Euro Zone

German job miracle becomes ever harder to sustain

3 Feb 2014

The country’s long-lasting labour market revolution is half-kaput. New jobs are still appearing at an amazing rate. But this is no longer translating into falling unemployment. And an ill-considered labour market re-regulation is poised to worsen the deep structural problems.

ECB can live with near-deflation

31 Jan 2014

After a drop in January, euro zone inflation has been below 1 pct for four months. The region’s internal devaluations are a durable drag. But the central bank has run out of easy anti-deflation policies. As the zone returns to growth, the ECB can get away with doing nothing.

Guest view: The ECB is much too stodgy

29 Jan 2014

The central bank can bridge the muddle at the middle of the single currency - monetary union, fiscal divergence and weak national banks, a Princeton professor responds to Breakingviews. He says a more aggressive ECB on monetary policy and debt writedowns would protect the euro.

In Europe, job destruction creates inequality

28 Jan 2014

Inequality, not traditionally a big issue in the EU, is gaining ground. Unemployment is increasing, especially among the vulnerable, and the fragile economic recovery is unlikely to recreate lost jobs. This will widen the rich-poor divide, turning it into a key problem for Europe. 

Bond rally stretches luck of the Irish

20 Jan 2014

Ireland is less risky than the United States, say bond markets. That’s a stunning performance for a country barely out of bailout – and it looks like a throwback to the pre-crisis era when credit risk was ignored. It may not last. And it dents Ireland’s hopes for EU debt relief. 

Money market starts to tell ECB to ease

20 Jan 2014

There have been some sudden odd jumps in rates in the euro zone short-term interbank market. A few scattered spikes won’t bother the central bank, but too much tension would boost borrowing costs in the real economy. To counter that, the ECB would be tempted to loosen policy.

Hugo Dixon: Renzi-Berlusconi pact gives Italy hope

20 Jan 2014

A constitutional reform deal between the leader of Italy’s largest party and the leader of the opposition addresses one of the country’s biggest problems: its ungovernability. Now Renzi needs to put his energy behind key economic reforms, especially jobs and public spending.

Euro QE puzzle misses French and Italian pieces

16 Jan 2014

Mario Draghi’s dovish stance has raised hopes the European Central Bank could launch asset purchases. Europe’s fragmented money markets and weak lending mean the payoff could be significant. But it can only be done if France and Italy embrace reform.

Facts belie tale of selfish German export mania

16 Jan 2014

Germany is often chastised for living at the expense of others. Stunted domestic demand and a misguided export obsession are said to threaten global stability. The reality is different, as the latest GDP numbers confirm. Consumption is thriving, while trade held back growth.

German investment drought imperils growth prospect

14 Jan 2014

Angela Merkel has vowed to end Germany’s long-standing freeze on public and private investment. But she is only considering symbolic actions that will not reverse two decades of negligence. The country’s depleting infrastructure is threatening its long-term economic potential. 

Spanish royal ruckus comes at terrible time

13 Jan 2014

Spain’s democracy is strong enough to question a princess on tax-evasion charges. But widespread corruption among the masses will be harder to fight if the elite is under suspicion. And the royal family loses respect just when the country most needs a stable national institution.

Euro zone “happy loop” carries a warning

9 Jan 2014

European bank shares are rising along with peripheral euro zone bonds. It’s the mirror image of the “doom loop” of shared falls. This connection solves - rather than causes - a policy headache. But it shows the symbiotic link between governments and banks hasn’t been broken. 

Euro debt rush marks redemption not resolution

8 Jan 2014

Risky sovereign debt from Portugal to Greece is a star in the new year. Peripheral economies are reforming. Their bonds offer a haven from U.S. tapering. Yet the euro zone has no solution to the problem of high debt and low growth. Bondholders will not always be protected.

Draghi is playing with fire on deflation risk

8 Jan 2014

Euro zone inflation remains at a worryingly low rate, with some countries at risk of falling into debilitating deflation. The ECB shouldn’t consider only the whole zone. Nor should the central bank let German opposition hold it back. It should act now, before it’s too late.

Euro zone "deflation" little worse than America’s

7 Jan 2014

A euro zone inflation rate of 0.8 percent will prompt calls for action. But the U.S. has had more stimulus and growth - and has only slightly higher inflation. Besides, wage cuts help weaker euro members and serious deflation isn’t yet a threat. But serious reforms are needed.  

Europe could live with Italian deficit heresy

7 Jan 2014

Matteo Renzi, Italy’s likely next leader, has suggested Rome could break euro zone fiscal rules. Higher deficits could be good economics and shrewd politics. But to keep markets and euro zone peers from panic, he has to offer lower public spending and faster privatisations.

Monetary policy similarity outweighs divergence

6 Jan 2014

It looks like monetary policy is splintering around the world. The Fed will taper, while the ECB may have to add stimulus. Japan and the UK plan to stay where they are. But the variations hide a greater similarity: they are all still trying to push up growth with easy money.

Commodities set to distinguish themselves

3 Jan 2014

From gold to grain, raw materials will in 2014 trade less in line not just with equities, but each other. That’ll continue a trend started in the summer. Thank a calm euro zone and the prospect of a Fed taper. Commodity costs set by fundamentals, not fear, would be good for many.

Spain embarks on dispirited recovery

20 Dec 2013

The country may be growing again, but it won’t feel like it in 2014. Few will find jobs. The proportion of temporary workers will stay high. More people will emigrate. Without further action, Spain’s unemployment rate could remain double digit for the next 15 years. 

Italy gathers ingredients for a slow-cooked reform

19 Dec 2013

Shifts in Italian politics are making reform possible. Silvio Berlusconi has been chased out of government; a reformist leader is taking over the centre-left. Italy needs speedy political and economic medicine to escape its debt trap. At least 2014 won’t be worse than 2013.