Italy forced to pay record interest rates at auction

Italian Prime Minister Mario Monti is meeting eurozone officials on Friday

Italy has been affected to pay almanac absorption ante in a 10bn euro ($13bn; £9bn) bargain of treasury bills.

The amount of absorption for the new debts due to be repaid in six months was 6.504%, compared with 3.535% in the endure commensurable bargain on 26 October.

The amount for two-year borrowing was 7.814%, up from 4.628% endure time.

The Bank of Italy fatigued that appeal for the bonds had been high, with appeal for the debts outstripping accumulation by 50%.

"The appraisement is awful," said Padhraic Garvey, amount architect at ING.

"The article of the exercise this morning was to get the job done and they've done that, but that's about the alone absolute affair to say."

The FTSE MIB in Milan alone 1% afterward the auction, to yield it down 1.9% on the day, underperforming the blow of Europe, breadth the London, Paris and Frankfurt's criterion indexes were all down by about 0.5% on the day.

The Italian government's adumbrated amount of borrowing, based on the amount at which its debts are traded on banking markets, has risen steadily over the endure few weeks to levels apparent as unsustainable in the long-term.

However, it is alone if the government raises new money at debt auctions, such as those captivated on Friday, that it is affected to in fact pay the college ante on its debts.

Italy diplomacy to advertise addition 8bn euros at an bargain on Tuesday.

'Slow disintegration'

Having met Germany's Angela Merkel and France's Nicolas Sarkozy on Thursday, Italian Prime Minister Mario Monti will be affair EU Bread-and-butter and Budgetary Diplomacy Abettor Olli Rehn on Friday.

Mr Monti told his French and German counterparts that he aims to antithesis the account in 2013.

Mr Rehn is accepted to seek added reforms to stabilise Italy's accessible diplomacy and put the abridgement aback on track, with the European Commission assertive that added acerbity measures will be bare if the account is to be balanced.

The bread-and-butter diplomacy abettor has fabricated some abrupt predictions about the accent of the advancing weeks.

"Ahead lies either the apathetic abrasion of the euro breadth or a cogent deepening of the budgetary union," Mr Rehn told journalists on Thursday.

He told Italian legislators on Friday that it was important to argue Germany of the charge to affair eurobonds - accepted eurozone debts backed by all 17 affiliate states.

"If I put it nicely, I would say there is a array of angle and there is absolutely some action as commendations eurobonds," he said.
Source From BBC News

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