March 6 2013

Center-left leader Pier Luigi Bersani tells his party he can lead next Italian government. Bersani’s eight-point plan reveiled. Bank of Canada keeps rates on hold. Dow registers another all-time high, hitting 14,320 in early trading this morning…

Powered by article titled “Eurozone crisis live: Bersani vows to break Italy’s austerity trap” was written by Graeme Wearden (until 3pm) and Nick Fletcher (now), for on Wednesday 6th March 2013 16.09 UTC

3.42pm GMT

Portugal must press on with reforms, says prime minister

Portugal’s Prime Minister Pedro Passos Coelho said the country must press on with its budget adjustment and structural reforms, to ensure the continuing support of its EU partners. He told parliament:

It is only possible to have our partners ready to help us in returning to debt markets as long as we are successful in executing the bailout programme in a credible way.

We need to proceed with firmness and resilience.

Updated at 4.09pm GMT

3.21pm GMT

Dow hits another new peak in early trading

Following the positive US jobs numbers earlier, the Dow Jones Industrial Average has got off to a strong start in early trading which means, yes, it’s at another new peak, hitting 14,320.

This rise comes amid hopes of further central bank stimulus despite – or because of – the disagreements over the current US spending cuts. Christopher Vecchio at DailyFX said:

On the surface, political tension is ominous; we’ve seen over the past several years what division in Europe and the US can do to investors’ sense of security.

This time, however, political division in the US might be forcing the Federal Reserve’s hand in keeping interest rates low as the economy struggles with balancing growth (a strengthening US consumer) and austerity (higher taxes and lower government spending).

In a sense, then, the political gridlock embracing the world’s largest economy is a bullish catalyst, because it means the Fed will need to continue its expansive quantitative easing policies.

Updated at 3.44pm GMT

3.14pm GMT

Canada keeps rates on hold

Over to Canada, where the central bank kept its interest rates on hold at 1% and seemed to hint at a further delay in any increase.

The bank, whose governor Mark Carney is set to take over at the Bank of England from Sir Mervyn King, has been signalling for some months the next move would be upwards. In January it said a move was “less imminent” and now it talked of keeping rates on hold “for a period of time.” Its statement said:

With continued slack in the Canadian economy, the muted outlook for inflation, and the more constructive evolution of imbalances in the household sector, the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required, consistent with achieving the 2% inflation target.

2.53pm GMT

Greek students protest in Athens

In Athens, university students have been demonstrating outside the parliament in protest at plans to overhaul the Greek university system.

It’s the latest in a string of protests against cuts to the Greek education system. This includes merging or shutting down 384 departments and faculties across Greece’s universities and technical colleges. Some institutions are expected to close altogether.

Teachers say will cause deep, permanent damage to standards in the sector

The government, though, has argued that it is vital to make cutbacks to save funds.

Here are some photo’s from today – a reminder that anger over austerity cutbacks has not diminished.

Keep Talking Greece has a report on the protests here, in which it gives the reform measures a rather withering verdict:

The plan seems to have been worked out the usual …Greek way: without thorough thought, without academic logic and without taking into consideration the real life factors. For example:

- The merger will force students of Public Relations Department in Agrinio to get a diploma in Economics.

- In some areas, the closure of technical colleges will force students to relocate 200-300 km away. And this in times of economic hardship for the students and their families.

(and with that, I’m handing over to my colleague Nick Fletcher. Thanks. GW)

1.59pm GMT

The Democratic Party meeting is continuing in Italy today. Eurasia Group’s Wolf Piccoli flags up that former Italian PM Massimo D’Alema has spoken, and given some limited backing to Pier Luigi Bersani.

Former leadership candidate Mattei Renzi, though, appears to have remained quiet.

1.36pm GMT

Some encouraging news from the US – the number of people employed in the private sector rose by 198,000 in February, beating forecast of a 170,000 rise.

1.12pm GMT

Surprise Polish rate cut

Unexpected news from Poland – its central bank has just cut interest rates by 50 basis points, to 3.25%.

Economists had been split between those forecasting a 0.25% cut, and those plumping for no change.

A reminder that central bankers can pull unexpected moves — and we’ve got the Bank of England and the European Central Bank setting monetary policy tomorrow.

And Canada later today….

12.53pm GMT

There was quite a media scrum outside the Democratic Party’s meeting today – here’s a couple of photos:

12.24pm GMT

Italian government bonds rally

Italian government debt has risen in value today, reversing the spike in borrowing costs seen after last week’s general election.

The yield (interest rate) on Italy’s 10-year bonds is down at 4.6% today, down from 4.74% last night. Spanish yields are also lower, dropping to 4.99%.

That suggests bond traders are moving back into peripheral eurozone debt, and are less worried about the crisis blowing up again.

Analysts say that the talk of a new technocratic government in Italy (see 8.34am) has calmed the markets.

11.28am GMT

Lizzy Davies on Bersani’s big speech

Our Rome correspondent, Lizzy Davies, says there were “no big surprises” from Pier Luigi Bersani this morning (see 9.28am onwards).

Lizzy writes:

Bersani insisted once again that it was the PD’s responsibility to try to form a government, he outlined an eight-point “programme of essentials” which ranged from a conflict of interest law to measures to get Italy “out of the cage of austerity”.

(those eight-points are summarised here.

Many of these run along the same lines as the M5S, but Bersani took the opportunity to deny he was “courting” Beppe Grillo but merely trying to understand what had led to its success.

He ruled out- again- any cooperation with Berlusconi’s centre-right, but said the PD was open to discussion with other parties, in particular with Mario Monti’s Scelta Civica.

But he reiterated that the ball was in the PD’s court. “The other parties cannot offer something better in terms of governability; they have neither the intentions nor the numbers,” he said, according to the Ansa news agency. “Apart from some ideas to block our path, they don’t have anything to say to the country.”

Poor Bersani, though. Although this was his big speech, many eyes are on another man in the room: Matteo Renzi, the young mayor of Florence who fought against him in the leadership primaries last year. Renzi, who met with Monti yesterday at Palazzo Chigi, is, for the moment, rejecting any suggestion that he could seize this inglorious moment in the party’s history to make his move.

That doesn’t, of course, stop commentators from speculating furiously. It will be very interesting to see what he says later.

Updated at 11.45am GMT

11.14am GMT

Key event

Here’s some instant reaction to Sir Mervyn King’s call for a new strategy for the Royal Bank of Scotland (see 11.05am):

11.05am GMT

Mervyn King: It’s time to come clean about RBS

Meanwhile, Sir Mervyn King has dropped a bombshell on the UK banking sector by calling for a radical shakeup of the way Royal Bank of Scotland is being managed.

King said that RBS needed to admit the true scale of the bad loans on its balance sheet.

He argued that RBS’s failure to write down bad loans was holding the company back, and the wider economy. He wasn’t directly critical of chief executive Stephen Hester, but insisted that a different approach was needed.

The governor told the Banking Standards commission that the losses on RBS’s balance sheet don’t go away simply because they haven’t been recognised yet

As he put it:

This has dragged on unnecessarily long….

I would certainly be prepared to lend my support to those who would argue that it is better to recognise [the situation and restructure RBS].

King added that the Treasury should not worry about the effect of the plan, on the public finances (more public money would probably be pumped into the bank to cover the ‘new’ losses).

Lord Lawson, the former UK chancellor, said King’s proposal was “very important indeed”, and could give a much-needed boost to small business lending in Britain.

It’s a pretty jaw-dropping intervention from the governor, two weeks before the next UK budget.

Reaction to follow!

Updated at 11.36am GMT

10.56am GMT

Democratic Party leaders are now discussing Bersani’s plan.

10.55am GMT

Bersani ended his speech by calling on the Five Star Movement (M5S) to engage with the democratic process:

Beppe Grillo has previously said that M5S could support specific measures that fit with its own priorities.

10.39am GMT

Bersani’s eight-point plan for a government of change

Important developments at the Democratic Party meeting. Pier Luigi Bersani has unveiled the eight-point plan which he hopes to base a government around.

Bersani also ruled out a grand coalition with Silvio Berlusconi’s centre-right alliance.

Instead, he pledged to propose a ‘government for change’ based around an “essential programme”.

The first challenge is to break out of the ‘cage of austerity’ created by Europe’s policy of fiscal consolidation. The first priority must be to help the real economy – only then should Italy turn to deficit and debt reduction, he says.

The remaining points are:

2) Measures to tackle the social emergency in Italy

3) Reform of its political system;

4) New measures on equity & justice

5) New rules on conflict of interests;

6) Green economy & sustainable development

7) Working on legislation on citizenship rights for migrants & civil partnerships;

8) Improve education, and research & development

Bersani also argues that Italy could play a key role in changing Europe’s economic policies.

10.23am GMT

Speaking of bonus caps, Conservative MP Douglas Carswell and French MEP Philippe Lambert have clashed over the issue on Bloomberg TV:

10.18am GMT

King: bank bonus caps are a distraction

Sir Mervyn King also weighs in on bank bonuses caps, arguing that the measures will be neither as effective as supporters claim, or as devastating as critics argue either.

They will, though, be a distraction at a time when there are bigger issues to solve.

King remains critical of the sector, though, saying banks have “lobbied intensively” on the leverage ratios they are allowed to run, in an attempt to maximise the return on their investments and thus the size of the bonuses.

10.14am GMT

Meanwhile, in parliament, Andrew Bailey — the Bank of England’s deputy governor for prudential regulation — has criticised the European clampdown on banking bonuses.

Bailey argues that it is mistake to peg bonuses at 100% of annual salaries, because it will undermine efforts to keep bankers on the straight and narrow (as basic salaries may rise to compensate them).

Fixed remuneration is cash out of the door — it’s much harder to get something back from someone once it’s paid to them.

Bailey argues that there has been real progress over bonuses in recent years, pointing out that bonus pools have shrunk recently because of fines imposed on banks (eg RBS following its Libor fine). Bonuses have also been clawed back in the cases of malice, he adds.

Bottom line: until Britain has fixed its ‘too big to fail’ problem, Bailey doesn’t want the bonus structure shaken up in the way the EU has agreed.

(speaking of bonuses, reader zippyp flags up an article arguing that the media got rather too excited about the EU bonus battle yesterday.

It’s here: EU legislation: blundering in the dark. )

Updated at 11.40am GMT

10.06am GMT

Monti, though, wasn’t the only leader who fell short in the Italian election. Bersani concedes that the result was a disappointment, and effectively a defeat

(hard to argue, given the Democratic Party entered the contest with a strong lead)

10.00am GMT

Back to Pier Luigi Bersani. He has pointed out that Mario Monti, the technocratic PM, failed to win enough support to play a significant role in the next administration.

9.54am GMT

9.52am GMT

Meanwhile, Bank of England governor Sir Mervyn King is up at the Banking Standards commission. It’s being streamed here.

King starts by agreeing that UK banks are still too important, and too big to fail.

9.52am GMT

Some more headlines from Bersani’s speech:

9.49am GMT

On the Five Star Movement, Bersani says the challenge is not to woo Beppe Grillo but to understand the reasons behind the former comic’s rise.

He’s also talking about the need to reform Italy’s political system.

9.46am GMT

Pier Luigi Bersani begins by warning that Italians are becoming poorer since the financial crisis struck, and speaks of a political earthquake that is shaking democracies across Europe, and

He takes a swipe at Silvio Berlusconi too, saying his rival had brought discredit to the Italian political system during his years in charge.

9.28am GMT

Not yet..

Correction, it appears that the Democratic Party meeting starts later than I thought.

The hall is filling up with PD members, but there’s no sign of Pier Luigi Bersani yet.

Here’s the scene:

Incidentally, this is a better webstream, on

(the first one I linked to is running adverts).

9.03am GMT

Stock markets rise again

Europe’s stock markets are climbing again today, following yesterday’s rally which saw the FTSE 100 hit a five-year high and the Dow Jones smash a new record.

Here’s the situation:

FTSE 100: up 17 points at 6450, + 0.28%

German DAX: up 43 points at 7914, +0.56%

French CAC: up 15 points at 3802. +0.4%

Spanish IBEX: up 34 points at 8457, +0.4%

Italian FTSE MIB: up 20 at 15994, +0.14%

8.50am GMT

What might happen this morning

Here’s some early thoughts on Bersani’s meeting today, from Alberto Nardelli, blogger, entrepreneur and Italian politics expert:

The party will back Bersani’s line to have a go at trying get the backing of parliament. As the largest coalition in both houses, procedure-wise, this is the right thing to do.

[however this is likely to fail as M5S has reiterated multiple times it will not provide a confidence vote].

As a plan B, while Bersani’s current approach seems to point to an immediate election as the only alternative to working with the M5S, the PD (Democratic Party) directive is likely to budge from this “Grillo or Bust” approach and open up to a greater flexibility towards alternative options (such as backing PMs/governments proposed by the president).

And if PD did support a technocratic government, it’s possible that fresh elections could be put off for a year or so.

8.43am GMT

Watch Bersani’s meeting

Pier Luigi Bersani’s meeting should be streamed online, here:

Updated at 9.10am GMT

8.34am GMT

Bersani to outline plan to form next Italian government

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

After yesterday’s focus on bankers bonuses, we’re back in the world of Italian politics this morning. Pier Luigi Bersani, the centre-left leader, will address senior members of his Democratic Left party shortly to outline how plans to form a government.

Having failed to win control of the Italian Senate, but holding a majority of seats in the lower house, Bersani still believes he can take power. But with the radical Five Star Movement (M5S) sticking to its guns and refusing to join Bersani or his rightwing rival Silvio Berlusconi in a coalition, it’s still unclear how the deadlock will be broken.

The key could be to design a legislative programme, and a new cabinet, that sufficient M5S’s senators are prepared to support.

Bersani is due to address about 100 members of the party’s top internal body at 10.00 am in Rome, or 9am GMT.

The meeting comes as speculation swirls that an unelected prime minister could be the answer. President Georgio Napolitano is reportedly considering installing a second technocratic PM to succeed Mario Monti.

As one government official told Reuters last night:

Napolitano wants a government with the broadest possible support that will last as long as possible.

We’ll be tracking Bersani’s meeting, and other key events across the eurozone and beyond.

That will include Sir Mervyn King’s appearance before the banking standards committee of parliament this morning (from 9.45am). The outgoing Bank of England governor will give his view on the financial sector, following the Libor scandal.

Updated at 9.23am GMT © Guardian News & Media Limited 2010

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