At that point, as was to be expected, banks retrenched, tightening credit conditions for their customers. Financial conditions became very harsh for the real economy. It took a long time to improve. Even one year ago, rates were very high for an economy that had not been growing for years and was expected to stagnate in the future.
Market discipline can move from too soft to too harsh. It was perhaps not enough in the past but then it became excessive. Governments should take measures to avoid a pro-cyclical financial loop that creates instability. In Italy a lot of people are starting to think we would be better off outside the euro. Italy joined the euro because the previous regime, i.e.