September 21 2012

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.

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


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.”


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.



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.


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.


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.



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.


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.


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).


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:


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.


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.


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).



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.


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.


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:


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.


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


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.


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.


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.


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



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


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. © Guardian News & Media Limited 2010

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