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A new government for Greece and battle lines are drawn

Greek political parties have struck a deal to create a coalition government and its first objective will be to go head to head with its European debtors over the bailout deal that has ravaged the country.

The coalition is comprised of the expected to be announced Prime Minister Antonis Samaras’ new democracy, Pasok and the democratic left party. The opposition is set to be dominated by SYRIZA and its leader Alexis Tsipras has vowed the government to task over the bailout.

New Democracy won 129 seats in Greece’s 300-seat parliament on Sunday, followed by Syriza with 71, Pasok with 33 and the Democratic Left with 17. Between them, New Democracy, Pasok and Democratic Left have a majority of 29.

The battle lines are already forming between the new administration and the EU after the new government vowed to renegotiate the terms of the bailout. Pasok leader Evangelo Venizelos said that the new government’s top priority will be the formation of “a national team” to renegotiate the €130bn bailout agreement Athens has signed with its creditors at the EU and IMF.

“Our first test will be the EU summit on June 28 where our battle to revise the terms of the loan agreement with our creditors will begin,” He hinted that Yiorgos Zanias the current caretaker finance minister will be sent to tomorrows Eurozone finance ministers meeting with a mandate calling for a renegotiation.

The German fiancé minister Wolfgang Schaeuble immediately retaliated saying that Greece will have to stick to its commitments. “What is needed is more decisiveness in swiftly implementing the measures which have already been agreed.”

Nicholas Spiro at Spiro Strategy has cautioned that it is merely a “distraction from the deep-seated problems facing the country and the Eurozone in the coming weeks and months:
“If Greece itself is a sideshow, then the new government is of little consequence. Indeed there is a significant risk that a coalition comprised of figures from Greece’s discredited establishment may even exacerbate matters.
The only “winner” in Sunday’s election is Mr Tsipras. Not only has he won the argument that changing the terms of the bail-out agreement does not in itself equate to Greece’s repudiation of its membership of the Eurozone, he’s now in the political driving seat as a popular leader of the opposition. Provided it is formed, the New Democracy-led cabinet will be a weak and distrusted administration which will have to drive a hard bargain with the Eurozone if it wants to remain in office for longer than a few months.”

Elsewhere, the UK economy received a bit of good news today after the latest job figures released by the office of national statistics showed that the number of people out of work fell by 51,000.
Unexpectedly the number of claims for job seeking allowance rose by 8,100 taking many observers by surprise as it was predicted it would see a fall of 3000. The news will be a welcome relive to the British government who has been barraged by a series of disappointing economic figures over the past few weeks.

Employment Minister Chris Grayling said “This time we’re seeing a very healthy increase in full-time jobs and that’s clearly very welcome any fall in unemployment is very welcome, but I remain cautious over the next few months, given the continuing economic challenges we face.”

Today saw the release of the Bank of England’s June meeting. The minutes revealed that four members of the UK Monetary Policy Committee voted to implement and increase further quantitative easing measures. The committee was split 5-4 in favour of not implementing further increases raising economists’ expectations that a new round of quantitative easing is inevitable for July.

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