Saturday

1st Oct 2022

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. EU ministers adopt measures to tackle soaring energy bills
  2. EU takes Malta to court over golden passports
  3. EU to ban Russian products worth €7bn a year more
  4. Denmark: CIA did not warn of Nord Stream attack
  5. Drone sightings in the North Sea 'occurred over months'
  6. Gazprom threatens to cut gas deliveries to Europe via Ukraine
  7. New compromise over EU energy emergency measures
  8. 15 states push for EU-wide gas price cap

Stakeholders' Highlights

  1. The European Association for Storage of EnergyRegister for the Energy Storage Global Conference, held in Brussels on 11-13 Oct.
  2. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  3. European Committee of the RegionsThe 20th edition of EURegionsWeek is ready to take off. Save your spot in Brussels.
  4. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  5. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  6. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries

Latest News

  1. Editor's weekly digest: A week of leaks
  2. Putin declares holy war on Western 'satanism'
  3. Two elections and 'Macron's club' in focus Next WEEK
  4. EU agrees windfall energy firm tax — but split on gas-price cap
  5. Ukrainian chess prodigy: 'We are not going to resign ... anywhere'
  6. Going Down Under — EU needs to finish trade deal with Australia
  7. MEPs worry Russian disinfo weakens support for Ukraine
  8. Everything you need to know about the EU gas price cap plan

Join EUobserver

Support quality EU news

Join us