US stocks closed higher for the second consecutive week on Friday, boosted by an easing of concerns about the fiscal situation in Europe, but the week's mixed economic data weighed on investor sentiment.
 
Volumes were relatively low for a day when options and futures contracts expire at the end of the session, a quarterly event known as "quadruple witching".
 
At the close on Friday, the S&P 500 was up 0.1% to 1,117.52 and 2.4% higher on the week.
 
The Dow Jones Industrial Average gained 0.2% to 10,450.87 and advanced 2.3% over the week.
 
The Nasdaq Composite was 0.1% higher to 2,309.80 and had added 3% since the start of the week.
 
Citigroup advanced 1.3% on Friday to $4.01. The bank is reported to be looking to raise more than $3bn for its private equity and hedge funds.
 
The fundraisings come as US lawmakers consider banning banks from owning and investing in so-called alternative funds.
 
Financial stocks were higher on the week as bank reform legislation continued to be debated in Congress and there was more clarity about how changes would affect the industry.
 
Bank of America rose 1.4% to $15.82, Goldman Sachs gained 1.9% to $138.18 and JPMorgan Chase rose 2.9% to $39.18.
 
Verizon Communications on Friday rose 0.1% to $29.13 after it raised the possibility that Verizon Wireless, the leading US mobile phone operator, could start paying a dividend to Vodafone in 2012.
 
Vodafone, which owns a 45% stake in the company, has not received dividends from Verizon Wireless since 2005.
 
US-listed shares in BP were 0.2% higher on Friday to $31.76 but 6.5% down on the week as the oil spill in the Gulf of Mexico continued.
 
The oil company said on Wednesday that it had suspended dividend payments for the rest of the year. It will set up a $20bn escrow fund to help pay for the clean-up operations.
 
Oil and gas company Southwestern Energy was down 1.1% to $44.08 after the stock was removed from the "conviction buy" list at Goldman Sachs.
 
Williams Companies added 1.7% on Friday to $21.42 as the natural gas company was added to the "conviction buy" list at Goldman Sachs.
 
Shares in Apple were at their all-time high on Friday as the stock gained 0.8% to $274.07.
 
On Wednesday, AT&T, the exclusive US wireless carrier of the iPhone, said it had to suspend pre-orders of the latest iPhone model ahead of its launch next week after running out of its allocated supply.
 
The stock's target price was on Friday raised to $335 from $325 at Susquehanna, which has a "positive" rating on the stock.
 
Shares in AT&T were 0.6% up on the week to $25.43.
 
News Corp advanced 4.7% during the week to $14 as British Sky Broadcasting's independent directors rejected a proposal valued at £7.8bn from the media conglomerate for the remaining 61% of the satellite broadcaster that it does not already own. The directors want another £1bn from News Corp.
 
Homebuilders were lower across the board on Friday as Credit Suisse downgraded a number of the sector's large cap stocks, citing concerns about weaker order demand.
 
Pulte fell 1.6% to $9.36, Toll Brothersdeclined 0.4% to $17.95 and DR Hortonlost 1.7% to $10.76.
 
KB Home, a mid-market homebuilder, fell 1.9% to $12.30 as the broker lowered its target price for the stock to $14 from $18.

 European stocks advanced for an eighth day, the longest stretch of gains in 11 months, as banks rallied on speculation that stress tests will show the region's lenders are robust.
 
Banco Bilbao Vizcaya Argentaria SA soared 5.6% as El Economista said the Spanish bank scored the second-highest rating in stress tests of Europe's largest lenders. Drugmakers limited gains, with Roche Holding AG sliding 2.5% after patients showed hypersensitivity to an experimental diabetes treatment and Sanofi-Aventis SA dropping 3% on concern one of its drugs may be linked to an increased risk of cancer.
 
The Stoxx Europe 600 Index rose 0.2% to 255.5 for a fourth consecutive week of gains. The measure has climbed 10% from its 2010 low on May 25 as concern eased that Europe's debt crisis will derail the economic recovery.
 
National benchmark indexes gained 15 of the 18 western European markets. Spain's IBEX 35 surged 2.2% and France's CAC 40 rose 0.1%. Germany's DAX slipped 0.1% while the UK's FTSE 100 was little changed. 
 
GERMANY
 
German stocks closed little changed, with the benchmark DAX Index posting a weekly gain, as concern over Europe's sovereign debt crisis eased.
 
Bayerische Motoren Werke AG and Daimler AG advanced as Credit Suisse Group AG reiterated its positive stance on the German carmakers in a report Friday. Deutsche Lufthansa AG rallied after saying it achieved most of its cost-cutting target. Salzgitter AG climbed as UniCredit SpA lifted its rating on the steelmaker. Bayer AG and Munich Re led falling shares.
 
The DAX index slipped 0.1% to 6,216.98, trimming its weekly gain to 2.8%, even as 16 out of 30 stocks advanced. The DAX has rallied 9.7% since May 25 after concern about levels of government debt in Europe pushed the measure near its cheapest level relative to earnings in more than a year. The broader HDAX Index was also little changed.
 
Price swings and trading volume may have been affected Friday because futures and options contracts on indexes and individual stocks expire. So-called quadruple witching occurs once every three months.
 
BMW and Daimler, the world's biggest makers of luxury cars, increased 2.5% to 40.71 Euros and 1.9% to 43.12 Euros, respectively. European carmakers rallied 1.5% Friday, among the best performers in the Stoxx Europe 600 Index.
 
"We strongly believe that Daimler and BMW will report future profits ahead of previous peak earnings," London-based analysts at Credit Suisse Group AG wrote in a report Friday. The analysts, led by Arndt Ellinghorst, kept their "positive stance" on the carmakers.
 
Lufthansa rose 1.4% to 11.73 Euros, a fourth gain this week. Europe's second-biggest airline secured 70% of its targeted 300 million Euros in annual savings for 2010, the head of the company's Climb-2011 cost-cutting program, Thomas Kluehr, said in the company's employees magazine Lufthanseat.
 
Salzgitter, Germany's second-biggest steelmaker, gained 2.9% to 53 Euros. UniCredit upgraded the stock to "hold" from "sell." Kepler Capital Markets recommended buying the stock Friday.
 
Solar Millennium AG jumped 12% to 21 Euros, the biggest gain since April. The builder of solar-thermal power plants said a special review by Deloitte dispelled doubts about its accounting procedures.
 
Bayer, Germany's largest drugmaker, dropped 0.7% to 48.33 Euros, ending the longest winning streak since November. A measure of health-care stocks posted the biggest decline most among the 19 industry groups in the Stoxx Europe 600 Index.
 
Munich Re, the world's biggest reinsurer, lost 1.4% to 104.50 Euros, ending the longest winning streak since March.
 
Germany's Institute for the World Economy, or IfW, raised its growth forecast for this year on Thursday, citing the overall cyclical growth momentum that was higher than expected in the first half of 2010 even on the face of harsh weather conditions.
 
The German growth forecast for 2010 has been revised up to 2.1% from 1.2% in its March forecast, the Kiel-based institute said. However, the growth rate for 2011 is seen at 1.2%, down from 1.8% in the previous forecast. Looking ahead, the IfW expects financial markets to calm down and allow the recovery to continue. However, the institute warned that the single largest risk to cyclical recovery is the huge public debt of the German government.
 
Euro area nations' fiscal consolidation measures, either proposed or announced, are most likely to impede growth in Germany, the report indicated. Though depreciation of Euro will continue to induce net exports, the overall impulses from abroad is likely to narrow down. Most notably, demand from Euro area may diminish due to fiscal consolidation measures announced or to be announced in most of the countries, the institute said in a report.
 
In contrast, domestic demand would be boosted by expansionary fiscal measures that stimulate public construction investment and private household consumption, the IfW said. Moreover, historically low mortgage rates are expected to encourage investment in housing. This year, the labour market conditions will continue to improve, the think tank said. Inflation will remain moderate, with consumer prices rising 1.3%. The public budget deficit is forecast to increase to 4.4% in relation to GDP from 3.1% last year.
 
Next year, growth will slow down considerably as the fiscal stimulus will be replaced by fiscal tightening measures, the group said. Investment growth will be dampened during the year. "In addition, net exports will not contribute to growth as the stimulus from the depreciation of the Euro fades out and GDP growth in the rest of the Euro area slows down," the report noted.
 
In 2011, inflation is likely to fall slightly, as the consumer prices will rise 1.2%, according to the IfW report. Unemployment on average is seen below the 3 million mark. The public budget deficit will fall to 4% of the GDP. The institute estimates real GDP to have risen 5.8% annually in the second quarter, having recorded only 0.6% growth in the first quarter, the group said. In 2009, the German economy contracted 4.9%.
 
German financial market participants' six-month outlook dropped sharply in June as mounting debt worries in Eurozone weighed on sentiment, results of a key survey revealed Tuesday.
 
The economic sentiment indicator for the biggest Eurozone economy plunged to 28.7 from 45.8 in May, the Mannheim-based Centre for European Economic Research, or ZEW, said Tuesday. That was the lowest level since April 2009 and was broadly in line with its long-run average. Meanwhile, the fall exceeded economists' forecast for a slight decline to 42.
 
According to ZEW, the economic sentiment was weakened by the uncertainty about the future developments of the debt crisis and the perspective of necessary cuts in public expenditure in EU member countries. Financial market experts expect the German economic recovery that can be observed in the second quarter 2010 to weaken towards the end of this year, the think tank said.
 
The German industry emerged from the winter dip rather impressively. Business confidence is strong, new orders keep on coming and the weak Euro provides welcome support for the months ahead. The improvement reflected in ZEW's current conditions index, which climbed notably. In June, the corresponding indicator rose by 13.7 points to minus 7.9 points. It exceeded economists' expectation for an increase to minus 15 from May's minus 21.6.
 
FRANCE
 
France's CAC 40 Index rose 4.13, or 0.1%, to 3,687.21 in Paris, climbing for an eighth day. The broader SBF 120 Index also rose 0.1%.
 
Credit Agricole rallied 6.1% to 9.88 Euros amid speculation stress tests will show European banks are robust. Societe Generale gained 3% to 38.23 Euros. Dexia increased 2.5% to 3.34 Euros.
 
Spain's Banco Bilbao Vizcaya Argentaria SA scored the second-highest rating among Europe's largest banks in tests carried out by the Committee of European Banking Supervisors, according to El Economista. The newspaper cited a copy of the test to which it had access.
 
Separately, Societe Generale's Chief Executive Officer Frederic Oudea said the results of a "stress test" on European banks will "bring confidence to the market."
 
Ipsen plunged 4.88 Euros, or 15%, to 27.08 Euros. Roche Holding AG delayed development of the experimental diabetes drug taspoglutide by at least 12 to 18 months after more people than expected suffered from side effects. Roche had planned to ask regulators to approve the diabetes drug, which it licensed from Ipsen in 2006, next year.
 
Oddo & Cie lowered his recommendation for Ipsen to "add" from "buy." Analysts at Natixis, JPMorgan Chase & Co. and Bank of America-Merrill Lynch all cut their ratings on the shares to "neutral."
 
Saft Groupe rose 1.02 Euros, or 3.8%, to 27.94 Euros, one of Friday's biggest gains in Paris. The company's battery technology was selected for a pilot program by the Sacramento municipal utility district in California.
 
Sanofi-Aventis retreated 1.54 Euros, or 3%, to 49.57 amid renewed concern that the drugmaker's Lantus diabetes treatment may be linked to an increased risk of cancer.
 
A study published this week in the journal Diabetes Care tied insulin glargine, as Lantus also is known, to a higher cancer risk, according to a note Friday from Hobart Capital Markets, a London brokerage. The study is "unclear" and "lacks precision," Jean-Pierre Lehner, Sanofi's chief medical officer, said in a telephone interview. The study can be "methodologically challenged," the company said.
 
France has raised the retirement age of employees from 60 to 62 as part of its sweeping pension reforms evoking strong resentments from labour unions, reports said on Wednesday.
 
Addressing media persons in Paris, labour Minister Eric Woerth said the decision would be implemented over the next eight years. Extending the tenure of employment was "inevitable" and absolutely necessary to balance the public finances, he added.
 
But the Nikolas Sarkozy government is unlikely to have its way on this easily as it will meet with stiff resistance from the country's powerful labour unions. Even before the decision was formally announced, labour unions were out on the streets to protest the move with more rallies and demonstrations expected in the coming months.
 
It is to slash pension costs and bring public borrowing down that the government resorted to the plan and Woerth said France had to follow in the footsteps of other European nations in addressing its deficit. "All our European partners have done this by working longer. We cannot avoid joining this movement," he added.
 
Besides the change in retirement age, the reforms require employees to work for a minimum of 41.5 years to meet the revised norms while the current service rules allow staff to retire at 60 if they have paid social security contributions for 40.5 years.
 
The reforms have been hailed by economic analysts who, however, stressed the need for more such measures for France to bridge its budget deficit. But the move has been flayed by the country's Opposition which accused the Sarkozy government of targeting the economically backward sections.
 
Currently, the country's soaring deficit is pegged at 7.5% of the GDP, several notches above the European Union (EU) mandated three%, but considerably lower than those of fellow EU members including Greece, Spain, UK, Portugal and Ireland.
 
Minus the reforms France's annual pension deficit is likely to reach 32 billion Euros ($39.5 billion) in 2010 and could go up to 114 billion Euros ($140.18 billion) by 2050.
 
The proposals have to be ratified by French lawmakers through a vote scheduled for September. 
 
BELGIUM
 
The Bel 20 in Brussels closed out the Friday trading session and the week on 2,528.93, up 0.22% on the day.
 
Belgian drugs, chemicals and plastics maker Solvay is selling its 50% stake in Vehicle Fuel Tank supplier Inergy Automotive Systems to French car parts maker Plastic Omnium.
 
Belgium's consumer confidence improved in June after showing a marked decline in the previous month, the central bank said on Friday.
 
The consumer confidence indicator stood at minus 9 in June, up from minus 13 in the previous month. A year ago, the index stood at minus 18.
 
The measure for households' saving capacity over the next twelve months increased to 6 in June from 3 in May, while the financial situation indicator rose to 1 from minus 1.
 
Further, the gauge for economic situation in Belgium for the next twelve months increased to minus 4 in June from minus 6 in the preceding month. At the same time, the measure for unemployment decreased to 40 from 47 in May.
 
The Belgian economy grew at a slower pace in the first quarter. The gross domestic product, or GDP, increased 0.1% on a sequential basis in the first quarter, following a 0.3% gain in the previous quarter.
 
The GDP increased for the third consecutive quarter. Consumer spending rose 0.5% quarterly, domestic demand grew 0.2%.
 
Belgian-Dutch financial group Fortis, which was carved up October 2008 after losing the confidence of clients and investors, made mistakes in communicating with the public, a probe concluded.
 
The report, ordered by a Dutch court, could expose Ageas, the Belgian insurance group that was created from the remaining assets of Fortis, to damages claims by investors.
 
Dutch brokerage Rabo Securities said claims against the group could total 400 million Euros ($490 million), but legal wrangling could take years.
 
The report, released late on Wednesday, also said the break-up of Fortis was "the best possible outcome under the circumstances".
 
After taking on massive debt to fund its portion of a buyout of Dutch banking group ABN AMRO, Fortis was carved up in 2008 by the Belgian, Dutch and Luxembourg governments after an 11.2 billion Euro cash injection failed to stem a slide of Fortis shares.
 
French bank BNP Paribas has now taken control of Fortis's Belgian banking arm Fortis Bank. The latter also has a 25% stake in its remaining Belgian operation, now called AG Insurance.
 
"Ageas welcomes the report as a step forward in removing part of the uncertainty relating to the events that occurred in 2007 and 2008," the company said in a statement.
 
The report was ordered by a commercial court in Amsterdam after two shareholder groups asked for an investigation into the collapse of Fortis.
 
THE NETHERLANDS
 
Amsterdam's AEX finished the week Friday on 336.06, a gain of 0.24% for the session Friday.
 
The incoming Dutch government should initialize steps for strict fiscal consolidation, gradual exit of stimulus policies and structural reforms, the Organization for Economic Cooperation and Development, or OECD, said on Wednesday.
 
"As economic growth strengthens, the government coming in after the June 2010 elections will be confronted with the task of consolidating public finances without putting the recovery at risk," the Paris-based think tank said in its economic survey report for the Netherlands.
 
The report also noted that the new government should start withdrawing stimulus measures as soon as the recovery gains strength. Consolidation of public finances is necessary for fiscal sustainability and the process will start only by withdrawing stimulus and through drastic spending cuts, the group said.
 
Restricting growth in aging-related spending like health and pension, poses a key challenge to the government's efforts in reducing administrative costs, the report said. This challenge would be met partially through increasing the official retirement age and linking it to the developments in life expectancy.
 
Another key challenge in this field is the solvency of many pension funds, that are hard hit by recession, the OECD noted. Additionally, increasing longevity is also a structural problem. "In response, the funds had to implement recovery plans, which were mostly based on suspending indexation of pensions and accrued pension rights," the report noted.
 
The survey found that labour utilization was relatively low in the Netherlands. The report said the new government should "renew its efforts to make the judicial part of the system more predictable and generally lower the cost of firing to enhance the job creation capacity of the projected upswing".
 
The duration of unemployment benefits should be reduced, while maintaining the initial generosity, that would diluted gradually to create dynamic "search incentives". OECD also recommended a more flexible housing market, by dismantling strict rent regulation and rigid allocation mechanisms in the social housing sector to boost labour mobility.
 
In mid-2008, the economy was severely hit by global meltdown. Growth was halted, but the unemployment rate was smaller than anticipated. A year later, the country exited recession as a result of the fiscal stimulus measures and liberal monetary policy.
 
Earlier, the Dutch central bank had upwardly revised its growth forecasts for this year as well as the next. De Nederlandsche Bank expects the economy to grow 1.2% in 2010. In 2011, the gross domestic product is likely to rise 1.3% and the growth rate for 2012 is estimated at 1.7%.
 
The Dutch jobless rate decreased for the second consecutive time in the March to May period after a series of increases, a report by the Central Bureau of Statistics showed on Thursday.
 
The not-seasonally adjusted jobless rate stood at 5.6% in the March to May period, down from 5.9% in the February to April period. The jobless rate was 4.6% in the corresponding period of the previous year. During the three month period to May, the number of unemployed persons stood at 437,000, easing from 459,000 in the previous three month period ending April.
 
The number of unemployed persons totaled a seasonally adjusted 431,000 in the March to May period, down from 438,000 persons in the previous three months period. A year ago, the number of unemployed stood at 353,000.
 
The Dutch economy expanded for the third consecutive quarter in the first quarter, but slower than the previous quarter. The GDP growth slowed to 0.2% from 0.4% in the fourth quarter.
 
The Dutch central bank upwardly revised its growth forecasts for this year, last week. De Nederlandsche Bank said the economy would grow 1.2% this year. In 2011, the gross domestic product is likely to rise 1.3%. 
 
SWITZERLAND
 
The SMI in Zurich headed into the weekend Friday on 6,447.06, down 0.46% on the day.
 
The Swiss National Bank left its key interest rate unchanged for a fifth time on Thursday, continuing its expansionary monetary policy stance to help the economy attain a sustainable recovery. The central bank also relaxed its forex stance that it will act decisively to prevent any excessive appreciation of the Swiss franc against the Euro.
 
In its second quarterly meeting of the year, the central bank's Governing Board, led by Chairman Philipp Hildebrand, left its three-month libor target range unchanged at 0%-0.75%, as expected. In effect, the bank kept its key interest rate unchanged at 0.25%.
 
"The recovery of the global economy continues and the Swiss economy is benefiting from it," Hildebrand said in a statement. "Although the weakening of the Euro with respect to the Swiss franc is dampening export activity, this activity is being supported by growth in foreign demand," he added. Moreover, the domestic sector is still performing favorably and deflationary risks "largely disappeared", the policy maker said.
 
Consequently, the central bank dropped its foreign exchange stance this time. Since March 2009, the SNB has intervened aggressively to prevent the franc appreciating too sharply against the Euro. The stated aim was to reduce the deflationary risk from a sharp fall in import prices.
 
The franc soared to a near 4-week high against the Pound and a 1-week high against the Euro following the SNB announcement. The franc also spiked up against the Dollar and the Yen. "Unless the Euro zone crisis becomes exacerbated again, we think the SNB probably will take no further action on the FX market," Commerzbank analyst Ulrike Rondorf said.
 
Further, the central bank revised up its economic growth outlook for this year to 2% from 1.5% expansion predicted in March. Gross domestic product rose 0.4% sequentially in the first quarter following 0.9% increase in the fourth quarter. Last week, the State Secretariat for Economic Affairs, lifted its 2010 outlook for the Swiss economy to show 1.8% growth, up from 1.4% estimated in March.
 
However, the central bank cautioned that the latest financial market tensions, particularly with regard to the public finances of some individual countries have raised downside risks. It warned of renewed threat of deflation if these downside risks materialize and the Swiss franc appreciate. If such a situation comes, the SNB said it will take all the measures necessary to ensure price stability.
 
An indicator of Swiss economic sentiment has plunged sharply, suggesting analysts are less optimistic over the prospects for the economy. The Credit Suisse - ZEW indicator shed 23 points in June to stand at 17.5. Merely 32.5% of the analysts forecast further improvement in the economic climate in the next 6 months, compared to a 52.4% majority in the previous month.
 
The proportion of analysts expecting a deterioration in the economic picture increased to 15% from 11.9%. Over half of the experts participating in the survey expect no change in the economic climate. In contrast, the indicator measuring current economic situation improved by 12.7 points to stand at 17.5.
 
Orders placed with the Swiss industrial firms rose markedly as the index rose 13.1% year-on-year in the first quarter, largely due to an increase in export orders, the Federal Statistical Office said Thursday.
 
Industrial orders grew 1.8% in the final three months of 2009, after falling in the previous four quarters. The engineering sector had the biggest order growth of 45.2%.
 
The Swiss industrial output grew during the first three months of this year after five consecutive quarters of negative development. Year-on-year, production rose 5.3%, rebounding from a 0.7% fall in the previous quarter. It was the first increase since the third quarter of 2008.
 
Among the main industries, production in the chemical industry, mining and manufacture of transport equipment improved considerably during the period. Manufacturing output grew 5.6%. Output declined in textile, leather processing and food among others.
 
The total turnover increased 3.1% year-on-year, led by notable turnover growth in energy and coal industry. The increase followed five quarters of decline. However, other manufacturing and textile industries recorded a turnover decline.
 
Orders on hand, however, showed a slight decline of 0.9% with order reserves declining in textile and leather industry. Orders on hand fell for the sixth straight quarter. Finished good inventories decreased 6.6% during the period.
 
In May, the SVME Purchasing Managers' Index rose to an all time high level. The index has now remained above the 50-point growth threshold for nine successive months. That said, the industry momentum that is being reflected in the current PMI originated from a low level.
 
The Swiss economy expanded at a slower pace in the first quarter driven by trade and private consumption. Gross domestic product rose 0.4% sequentially in the first quarter, following 0.9% expansion in the previous three months. Exports grew 4.8%, faster than the 2.2% rise in the fourth quarter. 
 
AUSTRIA
 
Vienna's ATX rounded out a hectic week on 2,428.06, up 1.17%.
 
Austria's central bank raised its growth expectations for this year on the back of the rapid recovery witnessed in the global trade.
 
The Oesterreichische Nationalbank or OeNB now forecasts the gross domestic product (GDP) to grow 1.6% this year, slightly faster than the December forecast of 1.2%. The economy had shrunk 3.4% in 2009.
 
The growth outlook for 2011 is also revised upwards. The growth is projected to accelerate to 1.8% in 2011 and 2.1% in 2012. The earlier forecast for 2011 was 1.6% growth.
 
However, the OeNB Governor Ewald Nowotny, who is also a member of the European Central Bank's Governing Council, said the medium-term growth prospects are likely to remain subdued. Domestic exports are expected to drive the growth. Exports would grow 4.6% in 2010, the bank said. Exports growth is seen accelerating to 5.4% in 2011 and 6.1% in 2012.
 
Further, the bank said the country's budget deficit may start falling in 2011, due to fiscal consolidation measures. The deficit is forecast to rise to 4.5% of the GDP this year. In 2011, this would reduce slightly to 4.2% and may further drop to 3.9% in 2012. The public debt ratio would increase to around 73% of the GDP in 2012 from 66.5% of the GDP at the end of 2009.
 
Gross fixed capital formation will increase this year after a sharp decline in 2009, the bank said, still posting a slump of 4.5%. It will move into the positive territory only in 2011 when a 1.5% growth is forecast. In 2012, the increase would improve to 2.9%.
 
The central bank said employment prospects still remained bleak after showing a decline in March. The labour supply will grow slightly over the forecast period, but the growth in the demand side is too weak to reduce the unemployment rate. Therefore, the unemployment rate for 2010 is forecast at 5% and for 2011, the rate may rise to 5.1%. However, 2012 will see no change in jobless rate from the 2011 level.
 
The Austrian economy stagnated in the first quarter, compared to the 0.3% growth in the previous quarter, the data published by the Austrian Institute of Economic Research or WIFO showed in May. Year-on-year, the GDP increased 0.4%, compared to 1.2% fall in the December quarter. The institute expects the economy to grow 1.3% this year and 1.4% in 2011.
 
Austria's consumer price inflation slightly eased in May, the first time in three months, the statistical office said on Wednesday. Separate data showed that that the jobless rate held steady during the first quarter, while the number of unemployed slightly eased from the previous three months.
 
The consumer price index, or CPI, rose 1.9% year-on-year in May, slower than the 2% growth in the previous month. Consumer prices increased for the eleventh consecutive month. A year earlier, the CPI increased 0.3%.
 
Alcoholic beverages and tobacco prices rose 2.6% annually in May, faster than 2.1% in the previous month. The increase in clothing prices slowed to 1% from 1.5%. Housing, water, energy prices increased 2.8% compared to 2.7% in April. Communication charges rose 1.4%, same as in the previous month. Education cost declined 5.3%.
 
On a monthly basis, the CPI increased 0.1% in May versus a 0.3% gain in April. Food and non alcoholic drinks prices fell 1% and clothing prices slipped 0.3%. Education costs dropped 0.1%.
 
Meanwhile, the harmonized index of consumer prices, or HICP, meant for EU comparison purposes, rose 1.7% on an annual basis in May, slower than 1.8% rise in April. The index dropped 0.1% compared to the preceding month.
 
Separately, the Statistics Austria said the jobless rate remained unchanged at 4.7% in the first quarter from last year as well as the previous three months. In the third quarter of 2009, the rate stood at 5.1%.
 
The number of unemployed totaled 198,400 persons in the first quarter compared to 200,300 in the final three months of last year. A year ago, the figure was 196,700.
 
The number of people in employment amounted to 4.023 million in the first quarter, broadly same as the previous year. 
 
SWEDEN
 
The OMX in Stockholm ended the day and the week Friday on 1,054.58, up 0.77% on the session.
 
The Swedish National Debt Office on Wednesday reduced its budget deficit estimates for both 2010 and 2011 as the economy recovers more quickly than expected. The central government finances are approaching balance already this year, the debt office said in a statement.
 
Due to the increase in tax revenue and a decline in unemployment benefit disbursements, the budget deficit for 2010 is seen at SEK 14 billion, a reduction of SEK 39 billion from the previous forecast. Also, the deficit estimate for 2011 was lowered by SEK 28 billion to SEK 8 billion.
 
The unexpectedly strong development of central government finances led to a fall in the borrowing requirement. Central government borrowing, including refunding of maturing loans, is expected to total SEK 105 billion in 2010 and SEK 100 million next year.

 
Further, the central government debt will be SEK 1.19 trillion at the end of 2010 and SEK 1.17 trillion at the end of 2011, corresponding to 37% and 36% of GDP. At the same time, central government debt including the Debt Office's financial assets in foreign currency is estimated at SEK 1.08 trillion at the end of 2010 and SEK 1.07 trillion at the end of 2011.
 
Sweden's unemployment rate fell to 4.5% in May from 4.9% in April, data from Public Employment Service showed Monday. Consensus forecast was for 4.7%.
 
The number of registered unemployed persons in May totaled 395,000, representing 8.5% of the workforce. A year ago, the level was 7.2%. Persons registered as part-time unemployed decreased 3,000 from the previous year to 35,000. Meanwhile, vacancies rose around 18,000 to 47,000.
 
The Statistics Sweden on June 8 revised its jobless rate for April to 9.5% from 9.8%. The revision for April reflects a new presentation of the Labour Force Survey based on a larger sample than previously. The number of employed persons totaled 4,481,000, while the previous figure was 4,465,000.
 
DENMARK
 
In Copenhagen, the OMX completed the trading week on 417.24, up a healthy 2.15% for the day.
 
Danish producer price inflation continued to rise in May, the statistical office said on Tuesday.
 
Producer price index, or PPI, rose 5.2% year-on-year in May, faster than the 5.1% growth in the previous month. Meanwhile, the domestic produced goods prices rose 6.4% and imported goods prices grew 4.5%.
 
On a monthly basis, the overall price index for domestic supply of goods rose 0.4% in May. At the same time, the domestic produced goods prices rose 0.8% and imported goods prices climbed 0.2%.
 
Separately, the Statistics Denmark said, the number of employed decreased by 112,000 persons or 4% in the first quarter from the previous year. Among the major industries, employment in construction slipped 14.2% and industry, mining and quarrying and utilities fell 10.2%. Employment in trade and transport, etc dropped 5%. Further, the number of hours worked totaled 33 million in the first three months of the year.
 
Danish pharmaceutical group Novo Nordisk said Monday it was reintroducing in Greece drugs for treating diabetes it had pulled from the Greek market over a government decree to lower drug prices.
 
Novo Nordisk, the world's largest producer of insulin to treat diabetes, said new drug prices decided by Athens on Friday made it possible to start selling all of its products in Greece again.
 
"These new prices on 48 insulin products are below what we consider reasonable, but they are nonetheless acceptable compared to the immediate 25% reduction of drug prices announced by Greece in May," Mike Rulis, Novo Nordisk's head of corporate communications, told AFP.
 
In March, Greece decided in a government decree to slash drug prices by 21.5% on average as part of a vast effort to cut its public deficit, which reached 14% of GDP in 2009.
 
Despite requests by the pharmaceutical industry to cancel the decree, Greece announced in May an immediate price cut of 25% on all prescription drugs, deemed "unacceptable" by Novo Nordisk.
 
"Novo Nordisk never stopped its sales in Greece, but informed the Greek government it would not comply with the price cut, which brought Greek suppliers to stop imports" of the company's drugs, as they would be selling the medicines at a loss, Rulis explained.
 
He said Greek prices were already among the lowest in Europe, and that a further price cut in Greece, used as a reference for drug prices in other countries, "would trigger similar reductions" elsewhere.
 
About 50,000 people in Greece use the new generation insulin products pulled but then reintroduced from the market.
 
The European Commission Friday cleared Danish ferry company DFDS Group to buy Dutch peer Norfolk Holdings BV, subject to the conclusion by DFDS of a space charter agreement on routes between the UK and Denmark.
 
A space charter agreement allows a party to buy space volumes on the vessels of another company. The commission had concerns the merger could lead to a quasi monopoly on those routes.
 
DFDS will buy its competitor from AP Moller-Maersk A/S, the world's largest container shipping company, for Eur346 million. 
 
NORWAY
 
Oslo's OBX ended the day Friday on 330.05, up 0.18% for the Friday session.
 
Norway's trade surplus continued to fall in May, a report by Statistics Norway showed on Tuesday.
 
The trade surplus, excluding ships and oil platforms, stood at NOK 26.55 billion in May, down from NOK 27.15 billion in the previous month. A year earlier, the trade surplus amounted to NOK 22.25 billion.
 
Exports value increased 10.3% year-on-year to NOK 61.25 billion in May from NOK 55.53 billion a year ago. At the same time, the value of natural gas exports increased 9% to NOK 14.4 billion ,while the export value of crude oil totaled NOK 20 billion. Similarly, the value of imports rose 4.2% annually to NOK 34.69 billion from NOK 33.29 billion last year.
 
On a monthly basis, total exports value dropped 3.7%. The decrease was mainly due to a fall in export value of crude oil. The natural gas exports value climbed 15.5% during the month.
 
For the January to April period, the value of exports and imports increased by 2.1% and 1.4%, respectively compared to the same period of the previous year. During the period, the trade surplus widened to NOK 148.45 billion from NOK 144.23 billion last year.
 
Norway's Statoil said on Thursday it had received the green light from the Norwegian parliament on a 21 billion crown ($3.3 billion) plan to develop and operate the North Sea Gudrun field.
 
The oil and gas group said it would invest in field installations, pipelines and production wells in the Gudrun field, which has an estimated 11.2 million standard cubic metres of recoverable oil reserves and 6.6 billion standard cubic metres of recoverable gas.
 
"The Gudrun field will add important volume, improve the capacity utilisation on Sleipner and help maintain the production level on the Norwegian continental shelf," Oystein Michelsen, Statoil's executive vice president for Exploration & Production Norway, said in a statement on the company's website.
 
Gudrun, where production is due to start in 2014, has high reservoir pressure and temperature, calling for the use of specialised technology that Statoil used on its Kvitebjoern and Kristin fields on the Norwegian continental shelf.
 
Statoil's planned platform at the site, discovered in 1974, will have a facility for the partial processing of oil and gas which will be piped to the Sleipner field, which is 55 kilometres south of the Gudrun field.
 
Statoil holds 46.8% of the license to the Gudrun field and is the operator, while US-based Marathon Petroleum owns 28.2% and France's GDF Suez 25%.
 
IK Investment Partners Thursday said it has bought a majority stake in Norway's Colosseum Dental, the private equity fund's second acquisition this week.
 
Financial details of the transaction weren't disclosed.
 
Oslo-based Colosseum operates 19 dental clinics across Scandinavia. It generated revenue of 382 million Norwegian kroner ($60 million) in 2009, up 19% on year. Earnings before interest, taxes, depreciation and amortization, or Ebitda, was NOK38 million.
 
Colosseum is the only pan-Scandinavian provider of dental services and IK plans to capitalize on the fragmented sector with further acquisitions. Drivers including a growing and aging population and increased use of advanced and expensive treatments are also likely to boost growth.
 
"The company has successfully grown into a leading player in Scandinavia and this unique position, coupled with the favorable market dynamics, provides an excellent foundation for Colosseum's future success," said Trygve Grindheim, partner at IK.
 
Gard Lauvsnes, chief dentist and founder of Colosseum, is reinvesting a significant proportion of the sale proceeds alongside IK.
 
Colosseum is the second deal announced by IK this week following its acquisition of a majority stake in Agros Nova, a diversified food and drink company in Poland, announced Monday. 
 
FINLAND
 
The OMX in Helsinki drew the week to a close at 6,626.42, up 0.86% for the day.
 
Finnish producer price inflation accelerated for the third month running in May, the statistical office said on Thursday.
 
The producer price index, or PPI, for manufactured products rose 5.2% year-on-year in May, faster than the 3.6% growth in the previous month. Producer prices increased for the fourth successive month. A year earlier, the PPI decreased 8.1%.
 
On a monthly basis, the PPI rose 1.1% in May, faster than the 0.5% gain in the preceding month. This was the eighth consecutive month of increase. The rise in overall prices was mainly driven by higher metals prices and falling electronic products and paper prices.
 
The export price index increased 4.7% annually in May, faster than 3% in April. At the same time, import price inflation rose to 8% from 6.7%. Month-on-month, export and import prices grew by 1.7% and 0.2%, respectively. The basic price index for domestic supply grew 5.3% over a year earlier and increased 0.3% from the previous month.
 
Meanwhile, the wholesale price index, or WPI, climbed 5.4% on an annual basis in May, faster than the 4.1% gain in the preceding month. Wholesale prices increased for the fourth straight month. The monthly WPI growth eased to 0.3% in May from 0.8% in April.
 
Finnish wages and salaries sum of the whole economy increased in the February to April period, the statistical office said on Wednesday.
 
Wages and salaries sum of the whole economy climbed 1.6% year-on-year in the February to April period, in contrast to the 0.7% fall in the corresponding period of the previous year. The figure was down 2.6% between November 2009 and January 2010.
 
Earnings in the public sector grew 5.4% annually in the February to April period, faster than 4% recorded a year ago. At the same time, earnings in the education sector rose 5.6% and health and social work increased 6.7%. Wages and salaries in the financial intermediation rose 1.1%.
 
Wages and salaries in construction edged up 0.1%, after a 4% decline in the previous year. Similarly, wages and salaries in trade rose 0.6% versus 0.3% fall last year. However, gross earnings in the industrial sector slipped 2.6%, following a 8.4% fall a year ago.
 
In April, the wages and salaries sum of the whole economy climbed 1.9% on an annual basis, slower than the 3.1% growth in the previous month. Wages and salaries increased for the the second successive month. In February, wages and salaries sum decreased 0.3%.
 
The Finnish economy slipped back into recession in the first three months of the year, official data revealed this week. The gross domestic product fell 0.4% sequentially in the first quarter, following a revised 0.2% decline in the fourth quarter.
 
Recently, the International Monetary Fund warned that aging population and recent loss of competitiveness due to international turbulence pose increased challenges to Finland's growth prospects and fiscal sustainability. The lender forecast 1.25% economic growth for this year and around 2% in 2011.
 
Turnover in the Finnish manufacturing industry increased in the first three months of this year after going through a series of declines in the previous quarters.
 
The manufacturing turnover increased 3.8% year-on-year in the first quarter, compared to 16.2% decline a year ago, the Statistics Finland said Tuesday. In the previous quarter, the turnover contracted 15.4% annually.
 
Domestic sales in the industry grew 0.6% year-on-year during the period and export turnover rose 6.5%. The revenue from industries related to utilities rose 29.8%, posting the strongest growth rate among the sub-industries. Turnover in the segment had declined 3.6% in the previous quarter.
 
In mining and quarrying, turnover increased 24.5% annually, while the food industry recorded a mere 0.1% rise in turnover. Turnover shrunk in the metal industry as well as in the clothing and leather industry.
 
Separately, the statistical office reported that turnover of construction enterprises dropped 6.7% year-on-year in the first quarter, slower than the 12.3% decrease in the previous quarter. During the period, turnover fell 4.2% in construction of buildings and declined 19.1% in civil engineering. In specialized construction activities, turnover decreased 5.6%.
 
The sales volume of construction enterprises increased 1.8% in January to March period compared with the first quarter of 2009. 
 
SPAIN
 
The IBEX in Madrid rounded off the week on 9,971.80, up 2.22%.
 
Spain faces a key test at bond auctions Friday amid investor worries over the government's financial health and the strength of the country's banking sector. The country plans to raise as much as Eur 3.5 billion through the sale of 10-year and 30-year bonds later Friday. On Wednesday, the Spanish government's cost of borrowing hit a new high, after reports emerged that a special credit facility was being readied by the IMF and the E.U. to support Spain.
 
The interest rate the Spanish government is being asked to pay investors for borrowing money is now 2.23 percentage points above that demanded from Germany. A higher gap means investors consider Spanish debt to be a riskier investment.
 
The Bank of Spain will make public the results of stress tests it has conducted on the state of Spain's commercial banks, the bank's governor Miguel Angel Fernandez Ordonez said on Wednesday. The move may persuade the Bank of Spain's European peers to do the same and disclose banks' risk exposure. "The bank intends to make public the results of these stress tests, showing estimated loan losses, the consequent capital requirements and the contribution of promised balance sheet reinforcements, so the markets have a good understanding of the circumstances of the Spanish banking system," said Ordonez.
 
Germany has so far been reluctant to the idea, with its commercial banks fiercely resisting a full public disclosure. But with investor confidence in the Eurozone banking system continuing to erode, analysts believe Berlin will re-think its policy.
 
Spanish labour costs recorded the slowest growth on record between January and March, statistical office INE said on Wednesday. labour costs increased 1% annually in the March quarter. This follows a 2.5% increase in the December quarter of 2009.
 
Separate data released by INE showed that the number of commercial companies set up in April increased 14.6% compared to the same month in 2009. At the same time, company bankruptcies were up 15.3%. 
 
PORTUGAL
 
In Lisbon the PSI General brought the week to a close on 2,627.31, up 2.36%.
 
The European Union on Tuesday asked Spanish and Portugal governments to detail their budget-cutting measures, which they have planned to achieve deficit targets for next year.
 
Spain has a target to reduce its 2011 budget by 1.75% of GDP and Portugal promised to reduce the budget by 1.5%. The EU said in a statement that the two countries' targets are appropriately ambitious and imply substantial fiscal consolidation.
 
"The current economic circumstances call for a coordinated fiscal exit strategy in order to face both the necessity of a decisive fiscal consolidation and the need to sustain the nascent economic recovery," Economic and Monetary Affairs Commissioner Olli Rehn said. "The current budgetary targets, including the revised targets of Spain and Portugal, appear to ensure an appropriate overall fiscal stance for the EU, but there is an evident need to advance more forcefully on the structural agenda."
 
Since the onset of the Greek crisis, which exposed fiscal vulnerability of peripheral Eurozone countries, member states of the currency bloc are struggling to cut their budget deficits and to stop the crisis spreading to other countries. In May, all Eurozone members agreed on a Eur 750 billion-rescue package in cooperation with the International Monetary Fund to prevent the crisis spreading. Moreover, Greece was solely given a Eur 110 billion financial assistance.
 
European Commission President José Manuel Barroso said in order to achieve sustainable and inclusive growth, fiscal consolidation and structural reforms are necessary. "It's obvious that without serious efforts in these areas confidence will not be back. Without confidence we cannot have growth so we have in fact now the opportunity to go further in our economic policy efforts."
 
In the report, the EU told both countries that the new deficit targets would not be enough to reverse the increasing trend in the debt ratio by next year. The EU said the two governments should focus on expenditure cuts when planning for additional budget cuts.
 
Under the Stability and Growth Pact, all EU members are required to keep their budget deficits below 3%. The mass stimulus injected during the global financial crisis widened most nations' budget deficits far away from the approved limit.
 
Further, the EU asked Finland to cut its deficit to below the 3% ceiling by next year, Cyprus in 2012 and Denmark in 2013. Luxembourg and Bulgaria are the only two countries whose budget deficits are within the limit.
 
Portugal's consumer price inflation climbed to an eighteen-month high in May on higher prices in transports.
 
Consumer price inflation accelerated to 1.1% in May, the highest since November 2008, from 0.7% in April, the National Statistics Institute or INE said Monday. Prices have been rising since January. Inflation accelerated for the fourth consecutive month. The core CPI, which excludes energy and certain food products, fell 0.1% in April after a 0.5% decline in the previous month.
 
Transport costs rose 5.4% year-on-year from 5% in the previous month, making the biggest impact on the consumer price index, or CPI. Meanwhile, prices of food and non-alcoholic beverages continued to decline for the fifteenth successive month, contributing negatively to the CPI. The index declined 1.8% in May, slower than the 2.7% decrease in the previous month. Prices of clothing and footwear declined 1.5% annually compared to 1.6% in April and utility prices were up 4.4% compared to 4.1% in the previous month.
 
On a monthly basis, consumer prices increased 0.2% compared to 0.4% in April. The main upward contribution came from the monthly increase in transport costs. 
 
ITALY
 
Italy's FTSE MIB Index rose for a second day, gaining 183.40, or 0.9%, to 20,752.31 in Milan. The gauge surged 5.6% this week, the biggest weekly advance in more than three months.
 
Banca Monte dei Paschi di Siena rose for the first session in three, increasing 4.85 cents, or 5.1%, to 1.01 after EU leaders Thursday agreed to publish the results of stress tests on banks. The Bank of Italy will publish the results of stress tests of the nation's banks so the public can know the financial strength of their lenders and investors may better understand what they are buying, the central bank's governor, Mario Draghi, said Friday.
 
Separately, HSBC Holdings Plc lifted its recommendation on the stock to "overweight" from "neutral."
 
The brokerage also upgraded to "overweight" from "neutral" Banca Popolare di Milano Scrl and Intesa Sanpaolo. Shares of Popolare di Milano advanced 6% to 3.79 Euros. Intesa gained 9.25 cents, or 4%, to 2.4 Euros, ending a two-day loss.
 
Banco Popolare, which remains an "overweight" at HSBC, climbed 17.25 cents, or 3.7%, to 4.82 Euros.
 
Fiat gained for a second day, rising 17.5 cents, or 1.9%, to 9.46 Euros. Equita Sim SpA kept a "buy" rating on the Italian carmaker, saying that "Fiat management's forecast of the 2010 Brazilian market is rather conservative for both light commercial vehicles and trucks."
 
Mediaset retreated 5 cents, or 1%, to 4.95 Euros, a second loss this week. Italy's biggest private television broadcaster had its price estimate cut to 5.3 Euros from 6.2 Euros at UBS AG. The brokerage kept a "neutral" rating.
 
Milano Assicurazioni climbed 7.3 cents, or 4.9%, to 1.56 Euros, the highest in more than a month. Gruppo Banca Leonardo reiterated a "buy" rating on the stock after Popolare di Milano completed the acquisition of a 51% stake in Bipiemme Vita from Fondiaria-Sai SpA's Milano Assicurazioni for 113 million Euros.
 
Saipem gained 55 cents, or 2.1%, to 26.91 Euros, a fourth increase this week. Morgan Stanley lifted its price estimate on Europe's largest oilfield-services provider to 35 Euros from 34 Euros. The brokerage kept an "overweight" rating.
 
Unipol Gruppo Finanziario rose 2.35 cents, or 3.4%, to 71.3 cents. Italy's third-largest insurer will sell new shares at 36% less than Thursday's closing price in a planned rights offer to boost capital, the company said in a statement distributed by the Italian stock exchange late Thursday. Cheuvreux kept an "underperform" rating, saying Unipol is "too expensive." 

Italy's consumer price index, or CPI, including tobacco rose 1.4% in May, final report from the statistical office Istat confirmed Wednesday. In April, inflation was 1.5%. A year ago, the rate stood at 0.9%.
 
Compared to the previous year, transport was 5% more expensive and alcoholic beverages and tobacco prices grew 2.2%. Education was 2.5% more expensive. At the same time, charges for health decreased 0.2% and those for communications was down 2%.
 
On a monthly basis, the CPI grew at a slower pace of 0.1% compared to the previous month's 0.4% growth.
 
The harmonized index of consumer prices, or HICP, was up 1.6% annually, unchanged from April. The month-on-month growth rate eased to 0.1% from 0.9%. All figures matched a preliminary estimate released on May 31.
 
Italy's unadjusted total trade deficit widened to Eur 829 million in April from Eur 76 million deficit recorded a year ago, statistical office Istat said Tuesday. Economists had forecast Eur 1.29 billion deficit. Exports rose 15.2% year-on-year and imports grew 18.3%. Seasonally adjusted exports rose 1.1% month-on-month, while imports decreased 0.1%, giving a trade deficit of Eur 1.35 billion.
 
Italy's trade with EU countries resulted in a trade surplus of Eur 213 million, with exports rising 17.2% annually and imports growing 14.1%. Non-EU trade deficit was Eur 1.04 billion. Exports to non-EU countries increased 12.6% and imports 23.9%.
 
After adjusting for seasonal variations, exports to EU countries rose 0.7% month-on-month and those to non-EU countries climbed 1.8%. On the other hand, imports from EU rose 0.5% and those from non-EU declined 0.8%. Adjusted trade balance with EU logged a deficit of Eur 27 million and Eur 1.33 billion with non-EU countries. 
 
GREECE
 
In Athens, the Athex Composite finisghed the trading session and completed a busy week on 1,542.99, up 1.86%.
 
Greek jobless rate for the first quarter rose sharply from the same period last year.
 
The unemployment rate rose to 11.7% in the first quarter from 9.3% in the same period last year, the Hellenic Statistical Authority said. It was the highest rate for a first quarter since the first three months of 2000, when it was 12.3%. In the final quarter of 2009, the jobless rate was 10.3%.
 
During the first quarter of 2010, the percentage of labour force over population aged 15 years old and over was 53.9%. Jobless rate among females were considerably higher than that among males.
 
Among different age-groups, the highest jobless rate was found among young people between 15 to 29 years. The rate among youth was 22.3%. The total number of unemployed persons is estimated at 586,767 during the three month period, out of which 23.6% were fresh job seekers.
 
Reeling under the huge deficit burden, the Greek economy contracted 1% in the first three months through March compared to the previous quarter. The country has laid out drastic spending cut measures to arrest the widening budget deficit. Greece pledged to reduce its budget deficit by 11% of GDP over four years.
 
The country accumulated a budget deficit of 13.6% of gross domestic product in 2009. Greece targets to bring the budget deficit under 3% in 2014 in exchange for accepting financial aid of Eur 110 billion from the E.U. and the International Monetary Fund. 

Monday, Moody's Investors Service reported that it has downgraded Greece's government bond ratings by four notches to Ba1 from A3, reflecting its view of the country's medium-term credit fundamentals. It also downgraded Greece's short-term issuer rating to Not-Prime from Prime-1. Greece's country ceilings for bonds and bank deposits are unaffected by the review and remain at Aaa, in line with the Eurozone's rating. The outlook on all ratings is stable.
 
The rating agency also said that Greece has been shielded by the Eurozone/IMF support package as it implements strict fiscal and economic reforms required by the package.
 
Moody's said that Friday's rating action concludes the review for possible downgrade, which it initiated on April 22, when it downgraded the country's rating to A3 and placed it under review for further downgrade.
 
"The Ba1 rating reflects our analysis of the balance of the strengths and risks associated with the Eurozone/IMF support package. The package effectively eliminates any near-term risk of a liquidity-driven default and encourages the implementation of a credible, feasible, and incentive-compatible set of structural reforms, which have a high likelihood of stabilizing debt service requirements at manageable levels," says Sarah Carlson, Vice President-Senior Analyst in Moody's Sovereign Risk Group and lead analyst for Greece. "Nevertheless, the macroeconomic and implementation risks associated with the programme are substantial and more consistent with a Ba1 rating," she added.
 
Moody's believes that the Eurozone/IMF support package has sheltered the country's government from the markets while it enacts the very ambitious fiscal austerity measures and structural economic reforms stipulated by the package. These have the potential to restore market confidence, depending on the effectiveness of the government's execution, and place the country on a more stable debt trajectory.
 
The rating agency said that its base-case scenario envisions the country implementing the policy changes it needs to stabilise its debt-to-GDP ratio at around 150% by 2013, and reduce its debt burden, defined as the interest payment/revenues ratio, gradually thereafter (expected at 20% in 2014). Should the economy respond positively to the competitiveness-enhancing structural reforms, debt stabilisation could be achieved earlier.