Talk of new debt crisis ‘completely exaggerated,’ EU’s Regling says

The head of the eurozone bailout fund Klaus Regling said on Monday that European countries with high public debt faced no short-term risk from rising interest rates and talk of a new debt crisis was “completely exaggerated.”

Shares in Italian banks plunged further on Monday as investors fretted about Rome’s debt costs surging higher ahead of the European Central Bank’s first rate hike in over a decade .

Speaking at a conference, the head of the European Stability Mechanism said markets were having some difficult days of adjustment after the ECB announced on Thursday it will raise interest rates in July and later this year.

However, “talk about a new debt crisis is completely exaggerated,” Regling said, noting that despite high debt levels in some eurozone countries, such as Italy and Greece, costs of servicing debts were historically low and debts had long maturities.

He also said that Asian investors had signalled interest in returning to eurozone markets now that yields were positive again.

Regling added that countries with high debt should, however, be careful for the long term to make sure they are prepared if a new crisis hit. [Reuters]