Everything would be all right! How’d that work out? Not so hot…
This really is the nightmare scenario for Italy. If yields stay up here for any length of time, the sizable Italian debt becomes unsustainable.
ECB buying in recent days has been powerless to even slow the decline in bond prices. A change in strategy is needed. At a minimum, they need to up the amount of bond buying buy a factor of 10. If that is done, they may have abandon sterilizing bond purchases and move to QE.
With the long-awaited details of EFSF financing still to be worked out, it is a perilous time for the Troika.
