Top Stories

European economy

european banks2

European economy 4th September 2020

The ECB Points The Way Towards Banking Mergers: Profitability To Fall Below 2% This Year vs 12% Demanded By Investors

The European banking sector continues to lose importance as reflected by the fact that both Societe Generale and BBVA will no longer form part of the Euro Stoxx50. Whatsmore, the ECB’s vice-president, Luis de Guindos, has warned of the need for the sector to continue with the merger process. According to de Guindos, this crisis has aggravated problems that already existed before Covid-19. These include high structural costs (commercial networks and staff), high leverage and low profitability. 

Erdogan's referendum victory

European economy 31st August 2020

Turkey: GDP Slumped But Beat Market Expectations

Ali Batuhan Barlas / Adem Ileri / Berk Orkun Isa / Seda Guler Mert / Alvaro Ortiz (BBVA Research) | Turkish economy contracted by -9.9% in yearly terms in 2Q20 (-10.7% Bloomberg, -12.7% Reuters). The quarter-on-quarter contraction was higher at 11%. The growth rates in services and industry, sensitive to the Covid-19 shock, were the key factors behind.

ipc

European economy 22nd August 2020

Euro Area Economic Watch Inflation update: it’s bad already, but it will probably get worse

Rubén Segura-Cayuela (BoAML) | We still expect a top-up of the Pandemic Emergency Purchase Programme (PEPP) by another EUR500bn to stretch until end-2021- probably announced in December. That will be necessary to accommodate the economy. But it will not suffice to tackle long-term inflation dynamics and faltering expectations. More and longer policy support is needed, urgently. 

Mind The European VAT Gap

European economy 19th August 2020

The Four Major Euro Area Countries Account For 80% Of The GDP Decline In 2Q

Philippe Waechter (Natixis IM) | Germany and France account for 23-24% of the deterioration in GDP in the euro area, while Italy and Spain are each responsible for around 15%. The remainder of the euro area accounts for 21%. We note that the weighting of Germany’s contribution is lower than the weighting of its contribution to GDP for the euro area. The opposite is true for France and Spain, and this shows the extent of the turmoil in these two countries, particularly Spain.

europe map

European economy 10th August 2020

Europe’s Labor Measures: Short‑Term Gain, Long‑term Pain?

Tiffany Wilding and Nicola Mai (PIMCO) | European measures applied to mitigate the effects of the pandemic have contained the unemployment rate in Europe more than in the U.S. While recognizing economic risks from the rising number of COVID-19 cases in the U.S., our forecast sees this success ratio reversing before the end of the year.

BoE

European economy 6th August 2020

BoE Policy Unchanged – Negative Rate Debate Rages

David Page, Head of Macro Research at AXA Investment Managers | The BoE left policy unchanged with Bank Rate at 0.1% and Asset Purchase Target at £745bn by unanimous vote. The Monetary Policy Report included projections for GDP to fall by 9.5% in 2020 and rebound by 9% in 2021. CPI was forecast to fall to 0.25% by end-2020, but to recover to 2% by end-2022. The MPC noted considerable uncertainty, but with risks skewed to the downside. The Report presented some discussion around the outlook for negative interest rates, which it confirmed it was “currently considering”.

Sin título 3

European economy 5th August 2020

The ECB’s Firewall Against The COVID-19 Crisis

Caixabank Research |Monetary policy has reacted quickly and decisively to the COVID-19 pandemic. However, having successfully played the role of “fire-fighter”, the ECB will have to remain highly active to support the revival of the economy. In just four months the ECB has increased the size of its balance sheet by more than 1.6 trillion euros (+35%), as much as it did in the entire four years of the global financial crisis and the euro area’s double recession of 2008-2012. It took four years (2008-2012) to do so then.

EU Green Deal: Bold headlines, elusive impact

European economy 4th August 2020

A Green Biased Recovery Fund

Morgan Stanley | The European Recovery Fund will not only benefit peripheral countries but also sustainable activities. In the end, this package will have an even greater green bias than initially expected: 30% of the funds will go towards climate investment compared to 25% in the initial proposal.

ECB Bundesbank

European economy 3rd August 2020

ECB’s Extended No-Dividend Recommendation: A Quid Pro Quo That Could Have Adverse Consequences

The ECB has finally decided to extend from 1 October this year until 1 January 2021 the recommendation to banks to not pay dividends to their shareholders. Nicolas Hardy, Analyst of Financial Institutions at Scope, thinks this measure is positive in the short term, but could be questioned in the long term as EU banks are facing different operating conditions in the wake of the pandemic.