Too BIG to Bail

You've read a lot about Greece, but the problem in Europe is Italy. Greece is a nano-state; it makes up about 2% of the European Union's gross domestic product. Italy, on the other hand, is one of the seven largest economies in the world. Its debts are greater than those of Spain, Portugal, Ireland and Greece combined. It has long been governed in an almost cartoonishly bad manner. Italy is too big to fail but might also be too big to bail. Even Germany might not be able to credibly bail it out along with all the other troubled countries.

As of late, Italy seems to be the new focal point of the global economy. While the media and political world was infatuated with Greece’s troubled economy, Economists the world over warned of the fragility of the Italian economy. If a solid firewall is not erected around the country, and the developed world refuses to help alleviate decades of foolish policy, Italian default could wreck the Eurozone economy. Berlusconi has exited, but the mess he left in his wake still haunts the global economy.


Abhi Kanakadandila