Because the European debt crisis has been running for so long, there is a tendency to tune it out. Periodic wake-up calls are a reminder that trouble is looming ahead and may already be here.
The financial rating firm Moody's lowered Italy's credit rating by three notches. Moody's action followed Standard & Poor's downgrade of Italian debt a month ago.
The downgrade is more ominoous because it came despite approval of an Italian austerity plan designed to balance the budget within two years.
The ratings agency, while noting Italy's high level of public debt, acknowledged that part of the logic behind the downgrade was due to the general jitters about sovereign debt within the euro zone and the European recession which has produced economic stagnation. The latter is exemplified in Italy by a puny 0.2 percent growth rate.
Stagnant growth has always been the flip side of austerity. Austerity can slow the accumulation of debt, but it cannot pay off or service previous loans.
The downgrade of Italian credit may have an adverse impact on the political fortunes of Italian Premier Silvio Berlusconi.
Despite the Prime Minister's lurid affairs and battles with corruption trials, he still clings to power. One of the forces sustaining him is the belief that governmental instability in Italy would undermine confidence in Italian finances. If Italian creditworthiness is going to sink in any case, who needs Silvio Berlusconi?
Another major blip on the European economic screen was this week's panic about Dexia SA, a major Franco-Belgian banking institution. Three months after the bank received a clean bill of health in European Union stress tests, it was announced that France and Belgium were contemplating a second bailout for the bank (after the 2008 crisis, they own 46% of the bank).
At one point in this week's trading, the stock of the bank plummeted by 40% in one day. Rumors of the impending rescue helped reverse the loss to "only" 22%.
For some analysts the crisis in Dexia meant that the debt contagion had spread from the peripheral countries in Europe to the core countries of Belgium and France.
Paris and Brussels, realizing this fear, have moved swiftly to reassure investors and depositors. Investors are uncertain about Dexia's exposure to Greek debt and its ability to finance itself.
The bank is a major lender to municipal governments in both France and Belgium.