ZURICH | UBS analysts | We review some of the key Eurozone developments of 2014, and look ahead to 2015 and beyond. Eurozone growth has disappointed in 2014, mainly due to Germany, France and Italy. Economic performance over the coming months is likely to remain subdued, given various risk factors, which are likely to weigh on sentiment.
MADRID | By Ana Fuentes | The possibility that leftist party SYRIZA wins next Greece’s elections on January 25th is hitting the European markets since this may involve a new kind of arrangement with Brussels about the country’s bailout and the precautionary line. According to Greek journalist at Macropolis, Nick Malkoutzis, “if the party offers structural reforms that would clean up Greek politics, improve tax collection and make the public administration more efficient, the Eurozone might be prepared to listen to what SYRIZA has to say”.
MADRID | The Corner | Greece’s prime minister failed to get his presidential candidate confirmed, which will lead to an early parliamentary election that could end the nation’s international lifeline. It was important that the Greek government reached an agreement to appoint a new PM. However, the third and decisive time only gave 168 votes to Antonis Samaras, the same as in the previous round. This means that there will be early elections and the possibility of Syriza reaching the government is even closer.
By Franceso Saraceno | Where [President of CESifo Group Hans-Werner Sinn and I] disagree is on how to trigger the demand-driven boom. Mr Sinn expects this to happen thanks to market mechanisms, just because of the reversal of capital flows that the crisis triggered. He argues that the capital which foolishly left Germany to be invested in peripheral countries, being repatriated would trigger an investment and property boom in Germany, that would reduce German’s current account surplus. This and this alone would be needed. Not a policy of wage increases, useless, nor a fiscal expansion even more useless. Problem is, the data speak against Mr Sinn’s belief. Since the crisis hit, capital massively left peripheral countries, and yet this did not fuel domestic demand in Germany.
MADRID | By Fernando Barciela | Last year, according to the World Investment Report 2014 by the UNCTAD, Spain received more foreign direct investment (FDI) than countries as the United Kingdom, Germany or Holland: up to $39,167 billion (52.4% more than in 2012). Who are boosting the investment activity? The so-called vulture funds are the ones that first noticed Spain’s “possibilities”: Lone Star, Cerberus, Burlington, GreenOak, Colony, Fortress or H.I.G –most of them North Americans.
BERLIN | By Alberto Lozano | The German economy has gone from growing at 0.8% q-o-q earlier this year to being on the verge of recession as a result of the geopolitical situation, especially after the sanctions against Russia. Only now in December the country seems to recover its confidence. However, an expected GDP growth of around 1% in 2015 continues to be insufficient to spur growth in the Eurozone.
MADRID | The Corner | Germany seems finally willing to boost its domestic demand. Real wages rose by 1.8% in 3Q (3T2014) compared to the same period from 2013, its largest rise in over three years, according to official data. An increase in wages along with penalized savings should result in more consumption.
MADRID | By JP Marín Arrese | Once again, Greece has ignited the flame of instability in the Eurozone. The prospect of early elections coupled with the left-wing party´s scores in the polls has resulted in severe shock-waves hitting other South-Med countries. The promised debt default by the better placed candidate in this race stands as a formidable threat to Europe. What happens in this relatively small country is bound to hit all of us. Confidence in sovereigns will dramatically fall while financials will also bear the brunt.
ATHENS | By Yiannis Mouzakis via MacroPolis | With the coalition in Greece getting only 160 votes for its presidential candidate in the first ballot, falling short even of the most conservative estimate, based on the currently available information it seems that the number of deputies that will vote in favour in the third round on December 29th will not reach the minimum 180 required.
BERLIN | By Alberto Lozano | The different measures implemented in Europe in order to boost growth through increased monetary action, investment and structural reforms have replaced austerity as the new dominant dogma. While Angela Merkel is adapting to the new situation, Bundesbank president Jens Weidmann disagrees with more budget flexibility and a possible QE by the ECB in 2015. (Cartoon: Horsch / La Repubblica).