Highly-indebted euro-zone governments look better placed to cope with tighter monetary policy than they were when the ECB last raised interest rates, in 2011. In most cases, governments’ interest spending is now lower than it was then and the average maturity of public debt is longer. The ECB also has an asset purchase programme that it could, in principle, use to keep bond spreads under control. That said, there is still plenty of scope for even-higher-than-expected inflation or a policy error to cause renewed turmoil in the bond markets.
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