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European economy 22nd July 2020

A Lot of Light And Some Shadow In The First European Debt Mutualisation Device

For the first time in its history, the European Union will take on debt to finance an extraordinary economic stimulus composed of 390 billion euros in grants and 360 billion in loans.It has finally managed to put together a European instrument for sharing debt. Equally important, the plan sends a signal to markets that the EU remains united in response to existential threats. However, the price for achieving the agreement has been high: maintaining the rebate cheques, renouncing of strict control as far as respecting the rule of law mechanism in the management of EU funds, increased conditionality and the fact the fund cannot work completely without ECB’s support.

European integration: the next five years... and the following decades

European politics 21st July 2020

The EU Makes History: Takes The Clearest Step Towards Integration And Cooperation In years

After more than four days of arguing, European leaders agreed on a historic European Recovery Fund worth €750 Bn, that will be split between €390 Bn in grants and €360 Bn in loans. This split represents a 52%/48% compromise for the Frugal Four versus the initial proposal of two thirds of the Fund being disbursed as grants. This is the analysis of Esty Dwek, Head of Global Market Strategies at Natixis IM Solutions, on the agreement reached at the European Summit.

European politics 20th July 2020

EU Leaders One Step Closer To Agreeing On Recovery Fund

Monex Europe | The euro found support in anonymous reports this morning that the frugal four countries are now satisfied with €390bn of the fund coming in the form of grants. The initial proposal included a total of €500bn to be allocated in grants, but the leaders failed to find a compromise on the overall size over the weekend. The talks will resume at 4pm CEST today.

The FAANG companies are moving Wall Street

European politics 20th July 2020

The Ruling In Favour Of Apple Undermines A Mechanism For Cleaning Up The EU’s Public Accounts

Intermoney | The European justice ruled last week in favour of Apple over Ireland’s advantageous tax treatment. In 2016, the Competition Commissioner Margrethe Vestager considered that Ireland’s tax treatment applied to Apple was irregular and distorting competition in the single market. Now, in an appealable judgment to the EU Court of Justice, Brussels is considered as not having been able to properly argue that reasoning.

Smartphone against illuminated financial district in the city with the concept of 5g communications technology 2 720x480

European economy 18th July 2020

Across Europe, Imaginary 5G Threats Create Real-World Headaches

European News | All of a sudden, a raft of new sensational stories emerged: 5G is responsible for causing COVID-19; 5G is spreading the virus at lightning speeds; 5G is a front for a global ploy to inject us all with a “vaccine” designed to track our movements. Such speculation borders on the absurd, but its consequences are no laughing matter. Since January, there have been over 140 attacks on telecoms infrastructure across 10 European countries, with 87 incidents taking place in the UK alone.

European politics 17th July 2020

EU Pushes For Renewable Hydrogen To Reach Climate Neutrality By 2050

On 8th July, the EU announced its hydrogen strategy as a priority within the Green Recovery Plan. Clean hydrogen will be a key tool for cutting greenhouse gas emissions in sectors that are highly dependent on fossil fuels. The European Commission aims to achieve 40GW of renewable hydrogen capacity by 2030, which is an ambitious target as it represents 2.7 times the estimated global capacity in that period. Even so, it is only 5% of the global capacity that would be needed to achieve the Paris agreement objectives.

European economy 16th July 2020

How To Make The Most Of The European Recovery Fund

Morgan Stanley | For the time being, the Fund is still only a proposal and there remains a wide divergence of views about the amount, duration, allocation, grants/loans etc. We assume that the final outcome will be in line with the Commission’s proposal: €750 Bn in joint issuance (500 Bn in grants and 250 Bn in loans). As regards to the use of the funds, the optimal scenario would be one where spending is applied via investment since it has a higher fiscal multiplier (vs for example a corporate tax cut or transfers).

European economy 15th July 2020

Europe Is Gaining Ground: Eurozone’s Activity Reaches 92% Of Pre-Crisis Level; The US Stagnates At 67%

David Kohl (Chief Economist Germany, Julius Baer) | Lower new infection rates in Europe and a swifter recovery of activity are valid reasons to scale back some pessimism regarding the eurozone growth outlook. The eurozone has ramped up its fiscal response to the corona pandemic. We feel comfortable in expecting for the region a more moderate contraction of -7.2% in 2020.

European economy 14th July 2020

ECB Preview: The Economy Continues To Recover And The Inflation Outlook Is Muted.

Peter Allen Goves (MFS Investment Management) | The overall macro picture has not changed significantly since the June meeting. The economy continues to recover and the inflation outlook is muted. We still see enough flexibility in the Pandemic Emergency Purchase Programme (PEPP) to combat any unwarranted tightening in financial conditions. The June targeted longer-term refinancing operation (TLTRO) was a successful exercise and the extra liquidity added (around €550bn) is seen as enough to support the private sector into the recovery phase (or at least reduce liquidity crisis). Overall, we do not believe there is a strong need for further action from the European Central Bank (ECB) at the current juncture. If anything, the ECB communication will be closely watched.

European economy 14th July 2020

Eurozone Industrial Production Rebounded 12.4% In May With The End Of Restrictions

Industrial production in the euro area chalked up a record rise of 12.4% in May, after falls of 18.2% in April and 11.8% in March. However, the figure was still 20.9% below the level recorded in May 2019, according to data published by the EU’s statistics office Eurostat. In the case of Spain, industrial production rebounded 15.1% in May after declines of 22.8% in April and 13.5% in March. The figure was still 24.9% lower than in May 2019.

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