IMF: Spread in Italia has narrowed, thanks to the positive impact of NextGenEU

Contribution also from the strengthening of the budgetary position

(Il Sole 24 Ore Radiocor) - In Italia, as in other southern European countries (Spain and Greece) ‘yield spreads with the core Member States have narrowed significantly in recent years’, a convergence that reflects ‘various factors, including the strengthening of the fiscal positions of southern countries and the measures adopted by the ECB in response to the macroeconomic shocks that have hit Europe’. This is according to the International Monetary Fund in an in-depth analysis in the Financial Stability Report published today. There is also another factor that has helped: NextGenEU. “Since the launch of the Next Generation EU programme, the European Commission has become a frequent and significant issuer across various maturities. By introducing mechanisms for joint borrowing and transfers to Member States, these programmes have reinforced the perception of fiscal risk-sharing and helped to alleviate concerns regarding debt sustainability and the risk of redenomination.” The Fund adds in the report that, on an empirical basis, ‘these initiatives appear to have mitigated the impact of systemic shocks on government bond markets’. The effect has been particularly marked in some southern European economies, where joint financing programmes have also helped to narrow sovereign spreads, thereby offsetting the risks of contagion and redenomination.

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