European markets gave back gains made on initial euphoria over last week’s Greek rescue plan, with the bond market in particular voting no confidence.
Bond yields on Spanish and Italian debt reached near record levels Monday. The Spanish 10-year bond reached just under 5.8% and the Italian 10-year bond 5.45%. A yield of 6% is considered by many financial analysts to put sovereign debt on an unsustainable path.
European stock markets, which skyrocketed on the Greek rescue plan last week, also retreated on Monday. The biggest gainers last week were Spain’s IBEX 35, which rose 6.06% on the week; and Italy’s FTSE MIB, which rose 5.48%. On Monday, the two indexes fell 1.8% and 2.5%, respectively.
Euro zone leaders meeting Thursday in Brussels crafted an ambitious proposal–which they described as a “European ‘Marshall Plan’”–aimed at staunching contagion; the plan doubled the time within which Greece could repay debts and eased the interest cost of those repayments.