Aurelia Butler

“We want to present plans for the budget soon,” Lindner said before answering questions in the Bundestag’s budget committee.Germany’s three-party government – comprising Lindner’s Free Democrats, the Social Democrats and the Greens – had been due to vote on the budget on June 21 after Lindner postponed the presentation of the final draft in March.Lindner has since said that the June 21 deadline was no longer feasible.The budget needs to be consolidated significantly after massive increases in spending during the coronavirus pandemic and due to higher energy costs as a result of the Ukraine war.At the same time, several ministries have registered projects that require financing.Lindner has already said that even more savings must be made and new spending should only come from existing funds.According to government sources, there is currently a gap of around 20 billion euros ($22.02 billion) in the plans for 2024.Germany’s finance ministry updated its tax estimates this month. It expects 148.7 billion euros less in tax revenues for the German state in the 2023-2027 period compared with previous forecasts published in the autumn of 2022.”We must adjust to the new budgetary realities,” Lindner said in the presentation of the tax estimates. ($1 = 0.9084 euros) More

WELLINGTON (Reuters) -New Zealand’s central bank on Wednesday signalled it was done tightening after raising rates by 25 basis points to the highest in more than 14 years at 5.5%, ending its most aggressive hiking cycle since 1999. The Reserve Bank of New Zealand’s (RBNZ) indication the official cash rate (OCR) would now be on hold defied market expectations that it might forecast further hikes and sent the New Zealand dollar down 1.25%.”The big surprise was leaving the OCR forecast unchanged. It says they’re done (hiking),” said Imre Speizer, head of new strategy at Westpac. “So that is a major surprise.” He added the statement was very dovish. The RBNZ forecasts the official cash rate to peak at its current level of 5.5% but will need to remain at the restrictive level until at least the middle of 2024 to ensure inflation returns to a target band of 1% to 3%, according to the monetary policy statement (MPS) accompanying the rate decision. A front-runner among its peers in withdrawing pandemic-era stimulus, the RBNZ has remained singularly focused on curbing inflation, lifting rates by 525 basis points since October 2021. This has been its most aggressive policy tightening streak since the official cash rate was introduced in 1999.RBNZ Governor Adrian Orr said at a media conference that there were signs higher interest rates were already having the desired effect.”It is quite nice to see some of the things we were hoping would already be here actually be here. And that is the lower surprise on GDP, the decline in inflation and all the indicators that suggest the interest-sensitive parts of the New Zealand economy are yielding,” he said.The central bank is still forecasting the economy will shrink in both the second and third quarters of 2023, however the RBNZ sees the recession as shallow and as positive as it reflects slower spending, which will help tame inflation. New Zealand’s annual inflation has come off in recent months and is currently running just below a three-decade high of 6.7%, with expectations it will return to the central bank’s 1% to 3% target within two years.The New Zealand dollar slumped 1.25% to a three-week low of $0.6168 after the rate decision, while benchmark two-year interest rate swaps dropped to 5.1970%, pulling away from a 14-year high of 5.5750% earlier in the day.Some economists continue to see upside risks to the central bank’s outlook, largely because they see risks around the impact of record migration and the government’s budget on inflation.Westpac New Zealand chief economist Kelly Eckhold said in a note that a key risk factor was around the RBNZ’s expectation that migration will quickly reverse and not add to housing market or inflation pressures.”The bottom line is that this is a central bank that sees itself on hold for a protracted period,” he said. More

UK bond markets sold off on Wednesday and traders pencilled in further interest rate rises after inflation fell much less than the Bank of England had forecast.The Office for National Statistics said consumer price inflation fell to 8.7 per cent in April — down from 10.1 per cent in March but significantly above the BoE’s forecast of 8.4 per cent.Government borrowing costs shot higher on the figures as traders revised their expectations of interest rates upwards. The yield on two-year gilts shot up 0.2 percentage points to 4.34 per cent, pushing them up towards rates last seen after Liz Truss’s unfunded 2022 “mini” Budget wreaked havoc in financial markets.Traders in forward markets are now betting that rates will peak at about 5.3 per cent by the end of the year.“It’s clearly a big surprise for the entire community and we’ve seen a big reaction,” said Peter Schaffrik, economist at RBC Capital Markets. “It’s very difficult to say with any degree of confidence that this environment will change in the near term — the UK labour market is still extremely tight.”While a substantial drop had been widely anticipated because of the impact of factoring out energy price increases early last year, core inflation for April rose to 6.8 per cent, from 6.2 per cent the month before.Food price inflation remained close to its 45-year peak, at 19.1 per cent compared with 19.2 per cent in March.UK inflation is now about double the equivalent US rate and significantly above that of the eurozone.

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Wednesday’s figures will add to the difficulties facing BoE governor Andrew Bailey who admitted the day before that the central bank’s economic model had not been accurate and there were “very big lessons to learn” on the management of high price rises. While the headline rate of inflation is likely to decline further as gas and electricity prices fall this year, the jump in the core inflation rate — which excludes food and energy costs — suggests there is more underlying inflationary pressure than hoped. Paul Dales, chief UK economist at Capital Economics, said that although the drop in the headline rate was welcome, “much more important was the worrying large rebound in core inflation”. He said this suggested that “the recent resilience of economic activity appears to be stoking domestic inflationary pressure”.The BoE has said that it would raise interest rates again if inflation appeared to be persisting.Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said Wednesday’s figures greatly exceeded expectations and were likely to prompt the central bank’s Monetary Policy Committee to act again. There was “too small a drop [in inflation] for the MPC to stop hiking in June”, he said.

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The ONS said the main rate dropped because of more stable energy prices — but this was largely offset by substantial increases in the prices of second-hand cars and cigarettes. Kitty Ussher, chief economist of the Institute of Directors, said that while the figures were concerning, there was still a chance that the fall in the headline inflation rate would change sentiment among companies setting prices and wages. “Policymakers will hope that now that the headline rate is back to single digits, expectations of future inflation will now start to fall as well, which then could become self-fulfilling,” she said.

In the month of April alone, UK prices rose 1.2 per cent at a time when gas and electricity bills were frozen. There was an 8 per cent rise in the communications component of inflation as mobile phone companies increased charges, moves often linked to the inflation rate.There was another 1.4 per cent increase in food prices, the same rise in rents and package holidays over the month and a 6 per cent rise in postal costs. More

ATHENS (Reuters) – Greece’s president appointed a caretaker prime minister on Wednesday to form a government that will lead the country to a repeat election on June 25, after last weekend’s inconclusive vote.The conservative New Democracy party of Prime Minister Kyriakos Mitsotakis stormed to victory polling 40.1% last Sunday, but fell short of an outright majority. The two parties that followed also refused to form a coalition, pushing for a second vote on June 25. Mitsotakis believes a second vote, which gives the leading party bonus seats, will give New Democracy the majority needed to rule alone. Opposition parties also hope a second vote will boost their ratings. On Wednesday, President Katerina Sakellaropoulou invited the leaders of all the parties whose share of votes surpassed the threshold of 3% to discuss steps forward. The invitation was procedural, and the brief talks did not produce a coalition government.Under Greece’s constitution, if coalition talks fail, the president appoints a caretaker prime minister to lead the country to a repeat vote. She appointed Ioannis Sarmas, a senior judicial official who is president of the Hellenic Court of Audit, one of the country’s three senior courts.”It is a constitutional obligation and at the same time my duty as a citizen to accept,” Sarmas told Sakellaropoulou. The leader of the Communist KKE party Dimitris Koutsoumbas said a repeat election would be held on June 25. “We are led to a caretaker government, with elections on June 25 and there we will give battle,” Koutsoumbas told state ERT TV. Under Greece’s electoral system, the winner of a second vote following an inconclusive first election can receive up to 50 bonus seats for every point it wins beyond 25%. To benefit from bonus seats, New Democracy needs to stay the biggest party, but that seems likely as its nearest rival, Syriza, secured just a fifth of the votes on May 21. If it secures 40% of the vote again or even a little less, it will most likely have a clear majority. The total seats New Democracy secures will, however, depend on how many other parties make it into parliament.The new parliament which emerged from the May 21 election will convene next Sunday and be dissolved a day later before the caretaker government takes over. More

WASHINGTON (Reuters) – Negotiators for Democratic President Joe Biden and Republican Speaker Kevin McCarthy were expected to reconvene on Wednesday morning, a source familiar with the matter said, seeking a deal to raise the United States’ $31.4 trillion debt ceiling and avoid a catastrophic default.With just over a week left before the deadline, Biden and House of Representatives Speaker Kevin McCarthy remain deeply divided on how to move forward. Republicans are pushing for sharp spending cuts while Democrats are offering to keep spending flat, instead using new taxes to help reduce the federal government’s debt.The months-long standoff has spooked Wall Street, weighing on U.S. stocks and pushing the nation’s cost of borrowing higher. The Treasury Department has warned it could run short of cash to meet all its needs as soon as June 1.But Biden and McCarthy’s negotiating teams, who reported no significant progress after a two-hour meeting at the Capitol on Tuesday, face an even tighter timeline as it could easily take a week to write any deal into legislation and pass it through the narrowly divided Congress.”The biggest gap we have is the funding issue,” said McCarthy’s lead negotiator, Representative Garret Graves, after Tuesday’s talks. Republicans want to cut spending for the 2024 fiscal year beginning in October back to 2022 levels, while Democrats have pushed to hold it steady at this year’s rate.White House spokesperson Karine Jean-Pierre called the talks “incredibly tough.””Both sides have to understand that they’re not going to get everything that they want,” Jean-Pierre said at a briefing.Negotiators differ over Republicans proposals to impose new work requirements on benefits programs for low-income Americans, loosening energy permitting rules and clawing back some unspent funds Congress authorized to fight the COVID pandemic.A source familiar with the White House’s negotiations said Biden is “willing to meet the Speaker halfway” and has offered a compromise, which includes a spending freeze, rescinding significant unspent COVID relief funds and a two-year cap on spending in line with previous bipartisan budget agreements.The source said McCarthy “claims he wants to negotiate, but today he said the only concession he is willing to make is to prevent default — a basic Constitutional responsibility of his job.”Congress regularly needs to raise the nation’s self-imposed debt limit to cover the cost of spending and tax cuts it has already approved. It did so three times during Republican Donald Trump’s four years in the White House without triggering a similar standoff.The last time the federal government came this close to default was in 2011, with a similar power divide in Washington – a Democratic president and Senate majority and a Republican-controlled House.Each party also faces opposition to the talks from within, with hardline Republicans insisting on the sharp spending cuts they passed in a House bill last month and progressive Democrats opposed to spending cuts or new work requirements.Biden spent months saying he would not negotiate on raising the debt limit only to reverse course and begin talks with McCarthy in the last few weeks. More