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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 …
18th May 2010
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. …
With considerable uncertainties over when the joint IMF/euro-zone rescue package for Greece will be implemented, Greece is still dangling from a precipice. If Europe is to pull Greece back up it will have to make funds available swiftly and put a …
27th April 2010
The European economy has shown further signs of recovery in response to the continued improvement in global economic and trade conditions. But the fiscal crisis in the euro-zone’s peripheral economies is casting an ever darker shadow over the medium-term …
Last week’s euro-zone data will have added to hopes that the recovery resumed at the start of this year, following Q4’s stagnation. But concerns about the region’s medium-term prospects remain, with the latest public finances data revealing the borrowing …
26th April 2010
April’s increase in the euro-zone composite PMI provides further hope that the recovery is regaining momentum. But with few signs from the hard data that the region’s heavy reliance on external demand is waning, the outlook remains fragile. … Euro-zone …
22nd April 2010
Greece is in the midst of another hellish week and now faces no choice but to seek to formally activate the European rescue package. While this may help to ease the markets’ frazzled nerves, the latest upward revision to the 2009 budget deficit highlights …
April’s sharp rise in German ZEW investor sentiment provides some hope that the recovery has not ground to a complete halt after the economy’s poor start to the year. … German ZEW Survey …
20th April 2010
Worries are growing that the paralysis of European air travel, caused by the volcanic eruption in Iceland, could have a damaging impact on European recovery prospects. But while there is no doubt that it will hit certain sectors hard, the overall impact …
19th April 2010
Despite the firmer details provided on the Greek rescue package, markets have made it crystal clear that they have deep reservations about the bailout. Before even considering lending on more favourable terms, they want to see euro-zone cash in Greek …
On the face of it, March’s sharp rise in euro-zone CPI inflation may look a little alarming. But with a fundamental lack of inflationary pressure in the economy, deflation rather than a surge in inflation is still the greater danger. … Euro-zone CPI …
16th April 2010
Greek bond yields have continued to surge as doubts remain over whether the euro-zone will actually be able to provide financial support to Greece. But a growing worry is that the ongoing crisis prompts Greek households and firms to remove their money …
15th April 2010
The European Commission’s warnings about Portugal’s budget plans are a timely reminder that the euro-zone’s fiscal crisis extends well beyond Greece. … Portugal warnings underline broader fiscal …
14th April 2010
On the face of it, February’s euro-zone industrial production figures confirm that the sector continues to expand at a healthy pace. But there are several reasons why these figures should be treated with a degree of caution. … Euro-zone Industrial …
Opinions on the broader implications of the Greek rescue package for the future of the euro-zone not surprisingly differ widely. But the conditions that made the bail-out necessary will have a profound effect on the region’s economy over the coming years. …
Last week’s further blow-out in Greek bond yields suggests that any slim chances that Greece had of muddling through its crisis on its own have all but evaporated. Some form of rescue - or at least a much stronger promise of assistance - looks likely to …
12th April 2010
While President Trichet sought to reassure markets today that aid would be provided for Greece if necessary, his call for aggressive fiscal tightening there and elsewhere underlined the prospect of only a very modest economic recovery in the region as a …
8th April 2010
February’s data on German industrial production and euro-zone retail sales put a dent in hopes that, after stagnating in Q4 last year, the euro-zone economy will have expanded strongly again in Q1. … German Industrial Production & Euro-zone Retail Sales …
The news on the euro-zone continues to be dominated by the fiscal crisis in Greece, which has prompted Greek government bond yields and the cost of insuring against default using credit default swaps (CDS) to rise further. These developments are putting …
7th April 2010
The downward revision to Q4’s euro-zone GDP figures is a reminder of the economy’s fragility. Thankfully, March’s final PMI survey brought further evidence that the recovery resumed in Q1. But the coming fiscal squeeze might mean that any improvement will …
Increased domestic spending in Germany would not only assist the euro-zone’s troubled periphery but would also be in Germany’s own interests, helping to reduce unemployment. However, while there are many ways in which the Government could boost domestic …
March’s stronger than expected rise in CPI inflation, combined with the recent depreciation of the euro, may ignite fears that inflationary pressures in the euro-zone are beginning to build. But we continue to think that deflation, rather than a surge in …
5th April 2010
The ECB is unlikely to make any major decisions at its April meeting after taking a big step towards phasing out unconventional policy support in March. While the Bank will argue that measures to support the banking sector are now not needed as much as …
1st April 2010
March’s increase in euro-zone HICP inflation related mainly to energy effects and should be short-lived. Indeed, the further increase in euro-zone unemployment in February was another sign that underlying price pressures are non-existent. … Euro-zone …
31st March 2010
Yesterday’s announcement of a raft of measures aimed to lift the troubled Irish banking sector from its knees, was an important step towards ending the economic slump. But the economy faces other major headwinds too and it will probably remain locked in …
March’s EC business and consumer survey provides some encouragement that, for now, fiscal worries in the region are not weighing too heavily on overall sentiment towards the economy. But the surveys still point to a pretty sluggish recovery. … Euro-zone …
29th March 2010
The latest news on the euro-zone has been mixed. March’s business surveys brought hope that the recovery has not ground completely to a halt and the agreement of a Greek rescue package was a relief. But medium-term prospects have continued to deteriorate, …
Q4’s Irish GDP figures, showing the economy still mired in a deep recession, underline the prolonged and painful adjustments likely to be faced by the euro-zone’s fiscally challenged economies. … Ireland GDP …
25th March 2010
We have revised our forecasts for the euro-zone economy down in response to the escalating fiscal crisis and fading prospects of a consumer recovery. The changes strengthen our view that ECB interest rates are on hold for a prolonged period and that the …
February’s euro-zone money supply figures provided few signs that the ECB’s unlimited provisions of liquidity are prompting much of a pick-up in broad money and bank lending. … Euro-zone Monetary Indicators Monitor …
