Tuesday 12 December 2017

Debt Crisis: Italian and Spanish borrowing costs spike while stock markets slump

Mario Monti is to take over as Italy's new prime minister from Silvio Berlusconi. Photo: Getty Images
Mario Monti is to take over as Italy's new prime minister from Silvio Berlusconi. Photo: Getty Images
Former European Commissioner and new Italian Prime Minister Mario Monti with his wife Elsa

Independent.ie reporters and Jamie Grierson

WORLD stock markets were lower today as Italy's borrowing costs remained stubbornly high despite moves to shake up the debt-laden country's government.

Wall Street's Dow Jones Industrial Average was 0.4pc lower as weak results from major companies such as retailer JC Penney added to the ongoing uncertainty in the eurozone.

In London, the FTSE 100 Index was 33.3 points lower at 5511.9 after investors demanded an interest rate of 6.29pc at an auction for five-year Italian bonds, the highest level since 1997.

But the country managed to raise €3bn despite the record rate - which suggests investors still lack confidence in the country's finances - came as premier-designate Mario Monti started talks on forming a new government of experts to guide the country through the financial crisis.

The prospect of new political leadership in Italy as well as Greece had lifted the mood earlier in the session but this optimism soon faded and the Dax in Germany and France's Cac-40 also pulled back.

And the underlying problems in the eurozone were brought to light by official figures showing a 2pc drop in industrial production in the 17-country bloc.

Contagion fears also emerged after Spanish 10-year bond yields hit 6pc for the first time since August 5.

German chancellor Angela Merkel said the region is facing its biggest challenges since the 1940s.

"Europe is in one of its toughest, perhaps the toughest hour, since the Second World War,” she said, addressing her Christian Democrats Union (CDU) conservative party in Leipzig,

“If the euro fails then Europe fails, and we want to prevent and we will prevent this, this is what we are working for, because it is such a huge historical project."

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