ROME ? Italy's borrowing rates skyrocketed in a big auction of bonds Tuesday as Premier Mario Monti put the finishing touches on his new lean government of technocrats that is tasked with getting the country's enormous debt under control to avoid a catastrophic default.
Though Italy easily raised euro7.49 billion ($10 billion), it had to pay more to investors to get them to open their wallets.
The yield on Italy's 3-year bonds surged to 7.89 percent in Tuesday's auction, a full 2.96 percentage points higher than last month, while yields on 10-year bonds spiked to 7.56 percent, up 1.5 percentage points from October. Both rates are unsustainable for the long-term, on par with levels that forced other eurozone governments to seek bailouts.
"Italian bond auctions are become more nerve-wracking by the week," said Nicholas Spiro of Spiro Sovereign Strategies. "Today's is another confirmation, if it were needed, that things are going from bad to worse."
Part of the reason for the high yields has been uncertainty over Monti's government.
Monti named ministers nearly two weeks ago but appointed 28 vice-ministers and undersecretaries only Tuesday, acknowledging that it has taken him more time than planned to complete his government.
He said he has been too busy, as he has had to spend time consulting with European partners about how to deal with the crisis that's threatening the future of the euro as well as the global economy. And the process also required consultation with politicians, an indication of the kind of difficult negotiations ahead when Monti brings real reform to the table.
But the higher yields also reflect a wider failure of eurozone leaders to come up with a coordinated response to the burgeoning crisis.
"This is an externally driven deterioration in Italy's creditworthiness, and the way to contain this crisis is to gradually restore confidence, and shore up the eurozone sovereign debt," Spiro said.
In Italy, the new government is charged with coming up with additional austerity measures followed by deeper reforms.
"If we do good work, we will help Italy get out of a very difficult situation, and perhaps we'll also help the political forces that have given us their trust to re-establish a more serene climate among themselves, and reconciliation with public opinion," Monti said.
Italy has debts amounting to euro1.9 trillion ($2.5 trillion), or some 120 percent of its national income. The country, which is the eurozone's third-largest economy, is considered to be too big to be bailed out under current rescue arrangements.
An Italian default would create devastating consequences for the eurozone, and send shockwaves throughout the global economy.
Monti called the new team "lean and strong," noting that the Cabinet is smaller than the previous administration of Silvio Berlusconi, who resigned after proving unable to get his fractious coalition to back necessary reforms.
Monti said part of the delay in naming the government was due to the fact that a number of recruits had to be persuaded to leave career tracks and more lucrative jobs to join a government tasked with reforming nearly every aspect of public life.
In one sign of progress, Italy's lower house of parliament was preparing Tuesday to introduce an EU-backed measure to amend the constitution to require a balanced budget.
The move is a first step in a long process. The amendment must be approved twice in both houses, the second time after a six-month interval.
Monti, who is also finance minister, was headed to Brussels for a eurozone finance ministers meeting Tuesday evening aimed at devising convincing measures to save the 17-nation euro.
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Barry reported from Milan, Italy.
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