Europe

So far, 2016 has seen some dramatic falls already, but Bank of Japan’s negative interest rates put some hope back into the global economy. The yen fell and markets reacted positively to the news of more support from a major central bank…

Powered by Guardian.co.ukThis article titled “Global markets end tumultuous month on a high” was written by Justin McCurry, Dominic Rushe and Katie Allen, for The Guardian on Friday 29th January 2016 20.24 UTC

Global markets have ended a difficult month on a stronger note after the Bank of Japan stepped in to boost its economy with negative interest rates.

However, weak economic growth figures in the US underscored the scale of a global slowdown that has rattled investors.

Policymakers at Japan’s central bank stunned markets with a narrow vote to impose a 0.1% fee on deposits left with the Bank of Japan (BoJ) – in effect a negative interest rate. The central bank was spurred into action as volatile markets, flagging global growth and a downturn in China threatened major economies around the world.

In the US, news that the economy barely grew in the final three months of 2015 prompted speculation that its central bank would rein in plans to raise interest rates this year, having tightened borrowing costs for the first time in almost a decade in December. GDP rose at an anaemic annual rate of 0.7% as consumers and businesses cut back on spending, while US exports were hurt by weaker overseas markets.

Rob Carnell, economist at ING Financial Markets, said: “All in all, these GDP data support the sense given by recent monthly numbers that the US economy lost momentum into the end of 2015. We are struggling to see how this story is reversed in the coming quarters.”

Stock market investors were cheered by the prospect of US interest rates rising at a slower pace and by the Japanese move, which followed the similarly aggressive precedent set by the European Central Bank (ECB) in June 2014. The negative rate is designed to encourage commercial banks to use excess reserves – which they normally keep with the central bank – to lend to businesses instead.

The radical intervention provided an immediate boost to stock markets around the world after a dramatic start to the year that saw trillions of dollars wiped off their value in a matter of days. On Friday, the FTSE 100 in London closed up 2.6% at 6,084, to be back within a whisker of its starting level for 2016 of 6,242. That rise was mirrored around European bourses and followed a rally in Asian stock markets, where Japan’s Nikkei jumped 2.8% to a two-week high. At the time of the London close, Wall Street was also higher, with the Dow Jones industrial average up 1.7%.

Chinese shares also rallied following the Japanese rate move but still suffered their biggest monthly fall for seven years. The Shanghai Composite Index has lost 22.6% since the start of the year.

The surprise negative rates decision came just days after the BoJ’s governor, Haruhiko Kuroda, suggested he had dismissed any drastic easing measures to boost business confidence.

On Friday, the bank said it had not ruled out a further cut. “The BoJ will cut the interest rate further into negative territory if judged as necessary,” it said in a statement.

It said the move was intended to lessen the risk to Japanese business confidence from turbulence in the global economy, a week after data showed the Chinese economy had grown at its slowest pace for a quarter of a century in 2015.

The ECB held back from injecting more electronic cash into markets at its meeting this month but it too fired up share prices with a promise to consider more action in March.

The prospect of central banks pumping more stimulus into a struggling global economy has also helped stabilise oil prices. Brent crude, which earlier in January hit a 13-year low below $28 a barrel, stood at about $33.86 on Friday. It is still down 30% from a year ago.

Highlighting global unease about the global outlook following China’s slowdown, gold prices have gained almost 5% in January.

Friday’s estimate of US GDP from the Commerce Department was less than half the 2% annual growth rate in the third quarter and was the weakest showing since a severe winter reduced growth to a 0.6% annual rate in the first quarter of 2015.

Economists cautioned that this early estimate could yet be revised but said it still pointed to global headwinds buffeting the world’s biggest economy and suggested the US Federal Reserve would not go ahead with all four interest rate rises slated for this year. Some said the latest signs of a US slowdown left the US central bank looking unwise after December’s rate rise.

“The GDP growth slowdown sheds a rather critical light on the Fed’s decision to raise interest rates in December,” said Nina Skero, economist at the Centre for Economics and Business Research.

“For the sake of credibility, it is unlikely that the Fed will reverse its December decision, but rates are likely to stay at their current level until 2017.”

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USA 

If the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission…

Powered by Guardian.co.ukThis article titled “Democratic decisions on benefits of the EU” was written by Letters, for The Guardian on Tuesday 15th December 2015 19.32 UTC

Zoe Williams misses the point about Cameron’s negotiations with EU member states (There is no master plan. On the EU, Cameron is flailing, 14 December). Restricting benefits to EU migrants may or may not be a sensible, legal or logical way to meet the concerns of people, be they “Ukip-minded” or not. But once our PM had to ask permission to do so, the issue was completely transformed. It is no longer one of EU migrants’ access to benefits, but the far more fundamental question of who decides how British taxpayers’ money is spent. It became a question of national sovereignty. That’s why organisations such Trade Unionists Against the EU are not awaiting the outcome of “negotiations” and are campaigning to get the UK out. The issue is as simple as it is clear: if the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission. This will continue to be the case while the UK remains a member of the EU.
Fawzi Ibrahim
Trade Unionists Against the EU

• David Cameron’s negotiations on limiting in-work benefits for EU immigrants appear to have won little support. One simple approach might be to limit levels of benefit to those payable in the country of origin of the European migrant. That would deter those seeking to exploit the system and could disarm politicians in other member states, who would no longer be able to claim that their emigrants were being monetarily disadvantaged. It would leave the fundamental right of freedom of movement untouched.
Ken Daly
Aisholt, Somerset

• Hans Dieter Potsch, the chairman of Volkswagen, glosses over the truth of what his company did to cheat emission tests: it wasn’t a “chain of errors”, it was a chain of liars prepared to sanction a management mindset (VW admits to ‘chain of errors’ at company, 11 December). Or is he not admitting responsibility, even though he is no doubt paid a monstrous salary on the basis of being in charge? This incident just confirms that all companies need active oversight from outside to try and stop such appalling actions. They cannot be trusted any more than managers of banks and other financial groups. This is why we need the EU and strong legislation trying to stop such abuses in companies that think they can do what they like.
David Reed
London

• Join the debate – email guardian.letters@theguardian.com

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Prices across the single currency region were flat in October while Europe’s unemployment crisis has eased. American household spending rose by just 0.1% in September, down from 0.4% in August. Canadian economic growth slows…

 

Powered by Guardian.co.ukThis article titled “Eurozone emerges from deflation as unemployment hits three-year low – live updates” was written by Graeme Wearden, for theguardian.com on Friday 30th October 2015 13.04 UTC

The latest US economic data just hit the wires, and paints a mixed picture of the world’s largest economy.

American household spending rose by just 0.1% in September, down from 0.4% in August, and only half as fast as economists expected.

But US labour costs have risen by 0.6% during the last quarter, up from 0.2% in the previous three months. That’s a broad measure of pay, suggesting salaries are rising as the employment market continues to tighten.

US consumer spending and income

So on balance, it doesn’t really settle the debate on whether US interest rates will go up before Christmas (as covered in the intro).

Updated

Canadian growth slows in August

Digital illustration - Canadian Flag<br />C95250 Digital illustration - Canadian Flag

The global slowdown has rippled across to Canada.

Canadian GDOP rose by only 0.1% in August, data just released showed, down from 0.3% in July.

That follows this week’s trend of slowing growth in the last quarter (in the UK, the US and Spain).

It’s the third monthly expansion in a row in Canada, following contractions earlier in the year. On an annual basis, the economy was only 0.9% bigger than 12 months ago.

Updated

Over in Lisbon, Portugal’s new government is being sworn in after a general election that produced no clear winner.

It means Pedro Passos Coehlo remains as prime minister, but leading a minority government.

Portugal’s president sparked controversy by asking Passos Coehlo to form the next administration, even though left-wing parties won a majority of seats between them.

This sparked talk that a coup had been perpetrated. But in truth, the wheels of democracy will keep turning.

The opposition will get their chance to kick Passos Coehlo out of office early next month, in a vote of confidence on the new government’s policies.

Merkel has used her China trip to call for more protection for Europe’s steel industry, which has been ravaged by falling prices and overcapacity.

Over to Reuters’ Andreas Rinke:

At a German-Sino business congress in Hefei, Merkel calledfor better protection of the steel and solar industries against unfair international competition, a complaint some manufacturers make against China.

Merkel said the steel sector needed “a certain amount of market protection” as steelmakers have pointed out that environmental regulations differ from country to country,impacting cost advantages.

“I also hope that we can extend the rules already in placein the solar sector,” she added.

Updated

Angela Merkel also had an opportunity to pass on some football tips to the next generation today, during a trip to a primary school in Xin Nan Cun.

German Chancellor Angela Merkel visits China<br />epa05003214 German chancellor Angela Merkel (C) visits a physical education class in Xin Nan Cun, China, 30 October 2015. Merkel is on a two-day official visit to China. EPA/SOEREN STACHE

Updated

Angela Merkel has also predicted that China’s economy will avoid a crash, during her trip to Hefei today.

She told journalists:

“I think one can expect that China’s growth will be a bit weaker, but that it will have constant growth.

“It is obvious that particularly the domestic demand through growing cities is an important factor to stimulate consumption and here with growth.”

This is Merkel’s eighth visit to China since becoming Germany’s leader a decade ago, underlining the importance of the links between Berlin and Beijing.

Photos: Angela Merkel visits China

Angela Merkel has been hard at work building closer trade links with China.

The chancellor has put worries over Germany’s economy, and Europe’s escalating refugee crisis behind her. And the latest photos from the trip suggest it’s going well.

Merkel got a warm welcome from students at Hefei University in Hefei, capital of east China’s Anhui Province….

Students with a banner await the arrival of German Chancellor Merkel at the German University in Hefei<br />Students with a banner that reads “Good day, Mrs Merkel!” await the arrival of German Chancellor Angela Merkel at the German University in Hefei October 30, 2015. REUTERS/ JOHANNES EISELE/Pool

…and then shared a drink with Chinese Premier Li Keqiang, using beer brewed by the students #cheers

Angela Merkel visit to China - 30 Oct 2015<br />Mandatory Credit: Photo by Xinhua/REX Shutterstock (5331237b) Chinese Premier Li Keqiang (L) and German Chancellor Angela Merkel (C) drink beer brewed by Chinese and German students during their visit to Hefei University in Hefei, capital of east China’s Anhui Province Angela Merkel visit to China - 30 Oct 2015

Merkel also told reporters that Germany favours granting China “market economy status” – a shift that would make it harder for the EU to protect local industry from Chinese competition.

However, Beijing still “has to do some homework, for example in the area of public procurement,” she added (Reuters reports)

German Chancellor Angela Merkel Visits China<br />HEFEI, CHINA - OCTOBER 30: German Chancellor Angela Merkel smiles during a signing ceremony on October 30, 2015 in Hefei, China. Merkel is in Hefei, capital of east China’s Anhui Province, for a one day visit, accompanied by her Chinese counterpart Li Keqiang. (Photo by Johannes Eisele - Pool/Getty Images)

A signing ceremony in Hefei. Photograph: Pool/Getty Images

And she also met a group of children in the Baohe district of Hefei:

Angela Merkel<br />German Chancellor Angela Merkel , left, greets village children in Baohe district of Hefei, China, Friday, Oct. 30, 2015. (Johannes Eisele/Pool photo via AP)

Updated

European Central Bank (ECB) president Mario Draghi addresses a news conference after a meeting of the ECB Governing Council in St Julian’s, outside Valletta, Malta, October 22, 2015. European Central Bank President Mario Draghi said on Thursday monetary policy alone cannot solve the euro zone’s economic problems and called on member countries to take additional actions alongside. REUTERS/Darrin Zammit Lupi MALTA OUT. NO COMMERCIAL OR EDITORIAL SALES IN MALTA

European Central Bank (ECB) president Mario Draghi. Photograph: Darrin Zammit Lupi/Reuters

Mario Draghi will be pleased to see the eurozone clamber out of deflation this month, but it only takes a little pressure off his central bank.

Last week, the ECB chief hinted that more stimulus could be needed soon, as inflation remained sharply off course.

Bill Adams, senior international economist at PNC Financial Services Group, believes Draghi will make an announcement at its next meeting:

The ECB’s most likely next move is to announce an extension in December of the duration of its quantitative easing program to last through March 2017. But hawks on the Governing Council may point to an exit from deflation as a reason for the ECB to continue with asset purchases in 2016, but without as clear a pre-commitment as they made in 2015.

This would provide the ECB with discretion to begin a taper of its easing program earlier than expected if inflation surprises to the upside due to pass-through of higher import prices or higher food prices (unprocessed food prices rose 3.0% from a year earlier in October).

No time like the present, eh?….

Updated

European Union jobless rate hits six-year low

Unemployment in the wider European Union has hit a six-year low of 9.3%, even better than the 3.5 year low of 10.8% in the eurozone:

But that still leaves 22.631 million men and women out of work in the 28 countries which make up the EU.

Eurostat explains:

The EU28 unemployment rate was 9.3% in September 2015, down from 9.4% in August 2015, and from 10.1% in September 2014. This is the lowest rate recorded in the EU28 since September 2009.

But this is still far, far too high — almost twice the levels in the UK and the US.

And many countries are still lagging behind.

The highest rates were recorded in Greece (25.0% in July 2015) and Spain (21.6%) — a reminder that the Spanish recovery hasn’t fully fed through to its labour market.

The lowest were recorded in Germany (4.5%), the Czech Republic (4.8%), Malta (5.1%) and the United Kingdom (5.3% in July 2015).

Updated

It’s almost a year since oil prices began to tumble on the world markets, giving the global economy a deflationary squeeze.

The impact of cheap oil should soon start to drop out of the annual inflation rates, though (as prices will no longer be cheaper than a year ago). And that could send consumer prices indices up again….

This is the second time this year that the eurozone has shaken off a bout of negative inflation:

Updated

Eurozone unemployment hits lowest since January 2012

Europe’s unemployment crisis has eased a little, in another little boost to the region.

Eurostat reports that the overall jobless rate dropped to 10.8% in September, down from 10.9% in August.

That’s lower than economists had expected, and is the lowest level since January 2012.

Although the eurozone’s inflation rate was zero in October, that masks wide differences across the economy.

Today’s eurozone inflation data shows that food prices rose by 1.5% year-on-year in October, while service sector costs were up by 1.3%.

Other goods prices only rose by +0.4%, while energy costs slumped by 8.7%.

So on average prices were unchanged (as the economist with one foot in a bucket of scalding hot water and the other foot in a bucket of ice might put it)

Eurozone inflation rises to 0.0%

The eurozone has emerged from deflation!

Prices across the single currency region were flat in October, having shrunk by 0.1% the previous month.

That’s broadly in line with forecast, and shows how little inflationary pressure there is in the eurozone (due to weak energy prices).

Core inflation (which strips out volatile elements such as energy and food) across the eurozone rose to 1% – well below the ECB’s 2% target.

Updated

European stock markets are subdued this morning, as investors wait for the latest eurozone inflation and unemployment data in 25 minutes.

The FTSE 100 has lost 5 points, or just under 0.1%, while the French and German markets are up just 0.15%.

But still, fears that we could suffer a grim October have not come to pass, with most indices posting strong gains this month:

Looking back at Japan…some economists believe the BoJ may beef up its stimulus package in November, when it meets again.

By then, they should have new growth figures showing whether Japan’s economy shrank in the last quarter, or not.

Mitsuo Shimizu, deputy general manager of Japan Asia Securities Group, says:

“They could move after the next meeting – expectations for more easing aren’t going away.”

But there’s also an argument for waiting until the US central bank’s next meeting in December. If the Fed does hike interest rates, then the yen will weaken against the US dollar without the BoJ needing to do anything….

Italy’s unemployment rate has dipped to its lowest point since January 2013 but still remains worryingly high.

New data shows that the Italian jobless rate fell to 11.8% in September, from 11.9% in August, suggesting prime minister Matteo Renzi’s reform plan may finally be bearing some fruit.

It’s better than economists expected.

In 50 minutes time we get the overall eurozone unemployment report….

Updated

Spain’s recovery has been partly due to a strong tourist season, which helped it overcome the housing crash.

The FT’s Ian Mount explains:

Record spending by foreign tourists has helped speed Spain’s recovery from a double dip recovery that began after its real estate bubble popped in 2008.

Tourists injected €53.8bn into the economy over the first nine months of 2015, 6.3 per cent more than in the same period in 2014.

Capital Economics fears that today’s GDP report shows Spain’s ‘impressive’ recovery is faltering a little:

Holger Sandte of Nordea Markets is concerned that Spain’s building and housing sector is still in the mire:

Spanish GDP up by 0.8% as recovery continues

Spain’s economic recovery continues, although at a slightly lower speed.

The Spanish statistics body reports that GDP rose by 0.8% in the last three months, compared to 1% in the second quarter of this year.

On an annual basis, the economy grew by 3.4%, up from 3.1%.

This is the 9th consecutive quarter of growth in Spain, which has been one of the best performing European economics since the debt crisis eased in 2012.

Spanish GDP

Spanish GDP Photograph: Spanish statistics office

Spain is the first eurozone country to report growth figures (we get most of the data in two weeks time).

Today’s numbers mean it is growing faster than the UK, which reported a GDP increase of 0.5% on Tuesday. It also beats America’s annualised rate of 1.5% (which is <0.4% on a quarter-on-quarter basis).

Reaction to follow….

Kuroda predicts moderate recovery for global economy

Governor Kuroda is also trying to dampen fears over China’s economy, and its impact on Japan.

He says he agrees with the IMF that the slowdown in China could last longer than expected, which would be bad for Japanese trade:

Many Japanese companies operate in East Asia so their profits may also be affected.

But he’s still optimistic that the region’s economies are resilient enough to cope:

Our main scenario is for the global economy to recover moderately, driven by the strength in advanced economies.”

Here’s some instant reaction to BoJ governor Haruhiko Kuroda’s comments:

BoJ’s Kuroda: We won’t hesitate to do more

The Bank of Japan (BOJ) building in Tokyo, October 30, 2015. The Bank of Japan held off on expanding its massive stimulus program on Friday, preferring to save its dwindling policy options in the hope that the economy can overcome the drag from China’s slowdown without additional monetary support. REUTERS/Thomas Peter

The Bank of Japan (BOJ) building in Tokyo today. Photograph: Thomas Peter/Reuters

The Bank of Japan has fuelled speculation that it could soon announce fresh stimulus measures, after cutting the Bank’s inflation and growth forecasts.

Governor Haruhiko Kuroda has just told a press conference that the BoJ has more ammunition at its disposal, as it battles against the deflationary pressures gripping the globe.

Kuroda insisted that the BoJ could still hit its target of getting inflation to 2% (even it is is taking longer than hoped), saying:

“We won’t hesitate to make necessary policy adjustments if we judge that there is a change in the broad price trend.”

“I’m not thinking of raising or lowering the current 2% inflation target.”

And on the details of monetary policy, Kuroda declared:

“I don’t think there are limits to our policy options.”

Kuroda was speaking after the BoJ left its current stimulus programme unchanged at its latest policy meeting, despite evidence that Japan hasn’t shaken off the spectre of deflation.

The BoJ also cut its forecast for real economic growth for the current fiscal year to 1.2% from 1.7%. It also kicked back the target for hitting 2% inflation to the back end of 2016, or even early 2017, from the middle of next year.

Some analysts had thought the Bank might boost its 80 trillion yen annual asset-buying scheme today, but Japan’s policymakers are hopeful that the global economy will pick up.

But there are signs that more may be needed. New figures showed that consumer prices fell 0.1% in the year to September, a second monthly decline, while household spending slid 1.3 percent from a year earlier.

More here:

Updated

The Agenda: Will eurozone emerge from deflation?

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It looks like another busy day for economic news, as policymakers, analysts and the public all ponder the state of the global economy as the year grinds towards its close (just 55 sleeps till Christmas, folks!)

In Europe, the latest inflation data come at 10am GMT. It may show that prices stopped falling in the eurozone, after dropping by 0.1% in September.

We also get European unemployment figures – likely to show that the eurozone jobless crisis is still severe:

EU jobs

Europe’s unemployment rate has been stubbornly high since the debt crisis began Photograph: ONS

There’s also a flurry of data coming our way from across the Atlantic. That includes US personal spending stats at 12.30pm and the University of Michigan confidence report at 2pm GMT.

They’ll both provide more ammunition for the ongoing debate about whether the Federal Reserve will take the plunge and raise interest rates at its December meeting (just 47 sleeps to go!).

Canada will become the latest major economy to report growth figures – economists predict that growth slowed to 0.1% in August from 0.3% in July.

And in the City, it’s quite busy for a Friday.

BG Group, the oil company, has been hit by the weak crude price:

And Royal Bank of Scotland has suffered an operating loss of £134m in the last quarter, after taking a £847m charge to cover restructuring costs.

It still managed to post a net profit though:

More details on that later, along with all the main events through the day….

Updated

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Alexis Tsipras and his party have returned to power with a mandate to govern Greece and implement the bailout deal. Syriza officials said the party would seek to form a stable government immediately with the aim of maintaining confidence in the country…

Powered by Guardian.co.uk

 

How well did Syriza and Alexis Tsipras do?

With 99.5% of the votes counted, Syriza had 35.5% of the vote, easily beating the centre-right New Democracy, the next biggest party on 28.1%. After Tsipras disappointed supporters by accepting a harsh eurozone-led austerity programme finalised in August, leftwingers appeared to be deserting Syriza, with polls showing New Democracy level just two weeks ago. But Syriza will now have 145 seats in the 300-member parliament – just four fewer than when Tsipras took power in January. Its share of the vote is also less than one percentage point down on its 36.3% share in January, although turnout was put at a record low of 55.6%.

What next for Syriza and Alexis Tsipras?

Syriza officials said the party would seek to form a stable government immediately with the aim of maintaining confidence in the country. Its former coalition partner, the small anti-austerity rightwing Independent Greeks party, is ready to use its 10 seats to forge a power-sharing agreement with Syriza. Independent Greeks’ leader, Panos Kammenos, joined Tsipras on stage to celebrate the result. Tsipras claimed the result gave him a mandate to govern and that he intended to serve a full term, promising relief for voters weary from five elections in six years.

Does this change the bailout deal with the EU?

No. Syriza campaigned on a pledge to implement the €86bn (£63bn) bailout, while pledging measures to protect vulnerable groups from some of its effects. In exchange for the bailout funds, Tsipras agreed to deficit-reduction measures including tax rises, changes to pensions and social welfare cuts. Other aspects include labour market reform, liberalisation of consumer markets and fewer perks for civil servants. Tsipras’s first task will be to persuade EU lenders that Greece has taken enough agreed steps to ensure the next payment. The bailout programme is up for review next month.

Could the IMF decline to join the bailout?

Yes. The International Monetary Fund has said it will refuse to take part in the bailout unless there is an “explicit and concrete” agreement on debt relief for Greece. The IMF has argued that Greece cannot bear the full burden of the austerity programme and that its creditors should include debt relief in the package. Without a long moratorium on repayments, perhaps of 30 years, or a reduction in the value of the debt, the burden will become unmanageable, the IMF has argued.

Will Greece need another bailout anyway?

Greece might need another rescue. Tsipras hopes Syriza’s electoral victory will give him renewed clout to negotiate debt relief and less onerous austerity measures from Greece’s creditors. But that stance will not be popular with Germany or European institutions that imposed draconian measures on Greece in the name of fiscal discipline. If Tsipras is unable to extract significant concessions, the economy will remain weak, endangering deficit-reduction targets in the current deal and potentially requiring another bailout to head off a debt default.

What do the markets think?

Reaction in financial markets was muted on Monday morning. The euro was little changed while Britain’s FTSE 100 share index, which has gyrated in the past in reaction to Greek events, rose slightly. The yield on Greek two-year bonds fell a little, meaning traders think the risk of default is reduced. Simon Smith, chief economist at the currency trader FxPro, said: “The immediate impact has been minimal, the single currency opening little changed versus Friday’s opening levels. In the wider picture, it’s not going to make life any easier for the likes of the EU, IMF and European Central Bank and the negotiations surrounding debt sustainability over the coming months.”

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Powered by Guardian.co.ukThis article titled “Greece debt crisis: ECB tightens screw ahead of emergency eurozone summit – as it happened” was written by Graeme Wearden (now), Nick Fletcher, Paul Farrell and Helen Davidson (all earlier), for theguardian.com on Monday 6th July 2015 20.50 UTC

And here’s Tuesday’s Guardian — complete with Yanis Varoufakis leaving the building…

Just one more thing… the front pages of the UK newspapers. And tomorrow’s crunch summit makes the front of the Financial Times:

While Angela Merkel’s hard-ish line on Greece is the splash in the Daily Telegraph:

I wonder what’s on the front page of Tuesday’s Guardian. Stay tuned….

Updated

Closing summary: Last chance for Greek deal looms

We’re been live-blogging the reaction to Sunday’s Greek referendum for around 21 hours now. It’s time to wrap up and give the Guardian web servers a rest.

So, a final recap.

Greece and the eurozone will make one last, desperate attempt to make progress towards an urgently needed bailout deal on Tuesday.

Leaders, and finance ministers, will both hold crucial meetings in Brussels, after Sunday’s referendum result raised the risks of Grexit to new heights. It’s a final chance for Greece to propose a new reform plan that could start the ball rolling towards a new aid package, but the journey looks perilous.

The leaders of France and Germany are scrambling to reach a consensus tonight in Paris, at a top-level meeting about Greece (photos here).

Greece’s prime minister has held telephone calls with the heads of the International Monetary Fund and also the European Central Bank. Alexis Tsipras told Mario Draghi that the capital controls in Greece need to be lifted, but was told by Christine Lagarde that the IMF cannot released more funds now Athens is in arrears.

Earlier, Francois Hollande insisted that there was time to reach a deal. Angela Merkel sounded less optimistic, though, warning that there was currently no basis for an agreement. Press conference highlights start here.

German Chancellor Angela Merkel makes a statement with French President Francois Hollande during a press conference after their meeting at the Elysee Palace on July 06, 2015 in Paris, France. Angela Merkel met Francois Hollande to discuss Greece’s situation in the European Union in a post-referendum environment.

Spain’s PM warned that time was now very short, while Dutch leader Mark Rutte said Greece must accept deep reforms to keep its place in the eurozone.

Analysts aren’t convinced that progress will be made tomorrow….

The European Central Bank has tightened the rules for giving emergency funding to Greek banks tonight. It is now imposing tougher haircuts on the assets they hand over, restricting their ability to access the funding.

The ECB also reportedly rejected a request for €3bn in extra ELA support:

This means Greek banks will remain shut for at least two more days, after capital controls were extended until the end of Wednesday.

Over in Greece, Alexis Tsipras has mobilised the leaders of the main opposition parties to support him. They signed a joint statement, saying Sunday’s referendum showed Greece’s desire for a “socially just and economically sustainable agreement”.

There’s talk of a new mood of national unity, but it could be swiftly shattered.

Tsipras has also passed the honour/poisoned chalice of being Greece’s finance minister to Euclid Tsakalotos, following Yanis Varoufakis’s resignation this morning.

Tsakalotos was sworn in tonight, and will represent Greece at Tuesday’s eurogroup meeting. He’s unlikely to don a tie for the occasion, though. Here’s our profile of Euclid.

Varoufakis has denied tonight that he was a sacrifical lamb, having exited the finance ministry in classic style today:

Outgoing Greek Finance minister Yanis Varoufakis leaves onto his motorcycle with his wife Danai after his resignation at the ministry of Finance in downtown Athens on July 6 2015. Varoufakis resigned in what appeared to be a concession by Prime Minister Alexis Tsipras to international creditors after his resounding victory in a historic bailout referendum. AFP PHOTO / LOUISA GOULIAMAKILOUISA GOULIAMAKI/AFP/Getty Images

In the UK, George Osborne has warned that the risks to the UK are rising. Britain is already providing more consular support in Greece for expats and holidaymakers, and help for businesses struggling to trade with Greek firms.


Video: George Osborne in parliament

And Fitch has warned that the risks of Greece leaving the eurozone are much higher, after last night’s resounding No.

I’ll pop back into the blog if there are any major developments — otherwise, please tune in tomorrow morning for more. Thanks, and goodnight. GW

Updated

Alexis Tsipras has discussed the Greek banking sector’s liquidity issues with ECB president Mario Draghi tonight.

Tsipras also raised the “immediate need” to lift capital controls during the phone call, according to a government spokesman quoted on Reuters.

Our europe editor, Ian Traynor, sums up the situation tonight:

Germany and France scrambled to avoid a major split over Greece on Monday evening as the eurozone delivered a damning verdict on Alexis Tsipras’s landslide referendum victory on Sunday and Angela Merkel demanded that the Greek prime minister put down new proposals to break the deadlock.

As concerns mount that Greek banks will run out of cash and about the damage being inflicted on the country’s economy, hopes for a breakthrough faded. EU leaders voiced despair and descended into recrimination over how to respond to Sunday’s overwhelming rejection of eurozone austerity terms as the price for keeping Greece in the currency.

Tsipras, meanwhile, moved to insure himself against purported eurozone plots to topple him and force regime change by engineering a national consensus of the country’s five mainstream parties behind his negotiating strategy, focused on securing debt relief.

Tsipras also sacrificed his controversial finance minister Yanis Varoufakis, in what was seen as a conciliatory signal towards Greece’s creditors.

In Paris, Chancellor Angela Merkel and President François Hollande tried to plot a common strategy after Greeks returned a resounding no to five years of eurozone-scripted austerity. The two leaders were trying to find a joint approach to the growing crisis ahead of an emergency eurozone summit on Tuesday to deal with the fallout.

But Merkel said there was no current basis for negotiating with the Greek side and called on Tsipras to make the next move.

As eurozone leaders prepared for today’s emergency summit in Brussels , the heads of government were at odds. France, Italy and Spain are impatient for a deal while Germany, the European commission and northern Europe seem content to let Greece stew andallow the euphoria following Sunday’s vote give way to the sobering realities of bank closures, cash shortages and isolation…..

Here’s the full story.

The logo of the International Monetary Fund.

Christine Lagarde spoke to Alexis Tsipras today, and explained that the International Monetary Fund can no longer provide money to Greece after it failed to repay €1.6bn last week.

Under IMF rules, once a country is in arrears, fresh funds cannot be supplied, a spokesman explained (via Reuters)

Hat-tip to Sky News’s Ed Conway for getting into Yanis Varoufakis’s leaving bash tonight and grabbing a quick interview.

Greece’s finance minister denied that he’d sacrificed himself, declaring:

“No, no, this is politics, mate. There are no sacrificial lambs.

Varoufakis added that he’ll rest on Tuesday, but is bound to offer advice from the sidelines.

Tuesday’s edition of the Guardian will carry many letters from readers about the Greek crisis, expressing support for Greece at this time.

Guardian Letters: Athens has reinvented our vision of democracy

Italy’s finance minister has suggested that the eurozone is willing to consider a new aid programme for Greece:

Pier Carlo Padoan told Canale 5 television.

“The 18 (other countries in the euro) are open to re-considering a Greek request which can only be a request for a new programme, not a continuation of the old one,”

Spain’s prime minister Mariano Rajoy has echoed Angela Merkel and Francois Hollande tonight, by warning that time is very short:

Dutch prime minister Mark Rutte has warned Greece it must decide whether it wants to remain in the eurozone, and accept the ‘deep reforms’ needed.

He told MPs tonight that Athens must deliver acceptable proposals to its creditors.

If things stay the way they are, then we’re at an impasse. There is no other choice, they must be ready to accept deep reforms.”

A Greek insider has told Reuters that the European Central Bank hiked the haircut on Greek assets by around 10%, but the impact will be ‘minimal’.

So the ECB hasn’t pulled the plug, yet…..

Updated

Greece Facing Uncertain Future After Rejecting EU Proposals<br />ATHENS, GREECE – JULY 6: People line up at an ATM machine outside a bank on July 6, 2015 in Athens Greece. Politicians in Europe and Greece are planning emergency talks after Greek voters rejected EU proposals to pay back it’s creditors creating an uncertain future for Greece. Finance minister Yanis Varoufakis resigned hours after the vote saying that it was felt his departure would be helpful in finding a solution.. ( Photo by Milos Bicanski/Getty Images)” width=”1000″ height=”600″ class=”gu-image” /><br />
<figcaption> <span class=People line up at an ATM machine outside a bank in Athens today. Photograph: Milos Bicanski/Getty Images

AFP has a good summary of the situation in Greece’s banking sector:

Greek banks to stay closed Tuesday and Wednesday

Greek banks will remain closed on Tuesday and Wednesday with limits on daily withdrawals unchanged, officials said on Monday as the European Central Bank maintained its liquidity assistance to the nation’s beleaguered lenders.

“Until Wednesday evening we continue as things stand today,” said Louka Katseli, chairwoman of the National Bank of Greece.

Speaking on behalf of the association of Greek banks, she added:

“If there is a decision by the European Central Bank in the meantime enabling us to modify this decision, there will be a new decision.”

The European Central Bank’s governing council decided to maintain the emergency liquidity assistance keeping Greek banks afloat at the level set on June 26, the Frankfurt-based bank said in a statement.

But the ECB said it had also “adjusted” the collateral demanded from Greek banks in return for the assistance.

“The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets…

“In this context, the governing council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA,” the ECB added, without specifying the level.

Capital controls were enacted on June 28, limiting ATM withdrawals by Greeks to €60 per account daily after a referendum on bailout terms sparked a run on deposits.

The Bank of Greece had requested an increase in emergency liquidity assistance (ELA) and that request was the subject of the ECB meeting, held a day after 61% of Greeks voted against further austerity measures in Sunday’s plebiscite.

ELA is currently the only source of financing for Greek banks, and therefore the Greek economy. But with Greece’s bailout programme now officially expired and in the absence of any new programme, the conditions for its continuation are no longer met.

But analysts believe the ECB will not want to be the one to pull the plug on Greece and force the country out of the single currency.

Updated

The Euro symbol in Willy Brandt Square, Frankfurt, on the first day of its restoration. The euro symbol will go through a four days restoration, starting on the day after Greece have voted ‘No’ to the EU, the ECB and the IMF policies, generating uncertainties on the monetary sign future. --- Image by © Horacio Villalobos/Corbis
The Euro symbol in Willy Brandt Square, Frankfurt, on the first day of its four-day restoration. Photograph: Horacio Villalobos/Corbis
Euro symbol in Willy Brandt Square, on the first day of its restoration.<br />06 Jul 2015, Frankfurt, Germany — Workers toil on the euro symbol in Willy Brandt Square, Frankfurt, Germany, 06 July 2015, during the first day of its restoration. The euro symbol will go through a four days restoration, starting on the day after Greece have voted ‘No’ to the EU, the ECB and the IMF policies, generating uncertainties on the monetary sign future. — Image by © Horacio Villalobos/Corbis” width=”1000″ height=”667″ class=”gu-image” /> </figure>
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<p class=Updated

Two members of the ECB’s governing council pushed for Greece’s banking sector to be hit with even tougher measures, according to Claire Jones of the Financial Times.

She writes:

The ECB refused to disclose the size of the new haircuts, but all four of Greece’s main banks are thought still to have enough collateral available to roll over their emergency loans.

Two people on the governing council objected to the decision, according to Eurosystem sources. Both of the objectors wanted the ECB to take stronger measures.

That implies either an even higher haircut (putting Greek banks in greater peril), lowering the ELA cap (ditto), or terminating ELA off (which would be game over for Greek banks).

The ECB may not have pulled the trigger on Greek banks tonight, but it is reserving the right to take a shot if Tuesday’s emergency summit doesn’t deliver any progress.

Updated

Confused? Try this….

This graph is crucial to understanding what the ECB did tonight.

By raising the haircut applied on assets from Greek banks, it cuts the amount of emergency liquidity that can be handed back in return. Every time the haircut goes up, the ‘value’ of the assets that can be used to access ELA falls.

So, to simplify the issue, each €1bn of Greek assets might have yielded €520m of emergency cash yesterday, but tomorrow it might only be good for €480m, for example (figures plucked out of the air).

Raise the haircut high enough, and Greek banks simply can’t qualify for extra assistance at all.

Updated

The European Central Bank has just raised the risk of a Greek bank going under, argues George Hay, European Financial Editor at Reuters Breakingviews.

ECB hits Greek banks with tougher haircuts

Finally, the European Central Bank has announced its decision on the emergency support it provides to Greek banks.

And the ECB has maintained the cap on emergency liquidity assistance (ELA) at €89bn, but crucially it has “adjusted” the haircuts it applies to the assets which Greek banks hand over in return for funds.

In simple terms, that probably means the ECB is treating Greek government bonds as riskier, and valuing them as such when it calculates how much liquidity it can provide.

It’s another tightening of the screw on Greece – meaning some banks may find it even tougher to qualify for emergency liquidity assistance.

Here’s the full statement:

ELA to Greek banks maintained

The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece.

ELA can only be provided against sufficient collateral.

The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets.

In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.

The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate.

More reaction to follow…

Updated

Crisis meeting in Paris between French President and German Chancellor<br />epa04834368 French President Francois Hollande and German Chancellor Angela Merkel deliver a speech to the press following a crisis meeting at the Elysee Palace regarding Greece, in Paris, France, 06 July 2015. Speaking after a bilateral meeting in Paris, Hollande drew attention to the fact that ‘time is running out,’ while Merkel said it was up to Greek Prime Minister Alexis Tsipras to come up with proposals on the way forward at the eurozone summit. EPA/ETIENNE LAURENT” width=”1000″ height=”667″ class=”gu-image” /><br />
<figcaption> <span class=Merkel and Hollande tonight. Photograph: Etienne Laurent/EPA

Merkel returns to her favourite theme – that European solidarity and responsibility are linked.

Europe can only hold itself together if each country takes responsibility for itself, she says, insisting that Greece got a generous offer in the past.

Merkel: No basis for negotiations yet

Angela Merkel agrees that the door to talks with Greece is still open, despite yesterday’s No vote.

But Greece must put its proposals on the table this week. As things stand, there is no basis for talks on a new programme under the European Stability Mechanism (ie, a new aid programme)

Hollande also speaks of the values that hold Europe together. It is not just a monetary and finance construction.

Hollande: the door is still open to Greece

Francois Hollande sounds quite conciliatory, telling the audience in Paris that France and Germany respect the vote of the Greek people yesterday.

The door is still open to talks for Alexis Tsipras to make serious proposals.

Tomorrow’s eurozone crisis summit will allow Europe to define its position, based on the Greek proposals, he says, adding that time is running very short.

Updated

Merkel-Hollande press conference

Angela Merkel and Francois Hollande are speaking to the press now, following their talks on the Greek crisis.

Here’s some photos of Euclid Tsakalotos being sworn in as finance minister tonight:

Swearing in of new Greek Finance Minister Euclid Tsakalotos<br />epa04834322 Greek President Prokopis Pavlopoulos (C) and Greek Prime Minister Alexis Tsipras (L) during the swearing-in ceremony of new Greek Finance Minister Euclides Tsakalotos (R) at the Presidential Palace in Athens, Greece, 06 July 2015. Greek voters resoundingly rejected bailout terms in a referendum on 05 July. Athens said it was willing to resume talks with international creditors, and eurozone leaders were planning an emergency summit on 07 July to tackle the crisis. EPA/ARMANDO BABANI” width=”1000″ height=”667″ class=”gu-image” /><br />
<figcaption> <span class=Greek President Prokopis Pavlopoulos (centre) and Greek Prime Minister Alexis Tsipras (left) during the swearing-in ceremony of new Greek Finance Minister Euclides Tsakalotos (right). Photograph: Armando Babani/EPA
Swearing in of new Greek Finance Minister Euclid Tsakalotos<br />epa04834287 New Greek Finance Minister Euclides Tsakalotos during his swearing-in ceremony at the Presidential Palace in Athens, Greece, 06 July 2015. Greek voters resoundingly rejected bailout terms in a referendum on 05 July. Athens said it was willing to resume talks with international creditors, and eurozone leaders were planning an emergency summit on 07 July to tackle the crisis. EPA/ARMANDO BABANI” width=”831″ height=”1000″ class=”gu-image” /> </figure>
<figure class= Prokopis Pavlopoulos, Euclid Tsakalotos<br />Greek President Prokopis Pavlopoulos, left, shakes hands with the new Greek Finance Minister Euclid Tsakalotos during the swearing in ceremony at Presidential Palace in Athens, Monday, July 6, 2015. Following Sunday’s referendum the Greece and its membership in Europe’s joint currency faced an uncertain future Monday, with the country under pressure to restart bailout talks with creditors as soon as possible after Greeks resoundingly rejected the notion of more austerity in exchange for aid. (AP Photo/Petros Karadjias)” width=”1000″ height=”600″ class=”gu-image” /><br />
<figcaption> <span class= Photograph: Petros Karadjias/AP

Tsakalotos has an engagingly dressed-down style, even for a member of the current Greek government (frankly, he could pass for a eurocrisis liveblogger).

But he did make one concession to the majesty of the occasion…..

The US government has urged Europe and Greece to seek a compromise that will avoid Grexit.

White House spokesman Josh Earnest said it was in the best interests of America, and Europe, that the Greek crisis is solved. It is a “European challenge to solve”, he added.

Here’s a video clip of UK finance minister George Osborne updating the British parliament on the Greek crisis today:


Video: Greece referendum: government will protect UK economy, says George Osborne

Osborne has been criticised for not backing calls for Greece to be given debt relief.

Jonathan Stevenson, campaigns officer at the Jubilee Debt Campaign, said:

“The Chancellor was today given several opportunities by MPs from all parties to add his voice to calls for Greek debt cancellation, but he refused to take it. By sitting on the fence, rather than making the case for debt cancellation, he is failing to use his influence to help resolve this crisis, and thereby selling the people of Britain short.

The French stock market suffered from the Greek crisis today, with the CAC index shedding 2%.

Germany’s DAX fell by 1.5%, while in London the FTSE 100 index fell 50 points of 0.7%.

So, electronic red ink everywhere – but not a really serious selloff, given the scale of the shock last night when the referendum results came through.

Tsakalotos sworn in as finance minister

The deed is done. Euclid Tsakalotos has just been sworn in as the new Greek finance minister, by president Prokopis Pavlopoulos.

Updated

This Google Trends data shows how Greeks have been searching for information on leaving the eurozone, and on the implication of yesterday’s referendum:

Google Trends
Photograph: Google
Google Trends
Photograph: Google

Updated

Photos: Merkel and Hollande begin Greek talks

Over in Paris, Francois Hollande has welcomed Angela Merkel to the Elysee Palace for crisis talks about Greece, following yesterday’s referendum.

After a brief smile for the camera, they swiftly got down to business. We’re expecting a joint statement from the two leaders before dinner.

French President Francois Hollande welcomes German Chancellor Angela Merkel before talks and a dinner at the Elysee Palace in Paris
French President Francois Hollande welcomes German Chancellor Angela Merkel before talks and a dinner at the Elysee Palace in Paris Photograph: Philippe Wojazer/Reuters
Crisis meeting in Paris between French President and German Chancellor<br />epa04834201 German Chancellor Angela Merkel (2-L) attends a crisis meeting with French President Francois Hollande (unseen) at the Elysee Palace regarding Greece, in Paris, France, 06 July 2015. The leaders met for talks on Greece in the aftermath of the referendum. EPA/ETIENNE LAURENT / POOL MAXPPP OUT” width=”1000″ height=”667″ class=”gu-image” /><br />
<figcaption> <span class= Photograph: ETIENNE LAURENT / POOL/EPA
Crisis meeting in Paris between French President and German Chancellor
Photograph: ETIENNE LAURENT / POOL/EPA

German finance minister Wolfgang Schäuble has insisted that it didn’t have any “personal problems” with Yanis Varoufakis, Greece’s former finance minister.

But it is true that the other euro finance ministers didn’t share Varoufakis’s opinion on many points, Schäuble added.

(that’s via Associated Press)

Here’s Reuters first take on the news that Greek banks won’t reopen tomorrow:

Greek banks will remain closed on Tuesday and Wednesday and a daily limit on cash withdrawals will stay at €60, the head of the Greek banking association said.

Greek banks were shuttered all last week after the collapse of negotiations on an aid deal and had officially been due to reopen on Tuesday, before Greeks voted resoundingly to reject bailout terms sought by creditors in a referendum on Sunday.

“We decided to extend the bank holiday by two days – Tuesday and Wednesday,” Louka Katseli said after a meeting with finance ministry and banking representatives.

GREECE-ATHENS-BAILOUT<br />06 Jul 2015, Athens, Attica, Greece — (150706) — ATHENS, July 6, 2015 (Xinhua) — Greek pensioners without bank cards line up outside bank to withdraw up to 120 euros for the week, in Athens, July 6, 2015. Greek President Prokopis Pavlopoulos convened political leaders for a meeting to design new strategy after the no victory in the July 5 referendum on bailout terms. (Xinhua/Marios Lolos) (dzl) — Image by © Marios Lolos/Xinhua Press/Corbis” width=”1000″ height=”667″ class=”gu-image” /><br />
<figcaption> <span class=Greek pensioners without bank cards line up outside bank to withdraw up to 120 euros for the week, in Athens today. Photograph: Marios Lolos/Xinhua Press/Corbis

Who is Euclid Tsakalotos anyway?

File photo of Varoufakis and Tsakalotos leaving the Maximos Mansion after a meeting with PM Tsipras in Athens<br />Greek Finance Minister Yanis Varoufakis (front) and deputy minister for international economic relations Euclid Tsakalotos leave the Maximos Mansion after a meeting with Prime Minister Alexis Tsipras (not pictured) in Athens in this April 3, 2015 file photo. Tsakalotos will be sworn in as finance minister on July 6, 2015 after the resignation of Varoufakis, a Greek presidency source said. REUTERS/Alkis Konstantinidis/Files” width=”1000″ height=”667″ class=”gu-image” /><br />
<figcaption> <span class=Euclid Tsakalotos isn’t in the back seat any more…. Photograph: Alkis Konstantinidis / Reuter/Reuters

Last month, our Athens correspondent Helena Smith explained how the “Phlegmatic, professorial, mild-mannered” Euclid Tsakalotos could be the key to reaching a breakthrough in the Greek crisis.

And as Tsakalotos is Greece’s new finance minister, this theory is about to be tested…..

Here’s a flavour:

The son of a civil engineer who worked in the well-heeled world of Greek shipping, Tsakalotos was born in Rotterdam in 1960. When his family relocated to London, he was immediately enrolled at the exclusive London private school St Paul’s. A place at Oxford, where he studied PPE, ensued. The hurly burly world of radical left politics could not have been further away.

“My grandfather’s cousin was general Thrasyvoulos Tsakalotos who led the other side, the wrong side, in the Greek civil war,” he said of the bloody conflict that pitted communists against rightists between 1946-49.

“He expressed the fear that I might end up as a liberal, certainly not anything further to the left”…

Perish the thought…

Here’s the full piece:

The risk of Greece sliding towards a disorderly exit from the eurozone has “dramatically” increased following the No vote in last night’s referendum.

So warns rating agency Fitch tonight:

An agreement between Greece and its official creditors remains possible, but time is short and the risk of policy missteps, or that the two sides simply cannot agree a deal, is high.

Fitch adds that it will be “difficult” to reaching a deal before 20 July, when Greece must repay €3.5bn to the ECB.

New finance minister to be sworn in tonight.

(FILES) In this file picture taken on June 15, 2015 Greek minister of International Economic Relations Euclidis Tsakalotos arrives for a meeting at the Prime minister’s office in Athens. Greece on July 6, 2015 named economist Euclid Tsakalotos, its top negotiator in the stalled EU-IMF talks, as the country’s new finance minister, the president’s office said. AFP PHOTO / ARIS MESSINISARIS MESSINIS/AFP/Getty Images
Photograph: Aris Messinis/AFP/Getty Images

The Greek government has announced that the new finance minister, Euclid Tsakalotos, will be sworn in by the Greek president at 8pm this evening (6pm BST).

This will allow the Oxford-educated economist to attend tomorrow’s eurogroup meeting and present Greece’s case.

And his first task will be to approve a two-day extension to Greece’s capital controls, meaning banks stay shut until Thursday:

Updated

Greek banks to stay shut

Newsflash: Greece’s banks will not reopen on Tuesday, or indeed on Wednesday, according to the head of the Greek bank association.

The daily withdrawal limit remains at €60.

A couple more lines from George Osborne’s statement to parliament on Greece.

He tells MPs that Britain has sent tax officials out on secondment in recent years, to assist with revenue collection.

Unfortunately, tax collection has “almost dried up” since the crisis escalated.

And the chancellor says Britain can’t suspend pension payments to expats in Greece, to protect them from capital controls. That would risk triggering financial problems, if people had set up rent payments, and suchlike.

And the worst thing for Britain, and the world, would be a completely disorderly situation in the next few weeks. That’s why we are urging all sides to reach a solution.

(FILES) In this file picture taken on March 7, 2015 guest speaker Euclid Tsakalotos of Greek Syriza party addresses the Republican party Sinn Fein annual conference in Londonderry, Northern Ireland. Greece on July 6, 2015 named economist Euclid Tsakalotos, its top negotiator in the stalled EU-IMF talks, as the country’s new finance minister, the president’s office said. AFP PHOTO / PAUL FAITHPAUL FAITH/AFP/Getty Images
Back in March, Euclid Tsakalotos addressed the Republican party Sinn Fein annual conference in Londonderry, Northern Ireland. Photograph: Paul Faith/AFP/Getty Images

Back in Greece, Euclid Tsakalotos is being appointed as Greece’s new finance minister to replace Yanis Varoufakis, as had been rumoured.

One official told Reuters:

“Tsakalotos will be sworn in with the political oath as finance minister,”

As mentioned earlier, Tsakalotos is known as the brain behind Syriza’s economics policies, and has been handling the day-to-day negotiations with creditors for the last couple of months.

Updated

Labour MP Gisela Stuart asks:

Does Britain have any plans to fly euros into Greece to pay our pensioners, if they cannot get money out of the cash machines?

Osborne says that Britain has “a number of contingency plans, and we just hope we don’t have to put them into operation.”

Two years ago, when Cyprus imposed capital controls, Britain flew out large quantities of euros in military planes to pay soldiers based in the country.

Andrew Tyrie, a senior MP who chairs Britain’s influential Treasury Committee, asks George Osborne if he agrees that Greece can never repay all its debt, or return to sustainable growth at the current eurozone exchange rate.

Shouldn’t Greece issue its own currency?

Osborne won’t be tempted to give an opinion. We don’t like it when other counties tell Britain what currency to use, so it’s up to Greece to decide its own currency.

But, the challenge is balancing Greece’s desire to stay in the euro with the conditions that other eurozone members wish to put on it, he adds.

Osborne sums up the challenge facing Greece rather neatly.

There are two different timetables, the chancellor says — the political one, of meetings and negotiations to reach a possible deal, which proceeds quite slowly.

And there is the situation in the Greek banking sector, which is moving at a much faster pace.

The challenge for the eurozone and the challenge for greece is to bring those timetables together.

George Osborne says that tomorrow’s eurogroup and eurozone leaders meetings are crucial for Greece, although tonight’s Franco-German meeting (between Merkel and Hollande) is also important.

Chris Leslie, the shadow chancellor, warns that the European Union faces its most “fundamental test” in a generation.

George Osborne
George Osborne in parliament today Photograph: BBC Parliament

Osborne: Risks to Britain from Greece are growing

George Osborne, Britain’s chancellor of the Exchequer, is speaking in parliament now.

He met with prime minister David Cameron and Bank of England governor Mark Carney earlier today.

Osborne warns MPs that the prospects of a happy ending in Greece are diminishing, while the risks to Britain from Greece are growing, so it’s right to remain vigilant.

The financial situation in Greece will “deteriorate rapidly” if there is no sign of agreement at tomorrow’s talks.

Osborne says:

This is a critical moment in the economic crisis in Greece. No-one should be under any illusions. The situation risks going from bad to worse…

Osborne tells MPs that the UK government will continue to pay state pensions to expats in Greece “in the normal way” , but also warns that tourists should take sufficient money, and medicines, to cover their stay.

The government has already been in touch with 2,000 pensioners to help them switch to UK bank accounts.

The Department for Business is providing advice to firms having problems dealing with companies in Greece, he adds.

And Britain is boosting its consular operations in Greece.

Updated

With his duties at the finance ministry over, Yanis Yaroufakis can now turn his attention to more mundane issues – like his new book.

Greek Prime Minister Alexis Tsipras (C) Minister of State Nikos Pappas (L) and Government spokesman Gavriil Sakellaridis (2-R) leave the Presidential Palace after a meeting with party leaders in Athens on July 6, 2015. Germany dismissed Greece’s bid to clinch a quick, new debt deal after the country delivered a resounding ‘No’ to more austerity measures, appearing little moved by the surprise resignation of the Greek finance minister.IAKOVOS HATZISTAVROU/AFP/Getty Images
Greek Prime Minister Alexis Tsipras (C) Minister of State Nikos Pappas (left) and Government spokesman Gabriel Sakellaridis (second right) leaving the Presidential Palace after a meeting with party leaders in Athens today. Photograph: Iakovos Hatzistavrou/AFP/Getty Images

What does yesterday’s No vote mean for Europe? How can Angela Merkel respond? Will the departure of Yanis Varoufakis help?

Guardian columnist Jonathan Freedland and economics editor Larry Elliott explain all, in barely 180 seconds…..


Video: Three-minute update: the Greeks have spoken. What now for the rest of Europe?

German media are reporting that Alexis Tsipras and Angela Merkel have telephoned (as we flagged earlier), with both leaders agreeing that Greece will bring new proposals with him to the Euro group meeting which may help to overcome the crisis.

Further details of what they discussed have yet to emerge.

Also, a Spiegel correspondent in Greece, Giorgis Christides, is reporting that paper supplies are running out in Greece, with newspaper publishers saying they had enough paper left to print only up until next Sunday.

One publishing manager has even proposed halting the printing of books, until the shortage eases.

IMF "stands ready to assist Greece"

Lagarde sits for an interview at IMF headquarters in Washington.
Photograph: Jonathan Ernst/Reuters

Christine Lagarde, Managing Director of the International Monetary Fund (IMF), has just issued a short statement on Greece:

“The IMF has taken note of yesterday’s referendum held in Greece. We are monitoring the situation closely and stand ready to assist Greece if requested to do so.”

Snap reaction: Greece heading towards national unity?

The fact that the leaders of three Greek opposition parties have agreed to back prime minister Alexis Tsipras in the debt negotiations is an important development.

The strong No vote in Sunday’s referendum has strengthened Tsipras’s position, as he heads to Brussels tomorrow.

As well as representing his Syriza-ANEL administration, Tsipras now has the backing of New Democracy, To Potami and Pasok.

That only leaves the KKE communist party on the sidelines, and the extreme right-wing Golden Dawn.

Commentators reckon it could be the first step towards a new ‘national unity’ administration to tackle the crisis.

UK chancellor George Osborne due to address the UK parliament on the Greek situation shortly. My colleague Andrew Sparrow is covering it all in his politics liveblog.

The centre-left Pasok party has also agreed to back Alexis Tsipras in the looming debt negotiations.

Fofi Genimata, Pasok’s leader, did criticise the PM for only rallying support “at the eleventh hour”.

New Democracy, the centre-right opposition party, will also sign the common statement expressing support for Alexis Tsipras in negotiations with lenders.

ND was represented by Vangelis Meimaraki at today’s meeting, following the resignation of leader Antonis Samaras last night.

Meimaraki criticised Tsipras for calling today’s meeting so late, and said the PM bears responsibility for the crisis. But crucially, he did still sign the statement:

Ah, it appears that the communist KKE party will not support this joint statement from Greece’s political leaders:

(that’s Kammenos in the middle)

Greek political leaders to release joint statement

The meeting of Greece’s political leaders is breaking up in Athens, after more than six hours.

And Panos Kammenos, the head of the right-wing ANEL party which is coalition with Alexis Tsiprass’ Syriza, is telling reporters that the leaders will release a “joint statement”.

That will be a written assurance that the opposition leaders support Tsipras in his negotiations with creditors, Kammenos says – along with a reference to debt relief.

Stavros Theodorakis of the centrist To Potami party is also speaking. He confirms that a common statement will be drawn up. ahead of Tuesday’s emergency eurozone summit.

Updated

US stock markets have opened after the July 4 holiday long weekend and so far reaction to the Greek crisis is muted.

The Dow, S&P 500 and Nasdaq are all down around 0.5% in early trading.

So far US investors have largely shrugged off the Greek crisis and it looks like they same mood will prevail today. But anything can happen. During the last Euro-crisis US markets went on a roller coaster ride as investors worried about “contagion” and Greek woes spreading across Europe.

Yanis, we’re going to miss you

Alexis Tsipras must bring serious proposals to Brussels tomorrow to tackle the crisis created by his referendum, says German MEP Manfred Weber.

Weber, who chairs the centre-right EPP Group in the European Parliament, has also tweeted his concern that the “No” victory will drive nationalism in Europe.

The heads of Greece’s political parties are still meeting with president Pavlopoulos, as they discuss their response to Sunday’s referendum.

Simon Marks of MNI is tweeting from outside the talks:

Yanis Varoufakis does know how to make an exit (if not a Grexit)…..

Greece’s maverick finance minister Yanis Varoufakis, who announced his surprise resignation leaves the Ministry of Finance with his wife Danai on the back of a motorbike in downtown Athens, on July 6 2015. Germany dismissed Greece’s bid to clinch a quick new debt deal after the country delivered a resounding ‘No’ to more austerity, appearing little moved by the surprise resignation of the Greek finance minister. AFP PHOTO / ANDREAS SOLAROANDREAS SOLARO/AFP/Getty Images
Greece’s maverick finance minister Yanis Varoufakis, who announced his surprise resignation leaves the Ministry of Finance with his wife Danae on the back of a motorbike in downtown Athens. Photograph: Andreas Solaro/AFP/Getty Images
Greece’s maverick finance minister Yanis Varoufakis, who announced his surprise resignation leaves the Ministry of Finance with his wife Danai on the back of a motorbike in downtown Athens, on July 6 2015.
Photograph: Andreas Solaro/AFP/Getty Images

Updated

Bank closures could continue for a few more days – report

BREAKING:

Greece will issue a new decree today to extend the bank holiday for a few more days, bankers are telling Reuters.

Greece to present new proposals on Tuesday

Sigmar Gabriel’s warning that Greece faces insolvency came as Alexis Tsipras and Angela Merkel ended their telephone call.

Greek officials say that Tsipras agreed to present a “comprehensive” Greek proposal for an aid deal at Tuesday’s emergency leaders summit.

Updated

Germany’s vice chancellor is warning that a third Greek bailout would include taxing conditions, as it would be issued under the European Stability Mechanism:

Gabriel is also worried that other bailed-out eurozone nations will demand help, if they see Greece getting relief:

Greece threatened with insolvency, says Germany’s Gabriel

The hard line from Germany continues.

Deputy chancellor and economy minister Sigmar Gabriel has said Greece is now threatened with insolvency. And if it wants to stay in the eurozone it has to present proposals that go beyond what it has offered before.

Yanis Varoufakis says he hopes Euclid Tsakalotos gets the hot seat in the finance ministry.

Euclid does have decent credentials; a PhD in economics from Oxford, followed by academic postings, and a reputation as the “big brain” of Syriza’s economic policy making.

Standard Chartered has already said his appointment would make a positive outcome more likely (see here)

And he’ll have lots to talk to the UK chancellor about, too:

Updated

The Kremlin has issued a brief statement on the telephone call between Greek prime minister Alexis Tsipras and Russian President Vladimir Putin:

On Greece’s initiative, Vladimir Putin had a telephone conversation with Prime Minister of Greece Alexis Tsipras.

Mr Putin and Mr Tsipras discussed the results of the Greek referendum on international creditors’ conditions for providing financial aid to Athens, and discussed several matters concerning further development of bilateral cooperation.

Mr Putin expressed his support for the Greek people in overcoming the country’s current difficulties.

Was it the Daily Telegraph that did it?

The Wall Street Journal has an intriguing theory to explain Yanis Varoufakis’s shock resignation this morning.

They say that Alexis Tsipras decided to jettison his finance minister after he told the Telegraph that Greece could start issuing its own IOU notes to run alongside the euro, if the liquidity squeeze choking Greece isn’t lifted.

Here’s that interview:

Daily Telegraph: Defiant Greeks reject EU demands as Syriza readies IOU currency

Lunchtime summary

Greek Prime Minister Alexis Tsipras, second from right, arrives for a Greek political leaders meeting in Athens this morning.
Greek Prime Minister Alexis Tsipras, second from right, arrives for a Greek political leaders meeting in Athens this morning. Photograph: Petros Giannakouris/AP

Time for a recap.

Yanis Varoufakis has ended a dramatic five-month stint as Greece’s finance minister, resigning just hours after Greece delivered a resounding No to the bailout conditions pushed by the country’s creditors.

Varoufakis said he fell on his sword after being:

made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my … ‘absence’ from its meetings.

And he remained resolute to the end, declaring:

I shall wear the creditors’ loathing with pride.

He also hailed last night’s referendum results as “a unique moment when a small European nation rose up against debt-bondage.”

His successor hasn’t been announced yet; Euclid Tsakalotos, who took over day-to-day management of negotiations, is one frontrunner.

Greek leaders have been locked in talks for hours this morning, discussing their next move.

Prime minister Alexis Tsipras has been busy – he’s speaking with German chancellor Angela Merkel right now.

Earlier, he held a phone call with Russian president Vladimir Putin.

The scale of yesterday’s No vote has stunned Europe this morning, as leaders prepare for Tuesday’s emergency summit.

Italy’s Matteo Renzi has just posted on Facebook that Europe must find permanent solution to the Greek crisis and go beyond austerity.

But European Commission vice-president Valdis Dombrovskis has warned that the No vote makes the situation even more complicated.

Angela Merkel and Francois Hollande are due to meet tonight in Paris to discuss the crisis. UK prime minister David Cameron has already held a meeting in London to discuss the impact on Britain response.

The Greek banking system continues to creak after a week of capital controls; some ATM machines are now only dispensing €50 per day, rather than the €60 limit.

The European Central Bank will hold a conference call later to discuss the emergency liquidity assistance it provides to Greece, which was capped eight days ago.

In the European markets, shares have fallen as the threat of a disorderly Grexit rises.

Here’s the situation at lunchtime in the City:

  • FTSE 100: down 40 points at 6545, -0.6%
  • German DAX: down 170 points at 10890, -1.5%
  • French CAC: down 89 points at 4718, -1.9%

The yields (interest rates) on Spanish and Italian government bonds have risen today, as investors view them as riskier. But it’s not a massive sell-off (the yield on Spanish 10-year debt has risen from 2.22% to 2.35% this morning)

Jens Nordvig of Japanese bank Nomura argues:

Those betting on run-away contagion as a result of Greece getting on an exit path will have to re-think….

The so-called domino theory is looking increasingly old-fashioned.

Meanwhile Rosie Scammell has helpfully done a translation of the comments from Italian prime minister Matteo Renzi on his Facebook page.

There are two areas…to confront quickly in European capitals and Brussels. The first regards Greece, a country that is in a very difficult economic and social situation. The meetings tomorrow must indicate a definitive road to resolve this emergency.

The second – even more fascinating and complex, but no longer postponable – is that of Europe. For months we have been insisting on discussing not only austerity and budgets, but growth, infrastructure, common policies on migration, innovation, the environment. In one word: politics, not only parameters. Values, not only numbers.

If we stay at a standstill, prisoners of rules and bureaucracy, Europe is finished.

Rebuilding a different Europe will not be easy, after what has happened in recent years. But this is the right moment to try and do it, all together. Italy will do its part.

The downbeat comments about the prospects of a new deal with Greece, notably from Germany and the European Commission’s Valdis Dombrovskis, have seen the euro lose nearly all the gains it made after news came in of Yanis Varoufakis’ resignation as Greek finance minister.

Euro midday
Euro loses early gains against the dollar. Photograph: Reuters/Reuters

And here’s AP’s summary of the earlier comments from Angela Merkel’s spokesman about the conditions not being there for new negotiations with Greece:

Chancellor Angela Merkel’s spokesman says Germany sees no basis at present for entering negotiations on a new bailout program for Greece, but that the door remains open.

Steffen Seibert said Monday that Germany respects the “clear ‘no’ vote” by Greeks against austerity measures demanded by creditors and that “the door for talks always remains open.”

However, he said the conditions are “not there at present to enter negotiations on a new program.” He said the “no” vote is a vote against the principle still supported by Germany that solidarity requires countries to take responsibility.

Seibert says Europe will explore what possibilities there are to help Greek citizens and “a lot will depend on what proposals the Greek government now puts on the table.”

Merkel arrives at the chancellery in Berlin this morning.
Merkel arrives at the chancellery in Berlin this morning. Photograph: Fabrizio Bensch/REUTERS

Greek debt reduction not on Germany’s agenda

Following the downbeat comments earlier from German government spokesman Steffen Seibert, the country’s finance ministry has now said a reduction in Greece’s debt mountain is not on Germany’s agenda. Associated Press reports:

Ministry spokesman Martin Jaeger said “our position is well-known … a debt cut is not an issue for us.”

He said there were no grounds for a debt restructuring given that Greece has yet to set out fresh proposals for financial aid.

Last week, the International Monetary Fund, which has been a major creditor of Greece over the past five years, suggested that debt relief for Greece is necessary.

Jaeger says Europe decided that economic reforms coupled with aid was a better route to a sustainable future for Greece, adding that it was working well in the country, until the end of last year.

Jaeger said he didn’t see much need to change this approach, noting the success of other bailed-out countries.

Italy’s Renzi says permanent solution must be found

Another sign we’re in the age of social media dominance: Italian prime minister Matteo Renzi has said Europe must find a permanent solution to the Greek crisis – via a Facebook post.

(Greek finance minister Yanis Varoufakis earlier announced his resignation by Twitter/blog)

Speaking of Russia, the country has said Greece and its creditors should reach a compromise as soon as possible. Bloomberg reports it is watching developments “closely” following the referendum:

“We treat with respect the voice raised during the plebiscite,” Kremlin spokesman Dmitry Peskov told reporters on a conference call on Monday. Russia would like Greece to take decisions that contribute to “social and economical stability in the country,” he said.

Greece has never asked Russia for financial aid in dealing with the debt crisis, Peskov said. Greek issues might be discussed on the sidelines of a BRICS summit in Ufa this week of leaders from Brazil, Russia, India, China and South Africa, though they are not on the official agenda, he said.

Full story here.

And this meeting of Greek party leaders may never end….

Helena Smith adds:

Reports now coming through that Tsipras has broken away from meeting with other party leaders to talk with German chancellor Angela Merkel.

Greek television channels have been breaking into scheduled programmes to announce that prime minister Alexis Tsipras will cut short the meeting currently taking place of political party leaders at the presidential palace to speak with Russia’s Vladimir Putin, reports Helena Smith. (We mentioned this possiblity earlier). Helena writes:

The two men will speak by phone. The cross party meeting of political leaders will then resume.

Interestingly, says, Helena, the Greek energy minister, Panagiotis Lafazanis, who has close ties with Moscow and heads the militant wing of Tsipras’ Syriza party, has also rushed to the presidential palace.

Tsipras and Putin in June
Tsipras and Putin in June Photograph: TASS / Barcroft Media/TASS / Barcroft Media

Meanwhile in Thessaloniki, people are hoping the no vote will prompt a resolution, finally, to the financial crisis. Angelique Chrisafis reports:

Stefanos Dimos was standing at his Thessaloniki flower shop, which for 62 years has been arranging bouquets to mark the births, deaths and weddings of locals in Greece’s second city. He had been weathering the crisis for five years, but this morning, after Greece’s resounding no vote, he said he felt optimistic.

In five years of austerity, Dimos had seen his trade fall by 50% and had to lay off two staff. Since last week the capital controls and bank closures that are still in place have seen his trade drop 90%, despite the summer wedding season. “The economy has virtually stopped,” he said. But like many “No” voters, Dimos, 52, held the prime minisiter Alexis Tsipiras to his word that there would be a new negotiation and a better deal for Greece. “We’re optimistic that there will be an agreement that is good for Greece and good for Europe. The “No” vote was a good result because it sent a clear message that we can’t have any more austerity. I see people foraging in bins here every day for food, something that didn’t happen before the crisis.”

He added: “We’re hoping that the deal will be improved, that debt will be eased, allowing business activity to start up again. Things have ground to a halt.”

Another florist in the city centre said he was happy with last night’s strong “No” result, even though he himself had tentatively voted “Yes”. He said: “I voted yes because I wanted Greece to stay in Europe. But I’m still pleased today because — like everyone else — I don’t want more austerity. I’m happy with the outcome as it voiced our feeling that we can’t take it any more. Austerity has been a dead-end for growth and for our economy.”

Outside a nearby bank, a small queue of pensioners gathered early to access limited amounts to their pensions, and a small line of others waited to withdraw their daily €60. One lawyer who had voted yes said: “There’s an urgency in getting a new deal as fast as possible because banks are facing a real liquidity problem, they can’t last much longer. Any new deal now has to satisfy all the other eurozone members, it’s not going to be easy. In fact, it’s going to be very difficult here.”

Constantin Petropoulous, 88, and his wife Georgia, 80, were standing at the back of the queue, waiting to access a portion of their monthly pensions that had shrunk to €600. Like many in the city, they had spent decades as labourers in Germany, where Constantin had worked for Bosch in Stuttgart, returing to Thessaloniki to later work in a shop. “The real challenge for Greece this week is this feeling of the unknown, the uncertainty,” he said. “Whether the vote had been yes or no, things would have been difficult. We know it will be a very hard week. We just have to be patient.”

The European Central Bank’s governing council is due to discuss emergency funding to Greek banks in a telephone call later this afternoon, sources have told Reuters.

In Athens, cash machines are increasingly failing to dispense the full amount allowed under the current capital controls. John Hooper reports:

A tour of banks in the capital this morning showed that, while depositors are notionally allowed €60 a day under the capital controls, increasingly €50 is the norm. That could help explain why the government is reportedly confident that Greece’s ATMs can continue to dole out cash till Friday.

Of seven cash machines visited, only two were dispensing the full amount, ostensibly because the banks are running out of €20 notes. At Alpha Bank on Alexandras Avenue, Irene Abatzi said: “I don’t care if it’s fifty or sixty, just so long as the machine carries on giving out cash.”

A woman withdraws money from an ATM machine while others speak to an official of the bank in Athens.
A woman withdraws money from an ATM machine while others speak to an official of the bank in Athens. Photograph: Louisa Gouliamaki/AFP/Getty Images

Elsewhere, customers were less phlegmatic. A man in the up-market quarter of Kolonaki exploded with rage when he found out that a payment had not been made to his account, and that he could not withdraw anything.

The banks were opening their doors to pensioners, but in at least two parts of the city the pensioners were being told that only those who failed to get their pensions last week could be served. The deputy finance minister, Nadia Valavani, highlighted the intensity of the cash squeeze in a statement on Sunday, telling safe deposit owners they could retrieve valuables – but only with a bank employee standing over them to ensure they did not take out cash as well.

In Spain Pablo Iglesias, leader of the anti-austerity party Podemos, welcomed the results of the Greek referendum but cautioned those who sought to draw parallels between Spain and Greece. Ashifa Kassam in Madrid reports:

“It’s a very clear message,” Iglesias told Spanish radio Cadena Ser. “The citizens of Greece have said that austerity isn’t the way to end the economic crisis.”

He called on Europe’s leaders to reach an agreement with Greece, pointing to the resignation of Greek finance minister Yanis Varoufakis. “Now there is no excuse. The time has come for sensibility and to find a reasonable agreement.”

On Varoufakis’ resignation he said: “It hurt me a lot because I think he’s an excellent economist….but I think the act of resigning is honorable as it will help the push for the agreement that his country needs.”

With a general election due in Spain by the end of the year, Iglesias carefully chose his words, knowing that the situation in Greece could drive moderate voters away from his party. “We have a great friendship with Syriza, but luckily, Spain is not Greece. We’re an economy with much more weight in the eurozone, we’re a country with a stronger administration and with a better economic situation,” he said, taking aim at the many comparisons being drawn between Spain and Greece. “The circumstances are different and I think it makes no sense to draw these parallels.”

Podemos leader Pablo Iglesias.
Podemos leader Pablo Iglesias. Photograph: Susana Vera/Reuters

The situation in Greece has been used by the governing People’s Party to justify the austerity measures imposed during the height of the economic crisis. “Fortunately Spain has a prime minister who said no to the bailout and instead undertook reforms,” PP vice-president Fernando Martínez-Maillo told broadcaster Radio Nacional de España on Monday. “Thanks to those reforms…we’re in a situation of economic growth and job creation.”

Spain’s finance minister, Luis de Guindos said on Monday that although the No vote made the situation more complex, everyone wants Greece to “stay in the euro.” His government is ready to talk about a third bailout, he added, but only if Greece was willing to play by the rules.

Eleni Varvitsiotis of Greek newspaper Kathimerini is not very upbeat about Dombrovskis:

More from Dombrovskis:

EC’s Dombrovskis says no vote complicates things

European Commissioner vice president Valdis Dombrovskis has said the no vote complicates the situation, but Greece’s place remains in the eurozone.

My colleague Jennifer Rankin notes:

Updated

Britain has called on Greece and its eurozone partners to sit down together and find a sustainable solution, Reuters reports.

Prime minister David Cameron’ spokeswoman said finding a solution was clearly in Britain’s best interests, and Britain supports a 28 member EU.

Meanwhile the ECB’s Ewald Nowotny, also president of the National Bank of Austria, said any new Greek deal needs time. To expect an agreement within two days – as Greece had suggested – is “illusionary.”

And regarding the emergency liquidity assistance for Greek banks:

Greek prime minister Alexis Tsipras has reportedly already been on the phone to European Central Bank president Mario Draghi – not surprising when the ECB has to decide its next move with regard to Greek banks.

Meanwhile Tsipras will apparently also speak to Russian president Putin on the phone before the end of the day.

And here’s a bit of a dampener on things, from Austria’s Finance Minister Hans Joerg Schelling:

But he did say he hopes talks would be easier now Varoufakis has gone.

Updated

What happens next?

So what happens next, for Greece’s bailout negotiations, the country’s banks, its future in the eurozone? Here is our updated assessment of where we stand:

And as a tribute to Yanis Varoufakis brief but colourful period as Greek finance minister, here is a piece of video from 1993. As an economics professor he was discussing government policies and, topically, austerity.

Varoufakis
Varoufakis in 1993 Photograph: Greek TV via Youtube

Spain’s economy minister Luis de Guindos has echoed that Greece should remain part of the eurozone and the euro is irreversible.

He said the Spanish government was open to negotiating a third bailout, and any new Greek package should include a comprehensive analysis of Greek needs.

(Quotes courtesy Reuters).

Luis de Guindos.
Luis de Guindos. Photograph: Andrea Comas/Reuters

Angela Merkel’s spokesman say conditions for Greek talks not in place

Conditions for talks with Greece are not in place, German government spokesman Steffen Seibert has said.

But Greece is part of the eurozone and the government must act to make sure this remains the case. Germany is now waiting for the new proposals from Greece:

Updated

Donald Tusk, President of the European Council, has confirmed this morning’s conference call and its participants:

George Osborne to make Commons statement on Greece

UK chancellor George Osborne is set to make a statement about Greece in the Commons at around 3.30 today. Earlier Osborne met prime minister David Cameron and Bank of England governor Mark Carney to discuss the crisis:

Greek banks can keep allowing withdrawals until Friday, depending on what happens with the ECB, the BBC’s Robert Peston has reported:

Meanwhile, earlier:

The Eurogroup – which as we said earlier is to meet on Tuesday – has said it expects new proposals from Greece. In a statement it said:

The Eurogroup will discuss the situation following the referendum in Greece that was held on 5 July 2015. Ministers expect new proposals from the Greek authorities.

The referendum was held after the Greek government unilaterally withdrew from ongoing negotiations with the institutions (the European Commission, the European Central Bank and the International Monetary Fund) on Greece’s comprehensive reform plan, foreseen under the agreement of February 2015.

Greece likely to be on BRICS summit agenda

There has been no official reaction from the Kremlin yet about the Greek vote, writes Shaun Walker, but Russia has been watching the drama unfold between Athens and Brussels with some interest, and Greek prime minister Alexis Tsipras has made two visits to Moscow in recent months to make the point that Greece could seek alternative creditors. He has left with little in the way of concrete commitments, however.

A summit of the BRICS group of nations (Brazil, Russia, India, China, South Africa) will be held in the Russian city of Ufa later this week and Greece is likely to be on the agenda. Various ideas have been floated in recent weeks, including making Greece a member of the club, which would give it access to loans from the newly founded BRICS development bank.

However, while Moscow might be keen on the idea for political reasons, Russia is also still in a difficult financial situation, and the other BRICS members may well be less keen.

The Eurogroup will be meeting tomorrow ahead of the eurozone leaders’ summit, its president Jeroen Dijsselbloem has just said:

As the European Central Bank decides about liquidity for Greek banks – ahead of the July 20 date for the country to repay €3.5bn on a bond held by the ECB – economist Dario Perkins at Lombard Street Research points to one possible outcome:

Updated

UK papers have reflected the uncertainty over the what comes next for the eurozone, as Roy Greenslade reports:

Crisis, chaos, turmoil. Today’s British national newspaper headlines reflect the seriousness of the situation facing the European Union and the eurozone after the referendum vote in Greece.

Several of the newspapers also convey the sense of bafflement at what happens next: “Europe faces crisis after gambling Greeks say No” (The Times); “Europe in turmoil as Greeks vote No” (Daily Telegraph); “Greek ‘no’ plunges Europe into crisis” (The Independent); “Greeks vote ‘no’ – Europe shudders (i); and “Greece’s eurozone future hangs in balance as No vote set to triumph” (Financial Times).

The Daily Mail and Daily Express engage in some prediction: “Meltdown: EU in crisis as Greece votes ‘no’ to crippling cuts and heads for eurozone exit” and “Greece ready to leave the Euro after day of chaos”.

Two prefer to state the bald fact: “Greek voters defy Europe” (The Guardian) and “Greeks vote no” (Metro). And the red-tops, being the red-tops, indulge in puns: “Greeky bum time” (The Sun); “Rhodes to ruin?” (Daily Mirror); and “It’s Greece frightenin’.” (Daily Star).

But there is nothing to smile about in the editorials, several of which refer to it, predictably, as a “Greek tragedy.” Newspapers opposed to the EU or, at the least, to the euro, barely conceal their delight at the possible unravelling of the eurozone.

Full story here:

Here’s Alexis Tsipras and his colleagues at their meeting this morning to discuss their next move after the no victory in the referendum:

Tsipras arrives for the meeting.
Tsipras arrives for the meeting. Photograph: Louisa Gouliamaki/AFP/Getty Images
Meeting begins.
Meeting begins. Photograph: Petros Giannakouris/AP

Earlier Tsipras met Greek president Prokopis Pavlopoulos:

Tsipras visits Pavlopoulos.
Tsipras visits Pavlopoulos. Photograph: Imago / Barcroft Media/imago/Wassilis Aswestopoulos

ECB member and Bank of France governor Christian Noyer has been commenting on Greek finances:

This refers to Greek debt held by the ECB, which he says cannot be restructured because it would be monetary financing of a state.

According to the bookies, Greece will not leave the eurozone this year but Britain is likely to vote to leave the EU in a referendum:

European Commission president Jean-Claude Juncker will hold a conference call with the Eurogroup and European Central Bank (among others) this morning.

In a statement the commission said it “takes note of and respects the result of the referendum in Greece,” and added:

President Juncker is consulting (…) with the democratically elected leaders of the other 18 Eurozone members as well as with the Heads of the EU institutions. He will have a conference call among the “Euro-Institutionals” (with the President of the Euro Summit, the President of the Euro Group and the President of the European Central Bank) on Monday morning. He intends to address the European Parliament in Strasbourg on Tuesday.

On Tuesday 7 July at 18h a special Euro Summit will take place to discuss the situation after the referendum in Greece.

Updated

Fabio Sdogati, professor of International Economics at Politecnico di Milano, the largest technical university in Italy, is clearly a Varoufakis fan:

More from Simon Goodley on IG’s trading floor:

Despite Greece being the world’s biggest financial story since, er, the last time Greece was the world’s biggest financial story, there is surprisingly little activity in the equity markets, where volumes are low. According to Alastair McCaig, market analyst at IG, this is because investors don’t like uncertainty and nobody knows what is going to happen next.

He said: “Ask politicians what is happening with Greece and they say ‘I don’t know’. Markets are the same. Greece has surprised at every opportunity. Last week they surprised by calling a referendum. This week they surprised by voting ‘no’. They have the propensity to surprise again”.

Added to that, there is also the wobbly Chinese stock market, which is causing further nervousness (and which here they suspect is a bigger markets story) plus the fact that we are currently inhabiting a month between May and September – a section of the year the City tends to like to take off.

European markets down, Greek bond yields higher

European markets remain in the red, but are not in freefall:

European markets
European markets Photograph: Reuters/Reuters

The bond markets are more volatile.

Greek 10 year bond yields are back above 17% at 17.3% while two year yields are up 13 percentage points at a hefty 48% (although Reuters is reporting no trading is going on.)

Meanwhile Spanish 10-year yields are up marginally at 2.3%, Italy’s are at 2.32% and Portugal at 3%.

Updated

So, is Grexit more or less likely now given the developments of the last few hours:

However:

Euclid Tsakalotos, the Oxford-educated chief spokesman of the economics ministry, has been tipped as the most likely replacement for Yanis Varoufakis, writes Jennifer Rankin.

“He is one of the most sensible/moderate figures in Syriza and his appointment, if confirmed, would increase the chances for a sensible negotiation and a positive outcome,” Demetrios Efstathiou of Standard Chartered bank said.

Euclid Tsakalotos (left) with Yanis Varoufakis.
Euclid Tsakalotos (left) with Yanis Varoufakis. Photograph: Alkis Konstantinidis/REUTERS

Back in the bond markets and UK 10-year gilt yields have hit their lowest level since mid-June, with investors seeing the UK as something of a haven.

The no vote raises the risk of Greece leaving the eurozone, but the basis for a dialogue between the two sides still exists, according to French finance minister Michel Sapin.

He also said discussions of possible debt relief were “not taboo” and said France had put this proposal on the table. MNI reports:

“The ‘no’ carries a considerable risk for Greece,” Sapin told Europe 1 radio. “In this risk for Greece is the risk of an exit from the euro. But there is nothing automatic.”

Sapin said that “there is on the table a basis for dialogue but it is up to Greece to show that it will take this dialogue seriously.” He said it was “up to the Greek government and Mr. Tsipras to make new proposals as quickly as possible.”

Sapin declined to comment on the possible reaction of the European Central Bank to the Greek vote, other than to say that “there is a level today of liquidity. This level of liquidity cannot be reduced.”

Michel Sapin.
Michel Sapin. Photograph: CHAMUSSY/SIPA/REX Shutterstock/CHAMUSSY/SIPA/REX Shutterstock

Greek bond yields are currently up 139 basis points at 16.24% but they have been higher this morning:

View from the trading room floor

“The Greek bloke’s resigned. He’s run rings round ‘em.”

That was how one IG trader was overheard explaining the news of the resignation of Greek finance minister Yanis Varoufakis following Sunday’s referendum, as he chatted on the phone in early trading this morning, writes Simon Goodley.

To say the City is surprised by the news coming out of Greece is an understatement. Like eurozone officials it had expected that last week’s trailer of capital controls would be enough to get the country to vote yes, and IG priced a yes vote as a 60% chance last week.

So what now? Chris Beauchamp, senior market analyst at IG, said: “[German stock market] the Dax has opened down but is surging back – much like it did last Monday and much like the euro is doing. It is coming back on Varoufakis’s resignation – possibly more hope than expectation, but if you take out the most irritating man in the room then you might get a more reasonable response from Germany and France”.

Updated

And here’s a (typical) reaction from London mayor Boris Johnson:

Some timings for German comments on the Greece situation, courtesy Reuters:

German chancellor Merkel arrives at the Chancellery in Berlin this morning
German chancellor Merkel arrives at the Chancellery in Berlin this morning Photograph: Fabrizio Bensch/Reuters

Elsewhere German industrial orders fell by just 0.2% in May, better than an expected 0.4% decline, despite the current eurozone crisis.

Economist Dr. Andreas Rees at UniCredit said:

After two consecutive and strong rises, German new orders in the manufacturing sector declined a moderate 0.2% month on month. The latest decrease is neither driven by a fundamental deterioration nor by the events in Greece.

The direct macro impact is limited, as only 0.4% of all German exports are shipped to Greece. The same is true for other eurozone countries. The most likely scenario going forward is that German companies (and their peers in the eurozone) will resume momentum in the next few months.

Italian Prime Minister Matteo Renzi is due to meet his finance minister, Pier Carlo Padoan, at 9.30am (8.30am BST) today to discuss the Greek referendum, writes Rosie Scammell. As the result came in last night, Padoan took to Twitter to share his views on the vote:

(Italy has always worked for a solid and more integrated Europe. It was true yesterday and it will still be true tomorrow.)

(Shared rules by European peoples serve to guarantee the same objectives: affluence through economic growth and employment )

(Reforms and investments are in all countries the key to regain sustainable growth)

The Greek government spokesman has just said Varoufakis’ replacement will be announced after the meeting of party political leaders. That would suggest the leftist-led government is attempting to find consensus over the issue, Helena Smith reports.

The spokesman said.

As finance minister Yanis Varoufakis placed a leading role in negotiations from the government’s first day. The prime minister feels the need to thank him for his ceaseless effort to promote the positions of the government and the interests of the Greek people under very difficult circumstances. After the meeting of political leaders, his replacement will be announced.

Updated

Tsipras to decide on Varoufakis replacement

Over in Athens our correspondent Helena Smith says prime minister Alexis Tsipras is now debating who to replace his finance minister with. She writes:

Talks are being held between deputy prime minister Yannis Dragasakis and Tsipras as I write with the sole purpose of deciding who should replace Yanis Varoufakis.

Dragasakis, a former Marxist who is also an economist, is himself one of the contenders. The low-profile politician has had broad oversight of Greece’s economic policy over the last five months – and had expressed growing displeasure with Varoufakis’ tactics. But the 67-year-old may well wish to remain behind the scenes where he has a particularly powerful role.

That leaves the economics professor Giorgos Stathakis, currently the economics minister and the Oxford-educated economist Euclid Tsakalotos, who has had a lead role coordinating negotiations.

George Chouliarakis, the Manchester University academic heading the Greek government’s negotiating team – whose moderate views and comportment has been particularly well received by creditors – is reportedly also being considered.

Banking shares are among the major fallers, given the prospect of contagion from the struggling Greek banking system.

Deutsche Bank is down 2.7%, Santander 2.6% and Italy’s Monte Dei Paschi is 3.5% lower. In the UK Barclays and HSBC have both fallen around 1.2%.

But generally the reaction so far has been fairly subdued – at least compared to the expected falls.

Of course, the surprise resignation of Yanis Varoufakis has probably helped limit the damage, since it could well make negotiations easier when leaders meet on Tuesday.

European markets open lower

After shares fell sharply in Asia after the no vote in the Greek referendum, European markets are following suit.

The FTSE 100 is currently down just over 1% or 70 points but this is less than the 130 originally expected. Early days yet, of course.

Germany’s Dax is down around 2%, Spain’s Ibex is off 2.2%, Italy’s FTSE MIB is 2.8% lower and France’s Cac has fallen 2%.

Other events to watch out for today:

  • The UK government and the Bank of England are to review continency plans
  • Germany’s Angela Merkel and France’s Francois Hollande are to meet tonight ahead of a leaders’ summit on Tuesday
  • Greek prime minister Alexis Tsipras is putting together his new negotiating team

More reaction, this time from Italy. Rosie Scammell writes:

Italy’s newspapers are today awash with Greek flags, with most leading on the impact the no vote will have on Europe. “Greece, a slap in Brussels’ face” reads the front page of left-leaning daily La Repubblica, while Italy’s leading daily, Corriere della Sera, writes “The Greek NO scares Europe”.

In covering the resignation of the Greek finance minister, Yanis Varoufakis, Italian media have honed in on his fashion choice. Varoufakis appeared at a press conference in a grey t-shirt on Sunday night, before today announcing his decision to quit. Italians themselves are still getting used to the casual clothing choices of their own prime minister, Matteo Renzi, who often makes public appearances in jeans.

Corriere Della Sera
Corriere Della Sera Photograph: Corriera Della Sera
La Repubblica
La Repubblica Photograph: La Republbica

Bond yields rise after referendum result

Yields on government bonds in Spain, Italy and Portugal are moving higher after the no vote, not surprising given the implications of Greece moving closer to a eurozone exit on these countries:

Updated

European Central Bank to meet on Greece

One of the key decisions of the day will be made by the European Central Bank when it looks at whether to continue providing liquidity to Greek banks. If not, they will struggle to reopen on Tuesday, as Greek politicians (notably the now departed Yanis Varoufakis) had promised. Michael Hewson, chief market analyst at CMC Markets UK, said:

The ball now lies firmly in the ECB’s court as the prospect of Greek banks running out of money in the coming hours is likely to increase, with the prospect that the ECB will cut off Greek banks in the process causing a collapse of the Greek banking system, and in the process highlighting the significant structural flaws of the euro.

In a proper monetary union it would be inconceivable for the US to cut off Florida or for the UK government to cut off Scotland from their lender of last resort, but if the ECB ends ELA then that is precisely what will happen to Greece, either later today, or later this week.

Updated

The surprise resignation of Yanis Varoufakis comes ahead of a meeting tomorrow between eurozone leaders to discuss their next steps following the no victory in the referendum.

That could of course make things easier for Greek prime minister Alexis Tsipras in any discussions with his peers. Varoufakis himself said as much: “I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my … ‘absence’ from its meetings.” Over the weekend he had accused Greece’s European creditors of “terrorism.”

And in keeping with his tenure as finance minister he ended with a jibe at his tormentors: “I shall wear the creditors’ loathing with pride.”

His departure was not the first in the wake of the vote – yesterday Antonis Samaras, the head of the opposition rightwing New Democracy party who campaigned for the yes side, stepped down.

But the decision by the motorcycle-riding, game-playing Varoufakis has far more significance, as shown by the fact the euro recovered some of its lost ground in the wake of the announcement:

Euro July 5
Euro July 5 Photograph: Reuters/Reuters

Updated

Here’s an early call on how European markets are expected to open, courtesy IG:

Summary

I’m handing over our continuing coverage of events in Greece and across Europe to my colleague Nick Fletcher. Here’s a short summary of how events stand at the moment:

  • The Greek finance minister Yanis Varoufakis has resigned, despite a no vote in the referendum. In a blog post on his website Varoufakis flagged that his decision was prompted in part by “some European participants” expressing a desire for his role to end in any further negotiations.
  • Alexis Tsipras has called for a key political meeting to take place in Greece on Monday morning at 10:00am to discuss the outcome of the referendum.
  • Greeks voted overwhelmingly for a no vote in the referendum, with over 61% casting a no vote in the groundbreaking political decision.

Here’s our report on the dramatic referendum result:

European leaders were scrambling for a response on Monday after a resounding no from Greek voters in a momentous referendum on austerity which could send the country crashing out of the eurozone.

With Europe’s financial markets set to follow Asia’s overnight lead by going sharply into the red, German chancellor Angela Merkel was to meet with French leader François Hollande in Paris after Greece overwhelmingly rejected international creditors’ tough bailout terms.

The pair spoke by telephone late Sunday, declaring the referendum decision must “be respected” and calling for an emergency eurozone summit which European Union president Donald Tusk said would be held on Tuesday.

A flurry of other meetings will also be held Monday as European leaders sized up the implications of the vote, a victory for Greece’s radical prime minister Alexis Tsipras, who insisted it did not mean a “rupture” with Europe.

Here’s the full story:

Updated

Here’s the very immediate response from some of the financial markets.

A short time before the post announcing his resignation, Varoufakis posted a much more jubilant note about the referendum decision:

On the 25th of January, dignity was restored to the people of Greece.

In the five months that intervened since then, we became the first government that dared raise its voice, speaking on behalf of the people, saying no to the damaging irrationality of our extend-and-pretend ‘Bailout Program’.

We

    • spread the word that the Greek ‘bailouts’ were exercises whose purpose was intentionally to transfer private losses onto the shoulders of the weakest Greeks, before being transferred to other European taxpayers
    • articulated, for the first time in the Eurogroup, an economic argument to which there was no credible response
    • put forward moderate, technically feasible proposals that would remove the need for further ‘bailouts’
    • confined the troika to its Brussels’ lair
    • internationalised Greece’s humanitarian crisis and its roots in intentionally recessionary policies
    • spread hope beyond Greece’s borders that democracy can breathe within a monetary union hitherto dominated by fear.

Ending interminable, self-defeating, austerity and restructuring Greece’s public debt were our two targets. But these two were also our creditors’ targets. From the moment our election seemed likely, last December, the powers-that-be started a bank run and planned, eventually, to shut Greece’s banks down. Their purpose?

Updated

Here’s our latest report on Varoufakis’ resignation. More details to be added shortly:

The Greek finance minister Yanis Varoufakis has resigned in the wake of the country’s resounding no vote rejecting the eurozone’s austerity terms.

Writing on his blog on Monday morning he said that he would be standing down immediately after pressure from Greece’s European partners.

“Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my … ‘absence’ from its meetings,” he wrote.

The prime minister Alexis Tsipras judged this to be “potentially helpful to him in reaching an agreement. For this reason I am leaving the ministry of finance today”.

He added: “The referendum of 5 July will stay in history as a unique moment when a small European nation rose up against debt-bondage.

“Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25 June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

Updated

Varoufakis’ presence in further negotiations was always going to be difficult after his public rhetoric about the role of European leaders.

In one interview published on Saturday, he accused the country’s creditors of terrorism:

“What they’re doing with Greece has a name: terrorism,” Varoufakis told Spain’s El Mundo. “What Brussels and the troika want today is for the yes [vote] to win so they could humiliate the Greeks. Why did they force us to close the banks? To instil fear in people. And spreading fear is called terrorism.”

On Sunday night he promised to resign in the event a yes vote was recorded. Despite the outcome of a no vote, he has still followed through on that decision to resign.

Updated

"Minister no more": Greek finance minister Yanis Varoufakis resigns

In another extraordinary development the Greek finance minister has just announced his resignation.

In a move likely to spark further concerns about the role of other European leaders in Greece’s internal politics, Varoufakis said he was made aware of a preference by “some European participants” of his absence throughout the continuing negotiations.

The post was made on Varoufakis’ blog and there is nothing to suggest it is not authentic. It has also been cross-posted on his Twitter account.

Here’s the post in full:

The referendum of 5th July will stay in history as a unique moment when a small European nation rose up against debt-bondage.

Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25th June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.

I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum.

And I shall wear the creditors’ loathing with pride.

We of the Left know how to act collectively with no care for the privileges of office. I shall support fully Prime Minister Tsipras, the new Minister of Finance, and our government.

The superhuman effort to honour the brave people of Greece, and the famous OXI (NO) that they granted to democrats the world over, is just beginning.

Peter Kazimir, the Slovakian finance minister, has also made some rather colourful observations of the current situation overnight:

The UK government is also prepared to do whatever necessary to protect the country from the impact of a possible exit from the Eurozone for Greece. This from AFP is the latest update:

Britain will do “whatever is necessary to protect its economic security”, a government spokesman said Monday after Greeks voted overwhelmingly against austerity in a referendum that could send them crashing out of the eurozone with unknown consequences.

“This is a critical moment in the economic crisis in Greece,” a Downing Street spokesman said. “We will continue to do whatever is necessary to protect our economic security at this uncertain time. We have already got contingency plans in place and later this morning the Prime Minister will chair a further meeting to review those plans in light of yesterday’s result.”

The front pages of newspapers across Europe are a combination of fear, hope and (on occasion) somewhat comical absurdity.

Here’s a short sample of a few of them, starting off with a rather extraordinary one from Efsyn featuring Dutch politician Jeroen Dijsselbloem:

Here’s the Guardian’s view on the current impasse now facing Europe following the Greek referendum:

Kicking the can down the road has been the cliche of choice over a slow euro crisis that has steadily strangled the life out of the Greek economy. But at some point Europe was bound to run out of road. That happened on Sunday night, when it emerged that the Greek people had said no to continuing to engage with their creditors on the same suffocating terms.

Just over a week ago, Alexis Tsipras staked his future on forcing this denouement. The eight days that followed his midnight declaration of a plebiscite, to accept or reject the creditors’ terms for the latest slug of overdraft, have witnessed many extraordinary things. The Greek parliament licensed a hasty referendum on a question that had already been overtaken by events. A ballot paper written in jargon posed a ludicrously technical question, opening up a void for emotion to fill. Mixing talk of “terror” from their partners with haze about what would happen after a no, Mr Tsipras and his finance minister, Yanis Varoufakis, aimed squarely for the heart rather than the head. Meanwhile, Greeks faced the fiercest financial controls ever seen in modern Europe: bank doors were shut, supplies disrupted, and citizens queued at every cashpoint for their ration of notes. In countries such as Germany, where history engenders suspicion of referendums, it may have looked like a paradigm case of how not to do democracy.

As the sun begins to rise now in Greece on “the morning after” Syntagma Square appears empty. That may well change as another highly politically charged day is set to get underway across Europe

John Cassidy in the New Yorker has outlined some useful analysis on the implications of the no vote:

Whether they will be offered one within the eurozone remains to be seen. Although the result was a great political triumph for Tsipras and Syriza, it doesn’t automatically translate into a victory in the showdown with the European Union and the International Monetary Fund. Greece is still broke, and its banks are still closed. If the Europeans want to force the Greeks out of their currency club, they have the means to do it at any moment. All they have to do is turn off the credit that the European Central Bank has been providing to Greece’s banks. Indeed, the ECB’s governing council will decide on Monday what to do next.

With Angela Merkel, the German chancellor, and François Hollande, the French president, due to meet in Paris on Monday afternoon, and an emergency summit of all European Union leaders scheduled for Tuesday, it seems highly unlikely that the ECB. will render these deliberations pointless by immediately torpedoing the Greek financial system. In all likelihood, there will be at least one more round of talks between the two sides, and, quite possibly, more than one. Greece’s next big payment to its creditors isn’t due until 23 July, which is more than two weeks away. If the country’s banks can somehow be propped up until then, there is time for more deliberation.

Updated

We’ve written a lot about the market reaction to events in Europe, but the political fallout in Greece is still likely to unfold rapidly over the next few days.

Prime minister Alexis Tsipras is convening a meeting of key political leaders at 10am on Monday in Athens, according to Enikos. Overnight the Greek opposition leader Antonis Samaras resigned following the referendum decision.

How Tsipras proceeds throughout this week will continue to shape how events unfold across Europe.

China’s response to the Greek referendum and the market uncertainty has been to engage in a series of complex manoeuvres aimed at stimulating the market.

It’s not yet clear how successful the measures – which involve a variety of investments and buyouts aided by the central bank – will be in preventing setbacks for their markets.

Reuters have a good take on the different measures that have been employed here:

Chinese stocks jumped on Monday after Beijing unleashed an unprecedented series of support measures over the weekend to stave off the prospect of a full-blown crash that was threatening to destabilize the world’s second-biggest economy.

In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.

Investors, who had ignored official measures to prop up the market as equity indexes slid around 12% last week, finally reacted, with the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen jumping 4%, while the Shanghai Composite Index .SSEC gained 3 percent. [.SS]

Blue chips, the explicit target of the stabilization fund, outperformed stocks on the small-cap ChiNext indexes.

The rapid decline of China’s previously booming stock market, which by the end of last week had fallen around 30 percent from a mid-June peak, had become a major headache for President Xi Jinping and China’s top leaders, who were already struggling to avert a sharper economic slowdown.

In response, China has orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.

Updated

My colleague Justin McCurry has filed a more comprehensive take on the Asian market reaction to the Greek referendum, which largely recorded falls across the board but with limited losses.

China is the exception – it saw a boost on open this morning – but that is attributed to the enormous and unprecedented government measures implemented over the weekend to try and stop a market crash.

This from Justin:

Analysts said that regional market panic was unlikely, even after Athens appeared to take a step closer to a “Grexit” by roundly rejecting the bailout terms set by its international creditors But they added that negotiations this week would be critical.

“The Greece ‘no’ vote is a surprise,” Shoji Hirakawa, chief equity strategist at Okasan Securities, told Bloomberg News. “But the key is that the direction is going toward more talks after this.”

Other analysts said markets had not expected Greek voters to reject the terms of the bailout so emphatically – a move that could see further losses on Monday and trigger an investor rush to US Treasuries or other government bonds that are seen as largely immune to market turbulence.

In one of the day’s more colourful commentaries, analysts at Japan’s Mizuho Bank said the Sunday’s “Greferendum” had turned out to be a “Grief-erendum”.

On what most had expected to be a tricky day for markets around the world, dealers stressed that uncertainty over Greece’s future had not rocked markets as badly as some might have expected.

Read his report in full here.

Updated

“The fightback for a Europe of dignity starts here.”

Another short documentary from John Domokos and Phoebe Greenwood.

As Syriza supporters flock to Athens’ Syntagma square to celebrate, Phoebe Greenwood talks to those who are celebrating a historic referendum outcome. ‘They thought they could intimidate us,’ one man says. Despite jitters on the financial markets, others happy with the historic oxi (no) vote say they hope it will be the moment that Greeks can come together.

Crisis will be "appropriately resolved" China minister says

Deputy Chinese foreign minister Cheng Guoping believes the Greek crisis will be “appropriately resolved” and the economy will turn around, Reuters reports.

However he would not say if Alexis Tsipras could attend an emerging powers summit later in the week in Russia.

“I believe that with the hard efforts of all sides, Greece’s economic situation will turn around. The economic crisis will be appropriately handled,” he told reporters, in China’s first official comment since the Greek vote.

“Whether or not it can be appropriately handled will not only have an important impact on Greece and its people, but will have an important impact on … the world too.”

Asked whether Greek Prime Minister Alexis Tsipras might come to this week’s summit of the BRICS group of five major emerging nations – Brazil, Russia, India, China and South Africa – Cheng said that as Russia was the host it was its decision on whether to invite other countries.

Russia’s finance minister said last week that Russia had not offered Greece the chance to become a member of the New Development Bank that is being created by the BRICS group.

Updated

Result is very regrettable – Eurogroup president

Jeroen Dijsselbloem, Dutch finance minister and president of the Eurogroup, has released a statement on the referendum results.

It is a short statement, but needless to say, Dijsselbloem is disappointed.

I take note of the outcome of the Greek referendum. This result is very regrettable for the future of Greece. For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities. The Eurogroup will discuss the state of play on Tuesday 7 July.

Argentinian president Cristina Fernández de Kirchner, who is never shy of enthusiastically tweeting her opinions, has welcomed the referendum results.

In a series of tweets written in English, Fernández labeled the No vote an “outright victory of democracy and dignity.”

The Greek people have said NO to the impossible and humiliating conditions imposed upon them for the restructuring of their foreign debt. We Argentines understand what this is about. We hope Europe and its leaders understand the message of the polls. Nobody can be asked to sign their own death certificate. The words of President Kirchner still resound at the UN General Assembly in 2003 he said: “The dead do not pay their debts.”

Some background on the link between Argentina and Greece in this current crisis, from Reuters:

There are stark similarities between Argentina’s 2002 financial meltdown and the turmoil in Greece: rigid monetary regimes, creditors battling domestic politics to fix the problem and banking systems at breaking point.

The South American grains behemoth defaulted on $100 billion in bonds in a 2002 crisis that thrust millions of middle-class Argentines into poverty. By the next year, helped by a massive soy crop, Argentina started growing again.

But the 2002 crisis continues to plague its finances.

Fernandez regularly blasts bondholders who have sued the country over the debt it failed to pay 13 years ago.

Most holders agreed to restructurings that paid about 30 cents on the dollar, while a group of hedge funds sued for full repayment.

The country defaulted again last year when a U.S. judge barred it from honouring its restructured debt without reaching a deal with the funds, which Fernandez denounces as “vultures.”

Argentina became one of the world’s fastest expanding economies after its default, growing at an averaging above 8.5 percent between 2003 and 2007, when Fernandez was first elected.

Since then she has ordered trade and currency controls that have slowed investment while government fiscal accounts deteriorate due to high state spending.

Updated

Greek finance minister, Yanis Varoufakis, has claimed the successful No campaign is a “majestic, big YES to a democratic, rational Europe.”

Varoufakis accuses Greece’s creditors of attempting to “humiliate” the leftwing government by forcing stringent austerity, and dragging them into an agreement which “offers no firm commitment to a sensible, well-defined debt restructure.”

He further writes:

Today’s referendum delivered a resounding call for a mutually beneficial agreement between Greece and our European partners. We shall respond to the Greek voters’ call with a positive approach to:

  • The IMF, which only recently released a helpful report confirming that Greek public debt was unsustainable
  • The ECB, the Governing Council of which, over the past week, refused to countenance some of the more aggressive voices within
  • The European Commission, whose leadership kept throwing bridges over the chasm separating Greece from some of our partners.

Updated

‘We’re going to hit the iceberg’

A great short film here from John Domokos.

From the Syriza faithful to the run-down docks of Piraeus and the middle-class district of Faliro, Greeks spent the day of the referendum locked in debate, suspense and catharsis.

For some it was a day they sent a message to Europe that they will ‘not be intimidated’. But many Greeks fear trouble lies ahead. As one voter said, both a yes and no outcome would result in calamity: ‘We’re three metres from the iceberg and we’re here to be asked if we’re going to go right or left.’ Either way, he said, ‘we’re going to hit the iceberg’.

Updated

Shanghai stocks have jumped almost 8%. The government boosts AFP refers to are emergency measures taken to prevent a possible stock market crash in the world’s second-largest economy. It’s not directly related to Greece, but could still have an effect on world markets.

From Reuters: In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company which in turn would be aided by a direct line of liquidity from the central bank.

China has also orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.

Europe dodged a bullet with the No result, and its supporters should be breathing a sigh of relief, Paul Krugman writes for the New York Times.

Krugman’s colourful take on the events of the last day is well worth a read, but here is a snippet. He continues:

Of course, that’s not the way the creditors would have you see it. Their story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice.

But the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.

What’s more, they weren’t. The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients — and when their treatment made the patients sicker, demanded even more bleeding.

Ouch.

Updated

As we continue our watch of the Asian/Pacific markets, the Malaysian ringgit has been given the unenviable title of “worst currency” this morning, according to the FT.

Japan’s Nikkei stock index has mounted a slight recovery after dropping 1.5% in early trading Monday, as Asian markets were jolted by the uncertainty created by Greece’s “no” vote in Sunday’s austerity referendum.

The Nikkei 225 was trading down 1.4% at 20256.69, having earlier fallen 339.64 points to 20,200.15, a day after Greece voted to rejected the eurozone’s terms for the country remaining in the single currency.

South Korea’s Kospi was down 0.9% at 2,085.67.

Nils Pratley, the Guardian’s financial editor, says the current crisis has pushed the financial world back to the wild markets of the 2008 financial crisis.

You can read Nils’ analysis in full here, but below is a snippet on bond markets, which he says will take centre stage.

That is where Grexit worries will be keenest. If Greece could be on the way out of the single currency, will investors be less willing to hold the debt of other eurozone states carrying heavy debt loads? The sovereign debt of Spain, Italy, Portugal and Ireland will be closely watched for knock-on effects. Will there be contagion?

All eyes will turn to the European Central Bank. First, to see if it cuts off support for Greek banks. Second, to learn if it is prepared to intervene to protect the bonds of other eurozone stragglers. Last Sunday, when Greek prime minister Alexis Tsipras called the referendum, the ECB and the eurogroup ministers pledged to react, if needed, to avoid a dangerous fall-out in debt markets.

Pratley also makes an interesting point that while the euro will “almost certainly fall in value initially” there is another school of though which says “the single currency would be strengthened in the long run by the departure of its weakest member.”

The Australian stock exchange fell sharply on Monday’s open, not long after the final vote was counted (not that 100% was needed to see the overwhelming response). Below is a graph from the ASX website.

The Australian stock market fell sharply on open on Monday 6 July, following Greece's rejection of bailout terms by creditors.
The Australian stock market fell sharply on open on Monday 6 July, following Greece’s rejection of bailout terms by creditors. Photograph: ASX

The Australian dollar dipped to a six-year low of US$0.7484 in early trading but has recovered to 0.7509.

The euro, not surprisingly, was down 0.8% at $1.1015 but off an early low of $1.0967. It had initially dropped around 1.5% against the yen – which is seen as a safe haven.

The US dollar also recouped its early drop to be only a touch softer at 122.48 yen.

Updated

In a delightfully headlined post, the Financial Times says early moves don’t suggest a panic in the Asian markets. It also notes:

“The hope for Alexis Tsipras, prime minister, is that the vote galvanises support for his anti-austerity agenda and forces Athens’ creditors to make concessions.

But it’s questionable whether banks will re-open on Tuesday (after a holiday today), as planned. If they don’t, the “no” vote could fast-track a Grexit and see Greece revive its only currency.”

Read more from ‘Fast Asia Open: Oxi oxi oxi, oi oi oi’ here.

Summary

While we await further market news, let’s have a look back at the extraordinary last few hours. My colleague Graeme Wearden, and before him Julia Kollewe, drove live coverage of the vote count and reaction in the streets of Greece and around the world.

You can relive the night blow by blow here, or Graeme’s summary is below.

Greece has delivered a resounding No to its creditors, in a move that has stunned the eurozone tonight and may shake the financial markets.

In the last few minutes, the last ballot papers were counted. And No campaign has exceeded all expectations by securing 61.31% of the vote [here’s the official count].

As our interactive shows, every area of Greece has voted to reject the proposals of Greece’s creditors and seek a better deal.

Prime minister Alexis Tsipras has declared that it’s a historic day for Greece, which shows that democracy cannot be blackmailed.

In a TV address, Tsipras has also vowed to begin negotiations with creditors to reach a sustainable deal to tackle Greece’s debt crisis.

“You made a very brave choice.

“The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution.”

“No” supporte”No” supporters wave Greek national flags during celebrations in Athens, Greece<br />“No” supporters wave Greek national flags during celebrations in Athens, Greece July 5, 2015. Greeks overwhelmingly rejected conditions of a rescue package from creditors on Sunday, throwing the future of the country’s euro zone membership into further doubt and deepening a standoff with lenders. REUTERS/Dimitris Michalakis” width=”1000″ height=”600″ class=”gu-image” /><br />
<figcaption> <span class=“No” supporte”No” supporters wave Greek national flags during celebrations in Athens, Greece
“No” supporters wave Greek national flags during celebrations in Athens, Greece July 5, 2015. Greeks overwhelmingly rejected conditions of a rescue package from creditors on Sunday, throwing the future of the country’s euro zone membership into further doubt and deepening a standoff with lenders. REUTERS/Dimitris Michalakis Photograph: STRINGER/Reuters

Greece’s future in the eurozone looks more perilous than ever, and the next 48 hours could be critical.

German chancellor Angela Merkel and French president Francois Hollande will meet in Paris on Monday night.

Then on Tuesday, eurozone leaders will debate the crisis at an emergency summit. Eurozone finance ministers will hold a Eurogroup meeting that afternoon.

Eurogroup president Jeroen Dijssebloem has already criticised the result of the referendum, warning:

“I take note of the outcome of the Greek referendum. This result is very regrettable for the future of Greece.”

But democratic senator Bernie Sanders has hailed the result as a decisive vote against austerity.

A series of financial analysts have warned tonight that Greece is likely to exit the eurozone. As Barclays warned:

“While Chancellor Merkel and President Hollande are scheduled to meet tomorrow, we argue that EMU exit now is the most likely scenario….”

Finance minister Yanis Varoufakis, though, has denied this is an option:

Updated

Japan, S Korea, Australia markets open down

  • Japan Nikkei index down 1.46% to 20239.0
  • Australia’s ASX 200 is down 1.57% to 5451.4
  • South Korea’s Kospi index is down 1.23% at 2078.47

Futures trading

  • UK FTSE 6431.4 (-1.84%)
  • US S&P 500 2044.15 (-1.11%)
  • German DAX 10808.5 (-2.78%)

The Guardian’s Tokyo correspondent, Justin McCurry, has just filed the below update on Japan’s market today.

Japan’s Nikkei stock index opened down more than 300 points on Monday, a day after Greece voted to rejected the eurozone’s terms for the country remaining in the single currency.

The Nikkei mounted a recovery last week after after posting its second-biggest daily drop this year after Greece and its international creditors failed to make a breakthrough in bailout talks.

Japan’s finance minister, Taro Aso, said last week he did not expect dramatic falls in Japanese share prices or a sudden surge in the yen if Greece defaulted but stayed in the eurozone.

He warned, however, that the impact on Japanese and other markets could be big if Athens left the single currency.

Mohamed El-Erian, the former boss of the world’s biggest bond trader Pimco and now chief economic adviser at insurance giant Allianz, said investors should brace for a major global equity selloff.

“Yes, you will see one. With the extent and duration a function of whether the ECB steps in with new anti-contagion measures,” he writes for Bloomberg.

“Without huge emergency assistance from the European Central Bank – a decision that faces long odds – the government will find it hard to get money to the country’s automated teller machines, let alone re-open the banks.”

Over to you Mario Draghi.

Updated

All votes counted – Greece votes no

All referendum votes have now been counted, with a final result of 61.31% voting no, to 38.69% yes.

Eyes are now moving towards the world markets, particularly those in Asia set to open in the next few hours. Tokyo and Korea will be first in the next few minutes and along with Shanghai and Hong Kong later today, are ones to watch.

Unsurprisingly the euro fell sharply in Asia, Reuters has already reported.

The Japanese government said it was ready to respond as needed in markets and was in close touch with other nations.

The euro was down 0.9 percent at $1.1012 but off an early low of $1.0967. It had initially dropped around 1.5 percent on the safe-haven yen only to find a big buy order waiting, which pared its losses to 134.53.

Likewise, the dollar recouped its early drop to be only a touch softer at 122.34 yen. The dollar index added 0.3 percent to 96.434.

Prime minister Alexis Tsipras has addressed the Greek nation, telling voters they made a “brave choice” and that “democracy can not be blackmailed.”

However he added: “I am fully aware that the mandate here is not one to break with Europe by a mandate to strengthen our negotiating position to seek a viable solution.”

Greek voters have overwhelmingly rejected the extra austerity measures demanded by creditors in return for bailout funds. In a referendum held with just eight days notice, more than 60% have voted no, or oxi.

No supporters have taken to the streets in celebration, while Antonis Samaras, the head of the New Democracy party who campaigned for a Yes vote, has resigned.

Shocked EU finance ministers have called an emergency meeting for Tuesday, as analysts fear collapse of the Greek banking system.

guardian.co.uk © Guardian News & Media Limited 2010

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Eurozone recovery takes a knock as economy grows just 0.2% in last quarter, with many countries disappointing. France flat, Germany strong, Dutch, Italian, and Portuguese reports miss analyst estimates. Inflation stays at 0.7% y/y in April…

 


Powered by Guardian.co.ukThis article titled “Eurozone growth misses forecasts, as France stagnates and Italy contracts – live” was written by Graeme Wearden, for theguardian.com on Thursday 15th May 2014 13.25 UTC

Back to the big story of the morning, Europe’s weak growth figures.

Economics editor Larry Elliott writes that Mario Draghi should consider copying the UK’s Funding for Lending Scheme, to drive lending in the euro area.

It’s really not happening in the eurozone. An already feeble recovery lost momentum in the first three months of 2014 and the signs are no better for the current quarter. The 18-nation single currency area is nowhere near achieving escape velocity, the rate of expansion that would start to make inroads into mass unemployment and prevent the drift towards deflation. Action from the European Central Bank next month is inevitable.

The nugatory growth in early 2014 was all the more disappointing because of an unusually mild winter. That had led economists to expect activity to pick up by 0.4%; instead it was just half that figure, a weaker performance than in the final three months of 2013. Had it not been for the robust growth posted by Germany, things would look even more dismal.

Some of the weather-related boost to output will be paid back in the second quarter. In addition, there have been signs recently that the tension in Ukraine is eating into business and consumer confidence. China’s slowdown will have an impact on Germany’s export-dependent economy. For those reasons, it is hard to see growth accelerating in the second quarter…..

More here: Eurozone recovery: time to call the ECB – but what’s the number?

Maybe the US economy isn’t healing as well as we thought. Industrial output across the country fell by 0.6% in April, defying expectations it would be unchanged.

Over to Greece, where the countdown to European and local elections (the first round of the latter taking place this weekend) has sent passions skyrocketing.

Protestors, including fired school guards who have been demonstrating outside the country’s administrative reform ministry since early this morning, see the double poll as the ideal chance to vent their spleen.

Our correspondent Helena Smith reports:

The mood outside the administrative reform ministry is as explosive as each of the protestors now gathered outside it. With dismissed school guards vowing to remain on the streets “for as long as it takes” authorities have dispatched vanloads of riot police to the area.

Scuffles have intermittently broken out as the guards, who were laid off as part of plans to streamline Greece’s bloated public sector, have tried to enter the building.

Harris Bastas who heads the group now representing the 2,000 offloaded school guards told me: “right now we want to meet the minister [Kyriakos Mitsotakis] and if it takes one, two, three days we will stay here. In fact as long as it takes. Our basic demand is to be reinstated. We want the jobs that we lost in one night,” he yelled, screaming himself hoarse. “We want what every state should guarantee its citizens: the right to live with dignity.”

Mitsotakis, who is under immense pressure to trim the civil service from Greece’s “troika” of creditors at the EU, ECB and IMF, has shown no inclination to meet the guards. Down the road irate finance ministry cleaners, who also lost their jobs at the end of March after being put into a special labour reserve, are similarly demonstrating. Now the emblem of austerity’s corrosive effects, the women have become increasingly organised, establishing a stall outside the national economy ministry from where they distribute leaflets describing their plight.

Our full story on the IMF’s warning to France is now live:

France must not renege on spending cuts programme, warns IMF

Just in – the number of Americans signing on for unemployment benefit has dropped to its lowest level in seven years.

Just 297,000 new jobless claims were filed last week, the lowest level since May 2007 (the dawn of the credit crunch)

And the US inflation rate has also picked up by its fastest rate since last July. The consumer prices index rose by 2.0% on an annual basis in April, with prices up by 0.3% month-on-month.

Two signs that the US economy is picking up pace, after stalling over the winter.

Here’s some instant reaction to Kristin Forbes’s appointment to the Bank of England’s monetary policy committee:

Dr Kristin Forbes, the US academic just named as the newest member of the Bank of England’s monetary policy committee, is an expert in “financial contagion”.

Bloomberg wrote last year that:

When Kristin Forbes sought tenure at the Massachusetts Institute of Technologyearly last decade, some colleagues said her research focus on financial contagion led to a dead end. Her reaction: Full speed ahead.

Forbes worked to safeguard global financial stability with then-U.S. Treasury Undersecretary John Taylor, became the youngest member ever on the White House Council of Economic Advisers and eventually won tenure at MIT. In August she presented the opening paper at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming.

“Kristin is one of the leaders in the empirical analysis of contagion,” said Roberto Rigobon, who, like Forbes, is a professor of economics at MIT’s Sloan School of Management in Cambridge, Massachusetts, and has co-written research with her on the topic. “Her papers are a tour de force for anyone interested in measuring” its “importance, existence and extent.”

Here’s the full profile: Contagion Thesis Once Derided Proven by Kristin Forbes

Dr Kristin Forbes to join the Bank of England’s MPC

Just in: the next member of the Bank of England’s monetary policy committee has been named.

Dr Kristin Forbes, currently Professor of Management and Global Economics at MIT’s Sloan School of Management, will join the rate-setting committee in July.

Chancellor George Osborne says Forbes is “an economist of outstanding ability with real practical experience of policy making.

She will make an exceptionally strong addition to the MPC. It’s a sign of the high regard in which the Bank of England and our monetary framework are held around the world that someone of Kristin’s ability wishes to be part of them”.

According to Forbes’ web page at MIT, she was the youngest ever person to serve on the White House’s Council of Economic Advisers. She’s also worked for the U.S. Treasury Department, and was a Davos “young Global Leader”.

In addition:

She is a research associate at the NBER and a member of the Bellagio Group, Trilateral Commission, and Council on Foreign Relations. She is on the Panel of Economic Advisers for the Congressional Budget Office and the Academic Advisory Board for the Peterson Institute for International Economics and the Center for Global Development. She has won numerous teaching awards and teaches one of the most popular classes at MIT’s Sloan School. Before joining MIT, Forbes worked at the World Bank and Morgan Stanley.

Correction, the chairman of Lloyds is Lord Blackwell, not Sir Win Bischoff (Blackwell’s predecessor) as I wrote earlier.

As if France wasn’t under enough pressure, the International Monetary Fund has dealt Francois Hollande another blow by questioning whether his new fiscal plan is achievable.

In a new review of the French economy, the IMF questioned whether France will manage to cut public spending fast enough to bring its deficit down to 3% by 2015, given Hollande’s pledge to also cut payroll taxes (paid by on companies).

The IMF warned that France cannot afford to waver on its spending cuts:

“Achieving the deficit objectives while delivering on the tax cut commitments leaves no room to deviate from the announced expenditure reductions,” the IMF said in a regular review on the French economy.

“The major risks are that the initial plans may be diluted in sequential annual budgets and that cuts in transfers to local governments may be compensated by unsustainable cuts in investment, higher taxes or higher debt,”

Good news – the security scare at the Bank of England is over.

The chairman of Lloyds Banking Group, Lord Blackwell, Sir Win Bischoff, has told shareholders at the bank’s AGM in Edinburgh today that the Scottish referendum on independence means “uncertainties for everyone”.

But Blackwell also said Lloyds didn’t hold a ‘corporate view’ – it’s a matter for Scotland.

Via Reuters:

  • 15-May-2014 12:22 – LLOYDS BANK CHAIR SAYS ‘UNCERTAINTIES FOR EVERYONE’ AHEAD OF SCOTS INDEPENDENCE VOTE
  • 15-May-2014 12:17 – LLOYDS BANK CHAIRMAN SAYS NOT PLANNING ANY MOVES AHEAD OF SCOTTISH INDEPENDENCE VOTE
  • 15-May-2014 12:18 – LLOYDS BANK CHAIR SAYS WILL WORK WITH RELEVANT AUTHORITIES IN EVENT SCOTS VOTE FOR INDEPENDENCE
  • 15-May-2014 12:21 – LLOYDS BANK CHAIR SAYS INDEPENDENCE MATTER FOR SCOTS, BANK HOLDS NO CORPORATE VIEW

Updated

Meanwhile in the City, the Bank of England has announced that it has moved staff to “safe areas”, as police investigate a car which has been abandoned outside the central bank headquarters.

Work continues as usual (despite the Bank tube station area being cordoned off), and there’ s no reaction in the financial markets.

Here’s the BoE statement:

Bank of England response to suspect vehicle

Following reports of a suspect vehicle near the Bank of England, the Bank has moved staff to safe areas of the building. All essential operations continue from those areas.

The Evening Standard has more details.

Today’s growth (and non-growth) readings are a “sobering reminder” that the eurozone isn’t out of the woods yet, says Aengus Collins, Europe Analyst at The Economist Intelligence Unit.

He writes:

Over the past year or so, most forecasters have been toning down the language that they use in relation to the euro zone’s economic woes, with Mario Draghi’s monetary activism (by ECB standards, at any rate) seen as a game-changer. In some respects that is correct. The euro zone is no longer gripped by a crisis of existential proportions.

But this morning’s data highlight the fact that the absence of crisis isn’t the same as the presence of recovery.

And while Germany is recovering strongly, this isn’t feeding through to its neighbours, Collins added:

France stagnated in the first quarter and Italy contracted. These two major economies are struggling to sustain even a tentative recovery. Italy is now likely to expand only slightly for the full year (and it would take very little for it to contract) while the first quarter in France will shave a few tenths off growth for the year that was already relatively weak at 0.8%.

Also of concern is the sharp contraction of 0.7% recorded in Portugal, just as that country prepares to exit its EU/IMF bailout.

 

Analysts at BNP Paribas agree that the ECB must act in June, especially as Mario Draghi said last week that the governing council is not happy about the path of inflation.

Weak eurozone growth: what the analysts say

The European Central Bank cannot leave monetary policy unchanged at next month’s meeting, argues James Ashley, chief European economist at RBC Capital Markets:

“The debate over ‘whether’ to act is surely over and it is now just a question of ‘how’ to act.”

Yesterday, it emerged that the ECB is preparing a package of possible measures – from cutting interest rates to stimulating small business lending.

Tom Rogers, senior economic adviser at EY, said today’s data should be “a wake-up call” for any eurozone policy makers who are complacent that Europe is safely on the road to recovery:

Rogers argues that Italy and France are paying the price for not reforming their economies (via AP):

“Stagnating output in Italy and France, two of the four largest economies, is in large part a result of deteriorating cost-competitiveness, while Germany and Spain continue to reap rewards from reform implemented either well before the crisis, or more recently.”

Howard Archer of IHS Global Insight is hopeful that the eurozone will pick up momentum through this year (recent surveys have been quite positive), arguing:

Reduced fiscal squeezes, very accommodative monetary policy (which now seems likely to augmented in June) and sharply reduced sovereign debt tensions are supportive to Eurozone growth, while global growth is seen picking up gradually.

In addition, consumers’ purchasing power is being helped by muted consumer price inflation (just 0.7% across the Eurozone in April) while Eurozone labour markets have largely stabilized and in some cases are even improving modestly.

(the -1.4% contraction at the bottom of the chart is the Netherlands, if you can’t see it clearly)

Updated

On a brighter note, Europe did grow faster than the US for the first time in three years.

Bad weather left the American economy struggling to expand over the winter — its GDP rose by just 0.05% on a quarterly basis.

You can see all the Eurostat data here (pdf)

Ahha! This chart, from the brighter sparks at MacroPolis shows how Greece’s economy may have clawed its way back to stagnation.

The wider European Union grew by +0.3% during the first quarter, beating the eurozone’s +0.2% growth.

Strong growth in the UK (+0.8%), Hungary and Poland (both 1.1% q-on-q) helped the EU outpace the euro area.

That means the EU economy is 1.4% larger than in the first quarter of 2013, according to Eurostat, while the eurozone is +0.9% larger.

Greece’s economy has contracted by around a fifth since the crisis began, and is currently 1.1% smaller than a year ago. Here’s a chart from Trading Economics showing the details:

Cyprus continued to suffer from its austerity programme, and the trauma of last year’s bailout crisis which left its banking sector on the mat.

The Cypriot economy shrank by 0.7% during the last quarter, and is now 4.1% smaller than a year ago.

Is there a glimmer of hope in Greece’s GDP data, just released?

Greece’s economy has shrunk by 1.1% over the last year, which is the smallest annual contraction since the debt crisis began in 2010. That’s also less severe than the 1.5% slump which economists expected.

I”m afraid we don’t get quarter-on-quarter data for Greece — ie, how it fared since the October-December period. So we don’t have a quarterly growth data.

Updated

Not only is Europe struggling to grow, its inflation rate is worrying low.

Eurostat reports that prices rose by just 0.7% across the euro area in April, which confirmed its flash estimate. That’s well shy of the European Central Bank’s target of just below 2% .

Eurozone grows by just 0.2% in last quarter, weaker than forecast

BAD NEWS: The Eurozone grew by just 0.2% in the first three months of this year, dragged down by stagnation in France, and contraction in Italy, Portugal and the Netherlands (see earlier summary).

That’s much weaker than the 0.4% growth that analysts had expected, and raises fresh fears that the eurozone recovery is running out of steam.

Reaction to follow!

Eurozone GDP – a country-by-country catch-up

Time for a very brisk recap before we get the overall figure for Eurozone GDP at 10am sharp (and updated inflation data too):

And the big picture is that the eurozone recovery story has taken a battering this morning with only Germany outperforming in the first three months of 2014.

German GDP beat forecasts, growing by 0.8%, thanks to a mild winter and solid demand from home and abroad.

But France’s economy has stalled, with GDP unchanged in the quarter.

Italy is shrinking again, with GDP down 0.1% – ending its short escape from contraction

Portugal has suffered a contraction, down 0.7%.

The Netherlands economy suffered from the warm winter, with GDP shrinking by an alarming 1.4%.

Austria grew by just 0.3%

And Finland is in recession, after GDP fell by 0.4%

And here’s the latest reaction:

Portugal’s GDP drops by 0.7%, defying hopes of growth

And now we get bad news from Portugal – its GDP fell by 0.7% in the first three months of this year, dashing hopes that it would keep expanding.

It’s one disappointment after another…. apart from Germany

Updated

Finland’s recession adds to euro malaise

Finland has also added to the gloom in the eurozone, sliding into recession with a 0.4% drop in GDP in the first three months of this year.

That follows a 0.3% contraction in Q4, and economists are concerned that the once-healthy Finnish economy is on the slide.

As Nordea analyst Jan Von Gerich put it: “It doesn’t look too good”, adding:

“Zero growth from the full-year is starting to look like an achievement for the economy

“If the situation in Russia gets worse, it will become a year of contraction.”

Andrew Balls, deputy chief investment officer at Pimco (and brother of the UK shadow chancellor) is discussing the eurozone GDP data on Bloomberg TV now.

On today’s laggards, France and Italy, Balls says that “two countries* who have not done a lot of economic] reforms are broadly flat in terms of activity.”

But he is more optimistic about the eurozone as whole, which is returning to trend-like growth….”a big improvement on where have been in recent years”.

Spain, and many smaller countries are also doing quite well, Balls adds (Spanish GDP was released last week, and rose by 0.4%)

* – not countries as I initially mistyped – apologies all

Updated

We also have decent growth data from Poland – the economy grew by 3.3% over the last year (I can’t find quarter-on-quarter figures, sorry)

That’s good, but not quite as good as Hungary’s 3.5% annual growth (which I covered here)

This chart, from ISTAT, shows how the Italian economy is shrinking again (-0.1%) having grown by just 0.1% in October-December after shrinking for nine straight quarters.

Italian GDP shrinks by 0.1%

ITALY’S ECONOMY HAS CONTRACTED AGAIN.

Italian GDP fell by 0.1% in the first quarter of the year, dashing hopes of 0.2% growth.

That’s an alarming development. Italy had only just clawed its way out of recession three months ago.

Today’s data means it has contracted by 0.5% over the last year. For all the talk of European recovery, Italy is still in a mess.

The euro has fallen this morning, as the weak French growth figures put more pressure on the ECB to act. It’s dropped 0.3% to $1.3673

Another gloomy statistics in the Dutch GDP report — in the first quarter of 2014 there were 112 thousand employee jobs less than a year earlier.

But the Central Bureau of Statistics also struck a note of optimism, saying Netherlands’ industrial base continued to recover.

Netherlands GDP falls by 1.4%

Shocking figures from the Netherlands.

Its economy shrunk by 1.4% in the first three months of this year, much worse than the 0.0% which economists had expected. That means its economy has contracted by 0.5% since the first quarter of 2013.

So what on earth happened?

The Netherlands Statistics Office blames lower gas consumption, due to the very mild winter.

Apparently this meant natural gas consumption by households was almost a third lower than a year earlier. Consumers also spent less on food and beverage, partly because Easter in 2014 fell in April rather than March.

This chart (via Yannis Koutsomitis) shows how Germany has now posted its strongest period of growth since 2011, having grown by 0.8% in the last quarter.

(the blue line is Markit’s monthly PMI survey of business leaders)

German DAX hits record intraday high

Germany’s DAX stock index has just hit a new record high, as traders in Frankfurt react to the news that German growth beat forecasts in the last three months.

GERMANY’S DAX .GDAXI HITS ALL-TIME HIGH AT 9,810.29 POINTS – RTRS

The FTSE 100 index is up 12 points this morning at 6890 points –marching towards the alltime closing high of 6930 set in 1999.

France’s CAC index is lagging, down 0.1%.

The Czech Republic has matched France’s weak performance, with no growth at all in the last quarter.

That’s actually better than expected — economists had feared a 0.2% contraction, following strong growth in Q4 2013.

The Czech stats body says manufacturing has recovered from a low base in 2013 (hurt by an 18-month recession), thanks to growing demand from abroad and at home.

Romania’s economy appears to have slowed in January-March, with quarterly growth of just 0.1%.

But year on year, its economy has grown by 3.8%, ahead of forecasts (according to Reuters), thanks to strong exports.

Hungary has beaten expectations with some healthy-looking GDP data. Its economy grew by 1.1% in the last quarter, and is 3.5% larger than a year ago.

The Central Statistics Office said the Hungarian construction and industry firms drove growth.

Austria’s GDP rises by 0.3% in Q1, missing forecasts

Austria’s economy grew by just 0.3% in the first three months of 2014, weaker than the 0.5% expected.

And growth in the final quarter of 2013 has been revised up to +0.4%, from +0.3% initially.

Statistics body WIFO reported that domestic consumption was weak, although exports were stronger.

Exports rose by 1.5% in the quarter, WIFO said, while imports were up by 1.1%.

France’s stagnation means it will be much harder for Paris to achieve its goal of 1% growth through 2014….

Another missed target for Hollande, who didn’t manage to get unemployment falling by the end of 2013 either…

France stagnates, Germany powers ahead – what the readers say

Readers are already having their say in the comments below (thanks, as ever, all of you). Please keep them coming .

Here’s some early reaction:

Bad news for everyone, nobody should be gloating.

Countries usually return to growth eventually, that is just the cycle. Osborne is not really responsible for the UK’s strong growth any more than he was really responsible for the earlier flat period.

But is France locked into perma-slump because of the eurozone?

What can Hollande do? The structural changes to make France more Anglo-Saxon are politically impossible for his party, and would only make a marginal difference anyway.

France’s crash was smaller than the UK’s (it is less exposed to the financial sector) but its long term future looks a bit grim.

France’s current economic weakness is due not to socialism, but rather to vague and meandering non-leadership from Hollande (who seems more involved with his lovers than his country).

Not to mention that there were several presidents from the right beforehand who picked and chose what changes they wanted to make, and what they would leave for the next president to sort out.

It has happened in Germany, and it is happening again: conservative parties leaving reform of welfare systems, that are necessary because an underfinanced state won’t be able to sustain thewelfare state through demographic change, to their left-wing opponents who are supposed by their voters not to make cuts to redistribution. It is a perfect tactics for the right because they reap the harvest twice: the left shoot themselves in the foot for the next election while making the unavoidable corrections to the system for the conservatives.

Or maybe Germany’s strength is due to its corporate structure which requires union representation in every industry at every level from factory to country. So there is no asset stripping. Money goes into investment in training and research rather than into dividends

In 2008 the government upped taxes to subsidise keeping people in work. Unions agreed a 10% wage-cut but workers actually lost only 3% as taxpayer and employer made up the rest.

What you would probably call socialism.

Coming up…

There’s lots more GDP data to come, including

  • Austria and Slovakia in a few moments (8am BST)
  • The Netherlands at 8.30 a.m.
  • Italy at 9am
  • The eurozone as a whole: 10am

Antonio Garcia Pascual, chief eurozone economist at Barclays, says France’s economy was dragged back by “very weak” business investment and household consumption during the last quarter.

He’s particularly concerned about the 0.9% drop in investment — which suggests anxiety about Francois Hollande’s economic programme, including tens of billions of euros of cuts to public spending over the next few years.

Updated

Dixons and Carphone agreed £3.7bn merger

Breaking away to the UK briefly, Carphone Warehouse and Dixons have agreed to merge and create a new high street giant.

The new company, called “Dixons Carphone plc”, is designed to create “a leader in European consumer electricals, mobiles, connectivity and related services” (they say here)

It brings together Carphone’s mobile technology outlets and Dixons electrical shops (fastFT neatly dubs it the “tablets meet toasters” merger).

The deal is worth £3.7bn. Carphone chairman Charlie Dunstone reckons:

“This is a new chapter for both businesses and we are energised and proud to be part of what will be another fantastic journey for consumers and shareholders.”

There is SOME good news for France, alongside its disappointing growth data. INSEE has revised last year’s data, and concluded that the French economy was larger than it first thought in 2012.

This means last year’s debt-to-GDP ratio has been cut to 91.8%, from 93.5%, while the public deficit was revised down to 4.2% from 4.3%. That makes it a little easier for Paris to meet the deficit targets agreed with Brussels.

Credit Agricole’s Frederik Ducrozet is also struck by the comparison between Europe’s two largest economies.

The UK also grew by 0.8% in the January-March quarter, according to data released last month, matching Germany’s performance (let’s hope this doesn’t go to penalties)

Economist Shaun Richards flags up another worrying point in today’s data — French imports rose in the last quarter, while exports slowed down.

The German finance ministry says the country’s economy benefitted from a mild winter, and decent domestic demand.

German economy grows by 0.8% in Q1 2014

GERMANY beats forecasts – with growth of 0.8% in the first quarter of 2014. That’s a little stronger than expected (economists expected +0.7%).

SUCH a contrast with France’s stagnation….

As well as that 0.5% slump in French household spending, INSEE also reports that capital spending dropped by 0.9% in the last quarter.

This chart from INSEE shows how inventories rose, suggesting companies stockpiled goods as demand wavered.

The full statement is here on INSEE’s website.

Jonathan Ferro of Bloomberg sums France’s (non) growth figures up:

So why couldn’t the French economy grow in the last three months?

Dominique Barbet, an economist at BNP Paribas SA in Paris, tells Bloomberg that consumer spending (which fell 0.5%) dragged down the economy. He’s concerned that France’s growth prospects look rather modest.

“What’s worrying beyond the first quarter is that the level of growth is weak. There’s no acceleration. We don’t have the recovery that other countries are seeing.”

Disappointment as French growth stalls

Eurozone GDP day has begun with bad news — the French economy stagnated during the first three months of 2014 as consumer spending slumped.

INSEE reports that GDP was unchanged over the quarter, a new blow to Francois Hollande’s already pummelled government.

Economists had expected growth of 0.2% — which would have been bad enough.

INSEE reported that consumer spending fell 0.5% in the first quarter, showing French households are struggling. Investment by nonfinancial companies also fell 0.5%.

Reaction to follow….

Eurozone GDP released today

Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and business.

And we’re heavily focused on the eurozone today, with the release of new growth data from across the region for the first three months of 2014.

It’ll show whether Europe’s economy continued to claw its way back from the recession which ended last summer. And there’s particular focus on France, given fears that the second largest country in the euro area is struggling.

I’ll be covering all the data for the next few hours, building up to the overall eurozone growth figure at 10am BST.

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Upbeat mood in Britain contrasts with pessimistic eurozone surveys. Fears of recession in France grow. Eurozone composite PMI remains in expansion territory above the 50 mark at 51.5, but declines from October’s level of 51.9…

 


Powered by Guardian.co.ukThis article titled “UK manufacturing expands at fastest rate since 1995″ was written by Heather Stewart, for theguardian.com on Thursday 21st November 2013 13.32 UTC

Britain’s manufacturing sector is expanding at its fastest pace for 18 years as new orders pour in, according to a new survey, rekindling hopes for a rebalancing of the economy.

The Confederation of British Industry’s monthly industrial trends survey shows manufacturing orders and output both at their highest level since 1995.

The CBI said that 36% of firms reported their order books were above normal, with 25% saying they were below normal. The resulting balance of +11% was the strongest since March 1995. Similarly, the positive balance for firms’ level of output, at +29%, was the strongest since January 1995.

Stephen Gifford, the CBI’s director of economics, said: “This new evidence shows encouraging signs of a broadening and deepening recovery in the manufacturing sector. Manufacturers finally seem to be feeling the benefit of growing confidence and spending within the UK and globally.”

The coalition will be encouraged to see signs of a revival in British industry, after fears that the economic recovery has so far been too reliant on consumer spending and an upturn in the housing market.

The chancellor of the exchequer, George Osborne, has said he would like to see a “march of the makers”, helping to double exports by the end of the decade, so that Britain can “pay its way in the world”.

Business surveys have been pointing to a revival in manufacturing for some time, but it has only recently begun to be reflected in official figures, which showed a 0.9% increase in output from the sector in the third quarter of 2013, driven primarily by the success of carmakers. However, output from manufacturing remains more than 8% below its peak before the financial crisis.

News of the upbeat mood among manufacturers in the UK contrasts with more pessimistic surveys from the eurozone where the so-called “flash PMIs” suggest that the economic recovery is petering out in several countries, including France.

While the composite PMI for the eurozone remains above the 50 mark at 51.5, this is a decline from October’s level of 51.9, suggesting that while the eurozone economy as a whole has not slipped back into recession, the pace of growth appears to have slowed.

Chris Williamson, of data provider Markit, which compiles the survey, said: “The fall in the PMI for a second successive month suggests that the European Central Bank was correct to cut interest rates to a record low at its last meeting, and the further loss of growth momentum will raise calls for policy makers to do more to prevent the eurozone from slipping back into another recession.”

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Greece ‘backsliding in democracy’ in face of joblessness, social unrest, corruption and disillusion with politicians, says thinktank. The report, commissioned by the European parliament, noted that Greece was the most corrupt state in the 28-nation bloc…

 


Powered by Guardian.co.ukThis article titled “Greece’s democracy in danger, warns Demos, as Greek reservists call for coup” was written by Helena Smith in Athens, for The Guardian on Thursday 26th September 2013 19.27 UTC

No country has displayed more of a “backslide in democracy” than Greece, the British thinktank Demos has said in a study highlighting the crisis-plagued country’s slide into economic, social and political disarray.

Released on the same day that judicial authorities ordered an investigation into a blog posting by an elite reservist group linked to Greece’s armed forces calling for a coup d’etat, the study singled out Greece and Hungary for being “the most significant democratic backsliders” in the EU.

“Researchers found Greece overwhelmed by high unemployment, social unrest, endemic corruption and a severe disillusionment with the political establishment,” it said. The report, commissioned by the European parliament, noted that Greece was the most corrupt state in the 28-nation bloc and voiced fears over the rise of far-right extremism in the country.

The report was released as the fragile two-party coalition of the prime minister, Antonis Samaras, admitted it was worried by a call for a military coup posted overnight on Wednesday on the website of the Special Forces Reserve Union. “It must worry us,” said a government spokesman, Simos Kedikoglou. “The overwhelming majority in the armed forces are devoted to our democracy,” he said. “The few who are not will face the consequences.”

With tension running high after a crackdown on the neo-Nazi Golden Dawn party, a supreme court public prosecutor demanded an immediate inquiry into who may have written the post, which called for an interim government under “the guarantee of the armed forces”.

The special forces reservist unit who issued the social media call – whose members appeared in uniform to protest against a visit to Athens by the German chancellor, Angela Merkel – said Greece should renege on the conditions attached to an international bailout and set up special courts to prosecute those responsible for its worst financial crisis in modern times. Assets belonging to German companies, individuals or the state should be seized to pay off war reparations amassed during the Nazi occupation.

Underscoring the social upheaval that has followed economic meltdown, the blog post argued that the government had violated the constitution by failing to provide adequate health, education, justice and security.

Insiders said the mysterious post once again highlighted the infiltration of the armed forces by the extreme right. This week revelations emerged of Golden Dawn hit squads being trained by special forces commandos.

Fears are growing that instead of reining in the extremist organisation, the crackdown on the group may ultimately create a backlash. The party, whose leaders publicly admire Adolf Hitler and have adopted an emblem resembling the swastika, have held their ground in opinion polls despite a wave of public outrage over the murder of a Greek rap musician, Pavlos Fyssas, by one of its members. Golden Dawn, which won nearly 7% of the vote in elections last year and has 18 MPs in Athens’ 300-member parliament, has capitalised more than any other political force on Greece’s economic crisis. “Much will depend on how well it will withstand the pressure and they are tough guys who seem to be withstanding it well,” said Giorgos Kyrtos, a political commentator.

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Polls point to grand coalition between Angela Merkel’s CDU, Bavarian sister party the CSU and the Social Democrats. One of Europe’s most important elections in years will be likely to go to the wire as the closeness of the contest becomes clear…

 


Powered by Guardian.co.ukThis article titled “German election goes to the wire with no clear winner in sight” was written by Kate Connolly in Berlin, for theguardian.com on Wednesday 18th September 2013 11.21 UTC

The final stretch of the German general election is turning into a nail-biting race between the main parties, with latest polls showing that neither Angela Merkel‘s conservatives together with her liberal coalition partner, the FDP, nor a leftwing-Green party alliance is set to obtain an overall majority.

The opinion polls indicate that one of Europe’s most important elections in years will go to the wire, with the most likely outcome to be a so-called grand coalition between the Christian Democratic Union (CDU) and its Bavarian sister party, the CSU, together with the Social Democrats (SPD).

The poll by the Forsa Institute put the CDU on 39%, the SPD on 25%, and the liberal Free Democrats on 5%, the threshold needed for it to get into parliament.

The Left (Linke) is on 10%, and the Green party on 9%.

Arithmetically the possibilities would be a grand coalition or a conservative-Green union, though the latter is unlikely, having more or less been ruled out by those involved.

As the closeness of the contest became clear, all parties were scrambling on Wednesday to try to garner the support of the large number of undecideds, estimated to be up to a third of voters.

The CDU was keen to warn its voters that splitting their two votes – a “local” vote for a constituency MP, and a second for the party list – would risk huge losses for the CDU.

The party had its fingers burned at a regional poll in Lower Saxony in January when so many second votes were given to the FDP that the CDU was narrowly defeated.

The FDP, meanwhile, whose survival in parliament is in grave doubt after it failed by a considerable margin to enter the Bavarian assembly in last Sunday’s election, was canvassing CDU voters to “lend” their second vote to the FDP to ensure a continuation of the conservative-FDP alliance. It was also trying to rally its core supporters by wheeling out its former star and foreign minister Hans-Dietrich Genscher.

The SPD, buoyed by a solid if not spectacular result in Bavaria, was also trying desperately to motivate its core voters, particularly as experience shows the higher the voter turnout is, the better its prospects have been. The SPD’s leadership has been gathering in recent days to discuss its position in a grand coalition, as its chances of re-entering government loomed ever larger.

An unknown quantity remains the Alternative für Deutschland, a new Eurosceptic party. Although polls show it is expected to get just 3%, analysts say the party should not be underestimated, not least because of the 1 million clicks its YouTube campaign video has received, and the €430,000 of donations it collected just last weekend. The party could yet benefit from the high number of undecided voters, and the growing number of “closet” anti-Europeans.

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The Japanese economy expanded more than expected by 0.9% q/q in the first quarter of the year. PM Shinzo Abe’s stimulus package could generate feel-good factor needed to end two decades of stagnant growth and a template for Europe…

 


Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Japan’s strong growth figures show Europe the way” was written by Phillip Inman, for theguardian.com on Thursday 16th May 2013 15.01 UTC

4.01pm BST

Time to close the blog…

Thank you for all your comments. It was a rumbustious, lively exchange of views, as Boris Johnson might say. Graeme Wearden is back tomorrow, no doubt armed with more pictures of rioting Greeks. To anyone who missed their regular fix, I apologise.

3.57pm BST

French President Francois Hollande gives a press conference on May 16, 2013 at the Elysee Palace in Paris, a day after his first anniversary in office was marred by news that France had fallen back into recession amid plummeting economic indicators.
French President Francois Hollande at a press conference this afternoon at the Elysee Palace in Paris, a day after his first anniversary in office was marred by news that France had fallen back into recession amid plummeting economic indicators. Photograph: AFP/Getty Images

More scepticism from Michael Hewson. And its hard not see to see the whole French agenda being driven by a basic loss of confidence and search for a sugar daddy

3.50pm BST

Not everyone is embracing the other side of his argument – that everyone work longer and be more entrepreneurial

3.47pm BST

Hollande starts the fight back

Francois Hollande, French prime minister, has gone on the offensive after a run of bad figures, and especially yesterday's 0.2% contraction in GDP. The triple dip recession is a blow to Paris when Hollande promised to reject austerity in favour of growth.

But he's probably pushing in the wrong direction if he thinks closer political integration is on the cards and more than that, will be the saviour of France.

2.34pm BST

Our Ireland correspondent Henry McDonald has seen a think tank report that urges Dublin to push for growth in the eurozone or risk further pain

Henry McDonald, Dublin

One of Ireland's most respected economic think-tanks has warned that Irish growth rates depend on Europe turning the corner. The Republic's Economic and Social Research Institute has projeced that growth in Irish output and jobs will continue this year and into 2014.

In their latest Quarterly Economic Commentary, the ESRI predicts growth of 18% in 2013 and 2.7% in 2014. Crucially the ESRI believes unemployment could fall below 14% of the workforce. But, and it is a big but, the ESRI concludes that this relies on fellow Europeans buying the goods and services Ireland has to offer from its resilent export sector.

Due to global economic uncertainty, the ESRI urges the Irish government to continue to drive down the country's massive public sector debt.
By doing so it said that "the deficit will be eliminated and the public finance contraction will not be weighing on the domestic economy".

2.27pm BST

Bernanke will take a cautious line

James Knightley at ING bank believes the US unemployment and inflation figures will force the Fed chief to be a little more downbeat about the recovery, though the housing data was mixed.

In terms of today’s data it should be remembered that the drop in housing starts is a fall from a five year high while building permits rose 14.3% and yesterday’s National Association of Home Builders reported a rise in activity. We therefore suspect that the fall in housing starts figure is a temporary blip.

With the activity data moving in lots of different directions right now and inflation remaining benign it is highly unlikely that the Fed will change its policy stance anytime soon. Consequently, Bernanke is likely to adopt a cautious tone when he testifies before the Joint Economic Committee on the economic outlook next Wednesday.

Updated at 3.20pm BST

2.08pm BST

US inflation falls

A clarification on US inflation. I cited the year on year increase in CPI inflation of 1.1% in the last but one post, but the world is understandably more focused on the month-on-month figure which showed the cost of living fell in April for a second month, and as Bloomberg points out, "the first back-to-back declines in inflation since late 2008.

Just for the record, the month on month decline was 0.4%, helped mainly by lower fuel costs. And there is your mega stat of the day. When we ask ourselves why is the US improving and look to the Fed and Obama stimulus, we are only partly right. Low fuel costs for a modern economy run on oil is manna from heaven. Low inflation based on low petrol prices IS the stimulus. But as Bernanke knows, you don't want inflation to low for too long or you become Japan.

1.56pm BST

Former BP boss Tony Hayward in 2010 (with current chief executive Bob Dudley. Hayward is now interim chairman of Glencore
Former BP boss Tony Hayward in 2010 (with current chief executive Bob Dudley. Hayward is now interim chairman of Glencore Jim Young/REUTERS

Over in Switzerland there were some seriously bizarre goings on this morning at the Glencore AGM. First Sir John Bond, remember him as the former HSBC boss and swashbuckling banker, took the chair, only to step down in favour of former BP boss Tony Hayward, who promptly said he would step down as soon as a permanent successor was found. This is the world's largest publicly listed miner and commodites trader, which is the largest supplier of coal to power stations worldwide. It is not a nickel and dime company. Yet it has allowed the AGM to become a farce. For more read Jill Treanor's story.

1.46pm BST

US data disappoints

It's a bad number for unemployment. The number of people who applied for benefits jumped by 32,000 to 360,000 in the week ended May 11. That's the fastest pace for new benefit claims in six months.

Economists surveyed by MarketWatch had expected claims to rise to a seasonally adjusted 330,000 from a revised 328,000 in the prior week.

A Labor official told MartketWatch there was nothing unusual in the report and "there was no evidence that reductions in federal spending under a law known as the sequester contributed to the spike".

Meanwhile inflation came in at 1.1%, which is the largest drop since 2008 and the financial crash. it will certainly give Fed chief Ben Bernanke plenty of scope for unconventional monetary policy over the coming months.

See a full report on Reuters

1.15pm BST

EU Referendum bill to get an airing

Stockton South MP James Wharton who came top of the annual ballot of MPs to scoop the chance to put forward EU referendum legislation to take effect in 2017.
Stockton South MP James Wharton who came top of the annual ballot of MPs to scoop the chance to put forward EU referendum legislation to take effect in 2017. Photograph: Philip Toscano/PA

More on the EU referendum bill. A Conservative backbencher, James Wharton, has accepted the challenge of introducing a bill paving the way for a referendum on the UK's EU membership. He gained the top slot in a list of MPs able to table private member's bills and readily accepted calls to champion a referendum. He will, says the BBC, "have full Tory support to bring forward a bill outlining the terms of a referendum to be held by 2017".

Downing Street said Mr Cameron was "very pleased" and would ensure the bill was given "the full support of the Conservative Party". See Andrew Sparrow's blog for more details

12.24pm BST

Lloyds share price soars

Antonio Horta-Osorio back in 2010 - he hasn't aged much and is smiling these days after returning the bank to more profitable ways.
Antonio Horta-Osorio back in 2010 – he hasn’t aged much and is smiling these days after returning the bank to more profitable ways. Photograph: AFP/Getty Images

The value of Lloyds Banking Group, which everyone will remember disastrously absorbed HBoS at the height of the banking disaster and is now 39% owned by the taxpayer, is on a bounce after boss Antonio Horta-Osorio said the bank was profitable again.

Shares have jumped and now nestle just below the 61p level that triggers Mr Horta-Osorio's generous bonus package. There is controversy after the government arbitrarily agreed to set the 61p level, justifying it with a piece of analysisn that says it was the average price of Lloyds shares when it crashed. However, the taxpayer paid 73p for the shares and many argue we should only celebrate when that level is reached.

Eurocrats will be watching developments in the UK because there are still many bust banks across the continent in need of extra funds from somewhere. Some analysts estimate that Spanish banks still need €200bn. Lenders may have recognised many of their debts on empty property developments, but have done little to recognise the debts on their distressed mortgage lending.

11.44am BST

Schäuble speaks in Berlin

German finance minister Wolfgang Schaeuble (on the left) and prime minister of Luxemburg Jean-Claude Juncker (R)  take part in a panel discussion during the Europe forum in Berlin.
German finance minister Wolfgang Schäuble (on the left) and prime minister of Luxemburg Jean-Claude Juncker take part in a panel discussion during the Europe forum in Berlin. Photograph: AFP/Getty Images

The German finance minister Wolfgang Schäuble is talking and repeating his misgivings about central banks printing money. What everyone should remember about the loveable Mr Schäuble is that he is a humble lawyer and politician who is obsessed by the German obsession with hyper-inflation. His heyday was negotiating German re-unification. Its been downhill ever since monetary unification, which hasn't worked so well.

Obviously, he is not a fan of Japan's latest fiscal and monetary moves.

Updated at 2.02pm BST

11.33am BST

More eurozone inflation details

To get the full picture on eurozone inflation there is always the eurostat website page with its country by country breakdown.

As Faisal Islam points out Greece is suffering badly …

Updated at 11.34am BST

11.06am BST

Austerity Kills

When I talk to eurocrats they will often spout the usual guff about the worst being behind the euro; that it will hang together and everything, everywhere is improving.

But a new book emphasises just how out of touch ambassadors, Brussels officials and government policymakers can become when they stare for too long at the macro economic figures.

My colleague John Henley has written about David Stuckler and Sanjay Basu's book The Body Economic about how austerity kills. I won't recount all the grim figures on health and happiness here, suffice it to say, a cosy Brussels salary and pension is the best insulation one can have from real life.

Updated at 11.29am BST

10.49am BST

Eurozone inflation fall confirmed, imports dive

Inflation in the eurozone was confirmed by Eurostat at 1.2% for April. More interestingly was the trade figures which showed a 10% fall in imports. This stark illustration of the shocking fall in demand across the 17 member currency zone follows figures earlier this month showing that German and Italian consumers combined could bring themselves to buy only as many cars as the relatively more bouyant UK consumer. There was no increase in exports.

As Reuters reports, the 10% fall in imports had one silver lining – that the eurozone's international trade balance for March rose to €22.9bn.

10.32am BST

Maybe Germany isn’t top dog really

In addition, while I'm discussing/ranting about Germany, the almost fanatical obsession with productivity, which was only knocked off course during the 1990s by unification with the east and the associated costs, is one of the main reasons the UK stayed out of the euro.

How can anyone compete with the Germans. The minute you up your game, they move up a gear. There are no sacrifices they won't make to be the most powerful economy. The UK understood this truth of the modern era.

That said, the country's low birth rate could be construed as a massive vote of no confidence by the country's families, and women in particular, on the German way of life.

Updated at 10.39am BST

10.26am BST

Why is Germany top dog?

A very interesting article on CiF today by Martin Kettle on Germany and why it's better than the UK. Can't agree myself. When he says they don't obsess about immigration in the way we do, I think he must be talking to the wrong people.

There are plenty of government economists in Berlin who think immigration is the only answer to a declining population, but know that to even mention it will be to stir huge protests and resentment.

Also they discuss education like the Chinese, with a sense of panic that schools and colleges are merely a factory training ground when they need to generate new ideas and be creative. No government has the right answers and everyone is panicked

Updated at 10.39am BST

10.16am BST

There some action today in the ongoing battle for the heart and soul of the Tory party as the implications of the vote against the Queen's speech filters through both houses of parliament. A Tory MP has won the ballot for private member's bills and is going to come under pressure to adopt the EU referendum bill as his own. Stockton South MP James Wharton is the Tory in question. Regular tweeter Douglas Carswell MP, a free marketeer and europhobe, is cock-a-hoop. More details can be found on Andrew Sparrow's politics blog

10.06am BST

Will Japan’s growth bring on tax rises

V Phani Kumar at Dow Jones MarketWatch has written an interesting blog about the prospect of tax rises next year should the recent growth spurt prove to have some legs. It certainly true that Tokyo needs to hike its equivalent of VAT from 5% to 10% and probably beyond, but not until consumer confidence is re-established.

Updated at 10.40am BST

9.40am BST

More on Japan’s soaring GDP

Markit, the financial data providers, have published a handy chart showing, it says, that the Japanese recovery has some momentum going into Q2. It tweeted the chart and then followed it with figures showing that Tokyo indulges in mega revisions of its GDP data. Joe Grice, chief economist at the UK's Office for National Statistics, is always chiding journalists for not loooking at the long term trend in GDP data, and maybe we need to take the same healthy scepticism to today's figures from Japan

9.03am BST

Telecoms giants enter tariff battle

Bloomberg is reporting that Nokia and Ericsson have told the EU to drop a probe into unfair subsidies for Chinese phone makers. It seems the two Scandinavian manufacturers are in favour of free trade and more importantly, fear retaliation from Beijing, where they both have big sales.

Updated at 10.40am BST

8.52am BST

An agenda, of sorts

The main items on the agenda today are….

• 09:00 (GMT) – eurozone consumer price index April (final estimate)
• 09:00 (GMT) – eurozone trade balance for March
• 12:30 (GMT) – US consumer price index, April
• 12:30 (GMT) – US building permits, April
• 12:30 (GMT) – US housing starts, April
• 12:30 (GMT) – US initial jobless claims (May 11)
• 23:50 (GMT) – Japan machine orders for March

8.38am BST

French unemployment worsens

France has suffered a further rise in unemployment, according to the National Institute of Statistics and Economic Studies. A flash estimate for the first quarter shows a decrease in payroll employment of 20,300 on the previous quarter, when payroll employment fell 44,000. Temprorary employment is expected to rise 12,000 it said, reflecting a trend across many of Europe’s indebted countries for a switch to part-time and temp employment.

Updated at 8.38am BST

8.31am BST

Could eurozone inflation fall further

At 9am GMT we are expecting eurozone inflation. Recently the consumer prices index has been sinking, putting pressure on the European Central Bank and its president Mario Draghi to ease credit conditions further. April inflation sank to 1.2% from 1.7% in March. The last time inflation was this weak was back in 2010 after falling to minus 0.5% in mid-2009.
Earlier this month the central bank cut the headline interest rate to 0.5%, matching the UK. But a further decline in price inflation will be yet another indication of weak demand and the need for a stimulus package, see Japan’s figures earlier today.

8.02am BST

Good morning

Graeme Wearden is away, so I'm in the euroblog hotseat.

Its exceptionally sunny in London today. And Tokyo, where the financial weather is usually gloomy, is enjoying some rays of sunshine.

Gross domestic product rose 0.9% from the previous quarter, which translates into an annualised 3.5% growth rate.

Let’s not get carried away, but Abenomics seems to be getting off to a flying start. After the damp squib of an economic lift that came after the 2011 tsunami, the stimulus package put together by new prime minister Shinzo Abe could be generating the kind of feelgood factor Japan needs to end two decades of virtually zero growth.

The eurozone needs to look and learn.

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