AS European leaders debate issues surrounding a massive financial rescue of Italy, let me make a strong statement. Even with Italy’s fiscal response to coronavirus, Italian debt is sustainable. The European Stability Mechanism (ESM), established in the wake of the last European debt crisis a decade ago, should come to this conclusion. Germany should accept it, Italy should be willing to enter a program, and the European Central Bank (ECB) should be willing to use its Outright Monetary Transactions (OMT) bond-purchasing vehicle, while interim measures are taken until OMT is ready to be used.

Because I am a two-handed economist, let me hedge (just) a bit. Italian debt is sustainable unless the world economic crisis turns out to be even worse than we currently expect, in which case, sustainability may become an issue, not just for Italy but for nearly all countries