PARIS/ROME, Nov 15 (Reuters) - http://www.reuters.com/places/france" title="Full coverage of France">France
came under heavy fire on global markets on Tuesday, reflecting fears
that the euro zone's second biggest economy is being sucked into a
spiralling debt crisis.
Global stocks and the euro fell as Italian bond yields
climbed back to unsustainable levels on doubts that Italy's
Mario Monti and new Greek leader Lucas Papademos, unelected
technocrats without a domestic political base, can impose tough
austerity measures and economic reform.
European Central Bank President Mario Draghi has predicted
the 17-nation currency bloc will be in a mild recession by the
end of the year, a view underlined by data showing the economy
barely grew in the third quarter and faces a sharp downturn.
"The risks of a technical recession have increased and we expect the economy in http://www.reuters.com/places/germany" title="Full coverage of Germany">Germany to shrink at least in one quarter," said Michael Schroeder of the German economic research institute ZEW.
On the markets, Italy's 10-year bond yield rocketed back
above 7 percent, pushing its borrowing costs to a level that
helped to trigger the fall of Silvio Berlusconi's government
last week and is widely seen as unsustainable in the long term.
Spain's Treasury paid yields not seen since 1997 to sell 12-
and 18-month treasury bills.
French 10-year bond yields have risen around 50 basis points
in the last week, pushing the spread over safe
haven German bonds to a euro-era high of 173 basis points. French banks are among the biggest holders of Italy's 1.8
trillion euro public debt pile. The
urgency of resolving the debt crisis was underscored by a think-tank
report saying that triple-A rated France should also be "ringing http://www.reuters.com/subjects/euro-zone" title="Full coverage of Euro Zone">euro zone alarm bells" as it could not make rapid adjustments to its economy.
"THREAT TO THE WORLD"
Fears are growing in the United States that Europe's debt
crisis is mushrooming into a wider systemic problem.
Alan Krueger, chairman of the White House Council of
Economic Advisers, said the European debt crisis was the leading
risk to the U.S. recovery.
And U.S. Treasury Secretary Timothy Geithner said Europe had
a difficult task in boosting the creditworthiness of some of its
economies while also boosting growth.