Saturday

3rd Dec 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.

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  4. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  5. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  6. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos

Latest News

  1. EU must break Orbán's veto on a tax rate for multinationals
  2. Belarus dictator's family loves EU luxuries, flight data shows
  3. How Berlin and Paris sold-out the EU corporate due diligence law
  4. Turkey's EU-funded detention centres ripe with abuse: NGO
  5. In green subsidy race, EU should not imitate US
  6. EU Commission proposes suspending billions to Hungary
  7. EU: Russian assets to be returned in case of peace treaty
  8. Frontex leadership candidates grilled by MEPs

Stakeholders' Highlights

  1. European Committee of the RegionsRe-Watch EURegions Week 2022
  2. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  3. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  4. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  5. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  6. European Centre for Press and Media FreedomEuropean Anti-SLAPP Conference 2022

Join EUobserver

Support quality EU news

Join us