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Eco Focus

Eco Focus is an aperiodic publication providing up-to-the-minute analysis of a current topic.

Spain - The rapid rise of Podemos threatens political stability

  • Edition February 27, 2015

    Spain political landscape is changing rapidly. The rise of the 12-month old anti-establishment party of Pablo Iglesias, Podemos, is breaking the country two-party system. Lying behind voters support for Podemos is an austerity fatigue, but also the anger against the corruption of the two traditional parties, the socialists PSOE and, even more, the currently ruling rightist Partido Popular (PP).


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Greece: four more months of hope and risks

  • Edition February 23, 2015

    The 19 February Eurogroup agreement lays the ground for continued financial assistance to Greece pending the approval of a list of reforms to be submitted by the Greek government today. It looks unclear how the Greek government will fund itself during the negotiations process; a further deterioration in the state cash position could require an increase in T-bills issuance as a bridging option.


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Greece : "extend and pretend" will probably not be the end

  • ECO Focus - Edition February 6, 2015

    In spite of mounting pressure we believe that an agreement between Greece and its creditor countries will be achieved and we look at a 'Grexit' as a tail risk.The compromise should probably be a mix of maturity extension, more concessional rates, fiscal easing and structural reforms.Fiscal easing should favour rather than jeopardise the success of the Greek adjustment program by providing a reflationary impulse and improving debt sustainability.


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BoE Inflation Report preview

  • ECO Focus - Edition February 6, 2015

    The BoE remained on hold at its February meeting (Bank rate at 0.5% and programme of asset purchases at GBP375bn). The February Inflation Report (to be published on Thursday, 12 February) will be the main UK key event for markets next week. We expect strong positive revisions to the growth forecasts and substantial downward revisions to near-term inflation owing to the recent decline in oil prices.


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ECB's liquidity move pressures Greek government

  • ECO Focus - Edition February 5, 2015
    Sticking with its (self-imposed) rules on the eligibility of collateral, the ECB decided to suspend normal refinancing to Greek banks, putting maximum pressure on the Greek government and Eurozone policymakers to reach a deal by the end of the month. The bottom line is that the ECB decision is a risky, albeit calculated political move.


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UK politics: 2015 general election and the erosion of the two-party system

  • ECO Focus - Edition February 2, 2015

    The main 'known' risk event this year in the UK is the general election, which will take place on 7 May. Uncertainty is running high over the configuration and stability of the next government. Polls suggest that neither of the two mainstream parties will have sufficient support to secure a majority, leading to a hung parliament and a coalition as the most likely scenario.


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Eurozone: Believe it or not, the credit cycle is turning

  • ECO Focus - Edition January 29, 2014

    Commercial banks in the Eurozone expanded credit to the non-financial private sector at the fastest pace seen in over three years at the end of last year. Supportive business surveys as well as looser monetary conditions suggest this trend should continue in the coming months.


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ECB QE: big and flexible enough

  • ECO Focus - Edition January 23, 2015

    Yesterday's ECB announcement of an Expanded Asset Purchase Programme (EAPP) is unambiguously positive, in our view, in terms of the size and scope of purchases (including agencies and linkers, up to 30Y, until at least September 2016). The limitations that could potentially mitigate the market impact, including an attempt to reduce the degree of risk-sharing and the fact that capital keys favour large core countries, should not be overstated in our view.


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The ECB's QE delivery and potential surprises

  • ECO Focus - Edition January 19, 2015

    Following months of speculation, the ECB is likely to announce a new broad-based asset-purchase programme on Thursday, which has the potential to surprise the market in various directions. The hope is that a compromise with the hawks on the degree of risk-sharing and moral hazard will allow for a more ambitious programme. The easiest and ‘cleanest' way to surprise would be with a flexible programme of at least EUR500bn, with more to come if needed.


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Greece: political uncertainties and public debt renegotiation ahead

  • ECO Focus - Edition January 13, 2015

    Greece legislative elections are scheduled for January 25th after current coalition parties failed to secure enough votes to elect a new President in December. If elections are to mirror public opinion polls, then Greece far-left opposition party, Syriza, will be ahead of current coalition parties. Given Syriza economic program, confrontational negotiations on public debt are expected with the most likely scenario of longer maturities.


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