Rising government debt levels could unsettle world monetary markets, the top of a frame advising central banks discussed on Sunday ahead of France’s high-stakes parliamentary elections.
Augustin Carstens, general manager of the Institute for Global Settlements (BIS), said the industry’s economy was on the right track for a “smooth landing” from the inflation emergency, although he warned that policymakers, especially politicians, would have to do the same. Attention.
International sovereign debt is already at record levels and everything from the United States presidential election in November to fresh elections in Mexico and South Africa and votes in France and Britain in the coming days all raise risks.
Emmanuel Macron’s decision to call snap elections in France has sent the country’s treasury shares crashing and unsettled bond markets, raising fiscal stability concerns in the eurozone’s second-largest economy.
Surveys conducted ahead of the first round of voting on Sunday showed that the party leading amid the record turnout is likely to win the largest percentage of votes.
Carstens said the BIS was not calling on any “one or two” governments, but the message had been published.
“They (governments) should reduce the increase in public debt and accept that interest rates cannot return to pre-pandemic ultra-low levels,” he said. “We need a solid foundation to build on.”
Since interest rates are no longer likely to rise again to ultra-low levels, and price pressures from fundamental pressures on one’s feet in a growing population, the breakdown and rebuilding of defense facilities, fiscal stimulus plans and protectionism could destabilize sensitive markets. Is. , warned BIS as it revealed its annual document.
“They can surprise you without much notice,” Carstens told reporters, pointing to the closest top UK markets to Prime Minister Liz Truss’ upcoming fund plans, which are expected to derail some pension budgets. Is. “You really want to avoid that.”
Brand new spending has been promised in all of France’s primaries. Macron’s government promised to reduce the budget deficit from 5.5% of gross domestic product to the EU union ceiling of 3% by 2027 – a target that will be impossible after the vote, which begins with a second round on July 7. Will end.
If it approaches a central authority, Marine Le Pen’s Nationwide Rally (RN) wants to reduce the value-added tax (VAT) on electricity, which it says will generate an additional €7bn ( £5.9bn) and would cost €12bn. A perfect presence. The RN would additionally eliminate the 2023 increase from 62 to 64, and says its spending plans will be paid for through cuts in contributions to EU funds.
The leftist Brandnew Frequent Entrance Coalition, now in the midst of voting, says its first attack will come with a 10% pay rise for civil servants, the offering of separate college lunches, a 10% increase in delivery and shipping costs .
The turmoil has sent the French government charging for repayments on its debt to global markets, with French debt holders seeking higher grades or spreads as Germany emerged at its best level since 2012.
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France’s blue-chip CAC 40 index has lost 6% since Macron dissolved parliament, with French banks having been some of the biggest losers. The big 3 – Societe Generale, BNP Paribas and Credit Agricole – are up 10%-14% since Macron’s announcement.
French banks are heavily indebted and vulnerable to losses if credit score prices rise sharply.
What was certain for Carstens was that central banks have effectively reined in inflation, which was at decade-old highs due to the COVID-19 pandemic and Russia’s 2022 invasion of Ukraine, which has rattled commodity markets Was.
“Compared to last year, I have to say, we’re in a much better place,” said the former Mexican Central Storehouse governor.
Even though Carstens noted that central banks deserve respect for navigating a difficult path that could have led to a recession, he added that he should liken the inflation fight to antibiotics to cure a blemish. We will have to continue with the process.
He described a “dire” situation where inflation rises again and central banks have to raise rates additional. However this is not what BIS expects.
