U.K. think tank Center for Economics and Business Research (CEBR) released a report on Thursday saying that Italy will likely default while Spain may escape unscathed.
Both countries are beleaguered by debt problems but unless Italy shows a large jump in economic progress, it will likely default, says the report.
Spain may have a “real chance” of avoiding a default along with debt restructuring, wrote Douglas McWilliams, the chief executive of CEBR.
Italy’s debt will rise from 128 percent of annual output to around 150 percent in 2017 if bond yields stay about the current 6 percent and growth remains low, the report found. The Italian economy grew by just 0.1 percent in the first quarter of this year.
Spain’s debt is a bit lower and the debt-to-GDP ratio will likely remain no higher than 75 percent in a “bad” scenario, making it less likely to default any time soon, McWilliams added.
“Realistically, Italy is bound to default, but Spain may just get away without having to do so,” McWilliams concluded.
According to media reports, Italy Prime Minister Silvio Berlusconi called for a growth action strategy on Wednesday when he was addressing legislators.
