The battle plan for the eurozone debt market has been to ringfence the smaller peripheral countries to avoid contagion to Spain – and its further spread from there, in the nightmare scenario. Events have now blown that battle plan out of the water. Panicked markets, it turns out, see no need for an Iberian stopover before a direct attack on Italy – the single currency’s third-largest economy with its second heaviest public debt burden. The crisis has suddenly turned a whole lot scarier – but not yet scary enough to shake Europe’s leaders out of their complacency.

Up until Monday, Italy’s cost of borrowing were soaring. Spreads over German bunds reached 3 percentage points, a euro-era record, before coming down a little. Investors across all markets took fright; none more than shareholders of Italian banks, whose equity values plunged by as much as a third.

Markets’ nerves were already frayed by still-inconclusive debates on how to solve Greece’s financing problem. But Italy is not just a victim of market contagion, in spite of a reputation for relative fiscal probity. It was the height of irresponsibility to sow doubt on the passage of an austerity budget, let alone to make it hostage to prime minister Silvio Berlusconi’s business interests.