In an editorial piece for German business daily Handelsblatt, Merkel wrote that successful budget consolidation creates more leeway for the government and private investors and allows central banks to keep interest rates low as long as possible. Moreover, it strengthens confidence, she added.
 
Eurozone nations are in the run-up to reduce their budget deficits, which are widened by the huge stimulus measures implemented during the financial crisis, even as the Greek crisis threatened the stability of the currency bloc. The European Union rules allow a maximum budget deficit of 3% of gross domestic product.
 
Merkel pointed out that economic growth is accelerating in Germany in line with global recovery. Hence, now is the right time to start gradual exit from emergency measures. The biggest Eurozone economy expanded 0.2% in the first quarter, unchanged from the fourth quarter of 2009. The country's strong industrial and export sectors are expected to push growth in the second quarter.
 
The German government on Thursday slashed its budget deficit estimate. The budget deficit for 2010 is seen at 4.5% of gross domestic product, down from January's estimate of 5.5% of GDP, the Finance Ministry said.
 
The ministry, confirming a report in the Handelsblatt newspaper, said the deficit is projected to ease to 4% of GDP next year and to 3% of GDP by 2012, which is the maximum level allowed by European Union rules. The government plans to cut its combined shortfall to 1% of GDP by 2014.
 
Data released by the Federal Statistical Office on June 30 showed an increase in Germany's budget deficit in the first quarter of 2010 to Eur 47.3 billion amid falling revenue and rising expenditure. Compared to the March quarter of 2009, this represents an increase of Eur 13.5 billion. 
 
FRANCE
 
The CAC-40 in France closed at 3,500.16, down a hefty 2.28%.
 
French consumer price inflation eased for the second straight month in June as energy prices rose at a slower pace.
 
Consumer prices increased for the eighth consecutive month in June, rising 1.5% year-on-year, slightly slower than the 1.6% rise in the previous month, data from INSEE showed Tuesday. In May, inflation had slowed from April's 1.7%. The June inflation matched economists' forecasts. Prices of services increased 1.3% year-on-year. Energy prices were up 9.4% compared to a 13.6% increase in May. Food prices recorded an increase of 1.3% annually. Fuel prices climbed 13% year-on-year.
 
The consumer price index remained unchanged in June from the previous month as cheaper food and energy offset an increase in service charges. The index recorded a flat reading in June after rising 0.1% in May. The change in prices was in line with the economists' expectations. Prices of services increased 0.2% month-on-month in June, while energy prices dipped 0.6% along with the recent drop in oil prices. Fuel prices slipped 1.1% and food prices were also down 0.2% on a monthly basis.
 
After adjusting to seasonal variations, the CPI declined 0.1% month-on-month and on an annual basis, the index rose 1.5%.
 
Core inflation, which excludes food, energy and administered prices was 1.4% in June, matching May's figure. The core index rose 0.1% from the previous month. Core inflation should remain on a downward trend and fall clearly below 1% in July, when the annual comparison of core prices does not include the effects of VAT cuts for restaurant that took place in July 2009 anymore, BNP Paribas economist Catherine Stephan said in a note.
 
The harmonized index of consumer prices, or HICP, was stable as expected and rose 1.7% year-on-year. In May, the yearly change in the index was 1.9%. Economists were looking for a 1.8% year-on-year increase.
 
Elsewhere Friday, Spanish statistical office INE said annual inflation fell to 1.5% from 1.8% in May. Inflation figure matched economists' expectations. Consumer prices started rising in November 2009, ending eight consecutive months of declines. Upward pressures in anticipation of the VAT hike together with a hike in tobacco prices partially offset an expected drag from energy, UniCredit economist Tullia Bucco said.
 
Month-on-month, consumer prices were up 0.2%, in line with forecast and May's growth. Excluding food and energy prices, core annual inflation doubled to 0.4% in June. Spain's HICP annual inflation for June was 1.5%, down from 1.8% in May. Inflation eased for the first time in four months.
 
France's current account balance, which is the broadest measure of the country's trade balance, recorded a larger deficit in May than in April, official figures show.
 
The Bank of France said a current account deficit of Eur 4.5 billion was recorded in May. This compares to a Eur 2.9 billion deficit in the previous month.
 
The goods account deficit widened to Eur 5.7 billion in May from Eur 4.2 billion in the preceding month. At the same time, the services account surplus fell to Eur 1.3 billion from Eur 1.5 billion.
 
On the other hand, the income account surplus rose to Eur 2.3 billion from Eur 2.1 billion in the prior month. The transfers account deficit was unchanged at Eur 2.3 billion.
 
Meanwhile, the financial account recorded a deficit of Eur 4.9 billion in May, down from the Eur 28.3 billion deficit in the preceding month. 
 
BELGIUM
 
The Bel 20 in Brussels closed out the week at 2,442.75, down 2.10%.
 
Montea SCA rose 1.1% to 20.33 Euros. The owner of warehouses in Belgium and France said it sold a 4,425 square-meter property in the Belgian town of Buggenhout for 900,000 Euros. It will record a gain of 300,000 Euros on the transaction.
 
Belgium's trade balance showed a deficit of Eur 1 billion in April, compared to a Eur 0.1 billion surplus recorded a year ago, the National Bank of Belgium said on Thursday.
 
Exports increased 17.7% year-on-year to Eur 17 billion in April, while imports grew 25.2% to Eur 18 billion. For the average three months ended in April, the volume of exports and imports rose by 12.2% and 12.6%, respectively compared to the same period of the previous year.
 
The Belgian economy grew at a slower pace in the first quarter. The gross domestic product increased 0.1% sequentially in the first quarter, slowing from 0.3% gain in the fourth quarter. However, the GDP increased for the third consecutive quarter. Annual inflation accelerated in June to reach the highest rate in eighteen months. The consumer price inflation quickened to 2.46% in June from 2.27% in May.
 
Serbian President Boris Tadic and Belgian PM Yves Leterme met in Brussels on July 15 and confirmed their determination to strengthen economic cooperation.
 
After the talks, Leterme stated: "We know that some significant economic files will be on the table in the next few hours or days, which may deepen Serbia's economic relations as well. I hope the negotiations on that will be successfully finished."
 
Beta news agency learned from Belgian business circles that there is a practically closed deal between the Belgian company for mass distribution of food products and daily supplies, Delhaize, and Serbia's largest privately-held company Delta Holding.
 
This implies that the powerful Belgian multinational company will be coming to the Serbian market, said the agency report.
 
Tadic said that Serbia, like many European countries in the region, was affected by the financial crisis, which has caused an increase of unemployment, similarly to other countries, but he underlined that Serbia has established macroeconomic stability and that the country does not have a high public debt.
 
Delhaize said it has received regulatory approval to take full control of local unit Alfa Beta Vassilopoulos, and will now move to take the unit private. The Belgian group said it will buy out the 9.13% stake it does not currently own, at E35.73 a share. It will then delist the company from the share market, effective 31 July.
 
Traders set a final recovery value of 3% on the Belgium-based company Truvo's bonds in an auction to resolve credit- default swaps, according to administrators Markit Group Ltd. and Creditex Group Inc.
 
Truvo USA LLC and four affiliates filed for bankruptcy on July 1 after Truvo Subsidiary, which publishes directories in Belgium, Ireland and Romania, didn't make payments on two senior note issues totaling $684 million.
 
The settlement price was determined in a second round of bidding by 14 dealers including Goldman Sachs Group Inc. and Barclays Plc. It matched an initial value of 3% in the first round, according to Creditfixings.com, a website run by Creditex, a New York-based derivatives broker, and financial information provider Markit. 
 
THE NETHERLANDS
 
In Amsterdam the AEX ended the session and the day Friday on 323.99, a drop of 1.75%.
 
ArcelorMittal rose 0.9% to 23.215 Euros, the stock's first increase in three days, after the world's biggest steelmaker was raised to "hold" from "sell" at UniCredit SpA by equity analyst Christian Obst.
 
Ballast Nedam surged 8% to 12.14 Euros, its biggest gain since May 2009, after the builder of AFC Ajax NV's soccer stadium reported an unexpected first-half profit.
 
Beter Bed Holding rose 3.2% to 17.425 Euros. Europe's biggest mattress retailer raised its second- quarter forecast, expecting profit in that period to double to 1.6 million Euros ($2.1 million).
 
Corio increased 0.7% to 41.71 Euros, paring two days of losses. The largest Dutch property company aims to more than double its German assets in the next five years after making its largest acquisition in the country in March, Chief Executive Officer Gerard Groener said.
 
Gamma Holding rose 89 cents, or 4.8%, to 19.34 Euros, the highest price since October 2008. The world's second-biggest maker of conveyor belts is exploring the possible sale of Vlisco Group to strengthen its financial position.
 
Netherlands retail sales dropped in May from the previous month, the Central Bureau of Statistics said on Thursday.
 
Retail sales value decreased 0.9% year-on-year in May, compared to a 0.1% rise in the previous month, which was revised from 0.2% fall reported initially.
 
Turnover in food and beverage stores slipped 0.7% annually in May, in contrast to a 2% rise in the preceding month. At the same time, turnover in supermarkets increased 0.4%, but slower than 2.8% growth in the previous month. Sales for non-food stores slipped 3.5%, compared to a revised 3.4% fall in the previous month.
 
For the January to May period, retail sales decreased 0.8% compared to the same period of the previous year. Sales in food and beverage stores grew 0.3% and non-food stores dipped 3.3%. Turnover in petrol stations climbed 5.7%.
 
Meanwhile, retail sales volume dropped 2.1% on an annual basis in May, compared to a revised 1.5% fall in the previous month. For the first five months of the year, sales volume decreased 2.1% over a year ago. 
 
SWITZERLAND
 
Swiss stocks tumbled for a second day as a slide in health-care shares overshadowed a gain in offshore drilling company Transocean Ltd. after BP Plc temporarily stopped its Gulf of Mexico oil leak.
 
Roche Holding AG, the world's biggest maker of tumor drugs, fell 4.2%, the most in 15 months, after a US review said its top-seller Avastin didn't slow breast tumors in new studies as much as in earlier data used to win approval. Bank stocks retreated after Citigroup Inc. reported revenue that missed analysts' estimates and US consumer confidence slumped. Transocean jumped 2%.
 
The benchmark Swiss Market Index fell 106.7, or 1.7%, to 6,184.37, down 0.4% this week. The SMI has retreated 11% from this year's high on April 15 amid speculation that Europe's debt crisis may derail the economic recovery and concern that Chinese authorities are cooling their nation's rate of growth. The broader Swiss Performance Index dropped 1.6% Friday.
 
Roche sank 4.2% to 144.5 Swiss francs. Avastin paired with chemotherapy treatments didn't help patients survive longer than using the other drugs alone, according to a US Food and Drug Administration staff review released Friday. Outside advisers to the FDA will meet July 20 to evaluate Avastin and consider whether use in breast malignancies should be continued, expanded, or halted.
 
Lonza Group AG, the largest maker of drug ingredients, retreated 3.1% to 71.25 francs, its first loss in four days.
 
Transocean, the owner of the Deepwater Horizon offshore rig which sank in April, increased 2% to 55.8 francs, paring two days of declines. BP said after the close of European trading Thursday that oil has stopped flowing into the Gulf of Mexico for the first time in about three months. BP is evaluating data from a pressure test it began Thursday that will determine whether the Macondo well can remain sealed.
 
Shares declined as Citigroup and Bank of America Corp. topped analyst estimates for per-share earnings while missing on sales. Stocks extended a drop after the Thomson Reuters/University of Michigan preliminary index of US consumer sentiment fell to 66.5 in July from 76 a month earlier, the lowest level in a year.
 
UBS AG, Europe's largest bank by assets, fell 2.2% to 15.04 francs, while Credit Suisse Group AG lost 2.7%, sliding to 43.03 francs, declining for a third day.
 
An indicator of Swiss economic sentiment plunged sharply in July, suggesting analysts are less optimistic over the prospects for the economy.
 
The Credit Suisse - ZEW economic sentiment indicator shed 15.3 points to stand at 2.2. Merely 17.8% of the analysts surveyed forecast further improvement in the economic climate in the next 6 months, compared to a 32.5% proportion in June.
 
The percentage of analysts expecting a deterioration in the economic picture increased to 15.6% from 15%. Two-thirds of the experts participating in the survey expect no change in the economic climate in the next 6 months.
 
Meanwhile, the ZEW - CS indicator measuring the current economic situation improved by 4.7 points from June to stand at 22.2.
 
Swiss producer and import price index rose 0.9% year-on-year in June following 1.4% increase in May, data released by the Federal Statistical Office showed Tuesday.
 
On a monthly basis, the producer and import price index fell for the first time in four months. The index dropped 0.4% following a 0.3% increase in May. The statistical agency attributed the monthly decline to lower prices for petroleum, petroleum products and metal products.
 
Detailed data showed that the producer price index rose 0.3% annually following 0.6% increase in May. At the same time, import prices were up 2.3%, slightly slower than the 2.8% increase seen in the previous month. On a monthly basis, producer prices declined 0.4% and import prices by 0.5%.
 
Underlining that price pressures are muted in the economy, data released earlier this month showed that the consumer price inflation slowed to 0.5% in June from 1.1% in May. The Swiss National Bank, the country's central bank, last month said that the risk of deflation has largely disappeared as a result of positive economic developments.
 
The SNB, which aims to keep inflation below 2%, increased its inflation forecast for 2010 and 2011, while kept it unchanged for 2012. Assuming an unchanged three-month Libor of 0.25%, average inflation is expected to amount to 0.9% this year, 1% in 2011 and 2.2% in 2012. The central bank expects the economy to expand 2% this year. Gross domestic product rose 0.4% sequentially in the first quarter following 0.9% increase in the fourth quarter. 
 
AUSTRIA
 
In Vienna, the ATX completed a hectic week at 2,325.99, down 1.93%.
 
Alarm bells are ringing among political and business decision-makers as it emerges the Austrian economy suffered the biggest post-war year on year decline in 2009.
 
Federal statistics agency Statistik Austria announced Friday (Fri) that the country's gross domestic product dropped by 3.9% from 2008 to 2009.
 
The July 2010 ratings by the Institute for Higher Studies (IHS) and the Institute for Economic Research (WIFO) - Austria's top think tanks - mentioned a 3.5% slump.
 
Statistik Austria stressed Friday its findings were based on updated and extended data. The agency pointed out that a minus of 3.9% was the most dramatic decline after the end of World War Two.
 
Austria nevertheless fared better in the economic crisis than most of the European Union's (EU) 27 member nations as the EU's 2009 GDP shrunk by 3.1% on average.
 
WIFO officials said recently the Austrian GDP failed to recover in the first quarter of this year as it dropped by 0.3% 2010 compared to the fourth quarter of 2009. The average GDP of the EU-27 meanwhile grew by 0.2% at the same time, they added.
 
Economists point out soaring mineral oil prices would not only keep investments low but also lead to a decline in spending by Austrians.
 
WIFO experts explained that they expected the Austrian economy to recover from the impact of the credit crunch. They however stressed that this process would occur slower than initially expected.
 
The International Monetary Fund (IMF) said recently it expected the Austrian economy to grow by 1.5% year on year in 2010.
 
The Austrian trade industry - a key factor for the wellbeing of the country's economy - is showing signs of recovery as foreign trade businesses reported a 13.6% improvement in export rates last April compared to the same month in 2009. This improvement follows a 9.6% year on year plus in March 2010
 
Another crucial aspect is the state of Austria's tourism industry. Speaking about his expectations for this year, ÖVP Economy Minister Reinhold Mitterlehner said earlier this week he was convinced last year's overnight figures were in reach.
 
The number of overnights by Austrians and tourists from abroad dropped by 1.9% to 124.3 million year on year in 2009. Analysts had however feared the global economic downturn would spark a more dramatic downturn.
 
Austria's consumer price inflation increased in June from the previous month.
 
The consumer price index, or CPI, rose 2% on an annual basis in June, faster than 1.9% in the previous month, a report by the Statistics Austria said on Wednesday.
 
Food and non-alcoholic drinks grew 0.6% annually in June, while clothing prices increased 2.6%. Prices for housing,water, and energy rose 2.8% and health charges climbed 1.4%. Communication charges were up 1.4%. The CPI, excluding petroleum products, rose 1.4%.
 
On a monthly basis, the CPI remained unchanged in June. At the same time, food and non-alcoholic drinks prices fell 0.1% and clothing prices slipped 1.8%. Restaurants and hotels prices grew 0.6%.
 
Meanwhile, the harmonized index of consumer prices, or HICP, rose 1.8% on an annual basis in June, faster than 1.7% in the previous month. The HICP remained stable compared to the preceding month.
 
Austria's trade deficit narrowed notably to Eur 255.5 million in April from Eur 731.6 million last year, the Statistics Austria said Friday.
 
During the month, the value of exports increased 13.6% year-on-year to Eur 8.61 billion and imports value rose 6.6% to Eur 8.87 billion. Shipments to EU member states advanced 11.9%, while imports from these countries rose 12.9% annually.
 
During the first four months of this year, trade deficit shrunk marginally to Eur 1.51 billion from Eur 1.81 billion in the same period last year. During the four-month period, exports were up 7.1% year-on-year and imports increased 5.8%. In the case of Austria's trade with the EU states, exports rose 7% between January to April, while imports rose 8%. The trade balance showed a deficit of Eur 1.73 billion.
 
The Alpine nation's economy stagnated in the first quarter, compared to the 0.3% quarterly growth in the previous quarter, according to the Austrian Institute of Economic Research or WIFO.
 
Meanwhile, last month, the International Monetary Fund has observed that Austria's deficit and debt levels are "not sustainable, though the country has more favorable debt and deficit levels than the Euro area average. The IMF expects Austria's fiscal deficit to be at 4.75% of GDP in 2010 and debt should be constrained to around 70%. 
 
SWEDEN
 
Stockholm's OMX brought the week to a close at 1,034.69, a 1.97% decline on the day.
 
Swedish compressor and machinery maker Atlas Copco bounded to record second-quarter margins and profit ahead of forecasts on the back of improved demand from miners and emerging economies.
 
Atlas suffered like other industrial players during the global economic crisis and revenues slumped in 2009.
 
But a strong recovery led on Friday to a record operating profit margin in the second quarter while pretax profit rose to 3.4 billion crowns ($466.1 million), compared with 2.5 billion in the previous quarter and an average forecast of 2.9 billion in a Reuters poll.
 
The company's shares rose 3% initially, but later fell back to be down 0.83% by 1251 GMT. One analyst said Swedish industrial shares were broadly down, but had no immediate explanation for the turn in Atlas Copco.
 
Another said there could be a shift of portfolios taking place due to the view that Swedish industrial shares had had a good recent run and that earnings growth had topped out.
 
Shares in bearings maker SKF, which reported strong earnings on Thursday, also fell.
 
But Atlas Copco was upbeat, posting record order intakes in Asia, including new records in China and India.
 
Fiscal policy tightening in Eurozone is likely to hold back economic growth and inflation in Sweden in the long run, Riksbank said Thursday.
 
According to minutes of the June 30 executive board meeting, when the central bank raised the repo rate by 0.25 percentage points to 0.5%, policymakers assessed that the Swedish economy is developing strongly following the severe downturn.
 
At the same time, economic growth abroad is expected to be lower, which means that the repo rate in the longer term will not need to be raised as much as was previously assumed. But, the repo rate now needs to be raised gradually towards more normal levels to attain the inflation target of 2% and to ensure stable growth in the real economy, minutes said.
 
The bank's Deputy Governor Karolina Ekholm entered a reservation against the decision to raise the repo rate. She advocated a repo rate path with an unchanged repo rate of 0.25% until September, followed by successive increases in accordance with the profile presented in the monetary policy report. Another Deputy Governor Lars Svensson entered a reservation against the repo rate path and advocated a repo rate path with a repo rate of 0.25% through the fourth quarter of 2010, and thereafter a gradual return to the repo rate path of the main scenario.
 
At the meeting, Swedish policymakers decided to restore the difference between the repo rate and the interest rates in the standing facilities to the level that prevailed prior to 22 April 2009. It means that the deposit rate will be the repo rate minus 0.75 of a percentage point, and the lending rate will be the repo rate plus 0.75 of a percentage point, the bank said. The central bank also decided to raise the lending rate to 1.25%, while the deposit rate is held unchanged at minus 0.25%.
 
Swedish jobless rate increased in June from the previous month, a report by the Public Employment Service showed on Tuesday.
 
The jobless rate rose to 4.8% in June from 4.5% in the previous month. The latest jobless rate came in line with economists' expectations.
 
"Unemployment is still high, but in the first half of this year has been more work and more job vacancies notified to employment service since last year," Jan-Olof Dahlgren, chief of staff, the Employment Service said. " It is good that the employer hires new start jobs, which thus have the opportunity to enter the labour market."
 
The number of registered unemployed persons amounted to 401,000 in June, representing 8.3% of the workforce. In May, the number of registered unemployed persons totaled 395,000. Persons registered as part-time unemployed decreased 3,000 from the previous year to 35,000.
 
For the first half of the year, the number of vacancies totaled 297,000, which was 56,000 vacancies higher than a year ago. At the same time, there were 313,000 persons enrolled in the employment service.
 
Sweden's Financial Supervisory Authority on Friday set out a general guideline for mortgages collateralised by homes. Accordingly, new loans should not exceed 85% of the home's market value, effective from October 1, 2010.
 
FSA said the new rules are intended to increase consumer protection and suppress an unhealthy development on the credit market. Mortgages represent the largest portion of households' total indebtedness. This rule will also increase incentive for households to limit their debt and thereby create better protection for the future.
 
The rules aim to counteract the use of higher loan-to-value ratios by banks and other credit institutions as a means of competition, FSA said. The rules will be applicable only to new loans or extensions to existing loans that use the home as collateral. FSA added that the rules will not have any considerable price effects on the housing market. 
 
DENMARK
 
In Copenhagen, the OMX finished the week at 409.33, dropping 1.46% on Friday alone.
 
Fitch Ratings on Monday affirmed Denmark's long-term foreign and local currency issuer default ratings at 'AAA', respectively. The outlooks on the IDRs are stable. Fitch has simultaneously affirmed Denmark's country ceiling at 'AAA' and the short-term foreign currency IDR at 'F1+'.
 
The rating agency said Denmark's 'AAA' fundamentals remain solid, despite suffering a relatively severe recession. Fitch noted that the country's central bank's ability to successfully manage its peg to the Euro has boosted the credibility of Denmark's fixed exchange rate regime. Moreover, pressures on Denmark's banking system have also eased substantially since last year as government support measures helped to ensure the availability of liquidity.
 
"Denmark has successfully weathered a number of major stress tests since the peak of the global financial crisis in 2008, including on its exchange rate - which has since seen pressure subside owing to successful management of the peg and renewed confidence in the Danish krone," said Maria Malas-Mroueh, Associate Director in Fitch's Sovereign team.
 
"Further, its financial sector has benefited from the government's extensive support schemes while household's net financial wealth continues to be robust despite a significant deterioration of their asset positions."
 
Fitch also pointed out the persistence of a number of risk factors in the Danish economy. They include the country's continued reliance on wholesale funding, and the large foreign currency liabilities of Danish banks. While the winding up and phasing out of the financial sector support measures is a main challenge for Denmark, Fitch expects banking sector stability to remain robust to the withdrawal of government guarantees later this year. The agency also recognizes that Denmark has the fiscal capacity to withstand financial sector pressures.
 
Further, it said the budget consolidation required to achieve the government's targeted structural balance by 2015 is modest compared with peers. Denmark's deficit is expected to be 5.1% of GDP in 2010 versus a surplus of 3.4% of GDP in 2008.
 
Danish producer prices increased in June, a report by the Statistics Denmark showed on Thursday.
 
The producer price index rose 4.8% year-on-year in June. Meanwhile, the domestic produced goods prices increased 3.2% and imported goods prices grew 5.8%.
 
On a monthly basis, the overall price index for domestic supply of goods rose 0.4% in June. At the same time, the domestic produced goods prices declined 1.2% and imported goods prices climbed 1.5%. Prices increased mostly on fish and fish products by 3.5% and machinery and tools,goods transport, by 1.7%.
 
Meanwhile, industrial price index increased 3.6% on an annual basis in June and was down 1.4% compared to the preceding month.
 
Danish consumer price inflation eased to a six-month low in June. Annual inflation was 1.7% in June, down from 2.2% in May. The economy expanded at a faster pace in the first quarter. The gross domestic product grew 0.5% sequentially in the first quarter, faster than a 0.2% growth in the previous quarter.
 
Danish consumer price inflation eased to a six-month low in June, the Statistics Denmark said Monday. Inflation slowed for the second consecutive month.
 
Annual inflation was 1.7% in June, down from 2.2% in May, largely driven by year-on-year decrease in clothing prices, the statistical office said. Meanwhile, the biggest increase in consumer prices was recorded by tobacco.
 
Clothing and footwear index fell 1.8% year-on-year due to lower prices of both clothing and shoes. Prices of alcoholic beverages and tobacco rose 5.1% on account of notably higher prices of tobacco. Prices of food and non-alcoholic beverages fell 1% annually, while housing prices rose 3.8%.
 
On a monthly basis, consumer prices rose 0.2%. While prices of books, furniture and fruits contributed positively to the monthly index, prices of clothing and vegetables acted as a major drag.
 
The harmonized index of consumer prices, or HICP, calculated according to the EU methodology, rose 1.7% year-on-year in June compared to 1.9% rise in the previous month. The index fell 0.1% monthly.
 
Official data shows that the Danish economy expanded at an accelerated pace of 0.5% sequentially in the first quarter, compared to 0.2% growth in the previous quarter. 
 
FINLAND
 
Helsinki's OMX headed into the weekend on 6,375.22, down 1.82%.
 
Finland's current account deficit widened in April from May, data released by the Bank of Finland showed Thursday.
 
The deficit ballooned to Eur 833 million from Eur 333 million April. That was led by a decrease in the goods trade surplus to Eur 389 million from Eur 477 million and an increase in income deficit to Eur 1.09 billion from Eur 680 million.
 
Services surplus and transfers deficit were unchanged at Eur 39 million and Eur 168 million, respectively. The country's capital account surplus was stable at Eur12 million.
 
The financial account deficit narrowed to Eur 2.4 billion from Eur 2.7 billion in April. There was a net inflow of Eur 0.2 billion in direct investment and Eur 0.7 billion in portfolio investment. Net outflow of Eur 3.6 billion was in other investment, such as loans, deposits and trade credits.
 
Finland's retail sales increased for the fourth consecutive month in May both in terms of volume as well as value, official data revealed Wednesday.
 
The volume of retail trade, excluding motor vehicle trade, grew 2.6% year-on-year in May, faster than the 1% increase in April, Statistics Finland said. At the same time, retail sales value rose 3.5% annually compared to 2.2% in the previous month. Total trade value increased 11% on an annual basis.
 
Wholesale trade recorded an annual increase of 11.1% in May in terms of value, much faster than the 5.5% rise in April. Meanwhile, the value of motor vehicle sales climbed 32.8%, stronger than 19% growth in April. In terms of volume, wholesales trade grew 4.9% and motor vehicle sales were up 31.2%.
 
During the January to May period, retail sales value rose 2.7% and the value of wholesale trade was up 5.5% compared to the same period last year. Motor vehicle sales rose 9.3% in terms of value, while total sales value increased 5.1% annually during the period. In the first quarter, retail sales increased 2.6% year-on-year and wholesale trade turnover was up 3.6%.
 
Separately, the statistical agency reported that the total turnover in services industries increased 0.9% year-on-year during the February to April period. A year ago, the services turnover had declined 5.3%.
 
Meanwhile, falling food prices and interest rates had a cooling impact on the headline inflation in Finland. The annual inflation rate eased to 0.9% in June from 1% in the preceding month.
 
Nonetheless, jobless rate in Finland recorded a seasonal jump in May, when more students enter the labour market. The unemployment figures usually return to a lower level in June. Finnish jobless rate climbed to 10.5% in May from 9.3% in April.
 
The Finnish economy contracted 0.4% sequentially in the first quarter, following a 0.2% decline in the fourth quarter. The economy contracted for a second straight quarter.
 
Meanwhile, the International Monetary Fund has cautioned that an aging population and recent loss of competitiveness due to international turbulence are posing big challenges to the country's growth prospects and fiscal sustainability. The lender projects 1.25% economic growth this year and around 2% in 2011.
 
Building costs in Finland were 1.1% higher in June than in the same period a year ago, Statistics Finland said on Monday.
 
labour costs in construction rose by 0.1% annually and prices of materials were up 2.7%. Other input costs were down 2.2%.
 
By type of building, building costs increased 3.1% for agricultural production buildings, while those for blocks of flats were up 2%. Costs for building detached residential houses, office & commercial buildings, and industrial & warehouse buildings all increased.
 
On a month-over-month basis, building costs rose by 0.3%. Prices of materials increased 0.6%.
 
Fortum Oyj, the Nordic region's second-largest utility, said second-quarter profit fell 9% as its achieved electricity prices declined.
 
Net income fell to 263 million Euros ($340 million), or 30 cents a share, from 289 million Euros, or 32 cents, a year earlier, Espoo, Finland-based Fortum said Friday in a statement.
 
European utilities seek to safeguard profit from volatile power prices by selling electricity at tariffs they set a year or more in advance. Fortum and its competitors charged their customers prices that were determined in 2009, when they slumped as industrial energy consumers shuttered factories and couldn't use all the power and natural gas they had ordered.
 
"There are areas where results could have been better," Chief Executive Officer Tapio Kuula said in the statement. "The first priority is to steadily improve our long-term performance."
 
The company's stock fell 5.5% 18.05 Euros at the 6:30 p.m. close in Helsinki. That's the biggest one-day slide since March 26.
 
Fortum said its power unit's achieved Nordic power price in the second-quarter was 44.8 Euros a megawatt-hour, down from 48 Euros a year earlier.
 
The utility's profits were also hurt by a drop in nuclear and hydropower generation in the first half as well as higher costs for the company's nuclear operations, according to the statement.
 
Nordic power demand should return to its 2008 level by 2012 to 2014 and electricity will continue to gain a higher share of total energy consumption, Fortum said. The power unit's sales fell to 597 million Euros from 608 million Euros a year earlier. Fortum also generates and sells electricity in Russia.
 
NORWAY
 
In Oslo the OBX closed out the trading session at 317.21; not suffering as heavily as other European markets, but still down 0.70% in the process.
 
Norwegian import prices, excluding ships and oil platforms, rose 2.5% sequentially in the second quarter, marking the first increase since the end of 2008, data released by Statistics Norway showed Thursday. But, on an annual basis, import prices were down 0.7%.
 
Import prices of food, beverages and tobacco declined 3.3% year-on-year and those of crude materials, except fuels climbed 25.3%. Import prices of fuels surged 20.9% and those of manufactured goods except food, beverages and tobacco declined 4.6%.
 
On the other hand, export prices increased 3.8% over the first quarter, taking the annual rise to 9.7%. Export prices of food, beverages and tobacco were up 5.5%, crude materials except fuels increased 10.7%, fuel by 14.2% and manufactured goods except food, beverages and tobacco by 0.1%.
 
The statistical agency also said the volume of imports increased 10.1% year-on-year in the second quarter and that of exports was up 2.8%.
 
Norway's trade surplus widened in the January to June period, a report by the Statistics Norway showed on Thursday.
 
The trade surplus totaled NOK 173.7 billion in the January to June period, up NOK 8.1 billion from the the same period of the previous year. The trade balance increased by 5% from the previous year. The growth was mainly due to a rise in crude oil exports, but the mainland exports also contributed to the increase, the statistical office said.
 
Exports amounted to NOK 390.5 billion in the first half of the year, while imports totaled NOK 216.7 billion. The export value of crude oil totaled NOK 140.3 billion, up from NOK 108.1 billion last year. This was mainly due to higher crude oil prices compared to the preceding year. At the same time, natural gas exports came to NOK 84.3 billion, a decrease of NOK 31.2 billion from the previous year.
 
Imports of goods, excluding ships and oil platforms, amounted to NOK 216.7 billion in the first half of the year, up from NOK 208.5 billion a year ago. Imports of manufactured goods increased 2% to NOK 33.4 billion, while imports of chemicals and related products as well as food and live animals also increased during the period.
 
In June, the trade balance showed a surplus of NOK 25.4 billion, up from NOK 21.41 billion a year ago. Exports increased 16.8% on an annual basis to NOK 67.23 billion, while imports climbed 15.6% to NOK 41.78 billion.
 
Norway's wholesale prices rose 1.7% sequentially in the second quarter, Statistics Norway reported Monday. Wholesale price inflation rose from 1.5% in the first quarter. On a yearly basis, wholesale prices were up 4.6% in the second quarter.
 
Within the wholesale trade, prices of food, beverages and tobacco climbed 2.6% sequentially and that of household goods remained flat. While, prices of textiles dipped 0.1%, wholesale of clothing and footwear gained 0.1%. Wholesale of electrical household appliances and radio and television goods declined 0.8% and that of machinery, equipment and supplies slipped 0.2%. The increase in wholesale of solid, liquid and gaseous fuels and related products prices was 4.3%.
 
Data released on July 7 showed that Norwegian consumer price inflation eased for the third straight month in June amid a decline in the prices of food and clothing. Inflation slowed to 1.9% year-on-year in June from 2.5% in May. 
 
SPAIN
 
The IBEX in Madrid ended the session and the week at 9,991.70, a dip of 1.66%.
 
A leading indicator of the Spanish economy was unchanged in May, suggesting growth is likely to be subdued going forward.
 
The Conference Board leading economic index for Spain was unchanged at 109.0 in May after increasing in April. Positive contributions to the indicator from job placings and the capital equipment component of industrial production were balanced by a negative contribution from the Spanish equity price index.
 
Meanwhile, the coincident index, which is a measure of current economic activity, increased 0.1% in May from April. Positive contributions came from final household consumption, industrial production excluding construction, and real imports. The retail sales survey and employment remained unchanged in May.
 
Spanish Prime Minister Jose Luis Rodriguez Zapatero said on Wednesday that the domestic economy is expected to have grown in the second quarter after emerging from the recession in the first quarter.
 
However, Zapatero said recent budget reduction measures is likely to weigh on growth in the latter half of the year. Spain's socialist government is trying to reduce its huge budget deficit, which is the third biggest in Eurozone.
 
The Spanish economy expanded 0.1% sequentially in the first quarter, growing for the first time since early 2008. However, the country's government foresee 0.3% contraction this year before expanding 1.3% next year. The Spanish statistical office is due to release second quarter GDP figures on August 13.
 
Speaking at Spain's annual State of the Nation parliamentary debate, Zapatero said his government will go ahead with the tough austerity measures and labour reform policies. The government wants to raise the retirement age to 67 from 65. It also plans to increase the number of years of contribution that are used to calculate pensions.
 
In May, Spain's parliament approved a Eur 15 billion austerity plan aimed at reducing its large fiscal deficit and to calm worries that the country could follow Greece into a debt crisis. The tough cost cutting measures are expected to save the Spanish government Eur 15 billion in 2010 and 2011.
 
The austerity measures are also expected to reduce Spain's deficit from its current level of more than 11% of GDP to 6% of GDP by 2011 and to 3% by 2013. The plan calls for slashing salaries of cabinet ministers and other senior officials by 15%, and includes an average five-percent pay cut for public sector workers from June, and a pay freeze from 2011.
 
 Home sales in Spain increased 11.9% year-on-year to 37,787 in May, the National Statistics Institute said Monday. On a monthly basis, there was an increase of 10.1%. The statistical agency said 89.6% of transfers of dwellings were free housing and 10.4% were protected housing.
 
It said 49.5% of the dwellings transferred by merchanting in May were used, and 50.5% were new. The number of transactions on new dwellings increased 8.8%, while that of used dwellings increased 15.3%, as compared with May 2009.
 
Total number of property transfers in May was 161,500, an increase of 6.1% over the previous year and 7.9% more than the figure recorded in April. Donation of property was up 3.3% year-on-year to 5,822. Inherited property sales increased 15.2% over the previous year to 31,753. The total number of property transfers per 100,000 inhabitants was highest in the Autonomous Communities of Castilla y León and Castilla-La Mancha, with 741 and 704, respectively.
 
In the first quarter, Spanish house prices declined 2.9% compared with the same period a year ago. On a quarter-over-quarter basis, house prices were down 1.2%. 
 
PORTUGAL
 
The PSI Generali in Lisbon finished the Friday trading session at 2,554.06, down 1.57%.
 
Moody's Investors Service downgraded Portugal's government bond ratings on Tuesday saying that the government's financial strength will weaken over the medium term and the economy's growth prospects are likely to remain weak. However, the outlook on the rating is stable, with the upside and downside risks evenly balanced.
 
Concluding its review for possible downgrade, the rating agency lowered the rating to A1 from Aa2. Moody's last rating action on Portugal was on May 5, when the agency placed the country's Aa2 government bond ratings on review for possible downgrade, while the Prime-1 short-term rating was affirmed. Prior to that, Moody's has changed the outlook on the government's Aa2 ratings to negative from stable on October 29, 2009.
 
The two-notch downgrade reflects the rating agency's conclusions that the Portuguese government's financial strength will continue to weaken over the medium term, as evidenced by the ongoing deterioration in the country's debt metrics, such as debt to GDP and debt to revenues. Moreover, the economy's growth prospects are likely to remain relatively weak unless recent structural reforms bear fruit over the medium to longer term.
 
In April 2010, Standard & Poor's lowered its long-term local and foreign currency sovereign issuer credit ratings on Portugal to A- from A+, while it cut the local and foreign currency short-term ratings to A-2 from A-1. The rating agency also said that the outlook is negative. That was followed by a downgrade by Fitch in March to 'AA-' from 'AA'.
 
Portugal's budget deficit ballooned to 9.3% of GDP in 2009 from 2.8% in 2008, with debt rising to 76.3% of GDP from 66.3%. The EU rules allow a budget deficit below 3%. To reduce the budget deficit, the Portuguese government announced additional fiscal measures in May, which included increases in taxes and spending cuts.
 
On July 2, Portugal's Finance Ministry said it aims to lower the government's budget deficit quicker than initially estimated. Setting new targets, the ministry said it wants to reduce the deficit to 7.3% of GDP this year. It had previously planned to lower the shortfall to 8.3% from 2009's 9.3%. In 2011, the government wants to lower the deficit to 4.6% of GDP, faster than the initially projected reduction to 6.6% of GDP. "This means that the 3% target will be reached a year before than initially forecast," the ministry said in a statement.
 
However, Moody's expects the government's debt metrics to continue to deteriorate for at least another two to three years, with the debt-to-GDP and debt-to-revenues ratios eventually approaching 90% and 210%, respectively, before stabilizing once the budget has moved back into a primary surplus position. It also remains concerned about the economy's medium-term growth potential.
 
The country is seeking to cut its budget deficit to 2.8% of gross domestic product by 2013. The Portuguese government headed by Prime Minister Jose Socrates had announced that the income tax rate will be raised to 45% for those earning over Eur 150,000 per year. The government also plans to cut military investments by 40% during the period, and postpone plans to build high-speed train links that would connect Lisbon and Porto to Spain.
 
Anthony Thomas, vice president - senior analyst in Moody's Sovereign Risk Group, said it is not yet clear whether the reforms will boost growth sufficiently to allow the deterioration in the country's debt metrics to eventually reverse, especially as the labour market reforms are relatively recent. This would imply that Portugal's government would remain relatively highly indebted for the foreseeable future.
 
The economy expanded 1.1% sequentially in the first quarter following a 0.1% decline in the fourth quarter of 2009. The European Commission foresee 0.5% growth this year before accelerating to 0.7% in 2011. In its spring forecast released in May, the Commission projected Portugal's budget deficit to narrow to 8.5% of GDP this year from 9.3% of GDP in 2009. Thereafter, it would further narrow to 7.9% of GDP in 2011.
 
Separately, Moody's has also affirmed Portugal's short-term issuer rating of Prime-1 with a stable outlook. Portugal falls under the Eurozone's Aaa regional ceilings for bonds and bank deposits, which were unaffected by the Portuguese government's downgrade.
 
The Bank of Portugal on Tuesday slashed its growth outlook for next year, as a sharp slowdown in the second half of 2010 is expected to deepen in 2011.
 
In its Summer Economic Bulletin, the central bank cut its forecast for 2011 gross domestic product growth to 0.2% from the 0.8% growth projected in March. Nonetheless, the forecast growth rate for 2010 was raised to 0.9% from 0.4%. In 2009, the economy contracted by 2.7%.
 
The bank also pointed to the risks of a further downturn stemming from the possible depreciation of the Euro and additional consolidation measures in Portugal's trade partners.
 
Additionally, the bank cautioned that a decreases in domestic demand as well as in private investment will dampen growth in 2011.
 
Domestic demand may decline 1.1% next year after remaining flat this year, the bank said. The slowdown in domestic demand may be driven by the government's fiscal consolidation measures, tight credit conditions, low household disposable income, and a weak labour market.
 
The Bank of Portugal also said that the deficit is expected to be 4.3% of GDP in 2010 and may accelerate to 5% of GDP in 2011. This development is still conditioned by the assumed increase in interest rates in the forecast period, the bank said.
 
Meanwhile, the bank maintained its forecast for export growth in 2011 at 3.7% while upwardly revising the forecast import growth rate to 1.7% from 1.4%.
 
ITALY
 
The Mibtel closed down 1.56% at 20,161.02, a large decline for the final trading day of the week.
 
Bank of Italy Governor Mario Draghi said on Thursday that stress tests will show Italian banks have sufficient capital to face further financial shocks.
 
"I'm confident that tests will show that the capital resources of the Italian banks are appropriate," Draghi, who is also a member of the European Central Bank Governing Council, said in a speech at the Italian Banking Association's annual meeting in Rome.
 
He added that the tests will examine banks' ability to function in a condition, where economic growth rate is three percentage points below the European Commission forecast for 2010-11.
 
A total of 91 banks across Europe are being tested to assess whether they will be able to withstand future shocks in the financial sector. The results are due to be published on July 23.
 
Draghi stated that the quality of Italian banks' capital is higher compared to banks of other nations. The policymaker also urged banks to increase lending to businesses to boost economic activity.
 
Italy's consumer price index, or CPI, including tobacco rose 1.3% in June from the previous year, a final report from the statistical office Istat showed on Wednesday. In May, inflation was 1.4%.
 
Alcoholic beverages and tobacco prices grew 2.2% annually in June, while clothing and footwear prices rose 1%. Housing, water, electricity, gas and other fuel prices increased 0.8%. Transport charges climbed 3.7%. On the other hand, food and non-alcoholic beverages fell 0.3%, while communications charges slipped 1%.
 
On a monthly basis, the CPI remained unchanged in June, after rising 0.1% in May. Food and non-alcoholic beverages prices rose 0.1% and clothing and footwear prices also grew 0.1%. Transport charges fell 0.3%.
 
Meanwhile, the harmonized index of consumer prices, or HICP, was up 1.5% year-on-year in June, slowing from 1.6% in May. Month-on-month, the HICP rose 0.1%. Thus, all latest figures matched a preliminary estimate released on June 30. 
 
GREECE
 
Athen's Athex Composite closed the day and the week Friday on 1,612.87, a gain of 0.26%.
 
Piraeus Bank, the fourth-largest Greek lender, on Thursday made an unsolicited cash bid of €701m ($903m) for the state's stakes in two loss-making domestic banks.
 
The move could trigger consolidation of the country's troubled bank sector, which has lost access to funding from interbank markets over fears of a Greek sovereign default, according to analysts.
 
Analysts said the deal would create Greece's biggest domestic banking group with assets of more than €105bn.
 
Piraeus offered to acquire 33.04% of Hellenic PostBank for €329m - a 30% premium to Wednesday's closing share price. It would also pay €372m for 77.3% of Agricultural Bank of Greece, equivalent to the group's net asset value.
 
"Given improvements in Greece's fiscal situation in the first six months, it's the right time to launch a specific initiative," said Michalis Sallas, Piraeus chairman.
 
Greece was praised this week for outperforming a first-half budget deficit target set under terms of a €110bn bail-out by the European Union and International Monetary Fund.
 
The government said it would consider Piraeus's offer. It was not immediately clear whether the finance ministry would call for counter bids from other domestic or foreign groups.
 
A Piraeus official said the bank had held discussions with the finance ministry before Mr Sallas announced the bid, although Greece does not currently have a formal bank privatisation programme. As the smallest of Greece's "big four" lenders, Piraeus has struggled recently to fund itself through deposits and the European Central Bank.
 
"Access to Hellenic's large and stable deposit base of close to €9bn would immediately solve Piraeus's funding problem," said an Athens-based analyst.
 
Piraeus made its offer the day after George Papaconstantinou, the finance minister, urged Greek banks to consolidate in order to weather the country's debt crisis.
 
"Banks urgently need to make strategic moves," said Mr Papaconstantinou on Wednesday night, as the parliament voted to set up a €10bn bank stabilisation fund backed by the IMF.
 
The stabilisation fund would provide capital injections for Greek banks that fail - or come close to failing - rigorous stress tests being carried out by the European Central Bank and the Bank of Greece.
 
Greek banks face a 23% "haircut" on their trading portfolios of government bonds. Non-performing loans in the sector are projected by analysts to exceed 10% this year.
 
Piraeus, Hellenic and ABG all reported first-quarter losses, reflecting sharply higher provisioning and sluggish credit expansion as Greece slips deeper into recession.
 
Piraeus would finance the proposed acquisition out of its own funds - including liquidity and capital provided under the government's 2008 rescue package.
 
Mr Sallas said the merged entity would have a loan-to-deposit ratio of 98%. Its tier one capital ratio would be 9%.
 
The banks' share prices jumped after the Athens stock exchange lifted a brief suspension of trading.
 
Greek jobless rate dropped in March from the preceding month.
 
The jobless rate was 11.6% in March, down from 12.1% in the previous month, the statistical office said on Thursday. A year earlier, the unemployment rate was 9.2%.
 
The number of unemployed totaled 578,723 in March, larger than 457,024 persons in the previous year. At the same time, the number of employed decreased to 4.42 million from 4.49 million a year ago.
 
Greek consumer price inflation eased in June. The consumer price index rose 5.2% annually in June, slower than a 5.4% growth in the previous month. Inflation rate eased for the first time since May 2009.
 
The economy contracted at a faster pace in the first quarter. The gross domestic product dropped 1% sequentially in the first quarter, faster than the 0.8% decline in the previous quarter. The GDP decreased for the sixth consecutive quarter since the fourth quarter of 2008.
 
Greece's import price inflation in May slowed for the first time in eight months, data released by the Hellenic Statistical Authority showed Monday.
 
The import price index grew 7.8% year-on-year compared to April's 10.1% rise. Import prices have been rising since October last year, ending declines, which started in November 2008. The statistical agency said the annual rise in the import price index reflects 1.3% increase in the import price index of the Eurozone market and 14.7% rise in non-Eurozone market.
 
By industrial groups, import prices of intermediate goods climbed 2.9% annually and that of capital goods dropped 0.1%. Import prices of durable consumer goods and non-durable consumer goods moved up by 0.7% each. Energy prices surged 32.7%.
 
On a monthly basis, import prices fell 0.5% in May, the first decline in five months. It followed a 1.5% increase in April. The decline was caused by a 2.2% drop in import prices of energy. Import prices of intermediate goods rose 0.1%, durable consumer goods prices went up by 0.2% and non-durable consumer goods prices by 0.1%. Capital goods prices were flat.