Italy sinking?

Whilst most eyes have been focused on Greece, with the G20 sidelined, the ECB has reduced interest rates by a derisory 0.25%.  It looks as though the new boss of the ECB is following in his predecessor's approach, namely that the ECB is an extension of German policy. See:

http://www.telegraph.co.uk/finance/comment/jeremy-warner/8868316/ECB-President-Mario-Draghi-cuts-the-euros-last-lifeline.html

I mentioned in an earlier blog today the problems in Italy which will tower above the Greek shambles .  Two paragraphs from the report the link above takes you to:

Events on Thursday were the now customary roller coaster ride. While all eyes were focused on the "will-he-won't-he resign" soap opera of George Papandreou and his threatened referendum, something potentially much more ominous was happening in Rome, where parliamentarians are refusing to implement the reform agenda in an attempt to force Silvio Berlusconi out of power. Insurrection against the penalties of the single currency is by no means confined to Greece. Berlusconi appears as much dead in the water as Papandreou.

Greece doesn't matter; the eurozone economy could cope with a hard Greek default. In any case, markets have already largely discounted it. But Italy, the eurozone's third largest economy as well as the world's third largest sovereign bond market, is a different matter. The euro could not survive an Italian default and/or exit.

More on the ECB and Italy:

http://www.telegraph.co.uk/finance/financialcrisis/8868535/ECBs-Teutonic-Mario-chills-bond-rescue-hopes.html

And this, on the UK and the IMF as well as Italy and Greece.

http://www.telegraph.co.uk/finance/g20-summit/8868676/Britain-poised-to-provide-billions-for-new-rescue-package-as-euro-crisis-deepens.html

Interesting article, as the title indicates:

http://blogs.telegraph.co.uk/finance/andrewlilico/100013055/italy-is-neither-insolvent-nor-illiquid/