The resignation of Portuguese Prime Minister António Costa and news of a coalition government being formed behind incumbent Spanish PM Pedro Sánchez this week could shift the two economies’ relative fortunes in Spain’s favour over the coming years, reversing the recent trend. In the near term, though, both are likely to experience sluggish growth as higher interest rates bite. Next week, we expect to learn that employment growth in the euro-zone accelerated slightly in Q3, despite a contraction in GDP.
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