The closely watched gap between Irish and German borrowing costs has risen above five percentage points for the first time on bond markets.
The interest rate demanded by investors to lend money to Ireland was 7.59% this evening, compared with just over 2.4% for equivalent German bonds. Ireland does not plan to borrow on the bond markets until next year.
The bonds of euro zone countries such as Ireland, Portugal and Greece have remained under pressure due to fears about a possible new permanent debt restructuring mechanism for the euro zone. The proposals have raised the possibility of bondholders having to share the burden if a euro zone country defaulted on its debt.
The European Commission said today it was too early to say if the proposals would include current debt in their provisions. The Commission will carry out the preparatory work on the structure of the crisis mechanism and make a proposal next month to the Council of EU member countries.
Portugal's parliament passes tough budget
Portugal's parliament today approved a tough budget as the main opposition abstained under a pact with the government aimed at averting a political crisis and renewed strains in the euro zone.
The 2011 budget will cut the public deficit to 4.6% of gross domestic product from 7.3% this year through a mixture of spending cuts and higher taxes. The EU deficit ceiling is 3%.
Socialist Prime Minister Jose Socrates had to compromise over his measures, which are hugely unpopular, in order to obtain abstention on the vote from the main opposition rightwing PSD party.
