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Two days ago, the European Central Bank’s (ECB) executive board member Benoit Coeure warned that the Euro area governments and other financial actors need to prepare for higher interest rates in the coming future. He said, "I hope that euro zone governments know that interest rates will not stay at current levels," and added that the negative interest rates that the ECB charges banks to deposit with it, had been effective in terms of monetary policy, but such rates should not stay in place too long due to the risk it could weaken those banks.
While it is an indication that the central bank is getting closer in winding up its monetary stimulus, it can be added to the several warnings issued by the central bank in recent months towards the European countries who failed to significantly reduce their debt burden as well as implement the reforms proposed during the 2011/12 debt crisis and after that.
There are several countries in the Euro area that can lead to the return of the 2011/12 debt crisis due to their high debt to GDP ratio if the inflation and the interest rates rise fast. They are Greece (debt to GDP at 176.9 percent), Italy (132.7 percent), Portugal (130.4 percent), Cyprus (108.9 percent), and Belgium (106 percent).
