September 2, 2011
Talks over new bailout funds for Greece were suspended Friday amid disagreements over how to fill a government-deficit gap that once again is veering off track, raising doubts about the country's future access to finance and triggering renewed nervousness in financial markets across Europe.
The suspension pushed yields on Greek government debt to levels indicating that investors see a default by Athens soon as a near certainty: Interest rates on one-year paper blew out past 70% and two-year yields rose close to 50%.
More disturbingly for euro-zone governments—given Greek bonds are barely traded and wild swings in yields therefore likely—financial markets also pushed up borrowing costs for Italy, reflecting anxieties about Italian austerity measures being watered down, and for Spain.
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