Italy and Spain see euro default cover leap
The cost of insurance against a catastrophic Italian and Spanish default jumped today amid fresh signs of gloom for the eurozone's strugglers.
The latest Markit snapshot of Europe's services industry showed Italy and Spain leading a fourth straight month of decline for the region in December, with only Germany and France registering slight growth.
Italy - plunging towards an all but certain recession - was the only country in the survey to see a deeper decline than in November. The results underline the two-speed eurozone which is developing after the latest rise in Spanish unemployment yesterday contrasted with falling German dole queues.
Germany was the only country in the eurozone to see its services industry to win new work during December.
Markit's chief economist Chris Williamson said: "Economic weakness is most evident in Italy and Spain, where domestic demand has been particularly hard hit by deficit-fighting austerity measures and growing uncertainty about the outlook. Recession is already looking inevitable in Italy and is a growing possibility in Spain as well."
The figures sent the cost of insuring against a Spanish default up 19 points to 4.21% - meaning it costs $421 (£270) a year to insure $10,000 in sovereign debt. Italian prices rose by 5.08%. Spain's benchmark cost of borrowing for 10 years increased 0.12% to 5.37% today.
Spain and Italy have to sell billions in debt next week. Germany got away a 10-year bond auction today, paying 1.93% as investors snapped up ultra-safe bunds.
