Europe and a new form of

31st March 2011

Portugal's Prime Minister resigned, Merkel's party was ousted from the most prosperous state in Germany after an almost 58 year uninterrupted rule and at France's recent election, abstention reached a new high at 54% of the population.

Berlusconi flirting with protectionism

In reaction to recent French takeovers of Italian companies, Italy is threatening to draft a bill to curtail the trend.

France maintains the bill will go beyond measures conceived by Paris and tensions look to worsen as the French EDF, the largest shareholder of Italian energy company Edison prepares to replace the Italian CEO with a French counterpart.

Indeed with David Cameron concerned about maintaining an open and competitive continent, the issue is one to watch. Nevertheless, with a high savings rate and exposure to German and Emerging Market economies, the outlook for Italy remains strong.

In a recent auction, the maximum amount of index-linked bonds targeted was sold on Tuesday, €6bn year to date. Domestic demand remains strong.


Spanish growth downgraded

Another European country with issues of its own and yet resilient market reaction is Spain.

The Central Bank sees a growth outlook of 0.8% for this year, lower than the government's expectation of 1.3% growth.

Unemployment is still among the highest in Europe at ~20% and they are implementing some of the deepest austerity measures to bring their deficit inline with that of France.

Nevertheless, markets are forward looking and are reacting well to the aggressive policy implementation. Spreads on Spanish bonds over the equivalent German versions continue to narrow.


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1 thought on “Europe and a new form of”

  1. Anonymous says:

    Just why is the Yen in such demand?    After all Japan’s debt is a staggering 200% GDP, its banks are moribund, to live it has to force the value of the yen downwards so that it can export.   That doesn’t spell a sustainable state with a save haven currency from where I sit, and yet people rush towards it.   Are short term views and long term views of Japan  so different or is there a more rational explanation?

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