Italy's public debt: The ogre in the attic

Fretful markets fear the worst ITALY’S public debt, the world’s third-biggest, equivalent to over 104% of GDP, is not so much the elephant in the living room as the ogre in the attic. The fear has long been that it could escape and wreak havoc, not only in Italy but also across the entire euro area. On December 3rd came what some took to be an ominous rattling of the attic door. It took the form of an answer by Silvio Berlusconi’s welfare minister, Maurizio Sacconi, to suggestions that he was at odds with the finance minister, Giulio Tremonti, over how much to spend on stimulus measures. Denying that there was any conflict, he said “I too am constrained by the public debt. And I too am worried by the risk of default.” Seemingly unaware of the possible effect of his words, he added: “There is something worse than recession, and that’s state bankruptcy: an improbable, but nevertheless possible, hypothesis.” If the Italian Treasury were unable to find ... (link)