March 4 2013

Spain’s Labor ministry reports a 1.2% rise in unemployment in February. Eurogroup finance ministers to discuss aid package for Cyprus, while Italy could see reelection. Weekend protests in Lisbon. Beppe Grillo meets new parliamentarians…

Powered by article titled “Eurozone crisis live: Spanish jobless total hits five million; Cyprus bailout talks resume” was written by Graeme Wearden, for on Monday 4th March 2013 16.00 UTC

4.00pm GMT

Osborne faces (losing?) battle over bonus caps

Today’s eurogroup meeting is, for once, just a taster ahead of the big action tomorrow — a clash between Britain and the rest of the EU over the plan to cap bankers bonuses.

George Osborne, the UK chancellor, is hoping to make last-ditch changes to the plan, announced last week, to cap performance-related payouts at 100% of salaries. He’s likely to fail.

Our Europe editor, Ian Traynor, sets the scene:

In a highly unusual defeat for the British financial services sector, illustrating the UK’s deepening isolation in Europe and the reluctance of EU partners to do Britain any more favours, finance ministers of the other 26 are expected to endorse new legislation to slash “fat cat” bonuses.

The decision to limit bonuses ordinarily to a year’s salary was made last week at hard-fought negotiations between the European Parliament and officials from the 27 member states. Despite David Cameron’s denunciation of the deal and Osborne’s pledges to contest it, the decision appears irreversible. The UK is unable to wield a veto as Tuesday’s decision can go to a qualified majority vote if necessary.

Britain has been unable to muster enough allies to block the proposal. Its likeliest supporters, Sweden, The Netherlands, and, most crucially, Germany have all come out in favour of capping bonuses.

After David Cameron’s success over the EU budget, it looks like Britain is returning to familiar isolation, as it cannot block the plan. However, Osborne could perhaps win some concessions…. More here

2.31pm GMT

The early news from the Five Star Movement meeting is that Beppe Grillo has reiterated that the party will not support any government in a vote of confidence (which is essential for a new administration to take power):

2.10pm GMT

Key event

Here’s a live feed of the Five Star Movement’s meeting:

2.05pm GMT

Watch Five Star Movement live

The meeting between Beppe Grillo and the new Five Star Movement parliamentarians has begun in Italy, and is being live-streamed at Grillo’s site (click here).

Unfortunately, the site appears to be struggling under the weight of traffic. I’ll try and embed the livestream. Otherwise, I’ll drop in the highlights ASAP.

1.42pm GMT

Jeroen Dijsselbloem, Dutch finance minister and the new head of the Eurogroup, has told reporters in Brussels that he hopes to make progress on Cyprus’s bailout application today.

Dijsselbloem said he was looking forward to meeting the “new colleague from Cyprus”, following last month’s presidential election. However, the big breakthrough won’t come today.

Dijsselbloem added:

Of course we’re very glad that there is a new government that we can work with, to find a solution for Cyprus.

As I’ve said before we’re probably going to reach an agreement in March, that’s what we’re aiming at, and it’s going to be an agreement that works on stabilisation, both for Cyprus and the eurozone as a whole.

The full video clip is here.

Updated at 2.19pm GMT

1.14pm GMT

Latvia to eurozone: room for one more?

Latvia has taken the plunge and decided to apply to join the eurozone.

Finance minister Andris Vilks told reporters this morning that the application will arrive in Brussels tomorrow, adding:

This is a day that will enter Latvia’s history.

It’s caused a bit of a buzz in Brussels, where eurocrats see it as a sign that the euro project is still on the road.

Our Europe editor, Ian Traynor, told us all two weeks ago that the application would come in March. That article is well worth a read, with prime minister, Algirdas Butkevicius, explaining exactly why Latvia still wants to join the euro club. It’s all about the security:

“We see it as a kind of insurance mechanism,” said Dombrovskis. “We don’t expect to go back into a crisis. We’re sticking with prudent fiscal policies and we don’t expect to overheat our economy again.

“And whatever happens to the euro happens to us anyway. Our economy is completely euro-ised: 80% of borrowing, households and businesses, is in euros. This will help financial and economic stability.”

12.29pm GMT

In Italy, masks and meetings

The political situation in Italy remains masked (ahem) in uncertainty today.

Last night, centre-left leader Pier Luigi Bersani threw down a challenge to the Five Star Movement (M5S) warning leader Beppe Grillo that “we’ll all go home” unless he backed a temporary government.

Speaking on Italian TV, Bersani declared that:

“He heads a movement that has a third of the Chamber, he needs to decide what he will do or we will all be sent packing, including Grillo.

Bersani’s failure to win a majority in the Italian Senate, and his refusal to form an alliance with Silvio Bersluconi, leave the former communist dependent on some kind of agreement with M5S.

Grillo himself has taken to wearing a mask in public, in an effort to deter journalists from asking about his plans. Over the weekend he indicated that he might support a government that was committed to cleaning up Italian politics (a prospect he saw as somewhat remote)

The situation could develop today – Grillo is due to meet with his new parliamentarians to discuss strategy. And Bloomberg are reporting that M5S is considering abstaining in an up-coming confidence vote. That, if it happened, would help a minority government to be created.

Here’s the Bloomberg story:

Beppe Grillo’s senators-elect, who hold a blocking minority in Italy’s upper house of parliament, may consider staging a confidence-vote walk-out to allow a political rival to form a government and ease gridlock.

Grillo’s Five Star Movement is seeking to influence the program of Italy’s next government and would require policy concessions in exchange for a walk-out, said two senators-elect who declined to be identified because no deal has been made. Five Star won’t vote to support any government, they said.

Walking out would lower the threshold for achieving a majority in the Senate confidence vote, making it easier to secure enough backing for a new government.

Updated at 12.35pm GMT

11.01am GMT

Eurozone investor confidence slides

The political mess in Italy has alarmed investors, whose growing confidence over the euro area has taken a knock this month.

The monthly eurozone investor confidence index, conducted by Sentix, has dropped to -10.6, down from -3.6 in February. That shows that investors across the eurozone have grown more nervous, reversing a six-month trend.

Sentix blamed the Italy election results:

The reason for this setback is obvious: it is the outcome of the election in Italy which has caused uncertainty over the country’s future development to skyrocket….This has had a negative impact on the whole euro zone.

Updated at 11.31am GMT

10.40am GMT

Chinese stock market tumble hits Europe

Most of Europe’s stock markets have fallen this morning, after the main Chinese indices suffered an alarming sell-off.

Overnight the CSI 300 share index (which includes the biggest companies on the Shanghai and Shenzhen markets) slumped by 4.6%, its biggest daily fall since November 2010. The Shanghai Composite index shed 3.7%, with property companies the biggest fallers.

The selloff was prompted by a new clampdown on speculators, and plans to force second home owners to pay higher interest rates and larger deposits

Some traders also blamed an investigation into China’s ‘ghost towns’ — newly built residential areas where no-one actually resides — by CBS News’s 60 Minutes. 

It showed images of vacant shops, empty streets, and half-built apartments where work appears to have suddenly stopped – suggesting that the Chinese property bubble may be bursting….

Here’s a video clip:

And here’s the situation in Europe:

FTSE 100: down 24 points at 6353, – 0.4%

German DAX: down 42 points at 7665, -0.5%

French CAC: down 8.5 points at 3691, – 0.23%

Italian FTSE MIB: down 146 points at 15528, -0.93%

Spanish IBEX: up 22 point at 8210, +0.3%

Updated at 10.40am GMT

10.15am GMT

Sharan Burrow, head of the international Trade Union Movement, argues that the International Monetary Fund should heed the public anger in Portugal.

She argues that austerity is being challenged across Europe, with Dutch unions now clashing the Netherlands government over a €4bn cuts package.

In the Netherlands, the government wants new wage freezes and tax rises after an official estimate that the Dutch budget deficit will hit 3.3% in 2013 and 3.4% per cent in 2014, over the EU’s 3% target.

Ton Heerts, head of the FNV federation of unions, has slammed the proposal as “stupidest thing you could do right now”, warning it will make the Dutch recession even worse (the FT has more details).

10.03am GMT

Photos: the Lisbon Protests

Here’s a few snaps from Saturday’s anti-austerity demonstrations in the Portuguese capital:

Updated at 11.30am GMT

9.50am GMT

Why Portugal is seeking new baIlout terms

Last weekend’s protests in Portugal were some of the largest seen in Europe during the crisis.

Organisers said that half a million people joined the demonstrations in Lisbon, with hundreds of thousands more attending other protests st some thirty cities (photos to follow).

The huge crowds in Lisbon’s Praca do Comercio square chanted, “It’s time for the government to go”, and there were also slogans declaring “Austerity Kills” and “Screw the Troika”.

Last week, Portugal’s government insisted it could not change its austerity programme, saying it would be “rudderless in a sea of storms” if it couldn’t rely on the support of the International Monetary Fund and the IMF.

However, Portual is expected to tell Eurogroup members today that it needs to be given an extra year to hit its bailout targets – a recognition that its recession is deeper than official forecasts.

As the Wall Street Journal explains here (with a handy graphic):

Portuguese officials acknowledge they overestimated tax revenues and underestimated how much money the country would have to spend on social benefits to the unemployed. They say Portugal has been hit hard by a deeper-than-expected slowdown in the euro zone, with which it does most of its trade.

Labor unions and opposition parties have accused the government of blindly making spending cuts and raising taxes without realizing that they would contribute to a downward economic spiral.

Full story: Portugal to Seek New Bailout Terms

9.12am GMT

Eurogroup to also consider Ireland and Portugal

Euro finance ministers will begin today’s Eurogroup meeting at 3pm Brussels time, or 2pm GMT. A press conference is expected at 8pm GMT.

Matina Stevis, the WSJ’s Brussels hotshot, flags up that ministers will consider whether to extend Ireland and Portugal’s financial reform programmes, but doesn’t believe any decisions will be taken:

Updated at 9.13am GMT

9.03am GMT

Spanish unemployment rises again

Gloomy economic news from Spain this morning – the number of people registered as out of work has risen by 1.2% last month, breaking through the 5 million barrier.

The Labour ministry reported that the number of registered jobless in Spain rose by another 59,444, as the country’s economy continued to contract.

The data doesn’t include around 1 million people who are out of work, but not registered as such.

The austerity programme being implemented by the current government is widely blamed for stifling economic growth and driving people out of work.

As this chart shows, employment in Spain has been falling since the financial crisis began, a trend that accelerated in the last two years:

Updated at 9.31am GMT

8.42am GMT

Eurogroup to debate Cyprus bailout again

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

The finance ministers of the eurozone will have a lot to chew on today when they gather in Brussels this afternoon for the latest Eurogroup meeting.

Top of the list – Cyprus’s bailout, which is back on the agenda following the election of Nicos Anastasiades last week. The €17bn package had stalled over the country’s reluctance to sell state assets, and Germany’s concerns that much of the aid would (it claims) benefit criminals who use the island’s banking sector for money-laundering.

The eurogroup is also expected to discuss the situation in Italy, mired in political uncertainty following last month’s general election.

Ministers are likely to insist that Italy sticks to its commitments, following last week’s rise in Italian bond yields — despite the wave of support for anti-austerity candidates, which leaves president Giorgio Napolitano struggling to form a government.

The talk this morning is that a second technocratic government could be installed, or that fresh elections will be called this summer.

And ministers may also be alarmed by the huge protests in Portugal over the weekend, with mass rallies urging the Lisbon government to halt its austerity programme. Europe’s drive for spending cuts and tax rises has already been shaken by the Italian election results. Could the Portuguese protests help to turn the tide?

As usual, we’ll be tracking the latest development through the day.

Updated at 8.59am GMT © Guardian News & Media Limited 2010

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