Greece is so far off course on its $172 billion bailout programme that it faces losing vital International Monetary Fund support unless European lenders write off significant amounts of its sovereign debt, the Fund has warned Athens' euro zone creditors.
The warning, delivered to euro zone finance ministers, raises the prospect that the IMF may hold back its portion of a €7.2 billion in bailout aid that Greece is desperately to secure to avoid bankruptcy. Half of the €7.2 billion, which is the subject of intense negotiations between Athens and its creditors in Brussels-based talks that resumed on Monday, is due to come from the IMF. Without the funds, Greece is expected to run out of cash this month.
Peter Brown, from the Institute of Investing and Financial Trading, says that despite the ongoing situation with Greece, he feels that - in terms of economics - financial markets now realise that the country will never be able to repay its debts. Mr Brown says the situation is now more of a geopolitical problem and its solution rests with the likes of Angela Merkel and Barack Obama, who has just "lost" Pakistan to the Chinese. The issue of Greece is moving away from being an economic decision to a geopolitical decision. The issue of whether we want Greece in the euro zone or not is not a decision that will be taken by the euro zone finance ministers, Mr Brown states. He says that if was left to them, Greece would be out. But the final decision will be taken by their leaders as part of a bigger geopolitical picture.
On this week's "astonishingly interesting" UK election, Mr Brown predicts the result will be very tight and there is no clear indication of what it will be. On the one hand, it could be a Labour government which the City of London and financial markets would not like and on the other hand, if could be a eurosceptic Conservative government. He says the reaction of the markets, so far, has been quite calm due to the low interest rate environment and as people are loathe to cash in their shares. But if the result of the election is a hung parliament and talks drag on, Mr Brown says that will have an impact on the markets.
The City of London understands how important Europe is to the UK economy, Mr Brown states. The UK is an island and could become very isolated if it withdraws from Europe, he adds. The financial markets that support London would move elsewhere and so it would be a "catastrophic" event for the UK to pull itself out of the euro zone and the massive buying power that is Europe, including Germany, France and Italy. "To divorce themselves from that would be a huge mistake," he states.
MORNING BRIEFS - UBS says it is in "advanced talks" with the US Department of Justice to settle allegations that it attempted to rig the foreign exchange market. That news came along with its first quarter results. It reported a net profit of $2.18 billion, almost double the same period of last year, and ahead of analyst expectations.
*** McDonald's has said it will restructure its business and increase its number of franchised restaurants around the world as it announced poor results for the first three months of 2015. The company also announced it would be focusing more on regions that earned it the most - namely the US, which brings in 40% of operating income. It said its top international markets, such as Australia, Canada, France and the UK, would become a priority.
*** The Reserve Bank of Australia has cut its key interest rate by 25 basis points to an all-time low of 2%. The cut was the second this year delivered by the central bank. It is among several central banks in the region to loosen monetary policy this year as it attempts to boost growth amid falling commodity prices. Central banks in China, Canada, Singapore, Korea and India have all cut interest rates in recent months. Rising real estate prices in Sydney have been a cause for concern for the economy, together with a lacklustre outlook for business investment.