Interest on Italy's 10-year bonds breached 7% this week - the level at which Greece, Ireland and Portugal needed bailouts. But Italy's sovereign debt is at a staggering €1.8tn (£1.5tn) - well beyond Europe's current capacity to take on.
One result from this turmoil in Rome has been the offer of resignation from Italy's controversial prime minister Silvio Berlusconi - a move quietly welcomed by his EU partners, though it may have come too late for the markets. John Hooper has been following the story in Rome. He says Berlusconi will go only after the latest budget bill is passed. And it's far from clear how Italy's economy can return to growth.
Economics editor Larry Elliott believes that ultimately it is Germany that will preside over the European single currency's survival or its demise.
Also this week we're joined by Robert H Frank, an economics professor at Cornell University. His latest book argues that Charles Darwin will come to be seen as a founding father of economics.
Darwin, says Frank, had the crucial insight that in nature individual and group interests often diverge sharply. Frank argues that economic competition often leads to "arms races", that provide no lasting advantages for individuals.
But he also offers solutions. One way of reducing wasteful one-upmanship on items such as fast cars and mansions would be to scrap income tax and instead put in place a progressive consumption tax. He explains how it could work.
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