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European economy

Hungaryok

European economy 24th November 2020

Hungary-High Debt Levels Remain A Major Weakness In The Mid-Term

Crédito y Caución (Atradius) | Hungary’s current account turned to a deficit in 2019, due to rising disposable income and import-intensive investment. The deficit will increase in 2020 to 1.8% of GDP, mainly due to export deterioration. External debt is very high and increasing to about 100% of GDP in 2021, with the share of inter-company lending amounting to 37%. A large share of external debt is foreign currency-denominated, and a sharp forint depreciation would hurt many Hungarian households and businesses whose loans are denominated in foreign currencies. The forint remains vulnerable to international investors’ sentiment due to the elevated external and public debt levels and a suboptimal institutional and policy environment. However, strong GDP growth in the coming years should continue to support the exchange rate.

UK

European economy 20th November 2020

UK-Spend, spend, spend

In the UK, the fiscal party continues. The government announced £12bn of funding for green initiatives this week and £16.5bn in additional defence spending. The government also published its latest public sector finances. For the fiscal year so far, the net borrowing requirement is £215bn, a staggering £169bn more than in the same period last year. The level of net public sector debt exceeded $2trn last month and stands at 100.8% of GDP, a level not seen since the 1960s.

Greece is meeting fiscal targets and concludes program reviews on time

European economy 19th November 2020

A Rebound Is Expected For The Greek Economy, But Downside Risks Remain

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).

Germany labour market

European economy 18th November 2020

ifo Institute: Low Earners in Germany Have Too Little Incentive to Work

“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.”

Europe Digital Agenda

European economy 15th November 2020

Facing a Second Wave of Lockdowns, Is The EU Ready To Build A Fully Digital Economy?

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.

ECB's president Christine Lagarde

European economy 13th November 2020

The Resumption Of Banking Sector Dividends, Increasingly Closer

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%).

recovery multi speed

European economy 10th November 2020

A Multi-Speed Recovery With Significant Consequences

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.

city of london

European economy 31st October 2020

Why Sovereign Credit Downgrades No Longer Matter As Much As They Used To

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.