Giuli, M., (2014), “A Disillusioned Guide to Spread Reductions”, Madariaga Paper – Vol. 7, No. 1, Ιανουάριος.
The present commentary will focus on the case of Italy, where in January 2014 the spread fell to under 200 points, recording a reduction of 80 points over the previous year. The current differential between Italian and German 10-year sovereign bond yields is back to 2011 levels, when the imminent risk of losing access to markets drove Italy into a political crisis, leading to the installment of a technocratic government and the adoption of emergency measures. Apart from the measures coping with imminent debt deadlines, the reduction of the spread was insistently described as a top priority for the government action, justifying huge efforts of budget consolidation – mainly composed of tax increase – which contributed to the plunging of the economy into a severe recession. This article first aims to highlight the causes of the current spread reduction and second, attempts to assess the conditions under which the country’s fiscal room for manoeuvre might be affected by this reduction.
Σχετικές Αναρτήσεις
- Favero, Carlo, Missale, Alessandro, (2012),‘Sovereign spreads in the eurozone: which prospects for a Eurobond?’, Economic Policy, Vol. 27, Issue 70, p.p. 231 – 273.
- Corsetti, G., Kuester, K., Meier, A. and Müller, G., (2013), “Sovereign Risk and Belief-Driven Fluctuations in the Euro Area”, International Monetary Fund, IMF Working Paper, WP/13/227.