Com­merzbank chief economist Jo­erg Krae­mer says the big­ger risk is in Italy.

Malta Independent - - NEWS -

op­po­site to bond prices, down. That’s key be­cause it was ex­or­bi­tant bond mar­ket rates in 2011 that threat­ened Italy’s fi­nan­cial sol­vency.

The ECB also has a spe­cial pro­gram dubbed out­right mon­e­tary trans­ac­tions, or OMT, un­der which it could buy a coun­try’s bonds to pre­vent it from fac­ing ru­inous bor­row­ing costs.

But the ECB’s bond pur­chases will have to end at some point. Right now the ear­li­est end is March, 2017, although that may be ex­tended by three or six months at a 8 De­cem­ber meet­ing.

And Krae­mer warns that de­ploy­ing the OMT could strengthen sup­port for anti-euro par­ties in Ger­many and the Nether­lands, where stim­u­lus scep­tics ar­gue such as­sis­tance only un­der­mines the will to re­form shaky gov­ern­ment fi­nances. Right now, it’s all hy­po­thet­i­cal. “I still hope that by the end of this pe­riod, we have a cou­ple of elected lead­ers who can get across more in­te­gra­tion at the eu­ro­zone level,” said Brzeski.

“The nega­tive sce­nario is, I’m wrong with at least one of these out­comes, we get a move to­ward more na­tion­al­ist pol­i­tics and poli­cies in Europe, and we get a grad­ual fur­ther dis­in­te­gra­tion. And then it would be more than noise.”

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