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Further signs that some of the region’s most troubled economies are struggling to meet their budget deficit goals, coupled with growing evidence that the euro-zone is entering a new recession, underline the fact that the latest euro-zone deal will not be …
31st October 2011
The latest euro-zone inflation and unemployment data might leave the hawks at the ECB still concerned about underlying price pressures. … Euro-zone Flash CPI & Unemployment …
The plans agreed at last week’s EU summit look like another example of policymakers sprinting to catch up with events, but failing to get decisively ahead. We are not suggesting that the positive market response will unravel in a matter of days, as it did …
Despite yet another round of speculation suggesting that China is about to ride to the rescue of the euro-zone, Europe will still have to solve its own problems. Meaningful Chinese support would probably require additional concessions that European …
29th October 2011
While the news on the euro-zone economy points strongly to the need for more policy support, there have been few hints that the ECB is intending to cut interest rates at its November meeting. However, new President Mario Draghi is likely both to signal a …
28th October 2011
The latest monetary data suggest that stresses in the banking sector are growing. With the new bank recapitalisation plans unlikely to restore stability to the banking sector, we expect credit conditions to continue to tighten. … Euro-zone Monetary …
October’s fall in the EC measure of business and consumer sentiment adds to the evidence that the recovery is well and truly over and that the region is suffering from far more than a fiscal crisis. … Euro-zone EC Survey …
The plans announced by euro-zone policymakers overnight look more like a peashooter than the “bazooka” previously promised to tackle the region’s problems. We have not altered our view that the crisis will deepen over the coming quarters, ultimately …
The immediate fall-out from a Greek default should be manageable and much less damaging than that which followed the collapse of Lehmans, even if it does count as a “credit event”. However, this assumes that policy-makers are able to prevent contagion to …
26th October 2011
The steep fall in the euro-zone composite PMI further below the theoretical 50 “no-change” barrier supports our view that the consensus outlook for GDP growth in the region is far too optimistic. … Euro-zone Flash PMIs …
25th October 2011
Aware of what is at stake and under the watchful glare of the world, euro-zone policymakers might finally put their differences aside and produce the goods at the forthcoming EC council meetings and G20 summit. But past experience does not bode well. And …
On the face of it, October’s modest decline in the headline Ifo index suggests that the German economy is still holding up reasonably well, but we continue to think that the index is understating the pace of the slowdown. … German Ifo Survey …
22nd October 2011
Policymakers’ latest plans to tackle the euro-zone debt crisis are unlikely to address the region’s fundamental problems and secure the future of the single currency. We still doubt that the euro will survive the crisis in its current form. … Can the euro …
19th October 2011
Signs that European policymakers may finalise a “comprehensive response” to the euro-zone debt crisis at the European Council meeting on 23rd October prompted the euro to climb sharply against the dollar last week and equity markets to rally. But we think …
18th October 2011
The final euro-zone CPI data for September confirmed that both headline and core inflation rose sharply. But given the recent dramatic deterioration in the growth outlook, we still expect the ECB to cut interest rates by the end of the year. … Euro-zone …
15th October 2011
August’s rise in euro-zone industrial production suggests that, for now at least, the sector is continuing to prop up the wider recovery. But this is unlikely to last. … Euro-zone Industrial Production …
13th October 2011
The dollar’s recovery against the euro may have paused but the outlook for the European single currency remains poor. The relative prospects for monetary policy and the risks of a renewed escalation of the financial crisis in the euro-zone should both …
12th October 2011
The ECB took some fairly bold steps to improve commercial banks’ liquidity last week. But given the growing likelihood of default by some euro-zone governments, fears about banks’ solvency have surged, prompting calls for capital injections of up to …
11th October 2011
August’s fall in German industrial production supports other evidence that the recovery in what was previously the strongest sector of the euro-zone’s strongest economy has gone into reverse. … German Industrial Production …
8th October 2011
The ECB today opted to focus on unconventional rather than conventional monetary policy measures, leaving interest rates on hold but substantially increasing its support for the banking sector. But with the euro-zone teetering on the brink of recession, …
7th October 2011
September’s data revealed a sharp rise in euro-zone HICP inflation from 2.5% to 3.0%, which appears to have been driven by a renewed rise in core price pressures as well as energy inflation. With consumers’ inflation expectations remaining high in …
New fiscal measures announced by the Greek Government may have reduced the risks of an imminent disorderly default. But policymakers still face a battle to agree a deal to cover Greece’s financing needs for the next few years, implying that a near-term …
5th October 2011
On the face of it, developments last week might have suggested that policymakers are inching closer to resolving the euro-zone crisis. However, the most radical suggestions have come from outside the euro-zone and not within it. Steps that have been taken …
4th October 2011
On the face of it, the latest euro-zone CPI inflation and unemployment numbers would appear to reduce the chance of an imminent ECB rate cut. But with the economy on the cusp of recession and the debt crisis still escalating, we still think that the Bank …
1st October 2011
Italy’s recent austerity measures and ECB purchases of government bonds have brought Italy back from the brink. But we still think that Italy may eventually default, with huge repercussions for the euro-zone economy and financial markets. … Is Italy close …
30th September 2011
At the press conference following his final meeting as ECB President, Jean-Claude Trichet will strike a more downbeat tone, suggesting that interest rate cuts are not far off. We are still pencilling in cuts in December and March, but they might easily …
Recent news shows that many of the euro-zone’s fiscally-challenged economies are broadly on track to meet their 2011 budget deficit goals. Nonetheless, we continue to think that several of the region’s most indebted economies may eventually end up …
September’s fall in the EC measure of business and consumer sentiment adds to evidence that the euro-zone economy is on the brink of recession. … Euro-zone EC Survey …
Emerging details about the recent proposal to supersize the euro-zone’s bail-out fund suggest that, at best, the plan is simply to use existing funds more imaginatively. Note that even this proposal seems to have more support outside the euro-zone than …
29th September 2011
The news that Ireland expanded robustly in the first half of the year, might suggest that the Southern European economies may reap similar rewards if they stick with plans to cut their budget deficits and implement structural reforms. But we are far from …
28th September 2011
Despite renewed hopes that euro-zone policymakers will adopt radical measures to solve the region’s debt crisis, we expect stresses in the banking sector to remain, increasing the chances of the region suffering from another long recession. … Euro-zone …
Talk of radical new measures to bail out highly indebted euro-zone governments and shore up banks throughout the region suggests that policymakers might finally be considering the bold steps that would be required to save the euro. But the plans might not …
27th September 2011
September’s modest decline in the German Ifo is a relief after sharper falls in other survey indicators. But the continued decline in the Ifo’s expectations index suggests that the euro-zone’s locomotive will stall before long. … German Ifo Survey …
Despite some dire pronouncements from global policymakers last week, there remain few signs that their counterparts in Europe are preparing to pull out all the stops and secure the future of the single currency. This, coupled with last week’s weak …
Irish Q2 GDP figures revealed that the economy expanded strongly in the first half of 2011 and add to evidence that Ireland is in a much better position than Greece and Portugal. But given the weak outlook for the global economy, its problems are far from …
23rd September 2011
The fall in the euro-zone composite PMI below the theoretical 50 “no-change” barrier provides the strongest sign yet that the region is on the cusp of recession. … Euro-zone Flash PMIs …
September’s drop in the German ZEW index is another sign that the economy is suffering increasingly from slowing global demand growth and troubles in the eurozone’s periphery. … German ZEW Survey …
21st September 2011
Last week proved to be another rollercoaster week for Greece. We now think that the Government may end up defaulting within months or perhaps even weeks. With concerns about banks’ solvency likely to increase as problems in the highly indebted economies …
20th September 2011
The latest euro-zone CPI inflation data do nothing to alter our view that underlying price pressures are not as strong as the ECB fears and that official interest rates may fall around the turn of the year. … Euro-zone Final CPI (Aug.) & Employment …
16th September 2011
On the face of it, July’s healthy rise in euro-zone industrial production suggests that near-term growth prospects may not be quite as bad as the business surveys have recently suggested. Nonetheless, the economic outlook remains pretty grim. … Euro-zone …
15th September 2011
On the face of it, the recent fall in Greek sovereign CDS premia and press reports suggesting that Greece will receive the fourth tranche of loans from its bail-out package in March are encouraging signs that the Government may be getting its fiscal house …
14th September 2011
The debt crisis in the euro-zone has escalated rapidly over recent months and could now come to a head sooner than we had previously anticipated. This is likely to have severe near- to medium-term economic consequences and we now expect the euro-zone to …
More signs emerged last week that policymakers in the core economies are unwilling to soften the conditions attached to current or future bail-outs. For now, though, Greece looks set to bow to EC, ECB and IMF demands and implement additional fiscal policy …
13th September 2011
After leaving interest rates on hold at 1.5% today, the ECB struck a downbeat tone regarding the economic outlook and acknowledged that risks to price stability are no longer on the upside, supporting our view that its recent rate hikes will be reversed …
9th September 2011
The Greek and Portuguese GDP figures for Q2 add to evidence that the recessions there will be more drawn out than either Government expects, suggesting that both economies will struggle to meet their budget deficit reduction targets. … Greek and …
The Italian Government’s recent indecision over the form of its latest fiscal package underlines the view that it is unlikely to implement the tough and unpopular measures needed to get the public finances on a stable footing. We think that a disastrous …
Developments over the past month suggest that there is a distinct possibility that the eurozone could soon slip back into recession. In particular, the ECB composite PMI now points to outright falls in GDP. Meanwhile, a steep drop in the EC Economic …
8th September 2011
July’s surge in German industrial production will clearly ease fears of an imminent double-dip, but a renewed industrial slowdown seems inevitable before long. … German Industrial Production …
Today’s ruling by the German Constitutional Court that bail-outs already undertaken by EU authorities were not unlawful might come as a relief to highly indebted euro-zone governments. But its insistence that the German parliament must be more heavily …
In the near term, Greece may continue to receive EU/IMF support and grudgingly meet the terms of its bail-out, despite the ongoing problems surrounding the second rescue package. But it is virtually inevitable that a debt restructuring involving large …
