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The Icelandic Government today presented its long-awaited plan to lift its capital controls after more than six years. While a detailed programme for their removal is a welcome step, the controversial “stability tax” may be challenged in the courts, …
8th June 2015
Denmark’s forthcoming general election appears to be an increasingly close contest. But the consensus between the two major parties on many issues means that the result is unlikely to alter the economic and fiscal outlook to any meaningful extent. … …
5th June 2015
Greece’s decision to emulate Zambia and bundle its June IMF payments has allowed another “make or break” moment to pass without either. But the continued divergences between the country and its creditors have left it very close to the brink. For now we …
Greece’s new plan for “debt management and investment-led growth” is a much-needed attempt to look beyond the completion of the current bailout and find a more permanent resolution to the crisis. But it still relies on over-optimistic growth projections …
The focus on the precise targets for the primary budget surplus in the negotiations between Greece and its creditors overlooks the fact that, unless the economy experiences a miracle, its debt ratio is simply unsustainable without a major write-down. … …
4th June 2015
Italy’s economy looks set to grow again in Q2. But households there will remain under enormous pressure for the foreseeable future, which has implications for the strength of the recovery and support for PM Matteo Renzi’s reform programme. … Italian …
Q1 GDP data confirmed that Finland’s economy is still in the doldrums. While we think that growth will pick up later in the year, Finland is likely to be among the euro-zone’s weakest economies in 2015. … Finland GDP …
Q1 GDP data confirmed that Finland’s economy is still in the doldrums. While we think that growth will pick up later in the year, Finland is likely to be among the euro-zone’s weakest economies in 2015. … Finland GDP (Q1 …
The depreciation of the euro over the past year or so appears to be finally starting to help euro-zone exporters. The latest data show that annual growth in euro-zone export values picked up to 7.3% in March, the fastest pace since late 2012. The …
3rd June 2015
ECB President Mario Draghi gave a dovish message today that the Governing Council remains cautious over the strength of the euro-zone economic recovery and intends to implement its quantitative easing programme in full or extend it. … Draghi sends …
The latest euro-zone unemployment and retail sales data point to a further gradual improvement for consumers at the start of Q2, indicating that household spending is likely to remain a key driver of the region’s economic recovery. … Euro-zone …
The mooted reallocation of unused banking bailout funds could boost the amount of cash provided to Greece in a forthcoming deal with its creditors and hence buy it some valuable additional time. But it would not make up for the probable lack of any …
The latest euro-zone fiscal data showed that most of the peripheral countries made fiscal progress at the start of Q2, after a mixed performance in Q1. But Greece’s position is still looking precarious. … Euro-zone Fiscal Monitor …
2nd June 2015
May’s rise in euro-zone HICP inflation will offer some relief to the ECB, but with underlying price pressures still very weak and the recovery seemingly slowing, strong monetary policy support will be needed for the foreseeable future. … Euro-zone Flash …
Last night’s meeting between Greece’s creditors may have been an important step towards reaching a proposal to release the country’s final bailout payment. But the risk of failure is still high and any deal is unlikely to provide a comprehensive and …
May’s rise in German HICP inflation mainly reflected an anticipated increase in the energy component – underlying price pressures remain very weak even in the euro-zone’s strongest economies. … German Flash CPI …
1st June 2015
Spain’s economy continues to go from strength to strength and could well grow by more than 3% this year. But with the large amount of spare capacity set to keep inflation negative or low, and growing political resistance to additional austerity, Spain …
29th May 2015
April’s euro-zone monetary data suggest that the region’s economic recovery will continue. But the continued lack of an agreement between Greece and its creditors poses a significant risk to the country’s banking sector. … Euro-zone Monetary Indicators …
The slowdown in Swedish GDP growth in Q1 came as little surprise after its sharp rise in Q4. But although the economy is still expanding, the breakdown was less than encouraging. Together with the still-low level of inflation, this suggests that the …
Swiss GDP data for Q1 probably exaggerate the true hit to exports from the appreciation of the franc. But with the currency likely to remain at a very high level, the economy is set to expand only modestly this year. … Swiss GDP …
Swiss GDP data for Q1 probably exaggerate the true hit to exports from the appreciation of the franc. But with the currency likely to remain at a very high level, the economy is set to expand only modestly this year. … Swiss GDP (Q1 …
While no policy changes are in prospect at the ECB Governing Council meeting on 3rd June, markets will be watching closely for President Mario Draghi’s latest thoughts on the effectiveness of the Bank’s quantitative easing programme and the ECB’s role …
28th May 2015
The European Commission’s monthly Business and Consumer survey for May offered some assurance that the modest euro-zone recovery has continued despite the ongoing Greek crisis. … EC Business & Consumer Survey …
The ECB’s exposure to Greece is not huge and ultimately lies with the euro-zone governments that would have to recapitalise it. But a Greek default to the ECB would be a serious blow to the Bank’s credibility that could limit its ability to control …
After saving the day with its pledge to “do whatever it takes” in 2012, the ECB has arguably now brought on a recovery with its quantitative easing programme. But we expect the policy’s effects to fade rather than grow with time. And the Bank is neither …
27th May 2015
Last week’s data gave mixed signals about Germany. On the one hand, the second GDP release showed that Q1’s slowdown belied a strong domestic economy and May’s Ifo survey pointed to a pick-up in growth to come. But on the other, the PMI fell to a level …
22nd May 2015
May’s small fall in the German Ifo business climate indicator left it consistent with pretty strong growth and came as a relief after bigger falls in other surveys. But the decline in businesses’ expectations may warn of a slowdown to come. … German …
The Riksbank’s third round of government bond buying got underway today. But we doubt that the programme will be enough to prevent the krona from appreciating and thereby depressing inflation. … Riksbank policy easing will need to be more …
21st May 2015
The minutes (or “account”) of the ECB’s monetary policy meeting on 14th and 15th April underscored the message already given by Mario Draghi and colleagues, in the press conference after the meeting and in subsequent speeches, that the Governing Council …
May’s flash euro-zone PMI survey echoed the message from other recent business surveys that growth in the currency union appears to have slowed again after the slight pick-up seen earlier in the year. … Euro-zone Flash PMIs …
While a deal to address Greece’s near-term financing needs might soon emerge, this will be merely a stop-gap. The main challenge of finding a lasting solution to Greece’s debt problems lies ahead. … A Greek deal might be coming, but it’s only a …
20th May 2015
On the face of it, the recent drop in German unemployment points to a sharp rise in wages that might make ultra-loose ECB policy difficult to justify. But there is more slack in the labour market than the headline figures imply and we suspect that pay …
Q1’s GDP data showed that the decline in oil prices hit the economy fairly hard. While policymakers have the tools to prevent a more severe downturn, growth is likely to remain slow by past standards. … Norwegian GDP …
Q1’s GDP data showed that the decline in oil prices hit the economy fairly hard. While policymakers have the tools to prevent a more severe downturn, growth is likely to remain slow by past standards. … Norwegian GDP (Q1 …
The ECB Governing Council has a right to be cautiously optimistic about the first ten weeks of QE. But we share its view that this does not mean that QE should end early. On the contrary, we think that it is more likely that the programme will be …
19th May 2015
May’s fall in German ZEW investor sentiment suggests that growing fears over Greece together with the recent rise in bond yields and appreciation of the euro exchange rate have damaged the economic outlook. … German ZEW …
March’s euro-zone trade data suggest that the weakness of the euro has still had little impact on net exports, and therefore provided only modest support to the recovery. … Euro-zone Trade (Mar.) & Consumer Prices …
A public referendum could help to break the current deadlock between Greece and its creditors. But it might only be a short-term solution and much could depend on its precise purpose and phrasing. … Would a referendum end the Greek …
18th May 2015
The Greek crisis has intensified, with last week’s Eurogroup meeting offering little hope of near-term financial support and the Government resorting to reserves held at the IMF to make a loan repayment to the Fund itself. Meanwhile, data for Q1 …
15th May 2015
With a bailout payment still not forthcoming, the Greek Government might have to resort to IOUs to pay public sector workers. While they could serve as a brief stop-gap, they would not solve Greece’s fundamental problems, which require an exit from the …
14th May 2015
Iceland’s healthy economic recovery after its financial collapse in 2008 highlights the attractions of currency depreciation, if necessary accompanied by capital controls. Such a path has its economic costs, but Greek policymakers might consider them a …
13th May 2015
Although Iceland’s central bank left its main interest rates on hold today, it adopted a much more hawkish tone, signalling that it was likely to start hiking rates as early as next month. … Sedlabanki holds, but interest rates to rise …
Q1’s euro-zone GDP figures confirmed that the currency union outgrew both the US and UK in the first quarter. But with signs that the Greek crisis is starting to constrain the recovery, the euro-zone’s outperformance is likely to be short-lived. … …
The renewed fall in Sweden’s headline inflation rate in April suggests that the Riksbank’s policy easing so far has eradicated the threat that deflation becomes entrenched. Accordingly, further measures will be needed. … Swedish Consumer Prices …
12th May 2015
The renewed fall in Sweden’s headline inflation rate in April suggests that the Riksbank’s policy easing so far has not eradicated the threat that deflation becomes entrenched. Accordingly, further measures will be needed. … Swedish Consumer Prices (Apr. …
