Does a New Eurozone Recession Threaten U.S. Growth?

It’s a perfect score for Germany’s economic reports so far this week—perfectly negative. In two days we’ve seen two macro updates for Europe’s biggest economy and in both cases the numbers were deeply disappointing. Yesterday we learned that new manufacturing orders suffered a substantially larger-than-expected decline in August, followed by today’s news that industrial output plunged 4% during that […]

Hard Work and External Help: How to Successfully Conduct Macroeconomic Adjustment With Official Assistance

What are the factors that ensure a successful and durable completion of a financial assistance programme? Past experience with IMF-supported adjustment programmes underlines the importance of external conditions but also of fiscal consolidation, financial repair and structural reforms. These findings vindicate the strategy pursued in recent adjustment programmes in the euro area: putting the fiscal […]

Euro Area: An Unbalanced Rebalancing?

By John Bluedorn and Shengzu Wang: Since the financial crisis, the euro area current account, made up mostly of the trade balances of the individual countries, has moved from rough balance into a clear surplus. But the underlying rebalancing across economies within the euro area has been highly asymmetric, with some debtors, like Greece, Ireland, and Spain, seeing […]

Euro Area – Q&A on QE

By Reza Moghadam and Ranjit Teja: As inflation has sunk in the euro area, talk of quantitative easing (QE)—and misgivings about it—have soared. Some think QE is not needed; others that it would not work; and yet others that it only creates asset bubbles and may even be “illegal.” In its latest report on the euro area, the IMF assesses […]

What to Do About the ‘Crazy Euro?’

From today’s FT: ECB under pressure to tackle ‘crazy’ euro Pressure is mounting on the European Central Bank to take action against a persistently strong euro with a leading industrialist calling on Frankfurt to tackle the “crazy” strength of the currency…Fabrice Brégier, chief executive of Airbus’s passenger jet business, said the ECB should intervene to push […]

Momentous EU Summit

There are two big issues for the EU heads of state meeting at the end of this week: A review of the fiscal plans and structural reforms of member countries and the appointment of the EC President, following the recent EU parliamentary elections. To the chagrin of many observers, especially in Berlin, the attempt some countries, […]

What the ECB Did and What it Means

We anticipate that it will take investors some time to digest the new initiatives the ECB announced last week. The ECB will be providing more details as well going forward. Here we will review the actions and discuss the implications of the different measures. There were five new measures announced: 1. Rate cuts: The entire rate corridor […]