Italy under fire in widening euro debt crisis

And now the attention is back on Europe.

Reuters

ROME | Tue Aug 2, 2011 3:34pm EDT

Financial market pressure on Italy intensified on Tuesday, sucking Europe's second biggest debtor nation deeper into the euro area danger zone and prompting emergency consultations in Rome and among European capitals.

Italian and Spanish bond yields hit their highest levels in 14 years, with five-year Italian yields reaching the same level as Spain's in a sign Rome is overtaking Madrid as a key focus of investors' concern about debt sustainability.

Italy's stock index fell 2.5 percent to its lowest in more than 27 months, dragged down by banks that have heavy exposure to Italian debt. European shares hit a 9-month low amid worries that slowing economic growth will make it even harder to overcome the euro zone's debt troubles.

"The fear of the market is that the world is going into recession again ... and in the euro zone the peripheral markets are the ones that will suffer most," said Alessandro Giansanti, strategist at ING in Amsterdam.

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