Italy hopes Greece can hold onto marbles

The beginning of this article was written 6 months ago...

EU finance ministers are meeting today amidst growing fears that Greece’s protracted debt crisis could spill over into Italy. For some time now, commentators have referenced Italy in cautionary tales of the spread of Greek contagion but few dared speculate vociferously of the robustness (or lack of) of the euro zone’s third-largest economy’s sand bagging. That was until last week. As Reuters put it, “policymakers have been seized with a new sense of urgency after Italy came under market attack last week, fearing any further delay in putting together a second Greek package could poison investor confidence in weak economies around the region”. A default on its debt by Greece to mark-down its debt (considered a possible last-ditch plan until recently) has all but been ruled out now as speculators insist this could send the euro markets reeling with massive ramifications for countries such as Italy. The situation is precarious and the remaining options are few and far between. The euro zone just prays that Greece can keep its marbles while a more viable solution is sought.

Although the UK is not a member of the single currency, 40% of its trade is with the eurozone and Mr Osborne said there were signs the continuing uncertainty was having a direct effect on the UK economy - which has seen sluggish growth.

BBC News Today (12.11.11): Mr Osborne told reporters: "It is a very, very difficult and dangerous situation in the eurozone - Britain is impacted by what's happening.

"There's no doubt that growth in Britain, jobs in Britain, have been hit by what's going on in the eurozone.

"It's all the more reason that we in Britain weather this storm by taking the difficult decisions we take on our own terms - rather than being forced to do so by the markets."

After passing the Italian senate on Friday, a far-reaching package of spending cuts and tax rises is expected to get final approval at the weekend.

Italian prime minister Silvio Berlusconi is set to resign once both houses of Parliament have passed the measures, with former EU commissioner Mario Monti tipped to succeed him.

n Greece, Mr Papademos is leading a new government of national unity which is expected to implement further austerity measures - seen by EU leaders as a prerequisite for any further bailout.