The bond markets have finally decided to start bullying Italy, and are now doing so with a vengeance. The spread with the Bund is close to 400 bpts, which means that a third of the Eurozone is now facing sovereign debt distress. The ECB has to start wielding a big stick quickly if this is going to stay together.
But Italy and Spain are facing political vacuums too - Zapatero has thrown in the towel and called for new elections in November, in which he will not stand. Berlusconi's government is by now close to zombie status, but removing him and finding a credible alternative will take months, possibly years. So, there is a space of a few months for all this to get much worse before any political response can emerge.