What an end to quantitative easing means for Italian debt

BEFORE THEECBECBGDPECB pandemic, there were a few accepted facts about the euro zone. Heavily indebted southern member states would try to persuade northerners to agree to jointly issue bonds, and fail. Emmanuel Macron, the president of France, would talk of a big common budget, only to be met by opposition in Berlin. And everyone agreed—some would say pretended—that Italy’s government debt was manageable. That helped give the European Central Bank () political cover to buy Italian bonds during downturns.Covid-19 has laid many of those truisms to rest. In 2020 the bloc set up a €750bn ($813bn) common recovery fund, financed by European bonds, to counter the economic fallout from the virus. The ‘s pandemic bond-buying scheme, through which it has bought €1.6trn in government debt, also helped contain borrowing costs for the zone’s more indebted members. But Italy’s big debt burden remains: in fact, it has grown, from 134% of on the eve of the pandemic to 151% by the end of 2021. As inflation surges, the has begun to signal that it will stop net bond purchases after the summer. What does that shift hold for Italian debt?