Introducing a new monthly report co-authored by ETF Securities Research and Roubini Global Economics Threats to Europe’s Cyclical Recovery
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Threats to Europe’s Cyclical Recovery
This report provides an update to themes introduced in our Quarterly Outlook, published in June. Our focus this month is on the threat to the European cyclical growth recovery, particularly the eurozone.
• The eurozone is in the middle of a weak cyclical rebound that began in Q2 2013 after a double-dip recession, but has gained pace (to 1.0% y/y) recently as a result of the lower interest rates, the weaker euro, the reduced fiscal ”drag” for some countries (due to the increased ”fiscal flexibility” that the EU authorities have allowed), lower oil prices and other idiosyncratic factors. Near-term threats abound, and longer-term problems remain as well.
• Most notably, if Greece fails to implement reforms, it could flunk its third successive ”bailout”. The UK’s economy and politics are diverging from the EU, and other ”anti-system” parties are gaining (in France, Hungary and Spain), while reform efforts are weak, indebtedness high and demographics negative.
• What to watch this month: Bank of England monetary policy committee meeting (August 6), for indications about when to expect a rate hike; Greek negotiations toward a European Stability Mechanism loan (mid-August) – further clues about whether the calm can be sustained.
For more information contact:
ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com
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