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The G7 has for a long time lacked the unanimity and leadership to tackle its many problems, particularly cutting carbon emissions and Greece’s unpayable debts

Leaders to gather in Schloss Elmau with state of Greek bailout set to dominate and Angela Merkel calling for countries to commit to Green Climate FundDavid Cameron joins the G7 summit of leading industrialised nations in Bavaria expecting to face a crowded agenda dominated by Ukraine, the Greek bailout and climate change.The summit host, Angela Merkel, fought hard to try to seal a deal with the Greek government before the summit, but failed, ensuring Barack Obama will want an update on how close Europe is to ending an impasse that still hangs over the world economy.Related: Protesters and police clash as G7 leaders prepare to discuss corruption and tradeRelated: Barack Obama on G7 unity mission as US president looks to repair German ties Continue reading...

Economists are starting to line up to warn of the danger behind the chancellor’s £25bn onslaught on public servicesIt’s a measure of the triumph of the pro-austerity argument in Britain that George Osborne presented his latest round of cuts in the Commons last week – a down payment on the £25bn he plans to make over the next three years – as a “culture of good housekeeping” in government. Austerity as common sense.With a historic general election victory under their belts, and Labour still obsessed with repudiating their own general election manifesto – and even trashing spending decisions Gordon Brown made seven or eight years ago – the Tories have a wide open field. But the forthcoming onslaught on the public services cannot be left unopposed.Less than 25% of UK debts is owed to overseas investors and there is little evidence that bondholders want fresh cuts Continue reading...

Holidays could be trickier, beaches dirtier, and some jobs would be at risk1. Travelling in the EUBritish visitors to mainland Europe would no longer be “fast-tracked” through the EU lines at passport control, unless the UK was willing to agree that there would still be full free movement of people between the UK and EU. It is unlikely that the EU would require British citizens to have visas to visit the EU - as long as the UK, in return, didn’t demand that the citizens of any EU country (such as Romania) needed a visa to visit Britain. Continue reading...

The rest of Europe is braced for bruising negotiations with David Cameron over reform of the EU. In capitals such as Warsaw, there is bemusement at the idea of ‘Brexit’Eleven years ago Poland threw in its lot, somewhat nervously, with the west and joined the European Union. But in the prime minister’s chancellery building in Warsaw – once home to the imperial Russian army’s cadet corps – no one now questions the wisdom of its decision.“Communism left us doubting our abilities,” admits Rafał Trzaskowski, the country’s secretary of state for European affairs. “We did not know how quickly we would adapt our mentality to the capitalist economy after so many years of communism.” Continue reading...

The IMF announced that the yuan was no longer overvalued, but history teaches us its trade surplus should now be drying up – and it’s not. Meanwhile the US economy could take a hit as a strong dollar (rightly) leads to a trade deficitChina’s yuan is no longer undervalued – or so the International Monetary Fund said last month.The basis for this claim is that China’s central bank is no longer engaged in large-scale interventions in currency markets and its trade imbalance is within a normal range. After being as high as 10% of GDP in 2007, China’s trade surplus is now just over 2% of its GDP. With this drop in the trade surplus, the IMF was effectively declaring mission accomplished. If only it was so simple. Continue reading...

French minister says COP21 climate conference’s success in curbing emissions requires rich nations to fulfil earlier funding pledges to finance poor countries

Prime minister to tell summit that leading nations must ‘break the taboo on talking about corruption’, calling it ‘arch-enemy of democracy and development’David Cameron is preparing to warn fellow world leaders at the two-day G7 summit that starts in Germany on Sunday that the Fifa bribery scandal must be a trigger for international action against corruption.The prime minister will criticise what he will call a widespread “taboo” in pointing the finger at corrupt institutions, and will say the Fifa scandal has shown how focusing on an organisation can provide the impetus for cleaning-up operations.Related: Greg Dyke predicts Sepp Blatter’s arrest and rules out World Cup in EnglandRelated: A dark day for Fifa after claims of arms deals for World Cup votes Continue reading...

Alexis Tsipras strikes a defiant note as he addresses the Greek parliament on Friday. Tsipras says the Greek government cannot in any way agree to 'absurd' proposals that continue austerity, and asks Europe not to humiliate Greece. Tsipras was presented with a tough cash-for-reforms deal on Wednesday, including tax hikes, privatisations and pension reform, which sparked outrage from Syriza Continue reading...

Charlotte Church is right to say she would pay more to protect public services – and a new current in economics is providing heavyweight support for her viewCharlotte Church says she would happily pay tax at 60% or 70% if it would protect public services. Three cheers for the Welsh singer who defends herself against sneers about champagne socialism by describing herself as “more of a prosecco girl myself”. In the wake of an election dominated by the need to cut public spending and won by a government that intends tax increases to contribute a mere 2% in the battle to balance the books, it is time to defend the virtue of the better-off paying more tax.One of the conceits of government is that income tax is a temporary imposition, even though it is 200 years since the defeat of Napoleon at Waterloo last resulted in income tax actually being abolished. It was reinstated in 1842, and has been renewed every year since, yet the impression remains that it is a temporary imposition on the citizen, required only to spread the burden of some pressing national project, acceded to reluctantly as part of the obligation of the rich. As the great Liberal leader William Gladstone, no enthusiast, described it in one of his epic budget speeches as the Crimean war broke out in 1854, income tax was an “engine of gigantic power for great national purposes”. Continue reading...

If you’re Greek or living in Greece, we want to hear how the situation between the Greek government and its creditors is affecting youGreece this week moved closer to a possible exit from the eurozone. The country’s government told the International Monetary Fund it would not be making a debt repayment of €300m (£219m) due on Friday.As the Guardian reported on Thursday night:The move came as the Greek government reacted angrily to what was seen as an ultimatum from its creditors – including the IMF – that demanded further austerity and unpopular reforms to VAT, pensions and wage bargaining as the price for €7.2bn in fresh financial help. Continue reading...

Residents of the German town of Garmisch-Partenkirchen are annoyed. Some say the gathering of world leaders, and all its ‘brimborium’, is Merkel’s revengeIn Garmisch-Partenkirchen they are battening down the hatches. Many restaurants and shops in this Alpine idyll have closed their doors and boarded their windows, the fear of what the coming days might hold greater than any sense of opportunity their owners might have to make money out of the thousands of anti-globalisation protesters, journalists and security guards who will descend on this Bavarian rural community over the coming days for the G7.

Greek debt crisis deepens as Athens decides to ‘bundle’ its IMF payments into a single bill at the end of June, raising new fears over its bailout talks

Athens takes creditor by surprise, saying it will bundle together €1.6bn of debt payments due to International Monetary Fund and settle up on 30 JuneGreece has moved closer to default and possible exit from the eurozone after telling the International Monetary Fund it would not be making a debt repayment of €300m (£219m) due on Friday.A crisis that has been going on for more than five years entered a new phase when Athens surprised the IMF by saying it intended to bundle up four payments in June totalling €1.6bn and make them all at the end of the month.Related: Greece vows not to leave the euro after IMF payment defiance - live updates Continue reading...

Chances of deal seem increasingly slim after lastminute decision by Athens to delay €300m payment until end of JuneYou could almost hear the gritted teeth through which the International Monetary Fund issued its terse statement acknowledging that Athens planned to miss Friday’s deadline for making a €300m (£219m) debt repayment.The Washington-based lender, which was always wary about being dragged into Europe’s debt crisis, didn’t condemn Greece’s actions, let alone suggest that deferring the payment was tantamount to default.Related: Greece delays €300m payment to IMF Continue reading...

The election leaves a chancellor unbound. He is using the opportunity not to grant himself more financial slack, but instead to pursue deeper cuts, ideological zeal and political cunningGeorge Osborne is in a rare and happy position for a British chancellor: he is under no real pressure at all. His place in No 11, next door to his best friend in politics, is entirely secure. Credited by many Conservatives as the mastermind behind the party’s surprise outright victory, the backbenches are inclined to give him room to do things his own way, rather than nagging for immediate tax cuts. The opposition lacks a leader, and the markets are so hungry for government bonds that they are prepared to fund even crisis-hit Portugal for bargain-basement rates. HM Treasury can effectively borrow whatever it pleases.So when the chancellor took his turn in the Queen’s speech debate on Thursday, the Commons was looking at Mr Osborne unbound. Had he wanted to cut himself a little slack, here was his moment. He would have had every reason. During an election campaign when hopes of a Conservative majority seemed like fantasy, the Tories had pledged a lot of wild things: accelerated cuts to social security and public services, a dash towards an unnecessary budget surplus, and retrenchment so unbalanced that it would fall 98% on public expenditure, and only 2% on taxation. But in a second hung parliament, all this would have been safely traded away in coalition talks. Now, with the wind in his sails and a Commons majority, Mr Osborne could have quietly diluted it all on his own without any real complaint. Continue reading...

Even the mere prospect of the Federal Reserve raising interest rates has delivered a shock to US markets due to a lack of liquidity – so what can investors expect when the inevitable rate hikes actually come to pass?Tick-tock. Tick-tock. We still don’t know when it’s going to happen, but we do know it’s only a matter of time. I’m referring, of course, to the inevitable day on which Federal Reserve policymakers begin to raise interest rates for the first time since 2008.The next key piece of economic data in the puzzle will arrive first thing Friday morning, when the Labor Department tells us just how many new jobs employers created during the month of May. Economists currently predict that figure will come in at around 225,000 – a pretty healthy number, if not enough to push the unemployment rate down below its current level of 5.4%.

George Osborne plans to raise £1.5bn from Royal Mail sale and £3bn in government department savings, prompting IFS warningGeorge Osborne has taken an early swipe at departmental budgets, announcing £4.5bn of savings this year through a sell-off of national assets – including the remaining stake in Royal Mail – and spending cuts.Government departments have been ordered to find £3bn in savings this year, and the chancellor says he will also raise £1.5bn from the sale of the government’s 30% stake in Royal Mail.Related: George Osborne's £4.5bn savings plan: what's being cut?Related: Relinquishing last Royal Mail shares must be done at highest price possibleRelated: On spending cuts, Osborne's A Hard Day's Night looks set to get harder Continue reading...

Fund’s experts raise fears of renewed financial turmoil and suggest first increase in US interest rates should be delayed until 2016The International Monetary Fund has cut its growth forecast for the US economy and warned the Federal Reserve to wait until next year before embarking on interest rate rises.In its annual assessment of the world’s largest economy, known as an Article IV report, the IMF downgrades its GDP growth forecast for 2015 from 3.1% to 2.5%, amid what it calls “significant uncertainties as to the future resilience of economic growth”. It also shaves its forecast for 2016, from 3.1% to 3%.Related: US Federal Reserve chair highlights concerns over ultra-low interest ratesRelated: IMF warns period of ultra-low interest rates poses fresh financial crisis threat Continue reading...

For the EU to survive, eurozone countries need to integrate further and create a joint treasuryFrom one border of the European Union, Greece, to the other, the United Kingdom, the European ideal is being challenged. It is no surprise, since the terrible crisis of the recent years has highlighted two key weaknesses of Europe’s architecture. The first is the end of economic convergence between EU – and, in particular, eurozone – countries. This is not a theoretical matter: unemployment is the daily reality of millions, especially for young people. The second is about political tensions: within the member states, where anti-European forces are on the rise; and within the union itself. The Greek and British cases, for all their differences, show that European general interest and national interests are increasingly seen as drifting apart from each other.In this context and 10 years after the French “no” to the constitutional referendum, now is the time to reopen the economic and political debate, and to fix the eurozone as part of a greater deal for a union in which all member states find their place. In the coming days we hope a solution will be found to address the urgent difficulties regarding Greece. But we also need to think further and to make proposals for the future of Europe as a whole.Related: German and French ministers call for radical integration of eurozoneA eurozone-level budget should not and need not come at the expense of fiscal discipline at the national levelStrengthening the euro is not only about the eurozone. It cannot be isolated from a broader rethinking of the EU Continue reading...

Social democrat Sigmar Gabriel and French economics minister Emmanuel Macron call for embryo euro area budget and fiscal powersGerman and French politicians are calling for a quantum leap in how the EU’s single currency is run, proposing an embryo eurozone treasury equipped with a eurozone finance chief, single budget, tax-raising powers, pooled debt liabilities, a common monetary fund, and separate organisation and representation within the European parliament.They also propose that all teenagers in the EU be given the chance to spend a subsidised six months in another European country.Related: Europe cannot wait any longer: France and Germany must drive ahead | Emmanuel Macron and Sigmar Gabriel Continue reading...

Prime minister Alexis Tsipras is meeting European Commission president Jean-Claude Juncker tonight as the Greek bailout drama intensifies

Leading thinktank warns chancellor against frontloading tough public spending cuts and shouldering burden on the poor Continue reading...

Document dump regarding Trade in Services Agreement comes day after organization put $100,000 bounty on documents from series of US trade treatiesWikiLeaks on Wednesday released 17 different documents related to the Trade in Services Agreement (Tisa), a controversial pact currently being hashed out between the US and 23 other countries – most of them in Europe and South America.The document dump comes at a tense moment in the negotiations over a series of trade deals. President Barack Obama has clashed with his own party over the deals as critics have worried about the impact on jobs and civil liberties. Continue reading...

For Athens, the question of default poses a real dilemma. For its creditors, a Greek exit is plainly the worst course. It would mean defending for the rest of time a currency union that had started to crumbleAnother crisis of solvency, and Greece is – once again – described as confronting a fork in the road. Athens must finally choose, runs the argument of its creditors, whether it is ready to face up to its responsibilities, or whether instead it prefers to wish away the stack of red final-reminder bills piling up from the IMF, demanding €1.5bn this month. If Greece plumps for denial, however, it should not assume that it can rely on the flow of finance from the north, which is all that is keeping Greek cash dispensers going. Instead, Greeks will have to prepare to slip out of a euro they overwhelmingly wish to keep.There is something in the creditors’ account of events, and yet much is omitted. It neglects to mention how austerity has steadily smothered day-to-day life. Greece has not merely suffered a recession but a full-blown Grapes of Wrath-style depression, with social and political convulsions to match. The unemployment rate has been 25%-plus for years, with a similar proportion knocked off national income. The “medicine” swallowed so far has proved to be poison. Continue reading...

Leading thinktank warns chancellor against frontloading tough public spending cuts and shouldering burden on the poorGeorge Osborne should spread the pain of tough public spending cuts beyond the next two years, according to the OECD in a critique of the chancellor’s debt consolidation strategy.The Paris-based thinktank said in its latest economic forecast that delaying some of the severe cuts planned by Osborne for the financial years 2015-16 and 2016-17 would “lower the impact on growth”.Related: OECD warns lack of investment could prompt new global slowdownRelated: A more radical approach to debt: do nothing Continue reading...

The City thinks it is a mere pause but demand for UK services is falling, prices may be starting to rise – and don’t forget Osborne’s emergency summer budgetSo much for the post-election boost to the economy. The latest evidence from the service sector – which accounts for almost 80% of national output – is that the pace of growth slackened quite sharply in May.The response from the City was that while disappointing, the Cips/Markit survey was a blip. The economy has had a bit of a growth pause but will start to accelerate again in the second half of the year.Related: UK service sector growth slows Continue reading...

Analysts air concern at weakening performance as key economic driver shows marked slowdown, denting hopes of post-election pickupGrowth in Britain’s key services sector appears to have slowed, raising doubts about the economy’s ability to bounce back from the weak start to the year.The key Purchasing Managers Index for May fell to 56.5, down from 59.5 in April. That was well above the 50 that marks expansion, but the weakest reading for four months.Related: Weak UK service growth - a post-election blip or maybe a warning? Continue reading...

Paris-based thinktank believes stronger investment is needed to revive labour productivity, wages and competitiveness in the UK

May’s drop in shop prices reinforces view that UK inflation will be low for rest of yearPrices in British shops have moved into their third year of decline as a result of widespread supermarket discounting and cheaper fresh food , according to new industry figures.The British Retail Consortium (BRC) said shop prices in May were down 1.9% on last year’s levels, unchanged from April’s rate of decline and the 25th straight month of deflation. The fall will reinforce expectations that the broader official measure of inflation in the UK will remain low for some months to come after turning negative in April. Continue reading...

Greece’s creditors reported to have drafted broad lines of an agreement after Angela Merkel’s mini-summit failed to make a breakthroughEurozone and International Monetary Fund officials appeared to have put the finishing touches on an ultimatum to Greece after Monday night’s emergency mini-summit between Athens’s ­creditors.Related: Alexis Tsipras to face take-it-or-leave-it ultimatum from lenders over debt offerRelated: Greece bailout talks: an intractable crisis with three possible outcomesNo one is going to push for a real agreement because the one who takes the lead takes too much risk Continue reading...

Cash-for-reform deal worth €7.2bn in loans agreed by EU, ECB and IMF officials – but it remains unclear if Greek government will accept itThe Greek prime minister, Alexis Tsipras, will be presented with what is expected to be a take-it-or-leave-it plan on Wednesday after five months of drama-filled negotiations to keep his debt-stricken country afloat.The radical left leader is to be given the ultimatum after lenders at the EU, European Central Bank (ECB) and International Monetary Fund (IMF) agreed on the contours of a cash-for-reform deal late on Tuesday.

Greece can either exit the eurozone, surrender to the troika’s demands or the EU can dream up a classic fudge and play for timeThe threat of Greece welching on its debts by the end of the week is concentrating minds. After a mini-summit in Berlin attended by the heads of the European commission, the European Central Bank and the International Monetary Fund, the so-called troika is preparing a fresh bail out offer.Related: Greece's creditors rush to finalise 'take it or leave it' debt offerRelated: Greece vows not to be blackmailed by creditors after emergency summit - live updates Continue reading...

In his analysis article (The icebergs are outnumbering the lifeboats, 1 June) Larry Elliott rejects the lifeboat of helicopter money (the injection of new publicly created money into the economy) as likely to cause a flood of imports or hyperinflation. This is only the case if the money is released directly into the hands of consumers. Even then, while there may be increased imports, hyperinflation is very unlikely under the present deflationary conditions. However, as I point out in my forthcoming book Debt or Democracy, if the money is issued into the economy through public expenditure and matched by a subsequent tax take if there are any inflationary pressures, there is a double benefit. The money would provide public services free of debt and then feed through into the wider economy. At present nearly all the new money in the economy is accessed only through borrowing, which feeds boom and bust.Recognition of the benefit of publicly created money free of debt will relieve the burden of debt on everyone. The illogicality of the current position is that the new public money created through quantitative easing has been used to buy back government debt, yet that debt has not been cancelled. People are still subject to austerity for debt that has been repaid. It needs to be recognised that new money creation and circulation should not only be used by “independent” central banks to periodically feed the faltering banking sector; it is a public resource and its creation and use should be a matter of democratic debate.

Rebound in oil prices coincided with the European Central Bank’s €1.1tn boost to lending across the eurozoneEurozone inflation turned a corner in May, posting a 0.3% increase after four months of flat or fallingprices.The measure of core inflation, which strips out food, energy and other volatile elements of the consumer prices index, jumped even higher to 0.9%, signalling a resurgence in demand across the eurozone. Continue reading...

Outcome unclear after ECB and IMF chiefs join Merkel and Hollande to seek joint position on negotiations over Greece bailoutThe German chancellor, Angela Merkel, moved to try to defuse Greece’s financial and European crisis late on Monday, converting a routine long-scheduled meeting with French and EU leaders into a mini-summit on Greece.Merkel met France’s president, François Hollande, and the president of the European commission, Jean-Claude Juncker, for what was billed as a session on how to boost investment in the EU. But they were joined by Mario Draghi, the president of the European Central Bank, and Christine Lagarde, the head of the International Monetary Fund, in what turned into a late-night session on Greece. Continue reading...