European economy


negative rates2

Deflation, The Greatest Threat For The Eurozone In The Short Term

Philippe Waetcher (Natixis AM) | The low inflation observed in the euro zone will translate into very weak wage dynamics. Demand will be weak while health constraints will weigh on activity. A situation that will not make it possible to fix on medium-term prospects compatible with the recovery plans. Inflation is the answer. The government on this point has more power than the central banks.


Eurozone housing prices

European House Prices Hinge On Managing Support Measures As Growth Moderates

Scope Ratings | Growth in house prices moderated in the second quarter for most European countries. With moratoriums and furloughs running out and unemployment expected to rise, house prices are at a crossroads. Low interest rates continue to support borrowers’ mortgage affordability but a second round of lockdowns leading to increasing business bankruptcies and further unemployment could prompt house prices to contract.



euro digital

The ECB’s Public Consultation On Digital Euro Is Already Underway; Will Negative Rates Increase?

On October 2nd, the European Central Bank published a report on a digital Euro, providing a list of possible reasons for its launch. These include increased demand for electronic payments, decreased use of cash, the launch of global private means of payment, digital currencies issued by foreign central banks or monetary policy considerations. The ECB launched a public consultation last Monday, October 12 and will venture to take a decision on the introduction of a digital Euro by mid-next year.


European banks1

European Banks’s ROE plummets to 0.01% in Q2’20 Vs 6.01% Yr Earlier

Intermoney | The ECB has published devastating data on the Eurozone banks. It revealed a ROE of 0.01% in Q2’20 compared with 6.01% a year earlier; a figure that was negative in the major institutions in 7 of the 19 countries in the euro area. In this context, non-performing loans remained almost stable at €503 Bn, allowing the NPL rate of the large banks in the EMU to fall to 2.94%. This was in a fictious manner, however, as it was thanks to state guarantees and, above all, the moratoriums on loan payments. 


EU recovery fund

A Resurgent Euro: Illusion Or Reality?

In the medium term there are reasons to believe that the euro should appreciate very gradually over the coming year, boosted by the reduction of EMU–US interest rate differentials and the increased demand for euros to acquire the new European asset known as coronabonds.


Oldman

UK: Care Homes Report

As lockdown began, thousands of patients were sent from hospitals into care homes. In three months 18,562 people living in Care Homes died with COVID-19. Our report As if Expendable highlights the UK Government’s failure to protect older people in care homes during the COVID-19 pandemic. Cases of coronavirus are rising again in the build-up to winter, the government must learn lessons from its disastrous decisions and not repeat the same mistakes.


The ECB's decision on interest rates hits the European banking sector

The ECB Links The Dividend Veto To The Default Rate; Santander Urges It To Reconsider

The ECB is focusing on the proactive management of NPLs, linking the dividend policy to the impact of Covid19 on credit quality. Estimates suggest an increase in delinquency rates of up to €1.4 Tr in an adverse macro scenario, equivalent to 5.7% of the capital ratio. At a round table organized last week by the Bundesbank, Banco Santander chairman Ana Patricia Botín argued that the dividend veto is one reason why the banking sector is not sufficiently resilient “in terms of its ability to attract capital.”


ECB

The ECB Could Move Towards An Inflation Model Similar To That Of The Fed

Intermoney | ECB President Christine Lagarde acknowledged yesterday that the central bank would consider formulas to allow inflation to exceed 2%, without being forced to raise rates and suffocate the recovery. Reality, as Lagarde indeed acknowledged, is in keeping with a world in which inflation targets must be transformed. They were designed to avoid upward deviations, but not to deal with prolonged situations of inflation deficit.