Christian Schulz, deputy chief European economist at Citibank, told CNBC on Oct. 7 that Wall Street is worried about a looming EU-wide financial crisis. The immediate cause of their concern, they claim, is a $200 billion energy relief plan that the German government of Olaf Scholz has announced, designed to mitigate the effect on consumers of soaring energy prices and dramatic shortages this winter. Germany would sell treasury bonds to finance the plans, which Citibank
The decision earlier this month of the new Truss government in the United Kingdom to launch a similar huge borrow-and-spend program, coupled with huge tax cuts for the rich, ended up blowing out the British gilt (treasuries) market. Said Citi’s Schulz: “The risk is that others may follow that example citing the UK’s recent bond market meltdown after unfunded tax cuts by the government…. The risk is that this same dynamic [as seen in Britain] evolves on the continent as well now,” Schulz warned.
