The European currency Euro logo stands in front of the European Central Bank (ECB) in Frankfurt/M., western Germany on August 4, 2011.
The European currency Euro logo stands in front of the European Central Bank (ECB) in Frankfurt/M., western Germany on August 4, 2011. - 
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Jeremy Hobson: Italian Prime Minister Silvio Berlusconi says he'll step down, but the real focus is on what's going up this morning: the interest rate on Italian debt -- specifically ten-year government bonds -- now well above 7 percent, a level that has led to bailouts in other countries.

For more, let's bring in the BBC's economics correspondent Andrew Walker who's with us now from London. Good morning.

Andrew Walker: Good morning, Jeremy.

Hobson: Well, why is 7 percent such an important level?

Walker: There are a number of particular concerns that this raises. First of all, for banks, and pension funds, and insurance companies, it's a level at which they start to get much more worried about the impact on their own financial strength because they hold a lot of these bonds.

There's also the fact that as people perceive it to be increasingly risky to buy these bonds, they may be reluctant to buy them at all -- making it harder for the Italian government to borrow what it needs. And then there is the fact that if these interest rates were to persist at these levels, it does make a substantial increase to the Italian government of borrowing.

Hobson: And brings up the question if Italy would need a bailout of its own -- and of course it's much bigger than Greece. And Andrew, do we now start have to start worrying about countries that we put on the backburner in the crisis, like Portugal, or Spain, or Ireland even?

Walker: Yes, for sure -- in the case of Ireland and Portugal people are more worried about contagion coming from Greece. In terms of the contagion from Italy, I think the big worry is Spain, also perhaps France.

Now, both those countries have seen the effective interest rate on their government debt rise this morning, although they're still a long way short -- especially in the case of France -- a long way short of the kind of danger levels that Italy has achieved. But it's certainly something that people are watching very carefully.

Hobson: The BBC's economic correspondent Andrew Walker in London, Andrew, thanks.

Walker: My pleasure.

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