Italy replaced Berlusconi with a technocrat prime minister: an ex Goldman Sachs banker: Mario Monti. Monti has been quite successful in following the austerity path: the Italian parliament approved many reforms. Monti also took the time to criticize Spain. The big achievement is that Italy’s yields are lower than Spain. Apart from that, the situation is worsening: Yields are still high – a recent auction of 10 year notes resulted in yields above 6%. Where are the fruits of austerity? Fast contraction: Italy’s economy squeezed by 0.8% in Q1, far worse than the European average of 0%. The unemployment rate leaped above 10%. Purchasing managers’ indicators, which are forward looking figures, are falling. The debt to GDP ratio of Italy isn’t much better than Greece’s: around 120%. Italy is the euro-zone’s third largest economy. If Spain is too big to bail and there are doubts if the euro-zone could survive without Spain, it’s clear that there’s no euro-zone without Italy. If Italy gets to a point where it needs a bailout, it’s game over. So far, Italy managed to hide behind Spain. If things get worse, a comprehensive solution must include some ring-fencing for Italy. The minimum is the renewal of the bond buying scheme by the ECB. Some debt restructuring cannot be excluded. Italy can hope that some form of a bailout for Spain will help stabilize Italian yields as well, keeping the boot away from Italy. This article is part of the Forex Monthly Outlook for May. 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 NZD/USD Outlook June 11-15 Anat Dror 11 years Italy replaced Berlusconi with a technocrat prime minister: an ex Goldman Sachs banker: Mario Monti. Monti has been quite successful in following the austerity path: the Italian parliament approved many reforms. Monti also took the time to criticize Spain. The big achievement is that Italy's yields are lower than Spain. Apart from that, the situation is worsening: Yields are still high - a recent auction of 10 year notes resulted in yields above 6%. Where are the fruits of austerity? Fast contraction: Italy's economy squeezed by 0.8% in Q1, far worse than the European average of 0%. The unemployment rate… 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.