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EU leaders focus on troubled Italy

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Kai Ryssdal: So the good news is you're not going to be hearing Greek debt stories for a little while. The bad news is you're going to be hearing Italian debt stories instead.

European Union leaders called yet another emergency meeting this morning to pressure a member country to pass an austerity budget. From London, Christopher Werth explains.


Christopher Werth: European officials have long worried that the debt crisis in Greece, Ireland and Portugal would ultimately spread to Europe's larger economies like Spain and Italy.

Luigi Zingales: Italy is a different ballgame in respect to all those other countries put together.

Luigi Zingales is with the Booth School of Business at the University of Chicago. He says Italy doesn't have deficit problems as big as Greece or Portugal. But it's weighed down with public debt -- a staggering 120 percent of GDP.

Zingales: Italy is in a major crisis of confidence.

Critics say that crisis was started by Prime Minister Silvio Berlusconi. He's trying to push out his respected finance minister, Giulio Tremonti, the main advocate of deep spending cuts in Italy. Zingales says the absence of Tremonti would be a problem.

Zingales: A Berlusconi government without Tremonti will have no credibility in the international financial markets.

He says because Italy faces increased borrowing costs, its deficit could rise still higher.

Zingales: That is a spiral that becomes almost impossible to undo at a certain point. And I think we're coming pretty close to that point.

But Andrew Lilico of the consultancy Europe Economics says Italy's finances aren't in reality any worse than they were six months ago.

Andrew Lilico: The real issue for Italy is just an unfortunate matter of timing.

Meaning Italy is trying to refinance around $250 billion worth of debt at a time when investors are jittery about the possibility of a Eurozone default -- a scenario, he says, that could bring Europe's "contagion" to the U.S.

In London, I'm Christopher Werth for Marketplace.

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