Euro crisis: Just when you thought you were out…

Signs, perhaps, that the markets remain less than convinced about last week’s eurozone leaders’ agreement on debt.

Yesterday Italy was forced to pay more to borrow than just one month ago.

Credit agency Moody’s has warned it may downgrade Spain’s rating.  All three credit agencies have a negative outlook on the country’s rating as the Spanish prime minister Jose Zapatero calls an early general election.

And, in Cyprus, where the credit rating was downgraded by 2 points on Wednesday by Moody’s, President Demetris Christofias refuses to stand down after demanding the mass resignation of his cabinet [free reg may be required].

Cyprus has been buffeted by its banks’ involvement in neighbouring Greece, as well as an explosion at a naval base a fortnight ago that killed 13 and wiped out a power station that supplied more than half the country’s electricity.

That accident has led to rolling power cuts in the midst of a scorching summer and is expected to knock the economy back to flat growth this year just as it was emerging from recession. It could also add at least €200m ($286m) to the island’s 2011 financing needs, according to government estimates, at a time when the broader eurozone debt crisis has closed its access to financial markets.

Meanwhile the euro remains under pressure in the financial markets even with the political wrangling in Washington.