A day after news that Greece would hold a referendum to ratify the aid package many had considered a done deal, Italy convened an emergency economic session and an impromptu cabinet meeting Wednesday, in an attempt to ward off the economic crisis threatening to hit its shores.
Finance Minister Giulio Tremonti called the meeting with the country's Financial Stability Safeguard Committee, which includes the newly installed head of Italy's central bank, the president of financial sector watchdog Consob, and various ministry officials.
The task at hand for them is a difficult one: rehabilitate damaged investor confidence in the country, and figure out a way to pay down Italy's debt without hurting already dim growth prospects.
The challenge has been made worse by Greece's woes. The decision from Greek Prime Minister George Papandreou was a punch in the face to the euro currency, which immediately lost three cents against the dollar, and it sent ripples across the European Union -- nowhere having more of an impact than in Italy.
The Italian Stock Exchange went into a freefall, losing 6.8 percent in the first session after Papandreou's remarks, though it recovered about a third of that fall on Wednesday.
And the yield on Italian sovereign debt grew, with Italian 10-year bonds now yielding 4.5 basis points more than the same bonds in Germany, to 6.34 percent, their highest level since the euro was introduced in 2002.
The spike in yields took place even though the European Central Bank, which, since Tuesday has been led by Italian Mario Draghi, continues to buy Italian bonds in order to keep the yield within reason.
The higher yield makes it increasingly expensive for Italy to pay down its estimated 1.9-trillion-euro in debt, the equivalent to 120 percent of the country's gross domestic product (GDP), one of the highest debt ratios in the world.
In order to pay the debt, the country must borrow more money, and the money it is borrowing now to pay off maturing bonds is costing as much as 2.5 percentage points more than the bonds they are replacing.
President Giorgio Napolitano on Tuesday urged the government to implement emergency measures as soon as possible, and he said he would meet with opposition lawmakers to help assure the plan had broad support.
Meanwhile, the emergency economic session worked on strategies all day. Prime Minister Silvio Berlusconi called an unscheduled cabinet meeting to discuss the emergency economic session's findings and to announce new crisis strategies ahead of the Group of 20 meetings, which get underway in Cannes, France, on Thursday.
Observers said that with the risks to Europe and the world economy that economic issues would take center stage in Cannes, leaving some French priorities for the meetings -- such as environmental issues, world corporate governance, and confronting volatile commodity prices -- on the sidelines.