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Greece moves closer to a deal

The government in Athens has given way on key proposals, reviving hopes of a deal between Greece and its creditors. 

The Greek government has inched closer to a deal that could prevent Greece from a default and an exit from the single European currency after the ruling party, Syriza, put forward proposals to raise VAT and cut the country’s pensions bill.

In addition, the Greek Prime Minister, Alexis Tsipras, has pledged to achieve budget surpluses of one percent this year, two per cent next year and three per cent in 2017.

Corporation tax will also rise, to 29 per cent, while a “solidarity supplement” on the rate of income tax will also rise, bringing in an extra €220m a year.

Tsipras’ concessions increase the chance that Greece’s creditors and the European Union will agree to release further bailout funds, allowing the government in Athens to make the £1.6bn payout it needs to make to the IMF by the end of the month.

Eurozone finance ministers will meet today to discuss whether the Greek deal is acceptable and if the numbers add up.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.