Borrowing costs of Italy fall, Greece struggles in debt talks
Italy’s borrowing costs mostly fell at a key bond sale yesterday as Greece kept the eurozone on edge, struggling for an elusive deal with private creditors to unlock fresh bailout funding. Italy raised €4.75 billion, including €3 billion in three-year...
Italy’s borrowing costs mostly fell at a key bond sale yesterday as Greece kept the eurozone on edge, struggling for an elusive deal with private creditors to unlock fresh bailout funding.
Italy raised €4.75 billion, including €3 billion in three-year bonds for which the rate fell to 4.83 per cent from 5.62 per cent in a similar sale last month although that on bonds due in 2018 rose slightly.
The result “was not great,” Italian business daily Il Sole 24 Ore said, especially if compared to a Spanish bond auction on Thursday in which Madrid raised twice the maximum it had been banking on at rates of below four per cent.
But analysts said it generally confirmed the trend of lower borrowing costs for debt-stricken Italy, reflecting improved market confidence as well as European Central Bank efforts to boost liquidity in the eurozone.
European bank shares in particular got a boost from the auction and stock markets in Frankfurt, London and Paris were all in positive territory at the start of a make-or-break year for the European single currency area.
Borrowing costs for other weaker eurozone states, which have hit record highs in recent months and sparked fears the likes of Italy and Spain could need bailouts, also eased slightly.
In an auction of short-term debt on Thursday, Italy raised €12 billion at far lower rates than in a similar auction last month.
“From high risk to a good investment,” Il Sole 24 Ore said of the sale.
With its debt mountain of €1.9 trillion, an economy headed into recession and borrowing costs that have reached disturbing levels in recent months, Italy faces a tough time on the markets this year as it moves to raise some €450 billion.
Prime Minister Mario Monti has called for greater recognition and recompense for Italy’s efforts to cut its public deficit with three austerity budgets worth €80 billion in the past year alone.
A report in Italian daily Corriere della Sera yesterday said German Chancellor Angela Merkel had suggested to Mr Monti during talks in Berlin this week that Italy should seek a credit from the International Monetary Fund.