Italy facing debt crisis?

12 July 2011

Italy could be on the verge of a debt crisis after the country's bonds dropped and stock reduced to the lowest level in two years.

The sell-off came about following warnings from Standard and Poor's and Moody's Investors Service regarding the nation's capacity to finance its debt, Bloomberg reports.

Proposed budget cuts, which have caused discontent within Silvio Berlusconi's government, were also blamed for the move.

Jacques Cailloux, chief European economist at Royal Bank of Scotland, told Bloomberg Television's The Pulse that contagion is spreading "very rapidly".

The industry figure explained: "Europe needs to recognize that it's no longer a crisis of small sovereigns in the euro area. It is becoming a euro-area wide crisis."

It has been evident that European policy makers have found it difficult to accept this argument for some time, he added.

These scenes in Italy came as finance ministers met in Brussels to come up with details of a new package for debt-ridden Greece, which saw 17 euro zone finance ministers in attendance.

By Tony Aynsley

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development