Curious paradox. Since June 2024, the European Central Bank (ECB) has lowered its guiding interest rates. She did it again, Thursday, March 6, a quarter of a point, carrying the cuts in total from 4 % to 2.5 %. However, the States do not benefit from it. The interest rates from which they borrow increase, highlighting the strange helplessness of the ECB.
For two days in particular, fire has spread in bond markets. Thursday, the interest rate of French bonds at ten years (which serve as reference) reached 3.6 %, its highest level since April 2011, fourteen years ago. Same thing in Germany, where the rate has risen to 2.9 %, a summit since 2011 too. In Italy, rates are 4 %, a level not reached since summer 2024.
Once is not customary, the tension came from Germany. The future chancellor, Friedrich Merz, who won the elections on February 23 and is currently negotiating a coalition, made two major announcements, Tuesday March 4. It ends decades of budgetary orthodoxy, by offering two large recovery instruments: a fund of 500 billion euros over ten years (12 % of the gross domestic product, GDP) devoted to infrastructure; An exemption from German budgetary rules on defense spending. In total, it’s a recovery “From 1 % to 2 % of GDP per year”According to the Capital Economics design firm.
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