Spain's 10-year borrowing costs breached 7 per cent yesterday, the highest level since the formation of the single currency, while the flames of the eurozone crisis spread closer to Italy.

Investors continued to dump Madrid's debt as investor confidence that the forthcoming €100bn (£81bn) bailout of the country's toxic banks would be sufficient to solve Spain's fiscal problems drained away. There were further signs of investor concerns over the sustainability of Italian debt too, with Rome forced to pay 5.3 per cent in a debt auction to raise three-year money yesterday, sharply up on the 3.9 per cent last month. Rome also sold €627m of bonds due in 2019 at an uncomfortably high yield of 6.13 per cent.