Why state debt will cost even more

by time news

The President of the European Central Bank Christine Lagarde, Thursday in Frankfurt, during the announcement of the increase in interest rates by 0.5 points. Alex Kraus/Bloomberg

DECRYPTION – For France and Italy, deprived of the ECB’s debt vacuum cleaner, borrowing on the markets will be more expensive and more difficult this year.

European states will fight to secure a record amount of credit this year on the financial markets. In total, they hope to raise around 600 billion euros in new debt, including 270 for France and 150 for Germany. All this in a tense environment, on the one hand by the rise in interest rates and, on the other, by the start of the resale by the European Central Bank (ECB) of its own 5000 billion euros of government debt securities that it has accumulated in recent years on these same markets. A total change of environment, after years when the ECB had maintained minimum rates and, in addition, swallowed almost all the debt issued by governments.

After a disastrous 2022 on the bond markets – when rates go up, the value of assets goes down -, “2023 will be another tough year for sovereign debt as government spending increases to fight inflation and recession,” plans…

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