Italy borrowing rates hit record after budget vote

Italys cost of borrowing has risen to a new record, despite Prime Minister Silvio Berlusconi winning a key parliamentary vote.The British Broadcasting Corporation reported that yield on Italian 10-year government bonds rose to 6.76 per cent, the highest since the euro was founded in 1999.Investors fear that the eurozones third-biggest economy could become the next victim of the debt crisis.Berlusconi won a budget vote with 308 votes. There were 321 abstentions and no votes against."The government no longer has a majority in this chamber," the leader of the main opposition party, Pier Luigi Bersani, said after the vote.To Berlusconi, he added: "Hand in your resignation."The euro pared gains after the vote, up 0.3 per cent to $1.3788.Italys benchmark 10-year debt has been rising sharply and the yield is now past the point that forced other eurozone countries to seek a bailout.Short-term borrowing costs have been rising at an even faster rate. Italy has to roll over more than 360bn euros of debt in 2012.The countrys cost of borrowing is much higher than the 1.8 per cent interest rate currently faced by Germany.Greece, the Irish Republic and Portugal have all been bailed out.Berlusconi has promised to push through another round of reforms to appease the financial markets.Austrias finance minister, Maria Fekter said on Tuesday that Italy was too big to fail. "Italy knows that given the size of the country it cant hope to get help from outside," Fekter said. "Thats why these huge efforts are made in Italy at the moment."She spoke as finance ministers from all 27 nations in the European Union were meeting in Brussels to discuss the October agreement to boost its ability to rescue nations in the eurozone.The benchmark index on the Milan bourse rose almost by 2.3 per cent, as stock markets across Europe were broadly higher.Germanys main Dax index rose 1.6 per cent and Frances Cac40 index rose 1.4 per cent, while United Kingdom stocks also gained.Banks were among the best performers on the markets. BNP Paribas rose 2.5 per cent and Deutsche Bank gained 1.9 per cent.Societe Generale rose almost six per cent. It reported quarterly profits of 622m euros, down 31 per cent, because of a 60 per cent write-off on its Greek loans.Concerns over Italy are overshadowing developments in Athens, where Greeces political leaders have been locked in debate over the formation of a unity government.
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