European stock markets are down sharply this lunchtime due to fears that the euro zone's debt crisis is spreading to Italy and Spain. London's FTSE was down almost 2% a short time ago, while Paris and Frankfurt were almost 2.5% lower. Banking shares fell heavily in early trading but later recovered some of their losses. The euro also recovered, having fallen to a four-month low of $1.3840 earlier this morning. But borrowing costs for Italy and Spain rose again, with the gap between the interest rates on their bonds compared with Germany's reaching a record high. Italy said it issued €6.75 billion in one-year bonds this morning at a rate of 3.67%, compared with 2.147% last month. Italian Economy Minister Giulio Tremonti left crucial EU talks in Brussels and announced he was returning to Rome to deal with the crisis. The yield or interest rate indicated on existing 10-year Italian debt rose to a record of 5.936% from 5.679% late on Monday. The yield on 10-year Spanish debt rose to 6.167% from just over 6%. Italy is particularly exposed because it has one of the highest public debt levels in the world and one of the lowest growth rates in Europe. In Spain, Finance Minister Elena Salgado said there was no logic to the market turmoil because both Italy and Spain had strong economies. 'We have strong, diversified economies which have always faced up to the problems and so if we are capable of transmitting that determination to everyone, reasonably the markets have to calm down,' she said.