Some maintain that Italy and Spain risk losing market access for their sovereign bonds despite drops in yields. A recent Vox column by Francesco Giavazzi suggested that Italy could and should avoid a bailout. This column argues that in spite of all its admirable human and economic assets, Italy has moved to a bad equilibrium from which it is most unlikely to escape.
Charles Wyplosz, Wednesday, August 15, 2012
Francesco Giavazzi, Monday, August 13, 2012
Spain looks set to turn to the EFSF for a formal bailout subject to stringent conditionality. In this column, Francesco Giavazzi – one of Europe’s leading macroeconomists and an advisor to the Monti government – argues that Italy’s situation is nothing like Spain’s. To avoid submitting itself to its EFSF conditionality, Italy should reduce its borrowing needs with a determined programme of public asset sales and bridge financing from the Cassa Depositi e Prestiti.