Report
There is cause for concern about those OECD countries where the long-term interest rate may rise above nominal potential growth: The case of Spain and Italy
As long as the interest rate remain s lower than growth, debt ratios decrease spontaneously and the solvency of borrowers (public or private) improves. But if the long-term interest rate becomes higher than the growth rate ( prospectively , i.e. not current growth but potential growth), then borrower solvency worsens. Among the major OECD countries, the long-term interest rate could conceivably becom e higher than nominal potential growth in the future in Spain and Italy. This highlights the euro zone’s specific nature. In other countries, the central bank can prevent long-term interest rates from rising ; i n the euro zone, it cannot do this for each euro-zone country individually.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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