So it didn't have to follow them in requesting a bailout from a so called Troika comprised of the International Monetary Fund, the European Commission and the ECB. Italy never had to deal with the bursting of a housing bubble during the global financial crisis and its budget problems were smaller than those of the other four troubled countries. "And the fiscal situation is not the cause, it's the consequence of that weakness." TABLES HAVE TURNED
"The real problem is that Italy has been a growth underperformer for two decades," Moritz Kraemer, chief economist at LBBW, said. read moreīut this is only likely to be another stop-gap solution as investors are bound to test the ECB's resolve for as long as Italy does not convince them it can stand on its own two feet. His words on July 26, 2012, reverberate to this day, keeping markets relatively calm on the expectation the ECB will once again put a lid on borrowing costs, including via a new bond-buying scheme now in the works.
Ten years ago, the then ECB president restored market calm by saying the ECB would do "whatever it takes" to save the euro - code for buying the bonds of troubled countries. The deeper issue is that Italy is big enough to bring down the rest of the euro zone periphery as its 2.5 trillion euro ($2.52 trillion) government debt pile is larger than those of the other four countries combined and too big for a bailout. I'm a human being, and so things happen," he told reporters. "This shows I'm not a shield against all events. "Things just got worse how much worse is difficult to tell," said Dirk Schumacher, an economist at Natixis.ĭraghi, 74, dubbed "Super Mario" due to his long career as a financial problem solver, has seen Italian borrowing costs rise during his 17-month premiership, something he acknowledged at a news conference two months ago. Italy's benchmark 10-year yield rose to a high of 3.5% on Thursday and the spread over safer German Bunds widened to 227 points by the close, having more than doubled since the start of the year.
Draghi is due to address parliament on Wednesday with his future still in the balance. The situation for Italy has just become a lot more unstable.ĭraghi offered to resign on Thursday after one of the parties in his fractious coalition refused to back him in a confidence vote, only to have his resignation rejected by the head of state.