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Italian debt hits new high

Friday, October 28, 2011 - 01:46

Oct. 28 - Italy's 10 year borrowing costs top 6 percent for the first time since the launch of the euro more than a decade ago, suggesting the EU rescue deal didn't go far enough in restoring investor confidence in Italy. Kirsty Basset reports.

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As Italian pensioners called for Italian Prime Minister Silvio Berlusconi to be fired, Italy's debt became even more expensive, raising questions about its sustainability. At an auction of ten-year bonds, Rome paid the highest premium since the creation of the euro - of more than 6 per cent. It was the first important test of market reaction to measures announced by euro zone leaders to stem the region's debt crisis - and the disappointing result suggests the rescue deal didn't go far enough in restoring investors' appetite for Italian debt. The auction did allow Italy to raise almost 8 billion euros, but analysts aren't ruling out the possibility of even more expensive borrowing costs. Lloyds Bank analyst Alessandro Mercuri says the problem is political. (SOUNDBITE)(English) LLOYDS BANK CORPORATE MARKETS INTEREST RATES STRATEGIST ALESSANDRO MERCURI SAYING: "Italy in many ways remains the fault line in the current euro area crisis. And the issue is one of political credibility. Market participants are less and less willing to lend Italy credibility in terms of the structural reforms that are needed to raise potential output and repay the debt going forward." Italians are angry about measures promised by Silvio Berlusconi's government to reduce the country's debt, which at 120 percent of GDP is second only to Greece's. But despite his insistence he'll see out his term until 2013, there's growing speculation that Berlusconi's fragile coalition may not be able to implement the reforms. Kirsty Basset, Reuters.

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Italian debt hits new high

Friday, October 28, 2011 - 01:46