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Italy, Europe's latest money pit

November 10, 2011 |  7:01 am

Italy's debt crisis makes you wonder: In just what universe did it seem like a good idea to let Italy go $2.6 trillion in debt?
Friends, Romans, countrymen, lend me, oh, say, $2.6 trillion.

In Times staff writers Tom Petruno's and Walter Hamilton's story Friday on stock markets and Europe's financial crisis, there is this astounding sentence:

With $2.6 trillion in outstanding sovereign debt, Italy is the world's third-largest bond market, after the U.S. and Japan.

Huh? Really? In just what universe did it seem like a good idea to let Italy go $2.6 trillion in debt?

Oh, yeah. Probably the same universe as the one Americans live in, where it also made sense to give people who made $50,000 a year $500,000 loans for houses.

Or maybe that's not the answer. Heck, if I understood high finance, I'd be a rich hedge fund manager who pays no income tax and has a mansion in Boca Raton and an offshore bank account.

Instead, all I know is what I read. Such as this:

Stocks plummeted worldwide Wednesday as the 2-year-old debt debacle took a frightening turn, threatening to engulf Italy and deal a heavy blow to investors' faith in the Eurozone's future.

The virtual bankruptcy of Greece, the trigger for the severe bout of market volatility that began in early August, has become a sideshow to Italy's nightmare: Just as they'd done with Greece, investors are bailing out of Italian government debt, worried that they won't be repaid in full.

Which I guess means that really smart investors, who've been snapping up Italian bonds for years -- to the tune of trillions of dollars, or euros, or whatever -- are just now "worried that they won't be repaid in full."

Now, if I had gone to a fancy business school, perhaps it would've occurred to me a little bit earlier that that does seem like a lot of Fiats out the door to pay off that note.

It also makes me wonder if Italy has a tea party. But probably not. I've heard they prefer really strong coffee drinks, and communists and socialists. And debt. Lots of debt.

But this whole mess has cost Prime Minister Silvio Berlusconi his job, so you know it's serious. Berlusconi, after all, has been accused of numerous improprieties  through the years, many of the salacious variety, and he always survived. 

Still, the news isn't all bad:

Italy doesn't face an imminent risk of defaulting on its debt, analysts say. But if investors continue to push up market rates on the country's bonds the situation could get grim in 2012, when the government must refinance about $400 billion in maturing debt.

Whew. So I'm sure banks and others will be lining up to refi Italy. It's got a lot of collateral, what with all those Roman ruins and all.

And that's good news for me, because I was planning a trip to Rome in April, and I was starting to worry that there wouldn't even be a country to visit. 

Assuming it's still there, though, for sure I'll take my credit card, because you know what they say: When in Rome ...


The wealth divide

A sensible solution to student loan debt

Graphic: Italian bond yields soar in debt crisis

-- Paul Whitefield

Photo: Italian Prime Minister Silvio Berlusconi. Credit: Francois Lenoir / Reuters

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