Public finances: Panetta says debt is high but conditions are much better than in the past
Rising yields originated in the US but are having a greater impact in the EU
(Il Sole 24 Ore Radiocor) - “The rise in interest rates is a non-European phenomenon. The epicentre is in the United States, because that is where growth has proved to be significantly higher than expected; there has been an inflationary surprise”, with higher consumer prices, “and there are expectations of an adjustment to monetary policy rates”. This was noted by the Governor of the Bank of Italia, Fabio Panetta. Furthermore, in the US, “the central bank finds itself competing for savings with technology companies, which now also raise debt in significant proportions” and “in addition, there is the issue of public finances”, given that the United States “has a growing debt and a significant deficit”. ‘The mechanism linking all this to Europe is the fact that global long-term interest rates are influenced more by financial activity in dollars than in other currencies,’ continued Panetta. “This has affected the European market, with rates rising less in Germany because it has sound public finances, a little more here in Italy, where we have high public debt but public finance trends that are far better than in the past, and even more so in France, which has a persistently high deficit.” Finally, Panetta noted that the rise in interest rates in the United States is ‘against the backdrop of a growing economy’, whilst ‘in Europe, growth is less robust and therefore the impact is greater’.
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