Greece avoided political and financial chaos after the pro-bailout party's narrow victory in Sunday's election. However it won't be easy for winner New Democracy to form a coalition government as leftist-party Syriza said it will not join the coalition. Greek parties ND and PASOK - pro-bailout - will agree to form a coalition government today, a senior official with the conservative New Democracy party told Reuters.
Markets experienced one of the most disappointing and brief relief rallies one may recall, with the focus turning fully back to Spain within hours. With the noise of the Greek election almost gone, the market appears to be increasingly worried by the lack of clarity on the Spanish bank bailout and the poor prospects of growth the country is projecting. The Bank of Spain revealed yesterday that bad loans had grown to 8.72 per cent of total lending in April, the country’s highest level for 18 years. The cost of borrowing for the nation peaked at 7.30%.
The International Monetary Fund has commitments for $456 billion to be used as a “second line of defense” to resolve and prevent financial crises. According to Managing Director Christine Lagarde, this almost doubles the fund’s lending capacity. Lagarde made the announcement in an e-mailed statement during the G-20 summit in Mexico yesterday.
In the UK an announcement is expected within weeks to encourage infrastructure investment for the private sector by using the government's low borrowing costs to make finance cheaper. The idea is to help boost lending to increase constructions and boost growth.
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