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The ECB seems increasingly likely to unveil a new scheme to boost lending to the private sector, perhaps as soon as its June policy meeting. We would welcome such a scheme, but its effectiveness will be limited by how much risk the ECB is willing to take …
22nd May 2014
May’s PMIs suggested that the euro-zone recovery remains lacklustre and highlighted the continued divergence between France and Germany. … Euro-zone Flash PMIs (May …
Iceland’s central bank kept interest rates unchanged at 6% at its meeting today, despite raising its medium-term forecasts for GDP growth. We continue to think that the Sedlabanki will have to raise the policy rate later this year as the slack in the …
21st May 2014
Euro-sceptic parties are set to perform strongly at elections for the European Parliament. Although the result may have little impact on the institution itself, it risks undermining national governments’ ability to implement painful reforms, particularly …
Upcoming elections in Belgium are unlikely to deliver a decisive victory to any one party. With the main parties divided over fundamental economic and political reforms, we doubt that a new coalition would be able to agree on meaningful policies to …
20th May 2014
The unexpected drop in Italy’s GDP in Q1 underlines the fragility of the country’s recovery and further undermines attempts to bring down its crushing public debt load. … Fragile recovery hampering Italy's belt …
Norway’s mainland economy continued to hum along at a decent pace in Q1, but the underlying drivers of growth are weakening. … Norwegian GDP …
Norway’s mainland economy continued to hum along at a decent pace in Q1, but the underlying drivers of growth are weakening. … Norwegian GDP (Q1 …
Portugal’s clean exit from its bail-out at the weekend was soured by the news that the economy contracted in the first quarter. The GDP figures are not as worrying as they seem, but the Portuguese Government still faces a challenge to maintain markets’ …
19th May 2014
The 0.4% fall in Finland’s trend output indicator over Q1 is a clear indication that the country is struggling to exit recession. We expect the Finnish economy to stagnate this year, undermining government efforts to put public debt on a downward …
While the German economy expanded by an impressive 0.8% in Q1, this failed to spur growth elsewhere in the euro-zone and the region's GDP rose by just 0.2%. Possible explanations for this are the fact that Germany's expansion was partly down to temporary …
March’s euro-zone trade data confirm that the strong level of the euro continues to act as a significant headwind for euro-zone exporters. This will furnish the ECB with yet another reason to take bold policy action at its June meeting. … Euro-zone …
16th May 2014
The disappointingly modest rise in euro-zone GDP in Q1 will have done little to reduce the risk of deflation in the region and the stark divergence between the major economies only adds to policymakers’ problems. … Euro-zone GDP …
15th May 2014
March’s euro-zone industrial production figures confirmed that industry has made a weak start to 2014, underscoring the fragility of the recovery both in the sector and in the euro-zone economy as a whole. … Euro-zone Industrial Production …
14th May 2014
The fifth consecutive decline in ZEW investor sentiment in May suggests that the German economic recovery might not gain much pace from here. … German ZEW Survey (May …
13th May 2014
While President Draghi made clear last week that the ECB will loosen policy in June, he gave very few hints about just what action the Bank will take. Small cuts in the main refinancing and deposit rates seem like a done deal and they might be accompanied …
12th May 2014
The ECB signalled very strongly at today’s press conference that policy will be loosened next month. A small cut in the main refinancing rate seems like the least that the Bank could do and is unlikely to be particularly effective. Bolder policy action, …
8th May 2014
The Norges Bank left its monetary policy stance unchanged today and we continue to think that a slowdown in the economy will prevent the Bank hiking until 2016. … Growth slowdown to delay rate hikes in Norway until …
March’s industrial production data for key euro-zone countries suggested that the recovery in the sector failed to pick up any momentum and that even Germany experienced a modest slowdown. … German & Spanish Industrial Production …
The Riksbank’s report on household indebtedness underscores the magnitude of the problem and the need for it to be addressed. But we continue to think that the Bank will cut interest rates as deflationary fears prove to be more critical. … Deflation to …
7th May 2014
The latest economic data have left the ECB’s two “contingencies” for further policy action – a worsening of the medium-term inflation outlook and an unwarranted tightening of the money markets – either met or on the brink. While euro-zone CPI inflation …
March’s retail sales data suggested that the euro-zone economic recovery may finally be broadening out to include households, while the final PMIs for April pointed to a stronger pace of recovery at the start of Q2. … Euro-zone Retail Sales (Mar.) & …
6th May 2014
The euro-zone’s upcoming bank stress tests are likely to be more effective than the region’s earlier attempts. But the euro-zone financial system will heal only slowly, remaining a drag on the recovery for a while yet. Meanwhile, last week brought good …
5th May 2014
The improvement in investor sentiment towards the euro-zone has allowed even beleaguered Cyprus to tap the markets for funding. But the nation remains a long way from replicating Ireland’s ‘clean exit’ from its bail-out. Indeed, we think that Cyprus will …
2nd May 2014
Although progress is still slow, the latest euro-zone fiscal data provided more evidence that peripheral governments are gradually strengthening their fiscal positions. … Euro-zone Fiscal Monitor …
March’s euro-zone unemployment figures maintained the picture of a gradual, but painfully slow, improvement in labour market conditions across the currency union. … Euro-zone Unemployment (Mar.) & Final Manu. PMI …
We doubt that recent events and data releases have been significant enough to ensure more policy action from the ECB at its May meeting. But developments in the inflation outlook and in money markets suggest that the Bank’s two “contingencies” for further …
1st May 2014
Although survey measures of short-term inflation expectations have fallen sharply, medium-term forecasts have so far remained well anchored. However, with deflationary pressures building, a de-anchoring of medium-term expectations is a clear danger in the …
Figures released today showed the Belgian recovery gaining a little momentum in the first quarter. But sharp falls in sentiment in March and April suggest that growth may yet slow later this year. … Belgian recovery likely to remain …
30th April 2014
The prospect of early elections in Slovenia is unlikely to spark significant market pressures. But it highlights how a dysfunctional political system is undermining the country’s economic reform efforts. … Slovenia’s political crisis shows flagging …
April’s inflation figures might have eased some of the immediate pressure on the European Central Bank (ECB) to provide more policy support, but they did not alter the big picture of growing deflation dangers in the currency union. … Euro-zone Flash CPI …
March’s euro-zone monetary data underlined the continued weakness of the region’s financial system and will help to maintain the pressure on the ECB to ease monetary policy further over the coming months. … Euro-zone Monetary Indicators Monitor …
29th April 2014
The unexpected fall in the EC’s Economic Sentiment Indicator (ESI) in April might be a warning not to expect too much from the euro-zone recovery and further highlights the risk of deflation in the region. … Euro-zone EC Survey …
Data released last week suggested that the euro-zone recovery gained more traction at the start of Q2. But there remains a worrying divergence between France and Germany which risks holding back the broader recovery. Meanwhile, last week’s successful bond …
28th April 2014
The prolonged deterioration in Finland’s labour market may finally be coming to an end, according to data published earlier this week. But we suspect that employment will pick up very slowly at best. … Labour market still a constraint on Finland's …
25th April 2014
The prolonged deterioration in Finland’s labour market may finally be coming to an end, according to data published earlier this week. But we suspect that employment will pick up very slowly at best. … Labour market still a constraint on Finland’s …
April’s Ifo survey supported the message from other recent surveys that the steady recovery in the German economy has continued into the second quarter. But a further marked acceleration seems unlikely. … German Ifo Survey …
24th April 2014
Despite the euro-zone composite PMI rising in April to its highest level in nearly three years, economic growth is not yet strong enough to diminish fears of deflation. … Euro-zone Flash PMIs …
23rd April 2014
The European Central Bank (ECB) appears finally to be seriously considering the option of implementing quantitative easing (QE). While we have long argued that QE in the euro-zone was a more likely option than commonly thought, there are many …
22nd April 2014
A negative interest rate on banks' excess reserves at the ECB might have some effect on banks' behaviour and at least prove that the ECB is prepared to follow its dovish words with action. But it must be just one part of a policy package that also …
21st April 2014
Although France’s short-term outlook remains weak, the new French Government’s recent policy announcements provide hope that France is slowly tackling its significant competitiveness problems. … France’s reform effort inches …
16th April 2014
The ECB’s battle against deflation is turning into a fight to lower the euro exchange rate. But it is far from clear that the central bank will act sufficiently to bring the currency down far enough. … Can the ECB get the euro …
15th April 2014
April’s ZEW survey brought further evidence of strength in the German economy. But the fall in expectations raises some concerns over the medium-term outlook. … German ZEW Survey (Apr.) & Euro-zone Trade …
Austria is likely to remain one of the best performing euro-zone core economies over the coming years. Even so, the banking sector remains a weak spot and is particularly exposed to an intensification of the crisis in Ukraine. … Austria’s recovery still …
Recent speeches from officials suggest that the ECB has finally accepted that the threat of deflation in the euro-zone warrants further policy action. But it is far from clear that any action will be both early and decisive enough to prevent a sustained …
14th April 2014
February’s euro-zone industrial production figures confirmed that the sector has made a weak start to 2014 and highlighted the slow and fragile recovery both in industry and in the euro-zone economy as a whole. … Euro-zone Industrial Production …
