It's all Goldman Sachs' fault says Matt Taibbi

[Jan Klimkowski]

The self-appointed financial correspondents opine: "Italy is too big to bail."

Nah, the piranha speculators are ready to gorge on yet more taxpayer bailout money:

Italy calls emergency meeting as eurozone crisis resurfaces

A fresh wave of eurozone panic prompted Italian authorities to call an emergency meeting on Tuesday and Spain's prime minister to delay his holiday as borrowing costs for the two nations hit fresh highs.

By Szu Ping Chan4:24PM BST 02 Aug 2011

Italy's economic and finance minister Giulio Tremonti is due to meet officials from the Bank of Italy and market regulators less than two weeks after ministers agreed a €159bn (£140bn) second bail-out for Greece.

Concerns that Spain and Italy will be the next victims of the eurozone crisis drove benchmark bond yields to all-time highs and unsettled stock markets.

Yields on 10-year Spanish government bonds touched 6.426pc at one point, while Italy's 10-year bonds also hit highs of 6.219pc -edging closer to the 7pc levels that forced its smaller Greek and Portuguese neighbours to ask for a bail-out.

Mr Tremonti is also due to speak with EU commissioner Olli Rehn, later today and will meet eurogroup chairman Jean-Claude Juncker in Luxembourg on Wednesday for further discussions.

With Europe's politicians on summer break, analysts said markets were renewing their fears that Europe's aid package for Greece and other bailed-out nations was not enough to prevent wider contagion.

"This has all the features of a self-fulfilling crisis," Harvinder Sian, a senior bond strategist at Royal Bank of Scotland, told Bloomberg. "The rise in yields looks pretty relentless, and it doesn't look as if the politicians are anywhere near to getting ahead of the curve."

The events forced Spanish prime minister Jose Luis Rodriguez Zapatero to delay his planned three-week holiday so he could keep a closer eye on the unfolding crisis.

European stock markets were also heavily hit by the uncertainty. Italy's benchmark FTSE Mib stock index dropped 1.5pc to a 27-month low of 17,463.92, while bourses in London, France and Germany followed Asian markets lower, falling around 0.6pc.

Analysts are now looking to see how the two countries could prevent the eurozone crisis escalating to the next level.

Italy is particularly viewed as 'too big to bail' because of its giant debt to GDP ratio - the highest of any eurozone country except Greece.

"Perhaps Italy will have to look at the funds available through the European Financial Stability Facility (the eurozone's bail-out fund), and maybe on Italy's part they will have to announce some further austerity measures, but of course that will take time," said Charles Jenkins, director for Western Europe at the Economist Intelligence Unit.

Italy has already pushed through a €48bn package of austerity measures in an attempt to reach a balanced budget by 2014.

Its central bank recently forecast the country's gross domestic product would grow by 1.1pc next year, less than the government's previous estimate of 1.3pc growth.