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Market confidence in the eurozone suffered another blow today as Italy had to pay a record interest rate to sell its bonds, reflecting fears over the country’s huge public debt of about €1.9trillion.
Italy sold at auction some €6.49billion of long-term bonds – almost reaching its end-of-the-year target of €7billion – but had to pay 5.6 per cent on €3.85billion of five-year bonds.
The interest rate - or yield - jumped from from 4.93 per cent, and was the highest paid since the country adopted the euro in 1999.

Lost faith: Markets are not confident about Italy and its prime minister Silvio Berlusconi's ability to extricate itself from the euro zone debt crisis

Before the auction, reports said the
Italian economy minister Giulio Tremonti had met delegates from CIC,
China’s largest sovereign wealth fund, sparking speculation that Italy
was asking Beijing to buy Italian assets and bonds.
‘Quite simply, investors have lost
confidence in Italy's ability to extricate itself from the euro zone
debt crisis,’ said sovereign debt consultancy Spiro Sovereign Strategy.
 



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‘The implications of this for Europe's monetary union are quite worrying’.
A surge in the rate paid over
the past week also suggested that markets have lost faith in the
intervention of the European Central Bank, which has been buying
Italian bonds to keep borrowing costs at a manageable level.
‘Markets want to see decisive
action and they want to see someone in control of the situation,’ said
Marc Ostwald, a London-based analyst with Monument Securities.
‘Nothing that we've had, be it at a
domestic level in Italy, be it at a pan eurozone level, or above all
from Germany, indicates that anyone really is getting to grips with
presenting euro zone policy with one voice.’

Prime Minister Silvio Berlusconi
said parliament would approve a €54billion austerity plan tomorrow
and promised to pursue other measures to stimulate growth.