Italy Wobbles

Italian GDP contracted for the last 12 months and the country is now looking at a longer and deeper recession than was previously expected.

With Spain already expected to request a sovereign bailout, investors are worried that the giant Italian economy might be the next domino to fall. So the big question on everyone’s mind: Is Italian debt sustainable? i.e. can Italy meet its debt without debt relief and avoid default…


Many observers agree that Spain has the rest of the euro area, specifically paymaster Germany, over a barrel: if it were to leave the common currency in order to inflate itself back to prosperity, as ruinous as such a decision would likely prove to be, it would probably precipitate the end of the euro.

This is apparently also the opinion of Spain’s government. After having dawdled since the GFC and having failed to seriously deal with its insolvent banks and the implementation of a rigorous economic reform program, the Rajoy government now is trying to preempt the ECB by issuing demands regarding the shape and form of its upcoming bailout…

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