A Decade of Lavished Spending
Rising political and economic crisis in Italy further impelled fears of a possible break-up in the Eurozone as borrowing costs for Europe's third biggest economy neared unsustainable levels. Italy’s cost of funding its economy reached 7.25% on Wednesday last week, the highest since the creation of the Zone.
This suggests that Italy could be the next Eurozone member to be bailed out as Portugal, Greece and Ireland were prompted to seek bailouts within days of crossing the crucial 7% mark. The binding constraint is that Italy is considered “too big to rescue” without dire consequences for the Zone.
Rome’s massive debts, about £1.6trillion, due to lavish government spending for over a decade, could possibly spur a global recession on the back of the spiralling EU debt crisis.