Greece has been left in an impossible position and Wolfgang Schaeuble’s finance ministry knows it. The German government has run out of patience. It was obvious at the EU summit on Friday when the German delegation let it be known that the second rescue package for Greece must be the final word. If it proves too small, and Greece cannot afford to pay public sector wages, then it must default on its debts. Talking to senior German negotiators last week, I found a change in attitude that was shocking for its clear and cold-hearted resolution. With a firewall in place and no confidence Athens can implement a serious reform agenda, Greece is robbed of its negotiating power. “There is no standing still for Greece. It must either move forward with reforms or leave,” said an official
Headlines “Debt crisis: Greek default fears grow as bond swap deadline looms”
“Tesco to create 2,000 jobs in UK fight-back”
“Let QE fund a new infrastructure bank” “BP fights on after $7.8bn deal “
Investors in Greek debt have just four days to sign up to the largest debt restructuring in history and save the country from default. The heavily-indebted country needs 75% of its private bondholders to accept a £172bn bond swap deal by Thursday evening so it can secure a €130bn (£108bn) international bail-out package. If too few agree to exchange their bonds for a package of new debt and cash that will knock around €100bn off Athens’ debt pile, the country faces the real possibility of becoming the Eurozone’s first sovereign default. Greek politicians have signalled they are prepared to use controversial collective action clauses to impose the restructuring deal. Standard & Poor’s, the credit rating agency, has warned, however, that it would treat any attempt to force bondholders into a deal as a “selective default,” according to ThAlmost four fifths of all businesses with up to 250 staff said they had no need to talk to banks about securing an overdraft or loan in the last year – the highest percentage so far seen in the quarterly poll of 15,000 small and medium firms by the bank-funded Business Monitor. The rise in self-reliance was boosted by a dramatic drop in the numbers of firms applying for credit facilities in the final quarter of last year when applications almost halved, the survey showed. One source said the figures showed the “scary deleveraging” taking place at small firms. In contrast, established companies with workforces of between 50 and 250 only marginally reduced their use of overdrafts and loans last year. Oil spikes usually metastasize once energy costs reach 9% of global GDP. The longer they stay there, the greater the damage. That proved to be the pain barrier in the 1970s and again in 2008, and we are just shy of that level right now. “Oil is already capturing a higher level of European GDP than in 2008,” said Francisco Blanch from Bank of America. The rule of thumb is that a 10% rise in crude cuts US growth by 0.2% four quarters later, but the science is flabbily soft and nobody knows where the inflexion point lies. The effect is famously “non-linear”. Nothing much seems to happen until confidence suddenly snaps. The unpleasant fact we must all face is that the relentless supply crunch – call it “Peak Oil’ if you want, or `Plateau Oil’ – was briefly disguised during the Great Recession and is already back with a vengeance before the West has fully recovered.
Phil Clarke, Tesco chief executive, has launched a fight-back after the supermarket chain’s torrid start to the year with plans to create 20,000 new UK jobs. The move, which comes weeks after the company issued its first profits warning in 20 years, was hailed by the Prime Minister as a “massive confidence boost for the economy”. It will see Britain’s largest retailer invest heavily in customer-facing roles. The company said it plans to refresh existing stores and open new ones, while the roles will be a mix of permanent full-time and part-time jobs. The news is likely to come under heavy scrutiny from analysts amid claims that major supermarkets are inflating the number of jobs they actually create.
Headlines“China tightens its grip on graphite” “Working families ‘better off on benefits’ “
“BP pulls clear of Deepwater spill after deal with victims “
“Audit Commission contracts snub Big Four”
Mortgage bills are set to rise for millions of UK households after Britain’s biggest home lender announced an interest rate increase that will cost average borrowers at least £16 extra a month. Analysts predicted that other banks would follow after Halifax lifted its standard variable rate from 3.5% to 3.99%, effective from May 1. The shift is the first rise in Halifax’s SVR for three years and will affect 850,000 of its customers and thousands more in the coming months as borrowers on other deals revert to the default SVR rate. Monthly bills will go up by £16.40 to £498.95 for a typical borrower of £67,500 on a repayment mortgage, while a typical interest-only borrower’s bill will go up by £27.54 to £224.44. Halifax said that it was lifting borrowing rates because the cost at which it raised funding, from depositors and wholesale markets,was “very expensive by historical standards”
The British Chambers of Commerce is calling for the upcoming Budget to include measures to stimulate growth as it downgrades its forecast for the UK economy this year. In its latest quarterly economic forecast, published today, the BCC is cutting its prediction for UK GDP growth in 2012 to 0.6%, from an already anaemic 0.8%, but has ruled out the prospect of a “double dip” recession. The BCC expects modest growth in the current quarter, but points to difficulties facing firms in the year ahead. BCC director-general John Longworth said the UK economy faces “serious challenges”, with problems in the Eurozone creating difficulties for exporters, combined with dampened domestic demand. “Our economic forecast underlines the need for the government to deliver a Budget that will bring confidence to businesses The Chancellor must pull out the stops to enable British businesses to drive growth here at home,” the business lobby adds.