• As EZA expected, the ECB's Governing Council left official interest rates unchanged on 3 May.• Draghi still maintains that economic activity stabilised in Q1 at very low levels, but he sees signs that uncertainty now prevails and pushes recovery back to the second half of 2012.• Inflation edges down from 2.7% to 2.6% in April but still seen likely to stay above 2% throughout 2012 before declining below 2% next year.• Changes in official interest rates again not discussed, policy stance still "accommodating", with ECB's rates historically low and short-term real rates negative in all euro area countries.• ECB sees further signs that effects of the 3-year LTROs are starting to work through to banks' de-posit base and credit supply side but still awaits a revival of loan demand.• Draghi calls on national governments to put structural policies in place to tackle national diver-gences competitiveness and growth as monetary policy focuses on eurozone-wide stability.• We continue to expect the ECB to maintain its present policy stance through into 2013, with offi-cial rates held at present levels and little further action on non-standard measures...[more]

• Despite his narrow lead in the first round of the presidential elections on 22Apr socialist candidate Francois Hollande appears on track to unseat Nicolas Sarkozy. • The election pledge to review the 2010 pension reform and provide a growth element to the fiscal pact suggest Hollande is unlikely to push for a fiscal boost - reminiscent of the Mitterand socialist administration in the early 1980s.• Hollande may actually be in a better position to “sell” austerity and reform of the public sector to French voters than Sarkozy...(more)