A public debt crisis in the euro zone is much less likely now than in 2010, according to Patrick Artus, Research Analyst at Natixis.

Key Quotes

“Many investors are concerned about the possibility of another (peripheral) euro-zone public debt crisis breaking out, given the high level of public debt ratios, the end of quantitative easing and the rise in long-term interest rates, and the possibility that political risk may return. But a public debt crisis in the euro zone is much less likely now than in 2010:

• The peripheral euro-zone countries now have external surpluses: a public debt crisis cannot be triggered by a balance of payments crisis, i.e. by a halt to non-residents’ purchases of the countries’ debt, since these countries no longer need non-residents to finance their fiscal deficits;
• The holding of euro-zone government bonds has become more domestic (the weight of non-residents in the holding of these bonds has decreased). So there could be a public debt crisis only if the country’s residents refused to hold their own national debt, which is very unlikely;
• The peripheral euro-zone countries’ fiscal solvency is now ensured, which was not the case in 2010.”