Euro Crisis: Scarily, The Real Action Is Now In Italy

For those inclined to wonk-out on the European financial crisis, watch the painfully dry and robotic bigwig Charles Dallara on Sir Lawrence's show.

It's informative stuff, and after it is all over Sir Larry asks his guests for a "whip around" commentary on the most important aspect of what Dallara shares. Since He of the House of Mustard Seed did not invite me on the show despite my clear qualifications, I will have to comment here.

Dallara hinted at it, but it's hard to escape the Big Kahuna here - Italy. Italy is the big bad mess that could sink everything. Greece is chump change and the world can move past a Greek meltdown before you can say spanikopita. Italy, however, has a big and meaningful economy and a gargantuan pile of debt for which there is no bailout solution. Italy has the potential to make this all for naught and bring the crisis right back to white hot danger levels. There must be a solvency-focused solution - deep structural reforms aimed at dynamic growth and a complete rethink of the welfare-state model - coming from the Italians. Unless that happens, we are all right back in this mess up to our necks; and the recently announced changes to the retirement age are, well, underwhelming. If the Italians don't get it right, we're f**ked, and sure enough the bond market seems to understand this and is starting to send its gentle hints.