European debt woes have flared up once more this week, with Italy coming strongly into view as a result of its burgeoning debt and sluggish growth. Defying pressure for his resignation amid the talk, Italian Prime Minister Silvio Berlusconi vowed Wednesday to remain in office until his mandate comes to a close in 2013 and promised to work tirelessly towards shoring up Italy’s finances.
Italy’s debt, a staggering $2.2T, is viewed all the more ominously when lined up with the country’s economic output. As a portion of GDP, Italy’s debt poses a far greater challenge than that of even the United States, as debated these past few weeks by Congress. Being the seventh largest economy worldwide, Italy’s default would likely ripple through financial markets, dragging the euro zone down with it. The question is whether Italy, and the broader region, will respond, or is capable of responding, to this crisis in the same way it had for Greece.
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