With the announcement that the attempts by the Democrats to form a government have been derailed by what the Economist characterizes as two clowns, former Prime Minister Silvio Berlusconi and Beppe Grillo, the situation in Italy gets more dangerous.
It's not that economies are too slow to appease markets. It's that the markets have too much power to destroy economies. Let's not forget -- this entire crisis was caused because markets mispriced risk.
Spain or Italy: which one is worse off? Economically, Spain; politically, Italy. But since a bad political situation tends to hurt the economy, and a sick economy always poisons politics, the answer could easily be reversed.
Greece was a problem, but the collapse of Italy is not manageable. Fifty percent of the Italian debt will mature in the next two years. This is a Damocles sword, and it is not going away any time soon.