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Emergency bells ringing in Europe: Italy and Spain in the Euro danger zone

Tuesday, August 2nd 2011 - 21:29 UTC
Full article 8 comments
Rodriguez Zapatero postponed vacations and Silvio Berlusconi is to address Parliament (L) Rodriguez Zapatero postponed vacations and Silvio Berlusconi is to address Parliament (L)

Financial market pressure on Italy intensified on Tuesday, sucking Europe's second biggest debtor nation deeper into the Euro area danger zone and prompting emergency consultations in Rome and among European capitals.

In Spain Prime Minister José Luis Rodríguez Zapatero postponed his departure for vacation to monitor economic developments after the risk premium on Spain’s debt over benchmark German bonds rose to a Euro lifetime high of more than 4.0 percentage points.

Italian and Spanish bond yields hit their highest levels in 14 years, with five-year Italian yields reaching the same level as Spain's in a sign Rome is overtaking Madrid as a key focus of investors' concern about debt sustainability.

Italy's stock index fell 2.5% to its lowest in more than 27 months, dragged down by banks that have heavy exposure to Italian debt. European shares hit a 9-month low amid worries that slowing economic growth will make it even harder to overcome the Euro zone's debt troubles.

Economy Minister Giulio Tremonti chaired a meeting of the Financial Stability Committee -- made up of representatives of the government, the Bank of Italy, market regulator Consob and insurance authority ISVAP -- a day before Prime Minister Silvio Berlusconi is due to break his silence and address parliament.

In a statement after the meeting, the committee said Italy's financial system remained solid thanks to recent action to strengthen the capital base and liquidity reserves of Italian banks, but it would continue to monitor developments.

Jean-Claude Juncker, who chairs the Euro group of Euro zone finance ministers, said he would meet Tremonti in Luxembourg on Wednesday, as it became increasingly clear that a second Greek bailout agreed on July 21 had brought no respite for the currency bloc.

The European Commission said monetary affairs chief Olli Rehn, who is on vacation in Finland, would speak to Tremonti later on Wednesday.

Spain said it was in contact with fellow European governments -- particularly Germany, Italy and France -- about the situation in the markets.

Rodriguez Zapatero last week called an early general election for Nov. 20. The conservative opposition Popular Party has a 14-point lead over his Socialists in opinion polls.

Although Spain’s registered unemployment declined in July for the fourth month, helped by a recovery in the country’s tourism industry, the nation’s jobless rate remained the highest in Europe. Even with the slight improvement 4.07 million Spaniards are still unemployed, more than in the same month last year.


Categories: Economy, Politics, International.

Top Comments

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  • Sergio Vega

    Well done, Rodriguez Zapatero....Probably you have taken lessons with Huguito, Fidelito and bro, Rafaelito, Evito, Cristinita and co. about how to do to sink your country as quick as is possible.....You will win your prize next November at the general election....(now you won´t have the help of the muslim terrorist, I hope so....).

    Aug 02nd, 2011 - 10:32 pm 0
  • Fido Dido

    well done? what are you talking about Sergio. Both aren't worried about muslim terrorists at all. They are worried what will happen if their people do not accept their Austerity measures, so they can bailout their banks that are in trouble that are linked to other banks who they should pay (German, French, UK, US, Dutch). They are worried that EU will tell them that they need more austerity measures than what they discuss to “save” their nation. Will spain and Italy have the destiney like Greece? Yes. Why? the credit agencies again, they will down grade them to JUNK status and boom. both are on sale (sell everything what already paid for to pay the debt and become a slave for the rest of your life).

    Aug 03rd, 2011 - 04:50 am 0
  • geo

    UK Banks exposure to below countries debts default :

    Greece : ~ 30 Billions $

    Ireland : ~210 Billions $

    Portugal : ~ 50 Billions $

    Spain : ~ 150 Billions $

    Aug 03rd, 2011 - 09:29 am 0
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