Spanish, Italian PM question debt risk premium movements

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The leaders of Spain and Italy feel that the "strong fluctuation and speculative movements" of their country's risk premiums are "difficult to understand", the Spanish government said Friday.

Spanish Prime Minister Jose Luis Rodriguez Zapatero spoke to Italian Prime Minister Silvio Berlusconi by telephone Friday to discuss the "evolution of the risk premium of both countries," it said in a statement.

The conversation came as the risk premium for Italy and Spain, the eurozone's third and fourth largest economies, hit their highest levels since the creation of the euro amid concerns over their debt and deficit levels.

"Both leaders feel that the strong fluctuations and speculative movements of the the sovereign debt markets are difficult to understand," the statement added.

Zapatero also spoke with French President Nicolas Sarkozy by telephone to discuss the state of the economy, the statement said.

"Both agreed on the need to apply the agreements reached by European leaders on July 21 as soon as possible and they reaffirmed their determination to defend the stability of the eurozone," it added.

The two leaders also reiterated "the need for different governments to cooperate and coordinate their actions on the global stage in the face of the fears which have emerged in recent over the state of the world economy."

European leaders at a summit on July 21 approved a new bailout for Greece, and also to allow the eurozone's current rescue fund, the European Financial Stability Facility, to buy bonds in the secondary market and to allow it to lend to governments not only under bailout programmes.

One of the reasons for recent market jitters is that national parliaments in the eurozone still need to approve the changes to the European Financial Stability Fund and it is unclear how long that will take.

© 2011 AFP

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