(MENAFN- Qatar News Agency) Alarmed investors continued to push up the borrowing costs of Spain and Italy Tuesday to dangerous levels, despite leaks of an official blueprint for closer fiscal union in the eurozone.
A draft of a report prepared by the presidents of the European Council, Commission, the Central Bank and the Eurogroup suggested eurozone nations should adopt eurobonds and a common treasury in the medium term. It also said Europe should move to a banking union, reported The Independent newspaper Wednesday.
Investors have been calling for European leaders to adopt these measures and make it clear they are willing to use their collective resources to ensure the single currency's survival.
But markets drew no comfort from the draft report yesterday. Spain's short-term borrowing costs nearly tripled at auction, with Madrid forced to pay 2.362 per cent to borrow for three months. Italy's short-term borrowing costs also spiked, with Rome forced to pay 4.712 per cent to offload two-year debt, the higher price since December,said the newspaper.
The two nations' longer-term borrowing costs were also up, with 10-year Spanish bond yields shooting back up to 6.85 per cent and Italian 10-year yields over 6.17 per cent.
Market sentiment was not helped when reports emerged that the German Chancellor, Angela Merkel, had told a meeting of her increasingly Eurosceptic coalition partners that Europe would never have shared debt liability "as long as I live". This was followed by reports that the Italian Prime Minister, Mario Monti, had threatened to resign if Merkel did not yield on this issue.
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