What's the matter with Italy?

BBC News - What's the matter with Italy?:

The country that came up more and more during meetings between ministers looking to solve the eurozone debt crisis was Italy, but why should it be affected by the Greek crisis?

Greece's debt problems are already widely known and the immediate consequences of a Greek default largely anticipated.

Moreover, the size of the Greek economy is small enough that the direct damage if Greece stopped paying its debts should be quite manageable for the eurozone.Instead, the big fear is "contagion" - that a Greek default could trigger a financial catastrophe for other, much bigger economies.

That is why European leaders announced in October a significant expansion of the European Financial and Stability Facility (EFSF).

And it seems it is Italy, not Spain, which is seen as lead candidate for that contagion among Europe's big economies and the main possible beneficiary of the enhanced fund.

Why is that?

Prudent Italy?
According to Germany's chancellor, Angela Merkel, "Italy has great economic strength, but Italy does also have a very high level of debt and that has to be reduced in a credible way in the years ahead."

As with Greece, she and other eurozone leaders believe the solution is more government austerity - spending cuts and tax rises - by Rome.

However, some economists might disagree with her assessment.