(Menafn - ecPulse)
This week includes important fundamentals from the U.K. while in the euro zone lights are spotted on the EU Finance Minister's meeting in Brussels. European economies are meanwhile passing through embracing phase in their recovery journey where central banks are tightening their monetary measures amid widening budget deficit prevailing in many European economies.
In the U.K., unlike last week, important data are going to be released, but perhaps the most important is the budget deficit data. Government spending exceeded revenue by 4.3 billion pounds which caused the U.K. to post its first January budget deficit since at least 1993, while the deficit is predicted to have reached 13.5 billion pounds in February.
Britain's budget deficit is expected to hit 12.6% of GDP during the fiscal year ending in March, while credit rating agencies continue to monitor the level of the country's disability to pay back debt, which could show the markets more surprises in the coming period. Prime Minister Gordon Brown pledged to cut halve the budget deficit by the year 2014.
Fitch Ratings said the British government must reduce the budget deficit to reach 3.0% by the end of 2015 fiscal year, instead of what is planned by the government to reach 4.4%. It is worth mentioning that Fitch had announced earlier that the outlook is "stable" for Britain's AAA credit rating.
By extension, Moody's Investors Service, also a credit rating agency, announced this month the possibility of exposure of British banks to downgrading if it did not fix its financial position and capital; especially with plans by government to withdraw support offered to banks. In December, Moody's announced that the credit rating of the country has come in contact with the lower boundary of "Aaa" rating.
In addition to the above problems, the conflict witnessed on the British political scene between the ruling Labor Party and the Conservative Party increased the pressure on the currency's value. More concerns are now focused on the outcome of the coming election and the possibility for a minority government, which will hurdle further the recovery and steady steps towards fiscal consolidation. The pound sterling fell against major currencies by about 25% during the three previous years and dropped against the U.S. dollar alone by 7.5% during the current year.
Furthermore, ILO unemployment for January is due this week with expectations to show a rise in unemployment in the three months ending January to 7.9% from 7.8%. While the rate remained steady at 7.8% in December, jobless claims for January rose to the highest since 1997.
The BoE had paused its 200 billion pounds program in February and left it unchanged in March withholding interest rate steady at 0.5%. The Minutes this week will clarify whether the vote was unanimous or there is disagreement between the 9 MPC members like what happened in November.
Turning to the euro zone, the 16-nation will release its annual CPI for February which is estimated to stagnate at 0.9%. However, the main focus nowadays in the euro zone is not on prices after it steadied in the past few months, but on EU officials who are getting ready for their meeting this week, where they will discuss the valid options for bailing out Greece.
Speculation last week was that the EU might give Greece 55 billion euros, yet there is no confirmation with regards to this information. Three people responsible for preparation of the 2-day meeting said the EU may fund Greece by either EU bonds guaranteed by euro area governments or provide it with direct loans to tackle its deficit.
Sarkozy uttered this month that the EU will help Greece if needed but on the other hand, the German Chancellor Merkel refused to give any support for Greece. If the EU agreed to bailout Greece this will end the debt woes in the debt-stricken country and probably will give a boost to the euro, while it may open the door for other European economies suffering from high debt to ask for assistance unfolding another chapter of agony for the EU!