The attention of international capital markets is likely to turn to Italy now that Spain has gotten a $125 billion reprieve for its economy and troubled banks. Although Greece remains a concern, Italy is Europe third largest economy, ahead of Spain. Bond vigilantes have to find some pool of sovereign paper if they want to keep up their methods for making profits.
Bloomberg reports that
Italy has more than 2 trillion euros of debt, more as a share of its economy than any advanced economy after Greece and Japan.
The perception may be unfair. Italy’s economy is much more diverse than that of Spain, Portugal, and Greece. Italy has both a robust manufacturing sector and continues to be one of the region’s export powers.
Douglas A. McIntyre