Eurozone Budgets Under the Spotlight
Eurozone governments have enjoyed an extended period of low interest rates. But, as indebted governments submit their budgets to the European Commission for review, they should consider the fiscal impact of a sudden reversal in bond-market sentiment, which is neither entirely rational nor sympathetic to political rhetoric.
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DUBLIN – Bond markets are notoriously fickle, often driven by sentiment rather than rigorous macroeconomic analysis, and, as the 2008 global financial crisis demonstrated, they are far from infallible. They can also be particularly unreliable when assessing an economy’s long-term prospects.