Here's my summary of the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news Greek political leaders failed overnight to meet a deadline to agree to a new austerity plan demanded by their bailout donors at the European Central Bank, the European Union and the International Monetary Fund.
Greek leaders asked for another day's delay despite warnings from Germany and others that it faces national bankruptcy unless it agrees to fresh cuts in the minimum wage, new public sector job cuts and new moves to crack down on tax evasion.
However, Greek political leaders are opposed to many of the new austerity measures. They face elections as soon as April and Greek voters are tired of austerity after four years of financial crisis, bailouts, job cuts, tax increases, economic contraction and civil unrest. See more here at Reuters.
Their donors in Germany and France are increasingly distrustful. They called overnight for a segregated account to be set up by the Greek government that cordoned off tax revenues so they could be dedicated for bond repayments and interest coupons rather than public services.
The risks inherent in an uncontrolled Greek default and possible exit from the Europe are substantial for the global economy, and indirectly, New Zealand. The IMF warned overnight that a slump in Europe would carve 4 percentage points off China's expected growth rate of around 8.2%.
That would constitute a hard landing that would flow through to the Australian and New Zealand economies, which now depend on growth in North Asia to avoid the fallout from recessions in Europe and the United States. See more here at Bloomberg. The European financial crisis is also increasing the cost of foreign borrowing by New Zealand banks, some of whom are beginning to warn they may pass on these costs in the form of floating mortgage rate hikes that are out of step with any changes in the Official Cash Rate.
Worries about the Greek crisis drove US and European stocks down around 0.3% in late trade. These concerns about the potential drag on global growth saw riskier currencies such as the New Zealand and Australian dollars fall.
The New Zealand dollar fell to 83.2 USc this morning from as high as 83.8 USc late on Friday night in the wake of surprisingly strong jobs growth in America. See more here on strong US jobs on our site here.
Meanwhile, the Reserve Bank of Australia is expected to cut the official cash rate there from 4.25% to 4% later this afternoon as Australia grapples with a slowdown of its domestic economy at the same time as a boom in its mining sector.
A high Australian dollar and heavy debts weighing on Australian household balance sheets has created a two speed economy where mining is going gangbusters, but retailing and manufacturing is struggling.
Retails sales in Australia fell in December. See more here at ABC.
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