Greece

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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USA 

World’s second largest economy continues to see slowing growth. Chinese GDP growth at six year low, but central bank unlikely to cut rates says economist. Weak European construction output. ECB likely to leave QE unchanged at next meeting…

 

Powered by Guardian.co.ukThis article titled “Markets mixed despite better than expected Chinese GDP – business live” was written by Nick Fletcher, for theguardian.com on Monday 19th October 2015 12.20 UTC

Here’s a full report on Oprah Winfrey’s deal with Weight Watchers:

Meanwhile Weight Watchers shares have jumped around 40% in pre-market trading following the news that Oprah Winfrey will invest and join the board.

That’s a nice return already on her investment.

Morgan Stanley earnings drop more than 42%

More news from the US, and Wall Street bank Morgan Stanley has just reported a 42.4% fall in third quarter earnings to $939m.

It was hit by turbulence in bond, currency and commodity markets following the concerns about the Chinese economy.

Oprah Winfrey takes stake in Weight Watchers

Over in the US, Oprah Winfrey has linked up with Weight Watchers International, buying a 10% stake in the business – with an option for another 5% – and is joining the board.

Winfrey said: “I believe in the program so much I decided to invest in the company and partner in its evolution.”

Oprah.

Oprah. Photograph: Splash News/Corbis

Updated

China could overtake Europe for trade in 20 years – survey

As Chinese president Xi Jinping begins his state visit to the UK, British people expect China to overtake Europe as our most valuable trading partner in 20 years. A poll by YouGov also shows Brits are enthusiastic about closer economic co-operation with the Chinese.

Of those surveyed, 40% said our most valuable trading partner was Europe, with 23% choosing China. But in the next two decades this is expected to change, with 29% predicting China will be our top partner and 22% forecasting it will still be Europe.

UK trade partners.

UK trade partners. Photograph: YouGov/YouGov

Nearly half – 43% – said the UK should be seeking closer trading links with China, with 31% saying it should continue the current level of economic co-operation and only 8% saying it should weaken ties.

Closer trade with China?

Closer trade with China? Photograph: YouGov/YouGov

The majority – 54% – believed China would to continue into the next two decades with either much stronger economic growth than now (22%) or slightly stronger growth than now (32%). Only 14% predicted weaker growth. In addition, 37% expected China’s growth to lift the UK’s, while 26% said it wouldcome at the expense of western economies and 10% said it would not make any difference.

But YouGov added:

The British public seems to have a pragmatic approach to economic relations with China, but there is not much evidence of great affection for the country. Of the 12 biggest economies by GDP excluding the USA and those in Europe, China comes in at 8th in terms of net positive impressions (29% positive, 55% negative).

Ireland moves to reduce need for one and two cent coins

Ireland has moved to cut back on one and two cent coins, with plans to launch a nationwide scheme to allow retailers to round bills to the nearest five cents – with the consent of shoppers. PA reports:

Since the euro was introduced in 2001 Ireland has spent €37m issuing one and two cent coins – minting the coppers at three times the rate of the rest of the eurozone.

But the initiative to reduce the need for coppers is voluntary and consumers will retain the right to pay the exact bill and request their exact change.

The Central Bank insisted rounding would only apply to cash transactions and not to credit card, electronic or cheque payments and it would also only be used on the final cash total of a bill and not to individual goods.

As examples it said final bills ending in one and two cents or six and seven cents would be rounded down to the nearest five and those ending in three and four cents or eight and nine cents would be rounded up.

Other rules on the rounding scheme include that one and two cent coins remain legal tender.

The nationwide initiative starts on October 28.

It follows a successful trial in Wexford in 2013, which showed that 85% of consumers and 100% of retailers in Wexford who expressed an opinion wanted rounding rolled out nationally.

Ireland to cut back on one and two cent coins.

Ireland to cut back on one and two cent coins. Photograph: Chris Bacon/PA

Back to China, and the weak GDP figures show that the stimulus measures introduced by the country’s central bank have had a limited effect, said Professor Kamel Mellahi at Warwick Business School. He said:

If there is one thing to take away from the third quarter figures it is the limited short-term impact of financial and economic stimulus packages on the Chinese economy. The Chinese Government has introduced a number of measures to stimulate economic growth, but so far the needle hasn’t moved much.

Right now it’s very important the Chinese Government is focused on the long-term economic fundamentals and resists the temptation to take unnecessary actions simply to meet short-term economic growth targets.

One cannot, and should not, read too much into the third quarter growth figures. A growth of 6.9% is slightly below official government expectations but they are also marginally better than the 6.8% that most economists have predicted. Because it’s the weakest growth since 2009, the figures are very symbolic but I don’t think they tell us something substantially new about the state of the Chinese economy.

The 0.2% fall in eurozone construction in August compared to July was due to civil enginering declining by 0.3% and building construction by 0.2%, according to statistics office Eurostat.

In the wider European Union, construction output fell by 1.2% month on month.

The year on year decline in the euro area was 6% and in the EU as a whole 5%.

The full report is here:

Production in construction down by 0.2% in euro area

Decline in European construction.

Decline in European construction. Photograph: Eurostat/Eurostat

Weaker European construction output

Eurozone construction output came in weaker in August, new figures have just revealed:

Updated

Chinese GDP does not tell the whole story

More on the Chinese figures and their accuracy or otherwise. Real growth could be closer to 3% to 4% according to Russ Mould, investment director at broker AJ Bell. He said:

Chinese headline GDP growth looks healthy at 6.9% but underlying metrics suggest the real growth rate could be nearer 3% – 4%. If you look at growth in rail cargo traffic, electricity consumption and demand for loans, three metrics favoured by Prime Minister Li, the picture is not so healthy.

Credit growth still looks promising but freight shipments and electricity demand growth look to be sagging, so the so-called Li Keqiang index does raise a few questions.

Today’s GDP figures are encouraging but investors with exposure to China should still expect some bumps and lumps along the way.

Chinese growth slows

Chinese growth slows Photograph: AJ Bell / Thomson Reuters Datastream/AJ Bell / Thomson Reuters Datastream

One of the disadvantages of being a stock market index laden with commodity companies is that the sector often has a disproportionate influence on events.

So it is today. With the weak Chinese data mining companies have come under pressure on concerns about slowing demand from the world’s second largest economy. With the likes of Anglo American and Glencore down between 2% and 4%, this means the FTSE 100 has slipped back into negative territory, while other European markets are still moving higher.

Chris Beauchamp, senior market analyst at IG, said:

Overall growth in China in the third quarter was a respectable 6.9%, while strength in consumer spending will allay some fears about a slowdown. However, the figures will do nothing to dispel the idea that this particular growth bonanza has come to an end.

Big name mining stocks are in the red again this morning, with the sector at its lowest level in nearly two weeks. It looks increasingly like the bounce of early October was a false dawn, and barring some kind of sustained revival in risk appetite, perhaps via fresh monetary stimulus, the sector is heading lower once again.

Mining shares fall

Mining shares fall Photograph: Reuters/Reuters

ECB expected to leave QE unchanged this week

One of the main economic events this week is the latest meeting of the European Cental Bank, due to take place in Malta.

Despite the weakness of the global economy and continued low inflation, the bank is widely expected to keep its quantitive easing programme unchanged but suggest it is ready to act further if necessary. Many economists believe an expansion of the programme – which involves €60bn of asset purchases a month and is due to run until at least September 2016 – could be unveiled in December.

ECB board member Ewald Nowotny said it was too early to discuss changing the programme in one of a couple of interviews over the weekend and today. He said (quote from Reuters):

In my view it’s too early to talk about (adjusting the asset purchases) because we still have almost a year of the programme ahead of us.

Economists at RBC Capital Markets said:

[Nowotny] remarked that Fed policy was not a “decisive aspect” in ECB decision-making, and that one should also not overestimate the impact of a slowdown in China. His more hawkish tone contrasts with the dovish tenor to his remarks from last week, where he acknowledged the clear weakness in domestic inflationary trends.

Nowotny said in a separate interview that the ECB has to show it is in control of inflation but governments may need to loosen fiscal policies to boost growth. He said it was too early to determine long term inflation trends, with low oil and commodity prices at the moment having a strong influence.

The service sector is now the biggest part of the Chinese economy:

One of the shares pushing the German market higher is Deutsche Bank.

It has jumped more than 3% after unveiling plans over the weekend to split its investment bank in two, and removing a number of top executives as part of an overhaul by chief executive John Cryan. Earlier this month the bank announced a record loss of €6bn in the third quarter.

The full story is here:

Updated

European markets are now making a better fist of it after an uncertain start, as traders take a more positive view of the Chinese data (it was disappointing but not as bad as expected).

The FTSE 100 is up 0.2%, Germany’s Dax has added 0.9% and France’s Cac is up 0.8%.

Markets

Markets recover after Chinese data Photograph: Reuters/Reuters

Greek creditors to examine reforms this week

Over in Greece, and the country’s creditors will be reviewing its finances and the progress of reforms to release the next tranche of the €2bn rescue package. The move follows the successful passing of measures through parliament early on Saturday, despite protests against the package.

Finance minister Euclid Tsakalotos and prime minister Alexis Tsipras in parliament on Friday.

Finance minister Euclid Tsakalotos and prime minister Alexis Tsipras in parliament on Friday. Photograph: Panayiotis Tzamaros/NurPhoto/Corbis

Greek newspaper Kathimerini reports:

Representatives of Greece’s lenders – the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund – are expected to return to Athens on Tuesday to start a review that, Greece hopes, will end successfully, paving the way for the launch of talks on debt relief.

The auditors are to scour Greece’s finances too, following the presentation of the draft budget. Finance Minister Euclid Tsakalotos is expected to request flexibility, arguing that the recession estimates in the draft budget – 2.3% of gross domestic product this year and 1.3% next year – are overly pessimistic.

His aim is to eliminate some of the more contentious austerity measures that Greece has suspended, such as plans for a 23% value added tax on private schools and higher taxes on rental income.

As regards pension reform, another controversial issue, the government is keen to convince creditors to allow the inclusion of certain prior actions in a broader overhaul of the pension system, to come later.

As regards the €2bn loan tranche, the Euro Working Group is to convene on Wednesday and may recommend the immediate release of the money or may ask Greece to legislate more actions from the first list of prior actions.

The full report is here.

Protesters at a rally in front of the Greek parliament in Athens as MPs voted for reforms.

Protesters at a rally in front of the Greek parliament in Athens as MPs voted for reforms. Photograph: Louisa Gouliamaki/AFP/Getty Images

Despite the weak Chinese numbers, Tim Condon at ING Bank believes the Chinese central bank is unlikely to cut interest rates any further. He said:

The third quarter GDP data on its own implies a revision in our full-year forecast to 6.9% from 6.8%. However, our previous forecast was based on an acceleration in fourth quarter growth from reduced financial market turbulence and the impact of the stimulus implemented in response to the turbulence. We think the argument still applies and we are revising our full-year forecast to 7.0% (Bloomberg consensus 6.8%).

We see the September economic data, including the money and credit data released last week, as enabling the PBOC to remain on hold. We are revising our forecast of one 25 basis point policy interest cut in the current quarter to no more cuts.

We retain our forecast of one more cut in the reserve ratio requirement [the amount of cash that lenders must hold as reserves] in the current quarter to sterilize the impact of hot money outflows on interbank liquidity.

Shire falls on drug disappointment

One of the biggest UK fallers so far is pharmaceutical group Shire.

Its shares are down 1.8% after the US Food and Drug Administration said late on Friday that it would not approve the company’s new dry eye drug, lifitegrast, based on current data. Chief executive Flemming Ornskov said he was disappointed but still hoped to launch the treatment in 2016. If results from a new phase 3 trial due by the end of the year are positive, Shire planned to refile a submission to the FDA in the first quarter of 2016. Ornskov said:

We are committed to working with FDA to expeditiously provide the evidence required to deliver a new prescription treatment option for the 29 million adults in the US living with the symptoms of this chronic and progressive disease. This is an area of unmet medical need for which there has been no new FDA-approved treatment in over a decade.

European markets make a mixed start

The weak Chinese GDP data has seen European shares get off to an uncertain start for the week.

The FTSE 100 is up 0.15% but Germany’s Dax, France’s Cac and Spain’s Ibex have dipped 0.2%.

In China itself, the Shanghai composite has ended down 0.1% at 3386.7 points.

Oil prices have edged lower on renewed concerns about a lack of demand amid a supply glut, with Brent crude down 0.48% at $50.22 a barrel.

ITV buys television assets of Northern Irish broadcaster UTV

On the corporate front, ITV has agreed to pay £100m for the television business of Northern Irish broadcaster UTV in a long expected deal.

It means the long-gestating consolitation of the independent television network is getting into its final stages, with 13 of the 15 licences now in the hands of ITV. Analysts at Liberum:

We see the deal as a strategic plus, especially if ITV can charge retransmission revenues for the main channel where we expect more newsflow before Christmas. We reiterate ITV as our top pick in media sector.

More suggestions the official Chinese GDP figure may be an overestimation:

The Chinese data comes as the country’s president, Xi Jinping, begins his first official state visit to London.

There are likely to be deals signed and co-operation agreements made, but the visit is controversial. It is likely to be marked by protests against human rights abuses, and concerns that the UK may be jeopardising national security by allowing Chinese state companies to invest in British nuclear power plants.

And it comes amid increased wariness towards China by the US. More here:

In Asia the Shanghai Composite is currently down 0.48%, while the Nikkei is 0.88% lower and the Hang Seng is down 0.54%.

European markets are expected to make an uncertain start after the mixed messages from the Chinese data. Here are the opening forecasts from IG Index:

Chinese economic growth at a six year low

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

China is in the spotlight once more, with news of a slowdown in economic growth in the third quarter. The world’s second largest economy grew by 6.9%, compared to 7% in the previous quarter, and the lowest rate since the 6.2% recorded in 2009 during the global recession.

The figure was slightly better than the 6.7% expected by economists but is still likely to prompt concerns about the outlook. The government has cut interest rates five times since November, and further stimulus measures are expected in the wake of a continued slowdown.

Our full report is here:

Michael Hewson, chief market analyst at CMC Markets, said:

Last week’s China trade balance numbers showed that while exports improved slightly, the sharp drop in imports suggested that internal demand remains constrained by the weakness in commodity prices, as well as lower domestic consumption, raising concerns that the Chinese government could well find it difficult to hit its 7% GDP target for this year.

This morning’s Chinese Q3 GDP was expected to reinforce these concerns, but came in rather conveniently slightly better than markets had been expecting at 6.9%, and above some of the more pessimistic expectations of 6.7%.

While most people accept that China’s GDP numbers should only be taking at face value, due to concerns that it is artificially inflated, this number does seem surprisingly good given how weak some of the more recent individual data components have been.

This is borne out by a much bigger than expected drop in the September industrial production numbers, which came in at 5.7% and well below expectations of 6%, and well down from 6.1% in August, while Chinese retail sales saw an increase of 10.9%, only slightly higher than August’s 10.8%. Fixed asset investment also disappointed, coming in at 10.3%, down from 10.9% in August.

Economist Danny Gabay of Fathom Consulting echoed the scepticism about the Chinese figures. He told the Today programme: “The figures are produced remarkably quickly and rarely revised.” And he believes the real figure is closer to 3%.

Otherwise it appears a relatively quiet day so far, but we’ll be keeping an eye on all the latest developments.

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German factories suffer in August. VW is preparing to scrap non-essential spending as it battles with the emissions scandal. VW boss: “This won’t be painless”. Non-essential VW investment in doubt. Institute of Directors demand early EU vote…

 

Powered by Guardian.co.ukThis article titled “Volkswagen prepares for ‘painful’ changes; German factory orders slide – business live” was written by Graeme Wearden, for theguardian.com on Tuesday 6th October 2015 12.40 UTC

America’s trade gap has hit a five-month high, in another sign that global economic growth may be weakening.

US imports rose by 1.2% in August, fuelled by a 3% increased in purchases from China.

But exports shrank by 2%, to their lowest point since October 2012. That indicates weakness in key markets such as emerging nations and Europe. It could also reflect the impact of the stronger US dollar, which has gained against other currencies.

This drove the US Trade Deficit up to $48.33bn in August, up from $41.81bn a year ago.

The VW scandal hasn’t hurt the UK auto industry yet – car sales hit an all-time high in September, according to new data today.

Petrol-powered cars saw the strongest demand; suggesting some consumers might be more wary about diesel now.

Updated

Volkswagen boss: Painful changes are ahead

A VW employee enters the Volkswagen factory site through Gate 17 in Wolfsburg, Germany, Oct. 6, 2015. For Volkswagen, the cost of its cheating on emissions tests in the U.S. is likely to run into the tens of billions of dollars and prematurely end its long-sought status as the world’s biggest carmaker. (Julian Stratenschulte/dpa via AP)

A VW employee arriving at the Wolfsburg factory today. Photograph: Julian Stratenschulte/AP

Workers at Volkswagen have been warned to expect painful changes as the German carmaker tackles the emissions scandal.

New CEO Matthias Müller told staff that non-essential investments will be delayed or abandoned as it wrestles with the crisis.

Müller told today’s meeting in Wolfsburg that:

“Technical solutions to the problems are within view. However, the business and financial consequences are not yet clear”.

“Therefore we are putting all planned investments under review. What is not urgently needed will be scrapped or delayed”.

“And therefore we will adjust our efficiency programme. I will be very open: this won’t be painless.”

Muller’s warning came after works council boss Bernd Osterloh predicted that bonus payments to workers are now at risk too.

Updated

Our Katie Allen confirms that Britain’s directors do not march on an empty stomach, or an environmentally friendly one….

Update: IoD delegates have now plonked themselves outside in the sun — making a nice photo for visiting tourists.

Updated

Delegates at the Institute of Directors’ conference are tucking into their legendary lunchboxes — a chance to refuel after a morning discussing weighty topics like Europe and migration.

There’s an astonishing amount of packaging on display too — here’s a photo of just one box:

Perhaps Britain’s new tax on plastic bags should be extended? £10 per plastic lid might cover it….

Here’s a couple of photos of Volkswagen staff arriving in Wolfsburg, where they were briefed on the emissions crisis today:

Volkswagen<br />06 Oct 2015, Wolfsburg, Germany --- VW employees enter the Volkswagen factory site through Gate 17 in Wolfsburg, Germany, 06 October 2015. Photo: JULIAN STRATENSCHULTE/dpa --- Image by © Julian Stratenschulte/dpa/Corbis

VW employees enter the Volkswagen factory site through Gate 17 in Wolfsburg, Germany. Photograph: Julian Stratenschulte/dpa/Corbis
Volkswagen<br />06 Oct 2015, Wolfsburg, Germany --- VW employee Birgit Schuettke shows off an IG Metall shirt written with ‘One Team. One Family.’ at the end of the works assembly at Gate 17 at the Volkswagen factory in Wolfsburg, Germany, 06 October 2015. Photo: JULIAN STRATENSCHULTE/dpa --- Image by © Julian Stratenschulte/dpa/Corbis

Volkswagen employee Birgit Schuettke shows off an IG Metall shirt written with ‘One Team. One Family.’ at the end of the works assembly at Gate 17. Photograph: Julian Stratenschulte/dpa/Corbis

Brewing firm SABMiller has turned down an ‘informal offer’ from rival Anheuser-Busch InBev, according to a Bloomberg newsflash.

That’s sent SAB’s shares down 3%, to the bottom of the FTSE 100 (budge up, Glencore!).

This come three weeks after AB INBev, which brews Stella Artois and Budweiser, approached SAB, whose brands including Grolsch and Peroni.

Any deal would be huge, creating a new company worth perhaps $250bn (£160bn).

AB InBev has just a week to make a firm bid or walk away, so it’s not Last Orders in this story, yet.

The works council boss at Volkswagen, Bernd Osterloh, has told staff that the company will have to review all its investments following the emissions crisis.

He also predicted that their pay packets will suffer too.

Osterloh gave the warning at today’s staff meeting in Wolfsburg (see earlier post)

Reuters has the story:

All investments at Volkswagen will be placed under review, the carmaker’s top labour representative said on Tuesday, as the embattled German group grapples with the fallout of its diesel emissions scandal.

“We will need to call into question with great resolve everything that is not economical,” Bernd Osterloh, head of VW’s works council told more than 20,000 workers at a staff gathering in Wolfsburg, Germany.

The scandal is not yet having consequences for jobs at VW, which employs 60,000 people at its main factory, but will impact earnings at the core autos division as well as bonus payments to workers, Osterloh said.

VW: eight million cars sold in EU with cheat software

Volkswagen Wrestles With Diesel Emissions Scandal<br />BERLIN, GERMANY - OCTOBER 06: The Volkswagen logo is visible under coloured lights on the front of a Volkswagen Passat 2.0 turbodiesel passenger car affected by the Volkswagen diesel emissions software scandal on October 6, 2015 in Berlin, Germany.

Volkswagen has revealed that it sold eight million cars with defective emissions testing software across Europe.

It made the admission in a letter to German MPs, dated last Friday.

That’s the bulk of the 11 million cars affected, including almost 500,000 in the US.

We already know that 1.2m cars sold in the UK contained software to beat emission tests, plus 2.8m in Germany.

Updated

Looks like Lord Lawson got the last blow in:

They’re still arguing…

Lawson and Mandelson on Europe

Back at the IoD conference, Nigel Lawson and Peter Mandelson are having a brisk exchange of views over Britain’s membership of the EU (Lord M is pro, Lord L is con).

Katie Allen is impartial, and tweeting the key points from the Albert Hall:

Mining shares are leading the fallers in London this morning.

The 1.8% drop in German factory orders in August isn’t helping the mood.

Investors are concerned that falling demand from emerging markets could increase the raw materials glut, which has already driven commodity price down to multi-year lows.

Biggest fallers on the FTSE 100, October 05 2015

Biggest fallers on the FTSE 100 this morning. Photograph: Thomson Reuters

Updated

The Institute of Directors’ chief is also rebuking UK politicians for playing the migrants card:

Business leaders demand early EU referendum

Over at London’s Royal Albert Hall, business leaders are gathering for the annual Institute of Directors convention.

The 2,000 or so delegates will be hearing first from IoD head Simon Walker. As we reported this morning, Walker will use his speech to warn prime minister David Cameron that waiting till 2017 to hold the referendum on EU membership risks turning it into a confidence vote in the government.

He wants the referendum brought forward to 2016.

Walker will tell the audience that:

“By 2017 this government will have implemented spending cuts that, while necessary, will not be popular. The third year of an election cycle is a difficult time for any administration. There is a real possibility that a 2017 referendum would be a short-term judgment on the government: a chance to whack the political elite.”

Next up, just after 10am is a debate on Britain’s EU membership between former Labour business secretary Lord Mandelson and former chancellor Lord Lawson, who last week announced he will lead a Conservative party campaign to leave the EU.

Also making an appearance, is chief executive of Lloyds Banking Group, Antonio Horta-Osorio, just a day after chancellor George Osborne announced the sale of the taxpayers’ remaining stake in the bailed out bank. The bank boss is talking on a panel under the banner “The future of banking: How to win back trust in a changing world.”

Alongside its trailing of Walker’s EU referendum thoughts, the IoD is also using its convention to adds its thoughts to the never-ending UK productivity puzzle debate.

Policymakers are looking at the puzzle all wrong, according to the business group’s new report, Balancing UK Productivity and Agility. It wants more focus on “agility” to ensure “new ideas and technologies spread throughout the economy as quickly as possible”.

It warns factors that have driven productivity gains in the past, such as large firms realising economies of scale and developing deep specialisations in certain areas, are no longer relevant for the UK and “it would be foolish to try to recreate them”.

IoD chief economist James Sproule explains:

“In pursuing the nirvana of steadily-rising productivity, one has to bear in mind how our economy is changing, how people choose to work, and what future economic success will look like.

We need to ask if too close a focus on productivity numbers without considering wider factors could pose a long-term risk to the economy and prosperity.”

His report echoes scepticism over how much can be gleaned from current productivity data and what many economists see as a narrow focus on mere output per hour measures.

Updated

Back in the UK, house prices dipped by 0.9% last month, according to mortgage lender Halifax.

But that’s little relief to those hoping to get a house (or buy a bigger one. Prices are up around 8.9% year-on-year. On a quarter-on-quarter basis, they’ve been gaining since the start of 2013.

Jonathan Portes

Interesting…. Jonathan Portes, one of the UK’s better known economists, has left his post as director of the National Institute of Economic and Social Research thinktank.

There doesn’t appear to be an official announcement, but NIESR has updated its website to show that Dame Frances Cairncross is now ‘interim director’.

Portes (who’s staying at NIESR as a research fellow until April) is known for using his statistical nous to fact-checking erroneous claims in the papers, especially over the impact of fiscal policy on poorer households.

But he also raised hackles among right wingers for his comments on austerity; they claimed loudly that Portes (once PM Gordon Brown’s chief economist) was too partisan for an independent thinktank:

Those spats culminated in an epic row with historian Niall Ferguson over an article in the Financial Times, which spawned an 16-page adjudication – and no clear winner (although the FT cleared itself of any failings, of course)

Updated

A general view of Wolfsburg, home to German carmaker Volkswagen.

A general view of Wolfsburg, home to German carmaker Volkswagen. Photograph: Carsten Koall/Getty Images

Over in Wolfsburg, thousands of Volkswagen employees are meeting at company HQ to hear from their new CEO.

Matthias Müller will brief staff on the ongoing emissions scandal, as Volkswagen strives to find a solution after selling millions of vehicles containing ‘defeat devices’ to fool emissions tests.

Müller was appointed as CEO less than two weeks ago, after Martin Winterkorn stepped down following the revelations that VW engines contained illicit software to hide how much noxious gases they produced.

It emerged last night that the probe into the VW scandal centres on two top engineers. Ulrich Hackenberg, Audi’s chief engineer, and Wolfgang Hatz, developer of Porsche’s Formula One and Le Mans racing engines, were among the engineers suspended last week, according to the WSJ.

European stock markets are being dragged down by the news that German factory orders slid in August.

The main indices are all in the red in early trading, with Germany’s DAX shedding almost 0.5%.

European stock markets, October 06 2015

Investors may also be anxious about the eurozone, after Brussels warned Spain last night that i’s 2016 budget isn’t good enough, and needs more spending cuts.

Conner Campbell of SpreadEx explains:

A huge miss in German factory orders (complete with a downward revision for last month’s figure) seems to have taken the edge off of the Eurozone, following a Eurogroup meeting yesterday that hinted at more trouble for the currency union going forwards.

European Commissioner Pierre Moscovici warned that Spain will miss its headline targets in 2015 and 2016, providing yet another bearish note from the country that already includes a 21 month low manufacturing figure, a 9 month low services PMI, a separatist victory in Catalonia AND an impending general election in September.

German economy minister: Global demand is ‘less reliable’

Here’s Associated Press’s early take on the decline in German factory orders:

German factory orders dropped for the second consecutive month in August, led by a drop in demand from countries outside the eurozone and lower demand at home.

The Economy Ministry said Tuesday that orders were down 1.8% in seasonally adjusted terms compared with the previous month. That followed a 2.2% drop in July.

Orders from other countries in the euro area were up 2.5%, following a smaller gain in July. However, demand from inside Germany was off 2.6% percent and orders from outside the eurozone dropped 3.7%.

The Economy Ministry noted that demand from countries beyond the euro area appears to be “less reliable at present.”

Germany has Europe’s biggest economy and is one of the world’s biggest exporters.

Updated

This chart confirms that German industrial orders have tailed off in the last couple of months, after a decent start to the year.

German industrial orders

German industrial orders Photograph: Destatis

The red line shows the total (or Insgesamt), while the blue line shows domestic orders (Inland) and the yellow line shows overseas orders (Ausland).

German factories suffer sliding orders

German factory orders fell unexpectedly in August, fuelling fears that Europe’s largest economy is being hit by slowing global growth.

Industrial orders slid by 1.8%, according to the economy ministry, dashing expectations of a 0.5% rise.

The decline was mainly due to falling demand from outside the eurozone, according to the ministry (which also attribute some of the decline to holidays). Orders from non-euro countries slid by 3.7%, while domestic orders shrank by 2.6%.

This is before the Volkswagen emissions scandal struck, hurting confidence in German industry.

July’s industrial orders has been revised down too, from -1.4% to -2.2%; again, driven by a decline in overseas demand.

It’s a worrying sign, suggesting ripples from the emerging market slowdown are now lapping against the eurozone.

Updated

The Agenda: Stimulus hopes keep markets buoyant

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

There’s a relaxed mood in the markets this morning, as investors become increasingly convinced that central banks won’t be able to tighten monetary policy anytime soon.

European stock markets are expected to inch higher after the Dow Jones industrial average jumped by 304 points overnight.

Last Friday’s disappointing US jobs report has probably helped to kick the first American interest rate rise into 2016.

Jasper Lawler of CMC Markets explains:

The weaker than expected US jobs report significantly reduces the chance of a rate hike this year from the Federal Reserve.

Europe and China could also be on the verge of adding stimulus with deflation and low growth possibly enough motivation for the respective central banks to intervene before the end of 2015.

Over in Japan, the Nikkei has closed 1% higher, as traders in Tokyo anticipate more stimulus from their own central bank.

Also coming up….

The bosses of Britain’s top companies will be gathering at the Institute of Director’s annual bash in London. They’ll be discussing Europe and the refugee crisis (among other topics).

Six former City brokers are going on trial over allegation that they rigged the benchmark Libor interest rate.

And in the City, we’ll be looking at results from budget airline easyJet and pastry purveyor Greggs…..

Updated

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Powered by Guardian.co.ukThis article titled “Growth fears as UK and eurozone service sectors slow – live updates” was written by Graeme Wearden (until 2pm BST) and Nick Fletcher (now), for theguardian.com on Monday 5th October 2015 14.21 UTC

Meanwhile here’s the arrivals at the Eurogroup meeting to discuss the latest Greek bailout programme:

And here’s an extract from the roundtable discussion:

Dennis de Jong, managing director at broker UFX.com said:

With inconclusive economic data in recent weeks, the Fed is now split on the timing of an interest rate rise. That situation is unlikely to change in response to today’s non-manufacturing figures, which aren’t strong enough to sway Janet Yellen and Co towards a clear decision.

A decline on last month puts a dampener on what is actually quite a robust set of numbers. It’s not all doom and gloom, however, as Yellen’s reluctance to act may be seen as a positive move elsewhere.

Wall Street, which has been quiet as it awaits consistency among the financial uncertainty, may now be prompted into increased activity before the end of 2016.

Confirmation that the US services sector saw slowing growth in September comes from the Institute for Supply Management.

The ISM services index fell to 56.9 from 59 in August, and lower than analysts’ expectations of a reading of 57.5p. Both new orders and business activity slowed.

But the employment component showed an increase:

Updated

And shortly we will get the ISM indices…

US service sector growth slows

America’s service sector is growing by less than expected, according to the first of two rival surveys.

Markit’s final purchasing managers index for the sector came in at 55.1 for September, down from an early reading of 55.6, which was also what analysts had been expecting for the final figure. That compares to 56.1 in August.

Markit service sector PMI
Market service sector PMI Photograph: Markit/Markit

Markit’s final composite reading is 55 compared to 55.7 in August. Chris Williamson, Chief Economist at Markit said:

The US economic growth slowed in the third quarter according the PMI surveys, down to around 2.2%. But this largely represents a payback after growth rebounded in the second quarter, suggesting that the economy is settling down to a moderate rate of growth in line with its long term average.

Hiring also remains relatively robust, albeit down from earlier in the year, again suggesting that the economy has shifted down a gear but remains in good health.

“At the moment it remains unclear as to whether growth will weaken further as wemove into the fourth quarter. However, with inflationary pressures waning, policymakers may have some breathing space to gauge the extent of any slowdown. Lower fuel costs helped push average prices charged for goods and services dropping at steepest rate for nearly five years.

Markit composite index
Markit composite index Photograph: Markit/Markit

Updated

Wall Street opens higher

In tandem with other global markets, Wall Street is moving ahead strongly.

The Dow Jones Industrial Average is up 164 points or 12%, while the S&P 500 has opened 0.5% higher.

Markets are being driven by hopes that central banks will not pull the plug on financial support in the immediate future. Friday’s poor US jobs numbers have convinced investors that the prospect of a Federal Reserve rate rise this year is looking less and less likely.

Another factor supporting the market is a rising oil price, which is boosting energy shares. Brent crude is up 2% after reports that Russia wants to meet other producers to discuss the market, where oversupply and falling demand have sent oil prices sharply lower. That could, believe some, presage production cuts. Meanwhile Friday also saw a fall in the number of rigs drilling for oil in the US.

China can manage its economic slowdown but needs to communicate policy more effectively, says the International Monetary Fund.

Ahead of its annual meeting the IMF said China’s exchange rate was in line with medium term fundamentals after the recent devaluations, Reuters reports.

Global corporations are avoiding tax to the tune of up to $240bn a year, according to a new report from the OECD, which has also announced reform measures to tackle the problem. Simon Bowers reports:

An unprecedented international collaboration on tax reform, led by the G20 nations and targeting many of the world’s largest global corporations, will wipe out much of the tax avoidance industry, it was claimed today.

The two-year reform programme, under the auspices of the OECD, was prompted by a spate of revelations in recent years about the tax affairs of multinationals including Starbucks, Google and Amazon.

Alongside the final batch of reforms, published today, the OECD released what it called “extremely conservative” estimates suggesting large global businesses were shifting profits and eroding the tax receipts of economies around the world at a cost of $100bn (£65bn) to $240bn a year — equivalent to between 4% and 10% of global corporation tax revenues.

In the face of increasingly aggressive tax avoidance, countries have been forced to rely more heavily on taxing income less able to be shifted abroad — such as workers’ pay and VAT.

“[The reforms will help] move away from an era when tax planning had become part of core business models,” said Pascal Saint-Amans, who has led the two-year OECD reform programme, backed by 60 countries representing more than 90% of the world’s economy. “Value creation [should be] the core business of industry. Tax planning should just be some supportive, marginal activity… The tax world will not be the same.”

Read more here:

Lunchtime summary: Growth fears after weak services data

A quick recap:

Britain’s recovery slowed last month, according to the latest survey of its dominant service sector.

Companies reported that activity grew at the slowest pace in two and a half years. Economists blame fears over China’s economy, and predict that GDP could grow by just 0.4% in the last three month of this year.

Expansion across the eurozone also eased back in September, data firm Markit reports. Firms in Germany, Spain and Ireland all said growth was slower, although France’s bucked the trend.

European stock markets are up. Shares are being driven by hopes that central banks will continue to stimulate the global economy, and resist early interest rate rises.

The FTSE 100 is now at its highest point of the day, up 132 points at 6262. The French CAC has soared by over 3%.

Two dozen Pacific-Rim countries are celebrating the creation of a major new trade partnership.

Workers have stormed the boardroom of Air France today, as the airline announced plans to cut 2,900 jobs. Two senior executives were forced to flee with ripped shirts.

TOPSHOTS Director of Air France in Orly Pierre Plissonnier, nearly shirtless, tries to cross a fence, helped by security and police officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Air France director Pierre Plissonnier, nearly shirtless, tries to cross a fence after several hundred of employees invaded the firm’s offices today. Photograph: Kenzo Tribouillard/AFP/Getty Images

The Greek government is preparing its new budget. Alexis Tsipras’s government must explain how it will implement tough tax rises and spending cuts demanded by lenders.

Finance minister Euclid Tsakalotos is meeting fellow eurozone finance ministers in Brussels today. They’ll discuss the various prior actions Greece must deliver to receive its next aid tranche, and to open talks on debt relief.

And in the UK, chancellor George Osborne has confirmed that he’s selling off shares in Lloyds Banking Group to the public at a chunky discount.

Updated

European commissioner Pierre Moscovici tweets from Brussels:

The Trans-Pacific Partnership deal is “a huge strategic and political win for US President Barack Obama and Japan’s Shinzo Abe,” says the FT’s Shawn Donnan.

He writes:

It represents the economic backbone of the Obama administration’s strategic “pivot” to Asia and a response to the rise of the US’s chief rival, China, and its growing regional and global influence.

It is also a key component of the “third arrow” of economic reforms that Mr Abe has been pursuing in Japan since taking office in 2012.

Here’s the FT’s take (£): Negotiators strike Pacific trade deal

Historic TPP trade deal agreed

Over in Atlanta, a dozen Pacific Rim nations have reached the most sweeping trade liberalization pact in a generation.

After late hitches over drugs monopolies, and New Zealand’s dairy market, the Trans-Pacific Partnership (TPP) has been hammered out. It is meant to lower trader barriers in the region, and set common standards in around 40% of the world economy.

My colleague Martin Farrer explains:

The TPP aims to lower trade tariffs between the signatory nations and bring in wide-ranging new regulations for investment, agriculture, intellectual property, labour and the environment. This in turn could mean cheaper food, medicine and everyday household goods for millions of people. It will also help the 12 countries to counter China’s rising economic influence in the region.

More here:

Updated

The Brussels press pack are assembling for today’s meeting of finance ministers, where Greece’s new bailout package will be discussed.

But it’s not as exciting as the eurogroup meetings we enjoyed (or was it endured?) this summer, so there’s more space outside:

Updated

Greeks brace for austerity budget

Prime Minister of Greece Alexis Tsipras in parliament last night.
Prime Minister of Greece Alexis Tsipras in parliament last night. Photograph: George Panagakis/Pacific Pres/BI/.

The Greek parliament is back in full force today with prime minister Alexis Tsipras outlining his newly elected government’s policy programme as the draft 2015 budget is also submitted.

Our correspondent Helena Smith reports from Athens

After a week of diplomacy abroad, the Greek prime minister must now face the music of applying what will be the most onerous financial rescue programme to date. It will not be easy.

From months of often fraught negotiations just getting to the point of reaching agreement over the bailout deal, the debate has shifted from the abstract to the real with Greeks now being bombarded with news of what the latest accord will entail. The draft budget is expected to outline an array of hard hitting levies, including the much-hated property tax known as Enfia, as well as pension cuts and structural reforms – the price of being bailed out for a third time to the tune of €86bn.

The measures will throw the debt-stricken economy into recession with the budget forecasting a return to growth in 2017 (for many a conservative estimate).

The Greek finance minister, Euclid Tsakalotos, who is on his way to Luxembourg, will outline the savings and government priorities when he meets euro area counterparts attending tonight’s Euro Group.

One insider tells us:

“He will present the prior actions lenders are demanding at the meeting,”

“These are the first package of measures we have agreed to apply [in exchange] for loans.”

The measures, which are expected to include deep cuts to monthly pensions over €1,000, have to be implemented in the coming weeks – before more than 60 others are enforced in November for international creditors to begin a review of the Greek economy.

All of which is going to require nifty explanation when Tsipras (whose radical left Syriza party was first catapulted into office vowing to “cancel” such measures) takes to the podium to present the policies of his second term in office at 7:30pm this evening.

Unions and leftists are already girding for battle. “We are organising the response of popular workers to the new wave of attack,” the communist Pame announced this morning, calling on Greeks to participate in a mass rally on October 22 and a strike on November 12.

Updated

Air France-KLM has criticised those responsible for today’s violence, and insisted that most staff were protesting peacefully before a group burst into its boardroom.

A spokesman said:

“This violence was carried out by particularly violent, isolated individuals, whereas the protest by striking personnel was taking place calmly up until then.”

Air France assistant director long-haul flight, Pierre Plissonnier, left, is protected by security guards as he flees the Air France headquarters at Roissy Airport, north of Paris, France, after scuffles with union activists. Monday, Oct. 5, 2015. Union activists protesting proposed layoffs at Air France stormed the headquarters during a meeting about the job cuts, zeroing in on two managers who had their shirts torn from their bodies, scaled a fence and fled under police protection. (AP Photo/Jacques Brinon)
Air France assistant director long-haul flight, Pierre Plissonnier, left, is protected by security guards as he flees the Air France headquarters. Photograph: Jacques Brinon/AP

Associated Press has more details on the Air France protests this morning:

Union activists protesting proposed layoffs at Air France stormed the headquarters during a meeting, zeroing in on two managers who had their shirts torn from their bodies, scaled a fence and fled under police protection.

An Associated Press photographer saw about a hundred activists rush the building. The managers who fled included the head of human resources.

Alexandre de Juniac, the CEO of Air France-KLM, announced Friday the company would have to cut jobs after failing to reach an agreement with pilots. French media reported a proposal to slash 2,900 jobs.

De Juniac said the company was being squeezed by low-cost airlines in Europe and Gulf carriers for long-haul flights. Monday’s meeting was intended to detail the cuts, which he told Europe 1 radio would be “significant.”

Employees of Air France shout slogans inside the company headquarters in Roissy-en-France, on October 5, 2015, interrupting the launch of the plan at a central committee meeting.
Employees of Air France shout slogans inside the company headquarters in Roissy-en-France, on October 5, 2015, interrupting the launch of the plan at a central committee meeting. Photograph: Kenzo Tribouillard/AFP/Getty Images

Fortunately, Xavier Broseta and Pierre Plissonnier did manage to escape the demonstrators, sans chemises.

Air France director of Human Ressources, Xavier Broseta, right, and Air France assistant director long-haul flight, Pierre Plissonnier, center, are protected by a police officer as they flee Air France headquarters at Roissy Airport, north of Paris, after scuffles with union activist, Monday, Oct. 5, 2015. Union activists protesting proposed layoffs at Air France stormed the headquarters during a meeting about the job cuts, zeroing in on two managers who had their shirts torn from their bodies, scaled a fence and fled under police protection. (AP Photo/Jacques Brinon)

Air France execs lose their shirts as workers storm HQ

Over in Paris, two Air France executives appear to have had their shirts ripped from their backs after the airline announced plans to cut up to 2,900 jobs.

According to local media reports, several hundred workers stormed the airline’s headquarters this morning, after it announced the cutbacks.

Photos from the scene show Pierre Plissonnier, Air France’s assistant director for long-haul flights, leaving the scene in a disheveled state.

Director of Air France in Orly Pierre Plissonnier, nearly shirtless, runs away from the demonstrators, helped by security officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Pierre Plissonnier, the director of Air France in Orly, running away from the demonstrators, helped by security officers, after several hundred of employees invaded the offices of Air France. Photograph: Kenzo Tribouillard/AFP/Getty Images
Director of Air France in Orly Pierre Plissonnier, nearly shirtless, walks away from the crowd, helped by security and police officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Plissonnier walking away from the crowd. Photograph: Kenzo Tribouillard/AFP/Getty Images

Human resources boss Xavier Broseta is pictured trying to climb a fence to flee.

Xavier Broseta, Executive Vice President for Human Resources and Labour Relations at Air France, is evacuated by security after employees interrupted a meeting at the Air France headquarters building in Roissy<br />A shirtless Xavier Broseta (C), Executive Vice President for Human Resources and Labour Relations at Air France, is evacuated by security after employees interrupted a meeting with representatives staff at the Air France headquarters building at the Charles de Gaulle International Airport in Roissy, near Paris, France, October 5, 2015.” width=”1000″ height=”662″ class=”gu-image” /><br />
<figcaption> <span class=Xavier Broseta, Executive Vice President for Human Resources and Labour Relations at Air France, is evacuated by security. Photograph: Jacky Naegelen/Reuters
Human Resources Assistant Manager of Air France Xavier Broseta, shirtless, tries to cross a fence, helped by security and police officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Broseta then tried to cross a fence, helped by security and police officers. Photograph: Kenzo Tribouillard/AFP/Getty Images

It’s not clear exactly what happened. But the AFP newswire reports that CEO Frederic Gagey “made a hasty exit, according to two members of the committee”, after workers broke into the meeting.

Unions have also called a strike to protest at the job cuts, which were announced after pilots turned down a proposal to work 100 more hours per year for the same salary.

It could see 300 pilots, 700 air hostesses and stewards, and 1,900 ground staff laid off by 2017.

Le Figaro reports that Air France is planning to file a complaint of “aggravated violence”. More here.

Updated

European stock markets aren’t panicking at today’s service sector slowdown.

Instead, they continue to rally –– catching up with Wall Street’s late jump on Friday night.

France’s CAC index is the best performer, following the news that its services firms actually caught up (a little) with the rest of the eurozone last month.
But other markets are also gaining ground, with the FTSE 100 jumping over around 2%, despite warnings that the economy may be slowing down.

European stock markets, 11am October 05 2015
European stock markets, 11am today. Photograph: Thomson Reuters

So what’s going on?

Well, investors do seem confident that the US Federal Reserve won’t raise rates this month, and probably not before 2016.

That’s bullish for shares, and also weakens the US dollar — which has a positive effect on commodity prices and oil. And that’s why mining shares are up today, while Royal Dutch Shell has gained 4%.

Jasper Lawler of CMC says:

UK and European markets were higher across the board on Monday, playing catch-up from the biggest turnaround on the Dow Jones Industrial Average in four years on Friday.

The French CAC was higher by over 2.5% supported by positive French service sector data. Missed expectations for Germany’s service sector took the edge off gains on the DAX, which was still higher by over 1.5%.

A new survey of Britain’s top finance chiefs confirms that the UK economy may be weakening.

Our Katie Allen reports this morning:

China’s downturn, the prospect of rising interest rates and uncertainty about the global economic outlook have knocked confidence among bosses of the UK’s biggest companies, according to a survey.

Chief financial officers (CFOs) polled by the consultancy Deloitte reported a sharp rise in uncertainty facing their businesses and have scaled back their expectations for investment and hiring over the coming year.

Almost three-quarters of the 122 CFOs, or 73%, said the level of financial and economic uncertainty was either above normal, high or very high. That was up from 55% in the second quarter of this year and is the highest proportion for more than two years.

More here:

Deloitte survey of CFOs
Uncertainty is rising…. Photograph: Deloitte/Guardian

Economist Howard Archer, of IHS Global Insight, fears UK economic growth could stumble in the last quarter of 2015:

UK "recovery at risk" from Chinese chill

The slowdown across Britain’s service sector is putting the recovery at risk, says David Noble CEO at the Chartered Institute of Procurement & Supply.

He blames the knock-on effect of China, which sparked global market panic in August after Beijing devalued the yuan.

Noble says:

The further softening of growth in the services sector must now be causing some concern for the sustainability of the recent recovery in the UK economy….

It appears that when China sneezes, the world catches a cold as some companies cited the region as a cause for worldwide concern.

Some instant reaction to the slowdown in Britain’s services sector:

UK service sector growth hits 2.5 year low

Britain’s service sector suffered a sharp slowdown last month, new data shows, raising fears that the economy may be faltering.

Data firm Markit reports that activity across the sector grew at its slowest rate since April 2013 in September. Its service PMI fell to 53.3, from August’s 55.6 (where 50=stagnation).

Firms reported that new business slowed, with some clients unwilling to place new contracts in the current “global economic uncertainty”.

More encouragingly, firms did keep hiring staff, but business investment is also under pressure.

And with Germany, Ireland and Spain’s service sectors also slowing (see last post), signs are building that the European economy may be faltering.

UK service PMI, September 2015
The blue line = today’s PMI survey Photograph: Markit

Markit’s Chris Williamson fears that “the economy sank further into a soft patch at the end of the third quarter”, and is only growing at 0.3% per quarter.

Services makes up around three-quarter of the UK economy, so any slowdown has serious consequences.

Williamson says:

“Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular.

There are also signs that consumers have become more cautious and are pulling back on their leisure spending, such as on restaurants and hotels.”

Updated

Eurozone service slows, putting more pressure on ECB

Growth across Europe’s private sector is slowing, according to the latest healthcheck of the region’s service sector.

Markit’s Eurozone PMI, which measures activity at thousands of companies, dipped to a four-month low of 53.6 in September, down from 54.3 in August. That shows the sector kept growing, but at a slower rate.

Growth in the service sector hit a seven-month low, with the Services PMI dropping to 53.7 from 54.0.

Growth in Spain hit its lowest level since January, although France – usually a laggard in these surveys – clawed back some ground:

Here’s the detail:

Eurozone PMIs, September 2015
Eurozone PMIs, September 2015 Photograph: Markit

Chris Williamson, chief economist at Markit, reckons that the slowdown could raise the chances of fresh stimulus measures from the European Central Bank:

“The final PMI reading came in slightly below the earlier flash estimate but still leaves a signal of the eurozone economy having expanded 0.4% in the third quarter.

“However, the failure of the economy to pick up speed over the summer will be a disappointment to the ECB, especially with job creation sliding to an eight-month low.

“The weakening of the pace of expansion in September raises the risk of growth fading further in the fourth quarter, which would in turn boost the likelihood of the ECB opening the QE taps further.

Mining stocks are packing the top of the FTSE 100 leaderboard:

Top risers on the FTSE 100
Top risers on the FTSE 100 this morning. Photograph: Thomson Reuters

That shows optimism that central banks will do more to stimulate the global economy, now that the US labor market appears to be weakening.

Tony Cross of Trustnet Direct explains:

Consensus is building that the Federal Reserve won’t now be in a position to hike interest rates before the end of the year. This gives emerging markets a little more breathing room and it’s the mining stocks that are forging their way to the top of the table.

Updated

European markets jump on stimulus hopes

Shares are rallying across Europe this morning, fuelled by hopes that central banks keep topping up the punchbowl for longer.

France’s CAC index is the biggest riser, up nearly 2%, and Germany’s DAX gaining 1.3%.

The FTSE 100 is close behind, up almost 100 points, as traders shake off their disappointment over Saturday night’s rugby.

European stock markets, October 05 2015

Investors have had a weekend to ponder Friday’s disappointing US jobs report, and concluded that a weak labor market means the Federal Reserve will resist raising interest rates in 2015.

And that’s encouraging them back into the market.

Kim Young-jun, a stock analyst at SK Securities in Seoul, explains (via Reuters)

“Risk aversion weakened today as the weak U.S. employment data supported expectations that the Fed would put off the timing of rate hikes.”

Glencore’s shares have rallied by 8% in early trading in London, fuelled by that takeover talk and speculation that it could sell its agricultural business.

They’re up 7.8p at 108.6p, having briefly jumped 20% to 114.45p. That’s quite a recovery, given they slumped to 66p last week.

However, it’s a weaker rally than in Asia, though, where they spiked 70% at one stage today.

Glencore has just issued a statement to the City, saying it is:

…the Board confirms that it is not aware of any reasons for these price and volume movements or of any information which must be announced to avoid a false market in the Company’s securities or of any inside information that needs to be disclosed…

That could dampen some of the chatter that a big deal is close…..

Updated

Treasury to sell £2bn Lloyds stake to public

Lloyds Bank shares to go on sale to the British public<br />epa04963989 (FILE) A file photograph showing a sign outside a Lloyds bank branch in London, Britain, 23 October 2014. According to news reports, on 05 October 2015 the British Chancellor of the Exchquer, Geroge Osbourne, has announce that 2 billion GBP or 2.7 billion euro worth of Lloyds Bank shares to go on sale to the British public. EPA/WILL OLIVER” width=”1000″ height=”631″ class=”gu-image” /> </figure>
<p><strong>Seven long years after bailing out Lloyds Banking Group, the UK government is finally selling some of its remaining stake to the public.</strong></p>
<p><a href=The Treasury has announced plans to sell £2bn of Lloyds shares in a retail offering. Anyone taking part will get a 5% discount, plus a bonus shares for every 10 they hold for at least a year.

The value of the bonus share incentive will be capped at £200 per investor. People applying for investments of less than £1,000 will be prioritised.

The move brings a bit of Thatcherite glamour (?!) to the Conservative Party conference, where delegates fondly remember the “Tell Sid” privatisation fetish drive of the 1980s.

But as the Economist’s Stan Pignal points out, discounted share sales benefit some rather more than others….

Updated

Reports that Glencore is in talks to sell its entire agriculture business are helping to drive its shares higher.

That would provide fresh resources to tackle its $30bn debt mountain, and to handle a further drop in commodity prices.

Glencore shares surge on sale talk

Something is going on at Glencore, the troubled commodity trading and mining company.

Shares in Glencore leapt by over 70% in Hong Kong overnight, and are currently up over 30%.

This comes after the Daily Telegraph reported that Ivan Glencore is prepared to listen to takeover offers for the company he has created, following the recent slump in its value.

Their commodity editor Andrew Critchlow wrote:

Glencore would listen to offers for a takeover of the entire company but its management does not believe there are any buyers willing to pay a fair value for the business in the current market.

That report appears to have sparked a wave of buying into Glencore, whose shares have lost around three-quarters of their value in the last year.

Glencore itself, though, says it’s “unaware” of the reason behind the surge, according to Bloomberg’s Jonathan Ferro.

American Apparel files for bankrupcy

Big news breaking in the retail sector — American Apparel, supplier of ethical clothing and god-awful adverts, has filed for bankruptcy protection.

The move follows a steady slide in sales, and ever-more disturbing antics by ex-chairman Dov Charney, who was forced out a year ago.

The Agenda: US jobs report lingers

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

A new week begins with investors digesting still last Friday’s disappointing US jobs data.

September’s Non-Farm Payroll was a bit of a shocker, with just 142,000 new jobs created, and wages unchanged month-on-month. That suggests America’s economy is being hit by the slowdown in emerging markets such as China, raising fears that a new downturn is looming.

And that has actually pushed shares higher in Asia this morning on speculation that monetary policy is going to stay loose for even longer.

Japan’s Nikkei gained 1.6%, while the Indian market is up around 1.5%:

We’ll get a fresh insight into the health of the global economy today, when new surveys of the world service sector are released.

Those Purchasing Managers Surveys will show if growth speeded up or slowed down; we get the eurozone report at 9am BST and the UK at 9.30am BST.

And over in Greece, Alexis Tsipras’s new government will be presenting its new budget, ahead of a vote on Wednesday.

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

Updated

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

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How well did Syriza and Alexis Tsipras do?

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

What next for Syriza and Alexis Tsipras?

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

Does this change the bailout deal with the EU?

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

Could the IMF decline to join the bailout?

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

Will Greece need another bailout anyway?

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

What do the markets think?

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

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

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

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

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

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

Updated

Closing summary: Last chance for Greek deal looms

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

So, a final recap.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Video: George Osborne in parliament

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

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

Updated

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

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

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

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

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

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

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

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

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

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

Here’s the full story.

The logo of the International Monetary Fund.

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

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

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

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

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

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

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

Guardian Letters: Athens has reinvented our vision of democracy

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

Pier Carlo Padoan told Canale 5 television.

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

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

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

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

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

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

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

Updated

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

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

Greek banks to stay closed Tuesday and Wednesday

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

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

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

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

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

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

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

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

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

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

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

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

Updated

The Euro symbol in Willy Brandt Square, Frankfurt, on the first day of its restoration. The euro symbol will go through a four days restoration, starting on the day after Greece have voted ‘No’ to the EU, the ECB and the IMF policies, generating uncertainties on the monetary sign future. --- Image by © Horacio Villalobos/Corbis
The Euro symbol in Willy Brandt Square, Frankfurt, on the first day of its four-day restoration. Photograph: Horacio Villalobos/Corbis
Euro symbol in Willy Brandt Square, on the first day of its restoration.<br />06 Jul 2015, Frankfurt, Germany — Workers toil on the euro symbol in Willy Brandt Square, Frankfurt, Germany, 06 July 2015, during the first day of its restoration. The euro symbol will go through a four days restoration, starting on the day after Greece have voted ‘No’ to the EU, the ECB and the IMF policies, generating uncertainties on the monetary sign future. — Image by © Horacio Villalobos/Corbis” width=”1000″ height=”667″ class=”gu-image” /> </figure>
</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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The latest US growth figures show America has recovered from its winter contraction. US GDP grew by annualized rate of 4.0% in Q2, while the Q1 reading was revised higher to show a smaller contraction by 2.1%. More details here…

 


Powered by Guardian.co.ukThis article titled “US economy beats forecasts with 4.0% growth – business live” was written by Graeme Wearden, for theguardian.com on Wednesday 30th July 2014 13.23 UTC

Ben Brettell, Hargreaves Lansdown Senior Economist, is encouraged that the US economy has bounced back faster than expected.

“The rebound was driven by lower energy prices, strength in the manufacturing sector and increased demand for exports. A healthier labour market is boosting consumer confidence, which is at a near-seven-year high.

However, the IMF and the Federal Reserve disagree on prospects for the year as a whole, with the IMF forecasting a disappointing 1.7% and the Fed a more optimistic 2.1%-2.3%.

Paul Ashworth, chief US economist at Capital Economics, reckons the Fed will raise US interest rates in eight months time.

This GDP report supports our view that an improving economy will persuade the Fed to begin raising rates in March next year.

US GDP reaction starts here

Nancy Curtin, CIO at Close Brothers Asset Management, says that growth in the US has stepped up a level in recent months.

“The US economy has a spring back in its step after the disastrous impact of arctic conditions in the first quarter. Since the weather abated, data has been broadly positive.

Strong figures for the service sector combined with resurgent consumer confidence and improving manufacturing all hinted at a revival in fortunes, and the second quarter reading has delivered in spades.”

US dollar rises after GDP report

The US dollar has rallied on the back of the US GDP report, gaining 0.2% against both the pound and the euro.

Traders are calculating that the growth report means the Federal Reserve is likely to raise interest rates a little earlier than before.

Dovish Fed members, though, are likely to remain focused on the US labour market. As Janet Yellen pointed out to senators this month, wage growth remains weak.

A stronger dollar is also good news for the eurozone:

Reminder: Fed policymakers are meeting today, and are expected to trim their stimulus programme by $10bn per month, from $35bn to $25bn.

Neil King, the WSJ’s global economics editor, isn’t getting carried away with excitement either:

Don’t forget, GDP estimates can go down as well as up.

As our US business and economics editor Heidi Moore tweets, a growth rate of 4.0% per year may prove too good to be true:

Updated

US GDP: some detail

So, what drove the US recovery in the second quarter?

Consumers played a big role. The Commerce Department says consumer spending grew by 2.5%, with Americans buying more long-lasting manufactured goods. Spending on services also rose.

But some economists are worried that the growth figures are flattered because companies expanded their inventories – stocking up on goods and materials for the future.

Inventory building provided around a third of the total growth recorded in Q2.

Business investment, government spending and investment in home building all picked up too.

And exports jumped by 9.5%, having slumped by 9.2% in the first quarter — as ice and snow hampered US companies.

The Commerce Department has also revised last year’s GDP figures — showing that America grew more rapidly than previously estimated in 2013.

The revisions to Q1 GDP means that the US economy has grown by 0.9% so far this year.

More good news. The US economy did not shrink as badly as feared in January-March.

The Commerce Department has revised up its estimate of GDP in the quarter, to an annualised rate of -2.1%, from -2.9% before.

US economy grew by 4.0% annualised rate in Q2 – beating forecasts

Breaking: The US economy grew by 4% on an annualised basis in the second three months of 2014.

That’s a much stronger bounceback than expected, and means US GDP rose by 1.0% on a quarter-on-quarter basis.

America has put its winter contraction firmly behind it — that’s going to calm some nerves. Bloomberg are calling it a “really strong” report.

Encouragingly, business investment has risen strongly during the quarter — by 5.5%.

Lots more detail and reaction to follow!

Updated

US growth figures: a preamble

The waiting is nearly over…. We’re about to find out whether the US economy has bounced back from its winter contraction.

The first estimate of America’s GDP for April-June is due shortly, at 8.30am Washington time or 1.30pm BST.

Economists think GDP will rise by around 0.7% to 0.8% in the quarter, showing the economy is growing at an annualised rate of around 3%.

A strong reading would suggest America’s economy is back on track. A weak reading, though, will raise fears over the strength of the global recovery….

Interesting….trading has been suspended on the Moscow stock market. No reason was given, according to Reuters….

Russian shares rise after sanctions, but trouble lies ahead

Russia’s stock market has shrugged off the sanctions announced by the US authorities last night.

The RTS index of the largest Russian companies has jumped by 2.3% so far today, with almost every share gaining ground.

And the Russian currency has also strengthened, to 35.8 rubles to $1, from 35.8 last night.

Moscow investors may have been reassured by Russia‘s central bank, which has pledged to support the financial institutions hit by US sanctions.

In an online statement, the bank promised to “take adequate measures” to support targeted institutions.

The long term consequences of the deterioration of relations between Russia and the West could be severe, though.

David Savage, sanctions expert at law firm Eversheds, warns that Russia’s economic growth will suffer:

“This latest wave of sanctions should come as no surprise. The impact of these far-reaching measures is as yet unknown, but with both the EU and the US imposing further restrictions on Russia’s financial sector, as well its weapons and energy industries, it seems likely that the Russian economy will increasingly stagnate over the coming months.

The corollary of this, of course, is that EU and US companies with Russian interests are also likely to experience some financial discomfort going forward.”

And there’s a good piece in the FT about the end of a “25-year chapter with Russia”

Barclays chief executive, Antony Jenkins, apparently supports the proposed tough rules for the City ‘in principle’:

The British Bankers’ Association is concerned that the new rules on bonus clawbacks and management accountability could make it hard for the City to hire and keep staff.

Really? These new rules (details) should only affect bankers who make an almighty botch of the job – Britain’s had its fair share of them, thanks.

Associated Press is reporting that the central bank of Albania has been burgled, losing 713 million leke (or just over £4m), from its reserve storage building.

Two bank employees have been arrested, according to AP, which adds:

The Bank of Albania, which is in charge of the country’s price stability and manages 16 private banks, said Wednesday that the cash was stolen over time. It did not provide further details, but insisted that the bank’s operations had not been affected and it was supplying the country’s banking system with the necessary liquidity.

Local media reported that one of the suspects acknowledged the theft over the last four years, saying he had spent much of the money on gambling. The bank, police and judicial authorities declined to comment on the report.

A Greek update

Over to Greece where the government has forged ahead with a series of steps aimed clearly at placating international creditors and the population at large.

Our correspondent Helena Smith reports on this week’ developments:

After appointing a new team to head the country’s privatization agency – the fifth such change since 2012 – finance ministry officials signaled that a major shift in doing business with foreign lenders keeping the country afloat was also underway.

Instead of holding talks in Athens, the next round of negotiations, currently scheduled for September, would take place in the neutral setting of Paris, they said, before mission chiefs and technical teams representing the EU, ECB and IMF wrap up the review with a quick visit to the Greek capital at the end of the month. “The spectre of the troika coming in for long, drawn out talks will, we hope, soon belong to the past,” one insider confided. “We want to de-dramatise the process.”

With the prospect of early elections a distinct possibility if political parties fail to muster enough votes to elect a new president in February, the ruling coalition is keen to avoid political tensions at a time when the stridently anti-austerity main opposition Syriza party, the victor of Euro elections in May, is gaining ground.

Prime minister Antonis Samaras has reportedly beseeched troika heads to change the location of the of talks for several months arguing that the presence of international monitors on such a regular basis in the Greek capital is not only fuel for the fire of anti-bailout but severely undermining for the government itself and the morale of Greeks at large.

Ministers – targeted by anti-bailout protestors from unionists to sacked cleaners – have frequently complained of the drama surrounding such visits including the lack of respect the international mission chiefs have often displayed for politicians in Athens.

The Greek finance minister Gikas Hardouvelis, an economics professor appointed to the post in June, will no doubt see the change of tact as particularly encouraging, Helena adds:

The no-nonsense Hardouvelis, who has promised to implement a number of reforms in what he says will be an “American August,” has openly spoken of changing the timbre of relations with the troika, insisting that the enormous sacrifices made by Greeks have to be respected. The academic came to the job asking that lenders split their review of the economy in two parts between fiscal and structural goals and the finding gap the debt-stricken country s likely to face in 2015. Ministers hope the shift will help Athens negotiate a new memorandum that Greeks will feel they own – many currently feel that bailout terms have been thrust upon them.

The government hopes, meanwhile, to show creditors that it also means business, tabling a huge omnibus bill of reforms in parliament on Tuesday signed by 13 ministers. The far-reaching legislation – changes range from new tax laws to relaxation of commercial activities on Greek seashores – is due to be voted on by August 8 and is key to the country receiving its next 1 bn euro aid installment in September.

Similarly, Greek officials hope that the new team overseeing the sale of state assets will kick-start long delayed privatizations even if they also concede that the process will likely be linked to debt reduction talks that the government hopes to launch in the fall.

Updated

Back in the eurozone, and Ireland’s unemployment rate has fallen to 11.5% in the latest sign that its economy is slowly healing.

The number of people on the ‘Live Register’ fell by 3,400 in July to 382,800, on a seasonally-adjusted basis.

So far this year, the Irish jobless total has dropped by 8.5%.

Some instant reaction to the new proposals to raise standards in British banking:

(that’s the clock will start ticking when the bonus is awarded, rather than waiting until they are actually paid)

(this ‘bright idea’ was proposed by the ResPublica thinktank yesterday)

UK bankers face tougher bonus clawbacks and a new ‘approval regime’

It’s official: British bankers could see their bonuses clawed back seven years after they are granted, under new rules to clean up the City.

Bonuses will also be held back for longer, to give more time for incompetence or malpractice to come to light.

Britain’s financial watchdogs have also proposed a “new approval regime” for senior executives who could cause “serious harm” to customers, or bring a bank crashing down.

That will force banks to explain exactly who is responsible for what, making it harder for top bankers to evade responsibility. And new conduct rules will spell out the behaviour expected from them.

The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) say their joint proposals “will make it easier for firms and regulators to hold individuals to account”.

Here are the key proposals to improve accountability:

  • A new Senior Managers Regime which will clarify the lines of responsibility at the top of banks, enhance the regulators’ ability to hold senior individuals in banks to account and require banks to regularly vet their senior managers for fitness and propriety;
  • A Certification Regime requiring firms to assess fitness and propriety of staff in positions where the decisions they make who could pose significant harm to the bank or any of its customers; and
  • A new set of Conduct Rules, which take the form of brief statements of high level principle, setting out the standards of behaviour for bank employees.

And on pay:

  • Increasing the alignment between risk and reward over the longer term, by requiring firms to defer payment of variable remuneration (e.g. bonuses) for a minimum of five or seven years depending on seniority, with a phased approach to vesting;
  • Further enhancing the ability of firms to recover variable remuneration, even if paid out or vested, from senior management if risk management or conduct failings come to light at a later date;
  • Options to address the problem that employees can sometimes evade the application of malus – reductions in unvested awards – by changing firms; and
  • Strengthening the existing presumption against discretionary payments where banks have been bailed out.
  • The PRA has also today published final rules on clawback which introduce a seven-year minimum period for clawback from the date of award. These rules will come into force on 1 January 2015.

The curious case of Barclays’ vanishing compensation ratio

Back to Barclays’ results — and City experts are scratching their heads wondering why it has stopped telling us how much money is being set aside for its investment bankers.

City editor Jill Treanor explains:

One of the numbers analysts and journalists look for in Barclays’ numbers is the compensation to income ratio – a measure how much of income is being kept aside to pay investment bankers.

In the first quarter of the year, the figure was 46%, as set out here on p16.

But it seems Barclays, which has been publishing this number on a quarterly basis, is no longer going to do so. The number is not there in the interim results published today and the finance director said today “we don’t disclose this at the half year”.

What price transparency? City veteran Christopher Wheeler isn’t impressed:

Ireland’s finance minister, Michael Noonan, has just welcomed Allied Irish Bank’s first profit since the crisis:

  • IRISH FIN MIN SAYS ALLIED IRISH BANKS RETURN TO PROFITABILITY VERY GOOD NEWS FOR TAXPAYER, MAKES IT A MORE VALUABLE BANK

Allied Irish Bank posts first profit since the crisis

One of Ireland’s state-owned banks is back profit for the first time since the financial crash that brought the Republic to the brink of national bankruptcy.

From Dublin, Henry McDonald reports on this landmark moment in Ireland’s recovery.

Allied Irish Bank, which was rescued by the taxpayer, reported today it has made a €437m profit in the first six months of 2014.

The AIB received more than 20 billion euros in state aid since 2009 and was one of the banks that over-lent to builders and property speculators during the Celtic Tiger boom.

In Northern Ireland and Britain AIB operates under the name First Trust Bank.

Return to profitability comes as the Irish banking sector prepares for a European wide financial stress test in the autumn carried out by the European Central Bank.

The head of AIB, which is still 99.8% owned by tax payers, said the recovery in the overall Irish economy had helped the bank back to profitability.

AIB’s chief executive officer, David Duffy, said the bank had “achieved its stated aim of returning to sustainable profitability” with its half year results “reflecting strong improvements” in its performance in several areas.

“As the Irish economy and the bank recovers, we remain focused on growth and maximising value for the Irish State, as 99.8% shareholder, and all other stakeholders over time,” he said.

But like all Irish banks, AIB still faces a major problem – tens of thousands of home owners are still in mortgage arrears, with many of them trapped in negative equity.

Britain’s energy regulator, which has faced accusations of toothlessness in the past, has announced new price proposals that will cut bills, a little.

Ofgem’s plan will see UK electricity bills fall by £1 per month on average, and will also lead to distribution companies spending £17bn upgrading the UK’s energy network.

More here: UK electricity bills to fall by £12 a year, Ofgem says

Updated

A quick round-up of some other corporate news:

Two more UK firms, British American Tobacco and contract caterer Compass, have warned that the strong pound is eating into their profits.

The Brazil World Cup has helped ITV post a 40% surge in pre-tax profits. CEO Adam Crozier says.

“In the first six months of the year, we again delivered double-digit profit growth in every area of the business and increased revenues by 7%.

Rightmove is benefitting from the upturn in the UK property sector, with revenue up 20%.

While new low-calorie sandwiches and a better hot drinks range has lured more customers into Greggs – the UK bakery chain has posted a 3% rise in sales, and a 48% surge in profits.

Heads-up. British bankers are about to be told that they’ll face some of the strictest bonus regulations in the world.

The proposal won’t stop huge payments being handed out, but they will give authorities the ability to claw back bonuses within the next seven years.

This would mean that a banker could be forced to return the cash if unexpected losses come to light, or unexpected losses.

The banking watchdog, the Prudential Regulation Authority, will announce the plans at 10am.

Sky News reckons the PRA has abandoned the idea of making the bonus rules retrospective, though.

David Roman of the Wall Street Journal also flags up that Spain’s economy is outpacing most European rivals.

Economists say this level of growth [+0.6% in Q2] is likely to make Spain the best or one of the best economic performers in the euro zone in the quarter, largely due to a series of effective economic reforms and because of a rebound effect after a long economic slump

Updated

Bloomberg’s Maxime Sbaihi reckon’s Spain’s economy is growing faster than the experts predicted.

The Spanish economy does now appear to be outperforming the rest of the eurozone — which is most unlikely to match Spain’s 0.6% growth in the last three months.

Both France and Germany are expected to report lacklustre growth.

Updated

Spanish growth hits six-year high, but prices fall

Spain has taken another major step away from the darkest days of the eurozone crisis, by posting its strongest growth since the financial crisis began.

Spanish GDP rose by 0.6% in the second quarter of 2014, its National Statistics Institute reported.

That’s stronger than the 0.5% expected, and means growth accelerated from the 0.4% growth in January-March.

Over the last year, Spanish GDP has risen by 1.2%.

Another welcome signal that the Spanish economy is recovering – hopefully it will drag down its record unemployment levels (currently 24.5%).

However, Spain is also being hit by the deflationary pressures in the eurozone.

New inflation figures, also just released, show that the consumer prices index fell by 0.3% annually in July.

That means that nominal GDP (growth plus inflation) remains weak, at just +0.3.

No major drama on Barclays’ early conference call.

Finance director Tushar Morzaria did confirm that US authorities have another year to assess whether its foreign exchange operations have broken the law (as Jill flagged up earlier).

Reuters sums it up:

  • BARCLAYS FINANCE DIRECTOR SAYS NET HEADCOUNT DOWN JUST UNDER 5,000 SO FAR THIS YEAR
  • BARCLAYS FINANCE DIRECTOR SAYS NON-PROSECUTION AGREEMENT WITH US DOJ EXTENDED BY 1 YEAR MAINLY FOR FURTHER ASSESSMENT OF FX MARKET ACTIVITIES
  • BARCLAYS FINANCE DIRECTOR SAYS CONFIDENT LEVERAGE RATIO WILL BE GREATER THAN 4 PCT IN 2016 AND BEYOND

Joshua Raymond of City Index is worried that Barclays investment bank suffered such a steep fall in profits, down almost 50% in the last six months.

He warns:

What will be troubling for some investors is not just the fact that investment banking continues to sap underlying numbers for the group as a whole, but the deterioration in the last quarter and the potential impact on the group’s full-year performance unless market activity picks up.

Barclays shares rise

Barclays shares have jumped 3% at the start of trading, putting it at the top of the FTSE 100 leaderboard.

City traders clearly aren’t worried that it has set aside another £900m to compensate PPI customers, or that profits at its investment bank halved.

There are some encouraging signs in today’s results.

For example, Barclays’ Personal and Corporate Banking division has cut its bad loans, thanks to “the improving UK economic environment”..

Buried in Barclays results statement is the news that the US Department of Justice has extended its “non-prosecution agreement” for another year.

That gives the DoJ another 12 months to decide whether Barclays foreign exchange operations have broken any US laws.

Several inquiries are underway into whether FX traders conspired to fix currency rates.

Barclays sets aside another £900m for PPI mis-selling

Britain’s PPI mis-selling scandal has taken another twist this morning.

Barclays, Britain’s third-biggest bank, has hiked its provision for compensating customers who were wrongly sold payment protection insurance protection by a futher £900m.

That pushes Barclays total PPI bill towards £5bn — a remarkable bill for selling insurance products which its customers simply didn’t need.

Not quite the image that CEO “St” Antony Jenkins is striving for.

The news comes as Barclays reports a 7% drop in underlying profits. Earnings were driven down by a weaker performance at from investment banking, where revenues slumped by 18% and profits almost halved.

Jenkins, who is trying to reshape Barclays and shrink the investment bank, says:

Performance in the Investment Bank was impacted by the repositioning underway as well as difficult trading conditions in the quarter, but it is where we expected it to be at this point.

US GDP awaited

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

Has America’s economy bounced back from the shock of its winter slowdown? We’ll find out today (1.30pm) UK time, when the first estimate of US GDP for April-June is released.

Economists predict strong growth, of at least 0.7% to 0.8%, or 3% on an annualised basis. That would reverse the unexpected slump in January-March, when annualised GDP shrank by 2.9% as grim winter weather gripped America.

If that doesn’t happen, it will spark fresh concerns over the state of the global economy.

As Michael Hewson of CMC Markets explains:

For some time now we’ve heard all manner of speculation that the slowdown in the US economy seen in Q1 was an aberration, caused by the worst winter in living memory.

The slowdown in Q1, we were told, would be more than offset by a strong bounce back in Q2.

World financial markets will be watching Argentina nervously. It has until the end of today to reach an agreement with its holdout bondholders, or else default on the debt.

Talks have been taking place in New York in a final bid to cut a deal:

Last-ditch New York talks on Argentina debt

Investors will also be digesting the latest raft of sanctions imposed on Russia by the US and EU last night, targeting weapons, energy and finance.

Three large banks – VTB Bank OAO, Bank of Moscow and the Russian Agricultural Bank – have been cut off from the US economy.

Lots of corporate results today, led by Barclays, which is holding a conference call at 8am. A clutch of other companies, including ITV, Taylor Wimpey, Rightmove and Greggs, are also reporting.

And then tonight, the US Federal Reserve ends its monthly meeting — it’s likely to trim its bond-buying stimulus programme by another $10bn/month.

We’ll be tracking all the action through the day.

 

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

Published via the Guardian News Feed plugin for WordPress.

Eurogroup splits €8.3bn Greek bailout into three parts. Eurozone jobless number falls by just 35,000. Manufacturing growth slows in the euro-area, although French manufacturing beats forecasts. Euro supported against the U.S. dollar ahead of ECB…

 


Powered by Guardian.co.ukThis article titled “Greek bailout payment approved; eurozone jobless rate stuck near record high – business live” was written by Graeme Wearden, for theguardian.com on Tuesday 1st April 2014 13.43 UTC

Greece’s finance minister, Yannis Stournaras, has declared that the Athens government has “turned the economy around” after a long battle, but many readers aren’t convinced.

Writing on the Guardian’s Comment Is Free site today, Stournaras insisted that Greece will return to growth this year:

Here’s the piece.

And here’s a flavour:

According to the latest estimates, in 2014 Greece will return to positive rates of growth after six years of deep recession. In the years to follow Greece is expected to experience robust growth rates that will gradually rise.

Confidence is being restored. The economic sentiment indicator has reached the highest level in the last five years. The spread of the Greek 10-year government bond compared with the German bund has fallen below 550 basis points, whereas at the peak of the crisis it surpassed 3,000 basis points. In January, the purchasing managers’ index (PMI) exceeded the threshold of 50, indicating expansion for the first time since August 2009.

That was written before March’s data, released this morning, showed factory activity fell again last month (see 9.24am).

As flagged up at 2.06pm, Brussels also believes Greece will start growing again this year.

But some regular Guardian readers aren’t letting Stournaras get away with too much triumphalism.

Excuse me while I have a minor fit.
Turned around?
Yiannis… mi les psemata.. You’re not in the Vouli now.
First of all.. Unemployment is still the highest in the EU at nearly 28%. Youth unemployment is the highest at nearly 60%. The Greeks wealth fell faster in 2013 than in any other EU country due to price and tax hikes and incomes slashed.
The PMI fell again last month.
The country is still contracting. Greeks are getting poorer. The unemployment levels are unlikely to recover for decades.
The rich still don’t pay any taxes.
The Vouli is till run by a bunch of Oligarchs… whom you have served.
FFS.. cut the crap.

Not that Greece had any easy choices….

Everybody knows that poverty is awful today in Greece. The question is whether not accepting the MoUs and associated loans would have made things better or not.

A level whereby 70% of the 28% of unemployed received no benefit at all.. No income at all. Nothing.

Just on this aspect. When things were better, ie in 2005, what prevented the Greek society of putting in place such a basic safety net? What is your take on the scheme supposed to be generalized in 2015? Not enough? Do you know the municipalities where it is experimented?

Italy’s newish prime minister, Matteo Renzi, is in London today – meeting with prime minister David Cameron now:

Back to Greece, and the EC has released comments made by commissioner Olli Rehn in Athens today.

Rehn told reporters that the Greek economy was ‘stabilising’, and would (at long last) exit recession this year.

We all know how difficult this adjustment has been and how great are the challenges faced by many Greek citizens still today. I would like to take this opportunity of being here in Athens to acknowledge the great efforts made by Greece over the past four years to repair the public finances and build a more sustainable model for growth and job creation.

There was no easy way to resolve the problems confronting Greece in 2010, given the scale of economic imbalances that had built up, over so many years. But what we can say is that European solidarity and Greek determination came together to ensure that a far worse outcome was avoided.

Today, the Greek economy is stabilising and we expect a return to growth and a gradual recovery in employment starting this year. To strengthen this recovery and boost job creation, it will be essential for Greece to continue to embrace economic reforms, maintain sound public finances and facilitate targeted investments. The European Commission will continue to stand by Greece and support Greece in creating the conditions for sustainable growth, as we have until now through the programme and through technical assistance provided by the Task Force for Greece.

The full statement, which also touched on the situation in Ukraine, is here:

Speaking points by Vice-President Olli Rehn at the Eurogroup Press Conference

I failed to flag this up amid the morning data splurge, but it’s worth mentioning now — policymakers at the Bank of England are worried that investors are too complacent about the prospect of interest rates rising.

The warning came from the Bank’s Financial Policy Committee. The minutes of its last meeting, released this morning, show that the FPC is concerned that the markets haven’t priced in the full consequences of exiting the current loose monetary conditions.

Members were concerned that there was a risk that [the] apparent resilience to past developments in advanced economy monetary policy could reinforce risk appetite in a way that did not fully take account of the eventual transition of monetary policy to more normal settings

Investors ‘too relaxed’ about rising interest rates, Bank of England warns

An unexpected departure at Heathrow — chief executive Colin Matthews has announced his resignation.

His six-year stint at the UK’s biggest airport began with the Terminal 5 fiasco, and will end when Terminal 2 has (we hope) been reopened in June.

Heathrow airport boss Colin Matthews resigns after six years

…and here’s Conservative MP Ben Gummer tweeting that the FCA must take action against those payday lenders who lure customers onto ‘extortionate’ rates:

Speaking of the FCA….it has also taken control of payday lenders today, and is expected to take a tough line with an industry accused of profiteering from Britain’s cost of living crisis and driving families deeper into debt.

One trade body reckons 50% of payday lenders could quit the market, once the FCA gets its teeth into them:

Half of all payday lenders could be ‘taken out of the market’

Updated

Chancellor George Osborne has piled further pressure on the UK’s City watchdog, the Financial Services Authority, and its chief executive Martin Wheatley.

Osborne has written to the FCA’s chairman to say he is “profoundly concerned” by the way the FCA announced plans for a probe into the UK life insurance industry last Friday.

That botched announcement (which began with an ill-advised leak to the Telegraph), sent share prices crumbling before the regulators (eventually) issued a clarification hours later.

Wheatley toured the radio studios this morning, admitting that it had not been the FCA’s “finest hour”, but insisted he won’t resign……

George Osborne ‘profoundly concerned’ by FCA insurance leak

Heads-up: The controversial Royal Mail privatisation will be discussed in parliament in a few moments.

Shadow business secretary Chuka Umunna has been granted an urgent question, following the National Audit’s revelations that last autumn’s IPO could have raised an extras £750m. Our politics liveblogger Andy Sparrow will be covering it here.

That NAO report (our story is here) has dominated the political sphere today – with unions and some analysts lambasting business secretary Vince Cable for, in their view, botching the float.

Here’s a flavour:

Eurogroup chief Jeroen Dijsselbloem also told reporters in Athens that it is “too early” to say whether Greece will need another aid package.

He also warned French president Francois Hollande that he cannot be given any more time to hit the EU’s debt targets (it already has a two-year extension).

Reuters has the details:

  • EUROGROUP’S DIJSSELBLOEM SAYS GREECE HAS AN AMBITION NOT TO ASK FOR ANOTHER BAILOUT, BUT IT IS TOO EARLY TO SAY IF THIS WILL BE POSSIBLE
  • EUROGROUP’S DIJSSELBLOEM SAYS FRANCE IS WELL AWARE OF ITS COMMITMENTS, WAS ALREADY GIVEN MORE TIME, NEW FRENCH CABINET WILL BE AWARE OF ITS OBLIGATIONS
  • EUROGROUP’S DIJSSELBLOEM SAYS FRANCE HAS TO DELIVER ON ITS COMMITMENTS UNDER EU BUDGET RULES

Last night, Hollande issued a plea to Brussels, saying he did not want to make savings that would sacrifice growth (details here)

Brussels, though, has snubbed him. Here’s what Dijsselbloem told the press conference:

“France is aware of its commitments, they were already given more time and more work needs to be done.

I’m sure new French government will be aware of its obligations,”.

Eurozone finance ministers have also postponed a decision on what future aid or assistance Portugal might need, until after this May’s European elections.

Speaking in Athens, Eurogroup president Jeroen Dijsselbloem said that ministers won’t consider Portugal’s exit strategy this month.

He told journalists:

“Portugal’s recovery is strengthening. Stabilisation of the banking sector is progressing

“We will discuss Portugal’s exit strategy at our May meeting.”

The WSJ reported last night that the decision to defer the Portugal question was “a bit messy”, according to one official. Lisbon’s bailout deal ends on May 17, and there are suggestions it could need a precautionary credit line.

Updated

The decision to approve Greece’s next bailout payment removes the danger that it wouldn’t have enough money for its next debt repayment, and ends months of brinkmanship between the two sides.

But most of the money will flow quickly back out of Athens, as the FT’s Peter Spiegel points out:

The bailout tranche of €8.3bn divided into three payments comes just in time to help repay a €9bn bond held by the European Central Bank that is due in May.

Peter’s early take is here.

Eurozone gives green light to next Greek bailout payment, in stages

It’s official, Greece will receive its next aid payment, worth over €8bn — but it will be split into three payments.

Over in Athens, eurozone finance minister have agreed that Athens has done enough to earn the next slice of its bailout.

In a statement just released, the eurogroup said it “reiterates its appreciation for the efforts made by the Greek citizens” , and welcomed the news that the bailout programme is “on track”.

However, it is only proposing disbursing €6.3bn right now. The remaining €2bn will be split into two €1bn slices, which will only be handed over if Greece implements further milestones agreed with the Troika.

In a statement, the eurogroup also urged Athens to continue with its reform programme – just days after the government narrowly won a vote over its austerity plans.

The statement is online here – here’s the key section:

The reform process will have to continue in order to enhance the growth potential of the Greek economy by creating job opportunities and a healthy investment environment.

In this context, the Eurogroup welcomes the authorities’ strong commitment to the implementation of a wide range of product (goods and services) market and institutional reforms. Concrete measures to liberalise transport and rental markets and to open up closed professions are being prepared.

Bold and frontloaded cuts in social security contributions are expected to improve competitiveness and boost growth. In addition, the authorities have committed to far-reaching energy market reforms and to enhancing the privatisation of public corporate and real estate assets, which would provide financing to the government while unlocking private investment.

It is also important that continued progress is made in the area of public administration reforms, in order to improve the quality and efficiency of the services that the public sector provides to its citizens, as well as with labour market reforms.

A press conference is underway in Athens now – highlights to follow….

Updated

The small drop in European unemployment last month may signal a welcome recovery in the region’s labour market, suggests Howard Archer of IHS Global Insight. He writes:

Eurozone unemployment dipped by 35,000 in February. While this followed a jump of 157,000 in January, it adds to mounting evidence that Eurozone labour markets have stabilized overall and are maybe even starting to see slight improvement after extended, marked weakness.

Eurozone unemployment falls in February, jobless rate steady at 11.9%

Europe’s unemployment crisis has eased a little — with the number of people out of work across the eurozone dropping by 35,000 in February.

The headline jobless rate is better than feared, coming in at 11.9%. Eurostat has also revised January’s figure down from 12% to 11.9%, and now believes the rate has been unchanged since October.

Across the wider European Union, the jobless rate dropped to 10.6%, from 10.7% in January, with the unemployment total falling by 60,000.

That means there are still 18.965m people out of work in the eurozone, and 25.92m across the EU.

But there was little relief in the eurozone periphery — Italy’s jobless rate hit a fresh record high of 13%, and Spain’s remained more than twice the eurozone average.

Eurostat reports:

Among the Member States, the lowest unemployment rates were recorded in Austria (4.8%), Germany (5.1%) and Luxembourg (6.1%), and the highest in Greece (27.5% in December 2013) and Spain (25.6%).

While any drop in unemployment is welcome, these rates remain depressingly high.

And Europe still faces a youth unemployment crisis, although the number of young people out of work has fallen over the last year.

There were 5.392 million under 25′s unemployed in the EU28, of whom 3.415 million were in the euro area.

Eurostat adds:

Compared with February 2013, youth unemployment decreased by 295 000 in the EU28 and by 194 000 in the euro area. In February 2014, the youth unemployment rate was 22.9% in the EU28 and 23.5% in the euro area, compared with 23.6% and 24.0% respectively in February 2013.

And again, you stand far more chance of getting on the career ladder in the northern core of Europe:

In February 2014, the lowest rates were observed in Germany (7.7%), Austria (9.4%) and the Netherlands (11.5%), and the highest in Greece (58.3% in December 2013), Spain (53.6%) and Croatia (48.8% in the fourth quarter of 2013).

Updated

We also have dispiriting news on Britain’s productivity – a big cause for concern in political and economic circles.

My colleague Katie Allen explains:

The latest official statistics on UK productivity show little turnaround from the languid growth of recent quarters.

The Office for National Statistics says that on an output per hour basis, UK labour productivity increased by 0.3% in the fourth quarter of 2013 and it was 0.7% higher than a year ago. Output per worker was unchanged in Q4.

Manufacturing and the rest of the industrial sector enjoyed stronger growth than the UK’s dominant services sector.

Output per hour in service industries grew by 0.3% in the fourth quarter, and has grown or been unchanged in each quarter of 2013. Across the production industries, output per hour grew by 1.2% in the fourth quarter, reversing a fall of a similar magnitude in the previous quarter.

More here.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, says today’s PMI survey shows Britain’s “strong” domestic demand is making up for weakness overseas:

“In spite of softer rates of expansion, UK manufacturing held its ground in March benefitting from ongoing improved operating conditions.

Leading the way to growth was the strong domestic market which, alongside robust consumer and intermediate production, was able to offset this month’s slower growth in both overseas demand and the investment goods output.

And according to Markit, some UK firms reported a drop in new orders from clients in the Asia-Pacific region — perhaps another signal that China’s economy is slowing?

Britain’s factory sector also suffered a slowdown in growth last month, driven by a worrying weakness in exports.

However, the sector did continue to expand – but at its slowest rate in eight months.

The UK manufacturing PMI dropped back to 55.3 in March, from February’s 56.2. That is weaker than City analysts had expected, but still some way above its longterm average.

The drop was due to a slower rise in output and new business. New export orders weakened further, to the slowest pace of growth for ten months.

It’s a sign that Britain is still struggling to rebalance its economy – a few days after the UK current account deficit widened alarmingly.

Markit’s Rob Dobson said:

The old criticisms still apply, with the survey signalling a downturn in export growth and an expansion that is all-too reliant on domestic consumers. However, the very fact that we have a healthy manufacturing economy that is generating jobs at a rate rarely seen in recent decades suggests that the rebalancing process is underway.

We may be still a consumption-oriented economy in many respects, but at least we now appear to be producing more of the goods we sell ourselves, which is a more sustainable situation to be in.

Updated

Deflation fears grow as eurozone factory growth slows

The upshot of this morning’s data (see 8.22am onwards) is that the Eurozone factory sector continued to expand last month, but at a lower rate than February.

And there are new fears over deflation, as the prices of raw materials and finished goods dropped.

The overall Eurozone manufacturing PMI, which surveys thousands of firms across the region, dropped to 53.0 in March from 53.2 in February. That shows growth, but at a slightly slower rate.

France’s surprise return to growth was balanced out by Germany’s weaker performance.

As Markit put it:

Slowdowns in February’s top performers – Germany, the Netherlands and Austria – were largely offset by faster growth in Ireland (35-month high), Spain (47-month high) and Italy (2-month high) and a return to expansion in France that took its PMI to a 33-month peak. 

The Greek PMI edged back into contraction territory for the first time in three months.

The survey showed that Eurozone manufacturing output, new orders and new exports all rose.

However, in another warning signal to the European Central Bank, average input costs declined for the second month running and output prices also dipped.

Chris Williamson, chief economist at Markit, says the data underlines that the eurozone recovery isn’t secure:

Alongside the renewed fall in factory gate prices, signs of slower output and order book growth are a reminder that a self-sustaining recovery is not yet in place and reliant at least in part on price discounting to win sales.

Such deflationary signals will continue to spook policymakers and raise the likelihood of further stimulus from the ECB.

Updated

Greece’s factory sector activity has slipped back into contraction as firms keep cutting jobs, and the recent growth in new orders slows.

The Greek manufacturing PMI has dropped below the 50-point mark, coming in at 49.7 in March, from 51.3 in February. That’s the lowest reading this year.

Markit’s Phil Smith said it was “somewhat disappointing” to see the headline PMI fall back below 50.0, in March:

However, the key indices pertaining to output and new orders remained in growth territory – albeit they were lower than February’s peaks – suggesting the manufacturing sector has made a positive contribution to GDP in the opening quarter.

Updated

Growth in Germany’s factories has fallen back, though — with its monthly manufacturing PMI dropping to 53.7 from 54.8 in February.

Although that it still healthily in ‘expansion’ territory (above 50), it suggests the eurozone’s largest economy may have lost some zip last month.

Oliver Kolodseike, economist at Markit, warned:

Germany’s goods producing sector lost some of its recently strong growth momentum…

Output and new business orders rose at sharp, albeit weaker rates, adding evidence that the manufacturing upturn has moderated slightly. With employment growth edging closer to stagnation and export growth easing to a five-month low, the data signal that there might still be a few obstacles on the path to recovery.

Wowzers – France’s factory sector has posted its biggest jump in output in 33 months, returning to growth for the first time in two years.

French manufacturing “sprang back to life” last month, Markit said, perhaps calming concerns that France has become the sick man of Europe.

The French manufacturing PMI jumped to 52.1, up from 49.7 in February, the highest reading since June 2011. That also ended a two-year period of continuous sub-50 readings (which showed a contraction).

Employment at French manufacturers increased fractionally in March, after two years of steady job shedding.

Jack Kennedy, Senior Economist at Markit, which compiles the France Manufacturing PMI® survey, said:

“The French manufacturing sector delivered a much improved performance in March, buoyed by solid growth of new orders.

With the sector having finally moved into expansion territory following a prolonged spell of weakness, firms will be looking for signs of a convincing recovery taking hold before looking to boost areas such as employment. If input prices continue to fall, French manufacturers may look to gain a competitive edge through cutting output prices.”

Here comes the survey of Italy’s factory sector….and it has followed Spain (see 8.35am) with another rise in activity – but no improvement on the jobs front.

Italy’s factory PMI rose to 52.4 in March, up from 52.3 a month ago, driven by a rise in exports.

Markit, which compiled the survey, said it showed another solid increase in Italy’s manufacturing output — with new orders also up.

However, there was “negligible” improvement in employment levels across the sector.

Markit explains:

Another area that manufacturers targeted for streamlining was employment. While production levels rose at a solid and accelerated pace, job creation eased to the slowest in the current five- month sequence and was negligible.

Only the investment goods sector saw a substantial rise in staffing numbers since February.

Markit is also worried that the cost of raw materials, and finished products, both fell – suggesting Italy’s economy risks sinking into deflation….

“Also of note in March’s data was the simultaneous falls in input and output prices, which further highlight the risk of deflation in Italy.”

Spanish factory growth hits four-year high

Spain’s factory sector continues to claw its way back from recession, with manufacturers reporting the fastest growth since April 2010.

The Spanish PMI, based on interviews with purchasing managers across the country, jumped to 52.8 in March — the fourth month in a row that it has come in above the 50-pint mark, denoting growth.

Firms reported a rise in new orders, and stronger demand from clients.

Markit said:

Rates of expansion in both output and new orders quickened during the month, although employment growth dropped off.

But the improvement hasn’t yet reached Spain’s troubled labour market — staffing levels were “broadly unchanged” last month.

And the survey also shows that eurozone inflation is sagging — factories reported that input costs fell while output charges decreased at a moderated pace in March.

Andrew Harker, senior economist at Markit and author of the report, said:

“The recent pick-up in the Spanish manufacturing sector continued in March, finishing off a solid first quarter.

Sharper rises in both new and existing orders suggest that further growth of output is likely in the near-term. Input prices decreased for the second time in the past three months, highlighting a continued lack of inflationary pressure.”

Updated

The first European manufacturing surveys are in. They all show growth — although it did slow in several countries.

The Netherland’s PMI dropped to 53.7 in March from 55.2. That indicates that its factories continued to expand last month, at a slower rate.

Poland’s PMI fell to 54.0, from 55.9 – also showing slower growth.

Hungary slipped to 53.7, from, 54.3.

But Norway posted faster growth, rising to 51.9 from 51.1 in February.

Asia’s stock markets have shaken off worries over China, hitting a four-month high on the back of some very dovish comments by the Federal Reserve chair, Janet Yellen, on Monday.

The MSCI index of Asia-Pacific shares has risen 0.4%, to its highest level since December. The main Chinese indices are up around 0.6%.

This follows Yellen’s speech yesterday, in which she argued that the US economy and its jobs sector remained weak and would require plenty more help from the Fed . In effect, she’s nimbly countered hew own suggestion, two weeks ago, that the Fed could raise interest rates in early 2015. One strategist called it “one of the most dovish speeches I have ever read”.

HSBC: Chinese manufacturing PMI hits eight-month low

Medium-sized and small firms in China are continuing to struggle to grow, adding to concerns that the Chinese economy is losing steam.

HSBC’s China manufacturing PMI survey, which focuses on smaller private companies, showed that activity contracted for the third month in a row in March, at the fastest rate in eight months.

It fell to just 48.0 in March, down from 48.5 in February, showing “a moderate deterioration of the health of the sector”. Any reading under 50 shows a contraction, and this is the biggest fall since July 2013.

Firms reported that output and new orders both fell, at a faster rate, while workforce numbers also fell. The survey suggests that China’s domestic economy is still cooling, as new business from abroad rose for the first time in four months.

Hongbin Qu, chief economist at HSBC, argued that China’s government needs to take further stimulus measures soon:

“The final reading of the HSBC China Manufacturing PMI in March confirmed the weakness of domestic demand conditions. This implies that 1Q GDP growth is likely to have fallen below the annual growth target of 7.5%. We expect Beijing to fine-tune policy sooner rather than later to stabilise growth.”

Here’s the details:

Key points

  • Both output and new orders contract at faster rates…
  • …while new export orders return to growth
  • Input costs and output charges both fall sharply

Confusingly, the ‘official’ Chinese PMI survey was a little more positive – inching higher to 50.3 in March from 50.2 in February. That may show that the biggest Chinese firms, and those under state control, are performing better.

But economists had hoped to see a stronger reading, as the disruption caused by the Chinese new year fades away.

IG’s Evan Lucas explained:

The March read was the first read free of the Chinese Luna New Year and despite the constant expansion there are weaknesses across the domestic sector, seeing price and output contracting.

Updated

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

It’s a busy morning for economic data, with manufacturing surveys from countries across the globe being released in the next few hours.

Fresh data from Europe will show how its economy is faring, after yesterday’s weak inflation data prompted fears that it is sliding into deflation.

Two surveys from China overnight have shown that its factory sector remained subdued in March (more to follow).

In the eurozone, European finance ministers are gathering in Athens for a meeting that could give the green light to Greece’s next tranche of bailout loans.

And in the UK, we’ll be watching the fallout from the official report into the privatisation of Royal Mail. Overnight, the National Audit Office hammered the handling of the sale; an extra £750m could have been raised for taxpayers if the government had heeded warnings that the company was being sold too cheaply.

Royal Mail: undervaluing shares costs taxpayer £750m in one day

I’ll be tracking the main events through the day….

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

Published via the Guardian News Feed plugin for WordPress.

Just 148,000 new jobs created in US last month, while the unemployment rate falls to 7.2%. An average of just 143, 000 new hires were made each month between July and September, compared to 209,000 p/m at the end of 2012. Bond prices jump, dollar drops…

 


Powered by Guardian.co.ukThis article titled “Tapering off the table as US jobs data disappoints – live” was written by Graeme Wearden, for theguardian.com on Tuesday 22nd October 2013 14.51 UTC

The Royal Mail flotation has taken another twist today, with the news that a leading activist hedge fund has amassed a 5% stake.

A regulatory filing from Royal Mail this afternoon showed that The Children’s Investment Fund now owns more than 58 million of the Royal Mail’s 1bn shares, giving it a 5.8% stake (thus triggering the announcement).

This appears to make TCI the biggest private shareholder (the government was left with more than 30% of the stock after the float.)

TCI, based in London, is well-known for taking stakes in companies and agitating for change, so Royal Mail’s management could face a rough ride.

It was founded a decade ago by manager and philanthropist Chris Hohn, who co-founded the Children’s Investment Fund Foundation (CIFF) charity with his wife to help under-privileged children in the developing world.

Business secretary Vince Cable had promised that responsible, long-term investors would be favoured in the allocation process. It’s not clear how many shares TCI received in the float, and how many it has mopped up since.

Shares in Royal Mail have dropped today, down 1% at present to 492p. They floated at 330p.

Updated

Co-op Group chief stepping down

The Co-operative Group’s chairman, Len Wardle, is to step down, as the turmoil surrounding the organisation continues to swirl.

Co-op Group just announced that Wardle will make his decision official at the next half-yearly meeting of members on 2 November, and depart in May 2014. The news comes a day after US hedge funds forced it to surrender control of its Bank yesterday. 

In a statement, Wardle said he should be replaced by an independent chairman.

On 2 November I intend to give the membership my notice that I will relinquish my Chairmanship in May 2014. In August this year, I informed the Board that it was my intention to step down at the end of my term of office whilst also making clear that I wanted to drive hard the reforms to modernise the Group. During the last year, we have appointed Euan Sutherland as Group CEO and started the changes that I believe will make The Co-operative Group stronger than ever.
The Co-operative is at its best when it is reforming and I want this change to continue. I want to persuade our members that The Co-operative Group should now look to an independent chair to lead the business, working side-by-side with the members who represent the movement.
I am immensely proud to have led the Group and to have chaired The Co-operative over the last six years.

The Group’s CEO, Euan Sutherland, commented:

Firstly, I want to thank Len for his leadership and commitment to The Co-operative over the last six years. Under his guidance we have made significant progress on beginning the reform which we will announce as planned in May 2014. I look forward to working with colleagues and members to ensure that we return the business to growth over the coming years.

As I covered extensively this morning, Sutherland’s predecessor was very critical of the Co-op Group’s structure while being quizzed by MPs today. Peter Marks said partly blamed the problems at Co-op Bank on the fact the organisation has a toe in too many areas.

Wall Street has opened a little higher on the back of the US jobs data, with the Dow Jones up 28 points, or 0.17%, in early trading. The S&P 500 and Nasdaq are also gaining a little.

Back to the UK briefly — the bosses of Britain’s largest energy firms are being hauled before MPs to explain the recent rash of price hikes, after tariffs jumped by upwards of 8%.

Big six energy firms to face MPs following price hikes

Wall Street correspondent Dominic Rushe flags up one cheerful note — the drop in the US jobless rate, to 7.2%, was caused by more people getting jobs rather than simply dropping out of the labour market altogether.

Dom writes:

September’s fall appears to be driven by employment growth, one bright spark in an otherwise lacklustre report. The largest job gains were in construction, wholesale trade, and transportation and warehousing.

Employers have now added an average of 185,000 positions each month over the last year as of September, but gains have slowed in recent months. The number of long-term unemployed (those jobless for 27 weeks or more) has remained high and was little changed in September at 4.1 million. These individuals accounted for 36.9% of the unemployed. The unemployment rates for teenagers (21.4%), black people (12.9%) and Hispanics (9%) also remained high and unchanged.

Stock markets in Europe have pushed higher on the back of the disappointing jobs data from America.

The FTSE 100 is up 30 points at 6684, a gain of 0.46%, having hit the highest intraday level since the start of August.

Germany’s DAX is up another 0.8% and heading for yet another record high.

The prospect of yet more Fed stimulus is getting traders drooling, even though the real message from today’s Non-Farm Payroll is that the US labour market is weak.

Barclays also reckons the Fed will keep stimulating for several more months…

Stock markets will climb higher by Christmas as the Federal Reserve keeps pumping money into the US economy, predicts Joe Rundle, head of trading at ETX Capital.

Rundle reckons the Fed might not start tapering its bond buying programme until the middle of next year:

Jobs generation remains weak, other facets of the US economy are also suffering from weakness – yesterday’s weaker existing home sales report for example and more importantly, fiscal uncertainty in the US remains. Lawmakers will have to re-address the debt limit and funding for the Treasury early next year; this makes the Fed’s job much harder in terms of an exit plan for QE.

At the same time, if the trigger is not pulled by current head Ben Bernanke before he leaves at the end of 2013, it will be the duty of the incoming Fed President who could be Janet Yellen – an endorser of loose monetary policies [low interest rates and accommodative easing tools], otherwise known as a dove in the market.

…Most likely it will be mid-2014 or late before we see the first tapering shot fired. Risk assets are to remain well supported through to year-end; S&P500 to hit 1810 by end of 2013, FTSE100 to hit 6850.

This graph also shows how job creation in America remains subdued:

The weak US jobs report shows that the Federal Reserve was quite right last month, when it decided not to start to ‘taper’ (or slow) its programme of buying $85bn of government bonds and mortgage debt.

Economist Justin Wolfers flags up that US job creation is faltering – an average of just 143, 000 new hires were made each month between July and September, compared to 209,000 per month at the end of 2012.

David Nicholls, alliance manager at UKForex, agrees that the US labour markets looks too weak for the Fed to start tapering its bond-purchase scheme:

Today’s non-farm payroll data (148K vs 182K expected) is another nail in the coffin for tapering anytime this year.

The numbers just aren’t supporting an immediate move by the Fed, and the dollar is softening further as a result.

It’s also difficult to see that October’s data is going to be any more positive given the recent government shut down. We expect data to continue to support a delayed tapering decision this year – and that will weigh heavily on the US dollar.

Our first take on the Non-Farm Payroll is here:

The US unemployment rate remained at the lowest level since 2008 in September, according to figures released on Tuesday that were delayed by the federal government shutdown.

According to the Bureau of Labor Statistics, the unemployment rate remained “little changed” at 7.2%, with the economy adding 148,000 jobs. But the US economic recovery remains fragile, with employers adding jobs at a slower rate than the previous month.

US jobless rate ‘little changed’ at 7.2% as recovery stays on sluggish pace

Bonds jump, dollar slides after Non-Farm Payroll

The price of US Treasury bills is jumping on the news that the US jobs market was weaker than expected in September. This has driven down the interest rate (yield) on 10-year bonds to a three month low.

The dollar also took an immediate dive, pushing the pound up almost half a cent to $1.6183.

That backs up the idea that the Federal Reserve won’t start tapering its QE programme for some months….

The early reaction from analysts and economists is that September’s non-farm payroll report means the Fed will keep stimulating the US economy at its current rate until 2014.

An increase of just 148,000 new jobs is quite a miss compared to the consensus of 180,000 (some bullish analysts expected to see a >200,000 reading).

Experts on Bloomberg TV are agreed that this is a bad jobs report, particularly in the private sector where just 126,000 new jobs were created in September.

This is not what the Federal Reserve is looking to see before it starts to ease its $85bn/month quantitative easing programme, one suggests.

The US labour force participation rate is unchanged, at 63.2%.

Previous US unemployment data has been revised, too.

The Bureau of Labour Statistics says 193,000 new jobs were created in August, up from 169,000 new jobs.

But July’s data has been downgraded, to 89,000 new jobs from 104,000.

Non-Farm released

Breaking: 148,000 new jobs were created in America last month. That’s less than expected.

The jobless rate is down, though, from 7.3% to 7.2%.

City forecasts for non-farm payroll vary considerably, as ever – the consensus is that 180,000 new jobs were created in America last month, leaving the jobless rate unchanged at 7.3%.

Updated

US jobs data imminent

Right, time for the next order of business – the delayed US jobs data.

The Non-Farm payroll for September, showing how many new jobs were created in America last month, is due out any moment (8.30am New York, or 1.30pm BST)

It’s been delayed by more than two weeks by the US government shutdown, and economists are eager to learn how the labour market was performing before Capitol Hill plunged the country into uncertainty in that row over the US budget and the debt ceiling…..

Summary

That really was quite a session between Peter Marks and the Treasury committee over Co-op’s lurch into crisis (highlights start here).

The key points, I think, are:

His warning that the Co-operative Group was, and is, spread too thinly, which helped to drive Co-op Bank into such difficulties. That is going to fuel fears over the mutual’s future, now two US hedge funds have taken control of the Bank via its refinancing.

The admission that Co-op should never have merged its financial service arm with Britannia Building Society. If he had a crystal ball, he’d not have done it. (why don’t board rooms include crystal balls as standard fittings?)…

…and the insistence that the ill-fated deal to buy hundreds of Lloyds branches was not a bad decision.

Marks’ refusal to take full personal responsibility. He tried to pin the blame for the Co-op Bank/Britannia merger on the two chief executives. And while he conceded being the “driving force” behind the Lloyds bid, he said former Co-op Bank CEO Neville Richardson had played the main role.

• The declaration that a hedge fund can’t be ethical will worry any Co-op Bank customer who is worrying about its future. As Marks put it:

Hedge funds exist to maximise profits…to be ethical, you can’t do that.

This raises the issue of whether Co-op Bank should continue to use the co-operative title, now it’s under the control of two US hedge funds. As Marks said “it’s not a Co-op” any more.

And Marks’s comments on why it’s so hard for a mutual bank to compete also suggest the era is over.

• We still don’t know exactly how the Co-op was allowed to continue with the Lloyds branch bid until Spring 2013, despite concerns over its capital position. Marks blamed the PRA regulators for ‘moving the goalposts’ and forcing the Co-op to seek more capital.

• MPs didn’t look convinced. The Treasury committee seemed sceptical on occasions, and incredulous on others, as Marks tried to avoid taking blame. As Brooks Newmark put it: “It says it on the tin. You were the leader” .

And Andrew Tyrie appeared most unimpressed at the sight of another executive explained how decisions were taken collectively. Where’s the individual accountability?…

Updated

After more than two hours of grilling, Andrew Tyrie releases Peter Marks from the Thatcher Room.

It’s not been an easy morning for you, or anyone else, Tyrie remarks. But a lot of people have lost money out there, not just bond holders, so it’s important that the session took place.

Any final words?

Marks, who can’t have enjoyed the session one little bit (the accusation of selective amnesia was probably the low point), says that he’s “spent his life working for the Co-op”. What has happened is a tragedy for the company, customers, and him personally.

However, despite everything, Marks believes the Co-operative Group (whose history dates back to the Rochdale pioneers of the 19th century), still has “a good future”.

Marks defends his record

Andrew Tyrie is returning to the question of Peter Marks’s own role in the Co-op’s failures. Didn’t you make “very big mistakes”?

Marks tries to shimmy the question. Taking over Britannia was indeed a mistake, but Project Verde (the aborted bid for Lloyds’ branches) wasn’t. That deal would have given the Bank the market share it needed, and fixed many of the regulator’s worries.

He also insists that the Verde project had everyone’s support , this wasn’t Peter Marks going “gung ho”.

He also defends another scheme, Project Unity, which was designed to allow Co-op Group to sell its products across its various operations.

John Thurso MP is asking if “mutuals” have a future – was the Co-op’s Bank’s mutual status responsible for its problems, or was it a straightforward case of bad management?

Peter Marks doesn’t believe it’s mutual status was the cause, except it couldn’t raise capital as easily as a PLC (which could tap the equity markets for funds).

So is the model viable, Thurso asks?

Marks: it’s very hard for a mutual to be a “real, serious competitor” in the UK banking market, which he dubs a “high volume, low margin business”, subject to costly regulation and high capital reserve requirements.

Updated

Brooks Newmark becomes the latest MP to question Peter Marks, and to question his claim that he is not responsible for the blunders that caused Co-op’s present problems.

He dismisses Marks argument that he was only a non-executive director of Co-op Bank at the time of the Britannia merger, saying he cannot “absolve responsibility” for mistakes.

Newmark accuses Marks of being in “complete denial”:

Newmark is also homing in on KPMG, who advised Co-op on both the Lloyds branch deal and the takeover of Britannia building society (details here). Did they botch the job and give ‘bad advice’?

Marks argues that the advice was “right at the time”, and again cites Britain’s economic problems (an excuse which the committee don’t appear impressed with)

Marks suggests the Co-op should get some credit for walking away from the deal to buy hundreds of branches of Lloyds.

We’re back on the issue of Co-op’s structure, with Peter Marks repeating his earlier warning that the Group is spread over too many areas – from supermarkets to travel via funerals and legal services.

If I failed at anything, it was not getting the Group board to heed my warnings, Marks says.

Andrew Tyrie pounces. If we look for the documentary evidence of these warnings, will we find it?

Probably not, Marks concedes.

No evidence of “your devastating critique”?

Marks suggests not, but is sure his former colleagues will remember….

Co-op ex boss: Hedge funds can’t be ethical

Can a hedge fund be ethical, asks Pat McFaddon MP, pointing to the fact that two US hedge funds now have control of Co-op Bank.

“No,” Peter Marks replies. “Hedge funds exist to maximise profits…to be ethical, you can’t do that”.

In that case, McFaddon asks, should it really be called the Co-op Bank if it’s not the Co-op?

Marks says it’s difficult for him to answer that, but concedes the point.

Peter Marks blames the City regulators for ‘moving the goalposts’ on capital reserves, triggering the £1.5bn capital shortfall at the Bank.

He also insists that the Co-operative Group took seriously the warnings from Andrew Bailey, the Bank of England’s top regulator, about capital reserves and risk management.

Asked about who took the decision to abandon the bid for Lloyds branches, Marks calls it a “collective decision”

Of the Group or the Bank?

Both, Marks replies.

Updated

Jesse Norman MP asks Marks if he could face criminal charges for acting as a ‘shadow executive chairman’.

Why? Because Marks says he was a driving force behind the failed bid for Lloyds branches despite not being the Co-op Bank CEO.

Marks says not, insisting the Co-op Group board unanimously voted to look at this deal, as did the board of the Bank.

Andrew Tyrie, the highly respected chairman of the Treasury committee, is asking a lot of follow-up questions. Not a good sign….

Peter Marks: I’m ‘feeling very sad’

Ruffley then reads out details of an interview given by Marks when he stepped down from the Group this year, about how he had risen from humble roots to the top. How does he feel today?

Feeling very sad.

Now it’s David Ruffley MP’s turn.

He warns Peter Marks that his “selective amnesia” had better stop, and demands better answers about when the former Group boss became aware of Lloyds Banking Group’s concerns about its capital weakness

Were there really no alarm bells ringing a year ago?

Marks insists that it only became clear at the start of this year that there was a capital shortfall (which led to the £1.5bn capital raising exercise, in which Co-op Group will only hold 30% of its Bank).

Updated

Mark BarnierGarnier MP tells Peter Marks that Lloyds had become aware a year ago that the Co-op Bank was undercapitalised. When did he learn this?

Marks says can’t remember the details of discussions over capital shortfalls.

Barnier is quite surprised. Surely you’d remember when you first learned that your big deal started to crash? 

Marks replies that the deal wasn’t crashing at that stage.

Updated

Marks also denies shirking responsibility for Co-op Bank’s woes, saying he was absolutely prepared to take the blame for other deals that he was fully involved in. The Lloyds bank branch deal doesn’t fall into this area, he claims.

Andrew Tyrie questions whether ‘tragedy’ is the right term to use for Co-op’ Banks woes — surely a tragedy is something unavoidable. This mess was quite avoidable.

Marks disputes this, and agrees with the suggestion that the Co-op Bank was an “innocent victim” of the financial crisis.

Marks repeats that the Co-op Bank’s slide into the hands of two US hedge funds is a “tragedy”, but claims it could be a good thing for the wider Group.

It will force the Co-operative Group to focus on key areas and not stretch its capital, he suggests, harking back to his earlier warning that the organisation is spread too thinly.

Labour MP John Mann savages Peter Marks over the situation at Co-op Bank today, accusing Peter Marks and colleagues of being “totally out of your depth when trying to grow the Co-op so rapidly.”

That’s why two US hedge funds are taking control of the Co-op, right?

Marks replies that those two funds are only taking majority control of Co-op Bank, not the wider Group.

Marks says he helped to guide the Group through the “worst recession in living memory”.

Did you make disastrous errors, John Mann inquires:

Marks say that it’s harsh to use the word disastrous, but concedes there were certainly errors.

Treasury committee chairman Andrew Tyrie is digging down into the details of who was actually taking the decisions that led to Co-op Bank’s slide into trouble.

Marks isn’t taking individual responsibility for the failed bid for Lloyd’s branches, saying that Neville Richardson (the Co-op’s Bank’s former) boss took most of the key decisions.

Tyrie says it looks like another example of “everyone collectively moving forward together, and no-one actually running it”.

He asks Marks if he’s read the Banking Standards Commission’s report into the sector, and Marks concedes that he hasn’t read it thoroughly.

What’s the Commission’s key recommendation?

Marks doesn’t know.

It’s that there should be individual responsibility for key decisions, Tyrie replies,.

Marks agrees that he was the ‘driving force’ behind Co-op’s bid for the Lloyds branches, calling it a “great opportunity” to deliver the scale that Bank needed.

But wasn’t it a catastrophic misjudgement, asks Jesse Norman MP ?

No, Marks says, arguing that Co-op Bank’s fundamental problem was a lack of capital. This deal would have brought much-needed capital in.

Updated

Onto the details of Co-op’s Bank’s failed bid for the branches being spun off by Lloyds (known as Project Verde)

Was Peter Marks aware of political interference with the Verde process? “Not that I’m aware of,” he replies.

Peter Marks seems reluctant to take too much blame for the Co-op Bank’s troubles, pointing out that he wasn’t personally regulated by the Financial Services Authority to run a bank.

He’s also pinned responsibility for the Britannia merger on Neville Richardson, Britannia’s chief executive at the time who became head of Co-op Bank, and former Co-operative Financial Services boss David Anderson:

The Treasury committee are trying to get a handle on exactly who to blame for Co-op’s woes.

Marks argues that ”we all have to take some degree of responsibility, including me”.

He has concedes that Co-op Bank’s “ethical reputation has been damaged” by the PPI scandal, in which it is paying out over £200m in compensation.

Co-op Bank was forced into trouble by its take-over of the Britannia Building Society in 2009, Marks agrees. With hindsight, he wouldn’t do it again.

Former Co-op chief Peter Marks went on to warn that the Co-operative Group is spread too thinly.

Marks, who stepped down in May 2013, is being asked by Andrew Tyrie about structural problems at the Group. He says:

I think there are areas of governance within the Co-operative that absolutely need to change.

So why didn’t you change then, Tyrie inquires.

Marks replied that he wasn’t on the board of the Group.

He than warns that the group, which runs supermarkets, pharmaceutical branches, funeral services, insurance and banks, is simply involved in too many different operations.

It was, and still is, stretching its capital over too many businesses, Marks added.

Updated

Ex-Co-op boss: Bank’s problems are tragic

Over in Westminster, MPs on the Treasury committee are starting to quiz Peter Marks, the former chief executive of the Co-operative Group.

Marks is facing questions over the Co-op’s ill-fated attempt to buy hundreds of bank branches from Lloyds. That bid was scuppered by the discovery of a capital shortfall in Co-op Bank, which eventually led yesterday to the Group losing majority control of its Bank after a battle with US hedge funds.

My colleague Jill Treanor is there, and reports:

The session is being streamed live here - although it has been a little flakey…

UK public finances, the key charts

This chart, from today’s UK public finances, shows how tax receipts rose 7% year-on-year in September, after a weaker August:

And this graph shows how cumulative borrowing since April is lower than a year ago:

UK public finances show improvement

Just in: the UK borrowed less than expected in September, thanks to an increase in tax revenues.

Britain’s Public Sector Net Borrowing, excluding the cost of financial interventions, came in at £11.072bn, beating forecasts of £11.2bn and better than last year’s £12.067bn.

The Office for National Statistics reported that central government accrued current receipts rose to £44.8bn, up £2.9 billion or 7.0% compared with September 2012.

The ONS explains, though that the monthly data needs treating with caution:

The higher receipts in September 2013 (compared with September 2012) came from taxes on production and taxes on income and wealth. However, the relatively large increases seen in taxes on income and wealth have been affected by monthly volatility. These are related to timing effects which offset the falls seen in August.

The ONS also reported that Britain’s ‘underlying’ Public Sector Net Borrowing since the start of April has now reached £56.7bn, 9.4% lower than a year ago.

By other measures, though, borrowing is actually up this year (due to various one-off factors like putting the Royal Mail pension fund onto the public books last year)

I’ll post some charts now….

Charlie Bean, one of the Bank of England’s deputy governors, has urged Europe to crack on and implement banking reform.

In a wide-ranging speech to the Society of Business Economists, Bean said it was important that Europe used the window created by Mario Draghi, who he credited with saving the euro from break-up.

Bean said:

The euro area is no longer in existential crisis, in part as a result of the willingness of the European Central Bank (ECB) to take redenomination risk off the table through its Outright Monetary Transactions programme.

The countries of the euro-area periphery have also made progress in restoring
competitiveness and rebalancing the composition of demand, though there is still quite a way to go. Member states are working towards the creation of a functional banking union, which has the potential to break the link between sovereigns and banks.

And in preparation for becoming the euro-area banking supervisor, the ECB is planning a rigorous review of the quality of banks’ assets, to be followed by a set of stress tests and, if necessary, recapitalisation. Provided these carry credibility with the market, this could do much to restore confidence in the euro-area banking system.

Bean also said the UK recovery was ‘gaining traction’ (we get new GDP data on Friday), and also defended the BoE’s forward guidance (which means interest rates shouldn’t rise until the labour market improves).

Over in Luxembourg, Jean-Claude Juncker’s long grip on power could finally be slipping.

Although Juncker’s party won the most support in Sunday’s elections, it lost three seats – dropping to just 23 of the 60 seats in parliament.

Opposition parties are beginning coalition talks, as Reuters reports this morning:

Luxembourg Prime Minister Jean-Claude Juncker was facing the end of a 19-year run in power on Tuesday after the centre-right Democratic Party (DP) said it would begin coalition talks with would-be partners, the Socialists and the Greens.

Juncker’s Christian Social People’s Party (CSV) has led governments in the tiny state between France, Germany and Belgium for all but five years since World War Two, but lost three seats in an election on Sunday to leave it with just 23 in the 60-seat parliament.

That was the party’s worst showing since 1999. The Democratic Party and the Socialists both won 13 seats and the Greens six.

“We will contact them to come together tomorrow to see if there is a possibility to work together in the coming five years,” DP leader Xavier Bettel told RTL television. “It’s a realistic option.”

Juncker was a familiar face in the dark days of the eurozone crisis, as leader of the Eurogroup of finance ministers (he stepped down at the end of 2012). Now, his position as Luxembourg’s PM could be at risk…. 

Heads-up. Greek MPs will vote today on whether to withdraw funding from parties whose members face serious criminal charges – the latest step in the clampdown against the extremist Golden Dawn group.

Kathimerini explains:

Greece’s conservative-led government and leftist opposition SYRIZA have reached a common position, with the leftist party confirming last week that it will vote in favor of the bill, which has been drafted by Interior Minister Yiannis Michelakis after extensive consultation with the Parliament’s opposition parties.

Last week MPs voted by an overwhelming majority to lift the immunity of six Golden Dawn MPs, opening the way for a broadening of a criminal investigation into the ultra-right party, which is the real target of the bill being voted on on Tuesday.

Economist Shaun Richards fears Ofgem’s clampdown on energy tariffs is too late.

Updated

Downbeat news from Lufthansa has sent the German airline’s shares down almost 4% this morning.

In an unscheduled update, Lufthansa warned that restructuring costs will wipe €200m off operating profits this year, with various ‘project’ costs costing another €100m. More here.

CEO Christoph Franz has been implementing a radical shake-up of the company, cutting thousands of jobs and shifting more traffic to its budget offering, Germanwings. Analysts had expected the company to deliver operating profits of around £917m — it now says it’ll be between €600m and €700m.

A pretty mixed start to European stock market trading, with the FTSE 100 creeping higher (up 0.1%) the German DAX flat, and the French CAC down 0.2%.

The excuse is that traders are waiting for those US jobs numbers at 1.30pm BST:

Mike van Dulken of  Accendo Markets agrees, saying:

 US jobs will be the driver for a break one way of the other. Or much ado about nothing?

Asian markets had also been mixed overnight, although Australia’s A&P/ASX 200 did gain another 0.4% to a new five-year high.

Ofgem hits ScottishPower with £8.5m penalty and tightens tariff rules

After taking quite a mauling in recent weeks over its handling of the energy market, watchdog Ofgem is showing its teeth in two ways this morning.

It has told Scottish Power to repay £8.5m to customers for breaking mis-selling rules, after finding that the agents who knocked on doors and ‘phoned households to suggest they change energy supplier had misled customers.

Ofgem said the penalty would “directly benefit vulnerable consumers and compensate consumers that were misled” by Scottish Power (which ended doorstep visits in 2011).

In a statement, senior partner Sarah Harrison declared:

Today’s announcement is a clear signal to energy suppliers of the consequences of breaching licence obligations and of the importance of taking action to put things right for consumers when they go wrong.

Ofgem has also announced that new rules on energy prices come into effect today, as a time when customers are reeling from large hikes in tariffs. Details are here.

The key points:

• it will prevent firms from raising the price of ‘fixed-term deals’ (sounds fair – the clue is in the name, after all).

• Firms also won’t be allowed to simply roll a customer over onto a new fixed-term contract when their existing one ends.

• “Simpler” tariffs will come in from December, with customers also getting “clearer information” in March 2014.

A case of better late than never? 

There’s also nothing here to prevent a company hitting consumers with the hefty price hikes seen in recent days.

As Ofgem boss Andrew Wright explains, the idea is to help customers ‘vote with their feet’, to keep the industry playing fair:

In an era of rising prices it is vital that competition works as effectively as possible.

Our reforms seek to give consumers the tools they need to find the best energy deal for them and to ensure that suppliers have to treat them fairly.

Updated

Oil price drops

The oil price has dropped again overnight, with a barrel of US crude dropping to $98.79 – its lowest level since early July.

US crude dropped through the $100 mark yesterday, as data showed an rise in oil inventory levels. Traders are also calculating that the economic damage cause by the US shutdown will mean less demand.

Could be good news for motorists, if it feeds through to the pumps…

Updated

Non-Farm Payroll, the wait is over….

Good morning, and welcome to our rolling coverage of events across the financial market, the global economy, the eurozone and the business world.

Investors and economists are waiting with eager anticipation for America’s unemployment data, eighteen days late thanks to the disruption caused by the US government shutdown shutdown.

After a Beckettian wait, we finally find out at 1.30pm BST how many jobs were created across the US last month — a key measure of the health of the world’s largest economy at the start of autumn.

Forecasts for the Non-Farm Payroll vary widely (as ever). The consensus is that 180,000 new job were created last month — there could be some lively action if this prediction is way off beam.

Under normal circumstances, the jobs data would indicate if the Federal Reserve is close to turning down the tap on its $85bn/month stimulus package. But the disruption caused by America’s government shutdown has thrown that up into the air.

What else is afoot?

Well, UK public finances are released at 9.30am – showing how much Britain borrowed to balance the books in September.

While in Parliament from 10am, MPs will be questioning the former boss of The Co-operative Group, Peter Marks, a day after the company surrendered control of its Bank to its bondholders (front page news in today’s paper)

Eurozone-wise, we’ll be watching Greece (where the Troika of lenders return next week), Portugal (whose finance minister ruled out a second bailout yesterday), and Italy (where opposition to the 2014 budget was growing).

I’ll be tracking the main events through the day – let me know what I’ve missed!

Updated

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

Published via the Guardian News Feed plugin for WordPress.

IMF Chief Christine Lagarde says “vital to raise US debt ceiling”. The US Treasury Department also weighed in, warning of dire calamity. US services sector showed growth was slowing, with the PMI coming in at 54.4 in September, down from 58.6 in August…

 


Powered by Guardian.co.ukThis article titled “Lagarde demands urgent action over US debt ceiling as markets get jittery – as it happened” was written by Graeme Wearden, for theguardian.com on Thursday 3rd October 2013 16.51 UTC

The end

The big story tonight remains the US government shutdown - which my US colleagues are live-blogging here. So here’s a brief summary to finish with.

• Christine Lagarde has piled pressure on America’s politicians to raise the US debt ceiling quickly. The IMF chief said it was “mission-critical” to avert the danger of a US default. The country’s Treasury Department also weighed in, warning of dire calamity.

• Fears over a possible US default hit shares on Wall Street. There were also signs of investors moving money out of short-term US debt, pushing up bond yields. Encouraging US jobs data was cancelled out by weaker service sector growth. Here’s what analysts are saying about the debt ceiling….

• Europe’s private sector has posted its biggest rise in activity in 27 months. Italian firms reported a stronger month, boosting hopes that the country is pulling out of recession. Retail sales also picked up.

• China’s service sector performed well in September too, pushing activity to a six-month high.

• In Greece, the head of the Golden Dawn party is being held in custody ahead of the criminal trial into the party, as the clampdown continues to raise fears over the country’s political stability. Another GD MP appeared in court, as the party raged against the decision to jail its leader.

• A survey of a Cyprus gas field found smaller reserves than hoped, but the government will still push on with exploiting it.

Back tomorrow, hopefully for a more lively day. Goodnight. GW 

An uninspiring day in Europe’s stock markets is over.

The FTSE 100 finished up 11 points at 6449, but the other main markets all lost ground. The French CAC shed 0.7%, the German DAX closed 0.37% lower, Spain’s IBEX is down 0.7% and the Italian FTSE MIB dropped 0.5%. No boost from today’s decent eurozone economic data, while the US debt ceiling deadline gets closer…..

Updated

The Japonica Partners investment fund, which has a big holding of Greek debt, has been holding a conference call for City analysts to explain why Greece’s bonds are actually much better quality than people realise.

Here’s a screengrab of Bloomberg’s news flashes:

FT Alphaville’s Joseph Cotterill is on the call, and flags up that Japonica was asked whether it’s planning to buy Greek state assets with its Greek government bonds. The idea wasn’t ruled out….

Wall Street falls

Those warnings over the US debt ceiling from Christine Lagarde, and from the US Treasury, come as shares fall on Wall Street today.

US traders pushed down the Dow Jones industrial average, as they watched Barack Obama lay into the Republicans in a speech in Rockville, Maryland (details in our US liveblog).

The Dow Jones industrial average is down 130 points, or 0.8%, with 28 of its 30 members losing ground.

It’s not all because of the deadlock on Capitol Hill. A monthly survey of the US services sector showed growth was slowing, with the PMI coming in at 54.4 in September, down from 58.6 in August (anything over 50 shows growth).

There are already fears that the shutdown will cost jobs and hit growth.

United Technologies, which supplies helicopters and jet engines to the U.S. military, has warned that if there’s no deal by Monday it might tell 2,000 workers to down tools. Bloomberg has the details.

My US colleague Tom McCarthy has launched a new liveblog tracking Day Three of the government shutdown:

Government shutdown enters third day after talks fail to break deadlock – live

It includes details of a report from the US Treasury Department which warns that there would be catastrophic consequences if America doesn’t raise its debt ceiling on time.

It certainly sounds scary:

A default would be unprecedented and has the potential to be catastrophic,” the Treasury reported.

“Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.

Surely they’ll get a debt ceiling deal in time, right? Surely….

Heads-up, Alexis Tsipras, head of Greece’s Syriza party, is giving a press conference with European Parliament president Martin Schulz.

It’s being streamed here.

The Golden Dawn clampdown has been raised. Schulz said there was “no place” for those with Nazi views in a democratic society while Tsipras welcomed the EP’s plans for a special session on “Golden Dawn and right-wing extremism”.

Tsipras also slammed the Greek bailout programme, saying: “One shouldn’t be taking new loans to pay off old ones,” according to AP’s Jurgen Baetz.

I don’t think he’s arguing against rolling over sovereign debt….

The IMF are tweeting highlights from the Lagarde speech, where she’s warning about the looming debt ceiling:

Lagarde: Mission critical to resolve US government crisis now

The head of the International Monetary Fund, Christine Lagarde, urged America’s warring politicians to settle their differences as she warned that an escalation of the budget row would harm the entire global economy, our economics editor Larry Elliott writes:

Speaking ahead of the Fund’s annual meeting in Washington next week, Lagarde said it was “mission critical” that Democrats and Republicans raise the US debt ceiling before the October 17 deadline.

Financial markets have started to take fright at the prospect that America could go into technical default as a result of the impasse in Washington and the IMF’s managing director said the dispute was a fresh setback for a global economy that would take at least a decade to recover from the deep slump of 2008-09.

Lagarde said:

I have said many times before that the U.S. needs to “slow down and hurry up”—by that I mean less fiscal adjustment today and more tomorrow.

She added that the world’s biggest economy needed to put its finances in order, but favoured back-loaded measures to raise revenues and limit entitlement spending that did not jeopardise short-term growth.

Lagarde added:

In the midst of this fiscal challenge, the ongoing political uncertainty over the budget and the debt ceiling does not help. The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the US economy, but the entire global economy.

So it is “mission-critical” that this be resolved as soon as possible.

We’ll have the full story online shortly

Some early snaps from Christine Lagarde’s speech, in which she also warns that America was too eager this year to cut spending and raise taxes:

03-Oct-2013 15:00 – IMF’S LAGARDE SAYS U.S. ECONOMIC GROWTH THIS YEAR WILL BE ‘TOO LOW,’ BELOW 2 PCT, DUE TO TOO MUCH FISCAL TIGHTENING

03-Oct-2013 15:00 – LAGARDE SAYS U.S. GROWTH WILL BE ABOUT 1 PERCENTAGE POINT HIGHER IN 2014 AS FISCAL STRAINS EASE – SPEECH TEXT

03-Oct-2013 15:00 – LAGARDE SAYS U.S. FAILURE TO RAISE DEBT CEILING COULD ‘VERY SERIOUSLY’ HURT U.S. AND GLOBAL ECONOMY, CRITICAL TO RESOLVE AS SOON AS POSSIBLE

03-Oct-2013 15:00 – LAGARDE SAYS MARKET TURBULENCE SINCE MAY OVER PERCEIVED END TO U.S. EASY MONEY POLICIES COULD REDUCE GDP IN MAJOR EMERGING MARKETS BY 0.5 TO 1 PCT

Christine Lagarde urges US politicians to end budget row

Breaking: Christine Lagarde, head of the International Monetary Fund, has urged politicians in Washington to act quickly to resolve the government shutdown before the global economy is hurt badly.

Speaking in Washington right now, Lagarde is warning that a failure to raise the debt ceiling could “very seriously hurt” the US and global economy.

It is critical to resolve the crisis soon, she said.

More to follow

Updated

The yield on America’s one-month debt has risen to the highest level in 10 months, suggesting investors are getting worried about the looming debt ceiling and selling bonds which mature at the end of October.

This has pushed the yield up to 0.129%, from just 0.028% a week ago. That’s still a very ‘safe’ level, of course, but it’s a sign that the US budget deadlock is starting to make traders more nervous, with the debt ceiling looming.

The cost of insuring US bonds against default is also up:

Updated

Some reaction to the Cyprus gas drilling results:

Updated

Cyprus gas results are in

Cyprus’s hopes of receiving a huge windfall from offshore reserves of natural gas received a knock today, after new drilling results found there is less recoverable gas at one field than hoped.

The Nicosia government announced the results of exploratory drilling off its coast a few minutes ago. Texas’s Noble Energy, which did the drilling in the Cypriot Aphrodite concession, also updated its shareholders.

And the news is that Noble Energy has estimated there is 5 trillion cubic feet of natural gas (or between 3.6trn and 6trn) to be recovered at that particular gas field south of the Mediterranean island. That’s a disappointment, as earlier drilling in 2011 indicated there was 7 trillion cubic feet (or between 5trn and 8trn).

The Cypriot government is still pushing on with its plans to exploit the reserves, though:

Cypriot energy minister Yiorgos Lakkotrypis told reporters:

It’s important to state from the outset that, despite the lower quantities we announce today compared to those of 2011, the confirmed reserves affirm a particularly important reserve of natural gas.

Keith Elliott, Noble Energy’s senior vice president for Eastern Mediterranean, also remained upbeat:

Results from the Cyprus A-2 well have confirmed substantial recoverable natural gas resources and high reservoir deliverability.

Cyprus has talked about recovering 60 trillion cubit feet of gas from its reserves – although some analysts are skeptical.

Separately, there are reports from Cyprus that the country is considering withdrawing from Eurovision as part of its financial plight.

Can we come too?

Updated

Here’s a handy graph putting today’s US jobs data into some context:

US initial jobless claims rise slightly

The weekly US jobless claims data is out…and it shows a small rise in the number of people signing on for unemployment benefit last week.

The initial jobless claims total rose by 1,000 last week to 308,000. That’s close to the recent six-year low, and better than expected.

The four-week average fell, to 305,000 – which is the lowest since May 2007.

That won’t include the effect of the US government shutdown (as this data runs to 28 September and the shutdown began at midnight on 1 October).

Oil giant BP helped push the FTSE 100 higher this morning, after a US court ruled in its favour in a case about compensation payments following the Deepwater Horizon diasaster.

BP share are up 1.5% in London, and are expected to rise a similar amount in New York. Last night, judges ruled that the company should not be forced to pay billions of dollars in compensation to those not directly affected by the environmental damage following the oil rig explosion in which 11 men died.

Angela Monaghan explains:

The British oil company welcomed a ruling by the US court of appeals which will force a rethink on how compensation claims related to the disaster will be assessed.

The supreme court also ordered that payments must be stopped to people who did not suffer “actual injury traceable to loss” from the spill until cases have been properly heard and decided through the judicial process.

More here: BP welcomes US court of appeal ruling on Gulf of Mexico oil spill payouts

Here’s the situation in Europe’s stock markets this lunchtime:

(I was incorrect to say the DAX was closed today for Germany’s Unity Holiday — but given it’s down 0.02% it may as well be :) )

Plenty of chatter in the City today about whether America will raise its debt ceiling in time.

Gary Jenkins of Swordfish Research reckons Washington DC will get its act together, before the US crashes into the $16.7bn borrowing limit, probably around 17 October.

He writes;

After all, would politicians really be so stupid as to go through a process in which the potential unintended consequences could be so harmful, where there is no precedent for their actions and where there is no clear plan of what exactly they are trying to achieve? (Unless it’s to do with military action…).

Jenkins adds, though, that the US should be careful about appearing so blasé about its priorities:

 If the US were a company and the shareholders were openly discussing whether or not they should pay their bills or not then I find it hard to believe that the agencies would be taking such a relaxed view of the matter.

So, even if the politicians step back from the abyss, unless the debt ceiling dynamic is dealt with we could see a recurrence of current events. I do not know what the unintended consequences will be, but then again nor do the politicians. What I do know is that if I had the major economic and political advantage of having the world’s reserve currency and most wanted debt instrument is that I wouldn’t play around with it.

There’s talk in Washington of carving out a ‘Grand Bargain’ (a wide-ranging fiscal program designed to lower America’s long-term borrowing needs). That’s a tough task, though, especially when the two sides can’t agree to reopen the government.

Louise Cooper of Cooper City reckons any deal will just be a temporary patch-up job

While Ishaq Siddiqi, market strategist at ETX Capital, isn’t 100% convinced Washington will manage a deal in time.

The fact that US lawmakers are tied in a game of political brinkmanship over a fresh budget leaves traders not feeling too confident that lawmakers will be able to find common ground on raising the debt ceiling.

Indeed, failure to do so could see a US default. President Obama warned Wall Street last night that a conservative faction of the Republicans is willing to allow the US to default on its debt, lifting fears in the market that such a scenario could be played out.

The euro has risen around 0.2% against the US dollar to $1.360, while Europe’s stock markets are pretty calm.

Another Golden Dawn MP in court

Back to Greece, another Golden Dawn MP has arrived in court as the courtroom drama over the last two days continues to reverberate.

Michaloliakos’ right hand man, Christos Pappas, was also arrested on charges of overseeing a criminal organisation. His hearing was due to start at 1pm local time, or 11am BST.

Earlier this week anti-terror units discovered “a heap” of Nazi paraphernalia in Pappas’s home, including a book titled “Hitler by my side”.

Golden Dawn itself is furious that judges decided to jail its leader, Nikos Michaloliakos, ahead of a trial over charges that the party is a criminal gang. It issued a statement calling the move “wretched plot” and blaming it on ”foreign centres.”

From Athens, Helena Smith reports:

In a move that has stunned Greeks, Ilias Kasidiaris, the party’s spokesman who emerged from court yesterday kicking and shoving journalists, has now used the media to denounce the imprisonment of Michaloliakos.

“The detention of our general secretary is totally unjust, unconstitutional and has been dictated by foreign centres of power,” he has told reporters gathered outside the court.

Yesterday’s courtroom drama (and the violence seen outside court afterwards) also gets plenty of coverage in today’s newspapers.

Reuters flags up:

“The leader’s in, the gang’s out!” top-selling daily Ta Nea wrote on its front page. “It is the state’s duty to go to the end: The criminals need to be revealed, they need to be tried, and they need to pay,” the newspaper said.

Kathimerini makes an important point. This is a live criminal trial, Due process needs to be followed.

The fact that certain Golden Dawn deputies were released from pretrial custody – conditionally – does not in any way represent evidence of their innocence, just as their being remanded to appear before a magistrate had not meant that they were guilty of the crimes being leveled against them.

Updated

More good news for the European economy: retail sales were much stronger than expected in August.

Eurostat reported that retail sales volumes rose by 0.7% in the euro area, and 0.4% across the wider European Union in August. July’s data was also revised higher, showing consumers weren’t as cautious about spending as first thought.

Eurostat’s data shows that non-food shopping was strong, rising by 0.6% in the eurozone. That covers items such as computers, clothing and medical products.

The data also showed an increase in fuel purchases, suggesting a rise in motor journeys. Spending on “automotive fuel in specialised stores” (that’s petrol stations to you and me) was up by 0.9% across euro members.

Nice result for Spain in the bond markets this morning, suggesting the political tensions in the euro area have eased following yesterday’s Italian confidence vote.

Spain sold its maximum target of debt in a strong auction, in which borrowing costs hit their lowest level in three years.

The auction saw the Spanish treasury shift €1.18bn of 10-year bonds at a yield (the rate of return on the debt) of 4.269%, a drop on the 4.5% paid last month.

Updated

UK service sector on a charge

The UK’s service sector has revival continues, with the strongest quarterly growth in 16 years - driven by the upswing in the housing market.

The monthly PMI survey shows that September was another strong month — with a reading of 60.3, close to August’s seven-month high of 60.5 and deep into expansion territory.

However, firms dependent on consumer spending aren’t doing quite as well as financial firms, it appears….

Reuters handily provides more details:

The sector saw jobs growth in September, something mirrored in surveys of manufacturing and construction earlier this week.

Over the third quarter as a whole, the index – measuring the change in activity, including income and chargeable hours worked, from the previous month – averaged its highest level since the second quarter of 1997, Markit said.

“Growth is being led by financial services – linked in part to increased housing market activity – and the business sector,” said Chris Williamson, chief economist at survey compilers Markit.

“Consumer-facing services continue to struggle, reflecting the ongoing squeeze on incomes due to weak pay growth and high inflation.”

Around half of firms surveyed in the service sector – which makes up more than three quarters of Britain’s output – expected even brisker trade in a year’s time, with the outlook index rising to 71.8.

Service providers reported that a jump in new business last month placed strain on resources, with backlogs of work rising at the fastest pace in more than 13 years.The workload, along with firms’ optimism about future business, led to a solid rise in employment and some pay rises.

Updated

Eurozone private sector output hits 27-month high

The eurozone recovery is gathering pace, with its private sector firms reporting the biggest leap in activity since June 2011 last month.

Data firm Markit’s monthly surveys of companies across the single currency showed a solid rise in activity.

New business has picked up, and the rate of job cuts may finally be slowing to a halt.

Markit’s monthly survey of activity came in at 52.2, up from August’s 51.5. Both service sector firms and manufacturers said conditions were better.

Here’s some key factoids from the report (online here)

Ireland: 55.7 2-month low
Germany: 53.2 2-month low
Italy: 52.8 29-month high
France: 50.5 20-month high
Spain: 49.6 2-month low

The news comes hours after China’s service sector output hit a 6-month high.

Chris Williamson, chief economist at Markit, said the eurozone data showed Europe’s recovery on track, despite Spain’s private firms faltering after a better August.

The final PMI confirms the message from the earlier flash reading that the eurozone enjoyed its strongest quarter of expansion for just over two years in the third quarter. With the rate of expansion picking up in September, the survey bodes well for ongoing growth in the final quarter of the year.

Growth is being led by Germany, but France has also now returned to growth. Even more encouraging are the upbeat survey data for Ireland and Italy, both of which show signs of returning to robust growth, and Spain has also stabilised, as ongoing weakness in the domestic economy is offset by a strong upturn in exports.

But don’t get the bunting out yet — this only suggests a weak recovery.

Williamson explains:

Growth remains only modest – the Eurozone PMI is consistent with GDP rising by just 0.2% on the third quarter, and the political instability that has reared up in Italy is a reminder that there remains plenty of scope for recoveries to be derailed.

Updated

Italian service sector finally growing

Good news from Italy this morning – its service sector has burst back into growth for the first time in 28 months.

This may suggest the Italian economy has finally stopped shrinking, a new boost a day after prime minister Enrico Letta faced down Silvio Berlusconi’s revolt.

Data provider Markit says it’s a welcome sign that the economic recovery could be underway, with the monthly PMI jumping to 52.7 in September, from 48.8 in August. It’s not been over the 50-point mark (which separates contraction from expansion) since May 2011.

Here’s the key points:

• Business activity lifted by increase in new work

• Job shedding continues, but at slower rate

• Future expectations highest in more than two years

Credit Agricole’s Frederik Ducrozet is encouraged:

Phil Smith, economist at Markit, said the data shows “the first signs” of recovery in the Italian economy after some grim months. But without political stability, he warned, it could quickly deteriorate.

He explained:

Should the data hold up, however, there may also be a return to growth in service sector employment, which showed its slowest fall for 16 months in September.

A significant improvement in businesses’ expectations for the year ahead will have no doubt also helped on this front.

The data, alongside those for manufacturing, show Italian GDP at least stabilising in Q3 and perhaps even rising slightly for the first time in more than two years. Political stability is key to this forward momentum being sustained into the later stages of the year and beyond.

Updated

Overnight in Greece, the head of the far-right Golden Dawn party was remanded in custody, hours after three of his MPs were released pending trial.

Another MP, Yannis Lagos, was also detained, as was Giorgos Patelis, the head of Golden Dawn’s local office in the area west of Athens where hip-hop star Pavlos Fyssas was stabbed two weeks ago. <updated, many thanks to reader Kizbot>

All the men faces charges of running a criminal gang, which they deny.

From Athens, Helena Smith reported:

Armed police led Nikos Mihaloliakos away from the courthouse in handcuffs in the early hours of Thursday after testimony lasting more than six hours.

His wife and daughter, also party members, and other Golden Dawn MPs, stood outside the building and shouted words of encouragement to him as he was led away.

“The ridiculous little men, they decided to jail the leader,” said party MP Michalis Arvanitis.

Golden Dawn leader jailed pending trial after Athens hearing

Updated

Just in – Spain’s service sector suffered a drop in activity in last month. Its PMI index has fallen into contraction territory again — at 49.0 in September, down from 50.4 (showing slight growth) in August.

Markit, which compiles the PMI data, also reported that new order growth slowed. On the upside, optimism hit a 41-month high.

Spain’s government ministers have been boldly declaring that the recession is over. This data doesn’t suggest much of a recovery yet.

Andrew Harker, senior economist at Markit, commented:

The Spanish service sector failed to show much sign of a recovery during September as activity fell back in response to weaker new order growth which itself had been supported by further sharp discounting.

One bright spot from the latest survey was that companies were at their most optimistic about the future for nearly three-and-a-half years, suggesting that Spanish service providers are seeing some light at the end of the tunnel.

Markets edge higher

Shares are edging a little higher in early trading — suggesting China’s strong service sector data is trumping US deadlock woes.

Here’s the early prices: (German’s DAX is closed for a public holiday)

FTSE 100: up 20 points at 6458, + 0.3%

French CAC: up 7 points at 4,165, + 0.18%

Italian FTSE MIB: up 98 points at 18,191, +0.5%

Spanish IBEX: up 21 points at 9,371, +0.23%

Mike van Dulken, head of research at Accendo Markets, reckons there’s some “cautious optimism” in the City this morning, despite the lack of progress in Washington DC. He argues that, with America on track to smash into its debt ceiling on 17 October, there’s little chance of the Federal Reserve turning down its bond-buying stimulus programme soon:

Sentiment is still not quite ignoring, but nor is it pricing in the worst case scenario – which is no agreement until debt ceiling deadline, and possible sovereign default.

The possible assumption is that default won’t be allowed, but the longer the budget takes to sort out, the longer the Fed is held off from tapering. Happy days for easy money policy lovers and risk appetite.

Updated

Michael Hewson of CMC Markets says traders will be hoping for encouraging data from Europe’s service sector this morning:

As we enter the third day of the shutdown of the US government the various positions seem as inextricably entrenched as ever. On the plus side at least we don’t have to worry about the soap opera playing out in Italy as Silvio Berlusconi negotiated what could be politely called a tactical withdrawal and agreed to support Enrico Letta’s government after it became apparent he didn’t have his party’s support with respect to the confidence vote.

While he may have run into a brick wall on this occasion Berlusconi has never lacked the capacity to surprise, so I would doubt that we have heard the last of him in this regard.

In any case while the political uncertainty in Italy may have subsided for now it still remains quite likely that any type of reform is still set to remain slow and problematic.

As for the rest of Europe’s markets while the FTSE may get a slight boost from a positive China services PMI, they continue to have one eye on events in the US, finishing lower yesterday along with US markets, though after yesterday’s non event of an ECB press conference, todays focus is on the latest services PMI data for September for Italy, Spain, France and Germany. All are expected to show positive readings above 50, with the exception of Italy, which is expected to come in at 49.2, raising expectations of a continued recovery.

Chinese service sector output hits six-month high

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

Looks like a mixed day ahead . Growing concern over the US government shutdown have taken the shine of some encouraging Chines economic data earlier today.

While in Europe, Italy is waking up to front pages dominated by Silvio Berlusconi’s humiliating defeat in the Senate yesterday, where prime minister Enrico Letta swept home in his confidence vote. More on this shortly.

First the good news — growth in China’s service sector has surged to a six month high. Activity jumped to 55.4 in September, from 53.9 in August, as measured by the official Purchasing Managers Index (anything over 50 points = growth).

That suggests that Beijing’s efforts to pep up the Chinese economy is bearing fruit this autumn.

Craig Erlam, analyst at Alpari, explained:

This is just another sign that the government’s targeted stimulus efforts, which were announced a few months ago in order to combat the slowing growth in the economy and achieve its minimum 7% growth target, are having the desired effect on the economy.

That might normally give stock markets a boost, especially with more service sector data due from the eurozone and UK this morning.

But now the bad news — Wednesday was another day of deadlock in Washington, despite US bank chiefs urging politicians on Capitol Hill to get a grip before it’s too late.

Obama meets bank chiefs as economists warn of ‘deep and dark recession’ 

So it’s probably going to be a nervy day in the markets….

Updated

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