THE ITALIAN PRIME minister Mario Monti will travel to Paris for talks with Nicolas Sarkozy today amid ongoing fears over both countries’ debt.

Monti will be trying to dampen down fears among other EU leaders that Italy’s huge debt levels – and the increasing costs it faces to borrow money on the international markets – could threaten the currency union itself.

He told a French newspaper in advance of the meeting that austerity measures introduced in Italy would alleviate the problem, the Economic Times reports. Monti said:

Europe has no reason to fear Italy any more.

However, yields on Italy’s ten-year government bonds remain significantly over the seven per cent level widely seen as the limit for sustainable debt financing.

French president Sarkozy faces his own worries, with the threat of losing the prized AAA credit rating still hanging over his country. Yesterday France issued its first bond yield of the new year, selling almost €8billion of debt.

Yields rose in a signal that investors are less confident in France’s prospects. But they are still less than half of Italy’s rates, currently standing at 3.37 per cent.

Credit ratings agencies have threatened a downgrade. One London analyst told Business Week: “There’s still the threat of a downgrade hanging over France and until we get that situation cleared up you can’t signal the all-clear.”

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