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The further rise in Irish bond yields over recent days has intensified speculation that Ireland will soon be forced to follow Greece in turning to international financial support. Is there anything that could yet save Ireland from a similar fate? … Can …
11th November 2010
Reports that Greece’s 2010 budget deficit is likely to have narrowed much less sharply than the Government had previously predicted emphasise that its problems are far from over. Greece will now come under heavy pressure to implement an even more …
10th November 2010
With the resilience of German export growth partly reflecting persistently strong demand from Emerging Asia, some have argued that Germany might continue to grow rapidly as demand elsewhere in the developed world weakens. We are not convinced that this …
9th November 2010
September’s German industrial and trade data bode pretty well for the third quarter. But given slowing global demand and the euro’s strength, a sharper slowdown in industrial and external activity seems very likely in the coming quarters. … German …
8th November 2010
The euro’s further rise certainly has not supported our forecast that it might eventually fall to parity against the dollar. The worries about peripheral debt that we had expected to drive the currency down are still raging, but they are perhaps seen as …
The G20 Summit in Korea next week (11th – 12th) will be overshadowed by the fall-out from “currency wars”, hampering any attempt at the improved coordination of policies necessary to help rebalance the global economy. In particular, the US will find it …
5th November 2010
We doubt that next year’s €6bn fiscal squeeze will be enough to ensure that the Irish Government’s 2011 budget deficit goal will be met. This, combined with rising political uncertainty and surging bond yields, implies that Ireland may struggle to solve …
4th November 2010
After leaving interest rates on hold today, the ECB signalled that it is certainly not ready to follow the Fed into a renewed bout of unconventional policy support. Bolder action might yet be taken once the recent recovery starts to falter. But for now, …
There are reasons to think that Portugal and Ireland will not follow Greece in seeking financial support in the very near future. But there are still major doubts over their ability to address their longterm fiscal and economic problems without some form …
The Government finally passed its 2011 Budget in parliament yesterday. This may provide some relief after weeks of political tension but the episode has re-awakened market concerns. And while Portugal may not be on the verge of requesting EU/IMF funds, …
Recent activity indicators confirm that while, the euro-zone recovery is slowing, it has by no means ground to a complete standstill. Nonetheless, news on the periphery remains grim. This, coupled with rising concerns over whether political pressures will …
3rd November 2010
Proposed arrangements for a permanent crisis resolution mechanism in the euro-zone threaten to have counter-productive effects on member countries’ fiscal consolidation efforts. … Euro-zone default mechanism poses near-term …
2nd November 2010
Recent news from the euro-zone industrial sector has provided some encouraging signs that, for now at least, output is merely starting to grow at a more sustainable rate, rather than grinding to a complete standstill. But slowing global demand, the strong …
1st November 2010
The latest euro-zone unemployment and inflation data attest to the absence of price pressures in the region. As inflation drops back next year, we think the ECB is more likely to up its unconventional policy support than to raise official interest rates. …
29th October 2010
October’s improvement in the EC consumer and business survey and fall in German unemployment suggest that the euro-zone is holding up well for now. But the worrying divergence between core and peripheral economies has widened further. … Euro-zone EC …
28th October 2010
Recent comments from ECB members, together with a reduction in its bank lending and halt to bond purchases, suggest that the Bank has maintained a tightening bias. It will probably keep open the option of buying more bonds and continuing to offer generous …
The long-term effects of some form of break-up of the euro-zone might ultimately prove to be positive. But the likely short-term damage means that such an event would hinder, rather than help, the global economic recovery. … Would a break-up of the euro …
27th October 2010
In a sign of what may be to come for the euro-zone, the pace of the Belgian recovery has slowed. While a modest fiscal tightening will partly shield consumers, the political crisis and talk of the country’s potential split may in time raise market fears …
October’s German CPI data confirmed that, even in the euro-zone’s best-performing economy, price pressures remain very subdued. … German Flash CPI …
The Irish Government’s announcement that it will implement an additional fiscal squeeze worth €7.5bn (4.8% of GDP) over the next four years is a big step in the right direction. But we think that extra measures will be needed to meet the Government’s …
The latest euro-zone broad money and credit data provide further signs that the problems in the banking sector may be easing. Nonetheless, credit growth remains very weak and supports our view that domestic spending growth will remain subdued. … Euro-zone …
Despite the krona’s recent strength, the Swedish Riksbank raised interest rates for the third time in four months. Although further hikes are inevitable, we expect the pace of tightening to ease sharply next year and for interest rates to remain …
26th October 2010
Last week was characterised by fairly downbeat news on economic activity and ongoing struggles to achieve fiscal goals. Although the German business surveys remained positive, October’s fall in the euro-zone PMI suggested that growth in the region as a …
25th October 2010
October’s rise in the German Ifo survey suggests that the economy is defying the global gloom for now. But while the economy should grow by 3% or more this year, we still see weaker exports prompting a slowdown to 1.5% or so in 2011. … German Ifo Survey …
22nd October 2010
Some reporters have put recent hawkish remarks by Axel Weber, the Bundesbank’s ECB representative, down to the relative strength of the German economy. But even there, the economic outlook warrants more monetary policy support, let alone in the …
21st October 2010
October’s fall in the euro-zone composite PMI adds to evidence that the recovery is stalling and that the external revival is failing to boost domestic spending. … Euro-zone Flash PMIs …
October’s drop in German ZEW investor sentiment highlighted understandable concerns that the euro-zone’s growth engine might soon stall. … German ZEW …
19th October 2010
There are early signs of a revival in euro-zone housing markets. Even in the periphery, the housing market seems to have passed its worst, which on the face of it, may provide some relief to consumers. But there are good reasons why the housing market is …
The latest speech by Governing Council member Axel Weber has highlighted the growing divergence between the ECB and more pro-active central banks elsewhere. We hope that the Bank might yet take bolder supportive action as the economy weakens. For now, …
18th October 2010
August’s euro-zone trade figures suggest that the region is coping with slowing global demand pretty well for now. But with the euro appearing increasingly likely to be a major loser in any global currency war, the export recovery may soon falter. … …
15th October 2010
The European economy has recently performed relatively well despite continued fears about public debt in parts of the region. But as global demand slows, the export recovery will falter, with the euro-zone particularly at risk from the strength of the …
13th October 2010
The French strike will probably have a smaller immediate effect on economic activity than the press might have you believe. However, it is the clearest sign yet that the euro-zone’s second largest economy will fail to meet its deficit reduction goals. … …
August’s healthy rise in euro-zone industrial production will help to ease concerns that the recovery in the sector is grinding to a halt. … Euro-zone Industrial Production …
Recent news from Italy suggests that the industrial recovery is going from strength to strength. Nonetheless, we doubt that this marks the start of an Italian renaissance. Indeed, there are several reasons why industrial growth may slow sharply in the …
11th October 2010
The euro’s rise to a nine-month high against the US dollar last week suggests that the euro-zone has lost what may turn out to be the opening skirmishes of a global currency war. If the euro remained at its current level, it would be consistent with a …
The ECB maintained a fairly dovish tone today, pledging continued support for commercial banks and possibly more peripheral government bond purchases. But there was little to suggest that the Bank will take the bolder steps that we think will be required …
7th October 2010
The latest German industrial and French trade data suggest that, despite ongoing fears about the region’s periphery, the immediate risk of a “double dip” recession in the euro-zone as a whole is small. … German Industrial Production & French Trade …
The euro-zone’s economic prospects appear to have taken a turn for the worse amidst continued worries over the periphery and signs that the recovery in the core economies is starting to lose momentum. Surveys such as the PMI point to a sharp slowdown in …
6th October 2010
The latest composite PMI business survey figures have added to evidence that the Spanish economy may have re-entered recession. This supports our view that Spain is set for a prolonged period of stagnation at best and could yet prove be the biggest threat …
5th October 2010
The fact that the Greek Government has announced that it expects to reduce its budget deficit by more than the IMF and EC have demanded in 2010 and 2011 is an indication of the great strides that it has made towards getting its public finances on an even …
4th October 2010
The Irish Government deserves some credit for coming clean last week on the “horrendous” costs of its banking support measures, although its openness may have been dictated as much by public accounting rules as by a desire to be transparent. … Ireland: …
Euro-zone unemployment figures for August showed further signs of improvement in labour market conditions in some core economies but unemployment continued to rise in the peripheral economies. … Euro-zone Unemployment …
1st October 2010
The euro-zone economy as a whole might be faring better than others for now, but strains in the region’s periphery have continued to mount. The ECB will provide reassurance after its forthcoming meeting that it will continue to support these economies …
30th September 2010
The Irish Government’s announcement on the costs of rescuing its banks appears to have provided the markets with some reassurance for now. But with the banking sector still fragile and the economy deep in recession and deflation, Ireland’s position …
Recent developments in France and Portugal confirm that both are struggling to implement measures to ensure a sustained reduction in public borrowing. But market pressures will force Portugal to act aggressively before long and even France won’t be able …
September’s rise in euro-zone CPI inflation probably reflected energy and food effects, while underlying price pressures remain very weak. … Euro-zone Flash CPI & German Unemployment …
If the world is about to engage in a currency war, the euro-zone’s arsenal looks poorly stocked. … Will the euro-zone be the biggest loser in a currency …
29th September 2010
September’s improvement in the EC business and consumer survey comes as a relief after recent weaker news on the euro-zone. But the survey still points to much slower growth in Q3 than in Q2. … Euro-zone EC Survey …
Proposed EC sanctions for euro-zone countries with high public debt, large current account deficits or housing market bubbles are being sold as a key step towards rebalancing and hence strengthening the region. But in the near term, they will only add to …
28th September 2010
