The issue of yield spreads between euro-zone countries will be crucial

The ECB wants to cautiously normalise its monetary policy (exit quantitative easing before the end of 2022 and subsequently raise interest rates slightly). However, it is evident that the announcement of this cautious normalisation has triggered a sharp rise in interest rates in some peripheral euro-zone countries (particularly Greece and Italy) and a marked widening of these countries’ yield spreads against Germany. So there is clearly a risk of a debt crisis in these countries, especially in Italy and Greece where potential growth is zero. It is important to understand that this risk will be a very significant obstacle to the effective implementation of a monetary policy normalisation in the euro zone, unless the ECB combines this normalisation with a commitment to stabilise yield spreads between euro-zone countries through targeted bond purchases.