Italy may a face a bailout sooner than later. Like the Italian sovereign, also Italian banks are somewhat hiding behind Spanish banks. The situation there isn’t much better; however, Italy’s main problem is financing itself (the sovereign) in the markets. There is a good chance that Italy will receive some kind of help to lower its yields during the month of July. This might be a limited bond-buying program to lower the yields. The EU Summit decided on no seniority for the ESM bailout mechanism over private bondholders. But that’s the end of the good news. Here are the problems: No seniority also in Italian case?: The biggest achievement of the EU Summit (which is full of holes) is that the bailout funds will have no seniority over private bondholders, thus not scaring them off. There is doubt that this will apply to Italy in addition to Spain. In addition, the ESM hasn’t been ratified by all the euro-zone countries. Sufficient size: It is highly doubted that the current bailout mechanisms are sufficient to safeguard Italy, due the size of the economy and the debt. Placing Italy in a bailout scheme casts an even bigger shadow over the euro-zone. ESM Not Ratified: The “permanent” bailout mechanism, ESM, hasn’t been ratified by all EU countries. This includes a heated debate in Germany, the paymaster, which faces challenges in the court. The changes in the rules of the ESM also require approval. Withdraw of Italy from funding: As the euro-zone’s third largest economy, Italy has a significant part in funding bailed out countries. If it requires a bailout, the stack of cards may tumble down. Other countries will have a higher burden and Italy’s bailout may be too high. As we’ve seen too often, action from the EU is usually greeted by the markets, and results in a rise of risk currencies such as the euro, pound, Aussie, kiwi and loonie against the dollar and the yen. However, when the markets understand that these moves are half baked, require approval and are subject to conditions, the trend quickly reverses. This article is part of the Forex Monthly Outlook. You can download it by joining the newsletter in the form below, which appears on any article on Forex Crunch. Yohay Elam Yohay Elam Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts. Yohay's Google Profile View All Post By Yohay Elam Opinions share Read Next EUR/USD: Trading the German ZEW Jul 2012 Kenny Fisher 11 years Italy may a face a bailout sooner than later. Like the Italian sovereign, also Italian banks are somewhat hiding behind Spanish banks. The situation there isn't much better; however, Italy's main problem is financing itself (the sovereign) in the markets. There is a good chance that Italy will receive some kind of help to lower its yields during the month of July. This might be a limited bond-buying program to lower the yields. The EU Summit decided on no seniority for the ESM bailout mechanism over private bondholders. But that's the end of the good news. Here are the problems:… Regulated Forex Brokers All Brokers Sponsored Brokers Broker Benefits Min Deposit Score Visit Broker 1 $100T&Cs Apply 0% Commission and No stamp DutyRegulated by US,UK & International StockCopy Successfull Traders 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.2 T&Cs Apply 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.3 Recommended Broker $100T&Cs Apply No deposit or withdrawal feesTrade major forex pairs such as EUR/USD with leverage up to 30:1 and tight spreads of 0.9 pips Low $100 minimum deposit to open a trading account 9 Visit Site FreeBets ReviewsYour capital is at risk.4 T&Cs Apply Visit Site FreeBets ReviewsYour capital is at risk.5 Recommended Broker $0T&Cs Apply Trade gold, silver, and platinum directly against major currenciesUp to 1:500 leverage for forex trading24/5 customer service by phone and email 9 Visit Site FreeBets ReviewsYour capital is at risk.