BERLIN | By Alberto Lozano | After Q1’s strong growth, numbers show that the German economy has slowed down during 2Q’s first two months, as Bundesbank reported this week. Both the industrial sector and the construction have fallen compared with the 1Q. However, it seems that Europe’s economic powerhouse will recover its strength in the coming months.
MADRID | The Corner | A staggering unemployment is one of Spain’s main weaknesses (as the IMF warns), although the forth economy in Europe is so far the best labor performer in the euro area, according to Brussels.
MIAMI | By Pablo Pardo | The director of the IMF’s Department of Financial and Monetary Affairs, José Viñals, has declared himself “worried” about “the optimism of the financial markets.” Viñals made his remarks at the LSE Global Pensions Program, organized by the London School of Economics, Santander Asset Management and Novaster. To an audience of around one hundred pension fund managers and regulators, most of them from Latin America, the IMF official remarked that “everybody investing” in what he called “heterogeneous assets” has “made money” this year, in spite of the fact that the “economic news, ‘surprises’ have been relatively bad.”
MADRID | By Jaime Santisteban | The Washington-based institution believes Spain has turned the corner and “the recovery reflects the collective efforts of Spanish society,” highlighting fiscal, banking and labour reforms. Forecasts (a 1.2% GDP hike this year and 1.6% in 2015) respond to the significant improvement of the country’s economy since the beginning of the year, surpassing government and experts’ estimates.
WASHINGTON | By Pablo Pardo | The Monty Python are back in London, and one of their most famous sketches revolves around the phrase “nobody expects the Spanish Inquisition.” The Bank of International Settlements (BIS) is like the Spanish Inquisition, only less funny and more predictable than the British surreal comedy group: it is the bearer of orthodoxy, even if it means sending everybody to the stake. Its prescriptions are suicidal in economic terms, wrong from a moral point of view, and unjust from a societal perspective.
MADRID | By The Corner | The International Monetary Fund (IMF) revised downwards its growth forecasts for the US from 2.8% in April 2014 to 2%, and maintained 2015 outlook in 3%. Furthermore, the institution believes that the country will not achieve full employment before 2017.
MADRID | The Corner | It’s not only about China or the US. Housing prices are well above their historical averages in many countries such as Poland, Turkey or Brazil. And that could mean big trouble for those economies, some of which need to assess their lack of capacity, like the UK. This time the EU’s peripherals are following the opposite trend, with home prices falling 7% in Greece, 6.6% in Italy and 5% in Spain in 2013. The graph shows home prices’ y-o-y evolution in 4Q13.
MADRID | By Julia Pastor | The key for a Spanish sustainable economic recovery are the country’s SMEs. Considering they mean about 90% of the national corporate landscape, the IMF’s last report on Spain provides two main recipes for helping them survive: extending aids for insolvent companies, which would “preserve Spain’s strong payment culture,” and also increasing wages cuts.
MADRID | By Ana Fuentes | Well-known U.S. economic theorist and financial strategist Michael Pettis believes the European project has a blatant, simple economic problem: Germany benefits from a weak euro while Spain suffers from a strong currency. As for the IMF’s recommendation of cutting wages in countries like Spain, Mr Pettis thinks it’s an absurd tip that can only make the global demand imbalance worse. He answered our questions via email from Beijing, where he is currently based.
WASHINGTON | By Pablo Pardo | Shadow banking in the U.S. doubles in size to the banking system, just the opposite than in Europe. According to the IMF’s number 3, José Viñals, it’s in the shadow financial where there is “a debt that grows very quickly and investors who are underestimating the risk of certain financial assets.” And he adds: “Careful, we’ve heard that song before.”