Recovery Fund

In Europe 28th May 2020

Italy And Spain, The Countries To Benefit Most From The Recovery Fund: €172.8 Bn And €140 Bn, Respectively, Between Transfers And Loans

The Recovery Fund exceeds the Merkel/Macron proposals with an amount of €750 billion euros (equivalent to 5.4% of the EU27’s annual GDP). Italy and Spain would be the countries to most benefit. This was something that was quickly reflected in the performance of peripheral credit on Wednesday, especially in the financial sector, with improvements on average of about 10bp in the CDS of banks in both countries. For its part, France and Germany will receive transfers of 39 Bn and 29 Bn, respectively.

European economy 25th May 2020

A Game Changer For The Euro Awaits

Olivia Álvarez (Monex Europe) | If the European Commission can get the EU-27 members on board with a project resembling the German-French initiative, markets could move significantly. Peripheral spreads can narrow notably from currently high levels and European stocks could deliver some rare outperformance. The euro could certainly recover from its depressed levels against the US dollar and other safe heaven currencies as the Swiss franc and the Japanese yen. This is particularly true given the notably bearish sentiment the single currency has recently attracted in futures markets.

European economy 19th May 2020

Euro Area: Finally A Step In The Right Direction

BofA Global Research | The Franco-German recovery fund initiative is a small positive surprise: EUR 500bn, joint EU issuance, allocated as grants. Caveats: it is too small in size to fix all problems, its exact design in allocation, repayment and timeline will be crucial. The political symbol could be strong, though, if the EU 27 can agree. The ECB may feel temporarily relieved now.

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