Key fundamentals from the euro zone and U.K. after introducing aid for Greece

This week, the euro zone will release its confidence for March and unemployment for February data, while the U.K. will release its final GDP reading for the fourth quarter. However, the main focus remains on deficit issues in EU countries after offering help to Greece.

In the euro zone, confidence slipped suddenly in February after reaching a record in January. After the improvement signaled in the third quarter, the pace of progress slowed in the fourth quarter and in the first quarter of 2010, raising concerns recovery may falter or be sluggish this year.

Other data to be released this week will show that unemployment climb to 10.0% in March from 9.9%, but meanwhile the main focus is not the rising jobless rate as before but is on the swelling budget deficit across EU members. 

The data released recently from the euro zone is showing deterioration due to the cold weather, the unwinding of stimulus measures, and the Greek woes that reduced confidence in the euro area countries.

However, the outlook may improve in the coming period after the EU endorsed the German-French proposal of giving an aid to Greece through a combination between the IMF and EU loans. But debt concerns are still persisting despite the aid introduced last week to Greece as many EU countries are still suffering from high debt and may not be able to reduce their debt to the 3% ceiling set by the EU this year.

For instance, Fitch Ratings lowered Portugal's sovereign credit rating to AA-minus from AA on Wednesday and said that it sees negative outlook for the country. Spain is also suffering from high debt along with other macroeconomic problems which may open the door for European economies to ask for assistance in the coming period. 
 
Moving to the British economy, growth rebounded to 0.3% from 0.2% contraction in the third quarter, while annually GDP came in at -3.3% from -3.2%. Growth estimates this week are showing that the final reading will remain unchanged from the flash reading.

The preliminary reading showed that the incline was led by services output was which was revised to 0.5% from the previous 0.1%. The reading was lifted also by private consumption that climbed to 0.4% from 0.1% and government spending which spiked to 1.2% from the revised 0.4%.

Data released recently from the U.K. is showing improvement and providing evidence the economy is on the right track towards recovery. However, Darling mentioned in the annual budget report that growth this year will be between 1%-1.5% inline with previous expectations, while it is presumed to range between 3 and 3.5% next year, which lower than the prior expectations of 3.75%.

Nonetheless, aside from the political pressure of having a minority government, the main focus remains budget deficit woes that are threatening recovery in the economy. Darling said in his budget statement to the Parliament that he pledges to slash the budget deficit by half within four years, as the government is going to reduce borrowing without hurting the recovery of the nation.

Darling revealed that borrowing will retreat to 131 billion pounds in 2011-2012 then to 110 billion pounds in 2013-2012 till reaching 89 billion pounds by 2014-2015 then 74 billion pounds after that.