Mario Draghi

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

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

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

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

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

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

Brian Davidson says:

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


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

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

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

More here:

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

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

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

The pound is tumbling on the FX markets today.

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

Sterling is being hit by two events

Back to the eurozone.

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

ECB policy options


US private sector job creation hits five-month high

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

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

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

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

US ADP Payroll

US ADP Payroll Photograph: ADP / fastFT

As fastFT puts it:

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

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

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

Euro vs US dollar today

Euro vs US dollar today Photograph: Thomson Reuters

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

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

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

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

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

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

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

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

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

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

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

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

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

I’ve taken the quotes off Reuters:

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

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

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

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

European stock markts

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


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

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

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

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

Citi predicts lots more QE.

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

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

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

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

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

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

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

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

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

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

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


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

Eurozone inflation: the detail

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

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

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

Eurozone inflation, November 2015 Photograph: Eurostat

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

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

Eurozone inflation stuck at 0.1%

Here comes the eagerly-awaited eurozone inflation data!

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

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

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

More to follow….


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

Pound vs dollar today

Pound vs dollar today Photograph: Thomson Reuters


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

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

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

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

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

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

Construction recovery is ‘down but not out’

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

Construction PMI by sector

Tim Moore, senior economist at Markit, explains:

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

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

UK construction growth hits seven-month low

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

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

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

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

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

Markit says:

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

UK construction PMI

More to follow…

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

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

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

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

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

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

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

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

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

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

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

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

European stock markets

European stock markets in early trading Photograph: Thomson Reuters

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

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

Ramin Nakisa of UBS

Ramin Nakisa of UBS Photograph: Bloomberg TV

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

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

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

Nakisa tells Bloomberg TV:

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

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

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

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

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

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

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

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

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

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


VW shareholders to face workers

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

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

Bloomberg has a good take:

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

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

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


The Agenda: Eurozone inflation could seal stimulus move

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

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

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

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

Or both.

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

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

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

Also coming up today….

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

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

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


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

Here’s the ECB’s brief statement:

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

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

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

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



Markets steady ahead of ECB decision

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

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

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

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

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

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

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

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

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

Lawler has looked at the ECB’s options:

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

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

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

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

As my colleague Graeme Wearden reported:

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

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

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

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


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

Osborne defends tax credit cuts

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

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

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

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


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

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

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

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

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

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

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

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

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

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

George Osborne at the Treasury Committee

George Osborne at the Treasury Committee Photograph:

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

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


Osborne: not looking for special deal for City of London

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

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

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

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

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

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


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

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

The chancellor said:

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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


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

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

Bank of England paper analyses positive impact of migration

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

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



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

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

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


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

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

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

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

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


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

Lawson slams Carney for wading into EU debate

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

The Spectator’s Coffee House team agreed.


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

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

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

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

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

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

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

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

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

ECB chief Draghi to hint of more QE

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

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

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

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

Investec economist Chris Hare said:

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

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

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

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

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

Closing summary: Protests in the heart of the ECB

It’s time for a closing summary.

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

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

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

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

And there’s a video clip here.

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

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

For example:

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

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

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

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

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

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

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

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

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

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

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

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

Thanks for reading and commenting, as ever. GW


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

The economics correspondent Pete Spence explains her motives:

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

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

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

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

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

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

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

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

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

S&P downgrades Greece

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

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

Video: That protest in full

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



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

ECB: Protester registered as a journalist

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

The European Central Bank has now issued a formal response:

Statement on incident at ECB press conference

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

Security staff took immediate and effective action.

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

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

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

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


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

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

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

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

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


Police: 21-year-old arrested

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

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


The FEMEN activist group have claimed responsibility for the protest.

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


Confirmation from Reuters:


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

After the drama:

ECB press conference, April 15 2015
. Photograph: ECB

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

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

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

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

Best question of the day, Draghi replies.

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

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

Finally, a question about the protest. A journalists asks whether the European Central Bank president is OK, as he seems pretty calm.

You’ve answered your own question there, Draghi smiles back.

He then returns to normal business, insisting that economic conditions are improving, and bank lending is improving.

However, the recovery is reliant on the ECB sticking with its monetary policy measures.

Clarification. Another photo just arrived, showing that the protestor was actually saying “End the ECB Dick-Tatorship”. A subtle difference.

A female activist (C) wearing a t-shirt with a slogan reading: ‘ECB Dick-Tatorship’ is subdued by ECB security personnel after an incident at the press conference of the European Central Bank in Frankfurt, Germany, 15 April 2015.
. Photograph: Boris Roessler/EPA


The European Central Bank says it is “investigating” today’s protest:

If you’re just tuning in, you can watch Mario Draghi’s press conference online here. He’s now covering weighty monetary policy issues, and their role in underpinning the eurozone recovery.

Amazingly, no-one has actually asked a question about the protest (“Are you OK, Mr Draghi?” might be a good place to start).

The ECB chief says that the press conference will run for another 10 minutes to make up for the time lost when it was dramatically disrupted.

Mario Draghi appears to be unshaken by the incident. He is now fielding questions about the eurozone. He says that he doesn’t even want to contemplate the possibility that Greece might default on its debts.

And he points to Spain as a success story, saying it is experiencing a “strong and employment rich recovery, supported by labour market reform”.

Bloomberg have uploaded a video clip too.

It shows that the protester was shouting “End the ECB dictatorship” before being bundled out.


Mario Draghi’s opening statement is now online here (without any reference to the disruption)

Here’s Associated Press’s early take on the protests:

A female protester interrupted the European Central Bank’s press conference on Wednesday, screaming “End ECB dictatorship” while she rushed the stage and threw what looked like confetti.

The action happened as ECB President Mario Draghi was delivering opening remarks after the bank’s latest policy meeting.

Draghi reappeared on stage a few minutes later and carried on with his remarks.

Some activists accuse the ECB of trying to enforce budget austerity measures on eurozone countries, such as Greece, that are under financial bailout programs.

Photos: Protester disrupts ECB press conference

Here are photos of the moment that the European Central Bank’s press conference was disrupted by a protester shouting “end the ECB dictatorship.” [see earlier blogpost onwards]

It shows she threw paper and confetti at the head of the ECB, Mario Draghi, before being carried out of the room:

A woman disrupts a press conference by Mario Draghi, President of the European Central Bank, (ECB) following a meeting of the Governing Council ain Frankfurt / Main, Germany, on April 15, 2015. AFP PHOTO / DANIEL ROLANDDANIEL ROLAND/AFP/Getty Images
. Photograph: Daniel Roland/AFP/Getty Images
Security officers detain a protester who jumped on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. The news conference was disrupted on Wednesday when a woman in a black T-shirt jumped on the podium. REUTERS/Kai Pfaffenbach
. Photograph: Kai Pfaffenbach/REUTERS
A woman interrupts a press conference by Mario Draghi, President of the European Central Bank (ECB) following a meeting of the Governing Council in Frankfurt / Main, Germany, on April 15, 2015. AFP PHOTO / DANIEL ROLANDDANIEL ROLAND/AFP/Getty Images
. Photograph: Daniel Roland/AFP/Getty Images
Security officers detain a protester who jumped on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. The news conference was disrupted on Wednesday when a woman in a black T-shirt jumped on the podium. REUTERS/Kai Pfaffenbach
. Photograph: Kai Pfaffenbach/REUTERS


Draghi has also played down concerns that the ECB’s QE stimulus programme will struggle to find enough eurozone bonds to buy.


Draghi is now taking questions from the media – no-one has asked if he’s OK following the attack, though.

Asked about Greece, he says that the ECB will support the Greek banks for as long as they are solvent. The ECB has now extended €110bn to the Greek financial sector, he adds.

Draghi concluded his statement by warning that the eurozone needs more supply side measures to tackle its high structural unemployment & low potential output growth.

Draghi appears completely unruffled by the disruption, and has returned to his statement.

He says the ECB is monitoring inflation closely, and still expects inflation to rise back towards its target in 2016 and 2017.

Here’s a better photo of the moment that Mario Draghi’s press conference was dramatically disrupted a few moments ago.

OK, we’re back now — Mario Draghi is unhurt, and he’s continuing with his opening statement.

A remarkable security breach, though — this press conference is taking place inside the ECB’s headquarters.

It looks like the protestor threw confetti at the ECB chief.


The protestor has been removed from the room, and the press conference has been suspended.

ECB press conference disrupted

Mario Draghi has then been dramatically cut off, as a woman rushed to the front press conference repeatedly shouting “End ECB dictatorship. End ECB dictatorship”*

She also threw something at the ECB chief – which looked like paper.


Press conference begins

Mario Draghi starts cheerfully, saying he’s “very pleased” to welcome the media to the press conference.

He confirms that the ECB began its stimulus programme as planned. It is proceeding smoothly.

There is “clear evidence” that the policy measures we have put in place are effective, he declares. Borrowing conditions for firms and households have “improved notably”.

The press room in Frankfurt is nicely packed…and there’s a burst of camera action as Draghi arrives.

. Photograph: ECB

Angst breaking out across finance Twitter

Umm no sign of Mario yet….

Maybe the lifts are broken again, like in January…..

Mario Draghi’s press conference is being streamed live, here.

Reminder: we want to hear Mario Draghi’s views on his QE programme, Greece, and the state of the eurozone, when the press conference starts in around 5 minutes.


Lunchtime summary: Stock markets at 14-year high ahead of ECB

A quick recap.

The European Central Bank has voted to leave eurozone interest rates at their current record lows.

ECB president Mario Draghi will hold a press conference at 1.30pm BST (2.30pm Frankfurt), where he’s expected to discuss the state of the eurozone economy and the early success of his QE programme.

He may be asked whether the bond-buying programme could end early, if it’s successful.

European stock markets have hit their highest levels in 14 years, and the euro has fallen back, as investors prepare for this afternoon’s ECB press conference.

Traders are calculating that central banks will maintain accommodative monetary policy for some time, with the eurozone still in negative inflation and China’s economy slowing.

Nick Gartside, fund manager at JPM Global Bond Opportunities Fund, explains:

Globally investors should bear in mind this is not the time to fight central banks.

Powerful policies are forcing bond investors to sell bonds back to the central banks and redeploy those assets, and we cannot forget how much this supports risk assets.”

That’s helped to drive the FTSE 100 to a new alltime high, over 7100 points for the first time.

European stock markets, 1pm, April 15 2015
European stock markets, 1pm, April 15 2015 Photograph: Thomson Reuters

German bonds are hitting new highs, driving the interest rate on its 10-year bonds close to zero.

It’s been a worrying morning for Greece, though.

Slovakia’s finance minister has warned there is little chance of a deal to unlock aid next week, meaning:

“Greece is moving ever closer to the abyss.”

And new budget data has shown that Greece only achieved a primary surplus of 0.4% last year, well below target [details here].

The Kathimerini newspaper says this raises fresh fears over Greece’s financial health.

The budget figures show “that Greece needs external financing not just to meet redemptions but also to meet its current financing needs,” said James Nixon, chief European economist at Oxford Economics in London.

“There’s very little appetite in Europe to extend significant lending to Greece, and so that means that effectively there will be a demand for renewed austerity and further fiscal tightening.”

ECB leaves interest rates at record lows

FRANKFURT AM MAIN, GERMANY - JANUARY 21: The symbol of the Euro, the currency of the Eurozone, stands illuminated on January 21, 2015 in Frankfurt, Germany. The European Central Bank (ECB) is schedule to meet tomorrow and announce a large-scale bond buying program. The Euro has dropped sharply against the U.S. dollar in recent months. (Photo by Hannelore Foerster/Getty Images)
. Photograph: Hannelore Foerster/Getty Images

It’s official: The European Central Bank has voted to leave the key interest rates across the eurozone unchanged, at today’s meeting.

That means the benchmark rate remains at its lowest level ever, at 0.05%. Banks will still be charged 0.3% for overnight borrowing from the ECB, and hit with a negative interest rate of -0.2% for leaving cash in the ECB’s vaults.


Here’s the statement. Now we must await Mario Draghi’s press conference, in just under 45 minutes.

Heads-up, the ECB is about to announce the decisions on monetary policy taken at today’s meeting:

Slovakia: Greece is close to the abyss

Slovak finance minister Peter Kazimir has thrown cold water on hopes of a breakthrough in the Greek bailout talks next week.

Speaking after a cabinet meeting in Bratislava, Kazimir warned that Greece is heading towards ‘the abyss”.

Reuters has the details:

“Given the we have lost a lot of time, I am sceptical,” Kazimir told reporters after a Slovak cabinet meeting when asked if he believed the Riga meeting could bring a breakthrough.

“Greece is moving ever closer to the abyss.”

Kazimir is a member of the Eurogroup, which will meet next Friday in Riga. Greece hopes that this will unlock some aid (as we reported last night).

However, German finance ministry spokesman Friederike von Tiesenhausen has just warned reporters in Berlin that talks are deadlocked:

He also denied this morning’s rumour that Germany was preparing for Greece to default.

The damage suffered by the Greek economy in the last four years has been exposed by new fiscal data published by statistics body Elstat this morning.

The figures confirm that Greece’s GDP shrank from €207bn in 2011 to €170bn in 2014.

And that means its national debt swelled from 171% of GDP to 177% GDP last year, despite the billions of Greek debt being written down in 2012 and heavy spending cuts.

The report also shows that Greece posted a small primary surplus [ie, ignoring debt repayments] of 0.4% of GDP in 2014; much lower than the 2% estimated by the previous Greek government last October.

Greek fiscal report
Greek fiscal report Photograph: Elstat

The broader deficit was 3.5% of GDP, slightly above the 3% target set by Brussels.

Today’s antitrust charge against Google over its Shopping service could be just the start, says competition commissioner Margrethe Vestager.

She’s briefing reporters in Brussels now, explaining that other services are also under the Commission’s microscope as it tries to ensure consumers aren’t exploited.

Vestager is also denying that there’s an anti-American tinge to the probe.

Brussels hits Google with antitrust charge

After five years of work, the European Commission has just hit Google with a charge that it abuses its dominant position in the search industry.

The case relates to Google’s shopping service; the EC says the search giant stifles competition by favouring its own pages.

Brussels has also opened a separate investigation into Google’s Android operating system.

Competition chief Margrethe Vestager says:

“I have also launched a formal antitrust investigation of Google’s conduct concerning mobile operating systems, apps and services. Smartphones, tablets and similar devices play an increasing role in many people’s daily lives and I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company.”

Antitrust: Commission sends Statement of Objections to Google on comparison shopping service; opens separate formal investigation on Android

More to follow…

The Eurozone Rumour Mill is grinding hard this morning, with Germany’s Die Zeit newspaper claiming that Angela Merkel’s government is preparing a plan to keep Greece inside the euro area even if it defaults.

According to Die Zeit, Germany fears that Greece could soon miss a debt repayment, and could be prepared offer concessions if Athens can show its committed to reforms.

The German government is declining to comment…

The drop in short-term borrowing costs in the eurozone is truly remarkable, with only Greece missing out:

The Greek government has cleared one, rather small, hurdle this morning by auctioning over €800m of three-month debt.

This will cover the cost of repaying three-month bonds which mature soon. The debt was almost certainly bought by Greek banks, who will receive a yield of 2.7% [so Athens must pay much more to borrow until July than Berlin would pay to borrow until 2045]

Update: German’s ten-year government bonds just hit a new record high:


Remarkable scenes in the bond markets today – German 30-year sovereign debt is changing hands at an effective interest rate of just 0.57%.

German 10-year bunds are now yielding just 0.13%, meaning Berlin can borrow for basically nothing for the next decade. And eight-year bund yields turned negative yesterday, meaning they’re worth more than their face value.

We can thank Mario Draghi for this situation. Under the ECB’s quantitative easing programme; it can buy bonds at negative yields as long as they’re not below its own deposit rate of -0.2% (what it charges banks to leave funds in the ECB vaults). Traders are piling into eurozone bonds, confident that they can sell them to Frankfurt at a guaranteed profit.

German two-year bond yields are already below this mark, at -0.27%. Some economists suggest the ECB may be forced to cut the deposit rate even lower, to find enough bonds to meet its QE targets.

The Turkish lira isn’t a pretty sight this morning — it just hit a record low against the US dollar.

Investors are getting jittery about June’s general election, and the sustained pressure which president Recep Tayyip Erdoğan is putting on Turkey’s central bank.

Erdogan has pushed hard for interest rate cuts to stimulate the economy, despite Turkey’s inflation rate rising to 7.6% last month.

His wider goal, if his AK party secures a sizeable victory in the election, is to rewrite Turkey’s constitution to create a full-blown presidential system giving him a tighter grip on power [officially the presidency is a ceremonial role, but Erdogan, a former prime minister, has other ideas, putting him at odds with his successor].

Nour Al-Hammoury, chief market strategist at ADS Securities in Abu Dhabi, is also keen to hear about how Mario Draghi might end his stimulus programme:

No one is expecting the ECB to change their policy, but questions will be asked about the length of the QE programme if European economies continue to grow more quickly than expected.

Investors will want to know whether the ECB has revised its exit strategy.

Mario Draghi could send the euro soaring if he gives any suggestion that his QE programme will be curtailed earlier than planned.

Currently the ECB is committed to buying €60bn of government bonds, and other debt, per month until September 2016. But there is speculation that it could ‘taper’ the plan if it succeeds in driving inflation and growth.

Ilya Spivak of DailyFX explains:

“The Eurozone economy has shown some signs of life in recent months and the central bank chief will almost certainly have to field questions about the possibility that QE will be cut short if growth and inflation mend faster than expected.

Rhetoric opening the door to such a possibility may be interpreted as a relative shift away from the ultra-dovish extreme on the policy outlook spectrum, boosting the Euro.”

Euro versus dollar, 2005-2015
Euro versus dollar over the last decade. Photograph: Thomson Reuters

The euro is currently worth $1.0607, close to its lowest level in 13 years. A weak single currency should help push inflation up, so Draghi is likely to dampen talk of tapering.


The FTSE 100 has just nudged a new record high of 7102 points.

High street chain Next is leading the way, up 2.3% after JP Morgan raised its price target.

Tony Cross of Trustnet Direct says the Chinese slowdown is the big story in the City this morning:

The big point of interest is the swathe of economic data we saw released from Beijing overnight – headline GDP was as expected at 7%, but a number of other readings fell short of expectations. However, rather than this initiating another rally for local markets, there’s growing concern that Chinese stocks are in bubble territory and as a result many traders have remained sidelined.

The Shanghai stock index has surged by a remarkable 28% this year, as retail investors pile into shares despite signs the economy is weakening. This kind of exuberance doesn’t always ends well….

Chinese investors look at prices of shares and the Shanghai Composite Index at a stock brokerage house in Shanghai today.
Chinese investors look at prices of shares and the Shanghai Composite Index at a stock brokerage house in Shanghai today. Photograph: Johannes Eisele/AFP/Getty Images

Here’s your regular reminder of Greece’s looming debt repayments, via Mike Bird of Business Insider.


I was going to knock up a list of key points to watch out for from the ECB today…. but Bloomberg’s Alessandro Speciale has already nailed it.

Here’s his list of five key points:

  • Must we really start worrying about tapering? (might the ECB end its QE bond-buying programme earlier than planned, if it succeeds in stimulating the economy
  • Are the March forecasts too optimistic? (minutes of the Bank’s last meeting showed some policymakers doubt the forecast of inflation hitting 1.8% in 2017)
  • Will the ECB find enough assets to buy? (some analysts suspect the pool of eurozone bonds could run dry as the QE programme mops them up)
  • What is the latest on Greece? (will the ECB keep providing emergency funding if the April 24 deadline for a deal is missed?)
  • Is there progress on structural reforms? (Draghi will surely repeat his regular plea to eurozone politicians not to slacken off)

European markets calm after Chinese growth slows

A woman walks at the Bund in front of the financial district of Pudong in Shanghai, in this March 5, 2015 file photo. China’s economy grew 7.0 percent in the first quarter of 2015, as expected but still its slowest rate in six years, reinforcing bets that policymakers will take more steps to bolster growth. REUTERS/Aly Song/Files
Shanghai’s financial district.

European stock markets are inching higher in early trading, as we await the ECB’s press conference this afternoon.

The FTSE 100 is up 10 points, with investors digesting the news overnight that China’s economy grew at its slowest pace in six years.

Chinese GDP expanded by an annual rate of 7% in the January-March quarter, according to government data, broadly in line with forecasts (and official targets).

But the underlying picture is less healthy, as Reuters explains:

Activity indicators, which are regarded as a more accurate picture of the economy, were all weaker in March than expected. Factory output climbed 5.6% in March from a year ago, below forecasts for a 6.9% gain.

Most tellingly, China’s power usage declined 3.7% compared with the previous year, the biggest drop since late 2008, when China’s economy was hit by the global financial crisis.

And that could mean more stimulus measures from Beijing…..


Greek bond yields spike on default fears

There’s an early selloff in Greek bonds this morning, despite the government claiming it will reach a deal with creditors next week.

Traders have driven the yield (or interest rate) on 10-year Greek bonds over 12%, from 11.9% last night.

Overnight, Bloomberg quoted an “international official” who said the two sides are not moving closer to a deal:

The Greek government’s refusal to proceed with any privatizations, and its pledges to reverse labor-market reform, pension reform and budget savings can’t be accepted by the country’s creditors, the official said, asking not to be named as talks between the two sides are not public.

Brussels insiders have been consistently less optimistic than their Greek counterparts since this crisis began.

The Agenda: It’s ECB Wednesday

The European Central Bank’s headquarters in Frankfurt.
The European Central Bank’s headquarters in Frankfurt. Photograph: Boris Roessler/EPA

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

The European Central Bank is top of the agenda today, as it holds its latest monetary policy committee meeting.

No, don’t adjust your calendars – it’s not Thursday already; the ECB is gathering a day earlier than usual so Mario Draghi can jet off to Washington for the International Monetary Fund’s Spring Meeting.

We’re not expecting any changes to eurozone interest rates (they can hardly go much lower, and it would be madness to raise them), so the real action comes at 1.30pm BST (2.30pm Frankfurt time) at Draghi’s press conference.

The ECB chief will be quizzed about his new QE bond-buying programme, which is giving the eurozone a much needed boost, and the state of the wider economy.

Stan Shamu of IG suspects Draghi will sound upbeat:

The press conference deserves some attention given Mario Draghi could make some positive commentary around signs of improvement in the economy.

Draghi’s views on the Greek crisis will also be worth hearing (as ever), as we tick towards another crunch deadline.

The ECB is understood to have thrown Athens a small lifeline last night, by offering its banks another €800m in emergency funding. That takes the total liquidity available to €74bn; Reuters reckons there’s around €4bn left.

Greece continues to loom over the markets today, amid speculation that it won’t reach a deal with its creditors at the next eurogroup meeting on 24 April.

Last night, deputy foreign minister Euclid Tsakalotos rejected such talk, declaring:

“I am absolutely confident an agreement will be reached on 24 April. Deals are always done five or three or one minute before midnight, it’s not unusual that they should go right to the brink.”

Or occasionally, right over the brink…..

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

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The ECB kept the main refinancing rate at 0.15 percent today after last month’s cut. Rolling coverage of the ECB’s monthly press conference in Frankfurt. UK service sector posts strong growth. Eurozone registers its best quarter in three years…


Powered by article titled “European Central Bank press conference and US jobs report – live” was written by Graeme Wearden and Angela Monaghan, for on Thursday 3rd July 2014 13.38 UTC

And finally, Mario Draghi is asked about a research paper suggesting that the eurozone banking sector is too fat, and would benefit from consolidation. What’s his take?

It’s an interesting paper, very interesting, the ECB governor replies.

Banks are a product of history, he point out. The industry has developed over centuries influenced by all kinds of factors

A programme of mergers and acquisitions would be challenging, he points out, but not impossible.

Would it be inappropriate? One can’t really rule out the need for this.

And with that, he clears off — the ECB is now holding a press conference to explain the details of its TLTRO programme.

Draghi embarks on a long answer to a question on credit availability in the euro area.

The key points is that there’s been marginal improvement in credit growth, but it’s very timid.

Draghi does seem a little heated about market expectations today.

Asked whether there is less pressure on the ECB to take further unconventional measures, he warns that there is a risk of “continuing self-fulfilling expectations”.

Maybe we should move to a six-monthly reporting cycle, he jokes (I think).


Draghi doesn’t appear to appreciate being asked about operating in the shadow of the Federal Reserve, with the markets being more driven by the Fed than the ECB.


Will the ECB take a closer look at the legal risks being run by eurozone banks, following BNP Paribas’s $8.8bn fine for sanction-busting?

There is already provisioning for legal risk, Draghi replies, but he agrees that this is a most important issue, and the ECB isn’t blind to it.

The issue is to see whether these provisions are adequate, and also to look where banks carry out their activities.


Draghi gently chides the financial markets for their habit of reacting strongly to gobbets of information flying their way.

We often see market reaction that have no relation to fundamentals… we act when needed, he says.

No escape from World Cup analogies…

Draghi says the shift to a six-week meeting cycle is designed to allow the ECB to publish minutes in an orderly way without spooking the markets.

Not quite convinced by this one — the Bank of England manages it. But maybe I’m missing something…

The better than expected US non-farm payroll data showed job creation in June was widespread across sectors but professional and business services, retail, food and drink and health care saw the strongest growth.

The number of unemployed people fell by 325,000 to 9.5m in June, while the labour force participation rate was 62.8% for a third month.


The euro has fallen through the $1.36 point against the dollar, as traders take a view that Draghi is being quite dovish today.

Draghi reiterates the point that the ECB is still committed to potentially using unconventional measures if needed.

We don’t think our job is finished, not at all.

ECB expert Lorcan Roche Kelly points out that we may be wrong to talk about minutes — we might get Federal Reserve-style forecasts for future interest rates, growth and inflation.

Could interest rates be cut further, or do last month’s cuts mean we’ve hit rock bottom?

Draghi says he can’t rule out technical adjustment to rates, and justifies the negative interest rates impose on banks, saying they helped to avoid narrowing the rate corridor.

Claire Jones of the FT seeks more information on the ECB’s plan to release minutes — what will they include?

It’s too early to say, Draghi replies. The governing council need to decide what to put into the accounts, and what to leave out — such as whether to include voting details.

And what do you think about the warning from BIS last weekend that central banks risk creating a new crisis by leaving interest rates so low?

Draghi explains that policymakers discussed this over the weekend. We think that monetary policy is perfectly appropriate to delivering our mandate of price stability.

But we are sensitive to the presence of potential financial stability risks, he adds – saying the ECB has already taken various steps to prevent its measures fuelling excessive risk.

And he then makes an important point that the rules of central banking have changed since the crisis:

The first line of defence against financial stablity risks should be the macro-prudential tools.

I don’t think people would support raising interest rates now…that would be an interesting proposition, and not one I could support.

Yesterday, the Bank op England’s Andy Haldane said macro-prudential tools are a “new arm” for central banks to use.


Draghi’s giving a long answer about the ECB’s work on creating an ABS (asset-backed securities) market – in which loans could be bundled up and sold on.

He says it’s crucial to make sure that no exotic derivatives, such “as CDS-squared” securities, are used. This is meant to encourage proper lending.

But he also points out that if interest rates stay so low, then banks may be less interested in ABS’s as they can access cash very cheaply today.

Here’s our news story on the US jobs data:

US adds 288,000 jobs in June as unemployment rate drops to 6.1%

A six-weekly cycle means three or four fewer meetings per year for the ECB.

I’m sure Draghi will miss seeing the press pack as often, though


Next question — how will the ECB timetable its move to six-weekly meetings, and will it synchronise its meetings with the Federal Reserve?

We don’t plan to synchronise our meetings with anyone else, really, says Draghi — sounding a little dismissive of the suggestion that the mighty ECB might play second fiddle to anyone else.

ECB Q&A begins

Onto questions — can Draghi give more details about the TLTRO programme?

The ECB governor says that this offer of cheap loans to banks will be a big help in driving inflation back towards target.

Banks can bid for loans individually, or in groups. They’ll be able to borrow up to 7% of their total lending to the eurozone non-financial sector.

And they’ll be able to generate extra loans if they hit certain benchmarks (designed to encourage lending to the ‘real economy’)

Six TLTROs will take place at quarterly intervals.

Draghi concedes that it’s complicated, but also attractive to banks.

ECB to release minutes, and shift to six-week meetings cycle

Draghi’s pulled a rabbit out of the hat – The ECB is to move to a six-week cycle of meetings, rather than monthly.

So, eight meetings a year (like the Federal Reserve), rather than 12.

And it will start to publish the minutes of its meetings, from January 2015.

Draghi makes his usual plea to governments not to unravel progress in structural reforms.

On the economic picture, Draghi says that eurozone unemployment is still too high.

Risks to the economic outlook are still to the downside, including the threat from geopolitical developments.


The ECB will publish more details about its €400bn TLTRO programme (announced last month) after the press conference.

TLTRO offers cheap loans to commercial banks, as long as they use the cash to lend to small businesses.

Draghi: Governing council unanimous in its commitment to unconventional measures, if needed

Mario Draghi reiterates the ECB’s forward guidance, that eurozone interest rates will remain at present or lower levels for an extended period.

And he emphasises that “the governing council is also unanimous in its commitment to use unconventional instruments’ if necessary, to address the risk of too-prolonged period of low inflation.

So QE is still in the toolbox,

Mario Draghi’s appeared in Frankfurt, and started reading out his prepared statement.

No early fireworks. He says that the European economy maintained its moderate recovery in the second quarter

Inflation expectations remain firmly anchored, he adds.

The measures we announced last month have helped to further ease our monetary policy stance.


Breaking: US non-farm payrolls jump by 288,000

US non-farm payrolls rose by 288,000 in June, much sharper than expected. Economists polled by Reuters were expecting a 212,000 rise.

The figure for May was also revised up to 224,000 from an earlier estimate of 217,000.

Meanwhile the unemployment rate dropped to 6.1%, which is the lowest rate since September 2008, the same month that US investment bank Lehman Brothers collapsed. Economists had expected the jobless rate to remain unchanged at 6.3%.

Growth in average hourly earnings was unchanged in June at 0.2%.

So all in all a strong jobs report from the US Bureau of Labor Statistics.

Reaction to the numbers is coming in.

Angus Campbell, senior analyst at FxPro:

Many investors have been waiting for stronger evidence that the world’s largest economy is in good shape and today certainly does that. This will allow the Federal Reserve to continue in its tapering and even prepare the ground for raising rates next year.

Dennis de Jong, managing director at UFXMarkets:

This is the fifth successive month the reading has risen above 200,000 with job growth significantly rebounding this quarter following a poor start to the year.

The third quarter officially opened yesterday ahead of Independence Day celebrations. Positive news has been sparse of late and this is as good an excuse as any to enjoy this weekend’s fireworks.

Rob Carnell, chief economist, ING Global:

Without a clear step up in wages, and whilst the unemployment rate remains 6-something percent, we suspect the Fed will be loathe to change its formal stance with respect to the taper, or to the possibility of normalising rates.

The time is soon coming that the FOMC will have to change its tack with respect to its policy stance, and forward guidance. Today’s release takes us a little closer to that point, but as FOMC chair Yellen’s recent testimony shows, they are not there yet.


One minute to go…. our friends in the US are getting a little excited (reminder, today’s non-farm payroll has been brought forward a day because of the Fourth of July holidays tomorrow)

Non-farm payroll and ECB press conference – a pre-amble

OK, it’s about to get quite busy.

At 1.30pm BST sharp, the US Bureau of Labour Statistics will release data showing how many new jobs were created in the US in June.

Economists expect that the latest US non-farm payroll report probably increased by around 215,000. The unemployment rate, 6.3% last month, may fall further.

But the big interest could be on how much US workers’ wages rose last month. That will help show whether inflationary pressures are building.

At the same moment, Mario Draghi will start explaining this month’s interest rate decision (no change).

Journalists in Frankfurt will quiz the ECB chairman on a range of issues, including:

• is the central bank any closer to launching quantitative easing

• What progress has been made on developing a programme to allow loans to small firms to be bundled together and sold on (which could encourage banks to lend).

• What’s his view of the eurozone economy, given this month’s PMI surveys have suggested growth slowed in June?

Angela Monaghan and I will try to cover both stories between us…

European Central Bank leaves interest rates unchanged

File this one under ‘unsurprising’.

The European Central Bank has left interest rates unchanged across the eurozone.

This means the main refinancing rate stays at its record low of 0.15%.

Banks are still being hit with negative interest rates when they leave cash at the ECB — with the deposit facility rate pegged at -0.10%.

And the marginal lending rate (charged when banks borrow overnight from the ECB) remains at 0.4%.

Mario Draghi will discuss the decision at his press conference in Frankfurt at 1.30pm BST, or 2.30pm.

With 80 minutes to go until the US jobs data is released, predictions are flying around.

Bloomberg has been tracking the various guesstimates being posted on social media, and reports that the average prediction is that around 230,000 new jobs were created last month.

Of course, the number of jobs created isn’t the only thing that matters. The unemployment rate could trickle down from 6.3% to 6.2%.

But a lot of economists will be looking at the earnings data, for signs that US wages are creeping up. That would add to inflationary pressure in the US economy, a key factor in how the Federal Reserve normalises monetary policy.


Missed this earlier… but Markit’s Chris Williamson predicted that France’s economy shrank by 0.1% in the last quarter (see here for details of this morning’s service sector survey)

Irish economy bounces back

Ireland has taken another step away from the turmoil of its bailout, by posting solid growth for the first three months of the year.

Gross national product across Ireland rose by 0.5% in the January-March quarter, and was 3.4% higher than a year ago.

And GDP, which includes multinational companies based in Ireland, jumped by a whopping 2.7% in the quarter, and was 4.1% higher on an annual basis.

Last year’s growth figures have been revised higher too, to show that GDP rose by 0.2% during 2013, up from -0.3%.


Over in Slovenia, the outgoing prime minister is trying to slam the brakes on the country’s privatisation programme, at least temporarily.

Alenka Bratusek tweeted that she will propose pausing the process until a snap election has been held, on 13 July.

Which translates as:

“I will propose to the government today that we require SDH to stop all privatisation processes until a new government is in place.”

SDH is the government body handling the privatisation of around 15 state-controlled companies. These asset sales are part of Slovenia’s strategy to clean up its banking sector and avoid a bailout.

They are also unpopular with the Slovenian public, so Bratusek may be looking to drum up support ahead of the election. The vote was called after Bratusek lost the leadership of her party, amid unhappiness with her austerity programme.

The leader of the opposition SMC party, which is leading the polls, said yesterday that he opposes selling off telecom operator Telekom Slovenia and airport Aerodrom Ljubljana, although it’s not clear if it can be halted.

Even a temporary pause in the sell-off process is likely to push down the amount of money that Slovenia can raise, according to Primoz Cencelj, a fixed-income portfolio manager at investment firm KD Skladi (via Reuters).

Speaking of the Bank of England…deputy governor Sir Jon Cunliffe has warned that the housing market is the “biggest risk” to the UK economy.

Here’s our take:

Housing market threatening UK economy, Bank of England official says

Foreign exchange traders are also suggesting that the first UK interest rate rise could come in four months time

Jake Trask, corporate dealer at UKForex, explains:

An interesting note in the service sector report concerned the plummeting rate of unemployment: currently sitting at 6.6%, it expects the rate to possibly dip below 6% by the end of the year, adding to the argument for an interest rate rise in time for November’s Inflation Report.

With MPC members becoming more and more hawkish in tone recently, this is still a distinct possibility.”

The Bank of England is likely to raise interest rates before Christmas, reckons Rob Wood, chief UK economist at Berenberg.

Wood says that this morning’s service sector PMI report, which followed upbeat surveys from the UK’s builders and factory, shows the recovery is ‘increasingly balanced’.

And the reports of wage growth suggests that the spare capacity in the economy is being used up.

Wood says:

Booming employment strengthens the case for a November rate hike.

The PMIs signal that further very rapid falls in unemployment are in prospect, which will put pressure on the BoE to hike rates earlier than they may have been planning on a few months ago. We expect the first rate hike in November this year.

Services firms reported a record increase in payrolls in June, while manufacturers said jobs numbers increased the most in 39 months. The tightening labour market is feeding through to better wage growth according to the PMIs. Services firms reported stronger pay growth, while construction firms recorded rapid input cost inflation.

David Noble, CEO of the Chartered Institute of Purchasing & Supply, says today’s report shows there was a “hiring spree” in the UK service sector last month, as new business poured in:

As levels of activity surged higher, along with strong customer demand and favourable market conditions, job creation accelerated to a record survey high in June.

With optimism increasing and momentum continuing to build, there is no evidence to suggest that the speed in the recovery is about to slow down anytime soon.

But despite the jump in employment, firms also reported an increased backlog of work….and a rise in wages.

Noble explains:

Reflecting these shortages in staffing levels, wages increased during this month, pushing running costs up. Services companies have been, however, only able to pass on a limited proportion of these higher costs to clients.

Overall in June, the UK services sector, alongside strong performances from manufacturing and construction, has cemented expectations that the economic recovery can power ahead into the second half of the year.”

UK service sector hires staff at ‘unprecented’ pace

Britain’s service sector has recorded another month of strong growth, with firms taking on new staff at a record rate and pushing up wages.

Data firm Markit’s monthly survey of the sector showed that activity within Britain’s dominant sector continued to rise in June.

With new business hitting its highest level this year, firms hired more staff at an “unprecedented” rate. And there are encouraging signs that workers are managing to squeeze pay rises out of their bosses.

As Markit explains:

A by-product of the tightening service sector labour market was reports of increased wages.

The headline service sector PMI did fall a little, to 57.7 from 58.6 in May. But that still shows a healthy rise in activity (any reading over 50=growth).

And with new business volumes at a six month high, business confidence remained strong.

Chris Williamson, Chief Economist at Markit, says the UK economy continued to “boom” in June:

“Alongside an ongoing surge in construction and the largest quarterly rise in manufacturing output for 20 years, the services PMI confirms that the economy is firing on all cylinders. We expect the economy to grow by 0.8% again in the second quarter, taking GDP to a new all-time high.

“A renewed upturn in growth of new orders across all three sectors suggests that the economy should also pick up speed again as we move into the second half of the year.

Reaction to follow….


Ahha, here’s a handy chart showing how the Swedish central bank loosened monetary policy this morning, by cutting rates and predicting they will stay low for longer.

Eurozone posts best quarter in three years, says Markit

The eurozone’s private sector has just posted its best quarter of growth since the debt crisis began, according to data firm Markit.

But there are fears that the recovery may be slowing.

Markit’s monthly PMI surveys suggest that the euro area grew 0.4% in the last quarter, twice as fast as in Q1.

But the date for June is a little less bright — Markit’s Eurozone Composite Output Index fell to 52.8, down from 53.5 in May. That’s the lowest reading this year.

As Markit puts it:

The eurozone economy saw further solid growth of output in June, rounding off the best quarter of economic expansion in the region for three years.

The outlook for the second half of the year was mixed, however, as signs that the upturn in output was losing momentum were offset by stronger inflows of incoming new business.

But as flagged up earlier, France’s private sector lagged behind, with the sharpest contraction of output for four months in June.

Business activity and new orders contracted in both the French manufacturing and service sectors.

Chris Williamson, chief economist at Markit, is cautious, but reckons :

“At first glance, June’s PMI survey results make grim reading and raise worries that the euro area’s recovery is already fading. Output growth slowed for a second successive month, to the weakest since December. Growth in the region’s main engine, Germany, is fading, while France has entered another downturn.

“Dig a little deeper, however, and there are grounds for optimism. We should not lose sight of the fact that, even with the slowdown, the June data round off the best quarter for three years. We should expect economic growth to strengthen from the 0.2% rise seen in the first quarter to perhaps 0.4% in the second quarter.

“With new orders rising at the fastest rate for three years, the pace of economic growth should also pick up again as we move into the second half of the year.”

German service sector growth slows

Germany’s service sector has reported a slowdown in growth — with its PMI dipping to 54.6, from 56.0 in May.

That means the wider German private sector has expanded at its slowest rate in eight months; another sign that the eurozone recovery is slowing a little.

But the overall picture in Germany still looks decent. Service sector firms said they were benefitting from a jump in new orders, leading them to keep taking on more staff.

The rate of job creation eased only marginally from May‟s near three-year high and was sharp overall.

Markit. which compiled the report, predicts that the German economy grew by 0.7% in the last three months — a marginal slowdown on the 0.8% in the first quarter.


French service sector shrinks again

But there’s more gloom for France — activity in its service sector activity has fallen for the second month running.

Its service sector PMI slipped to a four-month low of 48.2, down from 49.1 in May, which means a sharper contraction (any reading below 50 shows a fall in activity)

French firms reported that outstanding business fell, leading firms to cut staff for the eighth month running.

This follows a weak manufacturing PMI report earlier this week. Put together, it indicates that the French private sector is struggling.

Duncan Head, the Markit economist who compiled the report comments:

“The French service sector disappointed during June, contracting for the second month in a row. Companies pointed to lacklustre demand as the primary cause of the sustained fall in new business. In response, firms shed staff for the eighth month in sequence.

To add to the concern, strong competitive pressures continued to weigh on companies’ pricing power while input cost inflation continued to grow, placing greater constraints on firms’ operating margins. As was the case last month, there appears to be limited evidence of an up- turn in the French economy after the poor GDP figures from earlier in the year.”


Italian service sector’s recovery gathers pace

Italy’s service sector has posted its strongest rise in activity since November 2010.

Its Services PMI jumped to 53.9, up from, 51.6, showing an acceleration in growth.

Firms reported a jump in incoming new work in the sector, the sharpest since July 2007.

And after some rough years, Italian firms are more upbeat about the future. The confidence measure hit its second-highest level in the past 37 months, down only slightly on March’s recent high.

Anecdotal evidence suggested that companies are hopeful of expansion in market activity leading to new contract wins.

Sweden announces shock 0.5% interest rate cut

The Swedish central bank has just surprised the markets by slashing interest rates by 0.5 percentage points, to just 0.25%.

The Riksbank made the shock move after concluding the inflationary pressures are even lower than it thought in April.

It also adjusted its forward guidance; declaring that it doesn’t expect to start raising rates until the end of 2015.

The move sent the Swedish crown sliding to its weakest level against the euro this year. Analysts had only expected a quarter-point rate cut.

The announcement also shows that the decision wasn’t unanimous. Two members of the rate-setting committee, including central bank chief Stefan Ingves himself,

The statement says:

Governor Stefan Ingves and First Deputy Governor Kerstin af Jochnick entered a reservation against the decision to cut the repo rate to 0.25 and against the repo-rate path in the Monetary Policy Report.

They advocated cutting the repo rate by 0.25 percentage points to 0.5 per cent and a repo-rate path in which the repo rate remains at 0.5 per cent until 2016 and is slowly raised thereafter.

Update: the Norwegian Krone was also hit:


Spanish service sector keeps growing

The first major European service sector report is out — and it shows that Spain’s service companies continued to grow in June, but at a slower pace.

The Spanish service sector PMI came in at 54.8 in June, down from 55.7 in May. That means the sector has grown for the last eight months, helping to pull the economy out of recession.

However, this is the weakest rise in activity in three months.

On the jobs front, companies increased their staffing levels during June. Employment rose for the third month running, although the rate of job creation remained only modest, Markit (which compiled the report) said.


Balfour Beatty shares dive 10% after warning on profits

Shares in Balfour Beatty have slumped 10% after a disappointing trading update this morning.

The engineering firm told investors that trading has worsened at its mechanical and electrical engineering division (already a sore spot) had worsened, meaning profits will be £35m below forecast.

Balfour said it had found new problems at its Engineering Services business, as it “strengthened management control and project reviews”. They include:

design changes, project delays, rework on projects and contractual disputes on a number of projects.

Balfour had tried to reassure investors that its overall profit forecast was unchanged, as it can generate profits by selling its stake in certain public-private partnerships.

But investors aren’t impressed, sending shares sliding 23p to 209p. That knocks around £160m off its market value, I reckon.


Greek citizens face the prospect of power cuts today, as workers at the country’s Public Power Corporation begin a series of rolling blackouts.

They’re protesting against the government’s plans to sell off PPC, as part of its bailout programme. A bill to partly privatise the company is being debated in parliament today.

The unions are planning to put different areas of Greece offline at different times, rather than pulling all the switches at once.

Union chief Giorgos Adamidis told the Kathimerini newspaper:

“There is no danger of a blackout,”

“We are going on strike at all of PPC’s production units and mines from Komotini to Arcadia but nobody said that all the plants would go off line at the same time. The action will be staggered because nobody wants the country to be plunged into darkness.”

Non-farm payroll: what’s expected

As usual, economists have a wide range of forecasts for how many new jobs were created across the US economy last month.

Predictions for today’s non-farm payroll range from a paltry 160,000 new jobs to a rip-roaring 290,000.

So the correct answer is “probably in there somewhere”, as Michael Hewson of CMC Markets puts it.

Capital Economics predict that non-farm payroll employment increased by a healthy 200,000 in June.

That would be similar to May’s increase of 217,000 and would probably be enough to push the unemployment rate down to 6.2%, from 6.3% in May

Initial jobless claims have remained close to a seven-year low and the employment balances of most of the activity surveys have improved.

This chart from Marketwatch shows how the NFP has been pretty steady so far this year:

Waiting for Mario Draghi and non-farm payroll

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

There’s a bumper crop of economic data heading down the slipway today.

The monthly US unemployment payroll report, always a big event for the markets, has been hauled forward from tomorrow because of the Fourth of July holiday.

Economists will be looking to see whether American firms kept hiring staff at a steady rate last month; a strong increase in the payroll will suggest the US economy recovered from its ‘deep freeze’ contraction last winter.

Conversely, a weak number will raise fears that the recovery isn’t as strong as hoped, and could cause ructions in the markets.

The Non-Farm is released at 1.30pm BST….

…which, slightly irksomely, is also the moment when Mario Draghi, ECB president, begins his monthly press conference.

We’re not expecting any changes in monetary policy today, given the stimulus measures taken a month ago, but you can’t rule out a few fireworks from “Super Mario”.

We also get fresh information on the health of the European economy, with the monthly PMI reports for the service sector. Analysts fear that France’s service sector will have suffered a fall in activity, while Germany, Spain and Italy should all have grown.

And in the corporate world, Poundland are reporting that profits have jumped by a quarter, while cinema chain Cineworld is blaming the World Cup for a dip in admissions in the last few weeks (more on those shortly).

I’ll be tracking the key points through the day… © Guardian News & Media Limited 2010

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European Central Bank chief Mario Draghi under pressure to peg back the strength of the euro to boost struggling economies. Draghi, who has come under intense pressure, said the strength of the euro had become another reason to consider extra stimulus…


Powered by article titled “ECB may inject more money into weaker eurozone nations” was written by Phillip Inman in Washington, for on Saturday 12th April 2014 22.58 UTC

The European Central Bank must consider pumping funds into the eurozone economies should the euro/dollar exchange increase again, the organisaton’s chief Mario Draghi said on Saturday.

Draghi, who has come under intense pressure to combat high unemployment and a weak banking sector by injecting extra money into the financial system, said the strength of the euro had become another reason to consider an extra stimulus.

He said the board of the central bank would consider a range of measures to offset the effects of the rising currency on inflation if it increased further.

The euro has appreciated by around 10% against the dollar since last summer, which has made imports cheaper and depressed inflation. Last month official figures showed inflation fell from 0.7% to 0.5%, well below the target of 2%.

Speaking at the International Monetary Fund’s spring conference, Draghi said inflation was depressed following a fall in commodity prices, and especially fuel compared to last year. The inflationary effects of VAT rises had also come to an end. Low demand, especially in countries hit hard by the financial crisis was another reason alongside the appreciating value of the euro.

Spain, Italy, and Greece are among the many countries that have called for a stimulus to head off deflation, which would lead to falling wages and a potential downward spiral of declining inflation and recession.

The ECB board has so far rejected calls to combat low inflation with measures such as quantitative easing (QE), which involves pumping money into the bank system to increase the supply of credit. The adoption of QE is widely credited with helping reflate the US and UK economies, which have grown strongly over the last year and and are already considering withdrawing stimulus measures.

Draghi is believed to want to move more quickly and his emphasis on the negative effects of a higher currency was widely seen as a way to increase pressure on his fellow board members to adopt QE. © Guardian News & Media Limited 2010

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The European Central Bank keeps the benchmark rate unchanged. Draghi: “There was a discussion about QE today, it wasn’t neglected”. ECB governing council “unanimous” in its commitment to using all unconventional instruments within its mandate…


Powered by article titled “European Central Bank “talked about QE” today – ECB press conference live” was written by Graeme Wearden, for on Thursday 3rd April 2014 13.49 UTC

Here’s exactly how Mario Draghi took a pop at IMF chief Christine Lagarde, when asked to comment on her warning yesterday that the ECB should take more action (see 2.23pm)

The IMF has been of recent extremely generous in its suggestions on what we should do or not do, and we are really thankful for that.

Frankly, I would like the IMF to be as generous as they have been towards us also with other monetary policy jurisdictions, like for example issuing statements just the day before am FOMC (U.S. Federal Reserve) meeting would take place.

Dow Jones index hits fresh intraday high

Over in New York, the Dow Jones industrial average has hit a new all-time record high at the start of Wall Street trading.

The Dow is up 28 points, or 0.2%, at 16601, in early trading.

That’s the end of the ECB press conference – reaction to follow!

Another question about an ECB QE programme — Draghi agrees that there are various options in which QE could be done, (partly due to the kind of assets it would buy)

That’s why it is is really important to design a proper ABS (asset-backed securities) programme, he says.

Europe needs a proper system in which bank loans can be packaged together into high-quality assets, and sold on, he says.

And there are clearly disagreements in the governing council over how a quantitative easing programme is designed, with Draghi referring to “different preferences”.

As he puts it, it is hard to design a programme to buy private assets which is large enough to do some good, without threatening financial stability.

A well-targeted LTRO* would increase lending to the real economy, but that would have to be well-designed, says Draghi.

A badly-designed one wouldn’t help at all.

* – Long-Term Refinancing Operation — in which the ECB would offer ultra-cheap loans to banks.

Former senior ECB policy-maker Francesco Papadia isn’t convinced by Draghi’s comments on the eurozone bank stress test programme:

Interesting discussion about the output gap in the euro area – Draghi says there are still clear signs of unutilised capacity, or slack, in the economy, dragging down demand and price stability.

It took a while, but the euro has now fallen against the US dollar – down almost half a cent at $1.372.

OUCH. Mario Draghi is asked to comment on Christine Lagarde’s comments yesterday about how the eurozone needs more unconventional monetary policy.

Looking most displeased, the ECB president says he “really values” the IMF’s contribution, and adds that he hopes they can be as generous in their advice to other central banks.

Perhaps they could offer some advice the day before the Federal Reserve meets, he suggests, with his sarcasm turned up to stroppy teenager levels.

Our bank stress tests have already triggered action, even though the process isn’t finished, says Draghi.

Mario Draghi is reiterating that quantitative easing has an ‘immediate effect’ in America, because the Fed can immediately drive up asset prices (by buying Treasury bills).

The ECB, though, must work through the bank lending channel, he repeats. That’s why any QE programme must be carefully designed.

Hedge fund manager Lex van Dam agrees that an ECB-style QE programme would probably focus on bank loans:

Mario Draghi’s opening statement is online here:

Introductory statement to the press conference

Gosh - Draghi then says that his biggest fear, a protracted period of stagnation, is now “to some extent” a reality.

The ECB president doesn’t sound too happy, pointing out that many of the eurozone’s biggest problems are “structural” (and thus beyond the power of the ECB to solve)

The governing council also spent some time discussing whether to impose negative deposit rates on eurozone banks (currently they receive nothing for leaving money with the ECB)

Mario Draghi is now explaining that any eurozone QE programme would need to be carefully designed.

The governing council will “reflect hard” on what such as programme would take, he says — a sign that there isn’t agreement over how it could be done?

He is also arguing that the eurozone is not, yet, in a situation where it needs to embark on QE.

The longer inflation remains low, Draghi explains, the higher the risks.

And he also says that it’s harder for the eurozone to launch QE than for, say, the Federal Reserve. Our institutional and financial set-up is different to the US, he adds.

That might be a hint that it would buy asset-backed securities, rather than sovereign debt, suggests ECB expert Lorcan Roche Kelly.

IMF warns slow economic recovery will keep interest rates at historic lows

In a busy day for economic news, the IMF has warned that the sluggish global recovery will leave interest rates in rich countries at historic lows for several years.
In its World Economic Outlook, the Washington-based organisation said it expects rates to rise gently over the next couple of years in response to higher GDP growth, but that they will be pegged by a stuttering performance by Europe and slower growth in China.
The IMF blamed the Asian savings glut alongside a longstanding demand for safe haven assets and a lack of investment opportunities, especially in the developed world, for the persistence of low global rates.
It said that while the 2008 financial crisis had exacerbated the problem, low interest rates stretched back 30 years and many of the fundamental drivers will remain in place when the crisis is a distant memory (whenever that might be)

The story in full.

In about half an hour’s time the OECD will be releasing its latest economic surveys on the EU and Euro Area at a press conference in Brussels with Secretary-General Angel Gurria.

We’ll bring you that story once it’s ready.


Here’s the key quote from Mario Draghi, explaining how the governing council discussed the possibility of quantitative easing.

“All instruments that fall within the mandate, including QE, are intended to be part of this statement. There was, in fact, during the discussion we had today, there was a discussion of QE.”

And he also declared that all members of the governing council were “unanimous in its commitment to using all unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation.”

In short: QE is ON THE TABLE, although its not clear how close the ECB is to actually taking the plunge.


Does the reference to unanimity in today’s statement imply that the ECB was not unanimous last month?

Draghi replies that the difference this month is that QE was considered — it wasn’t talked about in March’s meeting.

What would it take for you to act, if a 0.5% inflation rate isn’t enough, asks Brian Blackstone of the WSJ.

Draghi pins some of the blame for weak inflation on Easter coming particularly late this year. Easter usually pushes prices higher (as there is more demand for flights etc). So inflation should rise in April, he suggests.

Draghi is now explaining that today’s “rich discussion” also covered the possibility of lowering interest rates.

But the revelation that QE was discussed has caused a real stir:

Draghi: We talked about QE today

Onto questions, and the FT’s Claire Jones asks for clarity about the unconventional measures which the governing council is “unanimous” in committing to. Does it include a quantitative easing programme?

Draghi says that the statement says that all instruments that fall within the mandate, including QE, are on the table.

There was a discussion of QE today, he adds. It was not neglected, in what was a “rich discussion”, says Draghi.

That feels like an important development — given the ongoing uncertainty over whether the ECB could launch a bond-buying programme without violating its mandate.


The statement ends with Draghi’s traditional call to eurozone government to continue their economic reforms. He also urges them to liberalise their labour markets to boost employment.

There has been significant progress in improving bank funding conditions since Summer 2012, Draghi continues, but more needs to be done.

Draghi also pledges to closely monitor the repercussions from geopolitical risks & exchange rate risks.

The risks to economic growth are on the downside, Draghi says.

But the governing council sees the risks to inflation and deflation as limited, and broadly balanced.

If Draghi is trying to talk the euro down, he’ll have to talk try harder — it is actually a little higher now at $1.378.

Draghi adds that the ECB’s governing council was “unanimous” in its commitment to using all unconventional instruments within its mandate to cope with the risk of low inflation becoming entrenched.

Draghi: ECB does not exclude further monetary policy easing

Draghi is taking a dovish line, saying that the ECB will consider all available instruments at its disposal.

We are resolute in our determination to maintain a high degree of accommodative monetary policy, he says.

We do not exclude further monetary policy easing, he adds, and “firmly reiterates” the ECB’s forward guidance that interest rates will remain at their current levels, or lower, for an extended period.


Draghi begins by explaining that today’s meeting was attended by Olli Rehn.

The moderate recovery in the eurozone is continuing, Draghi says, but the ECB also sees a prolonged period of low inflation before gradually rising.


The press conference is underway, after the cameramen have taken a flurry of photos of Draghi and his vice-president, Vitor Constancio.

Draghi will start by reading a prepared statement (which will then be published online), and then take questions from the Frankfurt press pack.

Nearly time for Mario Draghi’s press conference.

It will be streamed live here.

I’ll cover the key points, and reaction from the City and social media (often the best element of an ECB presser)

If an inflation rate of just 0.5% doesn’t prompt the ECB into action, what will, asks the WSJ’s Paul Hannon:

Here’s Associated Press’s take on the ECB’s decision not to cut interest rates today, by Jurgen Baetz.


ECB leaves rates on hold despite inflation worries

The European Central Bank left its main interest rate unchanged Thursday despite evidence that the economy of the 18-country eurozone is weak, with inflation continuing to fall and unemployment stuck near a record high.

The ECB’s decision to leave the rate at a record-low 0.25 percent is certain to prompt questions about whether it might soon resort to less conventional measures to boost the economy, such as a new round of cheap loans to banks or large-scale purchases of financial assets, as the U.S. Federal Reserve has done.

President Mario Draghi is set to discuss the ECB governing council’s policy decision later Thursday, and investors will be watching for any hints of future action.

Data released on Monday showed the annual inflation rate across the eurozone dropped to 0.5 percent in March down from 0.7 percent in February. The decline the third in as many months underlined concerns that consumer prices could start to fall outright, starting a so-called deflation.

That risks creating a situation in which consumers and businesses put off purchases in hopes of better deals down the line and companies cut prices to entice buyers. Such a downward spiral chokes off economic growth and can be difficult to get out of Japan was stuck in deflation for two decades.

The ECB has said the eurozone is experiencing a “protracted period of low inflation” but dismisses fears of an outright deflation.

Unemployment, meanwhile, remains stuck near a record-high of around 12 percent following years of economic and financial upheaval. In the countries hardest-hit by the crisis like Greece and Spain, more than one in four people are still jobless.

Besides having a social cost, high unemployment also weighs on consumption and the wider economy. The EU predicts the eurozone will grow 1.1 percent this year. While that would be the bloc’s best performance since 2011, it would still pale in comparison to the U.S. economy, which is expected to grow around 3 percent.

This week’s new dip in inflation came at a time when the euro has been buoyant in foreign exchange markets. But a higher currency can push inflation further down in two ways: It can make imports cheaper and weigh on economic activity by making exports more expensive on international markets.

The prospect of a looming deflation, meanwhile, is especially worrisome for those eurozone nations already unable to support growth because of their overly high debt burden. That’s because when prices fall, it becomes harder to service debts, which are fixed in nominal terms.

Among the possibilities the ECB might be considering in the near future, analysts say, might be large-scale purchases of financial assets such as government bonds with newly created money, as the U.S. Federal Reserve has done.

That would increase the amount of money in the economy and aim to lower market interest rates and stoke inflation. But such a move faces legal, political and technical obstacles.

Besides offering a new round of cheap loans to banks, the ECB could also trim its deposit rate below zero, effectively penalizing banks for holding money at the ECB instead of lending it out in the economy.


Anyone for Draghi bingo?

Bloomberg’s Jonathan Ferro reckons Mario Draghi might adopt a new dovish plumage at today’s press conference, to talk the euro down a bit.

There’s hardly any reaction on the FX markets, where the euro inched up just 0.02% to $1.377, from $1.3765 beforehand.

That shows the market was pricing in a very small chance of rates being cut.

So, despite inflation falling to just 0.5% in January, the European Central Bank’s governing council has resisted launching fresh measures to stimulate growth and drive prices up.

It has voted to:

  • leave the headline borrowing rate unchanged at 0.25%;
  • leave the marginal lending facility (charged on banks who borrow from the ECB) at 0.75%;
  • leave the deposit facility (paid to banks who deposit with the ECB) unchanged at 0.0%

Now it’s up to Mario Draghi to justify this inaction, at a press conference in 40 minutes.

European Central Bank leaves interest rates unchanged.

Breaking: The European Central Bank has voted to leave its main interest rates unchanged at their current record lows.

The euro has been stable today, currently trading at $1.3765 against the US dollar.

ECB watchers are doing their best to build the tension up…. Just 2 minutes now….

Just five minutes until the European Central Bank’s decision on monetary policy is announced….

Speaking of Spain, the Madrid Treasury held a successful debt auction this morning — raising almost €5.6bn at lower yields (interest rates). This included €1.6bn of 10-year debt, at a yields of just 3.29%.

Ishaq Siddiqi of ETX Capital reckons “the worst of the crisis” is over in Spain:

Moreover, it’s a fine example of a ‘peripheral’ country implementing structural reforms, initiatives and austerity to stimulate growth better than Italy, Greece and Portugal.

Furthermore, Spain just sold a total of EUR5.58b of bonds in an auction which we well-bid with ample demand, confirming the upbeat picture surrounding investor appetite for Spanish debt – it’s hard not to be inspired by Spain’s progress.

Spain’s stock market is outpacing the rest of Europe.

The IBEX has gained 0.8% today, as Madrid traders welcome the news this morning that the Spanish service sector grew at a faster pace last month (see this morning’s blogpost for the details)

Just under forty-five minutes until the European Central Bank announces the result of today’s governing council meeting.

Economists still don’t expect any new measures from the ECB, despite inflation hitting just 0.5% last month.

Peter Dixon at Commerzbank explains that the Bank will hope that prices will now pick up this month:

“The ECB is primarily concerned about what is happening with inflation, and yes we have too little for the ECB’s comfort.

“But I think they want to see if the most recent set of numbers marks a trough before acting further.”

The Bank of England has also released correspondence with prisoners who were incarcerated in the 18th and 19th century for the crime of forging banknotes.

It includes details of how the Bank actually provided some funds to convicts in places like Newgate Gaol, particularly women and their children, who could be transported rather than executed if they agreed to a plea bargain.

For example:

Johanna McCarthy writes on 8 April 1818 from the Maria ship at Deptford that ‘I am quite destitute of money and friends and have been confined in Newgate Bristol 13 months’.

The Committee for Lawsuits records that McCarthy and two other female convicts who were ‘on the point of sailing to Botany Bay’ be paid £5 each by the Solicitor in response to their pleas for relief.

The full details are here, in the BoE archive.


This is rather neat – the Bank of England has released a swathe of new documents from its archive.

It includes a photo gallery on Flickr, of photos going back over a century. Worth a look.


Willem Buiter, Citigroup’s chief economist, reckons the European Central Bank won’t take action today, but Mario Draghi may express concern over the strength of the euro:

Europe’s stock markets are treading water ahead of the ECB decision and press conference.

The news overnight of a new mini-stimulus package in China has not sparked a rally (Beijing is putting more money into railway construction, and offering new tax breaks to small firms)

  • FTSE 100: down 5 points at 6653, -0.1%
  • German DAX: down 4 points at 9618, -0.05%
  • French CAC: down 3 points at 4427, – 0.1%

Traders are also waiting for tomorrow’s US jobs data.

Will Hedden of IG says that market sentiment is “difficult to gauge, much like the London skyline through the morning’s smog”:

Macro event positioning, which is a clever way of saying doing nothing ahead of the European Central Bank meeting and non-farms, is the order of the day.

Scribes at UBS have boosted Tullow Oil (4%) to the top of the index this morning by upgrading them to buy, and the market likes B&Q owner Kingfisher’s (+2%) spot of cross-channel shopping as they pick up a controlling stake in French DIY chain Mr Bricolage.

We’ve also seen an IPO in London this morning, with online technology service Just Eat floating:

Just Eat shares rise on stock market debut

Retail sales across the eurozone rose 0.4% last month, according to Eurostat, which may calm some fears over the state of Europe’s economy.

The stats body reports that the retail sales in the non-food sector rose 0.8%, and there was a 0.3% increase in “Food, drinks and tobacco”. Automotive fuel sales fell by 0.8%.

The figures strip out inflation (or deflation, in some countries), and may show that consumers are feeling a little more confident. However, it’s hardly a strong reading.

IHS’s Howard Archer comments:

February’s further growth in retail sales boosts hopes that consumers are perking up and can help Eurozone growth to firm.

It may also take some pressure off the ECB to take fresh action today — rising retail sales do not suggest that consumers expect deflation to take hold (as they’d probably hold back purchases until prices have dropped)

(well, February, but Simon’s point stands)

On an annual basis, the retail sales index increased by 0.8% in the euro area and by 1.5% in the wider EU.

Here’s some detail from eurostat:

The highest [monthly] increases in total retail trade were registered in Malta (+1.9%), Denmark, Romania and the United Kingdom (all +1.4%) and Germany (+1.3%), and the largest decreases in Estonia (-3.4%), Poland (-1.5%), Slovenia and Finland (both -1.4%).


Andrew Tyrie also asked George Osborne about the Financial Services Authority, and the botched way it pre-briefed its inquiry into the life insurance industry last week.

The chancellor said that we must expect the FCA to abide to the same high standards of regulation as the rest of the City.

Tyrie (who is deeply worried about the incident) hammered home the point that the inquiry into the UK financial watchdog must be fully independent. Why has the Treasury said it wants to ‘discuss’ the conclusions as they come out?

Osborne says the inquiry will be independent, but the Treasury wants to ensure markets are working properly. More with Andy Sparrow’s liveblog from Parliament.


Heads-up: Chancellor George Osborne is appearing before the Treasury committee to discuss last month’s Budget.

Here’s the livefeed.

It began with chairman Andrew Tyrie asking whether this year’s Budget had been better received this year, because it wasn’t leaked this time.

Osborne replied that he wasn’t responsible for leaks in previous years (mentioning the Evening Standard’s accidental tweeting of its front page too early in 2013).

And after last year’s experience, he ended the practice of pre-releasing of budget information to the media.

Andrew Sparrow is live-blogging it here:


And here’s the chart showing how new orders into Britain’s service sector dropped last month:

UK service sector growth hits nine-month low

Just in – growth in the UK service sector has fallen to its lowest rate since last June, but is still fairly robust.

Markit’s UK Services PMI, based on data from thousands of firms across the country, dropped to 57.6, from 58.2 in February.

Any reading above 50 shows growth, and this graph shows how activity spiked last summer as Britain’s recovery got under way.

Companies reported a slowdown in the growth in new order, and also hired fewer new employees.

But they remain confident about future prospects.

David Noble, CEO at the Chartered Institute of Purchasing & Supply, reckons the UK services sector – a dominant part of the economy – is stabilising:

“As a whole, we may be seeing a slight downward trend at the start of this year, but we are hopeful that this healthy outlook is where we are now heading.”

The full report is here.

The pound has dropped a little, losing 0.17 cents against the US dollar to $1.661.

Chris Williamson, chief economist at Markit, said this week’s data shows the UK economy continued to grow steadily last month:

“While March saw growth slow across the services, manufacturing and construction sectors, all three continue to expand at very strong rates, meaning the economy looks to have grown by at least 0.7% again in the first quarter.

Eurozone firms keep slashing prices, as growth slows in March

Growth across the eurozone private sector slowed a little in March and firms kept slashing prices in a bid to drive demand – adding to already weak inflation in the euro area.

Markit’s ‘Composite PMI’, based on this morning’s service sector data and manufacturing reports early this week, fell to 53.1 from 53.3 a month earlier.

Markit reported that Ireland and France’s private sectors both posted their best monthly growth in several years, while Germany and Italy both saw weaker growth:

Nations ranked by all-sector output growth

Ireland: 59.0 – 85-month high

Germany: 54.3 – five-month low

Spain: 54.2 – two-month high

France: 51.8 – thirty-one month high

Italy: 51.1 – three-month low

Markit said the report was consistent with eurozone GDP rising by 0.5% in the first three months of 2014, which would be an improvement on the previous quarter’s 0.3% expansion.

The good news was that new orders rose in March, meaning a slight increase in the backlog of work.

The bad news is that firms kept cutting the prices they charge — meaning output charges have declined for the last two years. Input cost inflation fell to an eight-month low, which is another nudge to the ECB to take fresh action at today’s policy meeting.

Chris Williamson, chief economist at Markit, said the ECB should be worried:

Prices charged by manufacturers fell for the first time in seven months and charges levied for services were cut at a stronger rate, having fallen continually over the past 28 months.

“The weakening price indices will stoke fears that deflationary forces are intensifying amid weak demand and near-record unemployment. But the survey responses also show that companies are pricing more aggressively, having become leaner and more productive – which bodes well for competitiveness.”


That German service sector PMI reading is someway below expectations….

But growth in Germany’s services sector slowed in March, with its Services PMI falling to 53.0 from 56.4 in February. That’s still comfortably in ‘expansion’ territory (>50).

France’s services sector has reported its strongest growth in over two years, with its Services PMI jumping to 51.5, from 47.2 in February.

Bad news from Italy - activity in its service sector shrank last month, as firms failed to maintain the momentum recorded in February.

The Italian service sector PMI fell to 49.5 in March, from 52.9 – which indicates a small fall in activity (50 is the cut-off point between growth and contraction).

Data firm Markit found that new business growth slowed and firms kept cutting their workforce. Prices also kept falling, but at a lower rate than last month. On the upside, firms are more confidence about future prospects.

Economist Phil Smith said:

Unlike in manufacturing, where a recovery is now in full flow, the service sector looks to be stuck in a low gear with subdued domestic demand still weighing on activity.

Confidence among consumers and businesses alike is finally being restored, however, a factor which may help stimulate growth going forward.

Spain’s service sector grows again, but jobs keep being cut

Spain’s service sector has grown for the fifth month in a row, but firms are cutting jobs, according to Markit’s monthly survey of purchasing managers across the country.

The Spanish Services PMI rose to 54.0 in March, up from 53.7, as the recovery in Spain’s services sector continues.

Markit reports a “slight acceleration” in the growth of activity and new orders. Encouragingly, business sentiment hit its highest level in almost seven years, as firms try to put the pain of Spain’s recent recession behind it.

However, firms are cutting prices to drive demand — in another warning signal for the ECB. Markit said:

A further solid reduction in prices charged was recorded as companies reacted to strong competition and pressure from clients for discounts.

And employment fell for the second month running in March, after rising in January. More here.

Bank of England governor Mark Carney has refused to rule out raising interest rates ahead of next May’s general election, in a trip to Durham.

Carney told The Northern Echo that hiking borrowing costs from their current record lows would show that the UK economy had improved.

Asked if he would rule out a rise before next Spring’s election, he said: “No, absolutely not.

He conceded that borrowers wouldn’t applaud an interest rate rise:

“When you raise interest rates it is a welcome sign. I share my colleague Charlie Bean’s view that it is confirmation the economy is recovering after some very difficult years.

“I’m not sure we will get a lot of cards or letters to thank us, but we will do it when it needs to happen.

Here’s our take: Mark Carney won’t rule out pre-election interest rate rise

There’s a broad consensus that the ECB is unlikely to take action today, even though inflation is at a four-year low.

Reuters reports:

Policymakers have been willing in recent weeks to publicly broach cutting deposit rates below zero – effectively charging banks to hold cash with the ECB – or embarking on bond purchases as the United States, Japan and Britain have.

A straightforward cut in the ECB’s main refinancing rate to 0.1 percent from 0.25 percent – or more complex changes to existing market programmes – are other possibilities.

But there has been little sense that a majority of officials favours imminent use of any of those tools even though inflation has been below 1 percent for six months. Instead most may prefer to keep such policies on standby in case of an external economic shock.

“Policy rhetoric should lean in the direction of dovish. But it is unlikely that current economic and market conditions meet the watermark for ECB action,” said Lena Komileva, managing director of G+ Economics.

Matt Boesler of Business Insider agrees:

Many believe persistent low inflation will force the ECB to ease further this year, but only three of the 57 economists polled by Bloomberg expect such an announcement to come out of Thursday’s meeting.

And do check out Ambrose Evans-Pritchard in the Telegraph. He warns that the ECB’s “spectacular idiocy” in not fighting falling inflation is driving Italy, France and Spain into perilous debt traps, undermining the progress made in lowering their deficits.

Here’s a flavour:

Laurence Boone and Ruben Segura-Cayuela, from Bank of America, say their “inflation surprise” index keeps ratcheting lower as one shock after another hits the eurozone, while their gauge of “deflation vulnerability” has been flashing red for most EMU countries.

The effect is deeply corrosive even if the region never crosses the line into technical deflation. “Lowflation” near 0.5pc can play havoc with debt trajectories if it goes on for long, ultimately throwing Europe back into a debt crisis. “The biggest threat to public debt dynamics is weaker-than-expected inflation. Merely lower than expected inflation, not even deflation, would lead to a significant deterioration in countries’ public finances,” they said.

The bank said lingering “lowflation” would cause debt ratios to surge by 2018, rising 10 percentage points in France to 105pc of GDP, 15 points in Italy to 148pc and 24 points to 118pc in Spain.


Also coming up today….

ECB meets today under shadow of deflation

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

The European Central Bank’s governing council holds its monthly meeting today, as the spectre of deflation continues to loom over the euro area.

With inflation across the euro area dropping to just 0.5% last month, and prices actually falling in several countries, the governing council is under renewed pressure to act.

They also have the stern words of Christine Lagarde ringing in their ears. Yesterday, the IMF chief warned that the risk of “a prolonged period of low inflation, particularly in the eurozone” was a key threat to global stability.

Lagarde insisted that:

More monetary easing, including through unconventional measures, is needed in the euro area to raise the prospects of achieving the ECB’s price stability objective.

The ECB does have several tools at its disposal (as president Mario Draghi often points out):

  • It could cut its headline interest rates again (which would mean banks were charged negative rates for leaving money with the ECB)
  • It could stop ‘sterilising’ bond purchases made during the height of the eurozone crisis, which would inject more liquidity into the system
  • It could develop a new programme to drive lending to small eurozone firms
  • And, potentially, it could launch a QE-style stimulus programme – last week, the head of the Bundesbank appeared to soften Germany’s opposition to this.

But despite fears that eurozone is sliding into a Japan-style lost decade, few analysts believe the ECB will take action today. As Nordea Markets analyst Aurelija Augulyte tweets:

Why not? Well, the ECB’s own forecasts predict that inflation will return close to target by 2016. Falling energy prices are one main factor pushing prices down (although not the only one). And it is keen to see the results of this autumn’s bank stress tests, which will weed out failing institutions.

Draghi will also get the chance to talk down the euro when he faces the press pack after the decision is announced. The single currency is uncomfortably high at $1.376 to the US dollar – and could push higher if traders conclude that the ECB will keep sitting on its hands.

Michael Hewson of CMC Markets agrees that little action is expected today:

The consensus still remains for rates to remain on hold, but it is slowly shifting to some form of action with some predicting a cut of 0.15% in the headline rate and a negative deposit rate. This still seems unlikely at this stage, and even if implemented would have little lasting effect after the surprise factor had been digested.

On the subject of a negative deposit rate, the implementation of such a measure could well do far more harm than good, particularly with so many European banks already struggling for profitability and looking to build up their balance sheets in preparation for the upcoming “Asset Quality Review” so that they can pass the ECB mandated stress tests due later this year.

The ECB decision is announced at 12.45pm BST (or 1.45pm CET), with a press conference 45 minutes later.

I’ll be tracking all the main action through the day…. © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Both, the European Central Bank and the Bank of England decide to stay the course leaving their benchmark rates unchanged for another month. ECB raises growth projections for the euro-area. Mario Draghi is being quizzed by journalists…


Powered by article titled “European Central Bank press conference after leaving interest rates unchanged – business live” was written by Graeme Wearden, for on Thursday 6th March 2014 14.00 UTC

A Japanese journalist (apologies, I missed her name) gets the second question — asking why the ECB didn’t end the sterilisation of its bond-buying programme (to boost liquidity); and seeking details of why Draghi thinks the eurozone can avoid a Japanese-style deflation trap.

Draghi replies that ending such sterilisation is certainly a tool at the ECB’s disposal, but the governing council did not see the “unwarranted tightening” that would justify it.

Also, it would have a limited impact, lasting “less than a year” (analysts say it would put €175bn of new liquidity into the system).

And on Japan - Draghi says that inflation expectations remain well-anchored in the eurozone, unlike in Japan 20 years ago.

He says people expect the ECB to take action when needed (joking that reporters turn up in Frankfurt each month expecting policy changes, and are disappointed when it doesn’t).

And he pins some of the blame for Europe’s low inflation on global factors such as falling energy prices, and the fact that prices are falling in the ‘programme’ countries where tough austerity is being imposed.

Q&A begins:

Onto questions….

Brian Blackstone of the Wall Street Journal takes the microphone…

…and asks Draghi why the ECB has done nothing today, after saying a month ago that today’s economic forecasts would give the central bank the information it needed to take action:

Draghi replies that the new forecasts reaffirm the ECB’s view that a moderate recovery is underway.

He points to recent data showing a recovery in the service sector – important, as it is the major source of job creation.

The gap between consumer confidence between the periphery and the core of the eurozone has narrowed, he says.

And the jobless rate remained flat (with a “striking” fall in Portugal).

We asked ourselves whether the contingencies that I hinted at last month, such as an unwarranted tightening of financial conditions, or a worsening of the inflation outlook, had happened – and they had not, Draghi explains.

Draghi ends his statement with the usual warning that governments must continue decisive economic reforms, making it ‘easier to do business, and boost employment’ in the region.


ECB raises growth forecasts, but sees low inflation for a while

Draghi is giving some details about the ECB’s new economic forecasts.

The central bank now expects slightly faster growth this year, picking up pace in 2015 and 2016.

The inflation forecasts are interesting too — the ECB does not see it hitting the target of “close to, but below 2%” in 2016:

On the jobs crisis, Draghi says that unemployment in the euro area is “stabilising” but remains high (it was flat at 12% in January).

The euro is rising, up half a cent against the US dollar to €1.37, as Draghi fails to announce any new measures – not even an end to sterilising its bond-buying programme (yet, anyway)

Draghi also points to spare capacity in the euro area:

Draghi reiterates the ECB’s ‘forward guidance’ – that interest rates will remain at their present levels, or lower for an extended period.

Inflation expectations in the medium and long term, continue to be firmly anchored. he says.

Draghi adds that the ECB remains determined to maintain the high degree of accommodative monetary policy for as long as needed, and will take further actions as it sees fit.

And we’re off.

Mario Draghi confirms that the ECB has left the key interest rates unchanged, with the latest data showing that “the moderate economic recovery in the eurozone is proceeding.”

But the ECB’s latest economic forecasts confirm that the eurozone faces a prolonged period of low inflation.

The press pack are assembled at the ECB… now we just need Mario Draghi.


Credit Agricole’s Frederik Ducrozet says there are five things to watch out from Mario Draghi – including the ECB’s new economic forecasts, and whether today’s decisions were unanimous:

RBS economist Richard Barwell reckons Mario Draghi will tell reporters this afternoon that the eurozone economy is healing, and that the ECB certainly would act if needed.

He told Reuters:

”There will be two messages:

firstly, things are eventually going to get better and therefore we don’t need to act today. Secondly, if things get any worse in the near future, we absolutely will act.”

Mario Draghi’s press conference, which begins at 1.30pm GMT (2.30 CET), will give the ECB chief the opportunity to announce any new measures — or perhaps hint at future plans.

As explained in our opening post, the European Central Bank could boost liquidity in the euro area, by ending a process which ‘soaks up’ money spent on eurozone bonds at the height of the crisis (Reuters has a good explainer here).

European Central Bank leaves interest rates unchanged

HERE WE GO. The European Central Bank has voted to leave its main interest rate unchanged, at 0.25%. There’s a brief statement here.

The deposit facility, which banks receive on overnight deposits with the Eurosystem, remains at 0.0%.

The marginal lending facility, which banks pay to borrow overnight, remains at 0.75%.

So, no reaction from the ECB to the low inflation rate in the eurozone (just 0.8%), or the weak growth rates in many members of the currency region.

Next up, Mario Draghi’s press conference in just under 45 minutes time, and the ECB’s new economic forecasts.

Nearly time for the ECB’s decision. A majority of City economists reckon it will also leave interest rates unchanged, but a few reckon we could see a cut….

BCC: No rate rises yet, please

David Kern, chief economist at the British Chambers of Commerce (BCC), hopes the Bank of England will continues to leave interest rates alone for some time:

Kern argues the “continued clamour for early rate rises” is unwelcome and undermines the benefits of the Bank’s forward guidance (that borrowing costs won’t rise until the UK economy is stronger):

Even though we are getting closer to pre-recession GDP levels, this does not mean that the economy is back to normal.

“At a time when inflation is below target and is expected to remain stable, the recent strength of sterling will help to dampen any new inflationary pressures, and should reinforce the case against interest rate increases. Maintaining low rates underpins economic stability, enabling businesses to proceed with much needed investment – in the interests of growth and jobs.”

Today’s decision means UK interest rates have been pegged at just 0.5% for every month since March 2009.

Bank of England decision

NO CHANGE. The Bank of England has voted to leave UK interest rates unchanged at their record low of 0.5%, and also left its quantitative easing programme untouched at £375bn.

Five minutes until the Bank of England’s decision on UK interest rates. There’s little tension in the City, though, given the Bank’s ‘forward guidance’ that rates won’t be lifted until the economy is stronger.

Sony Kapoor, of the ReDefine thinktank, isn’t optimistic that the ECB will announce new measures today:

A couple of photos from today’s clashes (see also 10.59am) between anti-austerity demonstrators and riot police in Athens, after protests were banned during the German president’s visit.

The demonstration was organised by the communist PAME union.

AP reports that riot police used tear gas and pepper spray after “several dozen demonstrators” tried to break through a police cordon preventing them marching to the Finance Ministry.

German factory orders up 1.2%, but dangers loom

Germany’s manufacturing sector made a good start to 2013 — industrial orders jumped 1.2% in January, beating forecasts, according to a new survey from the German Economy Ministry.

It was driven by a 1.6% jump in domestic business, while new orders from overseas rose by 1.0%

Carsten Brzeski, ING economist, says the short-term outlook for the German economy had picked up — but the Ukraine crisis shows the importance of creating more domestic demand.

He writes:

Taken one-by-one, slowing emerging markets, Russia or the Ukraine are too small to matter for the economy. However, together with China, all these countries together account for around 15% of all German exports.

It looks as if the basis for a strong pick-up in German exports is shrinking.

All in all, today’s data send two important messages for the German growth outlook. The near term looks very rosy and industrial production should gain further momentum. To maintain this momentum into the longer term, however, the economy needs more domestic demand.


German president visits Greece; clashes in Athens

Riot police and anti-austerity protesters have scuffled in Athens, as German president Joachim Gauck begins a visit to Greece.

Gauck, who inspected a guard of honour this morning, is expected to visit a second world war memorial site tomorrow.

Athens authorities had imposed a ban on protests in parts of Athens today – which was defied by some demonstrators.

AP has the story:

Riot police have used tear gas and pepper spray during scuffles with union members protesting austerity measures, during a ban on demonstrations in parts of central Athens due to a visit by German President Joachim Gauck.

Scuffles broke out Thursday when a group of several dozen demonstrators attempted to break through a police cordon on a major avenue in an effort to march to the Finance Ministry.

The demonstrations were unrelated to the visit by Gauck, who was meeting with his Greek counterpart and was due to visit the site of a Nazi massacre in central Greece Friday.

Authorities banned all demonstrations from 8 a.m. to 7p.m. local time in parts of the city, citing security concerns. Several hundred union members, mainly construction workers, had already scheduled demonstrations.

These tweets (more here) appear to show the clashes:

Greek newspaper Kathimerini reports that Gauck refused to discuss demands in Greece that Germany should pay reparations for World War II atrocities. But he said Germany bears an undeniable “moral burden.”

Germany says it has settled all World War II reparations issues, and the Greek government has been reluctant to aggressively pursue the matter.

But opposition politicians have seized on Gauck’s visit to call for action.

German president seeks to visit Nazi massacre site


Greek jobless rate drops a little

Greece’s unemployment rate has dropped slightly in December to 27.5%, down from 27.6% in January, but more than double the average for the euro area.

The small decline was due to more people dropping out of the labour market altogether.

The ELSTAT statistics body reported that the number of people actually in work fell by 5,418 in December , while the number counted as unemployed dropped by 10,864.

The total classed as ‘inactive’ (rather than unemployed) rose by 4,453.

The survey also showed that women are worst hit by the Greek jobless crisis — with almost a third unemployed, compared to a quarter of men.

And there was a small annual drop in the youth jobless rate – to 55.5% from 57.1% a year ago.

On an annual basis, almost 100,000 people lost their jobs during 2013, the sixth year of Greece’s recession, while the unemployment total rose by almost 50,000 and the inactive total rose by 47,000.

There are now:

  • 3,555,034 people employed in Greece
  • 1,349,495 people unemployed
  • 3,388,917 people inactive.

Compare and contrast….

John Lewis staff get 15% bonuses

Just in: staff at the John Lewis Partnership are getting bonuses worth almost eight week’s pay — slightly less than a year ago.

The group, famously owned by its workers, reported that employees will share a £202.5m bonus pot for 2013. That’s worth around 15% of salary to its 91,000 partners.

Gross sales broke through the £10bn figure, up 6%, with solid growth at its Waitrose supermarket outlets and John Lewis department stores.

The John Lewis bonus pot is announced to staff across the organisation at the same moment each year.

Pre-tax profits before exceptional items rose almost 9% to £376.4m, but was down 4% at £329m once the £40m cost of compensating staff who were underpaid over holiday pay for several years.

This year’s payment was also hit by the cost of servicing its pension deficit (which is now over £1bn).

Full details here.

Chairman Charlie Mayfield said the outlook looks quite bright:

There are more encouraging signs for the economy as a whole and, although this has not yet come through as a significant increase in consumer spending, I am cautiously optimistic that we will see improvements this year.

I am confident that however quickly the UK economy emerges from this prolonged period of slow growth, the Partnership is well positioned to continue to strengthen its competitive position and to grow market share in both Waitrose and John Lewis.


While Britain’s house prices are accelerating, car sales are slowing down. The SMMT reports that registrations of new vehicles rose by 3% in February, rather lower than the 7.6% seen in January.

New car sales had jumped by over 10% last year, as the British car market outperformed the eurozone.

Today’s Halifax house price survey also shows that affordability is falling towards levels seen in the late ‘80s, as Sky’s Ed Conway flags up:

European markets calm ahead of the ECB

POP. The Milan stock market just hit its highest level since June 2011.

The Italian FTSE MIB jumped 211 points to 20970, a 1% gain.

European investors remained calm as they await the European Central Bank’s meeting, and its new economic forecasts. The Ukraine crisis appears to have drifted off the City’s radar.

In London, the FTSE 100 has gained 27 points to 6802, up 0.4%, with Aviva leading the way after this morning’s decent results.

Germany’s DAX is up 0.4%, and the French CAC has gained 0.6%.

In the currency markets, the euro is flat against the US dollar at $1.372


In the stock market, Aviva’s share price has surged 8% after reporting a 6% jump in operating profits. CEO Mark Wilson says insurance firm’s turnaround plan is working, a year after a shareholder rebellion forced his predecessor out.

But construction firm Balfour Beatty have slid almost 6% after hitting investors with a 32% drop in profits, which it admitted was “disappointing”.

It blamed “challenging economic conditions and operational issues in UK construction”, and a downturn in the Australian mining sector


Kit Juckes of Societe Generale (and Simon & Garfunkel fan) reckons that the European Central Bank will do little today, writing:

What the ECB is likely to offer us today is a pocketful of mumbles (promises, all lies and jests). And we, of course, will hear what we want to hear and disregard the rest.

The most likely move, Kit says, is ending the ‘sterilisation’ of the sovereign bonds bought by the ECB a few years ago. That would increase euro-ares liquidity by around €175bn (see opening post):

That doesn’t strike me as a game-changer….

I can’t really see what the ECB can do from here to boost credit demand and therefore money supply either.


UK house prices jump 2.4% in February – Halifax

Britain’s housing boom surged again in February, with prices rising at their fastest rate in almost five years.

That’s according to the latest survey from the Halifax building society. It reports that prices rose 2.4% last month, which is the biggest monthly rise since May 2009. The average home is now worth £179,872.

Economists had expected a rise of just 0.7%, and this leap reinforces fears that a bubble may be forming in the housing market (although most of the concern still centres on London).

House prices in the three months to January were 7.9% higher than a year earlier.

Stephen Noakes, mortgages director at Halifax, reckons the price rises will slow later this year — pointing to the recent revival in housebuilding.

”Several factors appear to have boosted demand, such as the improved economic outlook, unemployment falling faster than expected, improvements in consumer confidence and low interest rates.

However, continuing pressures on household finances, as earnings fail to keep pace with consumer price inflation, are expected to remain a constraint on the rate of growth of house prices.

Halifax added that the average house is still worth 10% than the pre-crisis peak in August 2007.

Howard Archer of IHS Global Insight said the data shows the Bank of England was wise to end its support for mortgage lending at the end of 2013:

While the strength of house prices is not yet a serious concern outside of London, it is something that needs to be closely monitored given that a number of recent data and surveys have indicated that the strength in house prices is becoming more widespread.

There is rising buyer interest and strengthening market activity across regions.


For more detail on the ECB decision, check out this breakdown of the latest eurozone data on the WSJ.

ECB decision: what the analysts predict

Economists and analysts are quite divided about what the European Central Bank will do at today’s meeting.

Some argue the fragility of the eurozone recovery means the ECB will cut interest rates to fresh record lows. Others point to January’s stable inflation reading, which calmed fears that the region is sinking into deflation.

Berenberg Bank economist Christian Schulz:

It is a close call this time.

The ECB itself had considerably raised the odds of additional easing action by highlighting, in its last statement, the new inflation forecasts that it will publish at the March meeting. But mostly positive data releases since February have weakened the case for action.

On balance, the data received since the last meeting do not warrant downward revisions of the inflation forecasts. The eurozone recovery is proving resilient to the emerging market troubles.

Jonathan Loynes of Capital Economics:

The second estimate of Q4 Euro-zone GDP (released on Wednesday) confirmed that the economy posted a pretty modest quarterly expansion of 0.3% and that growth was driven by exports (+1.2% q/q) and investment (+1.1%). By contrast, household spending edged up by just 0.1%, leaving the consumer revival required to broaden and strengthen the economic recovery still conspicuous by its absence. Admittedly, January’s retail sales numbers (also released Wednesday) recorded a decent monthly gain of 1.6%. But that followed a drop of almost the same size in December, so it is too early to talk about an upward trend. Indeed, retail sales rose by just 0.1% in the three months to January together.

Therefore, the latest batch of data on the euro-zone provided rather mixed signals for the European Central Bank ahead of its Governing Council meeting But while not certain, we think that some form of action – probably in the form of a further cut in interest rates – is a strong possibility.

Ian Williams of Peel Hunt

Although [February’s PMI surveys ] are consistent with Q1 GDP growth of up to +0.5% QoQ across the region, the employment picture is sluggish and price pressures subdued. There is still a case for more policy action after today’s ECB meeting.

Stan Shamu of IG:

Perhaps the main issues to look for would be a cut to the refinancing rate from 25 basis points to say 10 basis points. The idea here is to limit the upside in EONIA (interbank lending rates) rates. There is also a lot of talk about not sterilising the bonds it purchased through its Securities Market Program (SMP) during 2012. This would cap gains in the EUR as it could see its balance sheet expand by around 6%.

There will also be focus on revisions to the ECB’s economic projections.


ECB and Bank of England set policy today

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

It’s Central Bank Thursday — with the European Central Bank and the Bank of England both holding their monthly monetary policy meetings today.

Analysts are split over whether the ECB will take new action to stimulate the eurozone economy, with some hoping that its president, Mario Draghi, hasn’t given up being decisive for Lent.

As Frederik Ducrozet of Credit Agricole puts it:

The ECB has several tools at its disposal if it decides to do more to promote growth and drive inflation up.

It could cut the headline interest rate in the eurozone, which is already at a record low of 0.25%.

Another option is to stop ‘sterilising’ the eurozone bonds it bought to calm the crisis in 2011 and 2012. That would pump more liquidity into the euro financial sector.

The ECB could announce a scheme to drive credit to small firms — similar to the UK’s ‘funding for lending’ scheme’. There’s even the possibility of imposing negative interest rates on eurozone banks to force them to lend more.

Importantly, the ECB has new economic forecasts to work with, showing how its economists expect growth and inflation to pan out through to 2016.

Those forecasts could give it the impetus for action. Although, with the inflation rate stable at 0.8% last month, and the Ukraine crisis looming over the economy, the ECB may decide to sit on its hands for another month

The ECB releases its decision at 12.45pm GMT, followed by a press conference at 1.30pm GMT.

We’re not expecting any fireworks from the Bank of England, as we enter the sixth year of record low interest rates. The BoE will surely leave borrowing costs at the current record low at noon – although there’s always a (thin) chance of a statement.

Yesterday marked the fifth anniversary of UK interest rates at their record low of 0.5%.

Also coming up today – two pieces of economic data from the countries which book-end the eurozone economy:

Greek unemployment survey for December, at 10am GMT

German factory orders for January, at 11am GMT

I’ll be tracking all the key events through the day… © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

ECB keeps rates at record low 0.5% as the 17-nation economy recovers from the prolonged recession. Italian Prime Minister Letta survives as Berlusconi caves in. Letta: A new election would be a disaster. Anger in Greece as Golden Dawn MPs released…


Powered by article titled “Berlusconi backs Italian prime minister in crunch confidence vote – live” was written by Graeme Wearden, for on Wednesday 2nd October 2013 12.11 UTC

It will be fascinating to see what Mario Draghi, head of the European Central Bank, makes of the Italian situation when he begins a press conference in 20 minutes time (as expected, they have left interest rates unchanged)

Our Southern European editor John Hooper says Berlusconi has saved face, but lost influence:

Enrico Letta definitely looked less than euphoric as Berlusconi yanked hard on the political handbrake, and declared with palpable understatement:

we have decided, not without some internal strife, to support the government.

The general view among Italian political journalists is that Letta would be much better off without Berlusconi around at all. Instead, Letta remains the prime minister of a shaky coalition.

Having said that, Berlusconi is damaged by the antics of the last few days. The remarkable political gymnastics must have taken their toll — and an optimist might argue that PdL is irrevocably on the path to a new future….


Why Berlusconi caved in

What drama!

So, here’s the position. By sensationally dropping his opposition to Enrico Letta, Silvio Berlusconi has guaranteed that the Italian government survives.

Add all Berlusconi’s PdL senators to Letta’s existing support — his PD party, plus small parties and senators for life — and it’s a healthy majority.

So why did Berlusconi do it? Clearly, he concluded that he could not keep enough of his PdL party onside. The photo I included in the blog earlier showed a long list of rebels.

If Berlusconi hadn’t pulled such a SCREECHING u-turn, then he would presumably have seen his group shatter. The moderates would have followed Letta, and he’d have been left nursing a rump faction.


The Italian stock market jumped as the news came in, pushing the FTSE MIB up 1.4% today.

Italian government debt prices remain high, with the yield on 10-year bonds down at 4.38% (from 4.46% yesterday).

Here’s the key quotes from Berlusoni, before he threw his support behind Letta a few moments ago.


Berlusconi himself buried his head in his hands after announcing that the PdL party will support Letta — which means today’s confidence vote is a WIN for the prime minister.

It was not the speech of a winner — rather of a man whose long grip on his party may be slipping .

There’s applause in the Senate as Berlusconi says he will support Enrico Letta — although I think I saw Letta pull a rather rueful grin.




Berlusconi is addressing the Senate in an atmosphere of silence, trying to sound statesmanlike….

Berlusconi’s got the microphone!

Former technocratic prime minister Mario Monti just gave a brisk speech, in which he urged senators not to risk Italy falling into the troika and its “neocolonial oversight”. If Italy is forced to take a bailout, it could take years to recover, Monti warned.


While we wait for that vote, here’s Reuters’ report on Letta’s second speech to the Senate:

Italian Prime Minister Enrico Letta said on Wednesday his government could achieve reforms even with a smaller majority, as he wound up a debate on a confidence vote in which he has been boosted by dissidents from Silvio Berlusconi’s centre-right party.

“Our government can reach its objectives despite the fact that the majority’s numbers have changed,” Letta said as he formally put a confidence motion to the Senate, which is expected to complete the vote in the early afternoon.

Letta spoke at length about Italy’s role in the European Union and his goal to push for greater integration during the country’s rotating presidency in the second half of 2014, suggesting he sees his government lasting at least until 2015.

The vote hasn’t actually started yet. Senators are continuing to give their views. The latest word from Rome is that Berlusconi isn’t expected to speak (but given today’s twists and turns, let’s see).

Rome correspondent Lizzy Davies reports that two distinguished honorary senators, architect Renzo Piano and conductor Claudio Abbado, are both absent because they are out of the country.

Confidence Vote has been called

To repeat, Enrico Letta has called for a vote of confidence.

After a dramatic couple of hours in the Senate, we still don’t know what’s going to happen. There have been rumours that Berlusconi will back Letta, and also that he will order the entire PdL party to vote against. Speculation abounds.

We do know that there is a solid bunch of ‘dovish’ PdL senators who are unlikely to bow to pressure from Berlusconi, and are highly likely to back Letta. But we do not know if it will be enough.

As John Hooper flagged up the Berlusconi rebels are talking about creating a new party called ”Popolari per l’Italia”.

Wolf Piccoli, managing director at Teneo Intelligence, is as reliable as any, and he reckons Letta might get 171 votes — that’s a win, as he needs 160 for victory.

A briefer speech from Letta this time — his main message to the Senate is that today is a historic opportunity. Tomorrow the government must get back to work.

Amid applause from some members of the senate, Letta calls for a confidence vote:


Letta still looks calm:


Letta speaks again as vote looms

Italian prime Enrico Letta is beginning his second speech to the Senate, explaining that he didn’t sleep last night as he worked to hold the government together.

He’s initially heard in silence (gosh it’s tense), but there’s some heckling as Letta bluntly tells the Senate that he’s not prepared to keep taking “lessons in morality” from those who are holding him to ransom.

Letta then tells Senators that he needs their support. A smaller majority will make it even hard for him to govern.

Letta back on his feet

Enrico Letta is speaking again in the Italian parliament. Reminder: it’s being streamed on RAI News.


The rumour mill keeps swirling in Italy ahead of this lunchtime’s confidence vote. One insider reckons Berlusconi is going to back Letta, the next says he’s not. Confusion reigns (not for the first, or last time).

John Hooper, our Souther Europe editor, reports that Berlusconi’s rebels are talking of creating a new party called “Popolari per l’Italia” – even if the loyalist wing of PdL join them by supporting Letta.

Plenty of concern in Greece that three Golden Dawn MPs were released from court this morning, and promptly kicked and shoved their way through the assembled media .

Here’s a flavour:

Three Golden Dawn MPs released on bail – lash out at press

Breaking away to Greece briefly.

Four of the Golden Dawn MPs who were arrested as part of the clampdown on the neo-Nazi party appeared in court today. Three of the men were promptly released pending a future trial, while party leader Nikolaos Michaloliakos is due back in court later today.

TV footage from the scene shows one cameraman being pushed out of the way, while another man is kicked as the MPs and their supporters leave the scene.

Here’s the video clip showing the aggressive scenes:

And here’s Kathimerini’s early take:

Only one of four Golden Dawn deputies arrested last week on charges of heading a criminal organization responsible for a range of felonies, including murder, assault, blackmail and money laundering, among others, was remanded in custody on Wednesday, while another three were released pending trial, one of them posting a 50,000 euro bail.

Yiannis Lagos was expected to be transferred to a local jail on Wednesday following a unanimous decision reached by two investigative magistrates and two prosecutors.

Party spokesman Ilias Kasidiaris was ordered to post a €50,000 bail and not to exit the country. Deputies Ilias Panayiotaros and Nikos Michos were also ordered not to leave the country.

The clampdown followed the death of 34-year-old rapper Pavlos Fyssas two weeks ago. A Golden Dawn member was subsequently arrested over the stabbing.

More to follow


Here’s a photo that appears to show the list of Senators from the People of Freedom party who are considering backing Enrico Letta:

Rumours flying:

It is increasingly likely that Enrico Letta has enough votes for victory, even if Berlusconi decides to back him.

Letta needs 161 votes for victory – although he would like more. Vincenzo Scarpetta of Open Europe reckons that he currently has 170 senators behind him, based on the latest reports and public statements.

Here’s how Barclays summed it up this morning:

Letta has the numbers to survive the vote today. The Government needs the support of 161 Senators, and can count on 137.

With the support of the life Senators, and defectors from the smaller parties (including M5S) it is likely to get to around 147-149. Letta therefore only needs around 12-14 PdL Senators to defect in order to survive. With the PdL split he is likely to get this.

More reaction to the reports that Berlusconi is considering throwing his support behind Enrico Letta in the confidence vote:

It would be a stunning u-turn from Silvio Berlusconi if, as reports suggest, he has now decided to back Enrico Letta in today’s vote of confidence.

But it wouldn’t exactly be out of character — and a number of political journalists and analysts were suggesting yesterday that this might happen, once we learned that his party were rebelling.

Remember, it was Berlusconi who triggered this crisis by threatening to bring the government down last week — by withdrawing his PdL party from the Letta coalition.

If he backs Letta today, then he could still trigger a crisis in future.

As Serena Ruffoni of the WSJ put it to me:

I don’t think the Letta government is any stronger even if it survives this confidence vote.


Reports: Berlusconi’s Party to back Letta

Important: Sky Italia is reporting that the People of Freedom party are going to BACK Enrico Letta in the confidence vote.

If true, that means Letta would win a solid majority. It would also suggest that Berlusconi has decided that he cannot bring his rebels back into line, and has decided to fall in with them.

That is NOT the best result for Letta, though. While he’d still be in power, he’d also still be lumbered with the Berlusconi problem.

Market reaction

The Italian stock market surged during Enrico Letta’s speech, hitting a new two-year high as the PM sat down.

Italian government bonds are also strengthening, which has pushed the yield on its 10-year debt down to 4.37% . It as as high as 4.74% on Monday after Berlusconi launched his bid to bring the Letta government down.

Senators are now speaking, with one tearing into Silvio Berlusconi — calling the former prime minister “‘a simple story of criminality”.

The BBC’s Gavin Hewitt reckons the gloves are off, as the battle for Italy’s future continues:


Letta speech: instant reaction

How did he do?

Five months isn’t enough time to build a track record of leadership success — and much of Letta’s time as prime minister has been overshadowed by Berlusconi’s legal defeats.

It was a speech of vision — asking Senators to choose between future of a more competitive, thriving Italy, or a future of political strife, fresh elections, and the prospect of another divided parliament at the end of it.

Letta isn’t the most thrilling orator in European politics, but he has a mature, sensible style.

Highlights of his speech start here.


Letta’s speech over

Worth noting that Berlusconi didn’t applaud Letta as he ended his speech – so he’s not thrown in the towel yet….

Enrico Letta concluded his speech by urging those in the chamber to give him their ”courage and confidence”. “A confidence that is not against anyone; a confidence that is for Italy” (quotes via Lizzy).

He also urged senators to search their consciences, and avoid a result that would leave them feeling “shameful regret”.

While Letta was speaking, Berlusconi could be seen holding discussion with some of his allies. I grabbed a picture:

Oh the drama….

There’s also a European theme to the speech — with Letta speaking of the need to dream of a “United States of Europe” one day. That fits with his tradition of being a solid Europhile (he was an MEP at one stage of his career)

Letta is outlining his vision for Italy — saying that growth and jobs must be the focus in 2014.

Apparently Berlusconi has told Italian media that he will listen to Letta’s speech and then decide whether to support him or not.

Enrico Letta’s speech is turning into a solid defense of his government’s record in the five months since he took over (colleague Lizzy Davies dubs it a “ very level-headed and systematic defense”.

But will that be enough to persuade PdL members to back him? As explained earlier — Letta would like to see 30 rebels jump the fence. He needs more than 20 (I think 24 is the magic number).

Letta also cited three priorities – support economic recovery; cutting taxes on workers, and increasing competition in Italy’s economy.

Letta is continuing to defend his government’s record on the economy — part of the strategy to persuade moderate members of the Berlusconi camp to back him.

It is on ordinary people suffering in economic crisis that our actions will have biggest effect, he said.

A better webfeed

Berlusconi’s just arrived! He also looks weary, probably due to late night efforts to corall rebelling members of his PdL party into line.

No sign of Silvio Berlusconi at the start of Letta’s crunch speech. Angelino Alfano (deputy PM) is there, and there’s a consensus that he looks nervous.

(see 8.22am for a blurry snap of Dudu not being walked)

Looks like the confidence vote will come at midday — earlier than the previous indications.

And how many rebels will there be?

Lizzy Davies writes:

It’s all about the numbers today. Giovanardi claimed yesterday there were “more than 40″- believed to be as many as 44- PdL MPs prepared to vote for the confidence vote. But the Italian press reports that Berlusconi’s hawks told him the rebels were much- much- less numerous. Who’s right?

We’ll find out soon. Letta needs over 20 rebels. He’d be happier with more than 30.


Letta went on to warn that a new election could cause the same gridlock as last time:

Enrico Letta is urging parliament to give him a mandate for a “real and new” pact to tackle Italy’s problems.

(a reminder — Italy’s last election, in February, resulted in deadlock — with no party winning a majority in the Senate. Eventually a coalition was agreed between the centre-left PD and Berlusconi’s centre-right PdL, with Letta (a senior member of PD) as leader)

Here’s the key early quotes from Letta’s speech:

Letta speech begins

Prime minister Enrico Letta has begun to give one of the speeches of his political life, in a bid to win enough support to continue as the head of Italy’s shaky coalition government.

Before he started, there was a standing ovation for the country’s veteran president, Giorgio Napolitano.

Letta began his speech in the Italian parliament by urging its members to “seize the moment”. And, as expected, he insisted that the legal troubles of Silvio Berlusconi cannot be an excuse to bring the country’s government down.

But can he persuade enough of Berlusconi’s PdL party to back him?

Lizzy Davies is tweeting the key points, so I’ll be embedding them in the blog now….

Watch the speech here

Enrico Letta has begun speaking in the Italian parliament.

There’s a live stream here. However, it’s very flaky.

Key points from his speech will follow!

Update: the latest word from Italy is that we might get the confidence vote around midday, not this evening as I initially thought. 

Markets down

Europe’s stock markets are all in the red today, with the FTSE 100 shedding 73 points. There’s nervousness about the situation in Italy, and also a knock-on effect from a bad day in Asia. The US Federal government shutdown isn’t exactly helping sentiment.

Overnight, the Nikkei tumbled 2% after the latest stimulus package from prime minister Abe failed to excite investors.


Tesco shares lead fallers in London

In the City, Tesco’s shares are leading the fallers on the FTSE 100 after issuing a trading statement, down over 3%.

Britain’s biggest supermarket reported zero growth in like-for like UK sales, excluding fuel and VAT sales tax, in the 13 weeks to 24 August.

Tesco also warned that it faced ‘challenging economic conditions’ overseas. Europe was particularly tough, with profits down almost 70% and like-for-like sales down by 5% in the first half of the year.

Sainsbury posted stronger figures in the UK (as expected) – sales at British stores open at least a year were up 2%. Its shares are also suffering, though, down 1.5%. More here.

Wolf Piccoli, managing director at Teneo Intelligence, agrees that it could be a long day in the Rome parliament:

Analysts at Nordea Markets say it’s “fight night” in Italy, and possibly Berlusconi’s final bout.

In the red corner, we have PM Letta, who has probably worked hard – together with the President – to convince some of Berlusconi’s senators that new elections at this point is in no one’s interest.

A vote for a continuation of the current government and later on a vote for a budget and a new electoral law would make for a fresh start after spring elections. In the blue corner, we have Berlusconi. Media are full of stories about Berlusconi’s outstanding merits when it comes to winning tight political battles. But this time it seems that even members of his own party believes he has gone too far. Even Alfano – who has been seen as the crown prince in the PDL – said that he might vote for a continuation of the government.

Furthermore, it may be the old Champs last fight, if he is stripped of his senatorial seat on Friday. It will be a close call. Italy, and to a lesser extent Spain, will sell off if the government falls.

Jeremy Cook of World First agrees:

What might Letta tell parliament in his speech this morning?

Lizzy Davies explains that his speech is likely to focus on the socio-economic suffering of Italy, and tell deputies that they cannot just let its government fall.

His strategy will be to ram home the idea that the judicial woes of one man* have to be kept separate from the interests of the country – in an effort to split the doves in Berlusconi’s party from the hawks.

• – that man being Berlusconi himself, of course, who is on the brink of being expelled from the Senate after his tax fraud conviction.

In the comments section, regular reader mrwicket has outlined the potential scenarios from tonight’s vote.

As he flags up, we’re not 100% certain that a confidence vote will actually be called — Enrico Letta will probably judge the mood of the Senate first, and if he feels he can’t win then he might simply resign.

So, Django Alfano is standing his ground and wants to support Letta in the vote of confidence, as do the other maybe ministers and a chunk of the party.

Berlusconi says he wants the government to fall and to have new elections.

The two will meet again this morning at 9’30 so things could change.

Marina Berlusconi is said to be ready to enter into politics.

I asked yesterday how you could have a vote of confidence in a government that didn’t exist. On Monday, Letta’s office said the resignations were irrevocable but yesterday afternoon, it announced that it had refused to accept them. The ‘maybe ministers’ will walk into parliament today as ministers.

Giovanardi claimed yesterday that there were 40 PdL senators ready to vote for Letta (some reports in the evening said that number was dwindling). He even spoke of a new party called Nuova Italia

There were some nasty exchanges last night between Sallusti, editor of Il Giornale and Cicchitto, an important PdL dissident. Sallusti said they were cowards, hitting the man when he was down and that they had forgotten what had happened to Fini. “They are stabbing him in the back in his moment of weakness. They are cowards because they didn’t have the courage to do it when he was strong.”
“No! You are the coward!” etc…

Letta has said he will refuse to govern with a weak majority.


Possible scenarios;

Letta wins vote of confidence with sufficient votes to continue in government.

Letta wins vote of confidence with insufficient votes to continue in government and Napolitano sets up a technical government.

Letta wins vote of confidence by a narrow margin and continues to govern

Letta loses vote of confidence and Napolitano sets up a technical government.

Letta doesn’t call for a vote of confidence and Napolitano sets up a technical government.


With regard to policy, there would be very little to distinguish between a Letta government and a technical government so we will be as we were after this dramatic little interlude. The change is likely to be inside the PdL.

Lisa Jucca, Reuters chief financial correspondent in Italy, agrees that this could be the moment that Angelino Alfano, Berlusconi’s right-hand man for so long, finally rises up:

How Letta can win

Silvio Berlusconi is facing an unprecedented rebellion, opening up the possibility that Letta can surge to victory tonight. As our Rome correspondent, Lizzy Davies, explains:

To win the confidence vote in the senate, Letta needs to attract extra votes from either the centre-right PdL or the anti-establishment Five Star Movement (M5S) to reach the magic number of 161. He has said, however, that he has no interest in continuing at the head of a government that only sneaks in by a handful of votes.

His chances appeared to have been significantly boosted on Tuesday, when Carlo Giovanardi, a long-time ally of Berlusconi, struck the first major blow when he announced that “more than 40″ PdL MPs were prepared to vote to keep the government afloat.

Then, in a stunning move likened by one observer to an “Et tu, Brute?” moment, Angelino Alfano, the deputy prime minister long seen as Berlusconi’s political heir, appeared to solidify the mutiny. “I remain firmly convinced that all our party should tomorrow back the confidence vote in Letta,” he said, according to Ansa.

Here’s the full story: Silvio Berlusconi’s allies turn on him to keep Italy’s grand coalition alive

Make-or-break confidence vote for Italian PM

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

After yesterday’s foray into the US shutdown , we’re back in familiar territory today – the political crisis in Italy, with a monthly meeting of the European Central Bank on top.

Enrico Letta, Italy’s prime minister, is heading to parliament this morning for a make-or-break confidence vote. It was triggered by Silvio Berlusconi’s decision last Saturday to ordered his ministers out of the coalition, to bring Letta down.

Does Letta still have the support of the lower house, and the Senate? If not, Italy could be plunged deeper into chaos.

But Letta could win, and wins well, if Berlusconi’s centre-right party defy their disgraced leader and through their support behind the PM. Yesterday, key members of the People of Freedom party (PdL) said they would support the coalition [an alliance between Letta's own centre-left PD and the PdL].

The big question is how many PdL members of the Senate decide to throw their support behind Letta today.

Letta is due to start giving his first speech at around 9.30am Rome time, or 8.30am BST. The actual confidence vote could be quite late (we’ll update with firm timings when we have them).

The other key event in the eurozone today is the monthly meeting of the ECB’s governing council. They’re in Paris today. We’re not expecting any change to interest rates. There’s also a press conference at 2.30pm Paris time (1.30pm BST), where Mario Draghi will be quizzed over a range of issues, doubtless including his homeland of Italy.

I’ll be tracking all the developments through the day…

Updated © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

ECB press conference highlights. Bank of England and ECB decide to keep benchmark rates and monetary policy unchanged in August. Eurozone manufacturing returns to growth. Spanish PM denies slush fund claims. Rajoy’s gamble…


Powered by article titled “Eurozone crisis: Berlusconi’s final appeal rejected; central banks hold rates – as it happened” was written by Graeme Wearden, for on Thursday 1st August 2013 20.03 UTC

9.03pm BST

Lizzy Davies: Silvio Berlusconi’s prison sentence upheld by Italian supreme court

And finally, here’s our Rome correspondent Lizzy Davies with the news from the supreme court:

Silvio Berlusconi, Italy’s longest-serving postwar prime minister, has been handed his first definitive criminal conviction in more than 20 years of legal battles but the country’s supreme court spared him the immediate prospect of being barred from public office.

In a long-anticipated ruling, the five judges of the court of cassation emerged from more than seven hours of deliberations to issue a verdict confirming a four-year jail term for the leader of the Freedom People party (PdL), a vital part of Italy’s coalition government.

That sentence had already been cut to one year according to a 2006 amnesty, and, owing to Berlusconi’s age – he will be 77 in September – it will be served through house arrest or community service.

It was enough, however, to place great pressure on the fragile government and prompt fury among his supporters…..

Lizzy’s full story is here: Silvio Berlusconi’s prison sentence upheld by Italian supreme court

And that’s a good moment to stop the blog, I think. Cheers all, and good night from London.

Updated at 9.03pm BST

8.54pm BST

Berlusconi’s lawyers: it’s not over

Silvio Berlusconi’s legal team just released a statement, in which they talk about their dismay over the judgement of the supreme court tonight. They also suggest the possibility of an appeal to the European Courts.

It’s online here. Here’s a rough translation:

There were very solid reasons and legal arguments to reach a full acquittal of Mr Berlusconi.
We will pursue any useful initiative and also [look to] European locations to make sure that this unjust judgment is radically reformed.

8.50pm BST

Meanwhile, in the US courts

In unrelated legal news tonight — former Goldman Sachs vice-president Fabrice Tourre has been found liable on six of seven counts of defrauding investors by violating federal securities law..

The WSJ has a good early take: Former Goldman Trader Found Liable

8.40pm BST

Italian PM and president urge calm

Enrico Letta, Italy’s prime minister, and the country’s president Georgio Napolitano, have both urged Italians to remain calm following the Supreme Court ruling that three-time prime minister Silvio Berluconi is guilty of tax fraud.

Updated at 8.40pm BST

8.24pm BST

Political reaction

Reuters has pulled together some political reaction to the decision to uphold Berlusconi’s conviction for tax fraud, from across the spectrum:

Luca d’Alessandro, head of Berlusconi’s PDL parliamentary justice commission: "This country used to be famous as the cradle of law. Today it has become its tomb, run by a corporation of grave diggers in gowns who have carried out the perfect crime."

But the leader of the centre-left PD, Guglielmo Epifani said, "The sentence has to be respected and carried out."

Beppe Grillo, leader of the populist 5-Star Movement that won a quarter of the vote in the last general election, back in February, declared: "The verdict is like the fall of the Berlin Wall in 1989."

Updated at 8.32pm BST

8.15pm BST

Here’s a photo of the moment that the president of the Italian supreme court, Antonio Esposito, read out that Silvio Berlusconi’s prison term over tax fraud had been upheld, but that the public office ban would be reconsidered by a lower court.

The latter decision means Berlusconi can, for now, remain as a senator.

8.05pm BST

If Berlusconi’s public office ban is cut to three years, then there’s a possibility he could be free to run in the next Italian general election, points out analyst Alberto Nardelli.

He reckons that this evening’s news poses tough problems for Berlusconi’s opponents — as the mainstream centre-left and centre-right (Berlusconi’s PDL) parties are locked in an uncomfortable coalition.

Alberto adds:

• will Berlusconi decide to pull the plug on the Letta Government? I don’t think he will do this despite many in his party pushing for elections.
• how will the centre-left PD react: will they vote (in the Senate) to confirm the ban from public office when it eventually comes?
• if Berlusconi is banned from public office, the ban would expire before the end of Letta’s government if the government serves a full-term – would PD want to go to elections before then and will PD push for a law that would make those definitively sentenced ineligible?

More here: Thoughts on the Berlusconi verdict

Updated at 8.06pm BST

7.42pm BST

Photos: Celebrations at the Supreme Court

Scenes of celebration and fizz being swigged outside the Italian Supreme Court, following the news that Silvio Berlusconi’s final appeal has been rejected.
Two photos from the scene:

Updated at 7.51pm BST

7.28pm BST

The BBC’s Imelda Flattery suggests that house arrest is unlikely to count as cruel and unusual punishment for Silvio Berlusconi:

7.26pm BST

Berlusconi verdict – instant reaction

Italian political expert Alberto Nardelli says the key development tonight is that Silvio Berlusconi’s five-year ban on service in a public office is going to be reexamined:

Vincenzo Scarpetta of the Open Europe think tank underlines the point that the ban hasn’t actually been scrapped:

Updated at 7.30pm BST

7.18pm BST

And here’s Associated Press’s first take:

Italy’s highest court has upheld ex-Premier Silvio Berlusconi’s tax fraud conviction, but ordered a review a five-year ban on public office that was part of the lower court’s sentence.
The court on Thursday confirmed the four-year prison sentence, and ordered another court to determine the length of a public office ban.
This is the first time Berlusconi, a three-time former premier and billionaire media mogul, has been definitively convicted of any crime.

7.14pm BST

Hot off the Reuters terminal, here’s its first report from Rome:

Italy court rejects Berlusconi appeal against tax sentence

Italy’s top court upheld a jail sentence against Silvio Berlusconi for tax fraud on Thursday in a ruling which could throw the country’s fragile coalition government into crisis.
The Court of Cassation confirmed a four-year jail sentence – commuted to one year under an amnesty – imposed by a lower court. But it ordered a further judicial review of a ban on holding public office imposed for the same offence.
The long awaited ruling is likely place the fragile left-right coalition led by Prime Minister Enrico Letta under severe strain although Berlusconi has pledged that his centre-right party will maintain its support for the government.

7.12pm BST

Public office ban to be reviewed

The key question now, though, is what happens about the five-year ban on Silvio Berlusconi holding public office, which the court has now annulled?
The judges have asked for that ban to be reviewed, so we may not know for some time.

The prospect of the former PM being banished from the Senate for years had threatened to destabilise the coalition. As explained at 5.36pm BST, Italy’s coalition government relies on the support of Berlusconi’s party (although he doesn’t serve in Enrico Letta’s cabinet).

On Tuesday, the prosecution recommended cutting the ban to three years, which looked like an admission that the original sentence was too severe (Italy’s legal framework suggested a ban of between one and three years).

7.03pm BST

Historic moment

The verdict of the Rome Supreme Court means that Silvio Berlusconi has run out of legal road — there are no more appeal courts left, and he must now accept the conviction for tax fraud.

And that also means the prison sentence that was handed down by the lower court, and upheld in the last few minutes.

Given his age, though, legal experts have already predicted it would be changed to community service or house arrest.

Definitely a significant moment…

Updated at 7.04pm BST

6.51pm BST

BREAKING: The verdict is in. The Italian Supreme Court has upheld Silvio Berlusconi’s one year* prison sentence for tax fraud in the Mediaset case. It has also ordered a review on the ban on public office that was handed down.

*originally four years, but reduced to 1 year under an amnesty

More to follow…

Updated at 6.53pm BST

6.43pm BST

Any moment now..

6.16pm BST

Scratch that thought — it looks like a verdict has been reached over Silvio Berlusconi’s tax fraud appeal.

Cameras are being allowed into the Supreme Court in Rome now, , so the news could come within the hour. Police have asked journalists to turn off their mobile phones, reports Linkiesta’s reporter Alessandro Da Rold.

Updated at 6.32pm BST

6.03pm BST

Maybe we won’t get the Berlusconi verdict tonight, after all. If the Supreme Court can’t reach agreement in the next couple of hours, everyone might have to come back tomorrow…

Updated at 6.03pm BST

5.52pm BST

No Berlusconi verdict yet. The door of the Supreme Court remains shuttered, as Linkiesta’s Alessandro Da Rold tweets:

5.38pm BST

Supporters of Silvio Berlusconi have gathered at Palazzo Grazioli, Berlusconi’s house in Rome, ahead of tonight’s verdict. Here’s a photo:

5.36pm BST

A quick catch-up

Silvio Berlusconi is caught up in three separate court cases. The appeal under consideration in Rome now relates to last October’s tax fraud conviction involving his Mediaset media empire.
Judges in a lower court concluded that Mediaset had hiked the price of film distribution rights artificially high, to cut its tax liabilities, and said Berlsuconi has spawned "a whole system of tax fraud".
Lawyers for the former Italian prime minister and media magnate have argued this week that he wasn’t really in full control of the company at the time. They also claimed that any offense was tax evasion rather than fraud, so the jail term and public office ban handed down to Berlusconi wasn’t appropriate.
Given his age, Berlusconi would serve any prison term as house arrest. But it’s the prospect of a ban from public office that could shake politics, if Berlusconi retaliated by withdrawing his party’s support for Italy’s coalition.

Here’s a few good backgrounders:

Guardian: Silvio Berlusconi: Italy’s supreme court prepares for verdict on final appeal

BBC: Ex-Italy PM Silvio Berlusconi criminal appeal to finish

Reuters: Italy’s top court to issue verdict on Berlusconi fraud appeal

5.15pm BST

Italian journalist Alessandro Da Rold of Linkiesta reports from inside the courtroom that the Berlusconi verdict might come in around 45 minutes time, at 7pm local time or 6pm BST.

4.58pm BST

Here’s a live feed from outside the Italian Supreme Court in Rome, where Silvio Berlusconi’s appeal verdict may come soon.

Updated at 5.00pm BST

4.54pm BST

Now we wait, for news from Italy…

4.46pm BST

European markets close higher

European stock markets have closed sharply higher. The stream of decent news from the world’s manufacturing sectors, in the UK, US and across the eurozone, sent all the major indices up today on hopes that the global economy strengthened last month.

• FTSE 100: up 60 points at 6681, +0.9%
• German DAX: up 134 points at 8410, +1.6%
• French CAC: up 50 points at 4035, +1.25%
• Spanish IBEX: up 106 points at 8540, + 1.2%
• Italian FTSE MIB: up 336 points at 16818, +2%

Brenda Kelly, senior market strategist at IG, commented:

Anyone backing a eurozone recovery would have been more than pleased with the manufacturing output numbers today. With the exception of Spain they all came in ahead of expectations, with Italy even seeing manufacturing output crossing into expansion territory.

ECB president Mario Draghi reiterated his usual comments with respect to downside risks within the single currency area, which had the useful effect of driving the euro lower. Financial fragmentation and the lack of credit growth, together with the unsettling lack of inflationary pressures, gave the ECB to the excuse to keep rates on hold for as long as necessary.

Increasing evidence that the UK economy is clambering back to its feet perhaps acknowledges that previous monetary policy actions have worked. It was, therefore, no surprise that new Bank of England governor Mark Carney chose to keep his powder dry for now.

Updated at 5.44pm BST

4.28pm BST

Our correspondent in Rome, Lizzy Davies, flags up that the Berlusconi verdict may come once the Italian stock market has closed, in a few minutes time….

4.07pm BST

We’re still waiting for news from Italy’s supreme court, where judges have retired to considering Silvio Berlusconi’s final appeal against his tax fraud conviction.

Deliberations began at noon local time (11am BST), and were expected to take several hours.
Reuters has a good preview here, which explains how Italian politics could be plunged into chaos if the conviction is upheld:

Italy’s top court to issue verdict on Berlusconi fraud appeal

If you’re new to the case, here are the reasons the case has political ramifications, and could raise tensions across the euro area:

1) Berlusconi faces a sentence of four years in jail – commuted to one year under a 2006 amnesty – and a five-year ban from public office, although the prosecution has now suggested cutting that to three years
2) If upheld, the sentence would need to be rubber-stamped by the Senate
3) That could destabilise the coalition, made up of Berlusconi’s right-leaning People of Freedom (PDL) party, and the left-wing Democratic Party (PD).
4) The Senate might not hold such a vote until September, which could hold back the pace of economic reforms in Italy.

3.29pm BST

Booming US factory sector sends shares soaring

The US stock market is roaring to new record high this afternoon, after new factory data showed that America’s manufacturing sector posted impressive growth last month.

The ISM measure of manufacturing activity in the world’s largest economy jumped to 55.4, up from June’s 50.9. That’s the highest level since August 2011, and well into ‘growth’ territory (50.0 or above).
This pushed shares up on Wall Street, and in the City. The S&P 500 index blasted over the 1,700 point mark for the first time, while in London the FTSE 100 is up 52 points at 6673.

The news also hit US government bond prices. A stronger US economy means more chance of the Federal Reserve pullina back its bond-buying stimulus programme, so Treasuries are being sold off with gusto.

This has pushed the yield (interest rate) on a US 10-year bond to 2.666%, from 2.58% last night. 

Updated at 3.29pm BST

3.09pm BST

See Mario Draghi’s statement

Mario Draghi’s opening statement at the ECB press conference is now online:

It concluded with another reminder to eurozone national governments to cut borrowing and reform their economies. Only then, Draghi argued, can Europe’s youth unemployment crisis be solved:

As regards fiscal policies, in order to bring debt ratios back on a downward path, euro area countries should not unravel their efforts to reduce government budget deficits. The emphasis should be on growth-friendly fiscal strategies which have a medium-term perspective and combine improving the quality and efficiency of public services with minimising distortionary effects of taxation.

To reinforce the overall impact of such a strategy, Member States must step up the implementation of the necessary structural reforms so as to foster competitiveness, growth and job creation. Removing rigidities in the labour market, lowering the administrative burden and strengthening competition in product markets will particularly support small and medium-sized enterprises.

These structural reform measures are essential to bring down the currently high level of unemployment, in particular among the younger citizens of the euro area.

2.37pm BST

And that’s the end of the press conference. Not the most thrilling one ever, and no mention of the situation in Cyprus:

Just off to a meeting — will gather more reaction when I get back…

2.34pm BST

Final question, and it’s about the possibility of releasing European Central Bank minutes. Might this help mend the idea that the ECB and the Bundesbank are at war, and might it end the (entertaining) practice of Council members trying to get their message out through the media?
All this would be nice things to achieve, but it would be highly premature to comment on the specifics, Draghi replies.

2.33pm BST

Key event

Draghi must be looking forward to the beach – he jokes that he can’t take all the credit for restoring confidence to the eurozone area.

Much of this was due to government action, he modestly points out.

2.31pm BST

Follow-up question: Did eurozone countries take advantage of the relief created a year ago by the ECB’s promise to buy unlimited quantities of bonds?
Draghi replies that some countries "certainly did, some of them make progress…" Others, less so.
He declines to give any views on Italy’s progress, but cites Greece, Ireland & Portugal where labour market reforms and fiscal consolidation have taken place.

2.24pm BST

Draghi: One year since THAT speech

Next question: Would Mario Draghi like to reflect on the changes over the last 12 months since he delivered his ‘whatever it takes’ speech in London?
Draghi grabs the ball and runs with it.
There are three key areas of progress, he says. The return of normalisation in the financial markets, some some progress in fighting fragmentation in the credit markets, and thirdly the beginning of capital inflows into the euro area.

He adds:

More generally, OMT [Draghi's bond-buying programme] has reduced the riskiness, the general riskiness, in the euro area.

So, borrowing costs are down, and confidence is up, and finally there are signs that the real economy is feeling the benefits.
The ECB priority now is to repair the monetary policy transmission channels so that stimulus reaches the right parts of the economy, Draghi adds.

Updated at 2.27pm BST

2.18pm BST

Lots of chatter about exactly how, and why, the ECB might start releasing minutes of its meeting.
Jamie McGeever of Reuters sums it up:

While the FT’s Peter Spiegel’s heard quite enough:

2.14pm BST

Draghi: I see no deflation

Question: Is there a risk of deflation in the euro area?
Draghi says no:

We see relative price adjustments in certain sectors, where there is a waning of one-off effects such as taxation.
We don’t see deflation for any country at this point in time.

Updated at 2.15pm BST

2.07pm BST

Just to clarify, the ECB board will present a plan for releasing minutes from its meetings later this year

2.05pm BST

Draghi appears to be in good spirits:

2.03pm BST

Question: How unanimous was the decision, really?
Draghi insists that he’s not refusing to say whether some Council members wanted to cut rates. Apparently it wasn’t talked about.
"We actually only discussed forward guidance…and the decision was unanimous."

And while Draghi repeated his forward guidance today, he might not do it every month:
We may not repeat them if we think you, and the markets, understand that guidance remains the same until it is changed, the ECB president says, adding:
"We don’t change our mind until we change our mind".

2.01pm BST

Question: Why is the ECB considering releasing minutes from the monthly meetings now, when tensions over the eurozone crisis are higher then they were in the early days of the Bank? Isn’t it riskier?
Draghi agrees that the challenge is to make more information available, without threatening the independence of those on the Council.

1.57pm BST

Question: Minutes to be released?

Next questions: Did the ECB discuss tying its forward guidance to a specific target?
And did the ECB discuss release publishing the minutes of its meetings?
Draghi says no, there was no discussion of setting specific targets. Except that the guidance is, as he explained, based within the ECB’s view on inflation, or price stability.
And on the minutes?
We don’t start from scratch here, Draghi says, All central banks have changed their communications.
You’re probably too young to remember, he flatters (or patronises) the Frankfurt press pack, but the ECB was a pioneer in publishing forecasts. Other banks have followed us, he says, with initiatives such as press conferences after monetary policy meetings.
Draghi then says he is keen to see more information from the governing council meetings released.
But it’s vital that nothing is released that threatens the independence of the members of the governing council, who come from 17 countries but are acting in the interest of the eurozone, he adds.

1.50pm BST

The next questioner asks for more clarity on whether the decision to leave interest rates unchanged was unanimous. And gets no clarity all.
Draghi also rejects the suggestion that the ECB has failed to improve credit availability in the euro area.
We did compress volatility, and had some success on lowering short-term rates, he adds.

1.48pm BST

The first journalist gets two questions in:
1) Did the ECB discuss cutting rates and was the decision unanimous?
2) Is the ECB planning to refine its guidance on forward guidance?
Draghi responds:

"We have basically unanimously confirmed the forward guidance from last time"

He then argues that the statement was unanimously supported, by the governing council, and the decision to leave rates unchanged is part of the statement. Hmmm….

And how long will the ECB maintain its accommodative stance? As long as we think inflation pressure remains subdued, Draghi adds.

Updated at 1.48pm BST

1.45pm BST

No excitement after the statement:

1.42pm BST

Onto the questions….

1.42pm BST

A few more key points from Mario Draghi’s statement (which will be online very soon)
1) Europe’s labour market remains weak and needs to be reformed to boost competition
2) The eurozone’s credit market is too fragmented – thus the need for banking union to strengthen weaker institutions in
3) Governments must not deviate from focusing on cutting deficits, but should develop ‘growth friendly’ strategies

1.37pm BST

Downside risks…

Draghi explains that the ECB still expects a "tentative" recovery in the second half of 2013.
However, the risks to economic outlook to the euro area continue to be on the downside. He cites three threats
1) Volatility in the financial markets
2) weaker than expected domestic demand, and
3) slow progress on structural reforms.

1.35pm BST

Forward guidance repeated

Mario Draghi reiterates last months’ unprecedented forward guidance on borrowing costs:
The governing council confirms that it expects borrowing costs to remain at current or lower levels for an ‘extended period of time", he says.

Draghi cited the weak eurozone economy, and "subdued monetary dynamics".

1.32pm BST

And we’re off…
Mario Draghi is reading out the ECB’s statement, explaining why rates were left unchanged.
Underlying price pressures in the eurozone are likely to remain subdued in the eurozone, and inflation expectations are ‘firmly anchored’.
At the same time, recent confidence indicators show signs of improvement from low levels and "tentatively" confirm signs of recovery, he says.

1.30pm BST

ECB press conference begins

Over in Frankfurt, the ECB press conference is about to begin. It’s being streamed live here.

Updated at 1.30pm BST

1.22pm BST

The European Central Bank’s governing council was under no real pressure to ease monetary policy further today, explained Rabobank economist Elwin de Groot to Reuters.
Here’s a flavour:

That was in line with expectations," Rabobank economist Elwin de Groot said of the decision to leave rates unchanged, almost universally expected in a Reuters poll.

"At this stage, we’ve seen several indicators improving a little bit. Today, the update on the PMI surveys confirmed that point," he said of closely watched business surveys, which showed that last month euro zone manufacturing grew for the first time in two years.

Full details here from 9.08am:

Unemployment in the 17-country bloc sharing the euro fell for the first time in more than two years in June.But lending to firms is still declining in the euro zone and is especially weak across the bloc’s troubled debtor countries, which could keep calls for lower policy rates alive."There was no immediate pressure for the ECB to do more," de Groot said, but added: "There is a lot of uncertainty and if the economic recovery does not become more visible in the second half, they will be forced to do more."

12.54pm BST

The European Central Bank’s ‘no change’ decision means:

• The headline borrowing rate, or ‘refinancing rate’, remains at 0.5%

• The ‘deposit facility rate’, paid to commercial banks who leave cash with the ECB, remains at 0.0%

• The ‘marginal lending rate’, charged to banks when they borrow from the ECB, remains at 1.0%.

12.45pm BST

ECB decision

Here comes the European Central Bank… and it’s also voted to leave its key interest rates unchanged.

12.33pm BST

Can the ECB provide more fireworks when it publishes its own decision at 12.45pm BST? Probably not. Lorcan Roche Kelly, chief Europe strategist at Trend Macrolytics, jokily predicts a repeat of last month’s ‘no change’:

Updated at 12.34pm BST

12.25pm BST

Bank of England leaves rates unchanged – What the analysts say

A quick round-up of analyst reaction to the Bank of England’s decision (from 12.00pm onwards)

Lee Hopley, chief economist at EEF:

Recent data suggesting the recovery may now have some legs will have supported another no change decision this month. While the economy has moved in a more positive direction it’s unlikely that there will be major change to the Committee’s medium term view on inflation and growth in next week’s Inflation report. The main event from the MPC will now be more detail on its forward guidance plans alongside the Inflation report, which will frame the debate on monetary policy in the months ahead.

David Kern, chief economist at the British Chambers of Commerce:

Minutes from the recent MPC meeting suggest that QE is unlikely to be increased any time soon and low interest rates will be maintained for a long period, which will provide a stable environment for businesses.

This is a positive shift in emphasis – and we hope this will be confirmed when the MPC presents its response to the Chancellor on how forward guidance should be used, expected next week. When looking at the tradeoff between growth and inflation, we hope the Committee accepts that under current circumstances, more inflation is likely to damage growth. We continue to urge the MPC to consider new policy measures to help boost business lending. For example, the existing QE programme could be used to purchase private sector assets other than gilts, including securitized SME loans, as this would reduce the risk when banks are looking to lend to business.

Howard Archer of IHS Global Insight:

The Bank of England was always unlikely to act at the August MPC meeting given next Wednesday’s assessment on adopting a policy of forward guidance. Furthermore, the ongoing stream of improved news on the UK economy – evident again in the healthy manufacturing purchasing managers survey for July – suggests that the economy is not in need of any further stimulus for now at least.

 However, the improved news on the UK economy could be seen as highlighting the need for the Bank of England to make it absolutely clear that interest rates are not going to go up for some considerable time to come – so is supportive to the case for adopting forward guidance on monetary policy. While the economic recovery seems to be becoming more firmly entrenched, it is from a very low base and with fiscal policy tight, there remains a very strong case for keeping interest rates at 0.50% for a long time to come.

Vicky Redwood of Capital Economics:

Today’s Monetary Policy Committee (MPC) meeting was always looking likely to be a non-event ahead of the announcement about forward guidance due next week. Our best guess is that the MPC will commit to keep official interest rates low until an unemployment threshold is breached.

Updated at 12.25pm BST

12.11pm BST

It’s all about next week

City economists say they aren’t surprised that the Bank of England has voted to leave interest rates unchanged, and not to create more electronic money to buy government bonds.

They believe next week’s Quarterly Inflation Forecast meeting will see the real fireworks, as governor Mark Carney is likely to flesh out the Bank’s ‘forward guidance’ on future policy.

Updated at 12.28pm BST

12.10pm BST

Pound climbs higher

Sterling is gaining against the US dollar, now up a whole cent this morning at .523, following the news that the Bank of England had not cut interest rates further, increased its bond-buying programme, or released a statement.

Updated at 12.12pm BST

12.00pm BST

Bank of England leaves rates and QE unchanged

The Bank of England has voted to leave interest rates unchanged from their current record low of 0.5%, and also left its quantitative easing (bond-buying) programme as it stands.

And there’s no statement.

Recent encouraging economic data, such as this morning’s jump in manufacturing activity, must have encouraged the MPC to wait.

Reaction to follow

Updated at 12.04pm BST

11.50am BST

Just 10 minutes until the Bank of England releases its decision on monetary policy, and economists aren’t expecting a shock.

Ishaq Siddiqi, market strategist at ETX Capital, reckons the Monetary Policy Committee will sit tight:

For the BOE, growth in the UK with an uptick in most measures of economic activity build a greater excuse for Mark Carney and co to refrain from using QE as a tool to stimulate the economy.

While Shaun Richards points out that the BoE’s quarterly inflation report is due out next week:

Updated at 11.56am BST

11.21am BST

Italian political expert Alberto Nardelli has updated his blogpost on the Berlusconi appeal, explaining the various possibilities, and the pressures that a guilty verdict would put on the country’s coalition.

Silvio Berlusconi Mediaset verdict – possible scenarios

11.13am BST

Mario Draghi could produce a little surprise today and announce that the ECB Governing Council will start publishing the minutes of its monthly meetings.

Jens Weidmann, Germany’s man at the ECB, has thrown his weight behind the idea (more details on CNBC), which would improve transparency and bring it into line with the Bank of England and the Fed.

Fast FT has drawn up a few more key points to watch out for:

  • Will Mr Draghi renew or clarify his pledge to keep interest rates "at present or lower levels for an extended period of time?"
  • If he does clarify the time frame for that policy guidance, for how long?
  • Will Mr Draghi be more specific about future action; inflation remains "well-anchored" in the argot, will there be any hints as to what might trigger a further cut?

More on fastFT.

Updated at 11.16am BST

11.00am BST

Economics editor Larry Elliott has written about today’s encouraging manufacturing data:

UK manufacturing confidence highest since 2011

10.57am BST

Italy’s Supreme Court has convened to consider its ruling on Silvio Berlusconi’s tax fraud appeal.

The hearing began on Tuesday, and the judges’ decision isn’t expected until this evening, perhaps at 4pm or 5pm BST.

Updated at 10.57am BST

10.51am BST

Europe’s financial markets have rallied again today, on the back of this morning’s decent manufacturing data – and the cautious tone of the Federal Reserve last night.

In London, Lloyds is leading the way after returning to profit (see full story here).

• FTSE 100: up 30 points at 6651, + 0.45%

• German DAX: up 101 points at 8377, +1.2%

• French CAC: up 18 points at 4011, +0.47%

• Spanish IBEX: up 51 points at 8,464, + 0.6%

• Italian FTSE MIB: up 211 points at 16,694, +1.2%

Rachel Underhill, client manager at CMC Markets, commented that the stock market bulls have "regained control after strong PMI data gives cause for optimism."

10.31am BST

Ninety minutes to go until we get the Bank of England’s rate decision meeting, and 3 hours until the European Central Bank’s press conference. Here’s RanSquawk’s preview of the two meetings:

• Bank of England decision: noon BST

• ECB decision: 12.45pm BST

• ECB press conference: 1.30pm BST

Updated at 10.34am BST

10.26am BST

Over in Greece, public hospital workers began a four-hour strike at 11am local time (9am BST), and were also planning an anti-austerity demonstration.

Kathimerini reports:

The protesters were due to gather outside the Health Ministry at 11.30 a.m.

The workers oppose plans to transfer some 1,500 healthcare workers and turn at least six hospitals in Attica into health centers.

10.18am BST

John Hooper: Rajoy’s high-risk strategy over slush fund claims

Our Southern Europe editor, John Hooper, has been watching events unfold in the Spanish Parliament where prime minister Mariano Rajoy denied wrongdoing over the illegal payments scandal (highlights from 8.43am). Here’s his early analysis:

Rajoy’s strategy today was a high-risk one. But he had little alternative if he was not to resign.

He insisted his only mistake was to have been taken in by Luis Bárcenas — a “criminal” he called him. As a Basque nationalist lawmaker was quick to point out, though, that makes Rajoy a prisoner of what else has yet to emerge from the scandal – whether ferreted out by the young judge conducting the investigation or volunteered by Bárcenas, who has been drip-feeding his disclosures to an eager press.

 With an overall majority in parliament – Rajoy’s People’s Party has 186 of the 350 seats in the lower house, the Congress of Deputies – he can live to fight another day. But the question marks over his survival remain.

 The Spanish prime minister tried to bolster his position by pointing to signs of recovery, notably a drop in unemployment in the second quarter. But the economy has been in and out of recession for the last five years and remains worryingly dependent on other countries, both for exports and tourist receipts.

 Arguably, the best news for the prime minister came in the form of today’s improved manufacturing output figures from Britain and the Eurozone.

Updated at 10.20am BST

10.10am BST

Bit late, sorry, but the Spanish parliamentary hearing over the illegal payments scandal is being streamed online – click here to see it (no translation though).

10.05am BST

The pound has jumped on the back of today’s strong manufacturing data, up three-quarters of a cent against the US dollar to just above .52.

9.37am BST

UK ‘March of the Makers is underway’

Britain’s manufacturing revival has started at last. So argues David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, following the news that activity hit a 28-month high last month (see 9.33am).

Noble commented:

The much vaunted march of the makers has finally materialised.

Exports have been critical to this success, but it is the broad based nature of the sector’s performance which endorses the view we are on track for solid and accelerated growth in the coming months.

The ability of British manufacturers to market themselves abroad was always seen as crucial to long-term success and so it has proved. New export business has grown at its quickest rate in two years in a sign that macro-economic conditions are improving. Domestic performance has also been strong.

Markit’s data is online here:

It shows that confidence among factories is high, with jobs growth at a two-year peak.

Updated at 9.38am BST

9.33am BST

UK manufacturing activity beats forecasts

Britain’s manufacturers have also posted strong growth in July, according to Markit’s monthly survey of the sector.

Hot on the heels of the decent eurozone data (9.08am), the UK PMI index jumped to 54.6 –the strongest reading in 28-months, and well over the 50 point mark that shows growth.

Economists had expected a reading of 52.8.

This must bolster hopes that the UK’s economic recovery continued in July, following the 0.6% increase in GDP recorded in the previous three months.

9.26am BST

Rajoy: I won’t resign over corruption claims

Back in the Spanish parliament, prime minister Mariano Rajoy continues to deliver a lengthy speech defending himself over the slush fund scandal (see 8.43am onwards).

Rajoy has told MPs that he will not step down, and pledged to keep implementing his economic reform programme:

Nothing related to this affair has stopped me or will stop me from governing.

9.20am BST

Lloyds selloff moves closer

In the City, the big news is that Lloyds Banking Group has posted a profit, which will help the UK government sell off its 38% stake in the bank.

And Lloyds’ army of long-suffering shareholders will be interested to hear that the bank has begun talks over resuming its dividend.

My colleague Jill Treanor writes:

The 39%-government-owned bank reported first half profits of £2.1bn – compared with a £456m loss this time a year ago – even though it took an extra £500m charge for mis-selling payment protection insurance, taking the total cost of paying redress to customers to £7.3bn.

The return to profitability had been expected and the City was awaiting guidance on the bank’s future plans to pay dividends – blocked by Brussels when the bank was bailed out in 2008 – which is expected to make the shares easier for George Osborne to sell off. The shares were the biggest risers in the FTSE 100 in early trading, gaining 5% to over 71p.

Lloyds sell-off moves nearer as bank returns to profit

Updated at 9.44am BST

9.11am BST

Graph: Eurozone manufacturing returns to grow

And here’s the graph showing how eurozone manufacturing activity has revived after several dire years:

Updated at 9.12am BST

9.08am BST

Eurozone manufacturing sector returns to growth

Good news. The eurozone manufacturing sector has returned to growth, according to the final survey of the sector carried out by data firm Markit.

Markit’s manufacturing PMI survey (based on interviews by purchasing managers across the euro area) came in at 50.3, beating a ‘flash’ estimate of 50.1. That’s the best reading in two years, and means activity increased (50.0 = the cutoff point between growth and contraction).

Within the data, Germany’s manufacturing sector posted its strongest PMI reading in 18 months, and Italy also cheered analysts with a reading of 50.4.

And there’s even a better result in Greece, where the PMI was its least weak in more than three and a half years.

Rob Dobson, senior economist at Markit said the eurozone’s manufacturing sector had made a positive start to the third quarter of 2013:

Manufacturing output rose again in Germany, Italy, the Netherlands and Ireland during July, while there were welcome returns to growth for France and Austria. The breadth of the expansion will hopefully aid in its sustainability. Even the downturn in Greece showed signs of easing, while Spain saw its second-weakest contraction for over two years.

The bugbear of eurozone manufacturing remains its lacklustre labour market, which contributes to the persistent joblessness of the region as a whole.

Even here there were tentative signs of recovery, with the rate of manufacturing job losses easing to a one-and-a-half year low. Meanwhile, falling commodity prices and intense competition are still keeping inflationary pressures in the sector at bay and posing no real issues for policymakers.

8.53am BST

Rajoy: Justice must do its job

Mariano Rajoy also told MPs in the Madrid parliament that justice must take its course, over disgraced former treasurer Luis Barcenas. The Spanish PM added that he’s confident the courts will decide that neither he, nor his party, committed any crime.And here’s the key quote:

I was mistaken in trusting the wrong person. I didn’t cover up a guilty person. He tricked me, but it was easy because I don’t jump at condemning anyone.

MPs will question Rajoy on the affair once he’s completed his speech.

Updated at 8.53am BST

8.43am BST

Rajoy: Slush fund scandal has hurt Spain

Spanish prime minister Mariano Rajoy has begun testifying in the Madrid parliament over the illegal payments scandal, and admitted that the revelations of corruption and secret payments has hurt Spain’s image abroad.
The embattled PM insisted that claims his party received millions of euros in secret illegal payments are untrue, saying he had ‘made a mistake’ in his relationship with the party treasurer Luis Barcenas.
Barcenas is at the heart of the scandal, and faces a string of charges including money laundering, bribery, and tax fraud.
Here are the first Reuters newswire snaps from the court:



We’ll have more details and analysis later…

Updated at 8.43am BST

8.32am BST

Today’s meetings come after the US Federal Reserve got the ball rolling with its own meeting yesterday.

The Fed left its stimulus package unchanged, and warned that the US economy still faces difficulties. My colleague Heidi Moore explains:

The unemployment rate "remains elevated," members said, while mortgage rates are rising and a deadlocked Congress holding up budget policy is "restraining economic growth."

The committee’s wary tone on the economy is in marked contrast to its more chipper pronouncements just last month, when chairman Ben Bernanke said "generally speaking, financial conditions are improving" and "the fundamentals look a little better to us," crediting the housing sector in particular for creating construction jobs and supporting consumer spending.

Here’s the full story: Fed to keep interest rates at zero amid debate over future leadership

Updated at 8.32am BST

8.22am BST

Poll: Economists expect no change from the ECB

Reuters polled 70 economists ahead of today’s European Central bank meeting, and 69 of them said they don’t expect an interest rate cut today.

However, the ECB governing council could still discuss easing monetary policy.

Last month it surprised the City, and sent the euro tumbling, by declaring that rates would remain at their current record lows, or lower, for an extended period of time. Surely the Frankfurt press pack will ask Mario Draghi to clarify this forward guidance?….

Updated at 8.23am BST

8.10am BST

Central Banks in focus

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

It’s a big day for monetary policy, as the European Central Bank and the Bank of England hold their monthly meetings to set interest rates and stimulus packages.

Despite recent encouraging data suggesting the recession is ending, the ECB is expected to remain dovish. And as ever, Mario Draghi’s press conference will be a highlight. What will the man who promised a year ago to do ‘whatever it takes’ make of the situation today?

The Bank of England is also expected to keep its hands off the levers of monetary policy — analysts don’t expect any increases in its bond-buying programme ahead of next week’s quarterly inflation report. But with new boy Mark Carney in the governor’s chair, there’s a frisson of excitement. Will the BOE release another statement, as it surprisingly did last month after Carney’s first Monetary Policy Committee?

There’s also the prospect of drama in the political sphere. After two days of legal argument, Italy’s Supreme Court is expected to give its final verdict on Silvio Berluconi’s appeal against a jail sentence and public office ban for tax fraud. If the sentence is upheld, the Italian coalition government could look shakier.

While in Spain, prime minister Mariano Rajoy is appearing in parliament to answer questions over the illegal payments scandal. MPs will demand answers over allegations that Rajoy himself received money through a secret scheme in which cash from businesspeople was funneled to senior party figures. More details here.

Also, new manufacturing data for the eurozone, UK and US should show how the world economy fared in July.

I’ll be tracking the action through the day…

Updated at 8.22am BST

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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 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 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 News & Media Limited 2010

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