Filtered by Subscriptions: Europe Economics Use setting Europe Economics
January’s industrial production data suggest that Germany and Spain made a reasonable start to 2015, although there are few signs that the drop in the euro exchange rate is prompting a strong recovery. … German & Spanish Industrial Production …
6th March 2015
While ECB President Mario Draghi struck a cautiously optimistic tone today, we doubt that the Bank’s quantitative easing programme will prompt a meaningful economic recovery or eradicate the threat of deflation. Meanwhile, his comments on Greece did …
5th March 2015
Although headline consumer price inflation rose from -0.6% to -0.3% in February, this was driven entirely by a rise in energy prices as oil prices reversed some of their recent falls. Core inflation remained steady at a series low of 0.6% and looks set to …
4th March 2015
The latest euro-zone retail sales data and PMIs provided reassurance that the euro-zone economic recovery continued at the start of the year. … Euro-zone Retail Sales (Jan.) & Final PMIs …
After consolidating their fiscal positions in 2014, the peripheral economies had a mixed start to 2015. Ireland and Italy both fared comparatively well but Portugal and Greece struggled. … Euro-zone Fiscal Monitor …
3rd March 2015
The Swiss economy posted another healthy expansion in Q4, with both net exports and domestic demand continuing to rise. But the franc’s surge since then may well see the economy back in recession before long. … Swiss GDP …
The Swiss economy posted another healthy expansion in Q4, with both net exports and domestic demand continuing to rise. But the franc’s surge since then may well see the economy back in recession before long. … Swiss GDP (Q4 …
February’s continued fall in euro-zone consumer prices and the still-high rate of unemployment in January confirm that the ECB faces an uphill battle against the threat of deflation. … Euro-zone Flash CPI (Feb.) & Unemployment …
2nd March 2015
The markets responded with some relief to last week’s provisional approval by the institutions formerly known as the troika of the proposal advanced by the Greek government for a four-month extension of its bailout. But even if an extension is finalised, …
27th February 2015
February’s energy-related increases in inflation in Germany, Spain and Italy did little to reduce the threat of a prolonged bout of deflation in future. Headline rates remain either extremely low or negative and underlying price pressures are very weak. …
The unexpected surge in Swedish GDP in Q4 confirms that the economy is recovering at a solid pace and reduces the chances of a Japanese-style period of stagnation. But with prices continuing to fall, the Riksbank will still need to do more. … Swedish & …
The ECB is unlikely to announce any new policies after its meeting next week as it prepares to implement the quantitative easing programme unveiled in January. President Draghi will claim that QE is already having a positive impact, even before the bulk …
26th February 2015
January’s euro-zone monetary data showed that credit conditions were healthy at the start of the year, suggesting the ECB’s policy stimulus is already having an effect. … Euro-zone Monetary Indicators Monitor …
February’s EC business and consumer surveys are consistent with slow and steady growth. But even if this can be sustained as the Greek crisis continues, it will do little to erode the spare capacity in the region or to reduce the threat of deflation. … …
The recent sharp drop in the Danish krone back to its central rate against the euro suggests that the Danish Nationalbank has been successful in preserving its currency peg. But the upward pressure on the krone has not disappeared and we think that …
25th February 2015
The recent sharp drop in the Danish krone back to its central rate against the euro suggests that the Danish Nationalbank has been successful in preserving its currency peg. But the upward pressure on the krone has not disappeared and we think that the …
Struggles to implement a foreclosures bill and the associated suspension of the Cypriot bailout highlight that exit risks are not confined to Greece. Admittedly, the risk of a near-term “Cyxit” is relatively low. But if Greece abandons the euro, Cyprus …
24th February 2015
In this Update , we analyse the latest agreement between Greece and the Eurogroup to assess how much ground the two sides have won on the key issues. It is clear that Greece has made huge concessions, which its Parliament might not endorse. And even if …
23rd February 2015
February’s smaller-than-expected rise in the German Ifo index may be an early sign that businesses are worried about the wider effects of the Greek crisis. … German Ifo Survey …
The idea that Greece could introduce a parallel domestic currency to improve its competitiveness while still honouring its international debts is not the solution to the country’s problems. Indeed, if Greece goes down this route, it will effectively have …
20th February 2015
The risk of a Grexit has risen further still this week with the positions of the Eurogroup and the Greek Government seeming to be as far apart as ever. Even if a deal is cobbled together at the latest emergency meeting, it will need to be ratified by …
February’s small rise in the euro-zone composite PMI provided some reassurance that the region’s recovery may have continued in the first quarter of 2015 despite the ongoing crisis in Greece. … Euro-zone Flash PMIs …
The first ever publication of ECB minutes confirmed that support for the new QE programme was not unanimous, suggesting that its scale will remain limited. The account, together with the Bank’s decision on emergency funding for Greek banks, added to signs …
19th February 2015
The French Government’s decision yesterday to force its reform package through the lower house of Parliament showed a welcome political commitment to implement growth-boosting measures. But the bill has already been watered down and does not include more …
18th February 2015
As negotiations over Greece’s bailout stalled last night, the two sides seemed as far apart as ever. A deal still seems possible, but it might require a time-consuming Greek referendum. And in the meantime, the ECB could pull the plug on Greek banks, …
17th February 2015
February’s further improvement in ZEW investor sentiment provided some reassurance that confidence in the German economy is holding up despite the ongoing turmoil in Greece. But this could prove short-lived if Greece and the European authorities fail to …
The unexpected rise in Sweden’s headline inflation rate in January will be welcomed by the Riksbank but with prices still falling on an annual basis, we think the central bank will need to cut the repo rate further and increase its asset purchase …
The latest euro-zone trade data revealed that exporters are still not fully benefiting from the depreciation of the euro. … Euro-zone Trade …
16th February 2015
The failure of the Eurogroup last week to agree even on steps for further discussions on Greece does not bode well for the emergence of a full solution at Monday’s meeting. This could prompt nerves over whether the ECB will cut off emergency funding to …
13th February 2015
Q4’s slight pick-up in euro-zone GDP growth suggests that the benefits of a falling oil price and a weaker euro are offsetting the effects of the Greek crisis for now. But growth is too weak to reduce the threat of deflation and a slowdown may be to come. …
With euro-zone leaders struggling to reach a workable solution to Greece’s debt problems, the chances of a Greek exit from the currency union have risen. In 2012, Capital Economics won the Wolfson Prize for our submission on how an exit might be best …
12th February 2015
December’s disappointing stagnation of euro-zone industrial production confirmed that the region’s economy remains far too weak to ward off the threat of deflation. … Euro-zone Industrial Production …
The Swedish Riksbank today became the latest central bank to respond to the threat of persistent deflation by pushing interest rates into negative territory and launching a quantitative easing programme. We suspect it will have to do more. … Swedish …
Greece’s apparent improvement in competitiveness and recent economic recovery might suggest that it no longer requires a weaker currency and so would have little to gain from leaving the euro-zone. But a weaker currency would help to use up the vast …
11th February 2015
Q4’s solid gain in mainland GDP maintained Norway’s position as the strongest of the Nordic economies. But the ongoing effects of the fall in oil prices are likely to depress growth further over the coming quarters, probably prompting further monetary …
Tomorrow’s meeting of euro-zone finance ministers (the “Eurogroup”) takes place against a background of extreme urgency to meet Greece’s near-term financing needs. While some solution appears possible, it won’t address Greece’s longer-term debt problems. …
10th February 2015
January’s falls in Swiss and Danish CPI inflation into or further into negative territory highlight the need for central banks to do more to prevent their respective currencies appreciating further and tackle the threat of a long and damaging bout of …
The Greek Government may need to resort to capital controls to prevent the flow of deposits from its banks, particularly if the ECB withdraws access to central bank funding altogether. But once the considerable costs of such controls had been borne, it …
9th February 2015
The latest bout of deflation in the euro-zone looks set to last rather longer than the brief period of falling prices seen back in 2009. With vast amounts of slack in the economy and inflation expectations falling, there is a bigger risk that deflation …
The rebound in Turkish industrial production growth to 2.6% y/y in December provides an encouraging sign that the economy may have emerged from its recent slump. But even so, growth over Q4 as a whole was extremely weak. Meanwhile, although Czech …
Several developments last week arguably brought Greece closer to exiting the euro-zone than it has ever been. While the Government appeared to give ground on its demands for debt restructuring, its terms still seem unpalatable to the Troika. And the ECB’s …
6th February 2015
The latest fiscal data suggest that the peripheral economies continued to strengthen their budget positions at the end of last year. But many look set to have missed their 2014 targets and Greece’s fiscal progress may be reversed following Syriza’s …
December’s industrial production data for Germany and Spain show few signs that the export-sensitive areas of the euro-zone economy have yet received a boost from the drop in the euro exchange rate. … German & Spanish Industrial Production …
Euro-zone economic activity has continued to recover despite the troubles in Greece. For now, worries about the crisis seem to have been offset by the benefits of a weaker euro and falling producer and consumer prices. Note, for example, that while the …
5th February 2015
The proposed plan to exchange some of Greece’s current debts for bonds linked to the performance of the economy has some attractions. But we’re not convinced at this stage that it can make a material difference to Greece’s debt outlook. … Can GDP-linked …
3rd February 2015
The Greek banking sector is once again buckling under the weight of substantial deposit outflows and market concerns about the country’s future inside the euro-zone. There is a significant risk that this becomes self-perpetuating, forcing Greece to leave …
