Euro Zone

EU bank crisis plan makes best of bad landscape

18 Apr 2023

The European Union’s proposal to extend its bank-failure system to smaller lenders is an attempt to work around political constraints. Broader use of deposit guarantee schemes should limit bailouts and help troubled banks find buyers. But even sensible tweaks may not be possible.

Bank woes expose gaps in EU safety net

22 Mar 2023

As the US and Switzerland scramble to head off contagion, the European Union is watching from a shaky perch. While the euro zone probably could fend off a new banking crisis, it lacks some tools for doing so. Even a backstop for insuring retail deposits remains out of reach.

ECB’s inflation-fighting hose may have a blockage

20 Feb 2023

The central bank has hiked rates by 3 percentage points since July, pushing up corporate borrowing costs and squeezing demand for credit. Yet firms and households have longer-term debt than in the past. That means tighter monetary policy will take a while to cool the economy.

How investors can profit from Fed-ECB divergence

7 Feb 2023

As America flirts with a recession, the U.S. central bank is set to stop tightening as interest rates near 5%. That will leave ECB President Christine Lagarde as the West’s most hawkish policymaker. The transatlantic split is an opportunity for traders who bet on European assets.

Euro zone can afford to keep fiscal taps running

31 Jan 2023

The bloc’s governments pumped up spending by 3.75% of GDP over the past two years to cushion the blow of Covid-19 and higher energy prices. Now they are closing the spigots. That’s a mistake. Manageable debt costs leave room to support growth – and help the ECB fight inflation.

Central bank schism is bad news for bunds

22 Dec 2022

Markets reckon the Federal Reserve will stop hiking rates before the European Central Bank. That has pushed yields on 10-year German bonds closer to those of U.S. Treasuries. The trend will last in 2023, as sticky euro zone prices and a fiscal splurge pressure Berlin’s debt.

Euro crisis shield is stuck in hedge fund mode

21 Dec 2022

The European Stability Mechanism, set up to help troubled euro countries, aspires to be the bloc’s debt manager. But member states’ distrust of perceived German control and stigma around its aid make this unlikely. Managing old bailout loans is the fund’s best hope.

Inflation confusion increases odds of ECB mistake

30 Nov 2022

Euro zone prices rose a less-than-expected 10% in November, yet remained stubbornly high after stripping out fuel. That leaves central bankers in a pickle. To burnish their hawkish credentials with a sceptical market, they may keep tightening policy even as the economy falters.

How Italy could tip into a tailspin

19 Sep 2022

Investors think the country will probably muddle through if Giorgia Meloni, a former post-fascist and eurosceptic, becomes its next prime minister. But there’s still a medium-term risk that Italy’s massive debt will spin out of control, says Hugo Dixon.

Italy’s next government has tricky to-do list

13 Sep 2022

A rightist coalition is poised to win Italian general elections this month. In this week’s Exchange podcast Muzinich’s Fabrizio Pagani discusses the next executive’s immediate economic challenges. These include coping with an energy crisis, high public debt and a bailed-out bank.

Capital Calls: ECB rate hike

8 Sep 2022

Concise views on global finance: Europe’s central bank risks recession to combat inflation.

ECB plays with fire while unspooling its hose

21 Jul 2022

President Christine Lagarde hiked interest rates by 0.5%, double the amount she flagged last month, and unveiled a vague tool to control euro zone bond yields. If monetary tightening hastens an economic slowdown, the central bank will need its new powers sooner rather than later.

ECB risks forgetting 1990s currency crisis lessons

18 Jul 2022

President Christine Lagarde may soon unveil the central bank’s tool to control sovereign bond yields. Struggles with semi-fixed exchange rates before the euro offer a cautionary tale. To fend off speculative attack, authorities are best off keeping targets and methods vague.

Japan’s post-Abe future, Europe’s currency problem

14 Jul 2022

The assassination of former Prime Minister Shinzo Abe is an end of an economic era. In this Viewsroom podcast, Breakingviews columnists debate how his party’s success could bring about big spending. Also, the euro’s decline is a problem for central bank chief Christine Lagarde.

Euro weakness forces itself on ECB’s agenda

12 Jul 2022

The single currency is nearing parity with the dollar for the first time in 20 years. It’s due to the U.S. economy’s strength and fears of a continental gas crisis. It also reflects the European Central Bank’s late response to inflation, which a weak euro makes harder to fight.

Italy starts countdown to risky life after Draghi

5 Jul 2022

The 5-Star party may bring down Mario Draghi’s coalition government. A crisis would hurt growth and raise the chances of a less EU-friendly executive. Worse, market jitters due to rising political uncertainty may complicate the European Central Bank’s efforts to tame bond yields.

EU banks’ fading growth hopes imply more cost cuts

6 Jun 2022

After more than a decade of austerity, lenders like BNP and Deutsche are now betting on rising revenue to deliver adequate shareholder returns. A lacklustre economy could scupper that. To hit their targets, banks may have to slice into technology budgets and branch networks.

ECB caught in a rate quagmire of its own making

20 May 2022

The European Central Bank may raise rates in July but is divided on how high it should go. By then, weakening growth will make it harder for President Christine Lagarde to end the eight-year era of negative rates. Moving earlier to curb inflation would have avoided the dilemma.

ECB forecasting snafus may turn into trust problem

28 Apr 2022

Christine Lagarde’s central bank underestimated how high inflation would soar and deferred rate hikes. Its own research says rising inequality hurts faith in public institutions. Soaring prices risk undermining such confidence, which is critical in a still-young currency union.

Draghi’s bond-buying triumph lacks obvious sequel

13 Apr 2022

The ECB’s plans to tighten monetary policy and the Ukraine war revive fears that weak euro zone members’ borrowing costs will soar. Though the former central bank boss tamed debt spreads in 2012, a repeat is tricky. Besides, governments that struggle can use tools Draghi devised.