Faced with soaring interest rates, the European Central Bank held an exceptional meeting on Wednesday June 15, 2022. A meeting not on the agenda is very rare and a sign that the situation is getting more complicated in Europe. The expression entry into a “war economy” takes on its full meaning here. This meeting of the Governing Council of the ECB took place a few hours before that of the FED, the American Federal Reserve – the equivalent of the ECB in the United States – which decided to raise its key rates by three quarters of a point, the biggest increase since 1994, to fight against inflation. US rates are now between 1.5% and 1.75%. Further increases are to come in the coming weeks. We could go up to 3.25% or 3.5%.
For citizens, this sets the tone for the credits granted to us by commercial banks (real estate, consumption, etc.). Also for business loans. No more easy money with the zero rates of recent years. What seems to worry the monetary authorities above all is the impact on the repayment of public debts. More broadly, all the money spent in recent years by states that are not very cautious about this easy money. The objective now is to avoid competition between European countries: between those who have a good image with investors who buy public debt (this is the case of northern countries such as France and Germany), and those whose image is degraded (the southern countries, first and foremost Italy). This is called “spread”: rate differences. They are widening between Italy, Greece, Spain and Portugal, in particular.
In the background, there is the fragmentation of the sovereign debt market in the euro zone. European states will be forced to borrow money at very different levels depending on their ability to repay, with the immense risk of seeing the specter of a new debt crisis reappear, ten years after the one that failed. blow up the unity of the eurozone. This is where we are.
The emergency meeting of the ECB around its president Christine Lagarde did not lead to concrete measures, except for the ambition to put in place counterfire mechanisms, no details of which have been communicated. Obviously, the subject seriously complicates the start of the new five-year term.