Government bond rates and interest expenditure of large euro area member states: A scenario analysis
Veronika Grimm,
Lukas Nöh and
Volker Wieland
International Finance, 2023, vol. 26, issue 3, 286-303
Abstract:
This paper assesses the possible development of government interest expenditures for Germany, France, Italy and Spain. Until 2021, governments could anticipate a substantial further reduction in interest expenditure. This outlook has changed drastically with the surge in inflation and government bond rates. Assuming that bond rates remain at the levels implied by yield curves from December 2022, interest expenditure rises substantially. We also examined scenarios with a further upward shift in yield curves by one or two percentage points. They indicate major medium‐term risks for highly indebted member states with interest expenditure approaching or exceeding levels last observed on the eve of the euro area debt crisis. Governments should take action to achieve a decline in debt‐to‐GDP ratios towards safe levels. They need to make sure public debt remains sustainable at the higher interest rates that are required to achieve price stability in the euro area.
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://doi.org/10.1111/infi.12434
Related works:
Working Paper: Government bond rates and interest expenditure of large euro area member states: A scenario analysis (2022) 
Working Paper: Government bond rates and interest expenditure of large euro area member states: A scenario analysis (2022) 
Working Paper: Government bond rates and interest expenditure of large euro area member states: A scenario analysis (2022) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:26:y:2023:i:3:p:286-303
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1367-0271
Access Statistics for this article
International Finance is currently edited by Benn Steil
More articles in International Finance from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().