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The ECB maintained a supportive stance today, treating signs of an economic recovery with caution. While the Bank seems unlikely to resort to outright quantitative easing for now, sterilised bond purchases, generous bank lending and very low official …
10th June 2010
While the recent flurry of austerity measures in Germany and elsewhere goes some way towards meeting deficit reduction targets, there is considerably more to be done. And with the cuts already announced causing public uproar, some euro-zone countries will …
Q1’s GDP figures confirmed that, for now at least, Italy is expanding at a reasonably healthy pace. But with signs that the euro-zone fiscal crisis is damaging business and consumer confidence, growth looks set to slow over the remainder of the year. … …
Markets’ continued concern about the euro-zone fiscal outlook has prompted the euro to depreciate further and peripheral government bond yields to remain high over the past month. Worryingly, there are tentative signs that markets’ gloom may be starting …
9th June 2010
April’s rise in German industrial production provides hope that the recovery in the wider economy is gaining momentum. But with fiscal policy in Germany and elsewhere set to be tightened dramatically, the revival certainly remains fragile. … German …
8th June 2010
The past week’s data have added to concerns that strains in the region’s periphery are spreading to broader economic activity. While business sentiment remains consistent with a continued recovery for now, recent falls are worrying and the decline in …
7th June 2010
The second euro-zone GDP release for Q1 confirms that domestic spending remains weak and with fiscal tightening set to intensify, there is little prospect of an improvement any time soon. … Euro-zone GDP …
4th June 2010
The latest ratings downgrade of Spanish Government debt has triggered a new wave of concern in the markets. While Spain’s problems are far less acute than those of Greece, the Government still faces a tough task to convince the markets that it can return …
3rd June 2010
April’s drop in euro-zone retail sales brought more worrying evidence of the weakness of the consumer sector even before fiscal tightening really kicks in. … Euro-zone Retail Sales (Apr.) & Final PMI …
After making radical changes to unconventional policy just a few weeks ago, further alterations seem unlikely this month. The ECB will give little away about the size and type of future bond purchases. For now, it will stress that its actions are being …
Fears that Belgium might be the ‘Greece of the North’ have not yet been picked up by the markets. (See Chart 1.) But with persisting weaknesses in the banking sector and a renewed bout of political instability, risks to the economic and fiscal outlook are …
2nd June 2010
April’s sharp rise in euro-zone producer price inflation may prompt concerns that inflationary pressures are building. But we continue to think that deflation, rather than a surge in inflation is the greater threat for the region. … Euro-zone PPI …
The Swiss economy is recovering a little more slowly than had been hoped, but it continues to easily outperform the euro-zone. The key risk now is that close trade links to the region and a strong franc soon prompt the export-led revival to stall. … Swiss …
1st June 2010
April’s further rise in euro-zone unemployment adds to evidence that domestic demand in the region looks set to remain weak. … Euro-zone & German Unemployment …
Recent market developments, coupled with the prospect of a prolonged bout of fiscal consolidation, appear to be starting to have a damaging impact on confidence in the wider euro-zone economy. In the short term, this may not prevent the economic recovery …
31st May 2010
The sharp increase in Swedish activity in Q1, coupled with large upward revisions to growth in the preceding quarters, suggests that the Riksbank may bring forward its plans to raise interest rates in the summer or early autumn. … Swedish GDP …
28th May 2010
A bank levy along the lines of that recently proposed by the European Commission seems unlikely to alter banks’ behaviour or the state of European public finances dramatically. But the difficulty in agreeing to a uniform EU policy is another sign that a …
27th May 2010
German headline and core inflation remain very low and look set to fall further. With disinflationary pressures even stronger in many of the smaller euro-zone economies, deflation remains a real threat for the region as a whole. … German CPI (1st Est. …
The joint EU/IMF support packages may have provided Greece with some breathing space but it will not prevent years of economic hardship. Whatever its actions, the Government has no choice but to return its huge budget deficit to balance. … Greece: From …
The recent rescue package along with rulings made by the European Commission might be steps towards euro-zone fiscal integration that could feasibly benefit the region’s economies in the long run. But the near-term implication is greater pressure for a …
26th May 2010
On the face of it, there are signs that Ireland may be about to exit recession. But any recovery will be down to its exceptionally strong trade links with non-euro-zone economies, rather than any benefit from its early fiscal tightening. Accordingly, a …
24th May 2010
On the face of it, the recent weakening of the euro should provide the euro-zone’s external sector with a boost over the coming months. But given that exporters have tended previously to respond to a weaker currency by raising their prices in euros, the …
May’s falls in the euro-zone PMI and German Ifo business surveys are slightly worrying signs, but both still point to pretty strong growth for the time being. … Euro-zone Flash PMIs & German Ifo …
21st May 2010
Q1’s unexpected fall in GDP casts further doubt on the strength of the Norwegian recovery and supports our view that the Norges Bank will not increase interest rates as rapidly as its forecasts suggest. … Norwegian GDP …
20th May 2010
Switzerland’s low levels of public and private sector debt suggest that it will continue to out-grow the euro-zone over the next couple of years. But it will suffer from strong trade links with the region, particularly if the Swiss National Bank fails to …
19th May 2010
The latest Spanish GDP figures confirm that the economy just about exited recession at the start of the year. But with the Government recently announcing new austerity measures and the private sector still sitting on mountains of debt, the pick-up may …
May’s renewed decline in the ZEW index suggests that investors are still very worried about the effect of the periphery’s problems on the German economy. … German ZEW Survey (May), EZ CPI (Apr.) & Trade …
18th May 2010
Fears that the ECBs bond purchases will stoke inflation or encourage fiscal laxity are overblown. They do not constitute full-blown quantitative easing and will not allow euro-zone economies to escape a very painful fiscal squeeze. … What to make of the …
While some of the forces bearing down on the euro over recent months may now be easing, there are plenty of other reasons to expect the currency to fall further. Indeed, our forecast that the euro will drop to $1.20 by the end of this year looks too timid …
17th May 2010
Q1’s modest rise in euro-zone GDP confirms that the economic recovery in the region has failed to gain any real momentum even before the painful fiscal consolidation faced by many economies has begun. … Euro-zone GDP (Q1) & Industrial Production …
12th May 2010
The bold measures announced by European policymakers at the weekend may have reduced the chance of financial market meltdown. But this does not change our fundamental view that the Iberian Peninsula is set for several more rough years yet. … Iberian …
11th May 2010
The bolder than anticipated announcement of up to €750bn in loans and guarantees for euro-zone governments together with ECB government bond purchases hopefully reduces the immediate risk of financial market meltdown in the region. But it does not change …
10th May 2010
The latest data from the three main economies suggest that the region ended Q1 on a high note. But while the economic recovery may gain momentum in the short term, a prolonged period of fiscal consolidation, particularly in the periphery, is likely to …
The continued turmoil of Greek financial markets reflects a growing recognition that the rescue package - even if delivered swiftly - does not address Greece’s fundamental problems. There is still a significant risk of some form of default over the coming …
March’s surge in German industrial production confirms that the euro-zone’s largest economy is shaking off troubles in the periphery for now. But weather-related weakness earlier this year suggests that GDP broadly stagnated in the first quarter. … German …
7th May 2010
The ECB is trying to inject calm amid the fiscal turmoil, maintaining a dovish stance after leaving interest rates at 1%. Some might have been disappointed that there were no hints of further unconventional policy support to come. But President Trichet …
6th May 2010
With the impending bailout failing to reduce Greek bond yields and concerns spreading to other peripheral economies, some have suggested that the ECB might yet step in and buy government bonds itself. Whether it does or not, it is becoming clearer by the …
Despite having the highest level of government debt in the euro-zone, Italy has so far been largely untouched by the growing contagion effects of the Greek fiscal crisis. But there is no room for complacency if it is to stay below the markets’ radar. … …
The euro-zone’s fiscal crisis has clearly intensified, with Greek bond yields remaining extremely high despite the agreed bailout and concerns spreading to other peripheral economies. But the recovery in the broader economy seems to have carried on …
5th May 2010
With the joint euro-zone/IMF fiscal lifeline increasingly likely to be in place in a matter of days, the possibility of a near-term Greek funding crisis has been greatly reduced. But with government debt set to soar to astronomical levels this may just …
4th May 2010
With signs that Europe is perhaps finally getting its act together and is close to finalising a bailout package, the chances of a near term Greek Government default have greatly diminished. While there are still one or two potential sticking points, we …
3rd May 2010
Continued uncertainties about the proposed rescue package for Greece, coupled with the exceptionally grim medium-term outlook for the economy and public finances, point to a significant risk of some form of default on Greek Government debt over the next …
30th April 2010
The euro-zone CPI and unemployment figures add to the view that the region is set for a prolonged period of weak price pressures. … Euro-zone Flash CPI (Apr.) & Unemployment …
Any earlier suspicions that ECB interest rate hikes might have been on the horizon have surely been blown away by the Greek crisis. For now, the recovery in the broader euro-zone economy seems to have continued regardless. But there is a clear risk of …
29th April 2010
April’s improvement in the EC business and consumer survey suggests that, for the time being at least, the euro-zone’s fiscal crisis is not preventing a recovery in the broader economy. … Euro-zone EC Survey & German Unemployment …
Recent falls in the euro and euro-zone bond yields, coupled with stronger economic data from the core economies, has led to suggestions that the Greek crisis might have a silver lining. But we find it hard to believe that the effect of the episode can be …
28th April 2010
The euro-zone should stay together for another few years at least. But the region’s periphery requires an excruciating competitive adjustment that might well plunge it into depression. Meanwhile, fiscal tightening will damage even the core economies for a …
The crisis in Greece could pose as big a risk to the global economy and financial markets as the collapse of Lehman Brothers did in September 2008. In some respects the wider fall-out might even be worse. … Is Greece the next …
The latest German inflation figures show that, while the economy may be performing much better than the euro-zone’s periphery, core price pressures even there are firmly downward. … German CPI (1st Est. …
