Monetary policy|Economic growth in the two largest national economies of the euro area is at risk, two economists estimate.
The summary is made by artificial intelligence and checked by a human.
Political instability in France and Germany is causing headaches for the ECB.
The ECB Council meets on Thursday in Frankfurt.
The fall of the French and German governments could slow economic growth.
Investors expect the ECB to cut the key interest rate.
Political instability in France and Germany causes a new headache for the European Central Bank’s monetary policy council, writes news agency Bloomberg.
The Council will meet on Thursday in Frankfurt for the first time since the governments in France and Germany stumbled over next year’s budgets.
The instability raises concerns about the euro area’s economic growth, as Germany is the euro area’s largest national economy and France the second largest.
The key questions are how fiscal policy develops in France and Germany, and how the fall of governments affects households and companies.
Despite everything, investors consider it very likely that the ECB will cut its key interest rate on Thursday. It would be the fourth rate cut this year.
The new economic forecast published on the same day provides new information on the economic outlook, on the basis of which the market evaluates future interest rate cuts.
British analyst at financial company HSBC Fabio Balbonin think that political instability may be harmful to household consumption, business investment and economic growth.
“On the other hand, the ECB is waiting for fiscal policy to tighten, which would slow down inflation. Most of this was supposed to take place in France, but the current political state [hallituksen kaatuminen] questioning the rebalancing of the economy,” Falboni told Bloomberg.
President of France Emmanuel Macron has promised to quickly appoint a new prime minister after Michel Barnier’n the government’s plan to cut the deficit by around 60 billion euros failed.
The president’s primary goal is to get approval for the new budget from the same parliament that just rejected it.
in Germany new elections are to be held in February because the chancellor Olaf Scholzin the government broke up earlier in the fall due to economic policy disagreements.
The German economy has sunk into recession primarily due to difficulties in industry, and in November the confidence of companies in the economy weakened.
“Political uncertainty is likely to last until spring and weigh on investment at least in the first half of the year,” said Deutsche Bank’s chief economist for the German economy Robin Wrinkler Bloombergille.
of the euro area in addition to the problems, the next president of the United States is of concern Donald Trump’s import tariffs that Trump has announced he will impose on all foreign products.
At the center of Trump’s economic policy is the goal of putting the interests of the United States before everything else. With customs, he aims to protect domestic production from foreign competition and finance the tax cuts he promised.