Europe Ahead: United Kingdom Elections and ECB Rate Decision

Today, is one of the most memorable days in the UK economy, as everyone waits for the outcome of the elections as already polls are leaning towards David Cameron leader of the Conservatives, who might be the next new government in the economy. 

The United Kingdom is stuck between two stones, as on one side they have sluggish on economic growth and the other side, they have the highest budget deficit from the Group of Seven nations as it is above 11% of GDP, which is making it difficult for the government to improve conditions. 

The nation growth narrowed in the first quarter to 0.2% from the fourth quarter expansion of 0.4%. Growth levels were undermined in the first three months of this year as a result of the coldest weather since three decades that kept Britons at home. 

The new government that will be elected is facing great difficulties as they can not borrow to shore economic growth, more as they have the biggest annual budget deficit since WWII while it is projected that the deficit will expand further to 12.1% of GDP during the fiscal year. 

Darling pledged to reduce deficit within four years, while borrowing is promised to fall to 131 pounds during 2011 and 2012. David Cameron wants to reduce spending, so this will help the fiscal position of the economy as it will halt the deficit from widening further. 

Also for today ECB President Jean-Claude Trichet will speak following announcing interest rates, in which expectations show will leave them steady at 1.00%, while they will give us an outlook of the euro zone that is negatively affected from the debt crisis. 

Although the EU and IMF approved the bailout plan worth 110 billion euros, yet there are expectations that this package might not be enough to tame the deficit, yesterday we witnessed Chancellor Angela Merkel agree on Greece receiving the whole package aid to help the nation narrow deficit that is threatening the outlook of the euro zone. 

Yesterday, we saw that Portugal's, Spanish and Greek bonds resume their decline while their credit rating continues to be slashed on speculation that these governments will be able to hold the debt crisis from spreading further throughout the euro zone. 

The package still has not been received by the Greek government, as during this week; Merkel will have both chambers of the nation agree on the 22.4 billion euros provided from Germany to support Greece. 

Lately, most companies have been posting earnings while economic data has been hinting to the fact that economic conditions are improving in Europe therefore the deficit continues to hold back a full economic recovery. 

The European Commission expects debt average in the euro zone might equal 84.7% of GDP this year while 88.5% next year, they also expect GDP this year to expand 0.9% while 1.5% next year.