The Handelsblatt financial forecast predicts turmoil in bond markets as central banks launch interest rate hikes and “international investors are once again starting to look more closely at debt levels.” Among other things, we read: “In Germany, the five-year and ten-year bond yields no longer have a negative sign. With a rate of 0.2%, the ten-year bond reaches the highest levels since May 2019, the five-year bond yields a positive interest rate for the first time in almost three years. In the US, the yield on ten-year government bonds is approaching the 2% mark. For years, bond markets have not shown as much mobility in such a short period of time. Unexpectedly high inflation dynamics, while a shift to (low) interest rate policy in the US and Europe is imminent. Everything shows that normalcy is returning, as more than a decade of negative interest rates has passed. This radical change poses risks, especially for the countries of southern Europe, where debt debt can quickly become unbearable with a significant increase in interest rates. “Because yields in countries like Italy, Greece and Spain are growing at a much faster rate than their counterparts for secure debtors, such as Germany.”
Handelsblatt is talking about an impending “domino” in the markets, with the US Federal Reserve throwing the first stone and investors betting on the level of interest rate hikes. According to the German newspaper, “the memories of the debt crisis in the eurozone, ten years ago, are still fresh. After the suspension of payments in Greece, investors demanded such high yields on the bonds of Southern Europeans, that they almost collapsed. The markets calmed down only with the speech of the then head of the ECB Mario Draghi, with his announcement that he would do “whatever it takes to save the euro” and with the subsequent first bond purchases by the ECB. The ECB has since become the largest buyer of bonds in the eurozone. “The bond rescue program to save the euro followed an emergency quantitative easing program (PEPP) to offset the harmful economic consequences of the pandemic.”
The German financial watchdog notes that bond yields are rising, “especially in Greece, once again, as well as in Italy, the country with the highest public debt in the eurozone. The yield of the ten-year Greek bond reaches 2.4%, of the ten-year Italian bond 1.8%. Clemens Fust, head of the IfO Economics Institute in Munich, explains: ‘The rise in spreads in recent days shows that investors are not willing to hold bonds from eurozone countries with high debt unless the ECB offers a kind of guarantee that it will support ”.
A hawk with διαθέ friendly dispositions
While this is happening in the markets, the discussion about the revision of the stability pact in the EU starts soon and everyone is waiting for the official position of the German Minister of Finance Christian Lindner, who had a reputation as a “hierarch” in the budget, but so far shows rather friendly moods. In an article titled “A friendly hawk”, the weekly newspaper Die Zeit notes that the liberal German finance minister has received positive comments from his Eurogroup counterparts, including Greek Finance Minister Christos Staikouras. Specifically, Mr. Staikouras states: “My colleague Christian Lindner has a deep knowledge and understanding of economic policy. I am particularly optimistic that he is willing to work constructively with all his colleagues. “I am optimistic that we can find common ground on all open issues.”
However, the columnist argues that Christian Lindner will eventually reject both the demands within Germany for more state resources and the communitization of fiscal policy in Europe. “His people are already preparing the justification for a careful policy change, based on economic theory,” the columnist points out. “According to this perception, the ‘macroeconomic environment’ has changed. Until now, the state could be charged free of charge, as economic growth was so weak and interest rates so low. Now the economy is growing again, interest rates are rising. Borrowing becomes more expensive. “There is no debt,” as Christian Lindner puts it, adding that politics should ‘prioritize’ and ‘absorb shocks’. “Lindner himself wants to explain what this means in detail.”
Electric cars for “green” ministers
The financial website Businessinsider.de informs us about the official cars chosen by the ministers of the new German government. The main question is, of course, whether the ministers of the “Greens” have chosen an electric car. And indeed it is, the columnist informs us: Minister of Agriculture Cem Edzdemir has chosen an Audi e-tron, Minister of Family Affairs Anne Spiegel prefers a BMW i4. The most luxurious choice was made by Foreign Minister Analena Berbock, who chose a Mercedes EQS, which, however, has not yet been delivered. At the moment, the head of the German diplomacy moves with a hybrid Audi A8 L. The exception is the “green” Minister of Economy Robert Habeck, who does not want his own official car and moves with any vehicle available from the experts of the German Forensic Service ( BKA). Only the “fleet” of the BKA has only armored cars with conventional engines and not electric vehicles.
DW / Giannis Papadimitriou
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