Eurozone Crisis Fears Continue As Italy Forced To Pay Higher Rates To Borrow!

• Did the 2nd bailout of Greece calm the market? Just for a few days. The sovereign debt crisis is not over. It will get worse and worse and completely collapse.
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  Eurozone crisis fears continue as Italy forced to pay higher rates to borrow
  By Louise Armitstead , http://www.telegraph.co.uk/ 
  The Italian government was forced to pay the highest borrowing costs for 11   years in a bond auction that underscored market fears that a new phase of   the European debt crisis is set to be unleashed.
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  Italy successfully sold €2.7bn (£2.4bn) of 10-year bonds but only after yields had soared to 5.77pc – compared to 4.94pc at the last auction a month ago. Traders argued that last week’s €159bn Greek bail-out was not enough to prevent contagion to the bigger European economies. The euro dropped to $1.43 against the dollar but traders said the losses would have been worse had they not been balanced by concerns over the deadlock over the debt crisis in the US.
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  Analysts at Forex.com said: “Contagion is well and truly in the air. Both Italian and Spanish bond yields have risen sharply and are close to the highs reached last week, which suggests that on reflection the credit markets are not convinced with the EU’s latest deal.” George Saravelos, a strategist at Deutsche Bank, added: “We are seeing a sell-off in Italian bonds post-auction which is putting pressure on the euro.”
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  In Rome, ministers were forced to deny that Silvio Berlusconi, the prime   minister, and Giulio Tremonti, the economy minister were set to resign. They   insisted the crisis recovery plan was in hand.
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  The statements failed to stem fears that European authorities have neither the capability nor the political will to prop-up Italy. The country’s debts of €1.9 trillion is nearly three times the total debts of Greece, Portugal and Ireland combined.
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  Markets were also rattled as the debt crisis hit the government of Cyprus. Demetris Christofias, Cyprus’s president, called an emergency meeting of the cabinet to discuss a reshuffle to tackle the crisis. Although Cyprus’s finances are relatively stable – the deficit stood at 5.3pc at the end of 2010 – the country’s banks are thought to have the highest exposure to Greek debt in the eurozone. Analysts estimate that as much as 40pc of loans outstanding from the three biggest Cypriot banks are loans to Greece.
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  Research by Forex.com concluded: “The Eurozone debt crisis maybe about to claim another victim… Nearly 20pc of Cypriot bank assets are in Greek bonds or loans. This is bad news for a country with a GDP of only €17bn.” Cypriot two-year bond yields are hovering close to 10pc – nearly twice their level in mid-April

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