Bundesbank Executive Board member Michael Theurer said the recent sovereign bond
sell-off is a "clear warning signal" that investors are nervous about
governments' ability to control debt. He said fiscal and political uncertainty
is now affecting government bond markets; while there is currently no systemic
sovereign debt crisis, risks have risen materially. French bonds plunged amid
mounting concern over France's political and economic challenges, and the
turmoil has spread to other highly indebted euro-area countries, prompting
speculation the ECB may have to intervene. Echoing the IMF, Theurer called for a
medium-term strategy to review spending and refocus outlays on growth-supporting
investment. He added Germany's fiscal position remains stronger than most peers
but rising debt means urgent consolidation is necessary.
