It is, however, being counteracted by growing amounts of short-term commercial bank deposits with the central banks. Interest is paid on these at the deposit rate. At the end of the day, the effective borrowing costs for this portion of government debt thus depends on the central bank interest rate.
For Member States, this means having a funding cost advantage as long as the central bank interest rate is lower than the interest rate on medium to longer-term government bonds. The higher a Member State’s borrowing costs are on the capital market, the larger the difference is.