Paul Donavan economist update

In the wake of the fiscal tightening measures that the Euro area has been bullied into adopting, our European economists have revised down their growth estimates for the Euro. We see 1.5% this year and 1.9% next. Weaker exports to Euro will also moderate UK growth.

China's Premier Wen (who has met with fellow currency manipulator Merkel) was praising the Euro strongly. This is not a pro-Euro stance so much as a message to the US - "play nicely with us, or we will go and play with the Europeans and their shiny new currency".

French PM Fillon (a lawyer) says those who predict the Euro's collapse are wrong (fair enough) and that the problem is solely a debt crisis (wrong). The debt crisis is in part a function of the fact that the Euro does not work. As premier of an (economically) southern European country, Fillon needs to grasp this.

US CPI is not likely to be a focus. US consumer sentiment from the University of Michigan is probably the key point for markets, with investors concerned about slowing growth. We see a weaker than consensus 72.5 reading today.


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