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A page in monetary history has turned at the start of 2025, leading to new pressure on French debt. Since 1er January, the European Central Bank (ECB) stopped buying European bonds entirely. This is the first time in a decade that it has ended its interventions in the financial markets.

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“This is not the primary cause of the rise in interest rates [depuis un mois]but it contributes to the movement »estimates George Cole, economist at the American bank Goldman Sachs. According to him, this disengagement by the ECB adds around 0.7 points to European interest rates. For France, which currently borrows at 3.4% for ten-year bonds, and whose budgetary margins are particularly limited, this is far from negligible. Enough to add a little more than 2 billion euros in interest just for the loans planned by the French government in 2025.

To understand the mechanism at play, we have to go back to 2015. In the midst of the euro zone crisis, the economy is flat and the problem of the moment is the risk of deflation. The ECB is desperately trying to revive activity, but it is blocked: it has already lowered interest rates… into negative territory, to -0.2%. Never seen before.

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The ECB then decided to use another tool: it began to buy the debts of European states. By intervening directly on the markets, it pushes the interest rates at which they borrow even lower. This major departure from monetary orthodoxy triggers a storm internally at the monetary institution, provoking the anger of the German governor. But its president at the time, Mario Draghi, imposed his will, and the ECB became a major player in the bond markets.

Who will buy the debts?

When the Covid-19 pandemic arrived, his successor, Christine Lagarde, redoubled her activity in this direction. So much so that the ECB becomes – by far – the main buyer of European bonds. From 2015 to 2022, the institution buys nearly 5.2 trillion euros of debt. At its peak, it owned half of all eurozone countries' debts, according to UBS calculations.

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Source: Lemonde

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