April 17 2013

European Parliament scathing over way Cypriot deal was handled. UK unemployment rate rises to 7.9%. European car sales slump 10%. Rogoff & Reinhart row stirs economics world. Will Chinese bad debts become another crisis?


Powered by Guardian.co.ukThis article titled “Markets slide as Bundesbank head warns recovery could take a decade – as it happened” was written by Graeme Wearden, for theguardian.com on Wednesday 17th April 2013 14.40 UTC

6.49pm BST

Closing summary

Time to wrap things up. Here's a brief closing summary

Europe's stock markets have fallen sharply, after another day dominated by concerns over economic growth. The German Dax fell by 2.35% to its lowest level of 2013, while in London the FTSE 100 shed 50 points to a 10-week low (see 6.04pm for closing prices).

Germany's top central banker warned that the task of recovering from Europe's debt crisis could take a decade. Jens Weidmann, head of the Bundesbank, also suggested the ECB could cut interest rates to stimulate demand (see 4.59pm)

European car sales fell by over 10% last month, as the financial crisis hit the auto industry. Germany, France and Spain all saw double-digit falls (see 8.30am).

MEPs were deeply critical of the handling of the Cyprus bailout. A session at the European Parliament saw a series of politicians blast the botched rescue package (see 10.26am for early highlights and 12.47pm for details)

Harvard economists Kenneth Rogoff and Carmen Reinhart defended their research paper into the effects of debt on growth levels. They admitted making a mistake with an excel spreadsheet in which meant they overstated the impact of high debt on GDP. (See 2.16pm for details and 3.40pm for an example of the criticism directed at the pair).

Greek medical workers held a six-hour anti-austerity strike, and held a protest in Athens. (see 4.06pm for photos)

In the UK, the unemployment rate rose to 7.9%. Economists warned that the labour market has now caught up with the weak economy (see 9.59am onwards).

• Slovenia held a debt buyback (see 6.25pm)

• Portugal's opposition leader refused to support its austerity package (see 5.49pm)

I'll be back tomorrow. Until then, thanks for reading and commenting. Apologies that we had some technical issues with the comments system today (and yesterday) – our star tech team have fixed it now.


6.25pm BST

Slovenia’s debt buyback

Slovenia made progress today in its battle to avoid becoming the next member of the eurozone to seek international assistance.

It held a debt buyback, in an attempt to cut its refinancing costs as its new government constructs a deal to strengthen its banks. The project started well, with Slovenia raising €1.1bn with a bond auction. It then used some of the proceeds to buy back €510m of bonds that would have matured in June.

That means it shouldn't have to worry about rolling them over then – effectively buying some time.

Timothy Ash, a London-based emerging markets economist for Standard Bank, said (via the WSJ):

It has eased a little bit of the pressure, but they will ultimately have to come to the market abroad to raise financing.

6.04pm BST

European markets tumble amid gloomy forecasts

A bad day on Europe's stock markets has seen the German Dax slide to its lowest level since last December.

Bundesbank head Jens Weidmann's warning that the European recovery could last a decade helped to drive shares down across the region. There was also a rumour that Germany's credit rating was at risk — which surfaced this morning without ever being substantiated.

Here's the damage:

FTSE 100: down 60 points at 6244, – 0.96%

German DAX: down 179 points at 7503. -2.34%

French CAC: down 86 points at 3599, -2.35%

Spanish IBEX: down 145 points at 7803, -1.8%

Italian FTSE MIB: down 149 points at 15383, -0.96%

And in the foreign exchange markets, the euro has fallen by 1.5 cents against the US dollar, to .303.

So what caused Europe's stock markets to slide?

Traders are blaming the steady stream of negative economic data in recent days, including this morning's tumble in new car sales. They also pointed to today's warnings from the International Monetary Fund (which cut its growth forecasts again yesterday). That German downgrade rumour was another factor.

Here's some reaction:

Sebastien Galy of Societe Generale

The sensitivity of different markets to negative surprises seems to have risen sharply recently, particularly in Europe and the broad emerging market spectrum. It suggests that the period of consolidation is continuing.

Michael Hewson of CMC Markets

A day after the IMF downgraded its growth forecasts for the Euro area in 2013, markets have come under pressure once again today after European car sales once again slid on a monthly basis, this time down 10.2% to almost a 20 year low, with Germany’s auto market in particular suffering a sharp 17% slide.

Reported comments from Bundesbank chief Jens Weidmann, that Europe's recovery could well take a decade, also hit sentiment in the afternoon session and has seen European markets start to close in on significant support levels, while the DAX has led the declines making new lows for 2013.

Chris Beauchamp of IG

Overall it seems as if the general tone has shifted from ‘buy the dips’ to ‘sell the rallies’, with the sustaining sense of optimism that carried markets forward in the first quarter of 2013 having finally exhausted itself.

5.49pm BST

Portugal’s opposition leader won’t support austerity plans

The head of the Portuguese opposition has refused to back the country's austerity programme tonight, despite efforts from the Troika today to get political backing for the plan:

Reuters has the details:

Portugal's main opposition Socialists reiterated their rejection of the centre-right government's austerity policies on Wednesday despite attempts by Lisbon's EU and IMF lenders to rebuild a political consensus around their bailout.

"Our position is to show to the troika that the policy applied here does not lead to the desired results and also provokes a recessive spiral," Socialist leader Antonio Jose Seguro told reporters.

He was speaking after meeting representatives of Portugal's lenders from the European Union and IMF who are in Lisbon this week to work with the government on new spending cuts needed to meet bailout goals after the constitutional court rejected some austerity measures from this year's budget.

The coalition government has a comfortable majority in parliament to pass bills, but the lenders want a broader political support for austerity to make the reforms sustainable.

Portugal's austerity programme is being rejigged after its constitutional court rejected pay and benefit cuts last month. Pedro Passos Coelho responded by pledging to cut health and education spending.

5.27pm BST

Esther Bintliff of the Financial Times has pulled together a list of the key research papers and articles to explain the row over Carmen Reinhart and Kenneth Rogoff's research into the effects of debt levels on growth (see here for more)

4.59pm BST

Bundesbank chief: recovery could take a decade

Mario Draghi, President of the European Central Bank, ECB (L), and Jens Weidmann, President of the Bundesbank are pictured during the awarding ceremony of the Generation Euro Student's Award in Frankfurt/Main, Germany, on April 17, 2013.
Jens Weidmann, President of the Bundesbank (right) with Mario Draghi today at the awards ceremony of the Generation Euro Student’s Award in Frankfurt. Photograph: DANIEL ROLAND/AFP/Getty Images

Jens Weidmann, head of the Bundesbank, has caused a stir tonight by warning it may take a decade for Europe to recover from the debt crisis.

In an interview with the Wall Street Journal, Weidmann dismissed the suggestion that Europe was through the worst of its problems.

Instead, he indicated that the European Central Bank might have to cut interest rates to stimulate growth — which is interesting given Weidmann is one of the most hawkish members of the ECB's Governing Council.

Weidmann's comments pushed the euro down, and helped to send shares sliding in Europe (with the French and German stock markets posting heavy losses).

Here's a flavour:

"Overcoming the crisis and the crisis effects will remain a challenge over the next decade," he said, contrasting recent comments from European Commission President José Manuel Barroso that the worst of Europe's crisis is over.

"The calm that we are currently seeing might be treacherous" if it delays reforms at the national and European level, Mr. Weidmann said. There can be no quick fixes from the ECB either, he said.

Full interview here.

4.18pm BST

Also in Athens, Greek finance minister Yannis Stournaras told MPs this afternoon that "the Greek banking system was endangered by the the Cyprus crisis."

From Greece, Helena Smith reports:

"It's not an exaggeration to say that the Greek banking system was in danger because if the deposits of Greeks at Cypriot branches [in Greece] had also suffered a haircut, no one knows what would have happened afterwards," Stournaras told parliament as it debated the decision to ring fence the banks.

The decision to place the Greek network of Bank of Cyprus and Laiki banks in the hands of Pireaus Bank was "evidence of the helpful stance and support of Greece towards Cyprus," he said.

Many Cypriots would disagree. Greece is widely blamed by the islanders for their country's spectacular economic collapse. Had it not been for Nicosia standing in solidarity next to Athens when its own debt load was restructured last year, the Cypriot banking system would not have suffered €4.5bn of losses (tountamount to 25% of GDP) overnight, officials say.

One of the best kept secrets, rarely if ever acknowledged by the leaderships of both countries, is the little love lost between them. In truth the Cypriots and Greeks have little time for each other.

Updated at 4.18pm BST

4.06pm BST

Photos: medical staff protest in Greece

Here are a few photos from Athens today, where employees of the Greek health service held a six-hour strike in protest at the government's austerity package.

Hospital workers carry a banner reading “government, IMF, EU-troika are harmful for the public health” outside the ministry of health in Athens.
Employees in the Greek NHS (ESY) demonstrate in the center of Athens against government announced plans to lay off 1500 public sector employees as part of the continuous austerity measures.
Photograph: Giorgos Panagakis/Demotix/Corbis
A demonstrator is seen making noise with a whistle.
Photograph: Giorgos Panagakis/Demotix/Corbis

The protest followed the Greek government's decision to agree to cut 15,000 civil servant jobs by 2015 (see our story from Monday night).

3.55pm BST

Key event

Global slowdown watch: The Bank of Canada has cut its forecasts for GDP growth this year, from 2% to 1.5%.

BoC, whose governor Mark Carney will take over at the Bank of England this summer, effectively conceded it had been too optimistic about the Canadian recovery. It now reckons it will not return to full capacity until mid-2015, some six months later than predicted in January.

The move came as it left interest rates at 1%.

3.40pm BST

The jesting over Kenneth Rogoff and Carmen Reinhart's Excel problems which led them to overstate the impact of debt levels on growth (see 2.16pm) continues…

Updated at 3.51pm BST

3.21pm BST

IMF’s Viñals warns of old risks and new ones

José Viñals, the head of the IMF's monetary and capital markets department, was in cheerful mood at the press conference to mark the launch of the IMF's Global Financial Stability Report, reports Larry Elliott.

From the press conference, Larry writes:

Spring had arrived not just in Washington, he said, but "also it seems in global financial markets, where after repeated storms and threatening clouds, some blue sky and more sunny days are emerging."

It's not all good news, though. Vinals says there are two groups of risks facing financial markets – old risks and new risks.

The old risks are the continuing problems in the euro are and the weak state of banks.

The new risks are the US, where debt underwriting standards are "weakening rapidly and low interest rates are leading some pension funds and insurance companies to take further risks to close funding gaps; the spill over effect into emerging markets from cheap money in advanced countries; and the possibility that the unwinding of prolonged monetary easing in the US could de-stabilise credit markets.

"Put simply", says Vinals, "we are in uncharted territory".

3.00pm BST

IMF’s eurozone recommendations

The IMF's message to Europe today is: clean up your banks, and make progress on banking union.

Here's the key recommendations for the euro area:

• Bank balance sheets and business models need to be strengthened to improve investor confidence, reduce fragmentation, and improve the supply of credit for solvent small and medium-sized enterprises. Enhanced disclosure for banks and conducting selective asset quality reviews will help restore confidence in bank balance sheets and improve market discipline

• To anchor financial stability in the euro area and for ongoing crisis management, fast and sustained progress toward an effective Single
Supervisory Mechanism (SSM) and the completion of the banking union are essential.

A Single Resolution Mechanism should become operational at around the same time as the SSM becomes effective. This should be accompanied by agreement on a time-bound roadmap to set up a single resolution authority and deposit guarantee scheme, with common backstops. Proposals to harmonize capital requirements, resolution, common deposit
guarantee schemes, and insurance supervision frameworks at the EU level should be implemented promptly. Modalities and governance arrangements for direct recapitalization of banks by the European Stability Mechanism should also be established.

• The developments in Cyprus underscore the urgency for completing reforms across the euro area in order to reverse financial fragmentation
and further strengthen market resilience.

2.52pm BST

IMF: Financial crisis could flare up again

Over to Washington, where the International Monetary Fund has released its half-yearly Global Financial Stability Review (downloadable here)

Catchily titled "Old Risks, New Challenges", the report calls on world leaders and officials to take new steps to secure the recovery, or risk the crisis flaring up again. That means cleaning up the banking sector (particularly in Europe), and also being vigilant to avoid the current accomodative monetary policy causing a new credit boom.

Our economics editor Larry Elliott reports from Washington:

The International Monetary Fund has warned that the repair job on the world's battered financial system is only partly completed and said failure to finish the job risks propelling the crisis into a chronic new phase.

While being encouraged by the marked improvement in financial market conditions over the past six months, the IMF said further action was needed to tackle underlying threats to stability.

In its half-yearly Global Financial Stability Review, the fund said that the recent problems in Cyprus were a reminder of the continued fragility of market confidence.

"Global market conditions have improved appreciably in the past six months, providing additional support to the economy, and prompting a sharp rally in risk assets", the report said.

More from Larry here.

2.16pm BST

Rogoff/Reinhart row throws austerity debate open

The world of economics is in an almighty flap today after a famous (or perhaps notorious) academic paper into the impact of debt levels on growth was found to contain coding errors, and selective use of data.

The two top economists, Kenneth Rogoff and Carmen Reinhart of Harvard, have defended their study this morning – but critics of austerity programmes believe that the case for urgent fiscal consolidation has been damaged.

Some background. Rogoff and Reingart's paper was called Growth in a Time of Debt. The key finding was that countries with 90% or higher debt/GDP ratios suffer growth rates "several percent" below the average — and has been used to justify many of the fiscal consolidation programmes launched since the financial crisis began.

Anyway, last night researchers at the University of Massachusetts appeared to blow the study apart. After getting hold of the original data set, they made the startling claim that Rogoff and Reinhart had

a) excluded several years after the second world war, where there was high debt and average growth,

b) weighed the data in a "debatable" way

c) committed an Excel coding mistake that meant certain countries with high debt and average growth simply weren't counted

(full details here)

According to the Massachusetts maths… if you use all the data, and don't mess up your Excel cells, the (mean) average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90% is actually 2.2%, not -0.1% as Growth in a Time of Debt.

This caused a storm overnight. As US economist Dean Baker explained:

In the United States, many politicians have pointed to R&R's work as justification for deficit reduction even though the economy is far below full employment by any reasonable measure.

In Europe, R&R's work and its derivatives have been used to justify austerity policies that have pushed the unemployment rate over 10% for the eurozone as a whole and above 20% in Greece and Spain. In other words, this is a mistake that has had enormous consequences.

(more from Dean Baker here)

Other critics of austerity were equally scathing (Paul Krugman posted once, then twice) . And there was a certain amount of twitter tittering about two of the world's most eminent economists getting their sums wrong.

Anyway, Rogoff and Reingart have now issued a full response, in which they defend their work while conceding some ground (see here).

After labouring over their data again, the pair have owned up to the Excel coding error. They denied deliberately excluding certain countries ("there were still gaps in our public data debt set at the time of this paper.") and weighing the models to give less importance to certain "a small number of countries that may have their own peculiarities").

But Rogoff and Reingart are adamant that the broad point remains valid. "Put differently, growth at high debt levels is a little more than half of the growth rate at the lowest levels of debt," they said.

As the FT puts it:

The economic historians admitted that there was an Excel blunder. “Herndon, Ash and Pollin accurately point out the coding error that omits several countries from the averages in figure 2. Full stop. HAP are on point,” they said.

However, they “objected in the strongest terms” to the second criticism that they missed several years of data, and stood firm on the issue of unconventional weighting.

More here: Harvard duo defend case for austerity

But does it matter?

There's a persuasive argument that politicians used R&R to justify policies they wanted to impose anyway. And rival economists had already questioned the conclusions of the report (what comes first, the high debt or the slow growth?).

But the timing is fascinating — the Massachusetts work hit the newswires as we were still digesting the IMF's warning to George Osborne to relax the pace of his austerity programme.

Growth in a Time of Debt used to be a weapon in the armory of the deficit-cutters. Their opponents won't fear it any more….

Anyway…. a trader who blogs and tweets as Barnejek provided our favourite response:

And here's another good take on Quartz.

2.08pm BST

Here's the key section from Olli Rehn's speech to the European Parliament, defending the Cyprus bailout (before he was roasted by MEPs)

The support programme will enable Cyprus to restore the health of the economy and to create a more sustainable economic model. The loans of up to 10 billion euros equal to more than half of Cypriot GDP.

I agree with the Minister of Finance of Cyprus, Haris Georgiades, who said yesterday that he wants to shun the blame game and focus on the future. He said as follows: "We are determined to adopt and implement all those reform measures, which we should have adopted a long time ago, but we failed to do so".

Indeed, we now have to concentrate all our efforts to facilitate the emergence of new sources of economic activity and to alleviate the social consequences of the economic shock.

The Commission decided on the 27 of March to set up a Support Group for Cyprus with the implementation of the adjustment programme. The Commission is now mobilising its resources to provide technical assistance. The Support Group will rely on expertise from across the Commission services. An immediate priority is to identify the relevant resources available from the current structural funds.

The Commission stands by the Cypriot people in this time of deep trouble. We are committed to help Cyprus to get through the tough times and overcome the current difficulties. I trust that we can count on the support of the European Parliament in together mobilising the available resources for Cyprus, as quickly and as effectively as possible.

The full speech is online here

12.47pm BST

MEPs criticise Cyprus bailout – more details

European Union Commissioner for Economic and Monetary Affairs Olli Rehn adresses the assembly during a debate on the situation in Cyprus, on April 17, 2013, at the European Parliament in Strasbourg, eastern France.
European Union Commissioner for Economic and Monetary Affairs Olli Rehn at the European Parliament in Strasbourg this morning. Photograph: FREDERICK FLORIN/AFP/Getty Images

The European Parliament has released details of its concerns over the Cyprus bailout, following this morning's grilling of commissioner Olli Rehn (see 10.26am).

It confirms that MEPs were scathing about the Eurogroup's handing of the issue, and also condemned the decision (later reversed) to impose losses on smaller savers.

Criticism rained down on Rehn from all sides of the spectrum, with accusations of double standards and claims that Germany displayed 'near colonial' behaviour:

Here's the details: Cyprus: MEPs criticise handling of bailout programme

The key quotes from the EP statement:

Jean-Paul Gauzes, a French member of the EPP group, said that the Eurogroup's appalling communication was central to the fiasco. He also blamed the EU institutions for not being vigilant enough and Cypriot banks for having built up too much risk.

Hannes Swoboda, the Austrian leader of the S&D group, criticised the Council and more particularly Germany for behaving in a "near colonial way". He also called on the Commission to disband the troika, a partnership between the Commission, the European Central Bank and the International Monetary Fund, which oversees the implementation of bailout packages.

Jan Zahradil, a Czech member of the ECR group, said that the real problem was much wider than what was happening in Cyprus. Cyprus was being used as an excuse to attack national fiscal sovereignty, he said.

Nigel Farage, the British co-chair of the EFD group, accused the Commission of criminal behaviour, robbing people to prop up the euro project. He concluded that no-one has confidence in the euro.

Takis Hadjigeorgiou, a Cypriot member of the GUE/NGL group, accused the EPP political family of having double standards, by supporting the Cypriot cause within the EP, but not within the Eurogroup. He also criticised the Council for imposing measures on Cyprus which it would never apply to larger countries.


Olli Rehn, though, argued that it was time to stop assigning blame for the Cyprus deal.

During the session, members of the European United Left of the European Parliament group held up posters with the slogan "Hands off Cyprus, Portugal, Greece, Spain, Ireland"


Updated at 12.50pm BST

12.14pm BST

Greek doctors hold six-hour strike

In Greece, medical staff are holding a six-hour walkout in protest at the government's cuts to health care budgets.

From Athens, my colleague Helena Smith reports that a "well-humoured" demonstration is taking place:

Demonstrators are walking up to parliament as I write to deliver a petition denouncing "murderous cuts" in health care.

Many chanting "Hands off State hospitals. Enough with the Troika's barbaric policies."

Protestors are expressing outrage at the Greek government's decision to slash 15,000 public sector jobs by 2015.

"All these cuts are totally counter-productive. It reminds me of what you went through in Britain when Thatcher imposed her sinful policies on the NHS," said Michalis Papastakos, a doctor who trained in London at the time.

The strike is taking place between 9am and 3pm local time, or 7am to 1pm BST.

Updated at 12.24pm BST

11.44am BST

Trouble in China?

Looking at the wider financial economy, there's a lot of interest in China this week following its weaker-than-expected economic growth in the first quarter of 2013.

That has refocused attention on the bad debts lurking in the Chinese local government sector. One senior auditor even warned yesterday that the local authority bond market was "out of control"

Zhang Ke warned (via the FT):

We audited some local government bond issues and found them very dangerous, so we pulled out…

Most don’t have strong debt servicing abilities. Things could become very serious.

Those debts were built up since the financial crisis began, with Beijing encouraging local governments to increase their borrowings to sustain growth.

So is China heading for a major crash? Paul McNamara, investment Director at GAM, reckons not. He told CNBC this morning that the Chinese government should be able to contain the problem:

Here's a video of the interview:

McNamara explained:

I think [calling China] the next crash is probably a stretch – there's nothing really wrong with China that the government can't rescue.

They are going to have to step in. It's been very clear for some time that the local governments have been the vehicle by which they got growth going again.

A lot of those loans will probably have to be written off or moved onto the central government balance sheet, McNamara says, but that's not enough to cause a panic.

It's very hard to get a full scale crisis in China, just because they've got capital controls.

And this gallery, from last month, shows the 'ghost cities' that have proliferated in China in recent years.

Updated at 11.55am BST

11.05am BST

Germany's borrowing costs have fallen to a record low this morning, at a sale of €4bn of 10-year bunds.

Strong demand for German debt usually indicates traders are pushing their money into "safe havens".

10.26am BST

MEPs criticise Commission over botched Cyprus bailout.

The European Parliament is holding a session on the Cyprus bailout this morning – it's being streamed here (although the link is a little flaky).

The MEPs want to find out how the Cypriot rescue plan was so badly handled.

The session began with UKIP's Nigel Farage savaging the decision to force losses on depositors in Cyprus, before Sharon Bowles (who chairs the Economic and Monetary Affairs Committee), also laid into commissioner Olli Rehn.

Bruno Waterfield of the Daily Telegraph and Irish journalist Karen Coleman have been watching, and report:

10.20am BST

UK unemployment: early reaction

Economists and City investors are disappointed by today's weak UK unemployment data, with some warning that the labour market has caught up with the lack of growth in the economy. 

Here's some early reaction:

Alan Clarke of Scotia Bank:

It's very disappointing that employment was down in the last three months….

The ILO (jobless) rate rose from 7.8 to 7.9 percent, I think that’s the focus. A 5,000 to 10,000 drop in unemployment in the payment count measure – that measure does tend to get distorted by various government policy changes, which is why I look at the ILO.
It's not a disaster, but a lot of the froth and really good news we had over the last year on jobs is becoming exhausted, which shouldn’t be a surprise when there is not much growth around.

Brian Hilliard of Societe Generale

The jobs figures were disappointing. Even though the clamaint count has continued to fall, the 3-month on 3-month rate of employment growth has fallen to zero.

Ian Brinkley, director of The Work Foundation

As we predicted, economic reality has caught up with the labour market. The jobs recovery of 2012 appears to have stalled.

Comparing the three months to February with the previous three months shows that our economy has stopped creating new jobs, unemployment is increasing and wage growth has stalled. The increase in youth unemployment is of particular concern and disappointing given the Coalition has made tackling youth unemployment such a high priority. 

These numbers should be a spur for the government to focus the upcoming Spending Review on supporting activities with the potential to create jobs and drive growth.

10.07am BST

Key event

Pay in the UK has failed to keep pace with inflation since the early days of the financial crisis, as this chart from this morning's unemployment data shows:

Average earnings vs inflation in the UK
Photograph: Office for National Statistics

9.59am BST

UK unemployment rate rises to 7.9%

Unemployment in the UK has jumped, in a sign that Britain's economy remains worryingly weak .

The number of people out of work in Britain rose by 70,000 in the three months to February, compared to the previous quarter. That pushed the jobless rate up to 7.9%, from 7.8% last month, to its highest level since last summer.

Youth unemployment rose by 20,000 to 979,000, as young people continues to face the brunt of the troubles in the economy.

There was also a nasty slump in wages. Total pay rose by just 0.8%, year-on-year, in the three months to February. With inflation at 2.8%, that means real wages kept shrinking.

The only good news was a 7,000 drop in the claimant count, in March.

UK Labour Market, April 2013
Photograph: Office for National Statistics

More details here. Reaction to follow…

Updated at 10.00am BST

9.35am BST

Bank of England minutes

The Bank of England remains split over monetary policy — with its committee split 6-3 again over whether to create another £25bn to spend buying government debt.

Outgoing governor, Sir Mervyn King, was again outvoted, with a majority of policymakers leaving the QE programme at £375bn. All nine members voted to leave interest rates at their record low of 0.5%.

You can download the minutes here (pdf).

9.21am BST

Cyprus to decide on gold sale soon

Cyprus's finance minister has declared that the country will probably decide to start selling some of its gold reserves to help fund its bailout programme "in the coming months".

Haris Georgiades also told Bloomberg that the country's central bank will have to make the decision. This adds another potential complication to the sale, as governor Panicos Demetriades (under fire for his own handling of the crisis) has said he hasn't even been consulted about the plan.

Georgiades told Bloomberg:

The exact details of it will be formulated in due course primarily by the board of the central bank…Obviously it’s a big decision.

News that Cyprus would sell €400m of gold broke last week, when the details of the European Commission's debt sustainability report on the country leaked.

Cyprus holds around 13.9 metric tonnes of gold, which was worth around 0m (€580m) last week. Its value has now dropped to 0m (€508m) following the plunge in the gold price.

Some analysts have suggested that Cyprus's planned gold sale helped to puncture the gold price. Georgiades commented:

I’m not really sure if the series of events is exactly matching with the recent movements in the price of gold, but I suspect maybe it was a contributing factor.

9.00am BST

Australia: Europe must slow its austerity drive

Australia's top finance minister has blasted European leaders for damaging the global economy through their 'mindless' focus on austerity.

Wayne Swan, Treasurer of Australia, told the Wall Street Journal that Europe needed to take a slower approach to fiscal consolidation:

We need developed economies to take the hand brake off growth that is coming from mindless austerity…

We need new sources of growth to come from developed economies, particularly Europe, but at the moment fiscal austerity there is a huge brake on growth.

The full piece is here.

UPDATE: Regular reader AussieAnalyst reckons we shouldn't take much notice of Mr Swan….

Updated at 10.01am BST

8.48am BST

The agenda

Here's what's coming up today (via RANSquawk):

UK unemployment data: 9.30am BST

Bank of England minutes: 9.30am BST

Bank of Italy's quarterly economic bulletin: 10am BST

Angela Merkel meets Estonia's prime minister Ansip: from 11.30am BST

IMF's Financial Stability Review released: 2pm BST

Updated at 8.57am BST

8.30am BST

European car sales tumble again

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

It's another bleak morning for Europe's carmakers. New figures show that sales across the region tumbled by 10.2% in March, led by a slump in sales in Germany.

This proved seriously bad news for the region's carmakers, who saw their own sales slump again.

The Association of European Carmakers reported that last month:

Italy: -4.9% year-on-year

Spain: -13.9% year-on-year

France: -16.2% year-on-year

Germany: -17.1% year-on-year

The UK, though, continues to defy the downturn, with sales rising 5.9% last month.

Denand for new passenger cars across the EU has now fallen for the last 18 months. These graphs suggest that the downturn is actually picking up pace.

European car sales to March 2013
Photograph: Association of European Carmakers

Today's data underlines the link between consumer spending and manufacturing. With austerity-hit European customers spending, many of the region's carmakers suffered deep sales falls last month.

VW Group: -9%

Peugeot/Citreon: -16%

Renault: -9.6%

GM Group: -12.6%

Ford: -15.8%

Fiat Group: -0.8%

Toyota: -16.3%

Many of these companies are already making cutbacks and strategic changes — Peugeot, for example, angered the French government with its plan to cut 8,000 jobs.

The decline in sales makes those recovery plans even tougher — Reuters reckons we could see profits warnings from some of the major players in the months ahead.

With the International Monetary Fund warning yesterday that the eurozone will shrink by 0.3% this year, Europe's economic woes remain very worrying.

We'll be hearing more from the IMF today, as its Spring Conference continues in Washington. There's also the latest Bank of England minutes, UK unemployment data, and a debate in the European Parliament on Cyprus coming up.

Updated at 8.31am BST

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