Thursday

30th Mar 2023

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.

EU approves 2035 phaseout of polluting cars and vans

The agreement will ban the sale of carbon-emitting cars after 2035. The EU Commission will present a proposal for e-fuels after pressure from German negotiators via a delegated act, which can still be rejected by the EU Parliament.

'Final warning' to act on climate change, warns IPCC

The United Nations's report — synthesising years of climate, biodiversity, and nature research — paints a picture of the effects of global warming on the natural world, concluding there is "no time for inaction and delays."

Opinion

Dear EU, the science is clear: burning wood for energy is bad

The EU and the bioenergy industry claim trees cut for energy will regrow, eventually removing extra CO2 from the atmosphere. But regrowth is not certain, and takes time, decades or longer. In the meantime, burning wood makes climate change worse.

Opinion

EU's new critical raw materials act could be a recipe for conflict

Solar panels, wind-turbines, electric vehicle batteries and other green technologies require minerals including aluminium, cobalt and lithium — which are mined in some of the most conflict-riven nations on earth, such as the Democratic Republic of Congo, Guinea, and Kazakhstan.

Latest News

  1. The overlooked 'crimes against children' ICC arrest warrant
  2. EU approves 2035 phaseout of polluting cars and vans
  3. New measures to shield the EU against money laundering
  4. What does China really want? Perhaps we could try asking
  5. Dear EU, the science is clear: burning wood for energy is bad
  6. Biden's 'democracy summit' poses questions for EU identity
  7. Finnish elections and Hungary's Nato vote in focus This WEEK
  8. EU's new critical raw materials act could be a recipe for conflict

Stakeholders' Highlights

  1. InformaConnecting Expert Industry-Leaders, Top Suppliers, and Inquiring Buyers all in one space - visit Battery Show Europe.
  2. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  3. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  4. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  5. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence
  6. Nordic Council of MinistersCSW67: The Nordics are ready to push for gender equality

Stakeholders' Highlights

  1. Azerbaijan Embassy9th Southern Gas Corridor Advisory Council Ministerial Meeting and 1st Green Energy Advisory Council Ministerial Meeting
  2. EFBWWEU Social Dialogue review – publication of the European Commission package and joint statement of ETUFs
  3. Oxfam InternationalPan Africa Program Progress Report 2022 - Post Covid and Beyond
  4. WWFWWF Living Planet Report
  5. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains

Join EUobserver

Support quality EU news

Join us