MILAN/MADRID: Any hopes Italy and Spain may have had that the Greek election result would ease pressure on their own debt crises were dashed early on Monday when financial markets reacted as if nothing had changed.
The cost of borrowing rose for both countries, the two big euro zone economies under fire for poor finances, widening the gap between what they have to pay and what Germany pays. The yield on Spain's 10-year bond went above the 7 per cent widely viewed as unsustainable.
The moves underlined the essential dilemma facing the euro zone; short-term improvements to the climate do not address the root problem that finances are perilously tight in the middle of an economic downturn.
"The Greek elections have not solved the problems of the euro zone," one Italian bond trader said bluntly. Even so, a meltdown at the prospect of a Greek government pledged to reneging on its commitments and possibly forcing Greece out of the euro zone was averted.
So the leaders of Italy and Spain welcomed the narrow victory for Greek parties committed to the terms of the European Union/International Monetary Fund bailout.
"This allows us to have a more serene vision for the future of the European Union and for the euro zone," Italian Prime Minster Mario Monti told reporters in Mexico upon arriving for a G-20 summit.
Also speaking before the same meeting, Spanish Prime Minister Mariano Rajoy greeted the election outcome as "good news for Greece, very good news for the European Union, for the euro and also for Spain".
COMPREHENSIVE SOLUTION
But for Italy and Spain, the bond market reaction to the Greek vote suggested that the euro zone crisis needs a comprehensive solution before markets can start to build confidence.
indiatimes.com
The cost of borrowing rose for both countries, the two big euro zone economies under fire for poor finances, widening the gap between what they have to pay and what Germany pays. The yield on Spain's 10-year bond went above the 7 per cent widely viewed as unsustainable.
The moves underlined the essential dilemma facing the euro zone; short-term improvements to the climate do not address the root problem that finances are perilously tight in the middle of an economic downturn.
"The Greek elections have not solved the problems of the euro zone," one Italian bond trader said bluntly. Even so, a meltdown at the prospect of a Greek government pledged to reneging on its commitments and possibly forcing Greece out of the euro zone was averted.
So the leaders of Italy and Spain welcomed the narrow victory for Greek parties committed to the terms of the European Union/International Monetary Fund bailout.
"This allows us to have a more serene vision for the future of the European Union and for the euro zone," Italian Prime Minster Mario Monti told reporters in Mexico upon arriving for a G-20 summit.
Also speaking before the same meeting, Spanish Prime Minister Mariano Rajoy greeted the election outcome as "good news for Greece, very good news for the European Union, for the euro and also for Spain".
COMPREHENSIVE SOLUTION
But for Italy and Spain, the bond market reaction to the Greek vote suggested that the euro zone crisis needs a comprehensive solution before markets can start to build confidence.
indiatimes.com
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