MILAN, Italy - Italy had to pay sharply higher borrowing rates to entice investors to part with their cash during a couple of auctions Friday, in an acute sign that Europe's crippling debt crisis is laying siege to the eurozone's third-largest economy.
The auction results are another sign that the country's new technocratic government, faces a big battle to convince that it has a strategy to get a grip on the country's massive debts.
The country had to pay an average yield of 7.814 per cent to raise C2 billion in two-year bills. That rate was sharply higher on the 4.628 per cent it had to pay in the previous auction and represented a new high since the creation of the euro in 1999.
And even raising C8 billion for six months proved exorbitantly expensive. The yield for this auction spiked to 6.504 per cent, nearly double the 3.535 per cent rate in the last equivalent auction.
Following the grim news on the auction front, the country's borrowing rates in the markets sky-rocketed, with the ten-year yield spiking 0.34 percentage point to 7.30 per cent -- above the 7 per cent threshold that is widely-considered unsustainable in the long-run and eventually proved the point at which Greece, Ireland and Portugal had to seek financial bailouts.
The renewed rise is likely to renew tensions over Italy's debts, which stand at C1.9 trillion ($2.6 trillion), or a huge 120 per cent of economic output. Europe's current anti-crisis measures are too not big enough to deal with Italy's debt mountain.
