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Cost of Spanish borrowing hits record high

Fri 18th Nov 2011

The cost of borrowing in Spain has now hit a 14 year high, with 10 year loans paying a 6.975% rate of interest.

This brings the rate perilously close to the 7% limit where other eurozone member states were requested to seek bailouts.

The Government recently returned a disappointing outcome from itīs last bond auction, selling just 3.56 Billion euros worth of bonds from itīs target of 4 Billion euros.

The spread between French and German 10-year bonds increased to 203 basis points - the widest since the creation of the euro in 1999, amid fears that France will be the next eurozone country to face a debt crisis.

A number of analysts have suggested that the European Central Bank should buy up large quantities of bonds to try to stem contagion across the eurozone. However, Germany has opposed suggestions that the ECB becomes the "lender of last resort", fearing it may lead to rising inflation.

German Chancellor Angela Merkel maintained her position on Thursday. "If politicians think the ECB can solve the euro crisis, then they are mistaken," she said.

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