EU paralysis drives fresh bond rout

Political paralysis in Brussels and monetary tightening by the European Central Bank has set off a fresh spasm of the eurozone bond crisis, pushing spreads on Portuguese, Irish and Greek bonds to post-EMU records.

Lars Aronsson/Wiki Commons image

Ambrose Evans-Pritchard
Telegraph

Portugal edged closer to the brink yesterday, having to pay almost 6pc to raise two-year debt. The yield on 10-year bonds briefly surged to 7.8pc after the Chinese rating agency Dagong downgraded the country's debt to BBB+.

"These levels of interest rates are not sustainable over time," said Carlos Costa Pina, secretary of the Portuguese Treasury, blaming the latest upset on the lack of a coherent EU debt strategy rather any failing by Portugal to deliver on austerity.

Mr Costa Pina rebuffed calls by leading economists in Portugal for an EU-IMF bail-out rather than drawing out the agony. "It is not justified. Portugal doesn't need external help, it needs urgent measures by the EU to restore market confidence."

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