The credit vultures have been waiting all along. Italy had, for many years, struggled with ballooning public debt.

Even when all members of the eurozone were all good children, Italy was the bad boy. First Greece collapsed, then Ireland, then Portugal and then, the knives seemed to be out for Spain. But as the world awaited the outcome of the US debt ceiling increase, the mongers were already at work. Italy’s borrowing costs suddenly ballooned to over 6% - a figure considered by most economists to be unsustainable.

Spain is also in dire straits, forcing the Prime Minister to postpone his holiday as the government begins negotiations with the EU. In Italy’s case, it’s even worse. The country has already dispatched its Finance Minister for “crisis talks”. In fact, Giulio Tremonti has entered discussions with Jean-Claude Juncker, chair of the Eurogroup of finance ministers from the 17 eurozone countries.

Yields on Italian bonds have reached euro-era record levels. In early trading on Wednesday, the yield on Italian 10-year bonds rose 0.19 percentage points to 6.21%, while the yield on Spanish 10-year bonds was at 6.34%, just below Tuesday’s record of 6.45%.

It just goes to prove that Joe Public was right all along. As the heavyweights of Europe continue to preach that we “must save the eurozone”, it is clear that contagion is present. It is spreading, fast, like a cancer. It takes those who have a weak ‘immune system’ first, but unless drastic measures are taken soon, the whole eurozone will be affected. There are other analysts who argue that now that the dollar is under scrutiny, everyone else will be affected.

It is becoming abundantly clear: borrowing more does not help to pay your debts in the long run. It is just like any other person who tries to get more loans to pay off debts. Eventually, the interest you rack up just becomes unsustainable. You end up borrowing more, just to pay off the interest owed. Ask any grandmother or grandfather over the age of 50 to explain it, and it is there, clear as crystal.

The EU said it could afford to bailout Greece and Ireland, and, at a push Portugal. Now we are looking at threats to huge economies – those of Italy and Spain. Can the EU afford it? Will the IMF be brought in? Will the IMF commit to more loans?

No one has found the right formula. Some have tried austerity alone. Some have tried increasing taxes alone. Some have tried borrowing alone. Others have tried a combination of the above, but the result is still the same. Ever increasing debts. While Maastrich stipulates a 3 % of GDP deficit as being ideal for sustainable growth, as we have said time and time again, this still means that you are increasing your overall public debt. On the flipside, if you reduce your deficit through austerity alone, you are depriving yourself of natural growth. Perhaps it’s time to go back to swapping a cart of cabbages for a cow.