European Economic and Monetary Union in Crisis: Does Anyone Care?

The Greece 'can' has been kicked down the road yet again albeit with ritual withholding of funds and other solemn words.

Greek Prime Minister Antonis Samaras's brinkmanship appears to be paying off handsomely domestically as well as with the Troika: the other political parties have no alternatives to offer and he will surely secure from reluctant Economic and Monetary Union (EMU) governments not only more funding but eventually large haircuts on the bail-out loans.

The only problem is that the people are still very angry and the country still lacks a proper economy.

More bailouts also seem the obvious solution for Portugal but this may prove to be a more difficult 'can to kick' as the domestic political consensus on austerity and reform has broken down.

Meanwhile, ten-year bond yields at 7.5% remain dangerously unsustainable.

The fragile coalition in Italy is in danger from the magistrates' finally smelling Mr Berlusconi's blood. As a result, nothing much happening is happening on the reform front but that would almost certainly have been the case any way. S & P have reacted to the hiatus with a downgrade to BBB+, which is two notches above 'junk' status but, no doubt, Italian institutions and the European Central Bank (ECB) will find a solution if the worst were to happen.

Meanwhile, investors can extract higher yields.

The slush fund scandal in Spain has escalated with the former Popular Party Treasurer turning on his bosses, including Prime Minister Mariano Rajoy.

Voters are so disillusioned that both PP and the Socialists are down below 25% in the polls. All this provides another opportunity for investors to extract higher yields.

The EU Commission has decided to face up to the Germans and press on with a 'Single Resolution Mechanism', which would enable it to sort out struggling banks.

The Germans insist that this requires a new treaty and the Commission seem to be forcing the pace to get ahead of any restrictive decision by the Bundesverfassungsgericht.

With banking union going nowhere, France has suggested that Greek banks receive capital directly from the bail-out fund. Now what does that say about French banks?

UK Doing Better but Not 'Officially'

The UK has a battery of data due: inflation (higher but not yet above 3%), unemployment (solid enough), retail sales (encouraging) and public sector debt (more progress as tax revenues increase).

This should help to keep the FTSE 250 buzzing after its star performance last week.

Last week's official data on Industrial Production and Manufacturing were disappointing but not as very surprising as the way the Office of National Statistics (ONS) collects data creates a lag when compared with increasingly reliable industry surveys.

The Trade Figures were also disappointing and seem stuck.

Nevertheless, the National Institute of Economic and Social Research (NIESR) and the IMF, both entrenched critics of UK Chancellor George Osborne's policies forecast increasing growth.

The NIESR's latest three-month rolling estimate of GDP growth is +0.6% in Q2 while the IMF's forecast of +0.9 for 2013 as a whole means that the UK and Japan are the only major economies likely to improve in a rather sombre global outlook.

The British Retail Consortium's reported another solid set of sales figures for June and the RICS survey on house prices appears to have taken wing.

Regular readers may find tedious my frequent references to Supply Side initiatives but they really are the way forward in deficit-ridden economies. The latest include a £1bn ten-year joint government-industry investment in R & D for the motor industry.

Meanwhile Lord Heseltine has been lifting the lid on the gearing of central government contributions (much resented in Whitehall, he says) to Local Enterprise Partnerships for infrastructure development.

Another of my regular 'refrains' has been the need to tackle spending on the NHS. It now looks as if the debate will start before the next election instead of the politicians walking on eggshells until the votes were counted in 2015.

Alastair Winter is the Chief Economist at Daniel Stewart & Co