Italy groans under weight of debt

The yield on Italian 10-year bonds has hit 6.73%, a 15-year high. Can the beleaguered nation get its house in order in time to avoid disaster?

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
Italy’s national debt is approaching €2tn. Its debt to GDP ratio stands at 120%. Prime Minister Silvio Berlusconi is persona non grata with his EU peers. Move over Greece, there’s a new casualty in town.

Yesterday, rumour had it that Berlusconi, the joke of the eurozone, Mr ‘bunga bunga’ himself, was to step down. Immediately, the markets rallied with a slight recovery on the FTSE and a 2.4% upturn in Italy. But then the Italian PM took to that well known political platform – Facebook – to announce, ‘Rumours of my resignation are groundless’ and Italian bonds began to heat up again.

This morning, he’s still clinging to power, despite this overwhelming – and global – vote of no confidence. Even his Coalition partner Umberto Bossi wants him out. Brenda Kelly, market analyst at CMC Markets, says: ‘The biggest domino in the debt crisis is now teetering and Italian bond yields appear to have a Berlusconi premium built-in as they hit euro era highs and eye the bail-out territory 7% level.’

Italy is now poised to vote on financial policy and the all-important kicker: should Berlusconi stay or should he go. Whatever the outcome, Italy is in for a rough ride; too big to bail out, if it doesn't fix up fast, the euro itself is in peril.

Meanwhile Greece is attempting to appoint a new prime minister. Not the most over-subscribed of jobs at the moment. Economist and former vice president of the European Central BankLucas Papademos is a possible contender according to the Italian press. Greece's permanent representative at the IMF, Panayiotis Roumeliotis , could also be a dark horse in the running. The appointment is a matter of urgency to ensure that the next £8bn tranche of bail-out funds lands safely.

We’ll keep you posted as these situations develop...

Find this article useful?

Get more great articles like this in your inbox every lunchtime

What happens to your business if you get COVID-19?

Three bosses who caught coronavirus share their tips.

NextGen winners: The firms that will lead Britain's recovery

Agility, impact and vision define our next generation of great companies.

Furlough and bias: An open letter to business leaders facing tough decisions

In moments of stress, business leaders default to autopilot behaviours, with social structural prejudices baked...

The ‘cakeable’ offence: A short case study in morale-sapping management

Seemingly trivial decisions can have a knock-on effect.

Customer service in a pandemic: The great, the good and the downright terrible ...

As these examples show, the best businesses put humanity first.

How D&I can help firms grow during a crisis

Many D&I initiatives will be deprioritised, postponed or cancelled altogether in the next three months....