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Italy’s cost to borrow falls but all is not well

Solvency crisis still a possibility

Italy sold another bundle of government debt Thursday at levels well below the last bond auction. But the political pressure on the government of Prime Minister Mario Monti remained high - and was rising. Despite a dramatic drop in short-term borrowing costs Wednesday, the continuing high yields on the benchmark 10-year bonds - just shy of the psychologically important 7 percent rate - pointed to continuing challenges ahead. Italy, the eurozone’s third-largest economy, must refinance almost 200 billion euros in government debt by April, and if borrowing rates remain high, the country could face a solvency crisis that could threaten the stability of the euro.

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