EME Macro/Strategy: macro all-in-one (8-14 January)

Our first weekly of 2024 highlights some recent, positive developments. First, our assessment of the first month in power of the new ruling coalition led by Donald Tusk has delivered what it promised: an effort to improve the judicial system in line with the EU’s demands, additional fiscal easing starting this year already, and the full unlocking of the recovery and resilience funds. The transition is not smooth, but it would have been unrealistic to expect it to be so. In Hungary, the December Council meetings delivered some positive steps forward in the dispute on the judicial system, which contribute to an improvement in the funding position of the country. Budget execution remains very loose and an eventual long-term upward adjustment of taxes remains a realistic expectation, in our view. The tensions in the Middle East, especially in the Suez Canal, appear to be worsening steadily. Our assessment is that the main consequence for Europe relates to budget prospects, more than inflation, because the disinflationary forces in the EU are very strong.