THE GUARDIAN: With bond yields at 7.4%, Italy may soon need a bailout – and Germany will have to choose between printing euros and a breakup of the single currency
"There is a feeling in Asia that this crisis could go terribly wrong," said Stuart Gulliver, chief executive of HSBC, this morning as the yield on 10-year Italian bonds approached 7%.
Actually, there's a feeling everywhere this morning that it's already going wrong. As Gulliver also said, the reality is dawning that the crisis is moving faster than politicians' ability to deal with it.
With Italian yields now at 7.4% (at 11am), Italy will need a bailout if prices were to stay even roughly were they are. That's just arithmetic.
As a Lombard Street Research note pointed out, International Monetary Fund (IMF) simulations show that if Italy's funding costs rose to 8%, its interest payments on outstanding debt would reach 20% of government revenues by 2015. That 20% level is generally regarded as intolerable for any country.
The problem, of course, is that Italy cannot be bailed out – or, at least, not easily or quickly. » | Nils Pratley | Wednesday, November 09, 2011
