When Italy's debt ballooned to over $1.5 trillion, some leaders are now asking if the country has reached a point of being beyond rescue. The offer by Italian Prime Minister Silvio Berlusconi to resign from his post had failed to slow down the financial turmoil.
Another indicator that Italy's debt has reached unsustainable level is that the interest rate on Italian bonds hit 7 percent which is the same rate that smaller eurozone economies such as Ireland, Portugal and Greece reached and needed a rescue. At one point, the rate even reached 7.5 percent.
Because of the impact of the problematic eurozone members on the whole single currency area, instead of kicking out Greece and eventually Italy from the zone, Germany and France reportedly are scouting for ways to leave the currency.
Even non-eurozone members such as Britain are affected by the debt crisis that the United Kingdom faces a threat of a double dip recession before the end of 2011. Because of the impact of the Greek and Italian debt crisis on Britain, British Prime Minister David Cameron urged the leaders of the two nations to get on top of their countries' debts and deficits.
Cameron also suggested putting in place the largest possible firewall, which is what the European Financial Stability Facility was supposed to be. However, lack of interest failed among the markets failed to boost the fund's firepower.
Amid the political and financial turmoil besetting Italy, the Italian stock market lost 4 percent of its value, the FTSE 100 index closed 106.96 points down at 5460.38 and the Dow Jones closed 389 points down at 11,780.94.
Berlusconi to Resign After Italian Budget Released
Italian Prime Minister Silvio Berlusconi confirmed he will resign after a humiliating vote in Parliament on Tuesday.
President Giorgio Napolitano said the 75-year-old prime minister would step down as soon as parliament passed urgent reform demanded by the eurozone leaders to cut Italy's ballooning debt and attempts to goose stagnant growth in the economically troubled country.
The votes in both houses of parliament are expected this month.
Berlusconi, no stranger to the media and controversy, has been under pressure for weeks. He has faced myriad sex and legal scandals, political defeats and the loss of credibility among leaders of international markets.
Berlusconi, who has had a key role in Italy's politics for 17 years, maintained he would not step down, until Tuesday's embarrassing vote.
Bailout for Italy - out of the question
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