April 22 2013

Barroso: We’ve reached the limit on austerity. Bill Gross: investors want growth not austerity. Eurozone government debt hits 90% of GDP. Relief as Italian president reelected. But Five Star Movement protests. US existing home sales drop…


Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Brussels hints at austerity rethink as opposition mounts – as it happened” was written by Graeme Wearden, for theguardian.com on Monday 22nd April 2013 12.28 UTC

6.13pm BST

Closing summary

Time to wrap up for the day above the line (you can keep going below the line as long as you like!).

Here's a closing summary.

Pressure is growing to rethink the eurozone's austerity programme after top Brussels officials admitted that a new approach is needed to fix the crisis.

European Commission president José Manuel Barroso said the current programme of fiscal reform has reached its social and political limits, and suggested countries could be given more time to bring their deficits into line (see 2.17pm).

And European Council president Herman Van Rompuy declared that there was a 'renewed sense of urgency' to the crisis (see 4.53pm).

Bill Gross, head of bond-trading firm Pimco, weighed into the debate today. He told the FT that the UK and members of the Eurozone had blundered by enforcing austerity cutbacks, saying investers were more worried about future growth (see 12.11pm).

New data showed that total sovereign debt held by eurozone countries has reached 90% of GDP. Eurostat also reported that 17 members of the EU ran deficits over the target of 3% of annual output last year (see 10.40am onwards)

In Italy, president Giorgio Napolitano was sworn in for a second term. In an emotional speech, Napolitano savaged Italian politicians for not reforming the country's political system. Fighting back tears, he said he would resign unless vital changes were made — and insisted that a new government was urgently needed. (see 4.40pm).

Talks over the formation of a new government will start on Tuesday.

The financial markets cheered Napolitano's decision to serve a second term. Italy's borrowing costs fell, as the Milan stock market rallied by 1.6% (see 5.09pm for closing prices).

Political analysts warned, though, that Italy was in a precarious state. (see 2.43pm and 3.11pm).

Angela Merkel called on European leaders to continue to push for closer integration. Some sovereignty must be surrendered in return for a stable future, the German chancellor said (see 3..33pm).

Over in Japan, there was relief that G20 finance ministers didn't publicly criticised its new stimulus package. The Nikkei hit a new near-five year high, and the yen weakened closer to the 100 yen/$ mark (see 9.08am).

And a new deadline loomed in Greece. MPs were warned that they must pass a new bill of measures by Sunday, to ensure that their next aid payment is received (see 4.10pm).

Thanks for reading and commenting (some great stuff below the line, as ever). See you all tomorrow… G

Giorgio Napolitano (C) is applauded by Chamber of Deputies president Laura Boldrini (L), while being congratulated by Senate president Pietro Grasso (R), at the Italian parliament in Rome, 22 April 2013.
Giorgio Napolitano being applauded by Chamber of Deputies president Laura Boldrini (left), while being congratulated by Senate president Pietro Grasso (right), after being sworn in today. Photograph: MAURIZIO BRAMBATTI/EPA

Updated at 6.23pm BST

6.10pm BST

Just in — the Italian president has announced that he will begin a "rapid series of meetings" on Tuesday on the creation of a new government….

5.40pm BST

Support for Germany's new anti-euro party, Alternative für Deutschland, has risen to 5% — the threshold for winning seats in the Bundestag.

That's up from 3% when the party held its first conference earlier this month

Here's the latest polling data from INSA:

CDU/CSU: 38%,

SPD: 26%,

Greens: 15%,

Left: 6%,

FDP: 5%,

AfD: 5%,

Pirates: 2%

Updated at 5.40pm BST

5.33pm BST

Spain's population has fallen for the first time in decades, according to census data published today.

The Spanish population dropped by 206,000 to 47.1m, the National Statistic Institute (NSI) reported. Most of the decline is due to overseas workers leaving the country, it added.

The BBC has the full story: Spain's population shrinks as immigrants flee economic crisis

Updated at 5.33pm BST

5.14pm BST

And over in America, Europeam commissioner Olli Rehn has warned that growth will only return "slowly" to Europe's economy in the second half of this year.

Even that cautious forecast is too optimistic for Re-Define's Sony Kapoor:

Updated at 5.14pm BST

5.09pm BST

European markets are closed

President Giorgio Napolitano's threat to resign unless Italian politics is reformed didn't cause any late alarm in the Milan stock market where shares finished higher.

Italian sovereign debt have also staged a strong recovery, showing investors have more confidence in the country's future. The yield on Italy's 10-year bonds has now dropped to 4.06%, a chunky 16-basis point fall.

Other European markets were mixed, though:

Here's the closing prices:

Italian FTSE MIB: up 260 points at 16,021, + 1.66%

FTSE 100: down 6 points at 6280, – 0.09%

German DAX: up 18 points at 7478, – 0.24%

French CAC: flat

Spanish IBEX: up 112 points at 8,027, +1.4%

And here's Michael Hewson of CMC Markets' take:

Equity markets initially enjoyed somewhat of a relief rebound today after last week’s declines, helped by the lack of criticism from the G20 over Japan's attempts to create inflation which helped boost sentiment…however this could well be construed as clutching at straws given that the economic outlook continues to remain difficult.

There was also renewed optimism over an end to the political deadlock in Italy after Giorgio Napolitano agreed to another seven year term as President in an attempt to break the political deadlock that has gripped Europe’s third largest economy for nearly two months now.

Despite the optimism the inescapable fact remains that it is a sad state of affairs when an 87 year old man has to stand for re-election in an attempt to try and move the country forwards with respect to either a new coalition government, or new elections.

4.53pm BST

Van Rompuy: New urgency to fix the crisis

European Council president Herman Van Rompuy has claimed this evening that there is a "renewed sense of urgency" in Brussels to fix Europe's economic problems.

Welcome to the party, Herman…

There's more:

Updated at 4.55pm BST

4.43pm BST

Re-elected Italian President Giorgio Napolitano (C) addresses deputies and senators next to Laura Boldrini (L), president of the Italian Parliament and Pietro Grasso, president of the Italian senate, at the Italian Parliament in Rome on April 22, 2013.
Re-elected Italian President Giorgio Napolitano (C) addresses deputies and senators this afternoon. Photograph: ALBERTO PIZZOLI/AFP/Getty Images

4.40pm BST

President Napolitano: reform Italy or I quit

Giorgio Napolitano has been sworn in as Italy's next presdent, and promptly threatened to resign unless the country's politicians get their act together.

The 87-year old Napolitano gave an emotional speech, saying he had only agreed to take on an unprecedented second term to break the deadlock that was gripping Italy.

He was scathing about Italy's political leaders, citing their failure to reform the country's electoral law (which helped to deliver stalemate at February's general election). He warned that he would quite unless vital reforms were made.

According to Reuters, Napolitano was "occasionally choking back tears" as he said leaders "must not hesitate" in forming a new government (check out our 2.43pm post for Open Europe's analysis).

Any system in which the new president threatens to resign within 20 minutes of being sworn in clearly needs urgent treatment.

4.31pm BST

On Fitch’s AAA downgrade

A couple of good blogposts about Fitch's downgrade of the UK's triple-A rating, on Friday night, to flag up:

Banking expert Frances Coppola argues that it's a political downgrade:

Fitch notes that the UK's public debt is denominated exclusively in domestic currency. A sovereign currency-issuing government should never default on its domestic-currency sovereign debt obligations, since it can always create money to settle them. Debt default for a sovereign currency issuer is a therefore a POLITICAL decision, not an economic one. 

Fitch's downgrade amounts to a vote of no confidence in the Cameron government, and particularly in the Chancellorship of George Osborne. And the timing of the announcement is exquisite, coming as it does at the end of a week which saw bad labour market figures, criticism from the IMF of the Chancellor's economic strategy, and the exposure of fundamental flaws in an economic theory frequently used to justify aggressive deficit reduction measures.

And Duncan Weldon of the TUC flags up Fitch's supportive comments on the UK's debt profile (Britain has sold more long-maturity bonds than average). That gives the Treasury the flexibility to slow down its fiscal adjustment programme, he argues:

Whilst my views of the calibre of rating agencies analysis throughout the crisis has been pretty much in line with that of Jonathan Portes, I thought one nugget of information in Fitch’s statement was worth highlighting.

"The long average maturity of public debt (15 years) – the longest of any high-grade sovereign -exclusively denominated in local currency and low interest service burden implies a higher level of debt tolerance than many high-grade peers." [said Fitch]

This is an important point. Much as there is a tendency to look at deficit/GDP ratios without taking account of interest rates, too often economists look at debt/GDP ratios without looking at the maturity of that debt. This is nonsensical. As any individual can grasp, there is a world of difference between owing someone £100,000 repayable in twenty years time and owing someone £100,000 due tomorrow.

4.10pm BST

Over in Greece, MPs have been told that they must pass a bill outlining the next swathe of cutbacks by Sunday.

Finance minister Yannis Stournaras told MPs today that the legislation needs to be approved before parliament adjourns for Orthodox Easter. It will include laying off 15,000 civil servants over the next two years — one of the measures demanded by international lenders.

Greek newspaper Kathimerini explains:

Stournaras said that he would brief coalition leaders about the measures on Tuesday and would submit the bill to Parliament on Thursday under an emergency procedure.

The minister said that the vote would have to take place by Sunday because Greek Parliament will not be sitting next week as it is Holy Week ahead of Orthodox Easter.

He said that Greece would have to approve the prior actions in time for a Eurogroup meeting on May 13, when an instalment of 6 billion euros is due to be approved.

4.00pm BST

World stock markets have fallen back this afternoon, following disappointing results from equipment and machinery maker Caterpillar (see 1.06pm).

In New York the Dow Jones industrial average is down 0.4% – and the UK FTSE 100, the German Dax and the French CAC are all in the red in late trading (European markets close in 30 minutes).

There is also anxiety on Wall Street that Apple might miss forecasts when it releases its latest financial results on Tuesday night.

3.33pm BST

Merkel: Europe must give up some sovereignty

German Chancellor Angela Merkel and Polish Prime Minister Donald Tusk talking before the conference.
German Chancellor Angela Merkel and Polish Prime Minister Donald Tusk earlier today. Photograph: Gon alo Silva/Demotix/Corbis

German chancellor Angela Merkel has caused a stir this afternoon after declaring that European countries needed to yield some sovereignty to ensure Europe's survival.

Merkel made a pitch for more integration at a press conference with Polish prime minister Donald Tusk.

The chancellor was concerned that other European leaders lose their commitment to a closer Europe when the crisis ebbs away.Tusk, though, warned that it could be counterproductive for Berlin to force its agenda on the rest of the EU

As Reuters reports:

"We seem to find common solutions when we are staring over the abyss," Merkel said. "But as soon as the pressure eases, people say they want to go their own way.

"We need to be ready to accept that Europe has the last word in certain areas. Otherwise we won't be able to continue to build Europe," she added.

Tusk said it would be "dangerous" if other countries in Europe felt Germany was imposing its own economic model across the entire bloc.

But Merkel denied that, saying Europe was made up of different cultures and economies with different strengths. The key she said, was for Europe to orient itself towards best practices.

That meant Germany accepting a single market for services, a common labour market and more compatible social security systems, so that Europeans could move from one state to the other without worrying about their pensions.

"We don't always need to give up national practices but we need to be compatible," Merkel said. "It is chaos right now."
"We need to be prepared to break with the past in order to leap forward. I'm ready to do this," she said.

A lot of these issues will be tackled in June, at the next major EU summit.

Updated at 4.42pm BST

3.31pm BST

Eurozone consumer confidence rises

A welcome piece of encouraging economic data — consumer confidence across the eurozone rose in April to a nine-month high.

Consumer sentiment came in at -20.4 this month, up from -21.6 in March, according to Eurostat. That's still poor in historical terms, but a sign that people are less nervous. March, of course, was the month of the Cyprus bailout crisis.

Howard Archer, chief European economist at IHS Global Insight, said the rise in consumer confidence was welcome, but warned that people were unlikely to increase their spending soon:

Despite April’s increase, confidence is still low compared to long-term norms while Eurozone consumers continue to largely face high and rising unemployment, generally muted wage growth and tight fiscal policy.

This is particularly, the case in the southern periphery countries but it is also true for countries such as France and the Netherlands.

3.11pm BST

Robert O’Daly, Italian Analyst at The Economist Intelligence Unit, warns that Italian politics remains unstable, even though the country finally has a new president:

The re-election of Giorgio Napolitano as president has helped to reassure investors as it is expected to lead to the formation in the coming days of a broad centre-left/centre-right/centrist-backed government, probably led by Giuliano Amato.

However, the political deadlock since the February general election has taken its toll on the centre-left, the largest group in parliament. The centre-left is now deeply divided and the dominant Democratic Party risks splintering into several separate groups. The young mayor of Florence, Matteo Renzi, is openly challenging the current leader of the Democrats and the centre-left, Pier Luigi Bersani.

The internal turmoil of the Democratic Party and the broader centre-left alliance is likely to be a source of instability for the next government.”

2.43pm BST

Open Europe: What now for Italy?

Open Europe has released new analysis on the situation in Italy following the re-election of Giorgio Napolitano on Saturday.

And Italy's new President is…the old one! What happens next?

And here's the lowdown:

  • Napolitano will take his second oath this afternoon. From that moment, he will re-gain the power to dissolve parliament and call new elections.
  • Crucially, Napolitano has said he will "clarify the terms" under which he agreed to stay on in his (second) inauguration speech. The Italian media are speculating on at least two conditions. First, a shorter mandate than the seven years set out in the Italian Constitution – otherwise Re Giorgio would be leaving office at 95. Second, and most important, the formation of a national unity government – backed by the centre-left Democratic Party, Monti's centrist group and Silvio Berlusconi's People of Freedom party.
  • The markets seem to take the formation of a new government for granted, with Italy's borrowing costs going down this morning (see 1.27pm for details)
  • The latest from the Italian media is that Napolitano will hold a swift round of talks and could give someone the mandate to form the new government as early as tomorrow. There are reportedly two clear favourites to lead the new government. One is Giuliano Amato, 75 years old, who already served twice as Italian Prime Minister. The alternative is Enrico Letta, Pier Luigi Bersani's right hand. We would put our money on Amato, especially since not everyone within Letta's own Democratic Party is enthusiastic about him being appointed as Prime Minister.
  • The new government is likely to be a mix of politicians and technocrats. It will focus its efforts on bringing home 5-6 key reforms, based on the proposals put forward by the ten 'wise men' earlier this month. We expect the new government to give priority to political, rather than economic reform. Top of the agenda will be changing the electoral system, along with reforming a pretty dysfunctional institutional structure where the two houses of parliament have perfectly equal powers.
  • In any case, the new government is unlikely to remain in charge for the entire five-year parliamentary term.

More here.

There's also a rumour swirling this afternoon that outgoing prime minister Mario Monti could stay on as foreign minister:

Updated at 2.44pm BST

2.17pm BST

Barroso: euro austerity has reached its limits.

European Commission President Jose Manuel Barroso speeches at the opening of the 'Think Tank' conference at the Residence Palace, in Brussels, Belgium, 22 April 2013.
European Commission President Jose Manuel Barroso at the opening of the ‘Think Tank’ conference at the Residence Palace, Brussels, this morning. Photograph: JULIEN WARNAND/EPA

EC president José Manuel Barroso appeared to admit today that Europe's austerity drive cannot be pushed any harder.

Speaking in Brussels, Barroso warnedthat Europe's programme of fiscal consolidation has reached its "political and social" limits. He also hinted that countries who are missing their deficit targets will be given more flexibility.

Barroso told the Think Tank Dialogue:

While I think this policy is fundamentally right, I think it has reached its limits…

A policy to be successful not only has to be properly designed, it has to have the minimum of political and social support.

Barroso explained that Europe needs a "stronger emphasis on growth and growth measures".

Even if the policy of correcting deficit is fundamentally correct, we can always discuss fine tuning of pace.

Quite a change of heart from Barroso, given the EC's role helping to set bailout programmes since the crisis began. He faced a tough grilling by our Europe editor Ian Traynor:

Updated at 2.19pm BST

1.27pm BST

Optimism pushes Italian borrowing costs down

In the financial markets, there is still optimism over the situation in Italy – following Giorgo Napolitano's re-election as president on Saturday (see 8.29am). Government bonds continues to strengthen, which means Italy's cost of borrowing (measured by bond yields) has fallen.

Shares continue to rally. Here's the details:

• 10-year Italian bond yields, down 15 basis points at 4.07%.

• FTSE MIB: up 328 points, or 2.1%, at 16087 points.

But Sebastien Galy of Société Générale warns that the rally could be short-lived:

Napolitano's re-appointment, coupled with Bersani's resignation, paves the way for a coalition government between the Democratic Party and the Berlusconi-led centre-right.

But such a coalition government, born more out of political necessity than a popular mandate, is unlikely to be able to pursue the necessary structural reforms to the Italian economy, and is also likely to be short-lived. We essentially still have a problematic political situation in Italy. Keep short euro.

Updated at 1.28pm BST

1.06pm BST

Caterpillar: Eurozone to shrink almost 0.5% this year

A parking lot at Caterpillar Belgium, in Gosselies, Belgium.
A parking lot at Caterpillar Belgium, in Gosselies, Belgium. Photograph: Yves Logghe/AP

Caterpillar, the construction and mining equipment giant, has warned that it expects the eurozone to shrink this year – and by more than the International Monetary Fund believes.

In its latest results, released to Wall Street a few minutes ago (pdf), Caterpillar criticised the way the eurozone crisis is being handled. It said:

We believe that economic policies in the Eurozone have not changed enough to address record high unemployment, a 20-year low in construction and over a year of declining output. We expect the Eurozone economy will decline close to 0.5 percent this year.

Last week, the IMF predicted that eurozone GDP would fall by 0.3% in 2013.

Caterpillar's wide range of industrial and construction products mean it is a useful economic gauge – as demand for the firm's diggers, engines and trucks rises and falls with the wider economy.

Caterpillar warned shareholders that it has cut its sales and profit outlooks for this year, following a drop in demand for its mining equipment.

Our revised 2013 outlook reflects a sales decline of about 50% from 2012 for traditional Cat machines used in mining and a decline of about 15% for sales of machines from our Bucyrus acquisition.

Despite that, Caterpillar sees stability in the US and China:

As we began 2013, we were concerned about economic growth in the United States and China and are pleased with the relative stability we have seen so far this year. In the United States, we are encouraged by progress so far and are becoming more optimistic on the housing sector in particular. 

In China, first quarter economic growth was slightly less than many expected, but in our view, remains consistent with slow growth in the world economy.

12.11pm BST

Bill Gross blasts UK and eurozone over austerity

The chief executive of bond-trading giant Pimco has laid into the fiscal progammes of the UK and parts of the eurozone today, as the austerity debate continues to rage.

Bill Gross called for new stimulus measures to get economic growth moving again,rather than worrying about short-term debt targets, in an interview with the Financial Times published this morning.

Gross warned:

The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not.

You’ve got to spend money.

Gross's broad point is that it is a serious mistake to slash spending in an attempt to please the financial markets:

Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out – even if a country can print its own currency and write its own cheques.

In the long term it is important to be fiscal and austere. It is important to have a relatively average or low rate of debt to GDP….

The question in terms of the long term and the short term is how quickly to do it.

Gross's comments are topical – with today's data showing that total government debt across the eurozone has reached 90% of GDP and 17 EU countries running deficits above 3% despite several years of fiscal consolidation programmes.

(Portugal's deficit of 6.4%, for example, shows the challenge of reducing borrowing during a deep recession. Lisbon was forced into taking a bailout after its borrowing costs climbed into the danger zone after years of borrowing and weak growth)

This also looks like a u-turn from Gross.

Three years ago, the Pimco chief famously warned investors against buying UK government debt, warning that gilts were "resting on a bed of nitroglycerine". That forecast hasn't been born out yet — 10-year gilt yields have strengthened to just 1.6% , from around 4% three years ago.

Here's some early reaction:

11.20am BST

90% debt/GDP ratio fails to alarm…

The news that Britain, France and the eurozone's debt piles have all hit 90% of GDP (under Eurostat's maths) comes just days after research that warned this was the trigger point for slumping growth was rather discredited.

I imagine that Kenneth Rogoff and Carmen Reinhart's paper, Growth in a Time of Debt, would have been cited this morning — if it hadn't been shown to include Excel spreadsheet errors and selective user of data.

The Harvard pair insist that the report still shows that growth falls sharply when debt rises above 90%.

(incidentally, Eurostat's debt figures show 'consolidated gross debt', while Britain's Office for Budget Responsibility favours 'public sector net debt', which was 75.9% for the UK in the last financial year).

Updated at 11.32am BST

10.59am BST

Debt/GDP table

And here's the key details of today's government debt figures from Eurostat (see 10.40am onwards).

Government debt, as a percentage of GDP, 2012

Germany: 81.9%

France: 90.2%

Britain: 90.0%

Spain: 84.2%

Italy: 127.0%

Greece: 156.9%

Portugal: 123.6%

Ireland: 117.6%

Cyprus: 85.8%

Slovenia: 54.1%

Euro area: 90.6%

EU27 85.3%

Updated at 11.04am BST

10.47am BST

Germany tops the deficit pile

Germany outshone the rest of Europe by posting a budget surplus, of 0.2%.

Annual surpluses/deficits for 2012, via Eurostat

Germany: +0.2%

France: -4.8%

Britain: -6.3%

Spain: -10.6%

Italy: -3.0%

Greece: -10.0%

Portugal: -6.4%

Ireland: -7.6%

Cyprus: -6.3%

Slovenia: -4.0%

Euro area: -3.7%

European Union: -4.0%

You can download the full details here.

10.40am BST

Eurozone debt hits 90% of GDP

The Eurozone's government debt pile has risen to 90% of GDP, according to new data from Eurostat this morning which showed the region's annual deficit had fallen.

Eurostat has calculated that eurozone members' collective debt reached €8.6 trilion in 2012, when its combined economic output was nearly €9.5 trillion.

The total eurozone deficit fell to 3.7%, from 4.2% a year ago. Brussels will see that as proof that tough fiscal consolidation programmes are finally bearing fruit.

But the data shows stark difference across the region, and the wider EU. Five eurozone countries have deficit levels above 6% of GDP, a position shared with the UK.

And seventeen members of the European Union missed the target of a deficit below 3% of output (with Spain the worst, at 10.6%)

As Eurostat put it:

In all, thirteen Member States recorded an improvement in their government balance relative to GDP in 2012 compared with 2011, twelve a worsening and two remained stable.

Updated at 11.46am BST

10.15am BST

Italian stock market keeps climbing

ItalianRome traders really are feeling upbeat today – the FTSE MIB index is now up 2.15% at 16100 points.

(The Italian stock market is, of course, in Milan not Rome as I wrote originally. Apologies)

Updated at 1.21pm BST

10.13am BST

Key event

Here's one for the macro economists in the room – America is to recalculate decades-worth of historical economic data, to include factors such as research-and-development spending.

The move by the Bureau of Economic Analysis will also see 'intangible items' such as film royalties added to US GDP this summer. According to the Financial Times, it will make the US economy 3% larger.

The FT explains:

Billions of dollars of intangible assets will enter the gross domestic product of the world’s largest economy in a revision aimed at capturing the changing nature of US output…..

At present, R&D counts as a cost of doing business, so the final output of Apple iPads is included in GDP but the research done to create them is not. R&D will now count as an investment, adding a bit more than 2 per cent to the measured size of the economy.

Here's the full story: Data shift to lift US economy 3%

Despite the extent of the revision, the BEA reckons we won't see "large changes" in economic cycles or underlying trends. But it should give a different picture of the world's largest economy.

As the FT explains:

GDP will soar in small states that host a lot of military R&D, but barely change in others, widening measured income gaps across the US. R&D is expected to boost the GDP of New Mexico by 10 per cent and Maryland by 6 per cent while Louisiana will see an increase of just 0.6 per cent.

Creative works are expected to add a further 0.5 per cent to the overall size of the US economy. Around one-third of that will come from movies, one-third from TV programmes, and one-third from books, music and theatre.

9.30am BST

In the markets…

Most of the major European stock markets are up this morning, on relief over the re-election of Italy's president (see 8.29am) and the Nikkei's rally overnight (see 9.08am).

Italian FTSE MIB: up 274 points at 16035. +1.7%

FTSE 100: up 30 points at 6316, + 0.5%

German DAX: up 24 points at 7473, + 0.2%

French CAC: down 1 point at 3650, -0.04%

Spanish IBEX: up 42 points at 7957, +0.5%

Mike van Dulken, head of research at Accendo Markets, reckons investors are more bullish about upcoming company results:

Friday’s rebound has continued after the G20 refrained from criticising the Bank of Japan, and earnings optimism rises.

9.27am BST

This graph (via IG's early morning note) shows the correlation between Japan's Nikkei index and the yen/$ over the last year:

Nikkei vs Yen
Photograph: Bloomberg

9.08am BST

Sliding yen drives Nikkei higher

The Japanese stock market hit its highest level in almost five years today, after Japan avoided an international rebuke over its new stimulus and monetary easing programme.

The Nikkei ended 1.89% higher at 13,568 points, and the Japanese yen inched closer to the symbolic ¥100 mark, hitting ¥99.88.

Last week's G20 meeting ended with world finance ministers pledging to be "mindful" of the dangers of extended monetary stimulus, but made no specific reference to Japan.

Traders see it as a green light for the yen to keep falling, especially as Bank of Japan governor Haruhiko Kuroda told parliament this morning that other countries understood Tokyo's desire to revive its economy (Reuters has more details here).

Updated at 9.08am BST

8.50am BST

Five Star Movement protests at Napolitano re-election

Leader of the 5 Star Movement Beppe Grillo speaks during a press conference in Rome, Sunday, April 21, 2013.
Beppe Grillo speaks during a press conference in Rome, Sunday, April 21, 2013. Photograph: Mauro Scrobogna/AP

Beppe Grillo, the head of the radical Five Star Movement, has blasted Giorgio Napolitano's re-election as "a cunning little institutional coup" by Italy's established parties.

Grillo told a press conference yesterday that:

They have stolen a year of time. I don't think we can accept this.

Napolitano could now dissolve parliament and call a snap election (a power not available to a president at the end of his term). That gives him more leverage over the various parties to force them to form a government.

The prospect of a PD-PDL alliance brought many Five Star supporters onto the streets on Saturday night:

Five-Star Movement's leader Beppe Grillo on the roof of a car in Rome, Italy, 21 April 2013.
Five-Star Movement’s leader Beppe Grillo on the roof of a car in Rome yesterday. Photograph: GUIDO MONTANI/EPA
Activists of anti-establishment 5 Star Movement gather to stage a protest in Rome, Sunday, April 21, 2013.
Activists of anti-establishment 5 Star Movement gather to stage a protest in Rome, Sunday, April 21, 2013. Photograph: Gregorio Borgia/AP

8.29am BST

Italian bond yields hit record lows

Lawmakers and senators applaud after Giorgio Napolitano was elected new Italian head of state at the Lower Chamber on April 20, 2013 in Rome, Italy.
Lawmakers and senators applaud after Giorgio Napolitano was elected new Italian head of state at the Lower Chamber, on April 20, 2013. Photograph: Marco Ravagli/Barcroft Media

Good morning, and welcome to our rolling coverage of the eurozone crisis and other key event across the world economy.

There is relief in the financial markets this morning after the deadlock over Italy's next president was finally broken over the weekend.

Italian borrowing costs have fallen sharply, and shares are rallying across Europe.

After four failed votes, and with the centre-left Democratic Party (PD) on its knees, Georgio Napolitano was re-elected as president for an unprecented second term.

The 87-year old strolled to victory, with broad support from both PD and Silvio Berlusconi's People of Freedom (PDL) party. That could pave the way to a new government — Italy has already been trapped in deadlock for two months since February's general election.

Optimism that Italy could be inching fowards has driven down its borrowing costs this morning as traders piled into its bonds.

Here's the details:

The yield (or interest rate) on Italian two-year debt hit a record low of 1.267% in early trading.

And the yield on ten-year sovereign debt — the benchmark for a country's ability to borrow – also rose in value, pushing down the yield to 4.1% (from 4.22% last night). Far from the 7%-plus yields that forced Berlusconi out of office in November 2011.

And the Italian main share index, the FTSE MIB, has jumped bny 1.6% — up 255 points at 16,017.

Italy's problems are hardly over. The centre-left PD party, for example, is in turmoil – with leader Pier Luigi Bersani resigning over the weekend after both his favoured candidates for the presidency were rejected. But perhaps a corner has been turned….

As usual, I'll be covering all the latest developments through the day….

Updated at 8.30am BST

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Whether economy has contracted for second quarter in row may be a trivial detail that distracts from bigger, more dismal picture. Forecasters are split over whether the UK economy managed to grow in the first quarter of this year or contracted again…


Powered by Guardian.co.ukThis article titled “Will Britain slide into a triple-dip recession?” was written by Katie Allen, for theguardian.com on Monday 22nd April 2013 11.52 UTC

The wait to find out if the UK slipped into a triple-dip recession is over this week, with official GDP data out on Thursday. Forecasters are split over whether the UK economy managed to eke out some growth in the first quarter of this year or contracted again.

The consensus forecast in a Reuters poll is for a tiny 0.1% quarter-on-quarter uptick. But predictions range from a 0.2% drop in GDP to growth of 0.3%.

The Office for National Statistics (ONS) said the economy slipped by 0.3% in the fourth quarter. Thursday will be statisticians' first take of three for the first quarter and economists caution that the numbers, as well as data for previous quarters, could well be revised either up or down.

But if the figures do show two successive quarters of contraction from the beginning of October to the end of March it will mark a triple-dip recession – unprecedented in living memory.

Still, many economists also warn that whether the UK officially slipped into a triple-dip or not is a trivial detail that distracts from the bigger picture of an economy facing headwinds from squeezed consumers, an austerity drive and struggling industry.

Here is a roundup of views ahead of Thursday's 9.30am figures.

Brian Hilliard, Société Générale

The first estimate of GDP is an output measure on two months' hard data for industrial production, construction output and services output available to the ONS together with forecasts for the third month. However, only one month's services data is published before the GDP release. That makes it rather difficult to make a sensible forecast, but here goes! Based on reasonable assumptions for March, Q1 growth in industrial production should be between 0% and 0.1% quarter-on-quarter. Construction output should fall by between 3% and 6% and services should rise by about 0.2% quarter-on-quarter. The weather will have been a dampening factor in construction output and unfortunately that weakness is likely to outweigh the growth in services. The result should be a fall in GDP of about 0.1% quarter-on-quarter. This will inevitably spawn "triple dip" headlines. The real story is modest underlying growth but not high enough to reduce the output gap.

Nick Bate, Bank of America Merrill Lynch

We think the preliminary estimate of Q1 GDP may show zero growth over the quarter. Indeed, we think the balance of risks may be skewed a little to the downside … Monthly data available suggests that output in both the industrial and services sectors may have risen a little over the quarter, but another notable fall in construction output may have knocked around 0.2 percentage points off GDP growth.

Vicky Redwood, Capital Economics

It is questionable whether it should be considered a "true" triple-dip … The 0.3% quarterly drop in real GDP in the fourth quarter (Q4) can probably be wholly accounted for by the reversal of the Olympics boost which supported output in the third quarter. Without the Olympics effect, output would probably have avoided a contraction. In any case, any triple dip might well be revised away in the future. The double dip between Q4 2011 and Q2 2012 was initially estimated to consist of three quarterly contractions in GDP of 0.2%, 0.2% and 0.7%. But the two 0.2% contractions are now estimated to be 0.1% drops. So it is already being called the double dip that almost didn't happen.

Nonetheless, we should not let the somewhat meaningless debate about the triple dip distract from the big picture – that this recovery is still depressingly dismal. To rub salt into the wound, the US Q1 GDP figures also released this week are set to show growth rising by 3.2% annualised (a quarterly rise of about 0.8%). This will leave the divergence between the two economies looking even more striking.

Howard Archer, IHS Global Insight

In reality, it makes very little difference whether the economy expanded modestly in the first quarter, contracted marginally or was flat. However, it would be good for psychological/confidence reasons if the economy could dodge contraction in the first quarter and, therefore, avoid nasty and potentially damaging headlines about "triple-dip recession".

We put the odds of GDP contraction in the first quarter (and hence a triple-dip recession) at around 30%. So we reckon there is a 70% chance that the economy was either flat or grew marginally.

We suspect that expansion in the dominant service sector was strong enough to allow the economy to eke out marginal GDP growth of 0.1 to 0.2% quarter-on-quarter in the first quarter. This would result in year-on-year GDP growth of 0.4% year-on-year. Admittedly, it looks like there was substantial contraction in construction output in the first quarter, but the sector only accounts for 6.8% of GDP, while the services sector accounts for 77%. Meanwhile, industrial production was likely essentially flat in the first quarter, given that there was a marked rebound in output in February from January's sharp drop.

Ruth Lea, economic adviser to Arbuthnot Banking Group

On the basis of ONS data so far available and survey material, GDP for 2013 Q1 could be a tad positive, thus avoiding a triple dip. But whether or not a triple dip is avoided, economic performance is weak. The latest labour market data showed an increase in unemployment, the February trade data deteriorated and bank lending to the business sector fell in February. The IMF downgraded its forecasts for the UK last week, with its chief economist, Olivier Blanchard, saying the chancellor should reconsider his "strict" austerity programme, and Fitch's downgraded Britain's triple-A rating to AA+.

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