ECB data on Monday showed Spanish small businesses face the highest
bank borrowing costs in almost four years – while interest rates paid by
German rivals are at record lows.
The sharply diverging interest rates have put southern European companies increasingly at a competitive disadvantage to their northern European rivals.
They provide a gloomy backdrop to this week’s ECB governing council meeting, which will discuss plans for intervening in eurozone government debt markets, as investors price in the chance of a break-up of the 14-year old monetary union.
David Riley, head of sovereign ratings at Fitch Ratings, said: “The fragmentation is getting worse. If this trend gains even greater momentum we’ll face a fundamental reordering of the eurozone. It undercuts the whole rationale of the euro, and could eventually make it easier for it to break up.”
Mario Draghi, president, has justified possible ECB action by citing the financial fragmentation, which has seen banks reducing substantially their cross border exposures and the ECB replacing private capital flows on a large scale. The ECB president has pledged to do “whatever it takes to preserve the euro” – although he has made a bond-buying programme conditional on the benefiting countries first accepting conditions imposed by Europe’s bailout funds.
Read more: http://www.ft.com/intl/cms/s/0/60ae47cc-f5e5-11e1-a6c2-00144feabdc0.html#axzz25QwcWYk2
The sharply diverging interest rates have put southern European companies increasingly at a competitive disadvantage to their northern European rivals.
They provide a gloomy backdrop to this week’s ECB governing council meeting, which will discuss plans for intervening in eurozone government debt markets, as investors price in the chance of a break-up of the 14-year old monetary union.
David Riley, head of sovereign ratings at Fitch Ratings, said: “The fragmentation is getting worse. If this trend gains even greater momentum we’ll face a fundamental reordering of the eurozone. It undercuts the whole rationale of the euro, and could eventually make it easier for it to break up.”
Mario Draghi, president, has justified possible ECB action by citing the financial fragmentation, which has seen banks reducing substantially their cross border exposures and the ECB replacing private capital flows on a large scale. The ECB president has pledged to do “whatever it takes to preserve the euro” – although he has made a bond-buying programme conditional on the benefiting countries first accepting conditions imposed by Europe’s bailout funds.
Read more: http://www.ft.com/intl/cms/s/0/60ae47cc-f5e5-11e1-a6c2-00144feabdc0.html#axzz25QwcWYk2
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