Ireland's debt was downgraded to junk status yesterday, as the sovereign debt crisis in Europe deepens, but the big worries are Spain and Italy.
Satyajit Das is a globally renowned risk analyst, who accurately forecast the global credit crash and its causes.
He says the growing cost of funding Italy's debt is a major problem and there is now a serious risk of a catastrophic meltdown.
He spoke to me this afternoon.
SATYAJIT DAS: The position is quite serious because Italy has substantial amount of debt per capita, that is per Italian, the debt they have is second only to Greece.
But the real problem in the case of Italy is the quantum of its debt. Its debt is around $2.3 trillion. Now in comparison the Greek debt problem which has plagued the financial markets for now 15 months is only $340 billion. So the scale is very, very large.
STEPHEN LONG: Are you saying that Italy is at risk of default?
SATYAJIT DAS: I don't think Italy is at risk of default but it is at the moment at risk of two things, one is losing access to funding from commercial sources, which is what we saw happening to Ireland, Portugal and Spain.
STEPHEN LONG: And therefore needing a bail-out from the European Union.
SATYAJIT DAS: Indeed. And also what is also happening is that the cost of Italian debt is rising. It is now close to 6 per cent for 10 years. And the problem is once your debt cost gets to around the 6 to 8 per cent mark, with the tremendous burden of debt - because the Italian debt is around 120 per cent of everything Italy produces each year - that debt very quickly becomes impossible to service. (more)