RBNZ

In the trading room today: AUD and NZD: Is the Thunder from “Down Under” Over? Following the better than expected employment reports from Australia and New Zealand, we take a close look at the AUD and the NZD and ponder if the currencies “down under” will be able to regain their bullish momentum, we analyze the latest trend developments in the AUD/USD and NZD/USD currency pairs, we examine the range in the EUR/USD pair, we note the failure of the GBP/USD currency pair to break above an important resistance level, we highlight the market’s reaction to the Bank of England interest rate announcement, the Australian and the New Zealand Employment and Unemployment Rate, the UK Industrial Production, and the US Jobless Claims, we discuss new forecasts from Bank of New York-Mellon and Credit Agricole, and prepare for the trading session ahead.


USA 

Frankfurt professor’s concerns echo recent alarms being sounded across Europe over Berlin’s stance on EU fiscal policy. A leaked policy paper from France was redolent with fear of and hostility to Merkel and her prescriptions in the euro crisis…

 


Powered by Guardian.co.ukThis article titled “German role in steering euro crisis could lead to disaster, warns expert” was written by Ian Traynor in Leuven, for theguardian.com on Sunday 28th April 2013 14.37 UTC

One of Germany's most influential political thinkers has delivered a stark warning that its post-second world war liberal democracy cannot be taken for granted and its dominant role in managing Europe's debt crisis could lead to disaster.

Jürgen Habermas, the Frankfurt professor whose political thinking has helped shape Germany over the past 50 years, called for the EU to be turned into a supranational democracy and the eurozone to become a fully fledged political union, while lambasting the "technocratic" handling of the crisis by Brussels and European leaders.

In his first big speech on the euro crisis, delivered at Leuven University, east of Brussels, Habermas called for a revival of Europe's doomed constitutional ambitions, arguing that the disconnect between what needed to be done in economic policy and what was deemed to be politically feasible for voters was one of the biggest perils facing the continent. "Postponing democracy is rather a dangerous move," he said.

At 83, Habermas has long been revered as a guru and mentor to the post-1968 generation of centre-left German politicians. He is a champion of a democratically underpinned European federation, and has reserved some of his most trenchant criticism for Berlin's role in the three-year crisis.

"The German government holds the key to the fate of the European Union in its hands. The main question is whether Germany is not only in a position to take the initiative, but also whether it could have an interest in doing so," he said.

"The leadership role that falls to Germany today is not only awakening historical ghosts all around us, but also tempts us to choose a unilateral national course or even to succumb to power fantasies of a 'German Europe'.

Euro coins and banknotes
Habermas says the EU elite’s response to the currency crisis has been to construct a technocracy without democratic roots. Photograph: Reuters

"We Germans should have learned from the catastrophes of the first half of the 20th century that it is in our national interest to avoid permanently the dilemma of a semi-hegemonic status that can hardly hold up without sliding into conflicts."

Habermas's wakeup call came at the end of a week of similar alarms being sounded on both sides of the country's borders. The Polish prime minister, Donald Tusk, in the presence of the German chancellor, Angela Merkel, in Berlin last week, said there were worries about German domination of the EU "everywhere, without exception".

A leaked draft policy paper from France's governing socialist party on Friday was redolent with fear of and hostility to Merkel and her policy prescriptions in the euro crisis.

Habermas demanded a sea change in German policy, away from insisting on "stabilising" the budgets of vulnerable eurozone countries by slashing social security systems and public services, to a policy of "solidarity" entailing common eurozone liability, mutualised debt, and euro bonds.

He located Germany's traditional EU enthusiasm in the post-Nazi quest for international rehabilitation through reconciliation with France and driving European unification processes, all occurring under the protection and promotion of the US in cold-war western Europe until the Soviet collapse in 1989.

Habermas said: "The German population at large could develop a liberal self-understanding for the first time. This arduous transformation of a political mentality cannot be taken for granted … Germany not only has an interest in a policy of solidarity, it has even a corresponding normative obligation … What is required is a co-operative effort from a shared political perspective to promote growth and competitiveness in the eurozone as a whole."

Such an effort would require Germany and several other countries to accept short- and medium-term redistribution in its long-term interest, he added, "a classic example of solidarity".

The structural imbalances between the economies of greatly divergent eurozone countries at the root of the crisis were certain to worsen under the policies being pursued, Habermas argued, because governments were making decisions "exclusively from [their] own national perspective. Until now, the German government has clung steadfastly to this dogma".

He said the EU elite's response to the crisis had been to construct a "technocracy without democratic roots", trapping Europe in a dilemma of legitimacy and accountability, between "the economic policies required to preserve the euro and, on the other, the political steps to closer integration. The steps that are necessary are unpopular and meet with spontaneous popular resistance".

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Spain cuts growth forecasts, delays deficit target. US GDP grows by annualized 2.5% in first quarter. Italy’s borrowing costs fall to record low. Worst of crisis is over, says ECB’s Provopoulos. US consumer sentiment index revised higher in April…

 


Powered by Guardian.co.ukThis article titled “US economy grows less than expected, while Spain cuts forecasts – as it happened” was written by Nick Fletcher, for theguardian.com on Friday 26th April 2013 07.38 UTC

5.18pm BST

European markets edge lower after positive week

After a fairly positive week – based mostly on the hope of an ECB rate cut next week – markets have paused for breath. Spain's delay of its deficit target and slight worse than expected US GDP figures gave some investors the excuse to take a bit of profit:

• The FTSE 100 finished down 16.17 points or 0.25% at 6426.42

• Germany's Dax was down 0.23%

• France's Cac closed 0.79% lower

• Italy's FTSE MIB ended down 0.51%

• Spain's Ibex dropped 0.81%

The Dow Jones Industrial Average has dipped between negative and positive but is currently up just 0.02%.

And with that it's time to close the blog for the week. Thanks for all the comments, and we'll be back again on Monday.

5.10pm BST

IMF welcomes Spanish announcement

Praise for Spain from the IMF too. Managing director Christine Lagarde said:

I strongly support the Spanish government's objectives of restoring a sound fiscal position while securing a recovery and creating jobs. Today's announcement to pursue a more gradual consolidation path is a welcome step toward meeting these goals, building on major reforms and structural fiscal improvements last year.

We are looking forward to discussing the measures underpinning the new strategy in the forthcoming …consultation mission to Spain, scheduled for early June.

4.14pm BST

Olli Rehn, vice president of the European Commission has started a new blog, and observers believe the first post could reflect a new mood:

4.06pm BST

Greece prepares to vote on controversial reforms

Greece's parliament is preparing to vote this weekend on a controversial multi-bill of internationally mandated reforms. Helena Smith writes:

The bill outlining the dismissal of 15,000 civil servants from the public sector and a host of other “prior actions” Athens’ ruling coalition has pledged to enact in exchange for rescue funds worth €8.8bn has just been presented to parliament.

But not without a fight. Protesting trade unionists representing the public and private sector have been out in force today and more demonstrations are planned when the bill is put to vote in the 300-seat House late on Sunday.

The firing of some 4,000 civil servants this year and around 11,000 next has been met with fierce opposition at a time when unemployment rates in Greece are nudging 28 % – the highest in the euro zone.

Protesting farmers in Athens claim that their investments on photovoltaic systems are no longer profitable due to tax reforms. Photograph: EPA/Alexandros Vlachos
Protesting farmers in Athens claim that their investments on photovoltaic systems are no longer profitable due to tax reforms. Photograph: EPA/Alexandros Vlachos
Greek municipal workers protest against government reforms in Athens. Photograph: EPA/Alkis Konstantinidis
Greek municipal workers protest against government reforms in Athens. Photograph: EPA/Alkis Konstantinidis

Helena adds:

But prime minister Antonis Samaras insists the Greek economy is beginning to recover. Today, he highlighted that optimism by hailing the decision of the Finnish mobile operator, Nokia, to expand in the country as proof that it was finally turning a corner. Many beg to differ, however, as the fiercely anti-austerity Syriza’s sudden bounce in the polls would also prove [see earlier].

With spirits riding high, the prime minister has decided to visit China in a bid to lure investors. Aides confirmed he would make the trip, his first to the Far East since assuming office, in mid-May. A huge drive is currently underway in China to boost tourism to “glorious Greece.”

3.53pm BST

European Commission welcomes Spanish deficit target delay

The European Commission has welcomed Spain's announcement of a delay to the country meeting its deficit target. In a statement the EC said:

Regarding the fiscal targets, the postponement of the correction of the excessive deficit (to below 3% of GDP) to 2016 is consistent with the current technical analysis by the Commission services of what would be a balanced – but still ambitious – fiscal consolidation path, given the difficult economic environment.

It is crucial that the fiscal path in the Stability Programme be based on prudent macroeconomic assumptions and a sufficient amount of high-quality, structural measures. Our assessment in this regard will be also made public on 29 May.

3.01pm BST

US consumer sentiment better than expected in April

Despite US goverment spending cuts and tax rises, a survey of consumer sentiment has come in stronger than expected.

The Thomson Reuters/University of Michigan index rose to 76.4 in April, up from a preliminary reading for the month of 72.3 and higher than the forecast 73.2.

The news has helped lift US shares which had been struggling in the wake of the slightly worse than forecast first quarter GDP figures.

So the Dow Jones Industrial Average is currently around 25 points higher having initially edged lower.

2.19pm BST

French socialists accuse Merkel of causing crisis

Here's more on the blast aimed at Angela Merkel by France's governming socialist party. Europe editor Ian Traynor writes:

French president Francois Hollande’s governing socialists have delivered a blistering assault on Germany’s chancellor Angela Merkel, accusing her of causing the single currency crisis that has been tearing Europe apart for more than three years, of acting selfishly and intransigently in her own political and German national interest, and demanding a “showdown” with the “chancellor of austerity.”

In a draft paper on party policy on Europe ahead of a conference in June, the socialists contend that Europe is being run by a rightwing Anglo-German cabal dominated by liberal free trade interests with the rest of the world and austerity within the EU.

They call into question the Franco-German alliance that has been at the heart of the EU for as long as it has existed and argue that France alone of the big EU countries has a government that is genuinely pro-European.

Merkel, as well as Hollande’s predecessor, Nicolas Sarkozy, and David Cameron come in for stinging attack. Merkel and Sarkozy, the draft declares, managed to turn a small crisis that started in Greece more than three years ago into a mega-European disaster.

The 21-page draft leaked to le Monde which said it had the tacit support of Hollande’s government has been organized by Jean-Christophe Cambadélis, a party vice-president.

“The [EU] community project is now scarred by an alliance of convenience between the Thatcherite accents of the current British Prime Minister – who sees Europe only as a la carte and about rebates – and the selfish intransigence of Chancellor Merkel who thinks of nothing else but the savings of depositors in Germany, the trade balance recorded in Berlin and her electoral future,” the paper said.

“Today France is alone among the big countries of the EU in having a government which is genuinely European.”

2.09pm BST

Syriza party in lead in new Greek poll

Over to Greece where a poll released today shows the fiercely anti-austerity far left Syriza party in the lead as speculation also grows of an imminent government reshuffle. Helena Smith writes:

A survey conducted by the polling firm, VPRC, shows Syriza recapturing its lead with 29.5% against 27% for the centre-right New Democracy party, the predominant force in the governing coalition. Some 76% of respondents said they believed the country was headed in the wrong direction even if a majority continued to believe that Antonis Samaras was more suitable as prime minister – he received 16.6% compared to 9.1% who backed Syriza leader Alexis Tsipras in the role. But 60.3% thought “no politician” was suited for leadership.

In a further sign of the malaise gripping a nation now trapped in a sixth straight year of recession, 77% of those polled voiced support for the “immediate abolishment” of the EU-IMF mandated reforms that Greece has been obliged to enforce in return for aid, saying the debt-choked country should instead apply a “plan of economic and productive reconstruction.”

Tsipras, who is currently visiting Portugal, has been busy blasting Berlin’s fixation with austerity. Earlier today, he insisted that no country in southern Europe would be able to exit the crisis if it continues to enforce such policies. “We have to be aware that the future of Europe does not lie in the divide between the north and the south,” he said calling for enhanced dialogue between the countries of the south. "[The future] does not lie with a German Europe of surpluses in the north and social disintegration in the south.”

The survey was released amid mounting speculation that Samaras will soon reshuffle his cabinet after inter-governmental disagreement, and an embarrassing u-turn, over a reform that was to be part of a bill Athens must pass to secure further aid from creditors.

Syriza leader Alexis Tsipras at a rally during a two day visit to Portugal. Photograph: EPA/Manuel de Almeida
Syriza leader Alexis Tsipras at a rally during a two day visit to Portugal. Photograph: EPA/Manuel de Almeida

Updated at 2.12pm BST

2.04pm BST

Spain softens its commitment to austerity

Back to Spain, and here is our correspondent Giles Tremlett's full take on the day's developments:

Spain has dramatically softened it commitment to austerity, changing this year's budget deficit target from 4.5% to 6.3% – a reduction of just 0.8 percent of GDP over the year.

The softening, however, comes accompanied with dismal predictions for Spain's biggest social problem, unemployment.

The government's own predictions, presented today by ministers but without the presence of prime minister Mariano Rajoy, show unemployment at 27% this year and sticking around 25% until 2016.
The government has put back the target of reaching the Brussels-mandated deficit level of below three percent until 2016, a move that will see public debt grow to 100 percent of GDP.

Indirect and corporate taxes will be boosted, but tax minister Cristobal Montoro refused to say exactly which indirect taxes would be hit – bar ruling out petrol, VAT and income tax.

"Spain has, to all intents and purposes, thrown in the towel on fiscal austerity. The scale of the government's revisions to the country's GDP and budget deficit targets underscore the extent to which front-loaded fiscal retrenchment has exacerbated Spain's economic downturn and become self-defeating," says Nicholas Spiro of Spiro Sovereign Strategy, who warns that investors are being too kind to Spain by paying ever-lower yield prices for its bonds.

"This is a belated acknowledgement on the part of the Rajoy government that its macroeconomic policies have failed."

Growth predictions remain modest, with Spain to stay in recession this year as its economy shrinks 1.3%. Growth will not rise above one percent, the level at which many analysts see net job growth, until 2016.
These growth figures depend entirely on exports, with internal consumption also not increasing until 2016.

Spanish economy minister Luis de Guindos (back), deputy prime minister Soraya Saenz de Santamaria (left) and treasury minister Cristobal Montoro arrive to unveil a cut in growth forecasts. Photograph: Reuters/Sergio Perez
Spanish economy minister Luis de Guindos (back), deputy prime minister Soraya Saenz de Santamaria (left) and treasury minister Cristobal Montoro arrive to unveil a cut in growth forecasts. Photograph: Reuters/Sergio Perez

1.47pm BST

US government spending falls again

A continuing fall in government spending – more than 4% lower after falling by 7% in the fourth quarter – was one downward pressure on the GDP figure. Annalisa Piazza at Newedge Strategy said:

The softer than expected outcome is mainly due to the downward surprise in government spending. That said, the overall picture of moderate growth remains intact. Looking ahead, risks for growth are skewed to the downside in the second quarter as timely economic indicators point downwards.

Such a scenario fully justifies a "wait and see" approach at next week's Federal Reserve meeting as policymakers are expected to wait for more evidence before making any decision on future policy steps. The ongoing bn monthly asset purchase is expected to be confirmed next Wednesday.

Rob Carnell at ING said:

Trying to get a handle on what is going on under the bonnet of the US economy is a little tricky with figures as erratic as these, but this may be surmised from the final sales figure to domestic purchasers, which strips away the impact of volatile inventories and exports. This showed a 1.9% gain in the first quarter of 2013, up from 1.5% in the final quarter of 2012, and probably as good an indication of the true state of the underlying economy as there is.

This is OK, but not fantastic. Moreover, with the data softening sharply as of March, and likely to continue weak through April and May, there is a good chance that second quarter of 2013 is substantially weaker even than this latest number – a GDP figure much closer to 1.0% seems possible, and at those low levels, a rogue negative quarter can never be ruled out.

As for the Fed, we doubt they will pay much attention to this essentially historical data. Next week’s meeting will have to acknowledge the softening of recent data. These GDP numbers confirm that trend. All talk of imminent QE downscaling can be forgotten for a while. But growth will likely return later in the year, at which point, QE chatter and Treasury yields will start to nose up again. This is going to be a choppy year for both growth and for markets.

Updated at 1.54pm BST

1.42pm BST

US stock market futures fall after GDP numbers

US investors appear not to like the GDP figures. Dominic Rushe in New York writes:

The below forecast figures are another sign that the economic recovery may be stalling.

US stock market futures are all falling before the markets open. Economists polled by MarketWatch had expected first-quarter annualized growth of 3.2%, up from just 0.4% in the final three months of 2012. The figures come amid signs of a slowdown in the wider economy. The US added just 88,000 new jobs in March, less than half the rate it needs to cut the unemployment rate. The next set of monthly job figures are due this time next Friday.

This is the government economists’ first take on how the economy grew in the first quarter and is subject to revision.

1.34pm BST

US GDP grows by less than expected 2.5%

Breaking news

The US economy grew by less than expected in the first quarter, although it was much stronger than at the end of 2012.

Official figures showed GDP growing by an annualised 2.5% compared to forecasts of a 3% rise. This was up from 0.4% in the final quarter of last year.

Despite the growth, the fact that it missed expectations could raise fears about the impact of goverment spending cuts and higher taxes.

But it is also likely to encourage the belief that the US Federal Reserve will continue its programme to boost the economy.

Updated at 3.27pm BST

1.22pm BST

Spain's economy minister Luis de Guindos says the new deficit cutting plan was agreed with Europe.

1.09pm BST

Spanish prime minister Mariano Rajoy is apparently not at the announcement of the economic reforms, which has caused some comment:

Here's a live link (in Spanish).

Updated at 2.50pm BST

1.06pm BST

Spain slashes growth forecasts

Spain has revised down its growth forecast for 2013 from a decline of 0.5% to a 1.3% fall. It is now predicting growth of 0.5% in 2014.

The government has also revised down its deficit forecast for 2013 to 6.3% of GDP. It predicts the public deficit will be 5.5% of GDP in 2014, 4.1% the following year and 2.7% in 2016.

That means Spain has delayed meeting the EU budget deficit target by two years to 2016.

The revisions, although harsh on the growth front, seem to be much as expected.

After Thursday's record unemployment rate of 27.2% in the first quarter, the rate is expected to be 27.1% for 2013, 26.7% in 2014 and 25.8% in 2015.

Meanwhile deputy prime minister Soraya Saenz de Santamaria said there was no need for major new reforms or taxes, and the government would try to cut taxes in the future.

Updated at 1.10pm BST

11.50am BST

Hollande’s party blasts Merkel, says Le Monde

Angela Merkel has come under renewed attack from France's socialists, according to a report in Le Monde.

Our Europe editor Ian Traynor tweets:

11.09am BST

Eleven banks will repay €2.276bn of money borrowed under the three year LTRO programme on 2 May, the ECB has announced.

This follows an average €10.85bn repaid over the past two weeks. Annalisa Piazza at Newedge Strategy said:

The outcome is softer than anticipated and it is well below the average of the past couple of weeks. Today's data, coupled with the expected ECB refi rates cut next week, should reduce the volatility of short-term rates going forward.

Updated at 11.13am BST

10.58am BST

Merkel did not mean to infringe on ECB’s independence, says spokesman

Here's bit of backtracking by the look of it.

According to Reuters a German government spokesman said Chancellor Angela Merkel "in no way intended to infringe on the ECB's independence" with her comments on interest rates.

You may recall she said that if the ECB looked at Germany alone, it would have to raise rates at the moment. Markets have been buoyant in the past few days on hopes the ECB will actually cut rates next week.

The spokesman also said the German government was confident the constitutional court would uphold the legality of the eurozone bailout measures.

German chancellor Angela Merkel discusses interest rates at a savings bank conference on Thursday. Photograph: Reuters/Fabrizio Bensch
German chancellor Angela Merkel discusses interest rates at a savings bank conference on Thursday. Photograph: Reuters/Fabrizio Bensch

Updated at 11.03am BST

10.33am BST

Worst of crisis is over, says ECB’s Provopoulos

The worst of the eurozone crisis is behind us and the European Central Bank may never have to use its Outright Monetary Transactions (OMT) bond buying programme.

That is the (over-optimistic?) view of ECB council member and head of the Greek central bank George Provopoulos. In an interview with Bloomberg in Athens yesterday he said:

Given that in the last few months we have had a kind of stabilization, normalization, maybe it will never be used. OMT has helped enormously. It is a good thing that we have decided to go ahead with that, just in case it would be needed.

I think the worst of the debt crisis is behind us.This does not mean that all weaknesses have been dealt with or that the road ahead will be without bumps. But I think the worst is over.

Interesting, given Germany's apparent antipathy towards OMT and its concerns about the ECB's actions.

10.15am BST

Italian bond auction sees record low yields

Italy's bond auction seems to have gone well, just a couple of days after the country finally began resolving the impasse after its inconclusive elections with the appointment of Enrico Letta as prime minister.

The country sold €8bn of six month treasury bills at a yield of 0.503%, down from 0.831% previously.

This is the lowest rate since the introduction of the euro.

Part of the demand was due to the expectation of an ECB rate cut next week.

Meanwhile Letta has said talks to form a government were encouraging while Silvio Berlusconi's centre right party said there were no real problems.

According to Ansa, the new government could be sworn in over the weekend with a confidence vote to follow on Monday.

Berlusconi however has ruled himself out of being a minister:

Updated at 10.21am BST

10.04am BST

Stock markets slip back

After a recent burst of enthusiasm, largely thanks to the hope of an ECB rate cut next week, investors seem to have turned cautious once more. So markets are slipping back across the board, probably not helped by renewed signs the Germans may be unhappy with the ECB.

• The FTSE 100 is down 34.57 points or 0.54%

• Germany's Dax has dropped 0.68%

• France's Cac is 1.01% lower

• Italy's FTSE MIB is 0.93% down

• Spain's Ibex is off 0.97%

• US futures are showing a 32 point decline on the Dow Jones

9.36am BST

Cyprus bank deposits fall in March

Cyprus bank deposits fell €1.8bn in March, according to figures from the European Central Bank. That of course was the month when the contentious bailout was agreed, with many depositors taking a hefty haircut on their savings.

Martin van Vliet at ING said:

The bank deposit figures for March suggest little contagion from the Cyprus bail-in of uninsured depositors to other Eurozone countries – which will probably cause a sigh of relief in Brussels. In fact, private-sector deposits in most other peripheral Eurozone countries saw further signs of recovery in March. Consumers and firms' deposits at banks in Spain and Portugal rose by 0.9% and 0.6% month on month respectively, while Greek bank deposits edged up by 0.1%.

Cypriot banks further increased their reliance on emergency liquidity assistance or ELA from the national central bank, from €10.2bn in February to €11.4bn at the end of March. That said, bank holidays and capital controls have clearly prevented a more massive capital flight.

Updated at 9.39am BST

9.31am BST

ECB’s Asmussen on rate cuts

More on ECB interest rate cuts. In a speech in Frankfurt, bank board member Joerg Asmussen has seemingly again played down the effectiveness of such moves (courtesy Bloomberg):

Ransquawk points out the comments are largely repeating what Asmussen said earlier this week.

Updated at 9.48am BST

9.21am BST

Bundesbank reportedly unhappy at ECB – again

The move by the European Central Bank and its head Mario Draghi to introduce the OMT bond buying programme is one of the drivers of the revival in eurozone sentiment. But there is more evidence that the Bundesbank is not keen. Gary Jenkins at Swordfish Research says:

When Spanish two year bonds hit 7% last summer it appeared that it might be game over for the Eurozone. Or at least Spain would have to restructure its debt or receive assistance on a scale that would have been unprecedented even in European bailout terms. At that moment however the ECB changed from an institution that spoke softly and carried a small stick (that was temporary and limited in time and scale) to one that shouted very loudly and carried a great big stick that it wouldn’t hesitate to use to punish anyone with the audacity to short / underweight European government bonds.

There is no doubt that Mr Draghi’s intervention was a turning point in the crisis. There have been comments about the readiness of the OMT program but the trend in bond yields for the stressed nations would suggest that the market was not prepared to test Mr Draghi’s resolve.

Interesting then to note that the German newspaper Handelsblatt has seemingly got hold of a paper outlining the Bundesbank’s position on the OMT which has been prepared for the German constitutional court.

The Bundesbank rejects the idea of sovereign bond purchases in strong terms and indeed questions the role of the central bank in deciding whether the currency is irreversible. It will be interesting to see whether this has any impact on the market today. Whilst the lack of support from the German central bank is important it is hardly new news; Jens Weidmann and others have been fairly vocal about their disapproval of the ECB’s actions throughout much of Mr Draghi’s tenure as president.

Mario Draghi, president of the European Central Bank, and Jens Weidmann, president of the Bundesbank. Photograph: AFP/Getty Images/Daniel Roland
Mario Draghi, president of the European Central Bank, and Jens Weidmann, president of the Bundesbank. Photograph: AFP/Getty Images/Daniel Roland

8.49am BST

Agenda

Here's a look at some of the day's events (all times BST):

 8:15 ECB's Asmussen Speaks in Frankfurt

10:00 Italy to Sell €8bn 184-Day Bills

11:00 ECB Announces 3-Year LTRO Repayment

Midday Spain unveils new reform programme

13:30 US GDP

13:30 US Personal Consumption

14:30 ECB Governing Council Member Nowotny speaks in Prague

14:55 University of Michigan confidence index

Updated at 9.15am BST

8.37am BST

Spanish reforms and US GDP in the spotlight

Good morning and welcome to our rolling coverage of the eurozone crisis and other key events in the global economy.

All week markets have been soaring as investors became increasingly convinced central banks will take more measures to stimulate a sluggish economy.

In particular, poor data from Germany encouraged the believe the European Central Bank could cut rates as early as next week. However German chancellor Angela Merkel threw a slight spanner in the works by suggesting that the ECB should raise rates if it was to judge solely by Germany.

Meanwhile the Bank of Japan decided early this morning to keep monetary policy unchanged, and did not unveil any further measures. It said Japanese inflation was likely to rise to around 2% during the next three years, but it said it would continue monetary easing as long as necessary to meet that target.

On the agenda today are new economic reforms from Spain, due to be unveiled at midday.

Prime minister Mariano Rajoy is trying to tread a fine line between austerity and growth – as is the rest of the eurozone although much of the emphasis is still on the former. According to Reuters a Spanish goverment source said on Thursday:

There will be no relaxing of the austerity drive because we believe in this policy. Having said that, with Europe in recession, it would be absurd not to adjust the deficit-cutting path.

Proposals are expected to include a reform of the public pension system to increase the retirement age, a review of unemployment benefits and steps to boost small business growth.

Also coming up are US GDP figures. Michael Hewson, senior market analyst at CMC Markets, said:

Today’s main event remains US first quarter GDP where expectations seem somewhat optimistic with expectations of a rise of 3.1%, up from a very disappointing 0.4% at the end of last year.

This seems excessively optimistic given that we have seen payroll tax hikes and spending cuts kick in at the beginning of the year as well as a host of disappointing economic data for March.

Updated at 8.51am BST

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UK GDP rises by 0.3% exceeding estimates by analysts and avoiding triple-dip disaster. George Osborne: Britain is recovering. But it’s a bumpy recovery. US jobless claims fall by 16,000 to seasonally adjusted 339,000, pointing to slow improvement…



Powered by Guardian.co.ukThis article titled “Poor Spanish and French jobs data but UK economy returns to growth- as it happened” was written by Graeme Wearden and Nick Fletcher, for theguardian.com on Thursday 25th April 2013 13.18 UTC

5.17pm BST

Stock markets in Europe continue rally

European markets have closed on a – mainly – positive note once again. Analysts said the continuing downbeat data from the eurozone – including poor jobless figures from Spain and France – made it ever more likely the European Central Bank would cut interest rates, perhaps as soon as next week.

Looking at the wider picture, there were some reasonable US weekly jobless figures which helped sentiment. And better than expected UK GDP figures encouraged investors in London, even though the data seemed to suggest there would be no action by the Bank of England to stimulate the economy at its meeting next week. So here is the closing snapshot:

• The FTSE 100 finished 10.83 points higher at 6442.59, a 0.17% increase

• Germany's Dax added 0.95% to 7832.86

• France's Cac closed 2.47% lower as the jobless total rose

• Italy's FTSE MIB ended up 0.52%

• Spain's Ibex dipped 0.29%

In the US, the Dow Jones Industrial Average is currently 0.48% higher.

And with that, it's time to close up for the evening. We'll be back tomorrow, so thanks for all your comments and see you then.

5.16pm BST

Italy's centre right party has been making positive noises after a meeting with new prime minister Enrico Letta.

According to Reuters, the party said Letta was open to its economic priorities and there wil be further talks to resolve outstanding issues.

And here's a poll showing the country's split:

5.05pm BST

French jobless figures hit new high

French unemployment figures are out and it's not good.

The number of jobless hit an all time high in March, rising by 1.2% to 3.225m. This is the 23rd monthly rise in a row, and means it has reached the worst level since records began in January 1996.

This is more bad news for president Francois Hollande, whose approval ratings are already at a low. They come despite the president's attempts to promote youth job schemes and allow flexible hiring and firing.

4.59pm BST

Cyprus sets date for vote on bailout package

Cyprus has set a date for the its parliament to vote on the island's EU-IMF sponsored rescue programme, reports Helena Smith. She writes:

Cypriot officials are now saying that the bailout package will be put to a make-or-break vote next week and "probably on Tuesday." The ballot has thrown fresh uncertainty around the rescue programme amid speculation that it may not muster the required majority in the 56-seat House.

Well-briefed insiders say the possibility of the island exiting the euro zone has grown dramatically in recent weeks with many among its business elite backing the idea "as the best way out of the crisis."

Meanwhile, the National Federation of Cypriots in the UK are increasingly speaking out against the unfair treatment that Cyprus has received at the hands of the EU and IMF.

"The troika has extracted its pound of flesh in Cyprus and has made the island pay dearly for the eurozone’s policy failures in Greece and elsewhere. Alternative solutions, including re-capitalisation of the two main Cypriot banks and their effective ‘nationalisation’ by the European Central Bank, were not given the time of day," Peter Droussiotis, who heads the federation, told an audience at the Palace of Westeminster last night.

 "Such measured solutions, which could have been further calibrated by a more managed contraction of the banking sector, over a transitional period, were set aside with the result that Cyprus’s economy has now suffered a devastating blow,” he said at a dinner attended by the island's foreign minister and leading British MPs.

4.32pm BST

Still with Germany, the country has raised its growth forecast for the current year from 0.4% to 0.5%, with 1.6% expected in 2014.

4.06pm BST

Merkel says ECB would raise rates if looking at Germany alone

There have been some (perhaps unguarded, perhaps not) comments from German chancellor Angela Merkel about European Central Bank interest rates.

As has become apparent in recent days, the markets have become increasingly convinced the ECB will cut rates at its meeting next week. Disappointing economic figures, not least from Germany itself, in the last few days have only reinforced that view.

But speaking at a savings banking conference Merkel said, in what observers said were unusually outspoken comments, that the ECB would have to raise rates if it were looking at Germany alone. In what could be seen as an acknowledgement that the one size fits all approach to completely divergent economies within the eurozone was flawed, she said (courtesy Reuters):

The ECB is in a difficult position. For Germany it would actually have to raise rates slightly at the moment, but for other countries it would have to do even more for more liquidity to be made available.

Meanwhile Investec poured a smidgeon of cold water on the hopes of a rate cut by the ECB next week. The broker's Victoria Clarke said:

The ECB meets in Bratislava next week with its next monetary policy announcement due at 12.45pm on Thursday and President Draghi’s press conference following at 1.30pm. We judge that the ECB is on the verge of reducing the main refinancing rate either in May or June, but on balance we suspect that move is more likely to come at the June meeting. Hence, whilst a very close call, we see the ECB maintaining the refi rate at 0.75%, the deposit rate at zero and the marginal lending rate at 1.5%.

Chancellor Angela Merkel at a savings bank conference. Photograph: Reuters/Fabrizio Bensch
Chancellor Angela Merkel at a savings bank conference – With the people, for the People. Photograph: Reuters/Fabrizio Bensch

Updated at 4.30pm BST

3.39pm BST

IMF official calls for Europe to boost growth

The IMF has said Europe must strengthen its growth prospects, otherwise it could fall into long term stagnation.

In a speech in London (apologies for being a bit UK-centric today) David Lipton said:

There is…a risk Europe could fall into stagnation, which would have very serious implications for households, companies, banks and other bedrock institutions.

So, to decisiveliy avoid that dangerous downside, policymakers must act now to strengthen the prospects for growth.

And the austerity versus growth debate goes on…

IMF members Christine Lagarde, Tharman Shanmugaratnam and David Lipton (left). Photograph: Stephen Jaffe/Getty Images
IMF members Christine Lagarde, Tharman Shanmugaratnam and David Lipton (left). Photograph: Stephen Jaffe/Getty Images

2.18pm BST

Video: Britain dodges the triple-dip recession

Here's a video clip of this morning's GDP announcement:

And leaving you with that, I am handing over to my colleague Nick Fletcher.

Updated at 3.55pm BST

2.13pm BST

Key event

There's encouraging economic data to report in the US as well — the number of people signing on for jobless benefit fall by 16,000 last week.

At 339,000, the initial jobless claims was the second-lowest reading since the financial crisis began.

2.11pm BST

Brian Reading of Lombard Street isn't getting carried away by today's GDP data:

Near stagnation for the rest of this year would validate the OBR’s 0.6% year-on-year growth forecast. A belly-dancer’s belly-wobbles don’t show whether she is gaining or losing weight. Too much attention is paid to first estimates.

2.07pm BST

It’s time for a late lunchtime round-up:

Britain has returned to growth and avoided a triple-dip recession, with its economy expanded by 0.3% in the first quarter of the year.

Chancellor George Osborne hailed today's GDP data as a sign that the UK is recovering (see his statement here). But Labour's Ed Balls argued that Britain still "urgently" needed a new fiscal plan (see 11.01am).

As my colleague Heather Stewart explains:

The key services sector expanded by 0.6% on the quarter, according to the ONS, while industrial production also grew, by 0.2% – though much of that was accounted for by North Sea output. The struggling construction sector declined by 2.5%.

• Heather's news story is here: UK avoids triple-dip recession with better-than-expected 0.3% GDP growth

Joe Grice, the chief economist of the ONS, told reporters that Britain was experiencing a bumpy and shallow recovery (see press conference highlights from 9.34am onwards)

• Business leaders have welcomed the news that the UK is growing (see 11.30am).

• But with the UK still 2.6% smaller than at its peak in 2008, there's no reason to rejoice (see Larry Elliott's analysis). Britain's recovery from the shock of the financial crisis remains slower than in the 1930s (see graph here).

• The news is likely to strengthen George Osborne's hand ahead of the arrival of International Monetary Fund officials next week (see here).

• In the City, the pound has rallied against the US dollar – up two cents this afternoon at .546.

UK GDP
UK GDP, on a quarterly basis, since the start of 2008

1.55pm BST

Stephen Lewis, chief economist at Monument Securities, argues that politicians should focus on making serious structural changes to the UK economy rather than scrapping over the pace of fiscal cutbacks.

In a research note Lewis also suggsts that Britain's economy is not faring too badly given the damage suffered by its financial sector when the crisis began:

It can hardly be doubted that the UK economy was among those suffering the most severe structural damage in the crisis, given its over-reliance on financial services. It would have been a reasonable expectation in 2009 that the UK would take longer than many other advanced economies to pull out of economic depression and that, while in depression, its GDP trajectory would be weaker than most other nations'. In the event, the UK's economy has lagged the performance of those with sounder structures, such as Germany and the USA.

On the other hand, it has been performing a good deal better than the economies of Spain and Italy, where the structural problems were less obvious in 2009. When viewed in this broad perspective, it makes little sense to argue that the UK is suffering peculiarly strong headwinds on account of the strategy Mr Osborne has chosen to follow. If it were, its GDP might be contracting at a 2-3% annual rate, which is the fate of several other European economies at the moment.

This is not to say that the UK's growth outlook might not be even stronger than it currently appears but action that addresses structural weaknesses is likely to be more effective than tweaking macroeconomic policies.

To fashion measures that strengthen the economy's structure is more of a challenge to politicians than to argue over macroeconomic settings. That may be one reason why comparatively little progress has been made towards structural reform.

1.26pm BST

Over on Comment is Free, Will Hutton is making the case for the government to push through structural reforms and create a new bad bank, rather than take comfort in today's data.

It's here: Don't be fooled by the GDP figures – Britain needs to change course

Here's a flavour:

Osborne has never looked economic reality squarely in the eye – that in 2008 Britain suffered a massive credit crunch, disabling its banking sector and exposing a vast legacy of private debt in an economy which had grossly over-invested in property, construction and financial services. Economies after such shocks and with such grievous imbalances need a prolonged period of convalescence. It is imperative, knowing that the private sector must retrench, that the public sector does all it can to compensate.

Over the past three years, Osborne has stubbornly done the opposite, blindly believing in the private sector's magical properties which the state can only impair. He has stood back, attempting to slash the deficit and generally disengaging. Events have forced him to moderate his position, with the beginnings of an industrial policy along with bank reform, but it has been too little, too late and with too little conviction. The pity is that today's news will reinforce his position, easing the political pressure for change.

1.11pm BST

Two years ago, George Osborne pledged to deliver "A Britain carried aloft by the march of the makers" in his March 2011 budget.

Today's GDP data, though, show that it's the services sector (+0.6%) which is delivering most of the growth rather than industry (+0.2% — mainly due to higher oil production), while manufacturing declined by 0.3%.

That doesn't suggest that the much-discussed rebalancing of the UK economy is completed.

Richard Barley of the Wall Street Journal warns:

The big picture is still one of an economy that is only creeping forwards: GDP is still 2.6% below 2008's peak and has risen just 0.4% over the past 18 months. With global economic data showing signs of a slowdown, it isn't clear the first quarter's expansion is sustainable.

Meanwhile, there is precious little sign of the rebalancing of the U.K. economy that policy makers like Bank of England Governor Mervyn King say is necessary: all of the growth in the first quarter was in the services sector, up 0.6%, while manufacturing contracted 0.3%. But the City still appears to be in the doldrums: business services and finance increased just 0.2% in the quarter.

12.44pm BST

Today's rise in GDP comes as economists warn that inflation in the UK could rise over the 3% mark again this summer.

Jeremy Cook, chief economist at World First, told BBC News that inflationary pressures mean it is vital that the UK economy keeps growing so workers can push for pay rises (inflation is currently 2.8%, while wages are rising at just 1%)

Cook explained:

If we start to see profits in manufacturing and construction, which were poor in this quarter, come alongside what the services sector is doing then members of those sectors can go to their companies, ask for wage increases, probably get them.

And therefore the cost of living for you and me become a little bit more favourable.

12.15pm BST

Osborne: it’s not an easy recovery

George Osborne, April 25th
Photograph: Sky News

Sky News just broadcast an interview with George Osborne in which the chancellor was cautiously upbeat about the UK economy following today's GDP data.

Osborne said:

It is not as easy a path out of recovery as anyone would have hoped a few years ago.

But added that Brritain has "won credibility around the world" for the way it has handled the crisis.

Osborne appeared relaxed about the prospect of next month's IMF visit. He argued that the pace of UK fiscal consolidation, or "the pace opf the cuts if you like" as he put it, is appropriate and consistent with the IMF's own guidance.

The chancellor added that manufacturing exports are growing slower than he'd like — which he partly blamed on the weakness on key markets in Europe.

12.07pm BST

The deputy prime minister, Nick Clegg, has taken a cautious view of today's GDP data:

Clegg said:

I don't want anyone to think that somehow we are out of the woods yet. We have still got a lot of work to do. The healing of the British economy is taking longer than we had anticipated and we will continue to work hard to make sure the country and the economy grow from strength to strength.

More here: Chancellor welcomes 0.3% economic growth, but Lib Dems are cautious

11.58am BST

Does the Osborne fightback start here?

Last week was pretty dire for George Osborne. It began with the International Monetary Fund suggesting his economic plan should be changed, and ended with MPs giving a scathing verdict on his new scheme to help first-time buyers (via a nasty rise in unemployment and Fitch downgrading Britain's AAA rating).

By the weekend, the chancellor appeared to be on the mat. But today's GDP data could be the moment that his fortunes change.

The IMF is due in London next week for a healthcheck on the UK economy — Osborne can now point to a growing economy — at a time when the eurozone remains stuck in recession.

It's even possible that the ONS will revise its historic data, and conclude that Britain did not contract between the fouth-quarter of 2011 and the second quarter of 2012. That would mean the dreaded double-dip never actually happened…

11.30am BST

GDP: the reaction

The general reaction to today's growth figures has been quite positive.

Graeme Leach, chief economist at the Institute of Directors, called it "good news just when we needed it".

John Cridland, CBI director general, argues that the UK now really needs "a recovery in manufacturing output, helped by a brighter global outlook":

And Rob Carnell of ING Bank called it "one in the eye" for the International Monetary Fund, after last week's criticism of the UK government from senior IMF staff.

There's a full, comprehensive round-up of reaction to today's GDP data, here: UK avoids triple-dip recession – full reaction

11.01am BST

Balls: Urgent action still needed

Ed Balls on UK GDP
Ed Balls on UK GDP Photograph: /BBC News

Ed Balls, shadow chancellor, has given a rather muted response to today's GDP data, repeating his call for the chancellor to adjust the pace of his fiscal plans.

Here's his full response:

These lacklustre figures show our economy is only just back to where it was six months ago and continue the picture of flatlining we have seen since the last spending review. David Cameron and George Osborne have now given us the slowest recovery for over 100 years.

This stagnation in our economy is the reason why people are worse off than when this government came to office. They took an economy that was starting to grow strongly, with falling unemployment and a falling deficit, and delivered stagnation, rising unemployment and £245 billion more borrowing than planned. The government’s economic policies have failed and Britain’s families and businesses continue to pay the price.

If we’re to have a strong and sustained recovery, and catch up all the ground we have lost over the last few years, we need urgent action to kickstart our economy and strengthen it for the long-term – as Labour and the IMF have warned. We need radical bank reform and a jobs and growth plan, including building thousands of affordable homes and a compulsory jobs guarantee for the long term unemployed. And instead of a tax cut for millionaires, we need a lower 10p starting rate of tax to ease the squeeze on millions of people on middle and low incomes.

The longer we continue to bump along the bottom the more long term damage will be done. Britain’s struggling families and businesses cannot afford another two years of this.”

Updated at 11.05am BST

10.54am BST

Slowest recovery since the Great Depression

This graph (from our Datablog) shows how the UK economy actually recovered faster after the Great Depression:

The Labour Party makes the same point, and tries to pin the blame on the prime minister.

10.42am BST

Alex Hern: UK is stagnating

In the New Statesman, Alex Hern is warning that "stagnation is still the name of the game" in the UK:

Our economic system is basically built around a paradigm of real economic growth in the two to three per cent range. We can handle short-term deviations from that norm, but the long-term trend must remain the same.

Growth much below that isn't growth at all; it's stagnation by another name. On top of that, real GDP growth isn't the only figure we heard today; we also know the growth per capita. And in a country with a rising population like ours, we need to be growing just for that to stand still.

As it is, GDP per capita fell by 0.3 per cent in the last quarter. The nation is getting richer, but its people are still getting poorer

More here: GDP grows by 0.3 per cent

And this graph from the ONS shows how GDP is stil below its 2008 peak:

UK GDP - main components, Q1 2013
Photograph: ONS

10.30am BST

Larry Elliott: It’s helpful for Osborne

Our economics editor Larry Elliott has analysed today's GDP data. He points out that while 0.3% growth is 'resonably solid' under the circumstances, but unspectacular by historic standards.

And it's enough to spare Osborne the 'disaster' of presiding over a triple-dip recession:

Larry writes:

The actual figure was reasonably solid. The service sector – which accounts for 75% of the economy – grew by 0.6% on the quarter, while a bounce back in North Sea oil output helped industrial production grow by 0.2%. Had it not been for the 2.5% quarterly drop in the still depressed construction sector, growth would have been around 0.5% in the first quarter, quite close to its long-term trend.

It is not all good news. Despite the growth in early 2013, the economy is still 2.6% below its peak in early 2008 when the recession began. And, as the Office for National Statistics noted, the economy is no bigger now than it was 18 months ago – a point Ed Balls will no doubt be making over the coming weeks and months.

But make no mistake, this number is helpful to Osborne, who was quick to say that there were encouraging signs that the economy is healing. Had Thursday's number been negative – even by just 0.1% – that claim would have been impossible to make.

More here: Unspectacular GDP data will take political heat off George Osborne

10.21am BST

Cable: it doesn’t feel like a recovery yet

Out in Brazil, business secretary Vince Cable has welcomed the news that Britain has avoided falling back into recession. But he also points to several weaknesses in the UK economy, including construction (which suffered that 2.5% contraction).

Here's Cable's full comment:

We've always said the road to recovery would be a marathon, not a sprint. 

Today's figures are modestly encouraging and taken alongside other indicators such as employment figures, suggest that things are going in the right direction.

However there is still a long way to go and some serious issues such as the systemic lack of bank lending to SMEs, the weakness in the construction sector and the need to press further on trade and exports, which I am doing now on my visit to Brazil.

These issues all need to be addressed before people feel like the economy is genuinely starting to recover.

10.17am BST

And here's what a bumpy, shallow recovery looks like (via the Guardian's Datablog)

UK GDP quarter-by-quarter
Photograph: Datablog

10.10am BST

ONS: Britain’s bumpy and shallow recovery

The ONS's chief economist Joe Grice said the 0.3 per cent growth registered from January to the end of March fitted the pattern in recent years.

"Today's figures seem to be not out of line with recent history of an upward trend, but one that is quite bumpy and shallow," he said.

The services sector growth of 0.6 per cent was "broadly based" and offset falls in manufacturing at the beginning of the year and a sharp fall in construction output.

But within the services sector, car sales were a major growth area after a spending surge in the first three months, said ONS statastician Rob Doody.

The services sector is now 0.7 per cent above its peak. However, manufacturing remains 10 per cent below the peak in 2008 and construction is 18 per cent below its peak, said Grice.

(via our economics correspondent, Phillip Inman)

10.06am BST

The full details of today's GDP data can be downloaded here:

Gross Domestic Product: Preliminary Estimate, Q1 2013 Release.

10.04am BST

My colleague Paul Owen is covering all the political news today, including the full reaction from Westminster to today's GDP data, here: Politics Live.

9.57am BST

Pound jumps, but FTSE doesn’t

The pound is rallying on the foreign exchange markets, up almost one-and-a-half cents against the US dollar at .514.

Shares are unmoved, though, as our market reporter Nick Fletcher reports:

The FTSE 100, down 15.85 points ahead of the GDP announcement, edged slightly higher before slipping back to the current 6414.56, down 17.20 points.

9.52am BST

Car sales and oil production fuel growth

Phillip Inman flags up that strong sales of motor vehicles, and a bounce-back in oil production, helped to push UK GDP up in Q1.

From the ONS press conference, he reports:

GDP was rescued by car sales, says the ONS, with the Motor trade element of the services sector showing the strongest growth…

A bounce back in North Sea production after a sharp decline in q4 2012 is also a big factor in the rise this quarter.

9.49am BST

Despite the welcome rise in UK GDP in the last three months, Britain's economy is still 2.6% smaller than its all-time peak in 2008 — shortly before the collapse of Lehman Brothers rocked the financial world and drove many countries into recession.

9.43am BST

Osborne: Britain is recovering

George Osborne has welcomed today's GDP data, arguing it shows that the government is making progress.

Here's the chancellor's statement in full:

Today’s figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress.

The deficit is down by a third, businesses have created over a million and a quarter new jobs, and interest rates are at record lows.

We all know there are no easy answers to problems built up over many years, and I can’t promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future.

9.40am BST

ONS press conference
Photograph: Sky News

Joe Grice, the head of the ONS, is refusing to make any predictions for how the UK economy may fare in the months ahead.

9.37am BST

Service sector leads the way

Britain's dominant service sector has led the way, putting the UK back to growth and averting the triple-dip.The construction industry, though, continues to suffer an ongoing contraction.

Service sector grew by 0.6% in Q1

Construction sector shrank by 2.5%

Production industries: grew by 0.2%

9.34am BST

Key event

On a year-on-year basis, Britain's GDP is 0.6% larger than a year ago.

Joe Grice of the ONS is explaining that this adds to the picture of a slow, bumpy recovery over the last 12 and 18 months. He's talking about Britain's economy being on a plateau, but one on a slow, upwards trend.

Updated at 9.41am BST

9.31am BST

Triple dip avoided

This is good news for George Osborne, says our economics editor Larry Elliott:

It means the triple-dip fears have been averted – although Labour will say that the economy is back to where it was six months ago.

Updated at 9.32am BST

9.30am BST

UK GDP released – Britain avoids recession

UK GDP has grown by 0.3% in the first three months of this year.

That means Britain has avoided falling back into recession.

More to follow

9.25am BST

The GDP data will be announced at a press conferrence at 9.30am sharp in London. Our economics correspondent Phillip Inman is there.

The news is also released to the City at the same moment.

Updated at 9.25am BST

9.20am BST

Just 10 minutes to go until the Office for National Statistics releases its first estimate of UK GDP for the first quarter of 2013, and the predictions and caveats are flying:

A bit of excitement is OK, though

9.12am BST

Surveys of UK firms in recent weeks have suggested that conditions have improved a little in 2013. That's one reason that City economists, on balance, predict a small rise in GDP.

This graph shows 'composite PMI' (a measure of whether companies' output is growing) versus GDP.

GDP vs PMI, to April 2013
Photograph: ING

9.03am BST

Marc Ostwald of Monument Securities says it is 'at best facile' to fret too much about the triple dip right now, as this morning's data will probably be revised.

Ostwald also points out that the consensus forecast of +0.1% in the first quarter would mean Britain's GDP would have risen by +0.3% on a year-on-year basis.

That would actually be quite a good outcome, in light of a very long and arduous winter and its dampening effect on activity, not only in the UK, but across Europe, notwithstanding the other non-weather related headwinds blowing from the Eurozone.

Economist Andrew Lilico argues that it doesn't really matter whether today's data shows a small rise or a small fall.

And in the readers comments below, rafters points to the big picture:

Double dip, triple dip, quadruple dip, what does it matter?

We're just bumping along the bottom like an aircraft failing to take flight. All a short period of growth means is we'll shortly have another dip to add to the number.

8.51am BST

Spanish jobs data shows perils of austerity

Here's our Madrid correspondent Giles Tremlett's take on this morning's dire Spanish unemployment data (see 8.42am)

Is this where austerity gets you? Spain's unemployment rate reached 27 percent in the first quarter of this year, with more than six million unemployed for the first time ever.The figure of 6.2 million unemployed comes from the state statistics agency today. Spain's economy shrank 1.9 percent over the last year, though the speed of decline appeared to be slowing in the first quarter.

Mariano Rajoy's People's party (PP) government is due to introduce further cuts tomorrow. There are also rumours of further pension reform, with the retirement age for Spaniards apparently set to rise above 67. But a change of heart in Brussels will, according to reports in El Pais, see the deficit target softened considerably this year – raising it from 4.5 percent of GDP to six percent or above. Last year's deficit (excluding bank bailouts) was 7.1 percent.

Spain's jobless rate is also more than three times as high as the UK — where it hit 7.9% last week.

8.42am BST

George Osborne has often blamed the eurozone's debt crisis for causing some of Britain's economic ills, and the latest Spanish unemployment data (just released) certainly confirms the scale of the crisis in Europe.

The Spanish jobless rate hit 27.1% in the first quarter of 2013 – even worse than economists had expected. Spain is already deep in recession, and its GDP is expected to shrink by 1.6% this year.

Updated at 8.43am BST

8.34am BST

The bigger picture…

As many of you are pointing out in the comments below, the triple-dip question shouldn't distract from the fact that Britain's economy has been bumping along for a while.

On a quarterly basis GDP has risen, or fallen (see the chart at 7.34am) but the broad picture is of an economy stagnating for most of the last two years.

Also worth noting that we only get the preliminary estimate of GDP this morning – it will probably be revised.

8.25am BST

GDP predictions?

Any predictions for UK GDP today? If so, do post them in the comments below. (Full disclosure: I plumped for +0.2% in the office sweepstake).

8.14am BST

Calm in the City

The London stock market has opened, and shares and sterling have risen slightly in early trading.

FTSE 100: up 25 points at 6456, + 0.4%. That's a new three-week high.

The pound is also up nearly half a cent against the dollar, at .530.

The word in the City is that Britain will probably avoid a triple dip, but that the wider economic landscape remains troubled.

As Michael Hewson of CMC Markets put it:

The amount of growth to all intents and purposes is likely to be economically insignificant, but in a political context it is very important for the credibility of the government’s current policy, being the difference between a triple dip recession or not.

Updated at 8.14am BST

8.04am BST

What the economists are saying

We've rounded-up some of the City economist forecasts for GDP. here: Will Britain slide into a triple-dip recession?

Updated at 8.04am BST

7.59am BST

Bad weather could be key

Fears of a triple-dip recession have been fuelled by the grim winter weather which Britain suffered at the start of 2013. Heavy snowfall forced some factories to close, and also deterred many people from venturing onto the high street to spend.

As we wrote last month: Cold weather makes triple-dip recession more likely, economists fear

City analyst James Knightley reckons that the UK economy was flat in the first three months of 2013. A reading of 0% change to GDP would mean that the UK was not back in recession.

Knightley explains:

Today’s GDP numbers will tell us if the UK has returned to technical recession for the third time in 5 years.

Bad weather in January and March make this a close call.

7.34am BST

Has Britain suffered a triple-dip?

Good morning. Britain will learn today whether it has slumped into an unprecedented triple-dip recession when economic output data for the first quarter of 2013 is published.

The data, released at 9.30am by the Office for National Statistics, is eagerly awaited both in the City and in Westminster.

A negative GDP reading will plunge the UK economy into its third recession (defined as two consecutive quarters of negative growth), since the financial crisis began in 2008.

UK GDP since 2008
Photograph: Office for National Statistics

As well as a measure of the UK's economic strength, the latest GDP data is also a scorecard of George Osborne's performance.

The chancellor is already under pressure from the International Monetary Fund to relax the pace of his fiscal programme, and stinging from the loss of Britain's AAA rating with two credit rating agencies this year.

Many economists expect that Britain probably eked out a little growth at the start of this year. The City consensus is that UK GDP expanded by 0.1% between January and March. But some economists have predicted a negative reading, which would follow the 0.3% contraction in the last quarter of 2012.

Britain is also the first major country to report GDP data for the first quarter of 2013, so today's data could show how the global economy is faring.

Updated at 7.39am BST

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Analysts say cut is imminent as German manufacturing contracts for first time in five months. The European Central Bank is poised to reduce the base rate from 0.75% after months of bleak figures from across the single currency zone…

 


Powered by Guardian.co.ukThis article titled “ECB could cut interest rates after German output falls” was written by Phillip Inman, for The Guardian on Tuesday 23rd April 2013 20.16 UTC

Weaker than forecast factory output in Germany and China sent the oil price below 0 on Tuesday and raised expectations that the European Central Bank will cut interest rates at its monthly meeting next month.

German manufacturing contracted for the first time in five months while France, Italy and Spain suffered steep cutbacks in output. China maintained its recent upturn in output, though at a slower pace. Data from the US also showed a slowdown at its factories in April.

The ECB is poised to reduce the base rate from 0.75% after months of bleak figures from across the single currency zone. Analysts said a rate cut was imminent after Jens Weidmann, head of Germany's central bank, conceded that lower interest rates would be considered should there be a worsening in the economic data.

The prospect of cheaper funds from the ECB sent stock markets soaring. The FTSE 100 shrugged off the poor manufacturing figures to climb 125 points to 6406 while the Paris CAC finished the day up 3.6% at 3783.

The gloomy state of the eurozone economies, which has surprised officials in Brussels, is likely to continue through the summer months, said analysts.

The European Commission and the ECB had previously forecast a recovery in the second half of the year as a crisis that has forced Greece, Ireland, Portugal and Cyprus to apply for bailouts appeared to be receding.

But northern Europe has increasingly suffered as austerity cuts in the south hit their exports.

Christoph Weil, economist at Commerzbank, said it was likely the ECB will reduce interest rates to 0.5%, in line with the Bank of England.

"Investors are convinced the ECB will do whatever it takes to prevent a breakup of the monetary union. However, the central bank cannot solve the structural problems in the crisis countries with the printing press.

"For this reason the economic outlook for these countries remains rather gloomy. And the impact is felt not only by companies in the crisis countries. The lack of demand from the periphery is affecting also the core countries. As long as there is no marked improvement in sales prospects, even the low interest rates are unlikely to induce companies to invest more," he said.

The US manufacturing sector also slowed, growing at its slowest pace in six months during April following a downturn in the domestic market. Markit's US manufacturing purchasing managers' index (PMI) fell to 52 from 54.6, remaining just above the 50 level that marks the line between growth and contraction.

Chris Williamson, chief economist at Markit, said the findings suggested output growth was slowing sharply in the second quarter.

"While this week's first quarter GDP numbers may… bring some brighter news on the economy, the picture looks to have already begun to darken again, with GDP growth set to weaken in the second quarter."

The US data "will obviously add significantly to concerns, most recently related to the softer China and German data, that another seasonal slowdown in the global economy is taking hold," said Alan Ruskin, Deutsche Bank's head of G10 currency strategy.

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Whether economy has contracted for second quarter in row may be a trivial detail that distracts from bigger, more dismal picture. Forecasters are split over whether the UK economy managed to grow in the first quarter of this year or contracted again…

 


Powered by Guardian.co.ukThis article titled “Will Britain slide into a triple-dip recession?” was written by Katie Allen, for theguardian.com on Monday 22nd April 2013 11.52 UTC

The wait to find out if the UK slipped into a triple-dip recession is over this week, with official GDP data out on Thursday. Forecasters are split over whether the UK economy managed to eke out some growth in the first quarter of this year or contracted again.

The consensus forecast in a Reuters poll is for a tiny 0.1% quarter-on-quarter uptick. But predictions range from a 0.2% drop in GDP to growth of 0.3%.

The Office for National Statistics (ONS) said the economy slipped by 0.3% in the fourth quarter. Thursday will be statisticians' first take of three for the first quarter and economists caution that the numbers, as well as data for previous quarters, could well be revised either up or down.

But if the figures do show two successive quarters of contraction from the beginning of October to the end of March it will mark a triple-dip recession – unprecedented in living memory.

Still, many economists also warn that whether the UK officially slipped into a triple-dip or not is a trivial detail that distracts from the bigger picture of an economy facing headwinds from squeezed consumers, an austerity drive and struggling industry.

Here is a roundup of views ahead of Thursday's 9.30am figures.

Brian Hilliard, Société Générale

The first estimate of GDP is an output measure on two months' hard data for industrial production, construction output and services output available to the ONS together with forecasts for the third month. However, only one month's services data is published before the GDP release. That makes it rather difficult to make a sensible forecast, but here goes! Based on reasonable assumptions for March, Q1 growth in industrial production should be between 0% and 0.1% quarter-on-quarter. Construction output should fall by between 3% and 6% and services should rise by about 0.2% quarter-on-quarter. The weather will have been a dampening factor in construction output and unfortunately that weakness is likely to outweigh the growth in services. The result should be a fall in GDP of about 0.1% quarter-on-quarter. This will inevitably spawn "triple dip" headlines. The real story is modest underlying growth but not high enough to reduce the output gap.

Nick Bate, Bank of America Merrill Lynch

We think the preliminary estimate of Q1 GDP may show zero growth over the quarter. Indeed, we think the balance of risks may be skewed a little to the downside … Monthly data available suggests that output in both the industrial and services sectors may have risen a little over the quarter, but another notable fall in construction output may have knocked around 0.2 percentage points off GDP growth.

Vicky Redwood, Capital Economics

It is questionable whether it should be considered a "true" triple-dip … The 0.3% quarterly drop in real GDP in the fourth quarter (Q4) can probably be wholly accounted for by the reversal of the Olympics boost which supported output in the third quarter. Without the Olympics effect, output would probably have avoided a contraction. In any case, any triple dip might well be revised away in the future. The double dip between Q4 2011 and Q2 2012 was initially estimated to consist of three quarterly contractions in GDP of 0.2%, 0.2% and 0.7%. But the two 0.2% contractions are now estimated to be 0.1% drops. So it is already being called the double dip that almost didn't happen.

Nonetheless, we should not let the somewhat meaningless debate about the triple dip distract from the big picture – that this recovery is still depressingly dismal. To rub salt into the wound, the US Q1 GDP figures also released this week are set to show growth rising by 3.2% annualised (a quarterly rise of about 0.8%). This will leave the divergence between the two economies looking even more striking.

Howard Archer, IHS Global Insight

In reality, it makes very little difference whether the economy expanded modestly in the first quarter, contracted marginally or was flat. However, it would be good for psychological/confidence reasons if the economy could dodge contraction in the first quarter and, therefore, avoid nasty and potentially damaging headlines about "triple-dip recession".

We put the odds of GDP contraction in the first quarter (and hence a triple-dip recession) at around 30%. So we reckon there is a 70% chance that the economy was either flat or grew marginally.

We suspect that expansion in the dominant service sector was strong enough to allow the economy to eke out marginal GDP growth of 0.1 to 0.2% quarter-on-quarter in the first quarter. This would result in year-on-year GDP growth of 0.4% year-on-year. Admittedly, it looks like there was substantial contraction in construction output in the first quarter, but the sector only accounts for 6.8% of GDP, while the services sector accounts for 77%. Meanwhile, industrial production was likely essentially flat in the first quarter, given that there was a marked rebound in output in February from January's sharp drop.

Ruth Lea, economic adviser to Arbuthnot Banking Group

On the basis of ONS data so far available and survey material, GDP for 2013 Q1 could be a tad positive, thus avoiding a triple dip. But whether or not a triple dip is avoided, economic performance is weak. The latest labour market data showed an increase in unemployment, the February trade data deteriorated and bank lending to the business sector fell in February. The IMF downgraded its forecasts for the UK last week, with its chief economist, Olivier Blanchard, saying the chancellor should reconsider his "strict" austerity programme, and Fitch's downgraded Britain's triple-A rating to AA+.

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Apr. 21, 2013 (Allthingsforex.com) – A combination of notable economic data from the euro-area, coupled with the Bank of Japan’s monetary policy meeting and two GDP reports from the U.S. and the U.K., will offer plenty of excitement in the week ahead as the markets anxiously await to find out if the U.K. economy has averted an unprecedented triple-dip recession.

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe.

1.    USD- U.S. Existing Home Sales, the main gauge of the condition of the U.S. housing market measuring the number of closed sales of previously constructed homes, condominiums and co-ops, Mon., Apr. 22, 10:00 am, ET.

The report could start a sequence of upbeat U.S. economic data with sales of existing homes forecast to increase to 5.01 million in April, compared with 4.98 million in March.

2.    EUR- Euro-zone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Tues., Apr. 23, 4:00 am, ET.

Mired in recession, the euro-zone economy is expected to continue to suffer from a chronic contraction in its manufacturing and services sectors, as the Composite PMI stays in contraction territory below the 50 boom/bust line for another month with a reading of 46.3 in April from 46.5 in March. With economic growth still nowhere to be seen, the report could weigh on the EUR by increasing the odds that the European Central Bank might be forced to announce additional monetary policy easing measures as early as the bank’s next meeting on May 2.

3.    USD- U.S. New Home Sales, an important gauge of housing market conditions measuring sales of newly-constructed homes, Tues., Apr. 23, 10:00 am, ET.

Similar to the existing home sales, a small increase is also expected in the U.S. new home sales, with consensus forecasts estimating a reading of 420K in March compared with 411K in February.

4.    NZD- Reserve Bank of New Zealand Interest Rate Announcement, Tues., Apr. 23, 5:00 pm, ET.

The Reserve Bank of New Zealand joined “currency wars” in February with the Governor making it clear that intervention is being considered as an option to curb the persistent strength of the New Zealand dollar. In a world where competitive currency devaluation has become the norm, the New Zealand central bank will not be in a hurry to start tightening monetary policy. The Kiwi could weaken if the Reserve Bank of New Zealand issues another warning that its currency should not be considered as a “one way bet.”

5.    EUR- Germany IFO Business Climate Index, a leading indicator of economic conditions measuring the outlook of businesses, Wed., Apr. 24, 4:00 am, ET.

This could become another economic report that fails to instill confidence that the euro-area is on a path to recovery. The business outlook in the euro-zone’s largest economy is forecast to be less optimistic with a decline in the Ifo index to 106.2 in April, compared with a reading of 106.7 in the previous month.

6.    GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., Apr. 25, 4:30 am, ET.

Following three consecutive quarters of contraction, the U.K. returned to growth in Q3 2012, only to see its economy contracting again by 0.3% q/q in the final quarter of last year. As a result, fears of unprecedented triple-dip recession in the U.K. escalated and could become a reality if the economy unexpectedly contracts in the first quarter of 2013. The consensus forecasts suggest that such scenario could be averted with the U.K. economy expected to dodge the triple-dip recession bullet and grow by 0.1% q/q in Q1. On the other hand, should the report signal a triple-dip recession, pressure on the GBP would mount on expectations of more QE by the Bank of England.

7.     JPY- Japan CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of Japan, Thurs., Apr. 25, 7:30 pm, ET.

The Japanese national core inflation gauge is forecast to drop by -0.4% y/y in March from -0.3% y/y in February. With the index sinking deeper into deflation territory and heading further away from the Bank of Japan’s 2% inflation target, the report could accelerate the trend of JPY weakness on expectations that the Bank of Japan might resort to even more aggressive measures to fight deflation and to spur economic growth by devaluing its currency.

8.    JPY- Bank of Japan Interest Rate Announcement, Fri., Apr. 26, around 12:00 am, ET.

Since the Bank of Japan already gave the markets the “shock and awe” treatment earlier this month by doubling the size of asset purchases, the Japanese central bank will probably not rush to deliver even more fireworks. Policy makers will be likely to reaffirm their open-ended commitment to aggressive QE until the 2% inflation target is in sight. If the Bank of Japan does not announce anything we don’t already know, we could see the yen correcting some of its losses.

9.    USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth, Fri., Apr. 26, 8:30 am, ET.

After the U.S. economy avoided contraction in the final quarter of last year, the preliminary GDP estimate is forecast to show the U.S. growing at a faster pace by 3.0% q/y in the first quarter of 2103, compared with 0.4% q/y in Q4 2012. The USD could benefit from accelerating U.S. economic growth report which could raise the odds that the Fed might take the first step toward monetary policy tightening sooner rather than later.

10.     USD- U.S. Consumer Sentiment, the University of Michigan’s monthly survey of 500 households on their financial conditions and outlook of the economy, Fri., Apr. 26, 9:55 am, ET.

The final April reading of the U.S. consumer sentiment index is forecast to be revised higher to 74.3 from a preliminary estimate of 72.3. The report will wrap up what is expected to be a week of positive U.S. economic data that could boost investor sentiment and risk appetite.

Britain loses AAA rating with Fitch. Gross government debt expected to hit 101%. Treasury: we can’t run away from Britain’s debts. Britain is launching legal action against a plan to introduce a financial transaction tax in eurozone countries…

 


Powered by Guardian.co.ukThis article titled “Fitch downgrades UK credit rating – as it happened” was written by Graeme Wearden, for theguardian.com on Friday 19th April 2013 18.35 UTC

8.34pm BST

Closing summary

Our news story on the Fitch downgrade is now online here: Fitch strips UK of AAA credit rating.

Here's a flavour:

The UK's credit standing took a further blow on Friday when Fitch Ratings became the second major international agency to strip it of its top-notch credit rating.

The move is an embarrassment for the coalition, which promised to protect Britain's rating when it took power in 2010, and will heighten the debate about whether austerity is still the right approach.

Fitch trimmed the rating to AA+ from AAA, citing a weaker economic and fiscal outlook. But it returned the outlook to "stable", removing the threat of any further rating action, at least in the near term.

"The fiscal space to absorb further adverse economic and financial shocks is no longer consistent with a AAA rating," it said in a statement.

And as the reaction to the move has now died down, I'm going to shut up the liveblog for the day.

Here's the key points:

You can track the reaction to Fitch's downgrade from 5.06pm.

Here's the official statement

George Osborne says there's no credible alternative…

Shadow chancellor Ed Balls called it 'another devastating blow' to Osborne, and David Cameron

City analysts reacted calmly.

Thanks for reading, and goodnight. Back next week…..

8.30pm BST

Another photo from Washington, catching Osborne and Sir Mervyn King in thoughtful mood:

Britain Chancellor of the Exchequer George Osborne, center, stands with Bank of England Gov. Mervyn King, left, and U.S. Treasury Secretary Jack Lew during a group photo of the G20 finance ministers and central bank governors on the sidelines of their meeting at World Bank Group International Monetary Fund Spring Meetings in Washington, Friday, April 19, 2013.
Britain Chancellor of the Exchequer George Osborne, center, stands with Bank of England Gov. Mervyn King, left, and U.S. Treasury Secretary Jack Lew during a group photo of the G20 finance ministers and central bank governors on the sidelines of their meeting at World Bank Group International Monetary Fund Spring Meetings in Washington. Photograph: Charles Dharapak/AP

8.15pm BST

Meanwhile in Washington, finance ministers have agreed not to set hard targets for debt reduction.

Reuters has the details

8.09pm BST

UK launches legal action over FTT

Another important story to flag up… Britain is launching legal action against a plan to introduce a financial transaction tax in eleven eurozone countries.

The government says it is worried that the plan will affect banks and institutions in countries outside the scheme – in other words, hurt the City..

From Washington, Larry Elliott reports:

The scheme, also known as a Tobin tax, would put a levy on all euro transactions anywhere in the world. But hopes for it suffered a setback when George Osborne said in Washington that the UK was taking the case to the European court of justice (ECJ).

"I am not against financial transaction taxes in principle," the chancellor said, noting that the UK put stamp duty on shares. "But I am concerned about the extra-territorial aspects of the European commission's proposals.

It's quite a dramatic move from the UK. FTT supporters aren't impressed – the Robin Hood Tax campaign called it "the last refuge of a chancellor who has lost the argument".

Here's the full story: George Osborne to challenge proposed financial transaction tax in court

7.45pm BST

The International Monetary Fund has taken another swipe at the government's budget plans tonight.

In an interview with the BBC's Hardtalk programme, Christine Lagarde was asked whether the UK government needed show more flexibility.

She replied that Britain's recent "weak growth" meant the government could now reconsider its plans (effectively repeating her point from earlier this week).

Here's the quote:

We are saying with this medium-term, strong anchoring of fiscal consolidation, the pace has to be adjusted depending on the circumstances and given the weak growth that we have observed lately … now might be the time to consider.

The IMF has previously backed Osborne's plans. And the reference to "medium-term, strong anchoring of fiscal consolidation" shows it hasn't lost all faith in the UK.

7.35pm BST

Here's a second statement from the Treasury tonight, insisting that the UK economy is improving:

Though it is taking time, we are fixing this country's economic problems.

The deficit is down by a third, a million and a quarter new private-sector jobs have been created and the credibility we have earned means households and businesses are benefiting from near record low interest rates.

The test will come next Thursday, when the first estimate of UK economic output in January, February and March is released. If GDP has fallen then Britain will be a triple-dip recession.

7.23pm BST

Osborne: no credible alternative

US Treasury Secretary Jack Lew (R) talks with British Chancellor of the Exchequer George Osborne (L) during group photo of G-20 finance ministers and central bankers at the 2013 IMF and World Bank Spring Meetings in Washington, DC, USA, 19 April 2013.
 George Osborne (left) speaking to US Treasury Secretary Jack Lew during the group photo of G20 finance ministers and central bankers at the 2013 IMF and World Bank Spring Meetings in Washington. Photograph: SHAWN THEW/EPA

Over in Washington at the G20 meeting, George Osborne is refusing to be beaten down by Fitch's downgrade.

Speaking to the Financial Times, the chancellor argued that there was no 'credible' alternative to his plans.

Osborne said:

While of course there are ongoing economic challenges in the UK, I don’t feel a particularly strong political challenge to our economic policy.

I don’t feel under particular pressure politically because I don’t see anyone coming up with a credible alternative.

7.08pm BST

Rob Wood, chief UK economist at Berenbeg Bank, agrees that Fitch's downgrade has little impact economically. He points out that the UK deficit is not actually expected to fall this year (it is forecast to be £121bn, versus £120bn in 2012-2013)

Wood commented:

The downgrade comes hot on the heels of the spat this week between the IMF and the UK government, about whether to ease back on consolidation.

It will be further ammunition for the Labour opposition. Although in reality the arguments about Plan A and Plan B are pretty meaningless. The Chancellor has more or less switched to Plan B already.

He does not expect government borrowing to fall between FY2011/12 and FY2013/14. Ignoring all his questionable fiddles to get the measured deficit down, the Chancellor expects to borrow more than £100bn in the final fiscal year of the current parliament. It is hard to imagine a credible plan to borrow much more than that. Indeed, the stable outlook from Fitch relies on continued commitment to consolidation.

6.52pm BST

City unshaken by downgrade

There's a pretty muted reaction in the City tonight to Fitch's downgrade.

Economists and traders were already well aware of the state of the British economy, having digested the economic forecasts in last month's budget.

And Britain's credit rating had already lost its AAA status when Moody's made its own downgrade in February. The pound is still down on the day (see 5.33pm for a chart), but a fall of 0.5 cents isn't a big move.

Here's some early reaction:

Torben Kaaber, CEO at Saxo Capital Markets:

Poor George Osborne really has had a bad few days, not only has the IMF turned its back on him, Fitch has just downgraded the UK to AA+; a painful end to the week.

This further adds to the negativity around GBP and the perceived lack of policy to address the UK’s weak economic growth; specifically it was the poor economic growth that was highlighted by both Moody’s and Fitch as the key elements in their decisions to cut.

This downgrade set against a background of weakening UK economic data and the Bank of England likely to continue to add monetary stimulus would suggest that GBP will stay under pressure for now. Either way, shaky ground ahead, however given Osborne’s strong rhetoric to date, it seems the man is not for turning.

David Tinsley of BNP Paribas

For now the UK government is likely to stick to their existing plans for consolidation. But if growth falls short of already modest forecasts then pressure will build still further.

Howard Archer of IHS Global Insight

We suspect that there is likely to be little, if any, economic or market fall-out from Fitch’s decision to strip the UK’s of its rating, especially as the new AA+ rating has a stable outlook attached to it, which means that there are unlikely to be any further changes by Fitch to the rating for at least the next two years.

Updated at 6.58pm BST

6.19pm BST

Fitch's downgrade has come as George Osborne attends the meeting of G20 finance ministers in Washington.

Not the best timing for the chancellor, points out Channel 4's economics editor, Faisal Islam.

6.15pm BST

Ed Balls responds:

Ed Balls, the shadow chancellor, has called the downgrade "another humiliating blow" to the government, and repeated Labour's jibe that Osborne is a "downgraded chancellor".

Here's his full response:

This is another humiliating blow to a Prime Minister and Chancellor who said keeping our AAA rating was the number one test of their economic and political credibility. And it ends a disastrous week for George Osborne’s economic policy after the IMF downgraded its UK economic forecasts again and warned Britain needs a plan B for jobs and growth.

It’s not the views of the credit rating agencies, but the economic realities they are responding to which should be ringing alarm bells at the Treasury. Fitch is clear that their decision is a result of the weak growth performance of the UK in recent years. They are responding to nearly three years of stagnation, rising unemployment and billions more borrowing to pay for this economic failure.

This downgraded Chancellor needs to wake up and realise that his failing economic policies are causing long-term damage and Britain’s families and businesses are paying the price. When even your biggest allies – the IMF and the credit rating agencies – abandon you it really is time to put political pride aside and finally act to kickstart the economy.

Updated at 6.32pm BST

6.12pm BST

A bad week, by George

Fitch's downgrade comes at the end of a difficult week for George Osborne.

The International Monetary Fund warned on Tuesday that the government should ease the pace of its austerity programme, given the weak state of the economy.

On Wednesday, Britain's unemployment rate rose to 7.9%.

Then on Thursday, the IMF's Christine Lagarde repeated that Osborne should rethink and promised that her officials would conduct a thorough investigation into the health of the UK economy next month.

6.00pm BST

Fitch is the first agency to cut Britain's credit rating since last month's budget – the axe has been hovering since it put the UK on "rating watch negative" four weeks ago.

Standard & Poor's is now the only Big Three rating agency to still rank the UK as AAA (Moody's didn't even wait for the budget).

This puts the UK in a similar position as France (who are only AAA with Fitch).

Updated at 6.33pm BST

5.54pm BST

The headwinds of ‘private and public sector deleveraging’

Critics of George Osborne are likely to seize on Fitch's point that Britain's budget deficits are now forecast to be higher than expected last year (the third 'ratings driver' in the statement at 5.12pm)

Fitch blames "the weak growth performance of the UK economy in recent years", which it says are partly due to "headwinds of private and public sector deleveraging and the eurozone crisis".

Clearly Osborne can't be blamed for the euro's woes. But many Keynesian economists have argued that it was a blunder to attempt an austerity programme while many companies, and households, were also looking to pay down their debts.

Updated at 5.59pm BST

5.44pm BST

Treasury: downgrade shows Britain must tackle debts

The Treasury has responded to Fitch's downgrade, arguing that the move doesn't mean chancellor George Osborne should change course:

A spokesman said:

This is a stark reminder that the UK cannot simply run away from its problems, or refuse to deal with a legacy of debt built up over a decade.

Fitch themselves say the government's 'continued policy commitment to reducing the underlying budget deficit' is one of the main reasons UK debt now has a 'stable' outlook.

5.33pm BST

Pound drops after Fitch downgrade

The pound is down half a cent against the dollar today, following Fitch's announcement, to .523.

That's not a major move really, and as you can see sterling had actually been sliding all afternoon….

Sterling, April 19 2013
Pound vs dollar today. Photograph: Reuters

Updated at 6.33pm BST

5.23pm BST

Fitch’s statement

Fitch's statement is online here.

The new rating is AA+ with a stable outlook, which means Fitch is not anticipating a further downgrade in the near future.

5.12pm BST

Why Fitch downgraded the UK

Fitch says it took the decision to downgrade Britain's triple-A rating because of the country's deteriorating economic climate.

It now believes Britain's gross debt will peak at 101% of GDP in 2015-16.

A debt mountain larger than the UK's annual economic outlook is not consistence with a top-notch credit rating.

Here's the key points from tonight's statement:

• Fitch now forecasts that general government gross debt (GGGD) will peak at 101% of GDP in 2015-16 (equivalent to 86% of GDP for public sector net debt, PSND) and will only gradually decline from 2017-18. This compares with Fitch's previous projection for GGGD peaking at 97% and declining from 2016-17 and the 'AAA' median of around 50%.

• Fitch previously commented that failure to stabilise debt below 100% of GDP and place it on a firm downward path towards 90% of GDP over the medium term would likely trigger a rating downgrade. Despite the UK's strong fiscal financing flexibility underpinned by its own currency with reserve currency status and the long average maturity of public debt, the fiscal space to absorb further adverse economic and financial shocks is no longer consistent with a 'AAA' rating.

• Higher than previously projected budget deficits and debt primarily reflects the weak growth performance of the UK economy in recent years, partly due to headwinds of private and public sector deleveraging and the eurozone crisis. Fitch has revised down its forecast economic growth in 2013 and 2014 to 0.8% and 1.8%, respectively, from 1.5% and 2.0% at the time of the last review of the UK's sovereign ratings in September 2012. The UK economy is not expected to reach its 2007 level of real GDP until 2014, underscoring the weakness of the economic recovery.

• Despite significant progress in reducing public sector net borrowing (PSNB from a peak of 11.2% of GDP (GBP159bn) in 2009-10, the budget deficit remains 7.4% of GDP (excluding the effect of the transfer of Royal Mail pensions) and is not expected to fall below 6% of GDP and GBP100bn until the end of the current parliament term. The slower pace of deficit reduction means that the next government will be required to implement substantial spending reductions (and/or tax increases) if public debt is to be stabilised and reduced over the medium term.

Updated at 5.17pm BST

5.06pm BST

FITCH DOWNGRADES UK

Breaking News: Fitch has downgraded the UK's triple-A rating, by one notch, to AA+.

4.34pm BST

Goldbugs swarmed on bullion in April, says Royal Mint

My colleague Katie Allen has been looking into sales of physical gold over the last week and has some interesting numbers from the Royal Mint.

The battering in financial markets for gold has brought out the bargain hunters in the physical market and bars, nuggets and coins are going gangbusters.

In India, the world's biggest gold buyer, the wedding season is boosting sales further, jewellers report.

In the UK the Royal Mint tells us that bullion sales have rocketed.

Richard Samuels, bullion manager at The Royal Mint said:

Demand for gold bullion coins during April has seen an increase of over 150% in sales on the previous month, and over 200% on the same period in 2012.

Shane Bissett, director of bullion and commemorative coin at The Royal Mint said:

Since the dip in the price of gold we have seen increased demand for our gold bullion coins from the major coin markets, and this presently shows no sign of abating. The Royal Mint continues to supply to its customers and is increasing production to accommodate the higher demand.

The gold price has risen today, incidentally, to ,402 per ounce.

Updated at 5.00pm BST

4.03pm BST

Photos: Alessandra Mussolini wears ‘The Devil Wears Prodi’ top

Surprising scenes in the Italian parliamentAlessandra Mussolini MP, granddaughter of Benito, turned up for today's presidential vote with "The Devil Wears Prodi" written on the back of her top.

This led to hissing and booing from centre-left MPs, who had selected former prime minister Romano Prodi as their favoured candidate for the presidency (see 1.25pm for details).

Mussolini is a member of Silvio Berlusconi's PdL party, who are refusing to support their former rival.

Alessandra Mussolini wears a t-shirt to protest during the second day of the presidential election in the lower house of the parliament in Rome April 19, 2013.
Photograph: Max Rossi/Reuters
Lower house president Laura Boldrini (R) checks the t-shirt of  PDL (People of Freedom party) member Alessandra Mussolini (C) during the second day of the presidential election in the lower house of the parliament in Rome April 19, 2013.
Lower house president Laura Boldrini (R) checks the Alessandra Mussolini’s t-shirt. Photograph: Max Rossi/Reuters
PDL (People of Freedom party) member Alessandra Mussolini (L) gestures with Lower house president Laura Boldrini during the second day of the presidential election in the lower house of the parliament in Rome April 19, 2013. I
Photograph: Max Rossi/Reuters
Alessandra Mussolini of The People of Freedom (PdL) wears a T-shirt which reads 'The Devil wears Prodi' ('Il Diavolo veste Prodi') as she arrives in the Chamber of Deputies on the second day of the election of the new Italian President, Rome, Italy, 19 April 2013.
Photograph: Alessandro Di Meo/EPA

We don't have the results of the latest ballot yet, though.

Updated at 4.14pm BST

3.36pm BST

Over in Washington, we're expecting a statement from G20 finance ministers later this afternoon.

Details are starting to leak … the Wall Street Journal reckons we'll get a repeat of their previous comments about committing to avoid a currency war …

Updated at 3.36pm BST

3.30pm BST

Photos: Cyprus begins inquiry into bailout crisis

Cyprus' Finance Ministry permanent secretary Christos Patsalides, the first witness of a public inquiry into Cyprus' economic collapse, testifies before a panel of judges in Nicosia April 19, 2013.
Cyprus’s finance ministry permanent secretary Christos Patsalides testifying today. Photograph: ANDREAS MANOLIS/Reuters

The top civil servant at Cyprus's finance ministry has savaged the country's international lenders as "forces of occupation" with no compassion for human rights, at the start of an official judicial probe into the crisis.

Christos Patsalides told the inquiry that the officials who negotiated with Cyprus had been "unrelenting", and had driven it into its current plight.

Patsalides said:

With the imposition of Germany and the IMF…they shot a pigeon with an atomic bomb".

Cyprus's finance ministry permanent secretary Christos Patsalides (background right) starts testifying, Nicosia Friday 19 April 2013, into the economic circumstances leading to the turmoil of an EU sanctioned bailout for the troubled Mediterranean island.
Photograph: Katia Christodoulou

Here's more details via Reuters:

Asked whether forcing losses on depositors was compatible with their individual rights, Patsalides replied: "When you are dealing with forces of occupation, they don't talk about human rights."

Cyprus, which had modelled itself as an offshore financial services centre for lack of any other resources, now faces a grim future with its reputation in tatters and its economy deep in recession.

"They destroyed an economic system that worked," Patsalides said. "Yes, we have our shortcomings, but the magnitude of the punishment is far greater than the size of the problem."

Updated at 3.41pm BST

2.32pm BST

Schäuble suggests ECB should reduce liquidity

Wolfgang Schäuble has waded into the debate over excessive monetary easing by suggesting that the European Central Bank should take the opportunity to reduce liquidity.

The comments created some concern in the financial markets — with several eurocrisis experts pointing out that the weakest areas of the eurozone would benefit from more easing, not tightening at this stage.

After all, the IMF's Christine Lagarde argued this week that the ECB is the only central bank with the room to do more.

I've now found the comments, which were made in an interview with Germany's Wirtschafts Woche. It's online here.

Here's the key quotes:

There is a lot of money in the market, in my opinion too much money…If the ECB tries to exploit leeway to reduce the large liquidity a little, I can only welcome this.

Schäuble went on, though, to recognise that the economic crisis is not over, adding:

We must not forget in Germany that many European countries are still in a precarious position growth.

Worth noting that eurozone inflation actually dropped to 1.7% last month – hardly a sign of an overheating economy. And many banks have begun repaying early the cheap loans they took from the ECB over a year ago.

Here's the early reaction:

Updated at 2.39pm BST

1.25pm BST

You won't be surprised to learn that Italian MPs have again failed to elect a president, at their third round of voting today.

Now the fourth round, where a successful candidate just needs a straight majority (not the two-thirds mandate of earlier rounds).

The centre-left Democratic party has set up a clash with Silvio Berlusconi's People of Freedom (PDL) by choosing former prime minister Romano Prodi as its candidate.

That could prompt an early general election, as PDL has refused to accept Prodi. He and Berlusconi were fierce opponents through the last decade – Prodi defeated his rightwing rival in the general election of 2006, only to be ousted in 2008, when Berlusconi returned to office.

The fourth round starts in around an hour's time:

Updated at 1.28pm BST

12.25pm BST

Finland approves Cyprus bailout

Finland's parliament has given its approval to the Cyprus bailout, at two votes in Helsinki this lunchtime.

A total of 86 MPs backed Prime Minister Jyrki Katainen’s six-party coalition, with 65 against and 48 MPs absent (figures via Bloomberg).

The country's grand committee (which oversees EU policy) then voted 16 – 9 to back the aid package.

As we wrote yesterday, Cyprus's government is planning to hold its own vote to approve (or potentially reject) the programme agreed with Brussels, the ECB and the IMF.

Updated at 1.27pm BST

11.52am BST

Arrests over Greek migrant shooting

The Greek government has pledged not to deport migrant workers who were shot this week after asking for their unpaid wages, after three supervisors suspected of firing on the group were arrested.

The shooting of 28 Bangladeshi strawberry pickers shot in the Nea Manolada area prompted a public outcry, and coverage in the international media.

Visiting the site today, public order minister Nikos Dendias announced this morning that the victims would not be expelled from Greece, and said the government would crack down on the use of unregistered workers.

Kathemerini adds:

The brutal assault does not only violate Greek laws but also every sense of humanity and has no relation to Greece's culture, Dendias said after speaking with local police chiefs.

Greek police have issued a statement this morning, saying that they have now detained three men near the village where the shootings took place on Wednesday.

Two of the Greek men, aged 39 and 27, were arrested at their lawyer's office. The third, aged 21, was stopped during a road check. according to AP.

Migrant workers sit inside a makeshift camp in Nea Manolada on April 18, 2013.
Migrant workers sit inside a makeshift camp in Nea Manolada yesterday. Photograph: Giota Korbaki/AFP/Getty Images

Updated at 1.26pm BST

11.08am BST

Markets rise on G20 hopes

European stock markets are up this morning, partly driven by hopes that the G20 will make some progress towards repairing the global economy today.

FTSE 100: up 33 points at 6277, + 0.5%

German DAX: up 37 points at 7510, +0.5%

French CAC: up 44 points at 3643, +1.24%

Spanish IBEX: up 120 points at 7932, +1.5%

Italian FTSE MIB: up 330 points at 15,811. 2.1%

Brenda Kelly, market analyst at IG, points out that there are few fundamental reasons for traders to be cheerier:

Equity markets ramped up small gains in early trade, showing a recovery from yesterday’s mediocre performance. The cautious sentiment seems to be hinged on a positive outcome from the meeting of finance leaders in Washington today. Corporate and economic data from both across the water and closer to home have failed to lend any true traction to recent rally.

And Kit Juckes of Société Générale points out that share prices are still benefiting from the relaxed monetary policy that is causing such concern to fast-growing emerging nations (see 8.51am).

Updated at 11.08am BST

10.46am BST

German constitutional court to hear complaint against euro rescue funds

President of the German Constitutional Court Andreas Vosskuhle (R) arrives with other judges for the hearing on the European Stability Mechanism (ESM) and the fiscal pact in Karlsruhe July 10, 2012.
From July 2012, when the German constitutional court held a hearing on the European Stability Mechanism (ESM) and the fiscal pact. Photograph: Alex Domanski/Reuters

Heads up: Germany's constitutional court has announced that it will hear a wide-ranging complaint into Europe's rescue packages in June.

The two-day hearing, set for 11-12 June, will examine whether the European Central Bank's new bond-buying scheme or OMT (Outright Monetary Transactions) violates the German constitution.

Germany's top judges will also consider the ECB's earlier SMP bond-buying programme (used to stabilise the borrowing costs of Spain and Italy in 2011), and its Emergency Liquidity Assistance (which propped up banks in Cyprus). as well.

The court, in Karlsruhe, ruled seven months ago that the European Stability Mechanism (the €700bn rescue fund set aside for bailouts) did not infringe budget sovereignty of the German parliament. This new case will also see it consider the ESM again.

Updated at 1.20pm BST

10.17am BST

IMF fears ‘poisoned umbrellas’ in London

The UK government and the International Monetary Fund are preparing for a serious scrap over Britain's fiscal plans next month.

IMF officials are due in London in May to conduct their annual assessment – and are widely expected to challenge George Osborne's policies (following Christine Lagarde's concern over the UK's weak growth).

The Treasury, though, is planning an aggressive response – suggesting a clash that could potentially influence the economic debate beyond the UK.

According to the Financial Times, an unnamed IMF official is even harking back to the killing of Bulgarian dissident writer Georgi Markov back in 1978:

IMF economists concede they may need to watch out for “poisoned umbrellas” for their so-called “Article IV” mission to London. One aide to Mr Osborne said: “If they recommend we loosen fiscal policy, we won’t do it. We think they are wrong.”

Mr Osborne believes that IMF criticism of his policies is unfair, as Britain’s 1 per cent fiscal contraction this year is in line with the fund’s general recommendations for advanced economies.

Not sure the umbrella reference is in the very best taste…

Financial Times Front Page, April 19 2013
Today’s Financial Times

Updated at 1.16pm BST

9.47am BST

Italian industrial orders down 7.9%

Italy's industrial sector has suffered another slump in demand. Industrial orders tumbled by 7.9% in February, compared to a year ago, a sharper fall than analysts had expected.

On a seasonally adjusted basis, orders were down 2.5% month on month in February, on top of a 1.4% decline in January. That adds to fears that the eurozone economy weakened towards the end of December.

Updated at 1.15pm BST

9.08am BST

Yen falls back…

The G20 will not rebuke Japan over its new aggressive monetary easing policies, according to its finance minister, Taro Aso.

The Yen fell by over 1% against other currencies this morning after Aso told reporters that finance ministers will not make any official complaint over "Abenomics".

In response, the yen has fallen to over ¥99 to the US dollar.

8.51am BST

Emerging economies warn over liquidity surge

The world's leading emerging and developing countries have sounded the alarm this morning over dangers of huge monetary stimulus programmes.

In a joint communique, the group of 24 emerging and developing countries warned central banks in "advanced" economies that their unconventional policies would cause huge damage:

The G24, which includes Brazil, India and South Africa, said:

We remain concerned about the fragility and pace of the global recovery because of the protracted difficulties and uncertainties in many advanced economies, including the euro area and the United States.

We call on advanced economies to take into account the negative spillover effects on the emerging and developing countries of prolonged unconventional monetary policies.

AFP has a full report here.

The quantitative easing programmes launched by the US since the crisis began have long concerned the G24, who saw "hot money" flow into their economies after the Federal Reserve boosted liquidity.

The Bank of Japan's bold new scheme to double its monetary base and finally slay deflation is a new worry – the IMF warned this week that the seeds of the next crisis could be being sown now.

Updated at 1.14pm BST

8.27am BST

Olli Rehn: we could slow austerity down

Good morning, and welcome to our rolling coverage of the latest events in the eurozone crisis and across the world economy.

The battle between growth and austerity is centre stage today as the world's most powerful finance ministers and central bank governors gather in Washington for the G20 talks.

Overnight, European commissioner Olli Rehn signalled that the eurozone may finally be prepared to bow to pressure and relax its fiscal consolidation programme in some countries – where the belt tightening is clearly doing more harm than good.

Speaking to Reuters, Rehn declared:

In the early phase of the crisis it was essential to restore the credibility of fiscal policy in Europe because that was fundamentally questioned by market forces…

There was no choice. Decisive action was taken.

Now, as we have restored the credibility in the short-term, that gives us the possibility of having a smoother path of fiscal adjustment in the medium-term.

It could be an important shift in Brussels' position, as the G20 are expected to discuss whether to agree on a collective "co-ordinated debt reduction plan" for the coming years.

Rehn's comments also come as the International Monetary Fund appeared to shift its position on the balance between fiscal consolidation and stimulus. Some journalists are talking of a power battle within the Fund, with more Keynesian elements perhaps taking the upper hand.

But talk of more stimulus measures in the world's biggest economies may be alarming the developing world – who have issued a warning about the push for ever-more liquidity (more to follow).

In Europe, the Finnish parliament is due to debate the Cyprus bailout. The news yesterday that Cypriot MPs will hold their own vote is causing some jitters.

And Italian MPs will continue to vote on their next president, after two failed ballots yesterday.

I'll be tracking the latest developments in Europe, and beyond, through the day.

Updated at 1.13pm BST

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The UK Office for National Statistics reports 0.7% sales fall despite a near 1% rise in food sales. Sales volumes declined as department stores and homeware retailers suffered from March snow. The decline was smaller than the -0.8% forecast…

 


Powered by Guardian.co.ukThis article titled “Retail sales hit by March snow” was written by Phillip Inman, economics correspondent, for theguardian.com on Thursday 18th April 2013 10.15 UTC

Retail sales fell by more than expected in March after heavy snowfall deterred shoppers from venturing out to buy clothes and homeware.

According to official figures, sales volumes declined by 0.7% last month despite a near 1% rise in food sales as department stores and homeware retailers suffered from the cold weather.

James Knightley, UK economist at ING bank, said although sales were weaker than expected, they offered "a little more reassurance" that the UK would avoid falling into its third recession since the financial crisis began.

"Nonetheless, yesterday's employment numbers were not great and softer global figures still lead us to believe that the Bank of England will come in with more stimulus, potentially as soon as the May meeting when they produce new economic forecasts," he said.

First-quarter growth figures for the UK are released in a week, and economists remain split on whether they will show an unprecedented triple-dip downturn.

Chris Williamson, chief economist at Markit, the financial data provider, said higher retail sales figures at the end of last year to February showed the economy had regained some of its momentum, but, like Knightley, he warned the bounce could be short-lived.

"The upward trend in sales has followed a steady improvement in consumer confidence since late last year. Surveys of households show confidence had picked up further in March, linked in part to people being busier at work, which both improved job security and raised take-home pay. However, there is a worry that rising unemployment, weak pay growth and high inflation could reverse this trend in coming months," he said.

Woman picking up shopping bags
Retail sales have proved volatile in recent months, with a 0.7% decline in January. Photograph: Winston Davidian/Getty Images

Alan Clarke, UK economist at Scotia Bank, said the retail figures were disappointing and reflected a weakening economy that could still show a triple-dip recession.

"With wage inflation at around 1% and headline inflation at close to 3%, the maths don't add up to much in the way of consumer spending growth – rather the opposite – falling consumer spending by mid-year," he said. "Let's hope the Bank of England's new tactic of targeting business investment works."

Retail sales have proved volatile in recent months, with a 0.7% decline in January, when snow was again a factor, being followed by a 2.1% rise in February.

The Office for National Statistics said the March figures pushed sales over the year into a decline of 0.5%.

Knightley said: "The figure was always going to be weak, with the heavy snowfall in the month, which particularly hurt clothing retailers (with sales down 3.1% month on month), given they had started to stock their spring fashion ranges.

"The ONS reports that it was the coldest March since 1962 with department stores and household goods stores also particularly depressed (down 4% and 6.2% month on month respectively)."

High petrol prices also deterred motorists from filling up their tanks – the ONS figures showed a 1% decline in petrol sales.

The poor figures were rescued only by the consistent rise of food sales, which was repeated in March. Food sales rose 0.9%, the largest gain since July 2011.

Sales of goods over the internet gained momentum, with a 6% rise.

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European Parliament scathing over way Cypriot deal was handled. UK unemployment rate rises to 7.9%. European car sales slump 10%. Rogoff & Reinhart row stirs economics world. Will Chinese bad debts become another crisis?

 


Powered by Guardian.co.ukThis article titled “Markets slide as Bundesbank head warns recovery could take a decade – as it happened” was written by Graeme Wearden, for theguardian.com on Wednesday 17th April 2013 14.40 UTC

6.49pm BST

Closing summary

Time to wrap things up. Here's a brief closing summary

Europe's stock markets have fallen sharply, after another day dominated by concerns over economic growth. The German Dax fell by 2.35% to its lowest level of 2013, while in London the FTSE 100 shed 50 points to a 10-week low (see 6.04pm for closing prices).

Germany's top central banker warned that the task of recovering from Europe's debt crisis could take a decade. Jens Weidmann, head of the Bundesbank, also suggested the ECB could cut interest rates to stimulate demand (see 4.59pm)

European car sales fell by over 10% last month, as the financial crisis hit the auto industry. Germany, France and Spain all saw double-digit falls (see 8.30am).

MEPs were deeply critical of the handling of the Cyprus bailout. A session at the European Parliament saw a series of politicians blast the botched rescue package (see 10.26am for early highlights and 12.47pm for details)

Harvard economists Kenneth Rogoff and Carmen Reinhart defended their research paper into the effects of debt on growth levels. They admitted making a mistake with an excel spreadsheet in which meant they overstated the impact of high debt on GDP. (See 2.16pm for details and 3.40pm for an example of the criticism directed at the pair).

Greek medical workers held a six-hour anti-austerity strike, and held a protest in Athens. (see 4.06pm for photos)

In the UK, the unemployment rate rose to 7.9%. Economists warned that the labour market has now caught up with the weak economy (see 9.59am onwards).

• Slovenia held a debt buyback (see 6.25pm)

• Portugal's opposition leader refused to support its austerity package (see 5.49pm)

I'll be back tomorrow. Until then, thanks for reading and commenting. Apologies that we had some technical issues with the comments system today (and yesterday) – our star tech team have fixed it now.

Goodnight!

6.25pm BST

Slovenia’s debt buyback

Slovenia made progress today in its battle to avoid becoming the next member of the eurozone to seek international assistance.

It held a debt buyback, in an attempt to cut its refinancing costs as its new government constructs a deal to strengthen its banks. The project started well, with Slovenia raising €1.1bn with a bond auction. It then used some of the proceeds to buy back €510m of bonds that would have matured in June.

That means it shouldn't have to worry about rolling them over then – effectively buying some time.

Timothy Ash, a London-based emerging markets economist for Standard Bank, said (via the WSJ):

It has eased a little bit of the pressure, but they will ultimately have to come to the market abroad to raise financing.

6.04pm BST

European markets tumble amid gloomy forecasts

A bad day on Europe's stock markets has seen the German Dax slide to its lowest level since last December.

Bundesbank head Jens Weidmann's warning that the European recovery could last a decade helped to drive shares down across the region. There was also a rumour that Germany's credit rating was at risk — which surfaced this morning without ever being substantiated.

Here's the damage:

FTSE 100: down 60 points at 6244, – 0.96%

German DAX: down 179 points at 7503. -2.34%

French CAC: down 86 points at 3599, -2.35%

Spanish IBEX: down 145 points at 7803, -1.8%

Italian FTSE MIB: down 149 points at 15383, -0.96%

And in the foreign exchange markets, the euro has fallen by 1.5 cents against the US dollar, to .303.

So what caused Europe's stock markets to slide?

Traders are blaming the steady stream of negative economic data in recent days, including this morning's tumble in new car sales. They also pointed to today's warnings from the International Monetary Fund (which cut its growth forecasts again yesterday). That German downgrade rumour was another factor.

Here's some reaction:

Sebastien Galy of Societe Generale

The sensitivity of different markets to negative surprises seems to have risen sharply recently, particularly in Europe and the broad emerging market spectrum. It suggests that the period of consolidation is continuing.

Michael Hewson of CMC Markets

A day after the IMF downgraded its growth forecasts for the Euro area in 2013, markets have come under pressure once again today after European car sales once again slid on a monthly basis, this time down 10.2% to almost a 20 year low, with Germany’s auto market in particular suffering a sharp 17% slide.

Reported comments from Bundesbank chief Jens Weidmann, that Europe's recovery could well take a decade, also hit sentiment in the afternoon session and has seen European markets start to close in on significant support levels, while the DAX has led the declines making new lows for 2013.

Chris Beauchamp of IG

Overall it seems as if the general tone has shifted from ‘buy the dips’ to ‘sell the rallies’, with the sustaining sense of optimism that carried markets forward in the first quarter of 2013 having finally exhausted itself.

5.49pm BST

Portugal’s opposition leader won’t support austerity plans

The head of the Portuguese opposition has refused to back the country's austerity programme tonight, despite efforts from the Troika today to get political backing for the plan:

Reuters has the details:

Portugal's main opposition Socialists reiterated their rejection of the centre-right government's austerity policies on Wednesday despite attempts by Lisbon's EU and IMF lenders to rebuild a political consensus around their bailout.

"Our position is to show to the troika that the policy applied here does not lead to the desired results and also provokes a recessive spiral," Socialist leader Antonio Jose Seguro told reporters.

He was speaking after meeting representatives of Portugal's lenders from the European Union and IMF who are in Lisbon this week to work with the government on new spending cuts needed to meet bailout goals after the constitutional court rejected some austerity measures from this year's budget.

The coalition government has a comfortable majority in parliament to pass bills, but the lenders want a broader political support for austerity to make the reforms sustainable.

Portugal's austerity programme is being rejigged after its constitutional court rejected pay and benefit cuts last month. Pedro Passos Coelho responded by pledging to cut health and education spending.

5.27pm BST

Esther Bintliff of the Financial Times has pulled together a list of the key research papers and articles to explain the row over Carmen Reinhart and Kenneth Rogoff's research into the effects of debt levels on growth (see here for more)

4.59pm BST

Bundesbank chief: recovery could take a decade

Mario Draghi, President of the European Central Bank, ECB (L), and Jens Weidmann, President of the Bundesbank are pictured during the awarding ceremony of the Generation Euro Student's Award in Frankfurt/Main, Germany, on April 17, 2013.
Jens Weidmann, President of the Bundesbank (right) with Mario Draghi today at the awards ceremony of the Generation Euro Student’s Award in Frankfurt. Photograph: DANIEL ROLAND/AFP/Getty Images

Jens Weidmann, head of the Bundesbank, has caused a stir tonight by warning it may take a decade for Europe to recover from the debt crisis.

In an interview with the Wall Street Journal, Weidmann dismissed the suggestion that Europe was through the worst of its problems.

Instead, he indicated that the European Central Bank might have to cut interest rates to stimulate growth — which is interesting given Weidmann is one of the most hawkish members of the ECB's Governing Council.

Weidmann's comments pushed the euro down, and helped to send shares sliding in Europe (with the French and German stock markets posting heavy losses).

Here's a flavour:

"Overcoming the crisis and the crisis effects will remain a challenge over the next decade," he said, contrasting recent comments from European Commission President José Manuel Barroso that the worst of Europe's crisis is over.

"The calm that we are currently seeing might be treacherous" if it delays reforms at the national and European level, Mr. Weidmann said. There can be no quick fixes from the ECB either, he said.

Full interview here.

4.18pm BST

Also in Athens, Greek finance minister Yannis Stournaras told MPs this afternoon that "the Greek banking system was endangered by the the Cyprus crisis."

From Greece, Helena Smith reports:

"It's not an exaggeration to say that the Greek banking system was in danger because if the deposits of Greeks at Cypriot branches [in Greece] had also suffered a haircut, no one knows what would have happened afterwards," Stournaras told parliament as it debated the decision to ring fence the banks.

The decision to place the Greek network of Bank of Cyprus and Laiki banks in the hands of Pireaus Bank was "evidence of the helpful stance and support of Greece towards Cyprus," he said.

Many Cypriots would disagree. Greece is widely blamed by the islanders for their country's spectacular economic collapse. Had it not been for Nicosia standing in solidarity next to Athens when its own debt load was restructured last year, the Cypriot banking system would not have suffered €4.5bn of losses (tountamount to 25% of GDP) overnight, officials say.

One of the best kept secrets, rarely if ever acknowledged by the leaderships of both countries, is the little love lost between them. In truth the Cypriots and Greeks have little time for each other.

Updated at 4.18pm BST

4.06pm BST

Photos: medical staff protest in Greece

Here are a few photos from Athens today, where employees of the Greek health service held a six-hour strike in protest at the government's austerity package.


Hospital workers carry a banner reading “government, IMF, EU-troika are harmful for the public health” outside the ministry of health in Athens.
Employees in the Greek NHS (ESY) demonstrate in the center of Athens against government announced plans to lay off 1500 public sector employees as part of the continuous austerity measures.
Photograph: Giorgos Panagakis/Demotix/Corbis
A demonstrator is seen making noise with a whistle.
Photograph: Giorgos Panagakis/Demotix/Corbis

The protest followed the Greek government's decision to agree to cut 15,000 civil servant jobs by 2015 (see our story from Monday night).

3.55pm BST

Key event

Global slowdown watch: The Bank of Canada has cut its forecasts for GDP growth this year, from 2% to 1.5%.

BoC, whose governor Mark Carney will take over at the Bank of England this summer, effectively conceded it had been too optimistic about the Canadian recovery. It now reckons it will not return to full capacity until mid-2015, some six months later than predicted in January.

The move came as it left interest rates at 1%.

3.40pm BST

The jesting over Kenneth Rogoff and Carmen Reinhart's Excel problems which led them to overstate the impact of debt levels on growth (see 2.16pm) continues…

Updated at 3.51pm BST

3.21pm BST

IMF’s Viñals warns of old risks and new ones

José Viñals, the head of the IMF's monetary and capital markets department, was in cheerful mood at the press conference to mark the launch of the IMF's Global Financial Stability Report, reports Larry Elliott.

From the press conference, Larry writes:

Spring had arrived not just in Washington, he said, but "also it seems in global financial markets, where after repeated storms and threatening clouds, some blue sky and more sunny days are emerging."

It's not all good news, though. Vinals says there are two groups of risks facing financial markets – old risks and new risks.

The old risks are the continuing problems in the euro are and the weak state of banks.

The new risks are the US, where debt underwriting standards are "weakening rapidly and low interest rates are leading some pension funds and insurance companies to take further risks to close funding gaps; the spill over effect into emerging markets from cheap money in advanced countries; and the possibility that the unwinding of prolonged monetary easing in the US could de-stabilise credit markets.

"Put simply", says Vinals, "we are in uncharted territory".

3.00pm BST

IMF’s eurozone recommendations

The IMF's message to Europe today is: clean up your banks, and make progress on banking union.

Here's the key recommendations for the euro area:

• Bank balance sheets and business models need to be strengthened to improve investor confidence, reduce fragmentation, and improve the supply of credit for solvent small and medium-sized enterprises. Enhanced disclosure for banks and conducting selective asset quality reviews will help restore confidence in bank balance sheets and improve market discipline

• To anchor financial stability in the euro area and for ongoing crisis management, fast and sustained progress toward an effective Single
Supervisory Mechanism (SSM) and the completion of the banking union are essential.

A Single Resolution Mechanism should become operational at around the same time as the SSM becomes effective. This should be accompanied by agreement on a time-bound roadmap to set up a single resolution authority and deposit guarantee scheme, with common backstops. Proposals to harmonize capital requirements, resolution, common deposit
guarantee schemes, and insurance supervision frameworks at the EU level should be implemented promptly. Modalities and governance arrangements for direct recapitalization of banks by the European Stability Mechanism should also be established.

• The developments in Cyprus underscore the urgency for completing reforms across the euro area in order to reverse financial fragmentation
and further strengthen market resilience.

2.52pm BST

IMF: Financial crisis could flare up again

Over to Washington, where the International Monetary Fund has released its half-yearly Global Financial Stability Review (downloadable here)

Catchily titled "Old Risks, New Challenges", the report calls on world leaders and officials to take new steps to secure the recovery, or risk the crisis flaring up again. That means cleaning up the banking sector (particularly in Europe), and also being vigilant to avoid the current accomodative monetary policy causing a new credit boom.

Our economics editor Larry Elliott reports from Washington:

The International Monetary Fund has warned that the repair job on the world's battered financial system is only partly completed and said failure to finish the job risks propelling the crisis into a chronic new phase.

While being encouraged by the marked improvement in financial market conditions over the past six months, the IMF said further action was needed to tackle underlying threats to stability.

In its half-yearly Global Financial Stability Review, the fund said that the recent problems in Cyprus were a reminder of the continued fragility of market confidence.

"Global market conditions have improved appreciably in the past six months, providing additional support to the economy, and prompting a sharp rally in risk assets", the report said.

More from Larry here.

2.16pm BST

Rogoff/Reinhart row throws austerity debate open

The world of economics is in an almighty flap today after a famous (or perhaps notorious) academic paper into the impact of debt levels on growth was found to contain coding errors, and selective use of data.

The two top economists, Kenneth Rogoff and Carmen Reinhart of Harvard, have defended their study this morning – but critics of austerity programmes believe that the case for urgent fiscal consolidation has been damaged.

Some background. Rogoff and Reingart's paper was called Growth in a Time of Debt. The key finding was that countries with 90% or higher debt/GDP ratios suffer growth rates "several percent" below the average — and has been used to justify many of the fiscal consolidation programmes launched since the financial crisis began.

Anyway, last night researchers at the University of Massachusetts appeared to blow the study apart. After getting hold of the original data set, they made the startling claim that Rogoff and Reinhart had

a) excluded several years after the second world war, where there was high debt and average growth,

b) weighed the data in a "debatable" way

c) committed an Excel coding mistake that meant certain countries with high debt and average growth simply weren't counted

(full details here)

According to the Massachusetts maths… if you use all the data, and don't mess up your Excel cells, the (mean) average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90% is actually 2.2%, not -0.1% as Growth in a Time of Debt.

This caused a storm overnight. As US economist Dean Baker explained:

In the United States, many politicians have pointed to R&R's work as justification for deficit reduction even though the economy is far below full employment by any reasonable measure.

In Europe, R&R's work and its derivatives have been used to justify austerity policies that have pushed the unemployment rate over 10% for the eurozone as a whole and above 20% in Greece and Spain. In other words, this is a mistake that has had enormous consequences.

(more from Dean Baker here)

Other critics of austerity were equally scathing (Paul Krugman posted once, then twice) . And there was a certain amount of twitter tittering about two of the world's most eminent economists getting their sums wrong.

Anyway, Rogoff and Reingart have now issued a full response, in which they defend their work while conceding some ground (see here).

After labouring over their data again, the pair have owned up to the Excel coding error. They denied deliberately excluding certain countries ("there were still gaps in our public data debt set at the time of this paper.") and weighing the models to give less importance to certain "a small number of countries that may have their own peculiarities").

But Rogoff and Reingart are adamant that the broad point remains valid. "Put differently, growth at high debt levels is a little more than half of the growth rate at the lowest levels of debt," they said.

As the FT puts it:

The economic historians admitted that there was an Excel blunder. “Herndon, Ash and Pollin accurately point out the coding error that omits several countries from the averages in figure 2. Full stop. HAP are on point,” they said.

However, they “objected in the strongest terms” to the second criticism that they missed several years of data, and stood firm on the issue of unconventional weighting.

More here: Harvard duo defend case for austerity

But does it matter?

There's a persuasive argument that politicians used R&R to justify policies they wanted to impose anyway. And rival economists had already questioned the conclusions of the report (what comes first, the high debt or the slow growth?).

But the timing is fascinating — the Massachusetts work hit the newswires as we were still digesting the IMF's warning to George Osborne to relax the pace of his austerity programme.

Growth in a Time of Debt used to be a weapon in the armory of the deficit-cutters. Their opponents won't fear it any more….

Anyway…. a trader who blogs and tweets as Barnejek provided our favourite response:

And here's another good take on Quartz.

2.08pm BST

Here's the key section from Olli Rehn's speech to the European Parliament, defending the Cyprus bailout (before he was roasted by MEPs)

The support programme will enable Cyprus to restore the health of the economy and to create a more sustainable economic model. The loans of up to 10 billion euros equal to more than half of Cypriot GDP.

I agree with the Minister of Finance of Cyprus, Haris Georgiades, who said yesterday that he wants to shun the blame game and focus on the future. He said as follows: "We are determined to adopt and implement all those reform measures, which we should have adopted a long time ago, but we failed to do so".

Indeed, we now have to concentrate all our efforts to facilitate the emergence of new sources of economic activity and to alleviate the social consequences of the economic shock.

The Commission decided on the 27 of March to set up a Support Group for Cyprus with the implementation of the adjustment programme. The Commission is now mobilising its resources to provide technical assistance. The Support Group will rely on expertise from across the Commission services. An immediate priority is to identify the relevant resources available from the current structural funds.

The Commission stands by the Cypriot people in this time of deep trouble. We are committed to help Cyprus to get through the tough times and overcome the current difficulties. I trust that we can count on the support of the European Parliament in together mobilising the available resources for Cyprus, as quickly and as effectively as possible.

The full speech is online here

12.47pm BST

MEPs criticise Cyprus bailout – more details

European Union Commissioner for Economic and Monetary Affairs Olli Rehn adresses the assembly during a debate on the situation in Cyprus, on April 17, 2013, at the European Parliament in Strasbourg, eastern France.
European Union Commissioner for Economic and Monetary Affairs Olli Rehn at the European Parliament in Strasbourg this morning. Photograph: FREDERICK FLORIN/AFP/Getty Images

The European Parliament has released details of its concerns over the Cyprus bailout, following this morning's grilling of commissioner Olli Rehn (see 10.26am).

It confirms that MEPs were scathing about the Eurogroup's handing of the issue, and also condemned the decision (later reversed) to impose losses on smaller savers.

Criticism rained down on Rehn from all sides of the spectrum, with accusations of double standards and claims that Germany displayed 'near colonial' behaviour:

Here's the details: Cyprus: MEPs criticise handling of bailout programme

The key quotes from the EP statement:

Jean-Paul Gauzes, a French member of the EPP group, said that the Eurogroup's appalling communication was central to the fiasco. He also blamed the EU institutions for not being vigilant enough and Cypriot banks for having built up too much risk.

Hannes Swoboda, the Austrian leader of the S&D group, criticised the Council and more particularly Germany for behaving in a "near colonial way". He also called on the Commission to disband the troika, a partnership between the Commission, the European Central Bank and the International Monetary Fund, which oversees the implementation of bailout packages.

Jan Zahradil, a Czech member of the ECR group, said that the real problem was much wider than what was happening in Cyprus. Cyprus was being used as an excuse to attack national fiscal sovereignty, he said.

Nigel Farage, the British co-chair of the EFD group, accused the Commission of criminal behaviour, robbing people to prop up the euro project. He concluded that no-one has confidence in the euro.

Takis Hadjigeorgiou, a Cypriot member of the GUE/NGL group, accused the EPP political family of having double standards, by supporting the Cypriot cause within the EP, but not within the Eurogroup. He also criticised the Council for imposing measures on Cyprus which it would never apply to larger countries.

….

Olli Rehn, though, argued that it was time to stop assigning blame for the Cyprus deal.

During the session, members of the European United Left of the European Parliament group held up posters with the slogan "Hands off Cyprus, Portugal, Greece, Spain, Ireland"


Photograph: VINCENT KESSLER/REUTERS

Updated at 12.50pm BST

12.14pm BST

Greek doctors hold six-hour strike

In Greece, medical staff are holding a six-hour walkout in protest at the government's cuts to health care budgets.

From Athens, my colleague Helena Smith reports that a "well-humoured" demonstration is taking place:

Demonstrators are walking up to parliament as I write to deliver a petition denouncing "murderous cuts" in health care.

Many chanting "Hands off State hospitals. Enough with the Troika's barbaric policies."

Protestors are expressing outrage at the Greek government's decision to slash 15,000 public sector jobs by 2015.

"All these cuts are totally counter-productive. It reminds me of what you went through in Britain when Thatcher imposed her sinful policies on the NHS," said Michalis Papastakos, a doctor who trained in London at the time.

The strike is taking place between 9am and 3pm local time, or 7am to 1pm BST.

Updated at 12.24pm BST

11.44am BST

Trouble in China?

Looking at the wider financial economy, there's a lot of interest in China this week following its weaker-than-expected economic growth in the first quarter of 2013.

That has refocused attention on the bad debts lurking in the Chinese local government sector. One senior auditor even warned yesterday that the local authority bond market was "out of control"

Zhang Ke warned (via the FT):

We audited some local government bond issues and found them very dangerous, so we pulled out…

Most don’t have strong debt servicing abilities. Things could become very serious.

Those debts were built up since the financial crisis began, with Beijing encouraging local governments to increase their borrowings to sustain growth.

So is China heading for a major crash? Paul McNamara, investment Director at GAM, reckons not. He told CNBC this morning that the Chinese government should be able to contain the problem:

Here's a video of the interview:

McNamara explained:

I think [calling China] the next crash is probably a stretch – there's nothing really wrong with China that the government can't rescue.

They are going to have to step in. It's been very clear for some time that the local governments have been the vehicle by which they got growth going again.

A lot of those loans will probably have to be written off or moved onto the central government balance sheet, McNamara says, but that's not enough to cause a panic.

It's very hard to get a full scale crisis in China, just because they've got capital controls.

And this gallery, from last month, shows the 'ghost cities' that have proliferated in China in recent years.

Updated at 11.55am BST

11.05am BST

Germany's borrowing costs have fallen to a record low this morning, at a sale of €4bn of 10-year bunds.

Strong demand for German debt usually indicates traders are pushing their money into "safe havens".

10.26am BST

MEPs criticise Commission over botched Cyprus bailout.

The European Parliament is holding a session on the Cyprus bailout this morning – it's being streamed here (although the link is a little flaky).

The MEPs want to find out how the Cypriot rescue plan was so badly handled.

The session began with UKIP's Nigel Farage savaging the decision to force losses on depositors in Cyprus, before Sharon Bowles (who chairs the Economic and Monetary Affairs Committee), also laid into commissioner Olli Rehn.

Bruno Waterfield of the Daily Telegraph and Irish journalist Karen Coleman have been watching, and report:

10.20am BST

UK unemployment: early reaction

Economists and City investors are disappointed by today's weak UK unemployment data, with some warning that the labour market has caught up with the lack of growth in the economy. 

Here's some early reaction:

Alan Clarke of Scotia Bank:

It's very disappointing that employment was down in the last three months….

The ILO (jobless) rate rose from 7.8 to 7.9 percent, I think that’s the focus. A 5,000 to 10,000 drop in unemployment in the payment count measure – that measure does tend to get distorted by various government policy changes, which is why I look at the ILO.
It's not a disaster, but a lot of the froth and really good news we had over the last year on jobs is becoming exhausted, which shouldn’t be a surprise when there is not much growth around.

Brian Hilliard of Societe Generale

The jobs figures were disappointing. Even though the clamaint count has continued to fall, the 3-month on 3-month rate of employment growth has fallen to zero.

Ian Brinkley, director of The Work Foundation

As we predicted, economic reality has caught up with the labour market. The jobs recovery of 2012 appears to have stalled.

Comparing the three months to February with the previous three months shows that our economy has stopped creating new jobs, unemployment is increasing and wage growth has stalled. The increase in youth unemployment is of particular concern and disappointing given the Coalition has made tackling youth unemployment such a high priority. 

These numbers should be a spur for the government to focus the upcoming Spending Review on supporting activities with the potential to create jobs and drive growth.

10.07am BST

Key event

Pay in the UK has failed to keep pace with inflation since the early days of the financial crisis, as this chart from this morning's unemployment data shows:

Average earnings vs inflation in the UK
Photograph: Office for National Statistics

9.59am BST

UK unemployment rate rises to 7.9%

Unemployment in the UK has jumped, in a sign that Britain's economy remains worryingly weak .

The number of people out of work in Britain rose by 70,000 in the three months to February, compared to the previous quarter. That pushed the jobless rate up to 7.9%, from 7.8% last month, to its highest level since last summer.

Youth unemployment rose by 20,000 to 979,000, as young people continues to face the brunt of the troubles in the economy.

There was also a nasty slump in wages. Total pay rose by just 0.8%, year-on-year, in the three months to February. With inflation at 2.8%, that means real wages kept shrinking.

The only good news was a 7,000 drop in the claimant count, in March.

UK Labour Market, April 2013
Photograph: Office for National Statistics

More details here. Reaction to follow…

Updated at 10.00am BST

9.35am BST

Bank of England minutes

The Bank of England remains split over monetary policy — with its committee split 6-3 again over whether to create another £25bn to spend buying government debt.

Outgoing governor, Sir Mervyn King, was again outvoted, with a majority of policymakers leaving the QE programme at £375bn. All nine members voted to leave interest rates at their record low of 0.5%.

You can download the minutes here (pdf).

9.21am BST

Cyprus to decide on gold sale soon

Cyprus's finance minister has declared that the country will probably decide to start selling some of its gold reserves to help fund its bailout programme "in the coming months".

Haris Georgiades also told Bloomberg that the country's central bank will have to make the decision. This adds another potential complication to the sale, as governor Panicos Demetriades (under fire for his own handling of the crisis) has said he hasn't even been consulted about the plan.

Georgiades told Bloomberg:

The exact details of it will be formulated in due course primarily by the board of the central bank…Obviously it’s a big decision.

News that Cyprus would sell €400m of gold broke last week, when the details of the European Commission's debt sustainability report on the country leaked.

Cyprus holds around 13.9 metric tonnes of gold, which was worth around 0m (€580m) last week. Its value has now dropped to 0m (€508m) following the plunge in the gold price.

Some analysts have suggested that Cyprus's planned gold sale helped to puncture the gold price. Georgiades commented:

I’m not really sure if the series of events is exactly matching with the recent movements in the price of gold, but I suspect maybe it was a contributing factor.

9.00am BST

Australia: Europe must slow its austerity drive

Australia's top finance minister has blasted European leaders for damaging the global economy through their 'mindless' focus on austerity.

Wayne Swan, Treasurer of Australia, told the Wall Street Journal that Europe needed to take a slower approach to fiscal consolidation:

We need developed economies to take the hand brake off growth that is coming from mindless austerity…

We need new sources of growth to come from developed economies, particularly Europe, but at the moment fiscal austerity there is a huge brake on growth.

The full piece is here.

UPDATE: Regular reader AussieAnalyst reckons we shouldn't take much notice of Mr Swan….

Updated at 10.01am BST

8.48am BST

The agenda

Here's what's coming up today (via RANSquawk):

UK unemployment data: 9.30am BST

Bank of England minutes: 9.30am BST

Bank of Italy's quarterly economic bulletin: 10am BST

Angela Merkel meets Estonia's prime minister Ansip: from 11.30am BST

IMF's Financial Stability Review released: 2pm BST

Updated at 8.57am BST

8.30am BST

European car sales tumble again

Good morning, and welcome to our rolling coverage of the eurozone financial crisis, and other key events in the world economy.

It's another bleak morning for Europe's carmakers. New figures show that sales across the region tumbled by 10.2% in March, led by a slump in sales in Germany.

This proved seriously bad news for the region's carmakers, who saw their own sales slump again.

The Association of European Carmakers reported that last month:

Italy: -4.9% year-on-year

Spain: -13.9% year-on-year

France: -16.2% year-on-year

Germany: -17.1% year-on-year

The UK, though, continues to defy the downturn, with sales rising 5.9% last month.

Denand for new passenger cars across the EU has now fallen for the last 18 months. These graphs suggest that the downturn is actually picking up pace.

European car sales to March 2013
Photograph: Association of European Carmakers

Today's data underlines the link between consumer spending and manufacturing. With austerity-hit European customers spending, many of the region's carmakers suffered deep sales falls last month.

VW Group: -9%

Peugeot/Citreon: -16%

Renault: -9.6%

GM Group: -12.6%

Ford: -15.8%

Fiat Group: -0.8%

Toyota: -16.3%

Many of these companies are already making cutbacks and strategic changes — Peugeot, for example, angered the French government with its plan to cut 8,000 jobs.

The decline in sales makes those recovery plans even tougher — Reuters reckons we could see profits warnings from some of the major players in the months ahead.

With the International Monetary Fund warning yesterday that the eurozone will shrink by 0.3% this year, Europe's economic woes remain very worrying.

We'll be hearing more from the IMF today, as its Spring Conference continues in Washington. There's also the latest Bank of England minutes, UK unemployment data, and a debate in the European Parliament on Cyprus coming up.

Updated at 8.31am BST

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