Don’t get too optimistic about aggregate euro area economic data. One economy is clearly in a class of its own. Recent data for the euro area as a whole have been pretty upbeat of late, even suggesting that growth in the region gained a bit of momentum towards the end of 2010. Performance of the [...]
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Don’t expect any recent euro area pain relief to prove long lasting. Slower economic growth will hurt. Recent events in the euro area have taken some pressure off in the region. Government debt auctions in Portugal, Spain and Italy all drew strong demand last week. And maybe more importantly, signs that European officials were considering [...]
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IMF/EU orbit may not be as straightforward as Ireland – and perhaps Portugal – hopes. Spain and Italy must also battle against economic gravity. For those of you not old enough to remember the Muppets, “Pigs in Space” was a spoof on Star Trek, in which a bunch of hogs boldly went, as it were, to discover [...]
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Euro-area growth was faster than expected in the second quarter. But there are still good reasons to be pessimistic. We, like many, were surprised by the euro-area second quarter GDP numbers published today. Quarter on quarter euro-area growth of 1% was the fastest recorded for three years; quarter on quarter German GDP growth of 2.2% [...]
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Policymakers had their chance today to Greece behind us, as it were – and help start to convince markets that Greece will not be permitted to become the next Lehmans. In fact, however, the ECB came across as being rather complacent, while the Fed seemed to be signalling that it is getting worried about the possibility of contagion spreading across the Atlantic – spooking the markets in the process.
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The new IMF-EU bailout package for Greece adds a further 11 percent of GDP of spending cuts and tax rises. A fiscal tightening of this magnitude is the economic equivalence of suicide.
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Germany wants to increase the short-term pressure on member states failing to reduce their budget deficits. But France favours “soft laws” and puts a greater emphasis on better-placed states boosting demand.
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The establishment of a European Monetary Fund (EMF) would take time, and it would probably be too late to make much of a difference to the key issue facing Europe today – the risk that Greece’s public finance problems percolate through to other markets.
Filed under: Economics | Tagged: Euro area, fiscal policy, macroeconomics, monetary policy | 1 Comment »
Kevin Gardiner is Head of Investment Strategy, EMEA
Greg B. Davies
Greg B. Davies, PhD, is Head of Behavioural Finance
Henk Potts
Henk Potts is Market Analyst
