“A political crisis in Italy is causing global investors to freak out.

“Stock markets around the world plunged on Tuesday and investors demanded higher yields in return for taking on Italian government debt.

“The main stock index in Italy extended its losses for the week, dropping another 3%. The country’s banks were hardest hit, with some stocks falling by over 5%.

“Investors are worried that political turmoil in Italy could cause pain beyond the country’s borders. The yields on Spanish, Portuguese and Greek debt surged, and US stocks opened lower.

“Italy is heading for new elections after populist politicians failed to form a government. Radical parties could gain even more ground, and investors are worried that the vote will turn into a de-facto referendum on the euro.”

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