Italian bond yields are up, stocks are down, and Prime Minister Berlusconi is vowing quick passage of an austerity plan. But the real problem is the euro.
"It's a bit of a war zone in Europe today," says Domenico Crapanzano, head of European rates at Jefferies.
After frantic selling on Friday and Monday, "some buyers are coming into the picture, but we still have a very, very weak" feel in the market, he told CNBC's Simon Hobbs.
But why Italy? True, hedge funds are shorting the bonds, the cost of insuring against default is going up — but it's not clear Italy's problems are anywhere near as pressing as those in several other countries.
Crapanzano has an answer: "This was an accident waiting to happen," he says. "The market has been progressively losing patience. You have Greece, Ireland, Portugal — frankly, you know, the next step was just a matter of time. The issue is not really Italy, but the euro. You have a currency where monetary policy is not working."
Sure enough, the single currency has fallen sharply since late last week, even though some buyers — possibly the European Central Bank — have stepped in and tried to allay fears in the bond markets.
You can watch the whole discussion right here.
What might restore confidence in the euro? Crapanzano didn't say, but euro zone leaders will meet again at the end of the week to take another stab at solving Greece's problems. Stay tuned.
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