Business

Italian debt fears intensify

Ms Lagarde had previously called for the fund's lending capacity to be increased to $1 trillion, which would have entailed raising about $600 billion in new pledges from members.
Ms Lagarde had previously called for the fund's lending capacity to be increased to $1 trillion, which would have entailed raising about $600 billion in new pledges from members. Kaiser Nelson

MARKET nerves about the Spanish economy showed signs of spreading to Italy yesterday as Rome saw its medium-term borrowing costs spike.

Italy sold AU$2.9 billion in three-year debt at 3.89 per cent yesterday, higher than the 2.76 per cent it was forced to pay at a similar auction last month.

Demand for the debt issue was also muted.

Italy's benchmark 10-year bond yields have been rising in recent weeks as investor concerns about the solvency of struggling southern European nations have flooded back, although interest rates eased slightly yesterday to 5.4 per cent.

Investor fears have also been exacerbated by mixed signals from the European Central Bank about whether it might intervene in debt markets to keep eurozone borrowing costs down.

The managing director of the International Monetary Fund, Christine Lagarde, yesterday urged the ECB to show "continued support" for the eurozone. In a speech to the Brookings Institution in Washington, she also called on IMF member states to increase the fund's resources when they gather for the annual spring meeting next week.

However, Ms Lagarde downplayed expectations of the final figure that might result.

She said: "The needs now may not be quite as large as we had estimated earlier this year."

Ms Lagarde had previously called for the fund's lending capacity to be increased to $1 trillion, which would have entailed raising about $600 billion in new pledges from members.

Reflecting the general market concern about rising sovereign borrowing levels, the OECD yesterday called on industrialised nations to cut their national debts to 50 per cent of GDP over the coming decades to create a "safety margin" against future crises.

Eurozone states have seen their debt-to-GDP ratios spiral since the 2008 financial crisis.

But to hit this target Japan and the United States would have to enact the deepest cuts. Japan would need fiscal tightening worth more than 12 per cent of GDP a year to reach the 50 per cent mark by 2050.

The US would need a consolidation of close to 10 per cent a year.

Topics:  bonds, contagion, italy, sovereign debt crisis, spain


Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

Free skate day to celebrate new Blackwater PCYC position

Blackwater PCYC branch manager Sergeant Dominic Richardson.

Free skate day to celebrate new Blackwater PCYC position

Gymnasts qualify and improve, leading up to championships

The Emerald Gymnastics Club's ACRO group took part in the Central Queensland ACRO qualifier two in Emerald.

Gymnasts qualify and improve, leading up to championships

Clermont ranger cooks on

MasterChef Australia contestant Miles Pritchett.

Clermont ranger cooks on

Latest deals and offers

Avenger rides in to Emerald show

THE Emerald Show will feature brand new ride, Avenger, this year, the first time the ride has ever come to the Central Highlands.

Free skate day to celebrate new Blackwater PCYC position

Blackwater PCYC branch manager Sergeant Dominic Richardson.

Free skate day to celebrate new Blackwater PCYC position

Gymnasts qualify and improve, leading up to championships

The Emerald Gymnastics Club's ACRO group took part in the Central Queensland ACRO qualifier two in Emerald.

Gymnasts qualify and improve, leading up to championships

Clermont ranger cooks on

MasterChef Australia contestant Miles Pritchett.

Clermont ranger cooks on

Flood mitigation floated in council

A housing estate in Emerald during the 2010/11 floods.

Flood mitigation floated in council

Emerald apprentice proves to be a cut above the rest

The Hardcore Haircuts team of Demi Brotherson, Alan Freiberg, Kathleen Murray, Ronel Ryan and Stevie Featherstone.

Emerald apprentice proves to be a cut above the rest

Things to do in Central Queensland this week

Capella Show. Photo Matthew Holdsworth / CQ News

Your guide to events this weekend and throughout the week

Barnaby Joyce talks Johnny Depp's dogs in Tweed

Deputy Prime Minister Barnaby Joyce talks about Johnny Depp's dogs Pistol and Boo...

Billy Slater talks Origin Team

Queensland Origin great Billy Slater.

Queensland Origin great Billy Slater talks about this years team and his return to...

Road rage caught on Dashcam

Attack with a baseball bat caught on Dashcam

Video of a violent road rage incident in Orange last December.

Own Sunshine Coast property? You’re about to make money

UP AND UP: Property owners are likely to win from rent and price increases but tenants and first home buyers might not be so happy. Photo: Brett Wortman / Sunshine Coast Daily

Good new for property owners, not so good for buyers and tenants.

Sale nears on last large block of land in Coolum

The 43.37ha property on South Coolum Rd has sold.

South Coolum Rd property to be land banked