By Neal Wallace

Italy's cost of borrowing has reached seven per cent, a new record for the nation.

The news comes just a day after prime minister Silvio Berlusconi said he would resign once budget reforms were passed, having lost his majority in lower parliament during a crucial vote on Tuesday (November 8th).

Widely seen as unsustainable, the figure is the same point at which Portugal, Greece and Ireland were forced to seek a bailout, with analysts predicting Italy will be the next victim of the debt crisis.

Robert Peston, the BBC's business editor said: "No one wants to lend to a country when that country would use the loan to pay the interest on previous loans – that's throwing good money after bad".

If Italy were to borrow money repayable in ten years, the interest rate would be more than 7 per cent. This is a stark contrast to Germany's implied interest rate of 1.73 per cent.

A deal to form a coalition government in Greece, which is also deep in financial turmoil, recently collapsed after failed talks between parties.