Wednesday, 29 December 2010

Italy now close to euro danger zone

Ambrose Evans-Pritchard, International Business Editor of the Telegraph notes that Italy is now on its way to the euro high-risk zone:

Italy's debt costs approach red zone

Italy's borrowing costs have jumped to the highest level since the financial crisis over two years ago, raising concerns that Europe's biggest debtor may slip from the eurozone's stable core into the high-risk group on the periphery.

It is possible that the recent action taken by the EU leaders is not sufficient:

Willem Buiter, Citigroup's chief economist, said the response had been "woefully inadequate", raising the risk of fresh bank failures and a wave of sovereign defaults next year. He said the EU authorities may need a mix of measures worth up to €2 trillion to stop the rot.

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