LONDON (Reuters) - Although Italy’s debt burden is rising sharply in the face of the COVID-19 shock, its debt trajectory is likely to stabilise at high levels rather than end up on “unsustainable exponential path,” Barclays said in a new report on Wednesday.
“The key contributor is the structurally low core interest rates and the ECB’s commitment to putting a cap on Italian spreads,” Barclays said, referring to the European Central Bank’s massive asset purchase scheme.
In a major new report on debt in developed markets, Barclays estimated the euro area debt-to-GDP was likely to increase to around 100% in 2020 from around 85% in 2019. It said the debt/GDP ratio may reach 165% in Italy.
Barclays analysts said the bar for a new euro zone debt crisis was high versus 2010-12, noting a sharp fall in financing costs.
They added that they expected the U.S. debt/GDP ratio to increase almost 30 percentage points over the next two years.
Reporting by Dhara Ranasinghe; Editing by Saikat Chatterjee