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British think tank Centre for Economics and Business Research (CEBR) has released a report that finds Italy is likely default, though Spain may just avoid it, reports the BBC.The report looked at the “good” and “bad” scenarios for the countries.
Italy in particular would need to drastically improve its economic growth to avoid a default.
The report calculates that Italy’s debt will rise from 128% of annual output to 150% by 2017 if bond yields stay above the current 6% and growth remains low. Even under the good scenario, growth remains too low.
Italy only grew 0.1% in the first quarter of last year.
As Spain’s debt is lower, even under the “bad” scenario it should be able to keep debt to 75% of GDP.
“Realistically, Italy is bound to default, but Spain may just get away without having to do so,” wrote Doug McWilliams, the CEBR’s chief executive on Wednesday.
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