In last Sunday’s referendum in Greece, voters overwhelmingly delivered a ‘no’ vote to the eurozone’s terms for the country to remain in the single currency. This dramatically increased the odds of Greece exiting the eurozone.
Discussions that took place early in the week were futile, with creditors giving Greece until last Thursday to come up with a ‘concrete’ reform plan.
In the meantime, the European Central Bank’s liquidity to Greek banks remained frozen, with the consequence that Greek banks stayed closed throughout the week.
The Greek government presented the proposals last Thursday, two hours before the deadline. According to Greek media, the measures include tax rises, pension reforms, privatisation and spending cuts.
Greece is also seeking €53.5 billion in aid. Eurozone leaders are meeting this weekend to discuss Greece’s proposals to reach what could be a make-or-break decision.
In the meantime, the UK’s Chancellor of the Exchequer George Osborne last Wednesday announced more cuts to the corporate tax rate and changes to levies on banks, as he launched his first package of tax-and-spending plans following national elections in May.
Presenting the Budget to Parliament, Osborne said he expected to take an extra year of tough government spending cuts to achieve his goal of eliminating the UK’s Budget deficit.
Official forecasts published last Wednesday showed that the country will run a Budget surplus in early 2020, further pushing back the target that, when he took office in 2010, he had hoped to meet by this year.
Finally, the minutes of the June US Federal Reserve monetary policy committee meeting showed that policymakers favoured caution about raising interest rates as they weighed weak spots in the economy and foreign risks.
As expected, participants decided to leave the benchmark record low interest rate unchanged, as the economy was rebounding from a tough first quarter.
The bank also noted that conditions in the labour market and inflation did not yet warrant an increase.
This report was compiled by Bank of Valletta plc for general information purposes only.