News

On December 13 a panel of macroeconomic experts gathered to discuss the latest developments in the Eurozone. Together they gave their comprehensive insights of our recent findings and facts, and discussed topics such as:

• How business and political leaders could plan for a “lost decade”?
• What impact the revival of the growth pact will lead to?
• What remains to be done to keep the Eurozone in its current form?

To learn and read more please download our latest forecast and watch the webcast from December 13.

Eurozone news releases

• December 2012: Eurozone painfully progressing to stability
• September 2012: A lost decade for the Eurozone?

Eurozone comments

• 2012-07-04: Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast (EEF), comments on tomorrow's ECB interest rate decision.
  
  “We think that there is a strong chance that the ECB cut interest rates tomorrow, probably by 50 basis points. There were indications last month that some council members favoured a rate cut and economic news has not shifted significantly since. With Eurozone governments making some progress towards reforms at the EU summit at the end of June, the ECB could be encouraged to try to help buffer the economy. We do not think that a rate cut will provide a significant boost, since rate levels are already low. But it would show that the ECB is ready to use all the tools at its disposal.
  
  “We do not expect the ECB to announce a new LTRO tomorrow. More liquidity could be needed should tensions in the banking sector escalate again but at the moment, there is no strong evidence that a Eurozone-wide lack of liquidity is an issue.
  
  “We do not expect any announcement regarding bond purchases either. With the ESM now explicitly tasked to buy bonds of peripheral countries, the ECB will probably leave the SMP dormant. However, we think that the programme would need to be revived in severe downside scenarios. The ECB’s purchasing capability are potentially unlimited in stark contrast to the ESM’s limited funding which is likely to be insufficient should significant intervention be needed on the Spanish and/or Italian bond markets.”
  
  ENDS
  
  For an interview with Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast, please contact Bijal Tanna, Ernst & Young media relations, at +44 (0) 20 7951 8837 or +44 (0) 7957 342 975.
  
  
• 2012-06-29: Tom Rogers, senior economic adviser to the Ernst & Young Eurozone Forecast (EEF), comments on the EU summit.
  
  “This morning's news of a breakthrough in discussions over financial support for distressed European banks is very positive news. The deal to inject funds from the EFSF directly into banks should underpin confidence in the stability of the banking system, helping to sustain economic activity. Even more importantly, by loosening the ties between banking solvency and government solvency, it should help keep government borrowing costs down, and mitigate the risk of further debt restructuring.
  
  “Having said that there remains much to be agreed, in particular the parameters of the proposed European Banking Union. This is an essential precursor to the new role of the EFSF, but it will involve countries ceding sovereignty over banking regulation. Under the terms of the deal, the countries applying for EFSF aid for their banks will also need to be adhering to fiscal targets set by the Commission — given the outlook in Europe's economy over the coming couple of years this will in itself be a substantial challenge.
  
  ENDS
  
  For an interview with Tom Rogers, senior economic adviser to the Ernst & Young Eurozone Forecast, please contact Bijal Tanna, Ernst & Young media relations, at +44 (0) 20 7951 8837 or +44 (0) 7957 342 975.
  
  
• 2012-04-25: Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast (EEF), comments on today's Eurozone bank lending survey.
  
  Easing of lending criteria is very good news and suggests that the ECB’s LTRO has been positive beyond a temporary boost to financial markets.
  
  Since the survey was carried out, the financial environment has worsened again so banks’ own access to funding is likely to have deteriorated.
  
  The less good piece of news in this survey is that demand for loans remains anaemic. This is consistent with our forecast of a mild contraction in the Eurozone. Lower incomes and profits combined with a need to reduce debt in the private sector means that spending, and hence borrowing, will be weak throughout the year.
  
  “This survey’s results are particularly insightful since they give the first piece of evidence of the impact of the ECB’s LTRO on banks’ lending decisions. And the ECB will have been pleased with the results. Banks have significantly eased lending criteria on the back of the liquidity provided by the ECB. The recent reversal in market sentiment suggested that the LTRO may have been a very expensive operation for little and short-lived benefit. But these data imply that the ECB’s operation has achieved its main aim in improving access to credit. We will have to see how long this improvement lasts. Banks reported improved funding conditions which corresponded to the period of relative calm in financial markets at the beginning of this year. Since then the financial environment has worsened again so banks’ own access to funding is likely to have deteriorated.
  
  “The less good piece of news is that demand for loans remains anaemic. Despite banks being more inclined to lend, businesses in particular had very little appetite to borrow in the first quarter. This reflects weak growth and an uncertain economic outlook, conditions that are likely to stay throughout this year. We forecast a mild contraction in the Eurozone as companies and households adjust to much tighter fiscal policy and rising unemployment. Combined with the need to reduce private sector debt in a number of countries, this means that investment and consumption, and thereby borrowing, will remain weak throughout the year.”
  
  ENDS
  
  For an interview with Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast, please contact Bijal Tanna, Ernst & Young media relations, at +44 (0) 20 7951 8837 or +44 (0) 7957 342 975.

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