Germany, Austria, Netherlands and Belgium remind southern countries that financial conservatism is the best way to fight against fragmentation
- A divided ECB prepares to help southern Europe and avoid a new debt crisis
message i sent on wednesday European Central Bank (ECB) This Thursday did not deliver the expected results in the markets and, although the risk premiums of countries in southern Europe such as Spain or Italy fell, The required return on its debt increased again to levels not seen for eight years. Faced with this market backlash, countries prefer Germany, Austria or Netherlands reminded our neighbors in the south of the importance of cut their debt and deficit levels If they want to avoid debt crisis.
“Get your accounts in order, that’s the message,” Austria’s finance minister spoke loudly and clearly, Magnus Brunner, upon arrival at the meeting eurogroup In Luxembourg, which was attended by Christine Lagarde, the President of the ECB herself. “We are all in Europe together to shape our budget, because the ECB has more possibilities and the ECB can only have possibilities. Are the budgets of all member states in good standing“, Go.
he addressed The country with the most indebtedness and the public deficit Most in Europe, those are precisely those who have suffered over the past week from an increase in the required return for their bonds (which is always proportional to the issuer’s risk) and the tightening of their bonds. risk premium (indicator that measures the difference between the return on a ten-year bond from any given country and what its German counterpart, the Bund, is deemed a risk-free asset).
among them is Spainin which there is one Public debt over GDP of 117.7% at the end of the first quarter and a dficit Public at the end of 2021 6.7% of GDPand whose ten-year bond provides the return of 2.8%Highest since May 2014. its risk premiumHowever, this Thursday went down 117.8 basis points Because the return on German bonds also rose -5% to 1.72%-.
German Finance Minister, Christian Lindner, agreed with the Austrians and claimed that, although the ECB has a “responsibility to fight inflation”, responsibility of governments“including German”, is “reduce budget deficit and return to one reliable way to reduce debt To “protect market confidence and financial stability”.
Thus he told countries less conservative in fiscal terms: sanin its public financefrom then on they will be able to offer private investor trust That they now have to buy their debt because the ECB has stopped doing so. A message that he has repeated on several occasions and which he has also expressed in a recent interview with EL Mundo.
Still, he wanted to launch a message peace, “We are seeing some increase in risk premium among member states, but no need to worry, From a long-term perspective, if you compare the interest rates and premiums today with the interest rates of a few months or years ago, there is no need to panic.
In our country, institutions like bank of spain o Independent Authority for Financial Responsibility (AIREF) asking the government and, in particular, the finance ministry to present for more than a year medium term tax consolidation plan To explain to the market and the rest of European countries what the country’s strategy is to reduce the budget gap when the pandemic is over. Even then, Ministry has always said it was not the time To do so because EU financial regulations are not active.
Netherlands, Another country that has traditionally been a ‘baz’, a supporter of a more restrictive monetary policy to keep inflation at bay, and a defender of budgetary conservatism, spoke on the same line this Thursday. Your Finance Minister, sigrid cargosaid that “these are not easy times” and that fiscal stability And the fight against inflation is of vital importance.
su homelogo Belgian, Vincent van PeteghemI agreed to emphasize that “in the medium term” Public debt development must be sustainable“and that”Fiscal policy will also have to be implemented“Along with the ECB’s monetary measures against inflation. He also recalled that the EU already has clear rules regarding budgeting, despite the fact that the Stability and Growth Treaty is suspended.
It refers to the restriction of having dficit budget down 3% create more policies loan of converges under the masses 60%Rules that will be reviewed before they are activated again.
The announcements from all these countries indicate what the position of their central bank representative will be. discussion in the governing council To define a new anti-fission instrument of the ECB. On Wednesday, the body ordered the institute’s technical services to expedite the design of the device, but Its final acceptance must be agreed upon Council in which all countries are represented.
As pointed out by this medium, conditionally important, since countries that keep their accounts in order, as the Austrian minister said, those in the south will need to do so to try to control the profitability of their loans and their risk premium. If they achieve that budgetary rigor, it will not be necessary for the ECB to discriminatory buy bonds from only a few countries.
On behalf of the central bank, their spokespersons have tried to reinforce their message of market penetration. “We are fully committed to developing, designing and quickly implementing a tool to combat inappropriate fragmentation,” emphasized its vice president yesterday, luis de guindosowho pointed out that “a family or a company, in Italy or Spain, with the same liquidity position, is required to refrain from paying more for a loan than a family or a company that asks for the same thing in Germany”.
according to the norms of