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After leaving interest rates on hold, the ECB provided no indication that it is about to respond to the ongoing euro-zone fiscal crisis by adopting bolder unconventional policy measures. … ECB remains reluctant to do …
13th January 2011
Recent news on the euro-zone household sector has placed a dent in hopes that the external recovery is spreading to the domestic economy. November’s sharp drop in retail sales, and Q3’s downward revision to household spending growth suggest that consumer …
12th January 2011
November’s healthy rise in euro-zone industrial production adds to evidence that the recovery continued in Q4. But the ever-widening divergences between different countries continue to cast doubts on the future sustainability of the recovery. … Euro-zone …
It now seems a matter of when, rather than if, Portugal will follow Greece and Ireland in accepting some form of European/IMF bail-out. But will this signal the beginning of the end of the euro-zone debt crisis or the start of a new, more dangerous, …
11th January 2011
The euro-zone economic data released since Christmas has been fairly encouraging and suggests that, for now at least, the region continues to expand at a pretty healthy pace. But on the face of it, there are growing signs that inflationary pressures may …
10th January 2011
The latest euro-zone data once again highlight the huge divergences that are building up in the region and may also add to fears that the industrial recovery is failing to spread to other sectors of the economy. … Euro-zone Unemp. (Nov.) & GDP (Q3) & …
7th January 2011
Once again, the ECB faces the tough task of balancing a raft of bad news from the euro-zone’s periphery with the more positive developments elsewhere and the fact that CPI inflation has risen above target. While the ECB will keep open the option of …
6th January 2011
December’s EC business and consumer survey suggests that, for now at least, the improving global economic outlook is offsetting the ongoing troubles in the periphery. … Euro-zone EC Survey …
The joke about the differences between Iceland and Ireland (one letter and about six months) might provide some encouragement to the latter in the light of recent signs that Iceland is turning the corner. But the economy still faces major challenges. … …
4th January 2011
December’s bigger-than-expected rise in euro-zone CPI inflation probably reflected energy and food effects. Underlying price pressures in the region remain very weak. … Euro-zone Flash CPI & German Unemployment …
We have revised up our near-term forecasts for the euro-zone economy in response to improving global economic prospects and signs that domestic demand may be picking up. But with the region’s fundamental problems still firmly in place, we continue to …
27th December 2010
The news that EU leaders reached agreement last week on the treaty changes required to establish a “permanent crisis mechanism” in 2013 is unlikely to ease pressures in the peripheral bond markets. And given that the core economies’ resistance to adopting …
20th December 2010
December’s Ifo survey adds to the evidence that the German economy continues to expand at a rapid rate. For Germany at least, the problems in the periphery are for now being more than offset by the benefits of the weaker euro. … German Ifo Survey (Dec.) & …
17th December 2010
This week’s European Council meeting provides policymakers with the chance to prove that they will do whatever is necessary to get the region’s public finances on a stable footing. But in reality, policymakers are unlikely to announce anything that will …
16th December 2010
December’s euro-zone PMI surveys suggested that the economic recovery in the region maintained reasonable momentum towards the end of 2010. … Euro-zone Flash PMIs & Final CPI …
The Swedish Riksbank responded to the recent strong economic data by raising interest rates today for the fourth time since July. But while further rate hikes are inevitable, we expect monetary policy to remain very accommodative for the foreseeable …
15th December 2010
The rise in German ZEW economic sentiment in December and October’s increase in euro-zone industrial production confirm that the euro-zone recovery has not yet run out of steam. … German ZEW (Dec.), Euro-zone Industrial Production …
14th December 2010
Euro-zone policymakers face enormous challenges to avoid a near-term financial disaster, reduce governments’ debt burdens in the medium term and foster economic growth. Given the scale of these tasks, we still think that some kind of euro-zone break-up is …
13th December 2010
Last week was a mixed one for the euro-zone’s peripheral economies. While it was a relatively quiet week in the financial markets, the economic news did nothing to alter our view that growth prospects in the periphery are still pretty dismal. … Still no …
Most of the peripheral euro-zone economies, excluding Spain, are still struggling to meet their budget deficit targets for this year, suggesting that additional fiscal measures will be needed next year. … Euro-zone Fiscal Monitor …
9th December 2010
The ECB’s announcement that it would step up its bond purchase programme and extend liquidity provision to the banking sector has eased immediate pressure on Portugal. But the initial positive market reaction has already faded and the ECB’s move doesn’t …
As anticipated, the first vote on the Irish 2011 Budget was passed by Parliament late last night. But while this reduces the chances of the Government being unable to tap its bail-out facility for funds, it does nothing to alter the fundamentally bleak …
8th December 2010
Germany’s impressive industrial recovery continues to support growth in its own economy and in the euro-zone as a whole. But the favourable effects on the region’s peripheral economies are likely to be limited. … German Industrial Production & Trade …
Any disappointment that the ECB failed last week to commit to a major stepping up of its bond purchases was offset by reports that it had nonetheless bought large amounts of peripheral bonds. But it is still far from clear that it will take the further …
6th December 2010
Anyone hoping that the European Central Bank would respond to the euro-zone debt crisis with “shock and awe” today will have been severely disappointed. The fact that it failed to respond more decisively after the recent turmoil casts clear doubts on its …
2nd December 2010
The euro-zone economy has continued to recover despite the periphery’s troubles, with export growth holding up particularly well. It is too soon for the euro’s recent depreciation to have had an effect, but November’s rise in export orders in the …
The second estimate of euro-zone Q3 GDP provided some moderate encouragement that the economic recovery in the region is becoming a little more broad-based. But there are still good reasons to be cautious over the outlook for the region. … Euro-zone GDP …
Recent comments from ECB President Trichet have brought hope that the Bank might step up its bond purchases to support peripheral markets. But to make any real difference, the ECB would probably need to buy at least five times what it has already. For …
1st December 2010
There are several practical obstacles to leaving the euro-zone which mean that this is not an easy option. But if the benefits were deemed large enough, none of the obstacles would be insurmountable. And they apply even less to “core” economies like …
30th November 2010
The latest news on the euro-zone economy suggests that the recent strength of activity in the region is doing little to raise price pressures or improve conditions in the labour market. … Euro-zone Flash CPI (Nov.) & Unemployment …
November’s EC business and consumer survey confirmed that the sovereign debt crisis in Ireland and elsewhere is not yet standing in the way of a broader recovery in the euro-zone economy. But the worrying division between the core and periphery is …
29th November 2010
The further details of the Irish bailout package and the euro-zone’s permanent crisis resolution mechanism confirm that Germany and other European hardliners are in no mood to make major concessions to the periphery. Accordingly, market stresses are …
Ireland’s bailout and four-year fiscal plan have failed to reduce concerns about the euro-zone’s periphery. In fact, they are spreading again, most worryingly to Spain. While the risk of such a large economy needing a similar rescue seems fairly low for …
The latest money and credit figures show that annual lending growth is continuing to pick up. Nonetheless, with the periphery’s banks still in a vulnerable position, the ECB’s plan for a gradual removal of unconventional support is a concern. … Euro-zone …
26th November 2010
November’s rise in German HICP inflation reflected a temporary boost from the energy and food components. The rate remains low, at 1.6%, and looks set to fall again in the coming months as these effects fade and the economic recovery slows. … German Flash …
The ECB faces the difficult task this month of weighing up the periphery’s disastrous situation on the one hand and pretty strong growth in the core euro-zone economies on the other. With the region’s governments supposedly dealing with the fiscal crisis, …
25th November 2010
The recent increase in political uncertainty and rising concerns about banks’ near-term funding needs have only added to Ireland’s problems. Indeed, the further details on the shape of the fiscal package released today are unlikely to do much to ease the …
24th November 2010
November’s German Ifo survey suggests that, while the euro-zone’s periphery remains mired in economic gloom, strong German growth is continuing to support the recovery in the region as a whole for now. … German Ifo Survey …
With Ireland finally accepting a bailout, attention has turned to who might be next. Spain’s position is far less precarious, but there are some worrying similarities. And given the economy’s size, the small risk that it might eventually need help is …
23rd November 2010
November’s surprise rise in the euro-zone PMI survey suggests that the economy has continued to expand amid the turmoil in the periphery. … Euro-zone Flash PMIs …
News that Ireland has formally requested financial support has prompted a further drop in Irish bond yields and a small rise in the euro. But Ireland still faces a daunting set of fiscal and economic challenges, suggesting that its problems are far from …
22nd November 2010
Over the past week, it has become increasingly clear that it is now a matter of when, rather than if, Ireland receives some kind of financial support package. But there are still several unanswered questions, such as the size of the package, how the funds …
With Ireland on the brink of accepting some kind of bail-out, fears of contagion have intensified. While Portugal is clearly the next in line, it is in a better position than Ireland, which means that it may not need to request loans in the very near …
19th November 2010
The Spanish GDP figures confirmed that the economy narrowly avoided re-entering recession in Q3. But with the full force of the fiscal squeeze yet to be felt and global demand set to slow, it may not be long before activity begins falling again. … Spanish …
17th November 2010
It seems increasingly likely that Ireland may soon bow to pressure and ask for financial support. But while such an outcome may temporarily settle the markets, the fundamental picture will remain unchanged – financial support is by no means the solution …
16th November 2010
November’s rise in German ZEW investor sentiment suggests that the euro-zone’s core has remained encouragingly resilient to the periphery’s troubles for now. But we still see German growth slowing sharply before long as exports weaken. … German ZEW (Nov.) …
This week has seen worries about the euro-zone’s periphery escalate again, with Ireland in the spotlight. While the gradually emerging details of a permanent “crisis resolution mechanism” have helped a little, it will still be many months before this is …
15th November 2010
The slowdown in euro-zone GDP in the third quarter will do little to ease growing fears about the region’s periphery. The 0.4% quarterly expansion was a touch weaker than the consensus forecast and left the annual growth rate unchanged at 1.9%. … …
12th November 2010
