Italy (8th largest economy) is the eurozone's key vulnerability indicator due to its massive public debt (~140% of GDP). The BTP-Bund spread (Italy 10Y - Germany 10Y yield) is the most important risk gauge for European markets. Key thresholds: (1) Below 120bp — calm, no premium for Italian risk. (2) 150-200bp — elevated but manageable tension. (3) Above 250bp — crisis territory, triggers ECB intervention talk and euro weakness. During the 2011 sovereign debt crisis, spreads hit 550bp. (4) ECB's TPI (Transmission Protection Instrument) backstop aims to prevent 'fragmentation' — but activation conditions are politically contentious. (5) Italian fiscal policy announcements (budget deficits exceeding EU limits) instantly widen spreads. (6) A rising BTP-Bund spread pressures European bank stocks (especially Italian banks: Intesa, UniCredit) and weakens EUR/USD. (7) Italian elections and political instability are perennial spread-widening catalysts. Track this spread as the leading indicator of eurozone existential risk.