- Maria Fekter amplified investors’ fears Europe is far from ending crisis
- Italian and Spanish government 10-year bond yields rise above 6% level
- Spain, Portugal, Ireland and Greece have already been bailed out
- FTSE-100 is 0.34% up; France’s CAC 40 up 0.32%; DAX up 0.39%
Spain may have been temporarily saved from a complete economic meltdown with a €100billion bailout – but attention is now turning to Italy who could soon need similar help.
Austria’s finance minister today said the eurozone’s third largest economy may imminently need a financial rescue because of its high borrowing costs.
Maria Fekter’s comments, which rose the stakes in Europe’s debt crisis even further, amplified investors’ fears that Europe’s leaders are far from ending almost three years of turmoil.
Warning: Austrian finance minister Maria Fekter (left) has said Italy, led by Mario Monti (right), may soon have to be financially saved by the eurozone
A deal by eurozone finance ministers on Saturday to lend Spain up to €100billion to recapitalise its banks was seen by many in the markets as yet another sticking plaster.
Eurozone rescue funds, already stretched by supporting Greece, Portugal, Ireland and now Spain, might be insufficient to cope with Italy as well, Fekter added in last night’s interview.
She said: ‘Italy has to work its way out of its economic dilemma of very high deficits and debt, but of course it may be that – given high rates Italy pays to refinance markets – they too will need support.’
The Italian Treasury declined to comment on Fekter’s remarks. Italian and Spanish government 10-year bond yields rose further above the 6 per cent level today as the aid deal for Spanish banks failed to ease fears about Madrid’s ability to fund itself.
European shares and the euro were little changed amid rising scepticism over the Spanish bailout plan.
The FTSE 100 is 0.34 per cent up at 5,451.05; France’s CAC 40 is 0.32 per cent up at 3,052.64; and Germany’s DAX is just 0.39 per cent up at 6,164.71.
Stock markets across Europe rose this morning but in Asia there were drops following Wall Street losses
The market reaction suggests that ministers have failed to break the so-called doom loop between rising government debt, economic recession and teetering banks that previously drove Greece, Ireland and Portugal into EU/IMF bailouts.
Analysts cited uncertainty about the mechanics of the Spanish rescue package and fears that private bondholders could be subordinated to official lenders, risking losses in any debt restructuring, as they suffered in Greece.