Italy now pays only 0.9 percentage points more than Germany in 10-year borrowing costs, close to the lowest spread in a decade and a half. Spain is borrowing at a cheaper cost than France, the euro area\u2019s second-biggest economy, with a spread of less than 0.6 percentage points.<\/p>\n
A rise in German bond yields, as investors anticipate Chancellor Friedrich Merz\u2019s historic \u20ac1tn spending splurge on defence and infrastructure, have also helped to push down spreads.<\/p>\n
By contrast, during the Eurozone crisis spreads in the so-called \u201cperiphery\u201d ballooned amid concerns over unsustainable debt and potential break-up of the currency bloc.<\/p>\n
\u201cThe main reason to have credit spreads is [to reflect the risk of] default or break-up. If anything, that has gone down,\u201d said Nicola Mai, a sovereign credit analyst at Pimco.\u00a0He predicted that the convergence in sovereign bond yields \u201cis going to last\u201d.<\/p>\n
<\/p>\n In Greece, the country whose debt woes triggered the regional crisis and resulted in a series of sovereign bailouts, spreads have fallen to 0.7 percentage points.<\/p>\n \u201cThe rally has been relentless,\u201d said Fraser Lundie, global head of fixed income at Aviva Investors.<\/p>\n Investors have piled into southern European bonds despite the broader concern in global markets about heavy public borrowing that has driven up yields in big economies including the US, the UK and France.<\/p>\n Tighter spreads also reflect a longer-term strengthening in southern Europe\u2019s public finances, as services-dependent economies prosper, helped by a post-Covid tourism boom.<\/p>\n Spain\u2019s growth outpaced its larger Eurozone peers last year. Italy\u2019s government under Giorgia Meloni has proven<\/a> more fiscally cautious and stable than investors had anticipated. And Greece is enjoying a years-long recovery from the debt crisis that saw its credit rating lifted<\/a> to investment grade in 2023. <\/p>\n Investors argue that common EU debt issued during the pandemic, and the potential for further integration, has supported the case for a convergence of borrowing costs. <\/p>\n<\/a><\/p>\n
![\"The](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/06\/https:\/\/www.ft.com\/__origami\/service\/image\/v2\/images\/raw\/https%3A%2F%2Fd1e00ek4ebabms.cloudfront.net.jpeg\")
<\/a><\/p>\n