UH-OH: Check Out The Eerie Similarities Between Greece And Italy

italy greece doomed

As yields on 10-year Italian bonds shoot up once again and the FTSE MIB takes a tumble, more and more signs are emerging that Italy might be the next country to crack under the weight of its sovereign debt.

In particular, Italy looks a LOT like Greece.

And with the EFSF probably unable to support a bailout of the euro zone’s third-largest economy, the picture in Europe looks pretty grim.

Size Of Public Debt As % Of GDP

Greece: 142.8%

Italy: 119.0%

Italy has the second-highest public debt to GDP ratio in the eurozone.

Source: Eurostat

GDP Growth Is Low Or Stagnant

Italy: 1.1%

Greece: 1.3%

Though similar to other EU countries, check out how their GDP growth has moved in tandem since 2000. Both were some of the worst performers among large EU countries in 2008. They also reported the lowest economic growth in the EU behind Portugal in 2010.

Source: Eurostat

Public Sector Expenditures Are High

Italy: 50.3% of GDP

Greece: 49.5% of GDP

The economies of both Italy and Greece are heavily dependent upon government expenditures.

Youth Unemployment Is High By EU Standards

Italy: 27.8%

Greece: 32.9%

Source: Eurostat

Political Turmoil

Both Italy and Greece have witnessed violent riots by citizens protesting austerity measures, potentially inhibiting efforts to reign in excessive public debts.

Banks are highly exposed to domestic sovereign debt.

Each country's largest banks have at least 10 times more exposure to PIIGS sovereign debt than common equity.

Contagion fears abound. Check out this graph showing interconnectedness between banks in some of the world's largest economies.

Source: EBA Stress Tests (exposure and common equity) and Bloomberg (market cap)

Tax Evasion Is Rampant

Italy: 4.9% of GDP

Greece: 6.7% of GDP

Both Italian and Greek governments have stepped up efforts to crack down on tax evaders, but these changes might be too little to late.

Source: The Economist

Ease Of Doing Business

Italy and Greece are the most difficult countries in which to do business in the OECD.

Source: DoingBusiness.org

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