HEADLINES -- November 9, 2011 at 8:27 AM EDT
Italy's Debt Rate Hits Record 7% Despite Word of Berlusconi Resignation
Roberto Maroni, Italy's interior minister, left, speaks with Silvio Berlusconi, Italy's prime minister, during a voting session on last year's budget report inside the Chamber of Deputies in Rome, Italy, on Tuesday. Photo by Alessia Pierdomenico/Bloomberg via Getty Images.
One day after Italian Prime Minister Silvio Berlusconi offered to resign from office once budget reforms are passed, Italy's borrowing costs crossed what the New York Times describes as "through a key financial and psychological barrier of 7 percent, close to levels that have required other euro zone countries to seek bailouts." Berlusconi's woes come on the heels of Greek Prime Minister George Papandreou's own resignation announcement amid backlash over his plan to put a European bailout plan before a public referendum.
The 7 percent marker is seen as indicative of the level of a similar trend to that of Greece and Portugal, which both sought bailouts. As they were in Greece, proposed austerity measures have been unpopular with the Italian public.
Berlusconi's decision to step down over economic pressures came after a series of sex scandals and allegation of corruption. The Washington Post points to the economic loss of confidence that drove the 75-year-old leader's announcement:
Investors have been rapidly losing faith in deeply indebted Italy. They fear a catastrophic default here that could send shock waves through global markets. Berlusconi himself was widely seen as a big part of the credibility problem, with his divisive leadership endangering political consensus on austerity measures and economic reforms demanded by European leaders to restore market confidence.
(The Economist looks back at Berlusconi's storied years in office with this slideshow of magazine covers in the last decade.)
Despite his resignation, the unknown factor of what the composition of the next government would be has done little to calm markets.
Italy is the third-largest economy within the eurozone and the eighth-largest economy in the world and has a debt burden of 118 percent of its GDP.