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Europe is speeding up, the US is slowing down and some emerging countries are losing ground. Recent developments in the financial markets are an accurate reflection of the current state of affairs. Although international stock markets performed well on the whole in March, European shares are the ones showing the greatest drive, boosted by the start-up of monetary expansion (QE) by the European Central Bank (ECB) and by a battery of positive macroeconomic indicators, even though the Greek source of tension has yet to be fully resolved. However, a less expansionary start to the year than expected in the US has led the Federal Reserve to suggest in its communications that it might postpone any hike in official interest rates for longer than the market had been anticipating. In response to this more dovish tone, both US interest rates and the rise in the dollar slowed up. But the greatest market sensitivity has been seen in the downside risks for some emerging countries. Which ones? Judging by increased volatility in the foreign exchange market and the currencies losing most value, Brazil and Turkey are the biggest cause for concern.

Greater downside risks in emerging economies and a slight slowdown in the US and China. Although the world economy is accelerating thanks to the expansionary effects of accommodative monetary policies and lower oil prices, it is doing so at a slightly slower rate than expected a few months ago as the two global engines, the United States and China, have seen their growth in activity slow up at the beginning of 2015. This is no hard landing but is certainly a warning sign, especially in the case of the Asian giant. Nonetheless, we should not forget the factors lessening these risks in both cases. In the US, consumption (supported by labour's good performance), investment and fiscal policy will bolster growth while China's economic policy still has room to become more expansionary (margin which the country's monetary policy is already taking advantage of, with interest rate cuts in November and March).
More delicate is the balance of risks for some emerging countries. In March, attention (and financial pressure) turned to Brazil, whose outlook has deteriorated substantially, as well as Turkey. In both cases, beyond certain temporary factors, of greater concern is the persistence of larger macroeconomic imbalances than is desirable.

Europe is taking advantage of short-term supports but still faces the same long-term challenges. European prospects are gradually improving thanks to temporary factors such as falling oil prices and the euro's depreciation. Figures show that this recovery is occurring across the board, in consumption, investment and also the foreign sector although unfortunately there is still disparity between countries: while Germany is growing at an acceptable rate, France is falling behind. Together with growth, the other source of good news has been prices. Inflation picked up by 0.3 pps (to –0.1%) in March and this upswing could mark the start of a more appreciable change in trend. Nonetheless the euro area is still facing considerable challenges. In the short term the lack of agreement in negotiations with Greece is a cause for concern but the long-term challenges undoubtedly pose the biggest threat. In its report on macroeconomic imbalances, the European Commission states that, in spite of the cyclical improvement, the number of countries with excessive or slight imbalances has risen in the last year and only 3% of last year's recommendations were implemented fully.

Spain is speeding up. In its GDP flash figure for 2015 Q1, the Bank of Spain (BdE) presents an economy growing at
a considerable pace and somewhat faster than at the end of 2014, thanks to domestic demand. It also shows a country starting two positive years with 2.8% growth in GDP in 2015 and 2.7% in 2016. The factors mentioned by the BdE are illustrative of the current pattern of recovery: the positive effect of the ECB's QE, improved financing conditions, falling oil prices and the depreciation of the single currency. But such a positive diagnosis does not detract from the fact that Spain still needs to continue its ambitious reforms. The same European Commission report on macroeconomic imbalances highlights the work still pending: continuing the external adjustment, furthering fiscal effort and maintaining the agenda of structural reforms. Regarding the second of these areas for improvement, namely public finances, the 2014 public deficit figures (5.7% of GDP compared with a target of 5.5%) remind us of the need to continue the country's fiscal consolidation. Regarding the agenda  of structural reforms, this month saw the approval of the new employee training system, introducing a change in active employment policies that is required and in the right direction to improve the long-term sustainability of growth.

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