Greece

Greece ‘backsliding in democracy’ in face of joblessness, social unrest, corruption and disillusion with politicians, says thinktank. The report, commissioned by the European parliament, noted that Greece was the most corrupt state in the 28-nation bloc…

 


Powered by Guardian.co.ukThis article titled “Greece’s democracy in danger, warns Demos, as Greek reservists call for coup” was written by Helena Smith in Athens, for The Guardian on Thursday 26th September 2013 19.27 UTC

No country has displayed more of a “backslide in democracy” than Greece, the British thinktank Demos has said in a study highlighting the crisis-plagued country’s slide into economic, social and political disarray.

Released on the same day that judicial authorities ordered an investigation into a blog posting by an elite reservist group linked to Greece’s armed forces calling for a coup d’etat, the study singled out Greece and Hungary for being “the most significant democratic backsliders” in the EU.

“Researchers found Greece overwhelmed by high unemployment, social unrest, endemic corruption and a severe disillusionment with the political establishment,” it said. The report, commissioned by the European parliament, noted that Greece was the most corrupt state in the 28-nation bloc and voiced fears over the rise of far-right extremism in the country.

The report was released as the fragile two-party coalition of the prime minister, Antonis Samaras, admitted it was worried by a call for a military coup posted overnight on Wednesday on the website of the Special Forces Reserve Union. “It must worry us,” said a government spokesman, Simos Kedikoglou. “The overwhelming majority in the armed forces are devoted to our democracy,” he said. “The few who are not will face the consequences.”

With tension running high after a crackdown on the neo-Nazi Golden Dawn party, a supreme court public prosecutor demanded an immediate inquiry into who may have written the post, which called for an interim government under “the guarantee of the armed forces”.

The special forces reservist unit who issued the social media call – whose members appeared in uniform to protest against a visit to Athens by the German chancellor, Angela Merkel – said Greece should renege on the conditions attached to an international bailout and set up special courts to prosecute those responsible for its worst financial crisis in modern times. Assets belonging to German companies, individuals or the state should be seized to pay off war reparations amassed during the Nazi occupation.

Underscoring the social upheaval that has followed economic meltdown, the blog post argued that the government had violated the constitution by failing to provide adequate health, education, justice and security.

Insiders said the mysterious post once again highlighted the infiltration of the armed forces by the extreme right. This week revelations emerged of Golden Dawn hit squads being trained by special forces commandos.

Fears are growing that instead of reining in the extremist organisation, the crackdown on the group may ultimately create a backlash. The party, whose leaders publicly admire Adolf Hitler and have adopted an emblem resembling the swastika, have held their ground in opinion polls despite a wave of public outrage over the murder of a Greek rap musician, Pavlos Fyssas, by one of its members. Golden Dawn, which won nearly 7% of the vote in elections last year and has 18 MPs in Athens’ 300-member parliament, has capitalised more than any other political force on Greece’s economic crisis. “Much will depend on how well it will withstand the pressure and they are tough guys who seem to be withstanding it well,” said Giorgos Kyrtos, a political commentator.

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USA 

Athens government seeks two-month extension. University of Athens ‘suspends operations. Germany’s firms more confident as recovery continues. UK mortgage approvals hit highest since Dec 2009. Long slog expected over German coalition…

 


Powered by Guardian.co.ukThis article titled “Greece pleads for more time over public sector reforms – live” was written by Graeme Wearden, for theguardian.com on Tuesday 24th September 2013 17.06 UTC

Italian PM Enrico Letta is discussing the future of Telecom Italia, after Spain’s Telefonica announced plans to take a much larger stake in its parent company (up to 70%).

Fab Goria tweets the key points:

And here’s more details of the University of Athens’ decision to suspend operations, because (it says) public sector job cuts have made it impossible to continue: University of Athens, NTUA Suspend Operations

Updated

Greek government pleads for more time over public sector layoffs

Over in Greece our correspondent Helena Smith reports that the government has appealed for more time to press on with the troika’s most controversial of demands yet: public sector dismissals.

Inspectors from the EU, ECB and IMF have yet to respond, on a day in which Greek public workers protested again.

And in another worrying development, the University of Athens has suspended all its operations, saying it cannot keep functioning with so many staff laid off.

Helena writes:

Barely two days after negotiations with visiting troika representatives began, prime minister Antonis Samaras’ coalition government has upped the ante asking for yet more time to implement reforms.

At a meeting with mission heads from the EU, ECB and IMF, the administrative reform minister Kyriakos Mitsotakis appealed for a two-month extension to the deadline Athens presently has to transfer some 12,500 civil servants into a so–called mobility scheme where employees would see their salaries drastically reduced before being moved, if lucky, to another government department.

Insiders at the ministry described the atmosphere of the talks “as very positive” – in sharp contrast to the environment outside where thousands of demonstrators gathered to issue howls of protests.

To underline that point about a positive atmosphere the meeting was even cut short, apparently by a good 40 minutes. But a source close to the troika was not so confident.

He said:

They [auditors] made it clear that they would come back with an answer Friday.

Yes, Greece has made progress but there is a feeling that what we are seeing is yet more stalling of the inevitable with the government once again biding time.

After a mad dash scramble the ministry managed to complete the first phase of the scheme – identifying 12,500 civil servants who could be transferred to the programme by the end of the month. Most are from the education sector and have included teachers, administrative staff and school guards.

But the effects of the crude fiscal logic that has often guided those decisions has not been without consequence.

Earlier today the University of Athens repeated that with layoffs making its “educational, research and administrative operation … objectively impossible” it regretted to inform the public that it was “forced to suspend all of its operations.”

“There is a possibility that the next six months could be lost but the bigger issue is not to lose the university altogether,” its rector Theodosis Pelegrinis said. The academic insisted the dismissals had been handled “in an excessive manner” without foresight or any proper review.

Describing the job losses as “incomprehensible” the university’s senate said the cuts would lead with mathematical precision to “undermining higher education and the young generation of Greece, the only real hope for overcoming the social and economic crisis in the years to come.”

Syriza, the radical left main opposition party that has spurred on protests, announced that its leader Alexis Tsipras would hold talks with school teachers tomorrow.

A bad day for cruise firm Carnival, which has been keelhauled to the bottom of the FTSE 100.

Carnival shares fell by 5.6% today, after it warned that bookings are sharply lower this year.

As my colleague Nick Fletcher explains, Carnival spooked the markets by reporting a 30% fall in third quarter earnings after problems with a number of its ships. Most famously, Costa Concordia, which was finally refloated last week after crashing in early 2012.

Bookings for the rest of 2013 and the first half of 2014 are down on the previous year, the company admitted.

It admitted it could take three years for the Costa brand to recover its reputation, following the Concordia disaster in Italy and another setback involving Costa’s Triumph vessel which stranded passengers for five days. Mechanical problems have dogged some of its other vessels.

Video: Top banker under fire over Libor answers

The Libor scandal has taken another twist this afternoon. 

The Wall Street Journal is reporting that Alex Wilmot-Sitwell, a former top UBS executive, is under fire over the testimony he gave to Parliament in January, regarding attempts by traders to fix the rate at which banks would lend to each other.

Wilmot-Sitwell told MPs on the Treasury Committee that he didn’t recall Tom Hayes, one of the traders at the heart of the scandal. But the WSJ’s David Enrich has discovered that Wilmot-Sitwell was included on various emails which discussed Hayes — who was charged over the Libor affair in June.

Mark Garnier MP, a member of the Treasury Committee, says Wilmot-Sitwell has “questions to answer”.

Here’s the full email chain

And here’s the WSJ’s story: Ex-UBS Executive Under Fire Over Libor Testimony

Greece threatened with demotion, again

FTSE Group, the stock market index company, has again threatened to expel Greece from its list of Developed Markets, and rank it as an Advanced Emerging market.

In its Annual Country Classification Review, published this afternoon, FTSE said it was leaving Greece on its Watch List, for yet another year. Greece was first placed on Watch for a possible downgrade in 2006. 

  • Argentina: Possible demotion from Frontier
  • China ‘A’ Share: Possible inclusion as Secondary Emerging
  • Greece: Possible demotion from Developed to Advanced Emerging
  • Kazakhstan: Possible inclusion as Frontier
  • Kuwait: Possible inclusion as Secondary Emerging
  • Mongolia: Possible inclusion as Frontier
  • Morocco: Possible demotion from Secondary Emerging to Frontier
  • Poland: Possible promotion from Advanced Emerging to Developed
  • Qatar: Possible promotion from Frontier to Secondary Emerging
  • Taiwan: Possible promotion from Advanced Emerging to Developed

Morocco and Qatar are new entries, while Ukraine has been booted off the list. It had been lined up for “possible promotion to Frontier market status”, but FTSE is now worried about:

…continuing delays in market developments and no timelines as to when the market developments regarding regulatory oversight, capital controls, treatment of minority shareholders and settlement will be implemented.

Updated

If you’ve not seen it already, do check out this article on Comment Is Free today about Greece’s neo nazi Golden Dawn party, and the investigation into links between the party and the Greek police.

Here’s a flavour:

For a period, Greece’s experience of general strikes, occupations and social movement protests came close to insurrection. This is as near to what Gramsci called a crisis of authority as one can get. The political control of the state has been breaking down. It is this breakdown of authority – which reactionaries blame on immigration, foreign control and communist agitation – that fuels Golden Dawn’s support.

The situation is toxic. Austerity has not run its course, any more than the recession, or the social misery engendered by it. The only recourse of the left is to render Golden Dawn useless by incapacitating it, obstructing its activities and shutting it down as an effective street-fighting fascist organisation.

More here (where regular reader Kizbot had been putting the world to rights in the comments):

Golden Dawn’s rise signals breakdown of the Greek state’s authority

Updated

A weak start on Wall Street, with the Dow Jones index dropping 55 points in early trading to 15345, –.35%.

Once again (again) traders are fretting over the question of when the Federal Reserve will start tapering its QE programme.

There are some big risers, though — particularly in the tech sector. Facebook are up 4% to a new lifetime high after an upgrade from Citi and predictions of a new access deal in China, while Yahoo’s up 3% to a six-year high.

No rush for the Bank’s probing Paul Tucker

Bank of England deputy governor Paul Tucker has joined the chorus of policymakers and it would appear he is singing from the same hymn sheet on forward guidance, reports my colleague Katie Allen.

She’s swiftly digested Tucker’s lunchtime speech (see 1.57pm for the snaps), and explains that Tucker’s speech matches other pronouncements from BoE policymakers this week, all defending the Bank’s new approach.

Katie writes:

Fellow Monetary Policy Committee (MPC) member David Miles said earlier today that he believed the Bank’s promise to keep interest rates low until the recovery is well entrenched could help nurture the nascent upturn.

On Monday, their colleague Ben Broadbent defended tying policy to the unemployment rate.
Tucker’s view is that forward guidance can be particularly useful during a period when the recovery is beginning to take hold. And he wants people to know the MPC is in no rush to take away its economic crutches.

According to the text of his speech to the Association for Financial Markets in Europe (AFME), he said:

Saying more about the committee’s approach to policy in this way might be particularly valuable during a period when signs of recovery have become more apparent. These are conditions in which it would be very easy for the financial markets, businesses and households to jump to the mistaken conclusion that monetary stimulus will soon begin to be withdrawn. Given the slack in the economy, the Committee is not in a rush.

On the question of the Bank’s credibility when it comes to keeping inflation in check, Tucker draws a contrast with the pre-independence era. He argues that it was precisely that credibility of the independent BoE’s commitment to keeping inflation in check that “enabled us to provide such exceptional monetary support to help the recovery.”

Tucker adds:

It is unimaginable that, prior to Bank independence in 1997, any government would have been able to hold the policy rate at effectively zero and make a further monetary injection of £375bn without inflationary expectations – and government financing costs – spiralling out of control.

Still, he does concede that just having a 2% inflation target – that keen UK data watchers will know has been missed for 45 successive months now – is not a license to endless money printing.

Tucker again:

Credibility is not to be taken for granted. Even we cannot provide stimulus without limit, without a wary eye to inflation expectations.

And there is a further note of caution on that long-standing puzzle for the Bank, productivity:

Tucker says:

Let’s be clear: we do not understand why productivity has been so weak. And that means that we are highly uncertain about the amount of slack in the economy currently and prospectively; uncertain about the extent of the consequent downward pressure on domestically-generated inflation; and, thus, uncertain about the path of output and employment consistent with non-inflationary growth.

And where does all that leave policymaking?

Tucker sums it up: “Provide stimulus; pause to see whether inflation expectations remain anchored; if, but only if, they are and more stimulus is needed, provide it etc. A ‘probing’ approach.”

Another resignation in Germany… this time at the Pirate Party, where leader Bernd Schlömer has reportedly told party members that he won’t run again.

Not a surprise, given the Pirates captured just 2.2% of votes.

Updated

Paul Tucker, the Bank of England’s outgoing deputy governor with responsibility for financial stability, is giving a speech on monetary policy in London.

We’ll have full details shortly. In the meantime, here’s the newswire snaps:

24-Sep-2013 13:45 – BANK OF ENGLAND’S TUCKER SAYS BOE DOES NOT UNDERSTAND WHY UK PRODUCTIVITY SO WEAK, TAKING “PROBING” APPROACH TO POLICY

24-Sep-201313:45 – BOE’S TUCKER – MPC APPROACH HAS BEEN TO PROVIDE STIMULUS; PAUSE TO SEE IF INFLATION EXPECTATIONS STAY ANCHORED; IF, THEY ARE AND MORE STIMULUS IS NEEDED, THEY PROVIDE IT

24-Sep-2013 13:45 – BOE’S TUCKER – IF RECOVERY DOES GAIN TRACTION, MPC WILL NEED TO AVOID MISPERCEPTIONS ABOUT LIKELY COURSE OF POLICY

24-Sep-2013 13:45 – BOE’S TUCKER – BY ADOPTING A PROBING APPROACH MPC CAN PROVIDE BROADLY THE RIGHT DEGREE OF STIMULUS WITHOUT DILUTING COMMITMENT TO PRICE STABILITY

24-Sep-2013 13:45 – BOE’S TUCKER – FORWARD GUIDANCE DOES NOT COMMIT MPC TO KEEPING POLICY LOOSE BEYOND THE POINT THAT WOULD BE PRUDENT

24-Sep-2013 13:45 – BOE’S TUCKER – AS DATA COMES IN, BOE UNEMPLOYMENT FORECASTS MORE LIKELY TO CHANGE THAN FORWARD GUIDANCE 

Speaking of Germany, finance minister Wolfgang Schäuble has warned that Angela Merkel’s next government (once formed) will not change its approach to Europe’s economic problems.

Schäuble told the “Leipziger Volkszeitung” newspaper that Merkel will continue to push for rigorous budgetary discipline across the eurozone.

Appeals for countries to be allowed to relax their deficit targets and borrow more to stimulate growth will not be granted, insisted Schäuble, adding:

I’m also in favor of more growth and more jobs

But I believe that only through budget consolidation and accompanying structural reforms can you get there.

At this stage, though, it’s not clear whether Schäuble will remain as finance minister in the next administration. It all depends on the coalition talks….

More here.

The fallout from Germany’s election continues. Jürgen Trittin, co-leader of the Green Party, has announced that he won’t run for the leadership again.

Trittin added that he and co-leader Katrin Göring-Eckardt would continue to hold “exploratory talks” with Angela Merkel’s Christian Democrats.

From Athens, our correspondent Helena Smith reports that today’s protests were “quite raucous”.

Photos from the scene show the usual array of anti-Troika slogans, calling for an end to Greece’s austerity programme.

As expected, today’s 48-hour strike has hit many public services. Associated Press flags up, though, that some local services kept running. Here’s AP’s early take:

Greek civil servants walked off the job Tuesday at the start of a 48-hour public sector strike, the second in as many weeks, to protest job cuts required for the country to continue receiving international rescue loans.

State school, tax office and hospital workers joined the strike, while ambulances services were to run with a reduced staff. Journalists joined in with a three-hour work stoppage, pulling any non-strike related news of the air.

But participation appeared low, with many services remaining open in central Athens, including post offices and some schools and tax offices.

Thousands of people marched peacefully, chanting anti-austerity slogans through the center of the capital and in the country’s second-largest city of Thessaloniki in the north.

Updated

Back in the markets, the Italian stock markets is the best performer this morning.

That’s after Spain’s Telefonica announced plans to take a bigger stake in Telecom Italia’s parent company.

Here’s the lunchtime prices:

David Madden, market analyst at IG, says traders are still pondering when the Federal Reserve might start to taper its bond-purchase scheme, and fretting about Germany.

He also flags up the comments from ECB senior policymakers today, and yesterday, about the possibility of another round of cheap loans for euro-area banks (see 11.07am for details)

The Federal Reserve is trying to keep investors in the dark as to what its next move will be. The decision to keep the bond-buying programme unchanged at $85 billion per month pushed equities higher, but speculation is mounting about what the next meeting will bring. As always, the Fed members are divided: James Bullard is hinting at tapering, while William Dudley isn’t convinced the US economy is strong enough yet.
Just as the Fed is looking to ease up on its stimulus package, the ECB stated it is on standby to pump cash into the banking system if required. Traders are becoming too dependent on stimulus packages, but they can provide a boost to equities in the short term.
Mineral extractors have lost the most ground today, due to softer commodity prices. Meanwhile, European equity traders are sitting on their hands while Angela Merkel puts together a new coalition government.

Back in Greece, one demonstrator is carrying a flag with a German slogan on it — clearly looking for an overseas audience (see below – it’s the blue banner in the background) .

It reads “Nein zu Spardiktaten und Nationalismus” or “no to austerity diktats and nationalism”

Here’s the full details of the OECD’s warning about the eurozone, from Reuters:

 The European common currency area remains “a considerable source of risk” even though the systemic risk from its debt crisis is scaling back, the Organisation for Economic Cooperation and Development’s chief economist said on Tuesday.

The OECD’s Pier Carlo Padoan told a conference in Lisbon positive economic growth in the euro zone should return only in 2014, expecting growth to be still negative this year despite a recovery in many countries, including Portugal.

He said that while pursuing structural fiscal consolidation in 2014, euro zone countries should allow automatic stabilisers to work and focus on fighting high unemployment rates.

OECD chief: global economy is slowly recovering

Some quotes from the OECD’s chief economist, Pier Carlo Padoan, just flashed up on the Reuters screen.

He’s warning that the eurozone economy is still poses significant risks to the global economy, but also sees signs of recovery:.

11:15 – OECD CHIEF ECONOMIST SAYS GLOBAL ECONOMY SLOWLY EXITING RECESSION, BUT FAR FROM SUSTAINABLE GROWTH

11:16 – OECD CHIEF ECONOMIST SAYS EURO AREA “STILL REMAINS CONSIDERABLE SOURCE OF RISK” 24-Sep-2013

11:20 – OECD CHIEF ECONOMIST SEES EURO AREA ENTERING POSITIVE GROWTH IN 2014, 2013 STILL SEEN NEGATIVE 

11:22 – OECD CHIEF ECONOMIST SAYS GROWTH IS COMING BACK FOR MANY COUNTRIES INCLUDING PORTUGAL 

Greek photojournalist Nikolas Georgiou is tweeting some photos from today’s protests. Here’s a couple:

The European Central Bank could help the eurozone banking sector with a third injection of ultra-cheap loans, ECB governing council member Ewald Nowotny said this morning.

Speaking in Venice, Nowotny (who’s also the head of Austria’s central bank) said it was too early to consider stopping the ECB’s ‘non-standard’ stimulus measures.

Asked about the prospects of another Long Term Refinancing Operation (in which the ECB would offer huge quantities of low-priced loans to banks), Nowotny replied:

It is certainly important to show all that we have in the way of instruments, which are flexible.

The ECB offered almost a trillion euros to eurozone banks in two LTROs, at the end of 2011 and in early 2012. Yesterday, ECB president Mario Draghi told MEPs that a third LTRO was a possibility, if conditions required it.

Updated

Greek public sector workers have marched towards the country’s parliament in Athens, at the start the 48-hour strike that began this morning. Syntagma metro station has been temporarily closed.

The public sector ADEDY union has declared, as it’s said so many times before, that the protest is an attempt to push the government to change course.

We call on the workers … the self-employed, the unemployed, the pensioners, the youth and everyone affected by these policies to give their resounding presence.

But the Greek government is more worried about the Troika’s visit this week. There are murmurs from Athens that the debt inspectors are pushing for progress on privatisations, where Greece is already facing a €1bn shortfall this year.

Kathimerini explains:

During a meeting at TAIPED’s headquarters, the mission chiefs of the European Central Bank, the European Commission and the International Monetary Fund called for more action so that this year’s revenue shortfall, amounting to 1 billion euros, can be covered in 2014.

At the troika’s focus were the privatizations of ports, water and sewage companies, and Hellenic Post. According to plans drawn up in January, these sell-off projects should have started in the second quarter of the year, while the aim now is for them to get started in the last quarter, given that the third will be over in a week’s time.

Another reason for optimism about this morning’s IFO surveyit’s the best reading of German business confidence since April 2012.

Here’s AP’s take:

A closely watched index of German business optimism rose for the fifth month in a row in September, reflecting the improved prospects for Europe’s largest economy.

The IFO institute’s index edged up to 107.7 points from 107.6 in August. Market analysts had expected it to rise slightly more, to 108.0

The index is based on a survey of 7,000 companies about how they think the situation is now, and how they see things going in the coming months. It’s a leading indicator, meaning it suggests where the economy is going in the months ahead.

Germany’s economy expanded 0.7% in the second quarter, helping the 17-country euro currency union return to growth after six quarters of shrinking output.

Reminder — there’s analyst reaction here.

Updated

UK mortgage approvals at highest since December 2009

Just in: UK mortgage approvals have hit their highest level since December 2009, in another sign of a revival (some would say a boom) in Britain’s housing market.

A total of 38,228 loans were approved in August, up from 37,428 in July. That’s nearly a 26% jump on a year ago, according to the British Bankers Association.

Last week, chancellor George Osborne insisted that Britain isn’t gripped by a housing boom. But clearly the market has been revived by signs of economic recovery, and by Osborne’s Help To Buy scheme.

Prices are particularly rampant in the UK capital. As the FT’s Alphaville site points out, the average house price increase over the last 12 months (£38,729) is bigger than the average net income of a London household (£38,688).

Houses beating households, London edition

Those income figures include people who can’t afford to get on the housing ladder, of course:

Updated

IFO: What the experts say

Here’s that reaction to the news that Germany’s IFO business conditions index rose this month, if only marginally (see last post).

Analysts broadly agree that Germany is on the road to recovery, particularly as firms are more optimistic about future prospects.

However, there’s also a little bit of concern that the current conditions index fell (from 112 to 111.4), showing that firms are finding life a little harder.

I’ve taken the quotes off the Reuters terminal:

Thomas Gitzel, VP Bank:

“The somewhat worse conditions index reading is offset by the improved expectations index. Everything is pointing to a faster pace of growth for Germany in the coming months. But what is especially pleasing is that the improved indicators in Germany are based on a more positive international climate. These include improved prospects for the stricken euro zone countries, the recovery in the U.S. economy and the brightening situation in China.”"This leads us to conclude that the current upward movement can be seen sustainable.”

Ralf Umlauf, Helaba:

This is good news. The German economy is gaining speed and growth in the third quarter should again be robust. It’s a little disappointing that the rise in the business climate is only due to higher expectations. The European Cental Bank is likely to feel confirmed in its wait-and-see stance. On the political side, it’s now important to form a government able to act in order to prevent potential strain on the mood from a cliffhanger.

Christine Volk, KfW

German growth is on course for recovery, with business expectations brightening. Europe, as Germany’s most important export market, is beginning to stabilise after a very long lean period and Germany is benefiting from that. Growth in 2014 could even reach 2 percent.

We are less optimistic about Europe. There is a lack of growth stimulus and the debt sustainability of some countries is still in doubt. Here there is potential for disappointment.

Ben May, Capital Economics

The further rise in German Ifo business sentiment confirms that the economy is recovering, but we continue to expect growth to be reasonably sluggish. The rise in the headline business climate indicator was a touch smaller than the consensus forecast, but it left the index at its highest level since April 2012.

Updated

German business climate improves, but misses forecasts

German firms have reported that the business climate improved slightly in September, but they’re not as upbeat about the situation today as economists had expected.

That’s the top line from the monthly IFO survey, which was released a few minutes ago.

The IFO German Business Climate index came in at 107.7 in September – up from 107.6 in August, but lower than the 108.2 which the City had expected.

The Current Conditions index missed expectations, at 111.4 versus a consensus of 112.5. That’s also a fall compared with August’s reading of 112.0.

And IFO’s Future Expectations index came in at 104.2, just above the 104.0 that was pencilled in.

So, a mixed picture in Europe’s largest economy.

A year ago, the IFO business climate index was just 101.4 — so today’s 107.7 does show how the situation’s improved now Germany has left recession. But the fact firms aren’t as confident about current conditions as expected may show that growth this quarter will be a little weaker than hoped (although still quite robust)

Reaction to follow….

Updated

The most interesting corporate story this morning involves Spain’s Telefonica and Telecom Italia, whose shares jumped 4% in early trading.

Last night, Telefonica announced that it would raise its stake in Telecom Italia’s parent company, Telco, to 66%, and then eventually to 70%. It’s a complicated deal (see here) , but the upshot is that Telefonica will have a rather tighter grip on its Italian rival.

And as mrwicket flags up in the comments, the Italian press see it as a Spanish takeover:

Morning all.

The Italian papers are leading with ‘Telecom Italia becomes Spanish’. The deal was announced at midnight but seems a little more complicated than it appears.

At another midnight meeting, in a hotel in Palermo that used to be owned by the Graviano brothers, the Democratic Party decided to withdraw its support of its Governor of Sicily, Rosario Crocetta. Eleven months after the historic victory which ended the centre-right/mafia domination of the island, they pulled the plug.
Crocetta is openly (and genuinely) anti-mafia and a grass has said a boss has ordered his killing.

European stock markets have inched higher this morning, as traders await developments in Germany, or more clarity over when the Federal Reserve will start to slow its money-printing stimulus.

  • FTSE 100: up 12 points at 6569, +0.2%
  • German DAX: up 27 points at 8663, +0.3%
  • French CAC: up 18 points at 4190, +0.4%
  • Spanish IBEX: up 13 points at 9122, +0.14%
  • Italian FTSE MIB: up 48 points at 17962, +0.25%

Today’s public sector walkout in Greece is the second 48-hour strike in as many weeks.

It’s expected to hit schools and hospitals, and is timed to coincide with the Troika’s visit to Athens. As before, the unions are protesting about the government’s ‘mobility scheme’, part of the drive to cut thousands of public sector jobs.

The private sector GSEE union has called a four hour stoppage, from 11am local time (9am BST) – so it’ll be joining a protest rally in Athens.

While workers march through the streets, officials from the IMF, ECB and EU will be taking a close look at Greece’s budget for 2014. Greece’s Kathimerini newspaper reckons the Troika don’t share the Athens government’s optimism:

High-ranking Finance Ministry sources said that while the representatives of the European Commission, European Central Bank and International Monetary Fund agree that Greece will produce a primary surplus at the end of the year, they think it will be minimal. The troika is also skeptical about Greek projections for a primary surplus of 1.5 percent of GDP at the end of next year.

It is thought that one of the reasons Greece’s lenders are downplaying the possibility of Athens producing a sizable surplus is that they are alarmed by the debate in Greece about how this amount will be allocated and whether social spending could be increased.

With regard to the 2014 budget, the troika still has doubts about the effectiveness, in terms of revenue raising, of the unified property tax. Next year will be the first time the levy, which combines several property taxes into one, is applied.

Jürgen Baetz, AP’s man in Brussels, agrees that an alliance between Angela Merkel and the Greens looks increasingly unlikely.

Merkel’s coalition struggle

Looking at the German newspapers, Der Speigel has an interesting article about how Angela Merkel will find it difficult to reach a deal with the Green party, the only plausible alternative to a Grand Coalition with the Social Democrats.

It explains that some of Merkel’s advisors would prefer a Black-Green alliance, rather than a Black-Red deal with the SPD. But Horst Seehofer, party chief, is strongly opposed to a deal [Here's Spiegel's piece (in German)].

Seehofer told reporters last night that:

I have not heard anyone today calling on me to talk to the Greens.

Which leaves the SPD. But they remain nervous of another alliance with Merkel, having been burned by their first partnership eight years ago. That led to them posting their worst election results since the second world war in 2009.

Having seen history repeat itself last weekend when the Free Democrats were given the order of the boot from the Bundestag, the SPD may not want to risk it again.

As Bloomberg puts it:

The SPD, the second-place finishers in the Sept. 22 vote, may be reluctant to try again, picking up what its chairman suggested yesterday was a poisoned chalice.

The SPD won’t stand in line or make an application after Merkel ruined her current coalition partner,” Sigmar Gabriel told reporters yesterday in Berlin.

Updated

Caution over German coalition talks

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

Uncertainty abounds today, as Europe hunkers down to await progress on Germany’s coalition talks and Greece continues to told talks with its lenders in an atmosphere of tension and strife.

Ongoing confusion over the US Federal Reserve’s plans to slow its bond-buying stimulus programme (maybe next month? Maybe not until 2014?) are also casting a shadow over Europe, just when we’d hoped for some real clarity and progress.

As Michael Hewson of CMC Markets puts it:

If investors had been hoping that the latest Fed meeting and the result of the German elections would help bring much needed clarity to the uncertainty that has bedevilled markets for weeks now, the events of the last few days have soon dispelled that notion with the result that the current state of affairs is becoming quickly like the proverbial itch that you just can’t scratch.

This has inevitably meant that investors have become much less inclined to take on risk and has seen them start to once again err on the side of caution, pulling stocks down from recent all-time highs.

As we covered yesterday, the German coalition talks are going to be a long grind. Angela Merkel reached out to the Social Democrats yesterday, but their leadership group aren’t expected to meet until Friday.

This process could take several weeks, as the SPD is sure to drive as hard a bargain as it can in return for supporting Merkel’s CDU party

We’ll be watching for any developments in Germany through the day.

We’ll get another insight into the state of the German economy this morning, with the release of the monthly IFO survey. Due at 9am BST, it will show how confident businesses are about current conditions, and future prospects.

While in Greece, public sector unions have called another anti-austerity strike for today — with the usual protests in the streets of Athens.

There’s also a platoon of central bank officials holding speeches today — including no fewer than five members of the European Central Bank’s governing council. That’s Ewald Nowotny, Yves Mersch, Jorg Asmussen, Vitor Constancio and Benoit Coeure.

Two members of the Fed’s governing council are also due to speak later today – Sandra Pianalto and Ester George.

Updated

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Mrs. Merkel wins 41.5% of the vote but fell short of an overall majority. A coalition with the SPD seems the most probable outcome. European markets in the red. Merkel press conference in Berlin- highlights. How Merkel stormed to victory…

 


Powered by Guardian.co.ukThis article titled “Markets fall as Merkel faces ‘difficult’ coalition talks – live” was written by Graeme Wearden, for theguardian.com on Monday 23rd September 2013 15.21 UTC

Here’s CMC Markets’ Michael Hewson with an update from the City (pretty much reinforcing what I posted at 4pm)

While we now know that Angela Merkel won the German elections over the weekend, such are the idiosyncrasies of the German electoral system that it could well be another two months before we have any idea as to what form the new government will take.

Mrs Merkel may have won 41.5% of the vote but she fell short of an overall majority and it seems likely that a coalition with the SPD seems the most probable outcome.

This could well be complicated as they are more sympathetic to the idea of a banking union, something that Mrs Merkel has been reluctant to countenance, and any disagreements are likely to complicate the decision making process at a time when key decisions are needed with respect to Greece, and the ESM in the coming months.

We’ve also seen some residual softness in European markets as a result of comments last week from St. Louis Fed President James Bullard about the possibility of an October taper as well as concerns over political deadlock surrounding the raising of the debt ceiling and this has translated into further weakness despite some encouraging PMI data from China, while French and German PMI’s were somewhat mixed.

Apologies – our comments system seems to be broken. Hopefully a temporary problem — it’s being looked into.

Markets fall

The prospect of lengthy coalition negotiations in Germany has helped to push European stock markets down, with the major indices all in the red.

The German DAX has fallen almost 0.5%, while the Spanish market is off around 0.8%

Here’s the details:

Not major falls, of course. But at the same time, there is no relief rally at all. Markets don’t like uncertainty, and paradoxically Merkel’s success – and the failure of the Free Democrats to get into the Bundestag — has created doubts over Germany’s next government.

Shares are also down because of confusion over US monetary policy, after the Federal Reserve chose not to start slowing its huge asset-purchasing scheme last week. Last Friday, St Louis Federal Reserve President James Bullard suggested ‘tapering’ could begin as soon as October if economic data was strong enough.

Other analysts reckon it might not happen until 2014….

Updated

JP Morgan: Coalition talks will take some time

Angela Merkel faces a “difficult few weeks” as she attempts to pull together a new administration, warns JP Morgan.

They reckon there’s a 70% chance of a Grand Coalition between the Christian Democrats and the Social Democrats, and a 25% chance of a deal between the CDU and the Greens. They’re not totally discounting the idea that CDU might govern alone, although without a Bundestag majority that would be a bold move.

JP Morgan said:

The process will take some time…

The reality is that the SPD’s willingness to engage or not with the CDU will be crucial. By early next week we should have more of a sense of the approach they are likely to take. For now, Gabriel and Steinbruck are playing down the chances of a deal in the near-term.

They also suggest that Wolfgang Schauble is likely to remain as finance minister:

It is too early to tell precisely what the trade-offs will be in the formation of a new coalition. However, the Chancellor will be in a much stronger position to demand that she keep the finance ministry than we would have expected a week ago. Continuity looks significantly more likely than it once did.

This might not please readers in countries hit hard by the eurozone debt crisis, where Schauble is blamed for Europe’s austerity push.

Here’s the full research note

Updated

Draghi also surprised the markets by telling MEPs that the ECB is ready to offer the banking sector more help by launching a third round of ultra-cheap loans (or long term refinancing operation) if necessary.

That has knocked the euro down to $1.3485, a fall of around one third of a US cent.

Updated

Draghi: too early to discuss another Greek bailout

Back at the European parliament, Mairo Draghi has been asked about whether Greece needs a third bailout.

He replied that it’s “premature to ask this”, as the European side of the readjustment for Greece runs until the end of 2014.

In our view it’s too early to discuss a follow-up programme now, or an extension of the current one.

Any decision on further aid would also depend on whether Greece can return to the financial markets by the end of next year, he added.

Earlier, Draghi appeared to defend the ECB’s role in the Troika — telling MEPs that while it provided help and advice, the Eurogroup (eurozone finance ministers) takes the decisions. In the long term, Draghi added, the ECB doesn’t see itself as part of the troika.

This prompted committee chair Sharon Bowles to joke: “The Eurogroup may or may not accept advice.”

MEP Sylvie Goulard wasn’t impressed, comparing the Eurogroup to a group of children who’ve generated a mess – it can be hard to know which one is really to blame .

Updated

Reuters has filed a full story about how Angela Merkel won cheers from the press pack in Berlin, by joking about how she decided what to wear today (as mentioned at 12.55pm)

Relishing a thumping election victory for her conservatives in Germany’s Sunday election, a smiling Angela Merkel said on Monday that conjecture about looming coalition talks presented her with a dilemma on what to wear.

With speculation swirling about her coalition options – which Germans tend to describe in terms of party colours – a relaxed-looking Merkel told reporters how she had tried to choose a neutral colour for the news conference.

“This morning I stood in front of my wardrobe and I thought red is no good, bright green is no good, blue was yesterday, what are you going to do?” said Merkel, who wore a dark jacket with a blue-green hue.”I decided for something very neutral,” she chuckled, raising a cheer and applause from reporters.

The Social Democrats (SPD), with whom she seems most likely to share power, have red as their colour while green represents the Greens who may offer Merkel another coalition option. Her own conservatives’ colour is black.

Updated

Back to the German elections…and the Open Europe thinktank has published a handy guide to the Key Players To Watch in the coalition discussions.

As I’ve suggested already today, the process could be slow …

Little progress is expected before the end of the week, with the SPD holding a small party conference on Friday where it will determine its strategy for the negotiations.

Open Europe suggests the Social Democratic Party chairman Sigmar Gabriel could become vice-chancellor if a grand coalition between the CDU and SPD is agreed, or he might get the defence or labour brief.

The SPD’s leader in the Bundestag, Frank-Walter Steinmeier, is likely to become foreign minister.

But what if the Greens form a coalition with CDU? It’s already in flux, with several senior players offering their resignations today after the party’s vote share fell to 8.4%, from 10.7%.

Open Europe explains:

The party’s chief whip, Volcker Beck, has already announced his resignation while the double party chairmanship, Claudia Roth and Cem Özdemir, offered their resignation this morning.

Both lead candidates, Katrin Göring-Eckar and Jürgen Trittin, seem to be dedicated to stay even though internal party pressure is increasing on the latter. Finally, the leader of the Green parliamentary group, Renate Künast, would need to be considered among the key players in a potential coalition with the CDU/CSU. What ministerial posts they could or would push for is unclear, but one would assume environmental and energy related posts would be top of the list

More here: As focus shifts to German coalition negotiations, who are the key players to watch? 

Updated

Heads-up: Mario Draghi is testifying at the European parliament’s committee on economic and monetary affairs (livestream here)

He’s starting by reading out a statement, largely reiterating what the ECB said at its monthly meeting at the start of this month.

inflation is still subdued, credit conditions are still poor, the eurozone economy remains weak (although now recovering) …

Updated

America’s manufacturing sector is expanding at a slower pace this month, according to data released a few minutes ago.

Markit’s “flash” manufacturing PMI came in at a three-month low of 52.8 – mirroring the slower growth reported in Germany and France this morning.

Updated

Protests over closure of Greek police service

There have been extraordinary scenes in Greece this morning, where police officers held a symbolic funeral for the municipal police service that’s being closed as part of the government’s austerity cuts.

Our Athens correspondent, Helena Smith, reports that municipal policemen and other public sector workers took to the streets to protest job dismissals today.

She writes:

At the start of a second week of intense industrial action in the public sector, Greek municipal police took drama to another level this morning, holding a mock funeral in the centre of Athens to protest internationally mandated cuts that have marked the death of the sector.

Hundreds of black clad protestors marched solemnly behind a hearse carrying a coffin before opening the casket outside the administrative reform ministry and dumping uniforms once worn by municipal police into it.

The images, captured on TV, appeared to take even hardened program presenters by surprise.

Under pressure from its troika of creditors at the EU, ECB and IMF, the government announced the disbandment of the force two months ago saying staff would be redeployed into a mobility scheme on reduced pay.

Protestors denounced the scheme as a euphemism for jobs cuts in a nation which, with about 1.4 million out of work, has already been hit by explosive levels of unemployment.

“A lot of us have no one working in our families. This is insane,” said one protestor standing outside the reform ministry, the government department in charge of implementing public sector cuts.

Meanwhile teachers, who have also thrown their weight behind a second week of strikes, demonstrated outside the education ministry where they have draped banners denouncing the dismissals and promising to “overturn” the deeply unpopular policies.

These protests could escalate tomorrow when ADEDY, the civil servants union, begins another 48-hour work stoppage.

All this comes as the Troika continue to conduct their audit of the Greek finances (see 8.57am)

Updated

Interesting … Social Democrats’ chairman, Sigmar Gabriel, has declared that there’s “nothing automatic” about forming a coalition with the Christian Democrats.

The comments come after Angela Merkel told reporters that she’d contacted Gabriel to begin coalition talks with the SPD (see 12.44pm for the details).

Here’s the Reuters newflash:

23-Sep-2013 13:07 – GERMAN SOCIAL DEMOCRATS’ CHAIRMAN SAYS NOTHING AUTOMATIC ABOUT COALITION WITH CONSERVATIVES, UP TO MERKEL TO FORM A MAJORITY 

The SPD’s losing candidate for the chancellorship, Peer Steinbrück, has also insisted that the ball is in Merkel’s court. He added that the issue of eurozone banking union (where Merkel’s government has taken a slow approach), must be part of any coalition talks.

Updated

Merkel also expressed “sincere respect” to the Irish people for what’s been achieved since the financial crisis struck. Prime minister Enda Kenny has shown a passionate commitment to reforms, she added.

When not slapping down impudent questions about her fashion sense, Angela Merkel also reiterated that her commitment to tough reforms in other parts of Europe has not weakened.

Asked about the Irish bailout, chancellor Merkel said Ireland was an example of a country where conditions are improving (it exited recession last week).

Its progress, though, was based on people recognising the mistakes of the past:

Chancellor Merkel caused much amusement among the press pack in Berlin when she was asked if there was any symbolism in her outfit at today’s press conference.

Does the choice of a blue-greenish teal jacket suggest an imminent coalition alliance with the Greens?

Not at all, insists Merkel (already famous for her wide range of coloured jackets). She jokes that she stood at the wardrobe this morning, thinking:

Red doesn’t go, green doesn’t go, blue was yesterday.

So she chose a “neutral” colour instead.

Updated

Angela Merkel appears to be on top form at her post-victory press conference – neatly avoiding a question from one hack about whether Europe needs a Marshall plan to stimulate a recovery.

Updated

Ok, here’s the key quotes from Angela Merkel about her coalition plans (via Reuters’ Berlin office)

We conservatives have a clear mandate to form a government and Germany needs a stable government, so we will carry out this mandate

We are, of course, open for talks and I have already had initial contact with the SPD chairman* who said the SPD must first hold a meeting of its leaders on Friday.

* That’s Sigmar Gabriel (rather than Peer Steinbruck, who was the SPD challenger for the chancellorship). 

Updated

Merkel says she wants to study the reasons for the rise in support for the eurosceptic Alternative for Germany party, but won’t change CDU policy on Europe in response.

Updated

Merkel: Europe must become more competitive

The election result is a strong vote for a united Europe, says Angela Merkel as her post-victory press conference continues.

The chancellor also underlines that there will be no let-up in Europe’s economic strategy. We are not at the end of the reform process in Europe, she declares. Europe must become more competitive.

Merkel also indicates that her CDU-CSU party will not govern alone, saying wants a “stable” government to run Germany for the next four years.

Merkel press conference highlights

Angela Merkel had told reporters that she has opened coalition talks, by making her first contact with the chairman of the Social Democrats (who came second to the CDU with 192 seats).

This does not exclude talks with other parties, she adds (such as the Greens, who came third with 63 seats, I imagine).

On Europe, she says that Germany’s current policy is “integration friendly”, and she sees no need to change it.

More to follow …

Updated

ECB president Mario Draghi has flown to Brussels today for an appearance at the European parliament.

Chiara De Felice, ANSA’s EU correspondent, reports that Draghi’s first priority was to catch up with the latest Italian sports news. Suggests he’s not worried about the German election.

Heads-up: Angela Merkel is giving a press conference now. Let’s see what she says about coalition plans…..

Updated

Spain’s tourism industry has notched up its busiest August ever, offering hope to one of the eurozone’s most hard-pressed members.

A record 8.3 million holidaymakers from abroad visited Spain last month, a 7.1% increase on the same month last year. It appears that this was partly owing to people avoiding unrest in Egypt and Turkey.

Total visitor numbers are up 4.5% this year, suggesting Spain’s on track to beat 2012′s record number of visitors.

The number of French visitors jumped by 9% to 1.8 million. while Russian tourist numbers jumped by 30% to 1.1 million (according to Reuters).

As the image above shows, Angela Merkel’s election dominated the Spanish papers today.

Updated

Video: Inside the campaign headquarters

This video clip, from the Wall Street Journal, shows the scene at Germany’s various party headquarters last night as the election results came in.

There’s a wide spectrum of emotion – from jubilation at CDU HQ to open-mouthed shock at the Free Democrats bash.

Updated

Peter Schaffrik, an analyst at RBC Capital Markets, explains that the stock markets are subdued today because it could take weeks to agree a new German coalition.

He warned:

The formation of a government is not straightforward at all.

If finding a new government takes too long, markets might get jumpy as regards the stability of the German government, particularly with key European issues coming up for a negotiation.

The Bundesbank has predicted this morning that the German economy is on track for further growth in the months ahead, although the pace of expansion may have faltered this quarter.

Germany’s central bank said growth in the third quarter of 2013 would not match the previous three months, but still sounded fairly upbeat in its new monthly report. Here’s a flavour:

A noticeable improvement in expectations for production and exports as well as a slow increase in incoming orders point to growth in coming months

The extraordinarily good consumer sentiment continues, supported by slowing inflation and an overall good situation on the labour market.

Updated

Merkel’s win: what the analysts say

Here’s some more analyst reaction to the German election results (see 9.49am for Saxo’s early take).

Jonathan Pryor of Investec Corporate Treasury:

 The significance for the euro of Merkel being re-elected is that currency markets are generally quite precious when it comes to political change so a third term for Merkel is likely to be euro positive.

The fact that her party will also be forced to enter into a coalition should be received well by markets considering that it’s likely, left to their own devices, the Conservative party would yield a firm austerity first view to the peripheral member states.

 Steven Englander of Citigroup:

This is a vote in favour of Merkel rather than a vote in favour of big changes

It’s most likely Merkel will govern in a grand coalition with the Social Democrats, so that’s a slight euro positive because the government would be somewhat more friendly to the peripheral nations in the currency bloc.

Barclays:

Chancellor Merkel’s CDU/CSU won about 42% of the vote in the federal elections, according to the latest estimates, but a poor showing by the FDP means a CDU/CSU/SPD “grand” coalition of the largest parties looks the most likely outcome, providing limited near-term implications for markets …

We do not expect much change from Merkel’s current stance and continued support for weaker euro area member states. The relatively strong showing of the euro-critical AfD, however, is likely to limit the room for any new financial concessions from the next German government.

Kit Juckes of Société Générale:

Angela Merkel won a resounding endorsement of her policies from the German voters, with the highest share of votes for the CDU since 1990, but she didn’t win enough to avoid a painful period of coalition-building and uncertainty.

The outcome leaves markets somewhat in limbo.

Monex Capital Markets:

Critically, the future shape of Germany’s government will dictate how the eurozone works through its problems. Anything that is seen to deviate too far from the harsh austerity measures of recent years could inject a degree of fear, not just in Europe but in markets worldwide.

And here’s some more media reaction:

Updated

Forgot to mention earlier, but China’s manufacturing activity has hit its highest level since March, bolstering hopes that its economy is performing well this month.

China’s manufacturing activity hits six-month high.

Updated

Although Alternative For Germany (AfD) didn’t quite hit the major 5% mark to win Bundestag seats, the eurosceptic party still made a pretty decent impact in the election.

In the Financial Times, Peter Spiegel reckons AfD could still influence Angela Merkel’s thinking over Europe:

The future of AfD

Although it failed to reach the 5 per cent threshold to get into the Bundestag – it ended up with 4.696 per cent of the vote – the anti-euro Alternative for Germany party (known by its German initials AfD) surprised many in Brussels by getting as close as it did.

It was once conventional wisdom that no anti-Europe party could attract significant support in Germany, but if AfD is able to use this result as a base to grow, it could force Ms Merkel to keep an eye over her shoulder as she gets into bed with the SPD. Exit polls show that AfD drew most heavily from disaffected FDP voters, assuaging some of the fears within the CDU that they would pull voters away from them.

But if the AfD emerges as the alternative conservative force in Germany amid the rubble of the FDP, that could shape the way Ms Merkel approaches Brussels.

More here: What does the German result mean for the EU?

Interestingly, AfD appears to have won support from across the political spectrum. This chart, via Alberto Nardelli, shows how it won 330,000 from the Free Democrats (helping to drive them out of the Bundestag) and 230,000 from the Green party:

Market update

The news that eurozone private sector output hit a 27-month high this month has pushed stock markets a little higher this morning (see above), led by the French CAC.

The euro is flat at $1.314 to the US dollar.

There’s still no real relief that Angela Merkel secured such a strong result, particularly as we don’t know whether she’ll hammer out a credible coalition.

John Hardy, head of FX Strategy at Saxo Bank, suggests that a Grand Coalition with the SPD might lead to further tensions over eurozone strategy, and prevent rapid progress on issues like banking union and closer political ties.

Hardy writes:

Germany’s election was good for Angela Merkel, but leaves Europe and the euro in extreme state of uncertainty. Merkel’s landslide victory comes with a twist as much of her party’s strength was due to voters abandoning ship from the coalition partner FDP. Thus, the election result leaves Merkel in need of forming an awkward coalition with either the SPD or the Greens.

The storyline goes that one of these coalitions will be more “EU friendly” as the parties to the left tend to lean toward more generosity toward the EU project than Merkel. But even a “grand coalition” with the SPD if likely to be anything but grand and the greater risk from here is that Germany’s leadership in Europe risks being as weak as Merkel’s victory in the elections was strong. That’s at least in part because every EU-related decision in Germany will be a nervous exercise in calculating the effects of domestic politics within an uncomfortable coalition.

From here, Merkel is likely to try to continue the approach that has brought her relative success so far, making small concessions here and there, such as a small third bailout in Greece, to stem the risk that any individual crisis triggers a wider contagion. What we won’t see is a new overall vision for Europe. The on-going Big Question for Europe is the fundamental tension that will tear Europe apart if it is not eventually addressed: the single currency and single central bank within a multiple-sovereign union.

The EU is a house without a foundation, and such a house can’t stand forever. And a new Merkel-led coalition will not put Germany on a path toward building that foundation, it will merely see Germany continuing to send out the repairmen to plaster over the cracks that are appearing in the walls as the house continues to destabilize.

Francesco Papadia, who used to run market operations for the European Central Bank, believes the German election results could be good news for the eurozone.

He tweets that Angel Merkel will no longer be ‘captive’ to right-wing views, should she form a grand coalition with the Social Democrats:

Graph: Eurozone recovery gathers pace

Here’s the graph showing how Europe’s private sector is growing at its fastest pace in 27 months (see previous post):

Markit says it shows the eurozone recovery is ‘gathering pace’ – with both services sector and manufacturing firms reporting a rise in activity:

• Flash Eurozone Services PMI Activity Index at 52.1 (50.7 in August). 27-month high. 

• Flash Eurozone Manufacturing PMI(3) at 51.1 

The revival is being driven by Germany, where activity is growing at its fastest rate since the start of this year (details)

although Markit also believes the wider eurozone private sector continues to grow this month:

And Europe’s jobs crisis continues, with another small fall in manufacturing employment. The full report is here.

Eurozone business activity at highest since June 2011

Just in: business activity in the eurozone is growing at its fastest rate in over two years, due to a surge in new orders.

That’s according to data provider Markit, which reports that its composite purchasing managers index has jumped to its highest level since June 2011. It hit 52.1 this month, up from August’s 51.5 (anything over 50=growth).

This follows the better than expected data from France (8.25am) and Germany (see 8.39am) this morning, which showed a service sector revival.

Chris Williamson, chief economist at Markit, says the data is very encouraging:

These surveys show a real underlying swell of improvement. It’s all looking very positive.

More to follow….

Updated

While Germany was gripped by election fever, the Greek government was beginning a new round of talks with its lenders.

Troika officials are in Athens to assess whether Greece’s financial aid programe is on track. Overshadowing the talks is the question of whether Greece will get a third bailout in 2014.

The Wall Street Journal has a good take:

After a meeting lasting almost four hours with senior officials from the European commission, the International Monetary Fund and the European Central Bank– known locally as the troika – and the Greek finance minister, Yannis Stournaras, a senior finance ministry official said initial discussions focused on a broad range of issues including the execution of the 2013 budget.

‘We will continue to work through the week,’ said the official.

While the negotiations represent the latest round in the regular quarterly inspection visits that have accompanied Greece’s almost four-year-long debt crisis – and will decide on whether to unlock the country’s next aid tranche of €1bn ($1.35bn) – new budget and growth data also show Greece may be turning a corner.

Senior officials in Athens have spoken of gradually exiting the draconian austerity program tied to the bailouts, but they also warn that the turnaround has yet to be felt by the average Greek, and that extremism in the country is rising.

More here: Greece, Creditors Begin Talks on New Bailout

Meanwhile, Greek journalist Kostas Karkagiannis sums up the mood:

Updated

Here’s a nice montage of how German newspapers are reporting Angela Merkel’s success, via the invaluable Electionista

Updated

The key point from this morning’s French and German economic data could be that manufacturing output in both countries was weaker than expected.

Here’s some instant reaction:

German private sector picks up speed

German service sector companies, like the country’s chancellor, are enjoying a pretty successful September. Activity has reached its highest levels since the start of this year.

The monthly ‘flash’ survey of purchasing managers, just released, showed firms in Europe’s largest economy reporting stronger growth this month. This pushed the German PMI up to 53.8, up from August’s 53.5, and the best reading since January.

As in France (see last post) the service sector led the way:

• Flash Germany Services Activity Index at 54.4 (52.8 in August), 7-month high.

• Flash Germany Manufacturing PMI(3) at 51.3 (51.8 in August), 2-month low.

It indicates that Germany’s economy is continuing to expand this quarter, despite problems elsewhere in the euro area. A key factor in Angela Merkel’s victory last night.

Tim Moore, senior economist at Markit, suggested Germany could pull weaker neighbours forwards:

Germany’s economy remained firmly in recovery mode during September, and its strengthening performance should continue to reverberate across the euro area. Positive signs from the German economy are a crucial factor underpinning global business confidence at present, especially while some momentum has been lost across emerging markets.

German manufacturing and services output both rose again on the back of improved new business levels during September.

French private sector returns to growth

Encouraging economic news from France this morning – its private sector has returned to growth this month for the first time since February 2012.

The monthly ‘flash’ PMI (a survey of purchasing managers across the country) came in at a 19-month high 50.2 – up from August’s 48.8. That’s the first time it’s been above the 50-mark, which indicates growth, since the early months of last year.

(reminder, we get German PMI data in a few minutes)

Markit, which conducts the research, said French industry appears to have stabilised this month thanks to its service sector, where growth was a 20-month high. However, manufacturing output did fall slightly (to 49.5, worse than expected).

Jack Kennedy, senior economist at Markit, explained:

The latest Flash PMI data point to stabilising business conditions in France during September. A return to expansion for the service sector counterbalanced a weaker manufacturing performance, but new business trends were broadly flat across both sectors.

Employment also moved closer to stabilisation, which should help the economy remain on a firmer footing.

Updated

European markets open

As expected, there’s no sign of a Merkel rally in Europe’s stock markets after her historic election win over night.

In Frankfurt, the DAX index is up a measly 0.1%, as is the French CAC in Paris. In London, the FTSE fell 8 points at 6592.

Traders may be waiting to see how the coalition negotiations progress, and there’s talk that Merkel might struggle to strike a deal with the Social Democrats.

Via FT Alphaville:

As JP Morgan’s Alex White said, ‘One can hardly escape the fact that Merkel’s coalition partners in her last two terms lost double digit shares of the vote.’

Merkel’s win also means that the eurozone crisis may flare up again this autumn, as Mike van Dulken, Head of Research at Accendo Markets, points out:

With the election behind us, prepare for revival of discussions on tough eurozone issues put on hold for the summer.

Gary Jenkins of Swordfish Research agrees:

Updated

Angela Merkel’s election success made the front page of the Guardian today:

Here’s our full story of the German election: Merkel secures third election win

And if you missed the action, my colleague Mark Rice-Oxley live-blogged it all here: Germany election results – live updates

Updated

Our Europe editor, Ian Traynor, writes that Angela Merkel’s triumph is her reward for protecting German’s from the effects of the euro crisis:

Her victory demonstrates the gulf between Germany and the rest of the EU and the eurozone, although it is not clear what impact her third term will have on the direction of the crisis.

Merkel’s second term coincided exactly with the euro crisis. As she was forming her coalition with the Free Democrats (FDP) in October 2009, Greece went belly-up, prompting deep doubts about the euro and the survival of the EU.

She has been resented and criticised across Europe for her crisis management and responses. Berlin became alarmed at the resurrection of the “ugly German” stereotype in neighbouring countries. But German voters have voiced their approval.

More here: Angela Merkel’s election win is reward for weathering the euro crisis at home

Angela smashes her rivals

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.

What a triumph for Angela Merkel, eh? Germany’s chancellor stormed to a third term last night, leading the Christian Democrats to their best election result in two decades. The CDU-CSU alliance have scooped 311 seats out of 630, just five seats short of an overall majority.

At one stage last night it looked like Merkel might win enough seats to govern alone. Instead, she will now start coalition talks with her rival parties — but not her old partners, the Free Democrats, who have been dramatically ousted from the Bundestag after failing to win 5% of the vote.

That 5% threshold proved a stretch too far for the new eurosceptic force in German politics, Alternative für Deutschland, on an impressive debut performance.

Forming a coalition with one of her left-wing rival could be tricky for Merkel, who admitted last night that “Maybe we won’t find anyone who wants to do anything with us”.

A grand coalition with the SPD (192 votes) is a possibility — but could take some time to hammer out (as in 2005, when coalition talks took two months).

The SDP could demand some serious concessions from Merkel, including possibly new finance minister.

As Reuters sums up:

During the campaign, the center-left party argued for a minimum wage and higher taxes on the wealthy — both opposed by Merkel. The party could also demand the finance ministry, pushing out respected 71-year-old incumbent Wolfgang Schaeuble.

Don’t expect a decision imminently, though.

And this uncertainty over Germany’s next government means there will be no relief rally in Europe’s financial markets, where the euro has inched a little higher this morning to €1.354.

The German DAX might rise a few points this morning , but other markets are expect to fall (the FTSE is being called down 15 points by IG).

From the City, Michael Hewson writes:

The likely outcome [for Merkel] looks set to be a grand coalition with the SPD. In any event her old coalition partners the FDP appear to have missed out badly, with the new euro sceptic party Alternative for Deutschland, the AfD, doing particularly well, coming in as it did from a standing start.

Whatever the look of any government that is formed, and this might take several days, one of the key factors that did come out of the campaign was the increasing opposition of a rising number of German voters to further bailouts of what they perceive as fiscally irresponsible peripheral European economies. Any new government that chooses to ignore this rising scepticism in subsequent months is likely to come unstuck at the ballot box in any new state or European elections.

And speaking of bailouts, Greece’s “Troika” of lenders returned to the country yesterday to start a new assessment of its financial programme. New public sector strikes have been called for later this week — putting more pressure on the Athens government.

We also get new survey data this morning which will show how Germany and France’s manufacturing and service sectors are performing this month.

I’ll be tracking all the action through the day as usual….

Updated

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Polling data shows that Sunday’s German elections will be close, and could determine eurozone economic policy for the next stage of the crisis. Tight fight expected. Latest polling shows election is neck-and-neck. Grand coalition probably the most likely option…

 


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Here’s some Friday night ratings action:

On Malta Fitch said:

There has been significant fiscal slippage. Malta’s general government deficit was 3.3% of GDP in 2012, well above both the government’s target (2.2%) and Fitch’s September 2012 forecast (2.6% of GDP). This slippage has carried over to 2013, when Fitch forecasts a deficit of 3.6% of GDP, compared with 2.7% in the original 2013 budget. The European Commission has re-opened the excessive deficit procedure (EDP) against Malta, with the deadline for correcting the excessive deficit set for 2014. In its previous rating review (September 2012), Fitch identified material fiscal slippage in 2012 as a negative rating trigger.

And on Croatia being cut to junk:

Croatia’s fiscal outlook has deteriorated since Fitch’s previous sovereign rating review in November 2012. The agency has revised up its forecast for this year’s general government deficit to 4.7% in 2013 from 3.9%, while general government debt/GDP is now expected to peak at 66% of GDP in 2016, up from our previous forecast of 62%.

A structurally weak growth outlook has impaired the prospects for fiscal consolidation and the attainment of public debt sustainability.

A look at the possible problems facing Angela Merkel should she win the German election this weekend, courtesy of the Wall Street Journal. A taster below with the full story here:

Angela Merkel has become Europe’s most popular leader by telling Germans they don’t need to change, and by shielding them from much of Europe’s debt-crisis pain at the same time.

But as Ms. Merkel heads into a likely third term as Germany’s chancellor, there are increasing calls from the business community, which she has counted among her most loyal supporters, and others for her to move more quickly to confront simmering domestic problems that they worry will eventually endanger German prosperity.

The time to fix the problems—energy costs, worn-out roads and gaps in education among them—is now, they say, while the economy is healthy.

In the corporate world, Vodafone has received clearance from the European Commission for its takeover of Kabel Deutschland, and with that final hurdle passed, the deal is expected to be completed on 14 October.

Eurozone consumer confidence rose to a two year high in September, according to new figures from the European Commission, but is still in negative territory.

The index rose to -14.9 from -15.6 in August, compared to expectations of a figure of around -15. The news that strong German and French growth had helped pull the eurozone out of recession clearly helped sentiment, although the recovery remains fragile, as evidenced by Italy cutting its growth forecasts earlier today. Annalisa Piazza at Newedge Strategy said:

Consumer confidence is expected to have supported by the relative good news on the development of the EMU economy (that has finally emerged from a 6-quarter recession). News that the ECB is willing to maintain the current accommodative policy might have also played a role as households see reduced risks to their disposable income in the future. On the other hand, the still high unemployment rate and geopolitical uncertainties are likely to have put a lid on a more pronounced uptick in September.

Dow Jones opens lower after Fed taper comments

Wall Street has opened lower, not surprisingly given Fed official James Bullard’s comments that tapering might begin in October. The Fed gave markets at boost following Wednesday’s surprise decision by the US central bank to maintain its $85bn a month bond buying programme.

But after Bullard’s hint, the Dow Jones Industrial Average is down 22 points or 0.14% in early trading. However the Nasdaq had edged higher, up 0.15%, helped by a near 3% rise in Apple shares on the day queues form for the tech giant’s latest iPhones.

More German polling figures, showing the SPD and AfD edging up:

Updated

Across the Atlantic, observers are still trying to get their heads around Ben Bernanke’s decision on Wednesday not to start scaling back the US Federal Reserve’s $85bn a month bond buying programme.

Most economists had expected a move to wean the markets off the quantitative easing fix this month, but Bernanke pointed to the US economy still being too fragile.

But today Fed official James Bullard suggested to Bloomberg that the so-called tapering might now start in October. So we have all the “will-they-won’t-they” speculation to look forward to for another few weeks yet.

Updated

Budget airline Ryanair has promised to mend its ways, after being rebuked about its “abrupt” culture by shareholders today.

Reuters writes:

Ryanair, Europe’s biggest budget airline, has promised to transform its “abrupt culture” in a bid to win customers from costlier rivals, admitting for the first time that a reputation for treating its passengers badly might have become a problem.

The Irish firm, this week voted the worst of the 100 biggest brands serving the British market by readers of consumer magazine Which?, said on Friday it would become more lenient on fining customers over bag sizes and overhaul the way it communicates.

“We should try to eliminate things that unnecessarily piss people off,” chief executive Michael O’Leary told the company’s annual general meeting, after several shareholders complained about the impact of customer service on sales.

That’s the spirit.

More here: Ryanair must stop ‘unnecessarily pissing people off’, says O’Leary

And on that note, I’m going to fly home. Nick Fletcher has the controls. Thanks for reading and commenting.

Maybe see you online on Sunday night for the election excitement? Our foreign team will be all over it, and I’ll be on Twitter as @graemewearden as usual.

Updated

Forsa: German election is neck-and-neck

New polling data from Germany has just been released, showing that Sunday’s election is neck-and-neck with neither side on track for a clear majority.

The poll from Forsa found that the current CDU/CSU-FDP coalition would win 45% of the vote, as would their main rivals. Another key point, the eurosceptics Alternative For Germany would not hit the 5% threshold.

  • CDU/CSU 40%.
  • SPD 26%. 
  • Greens 10%.
  • LINKE 9%. 
  • FDP 5%
  • AfD 4%
  • Pirates 2%

I didn’t mention earlier, but the SDP has ruled out forming a government with the more left-wing Linke party, given its views on foreign affairs and its opposition to NATO. That could change in the heat of coalition talks, of course.

Today’s UK public finance figures mean George Osborne is on track to hit his fiscal targets for this year.

My colleague Katie Allen explains all:

A drop in government spending helped cut Britain’s borrowing last month, prompting economists to forecast that the chancellor is on track to meet his fiscal target for this year.

Borrowing for the last financial year as a whole was also revised down slightly by the Office for National Statistics as it published data on the public finances.

As mentioned earlier, Britain ran a deficit of £13.2bn in August – smaller than last year’s £14.4bn.

Katie continues:

The government’s progress on cutting Britain’s deficit – the gap between the government’s income and spending – was described as “painfully slow” by one business group. But analysts said the public finances appeared to be on an improving trend.

More here: Osborne on track to meet fiscal target as UK public borrowing falls

In the City, the Foxton’s estate agent chain continues to enjoy a stellar first day on the stock market. Its shares are up 20% this morning, at 277p from the 230p it floated at.

The FT says it shows “a recovery in both share offerings and the residential property market in the UK”.

Joshua Raymond, chief marketing strategist of Cityindex.co.uk, calls it a “hugely impressive” debut, and deliciously timed, too.

With London house prices shooting in the midst of a pricing bubble thanks in part to the Help to Buy Scheme, investors are trying to gain exposure to firms that directly benefit from this and as such the Foxtons IPO could not have been better timed in terms of its attractiveness.

Or as one fund manager puts it:

Updated

Thanks to BigBlue80 for flagging up the polling data which suggests Angela Merkel’s current CDU-CSU/FDP coalition would not get enough votes to return to power.

In the past, the most reliable of the large pollsters was the Institut für Demoskopie (IfD) Allensbach

They predict the following:
CDU/CSU 39,0%
SPD 26,0%
Grüne 11,0%
Linke 9,0%
FDP 6,0%
AfD 3,5%
Piraten 2,0%
Sonstige 3,5%

I.e. 45% for the current CDU/FDP coalition and 46% for the three major left parties.
It’s quite certain that Merkel stays chancellor although I would not completely discount the option of a SPD-Left-Green coalition. Which sounds like change but would mainly lead to too much instability to get anything done.

AfD might only influence politics in the sense that Merkel will have to watch her right-flank in the next few years. While these one-trick ponies usually don’t last long, they would have 4 years to embarass Germany abroad.

Updated

Speaking of eurosceptics….

Italy cuts growth targets

The Italian government has bowed to the inevitable today, tearing up its growth targets and admitting that its budget deficit is heading over target.

Enrico Letta’s government cut its forecast for 2013 to a contraction of -1.7%, down from -1.3% before. In 2014, it expects growth of 1%, down from 1.3%.

Both forecasts remain more optimistic than the IMF’s own targets — the Fund expects a 1.8% contraction in 2013 and a 0.7% expansion in 2014.

That difference could matter — on Letta’s calculations, the Italian deficit is on track to hit 3.1% this year. That’s over the EU’s target, and econony minister Fabrizio Saccomanni told reporters that it will be “corrected quickly”.

Sounds like the EU are putting pressure over the deficit too:

Saccomanni also predicted that Italy’s two-year recession will end soon, with GDP flat this quarter and then rising in the last three months of this year.

Updated

Tony Connelly, Europe Editor for RTE News, reports that the eurosceptic Alternative für Deutschland party are in good spirits ahead of Sunday’s election.

Party loyalists are confident they’ll win enough support to claim seats in the Bundestag. They’re also looking ahead to next year’s European elections.

Emma Tunney, an intern with Open Europe, attended one of Angela Merkel’s campaign rallies this week, and writes that Europe was only raised late in the chancellor’s speech:

Here her stance was clear – Germany must hold the course. Germany’s continued commitment to help its friends is necessary, that said she was quick to add that Germany had every right to expect those receiving assistance make meaningful changes to their financial systems.

Her assertion of a CDU rejection of the possibility of mutualizing European debt was well received, and was perhaps the most definitive statement on what we could expect should she become Chancellor once again.

Parish notice: my colleagues on the foreign desk have been tracking the twists and turns of the German general election in their own blog: German Elections Blog 2013.

Updated

From Berlin, my colleague Philip Oltermann flags up that the unfolding story of how US intelligence have been accessing Europe’s electronic communications was raised by Peer Steinbrück yesterday,

The NSA affair became a German election issue on Thursday when Social Democrat candidate Peer Steinbrück accused Angela Merkel of “negligent” treatment of the issue.

He said the revelations of US internet surveillance represented a “far-reaching interference with our basic democratic rights and personal self-determination”, and that Merkel had failed to “protect German citizens’ freedoms and interests”.

More here: Peer Steinbrück accuses Angela Merkel of negligence over NSA revelations

Electionista has crunched the recent polling data and concluded that Angela Merkel’s CDU-CSU/FDP coalition has just a 50.5% chance of winning a majority on Sunday:

On that point….

Updated

AP: Tight fight in Germany

Here AP’s latest dispatch from the German political frontline. It explains how the Free Democrat party are battling to hit the crucial 5% mark to get into the Bundestag.

Chancellor Angela Merkel’s conservatives and her struggling coalition partners were fighting over votes Friday in the final stretch of campaigning for Germany’s election as polls pointed to a tight outcome.

Merkel is heavily favored to emerge from Sunday’s election with a third term, but her hopes of continuing the current coalition of her conservatives and the pro-market Free Democrats are in the balance.

A ZDF television poll conducted Wednesday and Thursday showed a statistically insignificant one-point lead for the alliance over the combined opposition in line with other recent surveys showing a dead heat.

The Free Democrats are pushing hard for Merkel supporters’ votes after being ejected from Bavaria’s state legislature in a regional vote last weekend. In national polls, they’re hovering around the 5 percent support needed to keep their seats in Parliament.

Merkel and her conservative Union bloc are pushing back, saying they have no votes to give away. If the coalition loses its majority, the likeliest outcome would be a “grand coalition” between Merkel’s party and the center-left Social Democrats and the conservatives want to be as strong as possible.

“I would advise us all in the final hours before the election to fight our political opponents and not argue over each other’s votes,” Bavarian governor Horst Seehofer, who led Merkel’s conservative bloc to victory there, told the daily Die Welt.

The Free Democrats have “potential of well over 5 percent,” he was quoted as saying. They won nearly 15% at the last election.

“I think it’s a very strange understanding of democracy when the impression is raised that citizens’ votes belong to the chancellor,” the Free Democrats’ general secretary, Patrick Doering, shot back on n-tv television.

ZDF’s poll of 1,369 people gave Merkel’s conservatives 40 percent support and the Free Democrats 5.5%. Challenger Peer Steinbrueck’s Social Democrats polled 27%, their Green allies 9% and the hard-line Left Party with which the center-left parties say they won’t work 8.5%.

The poll showed a new anti-euro party, Alternative for Germany, at 4% not enough to win parliamentary seats. It gave a margin of error of plus or minus up to three percentage points.

But do note the caveat from earlier – some analysts think AfD are doing better than that…..

Looking back at the German election… here’s a handy graphic showing how last night’s polling data would translate into seats in the Bundestag:

The CDU’s 266 seats,plus the FDP’s 37, would give the current coalition a small majority –which could make for some tight votes on future eurozone policy.

Updated

On a lighter note, there’s a correction in the Financial Times today that deserves a wide audience (with many thanks to Luke Baker of Reuters)

Updated

Britain’s public finances were a little better than expected in August. The monthly deficit came in at £13.157bn, compared with estimates of around £13.3bn. Government revenues rose by 1.4%, and spending dipped by 2.2%.

So far this year, the UK had borrowed £46.8bn to balance the books, compared to £50.5bn for the first eight months of 2012. More to follow.

Updated

Corporate news

In the UK business world, the Office for Fair Trading has launched an investigation into possible price fixing on sports bras.

More here: OFT probes sports bra price fixing

And everyone’s favourite (?!) estate agent, Foxtons, has launched on the London stock market. Floated at 230p a share (valuing the firm at nearly £650m), its shares have leapt to 280p. Even London house prices aren’t going up that fast.

More here: Foxtons share price soars on debut

Adidas profits warning pushes DAX down

European stock markets are mostly lower today, but there’s not much afoot.

The initial rally sparked by the Federal Reserve’s decision on Wednesday not to taper its stimulus package has worn off, and traders appear to be hunkering down ahead of the German election.

The German stock market has been pulled down by a profit warning from Adidas last night.

Adidas blamed adverse currency effects, a distribution problem in Russia and poor trading at its golf business.

• FTSE 100: down 6 points at 6618, down 0.1%

German DAX: down 9 points at 8681, down 0.12%

French CAC: down 5 points at 4200,-0.12%

Italian FTSE MIB: down 1 point at 18056, – 0.01%

Spanish IBEX: up 11 points at 9,165, +0.13%

Updated

Here’s some early reaction to India’s surprise interest rate decision, which I’ve taken from Reuters.

Anjali Verma, chief economist at PhillipCapital:

Hiking the repo rate was unexpected. The governor is clearly worried about inflation. He is saying the improved international conditions will take care of the current account deficit funding and his focus will shift to fiscal deficit and inflation, which were taking a backseat.

Anubhuti Sahay, economist at Standard Chartered:

The statement clearly has a strong hawkish bias as it states that with a relatively more stable exchange rate, monetary policy formulation will be determined once again by internal determinants viz inflation and fiscal deficit.

Abheek Barua, chief economist at HDFC Bank:

The long-term signal is that the RBI is still concerned with inflation.

Easing short end of the curve, which it has done by cutting the MSF (marginal standing facility), reducing CRR requirements and etc. is a strong pro-growth signal. I think it (MSF) might be reduced even further.

India battles inflation with surprise rate hike

India’s new central bank governor Raghuram Rajan made a splashy debut in the monetary policy world this morning.

The Reserve Bank of India surprised the markets by announcing a quarter-point rise in India’s headline interest rate, from 7.25% to 7.5%.

However, the RBI also announced that it will unwind some of the “exceptional measures” put in place to support the Indian Rupee, after it slumped to record lows against the US dollar this summer.

Rajan’s message with today’s rate hike is that the RBI will make fighting India’s inflation problem its top priority. The cost of living is rising at 6.1% in India.

As Rajan put it in today’s statement:

Bringing down inflation to more tolerable levels warrants raising the repo rate by 25 basis points immediately.

The RBI raised rates despite recognising that the Indian economy is weakening, with “continuing sluggishness in industrial activity and service.”

Clearly, Rajan is showing that he’s taking price stability as his mantra. The minutes point out that that the RBI has struggled with this in the past:

What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence. Although better prospects of a robust kharif harvest will lead to some moderation in CPI inflation, there is no room for complacency.

A rate hike usually pushes currencies up. However, the rupee promptly dived as the news hit the wires, as traders realised that the RBI was also cutting some of the exceptional measures introduced to support its currency. The rupee fell from 61.7 to the dollar to as low as 62.55.

Stocks also fell on the Indian stock market — with the Sensex sliding over 2.1% so far today.

* – for the record, the RBI trimmed its marginal standing facility rate by 75 basis points from 10.25 to 9.5 per cent, and cut the minimum proportion of the cash reserve ratio that banks must maintain at the RBI from 99 per cent to 95 per cent.

Updated

Interest in the German election extends to the Asian markets, reports IG’s man in Melbourne, Chris Weston.

There’s no panic, but investors are calculating how the result will affect eurozone crisis policy. He writes:

The market sees the election really going one of two ways; either the status quo is resumed (i.e. CDU, CSU and FDP remain in power) or perhaps a grand coalition with the SPD party is put together after a short period of negotiations.

Given the SPD’s previous positive stance on backing a redemption fund, backed by Eurobonds, if they did help govern in future we could see a spike in EUR/USD on the prospect of a more euro-friendly government in place. On the other hand if the AfD (right wing, anti-euro party) get over 5% of votes and thus gain representation in parliament, we could see EUR and US futures gap lower on Monday.

Eurozone concerns have had limited influence on price action of late, but the prospect of having the AfD party having representation in parliament could have implications on eurozone policy going forward. The first thing that springs to mind is Greece.

We know the Greeks have a funding problem; the IMF talked openly about it July; highlighting a €4.4bn funding gap in its current program for 2014 and €6.5bn in 2015.

Given all new loans have to be fully agreed on in the Bundestag (German lower house of parliament); AfD representation in parliament could cause disruptions and uncertainty here.

Updated

On the campaign trail….

Angela Merkel and Peer Steinbrück, the SPD’s candidate for the chancellorship, held election rallies last night in a late drive to win votes before Sunday’s election (see opening post)

Both politicians attracted a healthy turnout of supporters, as these photos show:

Updated

German election looms

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

Germany’s general election has loomed over the eurozone for most of 2013. Finally, it’s all-but upon us.

Germans head to the polls on Sunday in a crunch poll that will determine how Europe’s largest countryeconomy is governed for the next four years. There’s no doubt that Angela Merkel’s CDU-CSU party will win the most votes. But there’s real uncertainty over whether her coalition with the Free Democrats can be repeated, or whether we’ll see a grand coalition with left-leaning rivals.

Poll after poll this week have confirmed that it’s just too close to call (do make your predictions in the comments).

The latest survey, released last night by FGW, suggested that Merkel’s coalition would just win enough votes to take power again.

It put CDU at 40%, the Social Democrats at 27%, FDP at 5.5%, Linke at 8.5%, the Greens at 9%, and then the eurosceptic Alternative for Deutscheland at 4% (not enough to win seats).

So, that’s the CDU-FDP on 45.5%, and other major parties at 44.5%.

The key factor is that a party needs 5% of votes to actually get into the Bundestag. And the whisper in Germany (and in the comments section of this blog this week) is the AfD might be doing better than the pollsters believe.

If AfD clear the 5% mark, as some polls have suggested, then German politics will be dramatically shaken up.

Here’s what some respected euro journalists have been tweeting:

So, the eyes of Europe could be on Germany this weekend, and for sometime after if it’s an unclear result.

Traders in the City are already watching with interest, as CMC’s Michael Hewson writes:

It still remains uncertain as to what the electoral maths will be with respect to any new coalition government.

A rising Eurosceptic movement in Germany could well complicate things significantly after a poll by German newspaper Bild showed that the AfD party could well be on course for more than 5% of the vote in the election this weekend.

A move above this threshold would mean that the party would gain seats in the Bundestag and as such would mean that they would have much greater influence over policy as well as make the likelihood of a less stable coalition a real possibility as neither the CDU, or the SPD would have enough votes to form a government with any prospective coalition partners.

I’ll be tracking events through the day as usual. We’ve already had one piece of interesting news outside Europe — India’s central bank has surprised the markets by raising interest rates. More on that shortly…. 

Updated

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Investors cheer prospect of dovish replacement for Bernanke. Would Janet Yellen really be a dramatically different prospect to Summers? Noon market update: Euro shares at highest since 2008. Greek riot police use teargas as strikes begin…

 


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The Bank of England is touring the UK, holding roadshows to promote its plan to replace Britain’s paper banknotes with plastic alternatives.

They’re in Gateshead today, having kicked off in the refined environs of Oxford on Friday – where my colleague Katie Allen watched events unfold.

She writes:

Stephen Barratt, an accountant from Oxford, is unimpressed. He rubs the polymer dummy between his fingers with a look of disgust.

“It’s the feel. I can see the practical advantages but paper is much nicer. I don’t like them personally … The fact paper notes age is actually quite nice,” he says.

More than 650 people handle the notes before the day is out. Questions range from the environmental impact to washability.

Justin Gunson, a 29-year-old magician, is keen to see how the notes handle as well as other possible professional challenges. “As a magician you want to know if you can mark them, if you can use fake ones.”

The Bank has more than a dozen roadshows planned (unless local conjurers relieve them of the prototypes first).

More here: British shoppers get to grips with Bank of England’s polymer notes

Updated

Back to Greece, and Greek unions say that more than 40,000 civil servants took part in the central Athens demonstration today.

Participation in strike action is reckoned to be 95% - a very high figure given that strikers lose their salaries when they walk off the job.

Angeliki Fatourou of the OLME union (which represents workers in education) told our correspondent Helena Smith that:

It’s been a huge success.

And indicative of what the government and troika can expect in the coming weeks and months ahead.

As flagged up earlier, Greece’s Troika of international lenders return to Athens next week…..

Market update: European share at five-year high

A quick markets update. European stock markets remain buoyant following Larry Summers’ decision to withdraw from the race to succeed Ben Bernanke as head of the Federal Reserve.

• FTSEurofirst 300: up 9.5 points at 1259, a new five-year high 

• FTSE 100: up 59 points at 6643, a five-week high

• German DAX: up 103 points at 8613, an all-time high

• French CAC: up 32 points at 4146, highest since February 2011

Some financial analysts reckon that the market reaction is overblown. After all, Ben Bernanke has already outlined the conditions under which the Fed would slow its stimulus programme. Would Janet Yellen really be a dramatically different prospect to Summers?

Stephen Lewis of Monument Securities thinks not.

Here’s his reasoning:

The markets should not assume that other candidates to lead the Fed will deviate far from the timetable for ‘tapering’ QE3 that Mr Bernanke has outlined. Ms Yellen, whose chances of taking the Chairmanship will appear to have improved with Prof Summers’ withdrawal, may be of a generally ‘dovish’ disposition.

But she has not dissented from the Bernanke schedule nor has she released any public comment recently about economic growth or unemployment that suggests she might look with favour on a more accommodative policy-course than the FOMC consensus currently approves.

There remains the mystery of why President Obama has appeared reluctant to nominate Yellen already. Lewis adds:

Dark rumours of personal frictions during the Clinton Administration abound but, politically, a Yellen appointment would probably be the easiest course for the President to pursue. He could at least count on most of the Democrats in the Senate being on his side.

Updated

Helena Smith: Anger on the streets of Athens

Over in Greece our correspondent Helena Smith reports that passions are on the rise as striking workers, starting with teachers, kick off a week of industrial action in the debt-stricken country.

She also confirms that several people were taken to hospital after riot police used tear gas this morning.

 After a slow-motion summer, Greek unions are back in action organising protests and walk-outs with a vengeance.

Outrage over government plans to pare back the bloated public sector boiled over at 7 AM this morning when a week of strikes got off the ground with police firing tear gas at demonstrating school guards amassed outside the administrative reform ministry.

Three protestors were subsequently rushed to hospital suffering respiratory problems. The decision of authorities to resort to using toxic chemicals so early in the day appears only to have reinforced the resolve of unions in both the public and private sector to step up action against the reforms now being asked of Greece by the EU and IMF.

“It’s just made us more mad,” said Angeliki Fatourou, a leading member of the secondary school teachers union OLME which kicked off five-day rolling strikes today. “Please note that we will not rest easily. This will be the mother of strikes and teachers will lead the way.”

As Helena writes, thousands of teachers, from both secondary and primary sectors, are marching towards the parliament building in Syntagma square in a massive display of opposition over reforms that will see some 12,500 civil servants being transferred to a mobility scheme, widely seen as shorthand for dismissal, by the end of the year.

“The cuts really are the last straw,” said Fatourou insisting that most public schools no longer had enough money to pay heating, electricity or water bills.

ADEDY, the umbrella group representing civil servants nationwide, has also called on its 42 federations to go on strike later this week.

The 48-hour walkout, Wednesday and Thursday, comes ahead of crucial meetings Friday and Saturday that will decide whether industrial action will continue across the public sector. “At the moment different sectors are backing the idea of strike action with varying degrees of intensity,” ADEDY’s Tania Karayiannis told me this morning. “But that is expected to change. Greeks in both the public and private sector have been pushed to the absolute brink. This will be a very hot week that should be seen as a prelude to a very hot winter,” she said.

Visiting inspectors representing Greece’s international creditors will almost certainly be given a baptism of fire when they arrived in Athens to begin what will be the most crucial review, yet, of the Greek economy next Monday.

This video clip appears to show those reported clashes outside Greece’s Ministry of Administrative Reforms between school guards and riot police this morning (see 10.56am onwards):

That’s via the Keep Talking Greece website, which reports that demonstrators held a sit-down protest in the middle of the road outside the ministry, prompting riot police to move them.

And here’s a photo of teachers on strike in Crete:

Updated

Greek schoolteachers have gathered in force in the city of Thessaloniki for today’s walkout, as these tweets from local resident Antonis Gazakis show:

That’s via university lecturer Spyros Gkelis. He also flags up that there is reportedly a high turnout across the country from Greece’s school teachers for today’s strike.

Updated

Greek strikers ‘clash with riot police’ as week of industrial action begins

Over in Greece, a week of industrial action has begun with schoolteachers downing tools, and reports of clashes between school guards and riot police in Athens.

Greek secondary school teachers launched a five-day strike this morning, in protest at the government’s plans to cut thousands of jobs, and transfer staff to its unpopular ‘mobility scheme’ [from where employees can be forced to take a new job or be laid off].

It’s likely to be the first in a series of ‘rolling’ strikes.

According to local reports, Greek police fired teargas to disperse school guards who tried to enter the Administrative Reforms ministry in central Athens this morning, as the walkout got underway.

One police official told Reuters:

About 60 to 70 school guards tried to enter the building to occupy it and were pushed back by police.

School guards are responsible for patroling educational premises, and also operate road crossings for pupils.

Here’s Associated Press’s early take:

Riot police have scuffled with striking school guards outside a ministry in central Athens, as labor unions gear up for a series of public sector strikes over job cuts.

Local media report Monday at least two demonstrators were transported to hospitals suffering from breathing problems after police used small amounts of pepper spray in an attempt to move protesters away from the Administrative Reform Ministry.

Greece’s government has pledged to ax thousands of public sector jobs in an effort to meet conditions of its international bailout. The country has been depending on rescue loans from the International Monetary Fund and other European countries that use the euro currency since May 2010.

Today’s walkout is the prelude to a major 48-hour walkout, starting on Wednesday, called by Greece’s main unions.

Updated

Janet Yellen is the odds-on favourite to succeed Ben Bernanke this morning. A shoe-in, really, at just 1-8 with Paddy Power (so you’d get £9 back for every £8 you risked.)

Tim Geithner, outgoing Treasury secretary, is an 8-1 shout, as is former Fed vice-chairman Donald Kohn.

Stanley Fischer, who just stepped down from running Israel’s central bank, is a 40-1 outsider.

More details here.

Larry Summers decision not to run for the Federal Reserve chair (see opening post onwards), is going to trigger a rally on Wall Street later today.

Traders are calling the Dow Jones industrial average up by over 1%, as US investors give the thumbs up to the prospect of a more dovish Fed chair (although we still don’t know who is going to actually replace Bernanke, of course)

European stocks remain at five-year highs, and the US dollar is still down around 0.5% on the currency markets.

Summers’ decision could give the US economy a small boost , tweets economic policy analyst Alan Tonelson:

Eurozone inflation fell to just 1.3% (annual basis) last month, data just released from Eurostat confirmed.

That’s a drop from July’s reading of 1.6% (for the consumer prices index), further away from the European Central Bank’s target of just below 2%. That shows there’s no pressure on the ECB to raise rates, or change its commitment to leave them at present levels, or lower, for an extended period.

The data confirmed that Greece remains in deflationary territory, with prices falling by 1.0% year-on year. Bulgaria (-0.7%) and Latvia (-0.1%) also showed the lowest rates.

The highest eurozone inflation figures were seen in Estonia (3.6%), the Netherlands (2.8%) and Romania (2.6%), with the UK also reporting inflation of 2.8% last month.

Updated

This may please Mario Draghi — as the ECB chief began his speech, Italy reported that its trade surplus has widened

Imports fell 0.3% year-on-year in July, while exports jumped by 3.0% compared with July 2012 – the first rise in exports in three months. This pushed the Italian trade surplus up to €5.948bn, up from €4.733bn a year ago.

In another welcome sign of rebalancing, exports to non-EU countries were up by 3.5% (full details here)

Draghi is also warning that eurozone governments must not slacken off the pace of reform – a familiar refrain for the ECB chief:

 Thanks to their consolidation efforts so far, the primary fiscal deficit for the euro area has fallen from 3.5% of GDP in 2009 to around 0.5% in 2012. This is projected to turn into a primary surplus from 2014 onwards.

This improvement in public finances has helped send a signal to investors that government debt levels will stabilise and then fall in the future. This has been crucial in reassuring markets about debt sustainability. But the average public debt level in the euro area is still very high, at around 95% of GDP. This means that consolidation efforts need to be maintained in the years to come.

Draghi: Europe’s ‘fragile’ recovery needs more help

Mario Draghi’s Berlin speech is now online at the ECB’s web site: click here

It’s called “Europe and the Euro – A Family Affair”*, and the key theme is that Europe needs growth to underpin its delicate recovery.

As Draghi puts it:

The recovery is only in its infancy. The economy remains fragile. And unemployment is still far too high.

Draghi is reminding his audience of German small business owners that the eurozone faced” difficult circumstances” a year ago, with “severe tensions in financial markets” as investors feared the break-up of the euro.

That threat has receded, he said, but Europe remains too weak:

My main message is that we have made significant progress on the first step, stabilising the euro area. But there is still work to do to transform this achievement into higher growth and employment. Strengthening the euro area through sustainable policies, higher competitiveness and stronger common institutions is therefore our priority for today.

The speech contained some familiar themes — unemployment remains too high, and banking union remains incomplete.

On competitiveness, Draghi actually hails the drop in wages in some eurozone countries:

One way to regain competitiveness quickly is to address the numerator in unit labour costs – nominal wages. Another, longer-term approach is to increase the denominator – to achieve higher productivity. In my view, in the euro area today we need both.

On the first count, there are already some encouraging signs of rebalancing in the euro area in terms of cost competitiveness. Thanks in part to the structural reforms introduced in several countries, relative costs are adjusting where they had become misaligned in the past.

• – presumably the title is a reference Sly and the Family Stone, following Mark Carney’s decision to name-check young UK singer-songwriter Jake Bugg last month.

Over in Berlin, European central bank president Mario Draghi has begun giving a speech – here’s the wire snaps off the Reuters terminal….

16-Sep-2013 09:00 – ECB’S DRAGHI – EURO ZONE ECONOMY REMAINS FRAGILE, UNEMPLOYMENT FAR TOO HIGH

16-Sep-2013 09:00 – ECB’S DRAGHI – GIVEN SUBDUED INFLATION OUTLOOK, EXPECT KEY INTEREST RATES TO REMAIN AT CURRENT OR LOWER LEVELS FOR EXTENDED PERIOD OF TIME

16-Sep-2013 09:00 – ECB’S DRAGHI – BANKING UNION SHOULD HELP SPEED UP THE REPAIR OF BANKS – THAT IS IF, AS I HOPE, WE END UP WITH A STRONG SINGLE RESOLUTION MECHANISM 

Updated

Kit Juckes of Société Générale dubs today’s market action the “Larry Rally”, and puts his finger firmly on the causes of the buoyant financial markets — easy money.

From his morning note to clients:

Five (long) years on from Lehman’s collapse, and while the global economy is still struggling to find its feet, financial markets are riding high. This morning’s catalyst may be Larry Summers’ decision to withdraw from consideration for the Fed Chairmanship, but the real driver is easy monetary policy. Of course.

June saw a huge market blood-letting as ‘tapering’ was priced in, and the period since then has seen outflows from emerging markets and bond funds slow, markets calm down.

The issue is how long the risk party can last as talk of tapering becomes reality and before the focus switches firmly to when and how fast the Federal Reserve actually tightens policy.

The Fed’s monetary policy committee meets on Wednesday night, so we might not have long to wait…..

Britain’s borrowing costs have dropped this morning, following Larry Summers’ decision.

The yield on 10-year gilts has dropped to 2.86% , from 2.91% on Friday night, as traders rush to buy UK debt (pushing up the price, and thus lowering the interest rate on the bond).

US Treasuries have also strengthened, driving down yields on America’s 10-year bonds by a chunky 8 basis points to 2.812%, from 2.9% on Friday.

The message from the markets is clear — they expect a less hawkish Fed chair than Summers….

Germany’s DAX index hit a new record high this morning — nudging 8,601 points in the opening minutes of trading.

Updated

European markets hit five-year high

The FTSeurofirst 300 index of Europe’s biggest companies has just hit a new five year high, driven by the prospect of the dovish Janet Yellen becoming the next Fed chair.

It has jumped 0.58% to 1,260.35, a level not seen since June 2008 — three months before the collapse of Lehman Brothers.

Here’s the details of the European markets this morning, following Asia’s rally (see 7.51am)

Mike van Dulken, head of research at Accendo Markets, explains that recent progress in Syria is also boosting the markets – along with the first election results from Germany (of which more shortly…..)

Investors are reacting positively to news that the more hawkish Larry Summers has withdrawn from the race to be the next Fed chair in Jan (not enough support from Obama’s Democrats), paving the way for the more accommodative vice-chair Janet Yellen.

Markets are not worried about tapering per se, rather the speed of it, seeing Yellen reduce bond buying more slowly and leave rates lower for longer.

Sentiment is also helped by news of deal between US & Russia over Syria’s chemical weapons surrender.

German Chancellor Merkel’s sister party won the Bavarian election which bodes well for her to keep her position in next week’s general election.

Updated

Summers end drives European markets higher

Europe’s stock markets are open, and the news that Larry Summers won’t be the next Fed chair is pushing shares higher.

The prospect of an “ even more dovish chairman at the helm of the world’s most pivotal central bank” than Ben Bernanke, as Chris Weston of IG puts it, is giving markets a lift.

The FTSE 100 jumped 1% at the start,and is now up 50 points at 6633.

Italy’s FTSE MIB has also gained 1%, with other indexes jumping at least 0.8%.

So why the rally? It’s all about Janet Yellen, the new favourite to replace Bernanke. As Weston explains, Yellen could potentially have quit the Fed altogether if Summers got the top job, depriving the Fed of one of its most dovish members:

Life with Larry Summers at the helm would have potentially been very different from life under Ben Bernanke; it’s these uncertainties that keep markets held back.

In theory if Larry Summers had got the job, we could easily have seen Janet Yellen step down from the Fed and return to academia, which would have had negative ramifications on the composition of the Fed in Q2 2014, with the board not just losing a key note dove, but also its last voting female. This has now changed, and while we know Donald Kohn has been interviewed, if Janet Yellen doesn’t get the job there could be an outcry given a large number of democrats and certainly market participants have been campaigning for her appointment.

Updated

Larry Summers’ withdrawal may be good news for investors who don’t want America’s stimulus programme to end, but it’s a blow to President Obama.

As our Washington bureau chief, Dan Roberts, explained last night:

Barack Obama’s hopes of a smooth transition of power at the US Federal Reserve were dealt a significant blow on Sunday night when Larry Summers unexpectedly pulled out of the running to replace Ben Bernanke when he stands down in January.

Summers, a former Treasury secretary under President Clinton, had been frontrunner to take charge of US monetary policy during a crucial phase in the economic recovery but is understood to have been deterred by the prospect of bumpy Senate confirmation hearings.

Despite an impeccable track record as an economist and policymaker, Summers remains widely associated with the period of laissez-faire economic policy-making that led up to the banking crash and his decision to step aside on the eve of the fifth anniversary of the crisis shows how raw the politics remain in Washington.

More here: Larry Summers withdraws name for Federal chairmanship

Updated

…while fastFT have swiftly rounded up the currency movements:

  • Malaysian ringgit: +1.42%
  • Indian rupee: +1.41%
  • Indonesian rupiah: +1.09%
  • Aussie dollar: +0.88%
  • Kiwi dollar: +0.71%
  • Thai Baht: +0.50%
  • Japanese yen +0.47%

Updated

Here’s a snapshot of the rally in Asia today: led by emerging markets (which have been buffeted in recent weeks by the prospect of the Fed ‘tapering’ its quantitative easing programme):

The agenda

It’s going to be a busy day, quite apart from the excitement over the Fed race.

Here’s an agenda:

• Mario Draghi gives speech in Berlin – from 10am CET (9am BST). Details

• Eurozone inflation data for August: 11am CET (10am BST)

• Troika begin review of Portugal’s bailout programme – all day

• Greek teachers strike over austerity cutbacks – all day

• Italian trade data – 10am CET (9am BST)

Markets to surge on Summers withdrawal

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

European stock markets are set to rally this morning following the surprise news last night that Larry Summers, former US Treasury secretary, has withdrawn from the race to become the next chairman of the US Federal Reserve.

The former US Treasury secretary threw in the towel yesterday, seemingly daunted by the prospect of a bruising fight with Congress.

The move throws the race to succeed Ben Bernanke wide open, with the Fed on the very brink of deciding whether to begin slowing its huge monetary stimulus programme. The new front-runner appears to be Janet Yellen, Fed vice-chair since 2010 – a popular choice with Democrats and many in the financial markets and the media.

As well as having helped guided Fed policy through the crisis, Yellen is credited with a rare knack of reading economic trends — including predicting in 2009 that the recovery would be “frustratingly slow”.

Economists and analysts believe Yellen is more likely than Summers to maintain a robust stimulus programme, meaning more easy money for Wall Street and the City.

Summers’ withdrawal has already hit the dollar, driving sterling to its highest level since January. The pound is up by 0.8 cents this morning, to $1.59.5.

Emerging markets have rallied overnight, with Thailand’s stock market up almost 3% and India up 1%.

European stocks are expected to surge too, while bond yields should probably slide — on the prospect of the Fed buying even more US debt than under Larry Summers.

IG is calling the FTSE 100 up 72 points at 6655, the DAX up 131 points at 8640, and the CAC up 57 points at 4171.

I’ll be tracking all the news through the day, as usual….

Updated

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Published via the Guardian News Feed plugin for WordPress.

Five favorite Draghi quotes of the year. Eurogroup signs off Greece’s next aid tranche. 12 months on from the speech that calmed the crisis. But ex-ECB chief economist issues warning. New deputy governor at BoE announced. FOMC, ECB and BoE on tap next week…

 


Powered by Guardian.co.ukThis article titled “Eurozone crisis: Greek bailout payment approved on anniversary of Draghi’s ‘whatever it takes’ speech” was written by Graeme Wearden (until 2pm) and Katie Allen (now), for theguardian.com on Friday 26th July 2013 12.09 UTC

5.59pm BST

Funds for Greece, New Man at the BoE and a year of Whatever it Takes

Time to close the live blog for today and to thank you for reading and commenting. We will be back next week with more and in the meantime, here is a round-up of today's main events.

• It's 12 months to the day since Mario Draghi, European Central Bank president, said "the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough." And my colleague Graeme Wearden has details of the speech here as well as top "super Mario" quotes here.

• INSEE, the national statistics office, reported that French consumer confidence rose. Details here from 8.20am.

• Jürgen Stark, the ECB's former chief economist, marked the first anniversary of Draghi's 'whatever it takes' speech by predicting that the eurozone crisis will worsen in the autumn.

• EU finance officials agreed that Greece has met the conditions to unlock its €2.5bn aid payment. Coverage starts here at 9.44am.

• Portugal's government pledged to help its battered private sector return to growth with some tax-cuts next year.

• The UK Treasury announced that Sir Jon Cunliffe, career civil servant and key figure in the banking crisis, will take over as Bank of England deputy governor in November. Details here from 2.05pm and a profile by Phillip Inman.

• US consumer sentiment rose to a six-year high

• The IMF reported on the US economy, saying deficit reduction has been "excessively rapid" and at the same time stressed that in order to minimise financial market volatility, the Federal Reserve must be clear about when and how it will exit its loose monetary policy stance.

• The FTSE 100 recorded its first weekly fall in a month while the Dax also fell and the CAC40 rose.

• Markets await a week of central bank meetings.

5.25pm BST

Some forward guidance

Given the vogue for forward guidance we can't close this blog for the week without a bit of a look ahead to next week.

It could well be a choppy time for financial markets with policy announcements due from the European Central Bank, the Bank of England and the US Federal Reserve.

First up, on Wednesday, the Federal Open Markets Committee (FOMC) is not expected to make any policy changes. But its statement may have some guidance on tapering its quantitative easing (QE) scheme later this year. Most economists say September is the most likely month for the Fed to properly announce it is cutting its monthly bond purchases. Friday brings the closely watched non-farm payrolls report from the US – the latest data on unemployment and a key measure followed by the Fed.

Similarly, the Bank of England is seen as unlikely to change policy next week but given Mark Carney’s move to issue a statement alongside this month’s no change decision, bank watchers say there may well be one again in August. The bigger news, however, is likely to come from the quarterly inflation report on 7 August, when the Bank is expected to announce it will be embarking on a policy of ‘forward guidance’. Maybe next week will see forward guidance about the prospect of a forward guidance announcement…

Not everyone is ruling out a change in policy next week. Investec is forecasting more QE.

Investec economist Victoria Clarke comments:

For the record, our central case envisages no change in the 0.5% Bank rate and an uplift in the QE total to £425bn from £375bn at the meeting next week, with forward guidance following on 7 August.

Her rationale?

We would argue that Dr Carney may not face a better opportunity than he will have, in terms of the inflation projections, next week to give QE one final push to solidify UK recovery momentum. Hence, whilst we see it as a close call, we judge that on balance the MPC could be convinced to back more QE, with a £50bn tranche seen as a sufficient ‘escape velocity’ push. One final point to note, working in favour of QE next month, is that the MPC may also be mindful that the Fed looks set to begin tapering QE3 possibly as soon as September, and it may want to pre-empt any upward pressure to Gilt yields, beyond what might be achieved from forward guidance, with a burst of QE ahead of that time.

So there you have it. If they go for more QE then, you can say you read it here almost first.

And last but not least – especially on Draghi day, as my colleague and eurozone blogmeister Greame Wearden would have it – the ECB’s meeting next week is expected to end with no change in policy. In a Reuters poll, all but one of 70 economists said the ECB will hold refinancing and deposit rates steady.

James Ashley, senior economist at RBC Capital Markets says:

We expect a relatively uneventful ECB press conference next week with no changes in policy. We think President Draghi is unlikely to provide many further specifics on the newly adopted policy of ‘forward guidance’, but there may be more information forthcoming on the plans to ease SME financing conditions.

We remain of the view that the Governing Council is willing to ease policy further (both conventionally and ‘non-conventionally’) if the macro outlook warrants such a move, i.e., we think that the ECB is far from being ‘done’. However, in our view, developments over the past couple of months have generally been supportive of the ECB leaving its current settings unchanged at present. In other words, it is not intransigence that is keeping the ECB on hold, rather it is the (relative improvement in the) economic outlook.

4.56pm BST

FTSE breaks weekly winning streak

The FTSE 100 has closed down 0.5% on the day, a loss of 33 points, to 6554.8. That compares with 6630 at the start of the week and marks the first weekly fall in a month.

Nicki Lace, senior sales trader at CMC Markets UK comments:

Some reasonable earnings amongst blue chip firms in the UK this morning lent early support to the FTSE100 index, though early optimism gave way to profit taking shortly after the open.

While we are on on the subject of falling stocks, the team at Capital Economics have some sobering words about the general UK outlook:

The succession of sporting achievements, the sizzling summer and the Royal baby have supposedly lifted British spirits and fostered hopes that this improved sentiment will give an extra boost to the economic recovery. But a sober look at the statistics suggests that this economic optimism is unlikely to be justified.

Elsewhere, Germany's Dax is down 0.65% at 8244.9, France's CAC40 is up 0.32% at 3968.8 and on Wall Street the S&P 500 is down 0.62% at 1679.7.

4.23pm BST

BoE appointment: A key figure from the banking crisis

Sir Jon Cunliffe's appointment as Paul Tucker's successor at the Bank of England will, according to governor Mark Carney, bring an "important European and international perspective".

My colleagues Jill Treanor and Phillip Inman have been looking into the appointment of the career civil servant at a time of charged debate over the regulation of the UK's high street banks and the City, where regulation from Brussels is having an increasing influence.

They write:

The Bank of England has recruited one of the most influential figures during the 2008 banking crash to succeed Paul Tucker as head of the central bank's financial stability arm.

Sir Jon Cunliffe, a career civil servant who worked closely with former chancellor Gordon Brown at the height of the financial crisis, will succeed Tucker as deputy governor. The 60-year-old is currently the UK's most senior diplomat in Brussels.

Bank of England governor Mark Carney said Cunliffe's experience during negotiations at G8 and G20 summits will prove invaluable as Threadneedle Street seeks to influence the implementation of European and international financial rules.

The full story is here.

HSBC's economics team has sent through this reaction to the appointment:

From a policy perspective, Sir Jon's appointment could further strengthen links between the Treasury and the BoE – he spent the vast majority of his career at the Treasury. It is perhaps unsurprising that Mark Carney wanted someone familiar with the workings of Whitehall. After all, Central Banks are increasingly becoming embroiled in politics. Also, one could argue that more coordination between monetary and fiscal policies is precisely what is required in current times.

But too close a relationship with the politicians may not be a good thing, running the risk of a further erosion of central bank independence.

Sir Jon's experience at the Treasury means he should fit into the MPC relatively easily, not least because on many occasions between 2005 and 2007
he was the Treasury representative present at MPC meetings.

What is less clear is his knowledge of the complexities of large financial institutions and the financial system as a whole. As Deputy Governor for Financial Stability, a key skill is an understanding of the workings of banks and other financial institutions. On this, Sir Jon is perhaps more of an unknown quantity.

4.11pm BST

IMF urges taper clarity from the Fed

The IMF has wound up its latest inspection of the US economy – the so-called Article IV consultation – and has messages for the Fed and the government.

The International Monetary Fund's executive board says deficit reduction has been "excessively rapid" and at the same time stresses that in order to minimise financial market volatility, the Federal Reserve must be clear about when and how it will exit its loose monetary policy stance.

The assessment is available here. Highlights (with our own bolding up of key phrases, not the IMF's) from the Executive Board Assessment:

Executive Directors welcomed the improvement in the underlying conditions of the U.S. economy, which bodes well for a gradual acceleration of growth, while noting that the balance of risks to the outlook remains tilted to the downside.

Directors generally concurred that the fiscal deficit reduction in 2013 is excessively rapid, and that the automatic spending cuts (“the sequester”) not only reduce growth in the short term but could also lower medium-term potential growth. They stressed the importance of adopting a comprehensive and back-loaded medium-term plan entailing lower growth in entitlement spending and higher revenues. Together with a slower pace of deficit reduction in the short run, this fiscal strategy would help sustain global growth, place the U.S. fiscal position on a sustainable path over the medium term, and support the reduction of global imbalances…

Directors broadly agreed that accommodative monetary policy continues to provide essential support to the recovery, but cautioned that its financial stability implications should be carefully assessed…

Directors noted that the Federal Reserve has a range of tools to manage the normalization of monetary policy, but that there are significant challenges involved in unwinding accommodation, including risks of market reactions leading to excessive interest rate volatility that could have adverse global implications. They stressed that effective communication on the exit strategy and a careful calibration of its timing will be critical for reducing these risks.

3.48pm BST

Strauss-Kahn faces pimping charges

Ex-IMF chief Dominique Strauss-Kahn, who is to be tried for pimping.
Ex-IMF chief Dominique Strauss-Kahn, who is to be tried for pimping. Photograph: MIGUEL MEDINA/AFP/Getty Images

From consumer sentiment to aggravated pimping. News reaches us now that former IMF boss Dominique Strauss-Kahn is to be tried on charges of pimping.

News wires are quoting DSK's lawyer and prosecutors following an inquiry into sex parties attended by the man who had his hopes for the French presidency dashed by a spectacular fall from grace.

Reuters reports:

Prosecutors in the northern city of Lille said investigating judges had determined that Strauss-Kahn, 64, who has been under investigation in the case since 2012, should be judged by a criminal court.

The decision came as a surprise after a public prosecutor had recommended in June that the inquiry be dropped without trial.

"We're not in the realm of the law, we're in ideology. We're sending someone to court for nothing," said Henri Leclerc, one of Strauss-Kahn's lawyers.

The so-called Carlton affair, named after a hotel in Lille, involves sex parties that Strauss-Kahn has acknowledged attending. He says he was unaware that the women who participated were prostitutes.

Strauss-Kahn is charged with "aggravated pimping." Pimping under French law is a broad crime that can encompass aiding or encouraging the act of prostitution. Strauss-Kahn was charged with the more serious form because it allegedly involved more than one prostitute.

The crime carries a maximum term of 10 years in prison and a fine of 1.5 million euros ( million).

3.22pm BST

US consumer sentiment at 6-year high

Some forecast-beating news from America, where consumer confidence has climbed to its highest since before the global financial crisis.

The rise came as consumers in the world's largest economy felt better about the current economic climate, though they expected to see a slower rate of growth in the year ahead.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment climbed to 85.1 from 84.1 in June, comfortably beating expectations for 84 in a Reuters poll. It was the highest level since July 2007.

Survey director Richard Curtin says:

This high level of confidence points toward a continued expansion of consumer spending in the year ahead.

3.05pm BST

Running man

We are working on getting an up to date picture of the Bank of England's new deputy governor, Sir Jon Cunliffe (details of the appointment here from 2.05pm onwards.)

In the meantime, from the Flickr feed of the UK Representation to the EU, we have this action shot of the new man.

Sir Jon Cunliffe running the Brussels Sport Relief Mile in 2012.
Sir Jon Cunliffe running the Brussels Sport Relief Mile in 2012.

2.58pm BST

Wall Street falls at open

US stocks are lower shortly after the opening bell on Wall Street, while in Europe, Germany's Dax is down as is the FTSE 100 in London, but France's CAC40 is up.

In the US:

The Dow Jones industrial average is down 0.44% at 15487

The S&P 500 is down 0.36% at 1684 

The Nasdaq is down 0.31% at 3594

Analysts highlight that there has been a slew of earnings reports to digest in the US. Andre Bakhos, director of market analytics at Lek Securities in New York tells Reuters:

As investors absorb many earnings reports this morning, they are also questioning, 'Can we get through the 1,700 (on the S&P 500)? Can we get a push beyond this round number?'

I still think the short-term weakness will just provide more buying opportunities for investors that have missed the boat.

2.36pm BST

Some austerity warnings from Ireland

Now to Ireland, where our correspondent Henry McDonald has been looking at the Irish Central Bank's quarterly bulletin. He writes from Dublin:

There is no rest even for the EU's austerity poster-child, Ireland.
Even though the Republic's citizens have unlike the Greeks, taken a position of grin and bear it, the Irish Central Bank warns today that the Fine Gael-Labour government should continue its austerity drive.

In its latest quarterly bulletin on the Irish economy, the Central
Bank advises that planned €5.1bn to be taken out of the Republic's economy in budgets 2014 and 2015 needs to be adhered to if the country is to maintain the confidence of international investors.

And the Central Bank in Dublin has revised down its growth forecasts for the Irish economy. It is expecting gross domestic product growth of 0.7% for 2013 with a modest pick-up to 2.1% in 2014.

The Central Bank's warning comes amidst signs of green shoot recovery in Ireland's economic situation. Hundreds of new jobs were created this week in the hi-tech and pharmaceutical sectors while house prices in Dublin have started to climb – albeit from a very low base following the property crash.

Updated at 2.37pm BST

2.30pm BST

Treasury smoothie

Heather Stewart on our economics team sends us this on Cunliffe:

Sir Jon Cunliffe is a consummate Treasury smoothie, who is very well known to three of the four man selection panel for the deputy governorship – senior mandarins Sir John Kingman, Tom Scholar, and Nick Macpherson.

Getting on with the Treasury is arguably an asset in the financial stability role, since tension between the two institutions were a key failing during the banking crisis; and Cunliffe's international experience as G8/G20 sherpa will be invaluable in the international negotiations that are critical in reforming financial regulation.

But with an ex-Goldman banker at the helm in Threadneedle Street, it may raise fears that the Bank will take a more emollient line with the City than during Mervyn King's tenure.

Updated at 2.31pm BST

2.17pm BST

Carney rings in the changes

Reacting to the Bank of England appointment, Jill Treanor, our City editor, says:

To me Cunliffe's appointment will raise speculation about the future of Andy Haldane, a long-standing official at the Bank and an outspoken critic of the banking industry. Mark Carney, the new governor of the Bank, is known to have had a say on who would replace Paul Tucker so the appointment of an outsider – albeit an experienced civil servant – will raise speculation that he his keen to instill further change in Threadneedle Street.

2.15pm BST

The new deputy

Newly appointed Bank of England deputy governor Sir Jon Cunliffe, pictured here in 2007 in his role as UK Second Permanent Secretary for the Treasury.
Newly appointed Bank of England deputy governor Sir Jon Cunliffe, pictured here in 2007 in his role as UK Second Permanent Secretary for the Treasury. Photograph: JOSE GIRIBAS/BLOOMBERG NEWS

We will have more shortly from our team on what this new appointment means for the Bank of England and its financial stability work.

In the meantime a bit more from the Treasury announcement that Sir Jon Cunliffe has been appointed deputy governor.

As the Bank’s Deputy Governor for Financial Stability, Sir Jon Cunliffe will play a crucial role in ensuring the safety and stability of the UK’s financial sector and will sit on the Bank’s Court of Directors, the Financial Policy Committee, the Monetary Policy Committee, the Board of the Prudential Regulation Authority, and will represent the Bank on a number of national and international bodies…

Sir Jon, aged 60, has been appointed for a five year term (renewable once) with effect from November 1 2013.

Sir Jon has been the UK’s Permanent Representative to the European Union since January 2012, covering policy issues including negotiations on the banking union and a number of financial services dossiers.

Between 2007 and 2011, he was the Prime Minister’s Adviser on Europe and Global Economic Issues. As part of this role he was the G20 and G8 ‘Sherpa’, including during the 2009 UK Chairmanship of the G20, where the post-crisis international financial regulation strategy was agreed.

Prior to this, he held a number of positions at HM Treasury and in the UK Government, including Second Permanent Secretary at HM Treasury with responsibility for the directorate that covered macroeconomic, international and financial sector policy, and Managing Director of the Finance Regulation and Industry Directorate at HM Treasury.

Chancellor George Osborne says:

With his extensive experience in economic and financial policy, and very strong record of service at the highest levels of government in this country and internationally, Sir Jon Cunliffe will be an outstanding Deputy Governor of the Bank of England.

Sir Jon will be instrumental in ensuring the success of the Bank’s enhanced responsibilities for financial stability. His deep experience in engaging with the European Union will be instrumental in ensuring Britain’s financial services are well represented and protected. I wish him well in his new role.

Tucker, announced he was stepping down on 14 June after missing out on the governor job to Canadian Mark Carney. Here is how the Guardian covered it.

Updated at 3.23pm BST

2.05pm BST

Sir Jon Cunliffe appointed BoE deputy governor

2.03pm BST

… and a new role for BoE’s Tucker

And our economics correspondent Heather Stewart highlights where the departing Bank of England deputy governor, Paul Tucker, is headed

2.01pm BST

New BoE deputy governor?

Good afternoon. Katie Allen here taking over from Graeme Wearden. A quick bit of news from Robert Peston at the BBC on a possible imminent announcement from the Bank of England:

Updated at 2.01pm BST

1.57pm BST

Portugal ‘planning tax cuts’

With its political crisis behind it, Portugal's government is pledging to help its battered private sector return to growth with some tax-cuts next year.

Reuters Lisbon bureau has the story:

Portugal's government on Friday promised gradual cuts in corporate taxes from early 2014 as part of fiscal reform to boost investment and help drag the bailed-out economy out of its deepest recession since the 1970s.

Austerity measures under the 78-billion euro bailout have led to a steep rise in company bankruptcies and pushed unemployment to record levels of around 18 percent.

"The main economic priority is the attraction of local and foreign investment, and the reform of the corporate tax system is crucial," said Antonio Pires de Lima, Portugal's new economy minister, told reporters.

Portugal's turmoil this month has shown the limits of Mario Draghi's pledge. The threat that its coalition government might collapse, sinking its bailout programme, sent bond yields soaring briefly. Political instability (along with social unrest) is beyond Draghi's remit.

Also, it's worth noting that Portugal didn't appear in the graph of easing bond yields I posted from the WSJ at 9.20am. It's 10-year bond yield has been more dramatic in recent weeks:

Portugal's 10-year bond yields over last year
Photograph: Thomson Reuters

And at that point, I'm handing over to my colleague Katie Allen – have good weekends, all. GW

1.09pm BST

Draghi’s pledge, what the analysts say (2)

Are we giving Draghi too much credit for dampening the eurocrisis fires?

Stephen Lewis, chief economist at Monument Securities, points out that while the ECB has been talking a good game, the Federal Reserve has actually been acting – with its bn per month bond-buying programme.

The Fed's actions have helped push up eurozone bond prices (and thus pushed down borrowing costs, or yields), as investors look for decent returns on their money.

Lewis points out the IMF warned yesterday that the eurozone crisis could flare up again if the Fed bungles the process of 'tapering' QE. He writes:

Mr Draghi’s trick with the OMT has attracted most of the credit for the easing in conditions but the Fed’s action was instrumental in generating the liquidity to drive the compression of yield-spreads in Europe. The IMF’s fear, evidently, is that this process would fizzle out or reverse if the Fed were to cut back on the flow of liquidity.

On the previous occasions when the Fed scaled back or terminated asset-buying programmes, there had been little prior seepage of Fed-generated liquidity into euro zone bonds. Even the quest for yield was not then strong enough motive to overcome investors’ wariness of the zone’s problems. So, what is different this time, at least as far as the euro zone is concerned, is that QE has interacted with the Draghi pledge to propel capital values to levels that the IMF does not believe would be sustainable on the basis of fundamentals alone.

And if those peripheral bond yields do start rising again, countries may consider tapping Draghi's OMT programme…

Updated at 1.09pm BST

12.54pm BST

Draghi’s pledge, what the analysts say (1)

Jane Foley of Rabobank points out that 'forward guidance' has become more fashionable since the 'whatever it takes' speech:

Draghi’s pledge has long since been associated with calming the tension in the EMU through the second half of last year and beyond. As a result this brief statement has won a prominent position in the central bankers’ hall of fame and arguably stirred up interest in the use of forward guidance by central banks.

Despite his success, Draghi cannot claim to be an innovator in the use of forward guidance, she adds:

Central banks such as the RBNZ (Reserve Bank of New Zealand), Norges Bank and Riksbank have been very frank in outlining policy expectations for many years. The BoC has employed forward guidance heavily since 2009. The Fed started to use forward guidance explicitly in August 2011, although it had periodically used a less forceful form earlier in the decade. In its purest form forward guidance is aimed at exerting control over the level of short-term market rates, which in turn has a strong implication for currency markets.

To this end the Norges Bank and Riksbank regularly provide guidance on the anticipated path of policy rates. Earlier this week the RBNZ left no one in any doubt about what it meant by the statement that “we expect to keep the OCR unchanged through the end of the year”.

12.40pm BST

In the City….

Europe's financial markets are pretty quiet after Japan's Nikkei took a near 3% tumble overnight.

The Nikkei was hit by a weakening dollar, which pushed up the yen and sparked fresh fretting on the merits and vibrancy of Abenomics.

After a strong few weeks, the FTSE 100 is on track to post a weekly loss.

The biggest riser on the FTSE 100 is publishing giant Pearson, up 8% on the news that it may sell its financial intelligence business:

Pearson puts FT Group's Mergermarket up for sale

Rolls-Royce is the biggest faller, down 4.75% after a strong day yesterday, followed by BSkyB which also released results this morning:

BSkyB annual results: Now TV 'day pass' sales hit 50,000

FTSE 100: down 16 points at 6571, – 0.26% [having ended last week at 6630]

German DAX: down 41 points at 8257, – 0.5%

French CAC: up 21 points at 3977, +0.5%

Spanish IBEX: up 76 points at 8358, + 0.9%

Italian FTSE MIB: down 15 points at 16416, – 0.1%

And in the currency markets, the euro isn't showing much bumblebee vigour — down 0.02% at .3273.

Updated at 12.41pm BST

12.09pm BST

EU Commissioner Viviane Reding has tweeted Mario Draghi a 'well done' message, alongside a reminder that politicians need to use the window of opportunity he created:

12.09pm BST

Just remembered that the Financial Times beat us to the punch, running their piece on the Draghi speech on Monday afternoon. Good stuff too. Here's a flavour:

The ECB president calls OMT the “most successful monetary policy measure undertaken in recent times” but has kept the finer details of the programme under wraps.

It is reminiscent of an early scene in the classic 1971 film Dirty Harry. The protagonist, played by Clint Eastwood, confronts a wounded bank robber who is reaching for his shotgun and tells him that the .44 Magnum pointed at his head is the world’s most powerful handgun, but then professes to have lost track of whether he had fired all six bullets in the chamber or just five. The question for the bank robber, and market participants tempted to test the ECB’s resolve, is “do you feel lucky, punk?”

So far, like the bank robber, they have not tested their luck.

More here: Draghi’s ‘Dirty Harry’ act keeps euro crisis at bay

11.47am BST

Five great Mario Draghi quotes of the last year

Mario Draghi, President of the European Central Bank, ECB as he addresses a press conference in Frankfurt am Main, central Germany. The crisis of the euro zone in 2012 brought dramatic months.
Photograph: DANIEL ROLAND/AFP/Getty Images

Mario Draghi is a quotable chap, and has provided a few choice lines over the last 12 months.

Everyone remembers the "whatever it takes" pledge (see opening post), so here are a few other favourites, starting with one from the landmark speech a year ago today.

Explaining the need for structural reforms in the eurozone – July 2012

The euro is like a bumblebee.

This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several years. And now – and I think people ask “how come?” – probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis. The bumblebee would have to graduate to a real bee. And that’s what it’s doing.

Promising not to repeat Germany's 1920's money-printing exploits – Ocober 2012

Because of inflation, my family lost a large part of its savings at that time. You can therefore rest assured that I am personally and not only professionally committed to delivering price stability.

On the decision to impose a levy on insured Cypriot bank depositors – April 2013

That was not smart, to say the least, and it was quickly corrected the day after in a Eurogroup teleconference.

You have a pecking order, and ideally uninsured depositors should be the very last category to be touched.

Asked if the ECB would issue a mea culpa over its role in Greece's first bailout – June 2013

Well, not really…

We cannot forget that four or five years ago, when the discussions about the adjustment in Greece were taking place, the climate was, in general, much worse. There was a fear of contagion there and very high volatility. That is, in a sense, where the fragmentation of the euro area really started. So, it is always very hard to pass ex post judgement on what happened four years ago. Having said that, rather than looking backwards, why do we not look forward and take stock of the extraordinary progress made and the positive path that has been taken?

After being questioned on the legal basis for his OMT bond-buying programme – July 2013

You have been very good at making a dull question a sexy one, but in fact it is not a question that really comes first in our priorities. Rather, the answer to your question is not one of our priorities now.

So when OMT is ready to be activated the documentation will be published.

Updated at 11.52am BST

11.35am BST

10.57am BST

EC spokesman Simon O'Connor also flags up that several national parliaments need to give their approval to the Greek loans. That should be a formality now that the eurogroup officlals are happy that Greece has hit its targets…

10.48am BST

Greece's struggle to satisfy its lenders isn't over, either. Kathimerini reports that the troika are demanding further measures.

That includes selling its stake in the country's third-largest bank, and keeping its unpopular property tax in place for longer.

Here's the story:

Greece has to sell Eurobank to foreign investor, might keep emergency property tax under terms of new bailout deal

According to documents seen by Kathimerini, Greece will have to keep the emergency property tax next year if the government is unable to create a new, single tax on property by the end of September. If ready in time, the new levy will have to raise 2.7 billion euros in 2014. There is also a reference to the possibility of the property transfer tax being scrapped next year, in which case the government will have to increase revenues from other property taxes. The transfer tax brings in about 200 million euros each year.

The pact between Greece and its lenders also foresees the sale of a substantial share in Eurobank, which has assets of almost €80bn, to a foreign strategic investor by the end of March 2014 at the latest. The government will have to find the investor by the end of October so due diligence can begin the following month.

Autumn is going to be interesting…

10.21am BST

Relief in Brussels that EU officials have finally agreed that Greece has qualified for its next aid payment:

In total, this bailout tranche is worth €5.8bn. €2.5bn comes from the European bailout facility (EFSF), and another €1.5bn from the income accrued on Greek bonds held EU institutions.

The International Monetary Fund is due to lend another €1.8bn.

10.11am BST

Greece gets green light for bailout tranche

Official confirmation that EU finance officials have agreed that Greece has met the conditions to unlock its €2.5bn aid payment.

European Commission spokesman Simon O'Connor tweets the news:

Those 'national procedures' include clearance by a German parliament committee, I believe.

Relief for Athens.

To win the next slice of bailout money, Antonis Samara's government had to agree various actions with its Troika of lenders – including the details of tens of thousands of job cuts – and then win a parliamentary vote last week.

MPs were then hauled back to parliament yesterday to overturn various "exemptions" to the layoffs, to ensure Greece hit its targets.

Updated at 10.13am BST

10.02am BST

Nothing official from the Eurogroup on the Greek bailout payment yet, though – the press office are promising more details shortly…

9.51am BST

The decision on Greece's bailout payment has been made, Bloomberg reports….

Updated at 9.51am BST

9.44am BST

Decision on Greek aid payment due soon

Senior euro-area finance officials are holding a conference call this morning to decide today whether Greece has done enough to receive its next aid payment.

They are expected to give the nod to the €2.5bn loan tranche, after Greek MPs voted through amendments that mean it will hit its targets for civil service layoffs.

As one official put it to Reuters:

All prior actions were implemented. This means we can approve.

9.32am BST

Kit Juckes of Société Générale wishes us all a happy "Whatever it takes" anniversary:

The euro has held together, no-one has left, spreads are tighter, PMI is back up, sun is shining and even the Spanish unemployment rate has fallen. Mario gets A* for originality and effort, if nothing else.

However, he has two concerns about the impact of Draghi's speech:

Firstly that by divorcing markets from the Euro Zone's woes, Mr Draghi tempts politicians into thinking everything is OK. And secondly, like any nuclear deterrent, OMT is fine as long as it remains unused.

It's a shame Jurgen Stark's in Handelsblatt saying it WILL be needed in due course.

9.20am BST

The Draghi squeeze

This graph, from the Wall Street Journal, shows the gap between the borrowing costs of 'safe' countries and 'risky' ones has narrowed since Mario Draghi's speech a year ago today (see opening post).

Eurozone 10-year bond yields over last 12 months
Photograph: WSJ

More here: Measuring Mario Draghi’s Promises 1 Year On

9.13am BST

Former ECB economist sees crisis flaring up again

Jurgen Stark
Photograph: Handelsblatt

There's always a party pooper. Jürgen Stark, the ECB's former chief economist, has marked the first anniversary of Draghi's 'whatever it takes' speech by predicting that the eurozone crisis will worsen in the autumn.

Stark told Germany's Handelsblatt newspaper that:

I think the crisis will come to a head in late autumn. We are entering a new phase of crisis management.

Stark dramatically quit the ECB two years ago in (apparent) protest at its early moves to support eurozone governments. He agreed that Draghi's speech had calmed the crisis, but fears the effect won't last.

The London speech impressed the markets. .But whether that's a sustainable reassurance, I doubt.

And for that reason, Stark reckons that the ECB will eventually be forced to pull the trigger on its OMT programme and actually start buying some government bonds — and possibly even support France…

More here: "Die Euro-Krise wird sich im Spätherbst zuspitzen“

8.39am BST

French consumer confidence, the details…

There are signs in today's consumer confidence data (see also 8.20am) that French households are feeling a little more upbeat.

INSEE reported that households’ opinion about the past general economic situation in France increased by 2 points on its index.

And their view of the general economic situation in the months ahead "noticeably rose" by 6 points, having deteriorated continuously since January:

French consumer confidence, to July 2013
French consumer confidence, to July 2013 Photograph: /INSEE

While this graph shows how the wider consumer confidence reading hit its three month high:

French consumer confidence, to July 2013
Photograph: INSEE

8.20am BST

French consumer confidence rises

Some early good news for Mario Draghi to toast as the ECB hangs the bunting up – optimism among consumers in France has risen to a three month high.

INSEE, the national statistics office, reported that Frence consumer confidence rose to 82, beating economist predictions of 79. In another piece of good news for Paris, June's record low of 78 was revised up to 79.

Morale is clearly low, given the long-term average is 100. But it could add weight to the claims from French ministers that the country is pulling out of recession.

8.05am BST

One year on from Draghi’s pledge

European Central Bank (ECB) President Mario Draghi takes part in the European Parliament's Economic and Monetary Affairs Committee in July 8, 2013.
A good year….. ECB president Mario Draghi. Photograph: YVES HERMAN/REUTERS

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

What a difference a year makes. It's 12 months to the day since Mario Draghi, European Central Bank president, made perhaps the most telling intervention since the eurozone crisis began.

Just 23 words. That's all it took to start the process of calming bond yields and strengthening the single currency. And the magic formula, delivered in London, was:

Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.

The speech is online here.

Out of that pledge came the ECB's Outright Monetary Transactions (OMT) programme – the promise to buy unlimited quantitites of government bonds from a country struggling to keep borrowing.

Now, OMT may not have been activated (and Draghi remains engagingly evasive about when we'll actually see the legal tramework for his pet project), but it's very existence has bought time for eurozone governments.

Whether they've spent it wisely enough, we're yet to learn….

But the impact of Draghi's statement is clear in the markets today, in the lower borrowing costs enjoyed by the eurozone's peripheral members.

Spain, for example. It's 10-year bonds were changing hands at yields (interest rates) of around 7.5% before Draghi dropped his bombshell. Today? Just 4.6%.

Spanish 10-year bond yields, to July 26 2013
Spanish 10-year bond yields over the last two years. Photograph: Thomson Reuters

As Michael Herzum at fund manager Union Investment, put it to Reuters, Draghi's speech in London was "the game changer" — allowing investors to stop fretting that the eurozone was about to rip itself apart.

It took the systemic risk out of the market by significantly reducing the likelihood of a break-up of the euro zone.

(more here)

But there are a problems a mere central banker can't easily tackle – such as structural economic flaws or record unemploment.

As the Wall Street Journal puts it:

Mr. Draghi’s speech was a game changer for markets, but it did little to restore economic growth or bring jobs to the euro zone. Unemployment is a record-high 12.2% and euro zone GDP hasn’t expanded since late 2011. Spanish and Italian small businesses still pay far higher interest rates on loans than their German counterparts.

“Verbal intervention isn’t enough, you have to do more,” said BNP Paribas economist Ken Wattret. The ECB could purchase large amounts of private-sector assets to stimulate lending but appears reluctant to do so, he said.

Still, with the eurozone hopefully pulling itself out of recession, Draghi can look back on a job well done.

I'll be tracking all the developments through the day as usual….

Updated at 8.12am BST

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

Published via the Guardian News Feed plugin for WordPress.

Chinese premier vows to keep GDP growth above 7%. French finance minister says recession’s over. Greek PM demands more progress on Troika targets. Bank of Spain sees recession slowing. Cyprus talks with its Troika of lenders are continuing, with a “difficult” path ahead…

 


Powered by Guardian.co.ukThis article titled “France ‘returns to growth’ and Spain sees slump easing – as it happened” was written by Graeme Wearden, for theguardian.com on Tuesday 23rd July 2013 16.23 UTC

5.17pm BST

European markets close lower

After a bright start fuelled partly by positive comments about Chinese growth, markets have slipped back from their best levels on disappointment with the latest US manufacturing survey, writes Nick Fletcher.

• The FTSE 100 fell 25.73 points or 0.39% to 6597.44

• Germany's Dax is down 0.2% at 8314

• France's Cac closed 0.43% lower at 3923

• Italy's FTSE MIB edged up 0.03% to 16,238

• Spain's Ibex added 1.35% to 8073

• Athen's market ended up 0.02% at 842

Meanwhile in the US, the Dow Jones Industrial Average is up 20 points ore 0.13%.

And on that note, it's time to close up for the evening. Thanks for all the comments, and we're back tomorrow.

5.06pm BST

Greek aid tranche reportedly delayed

Payment of the latest tranche of aid to Greece has reportedly been delayed, according to the German finance ministry:

Updated at 5.23pm BST

4.20pm BST

Cyprus government: we are travelling a long road

An elderly man walks outside the Ministry of Finance during a meeting between Cyprus' financial minister and central bank government and officials from the European Commission, European Central Bank and the International Monetary Fund in Nicosia, Wednesday, July 17, 2013.
The Ministry of Finance in Nicosia. Photograph: Petros Karadjias/AP

Over in Cyprus, a government spokesman has told reporters that talks with its Troika of lenders are continuing, with a "difficult" path ahead.

It's nearly a week since officials from the Troika began their assessment of Cyprus's bailout programme. Asked about reports that there are concerns about progress regarding certain structural reforms, Christos Stylianides said:

The Government is patient. It consults with the Troika, the lenders, and will speak out when the consultation is completed. We must not run ahead. The course we traverse is long but we insist on our basic positions. On our part, we are diligent with regard to the implementation of the Memorandum and we think that only through its implementation we can get out of the Memorandum at the earliest.

The consultation with the Troika takes place on a daily basis, it takes place in a very good climate, the road is difficult, but we are waiting for the final evaluation to say what we have to say on our part, and this will in fact be stated by the President of the Republic himself.

It also emerged this afternoon that the Bank of Cyprus is considering splitting itself in two. Asked about this, Stylianides said its new shareholders must decide the future of the bank, which has already cut many hundreds of jobs and seen large depositors 'bailed in' to its rescue package.

Stylianides's full statement is online here.

3.40pm BST

While eurozone consumer confidence offered reasons for optimism, the latest US economic data disappointed.

The Richmond Federal Reserve's survey of manufacturing output dropped to -11 in July, sharply lower than June's +8. Particularly alarmingly, the retail sales measure tumbled by 23 points, to -22.

Business Insider has a good summary: Richmond Fed Index Shows Mammoth Fall In Retail Sales

Updated at 3.44pm BST

3.22pm BST

Eurozone consumer confidence picks up

Eurozone consumer confidence, to July 2013
Photograph: European Commission

Morale among consumers in the 17 countries which use the euro has improved, in another signal that conditions may be picking up.

Data released by the European Commission found that eurozone consumer confidence improved to -17.4 this month, better than June's -18.8. It's the best performance since August 2011.

In the European Union, consumer confidence rose to -14.8, from -17.5 in June.

Both readings still show that morale is weak, as you'd expect given the events of recent years – and the challenges ahead. The long-term average is zero (as the graph above shows).

Howard Archer of IHS Global Insight said the data was encouraging. Here's his early analysis:

Eurozone consumer confidence extended its recent improvement in July to be at a 23-month high, likely driven by increased optimism about the economic outlook and a slightly less pessimistic view of the recent economic situation. Consumers were also likely relatively sanguine about the inflation situation and outlook.

Hopefully, improving consumer confidence and the help to purchasing power coming from muted inflation across the Eurozone (just 1.6% in June) will provide increasing support to consumer spending and help Eurozone economic activity to stabilize and then finally start growing over the latter months of 2013.

Even so, a marked overall pick up in Eurozone consumer spending still looks unlikely in the near term at least. Despite being at a 23-month high in July, confidence is still limited compared to long-term norms while Eurozone consumers continue to largely face high and rising unemployment, generally muted wage growth and tight fiscal policy. This is particularly, the case in the southern periphery countries but it is also true for countries such as France and the Netherlands.

Updated at 3.50pm BST

2.50pm BST

Wall Street has opened higher, pushing the Dow Jones industrlal average to a new record intraday high.

The Dow hit 15604 at the start of trading, up 59 points or 0.37%, while the S&P 500 gained 0.2% to 1,699.94.

Updated at 2.55pm BST

2.29pm BST

Cypriot property prices have taken quite a hoofing since the country lurched into a rescue package in March, a new survey has found.

The Cyprus arm of the Royal Institution of Chartered Surveyors (RICS) calculates that apartment price fell by 12.6% in the last three months. Office space has tumbled by 23.3% during the quarter.

And with capital controls still in place, the only way is down, as Pavlos Loizou of RICS Cyprus explained:

Definitely the market is going to deteriorate further and faster than before. There is no lending available and people's money (in banks) is blocked.

This follows many years of steadily rising prices during the good days, which now look firmly behind Cyprus. More on Reuters: Acute property slump takes hold in bailed-out Cyprus: survey

1.49pm BST

Market update

European stock markets continue to be boosted by the encouraging news from Asia overnight.

China's determination to keep GDP growth at 7% or higher, and Japan's upgraded economic forecasts (see 8.15am) has pushed mining stocks up in London – they're packing the list of top risers on the FTSE 100:

FTSE 100 top risers, lunchtime July 23 2013
Photograph: Thomson Reuters

And the Spanish stock market is romping ahead, after the Bank of Spain predicted that GDP fell by just 0.1% in the last three months (see 9.44am). Spain also conducted a successful debt auction this morning, with borrowing costs.

That's sent the Spanish IBEX up 1.8%, followed by Italy's FTSE MIB which is up 1.2%.

The FTSE 100 (+0.2%) German DAX (+0.26%) and French CAC (+0.2%) are only posting meagre gains, after Asian markets pushed to six-week highs overnight.

Chris Beauchamp of IG says the City is calm and subdued:

With the eurozone mercifully quiet for now, the main driver remains corporate earnings.

London-listed miners are stretching their legs this morning after some suitably sunny comments from the Chinese premier. Beijing aims to keep growth above 7%; commendable as this is, saying something doesn’t make it true, even if the latest economic data indicated that consumer spending in China was helping to pick up the slack.

1.07pm BST

12.29pm BST

12.18pm BST

Turkey hikes overnight lending rate

Developments in Turkey, where the Central Bank has just hiked its overnight lending rate to 7.25%, from 6.5%.

It's the latest shot in its fight to stop the lira's value sliding — it's been under pressure since last month's protests in Instanbul.

The Bank of TurKey also warned that capital inflows are slowing, which it blamed on uncertainties within the global economy.

The instant reaction – the lira has risen against the US dollar to a one-month high of .9090. Turkish government bonds also strengthened, pushing down the yields on 10-year debt to 8.49%, from 8.69% before.

Updated at 12.18pm BST

12.10pm BST

More debtors being jailed in Cyprus – report

Here's a headline that reeks of Dickensian London: Rise in debtors adds to prison overcrowding

But it's not Victorian history. It's Cyprus today, where the financial crisis is driving more people into jail through non-payment of fines and "other debts".

Prison Governor Giorgos Tryfonides told the Cyprus News Agency (CNA) that efforts were being made to help such convicts pay off their debts in instalments.

“We are trying our best to make plans for payment of debt so an arrangement can be made with the attorney-general to postpone any punishment as long as the instalment is accepted by the plaintiff,” he said.

Due to the crisis, the number of people facing jail for financial reasons is on the rise compared to other years, Tryfonides said, adding on certain days up to five people might be imprisoned for similar offences.

Here's the full story: Rise in debtors adds to prison overcrowding.

Updated at 1.27pm BST

11.43am BST

11.40am BST

Greek PM gives ministers the hurry-up

Greek prime minister Antonis Samaras has now met with senior ministers to discuss meeting the country's bailout targets.

Kathimerini reports that Samaras ordered his colleagues to speed up the pace of reforms, ahead of the Troika's next visit in early September. It explains:

Prime Minister Antonis Samaras on Tuesday told key cabinet members in the two-party coalition to speed up structural reforms in the state sector in order to meet the targets set by the country's international creditors, who want to see progress in agreed changes to the public administration as a condition for releasing further life-saving funding.

Meeting at his Maximos Mansion headquarters, Samaras, his coalition partner and Deputy Prime Minister Evangelos Venizelos, and Finance Minister Yannis Stournaras, called for more urgency from the ministers of Interior Yiannis Michelakis, Administrative Reform Kyriakos Mitsotakis, Education Constantinos Arvanitopoulos, Development Costis Hadzidakis and Health Adonis Georgiadis.

More here.

11.23am BST

Green shoots in Ireland’s property sector? For some, anyway.

Irish residential property prices have posted their first annual rise since the financial crisis began.

Ireland's central statistics office reported that property prices rose by 1.2% in June, on a year-on-year basis. That's the first rise since January 2008.

Estate agents, though, report an uneven recovery – with prices up around 15% in Dublin in the last year.

10.47am BST

Video: Moscovici saying France is out of recession

Europe 1 has uploaded a video clip of Pierre Moscovici's interview this morning, in which the French finance minister predicts that France's recession is over.

Here's their story: Moscovici : "nous sommes en sortie de récession"

10.31am BST

Crewe gets green light for Bentley SUV

Back in the UK…there'll be a few celebrations in Cheshire today.

The Volkswagen Group has just announced that its first Bentley sports utility vehicle will be constructed at its headquarters in Crewe, creating up to 1,000 new jobs across the country. Bentley will invest some £800m at the site, VW added.

A nice fillip for the British economy, ahead of Thursday's GDP figures which are likely to show that growth picked up in the last three months.

10.28am BST

Rajoy to discuss slush fund scandal on August 1

A date for the diary – Spain's prime minister, Mariano Rajoy, will answer questions regarding the illegal payments scandal in parliament on August 1. More details here.

Yesterday, Rajoy bowed to pressure and announced that he would agree to be quizzed over the affair, centred on a former treasurer of his party accused of siphoning off millions of euros of secret cash payments.

10.18am BST

Spain's latest GDP forecasts (see 9.44am) bolster hopes that the eurozone will keep muddling through the crisis, argues Simon Nixon of the Wall Street Journal:

10.11am BST

UK mortgage approvals rise again

In the UK, the British Bankers Association has reported that mortgage approvals rose to a 17-month high of 37,278 in June, up from 36,290 in May.

Quite an improvement on February's 31,109 – the month before UK chancellor George Osborne announced new measures to stimulate the housing market.

Osborne's been meeting with the industry this morning to discuss his Help to Buy Scheme — which critics claim will fuel a new price bubble.

But as my colleague Rupert Jones reports, planned income checks and "stress testing" means many people with less-than-perfect credit records could be barred from the £12bn scheme.

Credit history will bar many from £12bn scheme for homebuyers

Updated at 10.20am BST

9.44am BST

Bank of Spain sees recession slowing

Spain has now endured a recession for the last two years, but the pace of the downturn is finally slowing, according to official forecasts released this morning.

The Bank of Spain predicts that GDP shrank by just 0.1% in the last three months. That would be a much smaller contraction than the 0.5% drop in output recorded in the first quarter of this year.

On an annual basis, the Bank believes the Spanish economy had shrunk 1.8% over the last 12 months — again, a small improvement on Q1's reading, of 2%.

The Bank said that 'strong exports' had helped to moderate the pace of the downturn.

We get official GDP data for April-June next month, which will show whether or not the Spanish recession has really lasted for eight quarters, having begun in the second half of 2011.

The Madrid government has pinned its hopes on the recovering beginning in the current quarter.

Analysts fear, thought, that the country's banks are too weak to support a bounce-back — as their levels of toxic debts are still rising.

There are also concerns that this year's tourist season could be weaker than hoped, as holidaymakers across Europe tighten their belts.

Bloomberg has a report here:

Spanish Sunshine Season Overshadowed by Growth Doubts

It begins:

In Almeria’s Cabo de Gata natural park, one of the few unspoilt stretches left of Spain’s southern coast, Hotel Tio Kiko is close to full. Its owner, Jose Venzal Alonso, isn’t optimistic though.

“I can’t say I see an economic recovery,” the 51-year-old hotel manager says in a telephone interview, speaking with a heavy southern Spanish accent. “All our clients are saying so, that they can’t afford to stay more than three days when they would happily come for six before the crisis. We used to have a full house much earlier in the season.”

9.25am BST

Moscovici: French recession is over

France's Finance Minister Pierre Moscovici attends a news conference, part of the G20 finance ministers and central bank governors' meeting, in Moscow, July 19, 2013.
France’s finance minister Pierre Moscovici. Photograph: GRIGORY DUKOR/REUTERS

France's finance minister has declared that the French recession is over, hot on the heels of this morning's upbeat industrial morale reading (9.07am).

Speaking on Europe 1 radio, Pierre Moscovici cited forecasts from the Bank of France and INSEE for growth of 0.2% in the second quarter of this year. That would reverse the contraction of 0.2% in the first three months of 2013, which pushed France into Le Double DIp.

Moscovici declared:

Now we need to work to transform this exit from recession into a genuine recovery.

(quotes via Reuters).

France's economy has been stagnating over the last two year, as this graph shows:

French GDP
French GDP. Photograph: INSEE

9.07am BST

French industrial morale rises

There's reasons for optimism in France too this morning, where optimism among industrial firms has risen to its highest level for over a year.

Despite concerns over France's fiscal position, INSEE's monthly survey of industrial morale rose for the fourth month in a row, to 95. That's a rise on June's 93, and better than analysts expected. But it's still low in historical terms, where 100 is the long-term average.

The broader measure of business confidence also rose, to 87, from 86. Again, better, but still weak, as these charts show:

French business morale, July 23
French business morale, July 23 Photograph: /Thomson Reuters
French business morale graph, July 23
French business morale over the last 20 years. Photograph: /Thomson Reuters

8.37am BST

Greece pushing civil service job cuts

In Greece, meanwhile, the government is cracking on with the task of meeting the targets agreed with its lenders, including cutting thousands of public sector jobs.

Prime minister Antonis Samaras has summoned his top ministers to a meeting on Greece's "mobility scheme' – a key part of the strategy to lay off tens of thousands public sector workers.

Deputy PM Evangelos Venizelos, finance minister Yannis Stournaras and administrative reform minister Kyriakos Mitsotakis are all attending.

Kathimerini has more details:

Samaras is likely to press ministers to speed up the evaluation of staff at their ministries to ensure the project remains on track. Mitsotakis, who has been tasked with overseeing the civil service overhaul, appealed to his colleagues to join the effort. “I have repeatedly said that the job of administrative reform is being overseen by this ministry but, if we are to hit the targets, all the ministries must be involved.”

But the mobility scheme remains deeply unpopular with the workers who face being moved into it on lower pay, with the threat of being laid off. As reported in Monday's liveblog, schoolteachers held a protest rally in Athens yesterday…and medical staff are planning a strike tomorrow.

Updated at 8.37am BST

8.15am BST

Asian markets hit six-week high

Chinese Premier Li Keqiang addresses a symposium on the economic situation of a number of provinces and regions in Nanning, capital of southwest China's Guangxi Zhuang Autonomous Region, July 9, 2013
Chinese premier Li Keqiang, who pledged today to keep GDP growth at 7% or higher. Photograph: Ma Zhancheng/Xinhua Press/Corbis

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

We start with encouraging signs from Asia, where bullish talk from Chinese premier Li Keqiang and the Japanese government have sparked a share rally overnight.

Li tried to calm fears that the Chinese economy was stalling, telling businessmen in Shanghai that the country’s “bottom line” for economic growth is 7% in future (it slowed to 7.5% in the last quarter).

The comments came amid local reports that Beijing will drive investments in high-speed railways to help reduce overcapacity in sectors such as cement and steel.

Cue optimism across the region. As Alvin Pattisahusiwa, a director of investment at PT Manulife Aset Manajemen Indonesia, put it:

Li’s statement provides assurances for investors that there won’t be negative surprises in the country.

That's welcome news in Europe too, where there are fears that China could slide into an economic hole before the eurozone manages to dig itself out of its own predicament.

And with Tokyo's Cabinet Office upgrading its economic outlook for the third month in a row, there's a little more optimism about prospects in the month ahead.

The Cabinet Office declared that the Japanese economy was "steadily picking up", and moving towards a "self-sustainable recovery", adding:

Recent price developments indicate that deflation is easing.

This stream of news sparked a decent rally in Asia, driving markets to a six week high. China's CSI 300 jumped 2.5%, driven by railway company shares, while the Hong Kong Hang Seng is up 3.5%.

And in Europe, traders are joining in – with the main indices all gaining ground (the FTSE 100's up 27 points at 6650.

Otherwise, as you may have already deduced, it's a quiet morning, as Europe slides into its summer lull. I'll be covering all the key developments through the day, though…..

Updated at 9.04am BST

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Published via the Guardian News Feed plugin for WordPress.

Greek unions attack public sector layoffs. Trains stopped, offices closed, protests planned. European car sales hit 17-year low. UK inflation up compared with the same month last year. Germany’ s ZEW index misses forecasts…

 


Powered by Guardian.co.ukThis article titled “Greek protests amid general strike over austerity job cuts – eurozone crisis as it happened” was written by Graeme Wearden, for theguardian.com on Tuesday 16th July 2013 12.53 UTC

5.47pm BST

End of the line

A woman walks across rail tracks in the northern Greek port city of Thessaloniki, during a 24-hour strike that  disrupted flights, public transport, state hospitals and other services, on Tuesday, July 16, 2013.
A woman walks across rail tracks in the northern Greek port city of Thessaloniki, during today’s strike. Photograph: Nikolas Giakoumidis/AP

With the Greek general strike coming to a close (see 10.25am onwards, and 2.46pm onwards, for details, and 1.53pm for analysis) , and Europe's stock markets closed lower (see 5.04pm), it's time to wrap up for the day.

Back tomorrow, for more action in Greece over the austerity bill, Ben Bernanke testifying at Congress, UK unemployment, Bank of England minutes, the latest twists in the eurozone crisis, and anything else that comes our way.

Until then, thanks and goodnight. GW.

5.43pm BST

The falls on today's stock markets came despite a bumper set of profits from Goldman Sachs.

As Dominic Rushe writes from Wall Street:

Goldman Sachs doubled its profits in the second quarter as the bank benefited from gains in fixed income, currency and commodity trading revenue.

The Wall Street giant set out its latest quarterly earnings Tuesday morning announcing net income of .93bn, compared with 2m a year earlier. Net revenue, including net interest income, rose 30% to .61bn from .6bn last year.

Updated at 5.53pm BST

5.23pm BST

Bank of Portugal slashes 2014 growth forecast

Some late news from Lisbon – Portugal's central bank has revised its economic forecasts. It now expects a slightly shallower slump this year — with GDP shrinking by 2.0%, not 2.3% as before.

But the Bank of Portugal also took the knife to its growth forecasts for 2014, scribbling out its projection of 1.1% in favour of just 0.3%.

It also warned that the political instability was hurting the economy:

The forecasts for the Portuguese economy are surrounded by particularly high uncertainty linked to the recent internal developments, adding to the challenges of the compulsory implementation of the adjustment programme.

Portugal's politicians have been locked in talks this week, after the country's president insisted that the major parties should agree a deal to maintain stability before its bailout programme ends in 2014.

5.04pm BST

European stock markets close

Not the most thrilling day in the financial markets. Perhaps one of the least.

Here's where the numbers finished:

FTSE 100: down 29 points at 6556, -0.45%

German DAX: down 29 points at 8205, – 0.35%

French CAC: down 26 points at 3851, -0.69%

Spanish IBEX: down 56 points at 7798, -0.7%

Italian FTSE MIB: down 67 points at 15529, -0.43%

And in New York, the Dow Jones is down 43 points, or 0.28%, at 15441.

A trader works at the Goldman Sachs kiosk on the floor at the New York Stock Exchange, in this May 29, 2013 file photo.
A trader works at the Goldman Sachs kiosk on the floor at the New York Stock Exchange, in this May 29, 2013 file photo. Photograph: BRENDAN MCDERMID/REUTERS

Traders are waiting for Ben Bernanke, chair of the Federal Reserve, to testify at Congress tomorrow. He may give new insight into the Fed's plans for slowing its monetary easing programmes.

There's also some interesting UK data out tomorrow morning, as CMC Market's Michael Hewson explains:

Investors seem content to sit on the sidelines today ahead of a big day tomorrow, when Fed Chairman Ben Bernanke starts his semi-annual testimony to Congress, while UK markets will be awaiting the first set of post Carney minutes from the Bank of England, as well as unemployment and average earnings data.

 This morning's weaker-than-expected ZEW survey of German economic confidence (details at 10.21am) also hit share prices, explains David Jones, chief market strategist at IG. The latest slump in EU car sales didn't help (details at 8.50am)

We could lay today's blame for the sideways movement of European equity indices on the unexpected decline in the German economic sentiment survey, which fell for the first time in three months. The data point was the only real item of note in Europe today, as year-on-year inflation for the eurozone came in at 1.6% as expected.

European car sales were abysmal, falling to a 16-year low with year-on-year sales for June declining by 6.3%. The extreme levels of unemployment in Europe have been blamed

4.15pm BST

It's a big summer for Greece's tourist industry, with officials hoping for record numbers of visitors now the eurozone crisis has eased.

General strikes and marches might not sound like sightseeing gold-dust — but this photo suggests tourists were quite interested in today's events:

Tourists take photographs from the top of a tourist bus, of protesters taking part in an anti- austerity rally (not seen in the picture) outside the Greek parliament in central Athens,
Tourists take photographs from the top of a tourist bus, of protesters taking part in an anti- austerity rally (not seen in the picture) outside the Greek parliament in central Athens, Photograph: Petros Giannakouris/AP

Might be a different story if the teargas and stone-throwing youths return…

Updated at 4.18pm BST

3.41pm BST

Cyprus prepares for Troika visit

Over in Cyprus today, the government is hoping to get a good report card from its lenders, who begin their first assessment of its bailout programme on Wednesday.

While Greece's general strike was based on anger over the Troika's demands, the government in Nicosia is focused on persuading international creditors that it's sticking to the terms of its financial rescue when they complete their first assessment.

Speaking to reporters earlier today, finance minister Haris Georgiades argued that the quickest way to escape the bailout terms is to implement the reforms demanded.

The speedy exit from restructuring will allow us to take new steps that will further ease and ultimately eliminate capital controls.

Cyprus' Minister of Finance, Haris Georgiades speaks during a press conference on July 16, 2013 in Nicosia, Cyprus.
Cyprus’ minister of finance, Haris Georgiades, speaks during today’s press conference in Nicosia, Cyprus. Photograph: STAVROS IOANNIDES/AFP/Getty Images

Those capital controls still restrict how much money Cyprus's citizens can withdraw from a bank, or take out of the country, making a 'Cypriot euro' less valuable than one in other countries.

Georgiades also hinted that selling some of Cyprus's gold reserves, as outlined in the bailout deal, was not the only option to raise funds for its part of the deal, saying:

It [the gold sale] will be considered, when the time comes, with options, or rather, all other options.

The gold price has fallen sharply since Cyprus's bullion sale was originally agreed, from around ,585 per ounce in early April to below ,300 per ounce today.

Updated at 3.43pm BST

2.52pm BST

Athens police reckon that about 16,000 protesters gathered in the main Syntagma Square for today's demonstration, which (if accurate) is a rather smaller turnout than during previous marches.

2.50pm BST

Eleni Fotopoulou, 58, a retired teacher and mother of two, summed up the situation in Athens today:

It feels like Greece is dead and now the vultures are fighting over its corpse.

I'm not angry anymore, I am disgusted. We have to fight back.

Updated at 2.50pm BST

2.47pm BST

And here's one more photo from outside the Athens parliament this lunchtime, where protesters chanted "No more sacrifices" and waved banners with slogans such as "Fire the troika".

Protesters hold flags in front of the Greek Parliament during a demonstration in central Athens, Greece, 16 July 2013.
Photograph: SIMELA PANTZARTZI/EPA

2.46pm BST

Although the low-key protests are over, for now at least, many Greek workers remain off work today as the general strike continues.

Reuters sums up the situation:

Domestic flights were disrupted after civil aviation unions staged a four-hour work stoppage and Athens's main tourist attraction – the Acropolis – shut early.

City transport was also affected, with bus and trolley bus drives holding work stoppages in the morning and in the evening. Trains stopped running and tax offices and municipal services remained shut. Garbage collectors, bus drivers, bank employees and journalists were among other groups joining the walkout.

1.53pm BST

Analysis: Helena Smith on today’s strike

Municipal policemen march to Syntagma square where the Greek Parliament is situated.
Municipal policemen marching to Syntagma Square today. Photograph: Nikolas Georgiou/Demotix/Corbis

Every strike in Greece has a slogan and today’s, rather fittingly, is “we are people not numbers.” In Europe’s seemingly un-ending debt crisis, it is the human factor that has often got lost – never more so than in the country where it all began, writes Helena Smith from Athens.

Athens’ coalition government may insist that Greece is on the road torecovery but on the ground where the tell-take signs of six years of recession have left large swaths of the nation feeling increasingly desperate it is the opposite that rings true.

Efklidis Tsakalotos, the left-wing Syria MP, was not far off the mark this morning when he told parliament (11.36am):

the people running this country live in a different environment. They go to different hospitals. Their kids go to different schools. And they don’t understand what people are going through.

The Troika’s obsession with budget targets – no matter what the social cost – is what today’s protests are all about. Greeks have displayed immense patience – indeed fortitude – with austerity measures that have left over 1.3 million out of work, cut salaries by an average 25% and plunged more than a third of the population into poverty.

The omnibus reform package that parliament must now enact for the country to win further EU-IMF rescue funds is unlikely to be scuppered by the strike (as I write it is being tweaked by ministers desperate to keep anti-austerity sentiment in check).

But there are growing signs that Greece is reaching a tipping point. At a time when unemployment is nudging 27% the firing of some 25,000 civil servants – because no matter what language the dismissals are cloaked in that is what it amounts to – are simply seen as a demand too far.

A protester holds a banner featuring a man hanging from a Euro logo as he marches to the Greek Parliament during a protest in Athens, Tuesday, July 16, 2013.
A protester holds a banner as he marches to the Greek Parliament. Photograph: Kostas Tsironis/AP

Had the public sector been streamlined earlier, when other indicators were not so off-target, the sackings may have been more palatable. If, in six months, there were tangible results with privatisations, such news might have been better too.

As it is, the timing could not be worse. Barely a month after the debacle that followed prime minister Antonis Samaras’ attempt to close ERT, the state broadcaster, the government has egg on its face again. When he visits Athens on Thursday, the protests will be a vivid reminder to Wolfgang Schäuble, the German finance minister, that far from being a success story Greece remains a minefield in the euro zone. HS.

Updated at 1.53pm BST

12.58pm BST

Share your photos and videos

Guardian Witness are running an assignment for photos and videos of this week's protests in Greece.

If you're there, you can take part very easily – just visit this page.

Updated at 1.42pm BST

12.55pm BST

Syriza MPs join the protest


Photograph: YANNIS BEHRAKIS/REUTERS

MPs from the left-wing Syriza party took part in today's protests, coming out of the parliament building to hand a banner reading "Let's fire the government. No lay-offs in the state and private sector".


Photograph: YANNIS BEHRAKIS/REUTERS

12.38pm BST

Symantec gives Ireland a lift

At the other end of the eurozone, Ireland, there is some better news – 400 new posts have been created by Internet security firm Symantec.

From Dublin, Henry McDonald reports:

The jobs will be based at Symantec's base in Blanchardstown, West Dublin with 200 going on stream immediately and a further 200 IT workers recruited over the next two years.

They will work at the company's new European Customer Management Centre in the city.

The company says it will be seeking highly-skilled, multilingual staff to take on the roles.

Symantec has been in Blanchardstown for 22 years, and the base which employs just over 600 people, is already home to a security operations centre, as well as operations in business authentication, software development and testing.

The new project is supported by Ireland's Industrial Development Authority, and its chief executive Barry O'Leary said Symantec is part of a thriving cluster of world leading security software companies operating in the Republic.

This latest jobs boost comes less than a week after Standard & Poor gave an upbeat forecast of the Irish economy and put the country's credit rating into the positive zone.

The creation of these jobs also indicates that while domestic demand and the constrution industry remain in the doldrums the Republic's export led hi-tech sector continues to flourish in the face of the recession.

12.32pm BST

Nick Malkoutzis, deputy editor of Greece's Kathimerini newspaper, confirms that today's Athens rally was a "relatively low key protest".

More protests to come later today, though (including another gathering in Syntagma this evening).

Updated at 12.44pm BST

12.09pm BST

A couple more shots of today's protest march in Athens:

A rally has also taken place in Chania, Crete, though. Here's a photo of the march passing through its port:

Updated at 12.13pm BST

11.58am BST

Former Greek finance minister faces indictment over Lagarde List

George Papaconstantinou
Greece’s former finance minister George Papaconstantinou. Photograph: Icon/Reuters

Greek politics is also gripped by the repercussions of last night's parliamentary vote in favour of prosecuting the former finance minister George Papaconstantinou.

Papaconstantinou is accused of mishandling the infamous “Lagarde list” of 2079 suspected tax evaders with accounts in the Geneva branch of HSBC, and removing the names of his own relatives

From Athens, Helena Smith explains that a five-member judicial council will decide whether the 52-year-old former minister will face a special court. Most analysts think it very likely that the court will be set up.

Papaconstantinou told parliament that he'd been made a scapegoat, by a political establishment desperate to be seen to be cleaning up after the wrong-doing of the past.

I absolutely and categorically deny these accusations,” he told the chamber saying instead of pursuing the “real, big scandals that have cost the country billions” lawmakers were pursuing him on trumped-up charges. 

“Not only is it unfair to attempt to wash the sins of many governments on my back, it’s something more: it’s dishonourable,”

And Helena reports that Papaconstantinou, a reform-minded moderate, has his supporters on both the left and right today.

"I do not for a minute think he was foolish enough to delete the names of his own relatives from the list,” the right-wing publisher and analyst Giorgos Kyrtsos told me. "He has become a convenient scapegoat." 

In the socialist Pasok party insiders also rued the development. “He doesn’t deserve to rot in prison,” said one. “After all he did a lot to modernise the economy. If he is guilty it is of miscalculating public anger when he did something as silly as erase those names.”

In a front-page editorial today, the mass-selling daily Ta Nea makes the point that unlike France, Germany, Spain and Italy – handed similar lists of suspected tax evaders by the then French finance minister Christine Lagarde – Greece has failed to rake in “even one euro” from those on the list.

If tried and found guilty of the charges, Papaconstantinou could face ten years or more in prison.

11.36am BST

Syriza MP: Greece must change course

Efklidis Tsakalotos, a left-wing MP from the Syriza coalition, has laid into Antonis Samaras's government in parliament today during the debate on the austerity bill (vote due tomorrow night).

Tsakalotos called on the governing coalition to ditch its latest planned reforms.

It's a disgrace for the government to say that things are getting better with unemployment at such a high level.

It is clear that with the economy still shrinking that we need a change of course.

The people running this country live in a different environment. They go to different hospitals. Their kids go to different schools. And they don't understand what people are going through.

(via AP)

However, if the bill is not passed then Greece's lenders will not hand over the rest of its bailout tranche….

11.07am BST

Economist Intelligence Unit: Strike shows anti-austerity support

Tourists watch as union members stage a demonstration against the Greek government during a general strike in Athens on July 16, 2013
Tourists watch today’s demonstrations. Photograph: ANGELOS TZORTZINIS/AFP/Getty Images

Today's general strike will not succeed in persuading the Athens government to withdraw its austerity bill, predicts Martin Koehring, Greece analyst at The Economist Intelligence Unit.

Koehring also predicts that there's little chance of encouraging government MPs into a rebellion against the planned reforms and job cuts.

He explains:

The general strike is unlikely to succeed in its aim of forcing the government to withdraw its latest reform bill or convincing enough MPs to vote against it.

Although the government only has the support of 155 MPs in the 300-seat parliament, it is improbable that there will be sufficient defections for the bill to be voted down. A major rebellion by coalition MPs so soon after last month's cabinet reshuffle is unlikely.

But that doesn't mean the stike is meaningless. Instead, it shows the "strong anti-austerity sentiment among the population".

The Economist Intelligence Unit continues to expect political risk (social unrest and a potential collapse of the two-party government coalition) to remain a major focal point in Greece this year and in 2014, Koehring added.

10.38am BST

Communist protest march

A couple of photos of supporters of the Communist-affiliated trade union PAME marching up to, and past, the Athens parliament a few minutes ago:

Supporters of the Communist-affiliated trade union PAME take part in an anti-austerity rally in Athens, July, 16, 2013, during a 24-hour general strike.
Photograph: JOHN KOLESIDIS/REUTERS
Supporters of the Communist-affiliated trade union PAME take part in an anti-austerity rally in front of the parliament in Athens July, 16, 2013, during a 24-hour general strike
Photograph: JOHN KOLESIDIS/REUTERS

10.25am BST

Greek protest rally reaches Syntagma

Back to the Greek general strike, and the first union demonstration against the government's austerity bill has reached Syntagma Square.

Looks like a decent turnout (with the Greek parliament in the middle of the shot):

10.21am BST

ZEW survey

Meanwhile, the ZEW survey of economic confidence in Germany has just missed expectations.

At 36.3, the ZEW showed sentiment weakened, slighly, from May (when it registered 38.5). This follows unerwhelming German industrial production and foreign trade date.

German economists are a little more optimistic about economic expectations for the Eurozone. However, there's a long way to go. As Zew puts it:

The indicator for the current economic situation in the Eurozone has also improved and now stands at the minus 74.7 points-mark (up 4.8 points).

Not much reaction in the City.

Here's the statement from ZEW.

Updated at 10.43am BST

10.03am BST

Inflation, instant reaction

The 2.9% annual rise in the UK consumer prices index (9.32am onwards) to a 14-month high could mark inflation's high point in the current cycle, argues George Buckley of Deutsche Bank, who called it "encouraging news",

We think this is going to be the peak in inflation and inflation will fall in the second half of the year and beyond and get back towards its target, not at target but towards its target by the end of the year.

But it is rather higher than inflation in other countries (CPI in the eurozone is just 1.6%), and outpacing the rise in British wages (around 1%).

The TUC's Duncan Weldon doesn't expect any respite when we get UK unemployment stats tomorrow….

While Robert Wood of Berenberg says it's good news for governor Mark Carney:

They say it’s better to be lucky than good, and Mark Carney certainly appears to be lucky….

A fall in volatile air fares kept inflation from rising further.

However:

Britain is slowly but surely getting past the worst of its troubles. The recovery so far is built on sand. Household finances are not a pretty picture, with inflation eating into spending power and consumption therefore being sustained by sharp falls in the saving ratio.

Updated at 10.07am BST

9.36am BST

Inflation, the details

The rising cost of living in the UK last month was driven by increased prices of fuel, clothing and footware.

But at 2.9%, CPI has come in below City expectations. And crucially, it means governor Mark Carney will not have to write a letter to the chancellor explaining why the Bank of England failed to keep inflation within one percentage point of 2%.

The Retail Prices Index (RPI), the inflation measures used for wage negotiations, also came in slightly lower than forecast at 3.3%.

Updated at 9.42am BST

9.32am BST

UK inflation up

Breaking: Inflation is up in the UK, with the consumer prices index jumping to 2.9% in June, from 2.7% in May. That's the highest level since April 2012.

Updated at 10.07am BST

9.26am BST

Photos: General strike underway

Familiar scenes in Athens this morning as the walkout hits transport links:

A commuter walks by a closed train station in a northern Athens suburb July 16, 2013
A commuter walks by a closed train station in a northern Athens suburb this morning. Photograph: JOHN KOLESIDIS/REUTERS
Commuters read a notice at the closed entrance of central Syntagma square station during a general strike in Athens July 16, 2013.
Commuters read a notice at the closed entrance of central Syntagma square station. Photograph: YANNIS BEHRAKIS/REUTERS

8.50am BST

European car sales slide; Ireland hammered

The slump in Europe's car industry continues, with new figures released this morning showing that sales fell to a 17-year low in June.

The European Automobile Manufacturers Association reported a 5.6% slump in new vehicle registrations across Europe in June, and a 6.6% fell for the first six months of 2013.

That means the industry has sold around 400,000 fewer cars than a year ago during 2013, at a time when manufacturers are trying to cut capacity and improve competitiveness.

European car sales have been sliding steadily since the eurozone crisis began — apart from a small blip in April when sales rose year-on-year.

European car registrations, June 2013
Photograph: ACEA

Core eurozone countries are suffering now — with German sales down -4.7% and France dropping by -8.4%.

There was also a stunning 71% year-on-year plunge in sales in Ireland. Just 1,673 new vehicles were registrated in the Republic in June, down from 6,352 in June 2012. That puts Ireland's status as an austerity poster boy into perspective.

Within manufacturers, Fiat suffered a -12.6% drop in sales, GM were down 9.9%, Peugeot-Citreon fell 10.8%, BMW dropped 7.9% and VW Group's sales were down 3.6%.

Ford, though, gained +8.1%, and Jaguar Land Rover were up 1.6%.

Here's the data (pdf).

UPDATE: In the reader comments, grace5715 explains that the drop in Irish car sales follows a change to the registration system. (see here for the full story)

Updated at 3.14pm BST

8.22am BST

Today’s protests

Several protests are planned for Athens today, with the first starting shortly, and an all-night sit-in planned outside the Greek parliament

10:30 local time (8.30am BST): Communist workers group PAME will gather in Omonia Square in Athens, then coverge with union protest in Syntagma. A seperate march will take place in the city of Thessaloniki.

11:00 local time (9am BST): Employees from the ADEDY, GSEE and POE-OTA (municipal employees) unions will start a protest in Klafthmonos Square and move to Syntagma, outside Parliament

20:00 local time (6pm BST): Municipal workers will begin a sit-in and overnight protest in Syntagma Square, as MPs debate the latest austerity bill required to secure bailout funds.

That's via Living in Greece, which has more details of today's disruption.

8.15am BST

Why another strike?

By my reckoning this is the fourth general strike in Greece this year (following walkouts on 20 February, 1 May and 13 June).

Greek unions hope today's walkout can change the government's approach to the crisis (despite its austerity measures, such as 15,000 civil service job cuts by the end of 2014, being largely dictated by its Troika of lenders).

Private sector union GSEE declared:

We are continuing our fight to put an end to policies that annihilate workers and drive the economy to an even greater recession.

We will stand up to those who, with wrong and dead-end choices, have driven the Greek people to poverty and despair.

While ADEDY, representing state workers, has attacked the way layoffs are being imposed on staff, such as those at the state broadcaster ERT which was closed down last month.

It said:

The policy of mass layoffs, the dismantling of public institutions responsible and the demolition of any notion of labor rights inaugurate a new undemocratic governance of the country.

Today's walkout has already left trains halted in their sidings,and meant many government offices are shut, Reuters reports from Athens. Air traffic control staff are also holding a four-hour stoppage from noon (10am BST).

Updated at 8.16am BST

7.47am BST

Greek general strike against austerity

Teachers hold placards and posters with messages regarding the future of children. -- Teachers and education workers protest against layoffs and school closures. As Greece's lenders have demanded, the Greek coalition government is about to vote for 12,500 layoffs in the public sector, including teachers and school guards.
On Monday night, teachers and education workers protested against layoffs and school closures, ahead of today’s general strike. Photograph: Nikolas Georgiou/Demotix/Corbis

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

Bubbling anger against Greece's austerity programme will hit the streets of Athens today. Labour unions are holding their fourth general strike of 2013, with demonstrations planned for the Greek capital.

The walkout comes as MPs debate the latest austerity measures agreed with Greece's lenders, including cutting 15,000 public sector workers from the payroll. Those layoffs are the price of Greece's latest bailout loans, but the unions say they will bring further suffering to a country locked in recession since the early days of the financial crisis.

As usual on these occasions, we're expecting disruption to transport links, government services, and a protest march to the parliament at Syntagma Square.

MPs are due to vote on the austerity measures on Wednesday night, so today's strike is an opportunity to change some minds within the parliament.

The Athens government has already been trying to assuage the anger. As Kathimerini reports this morning:

In various statements to the media, government officials sought to appease fears of impending layoffs. Public Order Minister Nikos Dendias told Skai that the aim was for all municipal police officers to be reposted within the ranks of the Greek Police force.

Health Minister Adonis Georgiadis told Mega television channel that more than 1,000 hospital staff scheduled to join a mobility scheme for civil servants by the end of the year would only be subject to reduced wages for two months ahead of their transfer to other posts, insisting that none of them would be laid off.

But that may not prevent workers taking to the streets, or from continuing their sit-ins at some municipal buildings.

The schoolteachers union, for example, is reportedly planning legal action over plans to put teachers staff into Greece's new 'mobility scheme' — where workers are paid less and can be more easily laid off.

We'll have full analysis of the situation shortly, from Athens.

Also today…

• Spanish prime minister Mariano Rajoy remains under pressure over the slush fund scandal (after failing to resign yesterday).

UK inflation and German ZEW confidence data is due out later this morning.

• And in the corporate world, Goldman Sachs reports its results (as former trader Fabrice Tourre defends himself against fraud charges.

Busy busy….

Updated at 7.57am BST

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Mariano Rajoy: I won’t quit over slush fund allegations. ‘Blaring sirens’ at Athens demonstrations against job cuts. Police officers protest in Athens. Fresh stimulus measures expected after China’s growth rate drops. Weaker US retail sales…

 


Powered by Guardian.co.ukThis article titled “Eurozone crisis: Greek police officers protest; Spain’s PM refuses to resign – as it happened” was written by Graeme Wearden, for theguardian.com on Monday 15th July 2013 15.49 UTC

5.59pm BST

Closing summary

Time to stop, after one of our quieter days (apologies – I guess it's the summer lull…).

Here's a very brisk closing summary:

Greek unions are preparing for another general strike, starting midnight tonight. The protests, which will hit transport services, schools, hospitals and government offices, are designed to put pressure on MPs to reject the latest planned job cuts to the public sector. See 4.59pm for details.

Police officers have already held fresh protest today. Athens was brought to a halt by demonstrators in cars and on motorbikes, in the latest sign that municipal workers have not accepted the deep redundancies demanded by the Troika. See 11.57am for photos and 1.12pm for a report from the scene.

Spain continues to be gripped by the illegal payments scandal that has struck its ruling party. Prime minister Mariano Rajoy hopes to ride out the storm, refusing to resign today and insisting that stability is important. (see 8,.44am for the latest allegations and 3.19pm for highlights of Rajoy's press conference today)

The man at the heart of the issue, former party treasurer Luis Barcenas, appeared in court to answer questions over the affair. Details here

The day began with confirmation that China's economy is slowing. But at 7.5%, on an annual basis, its GDP growth was better than feared. See 8.25am for details

While the latest US economic data was murky. Manufacturing beat forecasts, but retail sales were weak. See 2pm

And European stock markets rose, on a mixture of Chinese relief and speculation that the US stimulus programme has longer to run. See 5.25pm for closing prices and the main movers on the FTSE 100.

And finally, Fitch downgraded the eurozone's temporary bailout fund, the EFSF. The fallout from France's downgrade continues… (see 5.53pm)

I"ll be back tomorrow. Should be more lively. Until then, thanks for reading and for the comments (as ever!). Goodnight! GW

5.53pm BST

Worth noting the 'Key Assumpions' that Fitch uses to assess the EFSF's credit rating (and by extension the eurozone as a whole):

Fitch assumes there will be progress in deepening fiscal and financial integration at the eurozone level in line with commitments by euro area policy makers. Fitch also assumes that the risk of fragmentation of the eurozone remains low.

On the one hand, that's encouraging. On t'other, it means further downgrades if progress stumbles or the crisis flares up again.

5.50pm BST

Fitch downgrades EFSF

Some late breaking news – Fitch, the credit rating agency, has downgraded the European Financial Stability Facility, the bailout fund which helped to finance several eurozone bailouts.

The move follows Friday night's downgrade of France, one of the main backers of the EFSF.

Here's the statement: Fitch Downgrades European Financial Stability Facility to 'AA+'

5.23pm BST

Markets close

A gentle day for Europe's stock markets. Relief that China's growth slowdown wasn't worse helped to push shares higher, while the Spanish stock market slipped as the slush fund scandal rumbled on.

Today's weaker-than-expected US retail sales figures (2pm) helped push shares higher, as it boosted hopes that America's stimulus packages will run for longer….

Here's the closing prices:

FTSE 100: up 41 points at 6586, +0.6%

German DAX: up 22 points at 8234, + 0.27%

French CAC: up 23 points at 3878, +0.6%

Spanish IBEX: up 10 points at 7855, + 0.13%

Italian FTSE MIB: up 166 points at 15597, + 1%

FTSE 100 top risers, July 15
FTSE 100 top risers today. Photograph: Thomson Reuters
FTSE 100 top fallers, July 15
FTSE 100 top fallers today. Photograph: Thomson Reuters

4.59pm BST

Greece's unions are getting ready for their third general strike of 2013, starting at midnight tonight.

GSEE, the biggest private-sector union, hopes that the walkout will persuade the Greek government to change course, as it brings leglslation to cut the public service workforce.

In a statement, GSEE said:

The workers continue the struggle to put a final end to these policies that kill labor and drive the economy to ever deeper recession.

We demand a change to the politics of firings, privatization and divestiture of the public sector.

(via Bloomberg)

As usual, government services, transport links, schools and health services could all be disrupted by the walkout.

4.49pm BST

Open Europe has been tracking the latest developments in Spain here: Slush fund scandal reignites in Spain, but risk of early elections remains small

It flags up that Mariano Rajoy's comments on the illegal payments scandal this afternoon (see 3.19pm onwards) may have been pre-prepared:

Another interesting fact from the Rajoy-Tusk presser. When a foreign leader comes to Spain on an official visit, the protocol establishes that, at the joint press conference, Spanish journalists and their counterparts from the visitor's country are only allowed two questions each.

Today, it had been agreed that the two questions from the Spanish side would come from El Mundo and the news agency EFE. However, Rajoy unexpectedly gave the floor to a journalist from ABC.

Asked by his colleagues at the end of the presser, the ABC journalist explained that he had received a phone call from his editor dictating him the exact wording of the question he had to put to Rajoy – who then replied by reading a short written statement he had prepared.

Updated at 4.50pm BST

4.40pm BST

IMF: Spain’s banks aren’t safe from risks

The International Monetary Fund has added to the pressure on Spain today, warning that its banks are still at risk – despite recent progress.

In its latest assessment of the Spanish financial sector, released this afternoon, the IMF welcomed the creation of Spain's Bad Bank, called Sareb, which hasmopped up toxic loans from the commercial banking sector.

But given the ongoing economic downturn,the country's banks are not out of the woods. The IMF fears they will suffer new losses as the recession continues, forcing them to limit their lending. It wants them to boost their capital ratios by cutting cash dividends or issuing new shares instead.

In its report, the IMF warned that Spain's banking sector was in a poor position, saying:

Risks to the financial sector arising from the difficult economic environment still loom large, requiring continued action to safeguard the program's gains and better support economic recovery.

Adding:

Financial sector dynamics still contribute to recessionary pressures, with credit contraction accelerating, lending standards tightening, and lending rates to firms rising.

Not a good time for the prime minister to be fighting calls for his resignation….

4.13pm BST

PP’s Barcenas in court….


A banner reading “Law and control to clean up”, is seen at the High Court in Madrid, where former People’s Party treasurer Luis Barcenas appeared today. Photograph: Andres Kudacki/AP

Luis Barcenas, the former treasurer of Mariano Rajoy's Popular Party, spent several hours in a closed-doors court hearing today.

Barcenas faces several charges including bribery, money laundering and tax fraud, relating to allegations that PP ran a secret fund where businesspeople funneled payments to the party.

Reuters reports that Barcenas, who has been held in prison since June, disclosed new documents to judge overseeing the case:

A High Court judge questioned Barcenas behind closed doors for more than three hours on Monday after he was transported from jail in a white and black van.

A lawyer involved with the case told Reuters that Barcenas, a once-trusted aide, turned over documents showing how he ran a secret slush fund at the party for many years, and provided details of years of cash payouts to party leaders.

Over his more than 20 years handling PP finances, Barcenas accumulated as much as 48 million euros in Swiss bank accounts that prosecutors say he has failed to adequately explain.

Rajoy is not charged with any crime and has repeatedly denied that he or other party leaders received illegal payments.

While Rajoy is refusing to resign over the affair (see 3.19pm), public anger over the scandal is rising, at a time when Spanish citizens have suffered from a long recession and record unemployment:

3.19pm BST

Rajoy refuses to resign over illegal payments scandal

Spanish Prime Minister Mariano Rajoy gestures during a joint press conference with his Polish counterpart after their meeting at the Moncloa palace in Madrid on July 15, 2013. Sain's Prime Minister Mariano Rajoy today ruled out resigning over a corruption scandal rocking his government.  AFP PHOTO / PIERRE-PHILIPPE MARCOUPIERRE-PHILIPPE MARCOU/AFP/Getty Images
Spanish PM Mariano Rajoy gestures during today’s joint press conference in Madrid. Photograph: PIERRE-PHILIPPE MARCOU/AFP/Getty Images

Spanish prime minister Mariano Rajoy has defended himself over the slush fund scandal, and refused to resign.

Speaking as the former treasurer of his Popular Party appeared in court over the affair, Rajoy said he would not bow to calls to step down. Rajoy insisted that he would see out his term of office, and would not allow the case to derail his political reform programme.

At a press conference with the Polish prime minister, Donald Tusk, Rajoy said:

I will defend political stability and I will fulfill the mandate given to me by Spanish voters.

As explained at 8.44am, the El Mundo newspaper published text messages which they claim show Rajoy offering support to Luis Barcenas, the ex-treasurer of the PP party, who is accused of collecting secret payments from Spanish businessmen and passing the onto senior party members.

Rajoy declined to comment on these latest allegations, as journalist José Miguel Sardo flags up:

City analysts aren't convinced that Rajoy can ride out the storm…..

Spanish Prime Minister Mariano Rajoy (R) shakes hands with his Polish counterpart Donald Tusk (L) during a press conference after their meeting at the Moncloa palace in Madrid on July 15, 2013.
Rajoy shakes hands with his Polish counterpart Donald Tusk. Photograph: PIERRE-PHILIPPE MARCOU/AFP/Getty Images

2.36pm BST

The spate of demonstrations in Greece in recent days, and the protests planned for this week, highlights the anger and shock felt by public sector workers who have discovered their jobs are being cut to meet the targets set by the Troika.

Teacher Dude, a citizen journalist who covers the Greek crisis, reports:

A municipal police officer holds a Greek flag during a protest in front of the  Parliament in Athens, Greece, 15 July 2013
A municipal police officer holds a Greek flag during a protest in front of the Parliament in Athens today. Photograph: FOTIS PLEGAS G./EPA

2.13pm BST

Confirmation that tomorrow's general strike in Greece will hit some flights into the country, with civil aviation employees planning to stop work between noon and 4pm (10am-2pm).

2.00pm BST

US data: retail sales disappoint, but manufacturing beats forecasts

A classic mixed bag of economic news from the US.

The Good: The 'Empire State' survey of the manufacturing sector in the New York area, which showed a decent, unexpected, rise in output .

Business conditions rose to 9.46, up from 7.84 in June, bneating foreacsts of a reading of 5.

The Bad: US retail sales only rose by 0.4% last month, dashing hopes of a 0.8% rise. Strip out spending on new cars, and gasoline, and sales were down by 0.1%.

And the bad news is trumping the good news, it seems, with the dollar weakening — on the grounds that this makes an early 'tapering' of America's stimulus measures a little less likely.

1.12pm BST

AP: Police protests block traffic in Athens

Municipal police officers protest in front of the  Parliament in Athens, Greece, 15 July 2013.
Municipal police officers protesting in front of the Parliament in Athens today. Photograph: FOTIS PLEGAS G./EPA

Traffic was brought to a standstill in Athens by the striking municipal police offices who held a demonstration against the plan to lay off thousands of public workers (see 11.57am for details & early photos).

Associated Press reports:

Sirens blaring, striking municipal police officers brought traffic to a standstill across central Athens Monday.

As part of a protest against government cuts, the officers parked their motorcycles and patrol cars outside the offices of the governing center-right New Democracy party and its Socialist coalition partner.

The officers hope to persuade MPs not to support the firing of 15,000 public sector workers by the end of 2014, as demanded by Greece's lenders.

AP continues:

The rally launched a week of planned demonstrations against the latest round of austerity measures that will impose staff cuts on teachers and local government. Municipal authorities across Greece including the Athens municipal police, who are generally tasked with checking parking violations and checking street vendors have suspended services for three days, while unions have called a general strike for Tuesday.

Public sector workers, while slapped with repeated salary and benefit cuts, have been spared firings until this year.

The measures are to be voted by parliament this week the first major political test for Conservative Prime Minister Antonis Samaras since a left-wing party abandoned his coalition government last month, leaving it with a reduced majority.

As explained earlier (11.26am), the municipal workers' strike will last until the end of Wednesday. Then on Thursday, German finance minister Wolfgang Schaeuble is visiting Athens…..

12.41pm BST

Uk business confidence has hit a six-year high, a new global business outlook survey from Markit has found.

However, eurozone firms are much less upbeat, as Markit's chief economist, Chris Williamson, explains:

The eurozone remains a weak spot in the global picture, though far less so than late last year.

However, while there are signs of rising optimism in the periphery, notably Spain and Ireland, the mood in France and Germany remains subdued compared with earlier in the recovery, which will restrain the overall pace of economic recovery for the region.

The survey also found that global business confidence had deteriorated in recent months, with US and Chinese firms less optimistic – even before today's GDP data confirmed China's growth was slowing (see opening post).

Here's the full story: UK business optimism at six-year high

12.12pm BST

Fabulous Fab due in court

Heads-up: Former Goldman Sachs banker Fabrice Tourre will go on trial today on civil fraud charges relating to sales of bundled mortgage securities in the run-up to the financial crisis.

'Fabulous Fab' is the only Goldmanite to face charges over the affair, which attracted a 0m fine in 2010. As our Wall Street correspondent Dominic Rushe explains, its a chance for the Securities and Exchange Commission to win a high-profile cases related to the credit crunch:

Tourre, a mid-level employee, was the only Goldman executive to be charged individually and chose to fight the case.

Tourre is to argue he was just a cog in the machine, and that those who lost money were sophisticated investors who made their own bad decisions.

The SEC claims that Tourre misled clients who were sold a 'toxic' derivatives product, by not revealing that hedge fund billionaire John Paulson had helped choose which mortgages were included, and was planning to bet on the assets falling in value,

Tourre denies the charges. More details here.

11.57am BST

Photos: Poiice demonstrate in Athens

Following on from that last post, Greek municipal police officers in cars and on motorbikes have held a demonstration against public sector layoffs this morning.

Here's the latest photos from Athens:

Municipal police officers take part in a protest with motorbikes and cars against public sector layoffs, which the government has promised its international lenders in exchange for bailout funds, in Athens July 15, 2013.
Photograph: YORGOS KARAHALIS/REUTERS
Municipal police officers take part in a protest with motorbikes against public sector layoffs, which the government has promised its international lenders in exchange for bailout funds, in Athens July 15, 2013.
Photograph: YORGOS KARAHALIS/REUTERS
A municipal police officer takes part in a protest with motorbikes and cars against public sector layoffs, which the government has promised its international lenders in exchange for bailout funds, in Athens July 15, 2013.
Photograph: YORGOS KARAHALIS/REUTERS

11.26am BST

Greece protests this week

It's shaping up to be another week of anti-austerity protests in Greece.

A general strike has been called for Tuesday by the main public and private sector unions, who will hold a protest march in Athens. Local airports and long-distance train services are likely to be disrupted (check out Living in Greece for full details).

Municipal workers have already begun a new three-day walkout this morning, against propose layoffs.

Union leaders representing the municipal workers are due to meet with deputy prime minister Evangelos Venizelos, finance minister Yannis Stournaras, interior minister Yiannis Michelakis and administrative reform Minister Kyriakos Mitsotakis this afternoon.

The Athens parliament is due to vote on the latest measures agreed with its Troika of lenders later this week.

MPs are also expected to vote tonight on whether former finance minister Giorgos Papaconstantinou should be prosecuted over the Lagarde list of tax evaders (he denies removing the names of several relatives from the list).

10.53am BST

FrAA+nce shrugs off downgrade

Being stripped of its AAA rating hasn't done France any immediate harm, with its government bond prices little changed this morning.

Fitch became the third and final major credit rating agency to downgrade France, on Friday night, with a one-notch downgrade to AA+.

The French debt burden is no longer consistent with a top-rated country, Fitch warned, with general government gross debt expected to peak at 96% of GDP next year, and still be 92% in 2017.

Bond traders aren't spooked, though, with the yield (interest rate) on French 10-year bonds up just 0.02% at 2.2% this morning.

Investors won't have been surprised to hear that France has a debt problem – Fitch is rather late to this party. And with so many AAA ratings having been trampled underfoot since the crisis began, a downgrade carries little oomph.

As Nikolaos Panigirtzoglou, head of global asset allocation at JPMorgan, put it, double-A is the new triple-A:

Conservative bond investors, such as reserve managers, used to have triple-A only mandates but they have adapted to the reality that there aren’t many triple-As anymore.

(quote via Reuters)

9.57am BST

In the UK, three pro-European politicians from across the political spectrum are warning that it would be a "historical error" for Britain to quit the European Union.

The Conservative cabinet minister Ken Clarke, Liberal Democrat Danny Alexander (number 2 at the Treasury) and Labour's Lord Mandelson are all backing a cross-party group called British Influence.

It's new manifesto, called 'Better off in a Better Europe', is being launched today. It argues that the UK should help reform the EU from the inside, making it "leaner and meaner", rather than quitting.

The move comes days after MPs voted in favour of an in-out EU referendum – Clarke was one of a small handful of Tories who didn't back the plan.

Here's the full story: Ken Clarke, Danny Alexander and Lord Mandelson warn against EU exit

Updated at 9.58am BST

9.35am BST

European stock markets are holding onto their early gains (see 8.25am), and Mike McCudden, head of derivatives at stockbroker Interactive Investor, confirms that the Chinese economic data has provided cheer:

Solid Chinese GDP has provided the comfort many investors were looking for and equities have been given a confidence boost in early trade.

9.28am BST

Tsipras re-elected as Syriza’s leader

Over in Greece, left-wing politician Alexis Tsipras is celebrating after being re-elected leader of Syriza last night.

Syriza has officially changed to become a single party rather than a coalition of leftists factions, in an attempt to pick up more support after surging to second place in last year's elections.

Tsipras, who picked up 74% of the vote, declared:

Starting tomorrow, with our new party, all together, stronger and more united than ever, we will embark on our great and victorious path.

Tsipras also declared that Syriza would support striking Greek municipal workers "to the end", as they fight thousands of public sector job cuts.

During a five-day congress, Syriza also agreed to keep pushing for Greece's bailout programme to be renegotiated:

Kathimerini reports:

The party adopted as its official position the cancelling of Greece's EU-IMF memorandum and the renegotiation of its loan agreement. It also intends to carry out an audit of Greece's public debt with the aim of cancelling any part that is considered "odious", or illegitimate.

9.14am BST

Over on Alphaville, Kate Mackenzie has crunched through the details of China's economic data (showing an annual growth rate of 7.5%), and flagged up some key details:

• The seasonally-adjusted rate is 1.7 per cent. If annualised — ie the way that most countries present their quarterly GDP data — is it just under 7 per cent. On the same basis, Q1 was 6.6 per cent, and Q4 2012 was 7.8 per cent (see table below for more).

• The headline rate of 7.5 per cent for Q2 was in line with expectations — but those expectations had fallen fairly rapidly from 7.8% about a month ago (at least on the Bloomberg survey).

There were also an intruiging rise in 'capital formation', which helpfully offset a drop in export growth. More here: China GDP

8.59am BST

Portuguese parties work on ‘national salvation’ plan

Portugal's three political parties have set themselves a week to agree a "national salvation pact" to keep its bailout programme on track.

Late last night, the opposition socialist party said it has begun talks with the two coalition parties who form the Portuguese government.

In a statement, it explained:

The talk process began today with representatives from the Social Democratic Party, the Democratic and Social Center Party and the Socialist Party discussing methodology of the works and fixing a deadline of a week to…search for a national salvation commitment.

(via the WSJ)

The parties are aiming to get a deal by July 21 (next Sunday). The talks come after the country's president shook Portugal by calling for politicians of all sides to work together, ahead of elections next year.

Updated at 9.00am BST

8.44am BST

Spanish PM faces new calls to resign

Hundreds of people demonstrated in Barcelona against political corruption and demanded the resignation of Prime Minister Mariano Rajoy, on 14 July 2013.
Hundreds of people demonstrating in Barcelona against political corruption and demandinf the resignation of Prime Minister Mariano Rajoy, on 14 July 2013. Photograph: Andreu Gim nez/Demotix/Corbis

Over in Madrid, Mariano Rajoy is under renewed pressure after the country's opposition leader called for his resignation over the illicit payments scandal.

There were also demonstrations in Barcelona yesterday, after a Spanish newspaper claimed that the prime minister had texted messages of support to the former party treasurer at the heart of the 'slush fund' scandal that has gripped Rajoy's Popular Party (PP), and the country, for months.

El Mundo said Mr Rajoy had sent supportive words to Luis Barcenas, PP's former treasurer, who is accused of taking secret donations from businesspeople and passing them on to senior party members.

One alleged text message read:

Luis, I understand. Stay strong. I'll call you tomorrow. A hug.

Barcenas denies charges of corruption and tax fraud, and Rajoy also denies any wrongdoing. But the scandal, and the drip-drip-drip of allegations continues to dog the PM.

The leader of Spain's main opposition Socialist Party, Alfredo Perez Rubalcaba, said last night that he was cutting all contact with Rajoy and PP, and said the PM should resign.

Rubalcaba declared:

Mr Rajoy's conduct in this situation can be summarised quite simply: silence, lies, and after what we have learned today, collusion, extremely serious collusion

Barcenas is due back in court later today.

8.25am BST

Shares rise after Chinese GDP data

An investor gestures at a private securities company on Monday July 15, 2013 in Shanghai, China.
An investor gestures at a private securities company in Shanghai, China, earlier today. Photograph: AP

There's relief in the City this morning that the Chinese GDP data didn't show a sharper slowdown.

The main European stock markets are all showing gains, led by mining stocks, after Shanghai's stock market rose by almost 1%.

Here's the early prices:

• FTSE 100: up 47 points at 6592, + 0.75%

• German DAX: up 43 points at 8255, + 0.5%

• French CAC: up 21 points at 3877, + 0.57%

• Spanish IBEX: up 43 points at 7888, + 0.5%

• Italian FTSE MIB: up 102 poiints at 15533, + 0.6%

Traders are cheered that China isn't slowing down more rapidly, especially after finance minister Lou Jiwei had appeared to hint that the data would be worse:

Mike van Dulken, head of research at Accendo Markets, explains:

While there may be concerns thar China's official target will be missed and a potential lower rate of growth, there is no real surprise as we get used to the emerging giant’s growth having to slow up after years of strong expansion…

Updated at 8.27am BST

8.02am BST

China’s slowing growth confirmed

A China Railway High-speed (CRH) Harmony bullet train (bottom) drives past Beijing's central business district, July 11, 2013.
A China Railway High-speed Harmony bullet train drives past Beijing’s central business district. Photograph: JASON LEE/REUTERS

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

The most important economic news this morning is that China's economic growth is continuing to slowdown, but no worst – officially at least – than economists had expected.

Chinese GDP grew by 7.5% on an annual basis between April and June, the second consecutive quarter of slowing growth.

Analysts reckon the data, released overnight, shows that Beijing could miss its target 7.5% growth for the whole of 2013. With Europe struggling for growth and some emerging markets stumbling, even 7.5% would be the lowest rate of expansion in more than two decades.

Xianfang Ren, economist at IHS Global Insight, warned:

As of now, China's gross domestic product has been staying under 8% for five straight quarters, a clear sign of distress

The rather sharp growth deceleration and the recent financial market turmoil indicate that risks have been building on both the financial and real goods sector.

Industrial production figures for June also showed less growth than a year ago, adding to fears that the second-largest economy is weakening in the face of a lacklustre global economy and a crackdown on its shadow banking sector.

If China's economy really stumbles, the effects will be felt worldwide – potentially hurting the eurozone's attempts to claw its way back to growth.

Credit Agricole's Dariusz Kowalczyk reckons China may need to launch fresh stimulus meaures, predicting:

We will see some targeted measures to stimulate growth.

The Bejing government has already scrambled to 'correct' a report that finance minister Lou Jiwei had said the country’s growth target this year is 7%.

Bloomberg has the details:

In an English-language story released yesterday and dated July 12, Xinhua [the official Chinese news agency] said it corrected a quote attributed to Lou to “there is no doubt that China can achieve this year’s growth target of 7.5 percent” from its original story dated July 11 that cited him as saying “there is no doubt that China can achieve the growth target, though the 7 percent goal should not be considered as the bottom line.”

Hope that clears up any doubts.

Meanwhile in Europe….. political instability threatens to reignite the eurozone debt crisis.

Portugal remains a serious concern, after opposition head António José Seguro called for an end to its austerity programme on Friday night, and a renegotiation of its bailout programme.

While in Spain, prime minister Mariano Rajoy is facing fresh calls to resign over the illicit payments scandal that has rocked the country in recent months.

I'll be watching for news from Lisbon and Madrid, along with reaction to China's slowing economy and other developments throughout the day….

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Disappointing UK trade data and industrial output. IMF calls for concerted action in euro area. Protest rally in Greece today after loans approved. The agenda- new IMF forecasts due. Markets head higher in today’s trading session…

 


Powered by Guardian.co.ukThis article titled “Eurozone crisis: IMF cuts growth forecasts amid new Greek protests – as it happened” was written by Graeme Wearden, for theguardian.com on Tuesday 9th July 2013 14.56 UTC

5.59pm BST

Closing summary

Time to wrap up for the day. Here's a brief closing summary with links to the key points in the blog.

The International Monetary Fund has cut its growth forecasts, admitting that the world economy has not met its expectations since April. The IMF warned that emerging economies were hitting roadblocks, while the eurozone was being held back by its weak banks and record unemployment. See 2.30pm for details and press conference highlights.

The UK, though, was one of the few countries whose growth prospects were revised up. The Treasury said it showed Britain was healing, but critics said the recovery was too weak (see 2.36pm and 3.38pm onwards).

In the eurozone, there was relief that finance ministers had agreed to extend Greece most of its next bailout tranche last night.However, a think tank warned that the economy will shrink by more than expected this year (see 1.45pm)

Municipal workers, who face losing their jobs through Greece's bailout programme, held another strike today. Up to 3,000 employees held a protest rally in Athens (see 1.02pm onwards)

epa03781500 Greek municipal employees protest in front of the Greek Parliament against a suspension decision and possible future layoffs in Athens, Greece, 08 July 2013.
Greek municipal employees protesting in front of the Greek Parliament today. Photograph: ALKIS KONSTANTINIDIS/EPA

Shares rose across Europe's financial markets, fuelled by hopes for economic growth after Alcoa, the world's largest aluminium producer, posted decent results last night.See 5.09pm for closing prices.

In the UK, the latest economic data showed that manufacturing output fell last month. Economists said the survey raised the chances of the Bank of England announcing new stimulus measures in August (see 9.39am onwards for details and reaction)

Britain's trade gap also widened in May. But exports to non-EU states hit a new record high (see 12.10pm).

I'll be back tomorrow. Until then, thanks and goodnight!

5.35pm BST

Hark! I hear the sound of the European Central Bank scrambling to fix the damage caused by Jorg Asmussen's interview today.

Apparently Asmussen just meant to confirm that rates would stay low for an 'extended period', and did not mean to suggest this would be more than a year.

According to Reuters, though, Asmussen said:

(ECB President) Mario Draghi said in his press conference it is not six months, it's not 12, it goes beyond.

The perils of dabbling with forward guidance – especially in the vague way the ECB has done.

5.09pm BST

Markets close

FTSE 100. last 3 months. to July 9
Photograph: Thomson Reuters

The IMF's warnings of an emerging market slowdown and a deeper eurozone recession this year did not spook the financial markets.

European stocks finished at their highest level in a month, as the upbeat mood that began this morning survived the day's ups and downs.

• FTSE 100: up 63 points at 6513m +1%

• German DAX: up 93 points at 8062, +1.2%

• French CAC: up 22 points at 3846, +0.58%

• Spanish IBEX: down 2 points at 8014, -0.03%

• Italian FTSE MIB: down 9 points at 15790, – 0.06%

In the bond markets,UK and German sovereign debt strengthened, but the yields on Spanisn and Italian bonds rose [prices up means yields, or borrowing costs, are down]

10-year bond yields tonight (not closing prices)

• US: flat at 2.63%

• UK: 2.44%, down 4 basis points (or 0.04%)

• Germany: 1.65%, down 4bp

• Spain: 4.71%, + 6bp

• Italy: 4.42%, +4bp

• Greece: 11.1%, + 15bp

Updated at 5.09pm BST

4.21pm BST

Video: The IMF’s new forecasts

Here's BBC News's piece on the International Monetary Fund's new forecasts, including highlights from Olivier Blanchard's press conference, and comment from World First's Jeremy Cook:

4.17pm BST

4.16pm BST

In the currency markets….

Meanwhile, the pound continues to be pummelled on the foreign exchanges, hitting a three-year low of .4812.

This morning's weak manufacturing data (see 9.39am onwards) is being blamed, with economists expecting yet more quantitative easing from the Bank of England in August.

And the euro has also fallen against the dollar, after the European Central Bank's Jorg Asmussen revealed that last week's guidance of low rates for an 'extended period' meant more than 12 months (Mario Draghi had been rather more vague).

Here's Asmussen's full interview, which sent the euro as low as .278.

3.56pm BST

Ed Ball: Infrastructure spending still essential

Shadow chancellor Ed Balls argues that the UK government should still bring forward structural spending, as the IMF argued after its official healthcheck of the UK economy:

These forecasts confirm that, after three years of flatlining, the IMF believes Britain's economic recovery will remain weak. While this year's figure has been revised up, it is disappointing that this is still a lower forecast than the IMF was making at the start of this year.

And the IMF's advice to George Osborne remains unchanged. As they said just a few weeks ago, Britain is a long way from a strong and sustained recovery and so the government should bring forward infrastructure investment right now to create jobs and growth.

George Osborne did pledge £100bn of infrastructure projects in last month's spending review (details)…

3.41pm BST

TUC: UK is experiencing a less rubbish recovery

Here's the official reaction to the IMF's new forecasts from the TUC's general secretary, Frances O’Grady:

The IMF upgrade is welcome, if unsurprising. But raising growth forecasts from rubbish to not quite so rubbish hardly constitutes a strong recovery. The UK is still on course for the slowest recovery in over a century, and growth this year will still be well below the OBR’s initial forecast of 2.9 per cent.

UK economic growth is slow and limited to a few industries and areas of the country. And with wages continuing to fall in real terms, most ordinary workers are not feeling any sort of recovery at all.

The case for a plan B – replacing austerity with investment in infrastructure and proper employment schemes for young people – is just as strong.

3.38pm BST

Treasury: We’re on the road to recovery

No surprise that the the UK Treasury has welcomed the IMF's upgrade – three months after being furious at Olivier Blanchard for suggesting George Osborne should change course.

A Treasury spokesperson said:

The IMF has confirmed that the UK economy is moving from rescue to recovery, revising up its growth forecast for this year.

But the IMF again warns of the continued risks to the global economy, showing that the recovery cannot be taken for granted.

3.36pm BST

NIESR predicts stronger UK growth in Q2

Bang on queue – the NIESR think tank has predicted that the UK economy grew by 0.6% in the second quarter of 2013.

If accurate, that would mean that growth picked up nicely after the 0.3% expansion in the January-March period. No wonder the IMF's raised its forecast…

3.13pm BST

UK – still a weak recovery

Thomas Helbling of the IMF
Photograph: IMF

Asked about the decision to revise UK growth predictions up (2.30pm onwards), defying the general mood, the IMF argued that we shouldn't get carried away.

Thomas Helbling, division chief of the World Economic Studies division, said that the change (from +0.6% to +0.9%) was pretty normal. It reflected the fact that growth in the first quarter was stronger than expected (+0.3%), and positive signs from the last three months.

Heibling said:

It doesn't change the big picture in the UK, that the recovery is weak…

and added that policymakers should be alert to the need to do more to secure the recovery.

No mention of the UK 'playing with fire', as Olivier Blanchard famously warned in April….

3.08pm BST

Eurozone gloom

The IMF warned that the eurozone has struggled more than it expected three months ago, as it warned that the recession will be deeper than previously feared.

It now expects GDP to fall by 0.6% across the eurozone this year, down from 0.4% before. It is particularly worried about Italy, predicting a 1.8% contraction this year (down from 1.5%).

And the recovery in 2014 will be a ilttle feebler, it says, with GDP rising by just 0.9%, not 1%.

The IMF said the eurozone suffered from:

low demand, depressed confidence, and weak balance sheets [which] interacted to exacerbate the effects on growth and the impact of tight fiscal and financial conditions.

2.49pm BST

Read the report yourself

2.47pm BST

Japan growth forecast hiked

Japan, along with the UK (see 2.36pm), is one of the few countries to be upgraded by the IMF this afternoon — growth of 2% is now expected this year, up from 1.5%.

Olivier Blanchard said there had been a clear increase in confidence since the launch of the Abenomics stimulus package earlier this year. But the IMF remains cautious, citing several dangers to Japan.

They include the risk that bond investors will worry about debt sustainability (Japan's ability to repay its debts). If they demand higher rates, that would put Abenomics in trouble, he added.

2.41pm BST

Blanchard: Emerging markets have hit speedbumps

Olivier Blanchard, chief economist at the International Monetary Fund
Olivier Blanchard, chief economist at the International Monetary Fund Photograph: /IMF

The iMF's chief economist, Olivier Blanchard, has warned that emerging markets face cyclical and structural problems.

Speaking at a press conference now (live here), Blanchard said that the IMF saw slightly slower growth across most economies, compared to April. This is particularly clear in the BRIC economics (Brazil, Russia, India and China), he warned:

After years of strong growth, the Brics are beginning to run into speedbumps.

For example, the IMF expects China to grow by 7.75% this year and next year, which is 0.25% (for 2013) and 0.5% (2014) less than before.

Updated at 2.44pm BST

2.36pm BST

…but raises UK forecast

However, the IMF has raised its forecast for UK growth. It now expects GDP to increase by 0.9% this year, up from 0.6% back in April (when it actually cut the forecast from 0.9%).

My colleague Phillip Inman explains:

Britain will grow faster this year than previously expected according to the International Monetary Fund (IMF), in the first major upgrade of the UK’s economic outlook for almost three years.
The economy will expand by 0.9% compared with the previous forecast of 0.6%, the IMF said in its quarterly global financial health check. But a lacklustre performance by developing countries, a prolonged eurozone recession and US spending cuts will hamper plans to increase exports and restrict Britain’s GDP growth in 2014 to 1.5%, it added.
George Osborne will be cheered by the more upbeat outlook after suffering two years of brickbats from the IMF, which has lectured the government on taking a more expansionary stance and delaying public spending cuts. Yet growth of 1.5% next year could still be too weak to improve employment or spark a revival in manufacturing investment, which the chancellor believes is necessary for a more sustainable recovery.

Here's Phillip's full story.

Updated at 2.36pm BST

2.30pm BST

IMF cuts global growth forecasts

Breaking: The International Monetary Fund has cut its forecast for global economic growth this year.

In its World Economic Outlook Update, the IMF predicted growth of around 3.1% this year, down from 3.3% back in April.

it also cut next year's growth forecast to 3.8%, down from 4%.

It said the downgrade was largely due to:

appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as by a more protracted recession in the euro area.

More details and reaction to follow….

2.24pm BST

Nearly time for the IMF:

2.09pm BST

One for history lovers:

Bryan, who ran for the US presidency several times without sucess, was a leading critic of the Gold Standard back in the day when most of the world's currencies were pegged to each other.

He argued that it was wrong that credit availability and interest rate levels were influenced by the amount of gold in the system – and wanted the system expanded to include silver.

In the famous speech of 9th July 1896, Bryan declared:

You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.

Despite the support of America's farming community (heavily dependent on loans to keep running), Bryan never succeeded in changing the monetary system of the day. He looked rather prescient forty years later (as Lords of Finance explains)

Updated at 3.32pm BST

1.57pm BST

New IMF report due at 2.30pm BST

A reminder that the International Monetary Fund will release its updated World Economic Outlook at 2.30pm BST.

There'll be a press conference, which should be streamed live here.

Updated at 1.57pm BST

1.48pm BST

1.45pm BST

Greek thinktank predicts deeper recession

A Greek thinktank has punctured any euphoria over last night's loan deal, by warning that the country's economy will shrink by even more than expected this year.

The Athens-based IOBE think tank predicted that Greece's GDP could shrink by as much as 5%, from a previous forecast of around 4.6%. That's a rather deeper forecast than Greece's lenders expect (officially, anyway):

Reuters has more details:

"The projection on growth must be adjusted downwards – the recession this year will be around 5.0 percent," IOBE said in its quarterly report. It said it would range between a decline of 4.8 and 5 percent, compared with its previous forecast of a 4.6 percent slump.
The EU and IMF expect the economy to shrink by 4.2 percent in 2013; the Bank of Greece projects a contraction of 4.6 percent. The economy shrank 6.4 percent last year.
"Fiscal consolidation and improved competitiveness have not been coupled with successful implementation of the structural reforms programme," the locally influential think tank said.
IOBE projected the country's unemployment rate will rise to 27.8 percent this year, raising its previous 27.3 percent projection. Unemployment was 26.8 percent at the last count.
"As long as the recession persists, the economy isn't only burning fat but also productive tissue," said Nikos Vettas, the new head of IOBE.

Updated at 1.45pm BST

1.27pm BST

Photos: today’s protests in Athens

Just in – new photos from Athens of the protest rally held today by up to 3,000 municipal employees who oppose plans to lay off thousands of workers as part of the Greek bailout (see also 1.02pm):

Municipal employees chants slogans in front of the ministry of administrative reform in Athens, during their protest rally  on July 9, 2013.
Municipal employees chants slogans in front of the ministry of administrative reform in Athens. Photograph: LOUISA GOULIAMAKI/AFP/Getty Images
A municipal worker sits in front of riot police guarding the parliament during a rally against public sector reforms in Athens July 9, 2013.
A municipal worker sits in front of riot police guarding the parliament. Photograph: YANNIS BEHRAKIS/REUTERS

A municipal worker holds a banner reading “layoffs” near the Greek parliament. Photograph: LOUISA GOULIAMAKI/AFP/Getty Images

Updated at 1.27pm BST

1.02pm BST

A striking municipal worker stands on July 9, 2013 in front of police forces protecting the Greek Parliament in Athens.
A striking municipal worker in front of police forces protecting the Greek Parliament in Athens earlier today. Photograph: LOUISA GOULIAMAKI/AFP/Getty Images

Up to 3,000 striking municipal workers have marched through the streets of central Athens to voice their anger over the planned cuts in civil service numbers, according to Associated Press reporters.

As explained at 9.00am, their union has called a two-day strike which began yesterday. They oppose being added to the “mobility and reallocation scheme”, from where they can be sacked if they don't accept a new job.

The Greek Administration and E-Governance Ministry has said that 4,200 civil servants will be added to the pool this month, rising to 12,500 by the end of September. More than 8,000 municipal police will also be included.

The Athens government is committed to dismissing 15,000 civil servante by the end of 2014, including 4,000 this year, so entering the pool could easily lead to the sack.

12.10pm BST

UK exports outside the EU hit record high

A technician assembles a Nissan car on the production line at Nissan's Sunderland plant on January 24, 2013 in Sunderland, England. The Japanese manufacturer's factory employs 6,225 people producing the Juke, Note and Qashqai models.
The production line at Nissan’s Sunderland plant. Photograph: Christopher Furlong/Getty Images

My colleague Katie Allen has analysed today's UK trade data (9.39am onwards), and found some positive news for UK business secretary Vince Cable and the business groups that have been pushing sales to new markets for fear of being too dependent on a troubled eurozone.

ONS data shows goods exports to non-EU countries have hit a record high. In the three months to May, exports of goods to non-EU countries rose £1.7bn (4.6%) to £39.0 billion. That outstripped growth in goods exports to the EU, which were up by £0.3bn (0.8%) to £37.4bn.

The ONS adds more details:

Outside the EU, the level of exports to China continues to grow. In the latest three months the value of exports was 17% higher than the average 2012 quarterly level.

Import values from China were little changed, so the trade deficit with China, which had averaged £5.2 billion a quarter in 2012 shrank to £4.8 billion in the latest three months.

Historically, the UK runs a trade in goods surplus with the United States. That rose in the latest three months. The value of exports was 5% higher than its average 2012 level, while imports fell by 8%.

And here's Katie's full story on today's trade figures and industrial output data: UK manufacturing suffers surprise output fall after string of upbeat survey

Updated at 1.28pm BST

11.55am BST

Latvia has finally been given full approval to join the eurozone.

EU finance ministers gave their agreement at today's ECOFIN meeting, stating:

Euro notes and coins will be issued in Latvia on 1 January 2014.

Riga will join at a rate of 0.702804 lats to the euro.

Updated at 11.57am BST

11.20am BST

Portugal’s junior coalition leader sees stability after dramatic week

Portuguese Foreign Affairs Minister and CDS-PP President party Paulo Portas (L) meets with Portugal's President Anibal Cavaco Silva at Belem president palace in Lisbon July 9, 2013.
Paulo Portas (left), Portuguese deputy PM and CDS-PP leader, at his meeting with Portugal’s President Anibal Cavaco Silva at Belem president palace today. Photograph: RAFAEL MARCHANTE/REUTERS

Over in Portugal, the head of the junior coalition partner has declared that the country is ready to return to political stabilty – a week after his resignation destabilised the government.

After a meeting with the country's president, CDS-PP party leader Paulo Portas told reporters that:

We think the conditions for stability are in place and that political stability is important not only for the government but also for the conclusion of the aid package.

Portas was promoted to deputy prime minister last weekend, after resigning as foreign minister last Tuesday.

That cabinet reshuffle has calmed the panic over Portugal's bailout — although its sovereign debt is still changing hands at lower prices than before Portas quit. Portuguese 10-year bonds are trading at a yield of 6.9% this morning (Tradeweb data).

11.05am BST

Spain’s house price crash

The slump in Spain's housing market continues, according to data released today by the real estate firm Tinsa.

Tinsa reported that prices fell by 10.6% year-on-year in June, which means the average property has lost around 40% of its value since the financial crisis began.

As this graph shows, property prices were rising by around 15% per year during the boom days, but have been shrinking ever since.

Spanish house prices over last decade
Photograph: Tinsa

10.45am BST

In the City…

Marks & Spencer is the worst performer on the FTSE 100, falling almost 2% this morning after reporting another quarter of falling clothes sales.

That won't protect CEO Marc Bolland from criticism from the hordes of small shareholders at today's annual general meeting. Here's the full story: M&S clothing and non-food sales fall for eighth consecutive quarter.

The word from Wembley Stadium is that the small investors are not in particularly good spirits:

The other key corporate story of the day was the appointment of Ben van Beurden as new chief executive of Royal Dutch Shell. That's not caused any ructions, with Shell's shares up 1% – in line with the market.

And here's a comment on the markets from Brenda Kelly, senior market strategist at IG:

The warm weather may be helping to energise equity markets, with the FTSE 100 powering through the 6500 level led by its key components, miners and banks. With US aluminium producer Alcoa providing a strong start to the US earnings season by beating forecasts, and the misfortunes of Greece seemingly appeased, risk appetite is back with a vengeance.

UK manufacturing production continues to be something of a fly in the ointment for the overall economic outlook, falling by 0.8% in May against the 0.3% increase expected. While most UK economic data has been fairly good of late, this adds up to an annualised fall of 2.9% in total and thus may give credence to the recent forward guidance from the Bank of England in respect of the perpetuation of a loose monetary policy.

Updated at 10.51am BST

10.19am BST

Greece's debt agency just rolled over €1.625bn of six-month bonds, showing that it still has access to the short-term money markets.

The T-bills were sold at average yield of 4.2%, with the agency receiving bids for 1.7 times as much debt as was on offer. That's an identical result to a similar auction in June.

10.03am BST

Reaction: Britain’s weak industrial production and widening trade gap

City analysts say this morning's disappointing UK economic data (9.39am onwards) suggest that growth may not have been as strong last quarter as hoped.

This could increase the chances of the Bank of England increasing its bond-buying programme next month.

Here's some instant reaction (partly culled from the Reuters terminal)

Philip Shaw of Investec:

Trade figures are as expected, no great surprises. The tone of the data suggests to us that we are still likely to get more QE from the Monetary Policy Committee next month.

Rob Wood of Berenberg Bank:

On trade … I think it broadly confirms the continuing picture for the UK, which is that this is not an export-led recovery we are starting to see. This is a monetary policy, low rate, rising consumption, rising house prices-driven recovery, so I don't expect the trade balance to improve very much.

Tom Vosa of National Australia Bank:

The mix seems to be that disappointingly, we're not seeing the rebalancing of the economy that we would like… But the trade data still points to a relatively robust Q2, although perhaps not as high as 0.6% on the quarter which the survey data had been pointing to.

Updated at 10.07am BST

9.48am BST

Pound slides

Sterling took a small tumble when this morning's weak UK economic data hit the wires a few minutes ago. The pound is down over half a cent against the US dollar, at .489. Against the euro, it's close to a four-month low at €1.155.

9.44am BST

Graph: Britain’s trade gap

..and this graph shows how Britain has made little, if any, impact on its trade gap over the last year, leading to today's deficit of £2.435bn.

UK monthly trade gap
UK monthly trade gap in goods and services with the rest of the world. Source: ONS

9.39am BST

UK trade gap widens as industrial output stalls

Britain's industrial output stalled in May, dashing hopes of a 0.2% rise, as the sector appeared to stumble.

The Office for National Statistics reported that manufacturing output was down by 0.8% in May, or 2.9% lower on a year-on-year basis. That left output across the wider industrial sector unchanged month-on-month, or down 2.3% on an annual basis.

In another downbeat news, Britain's trade gap widened in May to its biggest deficit in six months.

The Office for National Statistics reported that Britain's defict in goods rose to £8.491bn, up from £8.43bn in April. Even when services was added, the overall trade gap was £2.435bn, up from £2.073bn in April.

Updated at 9.39am BST

9.29am BST

Merkel’s election prospects looking rosy

German Chancellor Angela Merkel (CDU) talks to trainee Francis Schwan during a visit of the company GE Energy in Berlin, Germany, 08 July 2013.
German chancellor Angela Merkel visiting a GE Energy factory in Berlin yesterday. Photograph: Soeren Stache/dpa/Corbis

German chancellor Angela Merkel should be pleased that the mini-saga of Greek bailout loan tranche was concluded last night, ahead of Germany's general elections this autumn.

A raft of opinion polls have shown that Merkel's CDU/CSU party holds a healthy lead, with around 42% of the vote. With her junior partners, the right-wing Free Democrats, close to the 5% threshold for winning seats, there's a decent chance that the existing coalition will retain power.

As the Wall Street Journal explains:

Ms. Merkel's CDU/CSU group appears to be strengthening. The FDP is just short of 5% in some surveys. But its results in recent regional elections have been better than opinion polls predicted.

"The FDP has few core supporters and many of its voters decide late," says Manfred Güllner, head of Berlin polling institute Forsa.

A center-right win would please German business, which fears a stronger left-wing influence in government could lead to higher taxes. But it would disappoint many other countries in the euro zone, including France, where some officials hope a grand coalition with the SPD might push Ms. Merkel toward slightly more generous and growth-friendly policies on the European debt crisis.

German polling data, July 9
Photograph: WSJ

More here: Merkel Gains Ground as Election Nears

Updated at 10.05am BST

9.00am BST

Protest march due in Greece as strike continues

Greek municipal employees are continuing a two-day strike, in protest at the plans to lay off thousands of public sector workers.

The walkout will hit municipal offices and operations across the country, although social welfare services should continue (according to the informative Living in Greece)

Even though the Athens government has agreed to cut the state workforce, unions representing municipal staff have organised a march starting anytime now (11am local time, or 9am BST)

In a statement (here in Greek) the POE-OTA says that 'mass, unified' protests are the only way to prevent ordinary workers being impoverished through the bailout programme.

As crisis-watcher Yiannis Mouzakis points out, municipal workers are often at the lower end of the pay scale:

Updated at 9.00am BST

8.32am BST

Kathimerini: legislation on Greek ‘prior actions’ due soon

Back to Greece, where the Kathimerini newspaper flags up that legislation will soon be tabled on the Athens parliament to push through the 'corrective actions' demanded by the Troika.

A vote on the measures (which sparked angry protests yesterday) is expected next week.

Kathimerini writes:

A multi-bill bundling together all the prior actions that Athens must honor in order to receive the pledged funding – including an overhaul of the tax system and cutbacks in the civil service – is expected to be tabled in Parliament on Tuesday or Wednesday.

The bill will be put to a debate with a vote expected next week. The most controversial aspect of the legislation is a pledge by Greece to put 12,500 civil servants into a so-called mobility scheme in the coming weeks, where they would receive lower wages ahead of a status review, as well as 15,000 layoffs by the end of next year.

In last night's statement (online here) the Eurogroup insisted last night that these 'prior actions' are taken swiftly in return for Greece receiving its aid loans.

8.27am BST

Europe’s stock markets advance

FTSE 100 risers, early trading, July 9 2013
The biggest risers on the FTSE 100 in early trading. Photograph: Thomson Reuters

Optimism abounds in the stock markets this morning, with shares up across Europe after Greece secured its aid tranche last night.

Traders are also cheered by upbeat forecasts from alumunium producer Alcoa (details). By sticking to its demand forecast, Alcoa calmed fears that China's economy is caught in a rapid slowdown.

And in the UK, economic surveys released overnight have shown that retail sales rose in June, while house-buying inquiries also picked up. Further signs that the British economy may be returning to health.

• FTSE: up 60 points at 6510, + 0.9%

• German DAX: up 57 points at 8026, +0.7%

• French CAC: up 19 points at 3843, + 0.5%

• Spanish IBEX: up 61 points at 8081, +0.8%

• Italian FTSE MIB: up 112 points at 15912, + 0.7%

Updated at 8.34am BST

7.55am BST

The agenda

Here's what's coming up:

• EU finance ministers meet at ECOFIN: all day

• UK industrial production for May: 9.30am BST

• UK trade balance for May: 9.30am BST

• IMF: World Economic Outlook update: 2.30pm BST

7.41am BST

Greece gets its loans… eurozone gets a blast

Greek finance minister Yannis Stournaras at Eurogroup meeting.
Greek finance minister Yannis Stournaras at last night’s Eurogroup meeting. Photograph: Isopix/Rex Features

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets, and the global economy.

So, after all the talks and tension, Greece will receive its next bailout loans – in return for making further cuts to its public sector workforce.

Eurozone ministers last night agreed to extend €2.5bn of loans to Athens this month, with a further €500m arriving in October if various corrective actions (ie: civil service layoffs) are taken.

As our Europe editor Ian Traynor wrote last night from Brussels:

Under Monday's agreement, Athens has to get to grips with a painful programme of public sector job losses mainly affecting education.

Some 6,500 teachers or education ministry staff are either to be fired or put on a "reserve" and sacked at the end of next year if no alternative work has been found. This makes up more than half of the 12,500 public sector jobs on the line, which also include 3,500 police posts. Police officers anxious for their jobs staged protests in Athens at the weekend

With the International Monetary Fund expected to provide a further €1.8bn of loans, last night's decision removes a nagging worry as Europe's politicians prepare to wind down for the summer break. The move should please the financial markets, and give European finance ministers a sprint in their step as they gather for an ECOFIN meeting today.

But their problems are not over, as the IMF has been swift to warn in its new annual assessment of the euro area.

Pointing to the eurozone's weak growth and record unemployment, the IMF urged "concerted policy actions" to end the malaise.

IMF managing director Christine Lagarde warned bluntly that the economic crisis in Europe had not been resolved, saying:

Over the past year, substantial actions at both the national and euro-wide levels have been taken to combat the crisis,"

But despite this progress, the economic recovery remains elusive, unemployment is rising, and uncertainty is high. Additional policy measures are required to fully restore confidence, revive growth, and create jobs.

International Monetary Fund (IMF) Managing Director Christine Lagarde waits for the start of an euro zone finance ministers meeting in Brussels July 8, 2013.
Christine Lagarde at last night’s eurozone finance ministers meeting in Brussels. Photograph: FRANCOIS LENOIR/REUTERS

The IMF said growth was beng hampered by "centrifugal forces across the euro area" – including weak banks, record jobless, and limited credit in part of the region. Here's the full report.

The IMF's four-point plan for the eurozone contained familiar themes:

• a 'credible' assessment of how much capital needs to be pumped into Europe's struggling banks (and then action to fix the problems)

• completing banking union (including introducing a single resolution mechanism for failed banks)

• new measures to stimulare economic demand (with a nod of approval to Mario Draghi for last week's promise to keep interest rates low).

• and finally structural reforms (always an IMF favourite).

But with Europe soon to wind down until September, it's not clear that the warning will be heeded soon.

The IMF will be in the news this afternoon too, when it releases its latest World Economic Outlook report (at 2.30pm BST). That will include its latest economic forecasts for countries across the world, and the global economy.

I'll be tracking the IMF report, reaction to last night's eurogroup meeting, and other news in the eurozone and beyond through the day….

Updated at 7.59am BST

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