At the annual conference of the Institute of Economic Affairs today, Andrew Sentance, former Monetary Policy Committee member, opined that

“the current phase of disappointing growth and volatility”

…was

“the new normal.”

His comments mirrored the concept of both another economic survey that projected slow growth and the European Commission that noted a UK growth rate at 0.6 percent for 2012. The growth estimate for much of Europe was downgraded as well.

Mr. Sentance proposed that Britain was experiencing the end of the second nine-year period of stalled growth that has followed extended years of growth since World War II. He stated that the first period ended in the 1970s, followed by almost a decade of stagnant growth. In the late 1980s, not only did Britain’s economy begin picking up momentum again, so did the rest of the world.

In 2007, just before the crash of 2008, the expansion-retraction cycle had begun again.

During each economic ebb period, Britain’s growth rate ran less than one percent, matching the current trend.

He stated:

“I hope that a more sustained growth dynamic will emerge in the second half of the decade. The conditions, which supported the period of growth, which ended with the financial crisis, are not set to return quickly. There are parallels with the disappointing growth the 1970s and early 1980s.”

Andy Haldane, the Bank of England’s executive director for financial security, repeated the growth estimate concerns.

“We are not yet remotely in a position where balance sheets have been fully repaired. Households and business were therefore likely to keep saving and continue to act as a drag on the economy.”

Haldane also voiced concern regarding the apparent lack of concern by banks for small- or medium-sized businesses.

“[The country] needs structural reconfiguration of the banking industry to ensure that SMEs have the financing they need to be tomorrow’s growth….”

Yet another weekend of Greek bail-out controversy, Germany has nodded to pressure to drop the drafting of Greece’s exit from the European Commission.

There are yet unanswered questions and conditions to the bail-out requirements, none the least of which is the grandfathered acceptance of austerity and oversight conditions after the April elections. According to the troika of the International Monetary fund, the European Commission and the European Central Bank, the incoming government must agree to these conditions.

Theodoros Dritsas, MP from the Syriza party, has stated:

“If we achieve a Left-dominated government, we will politely tell the Troika to leave the country, and we may need to discuss an orderly return to the Drachma.”

Select members of the German coalition government agree in principle that Greece should leave. Markus Söder, the Bavarian finance minister declared that the euro’s status as a world reserve currency, which would be undermined if Greece defaulted while a member of the eurozone, is

“more important”

…than Greece’s solvency. He stated:

“It would be better if Greece stepped out of the euro.”

The bail-out instalment currently under discussion by European finance ministers was agreed to in October 2011 as part of a step-down plan implemented in stages. The €130-billion payment currently under review has already been determined to be at least €15 billion shy of the total funds Greece needs by March 20, 2012.

Should the bail-out fail, Greece would default on loans and bonds due at that time and cause the country to declare bankruptcy.

One condition that was met last week regarded those bond payments: Investors were required to accept a 70-percent drop in payments. Recently, the European Central Bank protected itself against their share of the bond debt by declaring itself a primary debtor and all others as secondary, guaranteeing the ECB is paid first, and secondary debtors are paid with remaining funds.

Wolfgang Schäuble, Germany’s finance minister, fears that the Greek austerity measures cut so deeply that no government would be capable of implementing them. A troika report leaked recently disparages Greece’s chances of bringing the deficit from the current 129 percent of GDP to 120 percent by 2020.

In his Inflation Report yesterday, Sir Mervin King, Govenor of the Bank of England, said that the United Kingdom is headed on a

“zig-zag”

…route to economic growth.

“With falling inflation, and the prospect of an end to the squeeze in real incomes leading to a recovery in growth, we are moving in the right direction.”

Risks of downturn still exist from oil markets and the eurozone, he warned, but consumer confidence that increased in January gave weight to the merits of his comments, that

“…renewed hope the UK will avoid a double-dip recession [in addition to] the downward trend in inflation.”

Sir Mervyn stated that there will be no quick fixes, but recent improvements in the Eurozone and the United States have had positive influence on the British economy, which enabled an adjusted growth forecast from 0.9 percent in November to 1.3 percent in 2012.

The Bank noted that inflation can be expected to drop below two percent in the last quarter of 2012, down from the current, reduced figure of 3.6 percent. The outlook relies on interest rates remaining at 0.5 percent until at least March 2014 and reduced the impetus for printing additional monies under Quantitative Easing or QE.

Alan Clarke at Scotiabank explained:

“QE is an emergency measure and the emergency seems to have faded.”

In the Inflation Report, Sir Melvyn said that

“substantial headwinds are hampering our recovery,”

…including the lingering risk of a eurozone meltdown that could substantially threaten a recession across the United Kingdom.

Those factors, along with the reduced growth and fall in exports and the deficit, that caused Moody to issue a warning of a potential degrading of the nation’s AAA credit rating, which Chancellor George Osborne considered a

“reality check.”

Sir Mervyn included in his report a recommendation for a massive overhaul in the Bank’s monetary policy by broadening it from the basic two-percent inflation target. Many experts believe the bank has already overridden that basic goal by setting a nominal GDP target.

Late Sunday night, the Greek legislature passed a deeply unpopular austerity bill that granted them initial clearance to receiving the €130 billion (£110 billion) bail-out instalment negotiated in October 2011.

The Greek populace, however, rioted violently against the measure. Recession and high unemployment have existed for years in the country, and the public funding and the mandated loss of jobs, primarily in the public sector as well as wage cuts stressed many beyond their limits of control.

As the 199-to-74 vote was being taken, more than 45,000 protesters launched vocal and physical attacks on the Parliament building, the surrounding grounds and the police who attempted to protect the property. Two demonstrations developed, and the smaller of the two threw fire bombs, receiving tear gas in response.

Statuary and structures were damaged or destroyed as Prime Minister Lucas Papademos issued a statement asking for calm and tolerance.

“Vandalism and destruction have no place in a democracy and will not be tolerated. I call on the public to show calm. At these crucial times, we do not have the luxury of this type of protest. I think everyone is aware of how serious the situation is.”

The bail-out payment must still be approved by the eurozone finance ministers before the funds are issued. Greece needs that funding to repay a €14.5 billion bond due on 20 March. Failing to receive the loan would result in default on the bond, sovereign bankruptcy and probable withdrawal from the euro currency system.

As protesters raged on, inside Parliament, the debate continued long into the night. Finance minister Evangelos Venizelos pleaded in favour of the austerity bill, stating:

“We must show that Greeks, when they are called on to choose between the bad and the worst, choose the bad to avoid the worst.”

After the tally, the coalition government ousted 63 cabinet deputies for casting dissenting votes.

Almost every household in Greece will be hit by the €300 billion in wage cuts and the 150,000 jobs slated to be cut by 2015.

After a long night of negotiations ended without an agreement in place, talks resumed early this morning, still €300 million short of the needed budget cuts demanded by the European Union, the International Monetary Fund and the European Central Bank.

The sticking point seems to revolve around Greek pensions. The above triumvirate is advocating a 15-percent reduction in the supplemental pay pensioners receive. Above and beyond the basic pensions, retirees currently receive a portion of their final pay. It’s that supplemental amount that is the reduction focus.

Antonis Samaras, leader of the conservative New Democracy Party, stated:

“At this difficult moment, we must take care of retirees.”

Evangelos Venizelos, the Greek finance minister, left this morning for talks with the eurozone finance ministers.

“I leave for Brussels with hope that the Eurogroup will take a positive decision concerning the new aid plan.”

To date, Greek leaders and the troika have come to agreement on several austerity measures; those spending cuts amount to 1.5 percent of Greece’s gross domestic product or €3.3 billion (£2.77 billion).

The agreed cuts include subtracting €400 million from public investment, €300 million from defense and €300 million from pensions, but Greek leaders are adamant at not cutting an additional €300 from the last category.

The next Greek government, determined in elections in June, must specify additional austerity measures totalling €10 billion for the years 2013 through 2015.

The euro rose in trading this morning with investors perceiving the progress made so far giant steps in the right direction. As stock markets opened today, the FTSE 100, France’s CAC 40 and Frankfurt’s DAX 30 all saw stock indexes rising.

The Bank of England prepares to insert another £50 billion into the British economy, a move that has experts on either side of the aisle in vehement disagreement on the long-term effects with inflation and debt.

As UK unemployment figures continue to rise, contradictory arguments continue to be levied as to its cause. Some blame immigrant workers displacing UK workers, while others state that immigrant workers are hired due to a lack of UK applications. Others argue that the immigration workers have no impact on UK unemployment. Some blame youths for not submitting applications but remain steadfastly argue the youth unemployment figures.

For example, British employers have placed thousands of job openings on foreign job boards, specifically of late, on Romanian job boards. Positions advertised include nurses, engineers, chefs and other skill-based occupations.

The job placements occurred when UK unemployment stretched to 2.69 million people, the highest in almost two decades.

The Bucharest-based job placement website, tjobs.ro, stated that British firms placed 2,434 new job listings for Britain-based positions.

The Government’s Migration Advisory Committee (MAC) published a report recently that immigrant workers were hired in favour of British workers in 160,000 positions. The report contradicted a report from National Institute of Economic and Social Research (NIESR). NIESR’s report declared that immigration had no detrimental impact on Britian’s unemployment numbers.

The MAC report did state further on, however, that once an immigrant held a position for five years or longer, the negative impact was negated.

Professor David Metcalf, MAC chairman, stated that a large percentage of jobs filled by immigrants were in skill-shortage areas. He noted sample areas of retail, communications technology, hospitality and health and care services as some industries that filled job openings with immigrant workers. Because of the skill shortage in the UK at the time of hiring, Metcalf admits that those positions had no impact on unemployment figures.

Employers state a number of reasons for looking elsewhere to fill job vacancies: Lack of applications and lack of proper skill sets were two common reasons. Some employers state that immigrant workers fill many positions because they have better work ethics and attitudes, are punctual and are harder working.

The United Kingdom is not alone in searching foreign markets to fill job openings. Germany has posted 2,387 positions based in Germany on tjobs.ro as well.

As Greece parlays with creditors to eliminate €100 billion in debt from Greece’s books, auditors find that not only that amount must be eliminated, the projected €130 billion in bail-out funds must be awarded by the IMF, and still Greece faces a €15 billion shortfall in its budget.

Even the IMF’s bail-out award has yet to be resolved, as Greece has not formally accepted the strict austerity measures attached to the funding – plus accept EU budget oversight to ensure Greece commits and executes those austerity measures.

Evangelos Venizelos, Greece’s finance minister, says of the creditor negotiations,

“We are just one step, just a formality, from completion.”

The proposed deal will cut €100 billion in bond repayment obligations out of the budget, but it will also leave banks, pension funds and other bondholders with up to 70 percent losses, all while not avoiding the probability of defaulting on other debts.

To have the €130 billion in bail-out funds awarded, Greece must enact stringent austerity measures that equal one percent of their GDP – a requirement that has created protests of blackmail and disrespecting the sovereignty of the country. However, the IMF, the EU nor the European Central Bank are willing to make the payment if the terms are not accepted.

The deeply contrasting projections in the Greek economy have played havoc with deficit estimates, already causing a €15 shortfall, escalating the minimum amount needed from the previously noted €130 billion to €145 billion.

Neither German nor Dutch Parliaments are baulking at approving additional funding, especially considering the resistance to the austerity measures outlined.

The European Central Bank is increasingly in debt from the European crisis, and it is under pressure to forego Greece’s interest payments on the €40 billion it already has invested – on top of additional financial commitments it may assume if the bail-out is paid.

With increasing unemployment and tighter credit standards in Europe, few experts see legitimate hope of weaker eurozone countries staying in the currency treaty.

Should Greek, Spain, Ireland, Portugal and Italy depart the European union, the UK could fall into a two-year recession from the departures’ impact on the GDP.

If any of the five leave, the United Kingdom would still feel the economic impact, and recovery from the decline would find no quick execution.

Greece sits poised on the razor’s edge above bankruptcy unless the European Union grants another bail-out instalment of £100 billion.

Without the bail-out instalment, Greece would default on €15 billion in loans due in March. Lucas Papandemos stated that Greece would face bankruptcy and be forced from the European Union.

Christine Lagarde, Managing Director of the International Monetary Fund, disclosed that leaders were to sign a

“fiscal compact”

…at the summit today.

Germany proposed that Greece austerity and tax issues should be closely monitored by a European Commissioner, a move vehemently opposed by Greece.

The plan caused anger in Athens, with one official calling the proposition

“the product of a sick imagination.”

Greek Finance Minister Evangelos Venizelos adamantly rejected the plan, stating it would undermine the country’s

“national identity and dignity.”

Philipp Rosler, Germany’s economic minister, countered:

“If the Greeks fail to do this themselves, the leadership and monitoring must come in a stronger way from outside, for example, via the EU.”

Greece has been plagued by financial woes since before it became the twelfth EU member by disguising the country’s true financial state. If that weak condition had been known, Greece would not have met the financial standard necessary to join the new currency zone organisation.

As debate continued on the status of the Greek bail-out package, stock markets around the globe showed signs of nervousness and extreme caution with stock prices falling in almost every financial centre.

On the FTSE 100, the two leading industries that reflected stock price drops were banks and mines.

Evraz, producer of Russian steel, saw its stock drop 4.9 percent. Verdanta Resources fell 3 percent; Angofagata fell 3.1 percent, and Eurasion Natural Resources Corporation fell 2.5 percent.

Banks that experienced a drop in share prices included Barclay’s at 2.8 percent, Lloyd’s Banking Group with a 4.3 percent fall, and the Royal Bank of Scotland stock was sliced by 3.2 percent.

As expected, David Cameron has continued his controversial stance in opposition to European Union economic and financial policies as the World Economic Forum began in Davos, Switzerland.

The UK Prime Minister has called the current trend of European taxes and regulation

“madness.”

Cameron declared that imposing a financial transaction tax could cost thousands of jobs, the timing of which is perilous.

He also stated that it was difficult to support a single currency without collective debt, financial integration and a strong central bank. He joked,

“Currently it’s not that the eurozone doesn’t have all of these, it’s that it doesn’t really have any of these.”

Mr Cameron stated that Europe’s weakest aspect is the lack of competitiveness.

“In the name of social protection, the EU has promoted unnecessary measures that impose burdens on businesses and governments, and can destroy jobs. The Agency Workers Directive, the Pregnant Workers Directive, the Working Time Directive. The list goes on and on. And then there’s the proposal for a Financial Transactions Tax… Even to be considering this at a time when we are struggling to get our economies growing is quite simply madness.”

He opined that European leaders must stop

“tinkering”

with regulations and

“…hoping we’ll drift to a solution. We can’t go on like this. That is why Britain has been arguing for a pro business agenda in Europe.”

Cameron’s tough stance risks further widening the rift between Britain and the rest of Europe. French leader Nicholas Sarkozy reportedly told Mr Cameron to

“stop interfering.”

The Prime Minister suggested free trade agreements between the EU and Canada, India, Singapore and the US. He extended the suggestion that some countries might even want independent trade agreements.

“This would mean countries who want to could forge ahead with more ambitious deals of their own.”

He stated that there were five countries in the European Union that were less competitive than Iran.

A recent study by Resolution Foundation reported that the middle class in the United Kingdom will require a minimum of eight years to recover its pre-2008 disposable income.

The study centres on 10 million adults and their 5.2 million offspring, none of whom receive means-tested state support. Within the study’s parameters, annual income levels for families without children lie between £12,000 and £29,000 while annual wages for families with children range from £16,000 to £41,000.

The Foundation study revealed its estimation that while the middle class will struggle to regain its disposable income, the upper class will experience a similar increase, boosting their income by almost 10 percent.

Former Treasury Secretary Byrne said in an interview recently,

“The government’s economic strategy is doing nothing for jobs, which is why wages are stagnating and welfare reforms are doing nothing for working people. The result is inequality between the middle and the top. Working people do not have a government working on their side.”

Matthew Whittaker, the author of the report, stated:

“Members of the squeezed middle did not share in the spoils of economic growth in the pre-recession years, with wages at the median and below stagnating. Gains instead flowed primarily to higher income households and, more particularly, to those at the very top of the distribution.”

He continued, saying,

“If this trend continues once growth returns, it may not be just those on low and middle incomes finding themselves left behind in the next decade, but rather the majority of society.”

The report included its conclusions that part of the disposable income percentage disparity arises from inflationary trends in the article purchased by each income class. The low- and middle-class families had financial progress erased or reduced by increased fuel and food costs.

The Foundation’s report computed that, at current trend, approximately two million households will be worse off by an average of £305 in 2012.