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Stirring events in the Euro zone

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  • Italy's new government has been sworn in. Judging by the extent of the concessions offered to Mr Berlusconi, Prime Minister Letta's main policy objective is to be Prime Minister. We are cautious about the new government's durability and ability to deliver further reform.
  • The Spanish government is becoming more realistic about its budget deficit (6.3% of GDP this year, not the improbable 4.5% previously forecast). This is what passes for stimulus in Europe - recognising fiscal realities and choosing not to tighten further.
  • The US GDP disappointed on the headline, but there was enough positive news in the details to allow us to maintain an unchanged 2.3% forecast for the year. The consumer, in particular, seems to be resilient. We have consumer spending numbers today.
  • Euro business and consumer confidence data is due today. US confidence data has tended to overreact to underlying economic fundamentals, but Euro data has not (perhaps people can not imagine anything worse than the current Euro reality?).

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