France and Germany were today preparing to give jittery debt markets their
first test of 2012 amid warnings that the world's biggest nations must roll
over a huge $7.6 trillion (pounds sterling 4.9 trillion) in borrowing this
year.
The two powerhouses are bidding to sell around euro 13 billion (pounds
sterling 10.8 billion) on Thursday in debt auctions likely to be closely
watched by analysts looking for fresh signs of strain in the eurozone.
France, which is perilously close to losing its cherished AAA credit
rating, will be under most scrutiny as it looks to raise up to euro 8 billion.
Lloyds Bank Corporate Markets analyst Eric Wand said the auction was "likely
to be tricky as downgrade fears linger."
Struggling Italy managed to get two debt auctions away over the Christmas
break but was forced to pay almost 7 percent to borrow for 10 years, a level
previously triggering bailouts in Portugal, Greece and Ireland.
Spain and Italy will be bidding to raise a combined euro 85 billion
during the first three months of this year, but funding pressure on the
region's strugglers is unlikely to recede as European leaders grapple to find
a solution to the debt crisis.
"In the absence of a convincing long-term argument to support the
still-vulnerable peripherals, we doubt that temporary support mechanisms can
provide a sustainable architecture to stem the debt crisis we are witnessing,"
Wand said.
The warning came as research by Bloomberg revealed the combined G7 group
of nations and the Bric economies of Brazil, India, Russia and China will have
to refinance a $7.6 trillion debt mountain this year, up from $7.4 trillion in
2011, with most forced to pay more interest on their debts as investors become
more risk averse.
Of the G7 nations, Italy must roll over some $428 billion in borrowing
this year followed by France at $367 billion, although the Bric nations are in
a far better state with Russia needing to tap markets for just $13 billion.
The International Monetary Fund has slashed its forecast for global
growth this year from 4.5 percent to 4 percent as Europe's crisis lingers.
