Eurozone: Increasing political and economic tensions – Westpac

The resurrection of the EU’s migrant crisis shows that the issue was never resolved and the impact has also highlighted increasing political and economic tensions within EU, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“The Italian BTP/German Bund yield spreads may have stabilised recently, but remain at elevated levels. Inability to gain some unity on migrant policy could also reignite issues over EU budgets, which, though they have dropped down the summit’s agenda, have also become more acute given the fiscal proposals of the new Italian coalition.”

“Recent Eurozone data has shown some stability, but if German factory orders and industrial production fail to rebound, risk of a soft Q2 will increase, underscoring ECB’s forward guidance.”

“A united front from the EU Leaders’ Summit may allow EUR to rebound, but growth moderation and political tensions should cap rebounds within a possible 1.12-1.19 range.”