Adam Tooze at his own website:
Right now the greatest threat to the eurozone and one of the most significant tail risks for the world economy is the unresolved standoff over the Italian budget and its public debt running to 133% of GDP. If Italy were not a member of the eurozone, if it had its own central bank debt at this level would be a matter of concern rather than alarm. But Italy is tied to the euro, the response of the ECB in a crisis is unpredictable and speculation about Italy leaving the euro is idle. Both the political and economics costs are too vast to contemplate seriously.
Last week I contributed a New York Times op-ed about the stand off and its risks: How does the EU think this is going to end?
My main theme was that the Rome government, however unpalatable its politics, has to be taken seriously as an expression of the crisis of Italy’s political economy. There are even worse political constellations, some of which might offer a fiscal deal more amenable to the Commission, but would be disastrous for Europe in political terms. For the EU to offer only discipline risks a further turn for the worse.
More here.