Assuming the pandemic comes to a gradual end, a robust recovery of investments, private consumption and exports output should lead to an economic rebound of almost 7.5% in 2021. Unemployment is expected to decrease again next year. However, besides a resurge of the pandemic, any deterioration of the Greek-Turkish relationship could hurt economic performance, especially within the tourism sector (e.g. if Turkey again opens the border for refugees to move on to Greece, or in case of rising military tensions and clashes in the Aegean Sea).
“For single people with low wages, there is little financial incentive to work full time. If they had an additional income of EUR 10 per hour gross, they would see only EUR 2.50 to 3.90 of this in their net income. This is a finding of a study by ifo researchers Andreas Peichl and Maximilian Blömer for the Bertelsmann Stiftung. “The fatal combination of taxes, social security contributions, and the high withdrawal rate of benefits are to blame,” Peichl says. “This error in the system must be corrected. The workforce is shrinking, and soon we’ll need all hands on deck.”
European Views | EU governments need to make sure a significant slice of their recovery funds are spent on solidifying the foundations of the digital economy at a time of sweeping economic transformation. While Finland and Sweden rank first and second in terms of both citizens’ internet use and in digital skills, southern European economies find themselves lagging in relation to their EU peers. Even Germany, Europe’s economic engine, has not realized its full potential in all matters digital.
Morgan Stanley | The negative impact of the dividend restriction will be eliminated once the market sees that it was temporary. The revolution by Pfizer and BiOntech following the announcement of their vaccine’s effectiveness undoubtedly anticipates the return of dividends is closer than ever. We hope the ECB will review the issue at the end of the year so that the payment can be reactivated as of January 2021 (gradually, individually and with estimated average payouts of 20-30%).
José Ramón Díez Guijarro (Bankia) | Three groups of countries have been formed according to the intensity of the recovery: a) countries with V-shaped recoveries (Asian countries such as Korea or China), which will recover lost GDP levels even before the end of this year; b) countries with asymmetric V-shaped recoveries (US, Germany, etc), which will recover pre-pandemic activity levels by the end-2021 or early 2022 ; and c) lagging countries (southern Europe and much of Latin America), which will take at least another year (2023) to recover.
Ghulam Sorwar via The Conversation | Moodys downgraded the UK from Aa3 to Aa2 on the rationale that its heavy reliance on face-face services would mean that economic growth would be worse than expected because of the coronavirus pandemic. The agency’s analysis would have made sense prior to the 2008 financial crisis. It does not make sense in today’s world, with historically low interest rates, long average bond durations and public debt still manageable.
Lagarde couldn’t have been clearer that risks are now tilted to the downside and that the economic recovery was losing momentum. Given today’s meeting, we expect an expansion of PEPP and further policy measures clearly now cannot be ruled out.
Data from the world’s airport industry employers, the Airports Council International (ACI), suggest that 193 airports in Europe, which directly and indirectly account for 277,000 jobs and 12.4 billion euros of activity, are at risk of bankruptcy. In principle, most are regional airports with traffic of less than 5 million passengers per year.
Today the European Central Bank will meet again under pressure by the new wave of Covid-19 contagion in the Eurozone. In addition, latest inflation data have been disappointing. Will it announce new measures at this meeting? will it remain in standby mode?
The S&P move reduces near term risks of Italy falling below investment grade that would have had implications on BTPs holdings by real money accounts and market pricing, somehow challenging the ECB efforts to keep financing conditions under control.