Debt Crisis: Cost of Italian borrowing rises above 7pc as stock markets fall
THE COST of Italian borrowing has risen above 7pc – the rate that many economists believe makes borrowing unsustainable as pressure grew on new Prime Minister Mario Monti to form a new government.
The yield, or interest rate, on 10-year Italian bonds hit 7.039pc while the European Parliament voted to ban ‘naked’ credit default swaps – controversial financial instruments used by traders to bet on a country’s likelihood of defaulting on its debts.
Contagion from the eurozone debt crisis also spread to AAA rated France and Spain with the cost of borrowing for these countries up to 3.6pc and 6.3pc respectivelyl
European stock markets were also under pressure with the FTSE 100 down 0.9pc, Germany’s DAX 1.8p and France’s CAC also off 1.8pc despite news that the German economy managed growth of 0.5pc in the third quarter, largely on the back of higher consumer spending.
The figures met expectations but failed to ease fears the eurozone region faces a bleak winter.
Today Mr Monti concludes talks with potential government partners to form a new cabinet he hopes will last until 2013 and will sort out Italy’s serious economic problems.
The former European Commissioner said talks had been constructive.
"The time frame in which the government is placing itself is between now and the end of the legislature in spring, 2013," he said.
"It's obvious that parliament can decide at any time that a government does not have its confidence."