Italy Is Likely To Default On Debt, But Spain Might Just Avoid It
British think tank, the Center for Economics and Business Research, have said that Italy will not avoid default unless the country sees an unlikely big jump in economic growth. The think tank went on to say that “there is a real chance that Spain may avoid default.” Even though the Italian government has managed to run a tight budget, and has also vowed to eliminate its deficit by 2014, the economy is still in need of a significant boost in growth.
Italy’s economy grew by just 0.1% in the first quarter of 2011 and further growth is expected to remain slow. Italian Prime Minister Silvio Berlusconi addressed parliament on Wednesday, saying the economy was “strong” and the nation’s banks “solvent”. Many economists believe that the eurozone’s third largest economy is in serious trouble and just might go bankrupt.
The conditions in Spain are better because its debt is much lower. Even under the “bad” scenario, Madrid’s debt ratio would climb to no higher than 75% of national output.
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