Asian shares fell on Thursday after Italy’s record-high cost of borrowing renewed fears over the eurozone debt crisis.

Japan’s Nikkei index fell 2.9%, South Korea’s Kospi shed 3.8% while Hong Kong’s Hang Seng dropped 4.4%.

The falls in Asia followed losses in the US markets.

The cost of borrowing on Italian government bonds jumped to 7% on Wednesday, a level considered unsustainable by economists.

The high interest rate means that if Italy were to borrow money today, with the aim of paying it back in 10 years, it would have to pay an interest of 7%.

However, Italy has a low growth rate, which means it would struggle to repay its debt at these rates.

Analysts said some actions needed to be taken in Italy in order to calm markets.

“Europe has moved from a manageable crisis in Greece to a much bigger challenge in Italy,” said Frederic Neumann from HSBC in Hong Kong.

“We need radical solutions at this point to backstop the markets.”
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Increasingly, there is a risk that it spills into the banking system and becomes an issue of credit, and the lifeline of economies freezes up again”

Su-Lin Ong RBC Capital Markets

Shares of banks in both Japan and Australia were hit particularly hard. In Tokyo, Sumitomo Mitsui Financial Group tumbled 5.3%, while Mizuho Financial group fell 3.8%.

In Sydney, Westpac Banking Corporation dropped 3.6%, to its lowest level in a month. For more visit: BBC.com

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