Intermoney | Days ago, Helge Braun, a close associate of Angela Merkel, proposed reforming Germany’s constitutional limit on public debt. This is an issue facing great resistance within key sectors of the CDU/CSU, making it difficult for it to go beyond the status of a mere proposal, but whose mere proposal represents a turning point. This debate will gain momentum after the September elections.
Gilles Moec (AXA Group Chief Economist) | In Rimini in August 2020, Mario Draghi gave a speech which in retrospect could well define his action. Draghi called for a reform of the European economic framework. This will be crucial for Italy, and hence for the fate of the whole monetary union. A structural reform platform primed by public spending will need time to prove itself to the markets. The fiscal surveillance system needs to evolve. As President of the ECB, Draghi did wonders thanks to Angela Merkel’s silent support (her refusal to criticize him for his unorthodox monetary policy). As, potentially, head of government of the Euro area’s third largest economy, he will have to get explicit support for a new framework.
CaixaBank Research (Álvaro Leandro | What consequences the agreement for the UK exit from the EU will end up having remains to be seen and will depend on how trade and foreign investment between the UK and Europe evolve, as well as London’s prevalence as an international financial hub. In Europe, the impact will be mixed across the different economies, depending on their trade and financial links with the United Kingdom.
Over the weekend, Mario Draghi has managed to obtain a broad majority to form a new coalition government in Italy after winning the support of the Five Star Movement and the ultra-right-wing League. His nomination is a try to turn the country around the virus-induced crisis, since he is a widely respected figure for his important role during the European debt crisis. The yield of the Italian 10-year bond fell last week -11 bps to 0.53% on the expectation of greater political stability in the country (vs. a high of 0.75% this year).
Nick Ottens (Atlantic Sentinel) | If the coronavirus pandemic is giving Europeans doubts about the EU, it isn’t showing up in support for Euroskeptic parties. Germany‘s ruling Christian Democrats are up from 33 to 35-37 percent in the polls. The far-right Alternative for Germany is at 9-10 percent, down from 13 percent in the last election. There is no chance it will end up in government. In Austria, the conservatives have swapped the far-right Freedom Party for the Greens in the ruling coalition. The Freedom Party is polling at 12-16 percent, far below their peak of 26 percent support in 2017. Mark Rutte is on track to win reelection in the Netherlands. The far-right Forum for Democracy, which narrowly bested Rutte’s liberal party in midterm elections in 2019, has imploded. In France…
Lidia Conde | Over the weekend in Germany, the CDU elected Angela Merkel’s replacement as head of the party. They bet on continuity with the election of the moderate Armin Laschet. For the first time in Germany’s history, the person who occupies the chancellor’s office is leaving voluntarily. And she does so with the respect and recognition of her opponents and successors, both in the CDU and in the government.
Ali Batuhan Barlas (BBVA Research) | Industrial Production (IP) grew by 11% yoy in cal. adj. terms in November, confirming a growth level in the first 2 months of 4Q20 (9%) similar to the strong 3Q20 performance (8.5%). We expect GDP growth to materialize near 5% in 2021, benefiting from a sizable contribution from external demand
European Views | Tensions over agricultural policy have been building steadily since November, when Frans Timmermans, the Vice-President of the EC, and one of the leading figures in the European Green Deal, questioned whether the €258.3 billion (in constant prices) budgeted for the European Agricultural Guarantee Fund (EAGF) and €90 billion for the European Agricultural Fund for Rural Development (EAFRD) were fully compliant with the European Green Deal and EU climate targets as they stood.
After seven years of negotiations, the EU and China announced the trade agreement that will seek to boost new and lucrative opportunities for companies on both sides. The deal is the most ambitious China has ever reached with a third economic bloc in terms of market access, fair competition, and sustainable development, said EU Trade Commissioner Valdis Dombrovskis.
Nick Ottens (Atlantic Sentinel) | I haven’t read the 1,246 pages of the EU-UK trade agreement, so I’m going to rely on trusted sources to make sense of the accord. For example, David Allen Green of the Financial Times argues the trade agreement leaves much unchanged. The Joint Partnership Council, alternating between Brussels and London, will be able to make binding decisions without the involvement of lawmakers. So much for UK “independence”.