Portugal has been given three years (till the end of 2008) to resolve its excess deficit situation. Portugal, like Italy only with less press attention, is in the midst of a serious economic slowdown. The decision to give Portugal slightly more time may be the result of a number of factors: it may be that [...]

Despite warnings from Otmar Issing that “The outlook for price developments has got decidedly gloomier since June”, the situation is far from uniform and far from clear. Yesterday Italy’s national statistical office, ISTAT, announced that annual inflation dropped in June to 1.8%, from 1.9% in May. This was Italy’s lowest annual reading since 1999. [...]

Bloombergs Mathew Lynn on why we need a rate cut regardless of fluctuations in the value of the euro. (Also see the Liquidity Trap post on Afoe yesterday, I, like Lynn, don’t agree we have reached the point where monetary policy is useless, at least not yet we haven’t).
“The ECB appears to have little comprehension [...]

There is a curious combination of expectations right now. The euro is rising, principally because of preoccupations about the US trade deficit and the associated sustainability issues, but also because there seem to be signs of a slightly better collective performance later in the year. This assessment may well be accurate. So what this means [...]

The euro is trading this morning at around $1.2150. The big issue seems to be the US trade deficit, which is currently outweighing all other considerations. Still what goes down can come up, and what goes up……
The dollar fell to the lowest in two weeks against the euro, the biggest move of any currency, on [...]

It may seem relatively trivial to be reporting on this after what has happened today in London, but, as they say, life goes on.
First the Bank of England.
The Bank of England left its benchmark interest rate unchanged after a series of explosions hit London buses and underground stations. The central bank’s Monetary Policy Committee kept [...]

The FT this morning discusses the state of the bond markets for the ‘weaker’ eurozone economies: Italy, Greece, Portugal. As expected interest differentials between government debt in these countries and German debt is widening, but only slowly. Italy is being evaluated at present as the weakest member. As the FT points out the temperature of [...]

I’ve been reasonably quiet about the evolution of the euro during the last couple of weeks. The movement has been a pretty volatile tug-of-war between the general downward drift, and resistance to change. Today there seems to have been a decisive push on one side (maybe because it was a Friday afternoon on a holiday [...]

German Finance Minister Hans Eichel said today that the German deficit would be over the 3 percent limit for the fourth consecutive year this year, and would remain there at least till 2007.
The latest data, from a meeting with state finance ministers, projected this year’s deficit to reach 3.7 percent. In addition, the country is [...]

As indicated earlier in the week, the EU Commission has given Italy two years to correct its deficit.
“The European Union on Wednesday gave Italy until the end of 2007 to cut its budget deficit in line with euro-zone rules. The EU head office said Italy has been violating the budget rules underpinning the common currency [...]