Italy and Spain back in euro spotlight
Source: Agencies |
October 30, 2012, Tuesday
|
Print Edition
Print Edition
ITALIAN political turmoil and Spanish hesitancy over seeking eurozone assistance put the two countries on the front line of the currency area's debt crisis back under market pressure yesterday as their leaders met in Madrid.
Former Prime Minister Silvio Berlusconi's weekend threat to bring down his successor Mario Monti's government, and regional elections in Sicily in which a protest party led by a stand-up comic polled strongly, highlighted the political risks in Italy.
Rome's borrowing costs have fallen since July partly due to the European Central Bank's pledge to buy unlimited quantities of bonds if necessary to help states that request aid and accept strict conditions, but also due to hopes that Monti, a reformist technocrat, may stay on after next year's general election.
Italian and Spanish bond yields rose yesterday as some investors sought the safety of German Bunds, partly due to political uncertainty in the eurozone's recession-stricken third and fourth largest economies. But Italy paid less a month ago to sell 8 billion euros (US$10.3 billion) of six-month bills.
The euro also slipped on uncertainty over whether near-bankrupt Greece, the country that triggered Europe's debt crisis, can agree to a deal on new austerity measures and its international lenders can figure out how to make its huge debts sustainable.
A German government spokesman rejected talk of any new write-down of Greek debt, this time involving official creditors, saying German law would not permit such a haircut while new aid for the struggling country was being discussed.
The ECB has also refused to take any losses on its sizeable holdings of Greek government bonds, saying that would be illegal.
Some market players are also concerned by signs that Spanish Prime Minister Mariano Rajoy, having almost completed this year's borrowing, will try to avoid the stigma of requesting a precautionary credit line from the eurozone's European Stability Mechanism rescue fund.
Monti sought to nudge Rajoy towards applying for a rescue when the two men met in early August.
Former Prime Minister Silvio Berlusconi's weekend threat to bring down his successor Mario Monti's government, and regional elections in Sicily in which a protest party led by a stand-up comic polled strongly, highlighted the political risks in Italy.
Rome's borrowing costs have fallen since July partly due to the European Central Bank's pledge to buy unlimited quantities of bonds if necessary to help states that request aid and accept strict conditions, but also due to hopes that Monti, a reformist technocrat, may stay on after next year's general election.
Italian and Spanish bond yields rose yesterday as some investors sought the safety of German Bunds, partly due to political uncertainty in the eurozone's recession-stricken third and fourth largest economies. But Italy paid less a month ago to sell 8 billion euros (US$10.3 billion) of six-month bills.
The euro also slipped on uncertainty over whether near-bankrupt Greece, the country that triggered Europe's debt crisis, can agree to a deal on new austerity measures and its international lenders can figure out how to make its huge debts sustainable.
A German government spokesman rejected talk of any new write-down of Greek debt, this time involving official creditors, saying German law would not permit such a haircut while new aid for the struggling country was being discussed.
The ECB has also refused to take any losses on its sizeable holdings of Greek government bonds, saying that would be illegal.
Some market players are also concerned by signs that Spanish Prime Minister Mariano Rajoy, having almost completed this year's borrowing, will try to avoid the stigma of requesting a precautionary credit line from the eurozone's European Stability Mechanism rescue fund.
Monti sought to nudge Rajoy towards applying for a rescue when the two men met in early August.
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