Spill watch: BP’s shares slid a further 9.7% overnight after a group of Democratic congressmen called on the oil company to immediately to inject $US20 billion into a protected fund to underwrite the clean up of the Gulf of Mexico oil spill. The fall partly reversed the 11% rise on Friday. At the same time the company’s board discussed whether to pay an interim dividend in a teleconference overnight. The company refused to comment after the meeting about whether the dividend, due to be revealed on July 27, will be paid or omitted to preserve cash. London and US analysts sat BP only has about $US7 billion in cash on hand. BP also said the cost of clean up is now more than $US1.6 billion. There’s talk the company could pay the cash into a special fund and pay the dividend in shares.

Calendar watch 1: Britain slashed its 2011 economic growth forecast to 2.6%, and cut its annual public borrowing estimate to £155 billion, in the new government’s first official data overnight. The growth figure, published by an independent fiscal watchdog set up by new UK government, compares with the 3.25% expansion forecast by the previous government in March. The Office for Budget Responsibility (OBR) added in a statement that the state borrowing forecast compared with the previous estimate of £163 billion. That was later cut by £7 billion when final figures for the March financial year on the deficit were confirmed last month. The deficit is forecast to drop to £71 billion by April 2015. That’s £22 billion under the earlier forecast. The government reveals its threatened deep spending cuts in the new Budget next week. But these forecasts will only last eight days: the OBR will issue new forecasts on June 22 to take account of the Budget measures.

Calendar watch 2: and June 22 looms as a big day for the new Japanese government of Prime Minister Naoto Kan. His government last Friday promised to reveal a mid-to-long-term plan to tackle the country’s debt next Tuesday. The government will seek to cap debt issuance this financial year (to March, 2011) to below $US500 billion. But a more important date might be July 11 when elections for the Senate are held. The new government and new PM stand a better chance of defending their position than did the government led by former PM Yukio Hatoyama. Kan lost his big spending, volatile banking minister Shizuka Kamei last week. He wanted to lift spending and debt, not cut them.

Club Austerity update: France claims to have plans to join the euro states cutting spending, with reports that it plans to slash state spending by €45 billion in the next three years to get its public deficit back down to 3% of GDP. According to AFP, Prime Minister Francois Fillon said at the weekend at a meeting of government MPs that his government will cut the public deficit by €100 billion, with half coming from slashing spending and half from increasing revenues. Closing tax loopholes will bring in €5 billion, but another €35 billion will come from faster economic growth, which is a wing and a prayer. €15 billion euros will come from stopping stimulus spending. Will the cuts happen before the Presidential election in 2012? Don’t bet on it.

Euro watch: data from the eurozone released Monday showed industrial production up 0.8% in April, and up 9.5% from a year earlier, the largest annual increase since records began in January 1990. (But really more the result of the low base and weak months a year ago). March output was bumped up to 1.5%. But the headline figure hid the real story: Germany is dragging growth higher, many other eurozone economies are lagging. Germany was up 0.8% in April, and 13.9% over the past year, but output in Greece plunged a massive 3.4% from March and is now down 6.4% on April last year. Greece fell back 3.4% compared with March, and 6.4% compared with last year. Ireland, Portugal and Spain still have lower industrial output than a year ago. As strong as the annual rise  for May was, output was still 13.5% under the pre-crunch/recession level. An awfully long way to go.

Greece suffers last cut: the move overnight by ratings agency Moody’s to cut Greece’s credit standing to junk status wasn’t a surprise, but still upset markets, especially in the US. Moody’s had signalled its intention  in April and in its statement overnight said: “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 stabilising debt service requirements at manageable levels.” The best news was that Moody’s says Greece’s outlook is stable, but when you’re that far down, small mercies loom large.

Jobs watch: unemployment in the 31 member states of the Organisation for Economic Co-Operation and Development (OECD) was unchanged at 8.7% in April from March. In the US the May jobless rate fell 0.2% from April to 9.7%, but the countries countries with the highest rates in April were Spain, 19.7%, Slovak Republic, 14.1%, Ireland, 13.2%, Portugal, 10.8%, Hungary, 10.4%, and France 10.1%. South Korea, with 3.7%, and the Netherlands, 4.1%, had the lowest jobless rates. Australia’s rate in May was 5.2%, down from 5.3% in April.

India watch: inflation might be a “problem” in China at an annual 3.1%, so what do we use to describe Indian inflation at the moment? Overnight the main indicator, the wholesale price index, was revised upwards to an annual rate of 11% in March and 10.2% in May, double the target range. Another rate rise looms, which will be the third this year. The government still expects a reasonable monsoon to push down on food prices, which have been a major driver of the price pressures in the past year.

Crunch alert: last week I told you about the interesting leading index from the Economic Cycle Research Institute and how it’s a pretty good indicator of what lies ahead for the US economy. The reading in late May showed it was turning down. Now the index shows that slump accelerating and it’s now down five weeks in a row. In the week ending June 4, it went from plus 0.3% to minus 3.5%, the weakest it has been in a year. There’s roughly a three-month lag for this index based on its 42-year history. It picked the rebound in the economy last year and this year. Now its saying something very different. Keep an eye on the -10% threshold, that’s where the US has gone into recession.