Omens

06:54 15/10/2019 - Πηγή: In.gr

Negative borrowing interest rates are considered by many analysts as a bad omen that presages a coming recession.

The rationale is simple.

One lends to receive less money but which will have a greater value than the current one in the future.

That may hold true for economies such as Germany’s which borrows with negative interest rates on its 10-year bonds.

It applies to robust economies which are troubled by incidents of deflation and stagnation.

How

then one must interpret the 0.20% with which Greece borrowed?

The first difference is that Germany borrowed with a 10-year negative interest whereas Greece borrowed with a three-month issue.

Investors can blindly trust the German economy whereas the Greek economy has been excluded by the markets until the last timid steps toward a return.

Negative interest rates in the case of Greece are a first good omen as long as steps are taken carefully and not with a possibly false exuberance.

Germany’s negative interests rates indeed presage a recession in the horizon.

That is a bad omen for a country like Greece which hopes to speed up growth rates on the international bandwagon.