Greece and its Eurogroup creditors have come to a tentative agreement that sees the current rescue package extended by four months provided that Greece present an acceptable list of reforms today (Monday), approval of which is essential to minimise the chances of a ‘Grexit.’ Without an extension, Greece could run out of money as early as the end of the week, but it is in both parties’ interest to reach a deal – for if Greece defaulted then Germany would lose €50bn.
Due to this uncertainty, capital flight has increased in Greece. Greek savers are withdrawing money at an alarming rate as a potential exit from the Eurozone looms large. Below is a pie chart of who owns the large amount of Greek debt.
Aside from Greece’s on-going negotiations, the ECB will be implementing their new QE programme next month which should boost growth and stave-off deflation. This should lower the Euro and help firms boost profits thereby creating employment. However, structural reforms need to take place in order for QE to be effective.
After 18-months of holding the rate constant at 2.5%, and with the recent a slowdown in consumer spending, the RBA cut interest rates to 2.25. In addition, due to China’s slowdown (shown in the graph) there has been a declining demand for commodities. The RBA have also reiterated that the Aussie Dollar remains very high and thus a rate cut should devalue the Aussie Dollar.
Unemployment still remains a concern for the RBA and currently sits at 12.5%. A rate cut should lift business investment and thus increase employment. In addition, a declining Aussie dollar and lower oil prices should help firms profit and help inflation.
The only concern the RBA have are house prices - with a lower cash rate there will be more buyers in the market. Thus there is a likely to be a mismatch between demand and supply resulting in higher property prices.
Due to this uncertainty, capital flight has increased in Greece. Greek savers are withdrawing money at an alarming rate as a potential exit from the Eurozone looms large. Below is a pie chart of who owns the large amount of Greek debt.
Aside from Greece’s on-going negotiations, the ECB will be implementing their new QE programme next month which should boost growth and stave-off deflation. This should lower the Euro and help firms boost profits thereby creating employment. However, structural reforms need to take place in order for QE to be effective.
After 18-months of holding the rate constant at 2.5%, and with the recent a slowdown in consumer spending, the RBA cut interest rates to 2.25. In addition, due to China’s slowdown (shown in the graph) there has been a declining demand for commodities. The RBA have also reiterated that the Aussie Dollar remains very high and thus a rate cut should devalue the Aussie Dollar.
Unemployment still remains a concern for the RBA and currently sits at 12.5%. A rate cut should lift business investment and thus increase employment. In addition, a declining Aussie dollar and lower oil prices should help firms profit and help inflation.
The only concern the RBA have are house prices - with a lower cash rate there will be more buyers in the market. Thus there is a likely to be a mismatch between demand and supply resulting in higher property prices.
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