Italy had to pay record rates to raise €10bn this morning, while France and Germany warn that a blow-out in its giant debt mountain would signal "the end of the euro."
Meanwhile, EU Economic and Monetary Affairs Commissioner Olli Rehn has upped the pressure on Italian Prime Minister Mario Monti's new government, calling for "an ambitious timeline" on economic reforms.
"Italy is faced with formidable challenges," Mr. Rehn told Italian lawmakers during a visit to Rome.
"The new government needs to deliver on fiscal consolidation and adopt bold measures to re-launch growth," he said.
''Full and effective implementation will be key," he said, adding: "It would be essential to give strong signals to citizens and markets with a clear and ambitious roadmap for reform and an ambitious timeline."
In its bond auction, Italy was forced to pay a rate of 6.504% on bonds due in six months and 7.814% on bonds due in two years - dangerous levels that analysts say could drive Italy insolvent within months.
A day after a summit in Strasbourg with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Mr. Monti's press office reported the two leaders had said a debt collapse in Italy would be "the end of the euro."
Ms. Merkel and Mr. Sarkozy, BOTH CIA assets..... "said they were aware that a collapse of Italy would inevitably be the end of the euro, stalling the process of European integration with unpredictable consequences," it said in a statement....LOL
Mario Monti promised the two leaders that further fiscal consolidation in Italy "will be implemented rapidly with measures to boost growth."
Commissioner Rehn is this afternoon meeting Mr. Monti, who was installed on 16 November after market pressures and a parliamentary revolt ousted his predecessor Silvio Berlusconi.
Italy has been forced to agree to auditing of its books by the European Union and the International Monetary Fund and the European Commission has said more austerity measures may be needed to balance the budget by 2013.
A first report from the monitoring mission is due on Tuesday, Mr. Rehn said.
Italy, the eurozone's third-biggest economy after Germany and France, passed two budget austerity packages earlier this year when fears over its giant debt and sluggish economic reforms began rattling the markets.
Mario Monti has promised rapid action to slash the debt and boost growth and has wide public support but has yet to launch concrete reform plans.
Italy's debt emergency has set off alarm bells around the world over concerns that it could break the eurozone.
Investors are fretting over the apparent failure of proposals to introduce Eurobonds - which would help weaker eurozone economies by spreading the risk - and turn the European Central Bank into a lender of last resort.
Concerns about Europe's health were underscored this week when Germany drew bids of only €3.9bn for a €6bn bond auction....
The E.U. demanded that not only must sovereign governments become mere puppets of some elite, faceless, unelected cabal in Brussels but must also see that their populations become vassals to this same cabal. Could none of these governmental hacks see that they were tying an anvil around the necks of all? And all will go down with the euro....
Germany , and northern Europe work hard and prosper....?
Southern Europe people kind of work and retire at 50 and spend 30 years griping that they do not get enough to retire on and blame it on the north.Kind of sounds like they "Ran out of other peoples money."(Thatcher). If the Eurozone falls apart and individual countries go their own way we may be looking at a repeat of the ill will in Europe in the twenties and thirties and the resurrection of ancient rivalries. The cost to keep the European Union together ,while great , would be trivial compared to a return of the bad old days. Would anyone want to return to the Europe of 1914 to 1918 or 1939 to 1945. Many governments with a common currency may have been a fools dream but it may shown that a common government must accompany a common currency. The Euro may be the choice currency , but ultimately it will need to be backed by a strong common political/economic bond and a common sensible foreign policy and inflated greatly to be viable....., albeit Zioconned at the end.
Everyone knows Greece is bankrupt, yet they receive bail out money from EU and IMF, why, what is the purpose of such deals?
Same with Italy, everyone knows that approaching $2 Trillion debt is not any longer manageable, yet they are implementing austerity measures that will never even cut a penny from the debt and borrowing at 7% or above to pay the old creditors of 6 months ago over and over again.
Except for Germany every other EU nation has deficit that will not come down for decades and decades, yet, somehow they can use the Euro without penalty in interest....
If Merkel is calling the shots, then make her the President of EU and let her lead all other nations.
Compromises or separate agreements will not work since if only one other country opposes any agreement, the new law will fail.....
When you read stories like this, this, this, and this .... you will then quickly realize that the markets have already factored in a Euro collapse. What we are now witnessing is just show .... followed by excuses and a wonderment on why did things go so wrong....
Markets are “pricing in the endgame” for the euro as the situation moves faster than Zioconned politicians can act, UBS has warned ahead of a key meeting between eurozone leaders and Zioconned Barack Obomba.....
Mr Obama is hosting this year’s EU-US summit at the White House today, with the debt crisis at the top of the agenda. Attendees include European Council President Herman Van Rompuy and European Commission President José Manuel Barroso.
The meeting will be held amid Italian media reports that the International Monetary Fund (IMF) is preparing a €600bn (£514bn) loan for Italy. This will give Mario Monti, the new Italian prime minister, breathing space to implement reforms before debt refinancing is needed, La Stampa reported. Speculation is also mounting that Spain may also need to apply to the IMF or the European Financial Stability Facility after its borrowing costs soared last week.
Germany’s cost of borrowing has also jumped, with yields on 10-year bunds moving ahead of the more indebted countries of the UK, US and Japan.
“Financial markets continue to move faster than politicians,” Mansoor Mohi-uddin, head of foreign exchange strategy for UBS, said. “Fixed income investors are betting that either Germany moves towards a fiscal union with its eurozone partners or that, without the ECB willing to buy unlimited amounts of sovereign bonds in the secondary markets, the eurozone will break apart.”
Should further integration of eurozone countries occur, then Germany’s finances will get worse, he said. “If [a closer union] involves fiscal transfers to shore up the single currency area then Germany’s fiscal position itself will deteriorate,” Mr Mohi-uddin said.
Concerns are increasing that the lack of a resolution by European politicians could result in Europe’s problems spreading globally. Canadian finance minister Jim Flaherty said yesterday that the debt crisis is creating “contagion” outside the eurozone. “Again today, we are staring a crisis in the face,” Mr Flaherty said.
Yesterday, Chancellor George Osborne warned that the euro’s collapse would have a massive impact on the UK’s economy.
“We have contingency plans for all situations,” Mr Osborne said. “We have obviously stepped up that contingency planning in recent months, you would expect us to do that as the British government.
“That doesn’t mean we are predicting any particular outcome, we are just ready for whatever ... the eurozone throws at us.”
Last week, Andrew Bailey, deputy head of the Prudential Business Unit at the Financial Services Authority (FSA), said that British banks must prepare for some countries to exit the single currency – or for a complete break-up.