Rising bond yields are exposing fiscal fantasy in Europe

As the FEAR that interest rates could stay higher for longer sinks in, government-bond yields across the rich world are rising. America’s ten-year Treasury yields, at about 4.7%, are at their highest since 2007. The Bank of Japan has ramped up its bond purchases to maintain its cap on yields. In Europe on October 4th the yield on ten-year German Bunds crossed 3% for the first time in more than a decade. Those on Italian debt are nearly 5%—the highest since the tail-end of the euro zone’s sovereign-debt crisis in 2012. And that is a worry, because Italy is one of the bloc’s most indebted member states and its government has not woken up to how its spending plans now look unsustainable.