Euro zone

Euro-area economic outlook: The hope for the recovery lives!

The Corona pandemic is in the middle of its second wave, but the signs of an imminent economic upturn are increasing. This is illustrated by the current development of out leading economic indicator. The DZ BANK Euro Indicator rose by 0.8 percent to a level of 98.8 points in January 2021. This means that the indicator’s annual rate of change of +0.2 percent is above the zero line again for the first time in around two and a half years. The setback in November, when the beginning of the lockdown in a whole series of countries had a noticeable impact on the European sentiment indicators in particular, was more than made up for in the past month. Almost all the sub-indicators included in the calculation have recently contributed to the improvement in our leading indicator.  For example, consumer confidence in Europe recovered somewhat in December according to the EU Commission’s…

The reconstruction fund is not a gamechanger

After tough wrangling, Poland and Hungary have given up their opposition to the EU reconstruction fund. If the EU Parliament also agrees, the fund can probably be launched in the first half of 2021, later than originally hoped. Southern Europe in particular is eagerly awaiting the billions in payments. Hopes are high that the funds will not only mitigate the economic damage caused by Corona, but also that there will now be financial leeway for creative economic policy. Rightly so? The EU funds will certainly help selectively, but they are probably not a „gamechanger“ for the core problem of growing economic divergence within the EU. A look at where the funds will mainly go and where the problems lie makes this clear. In order to ensure that the funds are used as efficiently as possible, the states cannot dispose of the funds as they wish; they must submit plans for…

A dispute rarely comes alone

The political dispute within the tripartite alliance in Italy threatens to escalate. For days now there has been disagreement between the government and the Five-Star Movement (M5S), which is part of the government, about the reform of the ESM. However, cracks are now opening up within the government as well. The dispute revolves around the procedure regarding the use of the money that Italy is expected to receive from the EU reconstruction fund. Specifically, Prime Minister Conte plans that the use of the funds will be coordinated primarily by him and Finance Minister Gualtieri, and both will be supported by managers with comprehensive powers. The remaining members of the cabinet, especially those from Italia Viva and the PD, view this as an affront and also take their criticism to the public.The strongest criticism currently comes from the small government partner Italia Viva. Former Prime Minister Renzi is demanding that Conte…

Ultimatum with consequences

Brussels seems to be losing patience in the dispute with Poland and Hungary over EU finances, including the EU Reconstruction Fund (NGEU). Instead of using the summit of heads of state and government on 10 and 11 December for negotiations, Budapest and Warsaw are supposed to give up their blockade attitude beforehand. As a means of exerting pressure, the Reconstruction Fund is being discussed as a multilateral construct without Poland and Hungary, if necessary. Both Central European states would then go away empty-handed for the time being. Up to now, they have mainly resisted the idea that both payments from the NGEU fund and regular EU budget funds should be tied to principles of the rule of law. While the principle of unanimity within the EU applies to financial issues, the remaining EU states could tie EU payments to conditions of the rule of law even against the will of…

Christmas presents from the ECB

The Covid 19 pandemic continues to give cause for concern. Many countries in the Eurozone are currently tightening their contact restrictions again. The growth in economic output in the euro zone is likely to be negative in the fourth quarter of this year and the first quarter of next year. For this reason, the ECB once again feels obliged to relax monetary policy once more. ECB head Christine Lagarde announced at the last ECB meeting that the central bank is preparing an extensive easing package for December. According to the ECB Chairwoman, all monetary policy instruments will be put to the test. In the wake of the press conference, some ECB representatives spoke out and even put forward new measures. PEPP: The central bank’s sharpest weapon We expect the bond purchases under the PEPP (Pandemic Emergency Purchase Programme) to be extended until the end of 2021. The central bank is…

UK: Historic economic growth only a snapshot

„Historically“, the strong growth of the British economy with 15.5 percent in the third quarter is certainly all-time high. Never before in the country’s post-war period has economic output grown so strongly in a quarter. The UK thus joins the group of numerous European economies that also achieved double-digit economic growth in the summer quarter. However, in the context of the equally „historic“ collapse of the economy in the spring, which cost the UK over 20 percent of its economic output, the current result is far less impressive. Over the summer, the British economy was only able to make up just over half of the losses caused by the severe and long corona lockdown. Economic output is still almost ten percent lower than in the final quarter of last year. In Europe, only Spain has been hit so hard. And the strong rebound cannot be continued into the future either…

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