Euro-area fiscal squeeze — post-COVID deficits and oil shock
Key Questions
What fiscal pressures are euro-area countries facing?
Euro-area deficits rose +3 percentage points post-COVID, compounded by ECB's 0.9% growth forecast and $111 oil shock, pushing bund yields to 3.077%.
How are UK gilts performing amid these pressures?
UK gilts yields reached 4.85% with £250 billion in issuance strains, reflecting broader fiscal squeeze.
What risks does the IMF highlight for emerging markets?
IMF's GFSR warns of hot money dominance in EM financing, with 80% flows doubled to $4T inflows amplifying shocks; examples include Vietnam auction fails and Ghana undersubscriptions, plus OECD tariff impacts.
+3pp deficits/ECB 0.9% growth/bund 3.077% (VSTOXX 28.5/HMM 46% shift)/($111 oil); UK gilts 4.85% (£250B); IMF GFSR EM hot money risks (80% flows doubled/$4T inflows shocks); Ghana T-bills 32% undersub/Vietnam fail/EM strain; OECD tariffs.
Sources (2)
Updated Apr 8, 2026