Is Italy the new Greece?
Italian Prime Minister Silvio Berlusconi addresses a press conference at the end of a summit of the EU heads of State.
JEREMY HOBSON: Well now to the European debt crisis where it's all about Italy today. Leaders are meeting to talk about new signs that Italy could be the next shoe to drop.
Marketplace's Stephen Beard has more now from London.
STEPHEN BEARD: Italy has one of the world's most heavily indebted governments and perhaps the most scandal-ridden prime minister. But until last week investors kept those two thoughts separate. They put their trust in the highly respected finance chief -- a former visiting professor at Oxford. But Prime Minister Berlusconi has fallen out badly with his finance minister. Last week Berlusconi sneered: "He thinks he's such a genius!" Confidence has been been hit. Government borrowing costs have jumped.
Simon Tilford of the Centre for European Reform says there'll big trouble if Italy needs help from its European partners.
SIMON TILFORD: Italy's a very big economy. It's the third biggest economy in the Euro zone. It's something like ten times the size of the Irish economy for example. And they couldn't afford to bail Italy out.
If Italy does need a bailout, it could really be crunch time for the euro. The crisis could climax this fall.
In London, I'm Stephen Beard for Marketplace.
STEVE CHIOTAKIS: European leaders meet today to talk about the latest twist in the European debt crisis. There are ominous signs Italy could be the next country in trouble with global investors.
Marketplace's Europe Correspondent Stephen Beard is with us live from London with the latest on that story. Hi Stephen.
STEPHEN BEARD: Hello Steve.
CHIOTAKIS: So Greece, Portugal, and Ireland have been bailed out. I thought Spain was next in line. Why are we talking about Italy now?
BEARD: Politics -- in a word. As we know, Prime Minister Berlusconi's been embroiled in scandal for months. But the markets were prepared to give his government the benefit of the doubt while his highly-respected finance chief was in control of the public finances. But that control is suddenly in doubt. Berlusconi's fallen out badly with the finance chief. "He thinks he's a genius," was Berlusconi's sneering comment about him last week. This disunity's hit confidence, the stock market's plummeted, and the cost of borrowing for the government has shot up, making it more and more difficult for it to service its debt.
CHIOTAKIS: Could Italy, Stephen, become as troublesome for the global economy as Greece?
BEARD: Potentially more troublesome. If it does need the help of its European partners, Simon Tilford with the Center for European Reform says that will pose a huge problem for the Euro zone.
SIMON TILFORD: Italy is a very big economy. It's the third-biggest economy in the Euro zone. It's something like probably 10 times the size of the Irish economy, for example. And they couldn't afford to bail Italy out.
So if Italy needs a bailout, it could be real crunch time. And Steve, after dragging on for 18 months, this crisis could finally reach some kind of a climax as early as this fall.
CHIOTAKIS: All right. Marketplace's Stephen Beard, reporting from London. Stephen thank you.
BEARD: OK Steve.