Over the years I’ve spent much time talking about Italy as the next ticking time bomb for Europe and the global banking system.

It’s government debt is the third highest in the world at 132% of GDP, coming only after Japan and Greece.

Its private debt is 23% of the Eurozone versus Greece’s 3%.

But here’s the bigger issue: Italy’s bad loans are 40% of the Eurozone.

Just one country comprises 40%… That’s crazy!

So, you can see how the euro and Eurozone can’t afford to bail out Italy. This has been obvious from the beginning. We’ve been saying so for years.

Italy’s already bankrupt. It’s just that no one has announced it yet.

Its banks keep propping up zombie companies with just enough credit for them to meet their debt obligations.

In other words: lend them just enough to pay you back and stay current on their debt obligations, but not enough to grow or get into more trouble.

It’s a form of denial. Nothing more than false hope that the economy will magically get better down the road.

The paradox in Italy is that the banks can’t get healthier without economic growth… and the economy can’t grow without healthy banks to lend money.

Now that the government’s divided, and the rising populist parties are calling for higher spending and even breaking away from the euro, the stock market and Italy’s bond market are falling.

The markets are finally starting to get serious about Italy and the imbalances in the entire euro system. Only Mario Draghi’s incessant stimulus, years after the U.S. tapered, has kept Italy’s 10-year bonds well below the much more solvent U.S. Treasurys. (We aren’t pretty either, just the best house in a bad neighborhood.)

Personally, I think it’s about time.

Italy’s yields spiked strongly on Tuesday, up to as high as 3.18%, while the U.S. 10-year fell sharply, down to as low as 2.97% from recent highs of 3.11%. But, more importantly, look at the most recent massive spike in Italy’s yields…

Italy’s bad debts had climbed to 14% of loans as of 2014, and now they are near 20%. Meanwhile, 10% is technically bankrupt…

Italy is the next Greece, and it’s too big to fail or bail out. Within the next six to 18 months the euro and Eurozone will be imploding in some fashion: one of many coming to the global economy.

And it couldn’t have happened to a nicer group of central bankers!

Harry
Follow Me on Twitter @harrydentjr

Harry Dent
Harry S. Dent Jr. studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of his chosen profession that he turned his back on it. Instead, he threw himself into the burgeoning new science of finance where identifying and studying demographic, technological, consumer and many, many other trends empowered him to forecast economic changes. Since then, he’s spoken to executives, financial advisors and investors around the world. He’s appeared on “Good Morning America,” PBS, CNBC and CNN/Fox News. He’s been featured in Barron’s, Investor’s Business Daily, Entrepreneur, Fortune, Success, U.S. News and World Report, Business Week, The Wall Street Journal, American Demographics and Omni. He is a regular guest on Fox Business’s “America’s Nightly Scorecard.” In his latest book, Zero Hour: Turn the Greatest Political and Financial Upheaval in Modern History to Your Advantage, Harry Dent reveals why the greatest social, economic, and political upheaval since the American Revolution is on our doorstep. Discover how its combined effects could cause stocks to crash as much as 80% beginning just weeks from now…crippling your wealth now and for the rest of your life. Harry arms you with the tools you need to financially prepare and survive as the world we know is turned upside down! Today, he uses the research he developed from years of hands-on business experience to offer readers a positive, easy-to-understand view of the economic future by heading up Dent Research, in his flagship newsletter, Boom & Bust.