Competition between eurozone governments and banks for funds raised on financial markets is likely to intensify in the coming months, a study by ratings agency Fitch said yesterday.

The agency said that the stepped-up pace would come "as higher gross fiscal financing needs coincide with an upsurge" in bank debt maturities in 2011.

States and banks are expected to seek 455 billion euros (579 billion dollars) from investors in the second half of this year and between 900 billion and one trillion euros a year in 2011 and 2012, according to Fitch.

By the end of June most eurozone states had managed to raise more than half the funds needed to meet their financing needs this year.

Greece, Ireland, Portugal and Spain, struggling with big deficits and public debt burdens, have recently met two thirds to three quarters of their funding needs through sovereign bond issues.

Many investors have lately favored the bond market in the face of volatility on equity exchanges.

Elsewhere in the study Fitch predicted that most of the 16 eurozone members would need three to four years to stabilise their debt levels.

It added that it did not expect that austerity measures aimed at narrowing public deficits in the eurozone to have an impact before 2011.

The agency found that market confidence in the eurozone remained fragile despite the outcome of recent "stress tests," which showed that most European banks are sound, and solid economic growth in the second quarter.

"Concerns persist over the sustainability of the global economic recovery and the medium-term outlook for public finances," said Paul Rawkins, a senior director in Fitch's sovereign group.

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