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European policymakers will hope that a second bail-out package will provide Greece with more time to show that its fiscal and structural reforms are working. But we are far from convinced and still expect a major default to take place eventually. … …
15th June 2011
Recent developments suggest that Spain may have started to recouple with the likes of Greece, Ireland and Portugal. Over the coming months, Spain is likely to face a number of tricky hurdles and could eventually be forced to be the fourth euro-zone …
14th June 2011
President Trichet last week stressed again the ECB’s general opposition to a restructuring of Greek debt. But he left the door slightly open to a “voluntary” agreement in which bondholders would commit to exchange maturing or soon-to-mature Greek bonds …
ECB President Jean-Claude Trichet struck a hard line on the euro-zone’s debt crisis today by both signalling an interest rate hike in July and again ruling out a debt restructuring for Greece. But on the latter, the ECB appears to be trying to put off the …
10th June 2011
The European Central Bank’s continued opposition to any form of sovereign debt restructuring in the euro-zone remains a major short-term obstacle to plans for a Greek debt “rollover”. But the ECB cannot put off the inevitable forever. … ECB trying to hold …
8th June 2011
The dust clouds may have cleared but economic gloom continues to hang over Iceland. While the economy returned to growth in Q1, conditions for consumers remain grim and large risks remain over plans to continue the lifting of capital controls. … Economic …
The breakdown of euro-zone Q1 GDP provided some support to our view that the pace of recovery in the region peaked in the first quarter and that growth is likely to be materially slower in Q2 and beyond. … Euro-zone GDP Breakdown …
Further falls in euro-zone leading indicators and the first hard data for Q2 suggest that the economic recovery may have passed its peak. After three consecutive falls, the EC’s Economic Sentiment Indicator is consistent with annual GDP growth remaining …
7th June 2011
April’s pick-up in euro-zone retail sales may look like an encouraging sign that euro-zone consumers are defying the fiscal squeeze. But the bounce is likely to have been a one-off boosted by Easter, as underlying retail sales growth remains weak. … …
Last week’s news of proposals for a voluntary “rollover” of Greek debt brought some hope that the policy impasse over the crisis may soon be over. Crucially, there were signs that the ECB − until now steadfastly opposed to any form of restructuring − …
6th June 2011
ECB President Jean-Claude Trichet will use Thursday’s post rate-announcement press conference to signal another rise in interest rates at the following meeting in July. But with growing signs that the euro-zone’s economic recovery is starting to lose …
2nd June 2011
A second Greek bail-out package, perhaps involving some form of voluntary debt rescheduling, won’t address Greece’s fundamental problems and won’t prevent a major restructuring in the future. … Greek bail-out 2 will merely delay the …
1st June 2011
While Spain has made good progress in reducing its central government budget deficit this year, its growing regional deficits are a cause for concern. Meanwhile, the Greek and Irish deficits are still running well above last year’s path. … Euro-zone …
The recent strength of the euro-zone economy has masked widening divergences within the region. And with even in the core economies set to slow over the coming quarters, it would be wrong to expect strong growth to address the fiscal crisis and ensure the …
31st May 2011
The Swiss economy expanded only modestly in the first quarter of this year. With the strong franc likely to hit exports over the coming quarters, growth looks likely to remain fairly lacklustre. … Swiss GDP …
May’s slight drop in euro-zone CPI inflation is unlikely to prompt the ECB to tone down its hawkishness. Interest rates are set to rise again in July. … Euro-zone Flash CPI & Unemployment …
The Swiss economy expanded only modestly in the first quarter of this year. With the strong franc likely to hit exports over the coming quarters, growth looks likely to remain fairly lacklustre. … Swiss GDP (Q1 …
Attention regarding the euro-zone’s debt crisis has remained focused on the continuing spat between the EU and the ECB on whether or not Greece should be allowed to undertake some form of “soft” debt restructuring or “re-profiling”. The stand-off …
30th May 2011
May’s unexpected fall in German CPI, which was probably driven by a drop in the core rate, is a welcome sign that inflationary pressures in the region may not be as great as the ECB think. … German Flash CPI …
27th May 2011
May’s EC business and consumer survey brought further signs that the economic recovery in the euro-zone is starting to lose steam and hence dented hopes that continued strong growth in the core will help to address the peripheral debt crisis. … Euro-zone …
The latest data show that euro-zone money and credit growth remain subdued. Of course, with headline inflation well above target, this won’t stop the ECB from raising interest rates again over the coming months. But it supports our view that aggressive …
Q1’s GDP figures confirmed that Sweden’s impressive recovery continued at the start of this year and will ensure that the Riksbank will continue to raise interest rates at a faster pace than other central banks in the region. … Swedish GDP …
Q1’s GDP figures confirmed that Sweden’s impressive recovery continued at the start of this year and will ensure that the Riksbank will continue to raise interest rates at a faster pace than other central banks in the region. … Swedish GDP (Q1 …
Some form of Greek debt rescheduling would certainly have rather less severe implications for the euro-zone’s banks than a “hard” default. Nonetheless, were the process badly handled, it could still have large negative repercussions – so European …
26th May 2011
With fears that Spain’s “decoupling” from Greece, Ireland and Portugal may prove temporary, markets may become less sanguine about Belgium than they have recently been. With the political situation still in deadlock, we continue to fear that Belgium may …
24th May 2011
May’s Ifo survey suggests that Germany’s impressive economic recovery continued in Q2. But with other surveys weakening recently and the GDP breakdown suggesting that Q1’s sharp rise in activity was driven by temporary factors, we continue to think that …
May’s sharp fall in the flash euro-zone Purchasing Managers’ Index (PMI), driven by developments in France and Germany, brought the strongest signs yet that the core economies’ recoveries are losing steam and will dent hopes that they can pull the …
23rd May 2011
There are growing signs that the EU will allow Greece to undertake a “soft” debt restructuring, probably involving the voluntary exchange of debt for bonds of longer maturities. This could ease the near-term pressures on Greece, but have less damaging …
Ireland appears to be under no imminent pressure to follow Greece and seek a bigger bail-out package. Nonetheless, we still think that it may eventually need to gain additional financial support from the EU and IMF or implement some form of debt …
19th May 2011
For now, markets continue to give Spain the benefit of the doubt. But with signs that its modest economic recovery will soon lose momentum and increasing concerns that the regional governments will undermine the fiscal consolidation programme, Spain could …
18th May 2011
Portugal’s bail-out has finally been given the green light. While a cash crisis has been avoided, there are reasons to think that Portugal may struggle to push away fears that it will eventually need to restructure its debt, particularly if concerns about …
17th May 2011
May’s fall in the headline ZEW index adds to evidence that the German economic recovery may be starting to slow. … German ZEW (May) …
The markets are right to think that a likely second bail-out for Greece over the coming months will not preclude some form of debt restructuring or default. But we suspect that they are too sanguine about the likely effects of such an event on the …
16th May 2011
April’s sharp rise in core inflation is probably not as worrying as it may seem, but it will do nothing to ease the ECB’s inflation concerns, suggesting that the Bank may raise interest rates again in July. … Euro-zone CPI (Final, Apr.) & Trade …
The solid 0.8% gain in euro-zone GDP in Q1 has left our previous forecast of 1.0% growth in 2011 overall looking too downbeat. We have pushed it up to 1.5%, but an even stronger figure of 2.0% or so is not out of the question. Nonetheless, with the …
Q1’s 0.8% gain in euro-zone GDP has got the year off to a solid start and we have revised our full-year growth forecast up from 1.0% to 1.5%. But with the divergences in the region still widening, strong growth won’t solve the fiscal crisis. … Euro-zone …
13th May 2011
March’s euro-zone industrial production figures add to evidence that the recovery in the sector is starting to lose a bit of steam. This supports our view that GDP growth is likely to be pretty subdued over the remainder of this year. … Euro-zone …
12th May 2011
European officials have bowed to the inevitable and accepted the need to extend Greece’s bail-out package. But we still think that it is inevitable that Greece will have to restructure its debts at some point in the future. What’s more, we also expect …
9th May 2011
It is not surprising that the positive market reaction to the initial details of Portugal’s package last week was short-lived. On the face of it, the bail-out may turn out to be more successful than the Greek or Irish packages have been so far. But …
March’s German industrial production figures add to other signs that the wider economy made a strong start to the year. But there is growing evidence that the industrial recovery may have started to lose a bit of momentum. … German Industrial Production …
6th May 2011
Initial estimates of Spanish GDP growth in Q1 suggest that the economy continued to expand at the start of this year, but only just. There remains a risk of a “double dip”, which could prompt Spain to be drawn deeper into the euro-zone debt crisis. … …
Having kept interest rates unchanged at 1.25% as expected, President Trichet’s comments in the press conference appeared to provide tentative support to the view that the ECB is not about to embark on an aggressive monetary tightening. With signs that the …
5th May 2011
Recent falls in euro-zone leading economic indicators suggest that the recovery in the region as a whole may be starting to falter. Admittedly, despite falling for a the third time in four months in April, the EC Economic Sentiment Indicator still points …
4th May 2011
Last week was another bad one for Greece. Markets are now increasingly convinced not only that Greece will default, but that it may happen before the European Stabilisation Mechanism comes into operation in 2013. But Greece might be reluctant to default …
2nd May 2011
With recent communications from the ECB maintaining a distinctly hawkish tone, President Trichet could use Thursday’s post rate-announcement press conference to signal that the next hike in interest rates will come as soon as June. However, with the …
28th April 2011
The deepening problems in the euro-zone’s peripheral economies beg the question of whether the single currency union is doomed to fail. If failure means that it does not survive and prosper in its current form, then we think the answer is probably yes. … …
27th April 2011
April’s sharp rise in the German CPI inflation figures will do nothing to ease the ECB’s concerns over rising inflationary pressures. But the pick-up is not quite as alarming as it initially seems. … German Flash CPI …
The European economic recovery has remained very much of the two-speed variety as the eurozone’s core economies and some countries outside the single currency area have grown robustly, while the fiscal crisis in the euro-zone’s periphery has continued to …
Official public finances data for 2010 confirmed that while the core economies are making clear progress to rein in their budget deficits, the periphery’s fiscal problems are far from over. … Euro-zone Fiscal Monitor …
26th April 2011
