As the European sovereign debt crisis has spread from Greece to Italy, investors worst fears are coming true. “Contagion” is the word of the day, as Italy’s precarious situation threatens to destabilize the entire euro zone, possibly posing a systemic risk to the global economy. A central member of the euro zone, and Europe’s third largest economy, Italy is too large to be bailed out by Europe as was the case with Greece. Italian bond rates have skyrocketed to above 7 percent, as investor fret over whether Italy’s government will be capable of dealing with the crisis, even with the departure of Prime Minister Silvio Berlusconi. Rachel Donadio, Rome bureau chief for The New York Times, reports on the latest.
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