Markets continue to wobble as ECB buys out government debt

August 8, 2023


Image by Stefan

After Friday’s bloodbath, confidence in the markets continues to falter as unsteady trading continues today.

This is despite measures by the European Central Bank (ECB) to buy out debt from struggling Eurozone nations Spain and Italy. The ECB hoped that in buying bonds from the two fledgling economies, it would decrease the chance of either government defaulting on their debts and settle the shaking nerves of traders.

While the ECB intended to increase confidence in the two economies, reactions to the move have been mixed, with European markets slumping around mid-morning after an initial jump: the FTSE 100 is currently down 2%, while Paris’ CAC 40 and the Frankfurt Dax are down 2% and 3% respectively.

However, there has also been some optimism in response to the news, as the cost of Spanish and Italian bonds both fell around 1.5%.

Nevertheless, the focus is now on European policymakers, as the ECB bailout is only a temporary solution. It is now up to European leaders to draw up feasible, long term plans to reduce spending and reassure market traders in the long term.

Spain and Italy have already made a start to their plans: Silvio Berlusconi is pledging to balance Italy’s budget by 2016, a year ahead of schedule; while the Spanish are also planning to speed up money saving measures, with an announcement of budget cuts aimed to slash their debt by €4.9bn expected later today.

However, despite these measures, nobody is really sure whether the worst is over. Some analysts are expecting unsteady trading to continue for some time.

Amrita Sen, an analyst at Barclays capital, told The Telegraph that they expect “price action to be choppy and volatile and downward pressure on prices is likely to remain until a more certain trajectory to economic growth is ascertained”.

Hold on tight, folks. It looks like the storm is far from over.

Have you been affected by the European market crisis? Tell us your stories in the comments section below.

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