Cycle of debt and cheap money traps euro zone

European Central Bank president Mario Draghi has come under criticism for keeping interest rates low. The ECB defends its policy by citing perceived deflationary risks or below-target inflation. Shepherds in Oristano, Italy, blocking the roads and em
Shepherds in Oristano, Italy, blocking the roads and emptying milk tanks during a protest against the rising prices of milk two weeks ago. Italy has debt of more than 130 per cent of its gross domestic product, so any rise in interest rates would bring the state budget to breaking point.PHOTO: DPA
European Central Bank president Mario Draghi has come under criticism for keeping interest rates low. The ECB defends its policy by citing perceived deflationary risks or below-target inflation. Shepherds in Oristano, Italy, blocking the roads and em
European Central Bank president Mario Draghi has come under criticism for keeping interest rates low. The ECB defends its policy by citing perceived deflationary risks or below-target inflation. PHOTO: REUTERS

ECB shows no sign of ending low interest-rate policy; higher rates put pressure on countries burdened by debt

There was hope that more than 10 years after the 2008 financial crisis, capital markets would be on the road back to normal - but those hopes have been dashed in Europe in recent weeks.

The European Central Bank (ECB) is showing no signs of ending its policy of low interest rates.

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A version of this article appeared in the print edition of The Straits Times on February 26, 2019, with the headline 'Cycle of debt and cheap money traps euro zone'. Print Edition | Subscribe