Fiscal shackles loosen but little stimulus in sight

Euro-zone member states appear to have put their public finances largely in order now, with the European Commission deeming this week that even Greece has made sufficient progress to become compliant with European fiscal rules. However, while fiscal policy is no longer a drag on euro-zone GDP growth, we do not think that it will provide a substantial boost either. Most member states still have limited room for fiscal manoeuvre, while the likes of Germany remain reluctant to loosen the purse strings meaningfully. As such, the onus will remain on monetary policy to support the region’s economic recovery.