Ranko Berich (Monex Europe) | The macroeconomic policy orthodoxy of the past 30 years will likely lie in ruins by the end of today, as the Bank of England and Treasury embark on synchronized monetary and fiscal easing on an unprecedented scale. The timing and size of the move from the BoE come as a surprise to markets, and seem calculated to send a clear message of policy synchronization.
As the latest OECD simulations rightly point out, the area where there is really room for maneuvering is that of fiscal policies and structural reforms. According to the international organization, in the short term and under a scenario of coordination in the G-20, the aforementioned measures could add up to nearly 0.5 percentage points of GDP in the first year with respect to the central scenario, as opposed to nearly 0.15 percentage points of monetary policy.
Radek Stefanski | European governments often appear to champion low-carbon policies. Yet, in 2017, European Union countries collectively spent US$87 billion subsidising the cost of fossil fuels. Shockingly – at a time when the world needs to act to stop climate change – this is nearly 2.5 times more than they spent in 2010.
In the increasingly complex choreography of the world economy, sovereign wealth funds (SWF) play an ever more important role due to their capacity to channel large volumes of savings toward in- vestment and hence boost economic growth. This role is analyzed in depth in the study on sovereign funds, a joint project between ICEX-Invest in Spain and IE University, and which has become a leading instrument of analysis for the institutional investment industry worldwide.
Bank Of America Global Research | We lower our Euro area growth forecast to 0.6% for 2020 (-40bp), on the back of lower foreign demand (global growth downgraded to 2.8%, from 3.1%), supply chain disruptions and at least temporarily lower domestic demand from local virus hot-spots. We keep our 2021 forecast unchanged at 1.1%, assuming a permanent loss in activity. Euro area growth is expected be close to zero in 1H20 (with negative quarters in Italy and Germany part of our base case).
Banca March | German Finance Minister Olaf Scholz is considering temporarily lifting the suspension of the country’s debt limit in what would be a major change in the fiscal policy of Europe’s leading econom.
J.L. M.Campuzano (Spanish Banking Association) | The European Central Bank (ECB) published on Thursday the statistics for monetary aggregates in January. In January specifically, the growth rate accelerated to 5.2% per year. This increase in the M3 money supply continues to exceed the theoretical level compatible with medium and long-term inflation of 2%. The main contribution was from credit to the private sector, with an increase of 3.4% over last year.
Caixabank Research | The experience of the Riksbank highlights the doubts over negative interest rates: despite a worsening economic outlook for Sweden, it raised the interest rate from –0.25% to 0% in December and abandoned its policy of negative rates.
In order to strengthen the Dutch government’s decisive contribution to the EU’s internal fiscal dumping, which drains tens of billions of euros of public resources from the states that do not enforce this, the Rutte government is opposed to the adoption of directives that seek to limit unfair tax competition in company taxation and to which it proposes changing the procedure from unanimity to qualified majority voting on tax rules.
The European Commission (EC) urged the Spanish government to “carefully” evaluate the potential impact of any modifications to the 2012 labour reform and to “preserve “the most positive aspects of it, which “supported solid job creation” during the recovery phase. Citing a recent study from the International Monetary Fund (IMF), it states that “the labour reforms adopted in 2012-13 in response to the crisis have played an important role in promoting a rich recovery in employment which began in 2014.”