Italy’s poor prospects for growth mean and its high debt levels mean that the EU’s third largest economy is “bound to default” on its debt “sooner or later,” the head of a leading British think tank has told the BBC.While Italy has uncomfortably high debt levels, until recently the country’s relatively modest annual budget deficits and ability to sell bonds in its home markets had kept Italy off the front lines of the European economic crisis. Concern over the country’s long economic stagnation, however, has made bondholders increasingly skittish and in the last week investors have demanded sharply increased interest payments to hold Italian debt.The higher interest costs make Italy’s large debt look less sustainable, driving investors to demand even higher (and even less sustainable) rates. Italy matters because it is not clear that the EU could or would fund a bailout.Statements like this from respected sources will not help; Italian stocks have fallen hard and fast as concern grows. The country’s controversial and widely distrusted Prime Minister Silvio Berlusconi failed to calm markets with a speech last night. The long-dreaded Italian financial crisis has finally arrived.