By Maximilian Clarke
As political parties in Greece debate a successor to the republic’s former Prime Minister, Europe’s eyes are turning to Italy where insecurity over the country’s finances has seen government bonds hit a 14 year high.
Investors are increasingly expecting the country to collapse, with potentially disastrous repercussions for the eurozone’s third largest economy’s creditors.
Commenting on the latest from the Eurozone crisis is John Douthwaite, CEO of Simply Stockbroking.
“The Italian government’s borrowing has hit a record high and questions have arisen on their ability to repay the loans. As it stands Italy’s national debt is at a massive €1.9 billion. The yield on Italian debt has risen to a 14 year high, making the economy susceptible to further economic turmoil. In 2012 Italy looks to borrow €300 billion, mainly to repay loans. If banks and investors are not able lend money to Italy, Italy faces a similar fate to Greece. At present the European Financial Stability Facility is not equipped to offer the proposed €1 trillion.
“Italy the third largest economy in the eurozone could fall prey to the debt crisis. They could fall victim to bankruptcy and worries about Prime Minister Berlusconi’s future has affected the economy in ominous way. This in turn puts pressure on the markets and the world’s economy.
“Italian banks UniCredit and IntesaSanPaolo, are unprotected from the crisis, stocks in both banks have fallen to around half their value. The eurozones leaders are very worried about Italy’s economic situation; theyhave even considered stopping purchasing its government bonds. If these issues worsen the problems on the global stock markets would be intensified.”
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