httpvh://www.youtube.com/watch?v=_0Ea3KEsS14

George Osborne has been busy over the past few days, yesterday he revealed plans for a ‘fundamental reassessment’ in the August spending review of the £185bn social security bill. This could possibly be a hit at child benefits, among other things such as tax credits and welfare payments,  which at 11bn a year is one of the larger benefits on the list. Osborne is keeping quiet about particulars, but the idea might be to cut tax credits rather than take them away from families. He also forewarned us yesterday, ahead of Monday’s government economic forecasts, that economic growth would not be enough to pull the country out of the deficit. Although his speech was another attempt to warm us to spending cuts, a tighter growth forecast does not necessarily mean a worse future for public finances. He was helped in all this by a report from the rating agency Fitch, calling for a ‘more ambitious deficit reduction plan’ to help ‘underpin market confidence’. These comments from Fitch about the budgetary difficulties in the UK has knocked sterling lower.

EU finance ministers have decided to go ahead with plans for a bank levy, despite the opposition at the weekend’s G20 meeting. The pursuit of this levy will ideally raise money to establish an EU network of funds which would help to resolve future problems at individual banks. They also agreed on the intervention of EU officials if member states have flawed figures, therefore agreeing to a tougher economic scrutiny.

Angela Merkel saw the first repercussions to her ‘Austerity Package’ as German public sector workers called for mass demonstrations this weekend. They believe the four-year savings programme, of which 37% will affect social spending, is unfair due to the cuts to welfare payments and benefits for the long-term employed.  A recent poll has shown that almost 75% of global investors have little hope in Europe’s rescue package and indeed in Trichet himself, many believe there is a distinct risk in the breakup of the euro.

Today is a fairly quiet day for data starting the morning off with UK’s Total Trade Balance, which could prove positive to sterling if the balance between goods and services shows a trade surplus. The US have their MBA Mortgage approvals and later tonight the Fed’s Beige Book reports on the current US economic situation, the dollar is hoping for an optimistic view. Japan have their Gross Domestic Product much later this evening which is expected to stay the same, however a drop would be a sign that Japanese economy is decreasing.