The UK's borrowing costs fell to a lower level than Germany

 

The UK's borrowing costs fell to a lower level than Germany for the first time in three years amid fears over the impact the euro crisis will have on the region's powerhouse economy. The yield on UK Government 10-year bonds fell to 2.16%, while the equivalent German costs rose to 2.21%, in a sign that investors have more faith in Britain's ability to cope with its debts. The rising borrowing costs in Germany followed the country's worst-received bond auction since the euro's launch as global investors appear to be turning their backs on Europe's biggest economy amid fears of a possible break-up of the eurozone. Chancellor George Osborne is likely to view the figures as evidence that his deficit-busting austerity measures are protecting the UK's position as a financial "safe haven". Anita Paluch, senior German liaison sales trader at Gekko Global Markets, said the rising costs in Germany emphasise "the seriousness of the state Europe is in" and without "severe and far reaching" reforms, there will be no breakthrough. The UK and Germany's implied borrowing costs are still far below those reached in Spain and Italy, where 10-year bond yields are 6.5% and 7% respectively, in unsustainable territory. The latest figures come as Italy's new prime minister Mario Monti meets Germany's chancellor Angela Merkel and France's president Nicolas Sarkozy to discuss potential ways of curing the region's woes. Fears over Germany's economic stability were calmed after a survey revealed business confidence rose unexpectedly in November despite the lingering debt crisis. The improvement breaks four months of falling business confidence in the country and went against analyst expectations of a further decline. Howard Wheeldon, senior strategist at BGC Partners, said Germany was still in a secure position. He said: "The bottom line is that Germany isn't about to fall off a cliff and that this is not a contagion spread. While there may well be a message in this for Angela Merkel from markets, the main failure to get these bonds away is purely down to safety, risk and common sense."