Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ said probably the most worrying development for the euro was the surge in Italian government bond yields in response to S&P’s move.

He said: “Italy has the largest government bond market in the eurozone and continued rising yields there over the coming weeks would have a very destabilising impact on the eurozone debt markets.

“With the authorities still seemingly divided over how to proceed with the debt crisis there remains considerable short-term risks for the euro.”

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Filed under: * Economics, Politics • Economy • Credit Markets • Currency Markets • Euro • European Central Bank • The Banking System/Sector • The Credit Freeze Crisis of Fall 2008/The Recession of 2007-- • Politics in General • * International News & Commentary • Europe • --European Sovereign Debt Crisis of 2010 • Greece • Italy • Spain

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