Italy's borrowing costs spike, PM resigns
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For a moment yesterday, attention shifted away from the drama of Greece’s political and economic struggle.
Yesterday, the interest rates Italy pays on its debt spiked over 6.5 percent, a level when previously reached by Greece, Portugal, and Ireland lead, according to The New York Times, to “a quick erosion of confidence that triggered international bailouts”.
Markets leaped as rumors emerged Italian Prime Minister Silvio Berlusconi, known for his adept ability to politically maneuver rumors of corruption, would resign. When he corrected these rumors and clarified his intention to stay, markets took a dip. After which, he promised to bring a budget plan to a vote. The plan passed, marking his loss of the majority party’s support. In response, Berlusconi announced he would resign as President in mid-November.
Italy is $2.6 trillion dollars in debt, which divided by a population of 60.6 million, comes out to approximately $42,904 per person. According to the Washington Post, should Italy default, the impact would be significant for the world economy as “Italy’s bonds are among the most widely held in the world.” Of countries that use the Euro (the Euro Zone), Italy has the third largest economy, making it difficult for the Euro Zone and International Monetary Fund to respond with bailout packages.