Successful sale

Italy and Spain, two eurozone countries suffering from serious debt problems, got a bit of good news on Thursday following the successful auctions of government bonds.

The borrowing costs for both countries were significantly lower than a similar sale last month. Italian 12-month bonds sold with a rate of 2.735 percent, down from nearly 6 percent last month, and Spanish three-, four- and five-year bonds fell below 4 percent.

Italy came up with 12 billion euros ($15.3 billion) in its bond auction. Spain managed to raise nearly 10 billion euros, more than double than what the country had hoped for.

In Madrid, lawmakers approved the newly elected government's austerity measures that would cut 15 billion euros from the budget just a day before the bond sale.

Investing in growth

Italy has also recently passed austerity measures, but Prime Minister Mario Monti said belt-tightening alone was just the first step in addressing the fiscal problems facing the European Union.

"Europe is not only about budget discipline. It is very important to move beyond this and to invest constructive political energy in growth," he said in the lower house of parliament in Rome.

Meanwhile the European Central Bank left interest rates unchanged at a record low of 1.0 percent. The ECB's cheap lending of cash to banks in December helped fuel the demand for shorter term debt, aiding Spain and Italy in their bond auctions.

Both countries have had borrowing rates that were considered to be unsustainable in recent months. While Thursday's bond auctions are certainly no indication that either country's problems are over, they were a welcome reprieve from the seemingly relentless eurozone debt crisis.

Countries making 'significant progress'

ECB President Mario Draghi alluded to the good news in Italy and Spain when he told a news conference in Frankfurt that eurozone countries were making progress on getting their budgets in order.

"Let me say what we are witnessing now is that some of the stressed countries are undertaking very substantial, very significant progress in the fiscal consolidation area," Draghi said. "I think that to some extent, the markets are showing some appreciation for this."

The ECB has shown limited willingness to aid countries in financial trouble by buying up their bonds, but it has repeatedly insisted that it is up to individual governments to restore investor confidence by showing fiscal responsibility.

Draghi went on to praise the so-called "fiscal compact" agreed to by all eurozone countries, as well as the rest of EU member states except for the United Kingdom. The agreement hands over significant budget oversight to EU inspectors to ensure deficits do not exceed a certain limit.

"The new fiscal compact... is an important contribution to ensuring the long-run sustainability of public finances in the euro area countries," he said.

Authors: Matt Zuvela, Andrew Bowen (AFP, AP, dpa)
Editor: Andreas Illmer