Little Cyprus Sparks Big Contagion Fears
The situation in Cyprus is still very fluid and very serious—perhaps more so than in Greece last year. While the country may be too small to have a meaningful direct impact on the rest of the euro area, the big issue for markets is the potential for contagion to more systemically important countries.
read moreCracks Appear in the French Economic Model
Today’s PMI data point to a deepening recession in France at a time when Germany is showing tentative signs of life. Is the euro crisis exposing the weaknesses of the French economic model?
read moreChastened ECB Wary of Premature Monetary Tightening
Cyclical indicators have improved, but the economic and financial backdrop in the euro area remains fragile. The ECB has clearly learned from past mistakes and is keen to avoid a premature tightening of monetary conditions.
read moreEuro-Area Periphery Faces More Pain to Complete Rebalancing
Most peripheral euro-area countries have significantly improved their competitiveness recently, but more needs to be done. With currency devaluation ruled out, further downward pressure on labor costs is likely, which will probably deepen and prolong recessions and interfere with fiscal adjustment.
read morePolicymakers 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 moreWhat Will Happen if Greece Leaves the Euro Area?
With party leaders failing to set aside their differences, Greece is set to hold another general election on June 17. The outcome is hard to predict, but one thing is clear: a Greek exit from the euro area is now a possibility that investors need to take very seriously.
read moreSpanish Jitters Reveal Euro’s Fragility
Yields on 10-year Spanish government bonds have risen by 100 basis points since the beginning of March. With attention now switching back to Spain, it seems the brief hope provided by the European Central Bank’s massive liquidity injections has proved to be a false dawn. Why has confidence evaporated so quickly?
read moreCould German Inflation Help the Euro Area to Rebalance?
Euro-area data have surprised on the upside in the opening weeks of 2012. This is particularly true in Germany, where there has been a strong bounce in key cyclical indicators and genuine signs of expansion. But could Germany be getting too much of a good thing?
read morePrivate Sector Involvement Is Unlikely in Second Portuguese Bailout
With 10-year Portuguese bond yields above 14% (see Display), the market is suggesting that Portugal will soon need another bailout from its euro-area partners. While we share the market’s skepticism about the sustainability of Portugal’s public sector finances, we doubt that policymakers at this stage will seek to impose losses on private sector creditors, as [...]
read moreArchives by Month:
- December 2012 (16)
- December 2011 (12)
- November 2012 (8)
- November 2011 (14)
- October 2012 (20)
- October 2011 (17)
- September 2012 (10)
- August 2012 (17)
- July 2012 (15)
- June 2013 (11)
- June 2012 (16)
- May 2013 (13)
- May 2012 (13)
- April 2013 (10)
- April 2012 (8)
- March 2013 (23)
- March 2012 (12)
- February 2013 (19)
- February 2012 (10)
- January 2013 (20)
- January 2012 (11)