Ill winds from the East

Russia: Ill winds from the East

The Ukrainian crisis is already straining the euro zone. As growth stalls and inflation vanishes, the ECB rolls out its big guns.

Jean-Luc PROUTAT

One risk can hide another

Economic growth in emerging countries has moderated during the summer following a strong Q2. Financing conditions remain favourable both in terms of capital inflows, market access and cost of financing. We have slightly revised our growth forecasts for 2014 and 2015 owing to stagnation in Brazil this year and a recession in Russia next. Political risk is more and more acute. A recent IMF study confirms that China has all the warning signs of a “insidious” credit crisis.

François FAURE

Eurozone: The ECB acts again

As growth disappoints and inflation as well as inflation expectations decline further, the ECB decided to cut key policy and buy private sector debt securities. Those measures favour a further depreciation of the euro. Should conditions deteriorate further, the ECB will not have other options than buying sovereign debt securities.

Clemente DE LUCIA

Germany: Summer’s gentle decline

After starting the year at a promising pace, the German economy suddenly put on the brakes last spring. The expected Q3 rebound is likely to be small given the impact of new European Union sanctions against Russia. Faced with this environment, we have revised downwards our growth outlook for Germany.

Caroline NEWHOUSE

France: A turbulent end to the summer

The French economy remained stalled in Q2, and weak growth looks set to continue. The lack of growth and very low inflation are undermining the government's budget deficit reduction targets (3.8% of GDP in 2014). Given this economic background, along with open criticism of the economic policy to be implemented, François Hollande and Manuel Valls decided to carry out another cabinet reshuffle. The appointment of Emmanuel Macron as the new minister of economy clarifies the liberal slant of the government’s economic policy, best illustrated by the responsibility pact. Although the government is more cohesive than before, it will have to deal with a more fractious parliamentary majority. Politically, the dissolution of the government, though quite unlikely, is now a possibility. In terms of the economy, the progress of reforms is at stake.

Hélène BAUDCHON