Now that the phase one trade deal between the US and China has been signed, the US will shift its focus to the EU. US frustrations related to EU trade policy have been mounting recently. In addition, little progress has been made on US requests related to defense spending and the EU’s China policy.
Soon, President Trump will announce what to do with tariffs on EU cars. We think he will not hike tariffs just yet, but will keep the tariff threat alive. Within the EU, the German and Hungarian economy are most vulnerable to higher car tariffs in the US.
Spain’s elections failed to solve the deadlock in parliament. Scraping a majority will be extremely difficult. The stalemate will not send the economy into crisis, but it prevents the economy and public finances from being prepared for one.
Sunday’s elections in Spain are unlikely to break the deadlock in parliament. The economy will continue to grow relatively fast in the short term, but growth is slowing while unemployment is still high and public finances weak.
The Eurozone economy grew with 0.2% in 19Q3. At first sight maybe little to cheer about, but given the trade tensions and ailing manufacturing sector, worth a minor celebration. Maybe more importantly, for now this is as good as it gets.
Special Dutch version
The centre-left socialists have won Spain’s national elections, but need to find support of others to govern. This should be doable, yet very tough. The economy should not suffer much in the short run, but the longer term outlook is clouded.
Special Dutch version
Italy’s slipped into a recession. A quick rebound is not to be expected. New budgetary issues are likely to raise concerns on the market later this year. Growth is forecasted to be flat in 2019. The probability of a coalition break-up is low, but looks set to increase after European elections.
Economic Report Dutch version
Spain will hold early elections on 28 April. The short-term economic impact will be limited, but public finances will be worse off in 2019. The longer-term impact is difficult to assess based on current polls, but it could well be positive.
To preserve healthy economic growth rates in the medium term, the Spanish government should speed up the labour market recovery and deal with remaining challenges. Elections in 2019 could break the reform deadlock, but not necessarily in a positive way.
During the crisis, unemployment in Spain increased rapidly. In the past years, employment has substantially recovered due to strong economic growth and labour market reforms. That said, the unemployment rate is still high and significant challenges remain.