Salient to Investors:
Economists say a resurgence of the debt crisis is the biggest threat facing Germany in an election year.
Thomas Mayer at Deutsche Bank, Holger Schmieding at Berenberg Bank and others say declining sovereign bond yields in countries such as Italy and Ireland should not lull governments across Europe into thinking they can let up on their budget-cutting efforts.
Schmieding said that if any country tried to undo austerity, it would shatter confidence and spark another row in Europe, another wave of the euro crisis. Schmieding said France poses a serious economic problem.
Policy makers risk complacency as they use a period of relative market calm to shift from crisis-fighting to longer-term efforts to bolster economic growth and combat unemployment.
Elga Bartsch at Morgan Stanley worries most about the European crisis effect on Germany’s outlook, and says cheaper energy may give US companies an advantage over German competitors given Merkel’s plan to phase out nuclear power and a US-European Union trade pact that both sides want to negotiate.
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