Markets were relieved by the formation of a new government in Italy, but there is still plenty of reason for worry. If the new prime minister, Enrico Letta, reverses the budget cutting done under his predecessor, as he has promised to do, Italy could quickly become economically unstable: If he does not, Italy could quickly become politically unstable. It does not seem likely that Letta can succeed, unless the dynamic in Europe changes between now and the end of 2013.
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