November 9, 2011
Fears that Europe's sovereign debt crisis was spiralling out of control have intensified as political chaos in Athens and Rome, and looming recession, created panic on world markets.
Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy will be too big to rescue.
Despite Silvio Berlusconi's announcement that he would step down as prime minister once austerity measures were pushed through parliament, a collapse of investor confidence in Europe's third-biggest economy sent interest rates in Italy to the levels that triggered bailouts in Portugal, Greece and Ireland.
Italian bond yields surged through the critical 7% mark, at one point hitting 7.5%, amid concern that the deteriorating situation had moved the crisis into a dangerous new phase.
In Athens talks to appoint a new prime minister to succeed George Papandreou were in deadlock, and will resume on Thursday morning. The Italian president, Giorgio Napolitano, sought to reassure the markets by promising that Berlusconi would be leaving office soon.
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