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.
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.
Italy: 50.3% of GDP
Greece: 49.5% of GDP
The economies of both Italy and Greece are heavily dependent upon government expenditures.
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.