September 2012

In the broadcast today: EUR, GBP & USD Outlook ahead of ECB, BOE & NFP. With the U.S. Non-Farm Payrolls report, the European Central Bank and the Bank of England meetings on the horizon, we explore the outcome of these important events and their potential impact on the USD, the EUR and the GBP, we  list the Top 10 spotlight economic events that will move the markets in the week ahead, we examine the consensus forecasts for the upcoming economic data, we analyze the current range in the EUR/USD currency pair, we continue to monitor the price correction in the GBP/USD pair, we note the bounce higher in the USD/JPY currency pair, we highlight the market’s reaction to the stress tests on Spanish banks, the Euro-zone HICP, the U.S. Personal Income and Outlays, Chicago PMI and Consumer Sentiment, we discuss new forecasts from JPMorgan, Bank of New York-Mellon and Barclays, and prepare for the trading week ahead.

Live Broadcast from 9:00 am to 10:00 am, Eastern Time, Monday – Friday.

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USA 

Key details of France’s toughest budget in decades. Huge day for president François Hollande. Spanish bank stress tests are due today after the market in Madrid closes. Moody’s could downgrade Spain tonight. Spain’s bond yields rise…



Powered by Guardian.co.ukThis article titled “Eurozone crisis live: France hikes taxes in tough budget” was written by Graeme Wearden, for guardian.co.uk on Friday 28th September 2012 13.26 UTC

2.26pm:

Suggested lunchtime reading: My colleague Jo Moulds has spent the last few days in Portugal, where the public rose up against the government over its latest tax rises. She writes:

We have reached the limit. People are tired of making sacrifices because you don’t see any improvement whatsoever. Quite the opposite.” Marina Padeiro, 36, is one of Portugal‘s estimated 1.3 million unemployed – a number that has shot up in the past year and a half, as a result of the stinging austerity measures imposed on the country in exchange for a €78bn (£62bn) bailout.

Sitting in a café in the northern industrial belt of Lisbon, she shrugs. “If there was some sort of hope you may see a decent future … the problem is they are not showing it to us.” Her father, a retired lorry driver, says the evidence is on the streets. Out here – far from the capital’s pretty, cobbled centre, which still attracts tourists – shops are closed up for good, or open only sporadically.

The full story is here

2.12pm:

There’s speculation that Moody’s could downgrade Spain to junk status tonight, capping a troubled week for the country.

The rating agency had set itself a deadline of the end of September to decide whether to leave its credit rating as Baa3, the lowest investment-level grade.

That runs out at Sunday evening, suggesting it could be announced before the close of business tonight. Perhaps just as the Spanish banking stress test results are out.

1.19pm:

DSK in Athens

While François Hollande was fine-tuning today’s budget (see 10.49 onwards), his former rival Dominique Strauss-Kahn has been visiting Greece.

The former IMF chief has spent the last two days or so in Athens, including plenty of time in a a bar by the Athenian riviera.

Helena Smith reports that DSK”s lighting visit to Athens made the front pages today – adding to some light relief over all the gloom and doom of yet more austerity measures.

The disgraced former IMF chief may be down and out but he is not unhappy, according to the leading Greek daily Ethnos which splashed this morning on the Frenchman’s lightning visit to Athens.

DSK arrived in the capital on Wednesday “for a private matter” but then proceeded to spend most of the next 24 hours with friends in a seaside restaurant and bar.

Ethnos reports:

During the time he spent at the bar of the restaurant, the former IMF chief … chatting to those around him made of point of saying how much he loved Greece and its people. When asked about the economic crisis he said the situation was difficult but that with great effort the problems could be overcome.

The daily said it was not until 5am on Thursday that DSK was spotted returning to his hotel – a fairly humble establishment — on Athens’ main commercial boulevard Ermou.

12.57pm:

Sophie Dworetzsky, partner at law firm Withers LLP, believes that the 75% top rate of tax announced as part of the French budget today will drive more wealthy people over (or under) the Channel:

Back in June, David Cameron raised French hackles by promising to “roll out the red carpet” to French firms if Hollande slapped a new levy.

Dworetzsky reckons the UK PM should get the hoover out:

We may need to spruce up Britain’s red carpet for the French sooner rather than later, given President Hollande’s latest announcement. Since Monsieur Hollande’s election we have seen a definite, and strong, increase in French individuals and corporates investigating the best, and most tax efficient way to relocate to the UK and minimise their French tax burden.

Typically, we are asked how to avoid becoming UK-resident for tax purposes, but it in this case UK residence is highly favourable, whereas French tax ties are seen as a burden’.

12.40pm:

After a solid start, shares are now in retreat in Spain and Italy.

Italian FTSE MIB: down 176 points at 15273, – 1.1%

Spain’s IBEX: down 100 points at 7741, – 1.28%

12.37pm:

Mario Monti might stay on

Over in Italy, Mario Monti’s announcement last night that he might stay on as Italian prime minister beyond next spring has upset Italian politicians who were itching to regain power.

From Rome, Tom Kington reports:

Until yesterday, the technocrat called in last November after Silvio Berlusconi stepped down was promising he would hand over the reins to elected officials following elections next year.
But that promise was beginning to startle the markets, which admire Monti’s appetite for austerity and fear the free spending and anti-European views of some Italian politicians.

Only yesterday, a resurgent Berlusconi was railing against Monti’s tax hikes and envisaging a German exit from the euro (as well as stumbling over his exchange rate arithmetic), while comedian turned politician Beppe Grillo continues to discuss a referendum on Italy staying in the euro.

But the real victim of Monti’s return would be the centre left Democratic Party, which is currently leading the polls and could see its chance to form a government go up in smoke if Monti offers to lead a coalition government.

Reacting to Monti’s statement, party leader Pier Luigi Bersani said that if anyone “thinks they can pre-book the election, making it practically useless, imagining that I will form a majority with Berlusconi or with Grillo, I will step back, I will miss a turn.”

Many in the City would be reassured by the prospect of Monti staying on, although his lack of democratic legitimacy is a concern.

12.20pm:

French opposition blasts Budget

The French budget has been criticised by a member of the French opposition.

Gilles Carrez, a member of the right-wing Union for a Popular Movement, claimed that Hollande’s government was simply hiking taxes without making long-term economic reforms.

Carrez,who chairs the French Parliament’s finance committee, said (via Reuters):

Never have households and companies been subjected to such a fiscal shock. It’s a very bad choice. More savings should have been made…

There are no structural measures. Therefore, it’s a short term-focused budget with no vision. There’s nothing about the competitiveness of companies whereas that should a major priority.

12.06pm:

Greece’s new austerity measures

Over to Greece again, where officials are refusing to deny or confirm reports in the media today about the measures.

Our correspondent Helena Smith says while the agreement is still tentative – ahead of further negotiations with the troika – Greek reports are suggesting that the vast majority of the savings will come from further cuts to state spending, pensions and public sector salaries.

Helena has analysed the reports, and reports:

• Around €10.5bn of the total €13.5bn package will come from cuts in government expenditure and €3bn from the levying of new taxes, according to reports.

• Once again pensioners and civil servants will bear the brunt of the austerity with €6.5bn being earmarked in cuts to wages, pensions and benefits.

• From 2013, the retirement age will also rise from the current 65 to 67.

• Pensions currently worth between €1,000 and €1500 will be slashed by 2%, between €1,500 and €2,000 by 5% and above €2,000 by 10%. Bonus holiday payments (known as the 13th and 14 wage or pension) will be eradicated for both retirees and civil servants.

All in all, pensioners will lose roughly a month’s worth of payments.

• According to the reports, some 15,000 civil servants will also lose their jobs between 2013 and 2014 – a measure that will reportedly save the government around €150 million. Public sector employees will have salaries reduced by 10 percent although staff employed with state-run utilities will see their wages drops by as much as 30 percent . Police, the judiciary and military personnel, who have joined anti-austerity protests in recent weeks, will also have their wages slashed by anywhere up to 23 percent.

Helena adds:

Then media is also making much of the new taxes that will be slapped on Greeks, already at the receiving end of a barrage of levies since Athens sought recourse to the EU and IMF with a first bailout program in May 2010.

The self-employed – long believed to be the most brazen tax evaders – will be particularly hard hit with taxes of up to 35 per cent on income earned. Bank deposits will also be taxed at a flat rate of 15 percent although in a bid to kick-start business corporate income taxes will be brought down from 42.5 percent to 35%

11.51am:

French PM defends budget

Prime Minister Jean-Marc Ayrault declared that today’s French budget will put France back on its feet. Here’s the key quotes:

This is a fighting budget to get the country back on the rails.

It is a budget which aims to bring back confidence and to break this spiral of debt that gets bigger and bigger.

Ayrault also described the target of 0.8% GDP growth next year as “realistic and ambitious”.

11.34am:

Today’s French budget contains around €20bn of new taxes, broadly as expected. It’s interesting that the most controversial measure, the 75% income tax on the wealthy, is only expected to raise €210m.

It is expected to affect between 2,000 and 3,000 people.

Changes to France’s wealth tax (levied on those with high personal wealth) will bring in almost five times as much.

11.31am:

How credible is the prediction that the French economy will grow by 0.8% next year? Well, it’s in line with the latest IMF forecast, made in July.

However, it would probably be too optimistic if the eurozone crisis were to escalate. The Bank of England’s forecasts, for example, exclude the worst case scenario in the euro as the impact is unquantifiable.

11.10am:

FRENCH BUDGET DETAILS

The first details of the French 2013 budget are out now!

Here are the early highlights.

Economic projections

• The Budget forecasts economic growth of 0.8% in 2013 and 2% every year between 2014 and 2017.

• The deficit is forecast to drop to 3% of GDP in 2013, and then to 2.2% in 2014, and 1.3% in 2015

• Public spending will remain stable at 56.3% of GDP in 2013

• The National Debt will rise to 91.3% of GDP in 2013

• The structural deficit will be eliminated by 2015

Tax and Spending changes

• New tax rises worth €10bn for “wealthy households”…and €10bn on big businesses

• €4bn will be raised by cutting corporate tax relief on interest payments

• €2bn will be raised from French households through a new tax on share dividends

• A marginal tax rate will be created, at 45%, tipped to raise €320m

• A new ‘exceptional’ 75% tax rate for highest incomes, tipped to raise €210m

• Lowering the threshold for France’s wealth tax, tipped to raise €1bn

10.49am:

FRENCH BUDGET APPROVED

JUST IN. The French cabinet has approved the 2013 budget at this morning’s meeting.

Prime minister Ayrault has described it as a “combat” budget.

We should get the details shortly, and the City is eager to hear the details:

10.44am:

Spain’s sovereign debt has slipped in value today, pushing the yield on its 10-year bonds over the 6% mark (to 6.03% right now).

More pressure on Madrid to take a bailout.

10.22am:

Economics professor Paul Krugman (the Keynesian’s Keynesian) has blasted Europe for its austerity fetish.

In a new column for the New York Times called Europe’s Austerity Madness, Krugman argues:

Spain didn’t get into trouble because its government was profligate. On the contrary, on the eve of the crisis, Spain actually had a budget surplus and low debt. Large deficits emerged when the economy tanked, taking revenues with it, but, even so, Spain doesn’t appear to have all that high a debt burden.

It’s true that Spain is now having trouble borrowing to finance its deficits. That trouble is, however, mainly because of fears about the nation’s broader difficulties — not least the fear of political turmoil in the face of very high unemployment. And shaving a few points off the budget deficit won’t resolve those fears. In fact, research by the International Monetary Fund suggests that spending cuts in deeply depressed economies may actually reduce investor confidence because they accelerate the pace of economic decline.

10.01am:

Greece prepares to show Troika its cuts plan

In Greece, the day has also got off to a lively start with widespread media leaks of the new measures that are in store for the country. We’ll have a summary shortly…

Our Athens correspondent Helena Smith reports that the Greek media is giving blanket coverage to the looming package of budget cuts, following the government’s announcement yesterday that it has reached a “basic agreement”.

But much of the agreeement could change, however, as the package now estimated at a whopping €13.5bn in spending cuts and tax increases (more than 5% of GDP), has to be “negotiated” with Athens’ troika” of creditors first. Helena explains:

Mission chiefs representing the EU, ECB and IMF, who have spent the past week out of Greece, will return to Athens at the weekend. Finance minister Yiannis Stournaras is already lined up to present the package to them on Monday.

Prime minister Antonis Samaras, who heads the conservative-led coalition, is also expected to meet the troika officials in what Greek officials are hoping will be a “problem-free process” to getting the package approved. After months of nail-biting negotiations over the cuts (and it must be added often saltily-worded exchanges) between the governing alliance’s three party leaders, a huge hurdle has finally been crossed. But, as the authoritative Ta Nea reported this morning, while there is “agreement inside,” a “marathon outside” still has to be conducted before the curtain on the drama of the measures finally comes down.

Samaras has made clear that he wants to see the package endorsed by Greece’s 300-seat parliament (where the tri-partite coalition enjoys a comfortable majority) as soon as possible and certainly before the next summit of EU leaders in Brussels on October 18. Having the package in his suitcase will enable the leader to better negotiate with the EU over prolonging Greece’s fiscal consolidation program, say aides. Extending the adjustment period by two years is now seen as essential to ameliorating the impact of the measures, the government insists. But the leader appears to have met resistance from his two junior coalition partners.

While both agree on the urgency of the extension, they have also made clear that they do not want parliament to vote on the measures before the extension has been agreed with the EU. The socialist Pasok leader Evangelos Venizelos argues that the two-year grace period will change the package as deadlines will be radically altered.

9.33am:

Yesterday’s Spanish budget has been well-received in the financial markets, with the European indices all higher.

FTSE 100: up 18 points at 5798, + 0.3%

German DAX: up 32 points at 7322, + 0.45%

French CAC: up 6 points at 3446, + 0.2%

Spanish IBEX: up 44 points at 7886, + 0.57%

Italian FTSE MIB: up 80 points at 15529. + 0.5%

As we reported yesterday, the Madrid government pledged to reduce its budget deficit to 4.5% of GDP in 2013, through around €40bn of cuts. We don’t get full details until the weekend, though.

Given the scale of Spain’s economic challenge, traders may be giving Mariano Rajoy’s government the benefit of the doubt. There could also be relief that the budget did not provoke major demonstrations on the streets.

Another theory is that the budget measures brings Madrid closer to that bailout request. Marc Ostwald of Monument Securities explains:

Market reaction has initially been positive, but only because of the perception that this takes Spain one step closer to an ECB OMT programme, though the gaming tactics of Rajoy over recent weeks and months suggests that markets may well have to apply renewed pressure to Rajoy to push Spain into the arms of the ESM/ECB.

And as our own Giles Tremlett pointed out last night, Madrid faces a serious confrontation with the Catalan parliament over its drive towards independence:

Spain’s deputy prime minister, Soraya Saenz de Santamaría, warned that the government would stop any attempt at a unilateral referendum, effectively challenging the Catalans to either desist or break the law and face the consequences.

“There are legal instruments to stop this,” she said, pointing out that the government could simply apply to the constitutional court to ban it before it was held. “And there is a government that is prepared to use them.”

More here.

9.03am:

The French budget is expected to outline €30bn in fiscal adjustments, split between increases in taxation and cuts to government spending.

• €10bn in extra taxes (mainly on wealthier households)

• €10bn in corporate tax rises and elimination of tax breaks

• €10bn from government spending

The details are closely awaited. Despite protests from some business leaders, Hollande is expected to deliver on his pledge of a 75% top tax rate.

8.51am:

French Q2 GDP change confirmed at 0.0%

The French government were given a reminder of their economic problems this morning, with confirmation that France’s GDP was unchanged in the second quarter of 2012. That means the economy has been flat for the last nine months.

8.45am:

French PM: Budget is about struggle and reconstruction

The French people are already braced for a budget to remember. President François Hollande has told them to expect “the most important fiscal effort in 30 years”.

It is expected to include €30bn worth of fiscal adjustments.

The goal is to cut the French deficit to 3% of GDP in 2013. That, Paris believes, means France can still stand alongside Germany as a proud member of the eurozone core.

Prime Minister Jean-Marc Ayrault told France 2 television that today’s budget was about securing France’s future, saying:

This budget is about struggle, about reconstruction.

If we abandon the (3 percent) target, our interest rates will rise immediately.

The budget will be presented to the French cabinet around mid-morning. Reuters says Hollande is putting his “fiscal credibility on the line”

In the Daily Telegraph, Louise Armitstead reckons French sovereign debt could be hit if Hollande disappoints, writing:

Bond traders on Thursday were poised to dump French debt if Mr Hollande reneges on his promise. The handling of Europe’s second biggest economy, which is on the verge of recession and a public debt of almost 90pc of GDP, is being carefully watched around the world.

8.30am:

Good morning, and welcome to our rolling coverage of the eurozone financial crisis.

It’s a big day. In France, president François Hollande is presenting the details of the 2013 budget to his cabinet this morning. The budget is expected to include tough spending freezes and tax rises for the wealthy as Paris struggles to rein in its deficit.

The budget is seen as a huge test of Hollande’s credibility. Can he deliver a credible plan to bring France’s finances into line, without driving the already stagnant French economy into a downturn?

It’s also another crucial day for Spain. After yesterday’s painful budget, attention now turns to its financial sector. The results of the audit into the Spanish banks is due this afternoon, and will show just how troubled they are.

The Spanish stress test results could push prime minister Mariano Rajoy closer to applying for financial help; a move that could further fuel public opposition to his government.

As usual we’ll be tracking the developments in Paris and Madrid. We’ll also be reporting from Athens, where coalition leaders yesterday reached a “basic agreement” on a fresh package of budget cuts.

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In the broadcast today: Is U.S. Economic Data Hurting or Helping the USD? In the aftermath of this morning’s sequence of important economic reports from both sides of the Atlantic, we compare conditions in the U.S. and in the euro-zone and explore how the state of the U.S. economy could impact the future direction of the U.S. dollar, we analyze the latest trend developments in the EUR/USD currency pair, we follow up on the GBP/USD pair after the better than expected Q2 U.K. GDP revision, we continue to monitor the persistent strength of the JPY, we highlight the market’s reaction to the Spanish budget release, the U.K. GDP, the Euro-zone Consumer Sentiment, the U.S. GDP, Jobless Claims and Durable Goods Orders, we discuss new forecasts from Citigroup and Commerzbank, and prepare for the trading session ahead.

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Spanish budget expected to be released at 2pm. UK shrank less than thought in Q2, while the U.S. did not grow as much as anticipated. Euro-zone consumer sentiment falls. Italian borrowing costs decline at the government’s auction…



Powered by Guardian.co.ukThis article titled “Markets await Spanish budget – eurozone crisis live” was written by Martin Farrer, for guardian.co.uk on Thursday 27th September 2012 12.42 UTC

1.42pm:

The American economy did not grow as much as originally thought in the second quarter.

The final GDP revision shows that it grew 1.3% between April and June, not the 1.7% reported last month. The country’s worst drought for decades is getting the blame.

1.36pm:

Over to Madrid now where our correspondent Giles Tremlett says that there are some leaks coming out about what to expect in the budget bill.

He says Europa Press is reporting that civil service pay will be frozen for the third year running, and there will be other cuts to ministry spending as they try to save a further €20bn next year (much of that will come from a sales tax hike that came this month).

But he says some costs will increase because of interest payments and social security growth, with pensions rising by 1% (Brussels won’t like that). Interest payments will account for an extra €9bn, reaching €38bn.

We’re hoping for the full details shortly….

1.29pm:

As promised at 12.09, our Athens correspondent Helena Smith has more on the talks in Greece where it seems party leaders have agreed on the full package of extra austerity measures.

Emerging form the talks, Greece’s finance minister Yiannis Stournaras was keen to sound upbeat saying: “Basically, yes, we have agreed on the full package.” But he added that a “few details” remained to be resolved.

The economist, who was present throughout the meeting with the Greek prime minister and his allies, said it now remained for the nearly €12 bn package to be approved by international creditors at the EU and IMF. The cuts, among the harshest to be implemented since the outbreak of the debt crisis, would form the “basis for strong negotiation” with foreign lenders, he said. “We must agree with the troika first and our [EU] partners next,” he said.

Insiders, however, said the governing coalition appeared to be biding time. Fotis Kouvellis, the leader of the Democratic Left which is participating in the alliance, insisted that while consensus had been reached on the main points, “there are sill outstanding issues.”

Kouvellis described the measures, expected to further slash low-income salaries and pensions as “very tough.” Because of this it was essential, he said, that Greece was given a two-year extension to meet the budget targets of its gruelling fiscal consolidation programme.

“We are going to seek an … extension,” he told reporters gathered outside the prime minister’s office, adding the government would do this on “multiple political levels.” “The cuts will be a heavy burden on Greece society … an extension will lighten the load considerably,” he said.

Stournaras said he did not know when the controversial package would go to parliament for ratification by lawmakers. “We don’t know when that will happen,” he said.

Unions have vowed to stage mass protests when the measures are discussed in the 300-seat House. The ruling coalition has not hidden its angst about the possible social backlash the new round of cuts will trigger.

1.15pm:

Time for a lunchtime update from the markets which seem to be ticking along quietly ahead of the Spanish budget.

The FTSE 100 is up 0.24% while the Dax is up 0.43% and the Cac up 0.69%. Watch this space…

12.53pm:

The big news of the day – Spain’s budget announcement could be delayed. A government official has just told Reuters that the news conference on the 2013 budget will begin at 2pm BST at the earliest because the cabinet is still meeting.

12.42pm:

Our economics correspondent Phillip Inman sees signs in Thursday’s jobs figures that the German economic boom is faltering.

Five months of downbeat business surveys from Berlin have concluded this month with a first fall in seasonally-adjusted employment since early 2010.
Stefan Schilbe, an economist at HSBC Global Research, says a rise in unemployment over the last two months has now had an impact on the seasonally adjusted employment figures. The fall in employment after the latest 9,000 rise in unemployment is no blip, he says. In effect Schilbe has called the top of the market and predicts the only way is down.
Without its powerhouse economy steaming ahead, the outlook for the eurozone employment and GDP averages is poor.
Schilbe says: ‘The positive momentum of the German labour market has finally come to an end. For the first time since early 2010, seasonally adjusted employment fell.’
The slowing world economy is to blame, he says, while the struggle in Spain and other peripheral economies doesn’t help. That said the unemployment rate remained at 6.8 % in September, which is the lowest rate since the German reunification.
‘In a slowing global growth environment, German companies are becoming more and more cautious on future hiring plans which should result in even more redundancies in the next few months,’ he says.

12.09pm:

Back to Greece again where Helena says that the talks have broken up. More soon …

12.08pm:

Over to Greece again where Helena Smith reports more demonstrations are taking place with both police officers and people with disabilities protesting against further austerity measures.

As reported earlier, the prime minister, Antonis Samaras, is meeting his two junior coalition partners for talks aimed at finalising a controversial €11.9bn package of cuts that are key to unlocking further aid for the debt-stricken country.

Helena writes:

Thousands of disabled Greeks have taken to the streets in what union organizers are describing as a “panhellenic rally” against the proposed cuts. Gathering in Omonia Square, one of the capital’s central plazas, the protestors – many in wheelchairs – issued a plea for benefits, including medicines, not to be slashed in the package of measures the government will almost certainly announce next week. The demonstrators, who will make their way up to the finance ministry in central Syntagma Square, are also demanding that they be spared from mass lay-offs in the public sector that the government has also come under pressure to enforce by international creditors. Police, holding banners decrying the measures, have also been protesting today outside the headquarters of the conservative New Democracy, the coalition’s predominant force and the offices of the main opposition radical left Syriza party.

Meanwhile, Helena adds, talks aimed at clinching the package do not look set to be wrapped up on Thursday.

Hopes of the measures being approved without further ado were dashed almost before this morning’s meeting (which is still ongoing) began. Speaking on Greek television, Nikos Tsoukalis, a leading MP with the Democratic Left, one of the three parties supporting the governing coalition, said “the mix of measures is not the one suggested by our party [DIMAR]. The package of measures has not been finalised and it will not be finalised today.” The savings are essential to Greece being given a good grade in an upcoming assessment of the country’s fiscal progress by lenders at the EU, ECB and IMF. The Greek finance minister had hoped to present the cuts in detail to his counterparts at a euro zone finance ministers meeting on 8 October in the hope that Athens could then draw down a fresh installment of cash – now seen as vital to kick-starting the recession-plagued economy – from the €130bn bailout it signed with the EU and IMF earlier this year. That now looks increasingly unlikely. Mission chiefs representing the troika return to Greece at the weekend. They have made clear that they want the package wrapped up by then to allow them enough time to work on their assessment of the economy.

12.04pm:

As Mariano Rajoy and François Hollande prepare to reveal their austerity budgets (Spain goes on Thursday and France on Friday), they might be forgiven for casting an envious eye towards Australia where government statisticians revealed that the country is A$325bn (£200bn) better off than they’d thought.

The lucky country, as it is sometimes known, is not exactly short of a few bob anyway as it rides the resources to China boom. So the unexpected windfall in overall national wealth must stick in the craw of the eurozone strugglers. How Messrs Samaras, Rajoy etc must wish that they could find such riches down the side of the proverbial sofa.

here’s how Reuters reported it earlier:

Australians are suddenly a whole lot better off after the government statistician ‘found’ A$325 billion ($338 billion) in share assets previously unrecognised.
The Australian bureau of statistics on Thursday released its latest report on household assets which included massive upward revisions to estimates for equity holdings. Total financial assets were now put at A$3.1 trillion at the end of March, compared to the originally reported A$2.77tn.
The revision is worth roughly A$14,380 for every one of the country’s 22.6 million people.
‘This issue incorporates new estimates for households holding of unlisted shares and other equity in other private non financial corporations,’ the statistician drily noted.
The value of such equity is now put at A$383bn at the end of March, compared to the original A$91bn.
‘The bureau of statistics has effectively “found” A$325bn in household wealth,’ said Craig James, chief economist at CommSec.

11.39am:

The Bank of England thinks that British banks should raise more capital. That’s the verdict of the bank’s financial policy committee, whose 14 September minutes show that it believes banks should take advantage of the calm in the euro storm (well, it was two weeks ago) to bolster their defences.

That’s slightly surprising given that Uk banks have recapitalised quite extensively since the crisis broke. it does raise the question, if UK banks need more money what on earth do Spain’s need? We will find out more about that on Friday when its finance minister, Luis de Guindos, reveals the verdict of an independent audit of the Spanish banking sector and how big their black hole really is.

10.58am:

Comment rolling in on the GDP figures.

Rachel Reeves MP, Labour’s shadow chief secretary to the Treasury:

While any small upward revision is clearly better than the opposite, these figures confirm our economy is in the longest double-dip recession since the second world war. And that is the reason why the deficit is rising – up by 22% so far this year.

David Cameron and George Osborne’s plan is clearly failing. While they promised to secure the recovery, our economy has shrunk by 0.4% since the spending review in 2010. And Britain is just one of two G20 countries in a double-dip recession.

Thank goodness the ticket sales, TV rights and extra visitors from the Olympics will have a positive effect on the next quarter’s growth figures, but this short term boost is not the long-term strategy we need. We urgently need a change of course and a plan for jobs and growth to stop permanent damage being done, as the IMF has warned.

The longer our complacent and out of touch prime minister and chancellor cling on to their failing plan, the heavier the price our country will pay.

10.55am:

The experts reckon that the Italian auction has been a bit of a score draw – ie good that yields have come down but disappointing because they didn’t sell the maximum amount of €7bn.

Marc Ostwald from Monument Securities says:

They haven’t quite sold the complete amount but they got pretty darn close … Demand still very much more domestic than anything else. The issue for the time being is not Italy, the issue is Spain, but they will be pleased they managed to get this one away.

10.44am:

Some better news. Italy’s borrowing costs fell on Thursday after successful bond auctions for 10- and 5-year money amounting to €6.6bn.

The yield on 10-year bonds was 5.24%, down from 5.82% in August, while 5-year bonds went for 4.09%, down from 4.73%.

10.19am:

More ugly numbers. Economic sentiment in the eurozone slipped gain in September. Figures from the European commission on Thursday say that it fell to 85 in September from 86.1 in August. Figures also show that the business climate was its worst since October 2009 last month. And consumer sentiment in the eurozone fell to -25.9 from -24.6.

9.44am:

A slew of figures from the Office for National Statistics for Thursday morning including this shocker – Britain’s current account deficit is the highest on record in a second quarter at £20.8bn. The march of the makers still has some way to go.

9.34am:

Britain is still in recession. The final revision of Britain’s output for the second quarter puts it at -0.4%, down from the -0.5% in August. The first estimate in July was -0.7%.

So, following a negative quarter in the first three months of this year, Britain is officially still in the red. But as Paul Fisher says today, we’re going to do much better next time.

9.27am:

German unemployment rose by 9,000 in September, with the rate unchanged at 6.8%. That was pretty much as expected but the feeling is that the German chancellor, Angela Merkel, can’t afford much of an increase as she goes into an election year.

8.54am:

Developments in Greece where our correspondent Helena Smith says its prime minister, Antonis Samaras, is about to meet his two junior coalition partners for talks aimed at finalising the draconian €11.9bn package of cuts the country’s EU, ECB and IMF creditors are demanding in return for bailout instalments.

Helena writes:

With Wednesday’s mass anti-austerity demonstrations hanging over them, and tensions between Greece and its troika of creditors on the rise, the prime minister, Antonis Samaras, will meet his two leftwing junior partners at 10:30am local time. The hope is that all three will – finally – agree to the cuts that have caused such hand-wringing over the long, hot summer. Samaras, say aides, will say “it is now or never” and impress upon both men that the time has come to bite the bullet: either Athens accepts the measures on which further aid instalments are now dependent, or default on its debt load – which at nearly 165% of GDP, is by far the highest in Europe.

The ever-energetic Greek finance minister, Yiannis Stournaras, spent much of Wednesday evening running through the details of the package’s latest amendments (which now makes up for a €2bn shortfall with extra taxes) with the Democratic Left leader, Fotis Kouvellis, and the socialist Pasok leader, Evangelos Venizelos.

Stournaras, a technocrat, is believed to have told the leaders that €7.5bn of cuts in the package (the equivalent of more than 5% of GDP) will be implemented next year, with the remainder due in 2014.

But with the EU, ECB and IMF still insisting on mass layoffs in Greece’s bloated public sector, it was far from sure if the measures will finally be given the go-ahead. Leaks suggest that lenders are demanding some 15,000 civil servants be immediately sacked – a red line for both parties.

Dimitris Hadjisokratis , who oversees economic policy at the Democratic Left, emerged from the talks late on Wednesday, saying progress “would be difficult”. Politicians have been left in no doubt by the turnout for Wednesday demonstrations, that Greeks almost three years into the crisis, Greeks are adamantly opposed to making yet more sacrifices.

8.25am:

Interesting comments this morning from the Bank of England director Paul Fisher ahead of the revised UK growth figures at 9.30am. He tells the Sun newspaper that he expects a very strong GDP number for the third quarter due out on 17 October. So does that mean that today’s revision is going to show the economy still well and truly in negative territory (it was put at -0.5% last time)? Stay tuned to find out …

He is also trumpeting the funding for lending scheme which he says could pump £60bn-£100bn into the UK economy. There are “credit hungry businesses out there”, he says.

8.08am:

The stock markets are duly up a bit.

The FTSE 100 in London has climbed 0.6% to 5803 while the Cac 40 in Paris, which took a battering on Wednesday, is up 0.8%. The Dax in Frankfurt is up 0.5% while the Ibex in Madrid has perked up 0.6%.

8.00am:

Just waiting for the markets to open there a couple of bits of corporate news of some interest today. Compass, the global catering company, says it is cutting back on its operations in southern Europe because of what it calls worsening trading conditions in the region.

That’s bad news for the Club Med countries but the travel group Tui says it had a much better summer this year than last so perhaps the eurozone strugglers of Spain Greece and Portugal will find they took more tourist euros this year.

7.49am:

Good morning and welcome to the eurozone crisis live blog. Today promises to be a crucial one in Spain’s struggle against its mounting economic and political crisis with the details of its austerity budget due to be unveiled at around 2pm BST. Our correspondent in Madrid, Giles Tremlett, will help to guide us through while we’ll also have updates from around Europe on the problems in other countries.

Markets rebounded a little overnight in Asia after a big sell-off in Europe on Wednesday. Markets are expected to open up around 0.6% here in a few minutes.
Key events of the day are:
• Spanish budget at 2pm
• German unemployment figures coming up at 8.55am
• UK Q2 GDP revision at 9.30am
• US Q2 GDP revision at 1.30pm

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In the broadcast today: Will the EUR Sell-Off Continue Further? As unrest in Greece and Spain threatens to escalate the euro-area crisis, we examine the factors weighing on the euro and explore the potential for a continuation of the recent euro sell-off, we analyze the levels of price correction in the EUR/USD currency pair, we keep an eye on the weakness of the USD against the JPY, we take a look at the GBP/USD pair ahead of tomorrow’s U.K. and U.S. GDP reports, we highlight the market’s reaction to the statement of Euro-zone finance ministers, the latest news from Greece and Spain, and the Italian Retail Sales, we discuss new forecasts from Bank of New York-Mellon, Canadian Imperial Bank and Barclays, and prepare for the trading session ahead.

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Unions say general strike is a success. Molotov cocktails and teargas in Athens as the euro-area crisis persists. Markets sell-off in Spain and Italy, the two countries most at risk of losing lender support. Europe’s bank recap fiasco…



Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Violent scenes in Athens as Greece holds general strike” was written by Graeme Wearden, for guardian.co.uk on Wednesday 26th September 2012 14.32 UTC

3.32pm:

European markets keep falling

Greece may be calm again, but Europe’s stock markets remain deeply in the red this afternoon as fears over the eurocrisis persist (as explained at 11.13am).

The selloff is particularly severe in Spain and Italy, the two countries most at risk of losing the support of international lenders.

In London, the FTSE 100 is down 98 points at 5760, a drop of almost 1.5%. In Spain, the IBEX down 3.5% at 7890, a tumble of 287 points.

And in Italy, the FTSE MIB has fallen by 540 points to 15391, down 3.3%

Investors have raced for the safety of the US dollar (so unoriginal), pushing the euro down to $1.284. The oil price has also been hit, with a barrel of Brent crude down $1.3 at $109.1.

Gloom abounds.

Analysts at Commerzbank summed it up in a research note.

The renewed escalation of the debt crisis in the euro zone, with violent protests in Spain against the planned new austerity measures, has sparked gloomier sentiment on the financial markets once again and is also putting oil prices under pressure.

2.50pm:

Economic bad tidings in Italy

Over in Italy, there is gloom following a report that Italian consumer spending is set to drop three percent year on year in 2012.

Our man Tom Kington has the story, based on a new study by Italian retailers’ group Confcommercio:

Confcommercio warns this is the biggest year on year drop since 1946, as Italy suffers from the downturn, as well from Mario Monti’s budget-balancing tax hikes which are hitting wallets hard.
Reacting to the news, Monti said he thought things could be worse. “That is not much compared to the intense cure which we have had to apply to the Italian economy,” he said.
Confcommercio added that consumer spending between the third quarter of 2007 and the second quarter of this year had plummeted by 6.5 percent, although spending on mobile phones and computers has held up. And while small stores are going out of business, large discount shops are resisting.
A report published by farmer’s group Coldiretti pointed to a seven percent drop in milk purchases in the first half of this year, and a five percent drop in olive oil.

In other bad news, La Repubblica reported on Wednesday that 1.42 million car purchases are expected this year, a million less than ten years ago and on par with 1979.

Perhaps the most dramatic stat is the 49.6% drop in new house mortgages registered in the first quarter of this year, while property sales were down 16.9%.

“We have already told our children that they will be worse off than us,” stated La Repubblica, “Now we discover that we are also going to be worse off than us.”

2.43pm:

Here’s some analysis of the events in Athens today, and Madrid last night, from Martin Koehring, economist at the Economist Intelligence Unit:

1) The ongoing austerity agenda in the crisis countries continues to have major social costs that are deemed unacceptable by large parts of the societies. The unemployment rate has risen to around 25% in both Greece and Spain (compared with around 11% in the euro area on average), while youth unemployment is above 50% in both countries. The Greek economy contracted by 17% since its pre-crisis peak in 2008, and the Spanish economy by more than 5%.

2) There are still huge political risks to the crisis resolution. In Spain, the government faces a backlash from separatist forces in the autonomous regions, especially Catalonia, as the Spanish government has used the crisis to recentralise powers. In Greece, the ruling three-party coalition is fragile and faces fierce opposition from anti-austerity and anti-establishment parties from both the far left and the far right.

3) Finally, the demonstrations remind us that central bankers cannot solve the crisis alone. The European Central Bank’s plan to intervene in sovereign bond markets can only succeed if governments in crisis countries can convince their electorates that ongoing austerity and reform are necessary to avoid bankruptcy. This, however, is increasingly challenging without the return of economic growth.

2.39pm:

Athens returns to normal…

And it’s back to business on Ermou, Athens’ main commercial thoroughfare, says Helena Smith who is out on the ground.

Helena tells me:

A lot of stores have re-opened with tourists wandering about with maps and shopping bags in hand. Many demonstrators are expressing disappointment with the strike saying unions are seriously over-estimating the numbers.

As young accountant who gave his name only as Vangelis told Helena:

If you think that there are over one million unemployed at least 300000 must live in Athens but there was nowhere near that turn-out…Isn’t it odd that the violence erupted just when the work stoppage (among shopowners) was about to end?

Martin Newman, a British photographer who now lives in Athens, has also decided to pack it in for the day.

It was nothing like the protests we’ve seen. The violence was a whirlwind. It was over before you knew it.

Riot police with shields and tear gas canisters are, however, still lining Syntagma square, Helena adds.

2.23pm:

Greek journalist Efthimia Efthimiou confirms that the demonstration is over:

2.17pm:

Looking at the latest TV feed from Athens, the situation does appear calm again. Pictures of quiet roads, people walking normally, etc.

Barnaby Phillips, Al Jazeera correspondent, confirms this, saying traffic is running again in the city centre near parliament:

1.43pm:

These photos from Athens show how the protests turned violent today. Reuters reports that the molotov cocktails were thrown by ‘hooded youths’ who were on the sidelines of the (orderly) demonstration. That fits the pattern of previous demonstrations.

1.32pm:

Greek newspaper Kathimerini points out that Greek police have broken a restriction blocking them from using teargas:

It writes

Tension rose outside Parliament on Wednesday afternoon as hooded demonstrators launched Molotov cocktails at riot police forces. The latter responded with tear gas, despite orders to refrain from using chemicals against protesters.

1.26pm:

UNIONS HAIL GENERAL STRIKE SUCCESS

Our correspondent in Athens Helena Smith says unions are describing today’s nationwide general strike as a “huge success.”

The civil servants union, ADEDY, estimates that as many as 350,000 Greeks have taken to the streets across the country today in a mass outpouring of protests against further austerity measures.

Helena writes:

Ilias Iliopoulos, a leading figure at ADEDY, Greece’s union of civil servants, has just told me:

“This is a warning to the government not to pass the measures.Today was a huge success as witnessed by all those in the armed forces and police who also participated because they, too, will be affected by these cuts. The government must know that if wants to push us further into a corner, we will react.”

Prime Minister Antonis Samaras’ conservative- led alliance is expected to decide tomorrow on budget cuts amounting to a whopping €11.9 bn, over 5 % of the country’s GDP. Once endorsed, the controversial austerity package will be sent to the parliament for ratification.

“Once the Greek people learn exactly what the measures are there will be uproar,” said Iliopoulos who reckoned that some 200,000 demonstrators marched through Athens - police reports put the number closer to 25,000. “There will be mass protests.”

1.05pm:

In Athens, Spyros Gkelis flags up that police in Syntagma Square are reorganising themselves now, having cleared the area:

But the protest against Greece’s austerity programme is not over. Nearby, one group of left-wing activists is still marching:

12.55pm:

Here’s a much better image of the moments when the Athens protests turned violent, via James Mates, Europe Editor at ITV News.

On previous occasions of this sort, a relatively small group of rioters have been responsible for the violence (some Greeks even allege links to the riot police themselves), and it does appear again that most people are remaining calm.

Or as Dimitris Api puts it

12.42pm:

Reuters reports that at least 50,000 people have taken to the streets of Athens today.

Smoke is rising over parts of the city, after one demonstrator set light to a bin

There are also reports that a tree has been set alight in Athens’ National Garden.

And bangs continue to ring out over the city.

12.37pm:

Live TV footage from Athens shows that groups of riot police are now moving through the streets, with large numbers of peaceful demonstrators also dispersing.

There are also shots of some protesters throwing objects at the police.

This page has a live feed.

And another feed from the Zougla TV station is here

12.30pm:

Another liveblog reader on the streets of Athens confirms that the protests have turned violent in the last few minutes. @Finisterre76 reports that petrol bombs and sound grenades are being thrown:

12.26pm:

PROTESTS TURN VIOLENT

The situation is escalating in Athens. In the last few minutes, police officers have used teargas on demonstrators, reportedly in response to petrol bombs and stones being thrown.

The live feed from Athens now shows petrol bombs cocktails thrown at police officers, and many people running for cover.

12.05pm:

From Athens, Theodora Oikonomides reports that some police officers are carrying tear-gas equipment.

Theodora also reports that it’s seriously hot in Athens today, and that the demonstration is larger than she (a veteran of these protests) expected.

11.59am:

My colleague Helena Smith is on the streets of Athens, and reports that police helicopters are flying overhead.

She also explains that the bullet proof barrier erected outside the Greek parliament (see 11.16am) was inspired by a similar fence used by French authorities in recent demonstrations.

Greek public order ministry officials apparently saw it and got it copied here. “It was much cheaper than having it imported,” said one official.

The water cannons (mentioned at 10.53) are also new, Helena explains:

The coalition government is keen not to be seen to be heavy-handed during the protests that will mark today’s strike. Prime minister Antonis Samaras’ two junior lefitist partners say it is very important that Greeks are not stripped of their “democratic right” to demonstrate against measures that they deem to be unfair.

11.52am:

IAN TRAYNOR: EURO BANK ROW IS A FIASCO IN THE MAKING

The confusion today over whether the European Stability Mechanism will be used for direct bank recaptalisations (see 11.13) has “all the makings of a fiasco”, warns our Europe editor Ian Traynor.

He writes that the row may well puncture the weeks of calm engineered by Mario Draghi and the ECB. That’s because the agreement to use the ECM to recapitalise banks directly appeared to be a real step forwards in fixing one of the root causes of the crisis.

Ian explains:

At their summit in June eurozone leaders pledged to break the invidious banks-sovereign loop which was weakening banks and worsening sovereign debt burdens.

The way to do this, they declared, was to allow the bailout fund (ESM) to shore up banks directly rather than going via governments and increasing debt levels. But the wording was left deliberately ambiguous and before the ink was dry on the statement, senior German officials, being grilled in Brussels by gobsmacked German journalists, were squirming and heavily qualifying the promise to shore up banks directly.

Tuesday’s statement from the triple-A Germans, Dutch and Finns amounts to the strongest caveat yet, hugely delaying if not reversing the June promise. Apart from ruling out direct help for banks from pre-existing cases, it describes use of the ESM as a “longer-term” option and as a “last resort.”

Besides, it insists that the new ECB bank supervisor has to be operational and seen to be effective before the ESM use can be triggered. A very long time, in other words. Germany in June insisted on the new ECB bank supervisor for eurozone banks. But it wants the ECB to supervise everyone else’s banks, not the vast majority of German ones. It is stalling on establishing the supervisor. France’s Europe minister, Bernard Cazeneuve, said in Brussels on Monday the supervisor had to be established “urgently”. The Germans say the absolute opposite.

And without the supervisor, there can be no use of the ESM to help weak banks directly. Catch-22 or going round in circles, as a matter of policy.

And while eurozone officials go round in circles, the stock markets go down (FTSE 100 now down 68 points). The euro has also lost ground this morning, down half a cent at $1.286.

11.16am:

A bulletproof barrier has been erected outside the Athens parliament in preparation for today’s protests:

11.02am:

There are signs of serious jitters in the City today. As feared, the yield on Spain’s 10-year bonds has now risen about 6% (6.03% at pixel time). The stock markets are all still lower,, with Spain’s IBEX down 2.66%.

There are several triggers for this sudden chill wind. The protests in Spain last night are certainly a factor – with analysts trying to assess whether the Spanish people have been pushed to the limit. Portugal’s u-turn on its latest tax rises (which threatened a political crisis in Lisbon) has also served as a reminder that politicians are still answerable to the people.

Another factor is that the eurozone’s commitment to recapitalise its banks through the European Stability Mechanism appears to be fraying. A statement last night from the finance ministers of Finland, Germany and the Netherlands appeared to reject some of the decisions made at last June’s summit (great analysis here on FT Alphaville).

If legacy banking assets aren’t going to included, how on earth with Spain and Ireland scrub their financial sectors clean?

The fear that Germany, the Netherlands and Finland have reneged on the deal has also hit Irish sovereign debt, pushing up the yield on its 10-year bonds to 5.213%.

As Peter Spiegel wrote in the FT today:

The need for Ireland and Spain to pump billions into their banking sector to keep them afloat forced otherwise fiscally prudent governments into eurozone bailout programmes with painful austerity measures that have exacerbated recessions.

Under the June deal, such bailouts would no longer be the responsibility of national governments but would shift to the eurozone rescue fund, the European Stability Mechanism, which was given the authority to inject capital directly into struggling banks. As part of the deal, Ireland was given a promise of equal treatment with Spain.

And the scenes in Athens are also a factor – a reminder that the public there, too, cannot be expected to swallow yet more austerity, especially when it is driving the economy ever lower.

Those in the City who had taken confidence in recent developments are now having a rethink:

Steve Collins, global head of dealing at London & Capital Asset Management, reports that clients are rushing to sell five and 10-year Spanish bonds.

11.01am:

These photos show thousands of supporters of the Greek Communist party marching past the Athens parliament this morning:

Right now, there are three lines of riot policemen at the side of Syntagma Square:

10.53am:

The latest estimates from Greek police are that between 12,000 and 13,000 members of the Pame union group are on the streets, and another 2,000 to 3,000 from GSEE*.

Many more people, though, are not affiliated to either group, and will be taking part in the protests independently.

* – those figures are from Keep Talking Greece, which also reports that water cannons are on the street:

Police has deployed five water canons in downtown Athens in ‘order to limit the usage of tear gas’ should the situation get out of control.

10.26am:

As expected, parts of the Athens transport system are in limbo today, as this photo from the city’s train station shows:

10.21am:

A new photo from the centre of Athens shows that there are now large numbers of people congregated at Syntagma Square for today’s protests:

That’s via Spyros Gkelis, who is a great person to follow on Twitter for live updates, tweeting as @northaura .

As is Theodora Oikonomides, who tweets as @irategreek. She’s on the streets of Athens, and also reports a heavy turnout:

10.02am:

Zougla, the Greek TV station, has a good live feed of events in Athens — here.

Here are a couple of screengrabs:

9.46am:

Lagarde and Merkel will tackle Greek Riddle

Germany’s chancellor, Angela Merkel, will hold talks with IMF chief Christine Lagarde today.

Greece’s mass-selling Ta Nea newspaper is reporting this morning that the pair will try to solve the “Greek riddle.”

Helena Smith explains:

This comes against a backdrop of reports that Merkel and Lagarde are at odds over how to proceed with the debt-stricken country following clear evidence of what the IMF managing director has described as a “financing gap” in Athens’ EU-IMF-sponsored rescue program. Growing pressure from the Washington-based fund for a restructuring of Greece’s debt mountain – this time in the official sector i.e, by EU governments – has reportedly exacerbated tensions.

Meanwhile, fraught talks aimed at clinching a mammouth package of austerity cuts – at nearly €12bn the equivalent of 5% of GDP — continue apace in Athens. According to the Greek media, the controversial measures were finally agreed at a marathon meeting last night between prime minister Antonis Samaras and the Greek finance minister Yiannis Stournaras.

“The package, according to reports, includes all the painful measures that existed in the government’s initial plan with the exception of firings in the public sector,” opined Ta Nea. “And the extra package of €2bn, which has also been sealed, will come from taxes.”

Regular readers will recall that that Athens’ conservative-led coalition has been battling to find an outstanding €2bn to close the package on which further disbursements of rescue funds depend. Samaras is expected to meet his junior coalition partners, the socialist Pasok leader Evangelos Venizelos and Fotis Kouvellis head of the Democratic Left party, tomorrow. During the talks all three men are expected to give the measures the green light.

It remains unclear, however, when the package will go to parliament to be ratified by lawmakers. What is certain, though, is that the Greek finance minister wants to present the cuts to his counterparts at the next euro group meeting of finance ministers on October 8.

9.38am:

No let-up in Spanish recession: central bank

The Bank of Spain has added to the gloom this morning by warning that Spanish GDP will fall sharply in the current financial quarter.

In its latest monthly statement, Spain’s central bank said that Spanish GDP will probably fall at a “significant rate” in Q3 212.

9.06am:

Spain’s prime minister has given a clear hint that he will bite the bullet and ask for financial help if Spanish borrowing costs become unacceptably high.

Speaking to the Wall Street Journal, Mariano Rajoy said:

I can assure you 100% that I would ask for this bailout [if necessary].

And on cue, Spanish sovereign debt is falling in value. The yield on its 10-year bonds (the benchmark for borrowing costs) has jumped to 5.94%, up from 5.77% overnight. Expect more jitters if it rises above 6%.

8.54am:

Via twitter, here’s a photo of teachers aligned to the Pame union at the start of their protest march in Athens:

The banner reads: “No to the reduction of wages and pensions. The plutocracy should pay for the crisis.” (thanks Helena!)

8.39am:

STOCK MARKETS FALL

Shares have fallen across Europe, as the protests in Spain last night send jitters through the financial markets.

FTSE 100: down 52 points at 5807, -0.9%

German DAX: down 81 points at 7343, – 1.1%

French CAC: down 45 points at 3466, – 1.34%

Spain’s IBEX: down 183 points at 7991, – 2.25%

Italy’s FTSE MIB: down 301 points at 15630, -1.8%

As Michael Hewson of CMC Markets explains, the sight of protests on the streets of Madrid have added to the uncertainty over the situation in Spain:

Investors are becoming unsettled at what appears to be unfolding….

In a country that has an unemployment rate of 25% and a contracting economy it was a reminder, if any were needed, that Spain is swimming against the tide as it struggles to meet its obligations, and balance its budget. It can only be a matter of time before Spain is forced into a bailout request and it might need an external catalyst to provide it.

8.34am:

The union groups who have organised today’s general strike argue that Greece simply cannot take further austerity (Helena Smith adds)

With unemployment at a record high – hitting almost 24% at a national level and 55% among young Greeks, the highest in Europe – and Greece in its fifth year of recession, they fear that the emphasis on deficit-cutting measures at the expense of growth and development is creating an economic death spiral.

As Stathis Anestis of the GSEE union group put it:

These policies have lead Greece to an impasse and are totally counter-productive.

There is also anger that EU, ECB and IMF are now pushing for further cuts in wages and pensions, (which have already drastically reduced in recent years), As well as proposing the introduction of a six-day working week, the Troika aim to cut the minimum wage by 22% and abolishing collective labour agreements – measures, unions say, that will roll back decades of hard-won workers’ rights.

8.25am:

The Living In Greece website has a great breakdown of how today’s general strike will hit public services and transport links today – here (you need to scroll down to the September 26 section)

8.17am:

Greek general strike underway

Our Athens correspondent Helena Smith says Greece’s general strike is underway as unions nationwide step up protests against the cutbacks being demanded of the country in return for more EU-IMF-funded rescue funds.

Helena writes:

This is the first mass confrontation with Greece’s three-month old coalition government and strikers say they are determined to give it their best. The industrial action is being backed by the General Confederation of Greek workers (GSEE), the country’s biggest private sector force, the union of civil servants, ADEDY, and militant unionists attached to the KKE communist party (whose organization is known as Pame). All three groups will hold mass demonstrations in Athens – and indeed some 65 cities nationwide – before protesters with the support of anti-bailout political forces from the far-left to far-right, march on the Greek parliament in Syntagma square [noon and after].

The mass action has brought the entire country to a standstill with state-run hospitals, schools and public services, government offices, habours, ports and indeed almost every form of transportation (bar trams and trolleys that will carry protestors to the centre of Athens) being paralysed. Flights at Athens’ International Airport have also been disrupted because of a walk-out by air traffic controllers until 1 PM local time.

Even tax collectors have said they will join in the action which has also closed archaeological sites, including the ancient Acropolis.

Supporters of the PAME union are expected to start gathering in Omonia Square at 10:30am local time (8.30am BST)

Private sector employees and civil servants will begin gathering at Athens’ main park, Pedio tou Areos, at 11am local time (9am BST).

Both groups will follow the main boulevards of Patission and Stadiou that run the length of the heart of Athens up to Syntagma Square – the scene of many protests since the crisis began.

7.50am:

UPDATE ON SPANISH PROTESTS

Overnight, my colleague Giles Tremlett filed this news story on the Spanish protests. He explains that the violence began after the demo overran its official cut-off time:

Violence flared on Tuesday in the centre of Madrid as baton-wielding police charged crowds and fired rubber bullets at demonstrators who had tried to surround the country’s parliament building.

Some 32 people were injured, including several police officers, and several dozen were arrested after police broke up the “surround the parliament” demonstration against Mariano Rajoy’s government shortly after it overran its 9.30pm deadline.

Several hundred protesters remained peacefully on the streets near the parliament building late on Tuesday night. They are demanding the resignation of the government and the king, as well as a rewrite of Spain‘s constitution.

We also have a photo gallery of events here.

And the BBC reports that Spanish police targeted “ringleaders” behind the “Occupy Congress” movement. Their Tom Burridge writes:

The heavy-handed tactics of the Spanish police, with little provocation, perhaps show that the authorities were worried that this could have escalated.

The scuffles tonight in Madrid will make relatively dramatic images on television. Spain is still a place of mainly peaceful protest, even in the face of deep austerity. However tonight shows that even here, there is the potential for some, albeit for now limited, social unrest.

7.36am:

GENERAL STRIKE IN GREECE TODAY

Good morning, and welcome to our rolling coverage of the eurozone financial crisis, and other key events in the global economy.

Coming up today… Greek prime minister Antonis Samaras faces his first general strike since becoming the country’s leader. Widespread disruption is expected across Greece as people register their anger over the country’s austerity programme.

The 24-hour strike has been called by the country’s two major union groups: GSEE and ADEDY. The scale of the industrial action will show the depth of public anger against Samaras’s coalition government.

It comes as Athens officials continue to negotiate with its foreign creditors over a €12bn package of cuts, and amid growing speculation that the country is missing its financial targets and will need further cuts, or more debt relief.

We’ll be tracking developments in Greece through the day.

We’ll also be monitoring the aftermath of last night’s protests in Madrid. As we covered in Tuesday’s liveblog last night, riot police struck some demonstrators with batons and even fired rubber bullets, in some of the more worrying scenes since the eurozone crisis began.

The events in Madrid caused some alarm in the financial markets last night, where the Dow Jones index fell 101 points.

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Riot officers striking demonstrators at Madrid protests. Large demonstrations taking place in Spain today. Reports of baton charge in Madrid. ECB President Mario Draghi speaks in Berlin. S&P warns of deep euro-zone recession…



Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Riot police clash with anti-austerity protestors in Madrid” was written by Graeme Wearden (until 19.30pm) and Ben Quinn (now), for guardian.co.uk on Tuesday 25th September 2012 18.32 UTC

7.32pm:

The demonstrations in Spain are continuing, so my colleague Ben Quinn is going to take over the liveblog and report the latest developments for a while.

If you’re just joining us, here’s a quick summary of the days events’

Tens of thousands of people are taking part in protests in Madrid. The demonstrations, organised by the Spanish indignados group, have been help to protest against the country’s austerity measures and to call for new elections in Spain.

After a peaceful start (see 17.13), there have been clashes between riot police and some demonstrators, which included officers using batons on the crowds (see 19.15 and 18.30).

In other news across the eurozone, ECB president Mario Draghi called on European leaders to take decisive steps to ease the crisis (see 14.39 onwards) and there are reports tonight that the IMF might withhold its aid payments for Greece until the issue of debt restructuring is resolved (see 17.52). The prospect of a third Greek aid package looms over Europe, and is a big political headache for Angela Merkel (see 12.17pm).

Thanks all, GW

7.12pm:

Here’s a photo from Madrid showing a policeman striking a protestor:

This photo shows another protestor knocked to the ground:

While this third photo appears to show a demonstrator being held in a headlock by a riot police officer:

7.05pm:

Back to Spain and Associated Press is reporting that the police did indeed use batons on some of the thousands of people protesting in Madrid tonight.

AP reports that the riot police (numbering around 1,300), managed to coral most of the protestors away from the Madrid parliament.

From Madrid, their reporters (Alan Clendenning and Ciaran Giles) report:

 Police used batons to push back some protesters at the front of the march as tempers flared.

The demonstration, organized with an “Occupy Congress” slogan, drew protesters weary of nine straight months of painful measures imposed by Prime Minister Mariano Rajoy.

Thousands of angry marchers yelled toward parliament, 250 meters (yards) away, “Get out!, Get out! They don’t represent us! Fire them!”
“The only solution is that we should put everyone in Parliament out on the street so they know what it’s like,” said one of the protestors, civil servant Maria Pilar Lopez.

Lopez and others are calling for fresh elections, claiming the government’s hard-hitting austerity measures are proof that the ruling Popular Party misled voters to get elected last November.

While Rajoy has said he has no plans to cut pensions for Spaniards, Lopez fears her retirement age could be raised from 65 to as much as 70. Three of her seven nieces and nephews have been laid off since Rajoy took office, and she said the prospect of them finding jobs “is very bleak.”

6.50pm:

More news from Greek TV, via our own Helena Smith in Athens.

Mega TV on its flagship 8 PM news show is reporting “it is very likely” a second euro group meeting of finance ministers will be held in October to resolve the twin issues:

1) disbursing Greece’s next €31.5bn tranche of aid, and

2) agreeing to the extension of the country fiscal consolidation program.

Meanwhile, Greece’s head of state president Carolos Papoulias has spoken out, yet again, about the controversial cuts being asked of the Greek people.

Helena Smith says he made the remarks meeting the country’s top military brass today.

I know that you have a problem with these cuts .. we have talked about that,” the octogenerian told military chiefs of staff. “You are part of [the nation of] Greek people and the Greek people at this time are really suffering.

The president’s comments prompted the defence minister, who was also attending the ceremony, to add: “But we know these cuts have to happen because we have another war, this time an economic war [to deal with].

6.49pm:

More photos from Madrid via twitter.

This one shows a man who’s appears to have taken a blow to the head during the protests:

6.30pm:

Latest reports from Madrid say that the Spanish police have baton-charged protestors.

I didn’t see it on the live feed, but there was a shot of ambulance workers preparing a stretcher.

6.07pm:

If you’re interested in the protests in Spain tonight, this livestream page is carrying live coverage (embedded below):

6.05pm:

Interesting developments in Helsinki tonight, where three hard-line finance ministers may have thrown Europe’s bid to strengthen its weakest banks.

Luke Baker of Reuters has the story:

Germany, the Netherlands and Finland issued a joint declaration on Tuesday that appeared to unravel much of what was agreed at the last European summit in June, when EU leaders paved the way for the direct recapitalization of problem banks.

In a statement issued after a meeting of their finance ministers in Helsinki, the three AAA-rated countries set out the terms under which they would be willing to allow the euro zone’s permanent rescue fund, the ESM, to recapitalise at-risk banks.

But the statement made a sharp distinction between future banking problems and “legacy” difficulties – essentially saying that highly indebted banks in Spain, Ireland and Greece will remain the responsibility of those countries’ governments.

That is likely to frustrate Spain and Ireland in particular, as both had interpreted the June summit as implying that a way would be found to break the debilitating link between their indebted banks and the debts of the government.

More here

5.52pm:

“IMF may withhold Greek aid funds until debt restructured”

Meanwhile, our Athens correspondent Helena Smith has got in touch to shed light on this evening’s Skai News report that the International Monetary Fund might suspend payments to Greece (see 17.00)

Turns out that the popular television channel has based its report on an interview with a senior IMF official in Washington. Suggesting it has legs…

Helena writes:

According to the Greek television station, the IMF is “not only examining” but may even already have slapped a veto on further rescue funds being given to near-bankrupt Greece if its debt mountain isn’t restructured first.

The channel’s Washington-based correspondent Thanos Dimades says the reduction of Greece’s debt load to 120% of GDP by 2020 is of “definitive importance” for the fund. That would tally with earlier reports that the body is angling for another write-down of the country’s debt, this time in the official sector.

A senior IMF official on the fund’s administrative board is quoted as telling the news channel: “The role of the fund is the temporary provision of liquidity, not the role of being the indefinite lender.”

Skai cites the IMF official as also predicting that the fund will withdraw from giving “financial support to Greece within 2013” – maintaining a technical advisory role instead for as long as the country remains locked out of international markets.

5.13pm:

Back to Madrid, and there appears to be a very sizeable turnout at this evening’s demonstrations:

There’s live coverage from Madrid here, www.rtve.es.

5.00pm:

Greek News: the Skai news channel is reporting that the IMF is considering withholding the next aid payment due to Greece until decisions have been made about restructuring its debt.

It’s not clear where the story has come from… but it’s being seen as an attempt to ratchet up the pressure on Greece, ahead of tomorrow’s general strike:

We’ll have more on this shortly….

4.53pm:

Here’s another photo from Madrid, showing large numbers of protesters near to the parliament:

4.21pm:

PROTESTERS GATHER IN MADRID

Protesters are out in force in Madrid now, ahead of the march on the country’s parliament organised by the indignados. And the police are ready, with barricades blocking the roads leading to the parliament building.

I’ve pulled together a few photos from the scene:

Here, protesters congregate close to Spain’s parliament ahead of the demonstration:

The demonstration has been called to oppose the government’s fiscal plans, and to call for new elections in Spain (which is sinking deep into recession).

Here, demonstrators carrying banners sit waiting for the demo to begin:

Mariano Rajoy’s unpopularity is clear:

And here’s the Indignados in action:

Pictures from Madrid are also circulating on Twitter (with the hashtag #25S ), including this snap showing large numbers of people at one site:

3.25pm:

The European Central Bank have now helpfully uploaded the full text of Mario Draghi’s speech in Berlin today: it’s here.

So what did we learn?

Draghi seemed to have a dual message. One: the eurozone crisis is not over, and euro politicians should take advantage of the current lull to take big decisions.

Key quote:

Our measures can only build a bridge towards a more stable future. It must be completed with decisive measures by governments to address fundamental challenges and complete the euro area’s institutional architecture. They are currently making progress in this direction. The key challenge going forward is to ensure that the immediate upturn strengthens rather than weakens this commitment.

That reflects fears that Spain is resisting applying for help because its bond yields have recovered.

Draghi’s second message was directed firmly at Germany. Europe’s largest economy may have genuine, heartfelt concerns over the way that the ECB is handling the crisis, but it should remember just how much it has gained from the euro – and how much it can benefit in future.

Key quote:

As has long been recognised in this country, low inflation and stable exchange rates ensure a level playing field on which German firms can prosper. They can compete based on their sophistication and innovativeness, without unfair distortions. At the same time, being part of a large and stable currency area provides a buffer against external shocks. This will only become more essential in an ever globalising world.

These factors have led to real economic benefits for Germany. Its intra-euro area trade increased from around 25% of GDP in 1999 to almost 40% of GDP in 2010, while its extra-euro area trade increase by more than 20 percentage points in the same period. Almost 65% of foreign direct investment in Germany now comes from the euro area – and more than one and a half million jobs depend on that investment.

In other words, a stable euro area supports a strong German economy. And a stable euro area is the objective of the all the measures that I have just described.

Draghi had a final message – he can create the conditions for politicians to deliver that stability, but he can’t do it all on his own.

3.24pm:

Our image system has roared back into life, so here are some pictures of Mario Draghi in Berlin (highlights of the speech start at 14.39):

Draghi arriving at the annual meeting of the BDI (Federation of German Industries):

And here’s Draghi in action:

3.04pm:

And finally, Mario Draghi insists that there is no going back on the European single currency, saying:

The euro is irreversible.

3.03pm:

Mario Draghi goes on to urge euro area governments to make deep structural reforms to boost competitiveness, and to throw their weight behind the efforts to build closer fiscal union in the euro area.

He also repeats a point which he made three weeks ago when he announced the ECB’s new bond-buying initiative, that the plan has ‘two legs’:

You need intervention, but you also need conditionality

In other words, the ECB will offer a commitment to buy your bonds, Mr Rajoy and Mr Monti, but we’ll need pledges of economic reform in return.

2.45pm:

Draghi offers Germany an olive branch

Interesting…. Mario Draghi has acknowledged Germany’s central banks concerns over the ECB’s bond-buying programme, telling his audience in Berlin that he has “enormous respect” for the Bundesbank, adding that:

many of the Bundesbank’s concerns are shared by the ECB’s governing council.

In the event, Bundesbank chief Jens Weidmann stood alone this month when the rest of the governing council approved Draghi’s plan.

Draghi is arguing, though, that protecting the eurozone is in Germany’s interest just as much as Spain or Italy. A stable, secure euro is in everyone’s interests.

Draghi’s arguably dead right, but German concerns over inflationary pressures and debt monetisation means his message may not be too well received:

2.39pm:

DRAGHI SPEECH BEGINS IN BERLIN

In Berlin, Mario Draghi has begun giving a speech about the situation in the eurozone.

The ECB chief (visiting Germany for talks with Angela Merkel) begins by warning that Europe faces “challenging times”, but that he “firmly believes” that there are reasons to be positive….if policymakers persevere with their efforts.

He moves onto the ECB’s bond-buying programme (unpopular with some in Germany), saying that the Outright Monetary Transactions programme can only be a bridge to help the eurozone along, adding:

It must be complemented by measures from governments.

But Draghi also reiterates that it is right for the ECB to act to bring down the borrowing costs of weaker members of the eurozone, saying the current divergent borrowing costs reflect “unfounded fears about the euro area”.

2.33pm:

Gordon and Sarah Brown have rung the Wall Street opening bell, and the Dow Jones has opened…..higher. Up 30 points at 13587 points. So anyone suggesting the Curse of Gordon would strike has been thwarted.

2.15pm:

Demonstrators gather in Madrid

In Madrid, thousands of demonstrators and hundreds of police officers are lining up ahead of this afternoon’s protests against the Spanish government.

The demonstrators had been planning to surround the Madrid parliament as part of their ongoing opposition to Mariano Rajoy’s government and its austerity programme.

But the word from Madrid is that police (not in riot gear) have cut off the main routes to the Congress with two lines of metal barricades. There are reported to be riot police vans at the scene and a helicopter hovering overhead

AP reports:

In Madrid’s Plaza de Neptuno square about 100 metres (yards) from the Congress, dozens of demonstrators began to assemble in front of the barricades several hours ahead of the main rally.

“Today is a key day to attack the state system and the politicians,” said 23-year-old engineering student Jose Luis Sanchez, who travelled from the northern city of Burgos to take part.

About another 200 demonstrators gathered opposite the city’s Atocha railway station watched by police. They chanted: “Rescue democracy,” or “This is not a crisis, it’s a swindle.”

1.37pm:

DEBT DEVELOPMENTS IN ATHENS

Greek finance minister Yannis Stournaras has claimed that giving Greece a two-year grace period to hit its fiscal targets would cost €13bn-€15bn. That’s lower than some previous estimates, and Stournaras reckoned it could be managed through increased borrowing and extending the maturities on bonds held by the ECB (an issue discussed at 11.19am).

Secondly, the ongoing haggling over Greece’s package of nearly €12bn of cuts drags on. But government officials are expressing optimism that after weeks of foot-dragging the negotiations could finally be wrapped up in the coming days.

From Athens, Helena Smith writes:

Aides to the Greek prime minister Antonis Samaras say it is vital negotiations over the cuts are concluded in the coming days.

“They have to be otherwise we will miss the train,” said one senior aide.

Finance ministry officials predict the controversial austerity package will be sealed by the time the three leaders supporting the conservative-led coalition meet this week. The politicians are expected to give the cuts their blessing at this rendezvous either late Wednesday or Thursday.

Earlier today, the socialist Pasok leader, Evangelos Venizelos, who is in the government but has repeatedly expressed misgivings over the measures, said his hope was that the cuts would be the last for Greeks. Since the crisis erupted in Athens in late 2009 ordinary Greeks, hit by successive rounds of cuts and tax increases, have seen their purchasing power drop dramatically.

“The measures that have to be taken are painful but we want to believe that they will be the last and we are making every effort in that direction,” Venizelos said.

Once endorsed by the leader the austerity package will go to parliament to be voted on by the 300-member house. That is not expected to happen until high-level troika official representing creditors at the EU, ECB and IMF, return to Athens after leaving attempts to fund an outstanding €2bn amount to lower-level technical teams in Athens. “They will likely return at the weekend which means by mid-week next week, the package should go to parliament. That is our hope.

Everything has to be finalised before the euro group meeting on October 8,” said one source at the finance ministry.

Helena adds that unions and anti-bailout forces in Greece are readying for Wednesday’s general strike when the country is expected to be brought to a standstill by stoppages in the public and private sector.

University professors, who will also be affected by the new round of cuts, will be protesting at 6pm local time (4pm BST) on Tuesday outside Athens’ ornate university building.

The academics, who will be joined by staff at the Union of Greek Researchers and technical institutes, are expected to march on the finance ministry which they will then encircle before holding a vigil.

“These cuts, combined with further cuts in operational grants … make it extremely difficult, not to say impossible, for institutes of higher education to continue functioning,” they said in a letter addressed to the ministers of finance and development.

1.26pm:

In Italy, a resignation and a Berlusconi interview

Political developments in Italy today: the governor of the Lazio region has quit amid a scandal over the alleged misuse of public funds.

Renata Polverini, an ally of Silvio Berlusconi, resigned following allegations that taxpayers’ funds had been diverted to pay for cars, holidays and expensive dinners.

The affair is a blow to Berlusconi’s Freedom People party, analysts reckon, ahead of next year’s election, and could also undermine the public view of politicians in Italy.

And bang on cue, Berlusconi himself has reappeared on the public eye with an attack on his successor, Mario Monti, and a pop at Germany

In an interview with the Huffington Post’s new Italian operation, Berlusconi criticised Monti for raising taxes, claiming that the technocratic leader had been taken hostage by leftwingers.

Berlusconi argued that Monti had “started out well … but unfortunately just at the moment when both austerity and growth were needed, the left conditioned Monti’s government.”

Germany, he added, needed to learn that austerity without growth risked “the end of the single currency and the destruction of Europe”"

12.44pm:

Fresh evidence that Greece’s economy is spiralling downhill: almost one in three shops in the central shopping district of Athens are now closed.

A survey conducted by the National Confederation of Hellenic Commerce (ESEE) found that 1,850 business premises are now closed, out of a total of 6,532. That works out at 31%, up from 24% a year ago.

12.02pm:

Analysis: Another Greek debt writedown looming?

We’ve had some interesting, if slightly foggy, developments on Greece today.

1) Christine Lagarde’s comments last night on the need to tackle the country’s debt problem are being taken as a signal that Athens must restructure its debts (see 10.31am)

2) The reports in the German press today that Greece may face a €30bn budget shortfall (over what timescale is unclear)

3) The suggestion from Greek deputy finance minister Christos Staikouras that Greece faces a future funding gap that could be closed by the ECB rolling over some Greek bonds (see 11.19am)

It all suggests that pressure is growing for another official debt writedown for Greece – and that ‘s a major political headache for Angela Merkel.

Our Europe editor, Ian Traynor, explains:

This is tough one for Merkel and the Germans. On no account does she want to have to go back to parliament to try to secure a third bailout. But it’s also increasingly clear she’s determined to avoid a Grexit.

There has been lots of speculation that this could change after the US elections in November but more pertinently perhaps, Merkel does not want to go down as the chancellor who presided over any kind of euro break-up.

She is said not to want to risk any country being forced to quit the euro before running for re-election a year from now. It is even said in Berlin that she’d rather lose that third-term race than see Greece go.

11.47am:

Heads-up: Gordon Brown, former UK prime minister, and his wife, Sarah, are scheduled to ring the New York Stock Exchange opening bell this afternoon (2.30pm BST).

The Browns get the honour to mark the launch of Education First, a UN initiative designed to put education on the top of the development agenda. Details here.

Hopefully Gordon will do a better job than culture secretary Jeremy Hunt managed with his Olympics bell in July.

11.42am:

Fighting talk from Germany’s Wolfgang Schäuble this lunchtime in Finland.

Asked about the crisis during a visit to Helsinki, Schäuble told reporters that defending the euro “is worth any effort”.

11.31am:

S&P forecasts bleak times ahead for Europe

Credit rating agency Standard & Poor’s has cut its forecasts for the eurozone economies, warning that the region will suffer a deeper recession than feared.

S&P now expects eurozone GDP to shrink by 0.8% this year, compared with 0.7% previously. It also slashed its forecast for next year from +0.3% to zero.

S&P is particularly downbeat about Spain, predicting a 1.4% contraction in 2013 (from -0.6% previously).

The forecasts were included in a research paper called New Recession In The Eurozone.

In it, Jean-Michel Six, S&P’s chief economist for Europe, the Middle East, and Africa, warned:

Recent economic indicators continue to paint a bleak picture for Europe. The data are confirming our view that the region is entering a new period of recession, after three quarters of negative or flat growth since the final quarter of 2010. But prospects continue to vary from country to country.

In particular, we forecast another year of very weak growth in 2013 in France and the UK, and further declines in output in Italy and Spain.

As well as bringing more pain to Europe’s population, weaker growth (or recession) means governments will probably miss their fiscal targets….

11.05am:

Greek minister suggests rolling over debt held by ECB

A document drawn up by the Greek government has proposed rolling over the Greek bonds held by the European Central Bank to help cover a looming funding gap.

In a written parliamentary answer, released on Tuesday and published by Reuters, deputy finance minister Christos Staikouras concedes that Greece will not hit the targets set under its second bailout. Extending the maturity of the bonds held by the ECB would help to plug this financial problem.

Staikouras said:

With a view to covering the financing gap, and given that the
eurosystem is holding €28bn of Greek bonds maturing in 2013-2016, the possibility of rolling over the maturities will be examined.

Staikouras also suggests that Greece may need to borrow more from the financial markets than previously planned.

Much of the ECB’s stockpile of Greek bonds was bought at a discount to the face value, suggesting that it should accept some form of writedown. That’s a tricky area legally – the ECB cannot monetise a government’s debt. So any changes to bond terms would need to be done without violating the Lisbon Treaty.

10.50am:

Merkel on the crisis

Angela Merkel spoke about the eurozone crisis in Berlin a short while ago, but restricted herself to fairly uncontroversial statements.

The German chancellor told a meeting of the Federation of Germany
Industries that euro countries must win back the confidence of the financial markets again. She also ruled out an early deal on bank recapitalisation, saying that Germany won’t accept that until proper banking supervision powers are in place.

Here are Merkel’s key quotes (via Reuters):

There is a lack of confidence in financial markets that some eurozone states can pay back their debts in the long term. The world wonders how competitive eurozone countries are.

Merkel added that Germany’s overall budget deficit is likely to be around 0.9% of GDP this year.

10.31am:

Athens officials expect further debt restructuring

Over to Greece where our correspondent Helena Smith says IMF chief Christine Lagarde’s comments last night (see 8.15am) are also being interpreted as the Washington-based Fund ratcheting up the pressure on EU governments to finally consent to a haircut of the country’s debt-load.

Helena writes:

Greek officials, starting with the finance minister Yiannis Stournaras, have long let it be known that behind the IMF’s hardened stance towards the country – blamed for the failure to resolve the issue of funding consensus on the package of spending cuts Athens must implement in return for further aid – lies another agenda: getting the official sector to agree to another write-down of Greece’s debt mountain.

Lagarde’s comments late Monday are further proof of that agenda, officials said today.

“The IMF simply doesn’t believe that in the long run Greece’s debt load is sustainable,” said one. “Lagarde is making that ever more apparent insisting that the [fiscal and structural reform] programme is so off track it will be practically impossible to plug the ‘financing gap’ that has emerged.”

The current EU-IMF rescue programme foresees Athens’ debt mountain being reduced from its current 166% to 120% by 2020. But EU diplomats in Athens concur that three months after private sector investors agreed to accept massive losses in the value of their Greek bond holdings, the IMF managing director seems to be moving firmly in the direction of another ‘haircut.’

“It’s off-limits as a discussion among EU governments but that is clearly what the IMF is pushing for,” one diplomat averred, adding that in Monday’s address to the Peterson Institute for International Economics in Washington, Lagarde had said: “The Greek debt will have to be addressed as part of the equation.”

Greek insiders reiterated this morning that the IMF’s “unrealistic demands” – that the government agrees to further cuts in wages and pensions, measures it would never be able to implement in an increasingly explosive environment – are all part of the strategy of making the case for an official write-down. Ironically, Greek officials and economists are the first to say that a public sector haircut of Greek debt is exactly what the country needs. “Nobody wants to talk about it ahead of a German election,” said one former high-level government minister referring to next year’s autumn poll. “But Greece can’t be rescued without it.”

Incidentally, the German newspapers are reporting today that the Troika will conclude that Greece needs to make a further €30bn of savings, debt restructuring or defaults (details on FT Alphaville).

That would certainly explain why Lagarde has been talking about ‘dealing’ with the Greek debts.

10.02am:

Yields rise at Spanish auction

Spain paid higher borrowing costs at an auction of short-term debt this morning.

It sold €1.4bn of three-month bills, at average yields (interest rate) of 1.203%, up from 0.946% at the last auction of this type.

It also sold €2.6bn of six-month bills at a yield of 2.213%, up from 2.026% previously.

The important issue for Madrid is to keep selling its debt, but the higher yields reinforce the fear that the financial markets are getting more nervous about Spain …

UPDATE: Nick Spiro of Spiro Sovereign Strategy says investors are nervous because they are still “none the wiser” about Spain’s plans:

Investor nervousness about Spain is rising and is now showing up in slightly higher yields at debt auctions – even sales of short-dated paper which have benefited most from the ECB’s conditional pledge to purchase unlimited amounts of short-term debt.

However the Treasury once again met its target. Demand for Spanish paper is holding up not because of an improvement in sentiment towards Spain, but because of an improvement in the credibility of an interim ECB-backed fiscal backstop for Spain.

9.45am:

Euro drops back

The euro dropped below $1.29 in early trading, following the news that lawyers are investigating the legality of the European Central Bank’s bond-buying programme (see 8.32am) and Christine Lagarde‘s warning on Greece (see 8.15am)

Rabobank’s Jane Foley reports that the euro has been one of the weakest major currencies in the last week, as summer optimism over the eurozone has withered.

She adds:

Lagarde’s comments… add weight to fairly rife suspicions regarding the ability of the country to hit its current budget targets in the allotted time.

At present Germany seems to be in no mood to tolerate a watering down of Greek’s targets meaning that sooner or later another showdown with Greece looks to be on the cards.

9.06am:

Italian consumer confidence boost

Some good economic news: Italian consumer confidence data came in slightly higher than expected this month, at 86.2 vs August’s 86.0.

8.57am:

Madrid Protests Later Today

Big demonstrations are expected in Madrid today, as protesters march on the parliament.

Around 1,300 police officers have been mobilised ahead of the demonstration by the radical indignados. They plan to surround the parliament building in protest against the government’s handling of the economic crisis.

The group are calling for new elections, arguing that Mariano Rajoy misled the people in last year’s general election by not admitting the scale of the austerity measures he would implement.

8.32am:

Bild: Lawyers checking ECB bond-buying plan

There’s an interesting story in the German tabloid Bild today: apparently the Bundesbank and the European Central Bank have engaged lawyers to crawl over the fine print of the ECB’s new bond-buying programme.

Bild reckons the Outright Monetary Transaction programme could soon be referred to the European Court of Justice, so the ECB and Bundesbank want to legally “arm” themselves ahead of a possible legal fight.

Mario Draghi has repeatedly insisted that OMT falls within the ECB’s mandate (on the grounds that excessively high bond yields are thwarting the effective transmission of monetary policy).

8.15am:

There’s a lot of interest this morning in Monday evening’s warning from Christine Lagarde about Greece’s debts.

The head of the International Monetary Fund told an event in Washington that macroeconomic problems and delays in implementing Greece’s privatisation programme had created a “financing gap”, which “have to be addressed” as part of the wider drive to repair the country’s battered economy.

As we reported last night, Lagarde’s comments could show that the IMF is prepared to give Greece more time to implement its cuts programme:

Christine Lagarde, the Fund’s managing director, said the Washington-based institution was “prepared to be flexible” and said both growth and austerity were needed to put an end to a crisis which will next month again force the IMF to cut its global growth forecasts.

The Wall Street Journal reckons the IMF chief could be signalling that eurozone states, and central banks, may have to take a hit on their Greek debts:

Lagarde’s comments are being taken by some as a public, albeit oblique, acknowledgment by the fund that a restructuring of the Greek debt held by euro governments may be what is necessary to put Greece’s program back on track.

AFP focuses on the implication that the cuts programme which Greek officials have been working on for months will not be enough:

Lagarde said that the €11.5 ($15bn) in more spending cuts and revenues increases demanded by Greece’s rescue lenders, including the IMF, might not be enough to get the massive rescue and reform operation back on the rails.

7.53am:

THE AGENDA

Here’s what we’re expecting to happen today:

Angela Merkel and Mario Draghi appear at an event organised by the BDI Federation of German Industry in Berlin: 9am BST/10am CEST

Spain auctions 3 and 6-month bonds: from 9am BST

Italian debt auction: 10am BST

Paul Fisher, Bank of England policymaker, speaks in London: 10.30am

Merkel and Draghi meet to discuss monetary union: 12.30pm BST/1.30pm CEST

US consumer confidence data: 3pm BST/10am EST

7.47am:

Coming up….

Good morning, and welcome to our rolling coverage of the eurozone financial crisis, and other events in the world economy.

Coming up today… two of the key players in the crisis are meeting in Germany today to discuss the state of the European monetary union.

Mario Draghi and Angela Merkel will hold private talks at the Chancellery, and are also due to attend a German industrial conference. The meeting comes as speculation swirls over the next steps in the crisis – with Spain yet to seek financial help and Greece still trying to reach its cuts targets.

We’ll be watching events in Berlin, Madrid and Athens as usual.

Also on the schedule…. Spain and Italy are holding bond auctions today, the Bank of England’s’ Paul Fisher is giving a speech in London, and we get new US consumer confidence data this afternoon (which will show how the world’s largest economy is faring…)

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Portugal’s plan to hike social security payments dropped. French PM: Greece should be granted an extension. Greece still seeking €11.9bn savings. IMF expected to cut its global growth forecasts at its annual meeting in Tokyo…



Powered by Guardian.co.ukThis article titled “Eurozone crisis as it happened: Portugal confirms tax U-turn after austerity protests” was written by Graeme Wearden and Nick Fletcher, for guardian.co.uk on Monday 24th September 2012 12.03 UTC

5.13pm:

IMF to cut global growth forecasts

The IMF will cut its global growth forecasts at its annual meeting in Tokyo in a couple of weeks time. In a speech in Washington, managing director Christine Lagarde said:

We continue to project a gradual recovery, but global growth will likely be a bit weaker than we had anticipated even in July, and our forecast has trended downward over the last twelve months.

A number of factors are weighing the global economy down. At the centre of them all is the element of uncertainty; uncertainty about whether policymakers can and will deliver on their promises.

This is having very real effects: increasing divergence of economic fortunes in the Eurozone; a tepid recovery in the United States.

And now we are also seeing other global ripple effects: the slowdown in emerging markets; great concern in low-income countries about rising food prices and volatile commodity prices; growing frustrations across the Middle East.

On Europe she said a strong and effective banking union should be implemented immediately.

But reform programmes should be tailored to the needs of individual countries, and the international community must recognise the efforts being made by the struggling countries – presumably Greece and Spain in particular – and provide the necessary funding and support. And she also emphasised the need for growth as well as austerity (a contentious topic as we know):

On the fund’s part, we are favorably considering that this [support] be done in as timely and flexible a manner as possible: slowing the pace of fiscal adjustment where needed; focusing on measures rather than targets; and, above all, keeping the emphasis not just on austerity, but also on growth as we believe that the two can be reconciled and should not be mutually exclusive.

And on that note it’s time to shut up shop once more. Thanks for all your comments, and we’ll be back again tomorrow.

5.20pm:

Oh dear. This won’t go down well with the austerity-hit Spanish public if true.

4.59pm:

European markets end lower

European markets have closed, and its been a cautious day all round following disappointing German confidence figures, and Greece, Spain and Portugal all being in the eurozone spotlight as the crisis staggers on.

The FTSE 100 has finished 13.78 points lower at 5838.84

Germany’s Dax is down 0.52%

France’s Cac has lost 0.95%

Italy’s FTSE MIB is off 0.78%

Spain’s Ibex is 1.12% lower

The Dow Jones Industrial Average is currently down 0.18%

4.57pm:

On the subject of European politicians, anyone who has wondered what the former Greek prime minister George Papandreou is up to, need go no further than the hallowed halls of Harvard University. As of today the ex socialist premier will start delivering a series of lectures on the euro debt crisis, says Helena Smith in Athens.

Less than a year after he joined the list of European leaders forced to resign over the euro crisis, Papandreou has popped up on the other side of the Atlantic for a teaching spell at Harvard. The politician, who remains a “simple MP” of the socialist Pasok party he led from 2004 to 2012 but which is now headed by his great rival, Evangelos Venizelos, will give his first lecture today at Harvard Kennedy School’s institute of politics where he is a “fall fellow”.

His subjects: the crisis in Greece and Europe, systemic weaknesses in the eurozone and institutional shortfalls in the European Union. Plenty of food for thought for students, with his course apparently being oversubscribed already.

3.32pm:

One potential challenger to the German chancellor, Angela Merkel, could already be facing checkmate.

According to reports Peer Steinbrueck used ministerial notepaper to seek sponsorship for a chess event when he was finance minister. He told newspapers he did not think there was anything scandalous in it, but Merkel’s spokesman said official paper should only be used for official business. Reuters has the story on Chessgate here.

3.20pm:

Ratings agency Fitch has said there is a “moderate probability” that Spain’s Banco de Valencia will be recapitalised by the country’s bank bailout fund, the FROB. So it has put the bank’s BB- rating on negative watch.

The results of the stress tests on Spain’s banks are due to be unveiled on Friday, with the government maintaining over the weekend that they would need only €60bn of the €100bn lifeline allocated to beef up their balance sheets.

The day before, Spain is expected to publish its new economic plans, amid continuing protests over the government’s austerity drive.

2.57pm:

Back in Greece, there are suspicions that part of the difficulty in agreeing €11.9bn of spending cuts could be due to growing differences between the troika of lenders. After spending the morning talking to officials on the ground, our correspondent Helena Smith writes:

Debt dynamics are a complicated affair and when it comes to shoring up Greece even more so. The country’s three lenders – the IMF, EU commission and ECB – have long been thought to have different, if subtle, approaches to keeping Athens’ moribund economy alive.

Of late, media reports have been rife that those differences have grown as leading members of the IMF have expressed mounting consternation at the extent of the help required by an advanced western economy like Greece. Almost three years after the outbreak of the crisis in Athens, countries such as Brazil are nothing short of dismayed. Many in the IMF have now come round to thinking that the only way to make Greek debt sustainable – at 166% of GDP still the highest in the EU – is another restructuring, this time in the official sector.

At Greece’s finance ministry senior officials, including the finance minister, Yiannis Stournaras, are convinced that this explains why the IMF’s mission chief to Greece, Poul Thomsen, has recently made consensus over the measures so difficult. Prior to leaving Athens on Friday for a week’s break from the negotiations, Thomsen had reportedly been racheting up the pressure.

“Stournaras was furious with him. Every time they got somewhere, Thomsen would make another demand, such as agreeing to further cuts in wages and pensions, which he knew would be impossible for the government to enforce,” one well-placed source said.

“Basically they want the measures to fail so that Greece is forced to ask for another haircut [on its debt] but we know that is not the view of the European commission or Germany which is strongly against another debt restructuring at this time.”

Greek insiders said if the package was finally closed and the spending cuts agreed “the worst may be over”.

More than €25bn of the €31.5bn tranche will go straight to banks which will immediately be able to make loans. That’s a huge amount and so hugely important for business and liquidity. Everything depends on how the government handles the measures. If agreement over the cuts is clinched and the country doesn’t implode [in reaction to them] then on every front things will be easier,” another insider said.

“If GDP stops falling, there is a slight increase in employment and attitudes begin to change, I give it 60% to 70% that the worst is over and Greece’s future in the eurozone is assured. That is why the next month is so critical.”

Once consensus is reached over the measures, the prime minister, Antonis Samaras, is expected to address the nation. Aides say the conservative leader – once a vehement opponent of the deficit-reducing policies – will emphasise that while the austerity package is the price of remaining in the eurozone it will be the last Greeks have to endure.

2.46pm:

Wall Street opens lower on eurozone gloom and downbeat Chicago report

Wall Street has caught the general global gloom and is following other markets lower.

In early trading the Dow Jones Industrial Average is down around 35 points, with the uncertainty over the eurozone and the poor German confidence figures taking their toll.

On top of that there has been a downbeat snapshot of part of the US economy, with the Chicago Fed activity index falling sharply in August. It is down to -0.87 from -0.12 the previous month, although Annalisa Piazza at Newedge Strategy said:

Although the index is close to “recessionary” levels, we suspect a modest upward correction will follow in the coming months. Indeed, the economy is certainly running well below potential but we don’t see signs of deep contraction any time soon. Certainly today’s report is a warning sign that the US economy is far from being on a sustainable upward trend.

2.32pm:

A couple of new snaps of Portuguese PM Pedro Passos Coelho just arrived, taken as he explained today’s decision to drop an effective pay cut for Portugal’s workers.

He looks pretty downbeat – no wonder, given the huge public backlash to the proposal.

And with that, I’m handing over to my colleague Nick Fletcher

2.12pm:

Back on Portugal’s tax U-turn (as covered at 13.03).

Pedro Passos Coelho has told the Portuguese people that the government cannot break away from its austerity commitments. Speaking after confirming that the unpopular social security payments hike has been axed, the PM said:

As long as Portugal maintains its level of fulfilment, we know that we will have the support of our external partners. If we do not, we put at risk our fulfilment, and these guarantee mechanisms will cease to exist.

In other words, the U-turn will have to be paid for by someone….

1.39pm:

The euro continues to weaken today, hitting €1.289 against the US dollar – a fall of around 1c today.

This morning’s disappointing German business confidence data (see 10.36am) is the main factor weighing on the euro.

As Peter O’Flanagan of Clear Currency put it:

This weak reading will put further pressure on the euro and supports last week’s ZEW economic sentiment survey that predicts the next six months will see further contraction in Europe’s core

1.03pm:

PORTUGUESE PM CONFIRMS TAX U-TURN

It’s official, Portugal has caved in on its plans to hit workers with a hike in their social security payments.

As expected (see 8.23am), the Lisbon government has pulled a U-turn on the austerity measures.

Speaking a little while ago, the prime minister, Pedro Passos Coelho, said new tax measures would be proposed. The original plan to raise employee social security payments from 11% of their salary to 18% is abandoned.

The decision is a victory for the hundreds of thousands of people who took to the streets nine days ago in massive protests against the plan.

Passos Coelho warned that Portugal needs to find the money from another source, otherwise its €78bn bailout could be at risk.

He added that he will continue negotiating with unions and business confederations over news ways to raise the funds, which could include separate income tax rises or changes to “capital tax measures” (Reuters reports).

Passos Coelho made his announcement after meeting union and business leaders this morning – here’s a photo of the PM (on the right) with the finance minister, Vitor Gaspar, before the talks began.

12.26pm:

Some photos of journalists protesting in Athens today have just arrived.

This one shows striking media workers carrying a banner criticising the government’s changes to labour laws. On the left is a banner, promoting Wednesday’s general strike (see 10.11am for more details)

And this photo shows striking journalists outside their union building.

11.20am:

Row over plans to leverage ESM

A report that Europe’s new bailout fund could soon be leveraged up to provide €2tn of firepower has been rebuffed by the German finance ministry today, but the whole story is a little confusing.

It started with Der Spiegel reporting that some eurozone policymakers favour leveraging the €700bn resources of the European Stability Mechanism up to €2tn, by partnering with private capital and providing insurance against losses on euro sovereign debt.

When asked about this report this morning, Germany’s deputy finance minister Steffen Kampeter confirmed that a discussion about the issue was under way (although any such change would need the approval of the Bundestag, for starters).

So far, so good, until a finance ministry spokesman declared that reports of the ESM being boost to €2tn were unrealistic and “completely illusory”.

So what gives? Our Europe editor, Ian Traynor, detects the grim hand of government spin:

While Reuters’ Luke Baker points out that the ESM is inheriting some leverage powers from its predecessor, the European Financial Stability Facility:

Those powers included allowing the EFSF to offer insurance to private investors who bought eurozone sovereign bonds, and allowing it to partner with those investors and promise to pick up the first tranche of losses.

Finland apparently baulked at those powers being transferred to the ESM, so they won’t be in place when it comes into power next month. But it’s probably a matter of time …

11.11am:

Van Rompuy: Euro leaders must not relax

Who’d like to see a video of Herman van Rompuy, president of the European Council, demanding more action on the eurozone crisis?

Go on then….

The clip, launched this morning, shows Van Rompuy issuing a rallying cry against those who think the eurozone crisis is over.

Here’s a flavour of the video, which starts with VR niftily rotating his chair to face the camera (wonder how many takes that took):

As long as 25 million people in our countries are looking for a job, and as long as we have not yet fully stabilised the euro, we cannot sit back, and I will make sure that we will not sit back.

I see a tendency of losing the sense of urgency, both on short-term policies and on the longer term. This must not happen.

10.43am:

A curious auction of German bonds this morning saw investors agree to negative interest rates, but more than half the debt was left unsold.

The Bundesbank sold €1.17bn of 12-month bonds at a yield of -0.0184% (which means buyers will receive slightly less than they paid when the debt matures in September 2013).

A total of €3bn of bills were on sale, but despite receiving €6bn of bids it held back €1.83bn which it now plans to sell in the secondary market.

10.36am:

This morning’s weak German business confidence data (see 9.24am) has sent a shiver through the European financial world.

At 101.4, the IFO index hit its lowest level in two and a half years.

ING analyst Carsten Brzeski said it shows that the European Central Bank’s OMT programme (designed to help struggling euro countries) is not a miracle cure:

Brzeski explained:

Today’s Ifo index shows that German companies remain skeptical about the economic impact of Mario Draghi’s magic…

Despite fears of a looming eurozone break-up clearly fading away, German businesses are downscaling their expectations. The structural adjustments in Germany’s eurozone trading partners will take time and will dampen demand for German products.

The news has helped to send European stock markets down this morning:

FTSE 100: down 29 points at 5823, – 0.5%

Spain’s IBEX: down 127 points at 8103, – 1.5%

Italian FTSE MIB: down 223 point at 15767, -1.4%

German DAX: down 47 points at 7403, – 0.64%

French CAC: down 38 points at 3491, -1.1%

10.12am:

Greece enters an autumn of unrest

Meanwhile, Helena Smith reports that Greece is also bracing for a week of mobilisations and industrial action. Opposition parties predict a mass turn out this Wednesday when workers declare their first autumnal general strike.

Helena explains:

Opposition to the latest round of cuts will deepen this week when unions bring the country to a grinding halt in a mass protest against measures that will, they say, push the recession-hit nation ever closer to penury.

The strike, the 17th this year, is being widely seen as the “inaugural” rallying of the troops as resistance to the belt-tightening policies deepens. “Opposition to the measures is going to strengthen and, in our estimation, Wednesday’s strike will mark the start of it,” Panos Skourletis, press spokesman of the main opposition radical left Syriza party, has just told me. “Everyone will resist these measures because they are so unfair.”

Some strike action is taking place today, with journalists holding a 24-hour stoppage and judges downing tools (gavels?) at some courthouses. Living In Greece has full details.

Helena continues:

Addressing a two-day meeting of the party’s central political committee over the weekend, Syriza’s leader, Alexis Tsipras, said he foresaw the crisis entering a new phase and “getting much bigger” once the nearly €12bn package of cuts was announced.

Greece’s justice system, which has been badly disrupted by judges and prosecutors protesting the cuts in industrial action that began last week, will be at the centre of yet more strikes. Judges, whose wages will be directly affected by the cuts, announced over the weekend that they would continue the walkout, due to finish at the end of September, until 20 October.

Wednesday’s strike will see civil servants and private sector workers take to the streets as well as Greece’s burgeoning mass of unemployed – now at a record high of nearly 24%.

10.02am:

The Bank of England’s financial policy committee has concluded that the risks to Britain’s financial system are as great as in June.

The FPC warned that it still believes banks must reinforce their capital reserves, to protect them from future losses as the financial crisis continues.

We’ll have a full story on this shortly…

9.33am:

Another crucial week for Greece

In Greece, finance ministry officials hope to finally seal the contentious €11.9bn package of spending cuts that international creditors have set as the condition of further rescue loans, within the next few days.

Our correspondent Helena Smith writes:

 With the thriller over the budget cuts set to continue, finance ministry sources are braced for another week of negotiations in a last ditch effort to find the outstanding €2bn amount that Athens needs to come up with if the austerity package is finally to be closed.

Two days after the departure of high-level envoys from Greece’s “troika” of creditors at the EU, ECB and IMF, the talks will continue with the technical teams that are almost permanently based in the Greek capital – mission chiefs, who are believed to be number-crunching back in Brussels, are not due to return to debt-stricken Greece until next Tuesday.

A senior finance ministry source has told reporters that efforts will focus on ministerial budgets in the hope that with better house-keeping at the finance, labour, health and defence ministeries the €2bn savings can be found. “I hope the ministeries that are being targeted by the troika can contribute more to the cuts,” he said. By the time inspectors return, Athens will also have to have devised “a credible breakdown” of tax cuts amid what one insider described as “widespread suspicion” of the tax measures proposed so far. Troika officials have told the Greeks that “everything depends on you.”

Although, as yet, there has been no reaction on the part of the government to suggestions that Greece will be given more time to implement the gruelling fiscal adjustment programme – with France making this clearer than ever before (see 08:23am onwards) – prime minister Antonis Samaras’ conservative-led coalition knows it is in a race against time.

“The time frame is very pressing. We still want to close the package and get it passed by parliament before the euro group meeting [of finance ministers] on October 8th,” said one source. With the cuts being agreed, Greece will not be given the €31.5bn rescue loan it so badly needs to recapitalise banks and inject some liquidity into the lifeless economy.

Germany’s Der Spiegel, incidentally, claimed over the weekend that the Troika’s preliminary report had concluded there was a €20bn gap in Greece’s budget, suggesting that billions of euros of extra cuts would be needed. That has been denied by Athens, though.

9.24am:

Weak German business confidence hits euro

The euro has fallen in the last few minutes after the latest survey of German business confidence came in weaker than expected.

The monthly IFO index fell to 101.4 in September, down from 102.3 in August and is the fifth monthly decline in a row.

That’s dented hopes that the ECB’s recent bond-buying programme had lifted sentiment in the euro economy. It sent the euro sliding to $1.2903, down 0.8 of a cent.

9.08am:

There were more protests in Madrid over the weekend, as people took to the streets to urge Spain’s government to relax its austerity plans.

According to AFP, around 1,000 protesters marched peacefully up a central avenue from Atocha train station under banners with slogans such as “Bankers out of Power” and “Jobless, Homeless and Fearless”.

Here’s a photo:

The demonstrations come ahead of Madrid’s new economic plans, which could be published on Thursday.

8.46am:

A small gobbet of economic news: new data out of the Netherlands has confirmed that its GDP grew by 0.2% in the second quarter of 2012. That underlines that the Dutch economy fared better than the eurozone average (-0.2%), and also outperformed the UK (-0.5%).

On an annual basis, that leaves Netherlands’ GDP 0.4% smaller than a year ago.

8.40am:

Jean-Marc Ayrault’s call for Greece to be given more time to hit its targets (see 8.23am) appears to be the most explicit signal yet on this issue from Paris.

As the Financial Times flags up, the French prime minister also voiced exasperation at eurozone partners who have refused to cut Greece much slack:

Mr Ayrault made clear the frustrations in the new socialist government over the handling of Greece by eurozone leaders, including the German chancellor, criticising them for a “political weakness” and “a lack of vision”.

“When you think that the Greek crisis has lasted 2½ years, and that Greece represents only 2 per cent of the gross domestic product of the eurozone . . . European leaders have not been able to meet their responsibilities in time,” he said.

8.14am:

Good morning, and welcome to our rolling coverage of events in the eurozone, and other key developments in the world economy.

First up: a couple of interesting developments overnight.

1) Greece’s request for an extension to its financial programme has won the support of France’s prime minister.

Speaking on Sunday, Jean-Marc Ayrault said that Athens should be given more time to hit its targets, if it can show that it’s serious about reform.

Speaking to French online news site Mediapart, Ayrault argued that Greece could not be allowed to tumble out of the eurozone, saying:

The answer must not be a Greek exit from the eurozone.

We can already offer it more time … on the condition that Greece is sincere in its commitment to reform, especially fiscal reform.

As things stand, we’re still waiting for the Troika’s official report into Greece’s progress. Ayrault’s comments add weight to the theory that Athens will be granted more support in the event that it has missed a significant chunk of its targets.

We’ll bring you reaction to Ayrault’s comments as soon as possible.

2) Portugal is on the brink of abandoning its controversial plans to hike taxes on workers, in a victory for the huge numbers of people who protested a week ago.

Pedro Passos Coelho, the Portuguese prime minister, is due to hold talks with employers and trade unions today to discuss alternative proposals. The public opposition to his plan to effectively slash workers’ pay to fund lower taxes for companies appears to have forced Lisbon to change course.

As my colleague Giles Tremlett reported last night:

Portugal’s government is preparing a U-turn on an announced rise in social security contributions that would have instantly increased workers’ payments by nearly two-thirds amid a growing popular revolt against austerity measures.

Hundreds of thousands of people took to town squares across the country a week ago to protest at the announced rise, which raised contributions from 11 to 18% of salaries, sparking a pledge by the government this weekend to reconsider the unpopular move.

…an eight-hour meeting of the presidential state council was besieged by protesters in the small hours of Saturday morning and ended with a government pledge to renegotiate deficit-cutting measures with trade unions and employers.

Giles’s full story is here.

We’ll be watching the latest developments in Portugal today, and also monitoring events in Spain. There’s speculation that this may be the week that Madrid seeks financial help, although prime minister Mariano Rajoy could well sit tight and look to ride out the crisis a little longer….

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In the broadcast today: EUR and USD New Trading Week Outlook. With the dust still settling after the ECB, the FOMC and the Bank of Japan’s “race to debase”, we turn our attention to the new trading week and explore the outlook for the EUR, the USD and other currency majors, we  list the Top 10 spotlight economic events that will move the markets in the week ahead, we examine the consensus forecasts for the upcoming economic data, we analyze the latest trend developments in the EUR/USD currency pair, we note the new 2012 high in the GBP/USD pair, we continue to monitor the USD/JPY currency pair, we highlight the market’s reaction to the meeting of Euro-zone leaders, the news of a potential delay of the Troika’s report on Greece, and the U.K. Public Borrowing, we discuss new forecasts from Bank of New York-Mellon and Bank of America Merrill Lynch, and prepare for the trading week ahead.

Live Broadcast from 9:00 am to 10:00 am, Eastern Time, Monday – Friday.

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Reuters: Troika report likely delayed till mid-November, but Athens tells us they expect report in October. Euro leaders meet in Rome. Italian minister says that there will be no voluntary bailouts. UK borrowing at record high…



Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Greece denies US election could delay aid deal” was written by Graeme Wearden, for guardian.co.uk on Friday 21st September 2012 15.19 UTC

4.19pm:

Meanwhile, talks over Greece’s €11.9bn package of spending cuts have resumed at the finance ministry.

Our correspondent Helena Smith reports that Greek finance minister Yannis Stournaras is back at the negotiating table with visiting troika mission chiefs. The meeting may well be the last before the officials, lead by the IMF’s Poul Thomsen, leave Athens on Monday for the “pause” we reported earlier (see 12.15pm)

Helena has the latest details and rumours from Greece:

There is widespread speculation in the Greek media that as much as €2bn of the package will be accounted for in the form of new taxes including a “head tax” that will start at €150 for those who rent out properties. None of the reports have as yet been confirmed, but if this is the case the new levies which are believed to be part of today’s discussions, will follow a barrage of duties slapped on Greeks since the outbreak of the crisis. Last year the cash-strapped Greek government began imposing a controversial property tax which it appended to electricity bills. Whatever the outcome of the talks, the cuts will not be given the green light until the three political parties supporting the governing coalition finally given them their blessing.

That is not expected to happen until next week when prime minister Antonis Samaras has returned from Rome and can meet his junior coalition partners. Both leaders have repeatedly warned that Greek society “has its limits.” The boulevards of central Athens are already decked out with banners and posters denouncing the new measures ahead of next Wednesday’s mass general strike. One banner, erected by the General Confederation of Greek workers (GSEE), proclaimed: “SOS: Let our country be saved but first save its people.”

3.36pm:

In Athens, government officials are surprised to hear that the Troika’s report into Greece could be delayed until after the US elections in November (see 15.18)

Our correspondent Helena Smith has hit the phones, and reports that senior government officials insist that they still expect the debt inspectors to complete their report next month as planned.

Helena writes:

Pouring cold water on the suggestion that the much-anticipated review could be delayed until after the US elections, high-ranking government officials maintained that the report would “almost certainly” be released before the euro group meeting of finance ministers on October 8.

“I consider that scenario [of such a delay] very unlikely,” said one well-placed source who had been in contact with several government ministers throughout the day. “The report will almost certainly be released before the euro group meeting. That is the plan and everything is on track for that to happen.”

With Greece’s next tranche of aid (worth €31bn) dependent on the review and mounting hostility to another round of austerity, the government is in a race against the clock to unlock the rescue funds in the hope that the new cash injection can keep social unrest at bay.

Helena adds that the €31bn aid tranche is vitally needed to “heat up” the real economy. Most of the money is earmarked to recapitalise Greek banks which have been unable to give out loans for months:

Contractors, who have also gone unpaid for months, will receive outstanding sums, as well, in the hope that major infrastructure projects that have been put on hold can also be brought to life again.

3.18pm:

REUTERS: TROIKA REPORT INTO GREECE COULD BE DELAYED BY US ELECTION

Rumours have been swirling for weeks that the showdown over Greece’s future in the eurozone would be delayed until after the US elections.

Well, Reuters is now reporting that the much-anticipated Troika report into Greece’s finances is likely to be delayed until after November 6, when either Barack Obama or Mitt Romney will have triumphed in the race for the White House.

We’ve heard before that Obama was extremely concerned that the eurocrisis could wreck his re-election bid; and it appears that EU leaders are prepared to do what they can.

The full story by Luke Baker, Reuters bureau chief in Brussels, is online here. Here’s some highlights:

Differences inside the troika about the precise extent of Greece’s debt problems, combined with political pressure to hold off for another few weeks, look likely to mean a delay until mid-November. In the meantime, Greece will be kept afloat by issuing short-term treasury bills and its banks will get access to emergency funds from the Greek central bank.

“The Obama administration doesn’t want anything on a macroeconomic scale that is going to rock the global economy before Nov. 6,” a senior EU official told Reuters, adding that previous troika reports had also slipped.

Several sources in Germany said top officials in Washington had made clear in numerous conversations with their German and European counterparts.

If the Troika’s report is delayed, then so is the decision on whether Greece gets a €31.5bn aid tranche, which is needed to recapitalise its banks, meet debt repayments, and pay public sector wages.

The stakes couldn’t be much higher.

2.36pm:

Ireland was warned to expect little respite from its economic woes today. One of its leading economic think tanks predicted that the Irish economy will contract further this year and will only experience low growth in 2013.

From Dublin, Henry McDonald reports:

The Economic and Social Research Institute in Dublin said that the Republic is still “bouncing along the bottom” with forecasts of joblessness remaining high next year. More than 14% of the working population is unemployed in Ireland.

The ESRI believes that GNP, the measure of economic activity that excludes foreign multinationals, will shrink by 0.2%, but it expects it will turn positive next year, with growth of 0.7%.

Using GDP, which is used to measure the fiscal targets set by the Troika, the picture is slightly more positive, with the ESRI
predicting growth this year of 1.8%, and 2.1% next year, which is much higher than other official forecasts.

It points out that even if there was no national debt to service,
there would still be a large budget deficit to close. The ESRI says day-to-day spending outstrips tax revenues.

The weakness of the Irish domestic economy means unemployment is set to remain high next year, and the ESRI has warned of the scale of the fiscal adjustment to come.

Taoiseach Enda Kenny has already said that it would be the the Fine Gael-Labour government’s most challenging Budget, but one which would strive to be fair to all.

2.27pm:

The gold price hit a new 6 and a half-month high, of $1.780.7 per ounce, this lunchtime.

The move came as the value of the US dollar slid fell, pushing the pound up to a new 12-month high of $1.63.

Andy Scott of foreign currency exchange brokers HiFX said the Federal Reserve’s new quantitative easing programme was continuing to undermine the value of the dollar:

With the Fed announcing last week an open ended programme of asset purchases and pledging to keep rates on hold until 2015, the Dollar could weaken further.

2.13pm:

LAGARDE: IT’S TIME FOR ACTION

Christine Lagarde has called for “co-operative action, not just co-operative talk” between countries to lift the world economy out of the mire.

The managing director of the IMF made the call this afternoon, telling leaders that it was important that they actually implement the measures they have agreed since the crisis began five years ago.

In an interview with IMF Watch, Lagarde argued that leaders must ‘get beyond’ the ongoing troubles in the eurozone.

Lagarde said:

It’s a question really of trying to get beyond the crisis in the eurozone, asserting a medium-term plan for countries like the United States and Japan, and making sure that some of the issues that actually created the crisis back five years ago are really dealt with, not just half dealt with.

And I’m particularly thinking about the financial sector.

1.46pm:

Ireland’s prime minister suggested that it may be hard for Mario Monti to impose tough austerity measures on the Italian economy.

Speaking after their meeting in Rome, Enda Kenny said it was sensible of Monti to raise the Italian budget-deficit forecast last night, in the face of a deeper-than-expected recession.

The scale of Italy’s downturn, he said, suggested it could be counter-productive to risk significant cuts at this time.

Kenny said:

Prime Minister Monti has been very pragmatic in what he set out here, clearly he has raised the question of the extent of austerity which can be applied in Italy.

1.20pm:

Portugal’s PM: we hear the anger

Facing waves of anger on the streets, Portugal’s prime minister has promised to listen to the people has he struggles to meet the demands of the country’s lenders.

Pedro Passos Coelho told the Lisbon parliament that his government “was not deaf” to the fury unleashed after it announced plans to hike social security payments levied on workers. That suggests there could yet be a u-turn on the policy, which drove tens of thousands of protesters to take part in last weekend’s demonstrations.

Passos Coelho said:

We are not deaf to the difficulties faced by the country.

We know that we are resolving problems, but we have the humility to recognize that the difficulties faced by people are very big and we know that Portugal’s adjustment is not over at the end of the year.

However he was blasted by opposition leader Antonio Jose Seguro, who accused Passos Coelho of “incompetent” handling of the budget.

Public protests are due to continue tonight, with protests across the country called for 6pm onwards. A demonstration is also scheduled for outside the Portuguese embassy in London from 5pm tonight (details).

1.09pm:

Enda Kenny and Mariano Rajoy also got the red carpet treatment when they arrived for their talks with Mario Monti today. Here are some more photos:

12.15pm:

Troika takes a pause in Athens

Another angle out of Brussels this lunchtime; the European Commission has said that the Troika officials in Greece will take a ‘pause’ in their negotiations with Athens.

Just checked with Helena in Athens, and this isn’t a major change of plan. Junior officials from the IMF/EC/ECB will stay behind to keep working on the details of Greece’s financial plans.

11.55am:

The European Commission was quizzed about the situation in Spain, following today’s report that EC officials have been discussing a new structural reform programme (see 8.42am)

A Commission spokesman told reporters in Brussels that the EC remained “in close contact” with the Spanish authorities, adding that Madrid retains “full responsibility” for its financial program.

11.25am:

Greek opposition blasts austerity plans

Back to Greece, where the draconian efforts to come up with a “fair package” have been derided by Greece’s increasingly virulent anti-bailout front.

Helena Smith reports:

The coalition government’s high-wire act of trying to placate international lenders while ensuring that austerity–hit Greeks are not pushed to breaking point is increasingly being derided as nothing but a “show”.

Across the board, from the far-left to the far-right, opposition parties have been unsparing in their criticism of the three-party alliance’s attempts to come up with an austerity package that will appease creditors – and unlock badly-needed loans – and yet also be “fair” for Greeks.

In an excoriating statement the main opposition radical left Syriza party lambasted the coalition saying its three party leaders were engaged in “an operation” that amounted to being “the height of deception against the Greek people.” “The so-called brave [efforts in their dealings] with the troika has the same credibility as the pre-election pledges of the governing parties to re-negotiate [the terms of Greece’s latest €130 bn bailout],” it railed.

“There is no fundamental disagreement between the governing partners, [there is] only their own common commitment to continue the policies of the memorandum [loan agreement] and their weakness in front of the people to defend the new program of social destruction and economic levelling. The mutual plan of both the government and troika for privatizations, the dissolution of public services, the exorbitant taxation of the people, lay-offs and cuts in wages and pensions is opposed by the majority of Greek society.”

Syriza has vowed to step up street protest, strikes and other forms of industrial action once the measures are announced and brought to parliament.

And we’ve just heard that finance minister Stournaras start today’s meeting with the Troika at 4pm local time (2pm BST).

11.13am:

BRAZIL WARNS OF CURRENCY WARS

Brazil’s finance minister has predicted that the quantitative easing programmes being pursued by developed nations will prompt a full-blown currency war.

Speaking in London this morning, Guido Mantega said the latest asset purchase schemes announced by the US Federal Reserve and the bank of Japan could spark tit-for-tat retaliation.

Mantego accused both countries of deliberately driving down the value of their currencies in an attempt speed their economic recovery.

He said:

Currency war is being used by countries that are important and the quantitative easing (QE) that’s been done by the Fed has stimulated this kind of currency war. The immediate answer to the U.S. QE is Japanese QE as Japan has already reacted and will adopt measures to devalue the yen.

They will be stimulating the currency wars as it will lead all countries also to pursue these wars… It’s natural other countries will defend themselves from these attitudes.

QE has caused trouble for developing nations before, with the new money created by central banks flooding into their economies as traders seek higher returns.

Mantego pledged that Brazil would fight back, by trying to prevent ‘hot money’ flooding in, and by buying more foreign reserves to keep the Brazilian real from appreciating too much.

10.45am:

Latest in Greece

Over to Greece again where as we have reported the ongoing efforts to clinch a whopping €11.9 bn in spending cuts continue apace. Our correspondent Helena Smith says with Greek finance minister Yannis Stournaras set to meet leading officials from the EU, ECB and IMF later this afternoon, after a marathon round of talks last night, there are hopes the package could even be sealed today.

Helena writes:

Following almost five hours of talks that ended at 1:30 AM, Greek finance ministry officials are expressing optimism that the spending cuts can finally be agreed when Stournaras meets troika officials later today. Thursday’s marathon talks appear to have cracked long-running disagreements with sources saying that while “a gap still exists” the worst of the negotiations are now behind them. “We are all aware that time is against us,” said one official emphasizing that if the talks dragged on the effects on the real economy could be “disastrous.”

Dimitris Tsiodras a former government spokesman who has excellent knowledge of the ongoing negotiations, also said he expected them to be concluded. “There is still a gap but it does not exceed more than €1.5 bn euro,” he told me. “This is a relatively small amount that has stumbled again on the troika’s insistence that it come from pensions.” But, he said, there was a realization that it could be settled even if the troika representatives left Greece, as they are scheduled, on Monday morning. According to media reports this morning, Stournaras made clear last night that he would rather step down than condone pensioners and low-income Greeks having to bear the brunt of yet more cuts (as it is, the package already foresees some €7.5 bn being amassed in cuts from pensions, wages and benefits). “The €1.5 bn can be resolved from afar … what is sure is that the package will be agreed before the euro group meeting on October 8,” said Tsiodras.

If that is the case, talks are likely to focus in the interim on the outstanding amount being covered by ministers at the finance, labour, health and defence departments agreeing to further cuts in their budgets. “In that sense I foresee negotiations continuing next week when party leaders will also meet to agree the package,” added Tsiodras. “But by Monday the package will essentially have been closed.”

Although hopes are now high that the austerity measures, the equivalent of 5 % of GDP, can be presented in detail by Stournaras to his counterparts on October 8, it is far from clear when the package will go to parliament. Originally, prime minister Antonis Samaras had hoped it would be ratified by the 300-seat House by the end of next week but that now seems highly improbable.

10.23am:

Greek prime minister Antonis Samaras was greeted by a military band and an armed guard when he arrived in Rome for talks with Mario Monti.

Here’s a couple of photos:

And the word from Rome is that the talks between Samaras and Monti have just concluded. I”m looking for some details about what was discussed…

Next up, Irish PM Enda Kenny:

10.03am:

Treasury minister David Gauke has said it’s too early to say whether Britain is going to miss its debt targets.

Speaking after the Office for National Statistics reported that UK’s public borrowing had hit a new record in August (see 9.49am), Gauke urged caution, saying:

At such an uncertain time we should not second guess what the Office for Budget Responsibility will forecast later in the year, by which time it will have further months’ data to draw on.

This is a timely issue. Last night, Bank of England governor Mervyn King declared that it would be OK for the government to miss its debt reduction targets.

9.49am:

Britain borrowed more than in any other August last month, data just released showed.

Britain’s public sector net borrowing requirement (excluding the state’s involvement in the financial sector) came in at £14.41bn for August, up from £14.365bn a year ago.

There was one piece of good news, though: the UK’s total borrowing for the last financial year was re-estimated downwards

9.36am:

There must be some tired bodies in Athens this morning, after yesterday’s talks between Greece’s officials and its Troika of lenders dragged on into the early hours of this morning.

Greek newspaper Kathimerini reports that the talks only ended at 1.30am. It adds that:

Finance Ministry sources appeared optimistic that the measures could be finalized, pending coalition leaders’ approval, by the end of the day.

We’ll have more on the latest developments in Athens soon.

8.54am:

Italian minister rules out voluntary bailout request

Neither Spain nor Italy will seek financial help until the financial markets forces it on them.

So argued one of Mario Monti’s ministers last night. Gianfranco Polillo, undersecretary of finance, told Bloomberg that neither country could accept asking for aid unless they were frozen out of the bond markets.

Pollio explained:

There won’t be any nation that voluntarily, with a preemptive move, even if rationally justified, would go to an international body and say — ‘I give up my national sovereignty,’

I rule it out for Italy and for any other country.

Both Spain and Italy’s borrowing costs have fallen sharply in recent weeks, after the European Central Bank made its pledge to buy unlimited quantities of their short-term debt.

By Polilo’s logic, Spain will sit tight and hope it can ride out the crisis.

8.42am:

On Spain’s possible bailout, the Financial Times reports that Madrid has been negotiating with the European Commission over the details of a new economic reform plan, due for release next Thursday.

The idea, it seems, is to get Brussels onside before the programme is announced to the Spanish people (national sovereignty still has its limits….).

Here’s a flavour:

One senior European official said negotiations have been conducted directly with Luis de Guindos, the Spanish finance minister. The plan, due to be unveiled next Thursday, will focus on structural reforms to the Spanish economy long requested by Brussels, rather than new taxes and spending cuts.

“It is a kind of ‘proto-programme,’ if such were needed,” the official said. The commission could, however, still request more austerity measures next month to meet existing EU budget targets, which Madrid is expected to miss.

More here.

8.30am:

Mario Monti’s day of meetings has dubbed “some serious pasta diplomacy” by the Daily Telegraph’s Damian Reece, who writes:

The Italian leader, Mario Monti, meets Mariano Rajoy of Spain for antipasta before shifting tables and enjoying some carne with Antonis Samaras of Greece and then Ireland’s Edna Kenny arrives for some gelato.

It’s a shame Portugal’s PM isn’t there too, otherwise Monti could have washed it all down with a coffee

8.22am:

THE AGENDA

Mario Monti’s meetings in Rome are the main scheduled event today:

Greek PM Antonis Samaras meets Monti: 8.30am BST / 9.30am CEST

UK August public finances: 9.30am BST

Irish PM Enda Kenny meets Monti: mid-morning

Spanish PM Mariano Rajoy meets Monti: 11.30am BST / 12.30pm BST

8.07am:

Good morning, and welcome to our rolling coverage of the Eurozone financial crisis, and other key events in the global economy.

Coming up. Italian prime minister Mario Monti is playing host to three other leaders today. Ireland’s Enda Kenny, Greece’s Antonis Samaras and Spain’s Mariano Rajoy (the man at the heart of the crisis right now) will all hold talks with Monti in Rome in the next few hours.

While the meetings take place, Greek government officials will hold yet another round of negotiations with its creditors in the hope of hitting agreeing almost €12bn of cutbacks. There is hope that the missing €2bn of savings could be agreed today….

And overshadowing everything else: Spain. The situation there has escalated further since Rajoy slapped down the Catalan government’s bid for new tax-raising powers on Thursday (details here). Speculation of the region breaking away from the rest of Spain adds to the pressure on Madrid.

Will there be any progress towards a bailout today?

Also coming up; UK public finance data for last month will be released this morning, and probably show that Britain is missing its fiscal targets.

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