Euro Zone

Germany is not the euro zone – what a shame

23 Aug 2013

If the whole single currency zone could catch up with its largest member, the crisis and the recession would be history. But while the latest survey confirms that the euro area is picking up, Germany remains far ahead. This unbalanced recovery could lead to more trouble.

Dull Dutch economy is euro zone’s newest drag

15 Aug 2013

Triple-A rated Netherlands is starting to stand out, in a bad way. The 0.2 pct GDP fall in the second quarter provided an unhealthy reminder of the slow recovery from a housing boom and bust. The country is fundamentally sound, but there’s more pain to come.

Euro zone recovery isn’t real yet

14 Aug 2013

It’s cheering to see the euro zone exit recession after six quarters of falling GDP. The monthly momentum is encouraging too. But output is still 3 pct below its peak and increasing at about a 1 pct annual rate. It’s hard to believe in more than a feeble revival for now.

Berlusconi verdict weakens Italian reform drive

2 Aug 2013

The former prime minister’s conviction for tax fraud will exacerbate tensions within Rome’s fraught ruling coalition. Yet neither party is ready to face their electorate. That means a crisis isn’t imminent – but the political unity needed for reform is still remote.

Greece needs a new debt deal

1 Aug 2013

Last year’s restructuring left Athens with a Sisyphean debt burden. The euro zone’s current policy of dangling modest relief in exchange for good behaviour won’t work for ever. Debt is stifling the economy and making austerity untenable. Greece needs more debt relief, without delay.

ECB wrongly toys with transparency gimmick

31 Jul 2013

Two members of the central bank’s governing council want to publish meeting minutes. The road to hell is paved with this sort of good intention. Publication would constrain policy and turn the council into another political forum. As if the euro zone doesn’t have enough of them.

Dividend cut would help Santander and BBVA

31 Jul 2013

The regulator wants to limit payouts to 25 pct of 2013 earnings. That might sound superfluous for the top two Spanish banks, which should gain from a stronger domestic economy and lower provisions. But it’s sensible to hoard capital ahead of next year’s euro zone banking union.

BNP’s sturdy model will help German push

31 Jul 2013

France’s largest lender weathered a hit at its investment banking division thanks to an old-style universal model. It now hopes to balance its exposure to weak economies like Italy with a push into Germany. That may prove challenging, but BNP’s solid balance sheet should help.

Spain moves steadily towards a slow recovery

30 Jul 2013

GDP hardly shrank at all in the second quarter. A 0.1 percent decline signals the end of a two-year slump. But the next phase is likely to be stagnation. Sustainable strong growth requires more credit, stronger exports and a lasting cure for unemployment.

ECB enters era when virtual tools do not suffice

29 Jul 2013

A year ago Mario Draghi’s mere pledge to save the euro prevented chaos. But his great bond-buying promise hasn’t delivered a sustainable recovery or restored true faith in peripheral debt. “Virtual” intervention has its limits. The ECB must use its other tools - or invent them.

ECB in thorny dilemma over Cypriot capital controls

29 Jul 2013

Bank of Cyprus depositors are about to know their fate. At below 50 percent, the likely haircut on their holdings could have been worse, and means the island state can think about easing capital controls. But that can only happen if the ECB agrees to fund a wave of withdrawals.

Hugo Dixon: EU ripe for single-market push

29 Jul 2013

Deepening the single market would do a lot for the EU’s sagging competitiveness. Vested interests, especially in Germany and France, may be opposed. But a new push would help the euro periphery and could keep Britain in the EU - killing two birds with one stone.

Hooray! Euro zone economy is almost stagnant

25 Jul 2013

The latest numbers point to minuscule GDP growth, although the pace isn’t fast enough to curb unemployment or make a dent in fiscal deficits. Still, stability is far better than decline. And in rich, ageing and sluggish Europe, it may be as good as it gets.

Italy’s problems will stay when Berlusconi is gone

18 Jul 2013

The former prime minister faces his final appeal for a tax-fraud case on July 30. A guilty verdict will be bad news for the main centre-right and centre-left parties: neither one wants new elections. The question is what comes after Berlusconi? The answer may be more of the same.

Euro zone weakened by banks’ sovereign-debt feast

16 Jul 2013

Peripheral bonds seem impervious to rating cuts or political crises, because debt is being increasingly swallowed up by domestic banks and investors. That stifles lending, discourages reform and delays the euro zone’s recovery. The ECB could help - but only up to a point.

Dash from emerging to developed markets hits new risks

11 Jul 2013

Capital is being sucked from emerging markets, depressing both asset prices and growth. Developed-market equities are the new favourite. But Europe is in recession, U.S. growth is moderate and Japan’s stimulus may wear off. Investors are swapping one set of risks for another.

EU bank resolution faces mother of all-nighters

10 Jul 2013

The European Commission wants to decide on whether euro zone banks should enter resolution, but accepts that national governments can’t be forced to put up their own money if it happens. When ministers meet later this year, expect the wrangling to go on even longer than usual.

Euro doomsters beware: rebalancing at work

8 Jul 2013

The German trade surplus vis-à-vis the euro zone has all but vanished in 2013, highlighting the easing of the currency area’s internal imbalances. The fundamental causes of the crisis are in full-scale retreat. The euro zone is more flexible than sceptics want to believe.

Hugo Dixon: How the euro zone can muddle through

8 Jul 2013

Three years on, debate still rages over what is to blame for the crisis and what to do about it. Looser monetary and fiscal policy are a small part of the answer, as is greater integration. Most important is to press ahead with reform, on a national and supranational level.

Draghi and Carney will find limits of word power

4 Jul 2013

Both the euro zone and British central banks took to verbal guidance this month, trying to counter the effect of loose talk from the Fed. Such guidance can be effective but not for long. Investors will figure out if the promises are likely to prove empty. Then they’ll want deeds.