Greece points finger of blame at its creditors

May 6, 2015

Greek Finance Minister Varoufakis leaves the European Commission headquarters in Brussels

After another day of to-and-fro on Greece’s bailout, Finance Minister Yanis Varoufakis said he expected euro zone finance ministers to acknowledge next Monday progress towards a cash-for-reform deal, opening the way to easing Athens’ liquidity crisis.

But the Greek government also lashed out at its creditors for blocking successful negotiations and accused the euro zone and IMF of raising contradictory “red lines”.

Today, Greece will sell 875 million euros of six-month treasury bills to refinance a maturing issue and has just met a 200 million euros repayment to the International Monetary Fund.

A further 750 million euros IMF bill next week is a tougher ask. The IMF denied it had pushed for euro zone countries to write off chunks of the Greek debts they hold.

The European Central Bank’s Governing Council meets in Frankfurt and may raise slightly the amount of Emergency Lending Assistance teetering Greek banks can avail themselves of.

There is talk of it raising the “haircut” on Greek securities offered as collateral for the funding following recent credit rating downgrades of Greece and its banks. That would further squeeze the debt-laden country and given the ECB has been determined to let the politicians take the lead in this standoff it seems unlikely it would take such a step yet.

For the same reason, the ECB is equally unlikely to give Athens a helping hand. The Greek government wants it to allow the banks to buy more short-term treasury bills, easing the government’s immediate funding crunch.

The uncertainty prompted the European Commission to slash Greek economic growth and primary surplus projections on Tuesday and forecast higher public debt.

It’s the last day of campaigning before Thursday’s UK election. The opinion polls continue to put the main two parties – Conservative and Labour – neck-and-neck.

Of five polls released on Tuesday, the Conservatives led in two, Labour in one, and two showed them tied. No recent poll has put either above 35 percent of the vote into the sort of territory where an outright majority starts to become possible.

The aggregated poll of polls tells a remarkably similar story and has barely budged in two months of campaigning. A final clutch of polls will be released today.

The Conservatives look marginally more likely to win the largest number of parliamentary seats but the way the country is carved up electorally means they would need to be several points ahead of Labour in share of the vote terms to be confident of securing an overall majority.

Further complicating the arithmetic are the facts that Scottish Nationalists are poised to trounce Labour north of the border while anti-EU UKIP will take a lot of Conservative votes in England.

With economic recovery entrenched, political history suggests an “incumbency factor” should kick in for the Conservatives when people actually go into the polling stations though they haven’t helped their cause with overwhelmingly negative campaign tactics.

If it does, they may be able to govern again with the Liberal Democrats although many of those pro-European centrists are reluctant to repeat the bruising experience of the last five years which has seen their support collapse.

However, Labour has better partner options than the Conservatives – the left-wing SNP could win 50 seats or more while the LibDems will be lucky to get 30 – so Ed Miliband could form a government even if the Conservatives win more seats.

Leading think tank the National Institute of Economic and Social Research cut its forecast for British growth to a still healthy 2.5 percent this year, from a previous 2.9. It said none of the main parties had a good plan to tackle the country’s biggest economic problem of stagnant productivity.

April service sector PMI surveys from euro zone countries and Britain are due. While cutting its Greek forecasts, the Commission raised its forecast for euro zone growth to 1.5 percent this year, with Germany expanding by nearly two percent.

A combination of low energy and food prices, a weak euro and ECB money printing appears to have lifted activity in the first part of 2015.

Poland’s central bank meets having declared that a March interest rate cut to 1.5 percent was the last in the cycle, but deflation risks persist as consumer prices fell 1.5 percent from a year earlier in March. The bank targets inflation of 2.5 percent.

Romania’s central bank also meets having cut its key rate to a record low of 2.00 percent in March and implied room for more easing to come.

Today is the deadline for Israel’s Benjamin Netanyahu to form a coalition government. He has 61 seats of our 120 signed up, so enough for a coalition, albeit the thinnest of majorities.

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