Standard and Poor’s just announced they’ve downgraded Italy’s credit rating to A from A+, with a negative outlook. Italy is the camel that will break Europe’s back if they can’t contain the crisis to the smaller countries of the periphery. The following chart from the American Enterprise Institute illustrates why.
Note the €440 EFSF is easily be overwhelmed by Italy, which has €465 government bonds maturing through the end of 2013. If the crisis continues and the full contagion spreads, the fear is Italy could lose market access. Some expect the ECB will monetize the financing gaps, but the Germans are not so warm to the idea.
Do the math, folks, then contact your MEP and demand they stop dithering and come up with a comprehensive solution. This will have to include bullet proofing European bank balance sheets and debt relief for Greece. We suspect, and maybe it’s just hope, they’re working on something.
(click here if chart is not observable)
Global Macro Monitor 
Why is it everyone except European Politicians seem to get this and the need to do something?
Our guess is the same reason U.S. politicians won’t address the structural budget deficit. Politics reigns until a systemic crisis.
It is already too late…
Did anyone else appreciate the irony of Geitner lecturing the Europeans on getting their economic act together?
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