After convincing investors and the European Central Bank that it's not Greece, Ireland may find it harder to escape the fallout from Italian turmoil.

Irish bonds lost 3.3 percent since Sept. 30, eroding the highest returns in the world since June. After falling to an eight-month low on Oct. 4, the yield on two-year Irish notes has jumped to about 80 basis points above its average of the past two months, according to data compiled by Bloomberg.

Borrowing costs for Ireland, which announced additional austerity measures last week, have risen as Italian Prime Minister Silvio Berlusconi agreed to resign to win parliamentary approval of plans to cut the region's second-biggest debt load and Greek premier George Papandreou tries to form a unity government under a new leader.

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