As Spain becomes the fourth euro zone state to pick up an international bailout cheque Italian officials fear they may be next in line.
Despite the 100 billion euros pumped into Spain’s banks many economists fear that financial infection will creep across Italian borders.
Daniel Alvarez is an analyst at XTB brokers:
“The attack is not on Spain, the attack is on Europe as a project and that is clear, proof of that is the Italian bond yield is up and the Italian stocks index well down.”
Spain’s bond yield has risen from 5.2 per cent in March of this year to a 6.7 per cent yield in June.
Italian bond yields follow a similar track up from 4.85 per cent in March to 6.1 per cent in June as the risks increase.
Analysts believe that Italy is unable to grow out of recession as the economy is sluggish meaning the government may have to borrow at high interest rates, adding to an already difficult debt burden.
Technocrat Prime Minister Mario Monti has expressed his concern about the risk of contagion.
News of the Spanish bailout lifted markets briefly, but on a generally flat day Italy’s benchmark index fared worse across Europe.