As rumours circulated that Italian finance minister Giulio Tremonti could resign over a corruption probe involving an aide, secondary market yields shot to 5.99 per cent, with six per cent seen as a dangerous threshold.
In the event, Italy paid 5.77 per cent on the 10-year bonds, a price last demanded in 2000, and 4.8 per cent on its three-year debt, a high not seen since before the financial crisis.
There were also reports that Italy could “opt out” of its share of Greece’s next tranche of aid. Conditions of Athens’ original €110bn aid package, put together last year, state that any country whose debt costs rise above that on the loans given to Greece – originally set at 5.8 per cent – can halt its rescue fund payments.
Europe’s markets face a tumultuous summer before Eurozone governments vote on Greece’s new bailout package, with the chief paymaster, Germany, not due to vote until September. Finance minister Wolfgang Schäuble has spooked markets repeatedly pledging that Berlin will not fork out for more rescues.