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Spanish and Italian risk premiums plummet after France-Germany agreement

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The risk premium of both Spain and Italy have plummeted at the close of the European market. The reason? German Chancellor Angela Merkel and French President Emmanuel Macron have proposed a € 500 billion recovery fund for the European economy destined through nonreimbursable subsidies to the countries and sectors hardest hit by the Covid-19 pandemic.

A news that has been well received in the indicator of both countries. In fact, after knowing the information, both the Spanish and the Italian have collapsed. In Spain, specifically, it has dropped to 127 basis points, a crash of more than 6% if you consider that it has dawned at 132 basis points.

While the Italian stands at 213 basis points. The day has begun in 238. This represents a decrease of more than 10%.

Both countries are between Europeans hardest hit by coronavirus and therefore they will be the beneficiaries of the fund announced by Merkel and Macron. This implies that they would have access to funds backed by the European budget to cover their post-crisis financing needs, without being directly affected by the conditionality of risk premiums implicit in the debt markets of individual member states.

The European Commission will be in charge of financing this fund. by issuing debt in the markets "according to European treaties and the rights of national parliaments". The grants will go "to the most affected sectors and regions", with priority for "digital and green transitions and the reinforcement of research and innovation".

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