Pressure mounts on Athens to reach a deal before facing new debt repayments in JuneLeaders of Germany and France want more progressGreek minister: We need a deal by June 5Merkel and Tsipras could discuss crisis in RigaEarlier: UK enters negative inflationOsborne: It’s good news 5.52pm BST The comments from European Central Bank policymaker Benoit Coeure suggesting an accelerated bond buying programme in May and June to avoid the summer lull sent the euro lower but stock markets higher. Investors were also hoping a deal to save Greece could be worked out, with some positive signs amid the usual confused commentary. So the final scores showed: 5.04pm BST More on Christine Lagarde’s comment that progress was being made in the Greek negotiations. Reuters reports:The International Monetary Fund is making “some” progress in discussions with Greece over an aid agreement, but it must also consider the views of the broader international community, the head of the institution said on Tuesday.“We have constant discussions, and are making some progress in those negotiations with the Greek authorities,” IMF Managing Director Christine Lagarde said at a conference. 4.22pm BST The remarks by senior ECB policymaker Benoit Coeure made last night but released this morning have caused some controversy.Coeure said the ECB was planning to speed up the pace of its bond-buying stimulus programme before the summer lull, comments which sent the euro tumbling. However investors are upset he made them to a select audience of bankers and hedge fund managers rather than making them generally available. The ECB said in a statement that the intention had been to release the remarks on Monday as Coeure spoke, and that a procedural error prevented that happening until Tuesday morning. It also said the speech was covered by Chatham House Rules, meaning it wouldn’t normally be published. 3.41pm BST On a more positive note, the IMF’s Christine Lagarde has said that some progress is being made in the Greek negotiations.Greek 2yr yields drop as #IMF’s Lagarde says some progress on talks with #Greece. pic.twitter.com/J0wshMkZrk 3.29pm BST Back with Greece:For the first time since SYRIZA came to power, Macedonia Uni poll finds the negotiating strategy is wrong http://t.co/1npoA1QYVC #Greece 3.22pm BST France’s economy is recovering but its growth potential is still much weaker than before the crisis.This is the view of International Monetary Fund staff after the end of an official visit to the country. The IMF is forecasting real GDP growth to rise to 1.2% this year after almost four years of near stagnation, above the government’s prediction. It added:The recovery is supported by a highly accommodative external environment, in particular sharply lower oil prices, a depreciated euro, and interest rates at historic lows. The initial rebound has been driven by household consumption and exports are set to pick up as well. However, investment has not yet responded, unemployment remains stubbornly high, and public debt continues to rise.We see a solid short-term recovery, but structural rigidities continue to weigh on medium-term prospects. Important progress has recently been made to address them, notably by reducing the tax wedge on labor and advancing supply-side reforms. However, continued efforts are needed to tackle France’s fundamental economic problems: high structural unemployment, low potential growth, and record-high public spending. Our main recommendations are to: 3.09pm BST Whatever happens it seems unlikely that any deal between Greece and its creditors will be reached at this week’s EU summit in Riga. The summit is mainly concerned with Eastern Europe but Greek prime minister Alexis Tsipras is expected to talk to fellow leaders on the sidelines of the meeting. But, Reuters reports:Eurogroup head Jeroen Dijsselbloem said on Tuesday it was unlikely Greece would reach a deal with its lenders when European leaders meet for a summit in Riga, Latvia, this week.Dijsselbloem, who is also Dutch finance minister, said a decision on Greece’s debt and reform negotiations would be made during talks with the European Commission, European Central Bank and International Monetary Fund. 3.01pm BST An uncertain opening on Wall Street has taken some of the shine off European shares, with the FTSE 100 now back below the 7000 level although it is still up around 0.35%.French and German shares have also come off their best levels, but are still holding on to reasonable gains after an ECB member suggested an acceleration in its bond buying programme. 2.41pm BST Another call for the Greece talks to speed up, this time from European Commission vice president Valdis Dombrovskis:EU’s Dombrovskis: Progress On Greece Depends On Technical Talks - #BBG -Time Is ‘Really Running Out’ For Greece Talks 2.07pm BST There’s a very good reason why Greece needs a deal by June 5th, as Labour minister Panos Skourletis warned today -- it owes €305m to the IMF that day. But that’s just the start....Greece has €1.5bn in IMF payments coming in June. 'Endgame' here according to Yves Mersch. http://t.co/D0fYOcszDc pic.twitter.com/5zMa8su1G0 2.04pm BST The leaders of the eurozone’s two largest countries have both called for the negotiations between Greece and her creditors to speed up.“I’d say the talks need to speed up, rather than that they are going too fast, and we hope the relevant forum - the Brussels Group - can make clear progress because the agreement in February was that a programme should be set up by the end of May.”“We all have the same stance which is that Greece must stay in the eurozone.” 1.48pm BST German chancellor Angela Merkel is trying to prevent a potential rebellion among her own party against approving more aid for Greece, reports Bloomberg.Here’s a flavour:Caucus leaders of Merkel’s party are working on the objectors, telling them they may be asked to approve further aid to ward off a default even if Greece refuses to implement all changes demanded by creditors, according to three officials.Merkel has been calling small groups of dissenters to the chancellery to tell them that Greece leaving the euro area would risk causing geopolitical instability in the region, one of the people said.In for a penny, in for a pound? - Merkel Seeks to Head Off Party Revolt Against Greek Deal http://t.co/WsqWrI08xE via @business 1.11pm BST Over in Athens word is coming through that June 5th is now being seen as the absolute deadline for a deal to be done. “Personally and collectively we will not accept this humiliation. Any rejection [of the plan] is aimed at humiliating the government.” 12.55pm BST Video: George Osborne has reiterated that today’s inflation data is not bad news..... and also ducked the question about falling prices will mean for benefit payments (which are pegged to the CPI rate) 12.24pm BST News is coming through from Berlin that Greek prime minister Alexis Tsipras is likely to meet Angela Merkel on the sidelines of the Riga summit, which starts on Thursday.A spokesman for the chancellor has said no decision will be taken in regards to reforms or debt by the two leaders. Insiders in Athens are saying it is likely they will reconfirm the headway made by technical teams leading negotiations.Media reports here are suggesting that “a working agreement” has been drawn up and is now the basis of talks which would imply that the two sides are closer to an agreement. 12.09pm BST Let’s turn back to the Greek crisis.....The European Commission continues to deny that it has drawn up a secret plan to bridge the rift between Athens and its lenders.Progress in talks between Greece and its creditors on more funding is slow, the European Commission said on Tuesday, denying the existence of a new proposal reported by the Greek press that would give Athens cash on more favourable terms.Greek newspaper To Vima said on Monday the Commission had prepared a possible compromise, proposing that creditors should accept a lower primary surplus target from Greece in return for tax reform and a hike in sales taxes. 12.08pm BST One last chart....#UK inflation since the 1950s, by @ReutersFlasseur pic.twitter.com/oLQ1LhZ55I 11.56am BST Bank of England governor Mark Carney has vowed to get UK inflation back to its 2% target.He told ITV News:We expect inflation to be very low for several months. But over the course of the year, towards the end, inflation should start to pick up towards our 2% target. Our job is to ensure that inflation remains low, stable and predictable.The British people should enjoy this period of very low energy prices, very low food prices....enjoy it while it lasts. We’re going to bring inflation back to that 2% target to keep this economy well functioning, to keep the jobs market growing and to bring income growth up.Bank of England Governor says Brits should 'enjoy low inflation and low prices while it lasts' http://t.co/dLUjU4D8DT pic.twitter.com/joULR6GbTX 11.45am BST Time for a recap. Related: UK inflation turns negative Instead we should welcome the positive effects that lower food and energy prices bring for households at a time when wages are rising strongly, unemployment is falling and the economy is growing. Of course, we have to remain vigilant to deflationary risks and our system is well equipped to deal with them should they arise. 11.43am BST Deflation, like cholesterol, can apparently come in good and bad flavours.Ben Southwood, Head of Research at the Adam Smith Institute argues that Britain is enjoying a dose of the good stuff:“We have deflation—albeit extremely mild deflation of 0.1%—for the first time since the 1960s. But this seems to be ‘good deflation’, coming mainly from cheaper goods – especially from cheaper oil— rather than from a drop in consumer demand.“Economists worry about deflation, but only the ‘bad’ kind, when prices are sliding at the same time as wages and output. Bad deflation makes debts harder to bear, puts people out of jobs, and can lead to a downward spiral. Good deflation, when wages and output are rising steadily, makes everyone better off. 11.29am BST And here’s Chris Leslie MP, Labour’s Shadow Chancellor, on today’s inflation figures: “Any relief for households is welcome, but this month’s figures reflect global trends and doesn’t change the reality that many are still struggling to pay the bills.“The Government must clearly guard against the risk that business investment might be deferred. We need stronger action now to raise productivity to deliver sustainable growth and rising living standards.” 11.13am BST Britain isn’t the only country experiencing disinflationary pressures. America’s annual inflation rate fell by 0.1% in March (we get April’s data on Friday).There is no doubt the US economy is no longer the world’s locomotive while China is struggling to replace it and Japan and Germany have long since given up. Central banks seem to be running out of ideas and there is an increasing disconnect between economic fundamentals and asset prices. There are potentially very dark clouds gathering that could prolong this deflation and make it malign. 11.01am BST Britain’s inflation rate will soon spring back into positive territory, predicts Martin Beck, senior economic advisor to the EY ITEM Club:“CPI inflation in April recorded its first negative reading since 1960, but this looks likely to be a one-off. Overall today’s reading may be an interesting piece of trivia, but it will have no tangible impact on the economic outlook beyond offering further evidence that UK consumers are enjoying a substantial boost to their spending power.” 10.52am BST TUC General Secretary Frances O’Grady does not share George Osborne’s optimism - she urges the chancellor to hold back from fierce cuts in his Budget in July:“The first period of negative inflation in over half a century could turn out to be the canary in the mine, signalling that there’s something very wrong with the recovery. And with the threat of deflation set to continue, the Chancellor’s plans for extreme cuts risk putting the economy into more serious trouble.“We need a better plan for growth if we are going to have a recovery built to last with a firm foundation for improving living standards. Stagnating prices are not a sound foundation for the strong and sustained pay rises that workers have been waiting years for.” 10.45am BST Andrew Sentance, senior economic adviser at the accountancy firm PwC, reckons that inflation could be pushed up as British workers gets a long-awaited pay rise.“Though prices are slightly down on a year ago according to the CPI, sustained deflation is not on the cards. Once the impact of the big drop in oil prices drops out of the annual inflation rate, it will move back up to 1-2% over the next year or so. With wage inflation picking up we may soon be considering the prospect of above target inflation.“In the meantime, flat or slightly falling consumer prices are good for growth, boosting real consumer spending power. So a temporary period of slightly negative inflation can be good for the UK economy.” 10.33am BST Falling prices means there’s no reason for the Bank of England to raise interest rates soon.“With inflation set to remain below 1 per cent this year, a rise in interest rates anytime soon seems off the cards. Rates are likely to remain low into next year and beyond, continuing to help the domestic recovery.” 10.30am BST James Sproule, Chief Economist at the Institute of Directors, agrees with George Osborne that Britain hasn’t lurched into a harmful period of deflation:Falling prices in necessities, such as food and transport, along with a period of sustained job creation and wage growth mean demand and consumption will remain buoyant.“Deflation can be a chronic problem where it represents a lack of consumer confidence and an unwillingness to spend. This danger is very real in some parts of southern Europe, but is not even a distant threat in the UK. While deflation does cause the cost of debt to rise in real terms, the benefits to the wider economy of a period of falling prices far outweigh any downsides.” 10.27am BST For the worst housing inflation, look at Scotland -- where prices are up almost 15% since March 2014.Annual house price inflation rises for first time in 7 months. 9.6% across UK. But no longer just driven by London: pic.twitter.com/qs2P7EfIgm 10.25am BST There’s not much sign of negative inflation in the UK housing market.New data this morning shows that UK house prices increased by 9.6% in the year to March 2015, up from 7.4% a month earlier. 10.21am BST The recent strength of the pound has also driven prices down over the last year, by making imports cheaperJeremy Cook, chief economist at the international payments company, World First, explains:Sterling is around 5.8% stronger than this time last year and the past 12 months have obviously been a significant decline in oil and food prices. The subsequent effect on imports into the UK means that disinflation is piggybacking on every product that we bring in from abroad.”“As oil prices recover and last year’s declines fall out of the inflationary basket then this will become less of an issue. 10.18am BST Another sign that Britain isn’t in “damaging deflation” - the Retail Prices Index, a broader measure of inflation that also includes housing costs, rose by 0.9% over the last year. 10.11am BST Kevin Doran, Chief Investment Officer at Brown Shipley, a private bank, says we shouldn’t read too much into the CPI index:“Despite today’s inflation numbers showing a fall into negative territory, investors shouldn’t be fooled into thinking this is an accurate representation of the state of inflation in the UK. You don’t have to look far to see that there is an abundance of inflation in asset prices, largely in bond and equity markets, with people rightly talking about bubbles in each of these respective asset classes, particularly tech stocks. 10.06am BST Over the last year, food prices have fallen by 3.0% and prices of motor fuels fell by 12.3%, according to today’s inflation report.This chart gives a better picture of price changes over the last 12 months and their impact on the inflation date: 9.58am BST What to call -0.1% CPI: negative inflation or deflation? My take: if you’re calling it deflation make sure you emphasise it’s not ‘30s style 9.56am BST Here’s another chart, showing how UK prices have risen (or very occasionally fallen) since the end of WW2 rationing:CPI inflation since 1950. Last time it was in negative territory was 55 years ago pic.twitter.com/o6atO2fOZV 9.50am BST A brief bout of negative inflation is NOT the same as full-blown deflation (defined as a protracted period of falling prices, where consumers expect things to keep getting cheaper).“Today we see good news for family budgets with prices lower than they were a year ago. As the Governor of the Bank of England said only last week, we should not mistake this for damaging deflation.Instead we should welcome the positive effects that lower food and energy prices bring for households at a time when wages are rising strongly, unemployment is falling and the economy is growing. Of course, we have to remain vigilant to deflationary risks and our system is well equipped to deal with them should they arise.” 9.42am BST We should enjoy falling prices while we can, says Tom Stevenson of Fidelity.Speaking on Sky News, he explains that Britain isn’t turning into Japan [which suffered actual deflation for many years], and this isn’t a return to the depression of the 1930. 9.40am BST CPI at -0.1% year on year, first dip into deflation since 1960. Timing of Easter this year an issue slightly depressing prices. 9.39am BST This chart confirms that transport costs were the biggest drag on inflation last month.That’s because Easter fell in March in 2015, but in April in 2014 -- so transport firms didn’t put their prices up this year. 9.33am BST 9.30am BST Breaking: Britain is experiencing negative inflation for the first time in over half a century.The Office for National Statistics just reported that the consumer prices index fell by 0.1% in April. That’s the first negative reading since March 1960. 9.24am BST This chart, from ING, shows how inflation, as measured by the Consumer Prices Index, hit a record low of zero this year. 9.09am BST Just 20 minute to go until we get the UK inflation data for April.Jeremy Cook, chief economist at World First, predicts that the consumer prices index will have turned negative, after being unchanged in February and March.Expecting UK CPI to see a YoY decline in April. Nothing catastrophic, but strong GBP, lower oil and food should see a print of -0.1%UK consumer price inflation could fall into negative territory for the first time in the series’ history. This won’t last long though with the BoE expecting inflation to be at 2% in 2 years’ time.....Motor fuel prices are starting to move higher given the pick-up in oil prices. Furthermore, we are doubtful that much more food price deflation can be squeezed out of the supermarket fight for market share. Preemptive tweet: if CPI goes negative today that is not "bad deflation" & no reason to panic. As long as wages are growing, it's benign. 9.06am BST European stock markets have jumped, following the news that the ECB will accelerate its bond-buying programme in May and June (before heading to the beaches for the summer).Traders are deducing that a weaker euro and an extra dose of stimulus is good news for European firms, pushing up shares in Paris, Frankfurt, Milan and Madrid: 8.55am BST Newsflashes are coming in that Jean-Claude Juncker, EC president, has denied that he’s drawn up a compromise plan to break the Greek deadlock.*JUNCKER DISMISSES REPORTS OF GREECE COMPROMISE PLAN BY HIM*JUNCKER RULES OUT POSSIBILITY OF GREECE AID DEAL IN RIGA*JUNCKER FORESEES AID DEAL ON GREECE AT END-MAY OR IN EARLY JUNEEU Commission Pres Jean-Claude Juncker tells Bloomberg he expects end-of-May/early-June Greek deal & that he's personally involved in talks. 8.40am BST Greek car sales may be up 43% this year, but they’re still way, way below their pre-crisis peak:About that 43.3% y/y rise in Greek car regs. Impressive, but also about base effects, trend still below 1990 levels! pic.twitter.com/vtymqhi8UX 8.32am BST The European Central Bank is planning to speed up the pace of its bond-buying stimulus programme before the summer lull, according to senior policymaker Benoit Coeure.In remarks that just send the euro tumbling, Coeure explained that the ECB wants to buy more bonds than average over the next six weeks, to avoid the “notably lower market liquidity” in late July and August.The Eurosystem is taking this into account in the implementation of its expanded asset purchase programme by moderately frontloading its purchase activity in May and June, which will allow us to maintain our monthly average of €60 billion, while having to buy less in the holiday period. If need be, the frontloading may be complemented by some backloading in September when market liquidity is expected to improve again.The slightly higher purchase volume that market analysts may observe in the coming weeks is therefore unrelated to the recent episode of market volatility.Cœuré: we frontload purchases in May and June to maintain monthly average of 60bn while buying less in holiday season http://t.co/do7tWq3flnCœuré: slightly higher purchases in coming weeks are therefore unrelated to the recent episode of market volatility http://t.co/do7tWq3fln 8.17am BST Car sales numbers from Greece suggest Greeks are storing cash in cars. Whether that is in the boot or not remains to be seen 8.12am BST Car sales across Europe have risen for the 20th month running, helped by a remarkable boom in demand in Greece.Industry body ACEA has reported that new passenger registrations in the EU rose by 6.9% year-on-year in April, as the pick-up in consumer spending continues.All major markets contributed positively to the overall expansion, especially Italy (+24.2%), which posted double‐digit growth, followed by Germany (+6.3%), the UK (+5.1%), Spain (+3.2%) and France (+2.3%) that also performed better than in April 2014. European car sales rose a 20th consecutive month in April, bolstered by reviving economy and new models from Renault, BMW and Fiat ChryslerDespite depreciating in value quite quickly, cars are still a handy asset to own because they can be put to productive use - especially if the alternative is just stashing your money under a mattress. In a strange irony of Greece’s woes, German industry is perversely one of the main beneficiaries of the country’s banking collapse. Greek consumers, like many of their fellow Europeans, buy German cars more than any other brand. Cars sales: decent proxy for Greek capital flight http://t.co/zILnpZQVM3 7.52am BST Germany’s Deutsche Bank has made a dramatic intervention into the debate over Britain’s membership of the European Union, revealing it might quit the City if the UK left the EU. Related: Deutsche Bank may leave Britain in event of 'Brexit' – reports 7.44am BST Last night, Greek finance minister Yanis Varoufakis was grilled about the country’s bailout negotiations in a live TV interview on Star TV.“I think we are very close....Let’s say (it’s a matter) of about a week.”“I assure you that if we face a dilemma between paying a creditor who refuses to sign an agreement with us and a pensioner, we will pay the pensioner.....I hope we will be able to pay both.”“The lack of liquidity is neither the choice nor the responsibility of the Greek government. It is a tough negotiating tactic of our partners, and I do not know whether everybody in Europe feels proud of it.”“It would be unfair for Greek citizens to have to take a position on such a matter, answering with either a yes or a no.”Varoufakis: I am a soldier, never considered resigning - http://t.co/pj2NGKwYfW pic.twitter.com/zy6fvUBFIdVaroufakis: We are NOT considering a different currency -http://t.co/ggxdwIAyEK 7.24am BST Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Britain’s headline inflation rate may turn negative for the first time in half a century. The cost of living has been unchanged for the last two months, but economists reckon it could actually have fallen in April, thanks to the cheaper oil and fuel. Related: UK inflation picked to turn negative for the first time in more than 50 years Related: Alexis Tsipras claims Greece is close to securing deal with Brussels and the IMF With a suspension of repayments [of the debt], measures that restrict the “freedom” of capital flight, governmental control over the banks, taxation of capital and of the rich for the financing of pro-people measures, support of this policy with any and all possible means, and with the possible break from the EMU.Call for "rupture now" by the Political Secretariat & Central Committee of #Syriza http://t.co/cGcxZlGExD #Greece Continue reading...
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