Greek rumour mill in overdrive

April 14, 2015

German Chancellor Merkel and Greek Prime Minister Tsipras leave after addressing news conference in Berlin

Greece returns from its Easter break with only a few days to improve on a package of reforms that the euro zone is insisting on in return for fresh bailout money.

The Greeks want nothing that smacks of austerity. The euro zone wants specifics about what Athens will cut and where it will reform. Something has to give and it almost certainly has to give on Athens’ side.

The rumour mill has gone into overdrive. The government denied a report by the Financial Times that it was preparing for a debt default if it did not reach a deal with its creditors by the end of the month and said the negotiations were proceeding “swiftly” towards a solution.

Earlier on Monday, it dismissed media reports that it was considering calling early elections and on Sunday Greece’s finance ministry rejected a report by a German newspaper which said euro zone officials were shocked at Greece’s failure to outline plans for structural reforms at last week’s talks in Brussels.

One thing both sides appear to agree on is that a deal needs to be struck when the Eurogroup of euro zone finance ministers meets in Riga late next week if the threat of bankruptcy is to be contained.

Britain’s opposition Labour party launched its manifesto and pushed its message that it can balance the country’s books in a fairer way than the Conservatives, while remaining fiscally prudent. Today it is the turn of the ruling Conservatives.

One opinion poll yesterday gave David Cameron’s Conservatives a six-point lead but most have the two main parties neck-and-neck with Labour, if anything, slightly ahead.

The advance of UKIP and the Scottish Nationalists makes this a tough election to call but it’s a massive one in that the unity of the UK and its place in Europe are at stake. All the betting suggests no party will command an overall majority.

As a result the manifestos – written on the basis that one party will rule – are probably best viewed as an opening gambit in what is likely to be a bout of haggling between two or more parties to form a durable coalition after the May 7 election.

Some Conservatives are nervous that their poll ratings haven’t improved on the back of an endless mantra that they offer economic competence rather than chaos, pointing to solid economic growth and a fervour for cutting the budget deficit.

If that strategy is to bear fruit, it hasn’t yet. On the other hand, Cameron’s personal ratings remain well above those of Labour leader Ed Miliband.

Cameron will try to broaden the message today and is expected to pledge expanded help for people to buy their own homes and to ensure that more low-paid workers no longer have to pay taxes as well as cutting taxes at the top end of the income bracket.

The British Retail Consortium reported overnight that retail spending rose at its fastest annual rate in almost a year last month, boosted by Easter falling a month earlier than in 2014. UK inflation data, due later, are expected to show no price pressures at all.

Swedish inflation numbers bear close scrutiny. The central bank’s key interest rate is at -0.25 percent and it has launched a QE programme due to a broad fall in headline consumer prices over the last couple of years despite solid economic growth.

Last month, inflation turned positive for the first time since June last year on an annual basis and the March reading is forecast to come in at 0.3 percent. The inflation figures are the last before the Riksbank’s next meeting on 28/29 April.

The U.N. Security Council is due to vote on a resolution to blacklist the son of Yemen’s former president and a Houthi leader and effectively impose an arms embargo on the rebels who rule most of the country.

Iraqi Prime Minister Haidar al-Abadi and President Barack Obama will discuss the fight against Islamic State at a White House meeting likely to be dominated by Iraqi requests for U.S. arms and tension over Iran’s role on the battlefield.

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