Could Italy be next? Concern in Rome after Spain bank rescue

Even as the global economic community hailed an agreement to rescue Spain's stricken banks, there was concern in Rome on Sunday that investors could now begin treating Italy as the next weak link in the eurozone.
Those fears have been fueled by a report from Moody's ratings agency warning that Spain's banking troubles could be "a major source of contagion" for Italy where lenders are also highly reliant on European Central Bank funding.
"Italy is now the only country in difficulty that has not had to ask for a bailout," said Federico Fubini, a columnist for the top-selling Corriere della Sera daily, after aid packages for Greece, Ireland, Portugal and now Spain.
Without a stabilisation in borrowing costs on the debt markets for Italy and Spain and a Europe-wide agreement on the banking system, Fubini said that "the uncertainty will be very high and scrutiny of Italy will grow ever higher."
Italy's borrowing costs are lower than Spain's -- indicating greater investor confidence -- but they have been moving in line with Spanish ones. The rate on benchmark 10-year Italian government bonds on Friday rose to 5.745 percent, while the rate on Spanish bonds went up to 6.192 percent.
Walter Riolfi, writing in business daily Il Sole 24 Ore, was also wary on the Spanish deal, saying: "For Italy this represents the removal of the filter that separates our country from the group of other countries in difficulty."
As has been the case in Spain, Italian banks have bought up large amounts of domestic government bonds in recent months, making up for reduced foreign demand but also increasing their exposure to the sovereign debt crisis.
The Corriere della Sera daily said concern about possible contagion drove Prime Minister Mario Monti, who is also the finance minister, to play a key role in negotiations leading up to the Spanish bank rescue announced Saturday.