‘Disastrous’ bond sale shakes Germany
Germany sees extremely poor demand for a new bond sale suggesting that confidence in the eurozone’s ability to pull through its debt crisis is starting to threaten even Berlin.
The largest economy in the eurozone failed to get bids for 35 percent of the 10-year bonds offered for sale, raising borrowing costs in Europe and sending the euro lower amid concern that the region’s debt crisis is driving away investors.
“It is a complete and utter disaster,” said Marc Ostwald, strategist at Monument Securities in London.
The poor debt sale by Europe’s powerhouse economy pushed the euro down to 1.336 against the dollar and European shares sank to seven-week lows.
Finance Minister Wolfgang Schaeuble’s spokesman told a news conference that the auction did not mean the government had refinancing problems.
The sale came as eurozone leaders Angela Merkel, Nicolas Sarkozy and new Italian Prime Minister Mario Monti were to meet in the French city of Strasbourg to discuss strategies for handling the crisis.
They were expected to discuss the reforms planned by former EU commissioner Monti at a meeting they hope will allow Italy to restructure its debt.
The borrowing costs of almost all eurozone states, even those previously seen as safe such as France, Austria and the Netherlands, have spiked in the last two weeks with panicky investors dumping paper no longer seen as risk-free.
Investors were also unnerved by reports that Belgium was urging France to pay more into emergency support for failed lender Dexia under a 90-billion-euro rescue deal that had appeared done and dusted.