The International Monetary Fund (IMF) questioned Greece’s ability to deliver on promised bailout reforms and warned in its clearest message yet that the eurozone must commit to debt restructuring to ensure that the latest bailout programme will work.
The IMF’s warning is a reality check for Europe and Greece about the political and economic commitments needed from both sides. The IMF’s strong assessment is a clear warning that the fragile bailout deal has not removed the risk of a Greek exit from the eurozone and that the IMF needs a strong commitment for debt restructuring from the eurozone to participate.
In the meantime, the European Central Bank (ECB) left interest rates unchanged last Thursday, holding them at record lows as it continues with its bond-buying programme to support the economy.
The 25-member governing council kept the main refinancing rate at 0.05 per cent at its meeting in Frankfurt. The deposit rate and the marginal lending rate remained at -0.2 per cent and 0.3 per cent, respectively.
The less immediate, yet potentially bigger issue may be whether more than five months of fractious political negotiations about the Greek bailout has damaged a single currency that ECB president Mario Draghi once called irreversible.
Finally, the UK unemployment rate rose for the first time in more than two years, data published by the Office for National Statistics showed last week. The unemployment rate edged up to 5.6 per cent in the three months through May from 5.5 per cent in the three months through April. Economists had expected the rate to remain stable at 5.5 per cent.
It was the first time the jobless rate rose since early 2013, shortly before Britain’s economy started to recover from the effects of the financial crisis. However, the jobless rate was well below the 6.5 per cent seen a year in May last year, the statistics office said.
On the other hand, total average weekly earnings in the three months through May, including bonuses, rose by 3.2 per cent, compared with the same period a year earlier, up from 2.7 per cent in the three months to April.
This report was compiled by Bank of Valletta plc for general information purposes only.