Hopes that a European bailout to her banks would ease the pressure on the Spanish economy evaporated today as Madrid’s borrowing costs rose to their highest rate since the launch of the euro in 1999.

Spain’s benchmark 10-year bond yield is now at  6.81%, with Italy’s  10-year bond yield rising to 6.28%. The interest rates are seen as unsustainable in the long run for two countries weighed down by huge debts.

The Ratings agency Fitch has also downgraded the creditworthiness of 18 of Spain’s banks, after cutting its ratings on Spain’s two biggest banks, Santander and BBVA on Monday.