High levels of public debt in the euro zone make governments hypersensitive to interest rate hikes by the central bank. This is because, as can be calculated from financial mathematics, even a small increase in the key interest rate places a far greater burden on the debt service of public budgets than the nominal interest rate increase. – This, however, prompts disputes between the debtor countries (at various levels: governments, parliaments, press, society) and the central bank. In the public perception, it is then suddenly no longer the extraordinarily high level of debt that is the evil, but the central bank’s policy, which is geared to monetary stability and thus to the preservation of money’s dimensionality. Experience has shown that a barrage against the central bank now begins. Ultimately, hawks are then replaced overnight (between nightfall and daybreak) by people who are more inclined to allow inflation. – See expenditure ratio, public, blame game, deficit ratio, euro crisis, European Monetary Union, fundamental error, money, moral, money ownership, monetary policy, monetary confidence, monetary stability, inflation tax, net creditor, nominal value principle,
Poltergeist, debt brake, debt ratio, semester, European, seven percent limit, solidarity, financial, public debt, public debt, consumption-reducing, public debt reduction, Stability and Growth Pact, debt ratio, public, transfer union, path inflation, payday rule, interest rate autonomy. – Cf. ECB Monthly Bulletin of March 2010, p. 95 (Fiscal policy considerations: four serious consequences of high budget deficits), Financial Stability Report 2012, p. 17 et seq. (government debt affects almost all economic variables; detailed presentation), Cf. ECB Monthly Bulletin of March 2013, pp. 92 ff (growth inhibition of high government debt; overviews; references), ECB Monthly Bulletin of May 2013, pp. 93 ff (in-depth analysis of the debt levels of euro area members; overviews; references).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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