Italy too may need bailout: Austria

Raising the stakes in Europe’s debt crisis, Austria’s finance minister said Italy, the euro zone’s third economy, may need a financial rescue because of its high borrowing costs.

Raising the stakes in Europe’s debt crisis, Austria’s finance minister said Italy, the euro zone’s third economy, may need a financial rescue because of its high borrowing costs.

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Maria Fekter’s comments in a television interview amplified investors’ fears that Europe’s leaders are far from ending two and a half years of turmoil. A deal by euro zone finance ministers on Saturday to lend Spain up to €100 billion ($125 billion) to recapitalise its banks was seen by many in the markets as yet another sticking plaster.

Euro zone rescue funds, already stretched by supporting Greece, Portugal, Ireland and now Spain, might be insufficient to cope with Italy as well, Fekter added in the interview on Monday evening. On Tuesday she sought to soften her remarks, saying she had no indication Italy planned to apply for aid. “Italy has to work its way out of its economic dilemma of very high deficits and debt, but of course it may be that — given the high rates Italy pays to refinance on markets — they too will need support,” Fekter said on Monday night.

The Italian Treasury declined comment on Fekter’s remarks.

Italian and Spanish government 10-year bond yields rose further above the 6% level on Tuesday as the aid deal for Spanish banks failed to ease fears about Madrid’s ability to fund itself.

European shares and the euro were little changed amid rising scepticism over the Spanish bailout plan.