“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."
Greece locked in coalition talks as Italy's borrowing costs soar - live
• Negotiations over a new Greek unity government continue • Italian 10-year bond yields hit 6.66%
The yield (or interest rate) on a 10-year just hit 6.66% - which, according to Reuters data, it its highest point since 1997 (when Italy was suffering another financial crisis) - from 6.353% overnight.
That is a huge move in the context of an average day in the bond markets. For context, 6% is generally seen as the start of the 'danger zone' where the cost of borrowing becomes prohibitively expensive (although the Bank of Italy argues that it can cope with 8%).
Italian bond yields have closed above the 6% mark for the last six days, despite the European Central Bank buying up tens billions of euros of Italian debt last week.
The steady rise in Italian bond yields is alarming the City. As Gary Jenkins of Evolution Securities explained this morning:
As calls grow for Silvio Berlusconi to step aside, he faces a key test of his leadership on Tuesday with members of the lower house of Parliament due to vote on public finances.
There has been a lot of speculation that a different leader would lead to a sharp retraction in Italian bond yields. That might well be the case in the short term but considering the starting debt position, the economic outlook and the general lack of confidence in Italian debt it promises to be a challenging period of time for any Italian leader.
Last Friday, Berlusconi denied that the Italian economy as in trouble, pointing out that its restaurants remain full.