EU Spend? Nein Danke!
Germany’s discipline in dealing with fiscal policy is proving a bitter pill to swallow for the rest of its European Union partners. The EU wants to put forward a budget large enough to help mitigate a global slowdown. But Germany is pushing for the spending budget to be restricted to just 1.0% of GDP across the region, with the likes of Sweden, Denmark and the Netherlands supporting its call. The calls to grow the budget stem from a desire to spend on research, the digital economy, border control and defence. Those in favour of the larger budget see Germany’s approach detracting from the ambitions of the EU broad church.
Meanwhile, European and German economic sentiment indicators will be released today. Recent readings of the ZEW (Zentrum für Europäische Wirtschaftsforschungeconomic) sentiment index reflect a significant deterioration in market sentiment, in line with a broader drop in economic activity in the Eurozone.
And in news about investors looking for a safe haven after the weekend oil refinery drone attack, the 10 Year German Bund yield pulled back off its recent highs. This indicates there has been some shift to safer havens like Germany, but it has not been wholesale… just yet. It would seem that investors are unconvinced that the rapid oil price hike is here to stay, with other producers and contingency reserves likely to make up any shortfall. Furthermore, the ECB (European Central Bank) has now confirmed that the recent decision was aimed at sending a strong message that low inflation and weak growth would not be tolerated and that the central bank would not want to lag behind the curve.