Aviator glasses and an impeccable suit and tie while waiting for his train, despite the heat wave that hit Lugano, Switzerland, Mathieu Savary draws a first assessment of his meetings, a bit worried. Usually based in Canada, the strategist of BCA Research, a company that advises investors, is touring Europe in mid-June. His specialty: the euro zone. The period is particularly turbulent. On June 9, the European Central Bank (ECB) thus promised an increase in its interest rate, a first in eleven years.
In the aftermath, the markets got carried away, Italy being perceived as the weak link. The ten-year Italian bond rate, which was still 1% at the start of 2022 and 3% on May 30, suddenly soared to 4.3%. The “spread”, that is to say the gap which separates it from the German bond rate, has tightened, rising, in the space of six months, from 1 point to 2.5 points. The “fragmentation” of the single currency is back. Enough to revive the specter of the euro zone crisis, when the prospect of an unsustainable Italian debt had seriously loomed. It took, on June 15, an emergency meeting of the ECB, which promised to intervene in the event of severe turbulence, to restore calm. Italian bonds are now down to 3.4%. For the moment.
“The concern is that investors’ perception of Italy hasn’t really changed. The country is still seen as the one with all the problems”, explains Mr. Savary. The crisis of 2010-2015 remains in everyone’s mind. He himself remembers it very well: the bonds on the Italian debt no longer found buyers. “Investors are afraid that there will be another buyers’ strike, he continues. And again, in Europe, my clients have a fairly good understanding of things. But I have to tour the United States in July, and I think the skepticism will be even stronger. The next attack on the Eurozone will come from British and American investors. »
Perilous balancing act
With each new economic shock, the euro continues to show signs of fragility. This monetary construction has no equivalent: the currency is issued by the ECB, the only truly federal body in the European project, but the debts are issued by the governments of the nineteen member countries. For an investor, this raises a recurring question: if a country were no longer able to repay its debt, would the ECB come to its rescue? It was for lack of a clear answer to this question that the 2010-2015 crisis occurred.
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