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08 April 2012

FT: Debt issuance boost for European economy


Europe's development banks and public sector groups responsible for offering loans to small businesses and local authorities have enjoyed record debt issuance this year, in a boost to the region's struggling economy.

Debt sales of these groups have soared to $360 billion so far this year, a 9 per cent increase on the same period in 2011, and the highest year-to-date total on record, says Dealogic, the data provider. The amount of debt raised this year is also more than double that of 2006 – before the financial crisis.

The jump in issuance, sparked by the emergency financial injections of the European Central Bank, may prove critical to the eurozone economy as it should help small business finance projects that could prove pivotal to a revival in a region still suffering from the public debt crisis.

Jean-Marc Mercier, global head of debt syndicate at HSBC, said: “These markets have been helped by the positive effects of the ECB’s loans. But they are also benefiting from the fact the Greek debt exchange is now behind us and the reform process in Italy and Spain.”

However, some bankers warn that the positive afterglow from the ECB’s emergency action may be dimming, as Spanish and Italian benchmark 10-year bond yields jumped sharply last week amid scepticism that these two countries can meet important fiscal targets and trigger growth in their sluggish economies.

Full article (FT subscription required)



© Financial Times


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