The cost of borrowing in Italy skyrockets
Italian Prime Minister Silvio Berlusconi (L) gestures after making a speech at Italy's Chamber of Deputies, in Rome, on October 13, 2011.
Steve Chiotakis: Greek Prime Minister George Papandreou says he could step down as early as today when a new government takes over. That parliament will have to push through big cuts needed for a rescue package. And that means the focus could now shift next door to Italy where that country's cost to borrow has skyrocketed.
From the European desk in London, Marketplace's Stephen Beard reports.
Stephen Beard: The interest rate that the Italian government has to pay has hit a record high of 6.5 percent. That's for borrowing money for a ten year term, and it's stretching Italy's finances to the limit.
Some analysts say that if the rate reaches 7 percent, it's game over. The country may not be able to raise enough taxes to pay the interest without seriously damaging the economy. Italy will then be staring default in the face. Investors are clearly rattled. Italy has the world's third biggest national debt: $2.6 trillion worth.
And says Vincenzo Scarpetta of the Open Europe think-tank, doubts are intensifying that Prime Minister Silvio Berlusconi is able to handle the crisis. Tomorrow he could face a vote on confidence in the Italian parliament:
Vincenzo Scarpetta: Berlusconi doesn't have the numbers. So it's a matter of arithmetics. As things stand at the moment, he can't, he just can't, win the vote.
If he does lose, Berlusconi could be forced to resign.
In London I'm Stephen Beard for marketplace.