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Italy made to pay record borrowing rates

 

Ap
Friday 25 November 2011 14:43 GMT
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Italy had to pay sharply higher borrowing rates to entice investors to part with their cash during auctions today.

It is a sign that Europe's crippling debt crisis is putting increasing pressure on the eurozone's third-largest economy.

The country's new technocratic government faces a big battle to convince investors that it has a strategy to get a grip on the country's massive debts.

Italy had to pay an average yield of 7.814% to raise two billion euro (£1.72 billion) in two-year bills. That rate was sharply higher on the 4.628% it had to pay in the previous auction and represented a new high since the creation of the euro in 1999.

And even raising eight billion euro (£6.88) for six months proved exorbitantly expensive. The yield for this auction spiked to 6.504%, nearly double the 3.535% rate in the last equivalent auction.

Following the grim news on the auction front, the country's borrowing rates in the markets sky-rocketed, with the ten-year yield spiking 0.34 percentage point to 7.30% - above the 7% threshold that is widely-considered unsustainable in the long-run and eventually proved the point at which Greece, Ireland and Portugal had to seek financial bailouts.

The renewed rise is likely to renew tensions over Italy's debts, which stand at 1.9 trillion euro (£1.63 trillion), or a huge 120% of economic output.

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