BlackRock Investment Institute

Macro insights

Europe's restart taking shape

The European restart looks set to resume as mobility restrictions are gradually lifted. The bloc’s vaccination rollout is gathering pace after a sluggish start. This expectation of a delayed restart ultimately taking shape was one reason we upgraded European equities to neutral earlier this year.

Fiscal support

Chart showing estimates of the fiscal support in response to COVID-19

Sources: BlackRock Investment Institute, May 2021. Notes: The chart shows average broker estimates of the discretionary spending measures introduced in response to COVID-19. For euro area economies, total spending is broken down into estimates of the contribution from borrowing by national governments (orange) and funded by the EU Recovery and Resilience Facility, assuming funds begin to get disbursed towards the end of 2021.

Policy support – from key fiscal measures taken at the European Union (EU) and national level to the European Central Bank maintaining easy financing conditions – will be crucial to the restart’s staying power. Withdrawing policy support too early would raise the risk of permanent economic scarring, in our view. The suspension of EU debt and deficit rules until at least 2023 and the prospective disbursement of funds from the EU’s Recovery and Resilience Fund (RRF) are encouraging signs. Covid-related fiscal support in 2021 has been on par with last year’s, as shown in the chart.

We believe Europe will avoid a fiscal cliff once the restart completes. The focus can then shift to long-term priorities on green investment, digital transformation and raising potential growth.

Recent macro insights

Manufacturers to slow production
Manufacturers have slowed production substantially in both the U.S. and the euro area, according to survey data.
Financial conditions tightening fast
U.S. financial conditions have tightened a lot since the start of the year – in other words, financing is becoming more costly for individuals and companies. Since then, th...
Less optimism on growth
Economic growth forecasts for this year and the next are coming down rapidly. The OECD last week followed the World Bank in downgrading growth forecasts.

Stay ahead of markets with the latest insights from the BlackRock Investment Institute.

Please try again
First Name *
Please enter a valid first name
Last Name *
Please enter a valid last name
Email *
Please enter a valid email
Investor type *
This field is mandatory
Country *
This field is mandatory
Company *
This field is mandatory
Thank you
Thank you for your subscription!
We usually publish weekly insights on every Monday. Expect to receive your first newsletter from us this upcoming Monday.