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Today’s decision by the Swiss National Bank to apply a limit of 1.20 per euro to the franc is a bold move which it has pledged to defend at all costs. But in the end, there may be limits to how many francs the Bank is prepared to “print”, implying that …
7th September 2011
The breakdown of euro-zone Q2 GDP added to evidence that the region is in the midst of a broad-based slowdown. With growth likely to remain subdued, even in the core, we still expect the euro-zone to expand by just 0.5% next year. … Euro-zone GDP …
6th September 2011
The latest data have provided considerable support to our long-held view that the euro-zone recovery would grind to a halt. For now, we continue to expect a long period of near economic stagnation, but a renewed recession is clearly a possibility. … Is …
The ECB is likely to soften its tone markedly at this month’s press conference amid signs of a significant deterioration in economic activity. With inflation risks probably no longer deemed to be on the upside, the chance of further interest rate hikes …
2nd September 2011
Most of the peripheral economies have continued to make progress in reducing their government borrowing. But over the past month, the euro-zone debt crisis has spread further to the core economies, forcing France and Italy to announce additional fiscal …
Swiss GDP data show that the economy held up relatively well in Q2, but exports have already begun to fall. As the Swiss National Bank struggles to prevent a renewed appreciation of the franc, the downturn in exports looks set to intensify dramatically, …
1st September 2011
The news that euro-zone core inflation remained very low in August while unemployment rose further in July should reduce any remaining inflation fears at the ECB, adding to expectations of possible future interest rate cuts. … Euro-zone Flash CPI & …
August’s weak EC business and consumer survey added to the evidence that the euro-zone recovery has gone into reverse, perhaps boosting expectations that the ECB’s recent interest rate hikes could also be reversed before long. … Euro-zone EC Survey …
31st August 2011
This week, the markets’ focus has fallen back on Greece. In addition to long-standing doubts over whether a sufficient number of private-sector creditors will sign up to the Greek debt exchange scheme, European policymakers are now squabbling over the …
30th August 2011
Recent signs of growing stresses in the euro-zone banking sector support our view that credit growth will remain subdued at best and that household spending and investment will grind to a virtual halt in the second half of the year. … Euro-zone Monetary …
27th August 2011
The final GDP figures from Spain confirmed that its recovery remained sluggish in Q2 and did nothing to alter our view that the economy may tip back into recession before too long. … Spanish GDP (Final, …
Belgium’s severe political deadlock seems to have done little harm so far. But the political crisis is still preventing crucial fiscal tightening from being implemented. The deadlock is also delaying reforms which are badly-needed to preserve …
25th August 2011
August’s drop in the Ifo measure of business confidence added to the growing evidence that the German economic recovery has faltered. … German Ifo Survey …
August’s first business and investor surveys suggest that activity in the euro-zone is stagnating at best. With Germany showing a particularly marked deterioration lately, the region’s strongest economies might be increasingly reluctant to bail out the …
24th August 2011
Q2’s GDP figures showed that the Norwegian economy expanded at a steady pace and added to evidence that it is less likely to suffer from a “double dip” than some of its European counterparts. Looking ahead though, we expect the Norges Bank to tread …
23rd August 2011
The dispute over the provision of collateral by Greece to some euro-zone economies in return for a second bail-out, coupled with the private sector’s reluctance to take part in a debt exchange, may not reignite the funding crisis in the near-term. But it …
Signs last week that European policymakers remain unwilling to take major steps towards fiscal union, coupled with very weak economic data and a renewed slump in equity prices, did nothing to alter our view that the debt crisis is set to intensify. … …
There have recently been signs that Ireland’s troubles may be starting to ease, but we still think that it faces a huge challenge to return its public finances to a stable footing. Accordingly, there remains a high chance that Ireland will eventually seek …
19th August 2011
Decisive steps towards greater fiscal integration across the euro-zone seem vital if the currency union is going to hold together in its current form. But recent comments from Angela Merkel and Nicolas Sarkozy suggest that policymakers are either …
18th August 2011
The Icelandic central bank’s surprise interest rate hike today was in stark contrast to the increasingly dovish tone of other central banks around the world. The move reflected a sharp increase in inflation related to the weakness of the krona. But as the …
Germany’s reluctance or political inability to implement stronger measures to support the euro-zone’s periphery suggests that its appetite for the project might be fading. While euro-zone membership has significant advantages for Germany, it might not be …
17th August 2011
Market pressure on Portugal has eased over the past weeks. But we remain sceptical that the ECB’s bond purchases and the agreement reached by euro-zone policymakers last month can be a lasting solution. And given Portugal’s fiscal outlook, we still think …
Q2’s euro-zone GDP figures revealed that the recovery has slowed dramatically. With even the previously healthy core economies now barely expanding, we maintain our far below consensus forecast that euro-zone GDP will rise by only 0.5% next year. … …
Last week saw markets respond fairly positively to the ECB’s bond purchases and Spanish and Italian bond yields fell sharply from dangerously high levels. At the same time, though, France has been dragged into the crisis, with worries about the effect of …
16th August 2011
June’s euro-zone industrial production data and Q2’s French GDP figures provide further strong indications that economic growth in the region as a whole slowed sharply in Q2. … Euro-zone Industrial Prod. (Jun.) & French & Greek GDP …
13th August 2011
The Swiss National Bank has not exhausted all options to stem the franc’s appreciation and might yet try capital controls or direct intervention in currency markets. But internationally co-ordinated intervention would probably be necessary to make a real …
12th August 2011
11th August 2011
The ongoing case in the German Constitutional Court against providing financial support for Greece is unlikely to lead to an outright ban on bail-outs. But the court could insist that Germany is heavily involved in any future decisions, potentially …
The recent plunge in equity markets may not necessarily have severe negative consequences for euro-zone growth. But when combined with the region’s other problems it supports our long-held bearish view that the recovery may soon grind to a halt and that …
Growing concerns about France’s fiscal position have underlined the breadth of the euro-zone’s debt crisis. While a default seems unlikely at this stage, merely a credit rating downgrade would significantly hamper policymakers’ ability to provide crucial …
10th August 2011
On the face of it, the response of the Italian Government to the recent market mayhem appears pretty impressive. But we are sceptical as to whether the Government can deliver on its promises. … Italy’s fiscal measures will need to be seen to be …
The ECB’s purchases of Italian and Spanish Government bonds have drawn a very positive initial response in the markets. But there are some good reasons to doubt that it will be sustained. … ECB purchases may have little lasting …
9th August 2011
Prior to the announcement of the second rescue package for Greece, we noted that anything other than a very decisive response by European policymakers could prompt Italy and Spain to be dragged deeper into the crisis, with catastrophic consequences. But …
The latest activity data from the euro-zone support our view that the recovery in the region as a whole is slowing sharply and cast further doubt on whether the likes of Italy and Spain can meet their budget deficit goals for this year and beyond. … …
6th August 2011
The ECB was bolder than expected today, upping its support for the banking sector and embarking on a new bout of bond purchases to help the peripheral economies. The Bank claimed that these measures should not be seen as a guide to the future path of …
5th August 2011
June’s rise in euro-zone retail sales does little to alter our view that consumers remain badly placed to offset the slowdown in other sectors of the economy. … Euro-zone Retail Sales (Jun.) & Final Comp. PMI …
4th August 2011
The past month has brought the firmest signs yet that the euro-zone economic slowdown is spreading from the region’s periphery to the northern “core”. July’s decline in the German Composite PMI was sharper than the euro-zone average, leaving it consistent …
Hopes that the latest Greek rescue package would limit contagion effects on Italy and Spain have already faded. But we still think that markets are too sanguine about growth prospects for both economies and that one or both may eventually default. … What …
The Swiss National Bank’s decision to cut interest rates to almost zero and embark on a renewed bout of quantitative easing to stem the franc’s appreciation looks pretty bold. But we still think that the Bank will be unable to fight the strong upward …
3rd August 2011
The continued slowdown in producer price inflation, combined with July’s unexpected fall in headline consumer price inflation, supports our view that the ECB will probably keep interest rates on hold for a prolonged period of time. … Euro-zone Producer …
The new details on the second rescue package for Greece that have emerged over the past week or so have not altered our view that Greece’s outstanding debt burden remains unsustainably high. A second, larger debt restructuring further down the line is …
2nd August 2011
It is becoming increasingly clear that some of the peripheral economies will struggle to meet their budget deficit targets this year. And the new Greek package, like its predecessors, is unlikely to prevent the debt crisis from spreading. … Euro-zone …
June’s euro-zone unemployment figures provide further evidence that the labour market is starting to weaken in response to the slowdown in the wider economy. … Euro-zone Unemployment (Jun.) & Manu. PMI (Final, …
Data last week brought perhaps the firmest signs yet that the slowdown in euro-zone economic activity has spread to the region’s core. With exports weakening in response to slowing world demand and consumers’ real incomes growth remaining subdued, hopes …
Q2’s flash Belgian GDP figure, the first release from a euro-zone economy, revealed that the economy expanded at a pretty strong pace. But this does little to change our view that growth in the euro-zone as a whole is likely to have slowed sharply in Q2. …
30th July 2011
