Clouds. 51.8   F New York
AI-Powered News Summarizer
World

Who cares about credit ratings? Italy can borrow money for free

October 14, 2020. Summarized by summa-bot.

Italy already had one of the highest debt mountains in the world before the pandemic pushed it into one of the deepest recessions of any major economy. It's still able to borrow money for free.

London (CNN Business)Italy already had one of the highest debt mountains in the world before the pandemic pushed it into one of the deepest recessions of any major economy.

It's the latest sign that there's very little preventing governments, backed by the firepower of their central banks, from borrowing whatever it takes to rebuild economies savaged by the pandemic.

Officials have already pumped trillions into their economies to cushion the impact of the crisis and are facing growing pressure to provide even more financial support to cash-strapped workers and businesses, particularly as a second wave of coronavirus infections threatens to derail the fragile recovery.

Federal Reserve chairman Jerome Powell said earlier this month that there is little risk of government overdoing stimulus, whereas too little support would lead to a "weak recovery. "

The IMF expects Italy's economy to contract 10. 6% this year and forecasts government debt to exceed 160% of GDP by the end of 2020, up from 135% last year.

Italy's ability to raise debt so cheaply highlights how unprecedented intervention by central banks has created a disconnect between financial markets and the real economy.

"We are still in the midst of a global pandemic, [yet] Italy can fund itself for free," said head of rates strategy at Rabobank Richard McGuire.

Investors are expecting even more support from the European Central Bank, he told CNN Business.

Bond investors are betting that the European Central Bank will turn on the stimulus taps again, possibly as early as December, by adding billions more to its $1. 35 trillion asset purchase program.

Italy is also benefiting from plans by the European Union to transfer huge sums of money to the hardest hit states as part of a €750 billion ($882 billion) post-pandemic recovery fund.

Summarizer is on Google News. Now you can get the latest AI summarized news on your favorite news platform.

Don't like Google News? We have an RSS Feed for you.

Suggestions