Italian Debt

The Italian debt is rearing its ugly head again. Of the PIIGS in the European Union, the Italian debt is one of the most worrying.

Mama Mia!

Okay, that is a bad stereotype, but I just could not let it pass. The truth of the matter is we are watching what is happening with Greece in Europe without realizing it really doesn’t mean much. Greece is a speck of dust compared to what some of the other countries in the European Union are facing. You don’t read much about them because the markets would panic, so everyone must focuses on tiny economies like Greece and Portugal.

The Italian national debt is worrisome because Italy is one of the bigger economies in the Euro Zone. As a matter of comparison, it is bigger than Iceland, Portugal and Greece combined. In short, trying to bailout the country would be a litmus test for how far the big economic boy in Europe, Germany, is willing to go to keep the EU as a functioning entity. While it might make logical sense to do so, the voting public in Germany is getting very tired of footing these bills and there are serious questions as to how far they are willing to go.

Italy Debt

So, just what is the Italy national debt level? Italy is carrying a debt to gross domestic product ration of 118 percent as of the end of 2010. Anything over 90 percent and definitely over 100 percent sets off alarms. To give you a perspective, Iceland collapsed as an economy from its banking crisis. The government bailout to reset the banks left the country at a debt to GDP ratio of 123 percent. Italy hasn’t tried to bailout anyone and the Italian national debt is already almost at this number! It does not bode well for the future.

Is the Italy national debt problem one that could finally lay waste to the EU? Yes, it is. The question is whether the country can maintain control of the debt or will it slip over the edge into the economic abyss and drag everyone else down with it? Only time will tell.

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