Spanish borrowing costs shoot up

Interest rates on benchmark 10-year Spanish sovereign bonds surpassed 7 percent early on Monday, a rate often considered the point at which government borrowing becomes unsustainable.

Fellow eurozone strugglers Greece, Ireland and Spain all said borrowing costs of over 7 percent were a key factor in their decision to seek emergency loans from eurozone partners and the International Monetary Fund.

The difficult news on the market preceded a meeting of eurozone finance ministers, the so-called Eurogroup, in Brussels. Spanish officials said they hoped the ministers would decide how much money was needed to shore up Spain's struggling banking sector.

EU leaders have freed up a fund of up to 100 billion euros ($124 billion) for the purpose, but the details are yet to be arranged.

Spain, the eurozone's fourth-largest economy, has a gross domestic product greater than Greece, Ireland and Portugal's combined. Some investors fear that the government in Madrid could not be rescued in the same way as these recipients of so-called bailouts.

Italian bond prices also jumped on the markets Monday, rising to more than 6 percent.

German 10-year bonds, meanwhile, dropped to an interest rate of just over 1.3 percent as investors sought perceived safe havens. The German government on Monday even issued short-term 6-month bonds where panicked investors accepted an average interest rate of negative 0.03 percent; in other words, the creditors agreed to pay the borrower.

msh/tj (AP, AFP, Reuters)