Spain and Italy vow to fix public finances

Spain and Italy promised new measures to repair their public finances as their borrowing costs raised new alarm ahead of a cliffhanger Greek election.

But German chancellor Angela Merkel rebuffed pressure from EU partners and the US for Europe’s most powerful economy to underwrite debt or guarantee bank deposits in the single currency area.

Spain’s 10-year bond yield hit a euro lifetime high above 7% yesterday — a danger level above which Ireland, Greece, and Portugal were driven to seek international rescues — despite last weekend’s eurozone deal to lend Madrid up to €100bn to recapitalise ailing banks.