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Speaking in London, S&P's top EMEA analyst Moritz Kraemer said
there was a strong relationship between government bond yields
-- an indicator of how much countries must pay to borrow -- and
their willingness to undertake structural reforms.
The European Central Bank's 1.7 trillion euro ($1.92 trillion)
asset purchase scheme has helped push yields lower across the
euro area, with yields on German bonds <0#DEBMK=> maturing in
eight years or less now in negative territory.
"All of these (reform) efforts from the governments have really
fallen by the wayside under the palliative that the ECB is
providing," Kraemer told the Euromoney Global Borrowers & Bond
Investors Forum.
ECB policymakers have been urging governments to take advantage
of easy financing conditions to implement reforms and make sure
the bloc's slow recovery becomes more sustainable.
But "the moment the pressure goes away, the action goes away as
well", said Kraemer.
In a normal interest rate environment, Kraemer said, government
deficits across the bloc would be 1.5 to 2 percentage points of
GDP higher, which would force the issue of reform up the agenda
for many states.
"I'm not just talking of Italy's deficit being close to 3
percent, I'm talking of close to 5 percent, and there would
certainly not be a surplus in Germany."
S&P said earlier this month that a number of major economies
could see their credit ratings cut or outlooks lowered if record
low interest rates rise to more normal levels.
(Reporting by John Geddie; Editing by Catherine Evans)
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