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SnapshotsSep 3, 2020 | 16:10 GMT
The Eurozone's Economic Rebound Loses Momentum
Early signs indicate the eurozone's economic rebound from the COVID-19 crisis is already losing steam, which will force governments to introduce new rounds of stimulus that deepen their already problematic fiscal deficits. The eurozone contracted by a record 12.1 percent during the second quarter of 2020 as lockdown measures negatively impacted consumption, investment and trade. The lifting of those measures led to an improvement in economic activity since late May, but recent indicators suggest that this rebound is weakening as the rise in COVID-19 cases forces governments to reintroduce social distancing measures and international travel warnings. 
AssessmentsSep 2, 2020 | 11:00 GMT
A view looking up at the U.S. Federal Reserve building in Washington D.C. on July 1, 2020.
What to Make of the U.S. Fed's New Approach to Inflation
The U.S. Federal Reserve's switch from inflation targeting to inflation averaging confirms it will keep interest rates near zero for a prolonged period, even if prices begin to rise. This will not have an immediate impact on monetary policy given extended shortfalls from targets by both the Fed and other major central banks. But the move may pressure the European Central Bank (ECB) and others to also adopt new approaches to inflation and employment. It will likely result in a somewhat weaker U.S. dollar for a longer time as well, which will come as relatively good news for emerging markets barring another shift in global risk aversion. 
AssessmentsAug 26, 2020 | 15:13 GMT
A close-up of a five-euro banknote.
The Eurozone's Upcoming Financial Problems
Escalating soverign debt and fiscal deficit levels in eurozone countries due to the COVID-19 crisis will increase the probability of financial and banking crises in the years ahead, as well as surges in social unrest and higher taxes for both large corporations and big earners. Furlough schemes, subsidies and other forms of welfare spending across the eurozone are mitigating the economic fallout from the pandemic by keeping money in people's pockets and helping sustain domestic consumption at a time of deep recessions. But these schemes are financed through sovereign debt, loans from EU institutions and deepening fiscal deficits -- all of which are unsustainable.
SnapshotsJul 31, 2020 | 18:13 GMT
The Eurozone's Shrinking GDP Growth Solidifies a Slow Recovery
Rising COVID-19 infections will slow the eurozone's economic recovery by forcing governments to reintroduce lockdown measures that undermine business activity. Recessions across the bloc could last well into 2021 -- keeping consumption, investment and trade below pre-pandemic levels for several more months, while increasing the chances of business uncertainty and social unrest. The economic recovery will be particularly slow in Southern Europe due to the disproportionate impact of lockdown measures on the region's tourism-based economies, some of which were already in recessions before the pandemic. Ongoing uncertainty about future lockdown measures and the potential lifting of national stimulus efforts also means the risk of bankruptcies, financial crises and social unrest across Europe will remain high in the coming months.
AssessmentsMay 27, 2020 | 16:31 GMT
A statue depicting the euro is pictured outside the headquarters of the European Central Bank, which serves as the central bank of the 19 EU countries within the eurozone, in Frankfurt, Germany.
Will COVID-19 Be the Eurozone’s Undoing?
COVID-19 will saddle the eurozone with financial and political risks for years to come, testing the economic and institutional resilience of the currency area. High debt and deficit levels will increase the probability of sovereign defaults, especially in Southern Europe, as high unemployment levels create fertile ground for social unrest and the resurgence of destabilizing nationalist and anti-establishment political parties across the Continent. 
SnapshotsMay 5, 2020 | 15:23 GMT
A German Court Ruling Could Trigger a Financial Crisis in Europe
A German court ruling could jeopardize the continuity of one of the European Union's bond-buying programs and result in higher borrowing costs for Southern European countries at a time when their debt levels are increasing due to the COVID-19 crisis. On May 5, Germany's constitutional court ruled that the European Central Bank (ECB) must provide additional clarifications about the Public Sector Purchase Programme (PSPP), which buys sovereign debt from eurozone countries in secondary markets, within three months. Otherwise, the Bundesbank, Germany’s central bank, will not be allowed to continue participating in the program. This would probably mean the end of the PSPP, given that the Bundesbank is the ECB’s largest shareholder. The ruling also opens the door to eventual legal challenges to the Pandemic Emergency Purchase Program (PEPP), the 750 billion euro ($816 billion) stimulus package that the ECB launched in March. Should the PEPP end abruptly, the recession in the eurozone
SnapshotsMar 31, 2020 | 10:00 GMT
COVID-19 Fuels Familiar Rifts Between EU Regional Blocs
The European Union is struggling to find a common approach to cope with the economic impact of the COVID-19 outbreak, as the crisis fuels familiar clashes between northern and southern members of the eurozone. As a result, financial relief measures are largely taking place at the national level, once again highlighting the shortcomings of the European project.
AssessmentsMar 24, 2020 | 10:00 GMT
A colorful and conceptual 3D illustration of the novel coronavirus.
Reassessing the Global Economic Fallout From COVID-19
As the COVID-19 outbreak continues to spread to more countries in more corners of the world, initial forecasts that the total economic damage would be mostly contained to China are no longer plausible. Consensus estimates now suggest a 5-10 percent drop in global gross domestic product (GDP) in the quarter in which country-wide epidemics begin, persisting at an as-yet-undetermined magnitude into the next quarter as consumers and businesses adjust to the impact. The still many unknowns that surround the pandemic, however, has made it difficult to forecast the full economic fallout. China’s recovery may thus provide a better benchmark for what will happen elsewhere, given its status as the initial epicenter. But few other countries will be willing or able to take actions as draconian as Beijing's to quickly and efficiently contain the virus -- and the subsequent economic hits. 
SnapshotsMar 20, 2020 | 21:07 GMT
Europe Moves to Keep Its Economy Afloat
The European Central Bank augmented its 30 billion euro (about $32 billion) a month program of quantitative easing with a Pandemic Emergency Purchase Program to buy an additional 750 billion euros (about $800 billion) in member country sovereign and corporate bonds until the COVID-19 crisis is over. The ECB also eased for the first time collateral standards and assets eligible for purchase, including Greek sovereign bonds, and included short-term corporate bonds in its buying. It is no exaggeration to say the ECB may have precluded a potential sovereign default by Italy as it and other European governments are forced to ramp up borrowing to fight the economic effects of COVID-19 containment measures and a probable major economic downturn.
SnapshotsMar 11, 2020 | 20:57 GMT
The European Central Bank Faces the COVID-19 Crisis With Limited Options
The European Central Bank is in a difficult position, with financial markets pricing in a near 100 percent probability of a 10 basis point cut in the already negative −0.5 percent deposit rate on bank reserves when the ECB's Governing Council meets March 12. Markets recognize the relative impotence of monetary policy in responding to the COVID-19 outbreak, which was initially a supply-driven shock that is now morphing into slack demand and the need for decisive government responses to the public health crisis. With the exception of Italy and the announcement of new investment in Germany, however, little is being done and markets expect a central bank independent of politics to step up and act as the "only game in town."
SnapshotsMar 9, 2020 | 17:14 GMT
Europe Reckons With Escalating Coronavirus Anxieties
European stock markets -- including those in London, Frankfurt, Paris and Milan -- plunged March 9 amid mounting concerns over the coronavirus epidemic. A slew of new coronavirus cases across the Continent, along with the recent drop in global oil prices following OPEC's failure to agree on a unified response to the expected drop in oil demand, has further shaken investor confidence in EU economies. As the number of coronavirus infections across the European Union continues to rise, companies and investors fear that the impact on the bloc's economies will be more severe than initially anticipated. By limiting domestic economic activity, Italy's more drastic efforts to contain the contagion risk taking a significant toll on the country's already slowing economy. 
AssessmentsFeb 26, 2020 | 10:00 GMT
This photo shows fanned-out 50, 100, 200 and 500 banknotes of the euro, the currency of the eurozone.
The Eurozone Braces for a Rocky Year
Households, companies and investors alike should brace for a year of lackluster economic growth in the eurozone. The European Commission expects the 19-member currency area to grow by only 1.2 percent this year -- the same rate as 2019, but below the 1.9 percent and 2.5 percent growth seen in 2018 and 2017, respectively. While uncertainty about the future of global trade has taken a toll on Europe's economic climate and manufacturing sector, domestic consumption has nonetheless remained strong due to rising employment and modest increases in wages. The next few months, however, will present multiple sources of geopolitical risk that will continue to stall economic expansion across the eurozone, and could potentially lead to temporary recessions in countries such as Italy.
AssessmentsFeb 13, 2020 | 17:23 GMT
This photo show former German Christian Democratic Union party leader Annegret Kramp-Karrenbauer, who resigned earlier in February.
A Convergence of Issues Weighs on Germany
Companies and households in Germany will face several sources of risk throughout the year, including political risk from the country's fragile government coalition; economic risk connected to global trade uncertainty and threats to Germany’s exports; and institutional risk, caused by strategic divisions within the European Union that will make it hard for the bloc to implement policy. Germany will continue to be stable and prosperous in 2020, but these risk factors could prove disruptive for business, investors and individuals in the country.
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