Doubts about euro’s survival still linger, Italy PM warns

The European Union has not done enough to dispel doubts about the euro’s long term future, Italian Prime Minister Enrico Letta said Tuesday.

In a speech to parliament, Letta spoke about “a Europe which is struggling to regain speed and in which the shadows over the stability of the single currency have not yet been completely cleared.” “Two pieces of news coming from places far away from each other have been enough to signal that the crisis is not yet over,” he continued, referring to German constitutional court hearings against the European Central Bank and renewed Greek political instability.

“If Europe remains in its current state, it is lost,” the Italian leader warned.

Letta was informing lawmakers about a two-day EU summit starting Thursday which is meant to focus on fighting youth unemployment and relaunching stalled plans to create a eurozone banking union. Both are seen as key crisis-busting measures.

As he spoke, the Italian treasury said it had to offer more than twice the interest compared to May to sell 3.5 billion euros’ ($4.6 billion) worth of 2-year bonds. Yields rose to 2.4 per cent, up from 1.1 per cent.

The treasury also sold about 1 billion euros of 5-year and 15-year bonds. Yield went up from 1.8 to 2.9 per cent for the five-year debt issuance, and from 3.2 to 3.7 per cent on 15—year paper.

After the auctions, the yield spread between Italian and German 10—year bonds rose above 300 basis points. It had stood at around 270 until last week.

Borrowing costs for highly—indebted euro area countries such as Italy have been surging for days. But analysts say the trend is largely due to monetary policy developments in the United States and China, rather than immediate concerns about their solvency.

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