1. Research
  2. About us
  3. Analysts
  4. Sebastian Becker

European Central Bank: Updated capital key “forces“ the ECB to reduce holdings of Italian, Spanish and French bonds

April 3, 2019
Region:
At the recent meeting of the Governing Council on 7 March 2019, the ECB decided to maintain an extremely expansionary degree of monetary accommodation in future. It now announced to keep target rates at their present extraordinarily low levels at least through year-end 2019 – instead of just "through the summer", as previously pledged. Furthermore, it reiterated that it intends to maintain the huge size of EMU sovereign bond holdings purchased between March 2015 and the end of December 2018 for an incalculable period of time. As a consequence, principal payments from maturing securities bought under the APP (asset purchase programme), including sovereign bonds from the PSPP portfolio (public sector purchase programme) have to be reinvested in full. This ought to support demand for EMU bonds for some time to come, putting downward pressure on yields. [more]

More documents from Sebastian Becker

23 Documents
March 19, 2020
Region:
1
Fighting the corona crisis: Whatever it takes. The government’s support measures so far include greater access for firms to short-time allowance, tax moratorium and the potential provision of state guarantees of up to EUR 460 bn. We expect the government to come up with additional fiscal stimulus measures soon. The budget balance could post a deficit of 3.5% of GDP in 2020/21. (Also in this issue: KfW programmes to support corporate Germany – A primer. Corporate lending in a corona recession: Development banks as an anchor of stability?) [more]
March 18, 2020
Region:
2
Corona recession – depth probably close to 2009 slump. Within days lock-down measures and (temporary) factory closures have reached a level that suggests a far bigger H1 contraction than previously thought. In our new baseline scenario we expect GDP to decline between 4% and 5% in 2020, notwithstanding a recovery in H2, as – in contrast to 2009 – the service sector will be hard hit, too. (Also in this issue: the German government's support measures, labour market, industrial recession, auto industry, corporate lending, the view from Berlin) [more]
February 10, 2020
Region:
3
After very weak December data a small drop in Q4 GDP seems likely. Looking forward, the coronavirus provides a substantial risk for the expected global recovery, as hopes were pinned on an improvement of the Chinese economy. We assume that the corona outbreak will shave off 0.2pp of Germany's Q1 GDP, making a technical recession quite probable during the winter half. [more]
December 20, 2019
Region:
4
In 2019 we've been asked lots of questions about the German economy, politics – fiscal policy and the black zero, in particular – and, more fundamentally, about Germany’s future given the risk of a more permanent reversal of globalisation, the increased environmental focus, the challenges for the German car industry and the widespread notion that Germany might miss the boat on the big data economy and other technological trends. This is why we are also discussing these issues in this report. For 2020 we anticipate a gradual recovery in global trade, which should enable a piecemeal recovery in exports and help end the industrial recession. We expect equipment spending to decline in 2020. On the other hand, the domestic growth pillars – private and government consumption as well as construction – should continue to expand at a healthy clip. But annual GDP growth of 1% forecast for 2020 after 0.5% in 2019 is clearly underwhelming, especially since the acceleration versus 2019 is almost exclusively the result of an unusually high number of working days in 2020. [more]
September 30, 2019
Region:
5
A new (green) 'fiscal deal' in Germany? The climate protection programme is no game changer for fiscal policies as it will be largely counter-financed by additional revenues. The ecological steering effect of the climate package is also limited since the initial carbon price will be low. Speculations that Germany will finally relent and embark on a decisive fiscal policy loosening have proved to be overplayed. We stick to our call that we will not see a fiscal package unless Germany enters a severe recession. Still, Germany’s budget surpluses are set to narrow considerably in 2019/20. (Also included in this issue: German labour market, industrial production, auto industry, the view from Berlin) [more]
May 20, 2019
Region:
6
This edition of Focus Germany has quite a lot but rather short articles. We are taking stock of the German economy after Q1’s surprisingly strong growth. We expect the economy to flatline in Q2 and foresee an only subdued recovery in H2 given the recent flare-up of several geopolitical hotspots, rather than their hoped for de-escalation. We cross-check this analysis with deep dives into the auto and the mechanical engineering sector. We look at the impossible trinity of Germany’s fiscal policy (tax cuts, higher social expenditures and the black zero) and peek into the difficulties finance ministers are facing in the digital economy. We discuss to what extent the upcoming EP and Länder elections might spell more trouble for the Groko and introduce our new German financial conditions index. [more]
April 9, 2019
Region:
7
If you think of Germany in the night (and you are an economist) three questions will jolt you from your sleep. Will external demand recover? Will the auto industry overcome its WLTP-induced supply shock and (if you are a Keynesian economist) will the government launch a fiscal package? The answers, of course, are not independent of each other. (Included in this issue: German exports 2019, world trade, the automotive industry's performance, public finances and the view from Berlin) [more]
March 25, 2019
Region:
8
While digitalisation does promise significant additional prosperity, it also threatens to lead to higher inequality. A major automation wave or increasingly capital-intensive production would reduce the overall wage share and raise corporate and capital income. According to our scenario analysis, the EU countries would, on average, have to deal with a huge annual fiscal deficit if automation dramatically reduced employment. It is uncertain how digitalisation will affect the demand for labour and the public finances. Nevertheless, governments should try and prepare their countries for the future, for example by paying more attention to education policy and adapting the international tax system to the realities of the 21st century, for example in the field of corporate taxation. [more]
March 4, 2019
Region:
9
The recession in German industry can be traced to the massive slowdown of global trade in 2018. Will the German service sector withstand the recession in industry, as some recent survey data seems to suggest? We doubt it. In previous downswings in the manufacturing sector services were pulled lower, too. Indeed, the two sectors' output trends during 2018 did already follow this pattern. (Also in this issue: Economic Minister Altmaier's National Industrial Strategy 2030, the German Federal Budget, lower total and rental inflation thanks to new basket, corporate lending in Germany, the view from Berlin) [more]
February 5, 2019
Region:
10
Given much weaker than expected January business surveys and in particular the slump in their more forward-looking components we are now expecting the German economy to contract again in Q1 2019. Due to the yet unknown Q4 GDP outcome and its contradictory signals we currently refrain from formally revising our 1% GDP forecast lower again, but are expecting to shave off several tenths of a percentage point come February 22nd, unless the Statistical Offices Q4 GDP breakdown – and the new monthly data available by then – provide us with substantial positive surprises. While a technical recession might be avoided by a hair’s breadth with a positive Q4 number, the development of several key cyclical indicators is telling us that the German economy is drifting towards recession right now. [more]
December 14, 2018
Region:
11
The 0.2% qoq drop in Q3 GDP was, of course, largely due to the WLTP effect, but underlying growth has also clearly slowed in 2018. After mustering 1.6% in 2018, we expect German GDP to expand by 1.3% in 2019. Growth should be only marginally higher in 2020, despite a strong positive working day effect, as a further slowing of the global economy and EUR appreciation will provide considerable external headwinds. [more]
October 4, 2018
Region:
12
Weak currencies and economic difficulties in emerging markets dampen German exports. Over the past few months, the euro has appreciated against the currencies of many emerging markets which will likely curtail German exports to these countries in 2018 and 2019. In 2017, the ten largest German export markets among the emerging markets accounted for some 16% of total exports. According to our estimation model, German exports to this country group are set to increase by a nominal 3.5% to 4% in 2018 and 2019. This would be a noticeable loss of momentum compared with 2017 when exports increased by just over 7%. The country group’s share of total exports for the industrial sector is highest for traditional capital goods manufacturers, with mechanical engineering taking the lead. The ten emerging economies examined accounted for just over 22% of all exports in this sector in 2017. [more]
4.10.3