Friday 22 September 2017

Debt Crisis: Spain denies it will need bailout as borrowing peaks at euro high

Fears that Italy could eventually default are pushing the cost of borrowing up for other eurozone countries
Fears that Italy could eventually default are pushing the cost of borrowing up for other eurozone countries

Independent.ie reporters

SPAIN’S Foreign Minister Elena Salgado today claimed her country will not need a bailout.

She told national radio: ‘‘Spain is absolutely not at risk of a bailout. The sustainability of our debt is beyond all doubt.’’



She was reacting to markets fears as Spanish borrowing spike at a euro-era record of 6.975pc – perilously close to the psychological 7pc level which is deemed untenable.



The new level was the highest since 1997, when the interest rate was 7.26pc, and was reached in a 10-year bond sale this morning.



Contagion from the debt crisis is spreading across Europe to countries which are not in bailout mode including AAA-rated France on growing fears that Italy could eventually default on its debt.



The bid-to-cover ratio, an indication of investor demand, in the Spanish bond auction was 1.5 down from 1.8 in October for a similar bond.



In a separate auction, France's cost of borrowing over two and four years jumped by about 0.5pc – French banks have a significant exposure to Greek debt.



Italy’s cost of borrowing is already at unsustainable levels piling more pressure on newly appointed Prime Minister, economist Mario Monti as the country needs to refinance €200bn in bonds by the end of April.



However, many analysts believe no amount of austerity will calm the bond markets at this stage with intervention by the European Central Bank seen by some as the only resolution.



They see the bank as the lender of last resort for troubled eurozone economies but the German Government is resisting any suggestions that its top bank would bale out Governments in the region.



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