EUR Monthly Review September 2018

Eurozone exporters are expressing concern over the rise of the Euro against Sterling as it is seen giving a boost to UK firms.

French President Emmanuel Macron is being accused of acting like “a king” as he enacts policies that favour the rich and big business, which is contrary to his centrist manifesto.

The levels of economic activity in the Eurozone as predicted by Purchasing Managers Indexes are slowing, which could lead the ECB to delay the removal of support.

The new Italian Government had abandoned plans for infrastructure development prior to the Genoa bridge disaster. Now they must revise policy to react to public safety concerns.

Italy wants to raise its debt to GDP ratio, which is currently more than 130% to deal with “Genoa” and make good on its welfare reform plans. This is unlikely to be seen positively in Brussels or Frankfurt and could lead to a major dispute, which if taken to its logical conclusion could see Italy depart the Euro citing its own population over the EU.

Angela Merkel wants a German as EU Council head. She is therefore unlikely to jeopardise that by promoting the candidacy of Bundesbank President Jens Weidmann for ECB head. In what would then be an open race the Irish Central Bank Governor is seen as a sensible compromise candidate.

The spectre of contagion returned with concerns over Eurozone bank exposure to Turkey. Fresh regulation is needed from the ECB that regulates total exposure across the entire region.

The scheduled removal of the Asset Purchase Scheme could be delayed or cancelled entirely if a slowdown in the Eurozone looks likely. ECB President Mario Draghi has already intimated he would be in favour of such a move if economic activity slows substantially.