Amid a whirlwind of economic turmoil and uncertainty, the center of the European debt crisis turned to Italy, a country that experienced peak bond rates – costs of borrowing of 7.4 percent on Nov. 9, and continues to carry a debt of $2.6 trillion.
At its lowest point of the week, the Dow Industrial Jones Average dropped 389.24 points or 3.2 percent on Nov. 9.
“I’ve heard Italy compared to Bank of America,” said finance professor Elinda Kiss. “It is too big to fail and too big to help out, and that’s where it’s a problem.”
Italy has the third largest bond market in the world.
“Italy is so large that the safety nets that are out there and available today are not of sufficient size,” said Tyser Teaching Fellow Clifford Rossi. “The consequences are very dire for [the European Union] not to do something to address Italy.”
On Nov. 11, the Italian Senate approved its first package, which aims to loosen the grip that local authorities’ have over public-service contracts. These measures are steps that Italy will take to move itself out of the spotlight of the debt crisis.
Prime Minister Silvio Berlusconi, who has been in office for three terms, offered to step down if Italy’s Senate is able to pass a series of fiscal austerity measures.
“Berlusconi has totally failed to deliver anything,” said finance professor Albert S. Kyle. “[But] if you are the prime minister when your economy is doing poorly, people tend to blame you and eventually you have to leave office.”