Unprecedented differences in Eurozone interest rates

In June 2010 the interest on the latest ten year Dutch government bonds was 2.9 percent. This is well below the Eurozone average. The only Eurozone country with a lower interest rate was Germany with 2.5 percent. Greek government bonds have by far the highest interest rate, namely 9.1 percent.

Rapid rise in interest on Greek government bonds

In June the interest rate of Greek government bonds was nearly twice as high as six months before. This sharp increase came with the enormous budget deficit and low credit rating of the Greek government. The interest rate also rose in Portugal, Ireland, Spain and Italy.

The interest rate dropped in the other Eurozone counties. Investors fled to countries where they can still safely place their money, which makes that the interest rates continue to drop in these countries. This has led to record low interest rates in the Netherlands and Germany.

Interest on the most recent ten year government bonds in Eurozone, December 2009 and June 2010

Largest difference between the highest and lowest interest rate since the euro was introduced

There has been an unprecedented increase in the difference between the highest and lowest interest rates in the Eurozone during the first half of 2010. In June the difference in the interest rate between Greek and German government bonds was up to 6.6 percent points. This was the largest difference between the highest and lowest interest rate in the Eurozone since the euro was introduced.

Difference between highest and lowest interest on government bonds in the Eurozone

Wouter Jonkers

Source: European Central Bank, Harmonised long-term interest rates for convergence assessment purposes