In every election on the other side of the Alps, the same concern resurfaces. That of seeing a government reluctant to apply European rules or quick to let go of deficits take power. That of a scenario where the country’s imposing public debt, which today exceeds 150% of gross domestic product (GDP), is the target of speculators and drags the eurozone into a debt crisis comparable to that of 2010-2012.
Even today Europeans worry about the possibility of seeing a government led by a coalition between Giorgia Meloni’s Fratelli d’Italia party (extreme right), Matteo Salvini’s (anti-immigration) League and Silvio Berlusconi’s Forza Italia (liberal right). markets and observers. The spread between the ten-year German rates, which are considered safe, and those of Italy: this is the spreadconsidered the barometer of risk by investors- fluctuated, on September 22, around 230 basic points, compared to 130 points at the beginning of the year.
It had ballooned to nearly 300 basis points in the summer of 2018, when the League and Luigi Di Maio’s (anti-system) 5-Star Movement entered a showdown with Brussels over public finances. In the fall of 2011, at the height of the eurozone debt crisis, the gap peaked at 575 points. Given the uncertainties linked to the rate hike by the European Central Bank (ECB) and the possibility that a right-wing-extreme-right coalition governs the country after the general elections on September 25, certain hedge funds have once again unleashed against Rome.
According to data from the analyst firm S&P Global Market Intelligence, the total value of Italian bonds borrowed by investors to bet on falling bond prices reached its highest level since January 2008 in August, exceeding 39 billion euros. euros. Does this mean that the country and the euro zone are on the threshold of a new debt crisis? “The situation is worrying, but we are not there”believes Gilles Moëc, chief economist of the Axa group.
The Italian banking system is much healthier than it was fifteen years ago and the level of the debt burden has fallen to 3.5% of GDP this year, compared to almost 6% in 2007. Above all: since then, the euro area has equipped itself with a series of firewalls designed to prevent a crisis of this type from happening again. The latest: the ECB’s anti-fragmentation tool (the transmission protection instrument, IPT), thanks to which the central bank can buy the debts of a country whose borrowing costs are skyrocketing unjustifiably, and thus curb any speculative outbreak.
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