LONDON, June 25 (Reuters) - A rise in euro zone borrowing costs, driven by the prospect of less U.S. monetary stimulus, does not pose an immediate threat to struggling euro zone countries’ ability to service their debt piles, officials said on Tuesday.
Bonds of peripheral euro zone countries have come under heavy selling pressure due to concerns the U.S. Federal Reserve would wind down its stimulative bond purchases by the end of the year, cutting the liquidity that drove investors into risky assets.
The Federal Reserve Chairman Ben Bernanke confirmed last week it could start reducing the speed at which it prints new money before the end of 2013.
Euro zone borrowing costs have risen off multi-year lows in a global sell-off across asset classes, prompting speculation that ever higher rates could thwart efforts to service debt, especially for debt-strained southern states.
But officials downplayed these concerns at a Euromoney bond conference, with Italy’s debt management head saying the country’s yield premium over German benchmarks could go back to “pre-Bernanke levels”.
“We are not concerned in Italy about (debt) sustainability,” Maria Cannata said, adding there had been a new wave of U.S. investors compared to a year ago, while foreign interest in longer-term Italian bonds had also picked up.
“The yields are at the same level as at the end of March. We have lost the gain (in) 10-year (bonds) in terms of lower yields between April and May, but yields are fully comfortable,” she said.
Belgian, French and Spanish debt management officials at the conference echoed her views, though Belgium’s Anne Leclercq said the European Central Bank may have to step in to prop up growth.
While the fact the Fed was mulling curbing monetary stimulus was a positive sign that the U.S. economy was picking up, there were potential adverse consequences for the euro zone.
“We are really following the (United) States, and worse, in our euro zone, the economic growth is not there yet,” Anne Leclercq, a director at the Belgian Debt Management Office said.
“We should at a certain moment in time probably expect something to be done by our central bank to make sure that the rise in rates, which is not really appropriate for our economy, is going to stop at a certain time.”
Earlier on Tuesday, ECB President Mario Draghi said an accommodative monetary policy was still appropriate for the central bank, whose OMT bond buying plan was essential now as policy shifts elsewhere reverberated across the world.
His French colleague Benoit Coeure said the bank needed to make sure that the Fed’s plans did not hit euro zone bonds.