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Top news: Markets are being rattled this week by indications that Europe’s growing debt crisis could spread to Italy, the world’s seventh largest economy. Italy has been heavily indebted for years, but signs of a crisis emerged last week when investors began dump Italian bonds. On Monday, fears over Italy, whose economy may be too big to bail out, contributed to the largest global stock sell-off since March.
German and French banks hold about $150 billion in Italian debt, compared to only $36 billion in Greece. U.S. banks hold about $36.7 billion in Italian debt. European leaders are scrambling to arrange an emergency summit to address the crisis as early as Friday.
Italy’s borrowing costs have soared to their highest level in over a decade. Prime Minister Silvio Berlusconi described the country as on the “front lines” of a battle that threatened all of Europe and the future of the common currency. Berlusconi is pushing a 40 billion euro austerity plan intended to erase the country’s deficit by 2014.
Berlusconi is under fire for spending too much time attending to his own suffering business interests, rather than the country, and is fighting the perception that he has been distracted by combating various sex and legal scandals. In recent days, Berlusconi has also been carrying on a public feud with his own finance minister over the handling of the crisis.