Bob Moon: A day that Greece's two main political parties spent negotiating over who will be the country's new prime minister. And eurozone finance ministers are trying to rule out any more rude surprises by demanding both Greek parties co-sign on their commitment to tough austerity measures.
And even before that's all tied up, concern is focusing on another European country that's too big to bail. Italy's prime minister is defying calls to resign, and now that country threatens to overtake Greece as the main threat to Europe's stability.
Marketplace's Stephen Beard is on the overseas circuit with us. Greetings, Stephen.
Stephen Beard: Hello Bob.
Moon: So we meet again for another chapter in this seemingly endless saga. Why is Italy so significant in this eurozone debt crisis?
Beard: This is the big one, Bob. It's the third largest economy in the eurozone, after Germany and France, and it has the world's third biggest national debt: $2.6 trillion -- $300 billion of which it has to repay or roll over next year. If it can't, there's going to be real trouble. The European bailout fund isn't big enough to bail it out. The Europeans have promised to increase that fund, but they're struggling to do so. So if Italy slides into default, it could easily bring down the European single currency, the euro.
Moon: Now, you're making this sound pretty ominous. Is there really any danger of Italy defaulting? I mean, surely, it has a much stronger economy than Greece?
Beard: Yes, it has. And in fact, Italian individuals and households have not borrowed up to the hilt; they're much less indebted than their European counterparts. The problem is, though, with its public debt -- which is huge, as I said -- and doubts about the ability of the government of Silvio Berlusconi to get that debt under control, investors are demanding higher and higher rates of interest to hold Italian government bonds. And today, the government's cost of borrowing in Rome hit the kind of levels that drove Portugal, Greece and Ireland to seek a bailout.
Moon: Now forgive me if you've heard this before, but this could be a big week in this story. Some key events coming up?
Beard: That's right. On Wednesday, a team from the European Commission arrives in Rome to check the books, to find out how much progress the Berlusconi government has been making in cutting public spending and reforming the economy. But tomorrow, there's potentially an even more explosive event: The government faces a vote on its public finances, which could be followed by a vote of confidence. Berlusconi could very easily lose that vote tomorrow, and could be forced to resign.
Moon: You know, it's really looking like the job of leading a country in the eurozone is quite a precarious occupation right now, isn't it?
Beard: Yes, indeed. This crisis has already toppled governments in Portugal and Ireland -- now Greece. Voters have been punishing their leaders because of the austerity that they've been doling out. The French president, Nicolas Sarkozy, faces an election campaign within six months, and he's already suffering badly in the polls. Sarkozy's said to be terrified that if Greece defaults, French banks will lose a fortune and will have to be bailed out by the government. And that will cost the French government its AAA credit rating. The word is that the French people couldn't stand such a humiliation, and would therefore give Sarkozy a real kicking in the presidential election. So yes, this crisis seems to be claiming political scalps across Europe.
Moon: And you'll be heading to Italy to give us some firsthand accounts, we'll be looking forward to that.
Beard: I'll talk to you then.
Moon: Marketplace's Stephen Beard in London.