Euro Zone

ECB, Syriza have broken euro zone’s German spell

27 Jan 2015

The European Central Bank’s easing and the Greek anti-austerity party’s electoral victory show the euro zone is breaking free of German dominance. With loose monetary policy and banking union, it seems ready for growth-friendly policies that don’t ignore economic reality. 

Hugo Dixon: Grexit still unlikely after Syriza win

26 Jan 2015

A resounding election victory for the radical left party has pushed Greece closer to quitting the euro zone. But Syriza should be able to cut a deal with the country’s European creditors to avoid bankruptcy – provided both sides are rational.

ECB bazooka a water pistol for emerging markets

23 Jan 2015

Between Mario Draghi’s bond-buying plan and the Bank of Japan’s ongoing splurge, central banks are pumping out $1.5 trillion a year in cheap money. The surprise should boost emerging markets wary of rising rates. But fading growth and falling prices will overwhelm the stimulus.

Fudge on loss-sharing weakens ECB’s massive attack

22 Jan 2015

At 1 trln euros or more, the European Central Bank’s long-expected bond-buying programme is powerful enough to impress markets and push down the euro. But partial nationalisation of any losses amounts to policy fragmentation. It risks undermining the euro zone’s foundations. 

Markets give Mario Draghi instant reward

22 Jan 2015

The European Central Bank president gave anxious investors more monetary easing than they expected. They responded by giving the ECB’s asset purchase plan a head start. The euro and regional bond yields both fell. Draghi may be smug now, but he still has to push up inflation.

Euro zone QE-by-country not as bad as it sounds

20 Jan 2015

The ECB’s bond-buying programme may leave national central banks on the hook for potential defaults. The goal is to soothe German fears on subsidising weaker countries. Sceptics see a fissure in the monetary union. The fears are exaggerated, but perceptions matter.

ECB’s mission possible: surprise markets

20 Jan 2015

Investors are so geared up for 600 billion euros of quantitative easing that its arrival could underwhelm. Yet Mario Draghi has a reputation for bending markets to his wishes. High uncertainty about how bond-buying will work means the ECB boss still has scope to over-deliver. 

ECB bank tsar chooses credibility over caution

15 Jan 2015

The single banking supervisor wants laggard lenders such as Italy’s Monte dei Paschi to hold extra capital buffers. That’s welcome. It may contradict the ECB’s other task – boosting lending in the euro zone. But that’s the price to pay for the new institution’s credibility.  

European court opinion gives QE a helping hand

14 Jan 2015

The European Court of Justice advocate general has blessed the principle of ECB government bond-buying, with few conditions attached. That provides cover for the central bank’s quantitative easing plans – and will do little to soothe German opposition to ECB policies.

Italy’s Renzi is caught in race against the crisis

14 Jan 2015

Italian Prime Minister Matteo Renzi has achieved more in 11 months than critics admit. But his weak parliamentary position has held him back. Upcoming presidential elections and another year of low growth could make life still harder for him.

Hugo Dixon: Banks are Greece’s Achilles’ heel

12 Jan 2015

If Syriza wins the coming election, the radical-left group will have to come to terms with the country’s euro zone creditors rapidly. Otherwise, by end-February, the state’s cash will run out and the ECB will no longer provide a lifeline to Greek banks, maybe triggering panic.

Merkel subjects Greece to risky tough love

8 Jan 2015

The German chancellor wishes to keep the euro zone intact – while playing up her indifference to the prospect of Greece leaving it. She just wants to make sure the next government in Athens will back reforms. That’s the only way to make a deal politically acceptable in Berlin.

Falling prices show ECB failed at its only mandate

7 Jan 2015

Euro zone inflation is now negative. Sinking oil prices played a part, but market expectations were falling well before. The European Central Bank has long been seen as doing too little, too late. No wonder investors have lost faith in the bank’s ability to fulfill its mission.

Greece debt compromise not as hard as it looks

6 Jan 2015

The country looks set to elect a left-wing government intent on a debt haircut. Germany could not stomach that. Yet neither side will want a disorderly Grexit. If agreement can be reached on reform, financial engineering could help disguise debt reduction and save face for all.

Europe returns to Franco-German axis of neurosis

2 Jan 2015

A prolonged economic slump highlights Europe’s core problem: a crisis in the French-German partnership. Populist parties are rising and the UK could leave the EU. Although many countries still want to join, it’s up to Paris and Berlin to make the case for a rejuvenated Europe.

Lithuania keeps euro’s little flame alive

31 Dec 2014

The monetary union will welcome its 19th member on Jan. 1. Never mind widespread euro gloom and a looming new Greek crisis, the Lithuanian people heartily support adhesion – for political as well as economic reasons. Other euro zone members can raise a feeble cheer. 

Greek limbo will weaken Europe’s recovery

29 Dec 2014

The failure of Greece’s deputies to agree on the country’s president will lead to new elections. That may bring left-wing Syriza to power, putting Athens at odds with its creditors. Reforms will stall, while uncertainty could undermine the ECB’s plan to boost growth in the euro zone.

Euro zone will flit between crisis and catharsis

24 Dec 2014

Elections in Greece or Spain could trigger fresh crises. Populist parties are on the rise, the economy is stalling and governments are paralyzed by their divisions. On the other hand, the euro zone has stronger banks and an activist ECB. There is cause for hope, but it is tiny.

ECB sours QE plans to keep Germany sweet

19 Dec 2014

The central bank will buy sovereign debt – but each national government may have to set aside provisions in line with their own risks, Reuters says. It may secure German approval. But it would also weaken quantitative easing, and highlight a fragmenting euro zone.

Deutsche strategy rejig may presage CEO succession

19 Dec 2014

The German bank is set to review its direction in 2015. Its bet on capital markets remains unproven. Likely regulatory settlements in the coming months could raise further doubts. Recent executive moves suggest Deutsche is keeping options open for strategy and leadership change.