The yield on 10 year gilts rocketed yesterday to 3.97pc, 46 basis points higher than costs on French bonds.

Britain and France were neck and neck as recently as last month, before Labour’s pre-Budget report raised deep concerns among Chinese, Arab, and Russian investors about the credibility of British state.

But what has caught market attention is the narrowing gap with Italian bonds, once mocked as the symbol of an ill-governed nation in thrall to the Dolce Vita.

Yields on 10-Italian treasuries have been hovering just above 4pc despite the eurozone’s Greek crisis, dropping as low as 3.98pc earlier this week.

Britain is vulnerable to a “gilts strike” because foreign investors own £217bn of UK debt, or 28pc of the total. These are footloose funds and likely to sell large holdings if Britain loses its AAA rating.

They have other tempting places to park their money, such as Turkey, Brazil, or India, where demography is healthy and growth prospects are better. Chile has already undercut British debt yields on some maturities.

Italy has its own problems, of course. Public debt was much higher before the crisis began. The IMF expects it to reach 120pc of GDP next year. However, this debt is mostly owned by high-saving Italians, who are less fickle than foreign funds.

For Italy, this may just be the calm before the storm. Markets assume that Germany will ultimately bail out Greece if necessary, preventing contagion to the rest of the Club Med bloc.

This is a questionable judgement. Volker Wissing, head of the finance committee of the German Bundestag, said it must be made explicit that “Germany will not take responsibility for Greek debts”.