As both Italy and Greece fumbled with successor governments, worries over officials’ failure to find a solution to the debt crisis spread contagion to Italy, where bond yields broke records.
As if that were not enough bad news for the region, France and Germany are squabbling over rules for a euro zone debt repayment plan. And non-euro-using nations warned against forming “a club within a club”—a two-tier system within the European Union (EU) that seems geared toward creating a two-speed Europe of nations within the euro zone and those that do not use the joint currency.
Investors growing increasingly fearful for the survival of the euro hammered Italian bonds Thursday, even as the European Central Bank (ECB) bought them in an attempt to keep worries under control. That failed, however, with 10-year Italian bond yields soaring above 7% and with Reuters reporting that the ECB also declared that it does not intend to rescue governments with unlimited funds.
Failure of both Greece and Italy to come up with successor governments has been an unlooked-for complication. The Greek debacle has the elements of a sideshow, as Prime Minister George Papandreou on Wednesday announced that a previously arranged coalition would take over, and Filippos Petsalnikos would succeed him as prime minister, according to Reuters.