Fears of debt contagion spread as French borrowing costs increase
European stockmarkets fell further on Friday over investor fears the financial problems facing Italy and Spain could be spreading to France. The three countries this week faced sharp spikes in borrowing costs in what is seen as a dangerous new phase of the debt crisis.
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In key bond auctions on Thursday, Spain had to pay a record 6.975 per cent when it raised 3.6 billion euros on 10-year bonds, while in France, the spread between its government bonds and the German equivalent reached 200 points.
This means France has to pay more than twice as much as Germany to borrow money on international markets. Back in July the spread was just 40 points.
Earlier in the week, Italy’s bonds topped the seven per cent level considered unsustainable for the government to service its huge debt.
In morning trading on Friday, London’s FTSE dropped 0.92 per cent, Frankfurt’s DAX fell
0.99 per cent and the Paris CAC was down 0.69 per cent.
Some analysts fear the French figures on borrowing mean the country has already lost its coveted AAA rating, the highest possible from agencies like Standard & Poor's and Moody’s.
Financial markets are concerned that France does not have a budget plan beyond 2012 and the estimated growth figure of one per cent next year is too optimistic
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