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EuVat Refund Europe Ahead - United Kingdom budget report and EU summit

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21st March 2010

After a tranquil economic week, this week is full of major highlights as the EU leaders are meeting on the 25-26 of March to discuss if they will provide aid for Greece or not once and for all; building on the proposals handed by the Euro finance ministers that tilted towards providing Greece with emergency loans.

Chancellor Angela Merkel of Germany wants Greece to turn to the International Monetary Fund (IMF) for aid; while President of the European Central Bank (ECB) Jean-Claude Trichet and French President Sarkozy say that the euro zone can handle their own problems.


Finance officials are worried that the swelling budget deficit in Greece might spread into other economies in the euro zone, which might weigh on the euro's strength. That is why they have all their focus on the current fiscal position of Greece.

Aiding Greece would restore some of the long lost confidence in markets, since lately this was a major market mover, especially for the euro. That is merely the main pillar for shaping the coming period for markets, and why we consider this week very critical.

Also in the United Kingdom, they are dealing with the same exact problem of a widened budget deficit. This week, the government is releasing the annual budget report which will include a plan of the government revenues and expenditures that will take place, printing the first path for the steps to control the staggering deficit.

There are currently a lot of attention on the new upcoming governmental election as Britons are in doubt if Prime Minister Gordon Brown is doing all he can to shore up economic growth while narrowing the budget deficit. The budget report will be the time for Brown to prove his power and will by doing all he could to continue supporting growth in the UK, which is why he did not accept pulling 25 billion pounds from the economy, when the EU commission asked him to, citing economic need!

Although the attention from officials in Europe is on the swelling budget deficits, yet there are still other core problems that are weighing on economic growth prospects; like high unemployment rates and instability in the banking and financial systems.

More news from the UK is on the queue, retail sales are due for release and expectations are they have improved last month. Lately consumption has been curtailed reflecting the high unemployment rates standing at 7.8% and the frozen lending system.

In other news, CPI in the UK is presumed to decline to 3.0% on the year ending in February after it had spiked to 3.5% for the year ending in January. Inflation rallied in the nation as a result of temporarily factors, which include the reversal of the VAT, energy prices, and the depreciation in sterling’s effective exchange rate. That combined pressured a temporary spike in inflation which officials see will fall back in coming months due to high spare capacity which is hoped to be offset by the adopted 200 billion pounds APF program, preventing deflationary threats.

Turning to economic data from the euro zone, we see that their dominate sectors’ readings are due for release. Expectations show that PMI services will slightly extend the expansion while PMI manufacturing will decline slightly, yet remains in expansion.

The focus this week as stated earlier is on the summit and annual budget report, while the data from major economies, will still help us comprehend the economic conditions across nations. Nonetheless, worries are floating around the widened budget deficits which there are speculations it might be the next economic bubble to explode…


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