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Jacques Brinon/AP
spainwreck

Spain in the firing line as borrowing costs hit new highs

The price of borrowing for Spain is approaching the 7 per cent barrier, after both Spain and France struggled with bond auctions.

SPAIN HAS BECOME the latest eurozone country to find itself in the firing line, as its cost of borrowing soared following a difficult bond auction for its government this morning.

The country – which goes to the polls on Sunday to elect a new government – this morning raised €3.6 billion through the issue of new bonds, but was forced to pay 6.975 per cent for the 10-year loans.

That premium was just short of a full percentage point higher than the rate that Spain paid for similar loans in July of this year, Reuters said.

The cost of borrowing for Italy, meanwhile, remains above the 7 per cent mark.

The fact that both of the countries – which are the two largest European economies threatened with the possibility of needing an EU-IMF bailout are now paying 7 per cent for their loans is a sign that many investors believe it likely that either could default.

The rate is of particular importance for Italy, which has a national debt of €1.9 trillion, but is equally pressing for Spain which has a debt of €355 billion – the ninth-highest in the world – and which may be about to enter a political vacuum, with elections due in three days’ time.

France also completed a bond auction this morning, but saw its interest rate for two-year and four-year bonds rise by 0.5 per cent compared to the previous auction.

Martin says there’s weeks to save the euro amid reports of French-German split

Monti announces Italian cabinet – and will be his own finance minister

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