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Italy's A Nice Place, But The Neighborhood's Going Downhill

Aug 5, 2011

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Italy is in trouble. The country is getting sucked into Europe's debt crisis, and leaders around the continent are trying to figure out what to do about it.

On today's show, we talk to a few Italians who describe how common tax evasion is in Italy, and how big the unofficial economy is.

We also talk to Andrew Balls, head of European portfolio management at PIMCO — a guy whose job is figuring out whether to lend money to Italy.

He says Italy isn't in such bad shape. Yes, it's debt is high. But its annual deficit is small, it didn't have a housing crisis and its banks are in decent shape.

Italy's problem is that investors are getting nervous about its neighbors — Spain, Greece and Portugal. And that tends to spill over. Italy is like a nice house in a neighborhood that's going downhill, Balls says:

It's difficult to be the Italian house in the deteriorating European neighborhood ... you can have pressure on a country like Italy, contagion to Italy, even though there hasn't been any significant change in the fundamentals.

Subscribe to the podcast. Music: Fabri Fibra's "In Italia." Find us: Twitter/ Facebook.

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