Tuesday, June 12, 2012
Next focus in Eurozone debt crisis may be Italy
Rumours of the Spain bank bailout sent stock markets up on Friday in many countries. When the 100 billion band aid was actually announced over the weekend the response was for U.S. markets to turn negative before closing Monday (June 11). Spanish bond interest rates rose to high levels. However now the band aid has been applied to Spain some analysts are concerned about Italy.
Italy's borrowing costs rose after the Spanish bank bailout. The yield on 10 year bonds crept up to 6.04 per cent in the biggest daily gain since back on Dec. 8, 2011. Shares of Italy's largest bank UCG declined sharply.
Analyst Nicola Marinelli said:.“The scrutiny of Italy is high and certainly will not dissipate after the deal with Spain,” . “This bailout does not mean that Italy will be under attack, but it means that investors will pay attention to every bit of information before deciding to buy or to sell Italian bonds.”
Italy has a 2 trillion euro debt. Only Greece and Japan of developed nations have larger debts as percentage of GDP. Italy has to market more than 35 billion of bonds etc. each month to finance its debt. If the cost of borrowing continues to increase Italy like Spain may need help. For much more see this article.