Following the vote, which was passed by 155 votes to 138, with seven abstentions, the FTSE jumped 89.07 points - its biggest one-day gain for more than two months – and the Euro rose to a two week high.
Had Prime Minister George Papandreou lost the vote there would almost certainly have been snap elections and a default on its existing debt, which would have been disastrous for European and global financial stability.
Greek’s largest creditor, Germany was delighted wit the news. Chancellor Angela Merkel said the vote was “really good news” and important for the stability of the Euro.
However, most analysts believe that the vote will only delay the crisis, as Greece’s debt looks unsustainable. Jens Weidmann, president of the German Bundesbank, said: "We've made an important step but we are not at the end yet."
And outgoing European Central Bank member Axel Weber said earlier this week: "ultimately, solving the Greek debt problem will have to deal with the outstanding, past amount of debt".
Following yesterday’s vote, Greece faces the huge question of whether it can implement the austerity programme well enough to satisfy the next inspection of international authorities in three months' time. It also has to raise up to €50bn from the sale of national assets.
Many experts think that this is not enough time. Raoul Ruparel of Open Europe, the London-based think-tank, said: "Although this may pave the way for a second bailout, a Greek default still looks inevitable in the longer term. Delaying tactics will only increase the cost of an inevitable restructuring, particularly for European taxpayers, who soon will own the majority of Greece's debt."
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( 3 / 494 )Under plans to be unveiled next month, local councils will be able to set their own business tax rates and keep the money raised rather than paying it to the Treasury.
Devised by Communities Secretary, Eric Pickles, the scheme will be outlined to the Local Government Association (LGA) conference in Birmingham by Deputy Prime Minister Nick Clegg.
Under the new system a cap will be imposed by the Government but different areas of the country will be free to lower the tax as they wish, which could attract more firms to set up in their areas.
Currently, central Government sets the business rates, which are collected by councils but sent to Whitehall, which then redistributes the proceeds in the form of a grant, which is used to fund local services such as the Police or Fire Services.
In his speech Mr Clegg will reassure areas with currently less business income that no authority will receive less money than it does now.
"I guarantee any new system will be fair. More deprived areas will not lose out," he will say.
Mr Clegg will also tell the conference that councils currently control less than half of their budgets, but with the localisation of business rates, that could rise to 80 per cent or more.
He will also argue that with the power to spend money as they see fit, councils can better address local priorities and offer greater incentives to attract successful firms to their area.
Councils will also have the power to borrow against business rate income to fund local development.
"We have to create the conditions for communities to invest in their own success. That means putting our money where our mouth is to give you proper power over spending, as well as more control over the tax you raise and keep so, for example, you can fight for businesses to come to your town," he will add.
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( 3 / 758 )The Chief Executive of a body responsible for UK mortgages worth £80bn has warned that there could be a tsunami of house repossessions if interest rates rise too soon.
His words are seen as a reaction to the Bank of International Settlements’ (BIS) annual report, published on Sunday, which urges the UK to raise rates to bring down inflation.
Richard Banks, the Chief Executive of UK Asset Resolution (UKAR), said that the industry may have been too lenient with some of its customers, and that a policy of "tough love" would be fairer to people facing long-term difficulty in keeping up payments on loans taken out when house prices were at their peak and personal incomes were on the rise.
UKAR, set up to run the nationalised mortgages of Bradford & Bingley and parts of Northern Rock, is the country's fifth largest mortgage lender. But 23,000 of their 750,000 mortgage holders are more than six months behind with payments.
Mr Banks said that the number of people falling behind on payments could get "scary" if lenders did nothing to prepare for higher rates.
"You can see if you don't do something about it, you can see a tsunami," he said. "If you don't get into the hills you could get drowned by this. If you don't manage this properly it could get very messy."
Banks’ remarks follow a warning last week from the new regulator set up to spot financial risks in the system – the Financial Policy Committee (FPC) inside the Bank of England – that warned banks may be providing a "misleading picture of their financial health" if they were not making big enough provisions for borrowers in difficulty.
It also noted that the most "vulnerable" households were concentrated in a few banks. It did not scrutinise UKAR but noted that the two other bailed-out banks, Lloyds Banking Group and Royal Bank of Scotland, had the largest exposure to customers whose mortgages were bigger than the value of their homes.
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( 3 / 896 )Britain and China are expected to announce business deals worth a billion pounds later today, including the reopening of British poultry exports to China and increased pork exports.
The deals will be announced following talks in Downing Street between British Prime Minister David Cameron and Chinese Premier Wen Jiabao, who is in the middle of a European tour.
As Greece teeters on the brink of default, Beijing is seeking to safeguard its vast holdings of euro-denominated assets and to preserve trade growth with the European Union, its largest trading partner.
And the British Government is delighted by the move. A Downing Street spokeswoman said: "China's rapid economic rise is good news for the UK. It means more money flowing into our economies and has the potential to create more jobs and investment opportunities for British business at home and in China.”
China and Britain are important trading partners, with Britain being China's third largest market in the EU and China being Britain's largest export destination save the EU and the United States.
Two-way trade in goods and services between the two nations hit an all-time high last year, rising 28 per cent from the year before.
Investment is also on the fast track, with more and more Chinese setting up subsidiaries in Britain. Last year, China became Britain's sixth largest foreign investor.
In addition, over the past few years an increasing number of Chinese companies have set up R&D centers in Britain.
Meanwhile, British enterprises continue to expand their presence and operations in China. Tesco has committed to making an investment worth $2 billion in China during the next five years.
At the same time, the potential to expand China-Britain commercial and economic ties remains huge. Trade with Britain accounts for a mere 1.7 per cent of China's trade with the rest of the world. British exports to China, meanwhile, constitute less than 2 per cent of China's total imports.
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( 3 / 931 )Sterling fell on Wednesday after the Bank of England’s Monetary Policy Committee (MPC) minutes for June showed that policymakers judged the growth outlook to have weakened with some believing that more stimulus may be needed.
The pound fell as the MPC’s minutes indicated that UK interest rates were unlikely to rise from their record low 0.5 percent this year and flagged a greater chance of the BoE opting instead for more quantitative easing (QE).
It was the first time since October last year that the MPC had discussed QE.
The minutes showed a 7-2 vote to keep rates on hold at 0.5 percent. As expected, new MPC member Ben Broadbent chose to vote with the majority and did not follow the lead of his predecessor, Andrew Sentance, in calling for higher rates.
Most members judged that current growth weakness was likely to last longer than previously thought, with the risks of "adverse shocks on demand" from the euro zone debt crisis.
MPC member Paul Fisher flagged the chances of more QE, saying that Britain's economic recovery remains fragile and could require more "money printing" if deflation becomes a risk.
And fellow MPC member Adam Posen again called for an immediate extra 50 billion pounds of quantitative easing to be added to the 200 billion already produced.
The two members who voted for an increase in the rate, Spencer Dale, the BoE chief economist, and fellow MPC member Martin Weale, accepted that forward-looking data on growth had been weak over the past month.
However, experts say another round of QE is unlikely to be needed over the short-term.
"Given the subsequent inflationary performance, an awful lot of bad news will be required before more QE becomes a serious contender," said Stuart Green at HSBC.
And Simon Ward, Henderson's chief economist, described the prospect of more inflation-boosting QE as "dangerous".
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