The eurozone crisis is developing at an unprecedented rate and Italy has become the latest country to be sucked into a debt spiral from which it might not return.
Prime Minister Silvio Berlusconi is facing his last few days in office as Italy moves closer to the financial brink.
Its bond rates hit emergency levels, close to those which forced Greece, Portugal and Ireland to ask for an EU bailout.
That has sparked panic in global markets amid fears Berlusconi's successor will not be able to prevent the eurozone's third-largest economy from sinking.
Borrowing costs have passed the seven per cent mark, entering extremely dangerous territory. Seven per cent was the trigger point which forced countries like Ireland, Portugal and Greece to seek an emergency bailout from the EU and the IMF.
This is also the point at which creditors start to look carefully at a country’s debt. With a debt the size of Italy’s, the likelihood is that the country will not be able to pay what it owes. At that point, creditors will stop lending and investors will turn away – depriving the economy of a lifeboat.
That scenario would be disastrous for a country like Italy which has debt of around € 1.9 trillion ($2.6 trillion). It is widely believed that Italy's debt is way too big for the EU to bail out.
Whether Europe has the resources to save Italy or not, the EU’s bailout fund is simply not ready as there is nowhere near enough money in it – which could prove to be a real problem in itself.
The financial crisis in the EU has morphed into a political one, and Italy is no exception. Prime Minister Silvio Berlusconi has said that his resignation is a certainty and he is actually quite relieved to be stepping down.
At the moment there are no guarantees that the interim government which will succeed his administration will actually have the political will to push through some of the very necessary anti-crisis measures that the markets are going to be demanding.
What is clear for now is that the hows and whens of any new government will make little short-term difference to the financial quagmire into which Rome is rapidly sinking.