It seems the Greek fiasco is headlining just about every newspaper and magazine these days. Europe and countries around the world are focused in on how Greece can finance the next few years of its government and how it can do so without defaulting. To be sure, a Greek default would have massive consequences worldwide. But it seems many politicians and investors have overlooked other countries that seem to be in pretty bad shape too. Enter Italy. Moody’s has recently indicated that it may downgrade Italy’s debt due to macroeconomic structural weaknesses and the surrounding economic turmoil of its neighbors. Just last Thursday, Moody’s said it might downgrade 13 Italian banks if the the country’s rating is cut. Most people might consider taking Italy’s warnings more seriously for the following reasons. Italy has experienced decades of declining productivity and poor growth. 2008 and 2009 GDP declined by 1.3% and 5.2%, respectively. The unemployment rate is 8.3% and youth unemployment is 29%. The nation’s debt load of 1.8 trillion euros makes it the 4th highest public debtor in the world. And while having debt isn’t a bad thing, it is when your GDP is sluggish - resulting in a debt/GDP ratio of 120% (compare that to Greece’s of 140% and 2x that of Spain’s). Beyond the sluggish growth and high debt load, Italy, like Greece, has a number of problems that make solving these issues quite difficult. For example, collecting taxes seems to be uncharacteristically hard. It is estimated that Italy will lose €120 billion from tax evasion in 2011 (not a typo). Compare that to Greece - €15 billion a year. While Italy’s Economy Minister Giulio Tremonti is widely credited with shielding Italy from the global economic crisis, it seems a little premature to consider Italy a success story. As Berlusconi loses his political grip on a country he has ruled for 17 years, Italy’s annus horriblis seems to be just getting started.