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DAVID CAMERON URGED TO PREPARE NEW GROWTH PUSH AS UK SLUMP DEEPENS
Contributor / 2012-05-29 21:32:03
UK Prime Minister David Cameron faced renewed pressure to do more to spur the UK economy after figures showed Britain is in a deeper recession than first estimated. His political opponents said the slump is the result of too much austerity, not the euro-region crisis. Business lobbies and economists said the downturn bodes ill for investment and may make it harder to cut the deficit as tax revenue weakens. Cameron is losing voter support as Britain struggles to emerge from what his spokesman called “the worst financial and debt crisis of our lifetime.” The economy’s 0.3 percent contraction in the first quarter more than the 0.2 percent initially estimated means output has grown just 0.3 percent since the Conservative-led government took office two years ago. Budget cuts, a squeeze on households as inflation outpaces wages and turmoil in the euro region the biggest market for British goods are weighing on an economy that has recovered barely half of the output lost in the recession of 2008-2009.
The report capped a week of poor economic news for the UK government. A jump in state borrowing in April raised doubts that the government can meet its goal of cutting a deficit of more than 8 percent of gross domestic product to below 6 percent this year. Both the Conservatives and Labour claim the support of the International Monetary Fund, which this week praised the government for restoring credibility to the public finances with its plan to erase the structural deficit by 2017 while warning that tax cuts may be needed unless the economy strengthens.
It’s been another difficult week in Euroland, and we are still no nearer to getting any sort of resolution to the Greek problem. In fact, after a week where Greece managed to keep off the front pages, the next few weeks will probably see the Hellenic republic back in the spotlight as we build towards a second election on June 17. Syriza, the left-wing anti-austerity party, remain front runners and the fear that Greece would leave the Euro once a new Government is elected is continuing to drive large scale withdrawals from the Greek banking system. European politicians will announce a capital injection shortly to shore up the ailing Greek banks, but it is now becoming clear as we’re approaching the point where support for further bail-out funds (official or emergency like the Bank funds) is decreasing rapidly.
Durable goods orders from the US came in exactly as forecast, rising 0.2% in April. The lack of any surprise kept the Dollar from advancing too much against its main trading partners. But the Dollar remains the best performing currency of the last two weeks and will hang on to that crown as long as the large amount of uncertainty hangs over the markets.
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