* Treasury to sell 2.5-3.5 bln euros of short-term debt * Yields seen down from last month, still at high levels * Europe debt markets not working - Spain economy minister * New austerity measures not seen helping financing costs By Nigel Davies MADRID, July 17 (Reuters) - Spain's borrowing costs are likely to drop on Tuesday when it tests investor appetite for its debt for the first time since announcing more austerity last week, but not enough to suggest markets believe it can avoid a full-scale sovereign bailout. Prime Minister Mariano Rajoy unveiled a package of savings and tax hikes...
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