Data released last week suggested that the euro-zone economy started 2017 on a pretty strong footing. January’s Composite PMI remains consistent with quarterly GDP growth of about 0.4%, while the rise in consumer confidence suggests that households have so far been unfazed by higher energy prices or concerns about political risk. However, a number of developments highlighted how important political risks are. A new leader for Germany’s SPD means that another Merkel-led government is far from certain, the National Front’s Marine Le Pen continues to poll strongly in France, an early Italian election now seems likely and an unfruitful Eurogroup meeting means that the Greek crisis could erupt again.
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