Eurozone crisis live

Investors believe Mario Draghi could impose deeper negative interest rates and unleash more QE tomorrow. UK construction growth hits seven-month low. Latest: eurozone inflation just 0.1%. Citi predicts big moves from Draghi tomorrow…

Powered by Guardian.co.ukThis article titled “Euro weakens as eurozone inflation boosts stimulus hopes – business live” was written by Graeme Wearden, for theguardian.com on Wednesday 2nd December 2015 17.01 UTC

After a fairly undramatic day, London’s stock market has closed higher:

In 24 hours we’ll know exactly what Mario Draghi and co have decided.

In the meantime, City analysts continue to speculate — and perhaps prepare the ground for some ‘I told you so’ action.

Capital Economics have nailed their trousers to the mast, forecasting steeper negative interest rates on banks, and a serious QE boost.

Brian Davidson says:

We have long argued that the ECB would need to add more stimulus before long, and the consensus has come round to this view following a series of dovish signals by the ECB. Accordingly, markets are now pricing in a cut of around 10bp to the deposit rate and polls show that most economists expect a €15bn increase in monthly asset purchases. We think the ECB will cut the deposit rate by 20bp, and increase its monthly asset purchases by €20bn.

Updated

Thursday’s ECB meeting could be quite combative, as some central bank governors are reluctant to provide more stimulus.

The German contingent are particularly concerned, as the Wall Street Journal explains:

Several officials have expressed skepticism that more stimulus is needed at this time, led by the ECB’s two German officials, Bundesbank President Jens Weidmann and ECB executive board member Sabine Lautenschläger. Central bankers from Baltic euro members have also signalled resistance, making it unlikely that Thursday’s decision will be a unanimous one.

More here:

Newsflash from Ontario: The Bank of Canada has left interest rates unchanged at today’s policy meeting.

Money is also flowing into eurozone government bonds today, on anticipation that the ECB will boost its QE programme.

This has driven the yield, or interest rate on German two-year bonds deeper into negative territory – which means the price is at a record high.

The pound is tumbling on the FX markets today.

It just hit a new seven and a half-month low against the US dollar at $1.4979.

Sterling is being hit by two events

Back to the eurozone.

Swiss bank UBS have produced a nifty chart showing the main options which the ECB could deploy tomorrow…..and the likely impact on the markets.

ECB policy options

Updated

US private sector job creation hits five-month high

A strong dose of US employment data has just increased the chances that the Federal Reserve raises interest rates in two weeks time.

A total of 217,000 new jobs were created by US companies last month, according to the ADP Research Institute.

That’s the biggest rise in private sector payrolls since June, and beats forecasts for a 190,000 increase. It also beats October’s reading of 196,000, which was revised up from 182,000.

It suggests that the wider Non-Farm Payroll will show a robust labour market. The NFP is due on Friday, and is the last major data point until the Fed’s December meeting.

US ADP Payroll

US ADP Payroll Photograph: ADP / fastFT

As fastFT puts it:

Although the ADP survey has not proved a consistent forecaster of the official monthly government jobs numbers, they may soothe investors nerves ahead of an important period for economic data and central bank decisions.

The euro has fallen back today, in another sign that Draghi is expected to announce new stimulus measures tomorrow.

The single currency dropped back through the $1.06 mark against the US dollar today, which is a near eight-month low.

Euro vs US dollar today

Euro vs US dollar today Photograph: Thomson Reuters

This is a handy chart, showing the three main options in the ECB’s toolbox, and the way they could be deployed:

There’s no realistic chance that eurozone inflation will hit the forecasts drawn up by the ECB’s own economists three months ago.

That’s the view of Timo del Carpio, European Economist, RBC Capital Markets, who told clients:

The most recent staff projections from the ECB (published in September) revealed an expectation for HICP [inflation] to average 0.4% y/y over Q4/15 as a whole.

Taking into account today’s outturn, this would require the headline rate to rise to at least 0.8% y/y in December in order for those forecasts to still be valid. Suffice to say, we think that is too tall an order, even taking into account the expected base effects from last year’s oil price declines (expected to come into force primarily in December and January).

In other words, this outturn should represent further downside news for the ECB.

And that’s why del Carpio predicts a further 20 basis point cut to the deposit rate, and a 6-month extension to the QE asset purchase programme .

It’s all systems go for more ECB stimulus, says Jonathan Loynes, chief European economist at Capital Economics:

“November’s weaker-than-expected eurozone consumer prices figures give a final green light for the ECB to both increase the pace of its asset purchases and cut its deposit rate at tomorrow’s policy meeting.”

Loynes is also concerned the core inflation – which excludes volatile components such as energy prices – dropped from 1.1% in October to 0.9% in November.

(FILES) A picture taken on August 7, 2014 shows the Euro logo in front of the European Central Bank, ECB in Frankfurt am Main, western Germany. Financial markets are looking to the European Central Bank to open the cash floodgates next week after consumer price data showed the 18-country eurozone is flirting with deflation, analysts said. AFP PHOTO / DANIEL ROLANDDANIEL ROLAND/AFP/Getty Images

Ruben Segura-Cayuela, a euro zone economist at Bank of America Merrill Lynch, believes the weak inflation report will have surprised the European Central Bank, in a bad way.

With inflation stuck at just 0.1%, Segura-Cayuela believes the ECB will boost its bond-buying QE programme from the current rate of €60bn per month.

I’ve taken the quotes off Reuters:

“It [the inflation report] is not consistent with the trend that the ECB was expecting.

We are expecting a one year extension on QE purchases and quantities to go up to as much as €70bn a month.”

Segura-Cayuela is also in the ‘deeper negative rates’ camp — he reckons the deposit rate on bank deposits at the ECB could fall from -0.2% to -0.3%.

European stock markets are still rallying after the inflation data reinforced hopes of more eurozone stimulus:

European stock markts

Bloomberg’s Maxime Sbaihi also expects significant action from the European Central Bank tomorrow:

Updated

Economist and ECB watcher Fred Ducrozet has found a chart showing how weak inflation will prompt extra QE from the European Central Bank.

The x-axis shows the forecast for inflation — the ECB’s target is just below 2%.

The y-axis shows how much extra bond-buying would be needed if inflation is falling short — red if the ECB is struggling to push funds into the real economy, and grey if the ‘transmission mechanism’ is working well.

And as Fred tweets, today’s poor inflation data suggests anything between €400bn and one trillion euros of extra QE could be required.

Citi predicts lots more QE.

Citigroup has predicted that Mario Draghi will make two serious announcements tomorrow.

1) They expect him to hit the banks with more severe negative interest rates, by cutting the deposit rate at the ECB to minus 0.4% (compared with minus 0.2% today).

2) In addition, they suspect Draghi will boost the ECB’s bond-buying programme from €60bn per month to €75bn per month….

…and also run the quantitative easing programme for another six months. So rather than ending in September 2016, it would continue to March 2017.

That adds up to around €585bn of extra QE, I reckon.

City traders are predicting that Mario Draghi will announce a significant increase in the ECB’s stimulus measures on Thursday:

This weak inflation report could provoke the ECB into a more dramatic stimulus boost at tomorrow’s governing council meeting, says Jasper Lawler of CMC Markets:

He believes Mario Draghi could announce plans to buy more assets with newly printed money each month, rather than just run the quantitative easing programme for longer.

The euro plunged after data showed Eurozone inflation was stuck at a meagre 0.1% year-over-year in November, missing estimates of a slight rise to 0.2%.

The inflation miss adds to the case for stronger action from the ECB tomorrow. The data could be the difference-maker for the ECB choosing to increase the size of monthly asset purchases over just extending the end-date of the QE program.

Currently the ECB is buying €60bn of assets each month with new money, to expand its balance sheet and push more cash into the economy.

Updated

The euro has fallen sharply, as investors calculate that the ECB is very likely to announce new stimulus measures tomorrow:

Eurozone inflation: the detail

Eurozone’s inflation rate was, once again, pegged back by cheaper oil and petrol.

Here’s the detail, explaining why inflation was just 0.1% last month.

  • Energy prices slumped by 7.3%
  • Food: up 1.5%
  • Service: up 1.1%
  • Other goods: +0.5%
Eurozone inflation

Eurozone inflation, November 2015 Photograph: Eurostat

Another blow – core inflation, which excludes energy, food and tobacco, only rose by 0.9%.

That’s down from 1.1% a month ago, suggesting that inflationary pressure in the eurozone is actually weakening….

Eurozone inflation stuck at 0.1%

Here comes the eagerly-awaited eurozone inflation data!

And it shows that consumer prices only rose by 0.1% year-on-year in November.

That’s a little weaker than the 0.2% which economists had expected.

It raises the chances of significant new stimulus moves from the European Central Bank tomorrow (as explained earlier in this blog)

More to follow….

Updated

The pound has been knocked by the news that UK construction growth has hit a seven-month low:

Pound vs dollar today

Pound vs dollar today Photograph: Thomson Reuters

Updated

Britain’s construction sector is suffering from a lack of skilled builders, warns David Noble, CEO at the Chartered Institute of Procurement & Supply.

He says this is a key factor behind the sharp drop in growth last month:

“Suppliers continued to struggle this month, citing shortages in key materials, supply chain capacity and skilled capability as the causes.

But there is a question mark over the coming months as the housing sector, normally the star performer, may drag back on recovery along with the lack of availability of skilled staff.”

Maybe George Osborne should get back to that building site….

Britain’s Chancellor of the Exchequer George Osborne lays a brick during a visit to a housing development in South Ockendon in Essex, Britain November 26, 2015. REUTERS/Carl Court/Pool

Construction recovery is ‘down but not out’

The slowdown in housebuilding growth last month means that it was overtaken by the commercial building sector, as this chart shows:

Construction PMI by sector

Tim Moore, senior economist at Markit, explains:

“The UK construction recovery is down but not out, according to November’s survey data. Aside from a pre-election growth slowdown in April, the latest expansion of construction activity was the weakest for almost two-and-a-half years amid a sharp loss of housebuilding momentum.

“Residential activity lost its position as the best performing sub-category, but a supportive policy backdrop should help prevent longer-term malaise. Strong growth of commercial construction was maintained in November as positive UK economic conditions acted as a boost to new projects, while civil engineering remained the weakest performer.

UK construction growth hits seven-month low

Breaking — growth across Britain’s construction sector has slowed to a seven month low, as builders suffer an unexpected slowdown.

Data firm Markit reports that house building activity expanded at the lowest rate since June 2013 in November.

Markit’s Construction PMI, which measures activity across the sector, fell to 55.3 last month from 58.8 in October.

That is the weakest reading since the pre-election slowdown in April, and the second-weakest since mid 2013.

The slowdown was particularly sharp in the house-building area – which is particularly worrying, given Britain’s desperate need for more homes.

Markit says:

All three broad areas of construction activity experienced a slowdown in output growth during November. Residential building activity increased at the weakest pace since June 2013, while civil engineering activity rose at the slowest rate for six months and was the worst performing sub- category.

UK construction PMI

More to follow…

Yannis Stournaras governor of Bank of Greece shows the new 20 euro note in Athens, Tuesday, Nov. 24, 2015. The new 20 euro notes will circulate in the 19 Eurozone countries on Wednesday. Greece was formally cleared Monday to get the next batch of bailout loans due from its third financial rescue after the cash-strapped country implemented a series of economic reform measures that European creditors had demanded. (AP Photo/Thanassis Stavrakis)

A new survey of Europe’s businesses has found that, for the first time since 2009, they aren’t struggling to get credit.

That suggests the ECB’s policy measures are having an effect — and also indicates that perhaps more stimulus isn’t needed after all….

The ECB surveyed more than 11,000 companies across the eurozone. And most reported that they have no concerns over their ability to borrow. Instead, the main problem is a lack of customers.

It’s six weeks since the last ECB meeting, when Mario Draghi dropped a loud hint that the central bank was ready to do more stimulus if needed.

Since then, European stock markets have climbed steadily, and are heading for a three-month high today.

Latvia’s central bank governor has apparently told a local newspaper that the ECB’s quantitative easing programme is “better than doing nothing”.

That’s via Bloomberg. The interview took place with the Neatkariga Rita Avize newspaper – but there’s only a teaser online.

There’s a bit of edginess in the markets this morning, as investors wait for November’s eurozone inflation data to arrive in 70 minutes time.

Economists expect a small uptick, from 0.1% to 0.2% — while core inflation (which strips out volatile factors like energy and food) might hover around 1.1%.

A poor reading would surely seal fresh stimulus measure at tomorrow’s ECB meeting. But a stronger inflation report might cause jitters, as Conner Campbell of Spreadex puts it:

Given that the region’s failure to reach its inflation targets is one of the main reasons the Eurozone’s central bank is considering another injection of QE, this Wednesday’s figures perhaps carry slightly more weight than they have of late.

European stock markets

European stock markets in early trading Photograph: Thomson Reuters

This chart shows how investors expect the ECB to impose deeper negative interest rates on commercial banks.

That would discourage them from leaving money in its vaults rather than lending it to consumers and businesses:

Ramin Nakisa of UBS

Ramin Nakisa of UBS Photograph: Bloomberg TV

It’s possible that the European Central Bank disappoints the markets tomorrow.

Ramin Nakisa, global asset allocation manager at UBS, believes the ECB will not boost its quantitative easing programme tomorrow, despite a general belief that more QE is coming.

He also reckons the deposit rate paid by banks who leave cash at the ECB will only be cut by 10 basis points, from minus 0.2% to minus 0.3%.

Nakisa tells Bloomberg TV:

If that happens, there could be some disappointment in the markets.

But in the long-term, Nakisa adds, the eurozone economy is recovering. More stimulus isn’t really needed.

Ding ding – European markets are open for trading, and shares are rising.

The German DAX, French CAC, Italian FTSE MIB and Spanish IBEX are all up around 0.4%, ahead of tomorrow’s ECB meeting.

The FTSE 100 is lagging, though – up just 0.1%. It’s being dragged down by Saga, the travel and insurance group, which has shed 5% after its biggest shareholder sold a 13% stake.

The Bank of England printing works, now De La Rue, in Debden Newly printed sheets of 5 notes are checked for printing mistakes<br />B81HM8 The Bank of England printing works, now De La Rue, in Debden Newly printed sheets of 5 notes are checked for printing mistakes

You’d think that printing banknotes would be a safely lucrative business (losing money? Just make some more!).

But De La Rue, the UK-based printer, has just announced that it’s cutting around 300 staff and halving its production lines from eight to four.

The axe is falling sharply on its Malta plant, which is to close.

De La Rue prints more than 150 national currencies, and has suffered from falling demand for paper notes. There had been chatter that it might pick up the contract to produce new drachma for Greece, but that particular opportunity appears to have gone…..

Updated

VW shareholders to face workers

There could be ructions in Wolfsberg his morning, as the billionaire owners of Volkswagen face workers for the first time since the emissions cheating scandal broke.

The Porsche-Piech have been criticised for keeping a low profile since the VW crisis erupted. But today, several members of the group will make the trip to the carmakers headquarters to show solidarity with workers – who are being forced to down tools over Christmas because sales have weakened.

Bloomberg has a good take:

Wolfgang Porsche, chairman of family-owned majority shareholder Porsche Automobil Holding SE, will address thousands of workers in hall 11 of Volkswagen’s huge factory in Wolfsburg, Germany. He’ll be flanked at the 9:30 a.m. staff meeting by the other three supervisory board members who represent the reclusive clan: Louise Kiesling, Hans-Michel Piech and Ferdinand Oliver Porsche.

The Porsche-Piech family has been asked by labor leaders to signal their commitment to workers, now facing two weeks of forced leave during the Christmas holidays as the crisis begins to affect sales.

Labor chief Bernd Osterloh, who has pushed to shield workers by focusing cutbacks on Volkswagen’s model portfolio, will host the assembly. It comes amid mixed news for Volkswagen: though the company has made progress toward a simpler-than-expected recall of 8.5 million rigged diesel cars in Europe, plummeting U.S. sales show the impact of the crisis on the showroom floor.

Updated

The Agenda: Eurozone inflation could seal stimulus move

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

There’s a ‘calm before the storm’ feeling in the markets today. Investors are bracing for Thursday’s European Central Bank meeting, where it is widely expected to boost its stimulus programme.

European stock markets are tipped to rally at the open, on anticipation that Mario Draghi will step up to the plate again and announce something significant.

It could be a new cut to borrowing costs, hitting banks with harsher negative interest rates to force them to lend money. Or it could be an extension to the ECB’s QE programme – a commitment to pump even more new electronic money into the economy.

Or both.

Or something else entirely. With ‘Super Mario’, you never know for sure.

The ECB is under pressure to act, because inflation in the eurozone is so weak.

At 10am GMT, the latest eurozone prices data is released — it’s expected to show that prices rose by just 0.2% annually in November. That would be an improvement on October’s 0.1%, but still far short of the target (just below 2%).

Also coming up today….

  • Market releases its UK construction PMI report at 9.30am GMT. That will show how the building industry fared last month -
  • The latest measure of US private sector employment is released at 1.30pm GMT. That will give a clue to how many jobs were created across America last month, ahead of Friday’s non-farm payroll report.
  • Federal Reserve chair Janet Yellen is speaking at the Economics Club of Washington on Wednesday at 5:25pm GMT.
  • And Canada’s central bank sets interest rates at 3pm GMT – we’re expecting no change.

We’ll be tracking all the main events through the day….

Updated

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USA 

Disappointment as Germany, France and Italy only post modest growth, while Portugal stagnates and Finland continues to slow. Eurozone GDP misses expectations. France returns to growth, but analysts aren’t impressed. Germany hit by global problems…

Powered by Guardian.co.ukThis article titled “Eurozone GDP: Growth slows to just 0.3% – as it happened” was written by Graeme Wearden, for theguardian.com on Friday 13th November 2015 13.42 UTC

Closing summary: Weak eurozone growth puts pressure on ECB

Rather like April Fool’s Day, eurozone GDP day is best enjoyed before lunchtime. So here’s a summary:

Europe’s economic recovery has faltered, with growth in the single currency region slowing to just 0.3% in the third quarter of the year.

Weak international trade helped to drag back Germany and Italy, and limited France’s recovery too.

Only consumer spending came to Europe’s aid, with household expenditure providing much of the growth impetus.

The subdued performance raises the pressure on the European Central Bank to boost its stimulus programmes at its December meeting.

Nick Kounis, head of macro and financial markets research at ABN AMRO bank, called it the “final push” for the ECB to be decisive.

The day began with France returning to growth, with GDP up by 0.3%.

Finance minister Michel Sapin told AFP that France’s economy will grow “by at least 1.1 percent” for 2015 as a whole, adding he believed the country had “exited the period of extremely weak growth that had lasted too long”.

But analysts were less impressed, pointing out that France’s ran a large trade deficit during the quarter. Only stockpiling by companies prevented the economy shrinking.

Germany’s economy also grew by 0.3%, down from 0.4%. The economy ministry blamed weak trade; economists warned that emerging market slowdown is hurting.

Smaller nations didn’t fare well either, with Italy slowing to +0.2%, the Netherlands barely growing, and Portugal actually stagnating.

But Finland was the real shocker — living up to its reputation as the ‘sick man of Europe’ with a 0.6% contraction.

Finland GDP

Only Greece beat expectations – shrinking by a mere 0.5%, not the 1% expected. That tells you something about the accuracy of City forecasts, and the turmoil in the Greek economy this year. When a 0.5% contraction is ‘good news’, you know you’re been through the mire.

But it may mean that Greece’s economy ‘only’ stagnates during 2015.

That’s probably all for today. I’m off to fold up the Eurozone GDP Day banners, and finish up the party punch.

Thanks for reading and commenting; see you next week. GW

A double helping of halušky to Slovakia, which was the fastest-growing member of the eurozone in the last quarter.

But it’s cold potatoes for Finland, which posted the worst performance – even worse than a Greek economy gripped by capital controls:

Eurozone GDP chart

Eurozone GDP chart

Updated

Here’s our news story on today’s GDP figures (to save new readers scrolling back to 6.15am onwards):

The eurozone’s economy lost steam in the latest quarter as Portugal stalled, Germany slowed and debt-stricken Greece contracted.

Gross domestic product (GDP) across the 19 countries in the single currency bloc rose just 0.3% in the third quarter, according to Eurostat. That defied expectations for growth to hold at 0.4%, according to a Reuters poll of economists. On a year earlier, GDP was up 1.6%, lower than forecasts for 1.7%.

The July to September figures mark a slowdown from eurozone GDP growth of 0.4% in the second quarter and 0.5% in the first quarter and come as the European Central Bank (ECB) hints that it is planning to inject further funds into the eurozone economy to maintain recovery…..

Updated

Eurozone markets hit by GDP disappointment

European stock markets have been hit by the news that growth slowed across the eurozone in the last quarter.

The main indices are all in the red, adding to yesterday’s selloff:

European stock markets, November 13 2015

Conner Campbell of SpreadEX says the mood darkened as this morning’s data emerged.

Joining a decent French figure and sliding Germany growth were misses by Italy and the Netherlands. Even worse were the performances from Portugal and Finland; the former, so often pointed to as one of the region’s post-crisis success stories, saw no growth at all in the third quarter, whilst the latter, increasingly becoming one of the Eurozone’s most rotten appendages, actually saw its GDP contract by 0.6%.

Given region’s general malaise, the Eurozone as a whole was arguably lucky only to see a 0.1% decline quarter-on-quarter, with its Q3 figure coming in at a forecast-missing 0.3%. Understandably investors weren’t too pleased with these results, meaning even the spectre of more ECB QE (the likelihood of which only increased with this morning’s figures) couldn’t drag the DAX and CAC out of the red.

This chart shows how Italy, Portugal and the Netherlands all missed expectations this morning, dragging the eurozone growth rate down (via Bloomberg)

Eurozone GDP

Updated

At just 0.3%, the eurozone economy isn’t growing fast enough to pull unemployment down and drive demand, as Bloomberg economist Maxime Sbaihi explains:

The weakness of the eurozone recovery adds “to the already strong case for the ECB to step up monetary stimulus in December,” says Nick Kounis, head of macro research at ABN Amro Bank.

Kounis added that while Europe’s domestic economy is doing well, it is suffering from weak world trade and deteriorating export markets.

Cyprus has posted another quarter of growth, as its recovery from its 2013 bailout trauma continues.

Cypriot GDP rose by 0.5% in July-to-September, matching the growth in April-June.

That means Cyprus’s economy is now 2.2% larger than a year ago.

The eurozone’s recovery has “ disappointingly lost momentum for a second successive quarter”, says Howard Archer of IHS Global Insight.

The third-quarter slowdown in Eurozone GDP growth appears to have been largely the consequence of negative net trade (this was certainly true of Germany, France and Italy).

This suggests that the benefit to Eurozone exporters coming from the weak euro was offset by muted global growth. Meanwhile, relatively decent Eurozone domestic demand supported imports.

This chart shows how Greece’s economy went into reverse in the last quarter:

Greek GDP

Greek economy shrinks

Oxi Day celebrations, Athens, Greece - 28 Oct 2015<br />Mandatory Credit: Photo by Kostas Pikoulas/Pacific Pres/REX Shutterstock (5320493d) A Greek flag waves during the parade Oxi Day celebrations, Athens, Greece - 28 Oct 2015 Students parade celebrating the ‘’Oxi Day’’ during the 75th anniversary of Greece’s entering WWII, after denying the Italian ultimatum to enter Greek soil in 28th October 1940.

Today’s figures also show that Greece’s faltering recovery has been wiped out in the last three months.

Greek GDP contracted by 0.5% in the July-September quarter, Eurostat says, having risen by 0.4% in April-June.

That’s not a surprise, given the bailout drama this summer which saw banks shuttered and capital controls imposed.

And it’s actually less awful than feared — economists had forecast a 1% contraction:

Updated

Eurozone growth slows to 0.3%

Breaking: The eurozone economy grew by just 0.3% in the third quarter of the year.

That’s a slowdown on the 0.4% recorded three months earlier, showing that Europe’s recovery remains fragile and lacklustre despite the huge stimulus measures launched by the European Central Bank this year.

It’s also weaker than expected — economists had expected 0.4% growth.

Updated

Brussels officials have pointed to Portugal as an example that tough fiscal consolidation can deliver results. Today’s disappointing (no) growth figures may prompt a rethink….

Portugal’s economy stagnates

The national Portuguese flag is hoisted next to the Euro 2004 flag<br />epa000207050 The national Portuguese flag is hoisted next to the Euro 2004 flag as the England soccer squad arrives in Lisbon on Monday, 07 June 2004, for the Euro 2004 European soccer Championships. England will play their opening first round match against France on Sunday. EPA/JOAO RELVAS

More gloom. Portugal’s recovery ran out of steam in the last quarter, just as its political crisis escalates.

GDP was flat in the July-September quarter, after growing by 0.5% in the second quarter.

That’s much weaker than the 0.4% economists had expected, and looks like the weakest quarter in 18 months.

The Portuguese Stats Office says:

Comparing with the second quarter, GDP registered a null change rate in real terms in the third quarter (0.5% in the second quarter).

The contribution of domestic demand was negative, mainly due to the reduction of Investment, while net external demand contributed positively, with Imports of Goods and Services decreasing more intensely than Exports of Goods and Services.

On an annual basis, Portuguese GDP grew by 1.4%, down from 1.6% three month ago.

Portuguese GDP

This comes as Portugal’s left-wing parties vow to overturn its austerity programmes and implement more growth-friendly measures, having overturned its centre-right government this week.

Updated

We now have to wait until 10am GMT for the official eurozone-wide GDP reading for July-September.

But it’s already clear that this wasn’t a great quarter for Europe, with a weak trade performance dragging back the three largest eurozone economies.

Economist Fred Ducrozet reckons eurozone growth will fall short of the 0.4% expected, to 0.3%.

While City firm Abshire-Smith reckons the European Central Bank is under even more pressure to ease monetary policy:

Updated

Italy growth slows

Here comes Italy’s GDP report….and it’s weaker than hoped.

The Italian economy grew by just 0.2% in the third quarter of 2015, dashing expectations of a 0.3% expansion.

It suggests Italy’s recovery is running out of steam.

GDP rose by 0.4% in the first quarter of 2015, dipping to 0.3% in the second quarter – and now just 0.2% in Q3.

Finland’s economy has now been locked in a painful downturn for the last three years, as this chart from Statistics Finland shows:

Finnish GDP

That’s via fastFT, which warns:

Finland is used to cold, dark winters, and the experience could stand it in good stead as the Nordic country’s bitter economic cold snap shows no sign of a thaw.

Netherlands grows by just 0.1%

The Dutch flag flies outside the ING head office in Amsterdam, Netherlands, Monday Oct. 20, 2008.

Next up, the Netherlands…. and its economy struggled to grow in the last quarter.

GDP rose by just 0.1% in the July-September quarter, a very modest performance.

And second-quarter GDP has been revised down, to just +0.1% from +0.2% originally.

That left the economy 1.9% larger than a year ago, weaker than forecast.

Updated

‘Sick man’ Finland’s economy shrinks by 0.6%

Scandinavian Flags<br />ca. 1990s, Helsinki, Finland --- Scandinavian Flags --- Image by Joel W. Rogers/CORBIS

Finland has cemented its growing reputation as one of Europe’s most ailing members.

Finnish GDP contracted by 0.6% in the last quarter, according to new data this morning. That left Finland’s economy 0.8% smaller than a year ago.

The fall in natural resource prices, the demise of Nokia, and the knock-on impact of Russia’s economic problems are all hurting.

Having been one of the cheeleaders for eurozone austerity, Finland now finds itself in a very tough position. It is trying to cut spending to keep its deficit within the limits set by Brussels, which is hurting attempts to return to growth.

Two months ago, finance minister Alex Stubb admitted “we are the sick man of Europe.” Today’s figures don’t challenge that diagnosis.

Slovakia has outpaced its larger neighbours to the west, with growth of 0.9% in the last three months. That’s up from 0.8% in the second quarter.

The Czech Republic has beaten expectations, with growth of 0.5% in the last quarter.

City analysts have been chewing through France’s GDP figures, and they’re not too impressed.

RBC is concerned that inventory-building by companies provided much of the growth:

While Barclays says France’s economy is still vulnerable.

More data. Hungary has missed forecasts by posting annual growth of 2.3% in the last quarter, down from 2.7% three months earlier.

On a quarter-on-quarter basis, Hungary (which isn’t in the eurozone) grew by 0.5%.

Germany’s economy would be in a worse state if consumers weren’t benefiting from cheaper energy costs, points out Holger Sandte of Nordea Markets.

This morning’s figures show that Britain has outpaced its two largest European rivals in the last quarter.

UK GDP grew by 0.5% between July and September, data released last month showed.

That’s obviously better than France and Germany, and also beats America (which grew by around 0.4% in Q3).

Germany’s Statistics Office says that domestic spending was a key driver of growth, while overseas demand for German exports lagged behind:

“Private and public consumption both increased.”

“According to preliminary estimates, growth was held back by foreign trade because imports rose far more strongly than exports.”

Germany’s economy has been dented by problems overseas, says Carsten Brzeski of ING.

Here’s his quick take on today’s growth figures:

The summer weakness of the German industry seems to be more substantial than only a vacation-driven soft spell. The turmoil in emerging markets and the Chinese slowdown have finally left some marks on the German economy.

More generally, the German industry has not managed to accelerate and shift up one gear. Somehow, the weak euro and extremely favourable financing conditions have not fully deployed their full impact on the industry, yet. This is partly the result of weakening external demand but also still the structural lack of investment incentives and projects.

Consumer spending, though, is still strong. More here.

Updated

This German GDP report “isn’t overwhelming”, says Bloomberg’s Hans Nichols, but at least the its economy is still growing.

The slight slowdown in the last quarter suggests Germany has been hit by problems in emerging markets such as China.

And as these charts show, 2015 hasn’t been a vintage year for the German economy

German GDP

german Photograph: Bloomberg
german GDP

The German GDP report is online here.

Germany posts 0.3% growth

German chancellor Merkel visits China<br />30 Oct 2015, Hefei, Anhui Province, China --- German Chancellor Angela Merkel looks on under a German and a Chinese national flag as she visits the German Academy at the University of Hefei in Hefei, China, 30 October 2015. Merkel is on a two-day official visit to China. Photo: Soeren Stache/dpa --- Image by © Soeren Stache/dpa/Corbis

Here comes Germany’s GDP data…. and it shows that Europe’s largest economy grew by 0.3% in the last quarter.

That matches France’s performance, and is a slightly slowdown on the 0.4% recorded in April-June.

Germany’s stats office says that consumer and government spending both rose.

Trade had a negative impact on growth, though, with imports growing faster than exports….

Updated

French finance minister Michel Sapin has welcomed today’s GDP data.

He told AFP newswires that France has escaped a long period of very low growth.

Some reaction to the French GDP report:

French GDP: The details

France’s return to growth was driven by household spending (up 0.3%) and business investment (up 0.7%).

But the trade picture is quite ugly. Exports fell by 0.6%, while imports grew by 1.7%.

So net trade actually knocked 0.7% off GDP, but this was compensated by firms bolstering their inventories.

Without that, the figures look worse.

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The French GDP report is online here.

Updated

Bloomberg TV flags up that the French economy has generally been sluggish over the few quarters, apart from a healthy bounce at the start of this year:

French quarterly GDP

French GDP over the last five quarters Photograph: Bloomberg

France’s economy is now 1.2% larger than a year ago, slightly better than the 1.1% annual growth economists expected.

French economy growing again – GDP up 0.3%

Close-up of French flag<br />A63GGC Close-up of French flag

France has got eurozone GDP day up and running by returning to growth.

French GDP increased by 0.3% in the last quarter, the INSEE stats office reports.

That follows zero growth in the April-June quarter, which fuelled fears that the French economy was stalling.

Updated

Introduction: Eurozone growth figures released

Hang out the bunting and put on the party hats, folks. It’s eurozone GDP day!

We’re about to discover how countries across Europe performed in the third quarter of 2015, from heavyweights like Germany and France to smaller members like Slovakia and Portugal.

Actually, you shouldn’t blow up too many balloons, because we’re probably going to learn that Europe’s recovery remains jammed in second gear.

Economists predict that the eurozone expanded by just 0.4% in the July-to-September quarter. That would match the performance in the second quarter of the year. Better than a recession, but not rapid enough to deal with Europe’s persistent unemployment and debt problems.

EU, eurozone and US growth compared

EU, eurozone and US growth compared Photograph: Eurostat

A poor number today would suggest that Europe has been hit harder than we thought by problems in emerging markets over the summer. It may also show the impact of the Greek bailout crisis on the region.

But anything stronger than 0.4% would be welcome.

The data will also influence whether the European Central Bank feels forced into taking fresh action to stimulate the eurozone economy – a boost to its bond-buying QE programme is already looking likely.

Here’s how the morning should unfold:

  • France: 6.30am GMT / 7.30am CET
  • Germany: 7am GMT / 8am CET
  • Hungary: 8am GMT / 9am CET
  • Romania: 8am GMT / 9am CET
  • Czech Republic: 8am GMT / 9am CET
  • The Netherlands: 8.30am GMT / 9.30am CET
  • Italy: 9am GMT / 10am CET
  • Portugal: 9,30am GMT / 10.30am CET
  • Greece: 10am GMT / 11am CET
  • The eurozone: 10am GMT / 11am CET

Updated

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Eurozone ministers are expected to refuse to hand over €2bn in new loans to Greece today, as a row over bad loans deepens. Officials: Eurogroup won’t release €2bn to Greece. France: We want a deal with Greece. OECD warns on global trade slowdown…

Powered by Guardian.co.ukThis article titled “Greece battles with creditors over new bailout payment – business live” was written by Graeme Wearden, for theguardian.com on Monday 9th November 2015 13.57 UTC

Wolfgang Schauble also flagged up that Greece has not yet implemented its new privatisation fund.

This was a key part of July’s bailout deal, under which €50bn of Greek assets will be sold off to cover the cost of recapitalising its banking sector.

Wolfgang Schauble

Germany’s Wolfgang Schäuble has arrived at the meeting.

He sounds fairly relaxed as he speaks to reporters.

Schäuble says that Greece has not yet taken all the required steps to qualify for its next aid tranche (according to his knowledge anyway).

Here’s the key quote from Eurogroup chief Dijsselbloem, confirming that Greece won’t get its €2bn today:

“The 2 billion will only be paid out once the institutions give the green light and say that all agreed actions have been carried out and have been implemented. That still has not happened.”

Some reaction to Jeroen Dijsselbloem’s comments as he arrived at the eurogroup meeting:

Dijsselbloem: Greece must complete first milestones very soon

Eurogroup president Jeroen Dijsselbloem
Eurogroup president Jeroen Dijsselbloem Photograph: EbS

An official limo has just deposited Eurogroup president Jeroen Dijsselbloem at today’s meeting.

He gave a brief ‘doorstep’ to reporters — it sounds like he’s not expecting to sign off Greece’s next aid tranche today.

Dijsselbloem says progress has been made in recent weeks regarding Greece’s banks and reform programmes.

But there are still open issues, and a lot more work needs to be done in the next two weeks.

The first set of milestones must be completed soon, he adds (which would pave the way to disbursing that €2bn in new loans).

And Dijsselbloem says he can’t speculate about the political crisis in Portugal where left-wing parties could soon win power.

My understanding is there will be debate today and tomorrow, says Dijsselbloem. There is always a legitimate government in each country, and that’s the government we work with….

Updated

Moscovici: Still a little way to go on Greece

Pierre Moscovici

Ministers are starting to arrive at today’s Eurogroup meeting in Brussels.

Commissioner Pierre Moscovici has told reporters gathered outside that he hopes Greece will receive its €2bn aid tranche this week, if not today.

Moscovici says he had “very positive, very fruitful meetings” in Athens last week with prime minister Alexis Tsipras and finance minister Euclid Tsakalotos.

The moves are positive. Most of the milestones are already adopted or decided. There is still a way to go.

We are not yet completely there, but I am hopeful and confident that with the spirit of compromise, with good co-operation with the authorities we can make it… if not today then in the days to come.

We are not far from that, but obviously there is a little way to go.

Moscovici then vanished inside, where he (or his team) tweeted this optimistic message too:

Shares are falling sharply on the Lisbon stock market, as investors react to the latest political upheaval in Portugal.

The main stock index, the PSI 20, has shed more than 2%, as the country’s socialist parties prepare to oust the centre-right administration sworn in two weeks ago.

Portuguese sovereign bonds are also continuing to fall, showing greater anxiety over the prospect of an anti-austerity government taking over.

The 10-year Portuguese bond is now yielding nearly 2.9%, a jump of 23 basis points. That’s a four-month high.

Over the weekend, four left-wing parties put aside their differences to support a legislative programme. They collectively hold a majority of seats in the parliament, following October’s election.

Analysts at the Royal Bank of Scotland Group have already warned that the Socialist-led program “is clearly less market-friendly than the one of the incumbent government,” Bloomberg flags up.

More here:

Updated

Greece “plans return to capital markets” in 2016

Now here’s a thing. Greece is apparently hoping to return to the financial markets next year.

Government insiders have told the Financial Times that plans are afoot to sell debt in the capital markets in 2016.

Despite the wild drama this year (capital controls, failing to repay the IMF, nearly leaving the eurozone), Athens hopes that investors will put their faith in them.

The FT says:

It won’t be in the first quarter but summer has been talked about,” said a person familiar with the situation.

“It depends on a positive chain reaction of events but discussions have been held.”

Full story: Greece plans a return to capital markets

Experienced City investors may raise their eyebrows….

On the other hand, Greece hasn’t actually defaulted on the three-year debt it issued last summer:

Updated

European Commissioner president Jean-Claude Juncker has just welcomed eurogroup president Jeroen Dijsselbloem to his office, for talks ahead of this afternoon’s meeting of finance chiefs.

Dijsselbloem got the tradition greeting:

Analyst: Greek crisis is repeating

Peter Rosenstreich, head of market strategy at Swissquote Bank, says investors need to pay attention to Greece again:

Rosenstreich is worried that Athens and its eurozone neighbours couldn’t reach agreement on how to handle the repossession of houses from people who are in default on their mortgages.

It suggests the whole third bailout deal, agreed after so much angst in July, may be in early trouble.

Rosenstreich says:

Left-wing Syriza is concerned that the high threshold will expose too many Greece citizens to the loss of their primary properties. In addition, Athens is balking at a 23% take rate on private schools.

This feels like a repeat of 8-months ago. The whole world understood that the third bailout agreement made was unsustainable. It was only a matter of time before it unraveled.

Getting back to Greece…

AFP’s man in Brussels, Danny Kemp, has heard that the outstanding issues between Greece ands its creditors *might* be resolved in a few days.

The OECD has also cut its forecast for global growth this year to 2.9%, down from 3%, due to the sharp slide in trade.

It also predicts growth of 3.3% in 2016, down from 3.6% previously.

The two demonstrators who disrupted David Cameron’s speech have revealed they created a fictitious company to get into the CBI’s flagship event:

Perhaps the CBI should get some advice from the European Central Bank, which upgraded its own security systems after a protester jumped on Mario Draghi’s desk this year…

The OECD’s latest economic outlook is online here.

OECD sounds alarm over global trade

The OECD has just released its latest economic projections.

And the Paris-based thinktank has warned that global growth is threatened by the impact of China’s slowdown on world trade, but raised its forecast for US growth.

It also urged richer countries to step up investment while keeping monetary policy loose, as my colleague Katie Allen explains.

The thinktank’s twice-yearly outlook highlights risks from emerging markets and weak trade.

Presenting the Outlook in Paris, OECD Secretary-General Angel Gurría said:

“The slowdown in global trade and the continuing weakness in investment are deeply concerning. Robust trade and investment and stronger global growth should go hand in hand.”

The thinktank edged up its forecast for economic growth in the group of 34 OECD countries this year to 2.0% from 1.9% in June’s outlook, when it had noted a sharp dip in US growth at the opening of 2015. For 2016, it has cut the forecast for OECD countries’ growth to 2.2% from 2.5%.

The OECD left its forecasts for the UK little changed with growth of 2.4% this year and next, compared with a forecast for 2016 growth of 2.3% made in June. The US economy, the world’s biggest, is now seen growing 2.4% this year and 2.5% in 2016, compared with June’s forecasts of 2.0% and 2.8%.

On the UK, the OECD said economic growth was projected to “continue at a robust pace over the coming two years, driven by domestic demand.”

Updated

Greece’s economy minister, George Stathakis, has suggested that eurozone governments might have to take a ‘political decision’ on whether Greece should get its €2bn aid tranche.

Stathakis told Real FM radio that talks with officials over how to enforce foreclosure laws have run their course:

The thorny issue is the distance that separates us on the issue of protecting primary residences.

“I think the negotiations we conducted with the institutions has closed its cycle .. so it’s a political decision which must be taken.

Updated

WSJ: Eurozone won’t release Greek loan today

Two eurozone officials have told the Wall Street Journal that there’s no chance that Greece will get its €2bn bailout loan at today’s eurogroup meeting.

That won’t please Michel Sapin, given his optimistic comments earlier. But it appears that Greece simply hasn’t done enough to satisfy lenders….

…in particular, over how to treat householders who can’t repay their mortgages. Athens and its creditors are still divided over which householders should be protected from foreclosure.

The WSJ’s Gabriele Steinhauser and Viktoria Dendrinou explains:

Senior officials from the currency union’s finance ministries were updated on Greece’s implementation of around 50 promised overhauls, known as milestones, during a conference call Sunday afternoon. While progress has been made on some issues—including measures to substitute a tax on private education, the governance of the country’s bailed-out banks and the treatment of overdue loans—Athens and its creditors will need more time to sign off on all overhauls, the officials said.

Greece needs the fresh loans to pay salaries and bills and settle domestic arrears. However, the government faces no immediate major payments to its international creditors, reducing the sense of urgency.

There will be “no agreement on [the] €2 billion,” one official said.

Updated

Drama at the CBI conference!

David Cameron’s speech has been briefly disrupted by protesters, chanting that the CBI is the “voice of Brussels”.

They’re clearly unhappy that Britain’s top business group is firmly in favour of EU membership:

Cameron handles it pretty well – suggesting they ask him a question rather than looking foolish.

Updated

Another important meeting is taking place in Brussels today.

UK business secretary Sajid Javid will discuss the crisis in Britain’s steel works with EU economy and industry ministers this afternoon.

Steel unions have urged Javid to demand a clampdown on cheap steel imports from China, which they blame for triggering thousands of job cuts across the UK steel industry:

Cameron at the CBI

David Cameron at the CBI
David Cameron at the CBI Photograph: Sky News

David Cameron is telling the CBI that he’s met business concerns, by cutting red tape and corporate taxes.

On infrastructure, he says the government has made progress – citing the planned HS2 railway – but admits there’s more to do.

We want to the most business friendly, enterprise friendly, government in the world, he adds. But the PM also acknowledges that Britain must do better on exports.

And he’s now outlining a new plan to give everyone guaranteed access to broadband, by 2020.

My colleague Andrew Sparrow is covering all the key points in his politics liveblog:

Heads-up: prime minister David Cameron is addressing the CBI’s annual conference in London. There’s a live feed here.

He’s expected to warn that he could consider campaigning to leave the EU, if his attempts to reform Britain’s relationship with Brussels is met with a ‘deaf ear’.

Updated

The prospect of yet another tussle over Greece’s bailout programme is casting a pall over Europe’s stock markets this morning.

The main indices are mainly in the red, as investors prepare to hear the dreaded phrase ‘eurogroup deadlock’ again.

European stock markets, early trading, November 09 2015
European stock markets this morning Photograph: Thomson Reuters

Conner Campbell of SpreadEx says that Greece’s “sluggish progress” over implementing foreclosure rules is an unwelcome reminder of the eurozone’s lingering issues.

The country’s next €2 billion tranche, which should be signed off at today’s Eurogroup meeting, is currently being withheld by Greece’s creditors, who are dissatisfied with the way the region’s hot potato has (or hasn’t) implemented the required reforms.

It’ Déjà vu all over again, as China’s stock market is pushed up by stimulus hopes, and Greece’s bailout hits a snag.

Open Europe analyst Raoul Ruparel points out that today’s dispute is small potatoes, compared to the big challenge of cutting Greece’s debt pile.

Greece is also clashing with its creditors over plans to hike the tax rate for private education, as the Telegraph’s Mehreen Khan explains:

That’s a slightly unusual issue for a hard-left party to go to the barricades over, when it needs agreement with its lenders to unlock the big prize of debt relief.

Updated

France: We want a Greek deal today

French Finance minister Michel Sapin.
Michel Sapin. Photograph: Lionel Bonaventure/AFP/Getty Images

France is playing its traditional role as Greece’s ally, ahead of today’s meeting of eurozone finance chiefs.

French finance minister Michel Sapin has told reporters in Paris that he hopes an agreement can be reached today over the main outstanding hurdle — how to handle bad loans at Greek banks (as explained earlier).

Sapin offered Athens his support, saying:

Greece is making considerable efforts. They are scrupulously respecting the July agreement.

One thorny issue remains: the seizure of homes for households who can’t pay their debts. I want an agreement to be reached today. France wants an agreement today.

(thanks to Reuters for the quotes)

Updated

Greek journalist Nick Malkoutzis of Kathimerini tweets that the gloss is coming off Alexis Tsipras’s new administration:

Portuguese bond yields jump as leftists prepare for power

The prospect of a new anti-austerity government taking power in Portugal is hitting its government debt this morning.

The yield (or interest rate) on 10-year Portuguese bonds has risen from 2.67% to 2.77%, a ten-week high.

That’s not a major move, but a sign that investors are anxious about events in Lisbon.

Portuguese 10-year bond yields

Updated

This new dispute over Greece’s bailout comes three days before unions hold a general strike that could bring Athens to a standstill.

The main public and private sector unions have both called 24-hour walkouts for Thursday, to protest against the pension cuts and tax rises contained in its third bailout deal.

ADEDY, the civil servants union, accused the government of taking over “the role of redistributing poverty”.

Just six week after winning re-election, Alexis Tsipras is facing quite a wave of discontent….

Dow Jones: Ministers won’t release Greek aid today

The Dow Jones newswire is reporting that eurozone finance ministers definitely won’t agree to release Greece’s next aid tranche at today’s meeting, due to the lack of progress over its bailout measures:

Updated

Updated

Greek officials have already warned that the argument over legislation covering bad loans won’t be resolved easily.

One told Reuters that:

There is a distance with lenders on that [foreclosure] issue, and I don’t think that we will have an agreement soon.

Prime minister Alexis Tsipras discussed the issue with Commission chief Jean-Claude Juncker yesterday.

The official added that those talks were a step towards resolving the issue at “a political level”; Greek-speak for a compromise hammered out between leaders, rather than lowly negotiators.

Updated

Greek debt talks hit by foreclosure row

University students holding flares burn a European flag outside the Greek parliament during a protest in central Athens last Thursday.
University students holding flares burn a European flag outside the Greek parliament during a protest in central Athens last Thursday. Photograph: Petros Giannakouris/AP

After a couple of quiet months, Greece’s debt crisis has loomed back into the spotlight today.

A new dispute between Athens and her creditors is holding up the disbursement of Greece’s next aid tranche, worth €2bn.

Athens spent last weekend in a fevered attempt to persuade its creditors that it has met the terms agreed last summer, to qualify for the much-needed cash.

But it appears that lenders aren’t convinced, meaning that the payment won’t be signed off when eurogroup ministers meet in Brussels at 2pm today for a Eurogroup meeting.

The two sides are still arguing over new laws to repossess houses from people who are deep in arrears on their mortgage payments.

Athens is trying to dilute the terms agreed in July’s bailout deal, but eurozone creditors are sticking to their guns. They insist that Greek residences valued above €120,000 should be covered by the foreclosure laws, down from the current level of €200,000.

The Kathimerini newspaper explains:

The key stumbling block is primary residence foreclosures.

Greece has put forward stricter criteria that protects 60 percent of homeowners, while suggesting that this is then gradually reduced over the next years.

With a deal unlikely today, officials are now racing to get an agreement within 48 hours or so:

Greece told to break bailout deadlock by Wednesday

And Greece certainly needs the money, to settle overdue payments owed to hundreds of government suppliers who have been squeezed badly this year.

Updated

The Agenda: Markets see Fed hike looming

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

Across the globe, investors are finally facing the prospect that the long run of record low interest rates is ending, at least in America.

There’s now a 70% chance that the US Federal Reserve hikes borrowing costs in next month’s meeting, according to this morning’s data.

This follows Friday’s strong US jobs report, which show 271,000 new positions created last month. With earnings rising too, Fed doves will probably be tempted to finally press the rate hike button at December’s meeting.

That is pushing up the dollar this morning, and weakening the euro. That will please the European Central Bank, as it ponders whether to launch its own new stimulus measures.

European stock markets are expected to inch higher at the open:

Also coming up….

  • The OECD will issue new economic forecasts at 10.30am GMT.
  • Britain’s business leaders are gathering in London for the CBI’s latest conference. The event is dominated by the UK’s “Brexit” referendum, and claims that the CBI is too pro-EU.
  • Eurozone finance ministers are holding a eurogroup meeting in Brussels this afternoon.

And there is fresh drama in the eurozone.

In Portugal, three left-wing parties have agreed to work together in a new “anti-austerity government”.

That will bring down minority administration created by Pedro Passos Coelho two weeks ago, after October’s inconclusive election.

And with Greece struggling to implement its own austerity measures, Europe’s problems are pushing up the agenda again.

We’ll be covering all the main events through the day….

Updated

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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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German bosses are more optimistic about future prospects but UK factories suffer as exports fall the fastest since 2012. Portuguese government bonds are coming under some pressure today as investors react to the unfolding political crisis…

 

Powered by Guardian.co.ukThis article titled “Germany shrugs off VW crisis, but UK factory orders slide – business live” was written by Graeme Wearden, for theguardian.com on Monday 26th October 2015 13.26 UTC

Portuguese bonds hit by political crisis

Portuguese government bonds are coming under some pressure today as investors react to the unfolding political crisis in Lisbon.

While most eurozone bonds have strengthened today, Portugal has gone the other way, pushing up the yield (or interest rate) on its 10-year debt from 2.37% to 2.45%.

Portuguese 10-year bond yield
Portuguese 10-year bond yield today Photograph: Thomson Reuters

The move came after opposition parties vowed to bring down Portugal’s new government in a confidence vote later this week. They’re furious that the centre-right coalition, led by former PM Pedro Passos Coelho, has been invited to form another administration despite failing to win a majority in this month’s election.

In taking this decision, Portugal’s president Cavaco Silva has enraged some certain commentators who argue that he’s “banned” the Portuguese left-wing a fair crack at power in a massive failure for democracy.

It’s a complicated situation, though. No party won an overall majority, although Passos Coelho’s group came first with 38% of the vote. The socialists came second with 32% followed by the hard left Left Bloc with 10% and the communists with 7%.

Those three left-wing parties *could* form a majority, but instead president Silva passed the mandate to Passos Coelho. Crucially, and controversially, he also warned that the far-left parties’ anti-EU views were a threat to Portugal.

Politics lecturer Chris Hanretty has written a good blogpost here, explaining why talk of a coup in Portugal is a little simplistic.

He says:

Often, there is no right or obvious answer to the question, “who won the election?”. But if Cavaco Silva’s decision is wrong, then it will be righted automatically by the actions of Parliament in less than a fortnight’s time.

If that happens, the alarmists will have been proven wrong. Unfortunately, attention will likely have moved on.

Sam Tombs of consultancy firm Pantheon Macroeconomic fears that UK factories will continue to struggle because of the strong pound.

He’s created a chart showing how exports fall after the the pound strengthens (the inverted left-hand scale, shifted forwards nine months).

And that correlation means factory orders could continue to weaken, Tombs explains:

The chart shows that the worst is not over for the manufacturing sector; sterling’s further appreciation over the last year will continue to depress export orders until mid-2016, at least.

IHS economist Howard Archer is alarmed by the drop in UK factory orders reported by the CBI:

This is a thoroughly disappointing survey through and through which indicates that manufacturers’ struggles are intensifying as a moderation in domestic demand adds to a still weakening export outlook.

Persistent and seemingly deepening manufacturing weakness is very worrying for hopes that UK growth can ultimately become more balanced and less dependent on the services sector and consumer spending.

Factory fears as UK exports fall at fastest pace since 2012

A turbine at Alstom power plant turbine refurbishment facility in Rugby.
A turbine at Alstom power plant turbine refurbishment facility in Rugby. Photograph: Bloomberg/Bloomberg via Getty Images

More signs that UK manufacturers are having a tough time as they contend with China’s downturn and a stronger pound.

The latest survey of factory bosses by business group CBI suggests orders have dropped from both within the UK and outside. The report’s key order book balance is the weakest for more than two years.

This does not bode well for official GDP figures due on Tuesday that will give the first snapshot of UK growth in the third quarter. The consensus forecast is for quarterly growth of 0.6% in the July-September period, down from 0.7% in the second quarter, according to a Reuters poll.

The CBI’s report suggests that in the three months to October new export orders fell at the fastest pace in three years. That was possibly down to the continued strength of the pound, which makes UK goods more expensive to overseas buyers, the CBI said.

Total new domestic orders fell over the quarter for the first time since April 2013.

Manufacturing production also edged downwards during the three months to October, marking the first decline in the last two years, according to the CBI Quarterly Industrial Trends Survey.

Against that backdrop, manufacturers’ optimism about both their business situation and export prospects for the year ahead fell at the fastest pace since October 2012, according to the poll of 463 companies. But they predicted that overall manufacturing conditions will stabilise in the next three months, with a small rise in output.

Rain Newton-Smith, CBI director of economics, says UK manufacturers are being buffeted at home and abroad.

“Manufacturers have been struggling with weak export demand for several months, because of the strength of the pound and subdued global growth. But now they’re also facing pressure back home as domestic demand is easing.”

And here are the key figures from the report:

  • 22% of businesses reported an increase in total new order books and 30% a decrease, giving a balance of -8%, the lowest since October 2012.
  • 20% of businesses reported an increase in domestic orders, with 31% noting a decrease. The balance for domestic orders (-11%) was below the long-run average (-5%), the lowest since April 2013 (-14%).
  • 15% reported an increase in export orders, with 33% signalling a decrease. The resulting balance for export orders (-17%) signalled a faster decrease in orders than the historic average (-7%). This marks the lowest rate since October 2012 (-17%).

Germany’s central bank reckons that the country’s economy remains “quite strong”, despite signs that growth slowed in the last three months.

Peterson leaves Southwark Crown Court in London<br />Magnus Peterson leaves Southwark Crown Court in London October 14, 2014. Magnus Peterson, the founder of the $600 million Weavering hedge fund that collapsed in the wake of the credit crisis in 2009, pleaded not guilty to 16 fraud-related charges at his London trial on Tuesday. REUTERS/Stefan Wermuth (BRITAIN - Tags: BUSINESS) - RTR4A646
Magnus Peterson in 2014. Photograph: Stefan Wermuth / Reuters/REUTERS

Former hedge fund boss Magnus Peterson has just been banned from the City, over one of the biggest rogue trading scandals of recent years.

Peterson’s Weavering Macro Fixed Income Fund collapsed in 2009, costing investors around £350m. It had been marketed as a safe and secure investment, which investors could easily reclaim their funds from.

But once the financial crisis struck, Peterson embarked on a series of risky wagers on financial derivatives which failed to reverse its fortunes. He was convicted of several counts of fraud, after the high court heard how he had taken out $600m of swap contracts, which turned out to be worthless, with another company under his control.

Mark Steward, director of enforcement and market oversight at the FCA, says Peterson has been banned to protect consumer and markets.

“Mr Peterson defrauded investors who should have been able to trust him. Over a prolonged period he purposely used investors’ money to prop up his business, and then lied in order to cover up his deception.”

This makes little practical difference to Peterson, aged 51, right now, as he was jailed for 13 years in January.

Updated

9% hacked off TalkTalk shares after cybercrime attack

Back in the City, UK telecoms group TalkTalk is the biggest faller on the stock market after suffering a major cybercrime attack last week.

TalkTalk shares have slumped by around 9.5% this morning. Last week, the firm admitted that customers’ personal and financial details could have been stolen by cybercriminals who breached its security systems.

TalkTalk boss Dido Harding told my colleague Josh Halliday last night that it’s too early to say if the company will compensate those affected.

She also argued that TalkTalk’s security was better than its rivals, despite the breach:

“Nobody is perfect. God knows, we’ve just demonstrated that our website security wasn’t perfect – I’m not going to pretend it is – but we take it incredibly seriously.

“On that specific vulnerability, it’s much better than it was and we are head and shoulders better than some of our competitors and some of the media bodies that were throwing those particular stones.”

And despite criticism from shareholders, Harding is determined to hold onto her job:

Updated

IFO: German car industry unfazed by VW scandal

IFO economist Klaus Wohlrabe has confirmed that Germany’s auto industry is shrugging off the revelations that VW deliberately cheated on emissions tests.

Speaking to Reuters about today’s IFO report, Wohlrabe pointed out that business expectations and the assessment of current conditions in the sector had both improved this month.

That helped to push IFO’s measure of business confidence higher this month, from 103.3 to 103.8.

Wohlrabe says:

The German automobile industry appears to be unfazed by the VW scandal.

Updated

German business leaders aren’t frightened by the crisis at Volkswagen, and the slowdown in emerging markets, explains Carsten Brzeski of ING.

Here’s his analysis on today’s IFO report:

Surprised but not frightened? German businesses showed an interesting reaction to the recent series of uncertainties and turmoil. In fact, the reaction can be summarized as impressed but not frightened.

Germany’s most prominent leading indicator, the just released Ifo index dropped to 108.2 in October, from 108.5 in September. The first drop since June this year. Interestingly, the drop was exclusively driven by a weaker assessment of the current situation. The expectation component, on the other side, increased to 103.8, from 103.3, continuing its recent positive trend and actually reaching the highest level since June last year.

Of course, one should not interpret too much in a single confidence indicator but today’s Ifo reading suggests that the German business community is filing the Volkswagen scandal as a one-off and also shrugs off the risk from a possible Chinese and emerging markets slowdown. Despite these external uncertainties and regular concerns about the real strength of the German economy, German business remain highly optimistic.

There are two possible explanations for this trend: either German businesses are naive optimists or ice-cold realists, sticking to the facts. In our view, there are many arguments in favour of the latter.

Updated

The euro is slightly higher following the IFO survey:

Updated

German IFO survey: What the experts say

Today’s German business confidence survey shows Europe’s powerhouse economy remains in decent health, say City experts.

Economist Frederik Ducrozet is encouraged by the rise in business expectation this month:

Die Welt’s Holger Zschaepitz points out that confidence in the German carmaking industry rose this month:

Bloomberg’s Maxime Sbaihi points out that demand within Germany is still robust:

Updated

German business climate worsens, but expectations rise

Business conditions in Germany have fallen this month, according to the latest survey of corporate confidence in Europe’s latest economy.

The IFO thinktank has just reported that current conditions in the German economy have deteriorated this month, for the first time in four months.

But IFO also found that business leaders are more upbeat about future prospects than in September. That suggests the VW emissions scandal has not caused major trauma.

IFO’s business climate index fell to 108.2 in October, down from 108.5 in September, but rather higher than expected.

The current conditions index fell to 112.6, from 114 a month ago. That suggests that business leaders are finding life a bit harder — after seeing exports and factory orders deteriorate over the summer.

But the expectations index rose to 103.8, from 103.3, indicating that Germany PLC expects to ride out the slowdown in China and other emerging markets, and the Volkswagen saga.

I’ll mop up some reaction now…

Updated

Speaking of carmakers…Japan’s Toyota has overtaken Germany’s Volkswagen to become the world’s largest carmaker.

Toyota has reported that it sold almost 7.5 million cars in the third quarter of 2015, while VW sold 7.43m.

Does that show that the diesel emissions scandal has hurt VW? Not really — that news only broke in mid-September, giving little opportunity for it to show up in these figures.

But it does show that VW may already have been finding life tougher, even before admitting that around 11 million vehicles were sold with software to trick emissions tests.

(FILES) - The logo of French car maker PSA Peugeot is seen on a car parked in front of French Economy minstry (left) in Paris, on September 11, 2012. French auto giant PSA Peugeot Citroen’s worldwide sales in 2012 dropped by 16.5 percent in 2012 due to contracting demand in debt-crippled southern Europe and the suspension of its activities in Iran, it said in a statement on January 9, 2013. AFP PHOTO JOEL SAGETJOEL SAGET/AFP/Getty Images

Shares in French carmaker Peugeot are down 2% this morning, after reporting a 4.4% drop in sales in China and South East Asia.

That took the shine off a 3.8% rise in sales in Europe.

WPP: business leaders remain ‘risk averse’

Sir Martin Sorrell, WPP chief executive, hides his head in his hand.

Advertising titan WPP is among the biggest fallers in London, down around 2%, despite reporting a 3.3% rise in net sales in the last six months.

Traders may be discouraged by a warning that “risk averse” business leaders are reluctant to stick their necks out too far, given the current geopolitical tensions.

WPP told shareholders that:

Country specific slowdowns in China and Brazil and geopolitical issues remain top of business leaders’ concerns. The continuing crisis in the Ukraine and consequent bilateral sanctions, principally affecting Russia, continued tensions in the Middle East and North Africa and the risk of possible exits from the European Community, driven by further political and economic trouble in Greece, top the agenda.

Corporate bosses are also facing a two-pronged squeeze — from new technology rivals on one side, and cost-cutting activists on the other, WPP added:

If you are trying to run a legacy business, at one end of the spectrum you have the disrupters like Uber and Airbnb and at the other end you have the cost-focused models like 3G in fast moving consumer goods, and Valeant and Endo in pharmaceuticals, whilst in the middle, hovering above you, you have the activists led by such as Nelson Peltz, Bill Ackman and Dan Loeb, emphasising short-term performance.

Not surprising then, that corporate leaders tend to be risk averse.

European markets in muted mood

As predicted, Europe’s stock markets have fallen into the red this morning.

The FTSE 100 has shed arounds 33 points, or 0.5%, as Tony Cross of Trustnet Direct, explains:

It has been a surprisingly muted overnight session in Asia with markets showing little reaction to Friday’s rate cut news out of China.

London’s FTSE-100 is failing to find any inspiration off the back of the news either, with the vast majority of stocks mired in red ink shortly after the open.

The other main markets are also down, apart from Germany’s DAX which is flat.

European stock markets, early trading, October 26 2015
European stock markets in early trading today. Photograph: Thomson Reuters

Mining and energy stocks are generally lower, showing that concerns over global growth haven’t gone away.

Connor Campbell of SpreadEx says:

The FTSE, falling by around 25 points soon after the bell, was weighed down by (what else?) its mining and oil stocks, with investors seemingly less sure about the Chinese rate cut than they were last Friday

Larry Elliott: Why China’s interest rate cut may be bad news for the world economy

By cutting interest rates, China’s central bank risks creating further instability in a global economy that is already hooked on ultra-cheap money and regular hits of stimulus.

As our economic editor Larry Elliott explains, such stimulus measures may already be less effective too:

Problem number one is that by deliberately weakening their exchange rates, countries are stealing growth from each other. Central banks insist that this does not represent a return to the competitive devaluations and protectionism of the 1930s, but it is starting to look awfully like it.

Problem number two is that the monetary stimulus is becoming less and less effective over time. There are two main channels through which QE operates. One is through the exchange rate, but the policy doesn’t work if all countries want a cheaper currency at once. Then, as the weakness of global trade testifies, it is simply robbing Peter to pay Paul.

The other channel is through long-term interest rates, which are linked to the price of bonds. When central banks buy bonds, they reduce the available supply and drive up the price. Interest rates (the yield) on bonds move in the opposite direction to the price, so a higher price means borrowing is cheaper for businesses, households and governments.

But when bond yields are already at historic lows, it is hard to drive them much lower even with large dollops of QE. In Keynes’s immortal words, central banks are pushing on a piece of string….

Here’s Larry’s full analysis on the rate cut:

Copper, a classic measure of the health of the global economy, hasn’t benefitted much from China’s rate cut. It’s only up by 0.2% this morning.

Chinese officials to agree next five-year plan

China is also in the spotlight today as top communist officials gather to hammer out its 13th five-year plan, setting the country’s economic programme until 2020.

Premier Li Keqiang has already indicated that slower growth is on the agenda, by declaring that Beijing will not “defend to the death” its target of 7% growth (which was narrowly missed in the third quarter of 2015).

He declared:

“We have never said that we should defend to the death any goal, but that the economy should operate within a reasonable range.”

Trade links and green issues will also be discussed, as China’s top brass try to manage the country’s economic rebalancing.

With China easing monetary policy last week, and the ECB expected to follow suit in December, it could soon be Japan’s turn to stimulate its economy again….

No jubilation in Hong Kong either, where the Hang Seng index just closed 0.2% lower.

Asian market creep higher after Chinese rate cut

Investors in Asia have given China’s interest rate cut a cautious reception overnight, but there’s no sign of euphoria.

In Shanghai, the main index of Chinese shares rose by just 0.5%, or 17 points, to 3430. Although Friday’s stimulus move has been welcomed, traders are also worrying about whether China is still going to suffer a hard landing.

Said Zhang Qi, an analyst at Haitong Securities in Shanghai, says shares got a small lift from the rate cut:

“But the market appeared to be in correction after it rose a lot in October, and some investors sold stocks on the short-lived rise from the rate cuts. So overall, the market stayed stable today.”

Japan’s Nikkei gained around 0.7%, but the Australian S&P market dipped a little despite hopes that its mining sector would benefit from Chinese stimulus moves.

Asian stock markets, October 26
Here’s the situation across Asia’s stock markets Photograph: Thomson Reuters

Updated

The agenda: Investors await German confidence figures

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

Today we’ll find out whether business confidence in Germany has been badly hit by the Volkswagen saga, and the slowdown in emerging markets.

The latest IFO survey, due at 9am GMT, is expect to show that German firms are gloomier about their prospects. That’s understandable, given the drop in German exports, factory output and orders in August.

We’ll also be mopping up the reaction to China’s interest rate cut, announced late last week.

That did give shares a boost on Friday afternoon, but European stock markets are tipped to fall back this morning, as concerns over the situation in China reemerge.

China’s rate cut came just a day after the European Central Bank hinted that it could boost its stimulus package soon, so investors have lots to ponder.

China cuts interest rates in surprise move – as it happened

In the corporate world, traders are digesting results from advertising giant WPP and French carmaker Peugeot.

And we’ll also be keeping an eye on Portugal, where the president has dramatically asked centre-right leader Pedro Passos Coelho to form another government, rather than two eurosceptic left-wing parties.

Portugal Government Fuels Debate About Democracy in Europe

We’ll be tracking all the main events through the day…..

Updated

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European Central Bank refrains from reducing the benchmark rate and keeps monetary policy on hold at Malta meeting. Markets prepare for hints of more QE to come at the ECB press conference. UK retail sales get a boost in September…

 

Powered by Guardian.co.ukThis article titled “Markets expect Draghi to hint of more QE – business live” was written by Julia Kollewe, for theguardian.com on Thursday 22nd October 2015 11.52 UTC

Here’s the ECB’s brief statement:

At today’s meeting, which was held in Malta, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05%, 0.30% and -0.20% respectively.”

The ECB cut rates to record levels to kickstart the economy over a year ago. The main refinancing rate determines the cost of credit in the economy, while the marginal lending facility is the emergency overnight borrowing rate for banks. The deposit facility is the rate on bank overnight deposits, which banks pay to park funds at the central bank.

ECB president Mario Draghi will set out the central bank’s thinking at a press conference at 1.30pm UK time, and whether the bank will make any adjustments to its €60bn a month bond-buying programme.

The ECB has kept its key interest rates unchanged at record lows, as expected.

Updated

However…

Markets steady ahead of ECB decision

Markets are steady ahead of the ECB’s policy decision at 12.45 UK time. The FTSE is trading 0.1% lower at 6340.48 after a profit warning from building merchant Travis Perkins dragged down housing stocks. Germany’s Dax has climbed 0.4% and France’s CAC is 0.15% ahead.

Chris Beauchamp, senior market analyst at spread-betting firm IG, said:

A steady battle of attrition continues in London, with the index still unable to establish a direction after four days of relentless grind. However, at least today we have a real reason for not moving too far – namely the ECB meeting. The general consensus is that Mario Draghi needs to do something to get things moving in the eurozone, but there is a sense that neither the ECB nor financial markets know exactly what that will be. We can hope for some indication that action is on its way, although the ECB president will be understandably keen to keep the details under wraps for now.

Housebuilders are jittery this morning after building merchant Travis Perkins warned on earnings. Weaker demand of late has taken the shine off a steady rise in sales overall, raising concerns that such names as Persimmon, Taylor Wimpey and others may be in line for a more sustained correction.”

Labour has responded to George Osborne’s comment that he is “comfortable” with his decision to cut tax credits. Shadow chancellor John McDonnell said:

Once again we’re seeing the true face of the Tory Party. It is shameful that David Cameron talked about his ‘delight’ at tax credit cuts and now George Osborne has said he is ‘comfortable’ with his decision to take £1,300 a year away from working families.

It’s time for David Cameron and George Osborne to think again and reverse these tax credit cuts.”


Expectations that ECB policymakers will announce fresh stimulus measures have gradually faded since governing council member Ewald Nowotny said last week euro area inflation is ‘clearly missing’ the ECB’s target, noted Jasper Lawler, market analyst at CMC Markets UK. Christian Noyer’s submission that the current QE is “well calibrated” is probably a better reflection of opinion on the governing council.

The ECB embarked on a scheme of sovereign bond purchases (quantitative easing) in March – more than €1 trillion in all at a rate of €60bn a month.

Lawler has looked at the ECB’s options:

A change to QE can really take three forms; increasing the size of asset purchases, increasing the length of the program or adding new assets to the mix such as corporate bonds. It is ten months until the programme is scheduled to end so increasing the length of the program seems rather premature.

Europe’s corporate bond market is not as deep as in the US with most companies traditionally favouring bank lending. Adding corporate bonds to the mix would probably work more as a signal of dovish intent than for any real impact on yields or the euro. If the ECB decided to buy shares or ETFs like the Bank of Japan, that would be a game changer and we’d be off to the races in European equities, but chances are slim.

Increasing the size of the programme would probably put the most downward pressure on the euro of all the likely options. However, the ECB runs the risk of crowding out private bondholders with more purchases, and would add to exit risks once the program finishes.”

So what are we expecting from the European Central Bank today?

As my colleague Graeme Wearden reported:

Economists predict that ECB president Mario Draghi will repeat his pledge from September to add more stimulus if needed. However, few expect decisive action this week.

“The ECB’s October meeting is for watching. Draghi’s message will be dovish, but it’s not time to act yet”, said Holger Sandte, chief European analyst at Nordea Bank.

The ECB is currently committed to buying €60bn (£40bn) of government and corporate bonds each month until September 2016, in an €1.1tn (£810bn) attempt to stimulate growth, inflation and bank lending.

Capital Economics’s Jonathan Loynes expects the ECB to boost its QE firepower to €80bn a month in December, but does not totally rule out an announcement this week.

Updated

George Osborne has welcomed the intervention of Mark Carney in the debate about Britain’s future in the European Union, saying the Bank of England governor has set out the principles for renegotiation, Heather Stewart writes. Read the full story here.

Osborne defends tax credit cuts

My colleague Heather Stewart, the Observer’s economics editor, reports:

George Osborne has defended his planned tax credit cuts to backbench MPs on the cross-party Treasury select committee.

The chancellor has come under growing pressure to soften the proposals; but he insisted: “this is fundamentally a judgment call, and I’m comfortable with the judgment call that I have made, and that the House of Commons has supported this week.” He urged the House of Lords not to overturn parliamentary convention by rejecting the tax credit cuts.

The chair of the committee, Andrew Tyrie, also repeated his demand for the Treasury to provide more detailed analysis of how the proposed cuts will hit households at different points on the income scale.

Updated

Earlier this morning, Lord Lawson, one of the leaders of the Conservative campaign to leave the EU, strongly criticised the Bank of England governor for wading into politics. But Osborne said the former chancellor was “probably a bit disappointed that Mark Carney didn’t agree with him”.

Osborne argued, in front of MPs on the Treasury Committee: “What Mark Carney’s speech shows today is that there is a strong argument for reform.”

Alan Clarke of Scotiabank’s reaction to the strong UK retail sales figures was: Wow!

We know that the consumer has the wind in his / her sales:

  • Solid employment growth of 1.25% y/y;
  • Wage inflation over 3% y/y in the private sector;
  • Zero inflation

That all adds up to robust real income growth. With house price inflation picking up too, that is even more motivation for people to go shopping.

Last but not least, with expectations for the timing of the first rate hike being pushed back to end-2016 / early 2017 then consumer spending is clearly well supported.

In terms of the bigger picture, with Q3 GDP (1st estimate) scheduled for next week, I am all the more confident to go for 0.6% q/q rather than be cautious with 0.5.%.

I’m also starting to think about black eye Friday. Sure, it’s a good scheme to get people into the shops, but with sales volumes like this, do I really need to cut my prices? Not convinced.

Anyway – a great reading, and restores my faith that sooner rather than later is the right call on the first Bank Rate hike.”

George Osborne at the Treasury Committee

George Osborne at the Treasury Committee Photograph: parliamentlive.tv

The chancellor has been asked why the UK government has not clearly set out what it wants to achieve in its negotiations with the EU.

Osborne said it’s not sensible to turn up with a final list of demands on day one. “That’s not the way to start a negotiation.”

Updated

Osborne: not looking for special deal for City of London

Osborne told MPs on the Treasury Committee that the government is not looking for “special deals or carve-outs for the City of London” as it tries to renegotiate the terms of Britain’s EU membership, but wants a fair deal for all non-eurozone countries.

He said the other EU members have accepted the principle of a renegotiation and that discussions are now moving into a technical phase.

We are looking for a fair deal for non-euro members, including the United Kingdom.

We don’t want to be part of ever-closer union.

We are getting into specific discussions, technical discussions with the EU Commission and the Council.

He promised that this autumn more details will emerge as the EU talks move into a new phase.

Updated

An important part of the renegotiation is the relationship between non-euro and euro members of the EU, Osborne said.

George Osborne is being quizzed by the Treasury Committee. MPs are asking about Mark Carney’s remarks on Britain’s EU membership.

The chancellor said:

I agree with the speech the governor made. The analysis he outlined was that EU membership has helped create a more open and dynamic economy, but, and there’s a crucial but, developments in the eurozone mean we do need safeguards for the UK.”

That’s why the UK has embarked on negotiations to secure reforms of the European Union, he added.

As the governor pointed out it’s [EU membership] not an unalloyed good. It’s presented challenges.

The single market in financial services is on balance a good thing for the UK.

The government’s position is not that we are against immigration. We are for controlled migration.

Updated

JPMorgan economist Allan Monks has taken a closer look at Mark Carney’s Brexit speech, which said “ensured there was more than just one liberal Canadian taking the headlines this week”.

The speech will be seen as another foray by Carney into a heated political debate, and its tone comes across as friendly to the campaign for keeping the UK within the European Union – ahead of a referendum which is to be held before the end of 2017.

Accompanying the speech was a chunky 100 page BoE report discussing the impact of EU membership on the central bank’s policy objectives. Despite Carney earlier this week having described the report as “a bit of a yawner” it will not prevent some from asking whether the BoE should be taking a more neutral stance on such a highly charged political issue (especially after similar interventions by Carney on Scottish independence and climate change).

Carney emphasised the report is not a thorough quantitative review of the pros and cons of EU membership, but rather is designed to assess the impact of membership on the Bank’s policy objectives.

In doing so, however, Carney highlights the beneficial impact EU membership has likely had in lifting sustainable growth in the UK (through fostering greater competition, efficiency and openness in key markets). The flip side of this openness to Europe is the higher sensitivity to external shocks, although Carney believes policy makers in the UK have adequate capacity to deal with these challenges.

A key concern for Carney looking forward is that UK policymakers retain adequate flexibility and control over policy, even as euro area countries go through a process of greater integration and risk sharing in the wake of the financial crisis. Carney’s comments have clear parallels with the government’s position in the debate.

The assertion that EU membership is a net positive for the UK, with caveats that the terms of membership need to reflect UK domestic interests and flexibility, will go down well with the Prime Minister – who seeks to renegotiate the terms of membership ahead of the referendum vote, and remove a requirement for the UK to commit to ‘ever closer union’.”

What difference could the BoE’s intervention make? The opinion polls suggest that the result of the referendum will be very close.

Our view has been that opinion will shift as the campaign heats up, with polls indicating a comfortable lead for the campaign to remain within the EU. While a natural status quo bias is central to this view, it also reflects our belief that the “in” campaign will gain the backing of at least a majority in the business community.

This week the CBI – which represents a broad cross section of small and large businesses – moved off the fence by coming out in support for the UK staying within the EU. The rhetoric behind Carney’s remarks put the BoE in the same camp, even if the Governor stops short of offering an explicit endorsement. The impact of these interventions may not be visible in the opinion polls right away, but we would expect them to grow in significance as the referendum draws closer.”

The ONS said retail sales will add 0.1 percentage points to overall economic growth in the third quarter, boosted by beer sales during the Rugby World Cup.

Tills are ringing on the high street: The breakdown of the retail sales figures showed that household goods retailers saw the biggest increase in sales last month, of 4.7%. Supermarkets and other food stores posted a 2.3% rise. Petrol sales were also strong, up 3.8%. However, clothes and shoe retailers did not have a good month, reporting a 0.9% drop.

Excluding petrol, overall retail sales rose by 1.7% in September.

The Rugby World Cup boosted retail sales last month, according to statisticians.

Kate Davies, ONS head of retail sales statistics, said:

Falling in-store prices and promotions around the Rugby World Cup are likely to be the main factors why the quantity bought in the retail sector increased in September at the fastest monthly rate seen since December 2013. The retail sector is continuing to grow with September seeing the 29th consecutive month of year-on-year increases.”

Average store prices (including petrol stations) fell by 3.6% in September from a year earlier, the 15th consecutive month of year-on-year price falls. It was the joint-lowest reading since the series began in 1988.

Updated

Sterling has hit a one-month high of 72.95p against the euro on the strong retail sales figures, up 0.8% on the day. Against the dollar, the pound climbed to $1.5510, up 0.5% on the day.

Updated

UK retail sales jump 1.9%, biggest rise since end 2013

News flash: UK retail sales jumped 1.9% in September from the previous month – the biggest rise since December 2013, according to the Office for National Statistics.

Bank of England paper analyses positive impact of migration

A Bank of England paper on EU membership analyses the positive impact of migration, as Jonathan Portes, director of the National Institute of Economic and Social Research, notes. Click on the link in his tweet to read the paper. It says:

Openness to labour flows – via migration – can allow an inflow of skills not otherwise available in the domestic economy. Ortega and Peri (2014) find that migration boosts long-run GDP per capita, acting both through increased diversity of skills and a greater degree of patenting. At the firm level, several studies further find that migration has a positive impact on productivity by diversifying the high-skilled labour employed by firms.”

Updated

Updated

In other news, Britain’s competition watchdog said highstreet banks will be forced to encourage their customers to switch to rivals. Switching could potentially save bank customers £70 a year, it said.

But consumer groups called on the Competition and Markets Authority to take tougher action to inject competition into banking, after it refrained from more radical measures to break up the biggest players. The market is dominated by the big four banks – Lloyds Banking Group, Royal Bank of Scotland, HSBC and Barclays – which together control 77% of the current account market.

The prime minister and the chancellor both welcomed the governor’s comments last night.

Updated

Howard Archer, chief UK and European economist at IHS Global Insight, said:

Despite Mark Carney’s stressing that his speech and the BOE report is not a comprehensive view of the pros and cons of UK membership of the EU, our strong suspicion is that the pro-EU membership camp will find more to grab hold of and champion than the Out camp.

Carney said Britain was possibly “the leading beneficiary” of the EU’s single market, and that being in the bloc had been one of the drivers of its strong economic performance in the four decades since it first joined.

He made some positive remarks on the free movement of labour, observing that it “can help better match workers with firms, alleviating skill shortages and boosting the supply side of the potential growth rate of the economy.”

In addition, he noted that the UK has been the top recipient of foreign direct investment in the UK since the single market was established in 1992.

Updated

However, Carney’s intervention is also likely to be seen as strengthening David Cameron’s hand in negotiations on reforms with Britain’s EU partners. Carney urged the prime minister to demand “clear principles” to safeguard Britain’s interests outside the euro, as he warned that botched European integration could threaten financial stability.

Lawson slams Carney for wading into EU debate

But former chancellor Nigel Lawson slammed the Bank of England governor for wading into the debate on EU membership, saying his remarks were “regrettable”.

The Spectator’s Coffee House team agreed.

Updated

Catherine Bearder MEP, chair of the Liberal Democrat EU referendum campaign, was quick to seize on Carney’s comments:

The Bank of England’s intervention confirms what we already know: being in the EU brings huge benefits to the UK economy.

Those calling for EU exit have failed to present a credible alternative that would protect the economy and secure jobs.

Instead of retreating to the side-lines, Britain should stay and lead reform in Europe from within.”

More on Carney’s speech on EU membership at St Peter’s College in Oxford last night. The governor concluded:

Overall, EU membership has increased the openness of the UK economy, facilitating dynamism but also creating some monetary and financial stability challenges for the Bank of England to manage. Thus far, we have been able to meet these challenges.”

You can read the speech on the Bank of England’s website, and watch the webcast.

Bank of England governor Mark Carney makes a speech at the University of Oxford.

Bank of England governor Mark Carney makes a speech at the University of Oxford. Photograph: Pool/Getty Images

ECB chief Draghi to hint of more QE

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

Policymakers from the European Central Bank have gathered in Valletta, Malta, for their monthly policy meeting (the governing council occasionally departs from its Frankfurt HQ to meet in other parts of the eurozone). The ECB is widely expected to keep its key interest rates unchanged along with its stimulus programme, despite fears over deflation.

But ECB president Mario Draghi may well strike a dovish tone again, and hint at further action towards the end of the year. Falling consumer prices (they slipped by 0.1% in the eurozone in September) and fears over the world economy suggest the central bank will ease policy at some point, unless things improve.

At the last press conference on 3 September, Draghi pointed to “renewed downside risks” to eurozone growth and inflation prospects, reflecting concerns about the outlook for emerging markets. He said that the ECB stood ready to adjust the size, composition or length of the QE programme if necessary.

Investec economist Chris Hare said:

Despite the QE teasers offered last month, our view is that Mr Draghi will not pull the trigger for now. In part, that is because developments since the then have seen a mixed bag, rather than an obvious worsening in conditions.

We still think that additional QE will be appropriate at some point, given global growth risks and the weakness of eurozone inflation (we are fairly agnostic on whether it will come in terms of size, composition or duration). More natural trigger dates would be the December, or perhaps next March’s, policy meeting. That would allow the ECB to announce the expansion alongside updated forecasts. December is also the month where we think the Federal Reserve will start raising rates: that, alongside a QE boost announcement, might give the euro a double kick down, offering a double whammy of stimulus to get inflation back on track.”

European stock markets are set to open lower ahead of the ECB’s decision, which will be announced at 12.45pm UK time, followed by Draghi’s press conference at 1.30pm.

Over here, Bank of England governor Mark Carney gave his “Brexit” speech in Oxford last night. He said that EU membership opened up the UK economy and made it more dynamic, although he added that it also left it more exposed to financial shocks like the eurozone debt crisis.

Updated

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Rolling economic and financial news, from the latest wealth report to the UK inflation data. Credit Suisse wealth report released. German investor morale hit by VW scandal. UK inflation turns negative. Chinese imports tumble 20%…

 

Powered by Guardian.co.ukThis article titled “Richest 1% now own half of all wealth, says Credit Suisse – business live” was written by Graeme Wearden (until 2pm) and Nick Fletcher, for theguardian.com on Tuesday 13th October 2015 13.41 UTC

Wall Street opens lower

US markets have fallen back in early trading, along with other global markets in the wake of poor Chinese trade figures, which cast new doubt over the prospects for the world’s second largest economy.

The Dow Jones Industrial Average is down more than 90 points or 0.5%, while European markets are also still firmly in the red.

Markets fall

Markets fall. Photograph: Reuters/Reuters

After the Treasury Select Committee heard from the newest member of the Bank of England’s Monetary Policy Committee, Jan Vlieghe, who appeared in no hurry to vote for a rate rise, it was the turn of fellow rate-setter Ian McCafferty.

McCafferty was the only one of the nine-member monetary policy committee (MPC) to vote for a hike last week. Katie Allen reports:

McCafferty appeared less worried about the negative impact on the UK and the inflation outlook from a global economic slowdown.

“I place more weight on some of the upside domestic risks to to inflation over the three-year horizon,” McCafferty told MPs.

“It’s clear that we have seen UK wages pick up relatively smartly in nominal terms over the course of the last six months, to a rate that is higher then the MPC would have expected six or nine months ago.”

He also expects a tightening labour market will mean nonimal wage growth accelerates further over 2016 and 2017 and that is something that will only be offset to “some extent” by a pick-up in productivity growth. McCafferty described himself as not hugley optimistic about productivity growth improving.

McCafferty.

McCafferty. Photograph: Rex Features/Rex Features

Asked about the relative merits of using quantitative easing (QE) or changes in the Bank rate to influence the economy, McCafferty noted policymakers had more experience on Bnk rate. He also said he would like to see the Bank rate become an effective marginal instrument again. “Over time, I would like to see Bank rate get up to a point at which we could cut it again were we to need to do so were the economy to slow or inflation to dip below target.”

The latest official figures showed inflation dipped into negative territory in September, at a rate of -0.1%. But McCaffterty sought to reassure MPs “I do not think we are entering a form of deflation” and noted there were few signs of changes in consumer behaviour as a result of stagnant prices.

Asked whether the latest news on inflation might influence him, McCafferty said it would not.

Nor would the latest warning about weaker global growth from the International Monetary Fund.

“In isolation, those things would not on their own change my view of the last few months,” he said.

Dorsey’s promise of no “corporate speak” in his email to Twitter employees about the job cuts fell at pretty much the first hurdle:

Twitter announces job cuts

Over in California, Twitter has just announced plans to cut around 8% of its workforce.

Jack Dorsey hasn’t wasted much time since becoming CEO again. In a letter to staff, he says Twitter will “part ways” with up to 336 workers in an attempt to grow faster.

It’s a tough decision, Dorsey says, but necessary as “the world needs a strong Twitter”….

As usual, the sound of job cuts goes down well on Wall Street – Twitter shares have risen in pre-market trading.

Updated

David Drumm, former head of Anglo Irish Bank.

David Drumm. Photograph: Dan Callister / Rex Features/Dan Callister / Rex Features

One of the bankers blamed for the financial crash in Ireland due to over-lending to property speculators faces extradition from the United States later today.

David Drumm, a former senior figure in the now defunct Anglo Irish Bank, will appear in a court in Boston where he has been living in exile since the institution collapsed in 2009 and hundreds of millions of taxpayers money was spent to nationalise it.

An American judge will decide today whether his arrest at the weekend in Massachusetts at the weekend was lawful. If the judge rules it was then this will pave the way for Drumm’s extradition back to Ireland where he will face up to 33 criminal charges including seven counts of forgery and seven counts of falsifying documents.

Drumm’s re-appearance in the Irish media is a reminder on Ireland’s Budget Day of the bad old days before the crash and the international bail out when bankers loaned billions to property speculators which in turn dangerous overstretched not only key business figures in Ireland but also overheated the Republic’s economy.

Our economics editor, Larry Elliott, has taken a look at today’s UK inflation data, which showed prices were 0.1% cheaper in September than a year ago.

We haven’t seen such weak price pressure in the British economy for many decades, he points out:

This is going to be a record-breaking year for UK inflation. Not since the interwar period has upward pressure on the cost of living been as persistently weak as it has since the start of 2015.

But this is being driven by cheaper commodities, as emerging markets slow down.

The Bank of England is therefore confronted with a situation in which the inflation rate for goods is currently -2.4% while the inflation rate for services is +2.5%.

So what happens next? Larry reckons prices will pick up in 2016, pushing inflation back towards the 2% target. Unless the global economy sours….

Global rich are getting richer

The top 1% of wealth holders now own half of all household wealth.

And that includes 120,000 “ultra-high net worth individuals” across the globe who own at least $50m of wealth each.

That’s according to Credit Suisse’s latest wealth report, which is packed with details about the distribution of wealth across the globe.

This year’s report shows that China’s stock market boom has helped to create more ultra-rich people there. Chinese multimillionaires and billionaires make up 8% of all UHNWI’s.

The group of millionaires below the $50m mark make up another 0.7% of global population, but owns 45.2% of global wealth.

But while the ultra rich have got even richer, others aren’t keeping pace.

Credit Suisse’s chief executive Tidjane Thiam says:

Notably, we find that middle-class wealth has grown at a slower pace than wealth at the top end. This has reversed the pre-crisis trend, which saw the share of middle-class wealth remaining fairly stable over time.

Here are some charts from the report, which is online here.

Credit Suisse wealth report 2015
Credit Suisse wealth report 2015

The top slice of this pyramid group is made up of 34 million US dollar millionaires, who comprise less than 1% of the world’s adult population, yet own 45% of all household wealth.

Credit Suisse estimates that 123,800 individuals within this group are worth more than $50m, and 44,900 have over $100m.

Credit Suisse wealth report 2015
Credit Suisse wealth report 2015

Updated

BoE’s new policymaker: It’s not time to raise rates yet

Hedge fund manager Gertjan Vlieghe

Hedge fund manager Gertjan Vlieghe, who is joining Britain’s MPC Photograph: Gertjan Vlieghe

UK parliament’s Treasury Committee has been hearing from the newest member of the Bank of England’s rate-setting Monetary Policy Committee, Jan Vlieghe, and it appears he is in no hury to vote for a hike.

This is the first time financial markets are getting a chance to hear what the new MPC member thinks about the UK economy, the global outlook and what should come next for interest rates in the UK.

After the Bank’s chief economist, Andy Haldane, recently raised the prospect of a rate cut – from what is already a record low of 0.5% – in the face several risks to the economic outlook, Vlieghe too is not ruling out even lower borrowing costs.

He is worried about the Bank meeting its government-set target for inflation at 2% on the consumer prices index (CPI), which fell to -0.1% this morning.

Asked if the BoE had run out of tools, Vlieghe said “we can cut rates if we judge it necessary” and that the Bank could also re-start its asset purchase programme, also known as quantitative easing (QE).

But he did also say “the next move in interest rates is more likely to be up than down.”

Vlieghe highlighted what he saw as risks to the UK from China’s downturn and the wider global slowdown.

“Clearly, the UK is an open economy, it has very important trade and financial links to the rest of the world. The UK is in reasonably good shape, growth is solid but not fantastic.

But we absolutely have to take into account we are operating in a global environment which is adverse, so to speak, and it’s a headwind to growth and it is one of the things that will prevent, I think, the UK economy from accelerating meaningfully from the pace we are seeing currently.”

He set out some upsides and downsides in the current domestic situation.

The “headwinds” were:

  • A strong pound
  • That the UK is operating in a weak global environment
  • An ongoing fiscal headwind:

But on the plus side:

  • There had been some improvement to productivity growth
  • A housing market recovery
  • Some improvement in real wages

“What we are trying to judge is how these play off against each other,” Vlieghe added.
As for when he might vote for rates to go higher, after already more than six years at their record low, the former hedge fund economist highlighted a host of low inflation numbers from the core rate to people’s inflation expectations.

Speaking after official figures showed headline inflation turned negative in September, Vlieghe said other prices indicators too were “all a little bit below where you’d want them to be to be confident of meeting the 2% inflation target in the medium term”.

“We need them to rise… I am not confident enough right now that they will rise in order to vote for an immediate rate hike. I think we have time. We can wait and see how this plays out and I would want to see a more convincing broad-based upward trajectory before I say OK, now I am confident enough that we will get to 2% eventually and therefore vote for a rate rise.”

Despite the evidence of today’s ZEW survey, German economy minister Sigmar Gabriel has claimed the diesel emissions scandal at Volkswagen won’t permanently damage the German economy.

Asked whether the VW crisis would hit the economic outlook for Germany, Europe’s largest economy, Gabriel said:

“No, I don’t expect the problems at Volkswagen to have lasting effects on the German economy.”

It may be too early to be sure, though. Yesterday, Britain’s transport secretary said Volkswagen deserves to suffer “substantial damage” because of the diesel emissions scandal.

Patrick McLoughlin told MPs that:

“They have behaved in an appalling way,”

“These [defeat] devices were made illegal in 1998 and it is unbelievable to think a company the size and reputation of VW have been doing something like this. They are going to suffer very substantial damage as a result and they deserve to.”

Pre-election giveaways expected in Irish 2016 budget

Irish budget 2016<br />A child’s piggy bank with euro notes as Ireland’s Budget 2016 is to be announced today by Finance Minister Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin. PRESS ASSOCIATION Photo. Picture date: Tuesday October 13, 2015. Only weeks or months from the next general election the electorate is in line for a softening-up with sources in the coalition Government billing the limited restoration to pay packets as “family friendly”. See PA story IRISH Budget. Photo credit should read: Brian Lawless/PA Wire

For the first time in seven years an Irish budget will actually be giving away something for its citizens after the years of tax hikes, brutal spending cuts, the humiliation of an IMF-EU bail out and the crash of the Celtic Tiger.

Irish Finance Minister Michael Noonan will get to his feet after 2pm inside the Dail and deliver a budget that is expected to include:

  • An increase in €3 to the weekly Old Age Pension
  • Tax cuts for the average worker that are expected to put €1000 back into their pockets
  • A cut of to the hated Universal Social Charge tax which was brought in to help plug the gap in public finances during the bail out times.
  • A €550 tax credit for the self-employed
  • The promise of 20,000 new public homes taken from the portfolio of properties nationalised after the financial crash and the bankruptcies of property speculators. Increases in child benefits and a freeze on prescription charges.

Of course it is hardly a coincidence that the Fine Gael-Labour goverment are facing into an election year in 2016 and will no doubt face accusations from opposition parties of trying to bribe their way back into power. In return the coalition will argue that they have done the “heavy lifting” after four years in office, carried out the painful adjustment policies that restored the nation’s finances and oversaw growth in the economy, and managed an exit from the bail out.
One thing is for sure – Enda Kenny and his administration are going to wait for at least three months before today’s budget measures sink into the public’s consciousness. The Taoiseach has finally decided that he won’t call the election until late February/early March. The wisdom of that decision to go late rests an awful lot on the impact of today’s Budget 2016.

VW emission scandal hits German morale

german flag

The Volkswagen diesel emissions scandal and economic problems in emerging markets have become a toxic cocktail for confidence within Germany, new data shows.

Morale among German investors and analysts fell sharply in October, according to the ZEW think tank, pulling its economic sentiment index down from 12.1 to just 1.9.

ZEW President Professor Clemens Fuest pinned the blame on VW, and troubles overseas:

“The exhaust gas scandal of Volkswagen and the weak growth of emerging markets has dampened economic outlook for Germany.”

ZEW’s assessment of the current situation in Germany also fell, by 12.3 points to 55.2 points.

Despite that, Fuest reckons Germany will not fall back into recession.

For the survey, ZEW asked analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

VW to slash investment by €1bn/year

Over in Germany, Volkswagen has just announced that it is cutting its investment programme by €1bn per year, as it grapples with the fallout from the diesel emissions scandal.

In a statement just released, VW announced a range of changes including shifting all its diesel cars to cleaner exhaust emissions systems, and making the next generation of its Phaeton car run on electricity..

Dr. Herbert Diess, who runs Volkswagen’s Passenger Brand, says:

“The Volkswagen brand is repositioning itself for the future.

We are becoming more efficient, we are giving our product range and our core technologies a new focus, and we are creating room for forward-looking technologies by speeding up the efficiency program.”

Here’s the key points from VW’s new strategic plan:

  • Accelerated implementation of the efficiency program creates room for reorientation
  • Streamlined processes leverage further cost-saving potential, including cuts in fixed costs
  • Investments to be reduced by 1 billion euros per year compared with planning – combined with prioritization of projects for the future
  • • Product decisions formulated
  • • New Phaeton will be electric
  • • New Modular Electric Toolkit planned

Updated

Over in parliament, MPs are beginning to quiz former hedge-fund economist Gertjan Vlieghe about his appointment to Britain’s Monetary Policy Committee. You can see it here. It could be quite tasty, as explained earlier….

September’s inflation rate is used to calculate a range of benefits payments in the UK.

Consumer expert Paul Lewis reports that these payments will now be frozen, as will other payments linked to the headline inflation rate.

Updated

Britain’s return to negative inflation isn’t a great surprise or a great calamity, says Jeremy Cook, chief economist at the international payments company, World First:

He reckons inflation will pick up sharply in 2016, once the recent slump in oil prices fades into history.

Headline inflation has been pressured for nearly a year now from falling energy and commodity prices but we must remember that base effects will see that initial drop in oil prices fall out of the calculations in the coming months.

Howard Archer of IHS Global Insight also sees UK interest rates on hold for longer.

With inflation back below zero, it’s hard to see Britain’s interest rates rising from their current record low before 2016.

Peter Cameron, Associate Fund Manager at EdenTree Investment Management, explains:

“Inflation is back in negative territory again and it’s very unlikely that we’ll see the Bank of England raise interest rates this side of Christmas. Although wage pressures are emerging and the impact of the falling oil price will soon start to drop out of the numbers, a rate hike would have a deflationary effect by pushing up Sterling.

At a time when the ECB is signalling it is ready to expand QE and the Fed is likely to delay its own rate lift-off into 2016, the Bank will be fearful of allowing Sterling to appreciate too much.”

Updated

There’s no sign of deflation in the British housing market. New data shows that prices rose by 5.2% across the country in August:

Osborne: This isn’t damaging deflation

UK chancellor George Osborne insists that Britain is not entering a period of ‘damaging deflation’:

Deflation is a protracted period in which prices fall in a downward spiral, and people stop spending because today’s items are going to be cheaper tomorrow.

The bigger picture is of a broadly flat inflation rate since the beginning of the year, says Richard Campbell, head of CPI at the Office for National Statistics.

“The main downward pressures on CPI came from clothing, which rose more slowly this September than in recent years, and falling petrol and diesel prices.”

The three reasons why UK inflation is negative again

Clothing and footwear prices rose by 2.8% between August and September this year, compared to 4% between the same 2 months a year ago. That pushed the inflation rate down, to 0.1% in September.

Fuel prices fell by 2.9% between August and September this year compared with a smaller fall of 0.6% between the same 2 months a year ago.

The ONS says:

The largest downward contribution came from petrol, with prices falling by 3.7 pence per litre between August and September this year compared with a fall of 0.8 pence per litre between the same 2 months a year ago. Diesel prices are now at their lowest level since December 2009, standing at 110.2 pence per litre.

And a price cut by British Gas also helped cut the cost of living.

Over to the ONS again:

Gas prices fell by 2.1% between August and September this year, compared with no change between the same 2 months a year ago, with price reductions from a major supplier.

UK inflation, the detail, September 2015

Food and fuel have played a key role in dragging UK inflation down in the last year.

Over the last year, food prices fell by 2.5% and prices of motor fuels fell by 14.9%, according to the ONS.

This chart confirms that the UK’s inflation rate has been bobbing around zero for most of this year.

UK inflation

Clothing and fuel prices push inflation negative

Here’s the key points from today’s inflation report:

  • The Consumer Prices Index (CPI) fell by 0.1% in the year to September 2015, compared to no change (0.0%) in the year to August 2015.
  • A smaller than usual rise in clothing prices and falling motor fuel prices were the main contributors to the fall in the rate.
  • The rate of inflation has been at or around 0.0% for most of 2015.

UK in negative inflation again

Here we go! UK inflation has turned negative again!

The Consumer prices index fell by 0.1% in September, the Office for National Statistics reports. That’s weaker than the zero reading that economists had expected.

It’s the first sub-zero reading since April.

More to follow

Crumbs! The pound has just taken a dive in the foreign exchange markets, dropping almost one cent against the US dollar.

Pound vs dollar

Pound vs US dollar today Photograph: Thomson Reuters

Traders may be calculating that September’s UK inflation reading, due in a moment, is weaker than expected. Could the inflation number possibly have leaked??

Updated

More signs of weakness in Germany – Berlin is expected to trim its estimate for growth this year to 1.7%, down from 1.8%.

Economy minister Sigmar Gabriel could announce the new forecast tomorrow, according to Reuters.

This follows a hattrick of bad economic data last week, with factory orders, industrial production and exports all declining, as emerging market problems hit Germany.

Inflation, a preamble

Just 30 minute to go until we get the Britain’s inflation date for September.

City economists broadly expect that the consumer prices index will remain flat for a second month, leaving inflation at zero. But a negative reading can’t be ruled out.

My colleague Katie Allen explains:

Falling pump prices and a cut in energy bills by British Gas are expected to have kept inflation at zero last month, putting little pressure on the Bank of England to raise interest rates from their record low any time soon.

Official figures on inflation due at 9.30am are forecast to show no change in the consumer prices index measure. Against the backdrop of tumbling global commodity prices, from food to oil, inflation in the UK has been at or close to zero since February, well below the Bank’s target of 2%.

While some have described low inflation as a sign of economic fragility, it relieves the pressure on household budgets after several years of wages falling in real terms following the financial crisis. The latest official figures on the jobs market on Wednesday are expected to put pay growth at 3.1%.

Here’s her preview:

Hedge fund manager Gertjan Vlieghe

MPs could give Gertjan Vlieghe, Britain’s newest interest rate setter, a rough ride when he appears before them in an hour’s time.

Vlieghe should expect some tough questions about his previous role as economist at a hedge fund (Brevan Howard Asset Management).

Vlieghe was appointed to the Bank of England in late July. He had originally hoped to remain a member of Brevan Howard’s long-term incentive plan, but was forced to exit it to avoid “any mistaken impression” of a conflict of interest.

Alan Clarke, an economist at Scotiabank in London, reckons that those concerns may dominate today’s hearing — as Brevan Howard Asset Management (like any hedge fund) could potentially make or lose money due to decisions taken at the BoE.

Clarke told Bloomberg:

“It’s probably right that happens because financial markets have not had a great reputation recently. Sadly, I think, that will overshadow what is an otherwise great appointment.”

Bloomberg economist Maxime Sbaihi predicts that today’s ZEW survey, due at 10am BST, will show economic confidence deteriorated in Germany this month.

Mining stocks hit by Chinese gloom

European stock markets are all falling this morning, as the 20% slide in Chinese imports last month spooks traders.

In London, the FTSE 100 has lost 36 points, or 0.6%, led by mining stocks such as Glencore (-4.5%).

FTSE 100 fallers

FTSE 100 fallers Photograph: Thomson Reuters

The French CAC shed 1%, while Germany’s DAX is down 0.6%.

Conner Campbell of SpreadEX explains:

A whopping 20% fall in Chinese imports in September didn’t get the day off to the best start, with that drop in demand sure to cause ripples of worry the world over.

Updated

Shares in SABMiller have jumped by 9% at the start of trading in London, to around £39.50.

That’s short of the £44 per share proposal which its board have accepted; the City may not be 100% convinced that AB InBev will pull this deal off.

SAB Miller shares

SAB Miller shares this morning Photograph: Thomson Reuters

AB InBev now has until 5pm on the 28th October to file a firm offer for SAB, having won the board round with its latest proposal.

The key is whether Colombia’s Santo Domingo family, which owns 14% of SABMiller, feels £44 per share is enough.

Updated

You know a deal is big when it moves the pound.

Here’s how sterling reacted to the news that AB INBev and SABMiller have agreed terms.

Pound vs US dollar

Pound vs US dollar today Photograph: Thomson Reuters

Updated

AB InBev and SABMiller agree terms on £68bn deal

File photo of a waiter serving a glass of beer ahead of an Anheuser-Busch InBev shareholders meeting in Brussels<br />A waiter serves a glass of beer ahead of an Anheuser-Busch InBev shareholders meeting in Brussels in this April 30, 2014 file photo. SABMiller, the world’s second largest brewer, has promptly rejected an improved offer from bigger rival Anheuser-Busch InBev, saying October 7, 2015, that its 68 billion-pound ($104 billion) valuation was insufficient. REUTERS/Yves Herman/Files

One of the biggest takeover battles in the City in recent years is heading to a climax this morning.

Anheuser-Busch InBev, the brewing giant behind Stella Artois and Budweiser, has announced it has “reached an agreement in principle on the key terms of a possible recommended offer” for its rival, SABMiller (producer of Grolsch, Peroni, Pilsner Urquell…).

Here’s the statement issued to the City.

At £44 per share, the deal values SABMiller at around £68bn — making it the biggest takeover of a UK company ever.

It’s not signed and sealed yet, though – it still needs the support of SAB’s shareholders. Yesterday, SAB rejected £43.50 per share, but the board has now calculated that it can’t turn down this new higher offer.

More here:

Updated

The impact of China’s slowdown will be felt around the globe, warns economist Cees Bruggemans.

The 20% tumble in Chinese imports last month means that growth is continuing to slow, says Yang Zhao, China economist at Nomura Holdings Inc. in Hong Kong.

He said (via Bloomberg)

“Import growth remained sluggish, suggesting weakening domestic demand, particularly investment demand

We maintain our view that GDP growth will decline to 6.7 percent in the third quarter.”

GDP growth was measured at 7.0% in the second quarter of 2015.

Updated

Chinese imports slump 20% as slowdown continues

The latest trade data from China has sent a shiver through the markets this morning.

Chinese imports slumped by over 20% year-on-year in September (in dollar terms), a worse performance than economists had expected. That means imports have now fallen for 11 months running, as the country’s economy has slowed.

Exports dipped by 3.7% — better than the 6% slide which was expected. But it’s the slump in imports that is alarming analysts, as it hints at more problems building in China.

Reuters has more details:

Imports plunged 20.4% in September from a year earlier to $145.2bn, customs officials said, due to weak commodity prices and soft domestic demand.

These factors will complicate Beijing’s efforts to stave off deflation, one of the headwinds threatening the world’s second biggest economy.

The news helped to drive shares down in Asia, where Japan’s Nikkei fell over 1% overnight.

Commodity prices also weakened, as investors calculated that China would be importing less raw materials in the months ahead.

Updated

Introduction: Has UK inflation turned negative again?

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

After the glamour and drama of yesterday’s Nobel economics prize, we’re back into the gritty world of data this morning.

At 9.30am, the latest UK inflation figures for September could show that the cost of living is falling again (at least according to the Consumer Price Index).

It was 0% in August, mainly due to cheaper energy costs, and some economists think it could have fallen below zero last month.

Then at 10am, Germany’s ZEW economic sentiment index will highlight if the emerging market slowdown and the Volkswagen emissions scandal is hurting Europe’s largest economy.

Also coming up…

At 10am, MPs on the Treasury Select Committee will grill Gertjan Vlieghe, the newest member of the Bank of England’s monetary policy committee.

And the banking reporting season will kick off later, with results from JPMorgan Chase, Citigroup and Wells Fargo.

Updated

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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>
</p></div>
<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.

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Powered by Guardian.co.ukThis article titled “Protester disrupts European Central Bank press conference – as it happened” was written by Graeme Wearden, for theguardian.com on Wednesday 15th April 2015 18.07 UTC

Closing summary: Protests in the heart of the ECB

It’s time for a closing summary.

Mario Draghi’s press conference in Frankfurt was dramatically disrupted today by an activist, in a protest against the European Central Bank’s policies.

In a remarkable security breach the protestor, understood to be Josephine Witt, leapt on the desk, showering glitter on the ECB president.

She also threw leaflets condemning the “undemocratic” Bank, and its role in the financial crisis, and chanted “End the ECB dictatorship” repeatedly, before being removed by security staff.

A protester who jumped on top of ECB president Mario Draghi’s desk during a news conference at the European Central Bank is detained by security. Her shirt reads “End the ECB Dick-tatorship”.
A protester who jumped on top of ECB president Mario Draghi’s desk during a news conference at the European Central Bank is detained by security. Her shirt reads “End the ECB Dick-tatorship”. Photograph: Marcus Golejewski/Demotix/Corbis

And there’s a video clip here.

The press conference was briefly suspended, before Draghi returned to tell reporters that his QE programme was delivering benefits to the eurozone economy, and to call for Europe’s labour market to be reformed to help younger people.

According to the ECB, Ms Witt registered as a journalist to attend today’s press conference in the Bank’s new Frankfurt headquarters. Staff took “immediate and effective action”, it said in a statement.

For example:

A protester who jumped on top of ECB president Mario Draghi’s desk during a news conference at the European Central Bank is detained by security. Her shirt reads “End the ECB Dick-tatorship”.
. Photograph: Marcus Golejewski/Demotix/Corbis

Police confirmed that they arrested a 21-year-old woman at the scene; she was later released:

Witt told Bloomberg tonight that she was motivated to protest against Draghi because he’s never been elected.

What’s very concerning to me is that Mario Draghi as ECB president is not actually serving the societies, but imposing rules on them — without ever being elected,” the 21-year-old said.

“This press conference is the little, little bit of democracy that the ECB gave us. I used this opportunity to express my criticism.”

It’s the latest in a series of protests against the ECB since the financial crisis began; last month, anti-austerity protestors caused major disruption in Frankfurt.

Once the drama was over, Draghi rebuffed concerns that the ECB’s new QE stimulus programme might falter, for lack of eurozone debt to buy:

“Now the worries about potential scarcity of government bonds, sovereign bonds to be bought under our purchase programme are just a little exaggerated. We don’t see problems. Both direct and indirect evidence and market feedbacks show that there isn’t any problem and our programme is flexible enough in any event to be adjusted if circumstances were to change.”

And he also refused to countenance the idea that Greece might default:

“I don’t even want to contemplate that. And based on the Greek government leaders’ statements this option is not contemplated by themselves as well. So I’m not ready to discuss any possible situation like that.”

But rating agency S&P then raised the stakes tonight, by cutting Greece’s credit rating deeper into junk.

I’ll be back tomorrow for another busy day of liveblogging, but probably one free of today’s drama (right, Josephine?…)

Thanks for reading and commenting, as ever. GW

Updated

Ms Witt registered as a Vice reporter, according to the Telegraph:

The economics correspondent Pete Spence explains her motives:

Ms Witt said she would continue to engage in “hardcore activism” in response to what she believed was an “undemocratic” ECB. She added that recent protests in Frankfurt during the opening of the ECB’s new offices were a reaction to Mr Draghi’s leadership. “[He] never got a mandate, never got voted for or elected,” she said.

“He imposes policies on these societies that are completely undemocratic,” she added. A friend of Ms Witt said she opposes what she describes as “European neo-liberalism”, and argued that the ECB cannot act “without a state of surveillance, of police and violence”.

If you squint at the photos taken earlier, you can see this is indeed the paper swirling around Mario Draghi’s head.

Protesters aren’t usually verified on Twitter, so I can’t confirm whether this actually is today’s activist or not: #disclaimer

While the credit rating downgrade isn’t a surprise, Standard & Poor’s has some serious concerns over Greece.

S&P says Greece’s economic state is “highly uncertain”, and warns that:

“without deep economic reform or further relief, we expect Greece’s debt and other financial commitments will be unsustainable”.

Greece’s solvency increasingly hinges on “favourable business, financial, and economic conditions”, it adds.

But despite the current problems, S&P reckons the government will manage to continue to pay salaries,pensions in cash (rather than non-negotiable IOUs) despite “weakening cash fiscal receipts”.

S&P downgrades Greece

Breaking news: Greece’s credit rating has just been cut by Standard & Poor’s, which also left the country on a negative outlook.

Wonder what S&P think of the ECB’s security system…

Video: That protest in full

For those of you who haven’t seen the protest already, this video captures the moment Mario Draghi’s opening statement was dramatically disrupted


.

Updated

Hopefully the ECB tighten up their security checks, before someone else pretends to be an economics hack.

ECB: Protester registered as a journalist

ALTERNATIVE CROP A woman disrupts a press conference by Mario Draghi (C), President of the European Central Bank, (ECB) following a meeting of the Governing Council ain Frankfurt / Main, Germany, on April 15, 2015. The woman who charged at Draghi calling for an “end to the ECB dictatorship” was quickly escorted out of the premises by security officers before the news conference resumed. AFP PHOTO / DANIEL ROLANDDANIEL ROLAND/AFP/Getty Images
The moment Mario Draghi was glitterbombed, and had a “butterfly” protest statement thrown at him Photograph: Daniel Roland/AFP/Getty Images

The European Central Bank has now issued a formal response:

Statement on incident at ECB press conference

The European Central Bank’s press conference was briefly disrupted by a protester today, who jumped on to the stage and threw confetti. Staff from the ECB are investigating the incident.

Security staff took immediate and effective action.

Initial findings suggest that the activist registered as journalist for a news organisation she does not represent. Like all visitors to the ECB, she went through an identity check, metal detector and x-ray of her bag, before entering the building.

ECB President Mario Draghi remained unharmed and calmly proceeded with the press conference. <end>

Here is a copy of the paper thrown at Mario Draghi today, accusing the ECB of arrogance and creating human disasters through its policies (thanks to Pete Spence of the Telegraph).

There is a Femen activist called Josephine Witt (short profile here), although the statement suggests it is an attack on austerity rather than the patriarchy.

Updated

Today’s incident feels unprecedented in financial circles; I can’t recall any central bank protestor getting so close to their target before, especially inside the central bank’s own headquarters.

But it’s not the first time the ECB has been a target. Last month, 350 people were arrested after protests disrupted the official opening of the new headquarters in Frankfurt, with several police cars set ablaze.

And the ECB’s decision to hold its monthly meeting in Barcelona in 2012 backfired, with thousands of police on the streets as protest marches took place.

It’s important to note that Draghi is completely unharmed — not too surprising, given confetti doesn’t pose much risk to human health. He certainly got off lighter than WTO Director-General Renato Ruggiero, who in 1999 was hit with cream pies by environmental protesters.

Update: He’s not a central banker, of course, but we shouldn’t forget the attempt to ‘pie’ Rupert Murdoch in 2011 at the UK parliament.

Updated

Police: 21-year-old arrested

A woman is taken away by security after she interrupted a press conference by President of the European Central Bank (ECB) by throwing confettis following a meeting of the Governing Council in Frankfurt / Main, Germany, on April 15, 2015.
. Photograph: Daniel Roland/AFP/Getty Images

Frankfurt police say the protester is a 21-year old woman from Hamburg. She’s currently being questioned.

Updated

The FEMEN activist group have claimed responsibility for the protest.

Femen have previously demonstrated against Vladimir Putin over the Ukraine conflict, and against former IMF chief Dominique Strauss-Kahn.

Updated

Confirmation from Reuters:

  • GERMAN POLICE SAY HAVE DETAINED WOMAN WHO DISRUPTED ECB NEWS CONFERENCE, SHE IS BEING QUESTIONED – RTRS

The women who threw paper and confetti at Mario Draghi is now in custody in Frankfurt, according to Bloomberg.

After the drama:

ECB press conference, April 15 2015
. Photograph: ECB

And that’s the end of the press conference. Unusually, there is a small ripple of applause — which Mario Draghi says is “very comforting”.

A couple of people wander to the front to take photos, but Draghi’s swiftly out of the room before there’s any more drama.

Finally, Draghi takes a question from a group of young people who won a competition to attend today’s press conference.

They ask for his views on the employment market today, and the prospects when they enter the labour market in a couple of years.

Best question of the day, Draghi replies.

The key to improving the eurozone’s labour market is to eliminate “duel market conditions”, he says, so that young people have a fair change of getting employment.

We must make it easier to hire people, cut the time people are unemployed, and change educational structure to make sure people have the right skills. That’s the most important thing.

Finally, a question about the protest. A journalists asks whether the European Central Bank president is OK, as he seems pretty calm.

You’ve answered your own question there, Draghi smiles back.

He then returns to normal business, insisting that economic conditions are improving, and bank lending is improving.

However, the recovery is reliant on the ECB sticking with its monetary policy measures.

Clarification. Another photo just arrived, showing that the protestor was actually saying “End the ECB Dick-Tatorship”. A subtle difference.

A female activist (C) wearing a t-shirt with a slogan reading: ‘ECB Dick-Tatorship’ is subdued by ECB security personnel after an incident at the press conference of the European Central Bank in Frankfurt, Germany, 15 April 2015.
. Photograph: Boris Roessler/EPA

Updated

The European Central Bank says it is “investigating” today’s protest:

If you’re just tuning in, you can watch Mario Draghi’s press conference online here. He’s now covering weighty monetary policy issues, and their role in underpinning the eurozone recovery.

Amazingly, no-one has actually asked a question about the protest (“Are you OK, Mr Draghi?” might be a good place to start).

The ECB chief says that the press conference will run for another 10 minutes to make up for the time lost when it was dramatically disrupted.

Mario Draghi appears to be unshaken by the incident. He is now fielding questions about the eurozone. He says that he doesn’t even want to contemplate the possibility that Greece might default on its debts.

And he points to Spain as a success story, saying it is experiencing a “strong and employment rich recovery, supported by labour market reform”.

Bloomberg have uploaded a video clip too.

It shows that the protester was shouting “End the ECB dictatorship” before being bundled out.

Updated

Mario Draghi’s opening statement is now online here (without any reference to the disruption)

Here’s Associated Press’s early take on the protests:

A female protester interrupted the European Central Bank’s press conference on Wednesday, screaming “End ECB dictatorship” while she rushed the stage and threw what looked like confetti.

The action happened as ECB President Mario Draghi was delivering opening remarks after the bank’s latest policy meeting.

Draghi reappeared on stage a few minutes later and carried on with his remarks.

Some activists accuse the ECB of trying to enforce budget austerity measures on eurozone countries, such as Greece, that are under financial bailout programs.

Photos: Protester disrupts ECB press conference

Here are photos of the moment that the European Central Bank’s press conference was disrupted by a protester shouting “end the ECB dictatorship.” [see earlier blogpost onwards]

It shows she threw paper and confetti at the head of the ECB, Mario Draghi, before being carried out of the room:

A woman disrupts a press conference by Mario Draghi, President of the European Central Bank, (ECB) following a meeting of the Governing Council ain Frankfurt / Main, Germany, on April 15, 2015. AFP PHOTO / DANIEL ROLANDDANIEL ROLAND/AFP/Getty Images
. Photograph: Daniel Roland/AFP/Getty Images
Security officers detain a protester who jumped on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. The news conference was disrupted on Wednesday when a woman in a black T-shirt jumped on the podium. REUTERS/Kai Pfaffenbach
. Photograph: Kai Pfaffenbach/REUTERS
A woman interrupts a press conference by Mario Draghi, President of the European Central Bank (ECB) following a meeting of the Governing Council in Frankfurt / Main, Germany, on April 15, 2015. AFP PHOTO / DANIEL ROLANDDANIEL ROLAND/AFP/Getty Images
. Photograph: Daniel Roland/AFP/Getty Images
Security officers detain a protester who jumped on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. The news conference was disrupted on Wednesday when a woman in a black T-shirt jumped on the podium. REUTERS/Kai Pfaffenbach
. Photograph: Kai Pfaffenbach/REUTERS

Updated

Draghi has also played down concerns that the ECB’s QE stimulus programme will struggle to find enough eurozone bonds to buy.

Updated

Draghi is now taking questions from the media – no-one has asked if he’s OK following the attack, though.

Asked about Greece, he says that the ECB will support the Greek banks for as long as they are solvent. The ECB has now extended €110bn to the Greek financial sector, he adds.

Draghi concluded his statement by warning that the eurozone needs more supply side measures to tackle its high structural unemployment & low potential output growth.

Draghi appears completely unruffled by the disruption, and has returned to his statement.

He says the ECB is monitoring inflation closely, and still expects inflation to rise back towards its target in 2016 and 2017.

Here’s a better photo of the moment that Mario Draghi’s press conference was dramatically disrupted a few moments ago.

OK, we’re back now — Mario Draghi is unhurt, and he’s continuing with his opening statement.

A remarkable security breach, though — this press conference is taking place inside the ECB’s headquarters.

It looks like the protestor threw confetti at the ECB chief.

Updated

The protestor has been removed from the room, and the press conference has been suspended.

ECB press conference disrupted

Mario Draghi has then been dramatically cut off, as a woman rushed to the front press conference repeatedly shouting “End ECB dictatorship. End ECB dictatorship”*

She also threw something at the ECB chief – which looked like paper.

Updated

Press conference begins

Mario Draghi starts cheerfully, saying he’s “very pleased” to welcome the media to the press conference.

He confirms that the ECB began its stimulus programme as planned. It is proceeding smoothly.

There is “clear evidence” that the policy measures we have put in place are effective, he declares. Borrowing conditions for firms and households have “improved notably”.

The press room in Frankfurt is nicely packed…and there’s a burst of camera action as Draghi arrives.

Draghi
. Photograph: ECB

Angst breaking out across finance Twitter

Umm no sign of Mario yet….

Maybe the lifts are broken again, like in January…..

Mario Draghi’s press conference is being streamed live, here.

Reminder: we want to hear Mario Draghi’s views on his QE programme, Greece, and the state of the eurozone, when the press conference starts in around 5 minutes.

Updated

Lunchtime summary: Stock markets at 14-year high ahead of ECB

A quick recap.

The European Central Bank has voted to leave eurozone interest rates at their current record lows.

ECB president Mario Draghi will hold a press conference at 1.30pm BST (2.30pm Frankfurt), where he’s expected to discuss the state of the eurozone economy and the early success of his QE programme.

He may be asked whether the bond-buying programme could end early, if it’s successful.

European stock markets have hit their highest levels in 14 years, and the euro has fallen back, as investors prepare for this afternoon’s ECB press conference.

Traders are calculating that central banks will maintain accommodative monetary policy for some time, with the eurozone still in negative inflation and China’s economy slowing.

Nick Gartside, fund manager at JPM Global Bond Opportunities Fund, explains:

Globally investors should bear in mind this is not the time to fight central banks.

Powerful policies are forcing bond investors to sell bonds back to the central banks and redeploy those assets, and we cannot forget how much this supports risk assets.”

That’s helped to drive the FTSE 100 to a new alltime high, over 7100 points for the first time.

European stock markets, 1pm, April 15 2015
European stock markets, 1pm, April 15 2015 Photograph: Thomson Reuters

German bonds are hitting new highs, driving the interest rate on its 10-year bonds close to zero.

It’s been a worrying morning for Greece, though.

Slovakia’s finance minister has warned there is little chance of a deal to unlock aid next week, meaning:

“Greece is moving ever closer to the abyss.”

And new budget data has shown that Greece only achieved a primary surplus of 0.4% last year, well below target [details here].

The Kathimerini newspaper says this raises fresh fears over Greece’s financial health.

The budget figures show “that Greece needs external financing not just to meet redemptions but also to meet its current financing needs,” said James Nixon, chief European economist at Oxford Economics in London.

“There’s very little appetite in Europe to extend significant lending to Greece, and so that means that effectively there will be a demand for renewed austerity and further fiscal tightening.”

ECB leaves interest rates at record lows

FRANKFURT AM MAIN, GERMANY - JANUARY 21: The symbol of the Euro, the currency of the Eurozone, stands illuminated on January 21, 2015 in Frankfurt, Germany. The European Central Bank (ECB) is schedule to meet tomorrow and announce a large-scale bond buying program. The Euro has dropped sharply against the U.S. dollar in recent months. (Photo by Hannelore Foerster/Getty Images)
. Photograph: Hannelore Foerster/Getty Images

It’s official: The European Central Bank has voted to leave the key interest rates across the eurozone unchanged, at today’s meeting.

That means the benchmark rate remains at its lowest level ever, at 0.05%. Banks will still be charged 0.3% for overnight borrowing from the ECB, and hit with a negative interest rate of -0.2% for leaving cash in the ECB’s vaults.

  • ECB SAYS LEAVES BENCHMARK REFINANCING RATE UNCHANGED AT 0.05%
  • ECB SAYS LEAVES INTEREST RATE ON MARGINAL LENDING UNCHANGED AT 0.30%
  • ECB SAYS LEAVES INTEREST RATE ON DEPOSIT FACILITY UNCHANGED AT -0.20%

Here’s the statement. Now we must await Mario Draghi’s press conference, in just under 45 minutes.

Heads-up, the ECB is about to announce the decisions on monetary policy taken at today’s meeting:

Slovakia: Greece is close to the abyss

Slovak finance minister Peter Kazimir has thrown cold water on hopes of a breakthrough in the Greek bailout talks next week.

Speaking after a cabinet meeting in Bratislava, Kazimir warned that Greece is heading towards ‘the abyss”.

Reuters has the details:

“Given the we have lost a lot of time, I am sceptical,” Kazimir told reporters after a Slovak cabinet meeting when asked if he believed the Riga meeting could bring a breakthrough.

“Greece is moving ever closer to the abyss.”

Kazimir is a member of the Eurogroup, which will meet next Friday in Riga. Greece hopes that this will unlock some aid (as we reported last night).

However, German finance ministry spokesman Friederike von Tiesenhausen has just warned reporters in Berlin that talks are deadlocked:

He also denied this morning’s rumour that Germany was preparing for Greece to default.

The damage suffered by the Greek economy in the last four years has been exposed by new fiscal data published by statistics body Elstat this morning.

The figures confirm that Greece’s GDP shrank from €207bn in 2011 to €170bn in 2014.

And that means its national debt swelled from 171% of GDP to 177% GDP last year, despite the billions of Greek debt being written down in 2012 and heavy spending cuts.

The report also shows that Greece posted a small primary surplus [ie, ignoring debt repayments] of 0.4% of GDP in 2014; much lower than the 2% estimated by the previous Greek government last October.

Greek fiscal report
Greek fiscal report Photograph: Elstat

The broader deficit was 3.5% of GDP, slightly above the 3% target set by Brussels.

Today’s antitrust charge against Google over its Shopping service could be just the start, says competition commissioner Margrethe Vestager.

She’s briefing reporters in Brussels now, explaining that other services are also under the Commission’s microscope as it tries to ensure consumers aren’t exploited.

Vestager is also denying that there’s an anti-American tinge to the probe.

Brussels hits Google with antitrust charge

After five years of work, the European Commission has just hit Google with a charge that it abuses its dominant position in the search industry.

The case relates to Google’s shopping service; the EC says the search giant stifles competition by favouring its own pages.

Brussels has also opened a separate investigation into Google’s Android operating system.

Competition chief Margrethe Vestager says:

“I have also launched a formal antitrust investigation of Google’s conduct concerning mobile operating systems, apps and services. Smartphones, tablets and similar devices play an increasing role in many people’s daily lives and I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company.”

Antitrust: Commission sends Statement of Objections to Google on comparison shopping service; opens separate formal investigation on Android

More to follow…

The Eurozone Rumour Mill is grinding hard this morning, with Germany’s Die Zeit newspaper claiming that Angela Merkel’s government is preparing a plan to keep Greece inside the euro area even if it defaults.

According to Die Zeit, Germany fears that Greece could soon miss a debt repayment, and could be prepared offer concessions if Athens can show its committed to reforms.

The German government is declining to comment…

The drop in short-term borrowing costs in the eurozone is truly remarkable, with only Greece missing out:

The Greek government has cleared one, rather small, hurdle this morning by auctioning over €800m of three-month debt.

This will cover the cost of repaying three-month bonds which mature soon. The debt was almost certainly bought by Greek banks, who will receive a yield of 2.7% [so Athens must pay much more to borrow until July than Berlin would pay to borrow until 2045]

Update: German’s ten-year government bonds just hit a new record high:

  • GERMAN 10-YEAR BUND YIELD FALLS TO RECORD LOW BELOW 0.1291%

Remarkable scenes in the bond markets today – German 30-year sovereign debt is changing hands at an effective interest rate of just 0.57%.

German 10-year bunds are now yielding just 0.13%, meaning Berlin can borrow for basically nothing for the next decade. And eight-year bund yields turned negative yesterday, meaning they’re worth more than their face value.

We can thank Mario Draghi for this situation. Under the ECB’s quantitative easing programme; it can buy bonds at negative yields as long as they’re not below its own deposit rate of -0.2% (what it charges banks to leave funds in the ECB vaults). Traders are piling into eurozone bonds, confident that they can sell them to Frankfurt at a guaranteed profit.

German two-year bond yields are already below this mark, at -0.27%. Some economists suggest the ECB may be forced to cut the deposit rate even lower, to find enough bonds to meet its QE targets.

The Turkish lira isn’t a pretty sight this morning — it just hit a record low against the US dollar.

Investors are getting jittery about June’s general election, and the sustained pressure which president Recep Tayyip Erdoğan is putting on Turkey’s central bank.

Erdogan has pushed hard for interest rate cuts to stimulate the economy, despite Turkey’s inflation rate rising to 7.6% last month.

His wider goal, if his AK party secures a sizeable victory in the election, is to rewrite Turkey’s constitution to create a full-blown presidential system giving him a tighter grip on power [officially the presidency is a ceremonial role, but Erdogan, a former prime minister, has other ideas, putting him at odds with his successor].

Nour Al-Hammoury, chief market strategist at ADS Securities in Abu Dhabi, is also keen to hear about how Mario Draghi might end his stimulus programme:

No one is expecting the ECB to change their policy, but questions will be asked about the length of the QE programme if European economies continue to grow more quickly than expected.

Investors will want to know whether the ECB has revised its exit strategy.

Mario Draghi could send the euro soaring if he gives any suggestion that his QE programme will be curtailed earlier than planned.

Currently the ECB is committed to buying €60bn of government bonds, and other debt, per month until September 2016. But there is speculation that it could ‘taper’ the plan if it succeeds in driving inflation and growth.

Ilya Spivak of DailyFX explains:

“The Eurozone economy has shown some signs of life in recent months and the central bank chief will almost certainly have to field questions about the possibility that QE will be cut short if growth and inflation mend faster than expected.

Rhetoric opening the door to such a possibility may be interpreted as a relative shift away from the ultra-dovish extreme on the policy outlook spectrum, boosting the Euro.”

Euro versus dollar, 2005-2015
Euro versus dollar over the last decade. Photograph: Thomson Reuters

The euro is currently worth $1.0607, close to its lowest level in 13 years. A weak single currency should help push inflation up, so Draghi is likely to dampen talk of tapering.

Updated

The FTSE 100 has just nudged a new record high of 7102 points.

High street chain Next is leading the way, up 2.3% after JP Morgan raised its price target.

Tony Cross of Trustnet Direct says the Chinese slowdown is the big story in the City this morning:

The big point of interest is the swathe of economic data we saw released from Beijing overnight – headline GDP was as expected at 7%, but a number of other readings fell short of expectations. However, rather than this initiating another rally for local markets, there’s growing concern that Chinese stocks are in bubble territory and as a result many traders have remained sidelined.

The Shanghai stock index has surged by a remarkable 28% this year, as retail investors pile into shares despite signs the economy is weakening. This kind of exuberance doesn’t always ends well….

Chinese investors look at prices of shares and the Shanghai Composite Index at a stock brokerage house in Shanghai today.
Chinese investors look at prices of shares and the Shanghai Composite Index at a stock brokerage house in Shanghai today. Photograph: Johannes Eisele/AFP/Getty Images

Here’s your regular reminder of Greece’s looming debt repayments, via Mike Bird of Business Insider.

Updated

I was going to knock up a list of key points to watch out for from the ECB today…. but Bloomberg’s Alessandro Speciale has already nailed it.

Here’s his list of five key points:

  • Must we really start worrying about tapering? (might the ECB end its QE bond-buying programme earlier than planned, if it succeeds in stimulating the economy
  • Are the March forecasts too optimistic? (minutes of the Bank’s last meeting showed some policymakers doubt the forecast of inflation hitting 1.8% in 2017)
  • Will the ECB find enough assets to buy? (some analysts suspect the pool of eurozone bonds could run dry as the QE programme mops them up)
  • What is the latest on Greece? (will the ECB keep providing emergency funding if the April 24 deadline for a deal is missed?)
  • Is there progress on structural reforms? (Draghi will surely repeat his regular plea to eurozone politicians not to slacken off)

European markets calm after Chinese growth slows

A woman walks at the Bund in front of the financial district of Pudong in Shanghai, in this March 5, 2015 file photo. China’s economy grew 7.0 percent in the first quarter of 2015, as expected but still its slowest rate in six years, reinforcing bets that policymakers will take more steps to bolster growth. REUTERS/Aly Song/Files
Shanghai’s financial district.

European stock markets are inching higher in early trading, as we await the ECB’s press conference this afternoon.

The FTSE 100 is up 10 points, with investors digesting the news overnight that China’s economy grew at its slowest pace in six years.

Chinese GDP expanded by an annual rate of 7% in the January-March quarter, according to government data, broadly in line with forecasts (and official targets).

But the underlying picture is less healthy, as Reuters explains:

Activity indicators, which are regarded as a more accurate picture of the economy, were all weaker in March than expected. Factory output climbed 5.6% in March from a year ago, below forecasts for a 6.9% gain.

Most tellingly, China’s power usage declined 3.7% compared with the previous year, the biggest drop since late 2008, when China’s economy was hit by the global financial crisis.

And that could mean more stimulus measures from Beijing…..

Updated

Greek bond yields spike on default fears

There’s an early selloff in Greek bonds this morning, despite the government claiming it will reach a deal with creditors next week.

Traders have driven the yield (or interest rate) on 10-year Greek bonds over 12%, from 11.9% last night.

Overnight, Bloomberg quoted an “international official” who said the two sides are not moving closer to a deal:

The Greek government’s refusal to proceed with any privatizations, and its pledges to reverse labor-market reform, pension reform and budget savings can’t be accepted by the country’s creditors, the official said, asking not to be named as talks between the two sides are not public.

Brussels insiders have been consistently less optimistic than their Greek counterparts since this crisis began.

The Agenda: It’s ECB Wednesday

The European Central Bank’s headquarters in Frankfurt.
The European Central Bank’s headquarters in Frankfurt. Photograph: Boris Roessler/EPA

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

The European Central Bank is top of the agenda today, as it holds its latest monetary policy committee meeting.

No, don’t adjust your calendars – it’s not Thursday already; the ECB is gathering a day earlier than usual so Mario Draghi can jet off to Washington for the International Monetary Fund’s Spring Meeting.

We’re not expecting any changes to eurozone interest rates (they can hardly go much lower, and it would be madness to raise them), so the real action comes at 1.30pm BST (2.30pm Frankfurt time) at Draghi’s press conference.

The ECB chief will be quizzed about his new QE bond-buying programme, which is giving the eurozone a much needed boost, and the state of the wider economy.

Stan Shamu of IG suspects Draghi will sound upbeat:

The press conference deserves some attention given Mario Draghi could make some positive commentary around signs of improvement in the economy.

Draghi’s views on the Greek crisis will also be worth hearing (as ever), as we tick towards another crunch deadline.

The ECB is understood to have thrown Athens a small lifeline last night, by offering its banks another €800m in emergency funding. That takes the total liquidity available to €74bn; Reuters reckons there’s around €4bn left.

Greece continues to loom over the markets today, amid speculation that it won’t reach a deal with its creditors at the next eurogroup meeting on 24 April.

Last night, deputy foreign minister Euclid Tsakalotos rejected such talk, declaring:

“I am absolutely confident an agreement will be reached on 24 April. Deals are always done five or three or one minute before midnight, it’s not unusual that they should go right to the brink.”

Or occasionally, right over the brink…..

I’ll be tracking all the main events through the day.

Updated

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BoE has slashed its forecast for wage growth this year, warned that geopolitical risks are rising, and said contingency plans for financial upheaval over Scottish independence are ready. Here are key points from the Bank’s Quarterly Inflation Report…

 


Powered by Guardian.co.ukThis article titled “Business Liveblog: Bank of England cuts wage growth forecast, and reveals Scottish contingency plans” was written by Graeme Wearden, for theguardian.com on Wednesday 13th August 2014 12.51 UTC

US retail sales miss forecasts, with no growth in July

Over in America, a disappointing set of retail sales figures have just raises concerns over the strength of its recovery.

Retail sales were flat in July, the worst performance in six months, having only risen by 0.2% in June.

Car sales fell, and demand for electronics and home appliances was weak — not a great sign of consumer confidence.

Core retail sales, which strips out cars, gasoline, food services and building materials, rose by just 0.1% in July, and June’s figure was revised down from 0.6% to 0.5%.

Ahha! On page 29 of the BoE’s Inflation report is a bar chart, showing how most new jobs created in the last six months have been in ‘low skill’ professions.

This may help explain the low growth in average earnings in recent months, if more new hirers are taking lower paid positions.

Hat-tip to Jeremy Warner of the Telegraph for flagging it up:

Labour: Weak wage growth shows economy isn’t fixed

Chris Leslie MP, Labour’s Shadow Chief Secretary to the Treasury, has seized on the news that the Bank of England has slashed its forecast for wage growth this year, to just 1.25%.

He says:

“The inflation report shows why this is no time for complacent and out-of-touch claims from Ministers that the economy is fixed and people are better off.

“While the economy is finally growing again and unemployment is falling, working people are still seeing their living standards squeezed. Pay growth is at a record low and lagging behind inflation and the Bank of England has halved its forecasts for wage growth this year.”

As covered earlier this morning, the latest unemployment data showed earnings growth faltering,

Total wages (including bonuses) have shrunk for the first time since 2009. And stripping out bonuses, average earnings rose by the lowest since records began in 2001, up just 0.6%.

Michael Izza, chief executive of ICAEW (which represents accountants) says the Bank of England’s new, lower wage growth forecasts are a concern:

The numbers of self-employed and part-time workers, together with those on zero-hours contracts are contributing to a flexible labour market that is keeping wages down. In addition, auto-enrolment means that employers are having to fund pensions from somewhere, and wages are suffering as a result.

David Kern, chief economist at the British Chambers of Commerce, says the Bank of England is giving out “mixed messages” on the outlook for interest rates.

The higher growth forecast for 2014 and the lower estimate for the amount of slack in the economy may be seen as a signal to bring forward interest rate rises.

However, Governor Carney’s comments will reassure businesses that the MPC will not rush any increases in rates. He also acknowledged that the rising supply of labour in the economy may provide new sources of economic capacity.

An early UK interest rate rise looks a little less likely, reckons Neil Lovatt, director of financial products at Scottish Friendly.

He says:

“To read between the lines, the message today is that rates are still destined to rise, but when that will be is still up for debate. The fickle nature of the UK economy seems to keep everyone guessing.”

“Any rate rises will be small, but even very small rises in interest rates will have a significant effect on what is still a fragile economy. That said, savers thinking that the ‘good old days’ of high interest rates will return are going to be sorely disappointed and the sooner we adapt to this environment the better.”

Those new BoE forecasts

Berenberg Bank have kindly wrapped up the changes to the Bank of England’s forecasts:

  • Growth up. The BoE raised its growth forecasts to 3.5% in 2014 and 3.0% in 2015, both up by 0.1ppts from their previous forecast. Although they cut their 2016 forecast to 2.6% from 2.8%
  • Inflation up in 2014 but down in 2015 and 2016. The BoE now forecasts 1.9%, 1.7% and 1.8% inflation for 2014, 2015 and 2016, compared to 1.8%, 1.8% and 1.9% in their previous forecast.
  • Unemployment down. To 5.9%, 5.6% and 5.4% in 2014, 2015 and 2016, from 6.3%, 6.0% and 5.9% in the previous forecasts.
  • Pay growth cut in the near term but raised later in the forecast. Specifically, the BoE now forecasts wage growth of 1.25%, 3.25% and 4% in 2014, 2015 and 2016 from 2.5%, 3.5% and 3.75%.
  • Slack now estimated at 1% of GDP, compared to 1-1.5% in the second quarter.

So, good news on growth and unemployment, but bad news on pay.

As Berenberg’s UK economist, Rob Wood, puts it, there’s “something for everyone”.

This fan chart shows the new growth forecasts:

One more key point — the Bank of England flagged up that geopolitical dangers (think Ukraine or the Middle East) are a growing threat to Britain’s recovery.

Carney said:

“Markets have been remarkably resilient to some of these geopolitical events and we’re only beginning to see the first advance signs of the middle through some of our major export markets such as Germany and the movements of some of the confidence indicators.”

(thanks to Reuters for the quote)

Bank of England’s quarterly inflation report – the key points

Quick recap.

1) The Bank of England has slashed its forecasts for wage growth, conceding that the recovery has still not fed through to people’s pockets.

The BoE now expects earnings to rise by just 1.25% this year, down from 2.5% previously. It admitted that there appears to be more slack in the economy than it realised, although it is also being eaten up at a faster rate.

Governor Mark Carney said the UK was experiencing “strong output growth”, but this has not been matched by a material pickup in productivity, or wages.

2) The prospects of an early rise in UK interest rates appear to have faded.

The pound tumbled on the news, shedding one cent against the US dollar to $1.6714 as investors calculated that an early rate rise is less likely than before.

The Bank also hammered home that interest rate rises will be gradual and limited, when the time comes to end Britain’s long period of record-low borrowing costs.

3) “Contingency plans” have been drawn up in case Scotland votes for independence.

Carney said:

”Uncertainty about the currency arrangements could raise financial stability issues….We have contingency plans.”

4) During an occasionally barbed press conference, Carney denied that the Bank was increasingly clueless about the UK economy.

He argued that rising geopolitical risks mean there is naturally more uncertainty about the situation, and denied that his precious forward guidance policy has been a muddle.

5) Europe remains a big worry. The BoE says that:

Eurozone growth continued to disappoint, net lending has been falling and inflation has stayed low.

And deputy governor Minouche Shafik warned that the UK can’t rely on the eurozone to drive its recovery.

Eurozone industrial production hits recovery hopes

Incidentally, we had further confirmation this morning that the eurozone is struggling — a poor set of industrial production numbers.

My colleague Jo Moulds reports:

Factory output in the eurozone contracted unexpectedly in June, further damaging hopes of a strong recovery.

Industrial production dropped 0.3% on the month following a 1.1% drop in May, hit by the ongoing conflicts in the Ukraine, Iraq and Gaza.

Production was flat compared to the same time last year. Economists had been targetting a 0.1% rise on the year. The annual reading was the lowest since August 2013.

Bank of England: we can’t rely on the Eurozone for our recovery

Britain can’t rely on the eurozone economy to drive our recovery, warns the Bank of England’s new deputy governor, Minouche Shafik.

Asked about the impact of the European Central Bank’s new stimulus measures (including hundreds of billions of cheap loans for banks), Shafik urged caution, saying the new impact of this LTRO programme will become clear over time.

The eurozone still faces low growth and low inflation, Shafik says, and we need to see whether the ECB’s measures lead to stronger credit growth and a stronger recovery.

The UK can’t rely on a eurozone recovery to lift our recovery. It would be good if the eurozone could drive us forwards, as it’s such an important export market, that’s not very likely, she concludes.

And that was the end of the press conference. Summary and reaction to follow…

Updated

Asked about the rise in self-employed workers (as covered earlier in the blog) deputy governor Ben Broadbent plays down the suggestion that it’s a risk. This isn’t necessarily a bad thing for productivity, he claims.

The Bank of England is tweeting some of the key points from today’s briefing, including a rather dashing (and slightly menacing?) photo of the governor:

Carney treats a question about his ‘muddled’ forward guidance policy with some distain.

Asa Bennett of the Huffington Post points out that the initial pledge (no rate rise until unemployment has fallen below 7%), has evolved into a broader measure based on slack, wage growth, and the like. Was it a muddle, or a learning process?

Not an unfair question, frankly, if a little mischievous.

But Carney doesn’t look pleased, claiming that Bennett is the muddled one, and that his guidance has been entirely consistent across many inflation reports and MPC minutes.

It’s consistent, it’s boring, but what’s what you get, he smiles.

The audience aren’t smiling, though:

Mark Carney: Bank of England has contingency plans for Scottish independence

Mark Carney has revealed that the Bank of England has drawn up contingency plans in case Scotland votes for independence next month.

Asked for his views on the prospect of ‘sterlingisation’ (that Scotland would use the pound without a formal currency union), Carney reveals that that BoE is preparing for all eventualities, as “uncertainty” over Scotland’s currency arrangements could hit financial stability.

He concedes that

He says:

We have contingency plans…. but it’s never a good idea to talk about them in public apart from to say that you have them.

Carney says that in terms of the Bank’s responsibilities for financial stability, we have “a wide range of tools and plans”. And the BoE isn’t the only body with responsibilities here — some are shared with the Treasury.

Updated

Back on the markets…. Carney says he is “encouraged” that the financial markets are more responsive to the latest data.

James Macintosh of the Financial Times takes up Larry’s point, that the Bank is looking increasingly clueless (on a spectrum between certainty and cluelessness).

Mark Carney replies; if we can agree that the range is between perfect certainty and perfect uncertainty, it’s fair that there is more uncertainty, mainly around the issue of productivity.

Here’s a link to the inflation report (sorry for the delay #hectic)

Ah, the Scotland question — is it time for Alex Salmond to produce a Plan B on an independent Scotland’s currency?

Mark Carney takes a cautious line; the Bank will implement whatever policymakers decide, but it has “noted” the statements from the three main UK political parties that they would not enter a formal currency union with iScotland.

He also points out that the Bank has a responsibility for financial stability across the UK, and will keep discharging those duties until circumstances change.

Updated

Could the Bank of England raise interest rates by as little as 0.125%, or would that be the equivalent of ‘boiling the frog’, asks Szu Ping Chan of the Telegraph.

Carney chuckles at the analogy, but doesn’t suggest such a small rise is on the agenda.

Ed Conway of Sky invites Mark Carney to comment on the financial markets’ expectations for UK interest rate rises (harking back to his Mansion House speech in June, when he suggested they were too dovish).

Carney plays the ball deftly, saying that the overall shape of market expectations are consistent with an adjustment that is both gradual and limited.

Deputy governor Ben Broadbent chips in, saying that it’s a “false dichotomy” to suggest the Bank should either be completely certain about everything, or completely clueless.

Larry Elliott, the Guardian’s economics editor, isn’t impressed by today’s report:

Doesn’t today report show that the Bank “really hasn’t got a clue, the MPC is divided, and that anyone taking out a mortgage or an overdraft would be ill-advised, as anything you say must be taken with a very large pinch of salt?”, Larry politely suggests.

Governor Carney defends his record, suggesting rather archly that Larry should try speaking to a lot of firms around the country*. The firms I speak to insist that business have understood the Bank’s ‘forward guidance’, he adds.

Interest rates will go up as the economy improves, they will go up to a limited extent, ands gradually, Carney says. But there are geopolitical dangers, and we may need to react to them.

* – Like in Rochdale, perhaps, Governor?

How much spare capacity is left to be absorbed in the UK economy?

Carney says there is “tremendous uncertainty” about the degree of slack, among policymakers on the Bank’s monetary policy committee (the overall view is that there’s 1% of capacity to mop up).

That’s not hugely reassuring, given the importance that the Bank now puts on the issue when setting monetary policy.

Updated

Alex Brummer of the Daily Mail wants more details about the Bank’s worries about geopolitics.

Carney replies that there is a “slight downturn skew” to today’s growth forecasts.

Bank of England press conference – Q&A session begins

Onto questions — Ben Chu of the Independent asks why the Bank has lowered its forecasts for productivity growth.

Mark Carney explains that firms have been taking on workers rather than investing in new equipment, as labour is cheaper than capital.

That process should end once cheap labour has been mopped up, meaning workers demand higher wages, and encouraging firms to invest in new equipment that will boost productivity. That process is taking longer than thought.

Pound hits 10-week low against the US dollar

The pound has hit its lowest level against the US dollar since last May, as the markets digest the inflation report (and the jobless data).

Sterling is down by 0.45% today, at $1.6732.

Updated

On interest rates, Mark Carney again reiterated that borrowing costs will rise in a “small, slow” manner, when the appropriate moment comes.

The economy is returning to a semblance of normality, Carney concludes.

Carney says that the amount of spare capacity in the economy has fallen somewhat in the last quarter, but the Bank also reckons there was more slack in the UK than before.

Updated

Bank of England slashes forecast for wage growth.

Over at the Bank of England, governor Mark Carney is unveiling the Quarterly Inflation Report.

He is declaring that the Uk recovery is “on track”…. “Robust growth” has taken output above the pre-crisis peak, and the Bank has revised its near-term forecast for growth up.

But the Bank has also slashed its forecast for wage growth in the UK.

  • It now expects wages to rise by just 1.25% in 2014, down from 2.5% previously.
  • It sees growth picking up to 3.25% in 2015, down from 3.5% before.
  • And in 2016, it reckons wages will rise by 4%, up from 3.75% previously.

Carney is also warning that Britain faces rising geopolitical risks, while the eurozone economy remains weak.

And the persistent strength of sterling is also a worry.

You can watch the press conference live here (right-click to open in a new tab).

Updated

So much for the year of the pay rise

Today’s report have cast a shadow over hopes that 2014 will be “the year of the pay rise.”, says the Resolution Foundation.

Adam Corlett, their economic analyst, comments:

“Once again a strong employment performance is to be welcomed but concerns remain over wages. There is still good reason to expect that real pay will start increasing during 2014 but today’s disappointing performance pushes the wages recovery further down the road.

It’s now almost impossible for average real pay in 2014 as a whole to exceed last year’s unless we see an unprecedented surge in wages during the rest of the year.

The number of people receiving the Jobseekers Allowance could soon fall below the one million mark:

The Press Assocation reports:

The claimant count fell for the 21st month in a row in June, by 33,600 to 1.01 million, according to today’s data from the Office for National Statistics.

If the trend continues, the number of Jobseeker’s Allowance claimants will fall below a million next month for the first time since September 2008.

See the report yourself

Nearly forgot… you can see the full labour market report here (as a pdf).

Iain Duncan Smith: Long-term plan is working

Work and Pensions Secretary Iain Duncan Smith has claimed that his changes to the welfare system have helped heal the labour market.

Here’s his official response to the jobless figures:

“In the past, many people in our society were written off and trapped in unemployment and welfare dependency. But through our welfare reforms, we are helping people to break that cycle and get back into work.

“The Government’s long-term economic plan to build a stronger economy and a fairer society is working – with employment going up, record drops in youth unemployment and hundreds of thousands of people replacing their signing-on book with a wage packet.

“This is transformative, not only for these individuals and their families, but for society as a whole. That is why we have set full employment as one of our key targets – bringing security and hope to families who have lost their jobs and others who never had jobs, we put people at the heart of the plan.

“The best way to help even more people into work is to go on delivering a plan that’s creating growth and jobs.”

However….critics, such as our own Polly Toynbee, are less impressed with Duncan Smith’s performance, given the stuttering start to his universal credit project:

Iain Duncan Smith’s delusional world of welfare reform

Today’s slump in real wages are a blow to hopes that the cost of living squeeze was easing — readers may remember that four months ago there was chatter that the squeeze was over, after pay rises (briefly) burst above inflation.

Could Britain’s falling real wages be partly due to changes in the composition of the labour market, with more people taking lower-paid jobs?

Newsnight’s economics correspondent, Duncan Weldon, reckons so:

Britain’s youth unemployment total has fallen:

The ONS reports that there were 767,000 unemployed people aged from 16 to 24 in April-June 2014; 102,000 fewer than for January to March 2014 and 206,000 fewer than for a year earlier.

These were the largest quarterly and annual falls in youth unemployment since comparable records began in 1992.

Updated

The recovery in the labour market has partly been driven by Britain’s army of self-employed people, which swelled by almost 10% over the last year.

The ONS reports that, since April-June 2013,

  • The number of employees increased by 447,000 to reach 25.77 million.
  • The number of self-employed people increased by 408,000 to reach 4.59 million.

UK unemployment, the key charts:

These two charts show what a bizarre jobs recovery the UK is experencing.

On the one hand, the employment rate is close to its highest level on record, as jobless falls and more people find work (820,000 in the last year).

But yet, real wages are shrinking – with the gap between earnings and inflation widening alarmingly (whether you include volatile bonuses or not)

One reason for caution — pay packets were boosted a year ago, because many bonuses were held back until after the UK top tax rate fell to 45%, in April 2013.

The ONS points out that “some employers who usually paid bonuses in March paid them in April last year.”

But if you strip out bonuses, pay is still up a measly 0.6% year-on-year, the lowest on record.

Updated

This chart from Bloomberg confirms that UK wages have suffered their first fall since the depths of the financial crisis:

Here are the key points on today’s unemployment data, from the ONS:

  • For April to June 2014, there were 30.60 million people in work, 167,000 more than for January to March 2014 and 820,000 more than a year earlier.
  • For April to June 2014, there were 2.08 million unemployed people, 132,000 fewer than for January to March 2014 and 437,000 fewer than a year earlier.
  • For April to June 2014, there were 8.86 million economically inactive people (those out of work but not seeking or available to work) aged from 16 to 64. This was 15,000 more than for January to March 2014 but 130,000 fewer than a year earlier.
  • For April to June 2014, pay including bonuses for employees in Great Britain was 0.2% lower than a year earlier, but pay excluding bonuses was 0.6% higher.

UK unemployment rate drops to 6.4%, but wages fall

Breaking News: Wage growth in the UK has hit its lowest level on record, and actually contracted if bonuses are included.

The Office for National Statistics reports that average earnings, excluding bonuses, rose by a mere 0.6% in the three months to June.

That means pay packets lagged well behind inflation — which hit 1.9% in June.

Including bonuses, total pay packets actually contracted by 0.2% during the quarter, the first fall since 2009.

In brighter news, the overall unemployment rate fell to 6.4% in April-June, which is the lowest since the end of 2008. And the claimant count fell by 33,000, showing that the labour market continues to recover.

But that recovery still isn’t reaching people’s pockets.

More details and reaction to follow

Updated

Nearly time for the UK unemployment data to hit the wires….

Reminder — economists expect another rise in employment, and a drop in the number of people claiming benefits.

But a crucial issue is whether earnings are picking up, after years of low pay rises.

As my colleague Katie Allen reports, many employees have been hit hard:

Angela Chicken was still in hospital with her newborn son when she was made redundant. She had been earning £11 an hour as a graphic designer. Ten years on, the 52-year-old single mother makes around £8 an hour working part-time at her local Sure Start children’s centre in Southampton.

With the cost of living rising faster than her pay, Chicken’s wages have fallen even further in real terms, a pattern likely to be reflected across the country in the latest official labour market figures today. After bills and housing costs, Chicken is left with £108 a week to feed herself and her son, buy clothes and anything else they need. They eat well, she said, but there is little left for treats or outings.

“We don’t really have enough money to go on holiday … I don’t get haircuts, I very rarely buy any clothes,” she said. “What I have had to do is pull myself back over the last 10 years to a position that isn’t as good as it was because I got knocked off my perch.”

More here:

In low-wage economy employers paying well make sound investment

Updated

Most of Europe’s stock markets have risen this morning, despite the worrying economic news from Asia overnight (details).

Germany’s DAX is leading the way, up 77 points or 0.86% at 9147.

Insurance group Swiss Re has cheered investors by posting a 3.5% jump in profits.

In London the FTSE 100 is flat (dragged back by a few companies going ‘ex-dividend’).

The Bank of England may admit this morning that it was too optimistic about wage growth, reckons Bloomberg’s Emma Charlton:

We also have confirmation that the eurozone has slipped worryingly close to deflation last month.

Fresh data this morning showed that Spain’s consumer prices index fell by 0.3% year-on-year in July, the biggest drop in almost five years. Month-on-month they slipped by 0.9%.

In France, prices were up by a meagre 0.5% last month compared with July 2013, and also fell on a monthly basis, down 0.3%.

Japan’s GDP shrinks by 6.8%; Chinese new lending slumps

Global economy watchers have two big pieces of economic data from Asia to digest today.

1) Japan has suffered its biggest contraction since the 2011 tsunami, in a blow to efforts to revitalise its economy.

Japanese GDP fell at an annualised rate of 6.8% between April and June (meaning it shrank by 1.7% during the quarter). The slump is being blamed on the recent hike in Japan’s sales tax, from 5% to 8%, which encouraged firms and households to bring forward their spending to January-March.

The government remains relaxed, saying the economy is recovering. But critics of prime minister Abe’s stimulus plan suggest he may have to postpone plans to raise the sales tax again in December.

2) The news from China isn’t too rosy either. The broadest measure of new credit has dropped to the lowest since the global financial crisis, suggesting many banks are cutting back on new lending.

Economists are concerned, as Chinese banks also face the impact of the property market downturn. Beijing may need to unleash further stimulus measures to avoid growth weakening. fastFT has a round-up of analyst comments.

Updated

Analysts at ING will be combing the inflation report for signs that the Bank of England’s monetary policy committee was divided last week, when it voted to leave interest rates unchanged.

They say:

The Bank will release new forecasts and update its forward guidance which will leave the door open for a rates rise this year. Any hints of dissent at the August meeting will boost the case for a November hike.

Inflation report: what to watch for

The Bank of England inflation report will be scrutinised for hints over interest rate rises, the latest assessment of ‘slack’ in the economy, wage growth (or lack thereof), and the outlook for growth (could possibly be revised up) and inflation (might be revised down).

Mark Carney can also expect a few questions about the UK housing market.

Here’s Angela Monaghan’s preview:

Bank of England inflation report – what to watch for

City analyst Michael Hewson of CMC Markets predicts that today’s data will show another welcome drop in the jobless rate, but an unwelcome drop in wage growth.

He writes:

The latest ILO unemployment numbers for June are expected to see a drop from 6.5% to 6.4%, while jobless claims in July are expected to show another drop of 30k, slightly lower than the 36.3k drop seen in June.

Wages growth continues to be the economic head scratcher and is the Bank of England’s biggest problem when it comes to deciding when to raise rates. If we continue to see the gap with inflation widen out then it becomes increasingly difficult to see how the Bank could even contemplate a rate rise this year.

Expectations are for flat wage growth for the 3 months to June, down from the 0.3% rise in May.

* – The wages figures are skewed by the cut in Britain’s top rate of income tax back in April 2013. That prompted some firms to hold back bonus payments until then, making comparisons trickier.

UK unemployment and Bank of England inflation report in focus

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

We’re tracking two big events in the UK this morning. First, the latest unemployment figures, due at 9.30am BST. They are expected to show another drop in the number of people out of work.

But that labour market recovery has come at a price — low wage growth, and today’s figures are likely to show pay rises lagging behind inflation again.

That would mean real wages are still falling; taking the shine off Britain’s economy recovery.

That data will set the scene for the Bank of England’s latest quarterly Inflation Report, released at 10.30am.

This is the Bank’s latest health-check on the UK economy, including forecasts for growth and inflation.

But the big issue is whether the BoE has moved closer to hiking interest rates — Governor Mark Carney will probably be quizzed on this during the press conference.

The key issue is whether the Bank thinks most of the spare capacity, or ‘slack’, in the economy has now been mopped up. Carney will probably reiterate that the Bank is watching wage growth closely – showing whether employers are having to pay more for talent, and whether households could cope with higher borrowing costs.

As Ian Williams of Peel Hunt explains:

Formal changes to the forecasts are likely to be minimal; the overall assessment of the degree of slack, especially regarding the labour market, will be the focus of investor interest.

Elsewhere, European stock markets are expected to rise modestly, despite ongoing geopolitical tensions [the Russian aid convoy chugging towards the Ukraine border could be the next flashpoint].

And in the euro area, investors are digesting yesterday’s slump in German investor confidence, and fretting about how bad tomorrow’s growth figures for the April-June quarter could be.

I’ll be tracking the key events though the day….

Updated

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