2023-04-22 08:05:33
Cis a question worth more than 550 billion euros: who is going to buy the debt of European states? This year, European governments find themselves faced with a painful pinch effect. On the one hand, their expenses are racing: the shock of inflation pushes them to offer social aid and tariff shields; the war in Ukraine requires increased military spending; and massive investments are required to deal with global warming. On the other hand, the European Central Bank (ECB), which has long been the big debt buyer, is pulling out of the market.
Lots of public spending, but one less essential bond market player: the equation will be strained for the markets. According to the calculations of Deutsche Bank analysts, in 2023 it will be necessary to find private investors ready to inject 555 billion euros net to finance the ten main countries of the euro zone. This is three times more than in 2022.
This financing requirement breaks down with 453 billion euros of bonds issued by these ten countries, while the ECB must at the same time reduce its bond portfolio by 102 billion euros. Germany and France are the two most affected countries, with respective financing needs of 155 billion and 138 billion euros this year. For France, it is more than a doubling compared to 2022, and for Germany, a multiplication… by thirteen.
The “whatever it takes” is starting to get expensive
No false suspense: European countries are not regarding to run out of funding. « Pimco, BlackRock [deux grands fonds d’investissement] and other major institutional investors are ready to buy European debt, emphasizes Eric Dor, director of economic studies at Iéseg, a business school. The demand is there, especially in large countries, where the markets are very liquid. » On the other hand, this enormous need for financing has a cost: investors are there, provided that the interest rates offered to them are sufficiently attractive. Clearly, the “whatever it takes” starts to get expensive.
A member of the Executive Board of the ECB, on condition of anonymity, confirms this analysis: “There is strong demand for European government bonds. With interest rates soaring, investors are happy to participate. But the cost has increased. »
Friday, April 21 brought a reminder of this issue of state financing. Eurostat, the European statistics agency, has published the level of the deficits of the countries of the European Union for 2022. For the whole of the euro zone, this reaches 3.6% of gross domestic product (GDP). Admittedly, this is a marked improvement compared to the pandemic years (7.1% in 2020, 5.3% in 2021), but then you have to go back to the eurozone crisis in 2012 to find a deficit as important. As always, some countries are particularly exposed, starting with Italy, whose deficit was 8% of GDP last year. Malta (5.8%), Spain (4.8%) and France (4.7%) show the next three worst results.
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