Italy was forced to pay record high interest rates in a $10 billion treasury bills auction. The interest rate for new debts that are to be paid back in six months was 6.504 percent, and the last comparable sale was on October 26, with the rate at 3.535 percent.
According to BBC
, the two-year borrowing rate is up too. The borrowing rate was 7.814%, and the last time it was 4.628%.
Silvio Peruzzo is an economist at Royal Bank of Scotland Group Plc in London, and he said that the Italian auction indicates the bond market in Europe is disrupted.
According to Business Week
, the auction comes just as Italy’s new Prime Minister, Mario Monti, is planning to cut Italy’s debt of 1.9 trillion euros, as well as trying to boost the economy.
According to Fox News
, the outcome of the auction will most likely spark calls for officials of the European Union to do something to grow the economy. The outcome will also probably call for the European Central Bank to do more to cool down the debt crisis.
Manuel Barroso is the head of the European Commission, and he said that they have not been able to reassure investors, and because of that there are going to be serious problems. Serious discussions are also expected to take place. Barroso was speaking while he was on a trip to Portugal, which has just taken an EU bailout.
Stephen Lewis is an analyst at Monument Securities. Lewis agrees the outlook described in the above paragraph. Lewis said that a highly skilled financial engineer will need to help, if the euro is going to withstand the strains it will probably end up facing in the next few weeks of this year.