I don’t have the slightest doubt that Draghi is going to do the impossible to keep the euro, but it doesn’t depend on him. The euro is a false project which should have happened when things were more settled, in other words, as Draghi says, “when there was a single market.”
AXA IM | Companies have re-leveraged their balance sheets since the global financial crisis (GFC), driven by low borrowing costs. Although heightened, corporate leverage is not currently excessive in developed markets, although we see signs of concern in emerging markets. In this note we assess whether we should be concerned about corporate leverage at current levels.
BoAML | We have remained quite bearish on Euro area inflation for the past few years, particularly compared with ECB forecasts (but also consensus), and have highlighted the many downside risks to the inflation outlook.
James Alexander via Historinhas | While still waiting for the 1Q16 official Eurostat NGDP figure for the Euro Area of 19 countries it has been interesting to have a look at the implied deflators for the currency bloc and its constituents. (Ireland, Slovakia, Cyprus and Luxemburg are all hopelessly late delivering GDP figures, and the first two don’t even seem to do it to Eurostat standards for calendar-adjusted data.)
James Alexander via Historinhas | A couple of my recent posts have focused on the immeasurability of inflation and the consequent immeasurability of RGDP. And, therefore, the unsuitability of using either as a guide to monetary policy, especially a notional “gap” between an unmeasurable RGDP and a theoretical maximum, but still unmeasurable, RGDP.
LA CAIXA RESEARCH | Convergence between core and periphery countries must improve in order to strengthen the eurozone’s future growth and sustainability.
STRASBOURG | By Alexandre Mato | After adopting the single currency on 1 January 2015, the transition period of dual circulation has finished for Lithuania, the country thus becoming the 19th euro area member. Vitas Vasiliauskas, the Governor of The Bank of Lithuania, spoke to The Corner in an exclusive interview before the ECB’s crucial meeting on 22 January, when QE could be launched.
LONDON | By Jim McCormick and Keith Parker (Barclays) | At the start of the year, we analyzed the risks of a prolonged bout of deflation in the euro area (Japan-style deflation in Europe getting harder to dismiss). Our broad conclusion was that the risks of deflation in the euro area were probably not materially different from the risks Japan faced in the mid 1990s. Perhaps more important, we felt investors should picture 1996-97 Japan when assessing the risks of euro area deflation today.
MADRID | The Corner | In August the Economic Sentiment Indicator (ESI) fell in the euro area (by 1.5 points to 100.6) and the EU (by 1.2 points at 104.6). Once again the core Europe does not bring any good news, where sentiment dropped in Italy (by 4.1p to 97.8), Germany (by 1.9p to 104.1 ) and France (by 0.6p to 95.1), while sentiment remained flat in Spain (103.). Among the data published by the European Commission today, the industrial confidence fell in the EA to -5.3 in August from -3.8 in July and construction sentiment dropped to -28.4 from -28.2. Sentiment in the services industry declined to 3.1 from 3.6 and retail trade to -4.6 from -2.3. Consumer confidence remained at -10.
MADRID | The Corner | Although it is not part of ECB’s mandate, last Friday in Jackson Hole, President Mario Draghi spoke about what needs to be done in the euro area to address the problem of high unemployment and weak economic growth. As Barclays analysts believe, the speech “represented a significant breakthrough in the ECB rhetoric and will probably have significant implications regarding the debate just about to start between European government on policies that need to be deployed to avoid a ‘triple-dip recession’ and a fall in outright deflation.”