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Credit Suisse’s announcement that it will charge other banks for holding large Swiss franc deposits with it has helped to ease the pressure on the currency for now. But while we have revised down our near term forecast for the franc, we still see it …
4th December 2012
Contrary to some suggestions, there are good reasons to think that, beyond the initial economic andfinancial disruption caused by an exit from the euro-zone, most of the current peripheral economieswould fare relatively well outside the currency union. … …
3rd December 2012
Last week’s bail-out agreement has prompted some commentators to suggest that Greece’s future in the euro-zone should now be secure until at least next autumn. But we are not convinced. Indeed, given the doubts over the effectiveness of the debt buyback …
The latest news on the euro-zone labour market and inflation further underlined the general weakness of the region’s economy. … Euro-zone Unemployment (Oct.) & Flash CPI …
30th November 2012
Having boldly pledged to do whatever it takes to save the euro back in the summer, ECB President Mario Draghi has struck a noticeably more cautious tone over recent months. We expect more of the same at the post-Governing Council meeting press conference …
29th November 2012
Sharp appreciations in the euro-zone’s core countries would threaten to damage their exports and GDP in the event of a euro-zone break-up. But there are various policies that could be implemented to stimulate domestic spending, which might even make them …
Although Greece, Portugal and Ireland are making some fiscal progress, Italy and Spain are still struggling to cut their budget deficits … Euro-zone Fiscal Monitor …
November’s EC consumer and business survey does not alter our view that the consensus forecast for the euro-zone economy broadly to stagnate in 2013 is far too optimistic. A deep recession still looks likely. … Euro-zone EC Survey …
Swiss and Swedish GDP figures for Q3 showed that the two economies remained resilient despite the euro-zone’s troubles. But while both may avoid deep recessions next year, we expect growth to be much weaker than the consensus forecasts. … Swiss & Swedish …
The latest euro-zone monetary data revealed a further small acceleration in the growth of money and bank lending in the region. But weak credit growth remains a major constraint on economic activity inside the single currency area. … Euro-zone Monetary …
28th November 2012
Euro-zone policymakers have found a bit more money down the back of the sofa to buy another sticking plaster for Greece. But the relatively easy options are running out fast. … Greek deal delays the day of …
27th November 2012
Euro-zone finance ministers are inching ever closer to a deal on the bail-out which will satisfy their own debt sustainability criteria and in the near term at least avoid a politically troublesome official sector debt restructuring. … Another Greek …
26th November 2012
This report is only available as a PDF. Click to download. … German Ifo Survey (Nov.) & GDP Breakdown (Q3) …
23rd November 2012
The news that Cyprus is about to run out of money has given a dangerous new angle to the euro-zone crisis. The economy is so small that a bail-out would be very cheap, but the Government will be particularly reluctant to accept the conditions on which …
22nd November 2012
The slight rise in the flash euro-zone composite purchasing managers’ index (PMI) in November clearly does nothing to alter our view that the recession has intensified in Q4. … Euro-zone Flash PMIs …
A euro-zone break-up would see the re-instated domestic currencies of the region’s core economies appreciate sharply. Without appropriate policy action, the resulting damage to exports would more than offset the boost to consumer spending from falling …
20th November 2012
Despite the fall in overall GDP in Q3, Norway is still weathering the euro-zone debt crisis rather well. … Norwegian GDP (Q3) …
The direct effect of the latest downgrade of France should be modest. But it threatens to deepen the political rift between France and Germany, making policies to tackle the euro-zone’s debt crisis more difficult to agree. And by increasing the pressure …
Despite the fall in overall GDP in Q3, Norway is still weathering the euro-zone debt crisis rather well. … Norwegian GDP (Q3 12) …
Last week’s euro-zone economic data brought some reasons for hope. While GDP in the region as a whole fell for the second quarter running in Q3, both Germany and France posted modest expansions, perhaps suggesting that the two might yet drag the rest of …
19th November 2012
Q3’s GDP data confirmed that, despite continued growth in Germany and France, the euro-zone as a whole is now officially in recession. We expect the recession to deepen markedly in the coming quarters. … Euro-zone GDP (Q3 …
15th November 2012
September’s plunge in euro-zone industrial production and the weak Greek and Portuguese Q3 GDP data provided additional firm evidence that the region’s economic problems continue to mount. … Euro-zone Ind. Prod. (Sep.) & Greek & Portuguese GDP …
14th November 2012
We suspect that policymakers may find a way to meet the estimated increase in Greece’s borrowing needs for the remainder of its bail-out deal without providing bigger loans. But if the economic forecasts on which the revised programme are based turn out …
13th November 2012
The common perception that the euro-zone’s core economies are inherently dependent on exports and would struggle to grow outside the single currency is misplaced. They all achieved pretty strong growth before the euro and could probably do so again …
12th November 2012
We’re throwing in the towel on a Greek euro exit in 2012. But that’s a matter of timing, not a change in our fundamental position on Greece or on the broader debt crisis. We still envisage a limited euro-zone break-up, probably commencing in 2013 with the …
While the ECB apparently stands ready to buy peripheral governments’ bonds, President Draghi gave little assurance today about when it might start or how many it might purchase. He also ruled out writing off any of Greece’s debt and gave no firm …
8th November 2012
The passing of the omnibus bill by Parliament last night means that Greece has taken a decisive step towards gaining the next loan tranche of its latest bail-out. But although this has reduced the chance of Greece exiting the euro-zone this year, we still …
The economic data has provided somewhat conflicting messages on the likely strength of the euro-zone economy during the third quarter of the year. While the hard data on industrial production and retail sales have pointed to a better performance than the …
7th November 2012
September’s German industrial production figures poured cold water on recent talk of a recovery in the euro-zone’s biggest economy. … German Industrial Production (Sep. …
We suspect that the recent rise in the euro-zone unemployment rate is a sign of things to come and see the rate peaking at about 13.5% next year. This, together with continued fiscal austerity, is likely to mean pretty sharp falls in households’ real …
6th November 2012
October’s ECB Bank Lending Survey revealed that banks tightened their lending criteria further despite easing strains related to the sovereign debt crisis. And weak demand for loans was a more commonly reported factor holding back lending than short …
5th November 2012
The ECB seems set to remain on standby this month. With just the announcement of its Outright Monetary Transactions (OMT) programme still buoying market sentiment, the Bank has yet to be called upon to act. But we think that the ECB will have to start …
1st November 2012
Over the next couple of crucial weeks, we suspect that Greek and euro-zone policymakers will hatch a deal to prevent, at least temporarily, the collapse of Greece’s rescue package. But as always, there is plenty of scope for a nasty surprise and we still …
The rise in euro-zone unemployment in September, coupled with the high level of CPI inflation, does not bode well for consumer spending in the latter part of 2012. … Euro-zone Unemployment (Sep.) & Flash CPI …
31st October 2012
Recent falls in French consumer spending are a blow to the economy, which has been heavily reliant on households for growth in the past. With unemployment near a record high, banks cutting back their lending and fiscal austerity set to hit households …
The latest Spanish public finances data, which show that Spain is struggling to meet its budget deficit targets, will increase the pressure on the Government to request a bail-out. … Euro-zone Fiscal Monitor (Oct. …
30th October 2012
October’s deterioration in the euro-zone EC business and consumer surveys supported other evidence that the economy started Q4 on a very weak note. The fall in the headline Economic Sentiment Indicator (ESI), from (an upwardly revised) 85.2 to 84.5, was …
The economic and financial effects of one or two small economies leaving the euro-zone would not necessarily be major, but the initial impact of a larger collapse would be rather more serious. Nonetheless, unlike the bankruptcy of Lehman Brothers, a …
29th October 2012
Developments over the past week or so suggest that the core euro-zone governments’ attitudes towards the peripheral economies currently receiving bail-outs may be mellowing. But while this reduces the chance of an imminent exit by Greece, we are not …
The latest monetary data have revealed that commercial banks are still using ECB funds to buy government bonds. Worryingly, though, the downturn in lending to the private sector has accelerated. … Euro-zone Monetary Indicators Monitor (Sep. …
25th October 2012
October’s euro-zone PMI and German Ifo surveys continued to paint a pretty dismal picture of growth prospects in the region as a whole and confirmed that Germany is also suffering. … Euro-zone Composite PMI & German Ifo Survey …
24th October 2012
The core euro-zone banks continued to reduce their claims on the region’s peripheral economies in Q2. And despite recent hopes that the worst of the euro-zone debt crisis may now be over, we expect banks to cut their exposures further. … Banks still …
22nd October 2012
Speculation built last week that Spain is finally about to ask for a bail-out and hence trigger the European Central Bank’s new bond-buying programme, giving Spanish bond yields another nudge downwards and no doubt contributing to the success of …
Calls for independence from the richest regions of Spain, Belgium and Italy threaten to blow big holes in the public finances of the three economies. And more fundamentally, growing public aversion to transfers within countries highlights the difficulties …
18th October 2012
A Spanish bail-out and subsequent ECB bond purchases may reinforce the perception that policymakers will provide similar support to Italy to keep its bond yields down too. But lower bond yields will not solve all of Italy’s problems. … What would a …
The fall in government bond yields after the ECB announced its new bond-buying programme has prompted suggestions that the plan may not actually need to be activated. But it is only a matter of time before President Draghi will have to put his money where …
17th October 2012
Expectations of stronger policy support from the European Central Bank have prompted a period of relative calm in the euro-zone. But previous lulls have not lasted for very long. There are still few signs of any improvement in the peripheral economies’ …
16th October 2012
October’s rise in the German ZEW index suggests that the prospect of ECB bond purchases has continued to ease investors’ fears for the economy. And August’s trade data suggest that the euro-zone as a whole might avoid a recession in Q3. … German ZEW …
On the face of it, Portugal’s Budget for 2013 will enable it to meet the deficit targets set by the Troika and receive the rest of its bail-out funds. But public resistance to austerity and/or a sharp economic downturn could yet mean that the deficit …
