Berlusconi stares into the abyss
And it has a comedian and Bunga Bunga party goer, Silvio Berlusconi, running it. There are conflicting rumours over whether Berlusconi will resign, or not. If he does, that may help calm the markets somewhat, though it also brings fresh uncertainty.
Debt comes calling
The irony though is that Italy does not have a debt problem in the way the UK has. Government debt stands at around 120% of GDP. It's high, but not terrifyingly so. Italians like to spend money on clothes but credit card debt is still modest - compared to the UK, at least - and house prices remain sensible.
Black marketWhere Italy really falls down completely is its growth rate. A lack of investment over the last 10 years twinned to little regulation and widespread ingrained corruption means her economy - significant areas of it remain black market controlled - has simply stagnated.
And because the interest rate on its overall liabilities is higher than its growth rate, that means its government and economy make it hugely vulnerable for debt management worries. And it can't simply raise the presses and print more cash because Frau Merkel and the European Central Bank are at the helm.
When confidence across Europe was better, Italy hobbled by. Wages had risen, so giving a veneer of the 'feel-good' factor. But this meant Italy was less competitive. But now lenders are calling time on debts and in order for Italy to pay them, it has - like Greece - had to borrow more.
For God's sake, goAnd more and more. And when your credit history is less than impressive, debt gets very expensive. Currently Germany pays around 0.25% if borrowing for a year. Italy, in contrast, is having to stump up at least 6%. And when these costs become unsustainable, that's when Italy needs a massive bail-out.
The problem is, Italy's too big for a bail-out. Tomorrow Berlusconi faces a vote on the public finances. If he fails to muster sufficient loyalty from his own coalition to pass much-needed reforms, he will face a vote of confidence on Thursday. But the markets may not wait. They want answers, pronto.
Berlusconi could be gone by Friday. And Merkel and Sarkozy would be absolutely delighted if he was.