Berlusconi has stepped down, Italy has approved cutbacks of 30 billion euros and rolled out new policies, but the country continues to take a beating from the financial markets.
After a week of respite, Italian ten-year treasury bonds (Btps) have once again risen above the critical 7% level, forcing the European Central Bank (ECB) to intervene in the debt market. Responsibility is pressing harder on the financial sector. Italy's largest bank, Unicredit, recently raised capital to bolster reserves, a move that devastated the Italian stock market, spread doubt to other European markets and weakened confidence in Italy's ability to cope with the crisis.
Italy's recently-appointed technocrat government, which is planning measures to stimulate the Italian economy over the course of the next few months, has be ineffectual to date. The spread on Italian ten-year bonds has widened with respect to German debt, sending the nation's risk premium above 500 baisis points. Why? Investors are losing confidence in Italy's ability to face debt obligations that they have to meet this quarter.
Sarkozy says: The end of peaceful times
French president Nicolas Sarkozy warned yesterday of consecuenes that would affect the euro: "The end of Europe, the end of peace." He made this statement yesterday during a meeting with Mario Monti in Paris. He also announced that he and Monti would meet with German chancellor Angela Merkel in Rome on January 20.