[B]Greece is on the verge of delivering some calm to markets that have been on a bumpy ride during the past 3 months. [/B]On Friday, PM Panpadremos formerly announced that it is seeking to activate the Eur45 billion-aid package. In televised comments, Panpadremos said, “the time has come” for Greece to request aid. “It is a necessity. It is a national and pressing necessity for us to officially request from our partners the activation of the support mechanism.” On Thursday, Eurostat says that Greece’s deficit last year is at least 13.6% and not the 12.9% the government estimated on April 9. The deficit may be 0.3-0.5% higher if the over the counter swaps, classification of some public entities, and social security funds are added. Eurostat also noted that the Irish deficit was 14.3%, giving it the honor of the largest deficit in the euro zone. Additionally, Moody’s downgraded the debt of Greece by notch to A3. Moody’s kept Greek debt rating on negative watch.
[B]
The UK is the first G7 country to report preliminary first GDP figures.[/B] The numbers were rather disappointing. The consensus expected a 0.4% expansion and instead ONS said the economy expanded half as much. The 0.2% rise was also half the pace reported in the fourth quarter 009. Because of the base effect, the year-over-year retraction eased to -0.3% from -3.1% in fourth quarter 09. The economic trough was hit in the second quarter at almost -6.0%. The preliminary report indicated that services expanded 0.2%, while industry expanded by 0.7%. During the week, the UK reported higher than expected inflation, which forces BOE Governor King to write another letter to Darling to explain the overshoot. The headline CPI rose 0.6%, twice what the consensus had expected. The year-over-year rate rose to 3.4% from 3.0%. The consensus had expected a 3.1% increase. There is beginning to be some questions raised over the BOE’s assessment that inflation will be just a transitory issue. Although energy was a strong component of the increase in headline CPI, prices for fuel are have not declined, which can create a problem for the central bank. Although unemployment claims shrank by 33 thousand, which can be spun in a positive light, Labour is facing lower than expected growth and higher than expected inflation as a time when the budget deficit and government spending is the core focus of the upcoming election.
Analysis provided by Exto Capital