Italy and Spain must pray for a miracle
Once again Europe’s debt crisis has metastasized, and once again the financial authorities face systemic contagion unless they take immediate and dramatic action.
By Ambrose Evans-Pritchard
If the ECB’s Jean-Claude Trichet is right in claiming that Europe was on the brink of a 1930s financial cataclysm a year ago – and I think he is – it is hard see how the threat is any less serious right now.
Fall-out from Greece flattened Portugal and Ireland last week. It is engulfing Spain and Italy, countries with €6.3 trillion of public and private debt between them.
Yields on Italian 10-year bonds hit a post-EMU high of 5.3pc on Friday. This is not just a theoretical price: the Italian treasury has to roll over €69bn (£61bn) in August and September; it must tap the markets for €500bn before the end of 2013. The interest burden on Italy’s €1.84 trillion stock of public debt is about to rise very fast.