Does Italy Pose a Threat to the Global Economy?

Global markets and economic policymakers seem to be turning a blind eye to the fact that Italy’s stagnant economy could pose a large spillover threat to the global economy.

Italy’s banking system suffers from a staggering share of nonperforming loans that raise the risk of an Italian banking crisis, while very low economic growth and high public-debt levels raise questions about debt sustainability.

Given the size of its economy and the possibility of an Italian exit from the euro, financial contagion risks from Italy to the rest of the European economy are simply too big to ignore.

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