Short-term help may have to come from the ECB buying Italian bonds (difficult politically because the next head of the ECB will be Mario Draghi, the boss of Italy’s central bank).
Soon though the euro zone may well have to expand the EFSF and allow it to issue jointly guaranteed “Eurobonds”.
That is a huge political leap—especially for Mrs Merkel.
Germany is firmly opposed to any solution that could imply open-ended transfers to feckless southerners; so are several other northern European countries, not least because guaranteeing others may raise their own borrowing costs. It is not a pleasant option.
But the alternative could be the end of the euro.
Italy and the euro: On the edge | The Economist