The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Sovereigns face a financing crunch

If you thought the credit market was dead, it’s not. It is now called the sovereign debt market. The crisis has boosted demand for their paper, but a day of reckoning for the government bond markets is coming. Alex Chambers reports.

THE START OF the year saw the usual spectacle of high-grade issuers jostling for position in the new-issue pipeline, mostly meeting with a decent reception. But the failure of a 10-year Bund auction to be fully covered was greeted with general dismay. If the benchmark borrower for the eurozone can suffer a failed auction, what hope is there for the rest of its members?

It is a question that is becoming more frequently asked of sovereign and central bank policymakers. In February, outspoken German finance minister Peer Steinbrück, speaking in a political party setting, raised the prospect of weaker countries within the single-currency system being helped if they had problems financing their deficits. Of course such an outcome is best avoided: Lorenzo Bini Smaghi will not be the last executive board member of the European Central Bank to warn eurozone nations of the dangers of ballooning budgets, as he did in mid-February speaking in the European parliament.

According to Fitch, gross borrowing requirements of the EU 15 plus Switzerland this year are €2 trillion – including term debt and rolling over short-term debt. This is 45% up on 2008 – some 17% of GDP. For the largest five borrowers combined, this will be a record proportion of GDP, greater than previous highs set in the 1990s when Italy was borrowing far more than today.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree