May 14 2013

EU is the new ‘Sick Man of Europe’, claims Pew Research Centre. French lose faith in integration and Hollande. EU ministers split over bank bail-ins. German ZEW investor sentiment index barely improves with a reading of 36.4 from 36.3…


Powered by article titled “EU agrees to protect small savers, but divided over tax evasion – as it happened” was written by Graeme Wearden, for on Tuesday 14th May 2013 18.04 UTC

6.52pm BST

Closing summary

With the Ecofin meeting over, that's all from me today. Here's a closing summary.

• EU finance ministers have agreed that upcoming new rules on how to resolve a failed bank should include guaranteed protection for savers with under €100,000.

The decision, taken at today's Ecofin meeting, is meant to reassure European bank customers that their money is safe, following the Cypriot bailout farrago, under the upcoming bank recovery and resolution directive that will outline how failing banks are handled.

See 6.09pm for the story, and 5.03pm onwards for highlights of tonight's press conference.

But there was only limited progress on other issues in Brussels. Ministers failed to reach a full agreement on how other creditors would be 'bailed in' under the new bank restructuring rules (see 12.25pm onwards for the key quotes) and the WSJ's early take is here.

 • Hopes that ministers would agree a new directive to clamp down on tax evasion were also dashed. Austria and Luxembourg refused to sign up for the directive, to the clear annoyance of the EU tax commissioner (see 5.16pm).

Instead, the EC has agreed a mandate for fresh negotiations with the likes of Monaco and San Marino (see 4.50pm for details)

The big news of the morning was a new survey which found a sharp drop in support for the European Union across Europe. Pew said rising unhappiness and anger over the debt crisis was turning the EU into 'the sick man of Europe' (see 8.17am for full details)

Pew findings
One of Pew’s findings.

Ian Traynor, our Europe editor, said the survey showed the relationship between Germany and France is deteriorating (see 11.30am)

Greece's credit rating was raised by Fitch. It which said the chances of the country leaving the eurozone had receded (see 6.02pm)

And the latest ZEW survey of economic sentiment in Germany was a disappointment. (see 10.23am onwards).

Thanks, as ever, for reading and for the many excellent comments. See you in the morning… Goodnight!

Austrian Federal Finance Minister Maria Fekter (L) takes part in a joint press conference alongside Luxembourg Finance Minister Luc Frieden,  following an Economic and Fiancial Affairs meeting on May 14, 2013, at the EU Headquarters in Brussels.
Austrian finance minister Maria Fekter and Luxembourg’s Luc Frieden. Photograph: GEORGES GOBET/AFP/Getty Images

Updated at 7.04pm BST

6.29pm BST

It was another bullish day in Europe's stock markets, with the FTSE 100 finishing up almost 1% at its highest level since October 2007 up 54 points at 6686.

As my colleague Nick Fletcher points out, it's the ninth daily rise in a row, and the best run since July 2009.

A takeover bid for Severn Trent (up 13% today) helped push the Footsie higher. Another factor was the sight of a bullish hedge fund manager, David Tepper, on CNBC today:

David Madden, market analyst at IG, explains:

David Tepper may not be the sole reason for this rally, but investors seem to have responded positively to the sight of a major hedge-fund manager making positive noises about the US economy

6.09pm BST

Here's Reuters take on the EU's decision to protect small savers, but the lack of concrete agreement on other issues (as we've covered through the day).

Depositors keeping less than 100,000 euros in a bank that is being closed down will get all their money back, European Union finance ministers agreed on Tuesday, and most supported the idea that bigger depositors would get privileged status.

"There was general agreement that deposits below 100,000 euros in any resolution will be sacrosanct," Irish Finance Minister Michael Noonan, who chaired the talks, told a news conference.

The ministers were discussing rules of closing down banks and the hierarchy of losses imposed on the banks' owners and creditors in such an event.

EU Internal Market Commissioner Michel Barnier said that most ministers supported the view that large depositors above 100,000 euros should enjoy a privileged status, and be the last to lose any funds, after senior bondholders.

The ministers are to conclude the discussions in June.

6.02pm BST

Greece upgraded – here’s why

Back to Fitch's decision this evening to upgrade Greece's credit rating to B- / stable.

The agency said it took the move after concluding that Athens had made real progress in addressing its debt crisis:

The Greek economy is rebalancing: clear progress has been made towards eliminating twin fiscal and current account deficits and 'internal devaluation' has at last begun to take hold.

The price has been high in terms of lost output and rising unemployment and the capacity for recovery is still in doubt.

Nonetheless, sovereign debt relief and an easing of fiscal targets have lifted Central Bank measures of economic sentiment to a three-year high and the risk of eurozone exit has receded.

The full statement is online here.

5.44pm BST

Ecofin press conference ends, May 14 2013
That’s all, folks

End of press conference…

5.37pm BST

Michael Noonan was also forced to defend Ireland's tax system, including its low corporation tax rates.

It's not 'aggressive' he insists, merely transparent*. Noonan adds that corporation tax levels are being lowered in other countries too, such as Britain.

* – doesn't that mean we can see right through them, as Pratchett once put it?…

Updated at 5.37pm BST

5.33pm BST

So, small depositors are safe, but we're not hearing a lot about those with more than €100,000 in a bank that fails.

That's because ministers couldn't reached a deal about creditor protection limits. And this could cause jitters in the European banking sector, if corporations, organisations and wealthier individuals fear that they are near the front of the line when the bail-in bucket comes round….

Updated at 5.33pm BST

5.28pm BST

Noonan: on the Cyprus mistakes…

The next question points out that the original Cyprus bailout managed to impose losses on small savers by declaring a tax, rather than a bail-in.

Why can't it happen again?

Noonan replies that the Cyprus situation was unusual, and that everyone now realises that the levy was a very bad idea.

The public reaction to what happened in Cyprus has nailed it down "harder than ever" that deposits under €100,000 are sacrosanct, he adds.

Updated at 5.45pm BST

5.26pm BST

Small savers definitely protected

So that's a firm commitment from the EU ministers that small savers, with up to €100,000 in the bank, will be absolutely protected in the event of a bank failure.

5.23pm BST

Question Time

The Q&A session begins, and the press pack are chasing Noonan over his comments that 'almost everyone' in the Ecofin meeting believes guarenteeing savings below €100,000 are sacrosant.

Noonan explains that some finance ministers pointed out that their juristictions have a limit below €100,000 [he doesn't say who].

But the broad agreement, he insists, is that such small savers' protection is sacrosant.

5.21pm BST

Michel Barnier explains the details of today's discussions on banking resolution mechanisms:

Updated at 5.21pm BST

5.19pm BST

Just in: Fitch has upgraded Greece's credit rating to 'B-', with a stable outlook.

5.16pm BST

Tax commissioner: high expections weren’t met today

EU tax commissioner Algirdas Semeta is being politely scathing about Austria and Luxembourg after they blocked the Ecofin from adopting the new tax evasion directive today.

Semeta says that expectations were high going into the meeting:

I cannot say that high expectations were fully met…..

and he added:

It saw with great disappointment that I saw a deal on the new savings directive blocked today…..

Semeta does hail the new mangate on tax deals as a step forwards, but hopes that EU leaders can do better when they meet nextr week.

In the battle of tax evasion, what we achieved today was undoubedly a step forward.

Let's hope that what our leaders agree next week is more like a giant leap.

5.07pm BST

Noonan: no tax evasion deal today

Noonan confirms that EU ministers couldn't reach agreement on the new tax evasion directive, but points to the agreement on a new mandate on negotiations with other countries (see 4.50pm)

Updated at 5.07pm BST

5.05pm BST

Curious… Noonan tells the press conference that "almost everyone" agreed that deposits under €100k should be protected under the new bank resolution mechanisms.

Who doesn't?…

He adds that there was general agreement for a broad scope for a bail-in procedure with "a limited number of exclusions".

(However, as we covered at lunchtime, no agreement on the depositor preference details)

5.03pm BST

Ecofin press conference begins

And we're off! Michael Noonan begins by saying that Ecofin made 'concrete progress' on three issues — bank resolution mechanisms, the EU budget, and tax evasion.

(remember, it's being streamed here)

4.50pm BST

European Council: new mandate for tax evasion talks

The European Council has issued a statement, confirming that EU ministers agreed to give the commission a mandate to negotiate amendments to the EU's agreements with Switzerland, Liechtenstein, Monaco, Andorra and San Marino on the taxation of savings income (tax evasion, basically)

It's online here: Savings taxation: Council go-ahead to negotiate with Switzerland, Liechtenstein, Monaco, Andorra and San Marino.

Here's a flavour:

The decision represents an important step in the EU's efforts to clamp down on tax evasion and tax fraud.

The aim is to ensure that the five countries continue to apply measures that are equivalent to the EU's directive on the taxation of savings income, which is being updated. The Commission will negotiate on the basis of a draft directive amending the savings directive (2003/48/EC), aimed at improving its effectiveness and closing certain loopholes so as to prevent its circumvention.

Updated at 4.50pm BST

4.44pm BST

You can follow the Ecofin press conference live, here. (not actually underway yet…)

4.42pm BST

The Ecofin press conference is about to start. It's 20 minutes earlier than expected, too. A rarity for the EU….

4.34pm BST

WSJ: Ministers divided over bank reforms

The Wall Street Journal has summed up the lack of progress over bank resolution mechanisms today (as covered in the blog from 12.11pm onwards)

EU Ministers Split on Protection for Depositors (paywall).

Here's a flavour:

German Finance Minister Wolfgang Schäuble, along with his Dutch and Danish counterparts, backed a tough approach in which uninsured depositors would contribute on the same level as senior bondholders when problems arose.

While that would help limit the losses borne by other classes of creditors, some worry it could jeopardize financial stability and scare off savers.

At the other end of the spectrum, France's Finance Minister Pierre Moscovici said uninsured depositors should be excluded from sharing losses as a general rule, with a resolution authority able to question that in individual cases.

Other ministers backed a mixed approach under which uninsured depositors would be tapped, but only after all other creditors had been bailed in. Such "depositor preference" is supported by the European Commission and European Central Bank, and is already status quo in countries such as the U.S.

Updated at 4.35pm BST

4.28pm BST

Back in Brussels the finance ministers of Luxembourg and Austria have been holding their own press conference, to explain why they didn't support the EU directive on tax evasion.

Luc Frieden defended the countries' line, saying they are committed to the issue:

Here's some other highlights:

Oh, and it's still being streamed here

Updated at 4.37pm BST

4.20pm BST

RadioBubble, the Greek citizens media group, has written up yesterday's marches in support of Greek teachers who are being 'mobilised' by Greek authorities to prevent them holding strike action.

Update on the teachers' strike and civil mobilization – 14 May 2013

It reports that Greek police have been distributing mobilization orders widely today, which are designed to stop teachers holding industrial action at the start of the Greek exam season.

There's also a photo of a mobilization order which shows that the measure is "open-ended":

In other words, the teachers' right to strike has been revoked until further notice.

4.13pm BST

Word from Brussels that the Eurogroup meeting is almost over…

Updated at 4.15pm BST

4.11pm BST

Britain's permanent representative to the EU confirms that EU ministers failed to reach an agreement on the Savings tax directive, but did agree a mandate for reaching agreemetn with third-parties:

4.07pm BST

Head-up: eurozone GDP data for the first three months of 2013 will be released tomorrow morning. Economists expect another quarter of contraction, extending the eurozone recession by another three months.

But the decline is likely to be slower than in the last three months of 2012.

My colleague Jo Moulds has the details: Eurozone recession set to ease but recovery elusive

3.14pm BST

Disappointment as ministers fail to agree tax evasion directive

Algirdas Semeta, Commissioner for Taxation, says he is disappointed that finance ministers didn't reach agreement on the tax evasion directive today (thanks to obstruction from certain members).

The issue will be considered at an EU summit next week (on May 22nd), he adds.

Wolfgang Schauble at Ecofin, May 14 2013
Wolfgang Schäuble (centre) and Maria Fekter (right).

But Germany's Wolfgang Schäuble is more positive, saying it would be wrong to think there is 'frustration' at the Eurogroup today. He points out that leaders have reached "unanimous agreement" on a mandate for negotiations with Switzerland over tax evasion.

Updated at 3.20pm BST

3.01pm BST

Maria Fekter appears to be effectively blocking the EU's attempt to bring in new rules to clamp down on tax evasion.

She's saying Austria can't sign up to the new Savings Directive until Europe has hammered out deals with other parts of the world for the exchange of information.

However, those countries (such as Switzerland) are resisting those agreements until Europe has agreed its own tougher rules inhouse…. by approving the Directive.

2.56pm BST

2.56pm BST

Fekter adds that Austria sees the Directive "a little more positively" than in the past….

2.52pm BST

Austria: We won’t back new Savings Directive today

The question today is whether finance ministers back an amended EU Savings Directive, or not.

Maria Fekter, Austria's finance minister, says that the existing directive has never worked because its scope is too limited.

So she is minded to back the new directive, but "not today" as there is insufficient harmonisation with the rest of the world.

I accept the text, but not adopted today, because we then have the situation that we in Europe are going further [than other countries].

2.47pm BST

Key event

EU finance ministers are discussing the issue of tax evasion, and whether to share more information on savings accounts (a big issue for George Osborne today – see 11.18am).

2.38pm BST

Ecofin meeting, May 14th 2013
Today’s Ecofin meeting

The Ecofin meeting is continuing, and being streamed here. No major dramas yet…..

2.37pm BST

Back in Brussels, finance ministers have voted through an amended 2013 budget – despite George Osborne asking for extra savings to be made.

That's via Jürgen Baetz, who is covering the Ecofin meeting for AP.

2.18pm BST

Portugal rules out gold sale

Portugal has no intention selling its gold reserves to fund any future aid package, the head of the country's central bank has pledged.

Bank of Portugal Governor Carlos Costa insisted today that Portugal was not falling off track with its bailout programme. Asked about the possibility of a gold sale in future, Costa replied:

It is not applicable in Portugal.

Portugal holds 382.5 tonnes of gold, according to recent estimates. That's worth around bn (€14.6bn) at current prices — around 25 times more than Cyprus's reserves.

Costa also ruled out revising his economic forecasts, even though the bank expects a 1.1% increase in GDP in 2014, while the Lisbon government only expects 0.6% growth.

1.49pm BST

British Land to quit continental Europe

The economic crisis which is hitting faith in the EU (see opening post onwards) has also thumped British Land.

The company announced today that the value of its European portfolio has fallen by 17%, mainly due to the biting recession in southern Europe.

British Land now plans to dispose of its continental businesses.

My colleague Nick Fletcher has the full story here: British Land plans European exit as economic crisis hits property values

Updated at 1.49pm BST

1.25pm BST

City analyst Dan Davies jokes that Eurozone finance minister haven't really grasped the point that "depositor preference" means the order at which creditors are bailed into a rescue:

1.09pm BST

Ecofin: early reaction

The lack of clear agreement between finance ministers has alarmed author Lawrence McDonald, who points out that Europe has had years to reach a deal:

The Cyprus bailout has put the issue of bank failures in the forefront of many people's minds, especially after its government briefly planned to tax all savers.

Eurogroup ministers now all insist that 'insured depositors' are safe. But those guarantees are only as strong as the government that stands behind them, as Sony Kapoor of the ReDefine thinktank points out:

1.01pm BST

Barnier: Not convinced by French plan

European commissioner Michel Barnier isn't convinced by Pierre Moscovici's suggestion that Europe should not lay out a clear "depositor preference"

Moscovici is pushing for 'flexibility' over who picks up the bill, rather than a fixed order for which creditors suffer losses when a bank is in trouble.

Barnier didn't mince his words, either, telling the room (in French) that:

I have some difficulty, to be frank with you, with Pierre's proposal.

(quote via the FT's Peter Spiegel)

Ireland's Michael Noonan, who is chairing the meeting, summed up the meeting by claiming that finance ministers were homing in on an agreement.

But the watching journalists aren't sure that's quite right:

(our 12.11pm post summed up the differing views too)

Updated at 1.10pm BST

12.25pm BST

Osborne: calls for ‘flexibility with restraint’

George Osborne at Ecofin, May 14th 2013
George Osborne today.

Now George Osborne speaks, saying that "flexibility with restraint" is the key to succesful, workable, rules for failing European banks.

The UK chancellor says it is essential that small savers (with up to €100,000) are completely protected under rules for handling a bank that needs to be recapitalised, or wound down.

Osborne points out that the decision of whether to put senior bondholders ahead of uninsured depositors, or behind them, is tricky. A "clear creditor hierarchy" can be evaded, he explains.

Here's Osborne's thinking:

If bondholders face the first hit, then corporations could get round the rules by moving money from bonds into bank deposits. But on the other hand, protecting all deposits could be controversial in a country such as Cyprus where many were held by businessmen from outside the eurozone. Should they really be protected ahead of European banks?

Osborne also backed an idea mentioned by Dutch finance minister Jeroen DIjsselbloem, of a 'bailinable buffer' in case banks hit trouble. The UK, though, can't afford to set its own fund up, though, given the size of its banking sector.

And before anyone suggested a new levy, Osborne added that Britain has "the highest bank taxes of any country around this table.

Updated at 12.29pm BST

12.11pm BST

EU ministers split over bank resolution powers

EU finance ministers are still at odds over how to resolve failing banks.

The public session (streamed live here) has heard a range of views over bank resolution mechanisms. The debate revolves around how creditors are 'bailed in' to fund future rescue deals, and in what order of priority.

Jörg Asmussen of the ECB said was "essential" that ministers reach agreement quickly, so that bank resolution can be introduced in 2014.

we need to establish a clear pecking order for the bail-in.

Sweden's Anders Borg warned that introducing rules that would 'bail-in' large creditors could be destabilising for EU countries who are not in the euro. They cannot rely on the ECB to step in, he warned.

Sweden's finance minister, Anders Borg
Sweden’s finance minister, Anders Borg, today.

Spain's Luis De Guindos was also concerned about the implication of exposing depositors with more than €100,000 in the bank to losses. That could easily prompt a bank run, even among smaller savers, he warned:

France's Pierre Moscovici called for flexibility, saying a 'discretionally approach' is best when deciding who should take the hit.

But Koen Geens of Belgium argued in favour of clear rules:

As did Germany and Denmark:

Updated at 2.14pm BST

11.51am BST

Another day, another interest rate cut. Serbia has slashed borrowing costs by 50 basis points, from 11.75% to 11.25%. Analysts had only expected a quarter-point cut.

It's the first cut in a year, and follows a stream of similar rate reductions in the past fortnight (eg the ECB, Australia, Poland, Israel…)

11.30am BST

Ian Traynor: Public mood at odds with Europe’s crisis response

Our Europe editor, Ian Traynor, has dubbed the Pew's report into Europe "a catalogue of unremitting gloom (unless you're a German)"

The report (see 8.17am onwards for details) is the latest sign that the Franco-German alliance at the heart of Europe is wobbling, he says.

Ian writes:

It is striking how the policy responses of EU leaders to the currency crisis are at such odds with public opinion, as centrifugal political action clashes with centripetal national moods.

The crisis management of the past three years has essentially seen Berlin, Brussels, and others resort to technocratic fixes in an incremental process of pooling economic and fiscal policy powers in the eurozone.

Outside of Germany, however, public support for surrendering such powers from the national level to Brussels, as is happening, is declining rapidly, generating an ever widening "democratic deficit" in the EU that the leaders regularly bemoan but have done nothing to address.

Here's Ian's full analysis: Eurozone crisis sees Franco-German axis crumbling

11.18am BST

George Osborne will push fellow finance ministers at today's Ecofin to help tackle tax evasion by signing up for a new EU directive on savings.

Our political editor, Patrick Wintour, explains that the directive will mean countries share more tax information, making it harder to conceal taxable assets.

Osborne, in advance of a heads of EU government summit later this month devoted to tax transparency, will urge his fellow EU ministers to sign off the directive, which has been delayed by almost a decade.

 Writing to other EU finance ministers ahead of Tuesday's meeting, he says: "Unless Europe can show it can agree on this existing proposal, our commitment to a new, stronger standard will not be credible. It is a test of our seriousness, and the world is watching us."

Here's the full story: George Osborne urges EU finance ministers to sign tax directive

Updated at 11.19am BST

11.07am BST

The public section of the Ecofin meeting is being streamed here

Updated at 11.07am BST

11.03am BST

Photos: EU finance ministers meet in Brussels

Over in Brussels, finance ministers from across the EU have gathered for today's Ecofin event. On the agenda, the push towards banking union and the details of the 2013 EU budget.

Here's a few photos of the pre-meeting banter:

French minister of  Economy, Finances and Foreign Trade  Pierre Moscovici and British Chancellor of the Exchequer  George Osborne  (LtR) talk prior to an Economic and Financial Affairs meeting on May 14, 2013 at the EU Headquarters in Brussels
French finance minister Pierre Moscovici chatting to British chancellor George Osborne. Photograph: GEORGES GOBET/AFP/Getty Images
French Finance Minister Pierre Moscovici, center, talks with Swedish Finance Minister Anders Borg, left, and British Chancellor of the Exchequer George Osborne, during the EU finance ministers meeting, at the European Council building in Brussels, Tuesday, May 14, 2013.
 Swedish Finance Minister Anders Borg, left, with Pierre Moscovici and George Osborne. Photograph: Yves Logghe/AP
Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem (C) at the start of a finance ministers meeting at the EU headquarters in Brussels, Belgium, 14 May 2013.
Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem at the start of a finance ministers meeting. Photograph: OLIVIER HOSLET/EPA
German Finance Minister Wolfgang Schaeuble and Finnish Finance Minister Jutta Urpilainen talk in front of (from L, background) French minister of  Economy, Finances and Foreign Trade Pierre Moscovici and European Investment Bank President Werner Hoyer prior to an Economic and Financial Affairs meeting on May 14, 2013 at the EU Headquarters in Brussels.
German Finance Minister Wolfgang Schaeuble and Finnish Finance Minister Jutta Urpilainen (both foreground). Photograph: GEORGES GOBET/AFP/Getty Images

The agenda for the meeting is online here:

ECONOMIC and FINANCIAL AFFAIRS Council meeting, Brussels, 14 May 2013

In summary (all times approximate)

• Banking Recovery and Resolution – from 10am BST/11am CEST

• Any other business – from noon BST/1pm CEST

• Draft Amending Budget No 2 to the General Budget 2013 – from 1.30pm BST/2.30pm CEST

• Savings taxation (relating to how savings income is taxed, and potential tax evasion) – from 2.15pm BST/3.15pm CEST

• Press conference: 5pm BST/6pm CEST

Updated at 2.44pm BST

10.46am BST

ZEW: What the analysts say

The news that German investor confidence has barely improved (see 10.23am) has disappointed financial analysts.

They say it shows that the eurozone recession is grinding on, while Germany itself appears to be stabilising.

Here's a round-up of reaction, from the Reuters terminal:

Lothar Hessler of HSBC Trinkaus

We had expected a better result after industrial orders and output and exports all rose recently. Also the European Central Bank cut rates.

The data nevertheless point to a stabilisation of the German economy. It is growing again. But the euro zone is still in a recessionary phase. That in turn dampens the upswing here.

David Brown of New View Economics

Germany and the troubled Eurozone economies are poles apart in terms of where they are in the recovery cycle and Eurozone policymakers should not confuse them.

While Germany continues to pull away, the rest of the Eurozone still needs a lot more stimulus efforts from the ECB and government fiscal policies before the Euro area is off the recession rocks.

Thilo Heidrich of Postbank

Basically, the ZEW index remained below expectations. Above all, a strong stock exchange performance and good industrial data from Germany had led people to expect something better.

On the other hand, the data points to a continued expectation among participants of economic stabilisation or a slight recovery."

And Mike van Dulken of Accendo Markets points out that ZEW took the shine of this morning's decent industrial production data (see 10.12am)

Updated at 10.47am BST

10.23am BST

ZEW survey of German sentiment shows little improvement

From Pew to ZEW…and the closely watched survey of economic sentiment has shown that German analysts and investors are still alarmed by the troubles in the eurozone.

The ZEW index inched higher to 36.4, from 36.3, dashing forecasts of a larger rise on the back of recent decent data.

A separate measure of current conditions dropped to 8.9 this month from 9.2 in April – suggesting the German economy is struggling to bounce back from its contraction at the end of 2012.

Clemens Fuest, president of the ZEW Institute, commented:

Despite mostly positive economic data for the German economy, the ZEW indicator remains at the level of the previous month.

This may be due to the still poor economic situation in the euro zone, that is also reflected by the recent ECB interest rate cut

Reaction to follow….

Updated at 10.23am BST

10.12am BST

Eurozone industrial output rose by 1% month-on-month in March, according to Eurostat.

That's twice as bit a rise as analysts had forecast, and an encouraging sign for Europe's manufacturing base (although the increase was mainly due to strong energy demand).

February's reading was revised down from 0.4% to 0.3%, so the sector is still 1.7% smaller than a year ago.

9.52am BST

Italian govenment debt hits record high

Italy's government debt has risen to a new alltime high of €2.035 trillion in March – the Bank of Italy reported.

9.32am BST

Pew's findings also chime with the latest Guardian/ICM poll, released this morning, which showed a surge in support for the eurosceptic Ukip party.

The poll found that the number of voters backing Ukip has doubled to 18%, while the three main parties all lost four percentage points.

Ths rising anti-European sentiment, both in the country and on its own backbenches, has forced the UK government to announce plans for a new draft bill introducing an in-out EU referendum.

Here's the full story: David Cameron offers olive branch on EU referendum as Ukip soars

9.18am BST

The agenda

Quick bit of housekeeping. Here's what's coming up in the eurozone

Ecofin finance ministers meeting in Brussels begins: 10am BST/11am CEST

Ecofin press conference: 5pm BST/6pm CEST (estimated!)

Spanish debt auction: morning

German ZEW survey of economic sentiment: 10am BST

ECB's Jörg Asmussen speaking in Berlin: 5pm BST.

(via RanSquawk)

9.08am BST

The 'national stereotypes' section of Pew's report gives an interesting insight into European attitudes:

Asked which EU member was 'most compassionate', people in each country surveyed picked themselves.

The French identified themselves as both the 'most arrogant' and 'least arrogant', while everyone decided that Germany was the most trustworthy, apart from the Greeks who felt they deserved the crown:

European stereotypes
Photograph: Pew Research Centre

(that's from the bottom of this page)

Updated at 9.08am BST

8.56am BST

Pew was particularly concerned about France, describing the eurozone's second-largest economy as "Dyspeptic", and drifting away from Germany.

No European country is becoming more dispirited and disillusioned faster than France. In just the past year, the public mood has soured dramatically across the board.

Economic woes are the main cause, with 91% of the French saying their economy is doing badly – up from 81% a year ago.

And two-thirds of those surveyed reckon president Francois Hollande is doing a poor job handling the challenges posed by the economic crisis. That's 24 percentage points worse that his predecessor, Nicolas Sarkozy.

Worryingly for Brussels, 77% said believed European economic integration has made things worse for France (+14), and 58% now have a bad impression of the European Union as an institution (+18).

France's economic mood, 2013
Photograph: Pew Research Centre

Updated at 8.56am BST

8.17am BST

Pew: European Union is The New Sick Man of Europe

Pew findings
Top-line findings from the Pew Institute’s report.

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

Public support for the European project has fallen and distrust between countries is growing, according to a new survey released overnight that shows the damage caused by the region's debt crisis over the last few years.

The well-respected Washington-based Pew Research Center warned that support for the EU has slid over the last 12 months, from 60% in 2012 to just 45% this year.

In a report titled "The New Sick Man of Europe: the European Union", Pew showed that backing for European integration tumbling in France.

The people of Europe are increasingly gloomy about economic conditions, disillusioned about their leaders, and losing faith in the whole idea of European Unity, the poll found.

Decline in support for EU
Photograph: Pew Research Center

As Pew put it:

The effort over the past half century to create a more united Europe is now the principal casualty of the euro crisis. The European project now stands in disrepute across much of Europe….

The prolonged economic crisis has created centrifugal forces that are pulling European public opinion apart, separating the French from the Germans and the Germans from everyone else.

The southern nations of Spain, Italy and Greece are becoming ever more estranged as evidenced by their frustration with Brussels, Berlin and the perceived unfairness of the economic system.

Pew surveyed over 7,600 people in March in eight countries – Germany, France, the UK, Italy, Spain, Poland, Greece and the Czech Republic.

It also found that Angela Merkel remains the most popular leader in Europe, by a wide margin. Not just at home — Merkel won majority approval for her handling of the European economic crisis in five of the eight nations surveyed.

Other leaders, though, are in the doghouse, Pew says:

Compounding their doubts about the Brussels-based European Union, Europeans are losing faith in the capacity of their own national leaders to cope with the economy’s woes. In most countries surveyed, fewer people today than a year ago think their national executive is doing a good job dealing with the euro crisis.

Support for EU leaders
Photograph: Pew Institute

The full report is here.

Pew's report comes as European finance ministers gather in Brussels today to discuss how to implement banking union across the eurozone. Perhaps they'lll find time to chat about these findings in the corridors…

I'll be tracking all the developments through the day, including more highlights of the Pew survey, and reaction to its findings.

Updated at 8.45am BST © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.


The Eurogroup concludes that the necessary elements are in place for Member States to finalize the procedures required for the approval of the next EFSF instalment, which amounts to €7.5 bn. ESM agrees €3bn for Cypriot bailout…


Powered by article titled “Eurozone crisis: Bailout payments for Cyprus and Greece agreed – as it happened” was written by Graeme Wearden, for on Monday 13th May 2013 18.20 UTC

9.14pm BST

Closing summary

Time to wrap up for the day.

To catch up on tonight's eurogroup press conference, see 7.36pm onwards for full highlights.

Here's a closing summary.

Greece and Cyprus are both receiving their next aid payments, in a move that removes the danger of either country running short of cash in the next few weeks.

After a meeting in Brussels this afternoon, the Eurogroup of finance ministers announced that Greece has done enough to quality for its next loans. €4.3bn will be handed over immediately, and the rest in June when a few outstanding issues have been addressed. (see 7.43pm for details)

Cyprus was awarded its first aid tranche under its bailout agreement earlier this afternoon, by the European Stability Mechanism. The Nicosia government gets €2bn immediately, and a further €1bn in June (see 3.30pm).

The Eurogroup also warned Slovenia that it must do more to reform its economy and strengthen its banks. (see 7.48pm)

In Greece… there were protests tonight over the government's attempts to stop a teachers strike. See 5.24pm onwards.

And grim construction data showed that the number of new building permits in Greece has almost halved, year-on-year. See 11.53am

The prime ministers of Spain and Portugal challenged Europe to agree banking union quickly, and called for more help to address their unemployment crises. See 5.58pm for a full report.

• Israel's central bank became the latest to cut interest rates, and also launched a programme to stop the shekel appreciating. See 1.50pm

A survey by Fitch found that a majority of investors believe financial markets are too calm, or too bullish, as the eurozone crisis has further to run. See 12.29pm

Italy held a succesful bond auction (see 11.31am onwards).

And another ECB policymaker hinted at negative interest rates for bank deposits (see 10.13am).

Thanks for reading, and for all the comments as ever. I'll be back tomorrow morning Goodnight! GW

Updated at 9.14pm BST

8.35pm BST

Not the most dramatic eurogroup meeting since the financial crisis struck…. and that's not a bad thing either.

8.27pm BST

It’s over

And that's the end of the eurogroup press conference.

Updated at 8.27pm BST

8.27pm BST

Asked about plans for eurozone banking reform, Jeroen Dijsselbloem repeats his goal of agreeing rules for bank recapitalisaion by the end of next month.

That would help pave the way to a single supervisory mechanism for the euro financial sector, from the summer of 2014.

8.24pm BST

Rehn: Greece could beat forecasts

A question on Greece, and the news today that the Troika's latest assessment shows that further measures may be needed to meet its targets in 2015 and 2016 (as covered at 2.25pm)

Rehn (again) says it is too early to say if additional measures needed, because Greek economic growth could be higher than expected.

OK, but since the financial crisis began Greece has consistently missed its forecasts to the downside….

Updated at 8.25pm BST

8.19pm BST

Olli Rehn at the Eurogroup, May 13 2013
Olli Rehn at tonight’s Eurogroup press conference.

On Portugal… Olli Rehn (who's doing the bulk of the talking tonight) says that its reform programme is "by and large" on track, and that political agreement has been reached on the seventh review of the Portuguese bailout program.

8.15pm BST

A Spanish journalist asks about the unemployment crisis raging in his country. Olli Rehn replies that the jobless crisis must be addressed, but puts part of the blame on "large and unsustainable macroeconomic balances" within the Spanish economy.

8.13pm BST

Rehn defends legality of banking union

Matina Stevis of the Wall Street Journal/Dow Jones asks about another key issue, the legality (or not) of introducing banking union and a single resolution scheme under the current EU treaties.

In reply, Jeroen Dijsselbloem admits that there are 'different opinions' over the important question of whether treaty change is needed. That shouldn't prevent the eurozone moving "far and as fast as we can", he adds.

And Olli Rehn says he's confident that all the elements of a banking union can be decided on the basis of the current treaty. But he then adds that work is continuing on the precise legal basis of a single resolution mechanism.

8.05pm BST

Rehn: We’d like to lift capital controls…

How long will Cyprus suffer capital controls?

Olli Rehn says that the eurozone would like to see the Cyprus government relax capital controls "for the point of view of economic recovery".

However, this could only happen when it was "safe, from the point of view of capital outflows".

UPDATE: To clarify, the capital controls are an issue for the Cyprus government, not the eurozone. Rehn's point is that the eurozone would like them lifted, but only when the moment is right

Klaus Regling of the ESM, who is also taking part in the press conference, denies that the Cyprus crisis has caused alarm across the eurozone. He points to a succesful Portuguese debt auction last week.

Updated at 8.38pm BST

7.58pm BST

Question time….

Asked about Slovenia's efforts to avoid a bailout, Olli Rehn says it's too early to say whether the country's reform programme is sufficient and credible.

On Greece, Rehn say the next 'review mission' will take place in the coming weeks. He also explains that Athens is expected to meet the remaining 'prior actions' this week, to ease the way for its €2.3bn aid payment in June.

Updated at 7.58pm BST

7.55pm BST

Now Olli Rehn, European Commissioner for monetary union, speaks — saying it's important the eurozone leaders work "intensively" to reach a solution on rules for bank recapitalisation by June.

Rehn also warned that Europe's banking sector remained a drag on its economy, as bad debts have not been recognised and cleaned-up – as happened in the US.

7.48pm BST

Slovenia also gets a rebuke, with Dijsselbloem saying the Eurogroup agreed that the Slovenian government must take swift action to reform its economy and restore trust in its banks.

Not sure that will exactly boster confidence in the Slovenian system at this time….

And nor is Lorcan Roche Kelly, chief Europe strategist at Trend Macrolytics:

Updated at 7.49pm BST

7.47pm BST

There's also a seperate statement on Cyprus – online here.

7.45pm BST

On Cyprus, Jeroen Dijsselbloem says that the Cypriot government has delivered on its bailout promises.

He welcomed the news today that the European Stability Mechanism has issued €2bn to Cyprus today (see 3.30pm), with another €1bn on the way.

Updated at 8.00pm BST

7.43pm BST

Eurogroup: Greece should get its next aid tranche

The Eurogroup has issued a statement on Greece – it's online here.

It confirms that Greece is ready to get €4.2bn of aid immediately, and a further €3.3bn €2.3bn once remaining measure have been taken (as Jeroen Dijsselbloem outlined at 7.40pm).

Here's the key statement:

The Eurogroup concludes that the necessary elements are in place for Member States to finalise the relevant national procedures required for the approval of the next EFSF instalment, which amounts to €7.5 bn.

The disbursement will take place in two sub-tranches. A first sub-tranche of €4.2 bn will be approved by the EWG and the EFSF Board of Directors in the following days, following the completion of the national procedures and the full implementation of the prior actions.

The disbursement of the second sub-tranche will be made in June 2013, linked to the implementation of the MoU milestones as agreed between Greece and the Troika.

Updated at 9.01pm BST

7.40pm BST

Dijsselbloem: A few priorities for Greece

On Greece, Dijsselbloem says that Greece has been making tremendous efforts, and claimed those efforts are now bearing results.

The Eurogroup has identified three priorities for Greece before it gets its next aid tranche — reforming its tax collection, opening up some professions, and reforming its public services.

Dijsselbloem says these remaining hurdles can be addressed in the coming days.

7.36pm BST

Eurogroup press conference begins.

The press conference is underway!

Jeroen Dijsselbloem says the Eurogroup considered the latest Spring forecasts from the EC (which warned of a deeper recession this year).

Dijsselbloem said Europe was "Not out of the woods", but was paving the way to sustainable growth and jobs.

Dijsselbloem added that the Eurogroup had welcomed the new Italian finance minister, Fabrizio Saccomanni, and urged him to deliver the 'ambitious structual reform agenda' needed to meet its targets.

Updated at 7.36pm BST

7.20pm BST

Tonight's press conference in Brussels will be streamed online here , and should start shortly.

7.14pm BST

Something of a light-hearted atmosphere in Brussels this evening – a sign that the eurozone crisis is in a calmer patch:

7.02pm BST

Word from Brussels that the eurogroup meeting has ended, and journalists are heading for the press conference room…..


6.35pm BST

Greece's Kathimerini also reckons that the eurogroup ministers have agreed to hand over €7.5bn of loans to Athens, writing:

Although the meeting of eurozone finance ministers was continuing on Monday, reliable sources told Kathimerini that the European Financial Stability Facility (EFSF) is due to convene on Wednesday to approve the transfer of € The money is expected to be disbursed on Friday.

Following on from this, if Greece completes the "milestones" it has agreed for May, then 3.3 billion euros will be released in June. A troika review will not be needed for this disbursement, which will be agreed by the Euro Working Group.

6.17pm BST

Greece's is reporting tonight that Eurogroup ministers have, as expected, decided to approve its next aid payment, worth €7.5bn.

The story's online here (in Greek). It says that Greek officials believe €4.2bn of loans will be handed over immediately, followed by a second tranche of €3.3bn in June once various structural measures are agreed .

Nothing official yet, though.

5.58pm BST

Spain and Portugal demand full banking union

Spain's Prime Minister Mariano Rajoy, right, and Portugal's Prime Minister Pedro Passos Coelho, left, gesture during a press conference at the Moncloa Palace, in Madrid, Monday, May 13, 2013.
Spain’s Prime Minister Mariano Rajoy, right, and Portugal’s Prime Minister Pedro Passos Coelho, left, at today’s press conference. Photograph: Andres Kudacki/AP

Earlier today the prime ministers of Spain and Portugal put more pressure on the eurozone to agree full eurozone banking union, and called for more help to address the tragedy of youth unemployment in their countries.

In the face of apparent foot-dragging from Germany (see 3.04pm), Spain's Mariano Rajoy and Portugual's Pedro Passos Coelho were united, at the Iberian Summit in Madrid.

AP has the details:

The leaders of Spain and Portugal on Monday demanded that the 17-nation eurozone speed up efforts to create a banking union and complained that credit is frozen in their countries, preventing economic growth and crucial job creation.

Many banks are lending at relatively high rates because they are worried about the weak economy. Those higher borrowing rates are making it difficult for households and companies to spend and invest.

"The money from the banking system isn't getting to the businesses or into the economy," Portugal's Pedro Coelho said after meeting with Spanish Prime Minister Mariano Rajoy.

Their bilateral government summit in Madrid came as European finance ministers were gathering in Brussels to discuss the continent's financial crisis.

Both Rajoy and Passos Coelho called on the European Union to move swiftly to create a regional banking union and to slow down budget cuts to help the economy grow.

"Investment is the only way to create jobs," Passos Coelho said. "If there's no financing, it'll be very hard for companies to grow and build up their business."

Spain has been in recession for most of the past four years and has a record 27.2 percent unemployment rate. Portugal, with a 17.7 percent jobless rate, is one of four eurozone countries to have received a sovereign bailout.

Both leaders said that more must also be done to reduce the crushing unemployment rates, which are particularly high for young people.

Portuguese Prime Minister Passos Coelho (L) and Spanish Prime Minister Mariano Rajoy (R) give a press conference at the Moncloa palace in Madrid on May 13, 2013.

Updated at 6.05pm BST

5.37pm BST

Protest marches are also taking place in Athens and Thessaloniki tonight, against the Greek government's attempts to prevent teachers holding a strike this Friday (as explained at 5.24pm)

Theodora Oikonomides, who blogs/tweets as the Irate Greek, is collecting photos from the scene on Twitter:

5.24pm BST

Strike called in Greece tomorrow over teachers’ protests

Over in Greece, tensions are rising between protesting schoolteachers and the government ahead of a planned strike later this week.

Our correspondent Helena Smith reports:

Piling on the pressure, the civil servants union ADEDY has now announced that it will stage a 24-hour strike Tuesday in a show of solidarity for school teachers. The walk-out follows the government’s decision to issue civil mobilization orders to prevent high school teachers from staging industrial action when students begin sitting annual exams on May 17.

 “With this action we want to send a strong message to the government that we will not allow public services to be dismantled, that we will not allow the country's constitution to be circumvented and the constitutional right of going on strike to be annulled,” said Adedy’s president Kostas Tsikrikas.

The union, however, stopped short of endorsing the strike action during the exam period despite agreeing that internationally-mandated austerity measures – including pay cuts and job dismissals — are “barbaric and unfair”.

 It is the third time in less than a year that prime minister Antonis Samaras’ governing coalition has resorted to the draconian measure of forcibly returning strikers to work.

Helena adds:

 Throughout the day, the rthetoric on all sides has been racheted up with Olme, the 88,000-strong secondary school teachers union, theatening to haul the government before Greece’s highest court, the council of state, if it dares to stop them from exerting their “sacred right” of walking off the job.

The sector is particularly enraged that school teachers will be amongst the first to be dismissed from posts under EU-IMF pressure to streamline the bloated civil service.

“We will also denounce Greece before European organisations for the violation of constitutional rights. They are mobilizing us with a law that was drafted to be used at times of war or natural disasters,” said Nikos Papachristos, the president of Olme. 

 Admitting that the mobilization order was “very hard” the government spokesman Simos Kedikogloyou said there was no going back. “The stike is tountamount to blackmailing society in a way that society can no longer accepted,” he said this morning.

Updated at 5.26pm BST

5.20pm BST

FTSE 100 extends winning streak

The FTSE 100 has closed up 6 points tonight. That's its eighth day of gains in a row, the longest 'winning streak' since June 2011 (my colleague Nick Fletcher points out).

it's been a quiet day generally, with the Spanish IBEX, Italian FTSE MIB and French CAC losing ground, and the German DAX little changed.

Stock markets closing prices, May 13 2013
Tonight’s stock markets closing prices, via Thomson Reuters

Chris Beauchamp, market analyst at IG, said traders were in subdued mood as they pondered how, and when, the US Federal Reserve might begin slowing its quantitative easing programme.

This debate was prompted by an article in the Wall Street Journal which said Fed officials planned to stop bond purchases in "careful and potentially halting steps".

Beauchamp commented:

It is only to be expected that the world’s most powerful central bank has begun to at least think about an exit from stimulus. Indeed, it would be more worrying if it hadn’t started to ponder how to wind down its unprecedented market support programme. Any withdrawal from stimulus will be a game of ‘Grandmother’s Footsteps’; i.e. slow and measured, not an ignominious run for the door.

This tweet sums up the Fed's 'dilemma':

4.29pm BST

Photos: Smiles at the eurogroup

Just received some photos from the eurogroup meeting, showing finance ministers in cheery mood as the gathering got underway.

(L-R) Eurogroup chairman Jeroen Dijsselbloem, Cyprus' Finance Minister Harris Georgiades and Italy's Economy Minister Fabrizio Saccomanni attend an euro zone finance ministers meeting in Brussels May 13, 2013.
From left: Eurogroup chairman Jeroen Dijsselbloem, Cyprus’ Finance Minister Harris Georgiades and Italy’s Economy Minister Fabrizio Saccomanni. Photograph: FRANCOIS LENOIR/REUTERS
Eurogroup chairman Jeroen Dijsselbloem, Greece's Finance Minister Yannis Stournaras, European Economic and Monetary Affairs Commissioner Olli Rehn and Ireland's Finance Minister Michael Noonan attend an euro zone finance ministers meeting in Brussels May 13, 2013
From left: Eurogroup chairman Jeroen Dijsselbloem, Greece’s Finance Minister Yannis Stournaras, European Economic and Monetary Affairs Commissioner Olli Rehn and Ireland’s Finance Minister Michael Noonan. Photograph: FRANCOIS LENOIR/REUTERS

Finland's Finance Minister Jutta Urpilainen and the new Cyprus finance minister, Haris Georgiades, also chatted before the meeting got underway:

Finland's Finance Minister Jutta Urpilainen, left, talks with the Cyprus' Finance Minister Haris Georgiades at the start of an Eurogroup meeting at the EU Council in Brussels on Monday, May 13, 2013. (AP Photo/Geert Vanden Wijngaert)
Photograph: Geert Vanden Wijngaert/AP

3.30pm BST

Green light for Cyprus’s first aid tranche

Cyprus's first aid payment has been officially approved by the European Stability Mechanism, the unit responsible for providing funding for euro-area bailouts.

The Board of Directors of the European Stability Mechanism (ESM) announced in the last few minutes that they have approved the Financial Assistance Facility Agreement for Cyprus.

The ESM is now transferring €2bn to Nicosia immediately, with another €1bn due by the end of June.

Klaus Regling, managing director of the ESM, announced:

The loans granted by the ESM help to maintain financial stability in the euro area and buy time for Cyprus.

This time enables Cyprus to undertake the reforms necessary to rebuild its economy on a sustainable basis.

The ESM's decision means there's no danger of Cyprus running out of funding in the short term. It is due to receive a total of €10bn of external loans by early 2016, under the bailout deal agreed in March.

The full press release is here: ESM disburses the first tranche of financial assistance to Cypru

And there are more details of the bailout here: FAQ: Financial Assistance for Cyprus

Updated at 3.39pm BST

3.12pm BST

Peter Spiegel, the Financial Times's Brussels bureau chief, fears that tonight's eurogroup meeting could be a little light on hard news….

Updated at 4.08pm BST

3.06pm BST

It appears that Germany's finance minister wasn't too keen to answer questions abotu tax evasion as he arrived for the eurogroup… at least from the Anglo-Saxon contingent.

Juergen Baetz, AP's man in Brussels, reports:

3.04pm BST

Dijsselbloem: banking union isn’t in trouble

Jeroen Dijsselbloem, head of the eurogroup, has tried to calm concerns that Europe's plans for banking union are unravelling.

Dijsselbloem told reporters outside the Justus Lipsius building that progress can be made without leaders deciding whether EU treaties would need rewriting.

He made the comments amid concern that a single resolution scheme – which outlines how a failed bank is handled – cannot be set up by 2014, as planned, because it isn't legal under current treaties. Germany, for one, fears that changing the legislation will be lengthy and tricky

Dijsselbloem said:

Many of the building blocks for the banking union can be put in place. The issue of the treaty change can be addressed later on….

I think the Germans are putting forward understandable questions, which will have to be dealt with. But I don't see why that should stop us making progress on banking union.

2.25pm BST

Troika: Greek privatisation process too slow

Reuters has got hold of a draft copy of the Troika's latest assessment of Greece, following their recent visit.

No major shocks… international lenders concluded that Greece is on track to hit its targets this year and in 2014, but warns it will struggle to fully return to te financal markets after that date.

The Troika also chides Athens for being too slow to privatise state assets….

Here's Reuters' early take:

Greece is set to meet its budget targets this year and next but must step up privatisations and public sector reform, the country's international lenders said in a draft report obtained by Reuters on Monday.

The report by the European Union and the International Monetary Fund assessing the country's progress in meeting its bailout goals, said the country's privatisation revenue target had been lowered for 2013 to €2bn (.59 billion) from €2.6bn euros.

"While progress has been made in preparing assets for privatisation, the overall speed of the privatisation process remains unsatisfactory," said the report.

The document adds to evidence that the debt-laden country still faces big hurdles to standing on its own feet, despite the fiscal progress made by its coalition government and about 200 billion euros in rescue loans it has obtained from the EU/IMF since mid-2010.

Even though Athens' overall debt outlook remains unchanged as it overachieves on budget cuts, Greece would take several years to fully return to capital markets once funding from the bailout programme ends in 2014, the report said.

Updated at 2.34pm BST

2.25pm BST

Why the Bank of Israel acted

The Bank of Israel's statement accompanying today's surprise interest rate cut is online here: The Bank of Israel reduces the interest rate by 0.25% to 1.5 %.

Here's how it justified the move (taken two weeks before its next scheduled meeting).

  • The appreciation trend of the shekel continues. In terms of the effective exchange rate, the shekel has appreciated by 2.4% in the past month, and by 5.4% in the past 3 months. The shekel’s strength against the dollar and the euro during these periods stood out markedly in comparison with other currencies’ movements vis-à-vis the dollar and euro. The appreciation trend was affected by, among other things, the beginning of natural gas production from the Tamar gas field, the interest rate reductions by central banks worldwide, notably the ECB, and the continued quantitative easing programs in several major economies around the world.
  • Forecasts of global growth, in particular projections regarding Europe and China, have recently been revised downward. This moderation is expected to have an effect on Israel’s economy.

The move caused some chatter in the City:

1.50pm BST

Israel in surprise rate cut

The Bank of Israel has joined the currency wars by cutting interest rates, and announcing a new programme to prevent the shekel's value rising too high.

In an unexpected, unscheduled move, the Bank of Israel cut its key lending rate by a quarter of one percent, to 1.25%.

It also declared it would intervene in the foreign exchange markets, by buying .1bn of other currencies by the end of 2013. It took the move because:

[the shekel] stood out markedly in comparison with other currencies' movements vis-à-vis the dollar and euro.

Another volley in the battle to devalue currencies….

Updated at 1.52pm BST

1.24pm BST

G8 could gee-up Fermanagh

Over in Northern Ireland, there is optimism that next month's G8 meeting will hand a £40m stimulus to the local economy in Enniskillen, County Fermanagh.

Our correspondent Henry McDonald explains:

While it is unclear if David Cameran, Barrack Obama, Vladimir Putin and the rest of the G8 can come up with plans to boost the global economy, the summit will at least generate £40 million of extra business in Northern Ireland.

According to research published today by Barclay's Bank and the University of Ulster, 85% of enterprises in Fermanagh believing holding the summit in the Irish border region will be good for them.

The report also found there could be a longer term boost for tourism and foreign investment as the lakeland county gets a chance to show off its stunning scenery to the entire planet next month.

1.09pm BST

Eurozone finance ministers have begun arriving in Brussels for this afternoon's meeting.

Austria's Maria Fekter is there, but swept past the assembled press pack without giving a tasty soundbite.

12.54pm BST

Interesting graph here, showing how bad debts have been rising alarmingly in weaker members of the eurozone since the crisis began:

Those 'non-performing loans' could force euro banks to seek new capital, especially once eurozone banking supervision is agreed this summer (when the ECB will take responsibility for the sector)…

12.29pm BST

Fitch survey: Eurozone crisis ain’t over

The eurozone financial crisis is not over, according to a majority of clients surveyed by ratings agency Fitch.

Fitch asked European fund managers (with €8.6trn of assets between them) whether the current buoyant financial markets reflected the reality of the situation.

It found that 41% reckoned the worst of the crisis is over due to strong support from the ECB and policy makers.

The remainder were split between:

29% who feel that this is a short-lived period of market calm;

30% who said markets are irrationally exuberant, ignoring the weak economic outlook for Europe.

That suggests the recent market rally could unwind, as Fitch warned:

If the latter is not validated by economic stabilisation and progress towards banking union, the danger is that market volatility will return with a vengeance over the summer, as it did in 2012 and 2011.

Fitch also found that only 9% of respondents ranked inflation as a high risk, versus 29% who regarded deflation as a major concern risk. Fears that loose, unconventional monetary policy from the world's central banks would send prices spiraling have eased…

For more on the inflation issue, check out these two blog posts:

• Mark Dow: There is zero correlation between the Fed printing and the money supply. Deal with it.

• @pawelmorski: Loose Money: Stop Us Before We Kill Again

11.53am BST

Greek construction output plunges

Greek building activity, Febuary 2013 vs 2012
Construction activity in many Greek regions has shrunk drastically. Photograph: ELSTAT

Dire construction data from Greece this morning. The number of permits issued to build new buildings tumbled by 42.9% year-on-year in February.

Just 1,240 new permits were awarded to builders during the month, down from 2,27 in February 2012. In volume terms, activity has almost halved.

It's another sign of the damage caused to Greece's economy, along with record unemployment and steadily shinking retail sales.

Economist Shaun Richards has written a blogpost today, outlining how the Greek economic crisis has been far worse than the Troika anticipated:

We are left three years after the bailout of Greece with shock and awe at the economic destruction that has been inflicted on Greece. Even the rose-tinted forecasts of the European Commission predict that her economy will shrink by 4.2% this year. Every time we see a number which shows a glimmer of hope we find another like todays truly dreadful construction numbers to shatter it.

Again and again we are told that reovery is “just around the corner” as we discover that like on a Roman road there are no corners in sight. I think that those responsible for this should be called to account for their actions. But sadly I see a world where one of them -Christine Lagarde- was elevated to the role of Manging Director of the IMF which can only be a sad indictment of these times.

Please remember this when it is presented as a success later that the Greek people will have another 7.5 billion Euros added to their debts by the end of June.

More here: Three years after the bailout of Greece the economy is still collapsing

Updated at 11.53am BST

11.26am BST

Italian bond auction reaction

Here's early reaction to the Italian debt sale (see 10.31am) from sovereign bond expert Nick Spiro, of Spiro Sovereign Strategy.

Spiro says the auction was 'solid', but warns that the market in bonds issued by Italy and Spain et al may be heading for turbulent times, eventually….

1. Sentiment towards eurozone peripheral sovereign debt remains remarkably benign despite the severity of the economic downturns across the region and the recent sell-off in core government bond markets. Central bank policy action continues to hold down Spanish and Italian borrowing costs even though the sustainability of the rally is being increasingly called into question. Despite evident tensions within Mr Letta's new coalition government and extremely bleak economic conditions, the resilience of Italy's sovereign bond market remains undiminished. However, demand at Spanish and Italian auctions has been somewhat lacklustre of late. Today's Italian sale was reflective of this trend but still a solid auction, with yields coming in further and the Treasury hitting the top end of its target.

2. There's a growing acknowledgement on the part of many market participants that Spanish and Italian bond prices have become far too detached from fundamentals. Yet just because the rally appears way overdone doesn't mean that it's about to go into reverse. The "reach for yield" continues unabated and Spanish and Italian debt markets are among the biggest beneficiaries of this dramatic shift in investment behaviour. Yet there's an inescapable sense that peripheral government bond markets are due for a correction – the timing and the abruptness of it being a matter of debate.

Updated at 11.31am BST

10.31am BST

Italian bond auction result

A successful bond auction for Italy. It just raised €8bn, its maximum target, at lower yields than earlier this year.

Not much sign that investors are losing their appetite for peripheral bonds (although demand was down slightly).

Here's the details:

• €3.5bn of 2016 bonds, at a yield of 1.92%, down from 2.29% in April (lowest yield since January 2013)

• €3bn of 2018 bonds, at a yield of 2.44%, down from 3.030%

• €1.5bn of 2026 bonds, at a yields of 4.07%, down from 4.55% in February

Financial analysts say it's a decent result, despite a drop in the bid-to-cover ratios (the measure of how over-subscribed the sale was)

Updated at 11.00am BST

10.13am BST

ECB negative rates ‘would be effective’

The euro has fallen this morning after Italy's central bank governor said the European Central Bank could cut its deposit rate (paid to banks who stash cash with it) into negative territory.

Ignazio Visco, a member of the ECB's governing council, told CNBC that a negative deposit rate would be effective.

The comments come 10 days after Mario Draghi revealed that the ECB was open to the idea of cutting the deposit rate below its current low of 0.0%.

Visco said:

We all agreed in the council that we have to look with care and in that case we may reduce the [deposit] rate….

We think that – and I personally think that, this is effective – the economy now is capable of taking it on board. Technically, we are equipped and ready to intervene. There may be unintended consequences – we know we may have to work on that – and we know how to work on that.

Just to be clear, we're not talking about hitting depositors with negative savings rates (the ECB cut that rate to a record low of 0.5% this month).

Imposing negative interest rates on bank deposits would be a significant development in the history of the eurozone. Visco's 'unintended consequences' include the possibility that banks buy riskier government bonds, rather than leaving money in the central bank to suffer a small loss each night.

Banks could also actually cut liquidity, rather than pushing more credit out into the eurozone economy.

But it's a complicated picture. A City pro who blogs and tweets as @barnejek did a fine post on this last Friday: What the central bank giveth, only the central bank taketh away.

I don’t question the fact that such a move will persuade banks to search for higher-yielding assets, ie loans but what I’m trying to explain is that the liquidity in the banking system is like a hot potato. The central bank controls how much money there is in the system (using various ways, eg printing money, changing the reserve requirement etc) and the market only needs to decide the price of this money.

The only way that lowering rates to the negative territory impacts the amount of cash in the system is because the central bank will be returning 99% of the money placed in it back to banks.

But then which of the major central banks could even contemplate shrinking its balance sheet at the time when the global economy remains exceptionally fragile?

And Frances Coppola's piece on the strange world of negative interest rates remains a must read, too.

Updated at 10.18am BST

9.40am BST

The Wall Street Journal's Matina Stevis predicts few fireworks in Brussels today, as euro finance ministers take stock of the situation:

9.37am BST

Heads up: Italy is auctioning up to €8bn of government debt this morning. RANsquawk has the details:

Updated at 9.37am BST

9.21am BST

Schäuble: Slovenia must accept tough austerity

Germany's finance minister declared this morning that Slovenia must swallow 'painful' measures if it is avoid seeking international help.

Wolfgang Schäuble told Germany's SWR radio station that:

Slovenia can manage [without a bailout programme]. However it must also carry out some painful restructuring [of its economy].

Quotes via Reuters.

Last week the Slovenian government announced a package of state asset sales, a restructuring of its ailing banking sector, and a 2% increase in VAT. The European Commission is expected to give its verdict on the plan by the end of May.

9.08am BST

Our economics editor, Larry Elliott, writes today that Spain's leaders are pinning their hopes on banking union, and eventually fiscal union too. But the risk of a "crash landing" remains dangerously real, he warns:

That's not just because unemployment in Spain has risen by three and a half million since the start of the crisis and has now reached 27%, or that the domestic economy has shrunk by a sixth. It is that Spain is up to its eyeballs in debt, with no likely improvement in prospect.

Despite austerity, little progress is being made in reducing the budget deficit and national debt is heading for well over 100% of gross domestic product. In the absence of more rapid growth and a banking union being agreed swiftly, a Greek-style debt restructuring seems eminently possible.

Spain is perhaps the emblematic eurozone country. Its past performance reflects the design flaws in the single currency; it is trapped in a low-growth, high-debt vortex; and it can only recover if a reluctant Germany backs plans for integration.

More here: Pedro Almodóvar's Spanish disaster script is all too realistic

8.52am BST

Cyprus: Europe must learn lessons

Cyprus is hoping to patch up relations with the eurozone during today's Eurogroup meeting, its finance minister has said.

Haris Georgiades (appointed in April) told CNBC that he was eager to repair any damage with relations with Brussels, following March's botched bailout that resulted in capital controls being imposed in Cyprus and heavy losses on larger bank customers.

Georgiades also warned that Europe must learn lessons from the Cyprus debacle and rethink its decision-making process.

8.33am BST

Video: Los Indignados hold ‘silent scream’

Spains' Los Indignados movement held a 'silent scream' in Madrid's Puerta del Sol square yesterday evening, as part of Sunday's protests.

This video clip shows that the famous square was packed, suggesting thousands of people took part:

Sunday's protests marked two years of Los Indignados (the official anniversary is this Wednesday).

Euronews has more details. Here's a flavour:

“I’m here because, two years later, things are worse. We demanded social rights, and we’re actually losing them,” said one demonstrator.

Another added: “I think everybody who is really concerned about people and not about other interests, should be here. We’re fighting to make everything fairer and to look after ourselves.

There were marches in around 30 cities in Spain, according to local reports. Many people were protesting against banks repossessing homes from people who can no longer afford their repayments (more than 350,000 families have been evicted since the crisis started).

Some photos:

Activists of the Mortgage Victims’ Platform (PAH) hold placards which read “Stop evictions” during a demonstration in Valencia on Sunday. Photograph: HEINO KALIS/REUTERS
Demonstrators gather in the Puerta del Sol on the second anniversary of the 15M movement in central Madrid May 12, 2013.
Demonstrators gather in the Puerta del Sol on the second anniversary of the 15M movement in central Madrid May 12, 2013. Photograph: PAUL HANNA/REUTERS
Demonstrators march on the second anniversary of the 15M movement in Malaga, southern Spain May 12, 2013
Demonstrators marching in Malaga on Sunday. Photograph: JON NAZCA/REUTERS

8.18am BST

The agenda

While the Eurogroup meeting takes place Spain's prime minister, Mariano Rajoy, will hosting his Portuguese counterpart, Pedro Passos Coelho, in Madrid.

As well as geography, the two leaders are united in facing public opposition to their austerity programmes.

• Rajoy and Passos Coelho at the Iberian summit

• Finance ministers arrive in Brussels for the Eurogroup: 2pm BST

• Eurogroup meeting begins 4pm BST

• Eurogroup press conference: 11pm BST (!)

7.59am BST

Ministers to decide on Greek and Cyprus aid payments

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

Greece and Cyprus will be under the microscope today when Eurozone finance ministers meet to decide whether to extend bailout payments to both countries.

Ministers are expected to give their approval to Cyprus's first aid tranche, worth €3bn, and also to sign off the latest instalment of Greece's own package. If that happens, expect to hear soothing words about Europe making progress…

…But the Eurogroup meeting will be overshadowed by two other unfolding stories — Slovenia's efforts to avoid its own bailout, and the escalating social unrest in Spain.

With Spanish unemployment at a blood-chilling 27%, there were fresh protests against the country's government over the weekend.

Spain's Los Indignados protest movement held marches in scores of cities across Spain on Sunday, under the slogan ""From outrage to rebellion" (more on this shortly)

Something for finance ministers to ponder as they head to the Eurogroup….

I'll be tracking the latest events through the day….

Updated at 8.39am BST © Guardian News & Media Limited 2010

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