Photo: AP Images
Italy is in a financial and political rout. Prime minister Silvio Berlusconi just said he refused financial aid from the IMF, only to have IMF head Christine Lagarde deny that aid was ever offered.While his political antics continue, the country has 120% debt-to-GDP ratio and it is $2.2 trillion deep in debt. 10-year government bond yields are up to 6.33%, its manufacturing sector is contracting and its economy is just inching along.
Exasperated, two loyalists from Berlusconi’s conservative party defected this week, and at least six in the lower house of parliament have agreed to defect in future votes. He faces a confidence vote in the next two weeks. Banks and countries with exposure to Italy are now in panic mode.