abstract:In money lending, penal interest is punitive interest charged by a lender to a borrower if installments are not paid according to the loan terms.
It should lend only to pre-certified countries facing temporary liquidity shocks, on a short-term basis, at a penalinterest rate, and without economic conditions attached.
To be clear, right now the ECB is purchasing modest amounts of Italian and Spanish government debt, for example, in an attempt to keep the respective interest rates they're charged at a bit less than the penal and prohibitive 7%.