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Euro debt crisis: After Greece, now Italy?

European and U.S. markets plunged this week over concerns that Italy may not be able to pay its burgeoning debt, which is now 120 percent of the country’s GDP. The jitters began last week when Italian Prime Minister Silvio Berlusconi publicly criticized his own finance minister, Giulio Tremonti, said Annalyn Censky in CNNMoney.com. “Beware,” an unamused Tremonti told Italian newspapers. “If I fall, then Italy falls. If Italy falls, then so falls the euro.” As Italian stock prices collapsed last week, Berlusconi’s office tried to calm the markets by announcing that he and Tremonti had enjoyed “a long and cordial working lunch.”

That and other reassurances didn’t quite do the trick, said Andrew Davis in Bloomberg​.com. European finance ministers, meeting this week in Brussels, said they were confident that Tremonti’s $56 billion austerity package would keep the eurozone’s third-largest economy from needing a Greece-style bailout. But the Italian stock market kept falling, to its lowest level in two years, and the interest rate on 10-year government bonds rose higher than it had been in a decade. “Over time, Italy cannot afford to pay the interest rates it is paying right now,” said Andrew Bosomworth of Munich-based Pacific Investment Management.

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Currency: No small bills, please

“Cash is in decline,” said Binyamin Appelbaum in The New York Times. The U.S. Treasury is printing fewer $1 and $5 bills than it has since the 1980s, as more and more people use credit or debit cards for their transactions. Because $1 bills are being used less often, they’re also lasting longer—an average of 40 months, compared with 18 months two decades ago. At the same time, government printing presses are churning out $100 bills like never before, two thirds of which end up being used—and often hoarded—abroad.

Retailing: Pain at the bottom of the market

Deep discounters are seeing profits slump as strapped shoppers cut back to bare essentials, said Ann Zimmerman in The Wall Street Journal. The sector “was in nirvana during the recession,” Goldman Sachs analyst Adrianne Shapira said. “But now their shoppers have a bunker mentality.” Dollar General announced that its gross margin rate shrank last quarter to 0.63 percent as transport and food costs rose. Petra Gomez, a mother of five, was holding back at a Family Dollar store in Texas. “I have had to put off my wants like sandals and shirts,” she said, “because money is tight and the kids come first.”

Commodities: Peabody tries again

U.S. coal company Peabody Energy is trying for a second time to buy Australia’s Macarthur Coal, but now it has a powerful partner, said Peter Smith in the Financial Times. The company has joined forces with ArcelorMittal, the world’s biggest steelmaker and already a major Macarthur shareholder, to purchase the Brisbane-based company, which has found a booming market in China. St. Louis–based Peabody, the world’s largest private-sector coal company, is part of a consortium that earlier this year acquired a vast coal deposit in Mongolia.

Internet commerce: The fight over sales tax

Amazon.com this month severed all ties to its California sales affiliates in reaction to a new state law that forces any online marketer with a physical presence in California to collect state sales tax. The state says the company is still subject to the law because it has California subsidiaries, one of which designed the Kindle e-reader, said Dale Kasler in The Sacramento Bee. But Amazon vowed not to collect the tax. “This is going to be going on for some time,” said tax lawyer Brian Toman. “I wouldn’t be surprised if this ends up in the [U.S.] Supreme Court.”