Norway’s centre-right swept to power last night, ousting a centre-left government that couldn’t capitalize on a solidly performing economy which escaped the world financial crisis largely unscathed (uncanny echoes of Australia’s weekend election here). The popular feeling seems to have been that a decade of strong growth was wasted and is now slowing.
Silvio Berlusconi’s political future – upon which both Italian and euro zone stability rest to varying degrees – is up for debate when a Senate committee meets on Monday to begin discussions that could end with formal procedures to expel him from the Senate. Talks could last for days.
The euro zone is growing again and while its weaker constituents face plenty of tough times yet, it seems less and less likely that the European Central Bank will cut interest rates from their record low 0.5 percent. That illustrates the problems of the new fad of forward guidance.
The Bank of England will publish the minutes of Mark Carney’s first policy meeting earlier this month which will pored over for signs of how the debate about forward guidance – it’s all the rage in the central banking world now – went, and whether that may herald more money printing or act as a proxy for looser policy.
Spain will sell up to four billion euros of six- and 12-month treasury bills, prior to a full bond auction on Thursday. Italy attracted only anaemic demand at auction last week and Madrid has already had to pay more to borrow since the Federal Reserve shook up the markets with its blueprint for an exit from QE.
After the European Central Bank broke with tradition and gave forward guidance that interest rates will not rise for an “extended period” and could even fall, some of its members – including French policymakers Benoit Coeure and Christian Noyer, and Bundesbank chief Jens Weidmann – head to an annual gathering in the south of France.
This could be a perfect storm of a day for the euro zone.
Portugal’s prime minister will attempt to shore up his government after the resignation of his finance and foreign ministers in successive days. The latter is threatening to pull his party out of the coalition but has decided to talk to the premier, Pedro Passos Coelho, to try and keep the show on the road.