Spain faces fresh crisis as cost of bonds rises again

 
George Osborne: Rejected an attempt by Brussels to subject British banks to a new pan-Europe regulator

Spain plunged back into the danger zone today as nervous investors pushed up its borrowing costs towards the crisis level of seven per cent.

Ten-year bond yields hit 6.65 per cent this morning, almost matching the six-month peaks of last month, reflecting fears that Spain’s credit rating is facing a cut following its £80 billion bailout.

With anxiety swirling around the euro markets, Italy was also being swept into danger, with its 10-year bond yield rising to 6.19 per cent.

“There’s a risk that Spain may be downgraded,” said Alessandro Giansanti, a senior rates strategist at ING Groep NV in Amsterdam. “The risk is that Spain’s yields will go higher, toward seven per cent.”

Chancellor George Osborne today rejected an attempt by Brussels to subject British banks to a new pan-Europe regulator.

José Manuel Barroso, president of the European Commission, called for an EU-wide deposit guarantee scheme and a rescue fund which would be paid for by levies charged to financial institutions among all 27 member countries.

A Treasury source said : “The Prime Minister and the Chancellor have made it very clear that we will not be part of any banking union.”

London bankers also rejected the Barroso scheme as an unfair tax on countries that had recapitalised their banks. Angela Knight, chief executive of the British Bankers Association, said: “It’s not reasonable to say to firms in one area that your industry has got to pay for failures in others.”

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