December 2012

Fiscal cliff deadline just hours away as Congress returns. No agreement has been reached between White House and Republicans in early morning talks. Latest deal to raise taxes on incomes over $450,000. Harry Reid says: ‘We really are running out of time’…



Powered by Guardian.co.ukThis article titled “Fiscal cliff deadline looms as talks on a deal continue – live updates” was written by Richard Adams in Washington DC, for guardian.co.uk on Monday 31st December 2012 17.19 UTC

12.19pm ET

Republican senator John Cornyn of Texas tweets:

11.50am ET

This may be a good sign. Or a bad sign. It’s too soon to say.

Updated at 11.52am ET

11.44am ET

Politico takes a metaphor and mixes it to death:

The last-ditch horse-trading underscored the urgency of the situation….

Old Politico saying: never switch a gift horse in the ditch.

11.22am ET

GOP senator: ‘There has been a lot of progress’

Senate minority whip Jon Kyl is making happy noises to Reuters:

Senator Jon Kyl on Monday said a “lot of progress” has been made in talks to avert the “fiscal cliff” but he cautioned that it is unclear if the progress will spur legislation the Senate can vote on before a midnight deadline when taxes and spending cuts kick-in.

“There is no agreement yet,” Kyl said. “Conversations are still ongoing. There has been a lot of progress.”

Then Kyl has a little joke at Reuters’ expense:

Asked how long talks could go on, Kyl said: “I guess until 11.59.”

Updated at 11.24am ET

11.06am ET

Harry Reid: ‘discussions continue as I speak’

The Senate has just got underway, and here’s the Democratic majority leader Harry Reid:

Discussions continue today, Reid notes:

There are a number of issues on which the two sides are apart but discussions continue as I speak….

We really are running out of time, Americans are threatened with a tax hike in a few hours.

That was short and sweet from Reid. And believe it or not, that tells us a lot, because Reid didn’t bash the Republicans as he has done on every available occasion in the last week.

Equally significant: Mitch McConnell didn’t take the floor after Reid.

So a deal is on the way, is the bet.

Updated at 11.09am ET

11.00am ET

This one is for total US politics geeks only:

If you know what that means, you’ll know what that means. If you know what I mean.

Updated at 11.01am ET

10.57am ET

Deal is on the cards, reports ABC News

Are Joe Biden and Mitch McConnell getting close to a deal? ABC News thinks so:

An emerging tentative agreement would extend current tax rates for households making $450,000 or less; extend the estate tax at its current level of 35% for estates larger than $5m; and prevent the Alternative Minimum Tax from hammering millions of middle-class workers, sources said.

The deal would also extend unemployment benefits set to expire Tuesday and avert a steep cut to Medicare payments for doctors.

Both sides also seem willing to delay by three months automatic spending cuts to defense and domestic programs, the sources said, setting the stage for continued fiscal debate in the next few months tied to the debt ceiling.

Still have to get it through the House, though.

Updated at 10.57am ET

10.48am ET

The ‘dairy cliff’ explained

Bloomberg has some background on the little-known ‘dairy cliff‘, which is triggered by the failure to pass a new farm bill of agricultural support and subsidies, as well as food stamps:

The most recent farm law, enacted in 2008, expired after attempts to pass a new five-year proposal failed. Without that plan, agricultural programs automatically return to rules passed in 1949, the basis of all subsequent legislation.

The effects of that transition have been delayed because of the growing seasons of different crops. Dairy production, a year-round business, is the first major commodity affected. In November, the US Department of Agriculture put the price of a gallon of fresh whole milk at just under $3.54.

Under President Harry Truman’s farm policy, the government bought supplies of a product until its price reached “parity” with the cost immediately before World War I. Adjusted for a century of inflation, the Agriculture Department’s milk-support price today would be $39.08 per hundred pounds, more than double the dairy futures price in Chicago on December 28.

Updated at 10.49am ET

10.41am ET

McConnell and Biden have early talks

There’s a flurry of fiscal cliff stuff going on, as the House starts its session, and the Senate prepares to get going at 11am, with comments expected from majority leader Harry Reid and (presumably) minority leader Mitch McConnell.

Politico is reporting on optimistic signs of a deal emerging:

Senate Minority Leader Mitch McConnell and Vice President Joe Biden engaged in furious overnight negotiations to avert the fiscal cliff and made major progress toward a year-end tax deal, giving sudden hope to high-stakes talks that had been on the brink of collapse, according to sources familiar with the discussion.

It also says that conversations between Biden and McConnell occurred early Monday morning, at 12.45am and 6.30am, and quotes a McConnell spokesman:

The leader and the VP continued their discussion late into the evening and will continue to work toward a solution. More info as it becomes available.

Updated at 10.41am ET

10.10am ET

‘Dairy cliff’ approaches sell-by date

Aside from the fiscal cliff, what about the so-called “dairy cliff,” the possibility of a sharp hike in the price of milk if a new farm bill isn’t passed quickly?

There was some positive movement over the weekend, when leaders in both parties on the House and Senate agriculture committees agreed on a one-year extension of the previous farm bill.

But hold on, what’s this? Via AP:

A spokesman for House Speaker John Boehner said Sunday that Republican leaders had not decided how they would proceed on the farm extension, though a vote could come as soon as Monday.

Oh well, so much for that outbreak of bipartisanship. It turns out the House GOP is also considering two other extensions: a one-month extension and an even smaller bill that would merely extends the current policy that expires on 1 January.

Update: ‘Diary cliff’? Yes we only have a few hours left to get our 2013 calendars (hat tip: @Mattywills). Anyway, dairy cliff…

Updated at 10.31am ET

9.54am ET

Is Obama caving in to the Republicans?

Is President Obama giving away too much? In New York magazine, Jonathan Chait fears that Obama is caving in to the Republicans on taxes, and wants a stiffer backbone:

[Obama] is allowing Republicans to whittle down the sum by essentially threatening to shoot themselves in the head. And this is the most ominous thing about it. The big meta question looming over Obama’s term is whether he has learned to grapple with Republican political hostage-taking. Hostage-taking is not simply aggressive or even irrational negotiating. It is the specific tactic of extracting concessions by threatening to withhold support for policies you yourself endorse, simply because your opponent cares more about the damage.

9.49am ET

The effects of the budget cuts contained within the fiscal cliff could be felt in short order on the US military, as the Associated Press reports:

A senior defense official said if the sequester were triggered, the Pentagon would soon begin notifying its 800,000 civilian employees that they should expect some furloughs — mandatory unpaid leave, not layoffs. It would then take some time for the furloughs to begin being implemented, said the official, who requested anonymity because the official was not authorized to discuss the internal preparations.

9.43am ET

Deal or no deal? Where the two sides differ

So where are the two sides at this point? Based on various reports, here’s where things stood at the end of the weekend in talks between Senate republicans, Democrats and the White House.

• Income tax: Senate Republicans propose higher taxes on incomes above $450,000. Democrats propose tax rises on incomes over $360,000

• Estate tax: Republicans want to tax inheritances valued above $5m at 35%. Democrats want to tax inheritances above $3.5m at 45%

• Budget cuts: a “pause” before implementing the across-the-board cuts demanded by the sequester – Democrats in favour, Republicans oppose

• Spending: Proposals to avoid a cut in Medicare payments to doctors and extend benefits for the long-term unemployed – Republicans say they should be paid for through budget cuts elsewhere

• Alternative minimum tax: Democrats want any deal to include a permanent revision to stop the AMT hitting middle class taxpayers

Updated at 9.48am ET

9.30am ET

With only hours remaining until midnight, can America’s political system avert the fiscal cliff of tax hikes and sweeping budget cuts before 2013 is ushered in?

Congress reconvenes this morning after hopes of a deal between the Democratic and Republican leaders in the Senate over the weekend, came to naught. The talks faltered after Republicans threw up a string of objections – leading the Republican Senate minority leader Mitch McConnell to open a new line of dialogue with vice president Joe Biden.

Harry Reid, the Senate majority leader, left the field yesterday evening, telling journalists “Talk to Joe Biden and McConnell” as his farewell remark.

Congress went home for the night soon after. But there was some progress, based on reports leaking out of the two caucuses. The New York Times reported:

On some of the biggest sticking points, the two sides are now inches apart. Barely a week after House Republicans refused to vote to allow taxes to rise on incomes over $1m, Senate Republicans proposed allowing tax rates to rise on incomes over $450,000 for singles and $550,000 for couples. Democrats countered with a proposal to extend expiring Bush-era tax cuts up to $360,000 for singles, $450,000 for couples. For both sides, that meant major movement. Mr Obama has been holding firm at a $250,000 threshold.

Despite that shift, Republicans first insisted that a new measure of inflation, known as “chained CPI”, be used to calculate future – and slower – increases in social security payments. Democrats rejected that but the Republicans produced a new objection, based on the putative deal’s delay of the severe budget cuts that form one half of the feared fiscal cliff.

President Obama weighed in via an appearance on NBC’s Meet The Press on Sunday morning, blaming Republicans intransigence for their failure to reach a deal:

We have been talking to the Republicans ever since the election was over. They have had trouble saying yes to a number of repeated offers.

We’ll be bringing you all the action or inaction as the clock ticks down. It could be a late night.

Updated at 10.59am ET

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USA 

In the broadcast today: USD, Fiscal Cliff Deadline and NFP Outlook. With 2013 just around the corner, another U.S. Non-Farm Payrolls report on the horizon, and anxiety levels rising as the “fiscal cliff” deadline approaches, we examine the outlook for these important events and explore their potential impact on the USD, we list the Top 10 spotlight economic reports that will move the markets in the first trading week of 2013, we examine the consensus forecasts for the upcoming economic data, we analyze the latest trend developments in the USD/JPY currency pair, we take a look at the range-bound price fluctuations in the EUR/USD and GBP/USD pairs, we highlight the market’s reaction to the Japanese CPI, Retail Sales and Industrial Production, the French GDP, and the U.S. Pending Home Sales, we discuss new forecasts from JPMorgan Chase, Bank of New York-Mellon and Bank of America Merrill Lynch, 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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Mariano Rajoy states that Span’s government is not planning to seek a bailout. French economy barely grew in third quarter of 2012. Nowotny: reasons for optimism over 2013. Schauble says “the worst is over for eurozone”. Is Japan the ghost of Europe’s future?..



Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Spanish PM predicts tough 2013″ was written by Graeme Wearden, for guardian.co.uk on Friday 28th December 2012 14.06 UTC

2.03pm GMT

Former Greek finance minister denies Lagarde List claims

Back to Greece, and our correspondent Helena Smith has full details of the allegations that broke today against former finance minister George Papaconstantinou, related to the list of alleged tax evaders (see also 12.42pm)

Helena writes:

Drama has erupted over revelations, now being made by the leading Greek daily Ta Nea, that the three names linked to former finance minister George Papaconstantinou in the famous Lagarde list are in fact relatives he allegedly sought to protect.

The three have been named as the two daughters of his politician uncle, the late Michalis Papaconstantinou, and one of their husbands with Ta Nea describing the account of at least one of the holders at the Geneva branch of HSBC as containing $US 1.222.000.

“These individuals, who had been dropped from the [original] list, allegedly held two accounts one of which included $US 1.222.000 while the movement of sums on the other [account] do not appear as it was a closed [account]. This is what emerged from the comparison of the two lists as a result of the investigation by the economic prosecutors Grigoris Peponis and Spyros Mousakitis,” Ta Nea wrote on its website.

As reported earlier, the new list arrived in cinematographic fashion in Athens a few days before Christmas. Ever since prosecutors have been earnestly studying whether it differs from the original handed to Papaconstantinou in April 2010.

But with Papaconstantinou adamantly denying making any changes to the list, Greek prosecutors are being cautious. Helena adds:

In the shrill climate that prevails in Greece, where calls for justice ring ever louder among a population blaming their country’s financial mess almost exclusively on the wrongdoing of politicians, prosecutors are also cautioning against a witch-hunt – one in which Papaconstantinou, who has stringently denied any suggestion that he tempered with the list, would be an easy victim.

The latest list reportedly contains the names of 2,062 individuals according to prosecutors who will study whether any of the depositors actively evaded taxes. The new list will be presented to parliament once it has been handed over to the ministry of justice, the paper says.

The reports have caused quite a storm on Twitter. And as the WSJ’s Matina Stevis explains, they have the potential to rock Brussels too.

Updated at 2.06pm GMT

1.22pm GMT

Rajoy went on to defend his austerity programme, claiming Spain would be in an “immeasurably worse situation” without it.

The priority now, he says, is to lay foundations for improving the economy in future.

1.16pm GMT

Here’s Rajoy’s full quote on the bailout issue:

We are not thinking of asking the European Central Bank to intervene and buy bonds in the secondary market…But we can’t rule it out in the future.

1.06pm GMT

Rajoy: don’t expect to ask for a bailout

Mariano Rajoy went on to credit the European Central Bank for calming the markets, through its offer of an unlimited bond buying programme to countries in distress.

But he also reiterated that he does not expect to apply for a bailout, thus triggering ECB action. Spain will ask for help if needed, though, he added.

That confidence reflects the recent drop in Spain’s borrowing costs since the summer, when the ECB’s Mario Draghi made his move.

1.01pm GMT

Rajoy: 2012 was tumultuous, 2013 will be tough

Spanish Prime minister Mariano Rajoy is giving his end-of-year press conference now.

Rajoy began by saying that 2012 has been a tumultuous year, but one that is ending with some calm in the financial markets.

He then warned that 2013 will be tough — particularly the first half of the year as the ongoing recession continues to bite.

After his first full year in office, Rajoy pinned the blame for the economic crisis on his predecessors.

Things have been more difficult than we expected.

And while austerity has been very unpopular, Rajoy argued that his tough policies are “starting to pay off”.

he added:

I will not ask for patience…or [or] blind faith, but understanding and solidarity.

Updated at 1.01pm GMT

12.42pm GMT

There are reports in Greece that former finance minister, George Papaconstantinou, is implicated on the ‘Lagarde List’ of suspected tax evaders.

Local media are claiming that three names “linked” to Papaconstantinou appear on the new version of the list obtained by the Greek government this month. However, they apparently do not appear on the version that came to light recently after being originally mislaid.

Papaconstantinou, who was finance minister when Christine Lagarde handed over the list, has robustly denied the suggestion that he manipulated the list in any way.

More to follow!

12.16pm GMT

Over in Athens, our correspondent Helena Smith says the architect of Greece’s admittance into the eurozone has ended the year with a damning indictment of the single currency bloc.

Helena writes:

Greece’s former prime minister Kostas Simitis, who oversaw the country’s entrance to the euro zone in 2001, slammed what he described as the “structural flaws” of the euro zone in an article published in today’s Frankfurter Allgemeine Zeitung.

Electing to use the prominent German daily to make the point that it was wrong to single out Greece as the sole instigator of the worst economic crisis to befall Europe since the Second World War, the German-educated erstwhile socialist leader said the entire architecture of the euro zone had to change. The founders of monetary union, he charged, had wrongfully believed that banks would automatically stop lending to euro zone states that had become overly indebted. “Trust in the power of the market to regulate everything was overly excessive,” he wrote.

A permanent solution to the crisis could only come “through deeper economic and political union,” said Simitis, a revered moderniser in his time even if Greece was later exposed to have cooked the books to get into the cherished common currency bloc. Reality, he argued, was now pressing for “a mutual contribution [to solving the crisis], the extent of which can not be foreseen only by legal texts.”

The biting commentary from one of Greece’s leading Europeanists will add fuel to the argument that Berlin will ultimately have to change tune if the euro zone is ever to properly function.

11.52am GMT

While we wait for Mariano Rajoy’s press conference…. economist Shaun Richards flags up that Spain’s GDP data for 2011 has been revised down today.

He fears that Spain will continue to suffer in 2013:

It is plain that the beat goes on in Spain and that the drums are beating a depressionary rhythm. So far the official numbers have not fully encapsulated this but perhaps today’s downwards revision for 2011 will be followed by others for 2012. The downwards spiral was caused by a boom and then bust in both her housing and banking markets which if the latest data is any guide are still developing. It appears that credit to other parts of the economy are being reduced too which is not a good sign either.

One bright spot is her balance of payments performance which has improved through this crisis and in July was positive for the first time in the Euro era. The trouble is that whilst there has been an export improvement this also represents a fall in imports due to economic weakness.

Also we see that in terms of bond yields they have retreated from the highs of the middle of this year and her benchmark ten-year is now far from where it began 2012 at 5.28%. The problem is that as problems and debts continue to build this is still much too high.

So we see that the problems of 2012 for Spain’s economy look set to carry on into 2013 with no respite in sight. In a country with an unemployment rate already at 25.02% as of the official numbers for the third quarter that is a prospect beyond chilling which sends a shiver down the spine. Unemployment of 5,778,100 is already far too high.

More here: What is happening in Spain’s economy and what is the outlook for 2013?

11.41am GMT

Heads-up: Spain’s prime minister, Mariano Rajoy, is due to give his end of year press conference this lunchtime (probably around 1.30pm local time, or 12.30pm GMT).

In the meantime, the Spanish stock market is losing ground – with the IBEX 35 now down 1.6%.

Bankia has tumbled another 25%, following yesterday’s news that existing shareholders will lose almost all their stakes when it is recapitalised.

11.28am GMT

Nowotny optimistic about 2013

European Central Bank policy maker Ewald Nowotny has joined the ranks of eurozone players predicting that 2013 will be a calmer year.

Nowotny, the governor of Austria’s central bank, said that eurozone leaders had made real progress in 2012. He cited the agreement on eurozone banking supervision, the decision to hand Greece its loan tranche this month, and the creation of the permanent bailout fund.

Altogether these are important measures that allow for cautious optimism for a way out of the crisis in 2013.

This follows Germany finance minister, Wolfgang Schauble’s, prediction that the worst is over for the eurocrisis….

Speaking of which, Reuters has rounded up the experts* whose predictions of a disaster in 2012 didn’t come true:

Euro doomsayers adjust predictions after 2012 apocalypse averted.

* Paul Krugman, Nouriel Roubini and Willem Buiter all get namechecked

11.01am GMT

Reassurance from Spain

One piece of good news this morning — capital is flowing back into Spain’s banking sector, as fears over the break-up of the eurozone subside.

The Bank of Spain reported a capital inflow of €12.1bn for October, the second month running in which more money moved into the Spanish banking sector than out of it.

It follows Mario Draghi’s famous pledge to defend the euro at all costs — but analysts caution against getting too excited.

As Martin van Vliet, senior economist at ING, told Reuters:

This confirms that ever since Draghi said he would do whatever it takes to save the euro, the capital flight has stopped and partially reversed…

It’s a positive development…but Spain is not out of the woods yet and the situation can change overnight.

10.26am GMT

Italian bond auction results

Over to Italy, where the Treasury has just raised €5.87bn through an auction of long-term bonds.

The cost of borrowing was the highest since October — 10-year bonds were sold at a yield of 4.48%, from 4.45%.

But there’s nothing too alarming here really – and no suggestion that the impending election is alarming the bond market.

World First’s chief economist, Jeremy Cook, certainly isn’t panicking:

10.07am GMT

Rather like an overstuffed Christmas diner, the UK stock market is struggling to move this morning.

The FTSE 100 is currently down just 0.37 points, somewhat to the chagrin of those who made the trip into the City:

Other European markets have fallen:

German DAX: down 9 points at 7646

French CAC: down 13 points at 0.36%

Spanish IBEX: down 79 points at 8201, – 0.1%

Italian FTSE MIB: down 51 points at 16356, – 0.3%

Updated at 10.08am GMT

9.39am GMT

Speaking of Japan, its Nikkei share index hit another 21-month high on its final trading day of 2012.

Traders are buying shares in anticipation of a huge injection of stimulus by the Bank of Japan. The NIkkei finished 72 points higher at 10,395, and analysts reckon it will break through 11,000 by early February.

Still some way shy of its lifetime peak of over 38,900 in 1989….

9.31am GMT

Kit Juckes: Europe must learn from Japan

Kit Juckes, global macro strategist at Société Générale, is concerned by France’s weak growth (see 8.37am) and Japan’s shrinking industrial output (see 9.18am). He writes:

Japan is stuck with deflation, Europe is stuck with recession. French Q3 GDP is flat y/y, which makes for a stagnant core and shrinking edges to the Euro Zone.

With a Dickensian flourish, Kit argues that Japan could be the Marley to Europe’s Scrooge:

Europe has much to learn from Japan’s woes. And indeed, if Europe wants to see more growth and a lower debt level than Japan has seen in the 23 years since the Nikkei peaked, they’d better get learning.

Don’t expect your currency to be weak just because your economy is, is one lesson. The correlation between the euro’s value and peripheral bond spreads tells us the euro does well whenever the Euro-crisis is put on the back-burner, as is now the case. But a strong euro is no more reason to cheer than a strong yen.

The ghost of Christmas yet to come can be seen by Eurocrats any time they want to brush up on modern Japanese economic history. Act now or deflate at your peril.

Updated at 9.31am GMT

9.18am GMT

The consequences of Europe’s weak economy continue to be felt in Japan, where industrial output has slipped again.

Industrial production in the world’s third-largest economy fell by 1.7% in November, compared with a year ago.

It adds impetus to new prime minister Shinzo Abe’s plans for a stimulus package and looser economic policies. But with Japan already in recession and battling deflation, it’s another reason to be downbeat about 2013.

8.59am GMT

Hot on the heels of France’s updated GDP data comes another fall in Spanish retail sales.

Retail sales across Spain slumped 7.8% in November, compared with a year earlier. That’s the 29th monthly fall in a row.

Spanish retailers have already admitted that Christmas did not go well, as the public suffered from the recession, austerity cut backs and tax rises.

Ainhoa Garcia, spokeswoman for the Spanish Commerce Confederation, told Reuters yesterday:

The Christmas campaign didn’t take off the way it was expected to and we know sales are down compared to 2011 though we don’t have the figures yet.

8.37am GMT

French GDP growth cut

Good morning, and welcome to another day of rolling coverage of the eurozone financial crisis, and other events across the world economy.

We start with some disappointing news for France. New GDP data released this morning showed that its economy barely grew in the third quarter of 2012. GDP increased by a paltry 0.1%, not the +0.2% first estimated.

The revision means France economy failed to post any growth at all over the last 12 months, and reinforces the fact that the eurozone itself is in a double-dip recession (as covered here last month).

The weak performance was driven by a drop in imports (which fell by 0.5%) and business investment (-0.6%). That suggests French firms were hunkering down during the early months of François Hollande’s presidency.

The data comes hours after the latest jobless data showed that the number of people out of work in France has risen for the 19th month in a row, to its highest level in nearly 15 years.

The French unemployment total rose by 29,300 in November, to 3.13 million. France’s unemployment rate is already 10.3%, rather worse than the UK, Germany or the US — but still below the eurozone average.

So while the worst of the crisis may be abating, Europe’s economy remains troubled. And with America’s fiscal cliff problems also unresolved, it feels like a nervy end to the year……

As usual, I’ll be covering the latest news, reaction and market moves through the day.

Updated at 8.40am GMT

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In the broadcast today: Is the USD Rally vs. JPY Unstoppable? As the Japanese Parliament approves Shinzo Abe, who has been very clear about his plans to weaken the currency, as the country’s new Prime Minister, we continue to monitor the market-wide assault on the yen and examine the factors fueling the USD rally vs. JPY, we analyze yet another bullish breakout in the USD/JPY currency pair, we note the EUR/USD pair’s move toward its 8-month high, we keep an eye on the GBP/USD currency pair, we highlight the market’s reaction to the Bank of Japan Meeting Minutes, the French and Italian Consumer Sentiment, the U.S. Jobless Claims, New Home Sales and Consumer Confidence, we discuss new forecasts from Bank of New York-Mellon, FX Concepts and Citigroup, 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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Mario Monti “meeting potential allies” today. Berlusconi hits back at outgoing PM. More troubles for Spain’s Bankia as the bank’s shares tumbled by another 14% today. U.S. jobless claims drop more than forecast to the lowest level in four and a half years…



Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Monti and Berlusconi set for election battle” was written by Graeme Wearden, for guardian.co.uk on Thursday 27th December 2012 14.14 UTC

2.14pm GMT

Bankia shares tumble as investors face total wipeout

Shares in Spain’s Bankia have tumbled by another 14% today after it emerged that investors in the deeply troubled bank will be all-but wiped out.

Last night, Spain’s bank rescue fund revealed that Bankia has a negative valuation of €4.2bn. The price of recapitalising the group, it seems, is that its shareholders will see their stakes cut to virtually nothing.

The news is another bitter blow to hundreds of thousands of small shareholders who took part in Bankia’s floatation in the summer of 2011, and have already seen their investments shrivel (it was nationalised back in May after being brought down by its toxic debt mountain)

Bankia is receiving €18bn through the recapitalisation of the Spanish banking sector but as one source explained to Reuters:

Are we looking into leaving shareholders with something? Yes. How much? That’s too soon to say. Will it be very little? For sure…..

But that will be purely symbolic. I can assure you they will lose up to the shirt on their back.

Bankia shares lost another €0.093 to €0.59 today, having floated at €3.75 17 months ago. Shareholders may feel they lost their shirts some time ago….

Updated at 2.14pm GMT

1.42pm GMT

US jobless data beats forecasts

Amid a quiet day for economic news, the number of Americans signing on for unemployment benefit for the first time has fallen close to its lowest level in four and a half years.

The US labour department has just reported a weekly jobless claims total of 350,000, a drop of 12,000, suggesting that America’s economy is ending the year healthily. However, Reuters cautions against reading too much into the data – as the numbers for 19 states had to be ‘estimated’ because federal workers were on holiday…

1.04pm GMT

Photos: Medical staff protesting in Spain today

Protests have been taking place in Madrid today against the Spanish government’s plans to cut health spending, and proposals to privatise some public hospitals and health centres.

Medical staff again urged Spain’s politicians to ditch the plans, warning they will hurt patients by eroding the quality of care:

12.32pm GMT

Lagarde: Gerrmany should resist rapid fiscal consolidation

Looking through the European papers, Der Spiegel is reporting that Christine Lagarde fears Germany may hamper the eurozone recovery by imposing domestic spending cutbacks after autumn’s general election.

The head of the IMF has apparently warned that Germany should resist any major fiscal consolidation efforts until the euro periphery is stronger.

Here’s a taste:

Germany and other countries “can afford to move ahead with consolidation at a slower pace than others,” Lagarde said. “That serves to counteract the negative effects on growth that emanate from the cuts made in crisis countries.”

The comments follow a report – denied by Berlin – that the German finance ministry is preparing a programme of tax hikes and spending cuts for 2014 (even though Germany appears to be on track to hit its target of a balance budget early)

Updated at 1.05pm GMT

12.18pm GMT

The euro has been gaining ground in the currency markets this morning, up 0.4 of a cent against the US dollar now at $1.3265.

Stock markets also remain calm (see also 10.04am), while traders await a breakthrough in the US fiscal cliff talks.

As fund manager Arnaud Scarpaci of Montaigne Capital in Paris put it to Bloomberg:

If there isn’t an agreement tonight, we can start worrying. If there is an agreement, we can have a little rally.

Meanwhile the FTSE 250 (composed of mid-value companies) hit a new lifetime high this morning. It’s gained around 23% this year — underlining how share prices shrugged off the eurozone crisis and the general economic malaise.

Updated at 12.35pm GMT

11.25am GMT

Key event

Over in Greece, the saga of the “Lagarde List” of alleged tax evaders rumbles on.

Greek newspaper Kathimerini reported last night that government officials have collected a new copy of the list (which was originally handed to Athens in 2010 and then curiously mislaid) from the French government.

Prosecutors are now checking whether this new list matches the existing version (which was produced by former finance minister Evangelos Venizelos in October).

Some media outlets claim that the new copy contains hundreds of extra names - running to 2,500 potential tax dodgers, not the 2,000 or so on the Venizelos list.

One source told Kathimerini:

The lists are being crosschecked name by name, amount by amount and if any differences are found, political and judicial responsibilities will be sought.

10.42am GMT

Italian debt auction proceeds smoothly

The Italian government has successfully raised almost €12bn this morning, despite the country’s political uncertainty.

The Italian treasury sold €8.5bn of six-month bills at an average yield (interest rate) of 0.949%, up from 0.919% in November – and the highest borrowing rate since October.

It also sold €3.25bn of two-year bonds at lower yields – 1.884% compared with 1.923% last month.

With fewer bond traders around, the sale looks like a success:

Updated at 10.42am GMT

10.16am GMT

Bundesbank chief: Italy must stick with Monti’s reforms

Back to Italy, and the head of the Bundesbank has warned that investors would lose faith in the Italian government if the reform programme put underway by Mario Monti faltered.

Jens Weidmann, Germany’s top central banker, told business news magazine Wirtschaftswoche that it would be “disastrous” if the country’s targets were called into question by next February’s election:

Italy suffers from low growth, low productivity and lack of innovation. But under the Monti government, Italy has set ambitious goals for reform in order to regain the confidence of investors, and had success with it.

Weidmann added that central bankers were not “sweepers”, there to clean up the mess created by politicians.

He was also cautious about suggesting the worst of the eurozone crisis was over, saying:

We have progressed a long way, but we must not underestimate the distance ahead.

The full interview is online here.

10.04am GMT

The financial markets are calm this morning as traders return to work following the Christmas break.

The major European indices are slightly higher, despite the fiscal cliff deadlock (see 9.56am). Here’s the latest prices:

FTSE 100: up 13 points at 5967, + 0.2%

German DAX: up 15 points at 6751, + 0.2%

French CAC: up 23 points at 3675, + 0.6%

Spanish IBEX: up 4 points at 8303, + 0.05%

Italian FTSE MIB: up 83 points at 16415, + 0.5%

And earlier this morning, Japan’s Nikkei closed at a 21-month high.

9.56am GMT

Geithner warns US could breach debt ceiling

The other big news this morning is that negotiations over the US fiscal cliff have still not reached a conclusion.

With the deadline to reach a deal looming, US Treasury secretary Tim Geithner warned yesterday that “extraordinary measures” might be needed to prevent the US hitting its $16.4tn (£10.16tn) debt ceiling.

Geithner warned Congress that the uncertainty over America’s tax and spending policies for 2013 meant the country risked breaching its borrowing limits.

He said the Treasury could raise $200bn through “extraordinary measures” – but warned that it wasn’t clear how much time that would buy.

US president Barack Obama has now cut short his holiday in Hawaii, heading back to Washington late last night….

Here’s our full story from late last night: US Treasury warns of ‘extraordinary measures’ amid fiscal cliff deadlock

Updated at 9.57am GMT

9.37am GMT

Berlusconi blasts Monti

The battle has already escalated this morning — with SIlvio Berlusconi launching an attack against Mario Monti on Italian TV today.

Berlusconi told Rai 1′s Unomattinathat Monti’s government had been ‘crushed’ by pressure from the rest of the eurozone, and repeated his pledge to abolish a key property tax.

Linkiesta’s Fabrizio Goria has tweeted the key quotes:

This comes after Monti was notably scathing about Berlusconi on Sunday, telling reporters that he was “struggling trying to follow” the PDL leader’s thinking…

9.26am GMT

A quick recap….

In case you’re been distracted by Christmas, here’s how events have unfolded in Italy in the last few days:

• The election battle really got underway last Friday, when Mario Monti formally stepped down: Mario Monti resigns as prime minister of Italy.

• On Sunday, Monti declared that he would be prepared to lead a group of parties who backed his reform agenda: Mario Monti considers return as Italian prime minister

• That agenda – including economic reforms and fiscal responsibility – was launched online on Christmas Eve: Mario Monti announces reform agenda for Italy

Monti also appears to have joined Twitter, tweeting late on Christmas Day that:

Together we have saved Italy from disaster. Now politics is due for renewal. Complaining does not help, you must work. “Let’s go” in politics!

9.05am GMT

Good morning, and welcome back to our rolling coverage of the eurozone financial crisis – and other events across the world economy as we edge nearer to the end of 2012.

With Boxing Day behind us, a meaty scrap is underway in Italy. Having resigned as Italian prime minister, Mario Monti is holding negotiations that could see him stay on as PM after next February’s elections.

Monti is expected to meet with prospective coalition partners today to discuss electoral strategy, and ‘candidate lists’ for the upcoming election.

He published his agenda for Italy last weekend — the big question for Italy (and arguably the eurozone too) is whether he will rally enough support for a credible election bid.

The Financial Times believes Monti is gearing up for a clash with his predecessor, Silvio Berlusconi, reporting this morning that:

Italy’s centrist politicians are rallying behind Mario Monti’s offer to lead an alliance into elections in February, setting the stage for a confrontation with Silvio Berlusconi in his attempt to return to power.

adding:

His decision to seek a second stint as prime minister, while not yet official, could lead to an even more fragmented parliament than had been expected. It injects a fourth element into a battle between the centre-left Democrats, Mr Berlusconi’s centre-right People of Liberty and the anti-establishment Five Star Movement.

And Berlusconi’s party has already hit back, accusing Monti of mishandling the Italian economy over the last 13 months.

As PDL member Anna Maria Bernini put it:

It is shocking to see how a man can present himself as a saviour after bringing the country to recession, taking all the merit (for successes) and attributing all the disasters to others.

So it’s looking like a tasty battle, which will play a significant part in Europe’s fortunes in 2013.

I’ll be tracking the developments in Italy, and beyond, through the day….

Updated at 9.08am GMT

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Salutary lessons can be learned from past financial crises. Boom-bust events tend to follow a classic arc: a tale with a grain of truth in it is seized on and peddled to credulous investors by an unholy alliance of greedy optimists and swindlers…



Powered by Guardian.co.ukThis article titled “Bubbles, tulips, booms and busts: same story, different dates” was written by Heather Stewart, for The Observer on Sunday 23rd December 2012 00.08 UTC

Perhaps one of the most cheering moments of 2012 was when Sir Mervyn King summoned Barclays chairman Marcus Agius and told him that after the appalling revelations about Libor-fixing, the bank’s chief executive Bob Diamond would have to go – or, as the Sun headline had it: “Sign on, You Crazy Diamond.”

Both King’s high moral tone and the headline-writers’ cheek seemed refreshingly modern – but for anyone wandering the damp streets of London with half an hour or so to kill during this festive season, a corner of the British Museum offers a healthy dose of historical perspective on these and many other events over the past torrid five years.

Tucked away in Room 69a, just around the corner from a display of Roman pottery, is a small temporary exhibition dedicated to “Bubbles and Bankruptcy: Financial Crises in Britain Since 1700″.

One exhibit is a cartoon from Punch, published after the Bank of England bailed out Barings (yes, that Barings) in 1890. A stiff-looking woman with an apron made of banknotes – the Old Lady of Threadneedle Street – crossly hands out cash to a queue of cowed financiers, saying: “You’ve Got Yourself into a Nice Mess With Your ‘Speculation’!” It must be reassuring for King to regard himself as today’s incarnation of that starchy matron.

It’s also salutary – and somehow comforting – to see artifacts from the events of the recent crash boxed up in glass cases as historical exhibits: an empty champagne bottle from the flotation of the ill-fated Northern Rock; a Steve Bell cartoon of ravenous fat cats having their toenails gingerly clipped by George Osborne; and a handful of credit cards from the bailed-out banks.

These now-poignant objects sit alongside exhibits illustrating a bevy of other investment frenzies and financial crises: the South Sea bubble, tulip mania and the railway investment boom – and bust – of the mid-19th century.

Apart from the facile (but nonetheless true) insight that there’s nothing new under the sun, the exhibition holds one or two other lessons for today’s policymakers.

The first is that these boom-bust events tend to follow a classic arc: a tale with a grain of truth in it is seized on and peddled to credulous investors by an unholy alliance of greedy optimists and downright swindlers.

An engraving in one case shows a certain Gregor MacGregor, a dashing-looking Scottish general who went off to Latin America and came back claiming to have discovered a lush territory called Poyais. He raised an extraordinary £200,000 – detailed in minute letters on a loan document on display – from investors convinced by the tale of vast, untapped riches in a faraway colony.

Unfortunately for MacGregor and the hundreds of would-be settlers who believed his tale and boldly set out across the Atlantic from Leith, Poyais turned out to be largely uninhabitable, and his backers lost their money.

Anyone reading the wild predictions about the potential riches to be made from exploiting shale gas deposits in the US should recognise the ring of a story so compelling that, given enough time, it could easily become a vast investment bubble. Fortunes will be made, but also lost.

A share certificate from the Sheffield and Retford Bank is a reminder that when Britain’s railways arrived, they certainly transformed the economy and created millionaires; but many of the early firms set up to drive brand-new lines across great tracts of the country went bust. The Sheffield and Retford made many loans to these companies. When they defaulted, the bank failed.

Some of the items on display also highlight the way that Britain’s political and social elites have always been prone to being seduced by smooth-talking investors. An 18th-century ballad, the Bubblers Medley, printed at the time of the South Sea crash, talks of the “Stars and Garters” tempted into the scheme alongside “harlots” from Drury Lane.

However, Gordon Brown and Alistair Darling should note that while the then chancellor of the exchequer, John Aislabie, did buy shares in the South Sea company, he shrewdly sold them before the crash – as visitors can see from the bill with his signature – making them over to some more gullible citizen.

When veteran bank-watcher Sir Donald Cruickshank appeared before the parliamentary commission on banking standards recently, he also called for some historical perspective, urging its members to immerse themselves in a copy of Anthony Trollope’s The Way We Live Now.

Reading the rip-roaring adventures of shady financier Augustus Melmotte, who takes London by storm with his eye-watering wealth, drawing politicians and aristocrats into his net, it’s hard not to think of the charming chancers in charge of Britain’s banks, who convinced us (and themselves) they were financial geniuses before the crisis – and were revealed to be self-deluded at best.

True, Melmotte certainly wouldn’t resort to the vulgar “done … for you big boy” tone of the emails that surfaced in the Barclays Libor settlement, but the sentiment is similar. Or, as Cruickshank put it: “I don’t think bankers are any worse than they have been before: they always calibrate off society … We have been here before.”

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In the broadcast today: USD and JPY New Trading Week Outlook. With a sequence of notable U.S. and Japanese economic reports scheduled for release in the Christmas holiday-shortened week ahead, we focus on the USD and the JPY and explore the outlook for the two currency majors, we list the Top 10 spotlight economic events that will move the markets next week, we examine the consensus forecasts for the upcoming economic data, we analyze the latest trend developments in the USD/JPY currency pair, we take a look at the price correction in the EUR/USD pair, we note the pullback in the GBP/USD currency pair, we highlight the market’s reaction to the German Consumer Confidence, the U.K. GDP, the U.S. Personal Income and Outlays and Consumer Sentiment, we discuss new forecasts from Goldman Sachs, Morgan Stanley 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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Unfestive jitters hit investors after Republicans failed to agree on an alternative plan to avoid the fiscal cliff. Stocks drop following the concerns that the fiscal cliff discussions had broken, with time running out for a resolution. German consumer sentiment wanes…



Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Fiscal cliff fears weigh on markets” was written by Dan Milmo, for guardian.co.uk on Friday 21st December 2012 15.01 UTC

3.01pm GMT

US fiscal cliff developments

To follow the latest developments with the fiscal cliff, my colleague Richard Adams is live blogging here.

2.46pm GMT

More on Cyprus.

2.45pm GMT

Monti wins vote of confidence in Italy’s lower house

Mario Monti’s government has won a vote of confidence on the 2013 budget in Italy’s lower house. Final approval is expected later today.

That could trigger Monti’s resignation as prime minister, with much speculation as to his next move. He is reported to be holding a press conference on Sunday, at which no doubt his future plans will be revealed.

2.36pm GMT

Wall Street opens lower

Wall Street has opened and in early trading, the Dow Jones Industrial Average is down around 144 points, following the concerns that the fiscal cliff discussions had broken, with time running out for a resolution.

1.55pm GMT

US data

Ahead of Wall Street’s opening, some US data to digest from @Reuters:

  • US consumer spending up 0.6% in November, biggest rise since August 2009
  • Personal income up 0.6% in November (durable goods orders, up 0.7%)

With that I’m handing over to my colleague Nick Fletcher.

Updated at 2.11pm GMT

1.32pm GMT

Booming world

If you haven’t already seen this, the Guardian’s booming world series went live this week:

http://www.guardian.co.uk/world/series/the-booming-world

Economist Ha-Joon Chang argues today for a more restrained approach to looking at developing world economies. “Asia shouldn’t overexcite people,” he says, arguing that the commodity price boom has given a short-lived boost to these countries.

He makes a strong case for a slowdown in the Chinese economy and says that “rapid growth” in emerging markets is not sustainable. More impressive than the developed world of course, but still not galloping ahead.

Updated at 1.52pm GMT

1.09pm GMT

German consumer sentiment wanes

GfK, the market research group, has reported that German consumer morale has dropped for the fourth consecutive month to its lowest level in more than a year. Its survey of 2,000 Germans showed that consumer sentiment registered a rating of 5.6 heading into January, down from 5.8 in December. The willingness to make purchases has fallen to its lowest level since May 2010.

But Germany’s love for a bargain should keep things ticking over. This Financial Times piece on the German love for Primark is an interesting read. Needs a subscription, mind. Crudely, the eurozone could do with Germany exporting less and consuming a bit more.

1.01pm GMT

Ferrovial confirms Heathrow stake sale

Another tangential guest entry, but Spanish conglomerate Ferrovial – a grandee of European infrastructure – has confirmed the sale of a 10% stake in Heathrow airport to the Qatar sovereign wealth fund. Heathrow’s investment roster is now dominated by the Chinese, Qatari and Singaporean governments. Another sign of the shifting balance in power. Not that it means sovereign wealth funds will be paying for Europe’s new roads and airports. Investors tend to prefer investing in assets after they have been built. So Europe’s taxpayers still need to stump up the cash to get projects started.

Updated at 1.53pm GMT

12.39pm GMT

Diamond exhumed from the rough?

Now this won’t be many people’s idea of a new year resolution, but the resurrection of Bob Diamond’s career could be one of the surprise events of 2013. This piece on Reuters says that while the Libor scandal was bad for Barclays, it was ultimately much worse elsewhere.

Updated at 1.54pm GMT

12.28pm GMT

Fitch and the eurozone

Fitch, the ratings agency, expects the eurozone to “stagnate” in 2013 after contracting 0.5% in 2012. It expects Emerging Europe, which includes the likes of Latvia, to grow by 2.9%, up from 2.3% in 2012.

12.09pm GMT

On a more positive note

With deference to the festive season, we ought to inject some optimism into the fiscal cliff issue. Let’s call it a fiscal ha-ha. The American economy will not implode on 1 January and the tightening will be gradual. One financial professional told Reuters this morning that it was more of a “slope” than a cliff – the latter term was coined by Ben Bernanke at the US Federal Reserve. This piece by the Centre on Budget and Policy Priorities offers a less hyperbolic perspective. Still, it does use the phrase “mild recession”, which is never as reassuring as they would like it to sound.

Updated at 12.19pm GMT

11.56am GMT

Next year and Japan

According to some informed commentary, including Peter Boone and Simon Johnson in the Atlantic Monthly recently, Japan could be the source for the next major financial panic – its gross debt is 236% of GDP and it is underpinned by fallible demographics. The piece is worth reading. Once you have done that, square it with this piece from Business Insider. There is more debate to be had on the Japan scenario, evidently.

Updated at 12.19pm GMT

11.44am GMT

Cyprus talks in January

European finance ministers will discuss the perilous state of Cyprus early next year, says Merkel official.

Updated at 11.44am GMT

11.39am GMT

Shares update

Reuters is reporting widespread selling in most major stock markets and strong demand for safe assets such as German bonds in the wake of the failed Boehner meeting. The FTSEurofirst 300 index of top European stocks fell 0.6% by mid-morning, while the dollar, yen, and US and German government bonds all rose.

Ian Williams, strategist at Peel Hunt, said:

The recent performance of key benchmarks has priced in a satisfactory outcome to the US fiscal discussions, which is far from a done deal.

11.33am GMT

Monti and politics

If the unelected Italian prime minister, Mario Monti, sheds his technocratic cloak and runs in elections next year, it could have a positive impact.

Updated at 11.42am GMT

11.03am GMT

Sequestration impact

If the US does indeed tumble off the fiscal cliff, automatic spending cuts kick in and will take $109bn per year from the federal budget – annually – over the next 10 years. Of that total, $54.7bn will come from defence and that could have an impact on BAE Systems, Britain’s largest defence contractor and a major player in the US market. For instance, it is helping build the F-35 fighter.

Here is Dan Wasserbly, Americas editor for IHS Jane’s Weekly, who plays down the impact nonetheless:

Indiscriminate cuts will cause problems, but will not have the chaotic impact predicted by some of the nation’s top military leaders. A 10% cut isn’t going to lay to waste the most powerful military in the world. The biggest immediate impacts could hit Pentagon’s plans to buy new planes, ships, helicopters, drones, missiles submarines, ammunition, radios and more.

Updated at 11.26am GMT

10.51am GMT

Siemens

This is a bit of a guest-editor comment, but it is worth noting confirmation yesterday that Siemens of Germany has reached a commercial agreement on the £1.4bn Thameslink trains contract for more than 1,000 train carriages that will run in London – but will be built in Germany. On a basic level, this reflects a UK manufacturer, Bombardier’s Derby factory, being beaten by a European competitor for a domestic contract. It underlines the competitive pressures that UK-based manufacturers and would-be exporters face as we try to tilt the economy away from services.

Updated at 11.06am GMT

10.31am GMT

Rehn on Hollande’s parade

Olli Rehn, the Finnish European commissioner for economic and monetary affairs, has some guiding words for French politicians this morning. In an interview with Le Monde he says that France must carry out labour market reform and extend pension reforms. But that additional French budget savings are not essential. The Economist would disagree.

10.14am GMT

The British Chambers of Commerce, which represents 100,000 businesses in the UK – SMEs account for about six out of 10 people in private sector employment – says there were some pearls in the ONS data. But exports need a boost, notwithstanding this morning’s BAE contract.

Some of the additional detail, revealed by the new estimates, are however positive. Business investment has shown good growth in the third quarter, and there has been a strong improvement in net trade with exports up 1.2%, and imports down 0.4%. This reverses some of the deterioration in net trade that we saw in the first half of the year.

Notwithstanding these positive developments, it is clear that economic growth remains much too weak, and more effective measures are needed to enable businesses to drive recovery by strengthening the growth in exports and jobs.

Updated at 10.26am GMT

10.06am GMT

Satire is not dead

It is a brief YouTube clip admittedly, but the Daily Show’s reference to, and coverage of, the fiscal cliff situation as “Cliffpocalypsemageddonacaust” rather nails it.

Updated at 10.09am GMT

9.56am GMT

If the UK is a services-dominated economy, then there is evidently still much to be done to stoke consumer demand…

9.50am GMT

Down, down deeper and Dow

The FTSE retreat is gathering pace, just shy of -1% now at 56 points down. According to the US futures market, the Dow Jones Industrial Average will follow when it opens this afternoon, with the prediction that it will open 151 points down.

9.41am GMT

UK economy makes weak start to Q4

The circumstantial evidence that we might be heading for a triple-dip recession has gathered further weight this morning after the Office for National Statistics posted data showing a deterioration in the public finances since last year, meagre growth in the all-important services sector and a downward revision in third quarter GDP. Merry Christmas.

Public sector net borrowing excluding financial sector interventions – the government’s preferred measure – rose to £17.5bn in November, up from £16.3bn in the same period last year. Third quarter GDP growth was revised down from 1% to 0.9%. Services data showed that the sector – which accounts for three-quarters of UK GDP – grew 0.1% in October. The UK economy needs a stronger start than that as it enters Q4, because construction and manufacturing are weak too.

9.22am GMT

Cyprus downgrade

It doesn’t receive as much attention as its Greek neighbour or the other troubled eurozone countries, but Cyprus has been mired in financial crisis for some time now. As much as Greece, it is in danger of a euro default. In the latest blow, Standard & Poor’s has downgraded the state further into junk status, to CCC+, due to a “considerable and rising” risk that the country may default.

S&P said the Cypriot government is running out of money and uncertainty remains over a bailout that is being negotiated with international lenders.

Updated at 9.40am GMT

9.16am GMT

Berlusconi speaks

Silvio is always good for a quote. He is warning, apparently, that the nightmare of translating lira into pounds could return …

Updated at 9.40am GMT

9.15am GMT

Coming up

Some UK economic news is imminent, by the way. The last revision of Q3 GDP – the economy grew 1% in the three months to September – and the latest government borrowing numbers. These will be coming out at 9.30am.

Updated at 9.42am GMT

9.11am GMT

The boot is on the other foot…

9.09am GMT

Apocalypto?

A few dry asides in the newsroom this morning about the fact that the world hasn’t ended despite the anticipated arrival of the apocalypse on a tide of Mayan fire – but it appears to have brought turmoil to trains running into Paddington.

Michael Hewson of CMC Markets UK has picked up on the theme, warning that if Boehner and his fellow Republicans cannot even agree a solution to the fiscal impasse among themselves, we might be in serious trouble.

Given that today is supposed to be the end of the world I suppose we shouldn’t be too surprised at the lack of progress, but most market participants are by now probably losing the will to live as we head into the Christmas break.

Updated at 9.39am GMT

9.07am GMT

FTSE tumbles

As you would expect, the FTSE 100 has fallen this morning on the back of the Boehner meeting, slipping 48 points or 0.8% to 5909. On the blue-chip European indices, Germany’s DAX lost 0.3% and France’s CAC-40 was 0.1% lower in early trading.

Updated at 9.37am GMT

8.52am GMT

Fiscal cliff

Fears over the US fiscal cliff have hit the euro and are weighing on investors this morning, bringing some unfestive jitters to the start of the holiday season.

The euro fell 0.3% to $1.3210, away from an eight-month high of $1.33085, after the House of Representatives speaker, John Boehner, was rebuked by fellow Republican lawmakers over his plan to avoid a tumble over the fiscal cliff – a combination of tax rises and spending cuts that will kick in automatically in January if US politicians fail to agree a federal budget.

If you want to learn the basics, and you should because the impact will be significant, read our Q&A.

Updated at 9.36am GMT

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In the broadcast today: What’s Next for the JPY after the BoJ Decision? Following the Japanese election and the Bank of Japan’s monetary policy decision, we explore what the future might have in store for the yen which is on track to end the year as the worst performer among the currencies of developed nations, we analyze the latest trend developments in the USD/JPY currency pair, we examine the bullish breakout in the EUR/USD pair, we note the test of the 2012 high for the GBP/USD exchange rate, we highlight the market’s reaction to the Bank of Japan interest rate announcement, the U.K. Retail Sales, the U.S. GDP and Existing Home Sales, we discuss new forecasts from Bank of Tokyo-Mitsubishi 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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Finance minister Yannis Stournaras says Greece could still quit the eurozone. Good news and bad news on Greek energy. Confusion over Italian Prime Minister Mario Monti’s future. U.S. economy grows at a faster pace by 3.1% in Q3 2012…



Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Greek euro exit still a risk, warns finance minister” was written by Graeme Wearden (until noon) and Nick Fletcher (now), for guardian.co.uk on Thursday 20th December 2012 14.44 UTC

2.41pm GMT

Portugal cancels sale of TAP airline

Portugal’s privatisation of its TAP airline has been cancelled after the only bidder failed to meet its requirements.

The sale of TAP, which has around €1.2bn of debt, is part of a disposal of assets as part of its €78bn EU and IMF bailout. But the bidder, Synergy Aerospace owned by Colombian-Brazilan airline entrepreneur German Efromovic, failed to present the necessary bank guarantees, according to Reuters.

Updated at 2.44pm GMT

2.21pm GMT

Italian electioneering starts even before final budget vote

As the Italian budget was passed by the senate and now passes to the lower house for a vote on Friday or Saturday, technocratic prime minister Mario Monti has been warning the country not to throw away the gains already made.

With elections coming next year and fears that key measures could be reversed, Monti said in a speech in Melfi (courtesy of Reuters):

It would be irresponsible to waste the many sacrifices Italians have made.

In comments seeming directed at his predecessor, Silvio Berlusconi, who had promised to slash taxes, Monti said voters should not be tempted by promises which were “far from reality.”

If the budget is passed by the lower house, some believe Monti will then call a press conference this weekend to announce his intentions in the election. So far these are shrouded in mystery although many believe he may yet stand. But Berlusconi has warned Monti against this, saying it would be “morally questionable” for him to run.

Updated at 2.24pm GMT

1.52pm GMT

Commenting on US GDP, Annalisa Piazza at Newedge Strategy said:

Most of the upward revision is explained by a slight upward revision in personal consumption (up by 1.6% versus 1.4% previously estimated) and net trade that now seems to have added nearly 4 tenths to GDP growth versus the 0.14% previously estimated. Government consumption has also been revised a touch higher.

Looking ahead, we rule out that US GDP will continue to accelerate in the coming quarters. At the current juncture, we expect Q4 GDP to run at around 2% and no major improvement is expected in the first part of next year.

Updated at 1.57pm GMT

1.33pm GMT

US GDP rise beats forecasts

US GDP figures have just come out and they show a bigger than expected gain.

The final third quarter rise was 3.1%, compared to expectations of 2.8% and the previous quarter’s 2.7%. This is the biggest increase since the fourth quarter of 2011.

Meanwhile jobless claims rose to 361,000 last week from a revised 344,000 the previous week.

12.55pm GMT

IMF reportedly wants a partial Cypriot default

Cyprus is another country to approve its austerity measures, but there are now reports that may not be enough to trigger aid payments.

According to a report in der Spiegel (itself quoting Süddeutsche Zeitung, the International Monetary Fund is demanding a partial default by Cyprus involving private creditors, before it joins the bailout agreement.

The IMF is said to be worried that even with the austerity measures, Cyprus would struggle to make the interest payments on its debt. A key quote, according to der Spiegel:

“The situation in Cyprus is much worse than it is in Greece,” one high-ranking EU official [said].

This is causing some comment on what exactly is being said:

Updated at 1.48pm GMT

12.21pm GMT

Italian budget passed by senate

BREAKING NEWS. Italy’s senate has approved the 2013 budget, which will now pass to the lower house, according to Reuters.

Prime minister Mario Monti has also been speaking.

Earlier, France passed its own austerity budget.

Updated at 12.24pm GMT

12.12pm GMT

Eurozone faces ‘economic stagnation and political uncertainty’ in 2013

On the theme of looking ahead, what can we expect from the eurozone in 2013? In a report on the prospects, Open Europe’s head of economic research, Raoul Ruparel, is not exactly bullish:

If 2012 saw a full on crisis in the eurozone, 2013 is likely to be a year of economic stagnation and political uncertainty, with low growth and high unemployment continuing to plague many countries.

There will be fewer threats to the eurozone’s existence than in 2012, but the fundamental flaws in the structure of the eurozone remain, and progress towards solving them is likely to continue to be slow. Italy, Spain and France face funding costs of €332bn, €195bn and €243bn respectively, which will keep markets on edge. On this front, liquidity from the ECB and the potential activation of its bond buying programme, the OMT, will help soothe fears in the first half of the year at least.

However, politics will be the name of the game. In order to get to the OMT, Spain and others will have to go through the ESM, meaning approval by parliaments in several creditor countries including Germany. This could trigger unexpected delays and tensions.

As for the UK and its future within or without Europe, he said:

A British exit from the EU became a topic of mainstream discussion in 2012 and will continue to be a front-page issue in 2013, with UKIP on the rise and European elections approaching.

In his forthcoming Europe speech – scheduled for mid-January – Cameron could well frame the choice for Britain in Europe as one between “renegotiation” and “Brixit”, though may still shy away from promising a concrete referendum. The two issues to watch are how many EU crime and policing laws the UK will remain signed up to, which could be decided next year, and whether Cameron can present a deal on the long-term EU budget as a success.

The full piece from the thinktank is here.

Updated at 12.28pm GMT

11.57am GMT

A quick bit of housekeeping.

We’ll be running the liveblog as usual tomorrow (Dan Milmo will be in the chair, as I have an urgent rendezvous with a turkey).

We’re not planning to run a liveblog on Christmas Eve, as we’d hate to distract regular readers from those essential last-minute shopping decisions. There’s nothing serious on the agenda – but rest assured that we will leap into action if there is big news.

Then I’ll be back on Thursday 27th December and Friday 28th December, and I’m also planning to be at my station on Monday 31st (although perhaps not till midnight, eh?)

And with that, I must fly…. Have lovely Christmases, one and all.

And over to Nick Fletcher….

Updated at 12.07pm GMT

11.34am GMT

Greece: the good news, and the bad news….

From Greece, our correspondent Helena Smith says Stournaras’s warning comes amid a welter of good and bad news for the debt-choked country.

On the one hand, a new gas pipeline could generate desperately needed revenues. On the other, classrooms may have to close because Greek schools can’t afford to heat them …

Here’s the good news

In what could be the single biggest foreign direct investment (FDI) ever in Greece, the Swiss-based Trans Adriatic Pipeline company announced that it has officially initiated the process to begin “host agreement” talks with the Greek government. The joint venture is competing to deliver gas from the Caspian region to Europe. If selected, Greece would become part of the fourth major gas import corridor for the EU, with the pipeline going through Greece, Albania and under the Adriatic to Italy, TAP officials say. The final selection of the gas transportation route is expected early in 2013. Azerbaijan’s BP-operated Shah Deniz consortium will oversee the process in a deal that would be worth €1.5bn for the crisis-hit country. TAP is the only option that will go through Greece.

“The host government agreement [governing the group’s investment] is a key step towards securing selection in 2013 of the Greek route,” TAP’s country manager for Greece, Rikard Scoufias, said. “We are very pleased with our co-operation with the Greek government, and this is yet another significant step towards realising the TAP project, which is destined to bring thousands of direct and indirect job opportunities as well as strengthen Greece’s strategic role in Europe.”

Now for the bad news:

In another area of the energy sector, Greeks are in for a rough ride, with the nation reeling from the announcement that state-run schools in snow-hit central and northern Greece may have to cancel classes because of a lack of funds to heat them.

Under pressure to meet internationally mandated budget targets, the Greek government has slashed funding for school heating oil supplies by around 60% as part of cost-cutting that has seen operational school expenses drop from €110m in 2011 to €80m this year. Just as the country is about to be gripped by a cold snap it has emerged that many schools have yet to receive any funding for heating at all. With temperatures due to drop to well below freezing, the primary school teachers’ federation (DOE) said the union may soon “have to suspend classes because of the cold weather”. “Many schools are facing serious problems with heating oil supplies,” DOE said in a statement.

Regular readers will know that sky-high oil prices in Greece are a classic case of big monopolies hogging the market. The coalition government has come under immense pressure from foreign lenders to liberalise the energy sector (currently dominated by Motor Oil Hellas and Hellenic Petroleum) as part of a reform programme aimed at opening up the country’s highly regulated economy and boosting competitiveness. Both companies are owned by two of the wealthiest tycoons in Greece, which is also hobbled by the highest fuel taxes on the continent of Europe.

An internal report produced by the International Monetary Fund, part of the troika of creditors propping up the insolvent Greek economy, this year attributed uncompetitive markets to the high costs. “The Greek market is highly concentrated and basically controlled by two domestic refiners,” the report contended, adding that lower fuel prices could help bring down the country’s consumer inflation rate by more than 1%.

Updated at 12.23pm GMT

11.23am GMT

Sony Kapoor of the Re-Define thinktank is also musing on the issue of how democracy survives within the eurozone:

Answers below (or here)

11.13am GMT

Charles Robertson of Renaissance Capital believes Stournaras is absolutely right to caution that Greece’s political system could struggle to handle public opposition to its austerity plans.

The Greek finance minister’s comments (see opening post) echo Robertson’s own concerns about Europes austerity programmes – that people won’t tolerate them.

He argues that Greece will leave the eurozone next year, with Spain following in 2014:

Is an economic policy that has produced 25% unemployment in Spain and Greece, and is forecast to make this worse, a morally acceptable policy choice?

How does an electorate react to such a socially damaging manmade disaster? History is unequivocal. The electorate will reject the policy. Taking the Great Depression template for countries leaving the gold standard, we should expect Greece to leave the euro in 2013 and Spain to follow in 2014-15. The former might see markets decline by 10-20% over one quarter. The latter is a Lehmans II event, likely to trigger a 50% fall in markets before a strong rebound.

Updated at 11.23am GMT

10.40am GMT

Back to Greece, where the current account deficit has fallen. Good news, you’d think, except the drop is mainly due to tumbling imports rather than a surge of exports.

The Greek current account balance came in at -€684m in October, better than the -€1.469bn recorded a year earlier.

Tourism revenues were also lower, down 19% compared to a year earlier.

Meanwhile, independent economist Shaun Richard is encouraged by the latest industrial orders data:

10.28am GMT

Finns face tough 2013

2013 may be crucial for Greece (see 8.18am), but it will be pretty tough for Finland, according to the Finnish finance ministry’s new outlook.

It has slashed its forecast for growth in 2013 to just 0.5% of GDP, from 1%. It also admitted that the economy probably shrank by 0.1% during 2012, having previously expected growth of 1%.

Finland is still one of the few European countries with an AAA rating, but weak growth could put it at risk.

Updated at 10.52am GMT

9.53am GMT

Monti

The Will he? Won’t he? speculation over Mario Monti continues this morning, with conflicting press reports on whether Italy’s technocratic PM will run as a candidate.

According to the FT, Monti indicated yesterday that he will run, at a meeting with Pier Ferdinando Casini, head of the small UDC party, and Luca Cordero di Montezemolo, the head of Ferrari.

‘Monti would be the political chief of the operation,’ one source said.

However, Italy’s Corriere della Sera newspaper takes the opposite line. It reckons Monti will not be an official candidate in Italy’s elections but will back a centrist coalition. That means he could then be appointed to the government after the vote.

Either way, Monti is still expected to reveal his plans over the weekend.

Updated at 10.54am GMT

9.24am GMT

Downbeat economic news from Italy – retail sales fell by 1.0% in October compared with September, the steepest monthly fall since April.

That means sales were 3.8% lower than a year ago, showing the impact of the Italian recession.

Italian inflation is running at 2.8%, so the belt-tightening is more severe in real terms.

Updated at 9.47am GMT

8.57am GMT

Updated at 8.58am GMT

8.46am GMT

Yannis Stournaras‘s warning may have taken some of the shine off the recent rally in Greek bonds. They’ve lost ground in early trading, pushing up the yield on 10-year debt to over 11.7%, from 11.6% overnight.

Still impressively low by recent form – at the end of May, Greek 10-year bonds were yielding 30%.

8.18am GMT

Greek finance minister: bankruptcy is still a risk

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

Greece’s finance minister has slightly deflated the sense of optimism as we ease into the Christmas break, by warning that the country faces another difficult year.

Yannis Stournaras has cautioned against getting carried away by recent progress, pointing out that things could unravel next year “if the political system finds the situation too difficult to handle”.

He made the comments in an interview with the Financial Times, published just a day after Greece’s credit rating was upgraded.

Stournaras is not all doom and despair, arguing that 2013 will be crucial:

We can make it next year if we can stick to the programme agreed with the EU and IMF.

But only if Greek people accept the job cuts and austerity measures that were contained in the 2013 budget. Stournaras warns that this is far from guaranteed:

What we have done so far is necessary but not sufficient to achieve a permanent solution for Greece … The issue now is implementation.

As such, there’s a “possible risk” of Greece leaving the euro, he added, despite Athens having now received its latest aid tranche.

With bond yields falling sharply, and yesterday’s general strike passing off peacefully, Greece has reached a calmer state. But it’s going to be a grim winter for many Greeks – and Stournaras is clearly concerned that he may struggle to hit his deficit targets and improve the competitiveness of the battered Greek economy.

As he put it:

We still face the possible risk of bankruptcy.

But get through 2013, and the future will be brighter, he added.

The full interview is here: Greece faces ‘make or break’ year.

Worth a read.

Anyway, as usual I’ll be mopping up the latest developments across the eurozone and beyond …

Updated at 9.50am GMT

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