How inflation and interest rates might affect Italy’s budget
Tighter monetary policy could make Italy’s debts harder to pay
Before the pandemic it was a cause for excitement among economists that the real interest rate governments paid on their debts had fallen below the rate of economic growth in most rich countries, allowing governments to spend more freely and worry less about running up debts. But central banks’ battle with inflation today threatens to turn that relationship on its head, making the fiscal position of indebted governments more perilous.
This article appeared in the Finance & economics section of the print edition under the headline “Whenever it breaks”
Finance & economics June 25th 2022
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