Italy May Find November Is the Cruelest Month

It won't take much to push highly indebted Italy into a debt crisis, as it is already flirting with bond yields close to unsustainable levels. The big risk is of a buyer's strike, akin to the recent UK gilt market meltdown. What happens next month will be crucial for the nation’s economic future.

A lot of things have to come together harmoniously in November, including the creation of a new Italian government with an acceptable finance minister and the reconvening of Parliament. Immediately after that comes the annual budget that has to pass scrutiny with the European Commission before year-end. That process, always fraught, is likely to be even more fractious this year because of a wider budget deficit and an increase in borrowing. With €245 billion ($238 billion) of government bonds needing to be refinanced next year and €230 billion in 2024, there is very little room for error.