Week ahead (27th – 31st January)

Last week the Portuguese Government cash deficit report showed that the deficit came in €1.7bn lower than the troika limit, thanks to rising revenues as the economy recovered in second half the year, and the fiscal amnesty implemented in Q4. Because the contribution from the amnesty was sizable, the starting point for the deficit in 2014 will be about €1bn higher than the 2013 deficit. Nevertheless, if the recovery takes hold as expected, the 2014 deficit limit may turn out to be somewhat easier to reach than what was anticipated when the 2014 Budget was first discussed.

In the coming week we will get the first indications of how confidence and inflation evolved in early 2014. The markets will be particularly focused on Euro area January flash inflation, as a further decline may lead the ECB to take further action on rates or on quantitative easing. At the World Economic Forum in Davos, ECB President hinted that the ECB may be able to buy packages of bank debt, it the products were properly constructed and priced.

30th January

  • January 2014 Business and Consumer Surveys: the German business confidence indicator Ifo was out earlier this morning and rose more than expected. Confidence in periphery countries such as Portugal and Greece is also expected to rise. The big question at the moment is how confidence will fare in France, which is facing a very weak recovery, a deterioration in public finances and some political turmoil caused by the President’s private life.

31st January:

  • December 2013 Euro area unemployment rate: the recovery in the euro area so far has not allowed for a d«significant decline int he unemployment rate. In December, it is expected to have remained broadly stable.
  • January Flash Estimate Euro area inflation: currently at 0.8%yoy, which is very low taking into consideration the ECB’s target of close to 2%yoy, it is likely to remain broadly unchanged.