Euphoria may have returned briefly courtesy of yet another promise for a resignation that will likely not be effectuated for weeks or months, if at all, and already someone has done the math on what the events in the past several days reveal for Italy. That someone is Barcalys, the math is not pretty, and the conclusion is that "Italy is now mathematically beyond point of no return."
European Wheels Spin Faster, Still No Traction - Walter Russell Mead
Even as Prime Minister Berlusconi announced his impending resignation, the yields on Italian bonds rose above seven percent, the highest level yet, and a level that just about everyone agrees will force Italy into a bailout sooner rather than later.
While Italy may not be too big to fail, it is too big to bail out; the IMF and the EFSF can’t handle the consequences of an Italian collapse. An Italian failure would force both Germany and France into massive bailouts of their domestic banking systems, destroy France’s credit rating and generally wreak unspeakable havoc on the increasingly fragile underpinnings of both the single currency and the European economy.
Idiot's Guide to the Euro Crisis - Simon Edge
So what went wrong?
As we discovered in the New Labour years, politicians find it very easy to spend their way into their voters’ good books, knowing that paying the debt back will be someone else’s problem.
In Greece and Italy much of the borrowed cash went on public-sector wage rises.
In the global financial meltdown that followed the collapse of Lehman Brothers bank in 2008 all economies contracted and it became painfully clear that the governments of the weakest countries in the eurozone had precious little means of paying back the money.
The debt totals in question are massive. While Britain’s entire debt is around 63 per cent of gross domestic product, Italy’s is 120 per cent and Greece owes 160 per cent of GDP.
That’s like having an income of £20,000 a year and debts of £32,000 on your credit card. And the point of bonds is they need paying back on a specific date. Not doing so is defaulting.
