Is Italy heading for disaster?

The very narrow election victory by Romano Prodi’s centre-left alliance was a “disaster for Italy and is a threat to the future of the euro”, says William Rees-Mogg in The Times.

The very narrow election victory by Romano Prodi's centre-left alliance was a "disaster for Italy and is a threat to the future of the euro", says William Rees-Mogg in The Times. Italy is now in the economic condition "that normally preceded devaluation of the lira" in the years before it joined the euro.

So expect international investors to "start taking speculative bets on Italy's euro membership within the lifetime of a Prodi government", says Wolfgang Munchau in the FT. Italian withdrawal from the euro "is equivalent to sovereign default". That ought to mean that Italian bonds yield significantly more than their European counterparts in return for the risk that Italy defaults on repaying them.

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Annunziata Rees-Mogg

Annunziata was a deputy editor at MoneyWeek, covering financial markets, politics, economics and comment pieces. She then went on to the Daily Telegraph as a lead writer where she wrote a column on young women’s financial issues. She was briefly a member of the European Parliament for the East Midlands region in the UK as part of the Conservative Party.  Annunziata continues to write  as a freelance journalist.