The European Central Bank is about to raise rates for the first time in 11 years to curb record inflation. But that could deepen Germany’s energy crisis or trigger an Italian debt bomb.
The last time the European Central Bank raised interest rates in 2011 it was forced to reverse the move within months as the eurozone was plunged into a wrenching debt crisis. The market panic that followed only subsided after Mario Draghi, then head of the ECB, declared it would do “whatever it takes” to save the euro.
Fears of a similar outcome are front of mind for many as current president Christine Lagarde prepares the ECB’s first rate rise in 11 years. The move, to be announced on Thursday (Friday AEST), will come alongside a new bond-buying plan that the central bank hopes will prevent rising borrowing costs from sparking another eurozone debt meltdown.
