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There is little sign that the Spanish housing downturn will come to an end any time soon. Not only does this spell bad news for households, it will also pile even more pressure on the troubled banks. … Spanish house prices still have much further to …
22nd July 2013
The lending capacity of the euro-zone’s bail-out funds is coming under strain again. €289bn of the ESM’s €500bn lending capacity has already been committed and developments in Portugal, Greece and Ireland last week suggested that all three might need more …
The ECB’s planned review of banks’ balance sheets is key to resuscitating the euro-zone’s struggling banking sector. Forthcoming stress tests are likely to be more credible than previous rounds, but filling the resulting capital shortfalls will put …
18th July 2013
Some central banks are beginning to make greater use of “forward guidance” to signal that interest rates will remain low for the foreseeable future. The evidence from Sweden, where the Riksbank has been publishing forecasts for the main policy interest …
Fitch’s downgrade of the EFSF has limited implications for the time being. But it will add to pressure on the euro-zone’s core countries who guarantee the various bail-out mechanisms to continue with their own controversial fiscal consolidation to keep …
16th July 2013
German investor sentiment weakened in July as disappointing hard data and troubles in Portugal reminded investors that the euro-zone crisis is far from over. And May’s sharp fall in euro-zone exports dented hopes of an export-led recovery in the bloc. … …
Some commentators have pointed to the recent run of encouraging Spanish unemployment figures as evidence that the green shoots of recovery may be emerging there. But we are far from convinced that the labour market is really on the mend. … Is the …
The risk of Portugal needing more financial support is growing. Even if a second bail-out can be agreed in the run-up to the German election, it is likely to involve private sector losses. And the ECB seems unlikely to step in with big enough bond …
15th July 2013
Last week’s German trade data revealed a sharp drop in exports, suggesting that the economy’s export engine is not performing particularly well. Much attention has focused on the deteriorating outlook for China, which has dented earlier hopes that German …
May’s euro-zone industrial production data show that the sector cannot be relied upon to generate a strong and sustained recovery. … Euro-zone Industrial Production (May …
12th July 2013
As the German economy struggles to grow, the Government will continue to resist the permanent transfers that the euro-zone’s periphery needs. But it will probably back further extensions to deficit targets and, despite resistance from the Bundesbank, more …
11th July 2013
We have long argued that the strength of the Norwegian krone would push the Norges Bank into further monetary easing. While the currency’s recent sell-off might ease pressure on the Bank somewhat, we still expect another rate cut by the end of the year. … …
10th July 2013
The European economy has shown tentative signs of improvement in recent months, with activity indicators in both Germany and some of the peripheral euro-zone countries regaining a firmer tone after weakening earlier in the year. But the recovery is built …
9th July 2013
May’s falls in German exports and industrial production add to evidence that the recovery in the euro-zone’s largest economy will be very modest. … German Industrial Production & Trade (May …
8th July 2013
The ECB joined the great forward policy guidance race last week. But when it comes to the broader provision of monetary policy support, it remains firmly at the back of the pack. … ECB still at the back of the …
The ECB’s unprecedented step in joining other central banks in providing forward guidance on future policy is a welcome one. But it won’t transform the outlook for the euro-zone economy. … The ECB joins the forward guidance …
4th July 2013
Burdened by the euro-zone’s most indebted households, the Netherlands is stuck in its third recession in five years. With pressure on households likely to intensify, the country’s AAA-rating will come under increasing threat and voters are likely to …
Euro-zone activity indicators have maintained a slightly firmer tone over the last month, providing tentative signs of an upturn in the region’s economy. Nonetheless, those indicators generally suggest that the currency union still posted a seventh …
3rd July 2013
The Swedish Riksbank left interest rates unchanged at 1.0% today and signalled that it still expects to begin raising rates in late 2014. However, we still think that the Bank’s economic forecasts are too optimistic and that the next interest rate move …
Although the peripheral economies remain mired in recession, some fiscal progress is being made, particularly in Greece. … Euro-zone Fiscal Monitor …
2nd July 2013
The latest euro-zone inflation and labour market figures brought a slight note of caution after the recent improvement in some of the region’s activity indicators. … Euro-zone Flash CPI (Jun.) & Unemployment …
1st July 2013
Recently, euro-zone policy makers have made commendable progress towards banking union. They have now agreed an ‘operational framework’ for the region’s bail-out fund, the ESM, to recapitalise banks and drawn up a new regime to ‘bail-in’ bank creditors. …
With the news that the US Fed is set to taper its QE programme hitting euro-zone financial markets, President Draghi should provide reassurance about ongoing ECB policy support at the forthcoming press conference. While we do not expect policy changes …
27th June 2013
The EC consumer and business survey for June made pretty encouraging reading, but it remains too soon to conclude that the euro-zone is on the cusp of an economic recovery. … Euro-zone EC Survey …
May’s monetary data revealed that bank credit contracted again, reinforcing our belief that the ECB will be forced into further action by the end of the year. … Euro-zone Monetary Indicators Monitor (May …
In spite of Slovenia’s low public debt and small banks, the country is in a very precarious position given the scale of the rot in the banking sector. To avoid a bail-out, the Government will need to press ahead with an ambitious reform agenda and hope …
26th June 2013
While the withdrawal of the smallest party from the Greek coalition is certainly an unwelcome development, for now at least, the Government should be able to limp on. But if the Troika forces it to undertake further austerity measures, then voters may …
24th June 2013
June’s German Ifo survey echoed the slightly firmer tone of other recent indicators. But it certainly did not suggest that the euro-zone’s biggest economy is embarking on a spectacular recovery. … German Ifo Survey …
Labour cost data released last week provided further evidence that the competitiveness gap between the euro-zone periphery and core may be narrowing. While labour costs were little unchanged or lower than a year earlier in the periphery, German labour …
We doubt that the new growth measures adopted by the Italian government will have much effect on the economy and still expect the 2013 budget deficit to be well above target. Based on this and Italy’s weak economic fundamentals, we expect concerns about …
20th June 2013
The Norges Bank left interest rates unchanged today as concerns about financial stability once again outweighed the need to weaken the currency and boost inflation. But the Bank once again pushed back its hiking cycle, reinforcing our belief that a rate …
June’s euro-zone PMI survey continued the upward trend of recent months, but still suggests that the euro-zone economy contracted for a seventh quarter running in Q2. … Euro-zone Flash PMIs …
A further rise in global bond yields could push borrowing costs for some euro-zone governments back towards danger levels and underline the limitations of the ECB’s OMT programme. … Could a global bond sell-off reignite the euro-zone …
19th June 2013
We doubt that the recent bout of political uncertainty, coupled with concerns over the Government’s ability to meet the privatisation targets set by the Troika, poses a serious near-term threat to Greece’s bail-out. But we still think that the long-term …
18th June 2013
The rise in the headline ZEW index in June reinforced other data in pointing to an acceleration in the German economy. But while expectations picked up, the ‘current situation’ component fell again. … German ZEW Survey …
As the euro-zone periphery struggles to pay off its external debt, core countries like the Netherlands are still running record current account surpluses. But the Netherlands seems unlikely to reduce its large surplus any time soon, underlining how …
17th June 2013
The commencement last week of the German Constitutional Court hearing into the legality of the European Central Bank’s Outright Monetary Transactions (OMTs) programme has re-stoked the debate over the ECB’s remit and the appropriate breadth of its …
Most peripheral euro-zone economies have made impressive progress in narrowing their current account deficits. But so far this is only a correction in flows; theses economies have made little or no headway in paying down their stock of external debt. As …
12th June 2013
The solid rise in euro-zone industrial production in April suggests that the sector will expand in Q2. But industry is unlikely to spearhead a wider economic recovery. … Euro-zone Industrial Production …
Italian GDP figures for Q1 confirmed that the economy remained in a broad-based recession and April’s fall in industrial production pointed to another contraction in Q2. Thankfully, French industrial data for April were more encouraging. … French & …
10th June 2013
While the IMF conceded last week that mistakes were made in Greece’s 2010 bail-out programme, it suggested that earlier debt restructuring was the way forward rather than bigger bail-outs. Meanwhile, the EC and ECB still seem convinced that austerity is …
Increases in German industrial production and exports in April have boosted the chances that the very modest recovery seen in Q1 might gain pace in Q2. … German Industrial Production & Trade …
7th June 2013
After leaving interest rates on hold, the ECB left the door open to more policy support, suggesting that more LTROs, negative deposit rates, forward policy guidance and stimulation for Asset-Backed Securities (ABS) markets were all possible. However, the …
6th June 2013
Some of the euro-zone business surveys have had a slightly stronger tone over the last couple of months. Nonetheless, at current levels, they remain consistent with a further contraction in activity in the single currency area. Meanwhile, the details of …
5th June 2013
Today’s convergence report by the EC, which gave the green light to Latvia to join the euro-zone in 2014, is likely to lead to further suggestions that Latvia serves as a role model of “internal devaluation” for the euro-zone periphery. However, it is …
The breakdown of Q1 GDP and more timely news on retail sales and the PMI provided little obvious support for the ECB’s view that the euro-zone economy is set to embark on a decent recovery later in the year. … Euro-zone GDP (Q1), Final PMI & Retail …
