November 2012

In the broadcast today: EUR and USD New Trading Week Outlook. Ahead of a busy trading week filled with important data from the Euro-zone and the United States, we focus on the EUR and the USD as the currencies to watch closely throughout the week and explore the outlook for these two 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 continuous efforts by the EUR/USD currency pair to break into the $1.30′s, we note the renewed strengthening of the USD vs. JPY, we keep an eye on the GBP/USD pair, we highlight the market’s reaction to the Japanese CPI and Industrial Production, the German Retail Sales, the Euro-zone Unemployment Rate, and the U.S. Personal Income and Outlays, we discuss new forecasts from Bank of New York-Mellon and UBS, and prepare for the trading session ahead.

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

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The German Bundestag votes in favor of the Greek deal with 473 votes vs 100. Highlights of the debate on Greece. Eurozone unemployment rate hits new record high. European Central Bank President Mario Draghi says: we’re living in a ‘fairy world’…

Powered by article titled “Eurozone crisis live: German parliament approves Greek deal” was written by Graeme Wearden, for on Friday 30th November 2012 14.13 UTC


Photos: Protests in Athens

In Athens, unions have held demonstrations today in protest at looming austerity-driven job cuts.

Here’s a few photos:


These two graphs show how eurozone unemployment has been climbing steadily since the financial crisis began:


Missed this earlier, but thanks to Reuters….

The parliamentary floor leader of Merkel’s Christian Democrats, Michael Grosse-Broemer, said he was happy with the result of the vote, adding: “Greece must now continue its efforts to reduce its debts and carry out structural reforms.”

And here’s a couple more photos from the Bundestag:


Moscovici hails Greek deal

France’s finance minister, Pierre Moscovici, has hailed this week’s Greek debt deal as a ‘turning point’.

Speaking at a conference in Paris, Moscovici (perhaps optimistically) reckoned that Greece’s problems will no longer be a daily concern for the euro zone,

Moscovici declared:

It’s a turning point for Greece…It’s also a turning point for the euro zone because it helps recreate stability and confidence. Greece’s fate will no longer be a daily issue.

Here’s a couple more photos from the conference, at which Christine Lagarde urged action on eurozone banking union (see 9.48am) and Mario Draghi warned that Europe was living in a ‘fairy world’ regarding imbalances within the region (see 9.20am):


Open Europe has the details of the Bundestag vote, confirming that Merkel didn’t hold her coalition together.

A dozen members of the CDU/CSU alliance (Merkel’s party) opposed the Greek plan, along with nine members of the Free Democrats (the junior coalition partners).


Report: Merkel misses out on Chancellor’s Majority

Reports from the Bundestag that Angela Merkel has missed getting the Chancellor’s Majority, meaning the Greek agreement was only approved because opposition MPs voted with the coalition.

News agency DPA reported that Merkel was 14 votes shy of the majority, indicating that the support of the SPD and Green Party was crucial.


Record Eurozone unemployment disappoints the City

Economists say today’s rise in European unemployment shows that the region is mired in a deep downturn.

Howard Archer of IHS Global Insight said the eurozone’s 11.7% jobless rate was dismal, and might prompt the ECB to cut interest rates next month (especially as inflation has fallen this month (see 11.27am) ).

Jonathan Loynes of Capital Economics said the data showed that labour market conditions across the eurozone were “clearly deteriorating”.

And Jason Conibear, trading director of Cambridge Mercantile, warned that the weakness of the eurozone economy was being “swept under the carpet” amid the focus on whether the single currency will survive:

Certainly the Greek bailout is back on track, and the immediate prospect of Eurogeddon has receded.

But even if the single currency is not about to come apart at the seams, the Eurozone is still stuck in a deep economic funk.


Eurozone inflation dropped this month

Another gobbet of economic news from this morning – eurozone inflation has fallen to 2.2%, from 2.5% in October. The fall was driven by lower energy price rises, and also showed that firms are struggling to pass high prices onto cash-strapped consumers.


Key event

A new opinion poll suggests that the German people are rather unenthusiastic about the Greek aid package (which their elected representatives just approved).

A survey conducted for public-service TV station ZDF found that just 43% of people approved of the deal hammered out by eurozone finance ministers on Monday night, while 46% reckoned it would have been better if Greece had been left to default (and 11% weren’t sure).

The survey also found that 40% of Germans believe a further Greek debt restructuring will be required in future.

More details here (with a Google translation into English here)


So the deal is approved — but it’s not clear yet whether Angela Merkel secured the Chancellor’s Majority. In other words, would the government have won if opposition MPs (such as the SPD and the Greens) had opposed the motion.

That won’t be clear for a few minutes…


Bundestag approves Greek aid package

The results are in — and the German parliament has APPROVED the Greek aid package.

A total of 584 MPs voted — 473 voted in favour, and 100 voted against. Eleven MPs abstained.

(with thanks to my colleague Nadine Schimroszik)


Greek retail sales slump

While we wait for the results of the Bundestag vote, here’s further evidence that Greece’s economy is still contracting – Greek retail sales tumbled by 12.1% in September, compared with the previous year.

That follows a 9.3% decline in August, showing that the slump actually picked up pace.


German MPs start voting

Back in Berlin, voting is underway on the Greek aid deal….


Europe’s youth jobless crisis worsens

Young people across Europe continue to suffer the brunt of the crisis, with today’s data (see 10am onwards) showing the youth jobless rate climbed again.

In October 2012, the youth unemployment rate in the eurozone hit 23.9%, up from 21.9% a year ago (and 23.3% last month).

There are now 5.678m people under the age of 25 out of work across the EU, with 3.609m in the euro area.

Again, the differences between North and South are remarkable (although not surprising)

The lowest rates were recorded in Germany (8.1%), Austria (8.5%) and the Netherlands (9.8%)/

The higher were in Greece (57.0% for August 2012) and Spain (55.9%).


Stark regional differences in jobless rates, again…

As ever, the eurozone date unemployment data shows the stark differences across the region;

The lowest rates were recorded in Austria (4.3%), Luxembourg
(5.1%), Germany (5.4%) and the Netherlands (5.5%),

The highest was recorded in Spain (26.2%), followed by Greece (25.4% – although that relates to August 2012).

This graph, from the eurostat release, shows more:


This latest rise in the eurozone unemployment rate in October, to 11.7%, was caused by another 173,000 people joining the ranks of the jobless last month. That nudged the rate up from September’s 11.6%

The rate across the wider European Union has also risen, from 10.6% to 10.7%.

You can see the full details here (pdf).


Eurozone unemployment hits new record high in October

Just in – the Eurozone unemployment rate has hit a new record high of 11.7% .

More to follow.


An update on Rainer Brüderle’s speech at the Bundestag (see also 9.30am) — he appeared to disagree with Wolfgang Schäuble’s argument that a Greek exit from the eurozone would be a calamity.

As Brüderle put it, Athens is an “extreme case” not a precedent.


Lagarde wants action on banking union

Over in Paris, Christine Lagarde has been discussing the euro crisis at a conference, and declared that full banking union must be the top priority for eurozone leaders.

Reuters’ Paris bureau has the details:

Implementing a banking union with powers to supervise all banks in the euro zone should be the currency bloc’s top priority followed by closer budgetary coordination, International Monetary Fund head Christine Lagarde said on Friday.

“Banking union seems to us to be the first priority,” Lagarde said during a meeting with top financial officials in Paris.

The economic situation in the euro zone remained fragile and governments should maintain a “reasonable” pace of budgetary consolidation to avoid crimping growth, she added.

The eurogroup is due to discuss banking union at its next meeting, next Monday and Tuesday. However, Sweden’s finance minister has indicated that there may be little progress:


Rainer Brüderle: Greece is a warning to others

Back to the Bundestag, where Rainer Brüderle of the right-wing Free Democrats (junior partners in Merkel’s coalition) has been speaking.

Brüderle told MPs that Greece was enduring ‘absolutely necessary’ reforms, adding that the country should be “a warning to others” who persevere with a large government and a small private sector.


Another quote from Mario Draghi just hit the wires, and it’s quite a classic:

UPDATE: This snap from the Reuters terminal throws a little more light on it:



Italian unemployment jumps again

Alarming news from Italy – its unemployment rate jumped to 11.1% in October, up from 10.8% the previous month.

That’s the highest level since January 2004.

We get the overall eurozone unemployment data in under an hour’s time….


Steinmeier: We can’t abandon Greece.

Despite hie criticism (see 8.59am), Frank-Walter Steinmeier confirms that the SPD will vote in favour of the new deal for Greece. He tells the Bundestag that it is an issue of European solidarity.

We cannot abandon the Greeks.


SPD parliamentary leader Frank-Walter Steinmeier is now speaking in the Bundestag, and criticising the governmnent’s handling of the crisis.

Steinmeier won applause from his own MPs when he argued that Angela Merkel’s administration should have been more explicit about Greece’s problems earlier this year.

He accuses the government of playing down the crisis for domestic political reasons, adding that it is clear that saving the Greeks will cost much money, including “our” money.


Watch the debate live

You can watch the session live on the Bundestag website, by the way – here (it’s on Kanal 1).


Schäuble: Greek bankrupcy would break the eurozone

Finally, Schäuble warns that Bundestag that a Grexit could not be handled easily, telling MPs that

A Greek bankruptcy would lead to the break-up of the eurozone.

The long term goal, he argues, is for Greece to pay its own debts again.

Schäuble’s speech got a pretty decent reception, with his CDU party applauding politely on several occasions.


Schäuble acknowledges that the European Union has been a very good thing for the German people, saying:

No country is gaining more from being part of the European Union than Germany.


Key event

Wolfgang Schäuble is also telling the Bundestag that Greece is not being given a free ride – it will only continue to receive aid if it keeps meeting its commitments.

He’s also playing down the idea of another haircut on Greek debt in the future –saying the speculation over a Greek debt cut risks fuelling instability in the eurozone.


Schäuble begins the debate

German finance minister Wolfgang Schäuble* is addressing the Bundestag now.

Schäuble begins by telling MPs that failure to approve Greece’s revised aid package would be a major blow to Europe, and also for the global economy.

Often a fierce critic of Greece, Schäuble is paying credit to the country’s efforts, saying Athens has achieved “the largest fiscal adjustment in the history of the European Union”

* – earlier than I expected <blush>


Bundestag timings.

Silvia Wadhwa, CNBC’s eurocrisis expert, reports that German MPs will vote at around 11am local time (10am GMT), with the result due around 30 minutes later.

The debate is now underway….


Ructions and rebels in the Bundestag?

The Bundestag is certain to hear some German MPs warn that their taxpayers will ultimately pay the price of getting Greece out of its debt hole.

The SPD, for example, has already concluded that the deal agreed for Greece this week is not robust enough, and simply puts off a future debt restructuring.

Carsten Schneider, the SPD’s parliamentary budget speaker, warned yesterday that:

It is only a matter of time. Already today it is clear that Greece will not be able to pay back its debt.

That’s via EUObserver, which also reports that 15 members of Angela Merkel’s CDU/CSU parliamentary group have already said they will vote No.


Draghi: recovery will begin in H2 2013

Just in — European Central Bank president Mario Draghi has declared that the eurozone will start to recover in the second half of next year, if governments press on with reforming their domestic economies and the eurozone.

Speaking to Europe 1 radio, Draghis also reiterated that the ECB will do whatever it takes to protect the euro (a familiar refrain…)

Reuters has the details:

European Central Bank President Mario Draghi said on Friday that budgetary consolidation in the euro zone would entail a short-term economic impact but the currency bloc was on track for a recovery in the second half of 2013.

Draghi told Europe 1 radio that euro zone governments must push ahead with implementing a banking union which should apply to all banks to avoid fragmenting the sector.

Governments must pursue structural reforms to reduce labour market rigidity, notably in France and Italy, he added.

Draghi added that France’s loss of its AAA rating last week was a “signal to governments” to press on with economic reforms, and should be taken seriously.


SPD: We’ll suppport Greece

The key to today’s Bundestag vote is the opposition Social Democratic Party (SPD) party.

Peer Steinbrück, the SPD candidate for chancellor in next autumn’s elections, has just confirmed that the party will support the adjustments to the Greek aid plan and the decision to hand Athens €44bn of loans.


Greek deal reaches the Bundestag

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

We’re watching the Bundestag this morning, where German MPs will be debating and voting on the revised Greek aid package hammered out by the eurozone on Monday night.

While the package is likely to be approved, the session will show whether concern over the eurocrisis is bubbling up within the German political system. In particular, will any of Angela Merkel’s coalition defect?

it should be an interesting debate – Wolfgang Schäuble is due to speak at 9am GMT (10am Berlin time) 8am GMT, (9am Berlin time) according to my schedule.

The other major event this morning is the latest eurozone unemployment data, due at 10am GMT. We’re braced for another rise, which would take the jobless rate across the eurozone to a fresh record high.

And Greek unions have called a short strike today, starting at 11.30am (9.30am GMT) local time, and a rally outside the Athens parliament.

As usual, we’ll be tracking all the action through the day. © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

In the broadcast today: Has the USD Rallied Too Much Too Soon vs. JPY? As the U.S. dollar takes a breather from its recent sprint against the Japanese yen, we examine if this is simply a price correction before the greenback regains its bullish momentum or if the dollar’s “too fast, too soon” rally may be running out of steam, we analyze the latest trend developments in the USD/JPY currency pair, we note yet another test by the EUR/USD pair at the $1.30 level, we take a look at the CHF following the better than expected Swiss economic growth data, we highlight the market’s reaction to the Japanese Retail Sales, the Fed Beige Book, the Swiss GDP, the German Unemployment, the U.S. GDP and Jobless Claims, we discuss new forecasts from JPMorgan Chase and BNP Paribas, and prepare for the trading session ahead.

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

Listen to the archived Broadcasts

European markets rise on optimism about the fiscal cliff talks in US. German unemployment rate unchanged at 6.9%. Bank of England worried about banks’ hidden losses. US GDP figures show that the world’s largest economy grew at a faster pace in Q3…

Powered by article titled “Eurozone crisis live: Fiscal cliff hopes buoy markets” was written by Martin Farrer and Nick Fletcher, for on Thursday 29th November 2012 14.32 UTC


Some reaction in now on the US figures. Chris Williamson, chief economist at Markit, warns that the numbers could be the best we see for a while:

“The US economy grew faster than previously thought in the third quarter, but the pace of expansion set to be the best we will see for a while. Austerity measures to be introduced in the new year are set to dampen some of the key factors that have helped boost the economy so far this year.

“Gross domestic product rose at an annualised rate of 2.7%, up from the initial estimate of 2.0% and above the 1.3% pace seen in the second quarter. The expansion was led by the consumer, government spending, inventory building and, to a lesser extent, exports. With the fiscal cliff set to hit government spending and drive up taxes in the new year, the expectation is that consumer and government spending could move in to reverse and drive the economy back into recession.

“A slowing trend already looks likely in the fourth quarter due to storm disruptions and because business confidence has sunk to its lowest for a year, hit in particular by uncertainty caused by the looming fiscal cliff and ongoing worries about the euro zone crisis. Manufacturing also continues to be affected by weak export sales, with the underlying trend in output estimated to have been flat in October after allowing for a 0.9% drop in production resulting from Hurricane Sandy. Durable goods orders were likewise unchanged during the month. “

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


The US economy grew quicker than expected in the third quarter. The commerce department said GDP grew at 2.7% at an annual rate, greater than the 2% estimated by the government last month. This was due to companies building up stocks more quickly than thought but is not expected to be sustained as the nation prepares for tax increases and spending cuts.

The number of Americans making new claims for unemployment benefits also dropped for the second week running. The labour department said initial claims for state benefits dropped 23,000 to a seasonally adjusted 393,000.


Breaking news: US gdp revised up

US GDP for the third quarter revised up to 2.7%


Lunchtime round-up

Apparently there’s some big news coming at 1.30 so here’s a quick round up of the day so far.

Markets are up quite strongly on hopes of a breakthrough on the US budget impasse. The FTSE is currently trading 52 points, or 0.9% higher at 5855.

Bond yields in struggling eurozone countries are down helped by a successful italian auction this morning.

The ECB has succeeded in keeping secret files showing how Greece manipulated its debt figures before the crash.


Breaking: Failed Irish bank sues auditors

In Ireland, what’s left of Anglo Irish Bank is suing the bank’s former auditors, Ernst & Young.

The state-owned bank, which is now called Irish Bank Resolution Corporation, issued proceedings on Tuesday, according to high court records in Dublin. IBRC said the case relates to the firm’s role as auditors before the bank’s nationalisation but it would not give any more details.


As promised a while ago, more on the intriguing story that the ECB will not be forced to reveal secret papers showing how Greece hid its debts (see 9.41am). Our reporter Julia Kollewe has been looking at the story and writes:

Talk that Goldman Sachs is taking over the world one central bank at a time was fuelled by the news that the ECB has won a ruling to refuse access to secret files showing how Greece used derivatives to hide its debt.

“Disclosure of those documents would have undermined the protection of the public interest so far as concerns the economic policy of the EU and Greece,” the European Union general court in Luxembourg said, rejecting a challenge by Bloomberg News brought under the EU’s freedom of information rules.

The ECB is of course headed by a former Goldman banker, Mario Draghi. The EU court ruling comes just after another ex-Goldmanite, Canada’s Mark Carney, was appointed governor of the Bank of England.

Goldman Sachs (and other investment banks) have been criticised by European leaders over allegations that they helped Greece disguise the true scale of its debts over several years.

German chancellor Angela Merkel said in February 2010: “It’s a scandal if it turned out that the same banks that brought us to the brink of the abyss helped to fake the statistics.”


European bond yields round-up

Bond yields are going down all over Europe, as Lord Grey didn’t say on the eve of an altogether more serious crisis in 1914.

But as a leading politician of his day I’m sure he was a keen student of the bond markets and would have been interested to know that not only are Italian and French borrowing costs falling, but also those of Spain, Belgium, Greece and Portugal.

Here are the numbers for 10-year bonds:

France – 2.048%

Belgium – 2.19%

Italy – 4.527%

Spain – 5.28%

Portugal – 7.527%

Greece – 16.428%

UK gilts by contrast are up slightly at 1.79%.


Strong retail sales in the UK

The CBI brings us positive news from the high street. Retailers said year on year sales rose for the third consecutive month and saw an increase in staff on the shop floor, according to the CBI.

The CBI’s latest quarterly distributive tades survey covers the first two weeks in November and revealed that year-on-year growth in retail sales volumes continued for a third consecutive month, with +49% of retailers reporting an increase in their volume of sales compared with a year ago, and +16% a reduction. The resulting balance of +33% is the highest since June this year (+42%) and slightly ahead of expectations (+27%).

Not bad news considering the ongoing carnage at Comet.

Anna Leach, CBI head of economic analysis, said:

‘This months’ survey is reason to be cheerful as we head into the festive period. Retailers across the board will be heartened by these encouraging results. The increase in employment, along with expectations for improvement in the business situation over the next quarter, point to a welcome boost to the sector.’


And talking of Mr Carney, there is some evidence today of the fine job he’s been doing on Canada’s financial sector. The Royal Bank of Canada said today that it made a record profit in the last financial year of C$7.5bn – up 17% on the year before helped by fixed income and loan growth. It’s a simple game.


Bank of England report

Jill and Larry have filed some words from the press conference down at the Bank of England. There will undoubtedly be more, including the moment when Paul Tucker ducked the question on whether he would stay put at the bank after being passed over for the big job this week.


Italian borrowing costs at two-year low

Italian benchmark 10-year bond yields have hit a 2-year low today on the back of this week’s deal on Greek debt.

At auction earlier this morning Italy sold €2.98bn of 10-year bonds, just shy of the maximum targeted amount, and paid a yield of 4.45% on Thursday, down almost 50 basis points from an end-October sale.
A year ago, Italy paid a record 7.56% to get 10-year bonds away.

French borrowing costs have also fallen today. The yield on 10-year bonds is at 2.04%, which defies both Moody’s downgrade of two weeks ago and predictions of the French economy imploding.


Good sport down at the Bank of England where the FT’s Chris Giles asked jilted would-be governor Paul Tucker if he would be staying on in his job.

I’m deputy governor for financial stability. There’s a job of work to be done and I’m doing it,’ came the testy reply.


There will be a full story on the Bank’s half-yearly financial stability review shortly but in the meantime our reporters Jill Treanor and Larry Elliott are down at Threadneedle Street listening to a press conference from Sir Mervyn King. The governor says that the FSA will begin immediately to assess the banks’ need for more capital

But, as Jill has just tweeted, King is stressing that the taxpayer will not have to front up more cash for the banks. The Treasury doesn’t want to put more in either. Phew.


Breaking news: Bank of England says UK banks could need more capital

The Bank of England says the FSA should re-assess the capital requirements of Britain’s banks.

The Bank’s financial policy committee said that bad debts are worse than thought in some cases and that the banks face rising fines and costs for misconduct.


Eurozone economic confidence up

Confidence in the eurozone’s economic prospects rose for the first time in a year in November according the European Commission’s monthly business and consumer survey.

Economic sentiment in the euro zone rose a greater than expected 1.4 points to 85.7, ending an eight-month run of falls.
Less cheery news is that the Commission’s survey of industry found expectations of a 1% fall in real investment in 2013 compared with this year, casting doubt on the prospects for growth next year.


ECB allowed to keep Greece files secret

The EU’s general court has blocked an attempt to force the ECB to release files showing how Greece used derivatives to hide its debt in the run-up to the crisis. The case was brought by Bloomberg under freedom of information in August 2010 but has been thrown out today by the court in Luxembourg. A bad day for those interested in finding out how Europe got into such a terrible fiscal mess. More on this shortly.


More mildly encouraging news from eurolandia where Italian business confidence rose to 88.5 in November compared with 87.8 in October. That’s slightly better than expected. Data for the whole of eurozone coming at 10am.


That news will add to confidence in the markets where the FTSE 100 is now up a healthy 45 points at 5848, a rise today of 0.8%. Other European bourses are feeling the love too. The Dax is up 0.79% and the Cac 1.09%.


Breaking news: German job figures

German unemployment stayed at 6.9% in November. Figures just out showed that the jobless total rose 5,000 – better than the 16,000 expected by forecasters.


Sorry for the digression. Back to base, sort of, and Kingfisher, Europe’s biggest home improvements retailer, has warned today that the situation in its large French business is “very uncertain”. Sales at the division which includes Castorama and Brico Depot were down more than 9.3% for the third quarter and will fuel the idea that France could be the next eurozone struggler.


It’s a pretty quiet start today in euroland so I’m going to head back to the proverbial clifftop. In particular I was struck by this report from Reuters about the Pentagon’s chief buyer Frank Kendall telling US arms manufacturers that despite the forthcoming financial armageddon, ‘don’t worry, there’s still plenty of money to be made from selling us weapons’.

He’s obviously concerned about American jobs etc but shouldn’t he be lowering companies’ expectations of fat contracts if the government wants to cut the debt a bit? Eisenhower famously warned about the perils of the military-industrial complex in his presidential valediction in 1961 and it has been a staple of conspiracy theorists ever since.


Optimism over the US situation is quite tentative. Reuters cites Republican House speaker John Boehner as saying that his party could broker a deal with the White house while President Barack Obama said that he thought it could be done by Christmas.

And there is also more signs of optimism in Europe where eurozone leaders hare clearly trying to be more conciliatory towards Greece than in the past few months.

My evidence for this is an interview given by Dutch prime minister Mark Rutte in which he concedes that Greece may need more financial aid to stay in the 17-nation pact. He tells Bloomberg:

Wolfgang Schauble, the German finance minister, is entirely right that you have to take a view on the situation of Greece every couple of years again, whether we are on track and whether extra steps have to be taken.’

Which contrasts with this sort of thing.


The FTSE is duly up 26 points as I type at 5829, a rise of 0.45% as investors, for now at least, follow the lead of those Asian markets. The Dax in Frankfurt is up 0.63% while the Cac in Paris has improved by 0.68%.


Today’s events

Good morning and welcome to the eurozone crisis live blog. Graeme Wearden is having a well-earned day off so I’ll be bringing together the key elements on the story today.

Markets in Europe look set to be up this morning on growing optimism that the US can avert falling off the fiscal cliff. Asian markets pointed the way overnight with Japan’s Nikkei 225 index rising 0.7 % to 9,377.91. Hong Kong’s Hang Seng up 1.1% 1.1 percent to 21,942.92 and South Korea’s Kospi added 0.9 percent to 1,930.15.

On the data front, there is German unemployment at 8.55am, which is forecast to be up slightly and then eurozone business and consumer confidence indicators at 10am. There should be some interesting stuff out of the UK’s half-yearly financial stability review at 10.30 and then there’s US Q3 GDP at 1.30pm. © Guardian News & Media Limited 2010

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Giles Tremlett on Spain’s banking bailout. Bankia to close nearly one in four branches. Eurozone governments are deliberately disguising the losses they are taking on Greece’s debts, analysts say. Bundesbank refuses to hand profits directly to Athens…

Powered by article titled “Eurozone crisis live: Spanish bank restructuring costs thousands of jobs” was written by Graeme Wearden, for on Wednesday 28th November 2012 13.00 UTC


Analysis: Spanish bank plans hit workers and bondholders

Our Madrid correspondent, Giles Tremlett, has analysed Europe’s bailout of the Spanish banking sector – and reports that the four nationalised Spanish banks, led by Bankia, will shrink by a massive 60%.

That means huge job cuts in a country with 25% unemployment and helps show why the OECD was probably right yesterday when it predicted a rise to 27% next year.

Brussels has been ruthless with Spain’s failed former cajas, or savings banks, which had become bloated with toxic real estate. They must sell their shares in other companies, stop lending to real estate developers and concentrate on retail clients.

Clients of Bankia and fellow bailout case Novagalicia who bought hybrid preference shares (often believing they were stable investments) will take a hammering. They, and other holders of subordinated debt, must take a €10bn hit.

Bankia holds 10% of Spanish retail deposits, with 7.5 million clients. The other banks are Catalunya Banc, Novagalicia and Banco de Valencia (which is being sold to Caixabank for one euro, after taking €4.5bn in European bailout cash).

As reported at 11.19am, the four banks will jointly receive €37bn from the European bailout fund. They will also sell their real estate assets to a “bad bank” at discounts of up to 63%.

And as flagged up at 11.32am, Bankia is to cut 28% of its workforce. That means around 6,000 job cuts there alone.


Graphic: who owns Greek debt?

Via the indispensable Open Europe, here’s a graphic of Greek debt ownership – showing that 70.5% is held by “official” (rather than private) creditors.

A quarter is held by the European Financial Stability Facility (the bailout fund), and another third is also used as security for loans from the eurozone or held by the ECB. National central banks also have a substantial slice.

Not easy to see how eurozone taxpayers can avoid paying for any further Greek debt restructuring…

That comes from this Open Europe analysis, which cautions against believing that eurozone governments have agreed to take future losses in order to keep Greece in the eurozone:

This deal does everything to avoid taking such a decision, and continues to sidestep the issue even if that means prolonging the pain and putting more taxpayer cash on the line.

The hope is that such a deal will be politically more palatable after the German elections next autumn. This may well be true but given that many of the constraints on solving this crisis are legal as well as political, such a decision may not be much easier even after the elections.


Euro dropping

The euro has been falling today, and just dropped below $1.29 (having risen above $1.30 when the eurogroup agreement was announced).

Another sign that relief over the Greek deal is abating.


Blair warns against ‘Brexit’

Tony Blair has attacked the idea that Britain should leave the European Union.

In a major speech, the former PM (and current JP Morgan adviser) argued that Britain would suffer a damaging loss of influence if it were abandon the EU.

Britain being part of Europe matters to how we are seen, by the world in general and our allies in particular. Any US president I know would regard Britain leaving as folly. The idea we would then seek new relationships with the likes of China and India is an especial illusion. Of course the bilateral relationship with both is strong and of course there are great trading opportunities. But both will never subordinate their Europe relationship to a British one outside of Europe. Our trade with India depends hugely on Europe negotiating the FTA and Germany currently exports more than double what we do to India and to China; and France and even Italy export more to India.

Blair also warned that a “Brexit” could happen accidentally, through David Cameron’s push to reshape Britain’s relationship with Europe.

That’s from Andrew Sparrow’s Politics Live blog – more details here.


That leaked chart

The Financial Times has now uploaded the leaked chart which shows how Greece will miss the revised debt/GDP targets agreed this week, without further debt relief (as discussed at 8.43am)

The key is the third column, which shows that Greek debts will be over 126% of GDP in 2020, unless new “contingent measures” are taken.

The FT’s Peter Spiegel explains more here.


Details of Bankia’s plans to shrink its business, as part of the Spanish bank recapitalisation, have now emerged.

Bankia will shut 39% of its branches and intends to cut staffing numbers by 28% over the next three years.

Bankia shareholders will also take (another) hit, with dividends frozen until 2014. They will also contribute to the restructuring, with the EU determined that investors share the pain of the €37bn recapitalisation.

(that’s via Reuters)


Fitch: Greek deal good, but hazy

Ratings agency Fitch just published its comment on the Greek bailout deal – saying it should “strengthen confidence in the fragile Greek banking sector”.

However Fitch has concerns, particularly about the Greek debt buyback plan.

The size of losses for the banks would depend on their sovereign debt exposure and valuations, which may vary widely for each bank, and the specific terms of the buyback.

An acceleration of asset quality deterioration due to the weak economy could increase the banks’ capital needs. With limited financial details available, the solvency implication is difficult to assess at present.

The full statement is online here.


Greek finance minister: nothing is easy

And back in Athens our correspondent Helena Smith says the finance minister Yiannis Stournaras emerged from the prime minister’s office where the three coalition leaders were holding talks, looking rather unhappy.

She writes:

The economics professor emerged from the meeting, where he had briefed the leaders on the agreement reached at the euro group, looking uncharacteristically glum.

His words were few.

“I am optimistic. Nothing is easy but we are always trying,” he said. But as reporters gathered outside were quick to point out, he did not seem so. Stournaras gave an affirmative nod when asked if the leaders had discussed the debt buyback – a central plank of the latest rescue programme for the debt-stricken country – saying “the buyback will happen” but remained deliberately opaque as to the details of how it would be conducted.

Greek banks, which stand to be the biggest “victim” of the buyback, are already grumbling, with analysts also pointing out that after the scheme recapitalisation of the lenders will have to be even bigger than the €24bn already earmarked for banks in the €44bn loan for the country.

“The government, it seems, is keeping its cards close to its chest regarding the debt buyback,” said state-run NET TV’s reporter. “The details continue to remain very vague on this issue.”


EC approves Spanish bank restructuring

Just in – the European commission has announced that it has approved the restructuring of Bankia, NCG Banco, Catalunya Banc and Banco de Valencia.

EU competition commissioner, Joaquín Almunia, says that the restructuring will cost a total of €37bn, while €45bn of toxic assets will be transferred to Spain’s new bad bank.

Almunia said the plan was:

a milestone in the implementation of the Memorandum of Understanding between euro area countries and Spain.

The four banks will face pay caps and a ban on acquisitions and, as flagged up at 9.06am, thousands of jobs are to go.


De Guindos explains Spanish bank plan

Spain’s finance minister, Luis de Guindos, is revealing details of the Spanish bank restructuring.

Here’s some early snaps:


Spain’s bank restructuring to be approved today

It’s a big day for Spain’s banking sector.

The European commission is expected to give its definitive approval to plans to restructure Spain’s four nationalised banks, which are receiving €40bn in bailout cash.

Shares in two of the banks – Bankia and Banco de Valencia – have already been suspended this morning.

Our Madrid correspondent Giles Tremlett flags up that the quartet will also announce plans to shed thousands of jobs, and reveal how much toxic debt (mainly property loans) will be transferred to Spain’s new bad bank.


Over in Greece, the three leaders of the country’s coalition were due to hold a meeting this morning to discuss how to proceed now the aid deal has been agreed.

There’s then a cabinet meeting at 1pm local time (11am GMT), which might yield some news.


Spanish retail sales gloom

The eurozone crisis continues to grip Spain, with retail sales falling 9.7% year-on-year last month, according to new data.

That’s the 28th month in a row of declining sales, although Reuters points out that analysts had expected an even worse number (-11.5% was penciled in).


Bundesbank won’t simply hand bond profits to Athens

Overnight, the head of the Bundesbank has challenged one of the key planks of the deal – that central banks should give Athens the profits they’ve made on Greek bonds

Jens Weidmann has declared that the German central bank will not hand back its share of the €11bn of profits unless German MPs give their approval.

Weidmann told German newspaper Die Welt:

The German parliament decides on the use of the Bundesbank’s profit as well as other income of the German federation.

This issue could be settled when the Bundestag votes on the whole package later this week.


Kicking the tyres of the Greek deal

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

It’s now 32 hours since the Eurogroup announced it had reached an agreement on Greece, and the shine is now coming off the deal.

While there is still relief that the immediate danger of Greece not receiving its bailout funds has been averted, there is growing concern that politicians have not been straight with the public over the actual cost of cutting Greece’s debt pile.

As German financial group Commerzbank puts it:

The whole structure of the Greek aid deal intentionally concealed from the taxpayers

We will highly likely need to negotiate the sustainability of the Greek debt again in 2014, but a clear haircut now would have been much better with regard to the transparency for the taxpayers.

Eurozone finance ministers have insisted that the latest deal does not include any debt forgiveness for Greece. However, the Financial Times is now challenging this, saying it has seen document that show euro governments could be forced to accept losses on their rescue loans.

The FT explains:

The series of measures agreed, which could relieve Greece of billions of euros in debt by the end of the decade, do not go far enough….

The agreed measures will only lower Greece’s debt levels to 126.6% per cent of economic output by 2020, not the 124% announced by eurozone leaders. This shortfall will be addressed once Greece has a primary surplus:

Because the deal already cuts interest on loans to just 50 basis points above interbank lending rates, any further cuts would almost certainly force losses on to eurozone creditors.

And that also probably won’t happen before 2014 – after the German elections.

Bloomberg is also unimpressed, arguing that this new scheme – Plan C – is really no better than what’s gone before. Only full debt relief can help Greece, it argues:

When the time comes to craft Plan D, Europe’s leaders would do well to move ahead with the Greek debt writedown they have tried so hard to avoid.

If, for example, they cut the government’s debt in half, and if its market borrowing cost could be brought down to about 5 percent, Greece could hold its debt burden steady by running a primary budget surplus (excluding interest payments) of roughly 1.5 percent of GDP – well within the range of what it has been able to achieve in the past. The upfront costs would be greater, but so would the chances of success.

The rest of the eurozone probably understands this all too well. As Sky News’s Ed Conway puts it:

On the basis that if Jean-Claude Juncker denies something, it’s probably true, it’s worth examining the deal cranked through in Brussels last night to “save” Greece….

Were this a private sector loan agreement, the probability is it would be regarded as a technical default.

So, the deal’s honeymoon is over.

As usual, I’ll be tracking developments across the eurozone throughout that day. © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

In the broadcast today: Can the new Greek Deal Change the EUR Fortunes? In the aftermath of the Eurogroup’s decision to start a debt buyback and to ease the bailout terms for Greece, we examine the details of the new Greek deal and explore its potential impact on the future trend direction of the euro against the USD and other currency majors, we analyze the failure of the EUR/USD currency pair to break above $1.30, we take a look at the GBP/USD pair following the U.K. economic growth data, we keep an eye on the USD/JPY pair, we highlight the market’s reaction to the Eurogroup meeting, the U.K. GDP, the U.S. Durable Goods Orders and Consumer Confidence, we discuss new forecasts from Bank of New York-Mellon and Barclays, and prepare for the trading session ahead.

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

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Forecasts for GDP growth, unemployment and inflation in the OECD’s latest Economic Outlook report show the global economy making a ‘hesitant and uneven recovery’ over the coming two years. Read OECD’s GDP, inflation and unemployment outlook…

Powered by article titled “OECD Economic Outlook – get the data” was written by Nick Mead, for on Tuesday 27th November 2012 12.43 UTC

The global economy is set to make a “hesitant and uneven recovery” over the coming two years, according to the OECD’s latest Economic Outlook.

Stalemate over fiscal policy in the US and continuing eurozone instability risk plunging the world back into recession, the Paris-based thinktank said.

GDP growth across the 34 rich nations of the OECD is projected to match this year’s 1.4% in 2013, before gathering momentum to 2.3% for 2014, according to the forecasts.

Source: OECD Economic Outlook

The line graph above shows estimates of year-on-year GDP growth for the UK, US, eurozone and Japan from 2000 to 2011 – and the OECD’s forecasts for 2012.

The eurozone will remain in recession until early 2013, leading to a mild contraction in GDP of 0.1% next year, before growth picks up to 1.3% in 2014.

If the US avoids the “fiscal cliff”, GDP growth is forecasts to hit 2% in 2013 before rising to 2.8% in 2014.

In Japan, GDP is expected to expand by 0.7% in 2013 and 0.8% in 2014.

After softer-than-expected activity during 2012, growth has begun picking up in the emerging-market economies, with China is expected to grow at 8.5% in 2013 and 8.9% in 2014, while Brazil, India, Indonesia, Russia and South Africa are expected to expand strongly (as the tables below show).

But labour markets are expected to remain weak, with around 50 million unemployed people in the OECD area.

Fuller data for GDP growth, inflation and unemployment for each of the OECD nations and selected emerging economies are in the tables below.

Download the data


Real GDP year-on-year

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DATA: download the full GDP spreadsheet


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DATA: download the full inflation spreadsheet

Unemployment rate

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DATA: download the full unemployment spreadsheet

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Eurozone ministers and the International Monetary Fund have hammered out a plan to bring down Greece’s debts by €40bn, but questions remain… Greek PM: New day for Greece. Opposition dismiss plan as a ‘band aid’. Highlights from the announcement…

Powered by article titled “Eurozone crisis live: Greek debt deal brings relief, and criticism” was written by Graeme Wearden (7.45am-2pm) and Nick Fletcher (now), for on Tuesday 27th November 2012 15.01 UTC


Wall Street opens lower on fiscal cliff worries

Away from the immediate eurozone crisis, investors are concerned about the US fiscal cliff – the forthcoming tax rises and spending cuts. Democrats and Republicans are negotiating to find a solution to the budget problem, so any US data at the moment is being scoured for signs of how the world’s biggest economy is performing.

Orders for capital goods, excluding aircraft, rebounded 1.7% last month, after a 0.4% fall the previous month, suggesting businesses are more optimistic about their spending plans.

But actual shipments fell for the fourth straight month, which analysts put down to worries about the fiscal cliff. Annalisa Piazza at Newedge Strategy said:

All in all, today’s report is mixed, a sign that factory activity remains subdued and no sharp acceleration is expected any time soon, as well flagged by recent business confidence indicators.

Elsewhere there were positive signs from the housing market. The S&P/Shiller index rose 0.4% in September, with house prices showing a 3% year-on-year increase.

But the uncertainty over the budget talks has pushed Wall Street lower in early trading, with the Dow Jones Industrial Average down 30 points.


Ireland gears up for its own austerity budget

Dublin will deliver its own austerity budget next week, and reports today suggest that the Irish government giveth and the Irish government taketh away.

Henry McDonald has the story:

Reports suggest next week’s fifth austerity, cost-cutting budget will include reviewing dole payments to the jobless if they remain claiming social welfare after nine months. Nearly 15% of the Irish workforce is currently unemployed.

However, the Fine Gael-Labour coalition also announced today that it is committed to one of the biggest capital projects in Dublin – the linking up of the two LUAS tram lines that run on both the north and south sides of the river Liffey.

Ireland’s transport minister, Leo Varadkar, confirmed today the cabinet had voted to pledge €370m to the project, which is likely to generate 800 construction jobs with a further 60 permanent posts to run the link-up line.

“The two Luas lines should have been joined up years ago. It’s a privilege for me as minister for transport to be able to finish the job”, the minister said.

Meanwhile another casualty of the ongoing economic crisis in Ireland has been the seasonal letter from Irish children to the Santa Claus residence at the North Pole. An Post – Ireland’s version of the Royal Mail – has issued an appeal to parents and guardians to put a 55 cent stamp on their kids’ Santa letters this year.

Henry continues:

The postal service has said that while they normally take bags of post “to the North Pole” [honest, kids - Ed.] for free, the continuing recession is effecting everyone equally.

An Post has also pointed out they are competing with other online Santa services that all charge for delivery to Father Christmas.

If your letter does not have a stamp, An Post says it will still deliver it.

Is nothing sacred?

On that sombre note, I think I’d better hand over to Nick Fletcher…..


Portuguese 2013 budget approved despite protests

Newsflash from Lisbon – the Portuguese parliament has just approved the 2013 budget, despite public protests.

The unpopular budget contained €5.3bn of austerity measures, mainly through higher taxes (including steep rises in income tax).

Thousands of people gathered close to the parliament building in Lisbon, to register their opposition to the budget:


Sony Kapoor of the Re-Define thinktank isn’t impressed by the agreement reached overnight on Greece:


Speaking of Germany…. one of Merkel’s parliamentary allies, Michael Meister, (a deputy party leader in the Bundestag) has said MPs would have to vote down the Greek deal, if they believe it would lead to a Greek debt writedown in future.

Meister said:

I do not see a public sector haircut as being part of this deal. If that were the case, then the Bundestag would have to decide…not to approve the next aid tranche.

(that’s also via Reuters)

Meister added that he believes the vote will be carried with a large majority (for the reasons explained in the previous post). But the issue of a Greek haircut won’t go away…


Germany cool on Greek deal

It looks as if the Greek deal agreed last night will sail through the Bundestag when it is voted on later this week (on Thursday or Friday – reports vary). The opposition SDP party has indicated that it will back the plan, and Angela Merkel should be able to rally most of the coalition behind it too.

However there is also political tension in Berlin today, Reuters reports:

SPD parliamentary leader Frank-Walter Steinmeier said his party would not do anything “that could lead to Greece becoming unable to make its payments in the short term or could force it to leave the euro zone”.

But he accused German finance minister Wolfgang Schäuble of pulling the wool over the eyes of the public, which might accept granting already-agreed aid tranches but would not easily support a second write-down of Greek public debt.

“Mr Schäuble brags to his own bloc that a debt haircut has been avoided but I tell you it has just been postponed to after the Bundestag elections,” he told German TV, adding that euro zone ministers had made “cryptic hints” to this effect.


Italian bond auction relief

Italy continues to avoid the heat from the eurocrisis – this morning it sold two-year bonds at the lowest borrowing costs since October 2010.

The auction of €3.5bn-worth of two-year bonds saw investors pay average yields (or interest rates) of 1.923% – sharply down from 2.397% last month.

The sale shows that bond traders are not, yet, alarmed by the political situation in Italy (with Silvio Berlusconi considering a comeback).

Nick Spiro of Spiro Sovereign Strategy pointed out that 12 months ago, Italy’s bond market looked “broken”. Now, though…

The fairly modest size of the sale, coupled with the favourable sentiment towards peripheral eurozone paper, ensured that today’s auction was pretty much a walk in the park for the Treasury. Although the cover was not particularly impressive, the yield was at pre-crisis levels, auguring well for Thursday’s sale of longer-dated debt.


OECD: Greece might need to miss its targets

The OECD has also suggested that Greece should deviate from its fiscal reform plans if its recession proves even deeper than feared.

In an apparent challenge to the country’s creditors, the OECD said today:

The agreed consolidation measures should be put in place, but if growth proves lower than assumed in the government’s fiscal plans, then the automatic stabilisers should be allowed to operate, even if this means missing the set targets.

“Automatic stabilisers” is the term for allowing welfare spending to rise, and tax receipts to fall, during the low points of the economic cycle.


OECD explains why it slashed its growth forecasts

Over in Paris, the OECD has been presenting its latest Economic Outlook – explaining why it has slashed its growth forecasts (see 10.12am).

The OECD secretary-general, José Ángel Gurría, said:

The world economy is far from being out of the woods

The US ‘fiscal cliff’, if it materialises, could tip an already weak economy into recession, while failure to solve the euro area crisis could lead to a major financial shock and global downturn.

Governments must act decisively, using all the tools at their disposal to turn confidence around and boost growth and jobs, in the United States, in Europe, and elsewhere.

The OECD now expects the world economy to grow by just 2.9% this year and 3.4% in 2013, down from previous forecasts of 3.4% and 4.2%.


Deal sparks joy and criticism in Greece

Over to Greece where our correspondent Helena Smith says amid all the jubilation triggered by the deal there are already loud voices of discontent in a country that will have to pay a heavy price for the deal.

 Helena writes:

In what will surely go down as a defining point in the euro debt drama, the deal reached in Brussels has been quick to elicit euphoria in Athens. In all three parties backing prime minister Antonis Samaras’s fragile coalition, there is broad consensus that the agreement has finally hit the mark of effectively dealing not only with Greece’s empty coffers but its perilous mountain of debt.

Speaking to the state-run TV channel NET, interior minister Evripides Sylianides described the deal as “guaranteeing Greece’s place not only in the euro but in ”the hard core of Europe””

The minister, a senior cadre in Samaras’s centre-right New Democracy party, added:

“We got the installment [of aid], we got the [two-year] extension [to achieve fiscal targets], we got the maximum that we could have won.”

But despite the sense of hard-won triumphalism for a government that has been in power for barely five months, ambivalence also reigns supreme – and not just within the ranks of the main opposition party, Syriza, whose leader, Alexis Tsipras, has just slammed the agreement saying:

It does not include a viable plan for Greece and that’s why it’s not a deal. A real solution will only happen when there is big political change.

Syriza MP Dimitris Papadoumilis had earlier described the agreement as a “Band-aid”. “It will barely last two months,” he said.

Economics professors and analysts are also questioning the efficacy of a rescue that, once again, precludes growth and development in a country that must endure yet more recession as the result of internationally mandated austerity measures, the price of the aid.

“Growth cannot be sustained through recession and a program that has constantly been off target,” said the analyst Stavros Lygeros.

“The [package] is undoubtedly good but I’m afraid it is far from being enough.”

Reducing the country’s debt-GDP ratio to 124% by 2020 would not be enough either.

“We all know that to be viable a debt load should not be more than 90% of GDP,” Athens University economics professor George Pagoulatos told NET TV as news of the breakthrough came through.


Bank of England top brass deny intimidating junior staff

MPs on the Treasury committee are giving Sir Mervyn King and other senior policymakers a tough time over allegations that there is an “intimidatory culture” at the bank.

That follows a report this month which attacked the “autocratic management” at the Bank.

King dismissed the criticism, though, telling MPs that junior bank staff never held back from giving him this views:

I’ve never seen them remotely shy about saying: ‘Hang on, what about this’?

This is an organisation that has always encouraged debate.

Paul Fisher said that the Bank should consider why some junior staff have the “perception” that they can’t make unpalatable proposals to senior staff (the very people who were too slow to realise how weak the global economy was.)

Economics journalists watching the session aren’t impressed:

You can watch the whole session here (either live, or from the start).


Mervyn King endorses successor

Over in Parliament, Sir Mervyn King has just endorsed (again) the choice of Mark Carney to replace him as Bank of England governor.

Appearing before the Treasury Committee (to discuss the latest UK inflation report), King said that any governor would want to hand on the job to “someone who they know can carry on the good work”

With Mark Carney you have someone with whom the bank is in very good hands…

And the United Kington should take pride, not only that we will search the world for the best candidate, but that we have produced a very strong shortlist….a truly outstanding shortlist for the chancellor.

King admits, under questioning from Andrew Tyrie, that the Bank had finally realised that the chances of very rapid growth in 2013 and 2014 were not very great.

In short, the Bank was too optimistic about the global economy, and too slow to see the truth.

As King put it:

We should have done it earlier, and we didn’t.

King added that “global imbalances’ mean weak global growth, and that the Bank is ready to adjust policy ‘in either direction’ depending on the outlook for inflation


OECD releases gloomy report

The OECD has just released a new forecast on the world economy, sparking a flurry of headlines.

Here’s what you need to know

The OECD has warned that the eurozone crisis is a bigger threat than the fiscal cliff

It also believes that the UK recovery will be slow, but not as slow as it thought earlier this year

• And it warned that Greece’s recession will last until 2015

• It has cut the growth forecasts of 31 countries, warning that 2013 will be much weaker than it previously thought


UK GDP: the details

More on that UK GDP data for Q3 2012 released by the Office for National Statistics:

• Industrial output: + 0.9% quarter-on-quarter (highest since Q2 2010)

• Services output: + 1.3% q-q (highest since Q3 2007)

• Construction output: -2.6% q-q

And with the topline growth confirmed at +1.0%, the UK’s strong bounceback from recession is confirmed.


UK GDP data

Just in — revised UK GDP data has confirmed that the British economy expanded by 1.0% in the third quarter of 2012, as initially thought.

However, year-on-year GDP change has been nudged down to -0.1%, from unchanged.


Farmers keep protesting in Brussels

I mentioned yesterday that angry EU farmers were demonstrating in Brussels yesterday. Well, the eurogroup may have gone – but the protesters have returned, using tractors to block roads in the centre of the capital.

They are protesting about UK milk quotas and prices – another sign of rising tension in the EU.


Expert reaction (1)

Here’s our first roundup of early reaction to the Greek deal.

Guardian economics editor Larry Elliott

In the short run, this deal should do the trick. Greece looks to have the finance to keep it solvent until 2014. It will stay in the euro, at least for now. The Germans can say that they have not given an inch. Investors, relieved that the uncertainty is over, will probably push the single currency higher on the foreign exchanges.

But Greece’s economic agony will go on. The financial package is enough for the government to pay its bills but not enough to end the recession and start reducing unemployment from 25%. As growth falters, the debt position will not improve as quickly as Greece’s eurozone partners anticipate. And there will be more burning of the midnight oil in Brussels.

Kit Juckes of Société Générale

World record can-kicking attempt successfully achieved…

The key issue for Greece, as for the rest of the eurozone, is the lack of growth. Trapped in an austerity trap, governments tighten their belts and watch budget outcomes miss their targets. Today’s optimistic mood will in due course be reversed unless someone comes along with a magic growth potion.

Gary Jenkins of Swordfish Research

There remains the potential for this deal to fall apart in the medium term as there are a lot of moving parts and it is a long way away from the permanent fix that the IMF had been insisting upon. Instead it is just one more big kick of the can down the road….

The idea is that rather than Greece reducing its debt/GDP to 120% by 2020 they will now reduce it to 124% by that date. So one arbitrary figure has been replaced by another. After all one man’s figure for debt sustainability is another man’s figure for insolvency.


About that debt buyback…

The murkier part of the deal relates to the plan to buy back billions of euros of Greek debt from investors at a discount to the face value — thus cutting Greece’s total national debt.

Rumours of this plan have been circulating for weeks – driving up the value of Greek bonds in the market (and thus diluting the potential benefits).

Christine Lagarde was notably reluctant to discuss the plan at the post-midnight press conference – presumably to avoid getting bond traders even more excited.

But the bottom line is that there’s no guarantee that this debt buyback will be a big success.

The FT has a good explanation on this issue:

The key to a debt buyback is to purchase outstanding bonds at heavily distressed prices, allowing Greece to retire the debt far more cheaply than if they had to pay the bonds off when they reached maturity.

But in a statement, finance ministers said the buyback price for bonds could be no higher than prices at Friday’s market close – meaning there will be little if any premium offered to private debtholders, raising questions about how many will participate.

And if the debt buyback flops, the IMF might not hand over its share of Greece’s aid tranche – worth around €10bn.


Markets rise

There’s a muted reaction to the Greek deal in the financial markets today. Shares have risen, but the euro has dropped back after hitting a one-month high of $1.301 v the dollar.

In early trading…

FTSE 100: up 27 points at 5814, +0.5%

German DAX: up 51 points at 7343, + 0.7%

French CAC: up 28 points at 3529, + 0.8%

Spanish IBEX: up 64 points at 7939, +0.8%

Italian FTSE MIB: up 95 points at 15615, + 0.6%

Traders are aware that the deal isn’t the last we’ll hear about Greece’s bailout, as Michael Hewson of CMC Markets explains:

It remains to be seen if this particular deal will be any more successful than previous EU deals to help Greece, and the likelihood is that we will probably be back discussing another renegotiation before too long.


Greek PM hails deal

Greece’s prime minister, Antonis Samaras, gave the deal a bleary-eyed welcome earlier this morning.

Speaking to reporters outside his official residence at around 3am local time, Samaras said:

Everything went well…All Greeks fought together.

A new day begins tomorrow for all Greeks.

Reuters described Samaras as “bleary-eyed” and “visibly tired” – no surprise given the stress of the last few weeks.


Here’s what they said

If you missed last night’s press conference (which kicked off around 12.30am GMT as I remember), here’s some of the key quotes:

Jean-Claude Juncker, head of the eurogroup:

This is not about money….This is the promise of a better future for the Greek people and for the euro area as a whole, a break from the era of missed targets and loose implementation towards a new paradigm of steadfast reform momentum, declining debt ratios and a return to growth.

Olli Rehn, European commissioner for monetary affairs:

This was a test for the eurozone and we simply could not afford to fail.

German finance minister Wolfgang Schäuble:

When Greece has achieved, or is about to achieve, a primary surplus and fulfilled all of its conditions, we will, if need be, consider further measures for the reduction of the total debt

IMF managing director Christine Lagarde

[the deal is] a substantial contribution to the sustainability of Greece’s debt.


Read the statement

The official statement released by the eurogroup can be downloaded here (pdf).


A tentative deal for Greece

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

Thee big news this morning is that yesterday’s Eurogroup meeting finally agreed a deal over Greece’s bailout programme that will, at last, unlock the country’s long-awaited aid payments.

As we blogged overnight, the deal will see Greece’s debt cut by €40bn, dropping to 124% of GDP by 2020 – a slightly less taxing target than before.

The country’s international lenders also promised to take further measures to bring Greece’s debts “significantly below 110%” in 2022 – which looks like the first signal that some form of debt writeoff is being considered.

Lenders have agreed three steps to help Greece:

1) Cutting the interest rate on official loans, extend their maturity by 15 years to 30 years, and granting Athens a 10-year interest repayment deferral.

2) To return €11bn of profits accrued through the European Central Bank’s purchase of distressed Greek government bonds

3) To conduct a debt-buyback scheme.

Greece will receive its aid tranche in stages, starting with €34.2bn next month. Much of the money will be used to recapitalise its banks.

That means the chatter about Athens running out of money should finally dampen down. However, this deal is only “tentative” – the IMF won’t hand over its share of the money until the debt buyback has been conducted.

And national parliaments must also be consulted.

The deal only came after another lengthy negotiations session in Brussels, as our Europe editor, Ian Traynor, writes:

After almost 12 hours of talks for the third time in a fortnight between eurozone finance ministers, leaders of the IMF, the European central bank and the European commission struggled to reach a consensus, suggesting a lack of confidence that the effort to resurrect the Greek economy will bear fruit or that three years of European bailout policy was working.

Ian’s full story on the deal is here:

I’ll be covering all the details and reaction to the deal through the day, along with other developments in the world economy. © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

In the broadcast today: Will the EUR Run Out of Good News Again? After a failed EU Summit and a Eurogroup meeting expected to approve additional financial aid for Greece, we explore the event schedule from the euro-area and ponder if EUR weakness may be in the cards as the single currency once again faces the potential to run out of good news, 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 take a look at the GBP/USD pair’s move above the $1.60 level, we note the anticipated price correction in the USD/JPY pair, we highlight the market’s reaction to the Bank of Japan Meeting Minutes and the German GfK Consumer Climate Index, we discuss new forecasts from Bank of New York-Mellon and UBS, and prepare for the trading session ahead.

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The Eurogroup gathers for another crunch meeting which could be lengthy. French finance minister: solution is very close. Protests in Ireland and Slovakia. Mark Carney, Canada’s central bank boss, will become the next Bank of England governor…

Powered by article titled “Eurozone crisis live: New talks over Greek aid deal underway” was written by Graeme Wearden and Nick Fletcher, for on Monday 26th November 2012 15.53 UTC


Surprise choice for Bank of England governor

In a shock move, the UK government has announced that Mark Carney, Canada’s central bank boss, will become the next governor of the Bank of England. Favourite Paul Tucker, the current Bank deputy, did not get a look in.

For all the latest reaction to the appointment, our live blog is here.


France holds successful debt auction despite Moody’s downgrade

France held its first debt auction since Moody’s stripped the country of its Triple A rating last week. And it went pretty well.

It sold €6.782bn worth of 13, 24, and 50 week bills with yields on the first two falling deeping into negative territory. Demand was strong with total bids worth more than three times the amount on offer.


And to ratchet up the pressure on the eurogroup, Greek prime minister Antonis Samaras has reportedly said the country’s government may collapse if it does not get a decision on the €31.5bn loan tranche today. Earlier we reported how Samaras had been working the phones over the weekend to help get an agreement.


Eurogroup meeting reportedly pauses for an hour

Hopes of an early decision are fading, it seems.


Herman Van Rompuy writes a haiku

In a frankly alarming development, Herman Van Rompuy has just composed another haiku — and the European Council president does not sounds like a happy chap.

He tweets:

This is Van Rompuy’s first contribution to Twitter since the EU Summit collapsed on Friday afternoon without a deal (or much progress) on the European Union budget.

Perhaps the criticism heaped on HVR’s head – such as the #rompuyshambles on Twitter – has got to him. Perhaps it’s a sign. Or perhaps it simply reflects that autumn is depressing.

I’m moving over to live blog the announcement of the next Bank of England governor, so my colleague Nick Fletcher will hold the fort here.


Germany: no new Greek debt writoffs

Germany’s deputy finance minister Steffen Kampeter has reiterated his opposition to a new Greek debt restructuring – telling a conference that every nation, apart from Greece, dislikes the idea of Official Sector Involvement in the country’s restructuring.

Bloomberg’s Linda Yueh has the details:

Kampeter was also upbeat about the eurogroup meeting, saying:

I see a very good chance for a deal tonight.


Chart: how Greece is missing its targets

Over on the FT, Peter Spiegel has uploaded an official chart which shows Greece’s financing needs and how its debt mountain would fall under various scenarios.The most important part is the third column, which shows how Greece’s debt/GDP ratio is on track to be 144% by 2020, not the target set under its bailout.

The bottom figure in that chart shows that it would still be 128% of GDP even if some Greek debt were bought back, and if the interest rate on its bonds were cut.

In other words, the only way to hit the 120% target in 2020 would be for creditors to write off some debt. (which is why delaying the deadline to 2022 is so appealing)

A high-quality (more legible) version is online here…

while Peter outlines the various options on the table here: Greece, round 3: Let the debt relief talks begin


Photos: Eurogroup arrivals

We now have pictures of ministers and top officials arriving at today’s Eurogroup meeting (see 12.08pm for some of the quotes thrown to a ravenous press pack):


New Bank of England governor to be named today

Stepping outside the eurozone briefly – news has just broken in the UK that the next Bank of England governor will be announced at 3.30pm.

Paul Tucker, the current deputy governor, is the favourite….


The WSJ’s Matina Stevis reports that the eurogroup meeting began with Ireland’s Michael Noonan declaring that the eurozone was united and the IMF must make the first move towards a solution….


Angela Merkel’s spokesman, Stefan Seibert, dampened hopes of a major breakthrough today by telling reporters in Berlin that the eurogroup would not even discuss the idea of writing off some Greek debt.


Eurogroup meeting could be a long one….

Ian Traynor, our Europe editor, fears that today’s Eurogroup meeting could be a lengthy affair.

From Brussels, he reports that there is little sign that the divisions between the eurozone and the IMF over Greece’s have narrowed. If the two sides cannot agree on Greece’s debt sustainability – namely what debt/GDP level Greece must hit, and when, then the meeting could last until midnight.

No wonder Jean-Claude Juncker brought an overnight bag (see 9.58am)…

Or the decision could be delayed again until the next meeting on December 5th.


Highlights as eurozone ministers gather

Going into the Eurogroup meeting a few minutes ago, Christine Lagarde declared that a credible solution for Greece must be found.

Some finance ministers sounded optimistic as they arrived, but others took a cautious line.

Here’s a round-up of comments made to the press pack:

Christine Lagarde

We are going to work towards a solution that is credible for Greece, that is what is important. It must be credible and it must really be about Greece, and so we are going to work very intensely on that.

European commissioner Olli Rehn

I want to encourage all the euro area member states and the IMF to go the last mile in order to find an agreement, in fact go the last centimetre because we are so close to an agreement.

This is essential now, and Greece has delivered. Now it is delivery time for the Eurogroup and the IMF.

Spanish finance minister Luis de Guindos

I think we are very close, we need to agree on Greece’s debt level. It is crucial to reach agreement, it would be a message of confidence, not just for Greece, but for the whole euro zone. It is important to send out a clear political message.

Austria’s finance minister, Maria Fekter:

We have the serious intent to come to a conclusion, on the one hand about the financing, and on the other hand regarding the plan of sustainable Greek debt. There are still talks with the IMF and we could decide on paying out the tranche today.

Greece has made a huge effort, it has lived up to all the conditions and we have nothing to criticise, so we have to make an effort to come to a joint solution.


Eurogroup meeting begins

The Eurogroup meeting is now getting underway in Brussels – marking the third attempt by euro area finance ministers to close the divisions with the International Monetary Fund over Greece.


Greece officials ‘very cautiously optimistic’ about aid decision

Over in Greece our correspondent Helena Smith reports that officials are expressing “cautious optimism” that the riddle of rescue funds for the debt-stricken country will finally be resolved at today’s euro group meeting.

Helena writes:

 In sign that success is far from assured officials close to prime minister Antonis Samaras and finance minister Yiannis Stournaras are unwilling to voice anything more than “cautious optimism” that today’s meeting will yield the longed-for result. A senior aide to Stournaras put it this way. “Everything is open. Nothing is certain. The general feeling is, you could say, one of very cautious optimism.”

Samaras, who says disbursement of the long-overdue €31.5bn aid tranche is “urgent” if recession-hit Greece is to be put on the road to “economic recovery,” has apparently been working the phones holding talks with counterparts and senior EU mandarins over the weekend.

The well-informed daily Ta Nea says he also called IMF chief Christine Lagarde in a bid to break the Gordion knot of Greece’s debt sustainability – the source of continuing friction between the Washington-based body and the EU. If there is one thing that Athens’ governing coalition and main opposition Syriza party agree on, it is the need for the country’s monumental debt load to finally be tackled with both sides pointing out that even if today’s euro group gives the green light for €446bn to be disbursed (which would include other bailout loans owed to Greece this year), more than half of that amount would go towards recapitalizing the Greek banking system to make up for losses incurred with the write-down of private sector bonds earlier this year.

The longer the delay in loans, the more difficult things become for a government now acutely aware that on the back of growing anti-austerity sentiment the radical left Syriza is surging ahead in the polls. Indicatively, party insiders tell me that a growing number of EU ambassadors have privately sought meetings with Alexis Tsipras, the Syriza leader, with the British ambassador holding long talks with the young politician this morning clearly in a bid to sound out his views.


Catalonia election leaves independence drive in confusion

The other big eurozone event of the weekend, the regional elections in Catalonia, have caused plenty of head-scratching this morning.

The raw facts are that the Catalan president who has been driving the campaign for independence actually lost seats in the region’s parliament. Artur Mas’s CiU won 50 seats, down from 62.

However the separatist Esquerra party grabbed 21 of the 135 seats on offer, putting it in second place, while other separatist parties also gained ground.

What does that mean for the campaign for an independent Catalonia?

Our Martin Roberts reports here that the voters have dealt a blow to Mas’s hopes of an independence referendum. Reuters agrees, saying it will be harder to co-ordinate a pro-independence movement with CiU weakened.

And Open Europe, the think tank, says it’s hard to predict how the situation will develop, but makes three key points:

1) any referendum bid would still face legal challenges from Madrid

2) it’s unclear how Catalonia would manage a break-away, given Madrid’s opposition

3) Catalonia would not be a member of the EU, and Spain could block any membership bid.


Berlusconi: I’m considering a comeback

Over in Italy, Silvio Berlusconi has declared that he is giving serious consideration to running in next year’s elections.

Berlusconi told his own Canale 5 TV channel, with typical insouciance, that he was pondering whether he could still make a contribution to Italian politics:

I think that it’s right for someone who had the honour of leading the Italian government for almost 10 years to reflect on the way to achieve this modernisation of Italy, this liberal revolution.

The former PM also laid into current leader Mario Monti, saying his austerity packages had plunged Italy into recession [even though the Italian economy was already shrinking when Monti took over]

The comments came after an inconclusive primary election to select the next leader of the centre left Democratic Party, which currently leads the opinion polls.

The voting put two men, current party secretary Pier Luigi Bersani, 61, and Florence mayor Matteo Renzi, 37, into a run-off on December 2nd.

Our correspondent in Rome, Tom Kington, explains all:

While the markets may want Monti to be asked back to lead a coalition government next Spring, neither Bersani or Renzi like the idea even if they back his bid to reform the Italian economy. And a new poll published on Monday showed 39% of Italians will not vote for a government that seeks to push on with the same austerity policies Monti enacted. Only four percent said they definitely would.

Bersani led the first round of voting yesterday with about 45% to Renzi’s 35.5%, and is a favourite to win the run-off. But if Bersani is the preferred candidate of Democratic Party members, Renzi would likely draw more right wing and centrist voters in a general election, which could give the party a real majority. With Bersani on the ticket, the party could forced into a coalition with centrist partners demanding Monti’s return.

As for Silvio Berlusconi’s chronic indecision about standing again, Bersani said yesterday, “He is always in the changing room, with one boot laced up and the other unlaced.”


Slovak teachers on strike

Over in Slovakia, teachers have begun a strike in protest at the government’s refusal to give them a 10% pay rise.

Most state-run schools are shut, according to AP, and there are demonstrations in several cities.

The Slovakian government has refused to offer a pay rise above 5%, saying it can’t pay anymore as it tried to cut its deficit to below 3% of GDP next year (as Brussels demands).

Slovakian teachers are unhappy that they earn less than the average wage, and are paid less than their counterparts in other OECD countries (the inflation rate, incidentally, is running at 3.9%).

Slovakia had to implement tough economic measures to qualify for eurozone membership – today’s strike indicates that tensions are growing across the country as it suffers the impact of the economic downturn.


Jean-Claude Juncker, head of the Eurogroup of euro finance ministers, has just arrived for today’s meeting (which is expected to start in a little over one hours time).

That’s via Matina Stevis of the Wall Street Journal, who also reports that the Luxembourg PM was carrying an ‘overnight bag’ – not a good sign for those of us hoping for a quick meeting.


Anti-austerity protests in Dublin last weekend

In Ireland, public opposition to the country’s austerity programme is growing – with 10,000 people marching in Dublin on Saturday to voice their opposition to another tough budget.

The Irish government is expected to hit the public with further tax hikes and spending cuts when it publishes the 2013 budget on December 5.

Saturday’s march, organised by a group of unions and community group, was designed to put pressure on Dublin to change course:

AP reports that the parade mixed darker themes with “gallows humour”:

A rider on horseback in white mask and black cape depicting Death led the parade, while the horse had a “no to austerity” banner round its neck.

On placards Irish leaders were portrayed as serpents, with pleas to St. Patrick to return and banish them from Ireland. Marchers donned Santa hats, some bearing the slogan “No no no!” rather than ho ho ho, and warned that the government wanted to play Grinch and steal Christmas.


Italian consumer confidence hits record low

Just in – consumer confidence in Italy has tumbled to its lowest level in at least 16 years.

ISTAT’s monthly index of consumer sentiment slumped to 84.8, down from 86.2 in October. That’s the weakest reading since the survey began in 1996.


Nervous markets

The financial markets are subdued this morning ahead of the Greek talks, with the main indices all falling by 0.2%-0.4%. The FTSE 100 is currently down 11 points at 5807.

Mike van Dulken, head of research at Accendo Markets, commented:

Optimism is tempered ahead of the Eurogroup meeting in Brussels, despite heightened expectations that finance chiefs/troika of bailout lenders will reach an agreement and give Greece the money it needs to avoid default and remove what has been more than a nagging doubt for some time now.


French finance minister: we’re very close

On Saturday, eurozone finance ministers held a telephone conference call to discuss today’s eurogroup meeting on Greece.

They didn’t release a statement afterwards – but France’s Pierre Moscovici was in good spirits last night, saying a solution was ‘very close’.

Moscovici also suggested that policymakers would have to buy back some Greek debt, cut the interest rate on its loans, and persuade the ECB to surrender profits on its Greek bonds, in order to make the country’s debts sustainable again.


Greece eager for a deal today

It’s now 18 days since the Greek parliament approved the €13.5bn of austerity measures demanded by the Troika in return for its bailout programme. And understandably, Athens officials are becoming impatient with the lengthy arguing between the eurozone and the IMF.

One senior Finance Ministry source told Skai TV:

God forbid that we should not be close to an agreement for Monday.


Eurogroup meets again to discuss Greek debt deal

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

For the third time in as many weeks, eurozone finance ministers will meet with the International Monetary Fund and the European Central Bank today to try to agree a deal on Greece’s bailout programme.

The Eurogroup meeting in Brussels is the latest attempt to find a credible way to reduce Greece’s debt pile and unlock aid payment worth up to €44bn, which the Greek government desperately needs.

Both previous meetings have floundered over the issue of how long Greece should be given to bring its debt down, and how to finance the two-year extension that Athens needs to hit its bailout targets.

Having agreed more painful austerity measures in recent weeks, Greece is now crossing its fingers and waiting for its international partners to reach agreement.

A deal could come today. But there are already murmurings that the issue could roll onto the next eurogroup meeting in early December.

Fortunately, the meeting starts at noon Brussels time (11am GMT), meaning we should be spared an all-nighter.

I’ll be tracking the action in Brussels today, as well as other key issues across the eurozone and the world economy. That will include political developments in Spain and Italy, following regional elections in Catalonia and a ballot to choose a leader of the Italian centre-left. © Guardian News & Media Limited 2010

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