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Italy's cost of borrowing touches new record amid investors' fears

(Xinhua)

17:13, November 10, 2011

File photo taken on Oct. 7, 2010 shows Italian Prime Minister Silvio Berlusconi reacts during a press conference in Rome, Italy. (Xinhua File Photo/Wang Qingqin)

MILAN, Italy, Nov. 9 (Xinhua) -- Italy's borrwing cost soared to breaking point on Wednesday, after Prime Minister Silvio Berlusconi announced on Tuesday that he would resign after reforms aimed at calming the eurozone turmoil was adopted.

In a clear sign of the evaporation of investor confidence, the yield on Italy's 10-year government bonds spiralled above a dangerous threshold of 7 percent to an euro-era record.

Greece, Portugal and Ireland were all forced to seek international bailout after their borrowing costs reached similar levels.

Unlike the above the three countries, a financial break down in Italy, which has an economy nearly three times the size of those of the three combined, would makes it far too large for the EU to bail out.

However, a risk of technical default of Italy is not likely in the short term, but it may become real if interest rates continue to attest at such high levels, Angelo Drusiani, a fund manager at Albertini Syz & Co. in Milan, told Xinhua.

Higher yields would make it more difficult and expensive for Italy to roll over its debts that according to the Italian central bank's data amounts to 1.89 trillion euros (2.56 trillion U.S. dollars).

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