Lucrezia Reichlin of the London Business School recently discussed rising borrowing costs in Italy on CNBC’s Squawk Box program.
Italy’s debt remains a major source of fragility for the country and Professor Reichlin was asked about rising borrowing costs for 10-year paper from half a percent to just over two percent. country that has more than 150% debt in relation to GDP?
Professor Reichlin said this was worrying, partly because Italy is one of the most indebted countries in the eurozone, but also because of a feature of the eurozone economy. “Whenever there are ‘bad shocks’ there is a flight to safety and the countries with the highest debts are the first to be penalized,” Reichlin said in an interview with Steve Sedgwick of CNBC Squawk Box Europe, which aired in early April this year. .
“We’ve seen this happen in previous crises and it’s something the European Central Bank (ECB) needs to correct as it relates to monetary policy transmission. We don’t want to have differential interest rates excessive in the euro area.
The interview went on to explore inflationary pressures in the Eurozone and monetary policy at the ECB. The interview can be viewed here.