Forget Greece - at least for a nanosecond. Now all the talk on the Internet news wires is that it's increasingly looking like Italy may too enter into its own debt crisis. And Italy in trouble will make the debt crises of Greece, Portugal, Ireland, Belgium and even Spain look like a financial walk in the park.
According to Reuters today:
"The main measure of Italy's borrowing costs broke above 6 percent for the first time in 14 years before easing back on Tuesday as the euro zone's third largest economy [my emphasis] was sucked into the bloc's debt crisis. Italian 10-year yields at one stage soared more than 30 basis points on the day to leap above 6 percent -- the highest since 1997 -- getting closer to the 7 percent level most market players see as being unsustainable for Italy's borrowing costs given its huge debt pile."
"Italy is by far the country with the greatest sensitivity to rising debt servicing costs and particularly in terms of rolling over debt. This is not a situation it can afford to have going on for any sustained period of time," said Marc Ostwald, strategist at Monument Securities in London."
Yikes. That's bad, whichever way you slice it.
Reuters continues by adding that, "Italy has one of the world's highest levels of public debt. At around 120 percent of gross domestic product, it is second only to Greece in the euro zone. A total of 176 billion euros ($250 billion) in Italian government paper will come due by the end of the year."
There are signs that the Italian government has been able to steady today the creaking ship that is the Italian bond market - and one simply has to believe that one of the biggest economies in the world will be able to pull through this...
Surely, right?
However Italy is able to pull through this latest debt crisis, it no doubt shows that financial contagion is a speedy, scary and downright unpredictable bastard.
And do we need any more evidence that the euro project is, for all intents and purposes, a failed project?
Do you get my point?
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