Italy bond costs rise, French FM calls for action on government bond buying
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(26 Jul 2012) Investor concern
(26 Jul 2012) Investor concern about Italy's ability to return its sluggish economy to growth has pushed the country's borrowing costs up to their highest level since November in a sale of two-year bonds.
Italy on Thursday paid 4.86 percent to sell 2.5 billion (b) euros (3.03 billion (b) US dollars) in two-year debt, up from 4.71 percent a month ago.
Demand was a strong, 1.78 times the relatively modest offer.
It was the highest rate paid on two-year bonds since Premier Mario Monti's government of technocrats took power with the remit of protecting Italy's economy from the European debt crisis.
Despite austerity and economic reform measures, investors are worried that Italy will not be able to control its public debt, which has reached 123 percent of GDP, the second-highest among the 17 countries that use the euro.
Analyst Guido Giennaccari said austerity alone would not help Italy tackle its debt problem.
"If you keep on cutting, but you don't have growth, the weight of the of the debt will be heavier," he said.
In Paris, the French Finance Minister Pierre Moscovici urged European leaders to press ahead with plans agreed at last month's European summit to make it easier for the continent's bailout funds to buy government bonds.
In the past, the European Central Bank has purchased government bonds to drive down a country's borrowing costs.
Without such help, these countries can be forced to seek rescue loans to pay their bills.
But the programme has always been contentious.
Germany, in particular, has expressed concerns that it was beyond the bank's purview.
Moscovici called on Thursday for a swifter implementation of all of the decisions of last month's European summit.
When pressed on the buying of bonds, he said "that dimension of market intervention should not go unheeded" but would not elaborate on the remark.
He also pushed for all energy to be mobilised "to make sure the eurozone is completely reassured, and to create confidence."
He added he believed this to be possible "but we must act now."
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Italy on Thursday paid 4.86 percent to sell 2.5 billion (b) euros (3.03 billion (b) US dollars) in two-year debt, up from 4.71 percent a month ago.
Demand was a strong, 1.78 times the relatively modest offer.
It was the highest rate paid on two-year bonds since Premier Mario Monti's government of technocrats took power with the remit of protecting Italy's economy from the European debt crisis.
Despite austerity and economic reform measures, investors are worried that Italy will not be able to control its public debt, which has reached 123 percent of GDP, the second-highest among the 17 countries that use the euro.
Analyst Guido Giennaccari said austerity alone would not help Italy tackle its debt problem.
"If you keep on cutting, but you don't have growth, the weight of the of the debt will be heavier," he said.
In Paris, the French Finance Minister Pierre Moscovici urged European leaders to press ahead with plans agreed at last month's European summit to make it easier for the continent's bailout funds to buy government bonds.
In the past, the European Central Bank has purchased government bonds to drive down a country's borrowing costs.
Without such help, these countries can be forced to seek rescue loans to pay their bills.
But the programme has always been contentious.
Germany, in particular, has expressed concerns that it was beyond the bank's purview.
Moscovici called on Thursday for a swifter implementation of all of the decisions of last month's European summit.
When pressed on the buying of bonds, he said "that dimension of market intervention should not go unheeded" but would not elaborate on the remark.
He also pushed for all energy to be mobilised "to make sure the eurozone is completely reassured, and to create confidence."
He added he believed this to be possible "but we must act now."
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Twitter: Twitter: AP_Archive
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