Structural or thematic topics
The number of corporate bankruptcies continued to rise in the first quarter of 2025. However, the momentum slowed, and the increase was uneven. Record highs were broken in the United Kingdom, where a slight decline was nevertheless observed. In contrast, the increase remains much more limited in Italy and Germany, where it continues. In France, the figures are high, but the increase has slowed. In terms of business sectors, services, trade, and construction are the most affected, but to varying degrees depending on the country. In contrast, industry appears to be relatively unscathed. An analysis of bank balance sheets, particularly in France, puts the impact of bankruptcies into perspective
Many European countries have decided to significantly increase their military spending, led by Germany. Will this effort be conducive to growth? This will depend on whether or not Europe is able to increase its production of military equipment. It will also depend on the possible crowding-out effects (inflation, interest rates) associated with an increase in public debt. The ability of European industry to meet demand (an increase in EU military spending from 2% to 3.5% of GDP) will be decisive. A reallocation of currently underutilised production capacity (mainly in the automotive and intermediate goods sectors) could help to increase production.
The vulnerability of ASEAN countries to US trade protectionism has increased significantly since 2017. The US has become a key destination for these countries, which export low-intensity tech products (such as textiles and footwear) as well as medium-intensity tech products (mobile phones) and high-intensity tech products (integrated circuits and semiconductors). Vietnam, Thailand and, to a lesser extent, Malaysia have the largest trade surpluses with the US and are therefore the most exposed to a change in US tariff policy.On 2 April, the US government announced an increase in tariffs on ASEAN countries that goes well beyond simple reciprocity
After being left reeling by the unexpected money-market crisis during its first round of quantitative tightening (QT1), the US Federal Reserve (Fed) intends to manage the second (QT2) with the utmost caution. This means reducing its securities portfolio without creating a shortage in central bank money, in view of the liquidity requirements imposed on banks under the Basel 3 framework. As it is unable to estimate the optimum amount of central bank reserves needed to ensure that its monetary policy is properly implemented, the Fed aims to reduce the stock of reserves to a sufficiently "ample" level.If QT2 is ended too early, it would have to activate its liquidity draining tools in order to limit the downwards pressure on short-term market rates
Government bond yields in advanced economies are highly correlated, much more than the correlation of real GDP growth. Governments should be cognizant that a lack of fiscal discipline can create negative externalities, by pushing up bond yields abroad. Given the prospect of huge financing needs in the public and private sector, every issuer of debt should prepare for the possibility of structurally higher interest rates and stress test his balance sheet in order to test its resilience.
The impulse of bank lending to the private sector continued to recover in the Eurozone in Q4 2024 (1.5 after between 1.1 and 1.2 since September 2024). It was back in positive territory since August (0.8), and in December 2024 it reached its highest level since November 2022 (2.7). The ECB bank lending survey in the Eurozone confirms the recovery in the demand for loans in Q4 2024. However, political uncertainties have resulted in a tightening of credit standards for lending to companies in France and Germany.
