Italy’s borrowing costs fell from record highs at its latest government debt auction, but cautious investors still demanded interest rates of close to seven percent for the 10-year bonds.
That is the level at which other eurozone countries were forced to seek bail-outs and it raises questions on how Rome will finance its public spending in the next few months.
At the same time Italy’s Prime Minister Mario Monti called for the eurozone’s bail-out fund to be beefed up.
He said the European Financial Stability Facility needs “significantly greater” resources but refused to say how much more.
Commenting on the debt sale Monti said: “As you know, the treasury bond auctions that took place this week went pretty well. This is encouraging, however, we absolutely don’t consider the market turbulence to be over, there is still a lot of work to do.”
Indeed analysts said there were too many risks and uncertainties surrounding Italy and buying its long term bonds was “a leap of faith”.
The Italian Treasury has the challenging task of raising around 450 billion euros next year.