Euro Area Still in Denial about Failure in Greece

Despite the Greek government’s best efforts, last night’s meeting of euro-area finance ministers failed to approve the release of new funding. We think it’s only a matter of time before Greece gets its money. But the latest delay reflects deep disagreement about how to reduce current unsustainable debt levels. Until the euro area addresses this [...]

read more

ECB Bond Buying Is a Double-Edged Sword

European Central Bank (ECB) president Mario Draghi’s promise to do “whatever it takes to preserve the euro” and create a new bond-purchase program has been positive for market sentiment. But the program also carries real dangers if it breaks the fragile consensus on the board of the ECB and eases the pressure on governments to create a [...]

read more

Bank of England Still Aiming at the Wrong Target

The UK is celebrating a near three-year low in consumer price inflation, but we think the Bank of England (BOE) should be more worried about the role that money and credit play in the inflation process.

read more

Collapse in UK Investment Income Is Cause for Concern

A collapse in direct investment income was the main factor behind the UK’s record second-quarter current account deficit. It’s too early to know whether this represents a permanent shift. But, if it does, it would make rebalancing the economy more difficult and have important implications for the pound.

read more

Euro-Area Interest Rates: To Zero and Beyond?

There has been some speculation that the European Central Bank (ECB) may soon push its deposit rate into negative territory.

read more

Weaker Growth Helps Shift Germany’s Approach to Sovereign-Debt Crisis

Recent German data show clearly that the sovereign-debt crisis is starting to bite. This might help explain why the government has given a green light to the European Central Bank’s (ECB’s) new sovereign-bond purchase program. It may also indicate a more lenient approach to Greece—at least for the time being.

read more

Policymakers Powerless to Stem Capital Flight from Spain

Capital flight from Spain is accelerating. As foreign investors and banks pull massive sums out of the country, policymakers look powerless to stop it.

read more

Euro Area: Locked in a Cycle of Market Pressure and Policy Response

 The European Central Bank (ECB) has raised the prospect of a more effective bond-purchase programme. Unfortunately, it may require additional market pressure for governments to unlock that support.

read more

Draghi’s Dilemma: How to Meet
Heightened Expectations

European Central Bank Governor Mario Draghi has raised expectations ahead of this week’s ECB Governing Council meeting.

read more

Is Germany an Example Other
Euro-Area Countries Can Follow?

Germany may have the strongest economy in the troubled euro area, but the euro has not been a massive “free lunch”, as some critics claim. Germany’s strength has come at the cost of many painful years of sacrifice.

read more

Archives by Month:

Archives by Subject: