Chancellor George Osborne yesterday delivered the first Conservative budget for 20 years and, as predicted, the measures he unveiled were business-friendly. Sterling lost ground yesterday morning against most currencies on the expectation that Chancellor Osborne would introduce more fiscal tightening measures in his budget (i.e increasing the rate of certain taxes and / or cutting government spending).
Some key points to note from the budget:
- economic growth has been revised down for this year to 2.4% from 2.5% and is forecast to grow 2.3% next year.
- corporation tax is to be cut to 19% in 2017 and to 18% in 2020. This is seen as a move to make companies pay extra wages to the lowest earners
- national living wage set at £9 from 2020. After the cut in corporation tax companies will be forced to pay their workers who are over 25 at least £7.20 an hour, rising to £9, by 2020
- public sector pay will increase by 1% a year for 4 years from 2016
Yesterday morning the ECB said it will pull support from Greek banks if no agreement is reached on Sunday. Chris Noyer, a member of the ECB's decision making council said Sunday was the last chance to reach a deal and avoid a catastrophe for the Greek economy.
In the afternoon Greece submitted its formal request for a new aid package in an attempt to avoid crashing out of the Eurozone. Promising signs were there that Tsakaloto's said Greece is proposing to immediately implement measures that could start as early as next week. This would include tax related reform measures and pension related measures, two of the key areas where Greece and its creditors have failed to reach an agreement.
Greece didn't put a figure on the new bailout it is looking for but the IMF estimates that a three-year programme could cost as much as 70B Euros.
Also for the first time yesterday a Reuters poll showed that economists now believe there is more of a chance of Greece leaving the Eurozone than not. 55% this week believe this could be the case in comparison to 45% suggesting this could happen last week. This is the first time the poll has read of 50%.
12:00 - GBP - Official Bank Rate
12:00 - GBP - MPC Rate statement
13:30 - USD - Unemployment claims