Thursday

24th Jun 2021

EU 'astonished' at soaring costs for Italy and Spain

  • Van Rompuy arriving in Spain last month. Market fears are "totally out of line" he wrote in the op-ed (Photo: consilium.europa.eu)

Spain and Italy's record borrowing costs are 'astonishing' after a eurozone deal reached less than two weeks ago, EU Council President Herman Van Rompuy said on Tuesday (2 August).

Italian and Spanish 10-year bonds dropped in value, while German bunds rose on Tuesday, pushing the difference in costs (yields) to 381 and 397 points, respectively - a record high since the euro was introduced 12 years ago.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The valuations reflect persisting market concerns that the eurozone crisis is far from over and that a Greek-style bailout with a partial default and private sector involvement may be on the cards for other troubled Mediterranean countries.

Cyprus has also made headlines after its economy was dealt a blow on 11 July when 2,000 tonnes of gunpowder stored inappropriately under open sky exploded, wiping out the island's main electric power plant. Political instability and exposure to Greek debt are adding to the mix, with ratings agencies predicting it may be the next country in line for a bailout.

So far, the EU commission is maintaining the same line as for other countries which ultimately were given a financial rescue package - that nothing of that sort is being discussed.

"The question of a programme of emergency aid is certainly not on the table," Chantal Hughes, a commission spokeswoman for economic affairs said on Tuesday in a press conference.

Spanish Prime Minister Jose Luis Rodriguez Zapatero delayed his holiday departure and Italian finance minister Giulio Tremonti decided to travel to Luxembourg on Wednesday for a snap meeting with Jean Claude-Juncker, chair of the eurozone finance minsters' meetings.

For his part, Van Rompuy, who brokered the eurozone deal on Greece, precipitated by the very same rising costs as for the Italian government, has tried to allay market fears in an op-ed published in several European newspapers.

"Astonishingly," he writes, "since our summit the cost of borrowing has increased again for a number of euro area countries. I say astonishingly, because all macro economic fundamentals point in the opposite direction."

The Greek bailout conditions are "exceptional" and mark no precedent for other countries, he added.

Citing the austerity measures adopted in Italy and Spain, as well as Madrid's low debt, Van Rompuy accused the markets of making risk assessments "totally out of line with the fundamentals." Ratings agencies which downgraded the two countries also acted in a "ludicrous" way when putting them in the top tier of default risk countries, he claimed.

He omitted to mention that the Spanish premier last week called for early elections in November, faced with growing public anger over soaring unemployment, a factor which has been aggravated by the austerity measures.

The true cause of market worries, in Van Rompuy's view, lies elsewhere - the aftermath of the financial crisis of 2008 and the interdependence with the debt-stricken US.

"It is imperative to bear in mind that this is not a crisis about the euro," he wrote.

Meanwhile, a French plan to have more regular eurozone leaders' meetings formalised in a "euro-council" may be presented at the end of the month if Berlin agrees to the proposal.

Speaking to Le Figaro, Luxembourg's Juncker said Tuesday that Van Rompuy would be the "logical and natural choice" to chair such meetings.

Berlusconi faces make-or-break confidence vote

Italian Prime Minister Silvio Berlusconi will on Friday confront the political trial of his career: a vote of confidence in parliament on the septuagenarian leader, forced on him as the economic crisis transforms into a political one.

News in Brief

  1. Gay-rights activist storms pitch at Hungary's Euro game
  2. UK defies Russian military over Crimea
  3. Delta variant to be 'predominant in EU by end-August'
  4. EU domestic banks need climate-risk plans
  5. Report: France and Germany want EU-Russia summit
  6. New EU rules on shipping fuels dubbed 'disastrous'
  7. Japan government proposes four-day working week
  8. US: Nord Stream 2 undermines Ukraine's security

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  2. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals
  3. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  4. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  5. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  6. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance

Latest News

  1. EU talks migration over dinner, as NGO rescue-ship sets sail
  2. EU enlargement still 'hopelessly stuck'
  3. EU creates new cyber unit, after wave of online attacks
  4. How NOT to frame debate about Hungary's toxic anti-gay law
  5. What a post-Netanyahu Israel means for EU
  6. EU Commission warns Hungary over anti-LGBTIQ measures
  7. Fourteen EU countries condemn Hungary over anti-LGBTIQ law
  8. EU preparing to lift Burundi sanctions, despite warning

Join EUobserver

Support quality EU news

Join us