Strong Irish growth to generate political pressures

2015 ◽  
Keyword(s):  
Euro Area ◽  
Economic Performance ◽  
Quantitative Easing ◽  
Success Story ◽  
Economic Expansion ◽  
Content Type ◽  
Economic Stimulus ◽  
Nationalised Banks ◽  
The Government

Subject Ireland's economic prospects. Significance A number of underlying factors suggest that Ireland's recent economic performance is neither as strong nor as clearly the result of its bailout programme (as opposed to other factors) as might appear. Nevertheless, its impressive recent headline economic results have confirmed Ireland's status as the euro-area's bailout success story. Impacts The government -- and therefore taxpayers -- will continue to repay debt taken on to pay bondholders from nationalised banks. Chagrin about this burden is likely to make Ireland take a hard line against possible euro-area concessions to Greece. A weak euro and strong UK and US growth will continue to support Irish exports and economic expansion this year. The government anticipates significant economic stimulus from the ECB's sovereign quantitative easing programme.

Immigration and Islam fears will fuel Germany's PEGIDA

2015 ◽  
Keyword(s):  
Cultural Identity ◽  
Economic Performance ◽  
Asylum Seekers ◽  
Drug Dealer ◽  
Content Type ◽  
Eu Member States ◽  
The United Kingdom ◽  
The Government ◽  
And Migration ◽  
German Cities

Significance PEGIDA, which was founded in October 2014 in Dresden by Lutz Bachmann, a convicted drug dealer and burglar, has established a pattern of weekly rallies attracting thousands of demonstrators across Germany, although its support is strongest in Dresden, the capital of Saxony. The January 5 rally mobilised a record 18,000 protesters, dwarfing the counter-demonstration of a few thousand people. Notwithstanding the strong resistance to PEGIDA in other German cities -- an estimated 30,000 counter-demonstrators marched on January 5 in Dresden, Stuttgart, Hamburg, Muenster, Berlin and Cologne -- the strength and persistence of the movement have sparked a debate in Germany and beyond about cultural identity and migration in an increasingly fractured and troubled region. Impacts The government may face challenges to reduce the number of asylum seekers, and could turn to other EU member states to ease the pressure. Concerns about immigration and cultural assimilation are decoupled from Germany's economic performance, which remains strong. Although manifested very differently, Germany, France and the United Kingdom are all showing signs of strain over immigration and Islam.

German shift on austerity would risk 'wrong' lessons

2015 ◽  
Keyword(s):  
Euro Area ◽  
Credit Rating ◽  
Bond Yields ◽  
Trade Surplus ◽  
Fiscal Stimulus ◽  
Content Type ◽  
Black Spots ◽  
Angela Merkel ◽  
Deficit Financing ◽  
The Government

Significance Chancellor Angela Merkel faces a rising tide of euro-area members in favour of a policy shift away from austerity and possibly towards more favourable debt deals for euro-area black spots. Adding to the pressure for change, her own voters may prefer a slower pace of debt reduction: German government debt has already been falling as a percentage of GDP -- from over 80% in 2010 to under 77% at the end of 2014 -- and debt is starting to fall in absolute terms as well. The government has delivered enough stabilisation (ie, austerity) and growth to tame the 2009-10 debt surge and maintain its AAA credit rating, but is now over-achieving in terms of its own tough targets because the greater-than-expected fall in debt interest costs is pushing the budget into surplus. Some modest spending adjustments look likely to curb this windfall surplus, yet many will argue that more could be done to re-energise the sluggish economy -- and boost the euro-area. Impacts The plummeting euro will provoke another rise in German exports (already near 50% of GDP) and tensions over Germany's bulging trade surplus. While a fiscal stimulus and/or higher wage payments could address these tensions and raise imports, there is no sign of such action. Germany's critics are gathering support to end austerity, to the point of ignoring the risks of deficit financing and reneging on debts. Ultra-low German bond yields, encouraged by the prospective supply fall, are dragging down euro-area yields, delivering wider benefits.

Hardening German attitudes on Greece risk a rupture

2015 ◽  
Keyword(s):  
Central Bank ◽  
Euro Area ◽  
Capital Controls ◽  
Financial Assistance ◽  
Content Type ◽  
Bank Deposits ◽  
Reform Programme ◽  
System Collapse ◽  
Greek Government ◽  
The Government

Significance Pressure is intensifying on the negotiators representing the Greek government and its creditors -- most importantly Germany -- to reach some form of agreement allowing the release of sufficient financial assistance for Greece to meet its payment obligations due by the end of June. However, the governing Greek coalition does not appear stable enough to adopt the reform programme demanded by its creditors. Meanwhile, German economic opinion on Greece is hardening, in the gathering belief that the risks to the rest of the euro-area from any concessions to Athens are now greater than those of a possible rupture. Impacts If the Greek negotiations drag on, the government may have to introduce capital controls to stem the outflow of bank deposits. Greece's central bank remains reliant on the ECB to continue authorising ELA, but opposition to ELA in Germany is growing. If the ECB withdrew ELA, Athens's choices would be to meet its creditors' demands, see a financial system collapse or exit the euro.

Even gradual quantitative tightening raises GDP risks

2019 ◽  
Keyword(s):  
Euro Area ◽  
Commercial Banks ◽  
Large Scale ◽  
Sales Tax ◽  
Quantitative Easing ◽  
Content Type ◽  
Balance Sheets ◽  
Liquidity Provision ◽  
The Us ◽  
Repurchase Agreements

Subject Quantitative easing and GDP. Significance The US Federal Reserve (Fed), Bank of Japan (BoJ) and ECB have all conducted quantitative easing (QE) programmes since 2008, purchasing assets from commercial banks on a large scale and without predefined repurchase agreements. These purchases have swollen the balance sheets of the three largest central banks and provided commercial banks with large liquidity buffers. Impacts The pace of the Fed withdrawing liquidity may slow; if US-China conflict worsens or another shock occurs, the Fed may consider reversing. In the euro-area, there are no new liquidity provisions, at a time when German GDP is weakening and Brexit threatens EU growth. New liquidity-provision plans may be hard for the euro-area to agree; if this is off the table, so are liquidity-withdrawing measures. The BoJ may stop scaling back its bond and ETF holdings if markets suffer; the upcoming sales tax rise will also hit spending.

Coal power contradicts China’s climate change goals

2020 ◽  
Keyword(s):  
Carbon Emissions ◽  
Power Plants ◽  
Low Carbon ◽  
Coal Consumption ◽  
Content Type ◽  
Time Investment ◽  
Generating Capacity ◽  
Economic Stimulus ◽  
The Government ◽  
Financial Losses

Subject Energy policy in China. Significance China has resumed the construction of large numbers of coal-fired power plants, despite a massive excess of generating capacity. At the same time, investment in non-fossil fuel capacity is also still underway and the government continues to deploy low-carbon policies. Impacts Coal consumption and carbon emissions will rise further, raising doubts over the achievability of peak emissions by 2030. Despite a modest economic stimulus, large excess generating capacity will persist, as will financial losses for generating companies. The economic stimulus will boost coal use in heavy industry as well as air pollution and carbon emissions in the short-term. The financial losses of the coal-fired generators will grow; bankruptcies will be avoided through enforced consolidation and plant closures.

SNB move will accentuate bond-equity divergence

2015 ◽  
Keyword(s):  
Euro Area ◽  
Yield Curve ◽  
Equity Markets ◽  
Bond Markets ◽  
Quantitative Easing ◽  
Bond Yields ◽  
Content Type ◽  
Sovereign Bond ◽  
Advanced Economies ◽  
The Us

Significance The move mainly aims to pre-empt the widely anticipated launch of a sovereign quantitative easing (QE) programme by the ECB on January 22. However, it will accentuate divergences between bond and equity markets. Sovereign bond yields for most advanced economies are falling to new lows and are increasingly negative at the shorter end of the yield curve, because of deflation fears and lacklustre growth outlooks. Yet equity markets are hovering near record highs, buoyed by the US recovery and expectations of further monetary stimulus in the euro-area. Impacts Bond markets will be driven by deflation fears, while equity markets, especially US stocks, will be buoyed by Goldilocks-type conditions. Market expectations that the ECB will launch a sovereign QE programme will make bond yields fall further. Bond yields will be suppressed by investor scepticism about the ECB's ability to reflate the euro-area economy.

Strong data increase pressure on ECB to wind down QE

2017 ◽  
Keyword(s):  
Euro Area ◽  
European Central Bank ◽  
Oil Price ◽  
Consumer Confidence ◽  
Quantitative Easing ◽  
Content Type ◽  
Core Inflation ◽  
European Central ◽  
Asset Purchases ◽  
Japanese Yen

Subject Outlook for euro-area uantitative easing. Significance Data released today by the European Commission showed business and consumer confidence rose to the highest in almost six years in February, further fuelling the debate over how quickly the European Central Bank (ECB) should wind down its two-year-old quantitative easing (QE) programme. Headline inflation rose to 1.8% year-on-year in January, the fastest in four years and just below the ECB’s 2.0% target. However, core inflation remains below 1.0%, justifying the continuation of the central bank’s asset purchases despite fierce resistance from Germany. Impacts The euro has fallen against the Japanese yen and the dollar this month because of rising concern about euro-area political risk. Fears of a sudden end to the 30-year bull market in bonds have eased; ten-year US yields are down over 20 basis points since mid-December. Further upside potential for the oil price is likely to be limited due to US shale and countries exempt from the OPEC cuts raising output. In this era of unconventional policy, the ECB could maintain QE to stabilise weaker members but raise rates to satisfy stronger ones.

Prior actions passed will unlock Greek bailout cash

2015 ◽  
Keyword(s):  
Euro Area ◽  
Pension Reform ◽  
The Political ◽  
Content Type ◽  
The Government

Significance This allowed the Eurogroup of euro-area finance ministers to authorise the release of 12 billion euros (12.8 billion dollars) from the latest bailout package of 86 billion -- 2 billion euros to supplement budget needs and 10 billion for bank recapitalisation. Impacts There could be more parliamentary cliff-hangers over approving implementing legislation in such areas as pension reform. The opposition may support the government on some issues, but this could undermine Tsipras's authority. Another election is possible, but might not change the political balance.

Pension reform could derail France’s Macron

2018 ◽  
Keyword(s):  
Economic Reform ◽  
Euro Area ◽  
Global Economy ◽  
Pension Reform ◽  
Content Type ◽  
Reform Agenda ◽  
Innovation Fund ◽  
Business Confidence ◽  
The Government ◽  
The Eu

Subject Macron’s economic reform agenda. Significance President Emmanuel Macron views his reforms through the prism of power: by strengthening the economy, he hopes to win credibility with Germany, whose support he needs to reform the EU and euro-area. However, the apparent ease of his labour regulations reform in September does not diminish the risk of his next two targets: unemployment benefits and pensions. Impacts With a shrinking share of euro-area exports, France will see limited benefit from the stronger global economy. Business confidence may increase if the government eases the regulatory burden on medium-to-large businesses. Financing an innovation fund by selling off some state assets will take time and likely have little impact on confidence.

Philippines jobs and wages issues could hit government

2017 ◽  
Keyword(s):  
Economic Performance ◽  
Agricultural Sector ◽  
Infrastructure Investment ◽  
Tax Reforms ◽  
Content Type ◽  
Investor Confidence ◽  
Tax Amnesty ◽  
Land Disputes ◽  
Macroeconomic Indicators ◽  
The Government

Subject Economic policy challenges facing the government. Significance President Rodrigo Duterte’s administration soon enters its eleventh month. The president campaigned on greater infrastructure investment and more equitably spread economic growth, among other pledges. So far, most macroeconomic indicators are either holding steady or improving; early worries about political disruption, underpinned by a weakening stock market and exchange rate, have also eased. Yet inflation and unemployment numbers are rising, and are highlighting problems in the agricultural sector. Impacts Interest rate increases could be on the horizon. The legislature’s proposal for a tax amnesty is unlikely to prosper. Failure to implement tax reforms would undermine business and investor confidence. Failure to develop infrastructure effectively, such as due to land disputes, could hit Philippine economic performance. Rising public calls to focus on the economy over the ‘drugs war’ are possible, putting pressure on Duterte politically.

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