More credible and enforceable fiscal rules should help bolster long-term debt sustainability in the euro area.
If tensions on gas markets remain higher for longer, a more severe gas market shock in which prices doubled from Q2 2022 levels (as modelled by IW Köln) would result in a deeper recession than in our baseline scenario.
Following the ECB’s first interest rate hike in more than a decade, monetary normalisation has finally reached the Euro Area. This will push mortgage rates up, cutting household affordabiltiy and dampening demand for house purchases.
Despite their current non-committal wait-and-see positioning, European banks could benefit from the introduction of central-bank digital currencies (CBDCs), including for funding stability.
The 54% abstention rate and the considerable electoral success of the left-wing coalition led by Jean-Luc Mélenchon, poses a scenario of uncertainty.
The revision of the Outlook on Portugal’s sovereign credit ratings to Positive reflects Scope’s expectation of a sustained improvement in Portugal’s fiscal fundamentals in the medium term.