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.

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