The International Monetary Fund denied Monday it was holding talks with Italy about a financial aid package to prop up the European country's economy.

The denial followed a report by the Italian newspaper La Stampa alleging that the fund could bail out Italy with up to 600 billion euros ($800 billion) in aid.

According to the report, the money would give Prime Minister Mario Monti a window of 12 to 18 months to implement urgent budget cuts and growth-boosting reforms "by removing the necessity of having to refinance the debt."

La Stampa said the IMF would guarantee rates of 4.0 percent or 5.0 percent on the loan -- far better than the borrowing costs on commercial markets, where the rate on two-year and five-year government bonds has gone above 7.0 percent.

Italy needs to refinance about 400 billion euros in debt next year.

Italy's 1.9-trillion euro ($2.5-trillion) public debt and low growth rate have spooked the markets in recent weeks, prompting concern that it could have to seek a bailout like fellow eurozone members Greece, Ireland and Portugal.

The European Union and the European Central Bank have sent auditors to check Italy's public accounts and the IMF is set to send experts soon under a special surveillance mechanism agreed at a G20 summit in France earlier this month.

Meanwhile, the La Stampa report had a far-reaching effect on financial markets. Buoyed by the newspaper account, Asian markets and the euro made gains in Monday's trading.

Tokyo rose 1.56 percent, Seoul closed up 2.19 percent, and Sydney jumped 1.85 percent.