Wednesday, 14 November 2012

Greece gets reprieve on deficit over IMF objection

Finance ministers from the euro area have given Greece two extra years to trim its budget deficit. Bloomberg reports:

In the latest compromise in three years of crisis fighting, creditors led by Germany opted late yesterday to keep money flowing to Greece instead of risking a default that could lead to the nation’s exit from the euro and stir more turmoil for the countries that remain in the single-currency bloc.

Greece has made “far-reaching decisions that go in the right direction,” German Finance Minister Wolfgang Schaeuble told reporters in Brussels today. He said Greece’s aid program can be re-engineered to plug a financing gap of as much as 32.6 billion euros ($41 billion) without costing creditors a cent.

The decision came despite objections from the International Monetary Fund's Managing Director Christine Lagarde.

“Debt sustainability of Greece has to be measured in 2020,” said Lagarde, who was French finance minister when the crisis started. “We clearly have different views. What matters at the end of the day is the sustainability of the Greek debt.”

Meanwhile, German investor confidence remains weak despite the actions taken to resolve the sovereign debt crisis. The ZEW index of investor and analyst confidence fell to minus 15.7 in November from minus 11.5 in October.

What did rise recently is UK inflation. Consumer price inflation rose to 2.7 percent in October from 2.2 percent in September.

The acceleration in UK inflation came as house prices fell at their slowest pace in more than two years last month. The Royal Institution of Chartered Surveyors' house price balance rose to -7 in October from -14 the month before.

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