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In Europe

ECB Eurosystem

European economy 7th September 2020

After Jackson Hole, Comes The Week Of The ECB

On Thursday September 10, the ECB will meet and present its updated macroeconomic table, which will give us a better idea of its expectations regarding the pace of economic recovery (the August PMIs showed signs of weakness after the strong rebound from the April lows). The central bank will also update its view on current and future inflation levels with data once again showing very contained prices and in a context where the Fed is willing to tolerate inflation above 2% to obtain this figure as an average.

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. 

Brexit endgame

European politics 2nd September 2020

Negotiating The End Of Brexit

John Bruton | It is increasingly likely that, unless things change, on January 1, 2021, we will have a no-deal Brexit. That would mean the only deal between the European Union and the United Kingdom would be the already ratified EU withdrawal agreement of 2019. Both Ireland and the European Union need their best team on the pitch as Brexit approaches the endgame.

EU Next Generation

European politics 2nd September 2020

SURE May Be Ready, But Next Generation EU May Make Noise Before Helping

The EU’s SURE programme, providing loans to help finance short-time work (even retrospectively) is in high demand. The recovery fund “Next Generation EU” was the big deal this summer. But more complicated news may be next, points BoA Global Research. Technical details and national approval processes are not completed and could be the source of less reassuring headlines, explains the firm.

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”.