Reading the ECB runes

April 2, 2015

European Central Bank President Draghi and Vice President Constancio leave after addressing an ECB news conferenc in Frankfurt

The European Central Bank will release minutes – or what it likes to call its account – of the last policy meeting after which it launched into quantitative easing.

Reflecting improved economic data, the ECB lifted its growth forecast to 1.5 percent for this year, from the 1.0 percent it predicted in December.

Already some in the markets are talking about a Federal Reserve-style tapering of the money-printing scheme should growth take off but President Mario Draghi was unequivocal last week, telling the European Parliament last week he believed a recovery in inflation depended on full implementation of the programme.

Nonetheless some monetary orthodoxists on the ECB Governing Council may well disagree at some point. In the months ahead, the minutes will bear close scrutiny.

France continues to lag its peers in growth terms but is also showing some signs of revival thanks to QE, a weak euro and cheap energy and food prices. The economy grew by only 0.4 percent in the whole of 2014 but is expected to have grown by at least 0.3 percent in the first quarter of this year.

Today, the OECD will produce a report on the French economy and its chief, Angel Gurria, will hold a news conference with French Finance Minister Michel Sapin. Separately, the government will auction up to 8 billion euros of long-term debt which is trading at record low yields and the INSEE statistics office publishes its regular update on short-term economic prospects.

There are still six weeks until polling day but one of the big moments of Britain’s election campaign happens this evening – a live TV debate featuring no less than seven party political leaders.

Conservative Prime Minister David Cameron refused plans for a later head-to-head with opposition Labour leader Ed Miliband, gambling that any accusations that he was running away from a confrontation would be outweighed by the benefits of denying Miliband a chance to close the gap in their personal ratings.

With seven leaders vying for attention, it could become a meaningless cacophony but not necessarily.

Last week, the two men were interviewed one after the other and opinion polls suggested Miliband benefitted by exceeding generally low expectations of him. The two parties are neck-and-neck in the polls despite the Labour leader’s poor personal ratings. If those perked up, it could be decisive.

Nonetheless, the odds remain heavily on neither winning an outright majority on May 7. Tonight, the leaders of anti-EU UKIP and the Scottish Nationalists will fancy their chances.

The Greek government submitted more detailed economic reform proposals on Wednesday which it said was “more specific and quantified”, hoping to unlock much-needed funds from its creditors. Euro zone deputy finance ministers said while there had been some progress, more work was needed to reach a deal.

With a long Easter weekend nearing, neither side expects a breakthrough before next week, leaving time very short. A source familiar with Greece’s financial position told Reuters last week Athens would run out of money on April 20 without new cash.

The document makes clear that Greece has no intention of exiting the euro zone. It says the country’s financing needs in 2015 are 19 billion euros and that proceeds from selling state assets will undewhelm.

It pledges to crack down on tax fraud, raise tax on luxuries and review asset sales on a case-by-case basis. It also proposes reintroducing an extra payment for poor pensioners and a gradual hike in the minimum wage and retaining government administration staffing levels.

Major powers and Iran negotiated into the early hours of Thursday on Tehran’s nuclear programme as talks stretched two days past their deadline. Diplomats say prospects for a preliminary agreement are finely balanced between success and collapse.

The negotiations, aimed at blocking Iran’s capacity to build a nuclear bomb in exchange for lifting sanctions, have become bogged down over key details after the broad outlines have been settled.

The gruelling round of talks are scheduled to resume shortly in the Swiss city of Lausanne. French Foreign Minister Laurent Fabius, who left because of slow progress, has returned and declared the finishing line to be only a few metres away.

Ukraine has signed a new agreement to buy Russian gas over the next three months at $248 per thousand cubic metres.

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