Week in Review

Negotiations between the Greek government and creditors, which now includes the European Financial Stability Mechanism (EFSM), started on Tuesday. The point is to determine the terms of the new €86bn bailout programme before 20 August, when a €3.2bn payment is due to the ECB (if negotiations are not concluded a second bridge-loan by the EFSM may be arranged). Creditors are still somewhat skeptical about this new programme, though Greek economy minister is confident negotiations will be finalized within three weeks. Benoît Coeuré, from the Executive Committee of the ECB, said this week that restructuring Greece´s debt is no longer a matter of argument, what there is to discuss is the way it will be accomplished. Even Germany is now willing to accept that idea. However, the IMF intervention remains restricted since Greece´s debt is unsustainably high. This may harm further negotiations as Germany was only willing to consider restructuring Greece´s debt if the IMF participates financially.

Meanwhile, political tensions in the Syriza´s party remain. The Left Platform – Syriza´s internal opposition led by the former energy minister, Panagioties Lafanazis – strongly defends the Grexit. Speculations around a possible rupture of the government and early elections – possibly in September – are rising, undermining the country´s political stability.

Inflation in the Euro Area in July was 0.2%, the same as in June and 0.2 pp less than one year ago. The sector with the most significant contribution is services, with a 1.2%yoy inflation rate, followed by the food, alcohol and beverages (+0.9%yoy).

In the US, the Bureau of Economic Analysis (BEA) announced an upward revision of GDP growth (0.6% annual growth rate instead of a 0.2% contraction), on the back of higher investment in the first three months of the year. For the second quarter, the BEA estimates that US growth had accelerated to 2.3% in annualized terms, mainly because of growing household consumption and real exports, despite the dollar appreciation. Supporting the evidence of increasing household spending, the saving rate fell to 4.8% in this quarter, less 0.4 percentage points than in Q1 2015.

The FED continues to signal on an interest rate hike in its September meeting as policy makers predict continuous improvements in the labor market and rising GDP.

In Portugal, the unemployment rate in percentage of the labor force aged 15-74 years  dropped to 12.4% in June, back to 2011 levels, according to the National Statistics flash estimate. The release includes a strong revision on the May’s rate from 13,2% to the same rate estimated now for June. The provisional estimate of the unemployed in June 2015 was 636,400 people and for the employed population was 4,492,700 people.


The Week Ahead & in Review won’t be published during the next month. It will be back in September.