January 21 2013

Dutch finance minister Jeroen Dijsselbloem is expected to be named next head of the Eurogroup in the last meeting of the eurozone finance ministers chaired by Chairman Jean Claude Juncker. British membership of the EU could be put at risk…

Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Finance chiefs vote in new leader as Juncker bows out” was written by Josephine Moulds and Nick Fletcher, for guardian.co.uk on Monday 21st January 2013 15.57 UTC

3.50pm GMT

We’d mentioned that there could be trouble over any proposals for direct bank recapitalisations by the European Stability Mechanism. The Germans for one are not keen on bailing out banks directly. Now comes this:

3.47pm GMT

We’re starting to get some pictures through of ministers arriving at the Eurogroup meeting.

First off, almost inevitably, is the man of the moment, the soon to be inaugurated new head of the Eurogroup,

Here’s a link to video of some of the arrivals.

Updated at 3.57pm GMT

3.30pm GMT

Dijsselbloem wants to focus on longer term, not continually firefighting

Dutch finance minister Jeroen Dijsselbloem wants to move away from firefighting one crisis after another if (when) he becomes head of the Eurogroup.

In a letter to eurozone colleagues he said he wanted to concentrate on longer term policies. Reuters reports:

Dijsselbloem said he would push to be invited to meetings of finance ministers and central bankers from the world’s 20 biggest economies, the G20.

The Dutch minister, who only took his national post three months ago, said the euro zone should continue with reforms and fiscal consolidation that have pleased investors.

“We now need to keep the momentum going, to ensure we retain the confidence we managed to regain in a lasting manner,” he said. “Our focus needs to shift from crisis management to delivering and implementing sound medium-term policies.”

He also reportedly confirmed Cyprus will be discussed today and next month, but as we have previously reported, there is no expectation the country will receive a bailout until at least March.

Updated at 3.43pm GMT

2.46pm GMT

Back to Italian finance minister Grilli, who has told the European parliament’s Committee on Economic and Monetary Affairs that Italy will not need any budget cuts this year.

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

Updated at 3.15pm GMT

2.41pm GMT

Eurogroup storm brewing over bank recaps

Meanwhile, the French finance minister Pierre Moscovici has said direct bank recapitalisations by the European Stability Mechanism must be a priority.

That should make the Eurogroup meeting interesting, at least. Germany, for one, is very wary of bailing out eurozone banks directly.

2.35pm GMT

Italy will grow by more than 1% from 2014

Italian finance minister Vittorio Grilli says confidence is growing in the eurozone.

Speaking to the the Committee on Economic and Monetary Affairs at the European parliament, Grilli says Italian GDP growth will be more than 1% from 2014. The Italian economy shrank by 2.4% in 2012, he says.

The finance minister, who will be going to the Eurogroup meeting later today, also says reforms are politically and socially difficult.

Updated at 2.44pm GMT

2.16pm GMT

Juncker’s successor must have “very big ears”

Jean Claude Juncker, outgoing chair of the Eurogroup, was on fine form as he prepared to chair his final meeting of the eurozone finance chiefs.

After eight years in the job, Juncker said his successor “must have big ears”. Not sure if that rules out the only candidate Jeroen Dijsselbloem, whose luxurious head of hair rather covers up his ears.

His point was serious though, he said in an interview with Swiss newspaper Neue Zuercher Zeitung that his successor must have a feel for the problems of all of the countries in the currency bloc.

One piece of advice I would give him is that he must have particularly big ears. Even though it is existentially necessary, it is not enough to very seriously consider the statements of larger euro countries. One must also have a feeling for the very diverse sensitivities of all euro member states.

Juncker reiterated the fact that no decision would be made on Cyprus today, and the country would not get a bailout until March.

And, if Twitter is to be believed (which in this case we think it is), he had a whimsical parting note for the Eurogroup.

Updated at 2.18pm GMT

12.17pm GMT

Valencian government acquires Valencia football club

More from Spain, where our correspondent Giles Tremlett reports that the crisis-hit regional government of Valencia has become the proud owners of a football club. He writes:

The corruption-hit regional government of Valencia has long been held up as one of the worst examples of an overstretched Spanish administration unable to control its own finances after wasting money on white elephants like the famously unused new airport at Castellón.

Now the cash-strapped region has added first division football club Valencia C.F. to its list of publicly owned entities.

With local health and education services hit by austerity programmes, the region’s takeover of Valencia has provoked fury. But it became inevitable after the club defaulted on an €86m loan that had been given to it after the regional government offered to stand as guarantor.

Providing guarantees for the club’s loans was just one of the populist measures carried out by a government that has long been run by Spanish prime minister Mariano Rajoy’s People’s party (PP). Nor was it the only club to benefit. It already part owns two local second division clubs, Elche and Hercules, that also failed to pay back loans.

Valencia is one of the four (out of 17) Spanish regions thought to have doubled the government-imposed budget deficit target of 1.5% of regional GDP last year, according to the Fedea think tank. It is also one of the most indebted, owing about 25% of local GDP according to the Bank of Spain.

It was the first region to ask for bailout money from central government in July when it requested €2.5bn to help it get through 2012. It is expected to ask for more money this year.

Amongst other measures designed to reduce its deficit, the region has pledged to sell off the myriad of public companies it owns. Valencia football club – until recently seen as one of the few teams able to challenge Barcelona and Real Madrid – is now one of them.

The region’s ownership of the club got off to a bad start last night when Real Madrid demolished Valencia 5-0 in the La Liga match in Estadio Mestalla.

Updated at 12.57pm GMT

12.14pm GMT

FT not backing Berlusconi – editor

The Financial Times is NOT backing Berlusconi in the upcoming Italian elections, according to a tweet from the paper’s editor.

Barber was forced to put the tweet out after a column from Wolfgang Münchau saying the current prime minister was not the right man to lead Italy. To be fair to Münchau, he does not then come out in favour of Berlusconi, but you can see where the confusion springs from. Münchau writes:

On the right, the alliance of Mr Berlusconi and the Northern League has been behind in the polls but is making advances. So far, the former prime minister has had a good campaign. He has delivered an anti-austerity message that has struck a chord with a disillusioned electorate. He also keeps criticising Germany for its reluctance to accept a eurozone bond and to allow the ECB to buy Italian bonds unconditionally.

You could interpret this as [the following] stance: insist on symmetrical adjustment or get out.

But, crucially, he goes on to say:

We know Mr Berlusconi only too well, however. He was a prime minister for long enough to have shaped such a debate much earlier. To become credible, he must produce a clear strategy that maps out the choices in detail. All we have now are television soundbites.

Where the FT stands on the Italian elections is not yet clear. But we can be pretty sure it is not behind the colourful character that is Berlusconi.

Updated at 12.33pm GMT

11.59am GMT

Cameron to give speech on Europe on Wednesday

And we’ve got confirmation that David Cameron’s speech on Europe will take place in London on Wednesday morning. Just to recap, Cameron delayed the speech on Friday, after abandoning a trip to the Netherlands to deal with the Algerian hostage crisis.

The prime minister had been due to warn his fellow European leaders that British membership of the EU could be put at risk unless its membership terms are changed. We already have an idea of what he is going to say, as some of the speech was leaked last week. So we can expect the following quotes:

If we don’t address these challenges, the danger is that Europe will fail and the British people will drift towards the exit. There is a growing frustration that the EU is seen as something that is done to people rather than acting on their behalf. And this is being intensified by the very solutions required to resolve the economic problems.

People are increasingly frustrated that decisions taken further and further away from them mean their living standards are slashed through enforced austerity or their taxes are used to bail out governments on the other side of the continent.

11.42am GMT

Iceland’s finance minister wants to adopt euro

Iceland needs to join the euro for an economic boost, says the country’s finance minister. Katrin Juliusdottir said to Reuters:

We need to be a member. We would be a sovereign nation working with other sovereign nations on our future, working together to raise the standard of living.

She said a referendum on joining the EU could be held as early as the autumn of 2014. Charles Duxbury reports:

Iceland applied to join the EU at the height of a financial crisis that struck after the country’s three main banks failed holding assets of nine times Iceland’s economic output. But as the situation on the North Atlantic island has stabilized, enthusiasm among its 320,000 residents about Europe has waned.

Opposition parties say joining the EU would mean giving up too much control over important domestic matters such as the vital fishing industry, which accounts for 40% of the country’s exports. Ms. Juliusdottir disagrees.

The news has prompted some raised eyebrows on Twitter.

11.27am GMT

Fake Portuguese economist unmasked

And to some lighter news out of Portugal, where a fake economist duped the nation for months. Our correspondent Giles Tremlett reports:

Artur Baptista da Silva had become one of the most authoritative voices on Portuguese television, using his experience as an economist and United Nations consultant to explain why so much austerity was bad for the bailed-out country’s economy.

But now it turns out that the 61-year-old economist who explained so seriously – and clearly – the damage being inflicted on the country by the austerity measures demanded by the troika of lenders (EU, IMF and ECB) was a conman with at least two jail terms behind him.

The fake economist earnestly debated with journalists and other experts on television shows, claiming that the European Union has become a farce.

Baptista da Silva became so popular that he was invited to talk to the socialist party’s summer school and some of the country’s most prestigious debating societies. He claimed to have been a professor at a now defunct US university and to have worked with the World Bank.

“He said what people wanted to hear,” explained Antonio Costa, editor of the Diario Economico newspaper. That may explain why fans have now launched Facebook groups supporting him, including one called “I worked at the United Nations with Baptista da Silva.”

11.22am GMT

Sterling at 10-month low against euro

It’s worth watching the pound this weak, ahead of GDP data, which many expect to show the UK economy shrank in the last three months of 2012.

Sterling hit a 10-month low against the euro last night as traders got ready for the economic releases out this week, including public sector borrowing tomorrow, Bank of England minutes on Wednesday and, of course, GDP on Friday.

Andy Scott at foreign currency exchange brokers HiFX said:

Sterling appears to have fallen firmly out of favour in recent months as an alternative to the Euro with investors clearly a lot less fearful of the Eurozone’s risks. Talk of a break up or countries exiting the Euro has all but ceased and Spanish and Italian borrowing costs have dropped dramatically to levels seen as sustainable.

With the [UK] government struggling to meet their deficit reduction target and the economy failing to maintain any growth, the economic situation remains a huge concern and this is manifesting itself in a weaker pound. With the potential for credit ratings downgrades and more quantitative easing from the Bank of England with the economy faltering, it’s unlikely there’ll be a resurgence of buying interest in the Pound any time soon.

Updated at 12.45pm GMT

10.51am GMT

Meanwhile, there’s more protests in Greece. Ekathimerini reports that farmers in Thessaly, in the centre of the country, have launched protests against the government’s new tax law and policy on agricultural subsidies.

Farmers began parking their tractors in town squares from Sunday and are demanding a meeting Agricultural Development Minister Athanasios Tsaftaris.

10.41am GMT

Ireland set to grow by 1.8% this year

Some brighter news out of Dublin from our correspondent Henry McDonald. He writes:

Ireland’s version of the CBI has predicted Irish economic growth of 1.8% this year, which is slightly ahead of the Dublin government’s own forecast.

IBEC notes that the Irish economy grew by 1.2% in 2011 making it the second fastest growing EU economy albeit in a sluggish eurozone.

The employers’ organisation believes there will be a slight increased in consumer demand at home in 2013. IBEC said that if Taoiseach Enda Kenny secures a deal on Irish IOU’s on its bank debts – the socalled Promissory Notes – that this might boost confidence and help the flagging domestic economy.

Six out of ten Irish employers in an IBEC survey of firms report that they will again free pay to 2012 levels as they try to regain competitiveness. However, IBEC in its forecast sees no dramatic drop in Irish unemployment rates this year with nearly 15% of the workforce still on the dole.

10.32am GMT

Latest news on the pronunciation of Dijsselbloem. In the comments below, ProEurope suggests we say “die-sell-bloom”, rather than “day-sell-bloom”. While a Dutch Guardian reader says:

As close as I can: daai-sol-bloom or dy-sol-bloom. The Dutch ‘ij’ sound hangs between ‘y’ as in ‘why’ and ‘phonetically’ ‘aai’.

Updated at 12.39pm GMT

10.20am GMT

Bomb blast in Athens prompts fears of escalating violence

Over to Greece, where our correspondent Helena Smith says fears of political violence are mounting following Sunday’s unprecedented bomb attack on the country’s biggest commercial center – a mall in the centre of Athens. She writes:

The attack on the Athens mall has unnerved government officials with many expressing fears of a dangerous escalation in political violence, as the crisis-hit country endures a sixth straight year of recession.

For the first time in the history of terrorist attacks, the perpetrators chose to target a popular shopping centre, planting a bomb in a newspaper stand on the first floor of the mall.

A warning call to two local media outlets barely 50 minutes before the blast triggered a panic-stricken evacuation of the building but police, who are now examining CCTV cameras, confirmed that two security guards were lightly injured in the attack.

Some 280 people – including many children – were on the premises at the time. “We are seeing a very worrying escalation of violence,” said Pireaus University International terrorism expert Mary Bossi, drawing attention to the recent spate of attacks on journalists and the central headquarters of the ruling New Democracy party that have been blamed on far-left militant groups.

“They [assailants] have clearly overcome their own fear to take ever higher risks … there is no longer a differentiation between innocent victims and targets. It’s all about targets,” she told SKAI TV this morning. “From now on, bigger and perhaps more painful attacks should be expected.”

Meanwhile, Helena says that the bomb blast has prompted the US State department to issue an immediate travel advisory warning US citizens to be on the alert, in a blow to tourism, which remains Greece’s biggest foreign currency earner.

In a sign of the growing edginess, Athens’ law courts were also evacuated this morning after authorities received a warning call that an explosive device had been placed on the premises. The threat proved to be a farce.

No group has yet claimed responsibility for Sunday’s explosion although police believe from CCTV footage as many as four people planted the device.

But the brazen nature of the attack – it was the first time in years that a bomb, rather than a gas canister, has been used – has spurred fears among counter-terrorism officials that Greece’s ongoing debt crisis has spawned a new generation of terrorists deeply opposed to unpopular austerity reforms and bent on hijacking the country’s political stability. The public order ministry described the explosion as a “strike against democracy.”

Although condemned by the entire political spectrum there are others on both the left and right who claim the renewed political violence “benefits” the government in diverting attention from unpopular reforms that include mammoth pay and pension cuts, increases in tax and utility prices and the mass sale of state assets.

Updated at 12.34pm GMT

10.01am GMT

Also out today, we’re expecting the UK government to confirm when and where David Cameron will make his long-awaited speech on Europe. 

Yesterday, foreign secretary William Hague said the prime minister will deliver his speech in the next few days but that the exact date and location would be confirmed on Monday. More on that as it comes in.

Updated at 10.05am GMT

9.47am GMT

Eurogroup to mull over new money laundering inquiry in Cyprus

The other major sticking point for Cyprus (see below) is concern among German MPs that a bailout would benefit money-launderers, who allegedly hold huge sums in Cypriot banks.

Der Spiegel reported yesterday (in German) that the German finance minister, Wolfgang Schäuble, and several of his European peers aimed to carry out a further examination into potential money laundering in Cyprus, without giving the source of the information.

The evaluation, which would examine whether international regulations on fighting money laundering have been applied, would be separate from the report on the country’s banking system commissioned by the troika. This will all be discussed at today’s meeting of the Eurogroup.

The Cypriot president, Dimitris Christofias, has previously said accusations of money laundering do not stand up to any kind of scrutiny and no evidence had been provided to validate the claims.

Updated at 9.54am GMT

9.40am GMT

Cyprus on the agenda for Eurogroup

As well as discussing their new chief, the Eurogroup of eurozone finance leaders will also be looking at Cyrpus when they meet at 4pm today. But nobody is expecting any decisions over a bailout for the stricken country.

Just to recap…

  • Cyprus is seeking a bailout of around €17bn, including at least €10bn to recapitalise its banking sector.
  • The negotiations over Cyprus’s bailout request have stalled over the issue of economic reforms and privatisations.
  • The ‘Troika’ of international lenders (the IMF, the EU and the European Central Bank) insist that Cyprus must sell stakes in some state assets in return for help. That has been rejected by outgoing communist president Dimitris Christofias.

The Eurogroup said ahead of its meeting that any decision over a bailout for Cyprus will wait until after the departure of Christofias, who will not be running in elections scheduled for February 17.

Updated at 9.51am GMT

8.46am GMT

Monty Python-fan Dijsselbloem prepares to take the stage

So, Jeroen Dijsselbloem looks like the man for the top job at Eurogroup. Even in the Netherlands he is relatively unknown, but reporters are scraping together profiles on him before his expected appointment this afternoon. (For reference his name is apparently pronounced ‘day-sell-bloom’.)

Reuters says the Dutchman was known as a “radical leftist” in the 2000s and impressed Brussels with a conciliatory, determined and austere personal style. However, Agence France Presse has him as “a slightly stuffy bridge builder”.

“A staggering strategist,” according to Dutch financial daily the Financieele Dagblad, Dijsselbloem is also, says the centre-left De Volkskrant, “a little stuffy and as loyal as a guide dog.”

Protestant daily Trouw describes the curly haired minister with a slightly pinched face as “a likeable man behind a mask of rigidity.”

All reports point to his relative lack of experience in power as, at 46, Dijsselbloem will have served just 11 weeks as a minister. He appeared to acknowledge this on Friday, when he thanked Eurogroup head Jean-Claude Juncker for “all the advice he has given me as a newcomer to this financial world”.

And crucially, we learned from AFP’s report that Dijsselbloem is a fan of British comedy series Monty Python’s Flying Circus, which can only be a good thing for a man about to immerse himself in the eurozone crisis.

Updated at 9.51am GMT

8.41am GMT

Looking ahead to the Eurogroup today, who will succeed Jean Claude-Juncker to lead the eurozone finance ministers (hopefully out of a crisis)?

There were doubts raised last week over whether the group would vote in Dutch finance minister Jeroen Dijsselbloem, after his French counterpart, Pierre Moscovici, said he needed to know more about the Dutchman’s agenda and suggested the appointment might not be made before February.

But those concerns appeared to be quashed over the weekend when Moscovici acknowledged on French TV for the first time that the Dutchman was set to be anointed on Monday.

Moscovici had been touted as a possible candidate for the job, but he sought to downplay those reports in the same interview.

It won’t be me. I was never a candidate for this post. It will in all likelihood be Mr Dijsselbloem. That should be endorsed tomorrow.

France did appear to be the only (mildly) dissenting voice, as Dijsselbloem has already won the backing of Germany as well as current chair, Juncker, to take the helm.

Updated at 9.46am GMT

8.16am GMT

Greece to enjoy six-month holiday from new austerity measures

Greece will face a six-month let up from the troika, according to Greek newspaper website ekathimerini.

The European Commission, European Central Bank and International Monetary Fund have agreed to a six-month moratorium where they will not ask for any new austerity measures from Greece, the reporters say, citing an unnamed high-ranking official at the Greek finance ministry. They write:

The aim of the troika is to give the Greek government a chance to implement a raft of measures and structural reforms committed to in exchange for continued rescue funding, while also attempting to ensure that Greece and its debt problems do not become a pre-election issue in Germany, which is gearing up for polls in September.

Updated at 9.44am GMT

8.07am GMT

Germany producer prices ease

Sticking with Germany, we’ll take a quick look at those producer prices, which eased in December.

Producer prices fell 0.3% in December, compared with expectations of no change.

Lower prices at Germany’s factory gates should help limit consumer prices, which rose on average 2% last year. That will be welcomed by the European Central Bank, which is hoping to limit inflation across the eurozone at just below 2% over the medium term.

8.01am GMT

Merkel’s party loses key seat in ‘swing state’

Over the weekend, the German chancellor, Angela Merkel, suffered a stinging defeat, as the centre-left Social Democrats and Greens won a crucial regional election by a single seat.

Our correspondent in Berlin, Kate Connolly reported:

The ruling centre-right coalition government of Angela Merkel was dealt a blow by voters in a critical regional election on Sunday after the centre-left opposition secured a wafer-thin victory, setting the scene for a tension-filled national election in the autumn when everything will be up for grabs.

The outcome is a crucial one for Merkel, coming as it does just months before her CDU-FDP alliance will be put to the test in September when she will seek a third term in office at national elections.

Merkel’s Christian Democrats party (CDU) was convinced it was on the verge of victory in Lower Saxony, a major agricultural and industrial region that Reuters describes as “Germany’s closest approximation to a swing state”.

The result gave the centre-left a majority in the upper house of Germany’s parliament, meaning the opposition can block major legislation from Merkel’s government and initiate laws themselves.

While it was a crushing blow for Merkel, she remains the strong favourite to win a third term in federal elections this year.

Updated at 9.42am GMT

7.51am GMT

Today’s agenda

It’s a holiday in the US for Martin Luther King day so all eyes are on Europe. Over here, the finance ministers aren’t meeting until 4pm. This morning, we’ve already had some house price data out of the UK and producer prices from Germany.

  • UK Rightmove house price survey (January): 00.01am
  • Germany producer prices (December): 7am
  • Switzerland money supply (December): 8am
  • Switzerland industrial production (Q3): 8.15am
  • Bundesbank monthly report: 11am
  • Italian finance minister speaks to EU parliament: 2pm
  • Bank of Greece produces 2012 annual report: 3.20pm
  • Eurogroup meets in Brussels: 4pm

7.41am GMT

Good morning and welcome to our rolling coverage of the eurozone crisis. Today will see Jean Claude Juncker chair his last meeting of the eurozone finance chiefs, where they are expected to vote in the Dutch finance minister Jeroen Dijsselbloem as his successor.

Dijsselbloem, who is seen as the only candidate for the job, will lay out his plans for the Eurogroup and, failing any big surprises, will be voted in to head up the next meeting in February.

Also on the agenda is the thorny issue of Cyprus (more on that later) and recapitalisations of eurozone banks.

Updated at 9.41am GMT

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