EU continues to eye Greece, pound tumbles

Markets in Europe edged higher on Wednesday June 3rd, after a turbulent Tuesday saw a selloff in bonds and the euro pummel the US dollar after an upbeat inflation report. Meanwhile, the British pound plummeted after the UK’s latest PMI survey missed forecasts.

However, Greece remains the talking point in Europe as rumours of a snap election abound and the debt crisis is cited as the reason for slowing growth across Europe’s private sector.

Proposals for reforms have been delivered to both sides now, after Greece’s European creditors delivered their proposal today. Meanwhile, Greek government spokesman Nikos Filis warned that Greece won’t repay the International Monetary Fund on Friday the €305 million it owes them unless a deal is close to being reached.

“If there is no prospect of a deal by Friday or Monday, I don’t know by when exactly, we will not pay,” said Mr Filis to Mega TV.

The Greek debt crisis is also being blamed for the fall in Markit’s eurozone composite output index in May, which declined to 53.6 from 53.9 in April. Experts suggest that the drawn out negotiations impacted confidence and led to a slower expansion in the sector. 

“Heightened uncertainty surrounding the Greek debt crisis is also acting as a brake on growth,” said Chris Williamson, chief economist at Markit. He added that high unemployment continues to limit spending on goods and services, which led to three-month lows in growth of output and new orders. 

Markit also released its latest survey for Britain’s service sector, which failed to match expectations to send the pound tumbling. The UK’s service sector PMI data for May came in at 56.5 and was sharply lower than forecasts of 59.2, the quickest contraction in nearly four years.

Sterling staggered on the news, declining by a full cent when compared with the US dollar. Mr Williamson said that the data “raises doubts about the ability of the [UK] economy to rebound convincingly from the weakness seen at the start of the year”.