Now it’s Spanish borrowing costs soaring

SPAIN’s borrowing costs soared to a 14-year high yesterday as eurozone debt fears continued to spook the markets.

The eye of the storm moved from Rome to Madrid, as the Spanish government was forced to pay almost 7 per cent to borrow €3.56 billion (£3bn) on bond markets – close to the level at which Greece, Ireland and Portugal were forced to seek a bail-out. France also saw bond yields rise at an auction yesterday.

All of the major European benchmarks dipped amid concerns that the crisis could shortly spiral beyond the control of EU policymakers. The FTSE 100 slid 1.6 per cent while France’s Cac-40 and Germany’s Dax closed down more than 1 per cent.

Eurozone concerns similarly weighed heavily on the minds of US investors after ratings agency Fitch earlier this week warned that American banks could be “greatly affected” if the contagion spread to other EU nations.

Markets remain unconvinced as to whether European politicians will be able to deliver credible enough austerity measures to bring the finances of several eurozone states under control.

JP Morgan-Cazenove strategist Emmanuel Cau said: “The market is still worried about the implementation of all these [austerity and anti-crisis] measures, which are not detailed enough to be credible.”