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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 …
2nd December 2010
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
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 …
