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Europe's debt crisis escalated on Monday as Italy and Spain saw their borrowing costs soar by record amounts, hitting bank shares and stock markets globally.
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Italy, the eurozone's third-largest economy and home to the continent's biggest bond market, saw the premium it pays to borrow over German debt rise by more than a quarter to 3 percentage points, a euro-era high. Spain's benchmark borrowing costs rose above 6 per cent, also a euro-era high.
The sharp market moves came as a consortium of large European banks with holdings of Greek bonds demanded that the European Union commit itself to a buy-back of the debt, possibly with billions in government money. Without quick action, they warned, countries such as Spain and Italy could be sucked under.
"It is essential that Euro area member states and the [International Monetary Fund] act in the coming days to avoid market developments spinning out of control and risk contagion accelerating," said a six-page paper presented to eurozone finance ministers by the banks on Monday.
http://www.proinvestor.se/index.php?p=debat_post&postid=837
