Eurozone Meltdown

This is the first in a new series of regular briefing notes on important issues facing the euro area. In this briefing note we are asking whether the euro area could ever break up. We think not. But we are not as certain as we used to be.

Inflationary pressures to remain low

By: KOF Swiss Economic Institute

The KOF MPC indicator measures the risks to future price stability as communicated by the ECB.

When debt levels diverge

By: Wolfgang Munchau

France and Germany are heading into opposite directions in fiscal policy. An interesting experiment.

The gloves are coming off in the European debate on financial regulation

Steinbruck accuses the British of footdragging over financial regulations; the incoming Swedish EU presidency sides with the British on some important regulatory issues; Sweden wants to prioritise climate change and the financial crisis in its six-month EU presidency; there are no green shoots in the US auto sector yet; Austria thought of ingenious tax evasion scam, by which German savers can legally repatriate their savings back to Germany; Silvio Berlusconi, meanwhile, says the Italian love him just as he is.

Don’t celebrate too early, Germany’s Constitutional Court has given a stinging judgment on European integration

Lisbon Treaty is declared constitutional, but Court demands new German domestic legislation to strengthen the parliament; Guy Verhofstadt has been leader of Europe’s liberals; Tony Blair seems to be the front-runner for the Council presidency; local council in France manage to delay infrastructure projects; house price, meanwhile, continue to fall in the US and Spain, but not in the UK.

Landesbanken consolidation off the agenda

German states are to set up their own bad bank without pressure to consolidate; Germany’s constitutional court decides on Lisbon today; BIS recommends ‘prescriptions’ for financial products; Eurozone confidence is at the highest level since November last year; The Irish prime minister is recommended to sack 4 ministers; The Greek government, meanwhile, is should use the black economy instead.

BIS criticises governments over bank policies

Annual report says bank rescue a pre-condition for economic recovery; Mario Draghi says global co-ordination is important for exit strategy; Bank of Spain urges consolidation of Spanish savings banks; recession drives Spanish immigrants underground; Fillon urges his cabinet to support a hard-nosed investment strategy for French government bond; Angela Merkel, meanwhile, promises lower taxes, only weeks after support a balanced budget law.

Exporters face credit crunch

The German export association predicts dramatic deterioration in credit conditions; stimulus policies have done little to save the French car industry; the German stimulus money is stuck in bureaucracy and not getting through; Mario Draghi warns of premature exit strategies; the gap between Spain and the euro area, meanwhile, is widen again, after having narrowed without interruption for 13 years.