Italy's cost of borrowing has increased to a new record, a day after Prime Minister Silvio Berlusconi said he would resign after budget reforms are passed.
The yield on 10-year government bonds reached more than 7%, the highest since the euro was founded in 1999.
Investors hasitate that Italy could become the next victim of the debt crisis.
The 7% cost of borrowing is widely viewed as unsustainable and was the level at which Portugal, Greece and the Irish Republic were forced to seek a bailout.
In comparison, Germany's implied cost of borrowing for 10 years is 1.73%.
In this scenario "No one agrees to lend to a country when that country would use the loan to pay the interest on previous loans - that's throwing good money after bad."
The debt was also pushed up as a clearing house asked for a larger deposit to trade Italian bonds - to cover the raised risk of default.
Economic Affairs Commissioner Olli Rehn called the situation in Italy "very worrisome". A team from the European Union is due in Rome on Wednesday to start monitoring how Italy plans to cut its soaring debt burden.
It is expected that Italy's parliament could sanction a package of budget reforms by the close of the month, after the Italian president engages in consultations with the political groups on the way forward.
No comments:
Post a Comment