UK economic outlook hinges on May selling deal

The UK government and European Commission have announced that the broad terms of the UK’s Withdrawal Agreement have been finalised. This lays the path for completion in the next few weeks, and the UK entering a transition period following its exit from the European Union on 29 March 2019. The 585-page draft agreement follows most … Continue reading “UK economic outlook hinges on May selling deal”

EU caught up in internal war of words

The President of the EU Commission had some choice words to say about the Italian budget dispute. Jean-Claude Juncker argues that Italy has to keep to strict budget limits on spending and borrowing that has been laid down by the EU. He went so far as to suggest it would mean the end of the … Continue reading “EU caught up in internal war of words”

Doom Loop

The most likely candidate for the next ‘Lehman moment’ is in Europe. In some ways the regulatory response that followed in the years after the collapse of Lehman Brothers has been a success. The days of racy balance sheets chasing outsized profits on wafer thin capital are largely over; replaced by a mantra of prudence … Continue reading “Doom Loop”

Trade wars should not derail growth

Markets worry about a trade war, and relax when they think it is about to be settled. Mr Trump’s attempts to negotiate new trading terms are often called a war but it’s actually a hard negotiation. The President threatens or imposes higher tariffs with a view to getting the other side to propose lower ones … Continue reading “Trade wars should not derail growth”

Genoa tragedy sets Italy on course for EU clash

The tragic loss of lives in Genoa when a large section of an elevated motorway collapsed is one of those dreadful events that should not have happened. We all feel for the families scarred by loss. It is a big event which is having a dramatic effect on Italian politics and government. This matters at … Continue reading “Genoa tragedy sets Italy on course for EU clash”

Brexit vote two years on: are we heading for a hard Brexit?

Two years have passed since the UK’s historic referendum on leaving the European Union, yet the big questions over the future relationship with the UK’s biggest trading partner remain unanswered. Will the UK remain in the EU’s customs union? Will it be a member of the single market? Will the UK face tariffs on its … Continue reading “Brexit vote two years on: are we heading for a hard Brexit?”

Bordering on a Customs Union

Since the start of this year, the UK political consensus has moved towards a customs union for goods, including agricultural trade, in the final UK-European Union (EU) free trade agreement. This is largely the result of the EU’s rejection of the UK’s alternative proposals to solve the Irish border issue and the Labour party making … Continue reading “Bordering on a Customs Union”

More trade disruption from US sanctions on Iran

There has been plenty of attention to the way the EU is caught in the crossfire of the US trade dispute with China. We also need to remember that the EU also stands to lose from the US wider dispute with Iran. The EU exported $10.8bn to Iran last year and is worried that US … Continue reading “More trade disruption from US sanctions on Iran”

Trade deficits and tariff wars

President Trump believes that if you are running a large deficit it should be easy to “win” a trade war. The problem with this argument is the EU and China may decide to engage. In 2016 the US ran a deficit of $505bn on trade in goods and services, according to the World Bank. Germany … Continue reading “Trade deficits and tariff wars”

Time to revisit the Italian election

Markets have been relaxed about the Italian election.1 Last year it was on the investment radar as a potential risk to the euro and the Eurozone, with the Five Star movement leading in the polls and expressing scepticism about the single currency. As they did well so the new leadership of Five Star toned down … Continue reading “Time to revisit the Italian election”

Can European politics damage the euro?

It is often fashionable to worry about European politics as newer parties of the right, left and centre emerge to challenge the economic orthodoxy of the Eurozone. We saw this at its most spectacular in Greece, where Syriza swept aside the old parties and gained a majority in a proportional system designed to make that … Continue reading “Can European politics damage the euro?”

Germany shows there is still political risk in the Eurozone

When the Netherlands kept Mr Wilders out of power and Mr Macron swept into office in France, the immediate threats to the Euro disappeared. The recent collapse of coalition talks in Germany does not presage any undermining of majority support for the single currency in its heartland. The next major political issue facing the Euro … Continue reading “Germany shows there is still political risk in the Eurozone”

Eurozone: Political risk still simmering

The major political obstacles, which had held back European risk assets, have now been overcome. However, events in Austria, Spain and Italy highlight the ongoing trend towards populist, nationalist and now regionalist sentiment. In Austria, although the far right Freedom Party (FPÖ) was recently defeated in elections for the legislative parliament, it could enter government … Continue reading “Eurozone: Political risk still simmering”

Mr Draghi worries about growth

ECB President Mario Draghi brought a surfeit of pessimism to the Jackson Hole meeting of central bankers. He argued that the 2% trend rate of growth for the Organisation for Economic Co-operation and Development (OECD) rich countries prior to the banking crash of 2008 has now halved to a trend rate of around just 1%. … Continue reading “Mr Draghi worries about growth”