German election result in the balance

After a sharp rise in support for the SDP the election result looks set to be very close. Whatever the outcome, economic policy will not change very much, but fiscal policy may be slightly less conservative, and Germany may be more open to European integration, if the Greens have a role in government.
Andrew Kenningham Chief Europe Economist
Continue reading

More from Europe

European Economics Weekly

Rising Covid fears will keep policymakers dovish

It is too early to judge how serious the B.1.1.529 variant will turn out to be, but it certainly reinforces the case for central banks to be ultra-cautious when withdrawing their policy support. We now think that at its next meeting, the ECB will make clear that even if it intends to end net PEPP purchases in March, it stands ready to start them again if needed. That in turn should help to keep bond yields and spreads low. Meanwhile, we are braced for some “shock” inflation numbers next week, but they should mark the peak and inflation is likely to fall quite sharply next year.

26 November 2021

European Economics Update

PEPP not guaranteed to end in March

The account of October’s ECB meeting suggests that it is by no means guaranteed that net PEPP purchases will end in March. And even if they do, the Bank may well leave open the possibility of re-starting PEPP purchases later in 2022 if needed. Meanwhile, we agree with the ECB’s message that investors have got ahead of themselves by pricing in interest rates hikes for next year.

25 November 2021

European Data Response

German Ifo Survey (November)

The fall in the Ifo Business Climate Index (BCI) for November was in line with expectations and suggests that the German economy was struggling even before the recent tightening of Covid restrictions. Things will be much worse in December as coronavirus restrictions are tightened further.

24 November 2021

More from Andrew Kenningham

European Economics Update

What to make of rising inflation expectations

Market-based measures of inflation expectations have risen during the past few months, but they are still consistent with our view that inflation will remain well below target over the medium term. And while firms expect to raise prices in the near future, we think the impact on inflation will be short-lived.

19 August 2021

European Economics Weekly

German election getting complicated

The latest opinion polls suggest that Germany’s election, on 26th September, will be a close-run affair, with many coalition governments still potentially feasible. Whether or not the Greens are part of the government may turn out to be the most important factor for the economy. Next week we expect to learn more about the temporary fall in core euro-zone inflation in July, and to learn that employment rebounded in Q2.

13 August 2021

European Data Response

Euro-zone Industrial Production (June)

The second successive monthly fall in euro-zone industrial production in June was largely due to ongoing supply-chain difficulties in Germany. As these will ease only slowly, we don’t expect industry to contribute much to economic growth in the coming months, even though demand is still red hot.

12 August 2021
↑ Back to top