Greek Budget Debate Begins, IMF Cuts US Forecast
Greek government begins budget debate, Moodys puts Italy on notice for a downgrade, IMF cuts US growth forecast
If problems in Greece werent enough for investors to digest then a couple of events on Friday wont have exactly helped with Moodys putting Italy on notice of a sovereign downgrade while the IMF cut its 2011 growth forecast for the US economy from 2.8% to 2.5%.
Over the weekend, there has been talk of European ministers mulling withholding half of the next 12bn aid tranche as they seek to defer the day of reckoning and keep Greece solvent while Greek ministers look to pass an austerity budget of 78bn in the face of massive voter discontent. The vote is expected to be held tomorrow.
German Chancellor Angela Merkel and French President Nicolas Sarkozys pledge to defend the euro whatever the cost may have brought the single currency some respite late on Friday, but the fact remains that the cost maybe too high for German taxpayers to bear, as they tire of having to bailout the periphery.
Eurozone producer prices for May are expected to slip back slightly from Aprils 1% rise, increasing by 0.1%, while the year on year figure is expected to decline to 6.3% from 6.4%.
The IMF downgraded its growth forecast for the US economy for 2011 from 2.8% to 2.5%, citing higher commodity prices as well as bad weather in the first quarter and weak housing market. Given that the final reading of US Q1 growth is due this Friday, that particular news item was particularly unwelcome. This weeks FOMC meeting is unlikely to see any change in US monetary policy as the expiry of QE2 looms.
GBP edged up after UK property market website Rightmove scaled back earlier predictions for a steep fall in house prices for the second half of the year. Rightmove said asking prices rose 0.6% in June after a 1.3% rise in May.
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