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Five years since they were implemented, Iceland still relies on ‘temporary’ capital controls to support its currency. And they are likely to remain in place for some time yet despite the new Government’s calls for them to be abolished quickly. That said, …
28th May 2013
The continued falls in commercial banks’ deposits at the ECB are in part a reflection of an improvement in conditions in the banking sector. But further falls could see liquidity falling to levels which have previously prompted inter-bank interest rates …
27th May 2013
May’s renewed rise in the German Ifo survey and the increase in the GfK consumer confidence indicator for June added to signs that the economy is recovering. But we expect the recovery to be modest. … German Ifo (May), Consumer Conf. (Jun) & Final GDP …
24th May 2013
May’s euro-zone PMI survey adds to the recent run of slightly more encouraging news from the region, but there is little sign that the region is about to emerge from recession. … Euro-zone Flash PMIs …
23rd May 2013
At face value, the ongoing improvement in the euro-zone’s current account position, which has been to a large part down to developments in the peripheral economies, is a sign that the structural reform process is reaping results. But we are not convinced. …
22nd May 2013
We doubt that the recent equity market rally, combined with the ongoing downward trend in CPI inflation, will prompt a sustained recovery in euro-zone household spending. Indeed, in the periphery, further sharp falls in consumer spending seem inevitable. …
21st May 2013
The news that some wealthy French households were taxed over 100% of their income last year has added to criticism of President François Hollande’s policies. But the bigger point is that rising unemployment and continued austerity are hitting average …
20th May 2013
The improvement in market sentiment towards the euro-zone has not been matched by a material change in the troubled countries’ economic and fiscal outlooks. As such, the crisis is not over. … Is the euro-zone crisis really …
The euro-zone’s Q1 GDP release made very grim reading. At least continued economic weakness will keep the pressure on the region’s policymakers to do more. But fiscal leniency has so far been very limited. And the latest comments from German Finance …
This Update addresses the question of whether monetary policy is now too loose for Germany and, if so, what can be done about it? While there are various policies that could be adopted at the national level to prevent overheating, we do not consider this …
16th May 2013
While March’s euro-zone trade data are certainly encouraging, we remain sceptical that the sector can single-handedly drag the euro-zone and, in particular, the peripheral economies out of recession. … Euro-zone Trade (Mar.) & Final CPI …
The mainland Norwegian economy picked-up strongly in Q1, suggesting that Q4’s slowdown was an outlier. But we still expect the economy to slow later in the year as the euro-zone crisis intensifies and households reduce their borrowing. … Norwegian GDP …
The Q1 estimate of Greek GDP and the credit rating upgrade by Fitch suggests that the economy may finally be turning a corner. But we still think that the economic forecasts underpinning the rescue package are too optimistic, implying that doubts about …
15th May 2013
Q1’s flash euro-zone GDP estimate confirmed that while the euro-zone economy performed rather better in Q1 than Q4, it remained in recession. … Euro-zone GDP …
As a result of ultra-loose monetary policy in major economies, central banks in smaller countries such as Switzerland, Sweden, Norway and Denmark are struggling to deal with both rising private debt levels and strong currencies at the same time. This …
14th May 2013
May’s German ZEW survey and March’s euro-zone industrial production numbers made encouraging reading, but do not alter our view that the euro-zone remains in recession. … German ZEW Survey (May) & Euro-zone Industrial Prod. …
This Update summarises views expressed by Capital Economics’ Jennifer McKeown in a panel discussion at the Euromoney “Germany Conference” in Berlin on 24th and 25th April. … Germany's role in a solution to the euro-zone debt …
13th May 2013
March’s national industrial production figures suggest that the sector gained momentum over the course of Q1. But we suspect that the revival could soon fizzle out. After all, domestic growth prospects remain weak. And given the strength of the euro and …
The growing likelihood of a grand coalition government after September’s election suggests that Germany’s tough stance on the euro-zone periphery might soften somewhat. However, none of the main parties seems to be contemplating a fiscal boost at home … …
9th May 2013
The Norges Bank left interest rates unchanged today as concerns about rising household debt once again outweighed the need to weaken the currency and boost inflation. But our expectation for the euro-zone crisis to intensify, combined with the Bank’s …
8th May 2013
March’s German industrial production figures suggest that the sector has gained momentum over the quarter, but a sustained and robust recovery still seems unlikely. … German Industrial Production …
The ECB appears to have concluded that it can limit the adverse side-effects of imposing negative interest rates on commercial banks’ deposits. But even if this is the case, negative rates are not going to transform the economic outlook and potentially …
A recent ECB survey suggested that German households are much less wealthy than those in the eurozone’s south and periphery. There are several reasons why this is untrue. But unfavourable coverage in the German press could still increase resistance to …
7th May 2013
March’s French industrial production and trade data suggest that the economic situation is not quite as bad as the surveys might have you believe. Nonetheless, it seems very likely that France officially re-entered recession in Q1. … French Industrial …
The recent run of weak economic data prompted the ECB to cut its policy rate last week. But as inflation itself continues to fall, pressure on the ECB to loosen monetary policy further is likely to intensify. The Bank’s next move looks most likely to be …
6th May 2013
The ECB’s widely anticipated interest rate cut should provide troubled banks in the region’s periphery with some much-needed support. But it will not be enough to drag the euro-zone out of recession on its own and bolder plans to boost lending to SMEs …
2nd May 2013
Due to Norway’s much-lauded fiscal rules, the recent fall in oil prices will have little impact on the economy’s bright near-term outlook. Nonetheless, Norway’s growing dependence on hydrocarbons highlights an increasingly unsustainable long-term growth …
Deflationary pressures in the euro-zone economy are continuing to intensify. While April’s drop in CPI inflation to just 1.2% was partly down to energy and Easter timing effects, underlying price pressures are clearly fading in response to the ongoing …
1st May 2013
In 2012, most of the peripheral economies made decent inroads into their budget deficits. But the fiscal consolidation process is far from over. … Euro-zone Fiscal Monitor …
30th April 2013
April’s drop in euro-zone inflation and the further rise in unemployment in March have added to the pressure on the ECB to provide more policy support. … Euro-zone Flash CPI (Apr.) & Unemployment …
If the peripheral euro-zone economies regained competitiveness via outright deflation, their public and private sector debt levels would spiral higher as a share of GDP, prompting disaster. … Would deflation lead the periphery into a debt …
The formation of a grand coalition government in Italy is clearly a step forward, but we doubt that this marks a period of lasting political stability. In addition, despite calls from Prime Minister Letta for Europe to re-examine fiscal targets, a …
29th April 2013
April’s EC consumer and business survey supports other evidence that the euro-zone economy could contract again in Q2, marking the region’s longest ever recession. … Euro-zone EC Survey …
Hopes that euro-zone policymakers are set to sanction a reduction in the pace of fiscal tightening across the region rose further last week after EC President Jose Manuel Barroso suggested that the austerity-driven policy response to the region’s crisis …
The latest euro-zone monetary data showed little sign of an improvement in financial market conditions or a pick-up in provision of credit to the private sector. … Euro-zone Monetary Indicators Monitor (Mar. …
26th April 2013
Household spending in Denmark has barely recovered since its housing bubble burst in 2007 and there appears little respite ahead for households. With rising debt now fuelling housing booms in Sweden and Norway, Denmark offers a sobering insight into what …
25th April 2013
Having stated following its last meeting that it stood ready to act, it would be a big disappointment if the ECB did nothing at the forthcoming meeting on May 2nd. On balance, we think that an interest rate cut is marginally more likely than not, but it …
April’s fall in the German Ifo business climate indicator will add to concerns that the recovery there is starting to falter. … German Ifo Survey …
24th April 2013
April’s euro-zone PMI survey provided another clear sign that a sustained economic recovery in the region is still some way off. … Euro-zone Flash PMIs …
23rd April 2013
The re-election of President Napolitano suggests that Italy could soon have a new government in place. But an end to the political deadlock will not resolve Italy’s deep economic problems. … Italy’s problems are far from …
22nd April 2013
The news that the euro-zone budget deficit shrank again last year will be hailed as evidence by some that austerity is working. But the fact that most economies’ deficits have fallen by less than expected and that the consolidation has coincided with …
February’s record-breaking euro-zone trade surplus of €12bn suggests that the external sector provided the wider economy with a boost in Q1. But we doubt that the sector is about to kick start an economic recovery. After all, much of the increase in the …
We have previously warned that Belgium shares several characteristics with peripheral economies, such as high public debt, banking problems and falling competitiveness. But the economy also enjoys several strengths which, combined with easing banking …
18th April 2013
The Swedish Riksbank’s decision to leave interest rates unchanged at 1.0% was no surprise given the recent run of encouraging economic data. But while the chances of an imminent cut have perhaps receded, we still think that the Riksbank will probably …
17th April 2013
The Portuguese Government’s proposed new spending cuts should allow it to receive the next tranche of its bail-out loan and have its previous loans extended. But while this would provide some much-needed breathing space, we suspect that a second bail-out …
16th April 2013
April’s fall in the German ZEW index highlighted investors’ fears that the German recovery will falter amid continued concerns about the euro-zone’s periphery. … German ZEW Survey (Apr.) & Euro-zone Final CPI …
