Flaherty frustrated with Europe's financial inaction

Canadian Finance Minister Jim Flaherty says he's frustrated with European countries' failure to take "clear and decisive action" to get a handle on their financial problems.

Speaking to reporters in Tokyo addressing a group of business leaders, Flaherty said bond market volatility is likely to persist unless European countries act.

"Until European countries build firewalls for their financial system, I think we will continue to see market volatility," Flaherty said, according to Reuters.

"Some of us [non-European leaders] are frustrated by the failure of clear and decisive action in Europe."

Italian 10-year bond yields on Tuesday topped seven per cent — the level at which Greece and Ireland were forced to seek bailouts. A yield above seven per cent is considered unsustainable over the long term.

Greece is embroiled in a political shakeup that recently saw the selection of a new prime minister. The country has vowed to remain in the euro currency system and to implement an austerity plan so it can get a promised bailout.

In Italy, Silvio Berlusconi has stepped down as prime minister, replaced by economist and former European commissioner Mario Monti.

Italy has a public debt of €1.9 trillion ($2.6 trillion) — or  nearly 120 per cent of GDP — and it has to roll over about €300 billion ($410 billion) next year alone.

The concern is that an Italian default could hurt the 17 countries that use the euro and lead to a global recession.