This is a major problem for the weaker and heavily indebted countries of the eurozone. As a result, they lose more and more interest and the debt – in the worst case scenario – only mounts until it is no longer bearable. Fear of such a scenario will only drive up interest rates.
That is also a big problem for the ECB, because if the differences between countries become too great, it cannot pursue policies that are good for all countries. The new anti-fragmentation tool, called the TPI, gives the ECB the opportunity to buy government bonds from countries facing sharply rising interest rates.
A number of conditions are attached to this. For example, a country must comply with European financial regulations, have a sustainable national debt and pursue sound economic policies. For now, we’ll see if Italy meets this requirement.
To buy or not to buy
The rise in government bond yields is largely due to the fact that the ECB has largely stopped buying government bonds. In recent years, the ECB has bought hundreds of billions of debt securities to stimulate the economy, resulting in historically low interest rates on these debts.
Now that the buyback programs are over, these interest rates are rising. This is noticed not only by governments and companies, but also by ordinary households. Mortgage rates, for example, have more than tripled this year, as these rates are closely linked to government bond yields.
Source: RTL
Smith Charles is a talented entertainment journalist and author at The Nation View. He has a passion for all things entertainment and writes about the latest movies, TV shows, music, and celebrity news. He’s known for his in-depth interviews with actors, musicians, and other industry figures, and his ability to provide unique perspectives on the entertainment industry.
