Daniel Kral
@DanielKral1
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Europe macro. Opinions my own. All of them.
Joined February 2013
Re investment, in ๐ฎ๐น scaling back of Superbonus (housing) is replaced by infrastructure (other) with ๐ช๐บ funds. Good momentum in ๐ช๐ธ though large rise in IP looks dodgy as in ๐ซ๐ท. Surprisingly good performance in ๐ฌ๐ง (would no doubt be on par with ๐ฎ๐น without Brexit). ๐ฉ๐ช worst by far.
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Some of the loudest pro-peace voices have turned out to be the biggest arms dealers. Classic.
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Germany is embarking on an experiment of massively expanding the size of the state to lean against structural headwinds and revive its economy. Govt spending is already higher than in the 1990s (reunification) with taxes rapidly creeping up, too. Europe needs Germany to succeed.
Hard to overstate the crisis engulfing the German economy - investment & goods exports in free fall, private consumption stagnant (despite higher population), only the size of government is growing. Energy prices, US tariffs, China shock 2.0 - Germany needs a new growth model.
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Budget day in ๐ฌ๐ง tomorrow. Govt deficit is 5.8% of GDP (bigger than in ๐ซ๐ท), spending is up 6ppts of GDP vs 2019 (3x more than in ๐ซ๐ท) and MPs won't cut it, debt interest cost is 3.2% of GDP (50% more than in ๐ซ๐ท). "Solution" is to raise taxes, denting growth for a repeat next year.
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Divergent picture for 2026 based on YTD growth. Even if the ๐ฉ๐ฐ economy stays flat from Q4 this year, it would still grow by 1.5% next year (gangbuster Q2 & Q3). Good carryover in ๐ธ๐ช๐ต๐ฑ๐ธ๐ฎ too. Conversely, ๐ฉ๐ช๐ฎ๐น๐ซ๐ฎ have a weak starting point and need to get themselves out of a hole.
On the surface, Eurozone growth looks pretty decent all things considered. But when looking under the hood, the picture worsens considerably: - Ireland (4% of the EZ) accounts for 40% of growth - Spain (10%) accounts for 20% - Half of the Eurozone is growing at 0.5% or below
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Hard to overstate the crisis engulfing the German economy - investment & goods exports in free fall, private consumption stagnant (despite higher population), only the size of government is growing. Energy prices, US tariffs, China shock 2.0 - Germany needs a new growth model.
Das #Bruttoinlandsprodukt stagnierte im 3. Quartal 2025 (0,0 %) gegenรผber dem 2. Quartal 2025. Die Konjunktur wurde im 3. Quartal von schwachen Exporten gebremst, wรคhrend die Investitionen leicht zulegten. Mehr Infos: https://t.co/GdylWoyERR
#BIP
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EU exports to both the US and China have fallen to below the pre-pandemic trend. A shift to domestic-demand led growth must be accompanied by policies to protect EU industry, boost capital markets and improve productivity. The alternative is the hollowing out of industry.
Euro politicians going to China should show this chart to their counterparts and ask if they think these scissors are politically sustainable or whether the US is a leading indicator for the future of EU-China trade, in which case who will provide the external demand China needs.
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Euro politicians going to China should show this chart to their counterparts and ask if they think these scissors are politically sustainable or whether the US is a leading indicator for the future of EU-China trade, in which case who will provide the external demand China needs.
China is running. Europe is living on debt. I have just returned from a five-day visit to Beijing. Conversations with representatives of the Chinese government, European diplomats, and entrepreneurs who have built their lives and companies in China made one thing unmistakably
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Despite the current cold spell draining gas storages at a fast pace and the overall storage fill being close to an all time low for this time of year, wholesale gas prices continue to decline. Strong LNG supply from US and weak demand in China are the key drivers. The new normal.
EUROPEAN ENERGY CRISIS: For the first time since mid-2024, European wholesale gas prices have dropped below โฌ30 per MWh (~$10 per mBtu) thanks to the abundance of LNG supply (mostly from the Americas)
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Has anyone come across a Euro politician - Commission, MEP, national - arguing for more regulation? It seems everyone is in favour of slashing it yet it seems to be only growing across most areas and sectors. Who is doing it then?
China is running. Europe is living on debt. I have just returned from a five-day visit to Beijing. Conversations with representatives of the Chinese government, European diplomats, and entrepreneurs who have built their lives and companies in China made one thing unmistakably
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EU is bearing the brunt of the new China shock. The overlap between products in which ๐ช๐บ countries and ๐จ๐ณ have a revealed comparative advantage is rising; and number of products in which ๐ช๐บ has an advantage but ๐จ๐ณ doesn't is shrinking. ๐จ๐ณ exports are displacing ๐ช๐บ crown jewels.
Kissinger said that the tragedy of Germany is that it's too big for Europe but too small for the world. China's problem is that it's too big for the world. Its vast manufactured goods surpluses, which far surpass previous export champions, cripple other industrialized economies.
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Kissinger said that the tragedy of Germany is that it's too big for Europe but too small for the world. China's problem is that it's too big for the world. Its vast manufactured goods surpluses, which far surpass previous export champions, cripple other industrialized economies.
Here's a possible explanation. Higher exports from China crowd out production of high-tech goods and innovation in the rest of the world. Over the medium term, GDP in the rest of the world drops because of lower productivity growth.
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The take-up of ๐ช๐บ Cohesion funds has been very slow with over โฌ300bln unused 5 years into the 7 year budget. There are constraints on what the funds can be used for & large recipients (CEE, South EU) will want to protect it, but it's another large pot of money laying around...
๐บ๐ฆ needs a LOT of cash to stay in the fight (existential for some ๐ช๐บ states) but ๐ช๐บ govts are cash strapped & against new joint debt. ๐ท๐บ sov. assets in ๐ช๐บ are literally โฌ200bln in cash in a bank account (other invest) as underlying debt instruments matured (portfolio invest).
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๐บ๐ฆ needs a LOT of cash to stay in the fight (existential for some ๐ช๐บ states) but ๐ช๐บ govts are cash strapped & against new joint debt. ๐ท๐บ sov. assets in ๐ช๐บ are literally โฌ200bln in cash in a bank account (other invest) as underlying debt instruments matured (portfolio invest).
The European Commission has offered sweeping guarantees for its โฌ140B loan to Ukraine, aiming to reassure Belgium it wonโt be left to face legal or financial blowback from using frozen Russian assets held on its soil. https://t.co/QtmBxAn9dm
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No aggregate fiscal loosening in ๐ช๐บ next year based on @EU_Commission's latest forecast. High risk of fiscal slippage in ๐ซ๐ท but stimulus may disappoint in ๐ฉ๐ช. Fiscal stance in several countries raises eyebrows, given generally low quality of draft budgets this time.
Diverging fiscal trends in the largest ๐ช๐บ economies: - ๐ฎ๐น is back to running sizeable primary surpluses, remarkable consolidation since 2023 - Despite high growth, ๐ช๐ธ is not building fiscal space, making it vulnerable - Improvement in ๐ฉ๐ช means still no stimulus - ๐ซ๐ท no comment
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> Debt on an unsustainable path among high debt economies > Chart shows debt on a declining trajectory for all > Peak trolling
The debate on the Euro is shifting. A growing number of mainstream economists point out that ECB backstops for high-debt countries put debt on an unsustainable path. That shouldn't need saying, but in the Euro zone it does. The ECB needs deep reform and must exit debt markets...
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They made a multiple of that in 2022-23 by selling gas to Europe at market prices. The biggest elephant in the room.
If the Norwegians go through with this, they should give the Nobel Peace Prize to themselves.
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As AJP Taylor said of Stalin, who crushed the Japanese in Manchuria to avenge the Tsar for the war of 1905, thus ending WW2 - men see things differently when they are themselves in power. Meloni was also a radical once. Until she got to power. So works for women too apparently.
โa ๐ซ๐ท government under Le Pen or Bardella could take Europe to the brink. France is a powerful agent. It is not Greece. Or Italy. Bardella also wants an EU budget rebate, like Thatcher once did. This would push an under-resourced EU that has over-committed itself on ๐บ๐ฆ into an
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The proposal to destroy the Euro is pure twitter ragebait. Economic costs, political fallout & implications for EU integration make the move absolutely reckless. Even Salvini and Le Pen understood this, AfD moved onto migration & identity. Only some twitter trolls won't move on.
The idea comes back every few years - we should destroy the euro. Allegedly this time around - because high-debt countries control the ECB. Except this is wrong. We have many problems in Europe indeed - but destroying the euro helps us solving none of them. Thread below 1/n
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They may find that the institutional guardrails for the ECB are by design more solid than pretty much anywhere else. And the governors from Latvia and Estonia have the same vote as does the French governor, who has been hawkish to put pressure on FR govt to consolidate finances.
The ECB has removed market discipline and France's left and right populists are paying attention Melanchon has long wanted to cancel the French debt held by the Euro system (the Banque de France, in fact). Now Bardella wants QE for France's debt.
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