By DAVID JOLLY
PARIS — Italy and Belgium’s borrowing costs soared again at debt auctions Tuesday, adding to the pressure on European officials gathering in Brussels for their latest attempt at easing the crisis in the euro area.
At an evening session, euro-zone ministers were hoping to nail down guidelines on how to expand the European Financial Stability Facility, the main bailout fund for heavily indebted euro-zone countries. Such a step could in theory make it possible for the fund to begin buying government bonds on a large scale by early next year.
The ministers were also expected to approve the release of an €8 billion, or $10.7 billion, loan to Greece — the latest installment in its international rescue package.
Both actions have been debated for months — a reminder of the painfully slow pace of European decision making, compared to the speed with which the financial markets have battered confidence in the euro. As the crisis drags on, fears have grown that the euro currency union could collapse, with potentially catastrophic consequences for Europe and the global economy.
Yields on euro-zone government bonds, which move in the opposite direction of prices, have been rising for months amid growing turmoil and doubts about the bloc’s ability to close ranks and respond credibly to market attacks on individual countries such as Italy and Spain.
With the exception of a few countries like Greece, the finances of euro members are relatively strong in comparison with those of more stable sovereign borrowers like the United States and Britain. But the political response to the crisis has been hampered by disagreements between Germany and the European Central Bank, on the one hand, which do not want to shoulder the large cost of a bailout, and other countries that see no credible alternative.
On Monday, President Barack Obama met in Washington with top European leaders, including Jose Manuel Barroso, president of the European Commission; Herman Van Rompuy, president of the European Council; and Catherine Ashton, the European foreign policy chief. Mr. Obama urged an immediate resolution to the debt crisis, saying the issue is “hugely important” for the United States.
The stress in the markets remained Tuesday, as even the euro and European stocks gained for a second day.
The Italian Treasury sold €7.5 billion of bonds, including three-year bonds at a yield of 7.89 percent, meeting demand for 1.5 times the amount on auction.
The yield on the three-year bonds was the most Italy has paid to move such securities since the creation of the euro, according to Reuters, and sharply above the 4.93 percent the government paid at the previous auction at the end of October. It sold 10-year bonds at a rate of 7.56 percent, 1.5 percentage point higher than last month.
Italy’s budget deficit is not huge in comparison with other developed nations, but its debt is among the world’s largest. Considering the burden of repaying that debt, interest rates of that magnitude will not be long sustainable.
The auction was held as the lower house of the Italian Parliament was preparing balanced-budget legislation, a key measure for convincing investors and euro-zone partners of its commitment to reeling in its public debt.
Belgium sold €502 million of three-month Treasury bills at an average yield of 2.19 percent, up from the 1.58 percent it paid just two weeks ago. Demand rose to 5.61 times the amount sold from 1.45 times at the previous auction.
It also sold €513 million of six-month bills at an average yield of 2.44 percent, more than double the 1.09 percent on Nov. 8. The bid-to-cover ratio was 2.76, up from 1.85 times in the prior auction.
Belgian borrowing costs rose after Standard & Poor’s on Friday cut its rating on the country’s sovereign debt to AA from AA-plus.
In addition to the turmoil that is shaking all the euro-zone countries, the agency cited Belgian’s peculiar problems, which include the fact that it has been without an elected government for the past 19 months, as well as the cost of bailing out Dexia, the French-Belgian bank that last month became the first European bank to be partially nationalized amid the euro crisis.
At an evening session, euro-zone ministers were hoping to nail down guidelines on how to expand the European Financial Stability Facility, the main bailout fund for heavily indebted euro-zone countries. Such a step could in theory make it possible for the fund to begin buying government bonds on a large scale by early next year.
The ministers were also expected to approve the release of an €8 billion, or $10.7 billion, loan to Greece — the latest installment in its international rescue package.
Both actions have been debated for months — a reminder of the painfully slow pace of European decision making, compared to the speed with which the financial markets have battered confidence in the euro. As the crisis drags on, fears have grown that the euro currency union could collapse, with potentially catastrophic consequences for Europe and the global economy.
Yields on euro-zone government bonds, which move in the opposite direction of prices, have been rising for months amid growing turmoil and doubts about the bloc’s ability to close ranks and respond credibly to market attacks on individual countries such as Italy and Spain.
With the exception of a few countries like Greece, the finances of euro members are relatively strong in comparison with those of more stable sovereign borrowers like the United States and Britain. But the political response to the crisis has been hampered by disagreements between Germany and the European Central Bank, on the one hand, which do not want to shoulder the large cost of a bailout, and other countries that see no credible alternative.
On Monday, President Barack Obama met in Washington with top European leaders, including Jose Manuel Barroso, president of the European Commission; Herman Van Rompuy, president of the European Council; and Catherine Ashton, the European foreign policy chief. Mr. Obama urged an immediate resolution to the debt crisis, saying the issue is “hugely important” for the United States.
The stress in the markets remained Tuesday, as even the euro and European stocks gained for a second day.
The Italian Treasury sold €7.5 billion of bonds, including three-year bonds at a yield of 7.89 percent, meeting demand for 1.5 times the amount on auction.
The yield on the three-year bonds was the most Italy has paid to move such securities since the creation of the euro, according to Reuters, and sharply above the 4.93 percent the government paid at the previous auction at the end of October. It sold 10-year bonds at a rate of 7.56 percent, 1.5 percentage point higher than last month.
Italy’s budget deficit is not huge in comparison with other developed nations, but its debt is among the world’s largest. Considering the burden of repaying that debt, interest rates of that magnitude will not be long sustainable.
The auction was held as the lower house of the Italian Parliament was preparing balanced-budget legislation, a key measure for convincing investors and euro-zone partners of its commitment to reeling in its public debt.
Belgium sold €502 million of three-month Treasury bills at an average yield of 2.19 percent, up from the 1.58 percent it paid just two weeks ago. Demand rose to 5.61 times the amount sold from 1.45 times at the previous auction.
It also sold €513 million of six-month bills at an average yield of 2.44 percent, more than double the 1.09 percent on Nov. 8. The bid-to-cover ratio was 2.76, up from 1.85 times in the prior auction.
Belgian borrowing costs rose after Standard & Poor’s on Friday cut its rating on the country’s sovereign debt to AA from AA-plus.
In addition to the turmoil that is shaking all the euro-zone countries, the agency cited Belgian’s peculiar problems, which include the fact that it has been without an elected government for the past 19 months, as well as the cost of bailing out Dexia, the French-Belgian bank that last month became the first European bank to be partially nationalized amid the euro crisis.
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