Italy back on the hot seat in European debt crisis

Italian Prime Minister Silvio Berlusconi greets U.S. President Barack Obama at the start of the Group of Eight summit in L'Aquila, central Italy -- July 8, 2009.

STEVE CHIOTKAIS: Markets around the world are down from Asia to Europe -- after U.S. shares fell big time yesterday and the S & P 500 sank to its lowest level of the year. There's a lot of worry coming from Europe today, where the debt crisis may be rearing its ugly head again in Italy and Spain.

Reporter Christopher Werth tells us from London, political turmoil may be partly to blame.

CHRISTOPHER WERTH: The cost of borrowing for Italy and Spain has shot up in the past few days. Investors are concerned about a weak U.S. economy slowing the global marketplace -- but also that the Greek crisis may still spread.

But Cinzia Alcidi of the Center for European Policy Studies says allegations of government corruption in Italy, and political unrest in Spain, are also playing a role.

CINZIA ALCIDI: So we'll find two very large countries that will find themselves in a similar situation as Ireland Portugal Greece just before asking for the bailout. Now, can we bail out Italy?

WERTH: The answer, she says, is probably not. The other problem for Italy and Spain is that the integrity of their governments has been called into question. And as we've just seen in the U.S., when the politics turn ugly the economy isn't far behind.

In London, I'm Christopher Werth for Marketplace.


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