In the past, Italy’s problem, or rather its debt, was the markets. Which, having little confidence in the boot, often turned their backs, denying the subscription of government bonds or asking for a richer premium to do so, raising the spread. Now that investors seem to believe Giorgia Meloni instead (the proof is in the Btp/Bund spread, which has been steadily below 200 basis points for weeks), the ECB is putting the brakes on Italy’s wheels. Since Frankfurt started reversing its monetary policy in July 2022, Italy’s debt has indeed become increasingly burdensome. Higher rates mean more generous coupons for investors and, therefore, higher expenses to guarantee the underwriting of the bonds. As well as more expensive mortgages for families. And so when yesterday morning, Eurotower chief economist Philip Lane put his hands up, stating that after the March council which will cut the cost of money to 3.5% thanks to a further tightening 50 basis points, Frankfurt will aim to get straight to 4% by the end of the year, someone jumped on the chair.
Starting with Economy Minister Giancarlo Giorgetti, for whom this risks putting Italy’s debt under pressure again. Message delivered to Frankfurt, the effect will be seen perhaps. Then there are the numbers, perhaps more useful for understanding the situation than political messages. For example, those from Cerved. Who counts how in 2022, due to the slowdown of the economy, but also to the increase in prices and interest rates, 89,192 new businesses were born in Italy, that is, 10,587 fewer (-10.6%) than in 2021 and down (-5.9%). ) also in 2019, when for the first time a positive trend that had dragged on since 2013 was reversed. It goes without saying that «this can only have a negative impact on the global economy, because start-ups have been the engine of job growth in last 15 years”. And that the 2022 missed births will likely translate to 27,080 fewer employees and a 2.5 billion drop in revenue. It’s not over.
Even the credit world is forced to pay the price for Christine Lagarde’s monetary policy. According to workers from Unisin’s banking union, yesterday’s announcement is “a veritable cold shower, even icy, for all those who have been seeing the cost of interest on loans and mortgages gradually increase the variable rate for months. The rapidity with which interest rates rise does not match an equally rapid improvement in rates payable on demand deposits. It is clear that this trend essentially favors banks, at least in the short term, as in the medium/long term it could have consequences in terms of the stability of the economic and social system, vis-à-vis account holders and those in need of a loan or a mortgage”.
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
