Italy suspended mortgage payments for households and small firms as the country entered a coronavirus lockdown this week. Meanwhile, on Monday the spread between Italian and German ten-year debt (the gap between the yields on each) went above 2% for the first time since mid-2019.
That suggests that the current sovereign bond rally is not completely indiscriminate, with investors reassessing the risks of lending to Europe’s second most-indebted nation. The Italian economy now looks set to contract sharply in the first and second quarter.
In the world of sovereign debt risk, Italy is “the elephant in the room”, says Hung Tran in the Financial Times. The country is almost certainly heading for its fourth recession since the global financial crisis.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
That will push government debt above $2.5trn, equivalent to an utterly unsustainable 135% of GDP. An outright crisis is unlikely so long as interest rates remain low. But the risk is “rising” and it represents an “existential threat to the eurozone”.
Europe’s leaders have yet to get a grip, says Peter Goodman in The New York Times. With recession looming, French and Italian politicians this week called for a coordinated fiscal response to Covid-19, but debt-averse northern governments will be hesitant to get on board.
History suggests it takes a real crisis to get consensus in Europe. With Italy locked down that day may not be far away.
-
Renewable investing: who is paying for the green revolution?Investors in renewables have not been rewarded, says Bruce Packard. Will they fund the government’s plans?
-
UK house prices rose 4.6% last year – where did property prices grow most?House prices increased by 4.6% in 2024, giving an average property price of £268,000. Where did property prices grow the most and will they continue to rise this year?
-
Trapped in a time of zombie governmentIt’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
-
America is in deep denial over debtThe downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
-
Bank of England raises interest rates to 5.25%The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
-
UK inflation remains at 8.7% ‒ what it means for your moneyInflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
-
VICE bankruptcy: how did it happen?Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
-
Would a food price cap actually work?Analysis The government is discussing plans to cap the prices of essentials. But could this intervention do more harm than good?
-
UK inflation slides to 8.7% - what does it mean for your money?News Inflation has dropped below 10% for the first time in months, but with food prices at a 45-year high, is this good news and what does it mean for your money?
-
Why the UK equity market is shrinkingAnalysis The crisis has been building for 25 years, says Max King, and it will take decades to reverse the trend.
