Published: 16 Nov 2011
Last Updated: 06 Nov 2012
A mixed bag from this morning’s MT eurozone bulletin. The good news first, though: though: after a day of ups and downs yesterday, Italian debt yields have dropped back below 7%, which means that the EU can, for the moment, halt the frantic search down the back of sofas for the money it would need to help it pay off the country’s €1.8tn debt. 10-year yields dropped to 6.95%, while two-year yields fell 50 basis points to 6.21%. That suggests new PM Mario Monti, who’s expected to announce his government later today, has given investors a crucial injection of confidence. Although 0.05% below crisis-level by no means takes the country out of the danger zone…
There were more positive headlines (sort of) about eurozone inflation, which remained flat during October, unchanged from September’s 3%. Good news, of course, because it suggests that price pressures are, as IHS Global Insight economist Howard Archer put it, ‘abating in the face of weakened economic activity and high and rising unemployment’. So people might not be getting payrises – but at least the price of bread hasn’t risen, either. Every cloud, etc.
That probably won’t come as much comfort to the good people of Spain, who have spent the last few days nervously eyeing the goings-on in Italy, for fear they might begin to spread west. Even if Italy doesn’t require a bailout (and the glass-half-empty contingent have all but guaranteed that it will), the European Financial Stability Facility would have a difficult time finding the cash to help out Spain. Plus, there’s an election in a few days’ time: it’s a sign of the times that Mariano Rajoy, the conservative Popular Party leader who is expected to breeze to victory, is using his last five days of campaigning to reassure voters he’ll ‘convince’ markets his country is solvent – rather than the usual last-minute ‘free tea for the elderly’-type commitments.
Meanwhile, David Cameron has managed to get himself into all sorts of trouble. Not only did his decidedly dodgy impression of the Aussie PM threaten to cause a diplomatic incident, but the Germans – specifically Volker Kauder, parliamentary leader of Angela Merkel’s Christian Democratic Union party - are also unimpressed. Kauder who said yesterday that Cameron will ‘not get away’ with opposing a Robin-Hood style tax on transactions, adding that Cameron’s ‘self-centred’ and Britain must not ignore its ‘responsibility for making Europe a success’. In the past, though, George Osborne has called the tax a ‘bullet aimed at the heart of London’. So we’ll see what happens there…
And if Cameron thought he could seek solace closer to home, he was mistaken: deputy PM Nick Clegg is on the warpath, too. Cameron’s Guy Friday has criticised the PM’s ambitions to separate the UK from the EU, saying that voters wouldn’t understand the Government’s plans to make ‘tortuous’ changes to EU treaties during an emergency. ‘It would open the door to populists, chauvinists and demagogues,’ he said. He also – perhaps sensibly – pointed out that bringing powers back to the UK wouldn’t be fast. ‘Europe doesn’t work like that,’ he said. Trouble in Coalition paradise?
There were more positive headlines (sort of) about eurozone inflation, which remained flat during October, unchanged from September’s 3%. Good news, of course, because it suggests that price pressures are, as IHS Global Insight economist Howard Archer put it, ‘abating in the face of weakened economic activity and high and rising unemployment’. So people might not be getting payrises – but at least the price of bread hasn’t risen, either. Every cloud, etc.
That probably won’t come as much comfort to the good people of Spain, who have spent the last few days nervously eyeing the goings-on in Italy, for fear they might begin to spread west. Even if Italy doesn’t require a bailout (and the glass-half-empty contingent have all but guaranteed that it will), the European Financial Stability Facility would have a difficult time finding the cash to help out Spain. Plus, there’s an election in a few days’ time: it’s a sign of the times that Mariano Rajoy, the conservative Popular Party leader who is expected to breeze to victory, is using his last five days of campaigning to reassure voters he’ll ‘convince’ markets his country is solvent – rather than the usual last-minute ‘free tea for the elderly’-type commitments.
Meanwhile, David Cameron has managed to get himself into all sorts of trouble. Not only did his decidedly dodgy impression of the Aussie PM threaten to cause a diplomatic incident, but the Germans – specifically Volker Kauder, parliamentary leader of Angela Merkel’s Christian Democratic Union party - are also unimpressed. Kauder who said yesterday that Cameron will ‘not get away’ with opposing a Robin-Hood style tax on transactions, adding that Cameron’s ‘self-centred’ and Britain must not ignore its ‘responsibility for making Europe a success’. In the past, though, George Osborne has called the tax a ‘bullet aimed at the heart of London’. So we’ll see what happens there…
And if Cameron thought he could seek solace closer to home, he was mistaken: deputy PM Nick Clegg is on the warpath, too. Cameron’s Guy Friday has criticised the PM’s ambitions to separate the UK from the EU, saying that voters wouldn’t understand the Government’s plans to make ‘tortuous’ changes to EU treaties during an emergency. ‘It would open the door to populists, chauvinists and demagogues,’ he said. He also – perhaps sensibly – pointed out that bringing powers back to the UK wouldn’t be fast. ‘Europe doesn’t work like that,’ he said. Trouble in Coalition paradise?
