Troubles in Rome

Posted on November 14, 2011


When a nation like China trades with Italy there will obviously be a trade deficit for which Italy pays China in Euros since China doesn’t need a billion Euros they can invest this extra money in Italian bonds. Unfortunately the high bond yields have put Italy at risk of defaulting on their debt. After previous complaints of corruption to bolster his own media company, and other equally heinous accusations the former prime minister of Italy Silvio Berlusconi finally stepped down last week as a result of Italian bond yields soaring above the ominous seven percent levels. Although seven percent may seem only slightly higher than the more stable six percent yields before the increase, the seven percent bond yields and additional economic pressure initiated the bailout plans in Spain, Portugal, and Greece. As with most of the countries facing bailouts austerity measures are seriously needed, for Italy this means taxes such as a tax on primary residences, and decreasing frivolous spending to help balance the 1.6 trillion dollar deficit. The new PM Mario Monti will need his skills as an economist to help salvage his country’s economic queries.