FRANKFURT—The European Central Bank’s plans to increase interest rates for the first time in more than a decade face a hurdle in southern Europe, especially Italy, where borrowing costs are surging as investors test the imbalances within Europe’s currency union.
Investors dumped southern European government debt on Thursday and Friday after the ECB laid out plans to phase out its giant bond-buying program in July and conduct a series of interest-rate hikes to fight record-high inflation.
