With an economy bigger than the rest of the PIIGS combined, a bailout of Italy’s enormous sovereign debt could prove impossible.Italy’s public debts are twice the maximum allowable for Eurozone countries. The Treasury has to come up with 500 billion Euros over the next three years. Even though the government has agreed to major spending cuts, there is so much wrong with their economy that nobody can be certain that they can keep up with payments.
Half of all government debt is held domestically, but Italian government and banks’ debt is spread far and wide. If Italy can’t pay its dues, banks all over the world will be vulnerable.
176 billion Euros of Italian bonds will come due by the end of 2011. Over the next three years, Italy will have to pay 500 billion Euros to bondholders.
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