(Updates with comments from Cameron starting in third paragraph, Darling in final two paragraphs. For more on the euro area debt crisis, EXT4 <GO>.)

Nov. 9 (Bloomberg) -- U.K. Prime Minister David Cameron said the cost of servicing Italy’s debt is approaching unsustainable levels and called on European leaders to spell out details of their bailout fund to prevent contagion spreading.

Italian bond yields on five-year notes rose above 7 percent for the first time in the euro era, driving European stocks and U.S. index futures lower, amid political uncertainty in Italy and limited progress in implementing bailout measures for Greece.

“If you don’t have credibility about your plans to deal with your debts and deal with your deficits, whether you like the markets or not, they won’t lend you any money,” Cameron told lawmakers in London today. “That’s what we are seeing in countries like Greece and now tragically in Italy, where the price of borrowing money is getting to a totally unsustainable level.”

Cameron is concerned that that the sovereign credit crisis sweeping Europe’s southern fringe may hurt Britain’s growth prospects, tipping a fragile economy back into recession for the second time in three years. Without a direct say in euro-area policy, Britain is struggling to shape Europe’s response to the crisis, while rebel lawmakers in the premier’s Conservative Party are calling for Britain to loosen ties with the 27-nation bloc.

‘Very Painful’

“Euro-zone leaders urgently need to put flesh on the bones, to put figures on the size of that firewall to stop this contagion going any further,” Cameron said. “Countries falling out of the euro could be very painful for our economy.”

Italian Prime Minister Silvio Berlusconi agreed last night to step down after the approval of an austerity plan to tame the euro-region’s second-biggest debt. LCH Clearnet SA raised the deposit it demands for trading the nation’s securities.

Greek Prime Minister George Papandreou’s talks on forming an interim government dragged into a third day as a near- agreement with the biggest opposition party stalled on European Union demands for written commitments.

Former Chancellor the Exchequer Alistair Darling, who in 2008 orchestrated a government rescue of Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc, said in an interview published today he fears the euro will “break up” unless the crisis is resolved before the end of the year.

“I despair of the way in which EU leaders are constantly behind events. I do not think enough people realize how serious this crisis is, and how hard it is going to hit us,” Darling said in the Guardian newspaper. “This is far worse than the banking crisis of 2008 in its seriousness and, if it is not solved by Christmas, I think the whole of the euro will break up.”

--With assistance from Robert Hutton in London. Editors: Eddie Buckle, Andrew Atkinson

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: Eddie Buckle at ebuckle@bloomberg.net