UK sterling has given up almost a cent against the euro this week, as the ONS (Office for National Statistics) tells us Britain contracted -0.1% more than previously thought in Q4, to a total –0.3%. Obviously enough, this has stoked concerns the UK might re-enter recession in 2012, and in fact the OECD (those cheery fellows!) have already made this prediction. Bright side for Britain Fortunately, on the flip-side there are plenty of economists who accuse the OECD of doom-mongering here, and indeed UK performance in 2012 has been pretty solid so far. Both the manufacturing and services sectors expanded these past 3 months, while exports also enjoyed a solid increase. This suggests the UK … [Read more...] about Pound slips on surprise UK GDP downturn
exchange
UK pound to euro exchange rate stable as outlook darkens
The UK pound kept close to the 1.20 mark against the euro this week, as economic data in both the UK and eurozone points to a difficult road for 2012. In particular, in the UK retail sales dropped a precipitous –0.8% last month, signalling that consumers are no more confident in their prospects, while the coalition government borrowed more than twice as much as forecast. In Europe meanwhile, attention has turned to Spain and Italy, where crucial labour reforms are being debated, while spluttering manufacturing output points to a deepening recession. UK retailers on the back foot UK retail sales declined double the expected rate last month, falling –0.8% compared to the -0.4% forecast. … [Read more...] about UK pound to euro exchange rate stable as outlook darkens
Is Spain set to follow Greece?
Even without fully grasping the situation in Greece right now, it’s difficult to read the list of austerity measures being imposed on it without feeling shocked. Public workers like teachers must return wages, because the debt deal is backdated to November. The government must cut €300m from public pensions, leaving people in and approaching retirement destitute. Greece must auction its €110 billion gold reserves in the event it fails to meet targets, removing the absolute last means of funding itself when all others are exhausted. For its pains, in all likelihood Greece will be forced to return to Brussels in 12 months to request more funds, because these same demands are pushing it … [Read more...] about Is Spain set to follow Greece?
Euro stumbles as Greece ups its brinkmanship
On Wednesday, Greek Finance Minister Evangelos Venizelos accused German Finance Minister Wolfgang Schaeuble of more or less plotting to push Greece out of the euro, while Schaeuble in turn said he is tired of dumping money into a black hole. This has delayed the dispatch of the second Greek bailout, bringing Greece closer to the March deadline before it defaults. For me, the dispute raises an interesting point about who is to blame per se for this continuing Greece debacle. Reading around, it seems to me the EU is getting a bad rep here, with Germany especially being painted as a dictatorial monster. Is this the case? I mean - I concede that the EU is a bureaucratic nightmare, but is … [Read more...] about Euro stumbles as Greece ups its brinkmanship
How much more can Greece take?
The euro has enjoyed an optimistic week. In particular, reports that the coalition in Greece has agreed a debt reduction plan with its creditors following eight long months of negotiations have boosted sentiment. From here on, Greece’s creditors will accept a 70.0% loss in the value of their existing government bonds, while receiving just 4.0% interest on the new ones. (This is a little like going into a negotiating room and not only coming out with no gains, but losing your trousers and shirt in addition. It is astonishing bondholders accepted these terms, and must reflect incredible pressure from the EU.) Of course, this is but one side of the coin. In return, Greece must implement … [Read more...] about How much more can Greece take?