With a potential €872 billion of sovereign debt to be refinanced in 2025, bond markets are already heating in the 20 eurozone countries. For countries such as France and Italy, costs of refinancing are increasing. If the ECB goes on as announced, with ceasing to reinvest in purchased bonds, a crisis is pre-programmed.
France, whose budgetary margins are particularly limited, currently borrows at 3.4% for ten-year bonds, and this adds €2 billion in interest just for the loans planned by the French government in 2025. When the new Prime Minister François Bayrou took power on Dec. 13, 2024, the rate for bonds was 2.9%. On Jan. 19, 2025, it had reached 3.45% and is expected to keep rising. France’s debt stands at 3.3 trillion and in 2023, some 52.9% in reimbursements alone went to accumulated interest.
The ECB has announced that in 2025 it will stop re-investing in eurozone sovereign bonds, after it had already ceased purchases of new debt through the anti-pandemic program PEPP. From 2015 to 2022, the institution bought nearly €5.2 trillion of debt. At its peak, it held half of all the debt of the eurozone countries, according to UBS calculations.
A key question then arises for European governments, pointed out Le Monde yesterday: “Who will now buy their debt?” “Clearly, someone will have to replace the ECB,” explains Emmanouil Karimalis, head of strategy at the Swiss bank UBS. In 2025, the 11 main countries of the eurozone will issue around €465 billion of net debt (a third of which will come from France). At the same time, the ECB will let €407 billion of debt mature without replacing them. All in all, private investors will therefore have to buy €872 billion of bonds, the highest amount ever. Added to rising energy prices and inflation, interest rates are set to rise.
This puts the financial oligarchs in the EU driver’s seat. They will dictate their rates and conditions for more privatizations, massive austerity and Schachtian economics. However, faced with a financial crisis, it is probable that the ECB will again open the flood gates, as it has done each time a liquidity crisis has threatened to bring down the system.
