The eurozone crisis has finally knocked on Italy’s door – and rather brutally at that. At one level this is surprising. Unlike Greece, Italy has gradually brought its deficit under control in recent years. Unlike Ireland, Italian banks have been only moderately affected by the crisis. Unlike Spain, Italy had not been characterised by an over expansion in either construction or private sector indebtedness.
So why has Italy been hit by sudden mistrust, expressed in words by rating agencies and in deeds by the markets? The answer is found in the combination of two factors: first, a tendency to continual delay in deference to the Greek calends (in Brussels more than in Athens); and second, a revival of commedia all’italiana (in Rome, of course).
It would be unfair not to recognise that the European Union’s response to the Greek crisis has been vigorous and fairly well-co-ordinated. But the cacophony of statements from the leaders of the eurozone, when combined with the problems of reaching speedy agreement on a final strategy, is clearly increasing the appetite of the markets to test the EU’s response.