European Economy


Charting the Eurozone growth dilemma

By Chris Becker Last night we saw the flash 2Q GDP print for the French, German and EMU economies (unchanged, up 0.3% and down 0.2% respectively) – you’ll hear more on the composition and expected flow on effects from Delusional Economics later on today. I’ve always contended that using GDP (gross domestic product – a metric


Markets move ahead of Draghi

Last week I speculated that Mario Draghi, the ECB president, was unlikely to deliver on his London promises due to a number of roadblocks. On Thursday markets fell sharply on just that but by Friday, after supportive statements from members of the Merkel’s coalition, they re-evaluated the statements and rallied sharply upwards. I’ll leave the analysis


Europe’s very ugly PMIs

And so the fallout from the European suicide pact continues. Overnight we had another round of PMI data and once again the results were woeful. From Markit Economic’s chief economist: “The Eurozone manufacturing sector’s woes intensified again in July. Output fell at the fastest rate since mid-2009, consistent with the official measure of production falling at


Draghi is set to disappoint

Late last week the ECB president, Mario Draghi jawboned the world’ markets with the statements: Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough. To the extent that the size of the sovereign premia hamper the functioning of the monetary policy transmission


Europe pulls the wrong lever

As I said on Friday, I’ve long held the view that contagion into Italy and/or Germany would be the key driver for more definitive action from Europe. Although we’ll have to wait until Thursday (Frankfurt time) for the ECB’s executive council meeting to find out the details the rumours are already swirling. Last Friday world market’s got


Draghi provides temporary relief

I’ve long thought that it was going to take the the European crisis to begin to genuinely infect Italy or Germany before we saw any real action from the Europeans. Italy because of its size , both debt and GDP, and Germany because … well it’s running the show. Given this week’s flash PMIs along with


Auf wiedersehen European economy

Another night of purchasing management index data from the Eurozone and, once again as expected, the data was a disappointment. Recession approaches for the zone as a whole, Germany has moved into contraction while the periphery continues to suffer from a deep recession, and in some cases depression. Manufacturing has collapsed across the region while


Are they really going to kill Spain now?

So, as predicted , Spain looks set to become the next Eurozone nation to fall. It’s 10 year yield hit 7.5% overnight, but more importantly the yield at the short end ramped up significantly. 2 yr yields are now sitting at 6.5%.  These rates are clearly unsustainable and so, against previous and continuing denial, Spain


Europe to recover in the next twelve months, not

This ECB took action on Friday in which it again declared the Hellenic Republic’s debt instruments ineligible as collateral: Due to the expiration on 25 July 2012 of the buy-back scheme for marketable debt instruments issued or fully guaranteed by the Hellenic Republic, these instruments will become for the time being ineligible for use as collateral in


Spain slides

It was an all round horrible night for Spain, starting with a bond auction that went a little wrong: Spain’s government just sold a bunch of short-term debt this morning. But, demand was way down and borrowing costs were much higher than in an auction for similar debt a month ago. 2-year bonds sold for 5.3%, up from 4.48% last


The politics of the undelivereable

We may, or may not, be heading towards a political resolution around the latest barrier Europe is attempting to erect for itself but in the meantime the real economy of the most vulnerable nations continue on their downwards slope: Spain’s housing market continued to weaken in the second quarter, with prices declining 8.3% year-on-year, a


The ECB’s Swedish plan

Last week I mentioned that Spanish bank security and debt holders were in for a shock stemming from certain sections of the new Spanish banking MoU: The restructuring plans of viable banks requiring public support will detail the actions to minimise the cost on taxpayers. Banks receiving State aid will contribute to the cost of restructuring


Italy’s political risk

As reported on MB last week Moody’s slapped Italy with another downgrade noting the following factors: 1. Italy is more likely to experience a further sharp increase in its funding costs or the loss of market access than at the time of our rating action five months ago due to increasingly fragile market confidence, contagion


Spain: The next leg down

Readers may remember my confusion with the jubilation shown by the Spanish public over the election win by Mariano Rajoy back in November 2011. His party’s strategy during the election campaign was to say very little about what he was actually intending to do to address his country’s financial problems, preferring to simply let the incumbent party


EZ screws Spain’s citizens

A draft Memorandum of understanding for the Spanish bank bailout became available overnight (available below). Much of the document makes sense in terms of assessing, monitoring and implementing corrective action on the banks. Specifically there is mention of using Special Purpose Vehicles to remove non-performing assets from banks balance sheets: Segregation of impaired assets: Asset


European austerity returns

At the end of last week the IMF issued a warning that the world is heading for a weaker than predicted period of economic growth: The International Monetary Fund will reduce its estimate for global growth this year on weakness in investment, jobs and manufacturing in Europe, the U.S., Brazil, India and China, Managing Director Christine Lagarde


Markets ignore ECB cut

Courtesy of Sober Look The markets were not impressed by today’s policy announcement from the ECB. Sovereign spreads are wider, the euro is lower by 1.1%, and European stocks are down 1.2% on the day. Here is what the ECB’s Governing Council had decided: 1. The interest rate on the main refinancing operations [MRO] of


Europe’s crisis is re-emerging

As I ‘ve been saying over the last few days, last week’s EU summit provided Europe with some political success but actual deliverables are some time off. According to the Finnish PM at least a year. There is already rumbling from a number of countries, including Germany, about what exactly was and wasn’t decided last Friday


The ECB turns the screw on EZ governments

Sorry for the lateness and shortness of today’s post, I’m not feeling the best. There was little economic news from Europe overnight due to the media concentration on the LIBOR scandal. Of note were the continuing rumblings from Finland around collateral and obligations. As I mentioned yesterday in morning links, Finland appears to be once again struggling with exactly what it


The European economy sinks

I discussed yesterday that the success of last week’s EU summit needed to be measured on a political scale not an economic one. There were obviously economic ramifications from the outcome, but the ratification of whatever they eventually turn out to be is likely to take many months of further politicking. In the meantime the downward