Mario Draghi Is Relying on Some Old Friends
With Italian bond yields inching upward, the prime minister’s economic recovery plans will depend heavily on the ECB “managing the spreads.”
The mother of all stimulus plans.
Photo: Bloomberg
Italy is at an inflection point. Not just because Prime Minister Mario Draghi unveiled the mother of all stimulus packages this week, but also because Italian bond yields are inching up to their highest levels for more than six months. The huge leap toward an economic recovery can only be achieved if the costs for the nation’s ballooning borrowing needs are kept in check.
This is where the European Central Bank, Draghi’s former employer, really has to have his back by reassuring bond markets that it will keep buying as much Italian debt as needed. This will keep the “gentlemen of the spread” — the League leader Matteo Salvini’s memorable description for bond traders — in check and ensure the differential to German Bunds remains controlled.