Will the Germans bail out Italy? No one else can do it. The IMF and the United States don’t want to contribute anything. The rest of the EU is either too small or too poor to do it. That leaves Germany to bail out the world’s third largest bond market whose ten-year bonds today jumped above 7%, the level at which other countries such as Greece required bailouts.
Maybe the Germans don’t like giving money to the Greeks. But the Greeks belong to a Balkan state. Italy’s practically right next store, especially to Austria. There are cultural affinities and a religion shared in common between Bavaria and Italy. And Italy was Germany’s ally for most of World War II. Hitler went out of his way to accommodate Mussolini. In the end he tried to save Il Duce. Maybe we will see a little of that quixiotic effort now.