Following the announcement that the president has accepted Draghi’s resignation, the interest rate on Italy’s ten-year government bond has risen by 22 basis points (0.22 percentage points) to 3.59 percent.
The interest rate level can be compared with the ten-year interest rate in Germany of 1.30 percent. The growing interest rate gap between the countries reflects a growing distrust of Italy’s future ability to pay.
At the same time, the Milan Stock Exchange is falling by almost 3 percent and is thus – if one excludes the Moscow Stock Exchange – the European stock market that performs the worst on Thursday.
The euro is also losing somewhat against the dollar in the wake of the drama in Italy.
Political turbulence increases the pressure on the European Central Bank to put in place a new aid buying program, to even out interest rate differentials between euro area countries. An announcement of such a support purchase program is expected in connection with Thursday’s interest rate announcement – where the ECB’s first interest rate hike since 2011 is expected.