Spain reaches a record dependency on the financing of the European Central Bank (ECB) after the decision of this body to expand its purchases of public debt.
The ECB will accumulate in its balance sheet nearly 400,000 million euros this year between the previous purchase programs and those that it has launched due to the coronavirus crisis. In addition to Treasury bills, bonds and obligations equivalent to more than 20% of the Spanish Gross Domestic Product acquired by the ECB in previous plans, we must add the gigantic program increased on Thursday by 600,000 million. The so-called emergency purchasing program against the pandemic (PEPP) will total 1.35 trillion until June 2021, which implies that, at the current rate, it will dedicate about 150,000 million to Spanish debt for its support in the markets .
The ECB's purchases are being decisive so that Spain's risk premium does not skyrocket and, although it has not yet returned to the levels prior to the virus crisis, it is now around 80 basis points, half that of the worst times of the health crisis. The institution chaired by Christine Lagarde has also managed to collapse Italy's risk premium, which is already below 170 basis points.
The European Union's response, greater than expected after the agreement reached by the German Chancellor, Angela Merkel, and the French President, Emmanuel Macron, has also contributed to the relaxation of the markets with these countries so affected by the coronavirus.
The increase in support from the ECB, unleashed by the worsening of the recession in the Eurozone, is far from now that Italy or Spain have to go to the European rescue fund, the so-called Mede, which, although it does not pose explicit conditions beyond dedicating the money to the health crisis, is a stigma.
Lagarde has not set conditions either, but he does begin to send messages to that effect by the Vice President of the European Commission, Valdis Dombrovskis, who attends the ECB meetings on behalf of Brussels. He recalled at a seminar organized by The Economist that "once we move from crisis to recovery, normal fiscal rules will begin to be applied again and countries will have to move towards prudent fiscal positions."
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