Eurozone: Fall in interest rates increases fiscal space – BNP Paribas

Frédérique Cerisier, analyst at BNP Paribas, points out that the current public debt ratios are much higher than before the Great Recession in Eurozone.

Key Quotes

“A proper assessment of the risk that this entails should also take into account other changes in the economic environment, and in particular, the decline in long-term sovereign rates.”

“This trend has accentuated recently, with long term interest rates in several eurozone countries dropping below zero. But the decline has been at work for a long time and has already produced major effects.”

“Considering that interest rates are expected to stay low for a long time and given that maneuvering room for monetary policy is close to exhausted, some countries might turn towards fiscal policies to support activity. The ECB has already made a plea in that sense, at least for those countries with fiscal space.”