Struggling Italy was forced to pay through the nose to borrow €7bn (£6bn) for a year yesterday, as financial markets delivered a downbeat verdict on the Brussels summit.
Italy paid 5.92 per cent in its latest auction of one-year debt — only marginally less than the 6.08 per cent it paid at the height of the political turmoil a month ago when president Silvio Berlusconi was toppled.
Traders also dumped the euro in favour of the dollar and the pound. The single currency dropped to a nine-month low of 84.84p against sterling at one stage, and the euro is also more than 6 per cent off its October peak against the greenback. CMC Markets' analyst Michael Hewson said: "The signs of strain are still there. Markets are unconvinced by the whole summit and whether European leaders have the wherewithal to put an end to this crisis."
The agreement of 26 EU members on a "fiscal compact" to rein in deficits did nothing to prevent Italy and Spain's benchmark 10-year borrowing costs blowing out further in volatile trading. Spain's borrowing costs are nearing 6 per cent and Italy – which faces the prospect of refinancing tens of billions in debt early next year – is paying 6.64 per cent.