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Q2’s GDP figures showed that the Norwegian economy expanded at a steady pace and added to evidence that it is less likely to suffer from a “double dip” than some of its European counterparts. Looking ahead though, we expect the Norges Bank to tread …
24th August 2011
23rd August 2011
The dispute over the provision of collateral by Greece to some euro-zone economies in return for a second bail-out, coupled with the private sector’s reluctance to take part in a debt exchange, may not reignite the funding crisis in the near-term. But it …
Signs last week that European policymakers remain unwilling to take major steps towards fiscal union, coupled with very weak economic data and a renewed slump in equity prices, did nothing to alter our view that the debt crisis is set to intensify. … …
There have recently been signs that Ireland’s troubles may be starting to ease, but we still think that it faces a huge challenge to return its public finances to a stable footing. Accordingly, there remains a high chance that Ireland will eventually seek …
19th August 2011
Decisive steps towards greater fiscal integration across the euro-zone seem vital if the currency union is going to hold together in its current form. But recent comments from Angela Merkel and Nicolas Sarkozy suggest that policymakers are either …
18th August 2011
The Icelandic central bank’s surprise interest rate hike today was in stark contrast to the increasingly dovish tone of other central banks around the world. The move reflected a sharp increase in inflation related to the weakness of the krona. But as the …
Germany’s reluctance or political inability to implement stronger measures to support the euro-zone’s periphery suggests that its appetite for the project might be fading. While euro-zone membership has significant advantages for Germany, it might not be …
17th August 2011
Market pressure on Portugal has eased over the past weeks. But we remain sceptical that the ECB’s bond purchases and the agreement reached by euro-zone policymakers last month can be a lasting solution. And given Portugal’s fiscal outlook, we still think …
Q2’s euro-zone GDP figures revealed that the recovery has slowed dramatically. With even the previously healthy core economies now barely expanding, we maintain our far below consensus forecast that euro-zone GDP will rise by only 0.5% next year. … …
Last week saw markets respond fairly positively to the ECB’s bond purchases and Spanish and Italian bond yields fell sharply from dangerously high levels. At the same time, though, France has been dragged into the crisis, with worries about the effect of …
16th August 2011
June’s euro-zone industrial production data and Q2’s French GDP figures provide further strong indications that economic growth in the region as a whole slowed sharply in Q2. … Euro-zone Industrial Prod. (Jun.) & French & Greek GDP …
13th August 2011
The Swiss National Bank has not exhausted all options to stem the franc’s appreciation and might yet try capital controls or direct intervention in currency markets. But internationally co-ordinated intervention would probably be necessary to make a real …
12th August 2011
11th August 2011
The ongoing case in the German Constitutional Court against providing financial support for Greece is unlikely to lead to an outright ban on bail-outs. But the court could insist that Germany is heavily involved in any future decisions, potentially …
The recent plunge in equity markets may not necessarily have severe negative consequences for euro-zone growth. But when combined with the region’s other problems it supports our long-held bearish view that the recovery may soon grind to a halt and that …
Growing concerns about France’s fiscal position have underlined the breadth of the euro-zone’s debt crisis. While a default seems unlikely at this stage, merely a credit rating downgrade would significantly hamper policymakers’ ability to provide crucial …
10th August 2011
On the face of it, the response of the Italian Government to the recent market mayhem appears pretty impressive. But we are sceptical as to whether the Government can deliver on its promises. … Italy’s fiscal measures will need to be seen to be …
The ECB’s purchases of Italian and Spanish Government bonds have drawn a very positive initial response in the markets. But there are some good reasons to doubt that it will be sustained. … ECB purchases may have little lasting …
9th August 2011
Prior to the announcement of the second rescue package for Greece, we noted that anything other than a very decisive response by European policymakers could prompt Italy and Spain to be dragged deeper into the crisis, with catastrophic consequences. But …
The latest activity data from the euro-zone support our view that the recovery in the region as a whole is slowing sharply and cast further doubt on whether the likes of Italy and Spain can meet their budget deficit goals for this year and beyond. … …
6th August 2011
The ECB was bolder than expected today, upping its support for the banking sector and embarking on a new bout of bond purchases to help the peripheral economies. The Bank claimed that these measures should not be seen as a guide to the future path of …
5th August 2011
June’s rise in euro-zone retail sales does little to alter our view that consumers remain badly placed to offset the slowdown in other sectors of the economy. … Euro-zone Retail Sales (Jun.) & Final Comp. PMI …
4th August 2011
The past month has brought the firmest signs yet that the euro-zone economic slowdown is spreading from the region’s periphery to the northern “core”. July’s decline in the German Composite PMI was sharper than the euro-zone average, leaving it consistent …
Hopes that the latest Greek rescue package would limit contagion effects on Italy and Spain have already faded. But we still think that markets are too sanguine about growth prospects for both economies and that one or both may eventually default. … What …
The Swiss National Bank’s decision to cut interest rates to almost zero and embark on a renewed bout of quantitative easing to stem the franc’s appreciation looks pretty bold. But we still think that the Bank will be unable to fight the strong upward …
3rd August 2011
The continued slowdown in producer price inflation, combined with July’s unexpected fall in headline consumer price inflation, supports our view that the ECB will probably keep interest rates on hold for a prolonged period of time. … Euro-zone Producer …
The new details on the second rescue package for Greece that have emerged over the past week or so have not altered our view that Greece’s outstanding debt burden remains unsustainably high. A second, larger debt restructuring further down the line is …
2nd August 2011
It is becoming increasingly clear that some of the peripheral economies will struggle to meet their budget deficit targets this year. And the new Greek package, like its predecessors, is unlikely to prevent the debt crisis from spreading. … Euro-zone …
June’s euro-zone unemployment figures provide further evidence that the labour market is starting to weaken in response to the slowdown in the wider economy. … Euro-zone Unemployment (Jun.) & Manu. PMI (Final, …
Data last week brought perhaps the firmest signs yet that the slowdown in euro-zone economic activity has spread to the region’s core. With exports weakening in response to slowing world demand and consumers’ real incomes growth remaining subdued, hopes …
Q2’s flash Belgian GDP figure, the first release from a euro-zone economy, revealed that the economy expanded at a pretty strong pace. But this does little to change our view that growth in the euro-zone as a whole is likely to have slowed sharply in Q2. …
30th July 2011
July’s euro-zone flash consumer prices figures came as something of a pleasant surprise and provide some support for our view that the ECB may not raise interest rates again over the coming months. … Euro-zone Flash CPI …
Q2’s GDP figures confirm that Sweden continues to expand at breakneck speed. Although growth will ease in the second half of the year, Sweden will remain one of Europe’s top performers. … Swedish GDP …
Q2’s GDP figures confirm that Sweden continues to expand at breakneck speed. Although growth will ease in the second half of the year, Sweden will remain one of Europe’s top performers. … Swedish GDP (Q2 …
29th July 2011
At August’s press conference, the ECB is likely to keep its options open over the likely near-term path of interest rates. But given the further decline in business and consumer sentiment and growing concerns about Italy and Spain in the markets, we would …
July’s fall in euro-zone economic sentiment adds to the evidence of a broad-based economic slowdown. The decline in the economy-wide Economic Sentiment Indicator (ESI), from 105.1 to 103.2, was sharper than the consensus forecast of a fall to 104.0 and …
The latest ECB Bank lending survey suggests that conditions in the euro-zone banking sector remain far from normal, supporting our view that domestic demand in the region as a whole will struggle to pick up the slack from the flagging external sector. … …
July’s rise in German CPI inflation appears to have been driven by energy prices. Underlying price pressures remain subdued and with the economic recovery already slowing, there is little risk of a sharp rise in core inflation in future. … German Flash …
28th July 2011
The latest rescue package for Greece has reduced the threat of a near-term catastrophe in the eurozone.But it does not address the fundamental problems facing Greece itself and is unlikely to bring an end to the recent signs of contagion to bigger …
27th July 2011
The positive market reaction to the Greek rescue package is not without some justification. After all, following the dithering and disagreement of recent months, it would not have been a shock if Thursday’s meeting had produced precisely nothing. … Back …
26th July 2011
July’s drop in the German Ifo index was another sign that the recovery in the eurozone’s largest and strongest economy is faltering. … German Ifo Survey …
23rd July 2011
The sharp fall in the flash euro-zone PMI in July provides further signs that slowing export growth and the debt crisis is starting to take a heavy toll on the region’s economic recovery both in the core and the periphery. … Euro-zone Flash PMIs …
22nd July 2011
News that a bank levy may be used to help fund Greece’s second rescue package suggests that eurozone policymakers are more concerned about appeasing taxpayers than adopting bold and decisive measures to try and get a grip on the region’s growing debt …
21st July 2011
This week’s crucial summit could provide the last chance for euro-zone policymakers to get a grip on the region’s debt crisis. Anything other than a very decisive response which could be applied not just to Greece but also to Spain and Italy could see the …
20th July 2011
July’s drop in German ZEW investor sentiment highlights fears that the peripheral crisis could soon do some serious damage to the German economy. … German ZEW Survey …
A loss of confidence in the banking system of a euro member country could potentially result in all of that country’s bank liabilities effectively ending up as the liabilities of the ECB. The sheer scale of the sums involved could overwhelm the euro …
19th July 2011
Having pledged to agree on a new rescue package for Greece last week, euro-zone policymakers managed only another vague statement pledging their commitment to “safeguard financial stability” in the region. This would be bad enough if Greece were the only …
