NEW YORK TIMES: …Many analysts doubt the government will be able to achieve a balanced budget by then, but even that may not be enough to head off an eventual solvency crisis. Last week, Italy’s borrowing rates spiked to a record 6 percent on a debt that is 120 percent of gross domestic product, the second-highest in Europe, after Greece.
If rates stay that high, it could add unbearable strains to a country that is expected to have to refinance nearly $500 billion in 2012, one of the highest amounts in the euro zone and the equivalent of 20 percent of Italy’s G.D.P.
“The situation is getting clearly worse,” said Tito Boeri, an economics professor at Bocconi University in Milan. “Markets have always perceived the risk in Italy as more a problem of slow growth than a problem of solvency, but for a country with a debt the size of Italian debt, the boundary between a liquidity and a solvency crisis is very difficult.” … (more)
