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ECB Bundesbank

European politics 8th May 2020

The ECB Responds Without Hesitation To German Constitutional Court Ruling But Must Build Bridges

Intermoney | In the name of the ECB independence, Christine Lagarde, made it clear that the only guide for the institution is the fulfilment of its mandate and no resources or efforts will be spared in this task. Once the central bank has made it clear that it does not accept the authority of the German courts, it must move on towards a more political phase in which it can build bridges and provide a solution to the problem. If it does not do so within three months, the Bundesbank could find itself in a difficult legal mess.

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European economy 7th May 2020

BoE Chooses To Wait In Face Of Uncertainty

David Page (Head of Macro Research at AXA Investment Managers) | The Bank of England (BoE) today announced its monetary policy decision for May. It left the Bank Rate unchanged at 0.10% as widely expected, by unanimous vote. It also left QE unchanged, leaving the Asset Purchase Facility target unchanged at £645bn. This was in line with the median consensus forecast, but we had expected a £100bn increase in QE today as the current programme is set to expire in early July. This was by split decision, with two members voting for an immediate £100bn increase. The majority of the Committee decided to wait for “more information… that was likely to become available over the coming weeks”, but these members “all” acknowledged prospective weakness in the economy and downside risks to the medium term outlook “might necessitate further monetary policy action to support the economy in the future”. We fully expect the MPC to increase QE, probably by £100bn at its next meeting on 18 June.

Karlsruhe Court

European economy 6th May 2020

Why Is The German Constitutional Court Now Challenging The ECB’s Purchase Programme And European Justice?

The German Constitutional Court surprised everyone yesterday with a ruling that some of the European Central Bank (ECB)’s actions, carried out as part of its 2015 bond purchase programme (PSPP), are unconstitutional. This decision clashes directly with the judgement of the European Court of Justice (ECJ). The decision does not call into question the entire debt purchase programme, but rather the part relating to the Bundesbank’s intervention.

ECB both christines

European economy 6th May 2020

The ECB Buys £26.75 Bn Of Bonds In April: 41% Italian, 31% French, 16% Spanish, And Just 2.3% German (Under Its Usual Purchase Programm)

Banca March | The European Central Bank expects an economic contraction of 5.5% in 2020 and a recovery in 2021 to growth of 4.3%. In this context of deteriorating growth forecasts, the ECB continues to increase its asset purchases to support the region’s economy. Even though, it does not reveal the composition of the purchases within this specific programme of support for European economies hit by COVID-19, we can take a look at its usual programme of sovereign debt purchases (known as the PSPP).

The trick of the Italian budget law

European politics 5th May 2020

Are Italy’s Days In The Eurozone Numbered?

Asad Zangana (Schroeders) | Many economies are facing a deep recession as a result of Covid-19, but Italy went into this crisis in a more precarious situation than most. The country stands out as the most likely candidate to exit the eurozone for several reasons. First, with gross debt estimated at 135% of GDP in 2019, it faces a significant challenge in both servicing its debt, but also refinancing it.

EU Green Deal: Bold headlines, elusive impact

European politics 2nd May 2020

Will The Covid-19 Crisis Undermine The EU Green Deal? A View From Europe’s Periphery

Oliver Vardakoulias via Macropolis |On March 26th, the European Council issued a joint statement stressing the objective of a ‘green transition. Since then a number of governments, business leaders, academics, MEPs, supra-national organizations, investors, and NGOs have equally called for post-emergency recovery packages (fiscal and monetary expansion to prop up our economies) to be aligned with the vision and targets of the EU Green Deal.

Spanish España.

European economy 1st May 2020

Spain, Among The Countries That Are Far From Having Mobilized Sufficient Fiscal Resources

Yves Bonzon (Julius Baer) | On the fiscal side all countries might provide support measures that are quantitatively and qualitatively strong enough to ensure recovery when the containment ends. The way the required transfers from governments to their private sectors are financed, in essence the chosen mix of tax increases, borrowing from private savings and monetisation, will play a determining role on the recovery capacity of different countries and regions.

european banks2

European economy 30th April 2020

Financial Sector Shields Itself From Coronavirus Shock; Brussels Helps With Regulatory Loosening

In the midst of the Q1 2020 earnings season, the financial sector is beginning to protect itself from the more than likely economic shock of the coronavirus. Meanwhile, The European Comisssion offered European banks temporary relief from capital regulations that could boost credit by up to €450 Bn this year. Brussels argued that the economic damage caused by the coronavirus crisis would justify a “selective” relaxation of the regulations introduced in the wake of the 2008 financial collapse.

Sanchez Conte

European economy 28th April 2020

The Opposition For Eurobond Remains Strong

Lidia Treiber (Wisdom Tree) | As the impact of Covid-19 lockdowns begin to more deeply unveil the economic impact that these severe measures have had on different European countries, the cost of funding has started to rise sharply for hard hit countries such as Italy and Spain. The spread of peripheral sovereign bonds over German sovereign bonds has begun to widen as investors become concerned about the rising debt to gross domestic product (GDP) levels for countries with already weaker fundamentals.