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The lack of a further step-up in the ECB’s anti-inflation rhetoric today supports our view that the Bank is unlikely to tighten policy in the near future. Nonetheless, its generally hawkish stance, and the effects of this on the euro exchange rate, …
3rd February 2011
Ireland’s next Government will push for better terms on its existing bail-out package, but it will enter discussions in a weak bargaining position. Even if it does gain major concessions there is a strong chance that weaker than anticipated growth will …
2nd February 2011
The further rise in euro-zone CPI inflation at the start of 2011 will have done little to ease the ECB’s fears that price pressures in the region are building. Nonetheless, inflation remains far lower than in mid-2008, the last time the ECB raised …
1st February 2011
Expectations are growing that euro-zone leaders will soon agree to a series of new measures - collectively labelled the “grand bargain” - to bolster the policies already in place to deal with the region’s debt crisis. But they are likely to come with …
The latest euro-zone data provide encouraging signs that the economic recovery is filtering through to the labour market and that the industrial sector is still expanding strongly. But large divergences between the core and periphery remain. … Euro-zone …
Last week’s successful first EFSF bond issue was hailed by some as a strong vote of confidence in the euro-zone. We are not so sure. The rise in Portuguese bond yields back up to the 7% danger level suggests that the facility may soon be needed again. …
31st January 2011
The latest euro-zone money and credit data continue to suggest that inflationary pressures in the region as a whole remain subdued, adding to evidence that the recent sharp rise in the headline CPI inflation will prove temporary. … Euro-zone Monetary …
28th January 2011
At February’s press conference, President Trichet looks set to maintain a fairly hawkish tone, adding to fears that the ECB might raise interest rates later this year and possibly placing further upward pressure on the euro. The ongoing problems in the …
27th January 2011
The further rise in German CPI inflation in January is likely to add to the ECB’s worries about building inflationary pressures. But the chances of inflation reaching the levels seen in mid 2008, when the ECB last hiked interest rates, remain low. … …
January’s EC business and consumer survey adds to evidence that the euro-zone economy has made a pretty good start to the year. But the recovery remains heavily reliant on the industrial and external sectors. … Euro-zone EC Survey …
The recent bail-out and banking support measures may have pulled Ireland back from the brink of imminent disaster. But the economy and the public finances remain in an extremely precarious position. Indeed, with Ireland at risk of a Japanese-style “lost …
26th January 2011
Most of the peripheral euro-zone economies appear to have made some inroads into their large budget deficits last year, with Spain taking the lead. … Euro-zone Fiscal Monitor …
25th January 2011
News that the Spanish Government will force the troubled banks to boost their capital ratios is an encouraging sign that it is trying to tackle the economy’s fundamental problems. But we doubt that the measures mark a turning point for Spain. … Spanish …
Ireland’s coming general election provides hope that months of political uncertainty may be about to end. But whatever the outcome, the economy and public finances will remain in a precarious state. … Ireland's political turmoil not as disastrous as it …
24th January 2011
January’s PMI surveys suggest that the euro-zone has made a pretty solid start to the year. But the upbeat data for the euro-zone as a whole continue to mask wide divergences between the region’s core and peripheral economies. … Euro-zone Flash PMIs …
European policymakers’ hopes of preventing the peripheral debt crisis from escalating further are continuing to focus heavily on the role of the European Financial Stability Facility (EFSF). Not only will the first bond issue to raise funds for the …
21st January 2011
Portugal has survived its first market tests of 2011 and resisted pressure to accept outside support. But with government bond yields still at very high levels, the Government’s struggle to go without assistance will continue. A renewed bout of political …
January’s Ifo index echoes the upbeat tone of most of the other short-term indicators on the German economy, including the ZEW survey released earlier this week. … German Ifo Survey …
The European economy has largely shrugged off the ongoing fiscal crisis in the euro-zone periphery and continued to expand at a healthy pace. But while the improvement in the global environment and the weaker euro bode well for exporters, the boost to …
20th January 2011
January’s healthy rise in the headline German ZEW index suggests that, for now at least, investor sentiment is continuing to be buoyed by the upbeat economic data and the weaker euro. … German ZEW …
18th January 2011
In adopting a more hawkish tone last week, when core euro-zone inflation is running at just 1.1%, the ECB has increased doubts over its ability to grasp the seriousness of the situation facing the euro-zone and its likely willingness to provide further …
17th January 2011
December’s final euro-zone CPI inflation figures should calm fears that underlying inflation pressures are building. But with headline CPI inflation likely to rise in early 2011, the ECB’s stance could turn more hawkish over the coming months. … Euro-zone …
14th January 2011
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
