Silvio Berlusconi

ECB keeps rates at record low 0.5% as the 17-nation economy recovers from the prolonged recession. Italian Prime Minister Letta survives as Berlusconi caves in. Letta: A new election would be a disaster. Anger in Greece as Golden Dawn MPs released…


Powered by article titled “Berlusconi backs Italian prime minister in crunch confidence vote – live” was written by Graeme Wearden, for on Wednesday 2nd October 2013 12.11 UTC

It will be fascinating to see what Mario Draghi, head of the European Central Bank, makes of the Italian situation when he begins a press conference in 20 minutes time (as expected, they have left interest rates unchanged)

Our Southern European editor John Hooper says Berlusconi has saved face, but lost influence:

Enrico Letta definitely looked less than euphoric as Berlusconi yanked hard on the political handbrake, and declared with palpable understatement:

we have decided, not without some internal strife, to support the government.

The general view among Italian political journalists is that Letta would be much better off without Berlusconi around at all. Instead, Letta remains the prime minister of a shaky coalition.

Having said that, Berlusconi is damaged by the antics of the last few days. The remarkable political gymnastics must have taken their toll — and an optimist might argue that PdL is irrevocably on the path to a new future….


Why Berlusconi caved in

What drama!

So, here’s the position. By sensationally dropping his opposition to Enrico Letta, Silvio Berlusconi has guaranteed that the Italian government survives.

Add all Berlusconi’s PdL senators to Letta’s existing support — his PD party, plus small parties and senators for life — and it’s a healthy majority.

So why did Berlusconi do it? Clearly, he concluded that he could not keep enough of his PdL party onside. The photo I included in the blog earlier showed a long list of rebels.

If Berlusconi hadn’t pulled such a SCREECHING u-turn, then he would presumably have seen his group shatter. The moderates would have followed Letta, and he’d have been left nursing a rump faction.


The Italian stock market jumped as the news came in, pushing the FTSE MIB up 1.4% today.

Italian government debt prices remain high, with the yield on 10-year bonds down at 4.38% (from 4.46% yesterday).

Here’s the key quotes from Berlusoni, before he threw his support behind Letta a few moments ago.


Berlusconi himself buried his head in his hands after announcing that the PdL party will support Letta — which means today’s confidence vote is a WIN for the prime minister.

It was not the speech of a winner — rather of a man whose long grip on his party may be slipping .

There’s applause in the Senate as Berlusconi says he will support Enrico Letta — although I think I saw Letta pull a rather rueful grin.




Berlusconi is addressing the Senate in an atmosphere of silence, trying to sound statesmanlike….

Berlusconi’s got the microphone!

Former technocratic prime minister Mario Monti just gave a brisk speech, in which he urged senators not to risk Italy falling into the troika and its “neocolonial oversight”. If Italy is forced to take a bailout, it could take years to recover, Monti warned.


While we wait for that vote, here’s Reuters’ report on Letta’s second speech to the Senate:

Italian Prime Minister Enrico Letta said on Wednesday his government could achieve reforms even with a smaller majority, as he wound up a debate on a confidence vote in which he has been boosted by dissidents from Silvio Berlusconi’s centre-right party.

“Our government can reach its objectives despite the fact that the majority’s numbers have changed,” Letta said as he formally put a confidence motion to the Senate, which is expected to complete the vote in the early afternoon.

Letta spoke at length about Italy’s role in the European Union and his goal to push for greater integration during the country’s rotating presidency in the second half of 2014, suggesting he sees his government lasting at least until 2015.

The vote hasn’t actually started yet. Senators are continuing to give their views. The latest word from Rome is that Berlusconi isn’t expected to speak (but given today’s twists and turns, let’s see).

Rome correspondent Lizzy Davies reports that two distinguished honorary senators, architect Renzo Piano and conductor Claudio Abbado, are both absent because they are out of the country.

Confidence Vote has been called

To repeat, Enrico Letta has called for a vote of confidence.

After a dramatic couple of hours in the Senate, we still don’t know what’s going to happen. There have been rumours that Berlusconi will back Letta, and also that he will order the entire PdL party to vote against. Speculation abounds.

We do know that there is a solid bunch of ‘dovish’ PdL senators who are unlikely to bow to pressure from Berlusconi, and are highly likely to back Letta. But we do not know if it will be enough.

As John Hooper flagged up the Berlusconi rebels are talking about creating a new party called ”Popolari per l’Italia”.

Wolf Piccoli, managing director at Teneo Intelligence, is as reliable as any, and he reckons Letta might get 171 votes — that’s a win, as he needs 160 for victory.

A briefer speech from Letta this time — his main message to the Senate is that today is a historic opportunity. Tomorrow the government must get back to work.

Amid applause from some members of the senate, Letta calls for a confidence vote:


Letta still looks calm:


Letta speaks again as vote looms

Italian prime Enrico Letta is beginning his second speech to the Senate, explaining that he didn’t sleep last night as he worked to hold the government together.

He’s initially heard in silence (gosh it’s tense), but there’s some heckling as Letta bluntly tells the Senate that he’s not prepared to keep taking “lessons in morality” from those who are holding him to ransom.

Letta then tells Senators that he needs their support. A smaller majority will make it even hard for him to govern.

Letta back on his feet

Enrico Letta is speaking again in the Italian parliament. Reminder: it’s being streamed on RAI News.


The rumour mill keeps swirling in Italy ahead of this lunchtime’s confidence vote. One insider reckons Berlusconi is going to back Letta, the next says he’s not. Confusion reigns (not for the first, or last time).

John Hooper, our Souther Europe editor, reports that Berlusconi’s rebels are talking of creating a new party called “Popolari per l’Italia” – even if the loyalist wing of PdL join them by supporting Letta.

Plenty of concern in Greece that three Golden Dawn MPs were released from court this morning, and promptly kicked and shoved their way through the assembled media .

Here’s a flavour:

Three Golden Dawn MPs released on bail – lash out at press

Breaking away to Greece briefly.

Four of the Golden Dawn MPs who were arrested as part of the clampdown on the neo-Nazi party appeared in court today. Three of the men were promptly released pending a future trial, while party leader Nikolaos Michaloliakos is due back in court later today.

TV footage from the scene shows one cameraman being pushed out of the way, while another man is kicked as the MPs and their supporters leave the scene.

Here’s the video clip showing the aggressive scenes:

And here’s Kathimerini’s early take:

Only one of four Golden Dawn deputies arrested last week on charges of heading a criminal organization responsible for a range of felonies, including murder, assault, blackmail and money laundering, among others, was remanded in custody on Wednesday, while another three were released pending trial, one of them posting a 50,000 euro bail.

Yiannis Lagos was expected to be transferred to a local jail on Wednesday following a unanimous decision reached by two investigative magistrates and two prosecutors.

Party spokesman Ilias Kasidiaris was ordered to post a €50,000 bail and not to exit the country. Deputies Ilias Panayiotaros and Nikos Michos were also ordered not to leave the country.

The clampdown followed the death of 34-year-old rapper Pavlos Fyssas two weeks ago. A Golden Dawn member was subsequently arrested over the stabbing.

More to follow


Here’s a photo that appears to show the list of Senators from the People of Freedom party who are considering backing Enrico Letta:

Rumours flying:

It is increasingly likely that Enrico Letta has enough votes for victory, even if Berlusconi decides to back him.

Letta needs 161 votes for victory – although he would like more. Vincenzo Scarpetta of Open Europe reckons that he currently has 170 senators behind him, based on the latest reports and public statements.

Here’s how Barclays summed it up this morning:

Letta has the numbers to survive the vote today. The Government needs the support of 161 Senators, and can count on 137.

With the support of the life Senators, and defectors from the smaller parties (including M5S) it is likely to get to around 147-149. Letta therefore only needs around 12-14 PdL Senators to defect in order to survive. With the PdL split he is likely to get this.

More reaction to the reports that Berlusconi is considering throwing his support behind Enrico Letta in the confidence vote:

It would be a stunning u-turn from Silvio Berlusconi if, as reports suggest, he has now decided to back Enrico Letta in today’s vote of confidence.

But it wouldn’t exactly be out of character — and a number of political journalists and analysts were suggesting yesterday that this might happen, once we learned that his party were rebelling.

Remember, it was Berlusconi who triggered this crisis by threatening to bring the government down last week — by withdrawing his PdL party from the Letta coalition.

If he backs Letta today, then he could still trigger a crisis in future.

As Serena Ruffoni of the WSJ put it to me:

I don’t think the Letta government is any stronger even if it survives this confidence vote.


Reports: Berlusconi’s Party to back Letta

Important: Sky Italia is reporting that the People of Freedom party are going to BACK Enrico Letta in the confidence vote.

If true, that means Letta would win a solid majority. It would also suggest that Berlusconi has decided that he cannot bring his rebels back into line, and has decided to fall in with them.

That is NOT the best result for Letta, though. While he’d still be in power, he’d also still be lumbered with the Berlusconi problem.

Market reaction

The Italian stock market surged during Enrico Letta’s speech, hitting a new two-year high as the PM sat down.

Italian government bonds are also strengthening, which has pushed the yield on its 10-year debt down to 4.37% . It as as high as 4.74% on Monday after Berlusconi launched his bid to bring the Letta government down.

Senators are now speaking, with one tearing into Silvio Berlusconi — calling the former prime minister “‘a simple story of criminality”.

The BBC’s Gavin Hewitt reckons the gloves are off, as the battle for Italy’s future continues:


Letta speech: instant reaction

How did he do?

Five months isn’t enough time to build a track record of leadership success — and much of Letta’s time as prime minister has been overshadowed by Berlusconi’s legal defeats.

It was a speech of vision — asking Senators to choose between future of a more competitive, thriving Italy, or a future of political strife, fresh elections, and the prospect of another divided parliament at the end of it.

Letta isn’t the most thrilling orator in European politics, but he has a mature, sensible style.

Highlights of his speech start here.


Letta’s speech over

Worth noting that Berlusconi didn’t applaud Letta as he ended his speech – so he’s not thrown in the towel yet….

Enrico Letta concluded his speech by urging those in the chamber to give him their ”courage and confidence”. “A confidence that is not against anyone; a confidence that is for Italy” (quotes via Lizzy).

He also urged senators to search their consciences, and avoid a result that would leave them feeling “shameful regret”.

While Letta was speaking, Berlusconi could be seen holding discussion with some of his allies. I grabbed a picture:

Oh the drama….

There’s also a European theme to the speech — with Letta speaking of the need to dream of a “United States of Europe” one day. That fits with his tradition of being a solid Europhile (he was an MEP at one stage of his career)

Letta is outlining his vision for Italy — saying that growth and jobs must be the focus in 2014.

Apparently Berlusconi has told Italian media that he will listen to Letta’s speech and then decide whether to support him or not.

Enrico Letta’s speech is turning into a solid defense of his government’s record in the five months since he took over (colleague Lizzy Davies dubs it a “ very level-headed and systematic defense”.

But will that be enough to persuade PdL members to back him? As explained earlier — Letta would like to see 30 rebels jump the fence. He needs more than 20 (I think 24 is the magic number).

Letta also cited three priorities – support economic recovery; cutting taxes on workers, and increasing competition in Italy’s economy.

Letta is continuing to defend his government’s record on the economy — part of the strategy to persuade moderate members of the Berlusconi camp to back him.

It is on ordinary people suffering in economic crisis that our actions will have biggest effect, he said.

A better webfeed

Berlusconi’s just arrived! He also looks weary, probably due to late night efforts to corall rebelling members of his PdL party into line.

No sign of Silvio Berlusconi at the start of Letta’s crunch speech. Angelino Alfano (deputy PM) is there, and there’s a consensus that he looks nervous.

(see 8.22am for a blurry snap of Dudu not being walked)

Looks like the confidence vote will come at midday — earlier than the previous indications.

And how many rebels will there be?

Lizzy Davies writes:

It’s all about the numbers today. Giovanardi claimed yesterday there were “more than 40″- believed to be as many as 44- PdL MPs prepared to vote for the confidence vote. But the Italian press reports that Berlusconi’s hawks told him the rebels were much- much- less numerous. Who’s right?

We’ll find out soon. Letta needs over 20 rebels. He’d be happier with more than 30.


Letta went on to warn that a new election could cause the same gridlock as last time:

Enrico Letta is urging parliament to give him a mandate for a “real and new” pact to tackle Italy’s problems.

(a reminder — Italy’s last election, in February, resulted in deadlock — with no party winning a majority in the Senate. Eventually a coalition was agreed between the centre-left PD and Berlusconi’s centre-right PdL, with Letta (a senior member of PD) as leader)

Here’s the key early quotes from Letta’s speech:

Letta speech begins

Prime minister Enrico Letta has begun to give one of the speeches of his political life, in a bid to win enough support to continue as the head of Italy’s shaky coalition government.

Before he started, there was a standing ovation for the country’s veteran president, Giorgio Napolitano.

Letta began his speech in the Italian parliament by urging its members to “seize the moment”. And, as expected, he insisted that the legal troubles of Silvio Berlusconi cannot be an excuse to bring the country’s government down.

But can he persuade enough of Berlusconi’s PdL party to back him?

Lizzy Davies is tweeting the key points, so I’ll be embedding them in the blog now….

Watch the speech here

Enrico Letta has begun speaking in the Italian parliament.

There’s a live stream here. However, it’s very flaky.

Key points from his speech will follow!

Update: the latest word from Italy is that we might get the confidence vote around midday, not this evening as I initially thought. 

Markets down

Europe’s stock markets are all in the red today, with the FTSE 100 shedding 73 points. There’s nervousness about the situation in Italy, and also a knock-on effect from a bad day in Asia. The US Federal government shutdown isn’t exactly helping sentiment.

Overnight, the Nikkei tumbled 2% after the latest stimulus package from prime minister Abe failed to excite investors.


Tesco shares lead fallers in London

In the City, Tesco’s shares are leading the fallers on the FTSE 100 after issuing a trading statement, down over 3%.

Britain’s biggest supermarket reported zero growth in like-for like UK sales, excluding fuel and VAT sales tax, in the 13 weeks to 24 August.

Tesco also warned that it faced ‘challenging economic conditions’ overseas. Europe was particularly tough, with profits down almost 70% and like-for-like sales down by 5% in the first half of the year.

Sainsbury posted stronger figures in the UK (as expected) – sales at British stores open at least a year were up 2%. Its shares are also suffering, though, down 1.5%. More here.

Wolf Piccoli, managing director at Teneo Intelligence, agrees that it could be a long day in the Rome parliament:

Analysts at Nordea Markets say it’s “fight night” in Italy, and possibly Berlusconi’s final bout.

In the red corner, we have PM Letta, who has probably worked hard – together with the President – to convince some of Berlusconi’s senators that new elections at this point is in no one’s interest.

A vote for a continuation of the current government and later on a vote for a budget and a new electoral law would make for a fresh start after spring elections. In the blue corner, we have Berlusconi. Media are full of stories about Berlusconi’s outstanding merits when it comes to winning tight political battles. But this time it seems that even members of his own party believes he has gone too far. Even Alfano – who has been seen as the crown prince in the PDL – said that he might vote for a continuation of the government.

Furthermore, it may be the old Champs last fight, if he is stripped of his senatorial seat on Friday. It will be a close call. Italy, and to a lesser extent Spain, will sell off if the government falls.

Jeremy Cook of World First agrees:

What might Letta tell parliament in his speech this morning?

Lizzy Davies explains that his speech is likely to focus on the socio-economic suffering of Italy, and tell deputies that they cannot just let its government fall.

His strategy will be to ram home the idea that the judicial woes of one man* have to be kept separate from the interests of the country – in an effort to split the doves in Berlusconi’s party from the hawks.

• – that man being Berlusconi himself, of course, who is on the brink of being expelled from the Senate after his tax fraud conviction.

In the comments section, regular reader mrwicket has outlined the potential scenarios from tonight’s vote.

As he flags up, we’re not 100% certain that a confidence vote will actually be called — Enrico Letta will probably judge the mood of the Senate first, and if he feels he can’t win then he might simply resign.

So, Django Alfano is standing his ground and wants to support Letta in the vote of confidence, as do the other maybe ministers and a chunk of the party.

Berlusconi says he wants the government to fall and to have new elections.

The two will meet again this morning at 9’30 so things could change.

Marina Berlusconi is said to be ready to enter into politics.

I asked yesterday how you could have a vote of confidence in a government that didn’t exist. On Monday, Letta’s office said the resignations were irrevocable but yesterday afternoon, it announced that it had refused to accept them. The ‘maybe ministers’ will walk into parliament today as ministers.

Giovanardi claimed yesterday that there were 40 PdL senators ready to vote for Letta (some reports in the evening said that number was dwindling). He even spoke of a new party called Nuova Italia

There were some nasty exchanges last night between Sallusti, editor of Il Giornale and Cicchitto, an important PdL dissident. Sallusti said they were cowards, hitting the man when he was down and that they had forgotten what had happened to Fini. “They are stabbing him in the back in his moment of weakness. They are cowards because they didn’t have the courage to do it when he was strong.”
“No! You are the coward!” etc…

Letta has said he will refuse to govern with a weak majority.


Possible scenarios;

Letta wins vote of confidence with sufficient votes to continue in government.

Letta wins vote of confidence with insufficient votes to continue in government and Napolitano sets up a technical government.

Letta wins vote of confidence by a narrow margin and continues to govern

Letta loses vote of confidence and Napolitano sets up a technical government.

Letta doesn’t call for a vote of confidence and Napolitano sets up a technical government.


With regard to policy, there would be very little to distinguish between a Letta government and a technical government so we will be as we were after this dramatic little interlude. The change is likely to be inside the PdL.

Lisa Jucca, Reuters chief financial correspondent in Italy, agrees that this could be the moment that Angelino Alfano, Berlusconi’s right-hand man for so long, finally rises up:

How Letta can win

Silvio Berlusconi is facing an unprecedented rebellion, opening up the possibility that Letta can surge to victory tonight. As our Rome correspondent, Lizzy Davies, explains:

To win the confidence vote in the senate, Letta needs to attract extra votes from either the centre-right PdL or the anti-establishment Five Star Movement (M5S) to reach the magic number of 161. He has said, however, that he has no interest in continuing at the head of a government that only sneaks in by a handful of votes.

His chances appeared to have been significantly boosted on Tuesday, when Carlo Giovanardi, a long-time ally of Berlusconi, struck the first major blow when he announced that “more than 40″ PdL MPs were prepared to vote to keep the government afloat.

Then, in a stunning move likened by one observer to an “Et tu, Brute?” moment, Angelino Alfano, the deputy prime minister long seen as Berlusconi’s political heir, appeared to solidify the mutiny. “I remain firmly convinced that all our party should tomorrow back the confidence vote in Letta,” he said, according to Ansa.

Here’s the full story: Silvio Berlusconi’s allies turn on him to keep Italy’s grand coalition alive

Make-or-break confidence vote for Italian PM

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

After yesterday’s foray into the US shutdown , we’re back in familiar territory today – the political crisis in Italy, with a monthly meeting of the European Central Bank on top.

Enrico Letta, Italy’s prime minister, is heading to parliament this morning for a make-or-break confidence vote. It was triggered by Silvio Berlusconi’s decision last Saturday to ordered his ministers out of the coalition, to bring Letta down.

Does Letta still have the support of the lower house, and the Senate? If not, Italy could be plunged deeper into chaos.

But Letta could win, and wins well, if Berlusconi’s centre-right party defy their disgraced leader and through their support behind the PM. Yesterday, key members of the People of Freedom party (PdL) said they would support the coalition [an alliance between Letta's own centre-left PD and the PdL].

The big question is how many PdL members of the Senate decide to throw their support behind Letta today.

Letta is due to start giving his first speech at around 9.30am Rome time, or 8.30am BST. The actual confidence vote could be quite late (we’ll update with firm timings when we have them).

The other key event in the eurozone today is the monthly meeting of the ECB’s governing council. They’re in Paris today. We’re not expecting any change to interest rates. There’s also a press conference at 2.30pm Paris time (1.30pm BST), where Mario Draghi will be quizzed over a range of issues, doubtless including his homeland of Italy.

I’ll be tracking all the developments through the day…

Updated © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.


ECB press conference highlights. Bank of England and ECB decide to keep benchmark rates and monetary policy unchanged in August. Eurozone manufacturing returns to growth. Spanish PM denies slush fund claims. Rajoy’s gamble…


Powered by article titled “Eurozone crisis: Berlusconi’s final appeal rejected; central banks hold rates – as it happened” was written by Graeme Wearden, for on Thursday 1st August 2013 20.03 UTC

9.03pm BST

Lizzy Davies: Silvio Berlusconi’s prison sentence upheld by Italian supreme court

And finally, here’s our Rome correspondent Lizzy Davies with the news from the supreme court:

Silvio Berlusconi, Italy’s longest-serving postwar prime minister, has been handed his first definitive criminal conviction in more than 20 years of legal battles but the country’s supreme court spared him the immediate prospect of being barred from public office.

In a long-anticipated ruling, the five judges of the court of cassation emerged from more than seven hours of deliberations to issue a verdict confirming a four-year jail term for the leader of the Freedom People party (PdL), a vital part of Italy’s coalition government.

That sentence had already been cut to one year according to a 2006 amnesty, and, owing to Berlusconi’s age – he will be 77 in September – it will be served through house arrest or community service.

It was enough, however, to place great pressure on the fragile government and prompt fury among his supporters…..

Lizzy’s full story is here: Silvio Berlusconi’s prison sentence upheld by Italian supreme court

And that’s a good moment to stop the blog, I think. Cheers all, and good night from London.

Updated at 9.03pm BST

8.54pm BST

Berlusconi’s lawyers: it’s not over

Silvio Berlusconi’s legal team just released a statement, in which they talk about their dismay over the judgement of the supreme court tonight. They also suggest the possibility of an appeal to the European Courts.

It’s online here. Here’s a rough translation:

There were very solid reasons and legal arguments to reach a full acquittal of Mr Berlusconi.
We will pursue any useful initiative and also [look to] European locations to make sure that this unjust judgment is radically reformed.

8.50pm BST

Meanwhile, in the US courts

In unrelated legal news tonight — former Goldman Sachs vice-president Fabrice Tourre has been found liable on six of seven counts of defrauding investors by violating federal securities law..

The WSJ has a good early take: Former Goldman Trader Found Liable

8.40pm BST

Italian PM and president urge calm

Enrico Letta, Italy’s prime minister, and the country’s president Georgio Napolitano, have both urged Italians to remain calm following the Supreme Court ruling that three-time prime minister Silvio Berluconi is guilty of tax fraud.

Updated at 8.40pm BST

8.24pm BST

Political reaction

Reuters has pulled together some political reaction to the decision to uphold Berlusconi’s conviction for tax fraud, from across the spectrum:

Luca d’Alessandro, head of Berlusconi’s PDL parliamentary justice commission: "This country used to be famous as the cradle of law. Today it has become its tomb, run by a corporation of grave diggers in gowns who have carried out the perfect crime."

But the leader of the centre-left PD, Guglielmo Epifani said, "The sentence has to be respected and carried out."

Beppe Grillo, leader of the populist 5-Star Movement that won a quarter of the vote in the last general election, back in February, declared: "The verdict is like the fall of the Berlin Wall in 1989."

Updated at 8.32pm BST

8.15pm BST

Here’s a photo of the moment that the president of the Italian supreme court, Antonio Esposito, read out that Silvio Berlusconi’s prison term over tax fraud had been upheld, but that the public office ban would be reconsidered by a lower court.

The latter decision means Berlusconi can, for now, remain as a senator.

8.05pm BST

If Berlusconi’s public office ban is cut to three years, then there’s a possibility he could be free to run in the next Italian general election, points out analyst Alberto Nardelli.

He reckons that this evening’s news poses tough problems for Berlusconi’s opponents — as the mainstream centre-left and centre-right (Berlusconi’s PDL) parties are locked in an uncomfortable coalition.

Alberto adds:

• will Berlusconi decide to pull the plug on the Letta Government? I don’t think he will do this despite many in his party pushing for elections.
• how will the centre-left PD react: will they vote (in the Senate) to confirm the ban from public office when it eventually comes?
• if Berlusconi is banned from public office, the ban would expire before the end of Letta’s government if the government serves a full-term – would PD want to go to elections before then and will PD push for a law that would make those definitively sentenced ineligible?

More here: Thoughts on the Berlusconi verdict

Updated at 8.06pm BST

7.42pm BST

Photos: Celebrations at the Supreme Court

Scenes of celebration and fizz being swigged outside the Italian Supreme Court, following the news that Silvio Berlusconi’s final appeal has been rejected.
Two photos from the scene:

Updated at 7.51pm BST

7.28pm BST

The BBC’s Imelda Flattery suggests that house arrest is unlikely to count as cruel and unusual punishment for Silvio Berlusconi:

7.26pm BST

Berlusconi verdict – instant reaction

Italian political expert Alberto Nardelli says the key development tonight is that Silvio Berlusconi’s five-year ban on service in a public office is going to be reexamined:

Vincenzo Scarpetta of the Open Europe think tank underlines the point that the ban hasn’t actually been scrapped:

Updated at 7.30pm BST

7.18pm BST

And here’s Associated Press’s first take:

Italy’s highest court has upheld ex-Premier Silvio Berlusconi’s tax fraud conviction, but ordered a review a five-year ban on public office that was part of the lower court’s sentence.
The court on Thursday confirmed the four-year prison sentence, and ordered another court to determine the length of a public office ban.
This is the first time Berlusconi, a three-time former premier and billionaire media mogul, has been definitively convicted of any crime.

7.14pm BST

Hot off the Reuters terminal, here’s its first report from Rome:

Italy court rejects Berlusconi appeal against tax sentence

Italy’s top court upheld a jail sentence against Silvio Berlusconi for tax fraud on Thursday in a ruling which could throw the country’s fragile coalition government into crisis.
The Court of Cassation confirmed a four-year jail sentence – commuted to one year under an amnesty – imposed by a lower court. But it ordered a further judicial review of a ban on holding public office imposed for the same offence.
The long awaited ruling is likely place the fragile left-right coalition led by Prime Minister Enrico Letta under severe strain although Berlusconi has pledged that his centre-right party will maintain its support for the government.

7.12pm BST

Public office ban to be reviewed

The key question now, though, is what happens about the five-year ban on Silvio Berlusconi holding public office, which the court has now annulled?
The judges have asked for that ban to be reviewed, so we may not know for some time.

The prospect of the former PM being banished from the Senate for years had threatened to destabilise the coalition. As explained at 5.36pm BST, Italy’s coalition government relies on the support of Berlusconi’s party (although he doesn’t serve in Enrico Letta’s cabinet).

On Tuesday, the prosecution recommended cutting the ban to three years, which looked like an admission that the original sentence was too severe (Italy’s legal framework suggested a ban of between one and three years).

7.03pm BST

Historic moment

The verdict of the Rome Supreme Court means that Silvio Berlusconi has run out of legal road — there are no more appeal courts left, and he must now accept the conviction for tax fraud.

And that also means the prison sentence that was handed down by the lower court, and upheld in the last few minutes.

Given his age, though, legal experts have already predicted it would be changed to community service or house arrest.

Definitely a significant moment…

Updated at 7.04pm BST

6.51pm BST

BREAKING: The verdict is in. The Italian Supreme Court has upheld Silvio Berlusconi’s one year* prison sentence for tax fraud in the Mediaset case. It has also ordered a review on the ban on public office that was handed down.

*originally four years, but reduced to 1 year under an amnesty

More to follow…

Updated at 6.53pm BST

6.43pm BST

Any moment now..

6.16pm BST

Scratch that thought — it looks like a verdict has been reached over Silvio Berlusconi’s tax fraud appeal.

Cameras are being allowed into the Supreme Court in Rome now, , so the news could come within the hour. Police have asked journalists to turn off their mobile phones, reports Linkiesta’s reporter Alessandro Da Rold.

Updated at 6.32pm BST

6.03pm BST

Maybe we won’t get the Berlusconi verdict tonight, after all. If the Supreme Court can’t reach agreement in the next couple of hours, everyone might have to come back tomorrow…

Updated at 6.03pm BST

5.52pm BST

No Berlusconi verdict yet. The door of the Supreme Court remains shuttered, as Linkiesta’s Alessandro Da Rold tweets:

5.38pm BST

Supporters of Silvio Berlusconi have gathered at Palazzo Grazioli, Berlusconi’s house in Rome, ahead of tonight’s verdict. Here’s a photo:

5.36pm BST

A quick catch-up

Silvio Berlusconi is caught up in three separate court cases. The appeal under consideration in Rome now relates to last October’s tax fraud conviction involving his Mediaset media empire.
Judges in a lower court concluded that Mediaset had hiked the price of film distribution rights artificially high, to cut its tax liabilities, and said Berlsuconi has spawned "a whole system of tax fraud".
Lawyers for the former Italian prime minister and media magnate have argued this week that he wasn’t really in full control of the company at the time. They also claimed that any offense was tax evasion rather than fraud, so the jail term and public office ban handed down to Berlusconi wasn’t appropriate.
Given his age, Berlusconi would serve any prison term as house arrest. But it’s the prospect of a ban from public office that could shake politics, if Berlusconi retaliated by withdrawing his party’s support for Italy’s coalition.

Here’s a few good backgrounders:

Guardian: Silvio Berlusconi: Italy’s supreme court prepares for verdict on final appeal

BBC: Ex-Italy PM Silvio Berlusconi criminal appeal to finish

Reuters: Italy’s top court to issue verdict on Berlusconi fraud appeal

5.15pm BST

Italian journalist Alessandro Da Rold of Linkiesta reports from inside the courtroom that the Berlusconi verdict might come in around 45 minutes time, at 7pm local time or 6pm BST.

4.58pm BST

Here’s a live feed from outside the Italian Supreme Court in Rome, where Silvio Berlusconi’s appeal verdict may come soon.

Updated at 5.00pm BST

4.54pm BST

Now we wait, for news from Italy…

4.46pm BST

European markets close higher

European stock markets have closed sharply higher. The stream of decent news from the world’s manufacturing sectors, in the UK, US and across the eurozone, sent all the major indices up today on hopes that the global economy strengthened last month.

• FTSE 100: up 60 points at 6681, +0.9%
• German DAX: up 134 points at 8410, +1.6%
• French CAC: up 50 points at 4035, +1.25%
• Spanish IBEX: up 106 points at 8540, + 1.2%
• Italian FTSE MIB: up 336 points at 16818, +2%

Brenda Kelly, senior market strategist at IG, commented:

Anyone backing a eurozone recovery would have been more than pleased with the manufacturing output numbers today. With the exception of Spain they all came in ahead of expectations, with Italy even seeing manufacturing output crossing into expansion territory.

ECB president Mario Draghi reiterated his usual comments with respect to downside risks within the single currency area, which had the useful effect of driving the euro lower. Financial fragmentation and the lack of credit growth, together with the unsettling lack of inflationary pressures, gave the ECB to the excuse to keep rates on hold for as long as necessary.

Increasing evidence that the UK economy is clambering back to its feet perhaps acknowledges that previous monetary policy actions have worked. It was, therefore, no surprise that new Bank of England governor Mark Carney chose to keep his powder dry for now.

Updated at 5.44pm BST

4.28pm BST

Our correspondent in Rome, Lizzy Davies, flags up that the Berlusconi verdict may come once the Italian stock market has closed, in a few minutes time….

4.07pm BST

We’re still waiting for news from Italy’s supreme court, where judges have retired to considering Silvio Berlusconi’s final appeal against his tax fraud conviction.

Deliberations began at noon local time (11am BST), and were expected to take several hours.
Reuters has a good preview here, which explains how Italian politics could be plunged into chaos if the conviction is upheld:

Italy’s top court to issue verdict on Berlusconi fraud appeal

If you’re new to the case, here are the reasons the case has political ramifications, and could raise tensions across the euro area:

1) Berlusconi faces a sentence of four years in jail – commuted to one year under a 2006 amnesty – and a five-year ban from public office, although the prosecution has now suggested cutting that to three years
2) If upheld, the sentence would need to be rubber-stamped by the Senate
3) That could destabilise the coalition, made up of Berlusconi’s right-leaning People of Freedom (PDL) party, and the left-wing Democratic Party (PD).
4) The Senate might not hold such a vote until September, which could hold back the pace of economic reforms in Italy.

3.29pm BST

Booming US factory sector sends shares soaring

The US stock market is roaring to new record high this afternoon, after new factory data showed that America’s manufacturing sector posted impressive growth last month.

The ISM measure of manufacturing activity in the world’s largest economy jumped to 55.4, up from June’s 50.9. That’s the highest level since August 2011, and well into ‘growth’ territory (50.0 or above).
This pushed shares up on Wall Street, and in the City. The S&P 500 index blasted over the 1,700 point mark for the first time, while in London the FTSE 100 is up 52 points at 6673.

The news also hit US government bond prices. A stronger US economy means more chance of the Federal Reserve pullina back its bond-buying stimulus programme, so Treasuries are being sold off with gusto.

This has pushed the yield (interest rate) on a US 10-year bond to 2.666%, from 2.58% last night. 

Updated at 3.29pm BST

3.09pm BST

See Mario Draghi’s statement

Mario Draghi’s opening statement at the ECB press conference is now online:

It concluded with another reminder to eurozone national governments to cut borrowing and reform their economies. Only then, Draghi argued, can Europe’s youth unemployment crisis be solved:

As regards fiscal policies, in order to bring debt ratios back on a downward path, euro area countries should not unravel their efforts to reduce government budget deficits. The emphasis should be on growth-friendly fiscal strategies which have a medium-term perspective and combine improving the quality and efficiency of public services with minimising distortionary effects of taxation.

To reinforce the overall impact of such a strategy, Member States must step up the implementation of the necessary structural reforms so as to foster competitiveness, growth and job creation. Removing rigidities in the labour market, lowering the administrative burden and strengthening competition in product markets will particularly support small and medium-sized enterprises.

These structural reform measures are essential to bring down the currently high level of unemployment, in particular among the younger citizens of the euro area.

2.37pm BST

And that’s the end of the press conference. Not the most thrilling one ever, and no mention of the situation in Cyprus:

Just off to a meeting — will gather more reaction when I get back…

2.34pm BST

Final question, and it’s about the possibility of releasing European Central Bank minutes. Might this help mend the idea that the ECB and the Bundesbank are at war, and might it end the (entertaining) practice of Council members trying to get their message out through the media?
All this would be nice things to achieve, but it would be highly premature to comment on the specifics, Draghi replies.

2.33pm BST

Key event

Draghi must be looking forward to the beach – he jokes that he can’t take all the credit for restoring confidence to the eurozone area.

Much of this was due to government action, he modestly points out.

2.31pm BST

Follow-up question: Did eurozone countries take advantage of the relief created a year ago by the ECB’s promise to buy unlimited quantities of bonds?
Draghi replies that some countries "certainly did, some of them make progress…" Others, less so.
He declines to give any views on Italy’s progress, but cites Greece, Ireland & Portugal where labour market reforms and fiscal consolidation have taken place.

2.24pm BST

Draghi: One year since THAT speech

Next question: Would Mario Draghi like to reflect on the changes over the last 12 months since he delivered his ‘whatever it takes’ speech in London?
Draghi grabs the ball and runs with it.
There are three key areas of progress, he says. The return of normalisation in the financial markets, some some progress in fighting fragmentation in the credit markets, and thirdly the beginning of capital inflows into the euro area.

He adds:

More generally, OMT [Draghi's bond-buying programme] has reduced the riskiness, the general riskiness, in the euro area.

So, borrowing costs are down, and confidence is up, and finally there are signs that the real economy is feeling the benefits.
The ECB priority now is to repair the monetary policy transmission channels so that stimulus reaches the right parts of the economy, Draghi adds.

Updated at 2.27pm BST

2.18pm BST

Lots of chatter about exactly how, and why, the ECB might start releasing minutes of its meeting.
Jamie McGeever of Reuters sums it up:

While the FT’s Peter Spiegel’s heard quite enough:

2.14pm BST

Draghi: I see no deflation

Question: Is there a risk of deflation in the euro area?
Draghi says no:

We see relative price adjustments in certain sectors, where there is a waning of one-off effects such as taxation.
We don’t see deflation for any country at this point in time.

Updated at 2.15pm BST

2.07pm BST

Just to clarify, the ECB board will present a plan for releasing minutes from its meetings later this year

2.05pm BST

Draghi appears to be in good spirits:

2.03pm BST

Question: How unanimous was the decision, really?
Draghi insists that he’s not refusing to say whether some Council members wanted to cut rates. Apparently it wasn’t talked about.
"We actually only discussed forward guidance…and the decision was unanimous."

And while Draghi repeated his forward guidance today, he might not do it every month:
We may not repeat them if we think you, and the markets, understand that guidance remains the same until it is changed, the ECB president says, adding:
"We don’t change our mind until we change our mind".

2.01pm BST

Question: Why is the ECB considering releasing minutes from the monthly meetings now, when tensions over the eurozone crisis are higher then they were in the early days of the Bank? Isn’t it riskier?
Draghi agrees that the challenge is to make more information available, without threatening the independence of those on the Council.

1.57pm BST

Question: Minutes to be released?

Next questions: Did the ECB discuss tying its forward guidance to a specific target?
And did the ECB discuss release publishing the minutes of its meetings?
Draghi says no, there was no discussion of setting specific targets. Except that the guidance is, as he explained, based within the ECB’s view on inflation, or price stability.
And on the minutes?
We don’t start from scratch here, Draghi says, All central banks have changed their communications.
You’re probably too young to remember, he flatters (or patronises) the Frankfurt press pack, but the ECB was a pioneer in publishing forecasts. Other banks have followed us, he says, with initiatives such as press conferences after monetary policy meetings.
Draghi then says he is keen to see more information from the governing council meetings released.
But it’s vital that nothing is released that threatens the independence of the members of the governing council, who come from 17 countries but are acting in the interest of the eurozone, he adds.

1.50pm BST

The next questioner asks for more clarity on whether the decision to leave interest rates unchanged was unanimous. And gets no clarity all.
Draghi also rejects the suggestion that the ECB has failed to improve credit availability in the euro area.
We did compress volatility, and had some success on lowering short-term rates, he adds.

1.48pm BST

The first journalist gets two questions in:
1) Did the ECB discuss cutting rates and was the decision unanimous?
2) Is the ECB planning to refine its guidance on forward guidance?
Draghi responds:

"We have basically unanimously confirmed the forward guidance from last time"

He then argues that the statement was unanimously supported, by the governing council, and the decision to leave rates unchanged is part of the statement. Hmmm….

And how long will the ECB maintain its accommodative stance? As long as we think inflation pressure remains subdued, Draghi adds.

Updated at 1.48pm BST

1.45pm BST

No excitement after the statement:

1.42pm BST

Onto the questions….

1.42pm BST

A few more key points from Mario Draghi’s statement (which will be online very soon)
1) Europe’s labour market remains weak and needs to be reformed to boost competition
2) The eurozone’s credit market is too fragmented – thus the need for banking union to strengthen weaker institutions in
3) Governments must not deviate from focusing on cutting deficits, but should develop ‘growth friendly’ strategies

1.37pm BST

Downside risks…

Draghi explains that the ECB still expects a "tentative" recovery in the second half of 2013.
However, the risks to economic outlook to the euro area continue to be on the downside. He cites three threats
1) Volatility in the financial markets
2) weaker than expected domestic demand, and
3) slow progress on structural reforms.

1.35pm BST

Forward guidance repeated

Mario Draghi reiterates last months’ unprecedented forward guidance on borrowing costs:
The governing council confirms that it expects borrowing costs to remain at current or lower levels for an ‘extended period of time", he says.

Draghi cited the weak eurozone economy, and "subdued monetary dynamics".

1.32pm BST

And we’re off…
Mario Draghi is reading out the ECB’s statement, explaining why rates were left unchanged.
Underlying price pressures in the eurozone are likely to remain subdued in the eurozone, and inflation expectations are ‘firmly anchored’.
At the same time, recent confidence indicators show signs of improvement from low levels and "tentatively" confirm signs of recovery, he says.

1.30pm BST

ECB press conference begins

Over in Frankfurt, the ECB press conference is about to begin. It’s being streamed live here.

Updated at 1.30pm BST

1.22pm BST

The European Central Bank’s governing council was under no real pressure to ease monetary policy further today, explained Rabobank economist Elwin de Groot to Reuters.
Here’s a flavour:

That was in line with expectations," Rabobank economist Elwin de Groot said of the decision to leave rates unchanged, almost universally expected in a Reuters poll.

"At this stage, we’ve seen several indicators improving a little bit. Today, the update on the PMI surveys confirmed that point," he said of closely watched business surveys, which showed that last month euro zone manufacturing grew for the first time in two years.

Full details here from 9.08am:

Unemployment in the 17-country bloc sharing the euro fell for the first time in more than two years in June.But lending to firms is still declining in the euro zone and is especially weak across the bloc’s troubled debtor countries, which could keep calls for lower policy rates alive."There was no immediate pressure for the ECB to do more," de Groot said, but added: "There is a lot of uncertainty and if the economic recovery does not become more visible in the second half, they will be forced to do more."

12.54pm BST

The European Central Bank’s ‘no change’ decision means:

• The headline borrowing rate, or ‘refinancing rate’, remains at 0.5%

• The ‘deposit facility rate’, paid to commercial banks who leave cash with the ECB, remains at 0.0%

• The ‘marginal lending rate’, charged to banks when they borrow from the ECB, remains at 1.0%.

12.45pm BST

ECB decision

Here comes the European Central Bank… and it’s also voted to leave its key interest rates unchanged.

12.33pm BST

Can the ECB provide more fireworks when it publishes its own decision at 12.45pm BST? Probably not. Lorcan Roche Kelly, chief Europe strategist at Trend Macrolytics, jokily predicts a repeat of last month’s ‘no change’:

Updated at 12.34pm BST

12.25pm BST

Bank of England leaves rates unchanged – What the analysts say

A quick round-up of analyst reaction to the Bank of England’s decision (from 12.00pm onwards)

Lee Hopley, chief economist at EEF:

Recent data suggesting the recovery may now have some legs will have supported another no change decision this month. While the economy has moved in a more positive direction it’s unlikely that there will be major change to the Committee’s medium term view on inflation and growth in next week’s Inflation report. The main event from the MPC will now be more detail on its forward guidance plans alongside the Inflation report, which will frame the debate on monetary policy in the months ahead.

David Kern, chief economist at the British Chambers of Commerce:

Minutes from the recent MPC meeting suggest that QE is unlikely to be increased any time soon and low interest rates will be maintained for a long period, which will provide a stable environment for businesses.

This is a positive shift in emphasis – and we hope this will be confirmed when the MPC presents its response to the Chancellor on how forward guidance should be used, expected next week. When looking at the tradeoff between growth and inflation, we hope the Committee accepts that under current circumstances, more inflation is likely to damage growth. We continue to urge the MPC to consider new policy measures to help boost business lending. For example, the existing QE programme could be used to purchase private sector assets other than gilts, including securitized SME loans, as this would reduce the risk when banks are looking to lend to business.

Howard Archer of IHS Global Insight:

The Bank of England was always unlikely to act at the August MPC meeting given next Wednesday’s assessment on adopting a policy of forward guidance. Furthermore, the ongoing stream of improved news on the UK economy – evident again in the healthy manufacturing purchasing managers survey for July – suggests that the economy is not in need of any further stimulus for now at least.

 However, the improved news on the UK economy could be seen as highlighting the need for the Bank of England to make it absolutely clear that interest rates are not going to go up for some considerable time to come – so is supportive to the case for adopting forward guidance on monetary policy. While the economic recovery seems to be becoming more firmly entrenched, it is from a very low base and with fiscal policy tight, there remains a very strong case for keeping interest rates at 0.50% for a long time to come.

Vicky Redwood of Capital Economics:

Today’s Monetary Policy Committee (MPC) meeting was always looking likely to be a non-event ahead of the announcement about forward guidance due next week. Our best guess is that the MPC will commit to keep official interest rates low until an unemployment threshold is breached.

Updated at 12.25pm BST

12.11pm BST

It’s all about next week

City economists say they aren’t surprised that the Bank of England has voted to leave interest rates unchanged, and not to create more electronic money to buy government bonds.

They believe next week’s Quarterly Inflation Forecast meeting will see the real fireworks, as governor Mark Carney is likely to flesh out the Bank’s ‘forward guidance’ on future policy.

Updated at 12.28pm BST

12.10pm BST

Pound climbs higher

Sterling is gaining against the US dollar, now up a whole cent this morning at .523, following the news that the Bank of England had not cut interest rates further, increased its bond-buying programme, or released a statement.

Updated at 12.12pm BST

12.00pm BST

Bank of England leaves rates and QE unchanged

The Bank of England has voted to leave interest rates unchanged from their current record low of 0.5%, and also left its quantitative easing (bond-buying) programme as it stands.

And there’s no statement.

Recent encouraging economic data, such as this morning’s jump in manufacturing activity, must have encouraged the MPC to wait.

Reaction to follow

Updated at 12.04pm BST

11.50am BST

Just 10 minutes until the Bank of England releases its decision on monetary policy, and economists aren’t expecting a shock.

Ishaq Siddiqi, market strategist at ETX Capital, reckons the Monetary Policy Committee will sit tight:

For the BOE, growth in the UK with an uptick in most measures of economic activity build a greater excuse for Mark Carney and co to refrain from using QE as a tool to stimulate the economy.

While Shaun Richards points out that the BoE’s quarterly inflation report is due out next week:

Updated at 11.56am BST

11.21am BST

Italian political expert Alberto Nardelli has updated his blogpost on the Berlusconi appeal, explaining the various possibilities, and the pressures that a guilty verdict would put on the country’s coalition.

Silvio Berlusconi Mediaset verdict – possible scenarios

11.13am BST

Mario Draghi could produce a little surprise today and announce that the ECB Governing Council will start publishing the minutes of its monthly meetings.

Jens Weidmann, Germany’s man at the ECB, has thrown his weight behind the idea (more details on CNBC), which would improve transparency and bring it into line with the Bank of England and the Fed.

Fast FT has drawn up a few more key points to watch out for:

  • Will Mr Draghi renew or clarify his pledge to keep interest rates "at present or lower levels for an extended period of time?"
  • If he does clarify the time frame for that policy guidance, for how long?
  • Will Mr Draghi be more specific about future action; inflation remains "well-anchored" in the argot, will there be any hints as to what might trigger a further cut?

More on fastFT.

Updated at 11.16am BST

11.00am BST

Economics editor Larry Elliott has written about today’s encouraging manufacturing data:

UK manufacturing confidence highest since 2011

10.57am BST

Italy’s Supreme Court has convened to consider its ruling on Silvio Berlusconi’s tax fraud appeal.

The hearing began on Tuesday, and the judges’ decision isn’t expected until this evening, perhaps at 4pm or 5pm BST.

Updated at 10.57am BST

10.51am BST

Europe’s financial markets have rallied again today, on the back of this morning’s decent manufacturing data – and the cautious tone of the Federal Reserve last night.

In London, Lloyds is leading the way after returning to profit (see full story here).

• FTSE 100: up 30 points at 6651, + 0.45%

• German DAX: up 101 points at 8377, +1.2%

• French CAC: up 18 points at 4011, +0.47%

• Spanish IBEX: up 51 points at 8,464, + 0.6%

• Italian FTSE MIB: up 211 points at 16,694, +1.2%

Rachel Underhill, client manager at CMC Markets, commented that the stock market bulls have "regained control after strong PMI data gives cause for optimism."

10.31am BST

Ninety minutes to go until we get the Bank of England’s rate decision meeting, and 3 hours until the European Central Bank’s press conference. Here’s RanSquawk’s preview of the two meetings:

• Bank of England decision: noon BST

• ECB decision: 12.45pm BST

• ECB press conference: 1.30pm BST

Updated at 10.34am BST

10.26am BST

Over in Greece, public hospital workers began a four-hour strike at 11am local time (9am BST), and were also planning an anti-austerity demonstration.

Kathimerini reports:

The protesters were due to gather outside the Health Ministry at 11.30 a.m.

The workers oppose plans to transfer some 1,500 healthcare workers and turn at least six hospitals in Attica into health centers.

10.18am BST

John Hooper: Rajoy’s high-risk strategy over slush fund claims

Our Southern Europe editor, John Hooper, has been watching events unfold in the Spanish Parliament where prime minister Mariano Rajoy denied wrongdoing over the illegal payments scandal (highlights from 8.43am). Here’s his early analysis:

Rajoy’s strategy today was a high-risk one. But he had little alternative if he was not to resign.

He insisted his only mistake was to have been taken in by Luis Bárcenas — a “criminal” he called him. As a Basque nationalist lawmaker was quick to point out, though, that makes Rajoy a prisoner of what else has yet to emerge from the scandal – whether ferreted out by the young judge conducting the investigation or volunteered by Bárcenas, who has been drip-feeding his disclosures to an eager press.

 With an overall majority in parliament – Rajoy’s People’s Party has 186 of the 350 seats in the lower house, the Congress of Deputies – he can live to fight another day. But the question marks over his survival remain.

 The Spanish prime minister tried to bolster his position by pointing to signs of recovery, notably a drop in unemployment in the second quarter. But the economy has been in and out of recession for the last five years and remains worryingly dependent on other countries, both for exports and tourist receipts.

 Arguably, the best news for the prime minister came in the form of today’s improved manufacturing output figures from Britain and the Eurozone.

Updated at 10.20am BST

10.10am BST

Bit late, sorry, but the Spanish parliamentary hearing over the illegal payments scandal is being streamed online – click here to see it (no translation though).

10.05am BST

The pound has jumped on the back of today’s strong manufacturing data, up three-quarters of a cent against the US dollar to just above .52.

9.37am BST

UK ‘March of the Makers is underway’

Britain’s manufacturing revival has started at last. So argues David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, following the news that activity hit a 28-month high last month (see 9.33am).

Noble commented:

The much vaunted march of the makers has finally materialised.

Exports have been critical to this success, but it is the broad based nature of the sector’s performance which endorses the view we are on track for solid and accelerated growth in the coming months.

The ability of British manufacturers to market themselves abroad was always seen as crucial to long-term success and so it has proved. New export business has grown at its quickest rate in two years in a sign that macro-economic conditions are improving. Domestic performance has also been strong.

Markit’s data is online here:

It shows that confidence among factories is high, with jobs growth at a two-year peak.

Updated at 9.38am BST

9.33am BST

UK manufacturing activity beats forecasts

Britain’s manufacturers have also posted strong growth in July, according to Markit’s monthly survey of the sector.

Hot on the heels of the decent eurozone data (9.08am), the UK PMI index jumped to 54.6 –the strongest reading in 28-months, and well over the 50 point mark that shows growth.

Economists had expected a reading of 52.8.

This must bolster hopes that the UK’s economic recovery continued in July, following the 0.6% increase in GDP recorded in the previous three months.

9.26am BST

Rajoy: I won’t resign over corruption claims

Back in the Spanish parliament, prime minister Mariano Rajoy continues to deliver a lengthy speech defending himself over the slush fund scandal (see 8.43am onwards).

Rajoy has told MPs that he will not step down, and pledged to keep implementing his economic reform programme:

Nothing related to this affair has stopped me or will stop me from governing.

9.20am BST

Lloyds selloff moves closer

In the City, the big news is that Lloyds Banking Group has posted a profit, which will help the UK government sell off its 38% stake in the bank.

And Lloyds’ army of long-suffering shareholders will be interested to hear that the bank has begun talks over resuming its dividend.

My colleague Jill Treanor writes:

The 39%-government-owned bank reported first half profits of £2.1bn – compared with a £456m loss this time a year ago – even though it took an extra £500m charge for mis-selling payment protection insurance, taking the total cost of paying redress to customers to £7.3bn.

The return to profitability had been expected and the City was awaiting guidance on the bank’s future plans to pay dividends – blocked by Brussels when the bank was bailed out in 2008 – which is expected to make the shares easier for George Osborne to sell off. The shares were the biggest risers in the FTSE 100 in early trading, gaining 5% to over 71p.

Lloyds sell-off moves nearer as bank returns to profit

Updated at 9.44am BST

9.11am BST

Graph: Eurozone manufacturing returns to grow

And here’s the graph showing how eurozone manufacturing activity has revived after several dire years:

Updated at 9.12am BST

9.08am BST

Eurozone manufacturing sector returns to growth

Good news. The eurozone manufacturing sector has returned to growth, according to the final survey of the sector carried out by data firm Markit.

Markit’s manufacturing PMI survey (based on interviews by purchasing managers across the euro area) came in at 50.3, beating a ‘flash’ estimate of 50.1. That’s the best reading in two years, and means activity increased (50.0 = the cutoff point between growth and contraction).

Within the data, Germany’s manufacturing sector posted its strongest PMI reading in 18 months, and Italy also cheered analysts with a reading of 50.4.

And there’s even a better result in Greece, where the PMI was its least weak in more than three and a half years.

Rob Dobson, senior economist at Markit said the eurozone’s manufacturing sector had made a positive start to the third quarter of 2013:

Manufacturing output rose again in Germany, Italy, the Netherlands and Ireland during July, while there were welcome returns to growth for France and Austria. The breadth of the expansion will hopefully aid in its sustainability. Even the downturn in Greece showed signs of easing, while Spain saw its second-weakest contraction for over two years.

The bugbear of eurozone manufacturing remains its lacklustre labour market, which contributes to the persistent joblessness of the region as a whole.

Even here there were tentative signs of recovery, with the rate of manufacturing job losses easing to a one-and-a-half year low. Meanwhile, falling commodity prices and intense competition are still keeping inflationary pressures in the sector at bay and posing no real issues for policymakers.

8.53am BST

Rajoy: Justice must do its job

Mariano Rajoy also told MPs in the Madrid parliament that justice must take its course, over disgraced former treasurer Luis Barcenas. The Spanish PM added that he’s confident the courts will decide that neither he, nor his party, committed any crime.And here’s the key quote:

I was mistaken in trusting the wrong person. I didn’t cover up a guilty person. He tricked me, but it was easy because I don’t jump at condemning anyone.

MPs will question Rajoy on the affair once he’s completed his speech.

Updated at 8.53am BST

8.43am BST

Rajoy: Slush fund scandal has hurt Spain

Spanish prime minister Mariano Rajoy has begun testifying in the Madrid parliament over the illegal payments scandal, and admitted that the revelations of corruption and secret payments has hurt Spain’s image abroad.
The embattled PM insisted that claims his party received millions of euros in secret illegal payments are untrue, saying he had ‘made a mistake’ in his relationship with the party treasurer Luis Barcenas.
Barcenas is at the heart of the scandal, and faces a string of charges including money laundering, bribery, and tax fraud.
Here are the first Reuters newswire snaps from the court:



We’ll have more details and analysis later…

Updated at 8.43am BST

8.32am BST

Today’s meetings come after the US Federal Reserve got the ball rolling with its own meeting yesterday.

The Fed left its stimulus package unchanged, and warned that the US economy still faces difficulties. My colleague Heidi Moore explains:

The unemployment rate "remains elevated," members said, while mortgage rates are rising and a deadlocked Congress holding up budget policy is "restraining economic growth."

The committee’s wary tone on the economy is in marked contrast to its more chipper pronouncements just last month, when chairman Ben Bernanke said "generally speaking, financial conditions are improving" and "the fundamentals look a little better to us," crediting the housing sector in particular for creating construction jobs and supporting consumer spending.

Here’s the full story: Fed to keep interest rates at zero amid debate over future leadership

Updated at 8.32am BST

8.22am BST

Poll: Economists expect no change from the ECB

Reuters polled 70 economists ahead of today’s European Central bank meeting, and 69 of them said they don’t expect an interest rate cut today.

However, the ECB governing council could still discuss easing monetary policy.

Last month it surprised the City, and sent the euro tumbling, by declaring that rates would remain at their current record lows, or lower, for an extended period of time. Surely the Frankfurt press pack will ask Mario Draghi to clarify this forward guidance?….

Updated at 8.23am BST

8.10am BST

Central Banks in focus

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

It’s a big day for monetary policy, as the European Central Bank and the Bank of England hold their monthly meetings to set interest rates and stimulus packages.

Despite recent encouraging data suggesting the recession is ending, the ECB is expected to remain dovish. And as ever, Mario Draghi’s press conference will be a highlight. What will the man who promised a year ago to do ‘whatever it takes’ make of the situation today?

The Bank of England is also expected to keep its hands off the levers of monetary policy — analysts don’t expect any increases in its bond-buying programme ahead of next week’s quarterly inflation report. But with new boy Mark Carney in the governor’s chair, there’s a frisson of excitement. Will the BOE release another statement, as it surprisingly did last month after Carney’s first Monetary Policy Committee?

There’s also the prospect of drama in the political sphere. After two days of legal argument, Italy’s Supreme Court is expected to give its final verdict on Silvio Berluconi’s appeal against a jail sentence and public office ban for tax fraud. If the sentence is upheld, the Italian coalition government could look shakier.

While in Spain, prime minister Mariano Rajoy is appearing in parliament to answer questions over the illegal payments scandal. MPs will demand answers over allegations that Rajoy himself received money through a secret scheme in which cash from businesspeople was funneled to senior party figures. More details here.

Also, new manufacturing data for the eurozone, UK and US should show how the world economy fared in July.

I’ll be tracking the action through the day…

Updated at 8.22am BST

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Spanish GDP falls 0.1%. Sweden also shrinks. Italy’s top court considering Silvio Berlusconi’s conviction and sentence for tax fraud. Alberto Nardelli: Four scenarios for Italy. Eurozone economic confidence improves, while US consumer confidence drops…


Powered by article titled “Eurozone crisis: Berlusconi prosecutor seeks cut in public office ban – as it happened” was written by Graeme Wearden, for on Tuesday 30th July 2013 19.24 UTC

8.16pm BST

So, with the Italian supreme court closed for the night, I'll shut up shop here too.

Back tomorrow with more coverage from Rome, and the usual fare. Thanks, and goodnight. GW

8.03pm BST

Berlusconi court adjourns until Wednesday

The Supreme Court in Rome has just adjourned for the day.

Silvio Berlusconi's final appeal will resume on Wednesday, when his legal team led by Franco Coppi is expected to present their counter arguments.

As explained at 4.07pm, Berlusconi's case is made up of around 50 different point. This includes the argument that the former PM wasn't really in ful charge of Mediaset when the offences took place, as he was busy with his political career.

A verdict could come tomorrow, or we might be left wating until Thursday….

Updated at 8.26pm BST

8.00pm BST

A quick recap

A reminder of the importance of this case:

Today's appeal hearing at the Supreme Court (which could last until Thursday) is Silvio Berlusconi's final attempt to avoid a ban from public office and a jail term over a tax fraud conviction involving his Mediaset empire.

If the sentence is upheld, then political analysts fear Berlusconi's Freedom Party could pull its support for the fragile Italian coalition. That could bring down prime minister Enrico Letta.

So, why has the prosecutor recommended reducing the public office ban from five years to three? Reuters explains that the move was made on "technical legal grounds"

One piece of idle speculation did strike me: that by cutting the sentence, the prosecutors reduce the risk that judges will acquit Berlusconi or void the verdict and start the process again… That's just a personal thought.

Alternatively, they could simply be responding to the Berlusconi side's case. (updated for clarity).

Updated at 8.14pm BST

7.25pm BST

Reuters: Berlusconi prosecutor seeks cut in public office ban

Reuters' Rome bureau provides details of the latest development in Silvio Berlusconi's appeal — the fact that the prosecution has proposed that the public office ban should be cut:

An Italian public prosecutor on Tuesday asked the country's top court to reduce former Prime Minister Silvio Berlusconi's ban from public office for tax fraud to 3 years from 5, but to confirm a one year prison term.

The supreme court is hearing Berlusconi's last appeal in a case which could threaten the survival of Italy's shaky coalition government if his conviction is confirmed.

Berlusconi was sentenced to four years in jail by the lower court but this has been reduced to one year under a 2006 amnesty.

7.20pm BST

ANSA: the legal arguments

ANSA, the Italian news agency, has details of the early skirmishes in the Berlusconi court case:

The four-year conviction regards a system of inflated film-rights purchases at Berlusconi's Mediaset media empire and the use of offshore companies to create slush funds.

Prosecutors say this enabled Berlusconi to dodge taxes on around seven million euros in 2002 and 2003.

"There is a thread that is given from the continuity of the system starting from the period of its invention in the 1980s," Prosecutor Antonello Mura told the Cassation Tuesday. Mura said the aim was to "inflate costs for tax benefits and produce payments for the creation of substantial capital abroad". Berlusconi says he had nothing to do with these dealings or authorising them as he was too occupied with political matters.

He was premier at the time.

Franco Coppi, a member of Berlusconi's defence team, said that the "crime does not exist", adding that he was aiming to have the conviction overturned.

More here.

7.14pm BST

Open Europe's Vincenzo Scarpetta also flags up this latest development:

(reminder: Open Europe's analysis of the case is covered at 12.23pm)

7.01pm BST

A late newsflash from Rome, saying the Italian prosecutor has asked for Silvio Berlusconi's ban from public office to be reduced:


Looking for more details now….

Updated at 7.03pm BST

6.19pm BST

AP: Berlusconi’s lawyer won’t make predictions, but…

Silvio Berlusconi's lawyer, Franco Coppi, during a break today.
Silvio Berlusconi’s lawyer, Franco Coppi, during a break today. Photograph: Claudia borgia/Demotix/Corbis

Associated Press reports that Silvio Berlusconi's lawyer, Franco Coppi, tried to avoid guessing the outcome of today's hearing. Not completely successfully.

Here's a flavour of its report from the Italian supreme court in Rome, as Berlusconi's appeal was being heard:

The tensely awaited decision, which could have an impact on Italy's fragile, three-month-old coalition government, is expected Wednesday or possibly Thursday, Berlusconi's lawyer Franco Coppi told reporters outside the courtroom.

Berlusconi's case is one of eight on the docket, and the last one to be heard.

"I'm superstitious and I don't make predictions," Coppi said during a break after the court spent two and a half hours summarizing the case, but he added: "I expect to win."

4.57pm BST

Back on the Cypriot haircut deal

Charles Forelle of the Wall Street Journal calculates that large depositors with over €100,000 in Bank of Cyprus are only getting back 15% of that 'unsecured' funds straight away, under the deal announced today (see 3.49pm):

Updated at 4.58pm BST

4.54pm BST

This handy graphic shows how the Greek bailout funds have been spent since its first bailout in 2010.

You'll note that a lot was used to cover maturing debt (the large purple slice), along with interest payments (red) and recapitalising the banks (grey/blue).

Very little was actually spent by the Athens goverment (primary deficit in blue, and 'other government needs' in green).

That's via Yiannis Mouzakis, a handy expert on the crisis based in Cyprus (who blogs as The Prodigal Greek).

4.40pm BST

Peugeot Citroen state aid aproved

Just in – the European Commission has (as rumoured last week) approved France's €7bn loan to the financing arm of struggling auto firm PSA Peugeot Citroen.

The EC did insist, though, that the loan was made at a higher price, to avoid competition concerns.

Commissioner Joaquin Almunia explained:

This is a balanced result which offers the PSA group the chance to make a new start on a sound basis.

4.32pm BST

Readers with an interest in economic history might like to know that the Bank of England has made various historical documents available online.

News Release – Historic Bank of England publications and documents now available online

It includes more than 80,000 ledgers, files and individual records. FT Alphaville's Joseph Cotterill has been trawling, and dredged up a few highlights already:

Updated at 4.32pm BST

4.07pm BST

Francesca Pascale, the girlfriend of Italian former Premier Silvio Berlusconi, leaves his residence in Rome, Tuesday, July 30, 2013. Berlusconi is waiting in his home in Rome for the decision that will change his political fate as Italy's highest court hears arguments in the former premier's fraud conviction.
Francesca Pascale, the girlfriend of Italian former Premier Silvio Berlusconi, leaving his residence in Rome today. Berlusconi remains there waiting for the court ruling. Photograph: Riccardo De Luca/AP

Nice piece in the Economist this afternoon on Silvio Berlusconi's court appeal hearing today.

Between a rock and a hard place

It points out that Berlusconi's defence is based on around 50 objections to the original conviction:

Central to their case is the argument that the billionaire media proprietor, who was prime minister at the time of the alleged offences in 2002 and 2003, was then not really in charge of Mediaset, his television empire.

That is the first of the ironies: his lawyers’ task would be a lot easier if, back in the 1990s when he entered politics, Mr Berlusconi had listened to his adversaries and ring-fenced his business interests from his political career.

If Berlusconi loses this final fight, "JH" writes, then prime minister Enrico Letta might have to ask his MPs to vote against the sentence – even though Berlusconi is a longtime opponent. If they refuse, the coalition could fall. At the least, it would enhance the prospects of Letta's rival, "the more telegenic, albeit less experienced, Matteo Renzi, the mayor of Florence".

One of the PdL’s lawmakers, Francesco Giro, told an interviewer as the court was assembling that Mr Berlusconi, though incurably optimistic, was “anxious”. He was not the only one.

3.59pm BST

3.47pm BST

Bank of Cyprus savers suffer 47.5% haircut

It's official. Large investors with more than €100,000 in Bank of Cyprus when the country collapsed into a bailout this year are surrendering 47.5% of that money in exchange for new shares in the company.

The Central Bank of Cyprus announced the news today. It put a positive spin on it, saying "significant progress" had been made in recapitalising BoC.

According to Reuters, the move means depositors will lose around €8bn.

And what of the rest? The Central Bank of Cyprus explained that 12% of deposits that were previously blocked will be released. The balance will be split into three deposits per customer, which will be locked for six, nine and 12 months each. However,…

BoC will have the option to renew the time deposits once for the same time duration

So in practice, savers might not get their hands on any of the money for a year, and could have to wait 24 months for the lot.

Here's the full statement:

Significant progress at Bank of Cyprus with the completion of the recapitalisation and the exit from resolution

And as this picture shows, anger over the Cypriot bailout is still visible:

A man walks past a of wall of a Bank of Cyprus branch which has graffiti on it reading in Greek: Troika get out in the Cypriot capital, Nicosia.
A man walks past a Bank of Cyprus branch which has graffiti on it reading in Greek: “Troika get out”. Photograph: Yiannis Kourtoglou/Demotix/Corbis

Updated at 5.49pm BST

3.16pm BST

Mixed news from America on the consumer confidence front — the headline measure calculated by the Conference Board fell ths month, to 80.3 from 82.1 in June.

US consumers, it seems, are growing more worried about the future. The expectations index slid to 84.7, from 91.1. That suggests growing worries about America's economic growth through the year, as fiscal cutbacks hit home.

The 'present situations' index, though, climbed to its highest level since May 2008.

3.00pm BST

Italian update

The lawyer of former Italian prime Minister Silvio Berlusconi, Franco Coppi (3rd L) walks out of the entrance of the Court of Cassation building, during a pause of the supreme court session which will decide whether to confirm former Italian Prime Minister Silvio Berlusconi's one-year prison sentence and five-year ban from politics in a long-running tax fraud case involving his media business interests, on July 30, 2013, in central Rome.  The final appeal hearing began on July 30 but one of Berlusconi's lawyers told reporters that the verdict may come only on July 31 or August 1.
The lawyer of former Italian prime Minister Silvio Berlusconi, Franco Coppi (3rd L) walks out of the entrance of the Court of Cassation building, during a pause of today’s supreme court session. Photograph: ANDREAS SOLARO/AFP/Getty Images

Back in Italy, its supreme court spent this morning hearing a summing up of the legal arguments in Silvio Berlusconi's tax fraud case.

They then called a lunch break – giving the crowds of reporters outside the court a glimpse of Berlusconi's legal team.

Silvio Berlusconi's lawyer Franco Coppi, center, leaves the Court of Cassation building where Berlusconi's case on tax fraud will be decided, in Rome, Tuesday, July 30, 2013.
Silvio Berlusconi’s lawyer Franco Coppi, center, leaving the Court of Cassation building. Photograph: Gregorio Borgia/AP

Public prosecutor Antonello Mura was lined up to present his case after the break.

As flagged up earlier, Berlusconi's lawyers – and some legal experts – don't expect a verdict tonight.

2.17pm BST

US house prices up again

Strong housing data from America this afternoon, where prices continue to romp ahead.

The S&P/Case-Shiller index, covering 20 US cities. showed a 2.4% rise in house prices during May. That means a positively perky 12.2% year-on-year rise – the biggest annual increase since March 2006.

House prices in Dallas and Denver are now at record levels.

The San Francisco showed the biggest gains, up 4.3% in May. Atlanta, Chicago, San Diego, and Seattle also posted gains of more than 3%.

Analysts had expected an even bigger rise, of 12.4% year-on-year. But ithe broad picture remains upbeat

S&P/Case Shiller house price index, to May 2013
Photograph: S&P/Case Shiller

Updated at 2.27pm BST

1.48pm BST

And here's a couple of snaps of Greece's finance minister, Yannis Stournaras, during his upbeat interview with Reuters (see 1.27pm).

Greece's Finance Minister Yannis Stournaras walks in his office during an interview with Reuters in Athens July 29, 2013.
Greece's Finance Minister Yannis Stournaras speaks during an interview with Reuters in Athens July 29, 2013.

Alas, no photos of the broken window…

1.27pm BST

The optimism of the Greek finance minister

Over in Greece, finance minister Yannis Stournaras has suggested the Greek government may avoid incurring a black hole in its bailout plan.

In a decidedly upbeat interview with Reuters, Stournaras argued that Greece's economy may actually perform better than its lenders predict.

A decent tourism season and a well-executed reform plan could mean Greece avoids the fiscal gap, of around 2% of GDP, which the Troika has predicted.

Stournaras argued that Greece's main threat is "political risk", not economic, due to MPs running out of enthusiam and patience for austerlty.

He said:

MPs just reflect the average man or woman in the street – they have to believe that there is light at the end of the tunnel. If they believe it they will continue voting the few necessary measures left over, if they don't they are not going to. This is the great risk.

Reuters also reports that Stournaras's office, in the centre of Athens, still sports a broken window thanks to "a bullet fired by angry anti-austerity demonstrators in 2010".

This 'feature' has also caught the eye of investors visiting Greece…

Updated at 1.30pm BST

12.23pm BST

Open Europe: Berlusconi case Q&A

It can be hard to keep track of Silvio Berlusconi's various legal travails. On top of the Mediaset tax fraud case under consideration today, he has also been convicted of breaching confidentiality in March 2013 over a leaked police wiretap, and also found guilty of underage sex charges in June.

Helpfully, Open Europe have published a guide to today's case:

Q&A: All you need to know about Berlusconi's tax fraud trial and its potential implications for the Italian government

It explains how the four-year prison sentence, if upheld, would need to be approved by the Senate, and that Berlusconi's age means most of the sentence would probably be annuled.

But Open Europe also warns that the political implications are unclear:

Several senior members of Berlusconi's party have evoked drastic retaliation (withdrawal from government, resignation en masse of Berlusconi's MPs and Senators, snap elections, and so forth).

The truth is Il Cavaliere would make the final decision – and his party would then almost certainly follow the leader. Sure enough, there would be the potential to trigger a political crisis in Italy.

12.01pm BST

Photos: Outside Rome’s supreme court

A couple more snaps from Rome, as judges at the supreme court consider Silvio Bersluconi's appeal:

A man holds up a picture of former Italian Prime Minister Silvio Berlusconi as he protests in front of Italy's supreme court building in Rome July 30, 2013.
A man holds up a picture of former Italian Prime Minister Silvio Berlusconi as he protests in front of Italy’s supreme court building in Rome today. Photograph: ALESSANDRO BIANCHI/REUTERS
Journalists gather outside the Court of Cassation building where former premier Silvio Berlusconi's case on tax fraud will be decided, in Rome, Tuesday, July 30, 2013.
Journalists gather outside the Court of Cassation building. Photograph: Gregorio Borgia/AP

11.42am BST

Italian debt auction unrattled by Berlusconi case

Berlusconi's court case drama did not alarm bond investors this morning at an auction of Italian debt.

Italy managed to raise its target of €6.75bn through selling new five and 10-year bonds without any obvious difficulty. Yields (or interest rates) dropped compared to the previous sale of this type.

Nick Spiro, sovereign bond expert at Spiro Sovereign Strategy, said the results showed that markets remain unconcerned over political risk in Italy, thanks to the potential support on offer from the European Central Bank

Mario Draghi, it seems, is more important than Silvio Berlusconi to Italy right now. Spiro writes:

Once again, the travails of Mr Berlusconi cast a long shadow over Italian politics. The "Berlusconi factor" seems to be a permanent fixture on Italy's political landscape. Yet the big difference between now and 2011 is that Italian politics is of scant concern to markets. 

Only a sudden collapse of Mr Letta's government is likely to trigger a sharp sell-off – and even this would almost certainly not be as severe as previous bond market routs if the reaction to February's inconclusive election is anything to go by. 

The reality is that the ECB's bond-buying programme, in spite of all its shortcomings, continues to suppress Spanish and Italian yields.

11.09am BST

Silvio Berlusconi's lawyer, Franco Coppi, has told journalists in Rome this morning that he doesn't expect a verdict today.

That's via Reuters, which adds that Coppi said the defence would not request that the case be postponed until September. The judges could still decide to do that on their own account, though.

Updated at 11.24am BST

10.55am BST

It appears that the Italian judges will not issue a verdict tonight, unless it is to postpone the whole process:

10.53am BST

Photo: the Italian court

Back to Italy, and here's a photo from outside the Court of Cassation building in Rome.

Police forces stand outside the Court of Cassation building where former Premier Silvio Berlusconi's case on tax fraud will be decided, in Rome, Tuesday, July 30, 2013.
Photograph: Mauro Scrobogna/AP

Police officers are in action as the judges settle down to consider Silvio Berlusconi's final appeal against his conviction, ban from public office and prison sentence for tax fraud (see opening post for the details).

Interestingly, shares in companies within Berlusconi's media empire are all up this morning, as trader Alessandro Aimone explains:

Perhaps investors anticipate a good result for the former PM. As Alberto Nardelli explained at 7.58am, the sentence could be overturned, or voided, or delayed….

10.41am BST

Eurozone economic sentiment improves – analysis

Eurozone Economic Sentiment
Eurozone Economic Sentiment Photograph: /EC

Eurozone economic sentiment is now at a 15-month high (see previous post), which reinforces the chances that the euro area will exit recession this quarter.

But with the main readings stuck in negative territory, or below the long-term average, the data also shows that the recovery will be tough.

Howard Archer of IHS Global Insight reckons the eurozone should eke out 'marginal growth' later this year.

All business sectors saw confidence rise in July, with the exception of construction, which consumer confidence rose to a 23-month high. Similarly most countries saw confidence pick-up including Germany, France, Italy and Spain.


it is hard to see consumers generally lifting their spending markedly in the near term as their confidence is still limited despite improving appreciably to a 23-month high in July while they are still facing generally high unemployment and limited purchasing power (as limited wage growth and tight fiscal policy counters moderate inflation). The situation does vary markedly though between countries and German consumers are well placed to spend more.

10.09am BST

Eurozone confidence data released

Business and consumers across the eurozone are less pessimistic about the economic climate, according to data just published by the European Commission.

Economic sentiment across the eurozone rose to 92.5 in July, from 91.3 in June, the EC reported. Better, but (understandably) still below the 100-mark average.

The data generally showed an improving situation, although the picture is clearly still tough:

• The industrial climate reading rose to minus 10.6, from minus 11.2.

• Services sentiment picked up to minus 7.8, from minus 9.6

And consumers remained nervous, with a sentiment reading of minus 17.4, from minus 18.8.

9.59am BST

Elsewhere in the City this morning: BP's bn fund to compensate those hurt by the Deepwater Horizon disaster is running dry, with just 0m in the tank. Full story here.

9.57am BST

Customers use ATM machines outside a Barclays bank branch in London, Britain, 09 October 2012.
Barclays cash call…. Photograph: ANDY RAIN/EPA

Here's our full story on Barclays revealing a £12.6bn capital shortfall this morning, and announcing a £6bn rights issue:

Barclays pushed into £6bn cash call to plug capital gap

Barclays is asking shareholders for almost £6bn of cash as the bank's new management team races to comply with a demand by the Bank of England that it plug a £12.8bn capital shortfall.

As Antony Jenkins admitted on Tuesday the bank was increasing its provisions for mis-selling financial products by £2bn, he conceded that Barclays had been forced to change its plans as a result of the actions of the Bank of England, which showed the bank's finances were in a worse state than previously thought.

9.36am BST

Sweden in surprise contraction

The crisis in the eurozone may have hit Sweden, with the surprise news that its economy shrank in the last three months.

The Swedish statistics office dashed forecasts of a 0.1% rise in GDP by reporting a 0.1% contraction in the April-June period. That's a sharp deterioration on the 0.6% expansion in the first quarter of 2013.

The contraction means the Swedish economy has only grown by 0.6% over the last 12 months, down from 1.7% year-on-year three months ago.

Analysts urged caution, as these are only preliminary statistics.

As Robert Bergqvist of SEB put it:

The main reason for the weakening of the economy in second quarter is very weak external demand, and problems within the euro area.

On other hand, private consumption is fairly strong, and retail sales yesterday were also strong and that confirms the key growth driver is households, and private consumption.

9.00am BST

Graph: Spanish GDP

And this graph from the Instituto Nacional de Estadistica shows how Spain's economy has slumped over the last eight quarters:

Spanish GDP, quarter-on-quarter
Spanish GDP, quarter-on-quarter. Photograph: INE

8.49am BST

Ebrahim Rahbari, Citi analyst, is more downbeat about Spain's prospects, commenting:

We're not counting on a further improvement in the third quarter and are very sceptical of any statement that the recession in close to being over.

In an environment where there is more than 25 percent unemployment, a slightly positive GDP figure does not mean the recession has ended.

(via Reuters)

Updated at 12.37pm BST

8.20am BST

Economist Shaun Richards agrees that the Spanish GDP data is an improvement:

Updated at 8.21am BST

8.14am BST

Spanish GDP falls 0.1%: instant reaction

Kit Juckes of Société Générale tweets that the 0.1% drop in Spanish GDP in the last three months shows its economy is levelling out.

Updated at 8.14am BST

8.05am BST

Spanish GDP falls by 0.1%

Breaking: Spain's economy has now been shrinking for two full years.

Data just released by the Spanish National Statistics Institute showed that Spanish GDP fell by 0.1% between April and June. That's the eighth quarterly contraction in a row.

Encouragingly, though, the pace of decline has slowed — following the 0.5% contraction suffered in the first three months of 2013.

And on a year-on-year basis, the Spanish economy has shrunk by 1.7% — slightly better than the 1.8% economists had expected.

I don't think we can call it a green shoot of recovery – but perhaps the bitter frost is easing?

7.58am BST

Alberto Nardelli: Four scenarios

There are four possible scenarios of how the Supreme Court ruling over Silvio Berlusconi could play out, explains political analyst Alberto Nardelli.

• the ruling is postponed.

• Berlusconi’s lawyers ask for the ruling to be postponed – they have until Tuesday morning to put in a formal request. Risky, as it would freeze the statute of limitations.

• Berlusconi is acquitted – two possibilities in this scenario: 1) sentence is void and the appeal trial needs to start again (which could end with the statute of limitations kicking in (Sept. 2014)) and 2) full acquittal.

• the sentence is upheld – the key point here, which is missing from lots of media analysis I’ve read is the fact that the ban from public office needs to be rubber stamped by a Senate committee vote

Nardelli also suspects that a` final ruling might not come until Wednesday or Thursday.

Here's his full analysis:

Silvio Berlusconi Mediaset verdict – possible scenarios

Updated at 8.26am BST

7.42am BST

Italy waits for Berlusconi appeal ruling

A rally is held in front of the Court of Cassation of Rome in view of the Mediaset lawsuit that sees Silvio Berlusconi accused of tax fraud. Western Europe
A rally was held in front of the Court of Cassation of Rome yesterday by supporters of Silvio Berlusconi. Photograph: Fabrizio Lasorsa/Demotix/Corbis

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

Judgement Day is looming for Silvio Berlusconio, in a case that could have major implications for the stability of the Italian government, and perhaps the eurozone too.

Italy's supreme court will meet today to consider Silvio Berlusconi's final appeal against a 1-year jail sentence and 5-year ban from office for tax fraud. If the judges uphold the ruling, then the three-times prime minister – who has dominated the Italian system for two decades – would face ejection from politics.

And that prospect raises the threat that Berlusconi's People of Liberty party would pull the plug on Enrico Letta's shaky-looking coalition.

Tense times, with rumours swirling that the judges might take the pragmatic step of delaying a decision.

As my colleague Lizzy Davies explains from Rome:

If the judges agree with those verdicts, they are likely to enforce the requested sentence of four years in prison and a five-year ban on holding public office. The former is unlikely to cause the 76-year-old to lose much sleep as prisoners of his age rarely go to jail in Italy and, due to a 2006 amnesty law, he would be more likely to spend a year under some form of house arrest. But the latter could effectively end the political career of a man who, for better or worse, still plays a highly influential role in his country's affairs.

As head of the centre-right Freedom People (PdL) party, the main partner in centre-left prime minister Enrico Letta's government, Berlusconi is still capable of bringing down the coalition by withdrawing his support, should the moment suit him.

However, as the date of the cassation hearing has approached, speculation has mounted that the decision could be postponed.

Tense times – especially as legal experts are split on how long it will take to get the verdict… Here's Lizzy's full story.

It's looking like a busy day generally. There's plenty of economic data to shed new light on the state of the eurozone, including Spanish GDP data for the last three months (at 8am BST) and euro area consumer confidence and business confidence (at 10am BST).

It's also hectic in the City — with Barclays dominating attention with news that it is tapping shareholders for almost £6bn to improve its capital base. It's also announced that another £2bn is being set aside to cover compensation for consumer misselling….

Here's the statement from Barclays on its rights issue.

My collleagues are on the case with that story now….

I'll be tracking all the developments through the day….

Updated at 7.51am BST © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Euro falls below $1.30 to 2013 low on record high unemployment and another month of contraction in the region’s manufacturing sector. Euro jobless rate now at 11.9%. Grillo attacks Bersani again. US manufacturing expands more than expected…

Powered by article titled “Eurozone crisis live: Record unemployment and shrinking manufacturing drive euro down” was written by Graeme Wearden, for on Friday 1st March 2013 15.48 UTC

3.39pm GMT

US manufacturing sector beats foecasts

America’s manufacturing sector has, once again, outperformed other nations.

The US ISM index jumped to 54.2 in February from 53.1 in January, which means that growth is accelerating.

That’s the fastest rate in 20 months, and makes the contractions in the UK (PMI of 49.7) and the eurozone (PMI of 47.9) look even worse.

Amna Asaf of Capital Economics commented:

US manufacturers were undeterred by the fragile recovery in overseas manufacturing activity, for now at least.

Updated at 3.48pm GMT

3.08pm GMT

Exclusive: M5S’s Casaleggio on the party’s future

Gianroberto Casaleggio, joint founder of the Italian Five Star Movement, has given an exclusive interview to the Guardian in which he states there is no chance of the group joining the country’s next government.

But… speaking to John Hooper, our Southern Europe editor, Casaleggio also suggests that the party could provide limited support for a minority government, on policies which M5S agreed with.

Casaleggio, the man who helped mastermind the movement’s rapid growth using the power of the Internet, explained:

If a government is put together, formed by other parties, the Five Star Movement will vote for everything that forms an integral part of its programme.

Significantly, Casaleggio also says the party will remain on the sidelines as president Napolitano tries to build a coalition over the coming days. That, John says, is a new, tougher line from M5S.

Here’s the story: M5S says it will not help form Italian government

Definitely worth a read, as Casaleggio opens up about the party’s long-term ambitions, and about how digital democracy will fundamentally reshape politics around the globe.

What is happening in Italy is just the beginning of a much more radical change. It’s a change that is going to touch all democracies.

2.42pm GMT

Pound falls below $1.50

The pound just slipped below the $1.50 mark for the first time since early July 2010, a fall of 1.5 cents against the US dollar today.

Sterling has been suffering since this morning’s weak manufacturing data was released, fueling fears of a triple-dip recession.

Kit Juckes of Societe Generale reckons the pound could soon be as low as $1.40.

Since, as I’ve argued plenty of times before, a weaker pound won’t really help UK exports (of planes, lawyers and investment bankers) as much as they hurt consumes’ real incomes, the UK’s de facto weak pound policy won’t work well, so will continue for a long time.

There is no other path.

1.42pm GMT

Italy’s president has challenged the German government to do more to help the eurozone out of its economic crisis, on the final day of his trip to Germany.

President Giorgio Napolitano told an audience in Berlin that Germany had shown leadership in the crisis. However, he then appeared to chide its government for not stimulating its domestic economy more vigorously to help its neighbours:

Napolitano said:

I don’t want to simplify the problem, but it would be reasonable to expect an expansive impulse from Germany to contribute to a real, not just proclaimed, recovery in growth and employment in Europe.

(quote via Reuters).

Today’s manufacturing data showed that Germany’s factories are enjoying rising output, while most other countries are still suffering the impact of the euro recession.

The Italian president also dampened speculation that the election could be rerun soon, telling reporters that “I’m not interested in a new vote”, and that his successor (Napolitano’s term ends in May) is unlikely to want more instability either.

Napolitano’s trip had already been marred by the diplomatic spat after the SPD’s candidate for the chancellorship, Peer Steinbrück, over his comment that two clowns had won the election.

1.00pm GMT

Italy has missed its deficit reduction target for 2012 – but the good news is that it didn’t exceed the 3% target limit set by the European Commission.

Italy’s deficit came in at 3.0%, rather higher than Mario Monti’s most recent forecast of 2.6%. But it still low enough for the country to extract itself from the EC’s ‘excessive deficit’ procedure.

This pushed the total national debt to a new record high of 127% of GDP.

12.29pm GMT

Euro hits lowest level of 2013

The euro has fallen to its lowest level of 2013, following the latest record unemployment levels and weak manufacturing data.

The euro just dropped through the $1.30 mark for the first time since last December, to a low of $1.2987.

Traders are blaming fresh fears over the health of Europe’s economy, with eurozone jobless rate now at 11.9% (see 10.06am) and factory output falling sharply in Italy and France (see 9.32am)

The ongoing uncertainty over Italy, following Beppe Grillo’s latest attack on the centre-left (see 11.50am), isn’t helping the euro either.

12.16pm GMT

Economist Megan Greene suggests that the solution to the deadlock in Italy could be for Bersani to step down and be replaced by Matteo Renzi, who was defeated for the leadership of the centre-left late last year.

Renzi, mayor of Florence, had pledged to be loyal to Bersani – but Beppe Grillo’s repeated personal attacks on the Democratic Party leader are adding to the pressure for a change.

11.50am GMT

Grillo: hands off my senators!

Back to Italy, and Beppe Grillo has just tried to sink Pier Luigi Bersani’s efforts to become the prime minister of a minority government.

In a new blog post (see it here), Grillo accused Bersani and his Democratic Party of acting like “vulgar predators” by trying to persuade some his Five Star Movement’s new senators to work with him.

Grillo pointed out that everyone who stood as a M5S candidate had agreed not to “associate with other parties or coalitions or groups except for voting on shared points”.

Grillo declared that:

M5S, its elected officials, its activists, its voters are not for sale.

and added that Bersani does not realise he is “out of history”.

This looks like a blow to Bersani’s hopes of persuading president Napolitano that he can build a consensus with M5S (see 8.47am).

The stalemate continues…

Updated at 12.21pm GMT

10.54am GMT

Eurozone inflation drops below 2%

Inflation in the eurozone has fallen below the 2% mark, giving the European Central Bank some leeway to cut interest rates.

The consumer prices index dropped to 1.8% in February, from 2.0% in January. The ECB’s goal is to have the cost of living rising by a little below 2% per year – so there’s now more leeway for a rate cut…

10.42am GMT

Table: Latest jobless rates

And here’s each country’s unemployment rate (as that picture at 10.14am is a little blurry).

  • Eurozone: 11.9%
  • European Union: 10.8%
  • Belgium: 7.4%
  • Bulgaria: 12.%
  • Czech Republic: 7.0%
  • Denmark: 7.4%
  • Germany: 5.3%
  • Estonia 9.9%
  • Ireland: 14.7%
  • Greece: 27%
  • Spain: 26.2%
  • France: 10.6%
  • Italy: 11.7%
  • Cyprus: 14.7%
  • Latvia: 14.4%
  • Lithuania: 13.3%
  • Luxembourg: 5.3%
  • Hungary: 11.1%
  • Malta: 7.0%
  • Netherlands: 6.0%
  • Austria: 4.9%
  • Poland: 10.6%
  • Romania: 6.6%
  • Slovenia: 10.2%
  • Slovakia: 14.9%
  • Finland: 7.9%
  • Sweden: 8.0%
  • UK: 7.7%

10.31am GMT

10.14am GMT

Jobless rates across the EU

As usual, the highest jobless rates are being suffered in Spain (26.2%) and Greece (27%).

Austria (4.9%) and Denmark (5.3%) enjoy the lowest unemployment levels.

Updated at 10.46am GMT

10.06am GMT

Eurozone unemployment hits record high again

It’s official: Eurozone unemployment has hit a new record high of 11.9%, as the economic downturn forces more people out of work.

That’s up from a new estimate of 11.8% for December (which has been revised up).

That means that 18.998 million men and women were out of work in the euro area, and a total of 26.217m people across the European Union.

The statement’s online here:

More to follow

9.55am GMT

Much gloom in the City following the news that Britain’s manufacturing sector shrank in February (see 9.50am).

9.50am GMT

Britain’s manufacturing sector has also suffered a grim February, with Markit reporting the first contraction since last November.

The UK manufacturing PMI skittered down to 47.9, from 50.5 in January. Economists had expected a rise to 51, and the pound had swiftly shed one cent against the US dollar, to $1.505.

Markit warned that the manufacturing sector will be ‘a drag on economic growth’ this quarter, unless we see a big recovery in March. The triple-dip recession remains a risk.

9.39am GMT

…and this graph shows how German and French manufacturers are now experiencing diverging fortunes:

9.32am GMT

The slump in Italian and French manufacturing output reported this morning could show the region will continue to suffer recession this quarter.

The eurozone manufacturing PMI for February, which measures activity across the region, crept up to 47.9 vs 47.8 in January. That means it still shrank, despite Germany hitting growth again.

Howard Archer of IHS Global Insight commented:

While Eurozone economic activity appears to have bottomed out around last October, it looks highly possible that the single currency area will still suffer a fourth successive quarter of contraction in the first quarter of 2013.

9.21am GMT

When we say ‘record high’ – the Italian jobless data goes back to 1992, so this is the worst unemployment situation in at least 21 years. Certainly since the euro was created.

9.11am GMT

Record unemployment in Italy too

And another blow for Italy: its jobless rate has jumped to a new record high.

Unemployment across Italy is now running at 11.7% of the population, up from 11.3% in January. The youth unemployment rate also rose to a new record high, with 38.7% of young people out of work.

Rising unemployment was a big factor in the Italian election, particularly among parties arguing against Mario Monti’s economic reforms. This will surely bolster their argument.

We get overall eurozone jobless date in just under an hour’s time (10am GMT) – and it could also be another record high (from 11.7% last month).

Updated at 9.12am GMT

9.04am GMT

Italian manufacturing output slides

Economic data just released shows that the Italian economy is in a bad way – manufacturing activity has fallen for the 19th month in a row, and by more than expected.

The monthly PMI survey came in at a mere 45.8 for February, down 47.8 in January — which means the country’s manufacturing sector is shrinking at a faster pace [any number below 50 means contraction].

Other European economies are also reporting PMI data – and it shows that Germany continues to outperform weaker members of the eurozone.

German manufacturing PMI rose to 50.3, from 49.8 in January – meaning it returned to growth.

But France manufacturing sector is still shrinking, but at a slower pace (with a PMI of 43.9, up from 42.9 in January).

8.47am GMT

Bersani says ‘no deal with Berlusconi’

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

Italy remains in a state of political flux this morning. Pier Luigi Bersani, the centre-left leader whose hopes of winning this week’s general election were dashed, has this morning ruled out a Grand Coalition with the centre-right.

In an interview with the La Repubblica newspaper, Bersani insisted that he can become Italy’s next leader without getting into bed with Silvio Berlusconi.

He declared:

I want to spell it out clearly: the idea of a grand coalition does not exist and will never exist.

Instead, Bersani hopes to persuade Italy’s president, Giorgio Napolitano, that he could govern without a majority in the Senate (having narrowly won control of the lower house). He has drawn up a seven or eight-point plan to present to Napolitano next Wednesday.

Asked if his goal was to be prime minister in a minority government, Bersani said:

Call it what you want: a minority government, a government of purpose, I do not care.

I call it a government of change, which I assume the responsibility of guiding.

The full interview is online at Bersani’s web site (in Italian).

With Beppe Grillo ( refusing to back Bersani in a vote of confidence, a deal with Berlusconi was the only way the centre-left could get a majority in the Senate.

Some political analysts have questioned whether Napolitano would agree to a minority government, given the implicit instability. We’ll find out next week….

In the meantime, the rest of Europe watches the events in Italy with interest. And one German politician has raised the possibility of the country abandoning the euro.

Klaus-Peter Willsch, a member of Angela Merkel’s CDU party, has even declared that Italy should leave the eurozone, rather than hold fresh elections, if a majority of the population will not support the measures needed to support the eurozone.

Willsch told the “Handelsblatt” newspaper that:

A monetary union will survive only if it benefits all of its members.

It’s a little early to be discussing Italy’s exit from the single currency, I’d suggest – but Willsch‘s comments do show how much concern Italy has created.

As usual we’ll be tracking the action through the day….

Updated at 8.49am GMT © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Grillo damns Bersani as a political stalker. Steinbruck’s ‘clowns’ comment annoys Italian president. Italy holds successful auction, sells €6.5bn of bonds. EU austerity plans shaken by Italian vote. US pending home sales rise more than expected…

Powered by article titled “Eurozone crisis live: Fresh deadlock in Italy as Grillo rules out alliance with centre-left” was written by Graeme Wearden, for on Wednesday 27th February 2013 15.18 UTC

3.15pm GMT

Bersani’s ally: no deal with Berlusconi

It’s official – the Left Ecology Freedom party, which teamed up with Pier Luigi Bersani in the election, is refusing to take part in a coalition with Silvio Berlusconi.

Reuters has the full details:

The junior partner in Italy’s centre-left coalition on Wednesday rejected forming a governing alliance with the centre-right after neither side won enough seats to govern in this week’s election.

“No grand coalition,” said Nichi Vendola, leader of the Left Ecology Freedom party, after a meeting with centre-left leader Pier Luigi Bersani.

In a statement, Vendola said he hoped populist leader Beppe Grillo did not want a right-left government either, and called for a government that would “give an electric shock” to the country.

Updated at 3.21pm GMT

2.53pm GMT

It’s moving fast in Italy… one of Bersani’s allies has ruled out a deal with Berlusconi’s People of Freedom party, reports Reuters.

Here’s the newsflash:


Looking for the details now….

Updated at 3.11pm GMT

2.49pm GMT

It’s lose lose lose for Bersani

Beppe Grillo’s decision (see 2.36pm) leaves Pier Luigi Bersani in a very difficult position. If an alliance with Five Star is ruled out, then his only hope of a majority is through a grand coalition with Silvio Berlusconi.

Political analyst Alberto Nardelli explains:

Updated at 3.18pm GMT

2.36pm GMT

Grillo rules out alliance with centre-left group

Big news from Italy – Beppe Grillo has ruled out forming an alliance with the centre-left, dashing hopes that the two sides could form a stable government.

The leader of the Five Star Movement made the announcement in a blog post in which he blasted Pier Luigi Bersani as “a stalker” and a “dead man talking” who should have resigned rather than attempted to woo his rivals – as he did last night.

Writing on his blog, Grillo reiterated his opposition to any form of formal alliance with Bersani’s Democratic Party. Instead, Grillo said, Five Star would only support policies which it agreed with.

The news was accompanied with a remarkable graphic of Pier Luigi Bersani presented as a corpse:

Click here for Grillo’s full statement.

Reaction to follow

Updated at 2.43pm GMT

2.24pm GMT

Italian president blows out Peer Steinbrück over clown comments

German politician Peer Steinbrück has paid a heavy price for joking yesterday that the Italian election had been won by a couple of clowns – Italy’s president, Giorgio Napolitano, has cancelled a meeting with him.

The rebuke comes after Steinbrück‘s, the SPD’s candidate for the chancellorship in this autumn’s general election, told voters at an event called Straight Talk with Peer Steinbrück that

To a certain degree I am appalled that two clowns have won.

In fairness to Steinbrück, he’s not the first person to connect Beppe Grillo’s career as a satirist with Silvio Berlusconi‘s long record of being, well, Silvio Berlusconi – or “a clown with a testosterone boost”, as he put it.

But Napolitano – on a trip to Germany – is most unamused.

Der Spiegel has more details.

Updated at 2.52pm GMT

1.35pm GMT

Bean blasts negative interest rates plan

In the UK, one of the Bank of England’s deputy governors has tried to shoot down speculation that Britain might experiment with negative interest rates — a day after a fellow deputy suggested it might.

Charlie Bean insisted that the Bank was not about to ask to be paid to hold commercial banks’ deposits, despite Paul Tucker hinting that it was under consideration.

Speaking at a conference organised by the Institute of Economic Affairs, Bean said:

Any suggestion that we have a plan to introduce negative interest rates immediately, I should make absolutely clear, is not the case.

The ECB cut its deposit rate to 0.0% last year, in an attempt to get banks to lend. But as our economics correspondent, Phillip Inman, reports, Bean says the Bank of England couldn’t easily folow.

Bean did his best to demolish the policy, saying it would create huge problems for banks that have tied mortgages to the current bank base rate of 0.5%.

“It has significant negative side-effects which is why I do not support it,” explained Bean.

He pointed out that the European Central Bank has a separate rate for some commercial bank deposits because they are forced to keep particular reserves, whereas UK banks are allowed flexibility.

Disaggregating some bank deposits with Threadneedle Street from others would be a minefield, Bean added.

I just chatted with economist Shaun Richards, who argued that the ECB’s move hadn’t worked:

Zero rates had zero effect. The ECB cut the deposit rate to zero, and all the money just moved to another account in the ECB.

Richards said he wasn’t surprised to see Tucker discussing negative rates, given the weak state of the UK economy and the Bank’s failure to stimulate output. But he pointed out that previous rate cuts haven’t had much effect, and warns that savers would inevitably suffer.

Just to be clear, this is different from the Bank of England’s base rate, which is at a current record low of 0.5%. Our Q&A explains all….

…unlike a certain radio station this morning, it seems:

Updated at 2.26pm GMT

12.46pm GMT

Greek embezzlement

Over in Greece, the former mayor of Thessaloniki has been jailed for life after being convicted of stealing almost €18m from the city.

Vassilis Papageorgopoulos was convicted of embezzlement after a trial where four others were also convicted and received lesser sentences, including the municipality’s former general secretary, Michalis Lemousias, ex-cashier Panayiotis Saxonis.

Greek newspaper Kathimerini reports:

Papageorgopoulos and 17 other officials stood trial for allegedly embezzling almost 52 million euros from the municipality’s coffers, though the Thessaloniki court on Wednesday said that there was proof of 17.962 million euros having been misappropriated by the former mayor and his cohorts.

The other 13 officials were acquitted.

Updated at 1.47pm GMT

12.04pm GMT

Reforms must carry on – Van Rompuy

Herman Van Rompuy, president of the European Council, has joined the ranks of Eurocrats warning Italy that they cannot avoid fiscal consolidation.

Speaking after meeting the prime minister of Hungary, Viktor Orbán, Van Rompuy said the pair had spoken about “ the economic and social situation in Europe”.

As I have said before – and others like me – I believe that 2012 marked a turning point in the crisis in the eurozone – and that the worst is now hopefully behind us.

But we should not become complacent – neither in Member States nor at the level of the European Union and the eurozone. There is no real alternative to keep up reforming our economies. There is no way back for any of our Member States.

Updated at 1.48pm GMT

11.41am GMT

There’s very little political action to report in Italy yet (where the Pope is making an emotional farewell to huge crowds in the Vatican).

But Beppe Grillo’s Five Star group are making murmurings about a potential deal with Bersani, it seems:

11.25am GMT

Word from Brussels that the European Commission president, José Manuel Barroso, will meet Italy’s current prime minister, Mario Monti, to discuss the situation.

11.02am GMT

Reaction to Italian bond sale

The news that Italy’s much-watched bond sale went smoothly (see 10.24am) has cheered analysts, although some traders are muttering darkly that we don’t know who bought the bonds (so perhaps domestic banks mopped most of them up to ease the panic).

Nick Spiro of Spiro Sovereign Strategy said the sale had gone “relatively smoothly”, but warned:

The higher yields show that Italian sovereign debt is now caught in a tug-of-war between the reassurance provided by the ECB’s fiscal backstop and the confusion and instability in Italian politics.

…While there’s still none of the panic of November 2011 or July 2012, sentiment towards Italy has deteriorated markedly since Sunday’s inconclusive parliamentary election.

Nick Stamenkovic of RIA Capital Markets said the results would generate “some relief”, with buyers calculating that an Italian government will be carved out, somehow.

They got reasonable demand, but clearly investors demanded a higher risk premium to take it down.

Demand reflected by the bid/cover ratio suggests that despite the uncertain outlook, investors believe that some sort of a coalition will be cobbled together in coming weeks.

And Elisabeth Afseth of Investec agreed that the important point is that the Italian debt management office “got it done”.

The yields are higher than anything they’ve done for quite some time but that’s hardly a big surprise but they got the amount they wanted.

But some were more cynical:

10.24am GMT

Italian bond sale success

Breaking: the results of the Italian debt auction are in, and it has gone better than feared.

Borrowing costs are up compared with the previous auctions (no surprise there!), but they are not at dangerous levels. And there certainly wasn’t a buyer’s strike – Italy sold the full €6.5bn on offer.

Here’s the details:

• Italy sold €2.5bn of 5-year bonds at an average yield of 3.59%, up from 2.94% last time.

• It also sold €4bn of 10-year bonds at an average yield of 4.83%, up from 4.17%

And the bid-to-cover ratio (the amount of bids compared to the amount on offer) actually rose, to 1.6, from 1.3 last time.

Reaction to follow

Updated at 1.50pm GMT

10.03am GMT

The better news in today’s UK GDP data is that the economy actually grew over the last 12 months.

Britain’s economy was 0.3% higher than a year ago – not flat as expected. That’s because the ONS have revised two other quarters last year. It now thinks GDP in Q1 2012 only fell by -0.1% (from -0.2%), while Q3 2012 GDP is now estimated at +1.0% (from +0.9%).

On the one hand, this is much weaker than the UK government had expected (via the independent Office for Budget Responsibility)

On the other hand, some eurozone countries would welcome any growth:

Updated at 1.52pm GMT

9.35am GMT

UK GDP confirmed

Despite rumours it would be revised down, UK GDP is unchanged at -0.3% for the last quarter, the ONS just reported.

Output data for various sections of the British economy showed that:

• UK services sector shrank by 0.1% in October-December

• Construction output rose by 0.9%

• Industrial output tumbled by 1.9% and manufacturing output by 1.3% — both the steepest falls since the first quarter of 2009

9.27am GMT

Moody’s has warned it could downgrade Italy

Rating agency Moody’s weighed in on the Italian election deadlock last night, warning that it could downgrade the country’s credit rating if a government can’t be formed, or if its economic reform agenda now stalls.

In a statement, Moody’s said:

We would consider downgrading Italy’s government debt rating in the event of additional material deterioration in the country’s economic prospects or difficulties in implementing reform

A deterioration in funding conditions as a result of new, substantial domestic economic and financial shocks from the euro area debt crisis would also place downward pressure on Italy’s rating.

Moody’s currently rates Italy just two notches above Junk status, at Baa2.

8.55am GMT

Bernanke helps ease markets

City traders also appear to be taking comfort from US central bank chief Ben Bernanke – who yesterday calmed fears that the Federal Reserve will tighten monetary policy.

Mike van Dulken, Head of Research at Accendo Markets, explains:

While Italian political chaos likely to persist as discussions take place on coalition formation, investors still looked to put more onus on US Fed Chairman’s statement that quantitative easing was here to stay.

8.51am GMT

Shares rally

After yesterday’s drama, Europe’s stock markets are rising in early trading.

Italy’s FTSE MIB: up 106 points at 15657, + 0.7%,

FTSE 100: up 29 points at 6299, + 0.5%

German DAX: up 35 points at 7629, +0.4%

French CAC: up 24 points at 3646, +0.7%

Spanish IBEX: up 64 points at 8044, +0.8%

So why the change? One argument is that investors would actually welcome some grit being thrown into the wheels of the eurozone austerity machine.

The prospect of a Bersani-Grillo government, providing some stability but less fiscal consolidation, isn’t a reason to panic.

Investors haven’t been demanding that economic growth is choked off recklessly across Europe — their concern is simply that they get their money back.

Or as one London fund manager put it:

8.23am GMT

Deadlocked Italy holds bond sale as EU faces turmoil

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

It never really went away, but there’s no doubt that the eurozone crisis is now getting everyone’s full attention again.

The deadlock in Italy following the weekend’s election is a very nasty shock to those who thought the worst was somehow over for Europe.

With a majority of voters rejecting the reform plans favoured by the EU, we might be looking at months of drama:

As our front page story today declares:

Three years of German-led austerity and budget cuts aimed at saving the euro and retooling the European economy was left facing one of its biggest challenges as Italian voters’ rejection of spending cuts and tax rises opened up a stark new fissure in European politics.

The governing stalemate in Rome and the vote in the general election – by a factor of three to two – against the austerity policies pursued by Italy‘s humiliated caretaker prime minister, Mario Monti, meant that the spending cuts and tax rises dictated by the eurozone would grind to a halt, risking a re-eruption of the euro crisis after six months of relative stability.

That was yesterday. Now, Italy’s first challenge is to sell up to €6.5bn of long-term government bonds this morning.

Investors are certain to demand a higher rate of return, with Italy’s future so uncertain. How much higher (and how many bond traders take part), will show how nervous the markets are today.

And the big question remains – who will govern Italy?

Last night Pier Luigi Bersani threw down a challenge to Beppe Grillo and his Five Star Movement (M5S) — you’ve won influence, now use it.

As John Hooper reported from Rome:

At a press conference in Rome, a weary-looking Bersani said it was time for the upstart movement to do something more than just demand the removal of Italy’s mainstream politicians.

“Up to now, they have been saying: ‘All go home.’ But now they’re here, too. So either they go home as well, or they say what they want to do for their country and their children.”

Such an alliance would scupper the Grand Coalition favoured by Silvio Berlusconi. Your move, Beppe.

We’ll be watching all the latest political and financial developments through the day….

Updated at 8.37am GMT © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

In the broadcast today: Is there Further EUR Weakness to Come? In the aftermath of the uncertain outcome of the Italian election which has raised the prospects of a hung parliament, we examine the factors weighing on the euro and ponder if there might be further weakness to come for the single currency, we analyze the latest trend developments in the EUR/USD currency pair, we continue to monitor the sell-off in the GBP/USD pair, we note the first signs of a corrective pattern in the USD/JPY currency pair, we highlight the market’s reaction to the Italian election results, the Fed Chairman’s testimony to the Senate, the U.S. Consumer Confidence, Richmond Fed Index and New Home Sales, we discuss new forecasts from Bank of New York-Mellon and UBS, and prepare for the trading session ahead.

Live Broadcast from 9:00 am to 10:00 am, Eastern Time, Monday – Friday.

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European shares down sharply. Confusion in Italy as analysts say new elections may be necessary. Euro trades under pressure on rising Italian and Spanish borrowing costs. Fed Chairman Ben Bernanke defends QE in his testimony to Senate…

Powered by article titled “Eurozone crisis live: Italian political deadlock sends markets tumbling” was written by Graeme Wearden (7.15am-1.45pm) and Nick Fletcher (now), for on Tuesday 26th February 2013 15.27 UTC

3.27pm GMT

It wasn’t all bad news for Italy’s technocrat prime minister Mario Monti, whose poor performance in the election is a bit of an embarrassment and a slapdown of his austerity reforms. It appears he didn’t fail everywhere:

Updated at 3.27pm GMT

3.09pm GMT

Fed chairman Bernanke defends bond buying programme

US Federal Reserve chairman Ben Bernanke has strongly defended the central bank’s bond buying programme in testimony to the Senate.

He said the benefits of the stimulus outweighed the possible costs. He said the Fed was aware of the public losing confidence it its ability to unwind its programme smoothly or the possible destabilising effects of low interest rates. But he said these risks did not seem material at the moment. He said:

To this point, we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation.

But he urged politicians to avoid the spending cuts due to come into force at the end of the week, which he warned could combine with earlier tax rises to create a “significant headwind” for the economic recovery.

Markets have greeted his dovish tone on the quantitative easing programme positively, concluding it means the prospect of further easing.

The testimony followed some positive data, with positive new homes sales, growing consumer confidence and an unexpected jump in the Richmond Fed manufacturing survey.

Updated at 3.11pm GMT

2.59pm GMT

US markets open higher

US markets, which fell sharply on Monday after the impasse in Italy became clearer, are recovering ahead of a testimony before the Senate by Federal Reserve chairman Ben Bernanke.

The Dow Jones Industrial Average is up almost 100 points in early trading, but this has done little to help European markets, which are still firmly in the red.

• The FTSE 100 is down 1.11% or 70.52 points

• Italy’s FTSE MIB is 3.84% lower

• Germany’s Dax is down 1.41% and France’s Cac 1.63%

• Italy’s borrowing costs are still higher, up to 4.82% from 4.37% last night

2.48pm GMT

Ireland close to €300m savings on public pay bill

While Italy struggles to elect a government the Irish Coalition seems to be on the verge of saving €300m of its public pay bill as the Republic continues to be the ‘poster child’ for the EU, writes Henry McDonald in Dublin.

Agreement on a national wages and pension agreement in the public sector still hinges on unions accepting the deal. They are balloting their members over the weekend.

But the politician heading up the negotiations, the Labour Minister Brendan Howlin promised today that this will be the “last ask” from the government to the unions in terms of accepting austerity measures.

Speaking outside Government Buildings in central Dublin today, Howlin directly appealed to the unions to endorse the agreement: “I have said to public servants that this is the last ask. If you consider this, swallow hard as I know it’s not easy and vote for this, we will not be coming back again and we can plan our recovery over the next three years.”

Cuts to wages include a ten per cent reduction for any civil servant earning €185,000 or more. To demonstrate solidarity with public servants, the Cabinet are also taking pay cuts.

Taoiseach Enda Kenny will see his €200,000 salary reduced to €185,350, while Irish Deputy Prime Minister and Foreign Minister Eamon Gilmore will see his €184,405 salary drop to €171,308.

2.41pm GMT

Eurogroup head Dijsselbloem calls for Italy to stick to agreements

Jeroen Dijsselbloem, the Dutch finance minister and new head of the eurogroup, has added his voice to those calling for Italy to stick to its agreements with the rest of the eurozone. He told Dutch broadcaster RTL7:

I think and I hope there is a broad understanding that there is also a responsibility for the stability of the eurozone as a whole, and that agreements have to be met.

Pulling Europe from the economic doldrums requires a stable, political policy, also in Italy.

2.29pm GMT

Here’s a quick summary of the developments so far:

The Italian election has resulted in deadlock, with the centre-left group led by Pier Luigi Bersani winning a narrow victory in the lower house but the senate deeply split

There was a surge of support for Beppo Grillo’s Five Star Movement with voters disillusioned by austerity and the existing political parties

European stock markets are in retreat and Italy’s borrowing costs rising after the uncertain outcome

Two German politicians have said Italy must stick to its reform programme despite the surge in support for parties opposing it

The European Commission said it had heard the concerns of the people but Italy must continue to address its deficit

Analysts say unity government could still be formed but new elections may be necessary

Our latest news story on the election is here.

Updated at 2.43pm GMT

2.10pm GMT

Portuguese leaders divided over bailout

With the current political crisis in Italy, there are also disagreements elsewhere about the way forward.

In Portugal for instance, prime minister Passos Coelho has been playing down concerns about its bailout, as its creditors start another review. As reported by Reuters, he said:

We do not want more time under the adjustment programme, neither more time, nor more money. We intend to conclude the bailout programme by mid-2014 with the same financial package that has been envisaged.

But the leader of the main opposition party has said the package should be renegotiated. Socialist head Antonio Jose Seguro said:

We need more time and a delay of interest payments. There cannot be more austerity, there has to be a strategy of growth. I hope the government refuses proposals (by the troika of lenders) for more austerity.

Seguro also said the election result in Italy was “very worrying”.

1.45pm GMT

What’s next for Italy?

Open Europe, the think tank, outlines the potential scenarios for Italy:

  • A national unity government, if Bersani, Berlusconi and Monti join forces – could be possible but may not be enough to avoid snap elections (maybe as early as next year, and after the electoral law is changed);
  • Grillo U-turns and agrees to form a coalition with Bersani’s centre-left alliance;
  • A re-run election (presumably within 3-4 months) (with a caretaker government taking temporary control)

But without a change to Italy’s convoluted system of proportional representation, a new election might not help!

Under scenarios 1 and 3, there will be a lot of pressure to change the electoral law before new elections to avoid a similar stalemate. For that, however, there needs to be a majority in both houses, meaning that we’re looking at a potential Catch-22.

Berlusconi, of course, has already said he wouldn’t want fresh elections – and other parties also appear opposed.

Here’s the likely timescale:

15 March: First seating of the Italian parliament (both chambers).

By 20 March: The speakers of both chambers should have been elected.
After 20 March: Italian President Giorgio Napolitano starts official consultations on the formation of the new government.

However, there’s another problem – Napolitano no longer has the power to dissolve parliament, because he is in the last six months of his mandate (his term finished in May).

So if a new vote is needed, there could be months of paralysis while MPs elects a new president, so that parliament could be dissolved.

Full details here.

And with that, I’m handing over to Nick Fletcher….

12.51pm GMT

Bersani press conference this afternoon

Pier Luigi Bersani, the centre-left leader who won control of the Italian lower house but not the Senate, is due to give a press conference in around three hours time (4pm GMT / 5pm CET)

12.38pm GMT

Addressing Italy’s debt problem

The European commission also warned that Italy must address its huge debt pile, in its first public comment on the election results.

Olivier Bailly, EC spokesman, told a regular press briefing in Brussels that Italy needs a government that will push for stronger economic growth and job creation.

Asked about today’s tumbling stock markets, Bailly said:

Markets are free to react the way they want. As far as the Commission is concerned, we would like to underline our full confidence in the Italian authorities in their capacity to find and establish a political majority that will continue to deliver a growth and jobs agenda, which is what Italy needs to reduce the unsustainable level of its debt.

At around €2 trillion, Italy’s public debt is expected to hit 128% of national output during 2013. But its annual deficit is relatively low, and could fall below 3% of GDP this year.

Bailly also insisted that the EC had heard the voice of Italians, and indicated some frustration with the way the election was fought (Bersani, in particular, approached the campaign rather cautiously)

Updated at 1.28pm GMT

12.10pm GMT

Another photo from the Frankfurt stock market (that’s Beppe Grillo on the TV news).

11.51am GMT

Short-selling ban

Italy’s financial regulator has responded to the heavy falls on the Milan stock market by banning people from short-selling shares in the country’s biggest bank – Intesa San Paolo.

Intesa San Paolo’s shares have already shed 10% in a volatile sell-off this morning.

Short-selling bans, which prevent speculators selling shares they don’t own – are often rolled out at times of crisis. They won’t stop investors selling out, though, and traders in Italy aren’t impressed:

Updated at 1.29pm GMT

11.37am GMT

Latest stock market prices

Europe’s financial markets are still in retreat today, led by Italy where there’s been little relief from its rout.

Spain’s stock market has also seen a rush of sellers – reflecting concern that an escalating eurozone crisis could swamp Madrid’s efforts to avoid a bailout.

Here’s a round-up of the latest major indices:

Italy’s FTSE MIB: down 745 points at 15606, -4.5%

FTSE 100: down 81 points at 6273. -1.29%

German DAX: down 149 points at 7623, – 1.9%

French CAC: down 85 points at 3636, – 2.29%

Spanish IBEX: down 227 points at 8017, -2.75%

Italian borrowing costs also remain sharply higher, after nervy bond traders drove down its bonds. 10-year Italian bonds are changing hands at a yield of 4.78% — around 0.4 percentage points higher today.

Higher yields indicate that Italy is a riskier bet – a safe call, frankly. but something of a worry given tomorrow’s big bond sale.

Robert O’Daly, Italy analyst at the Economist Intelligence Unit (EIU), comments:

With Italy looking ungovernable, the financial markets are responding as expected.

Updated at 12.19pm GMT

11.06am GMT

Germany’s foreign minister, Guido Westerwelle, has now weighed in, becoming the third German politician to argue that Italy must stick with Monti’s reform plan.

Speaking in Berlin, Westerwelle said it was important that a stable Italian government is formed quickly – one that is committed to Monti’s policies.

Given Monti’s poor show, and the way Berlusconi won support by painting himself as the alternative to German oppression, this may not be the best approach from Westerwelle:

Updated at 11.37am GMT

10.44am GMT

Italy has seen its borrowing costs jump at its auction of short-term debt this morning.

It sold €8.75bn of six-month bills, as planned, but at an interest rate of 1.237% – much higher than the 0.73% agreed at a similar sale last month.

Analysts blamed the post-election deadlock.

Italy is due to sell long-term debt tomorrow, and Christian Lenk of DZ Bank is warning that it will probably have to accept higher borrowing costs then too.

Updated at 10.51am GMT

10.34am GMT

John Hooper: the real story of Grillo’s success

Our Southern Europe editor, John Hooper, flags up that we shouldn’t simply see the Italian election result as a simple vote against austerity.

He explains that the surge in support for Beppe Grillo’s Five Star movement reflects a deeper disenchantment with Italy’s entire political system:

John writes:

Market analysts this morning are interpreting this as a vote against austerity. But that is not the whole story, and they will misunderstand (and underestimate) the result if they see if through an exclusively euro zone, macro-economic lens.

Many of Grillo’s supporters are unquestionably fed up with their economic prospects. A recent study by the Demos think tank showed they were far more likely to be (a) pessimistic about Italy’s (and Europe’s) prospects and (b) unemployed.

But while Grillo did indeed lambast the current direction of the EU and the euro zone in his campaign (decrying Mario Monti as Angela Merkel’s poodle), his Five Star Movement’s main target is Italy’s sleazy, complacent political establishment. A new government made up of pro-growth, anti-austerity ministers drawn from among the same old parties will not make the M5S go away.

What is more, the movement’s attitude to the EU is profoundly ambiguous. When I spent well over an hour with him a few weeks ago he described himself as a “convinced European”.

That meeting led to this article: Beppe Grillo: populist who could throw Italy into turmoil at general election.

John continues:

But, Grillo says, the decision on the euro is such an important one that Italy’s membership needs to be decided by the people in a referendum. The same is true of M5S’s economic approach.

Grillo himself espouses an anti-capitalism that chimes with many of the ideas of the Occupy and anti-globalism movements. But his movement’s programme actually talks about cutting the budget deficit, and with spending cuts.

Updated at 12.20pm GMT

10.17am GMT

Germany: Italy must stick to Monti’s reforms

Two German politicians have declared that Italy must stick with the reform programme which Mario Monti has put underway — despite the surge of support for parties which oppose it.

Michael Grosse-Brömer, the parliamentary floor leader of Merkel’s Christian Democrats (CDU), said this morning.

It is important that Italy has a functioning government. Monti’s reform path must be continued.

(via Reuters).

German economy minister Philipp Rösler was putting a brace face on events, saying that he could imagine a better result for the pro-reform parties.

But in a statement, Rösler insisted there was no other way:

There is no alternative to the structural reforms that are already underway and which include consolidating the budget and boosting competitiveness.

Meanwhile the German tabloid newpaper, Bild, is horrified by Beppe Grillo’s ascendancy, and the reappearance of Silvio Berlusconi.

Its headline asks: “Are they going to destroy our euro now?”

“Our” euro?

Updated at 12.20pm GMT

9.57am GMT

Heads-up: Italy is about to hold an auction of short-term bonds.

9.54am GMT

Italy’s current prime minister, Mario Monti, is about to hold talks with the governor of the Bank of Italy, Ignazio Visco, and his own finance minister, Vittorio Grilli, about the situation following the election.

Updated at 12.20pm GMT

9.38am GMT

Our Europe editor, Ian Traynor, reports that there is shock in Brussels about the Italian election result:

But in Britain one Conservative MP, the maverick Douglas Carswell, has welcomed the surge in support for Beppe Grillo, and Mario Monti’s poor showing:

9.33am GMT

Lizzy Davies: confusion in Italy

From Italy, our Rome correspondent Lizzy Davies reports that Italians have woken up to “utter confusion”

Last night the possibility of fresh elections was being mooted by some.

But the centre-left Democratic Party appeared to back away from that, and this morning Berlusconi had had his say too. Asked on Canale 5 television about another vote, the former prime minister replied in his inimitable style: “I don’t think that would be helpful in this situation because there are no political programmes that have been discussed. The only one to have put forward programmes in this campaign was me.”

As mentioned at 8.40am, Berlusconi said all parties must reflect on the result and make sacrificies “for the good of Italy”.

Lizzy reports that, with the markets sliding, the former PM reminded us of his financial views, and criticised comparisons between Italy’s borrowing costs and Germany’s.

The spread between yields on Italian and German government bonds was “an invention of two years ago” without which Italians had lived very happily for years, he explained, adding that he was not worried about the effect the result was having on the markets.

“The markets are independent and also a bit reckless,” he said. According to the Ansa news agency, he said: “Let’s be done with the spread. Let leave it.”

That spread has widened significantly today, following the fall in the value of Italian bonds (see 7.57am).

Why there is stalemate in Italy

The situation after yesterday’s elections is that the centre-left has, as expected, secured a majority in the lower house of parliament, or chamber.

But in the upper house, or Senate, it has just two seats more than the centre-right bloc led by Silvio Berlusconi’s Freedom People party.

Centre-left: 119 seats

Berlusconi’s alliance: 117 seats

Beppe Grillo’s Five Star Movement: 54 seats

Mario Monti’s centrist group: 18 seats

Thus total deadlock – as Grillo has previously said that Five Star will not work with other parties.

Updated at 9.37am GMT

9.12am GMT

What the City experts say

The Italian election results have knocked the wind right out of Europe’s austerity drive, City analysts are suggesting today. Here’s a round-up of early comment:

Kit Juckes of Société Générale:

The cognoscenti will be focusing on the fact that the Italian election was a clear anti-austerity protest by the people of the Euro Zone’s third-largest economy.

Austerity delivers an even higher debt levels as it induces perma-recession, so what’s the point?

Gary Jenkins of Swordfish Research

The election result is an embarrassment for Mario Monti, who managed to win around 10% of the vote in both houses, a triumphant return for Mr Berlusconi and a breakthrough for Beppe Grillo’s Five Star Movement. One can assume that Angela Merkel had to be served her dinner with plastic cutlery last night.

….the early indications are that Mr Grillo is still sticking to his pre-election promise that he would not enter into a coalition with either of the traditional parties. If he sticks to that line then it would appear to leave only some form of ‘Grand Coalition’ or new elections. One would imagine that the last thing that Mr Bersani would want is another set of elections because the momentum would appear to be with Mr Grillo.

Marc Ostwald of Monument Securities:

It would appear that another round of elections are inevitable [after] a victory for Mr Grillo, a resounding defeat for the establishment as represented by Berlusconi, Bersani and Monti.

Matt Basi, of CMC Markets:

Results from this weekend’s Italian election saw voters show firm opposition to austerity plans instigated by outgoing PM Mario Monti, in favour of a comedian and a tax evader with a scandal list that goes on longer than a Bunga Bunga party. Unsurprisingly, Italian treasuries are better offered this morning.

Updated at 9.22am GMT

8.51am GMT

Trading in several Italian banks was suspended as soon as the market opened, because investors were so desperate to sell, trader @finansakrobat explains:

8.40am GMT

Berlusconi hints at deal with centre-left

Political developments in Italy: Silvio Berlusconi has ruled out forming a coalition with Mario Monti, the technocratic PM who took power when Berlusconi was ousted in November 2011.

In a TV interview Berlusconi, whose centre-right coalition was narrowly defeated in the lower Italian parliament, said that all parties need to make sacrifices.

Asked if he’d be prepared to work with Pier Luigi’s centre-left Democratic Party, Berlusconi said:

Italy cannot be left ungoverned, we have to reflect.

Berlusconi conceded that the centre-left had won the battle in the lower house (last night his party had argued that the race was too close to call). He also argued that Monti’s weak performance showed that Italians would not accept his unpopular austerity measures.

Updated at 12.23pm GMT

8.29am GMT

Shares in Italy’s two biggest lenders are being hammered – Intesa San Paolo is down 10%, with UniCredit falling 8.8%.

Updated at 12.23pm GMT

8.21am GMT

There’s also a big selloff in Spain – where the IBEX index has fallen by 3%.

Updated at 8.21am GMT

8.19am GMT

Italian stock market tumbles

in Milan the Italian stock market is plunging – by much more than feared.

The FTSE MIB, made up of the biggest companies on the market, has fallen by 5% — shedding over 760 points (it took several nervous minutes before all shares were trading properly)

Yesterday afternoon the MIB actually spiked by 4% when the first exit polls emerged, suggesting a win for the centre-left coalition. The reality – a divided Senate with no clear way ahead – has sent investors fleeing.

8.11am GMT

FTSE 100 falls at start of trading

As feared, European stock markets are sliding at the start of trading.

The FTSE 100 has dived by 92 points, to nearly 1.5%, to 6262. Financial stocks are suffering, with Barclays shedding more than 5%

Here’s a chart of the biggest fallers:

The French market has been hit even harder by the chaos in Italy, down over 3%, while Germany’s DAX is down over 1%.

Updated at 8.11am GMT

8.02am GMT

Our latest news story from Italy is online here: Italy election sparks fresh fears for euro. Here’s a flavour:

Neither right nor left had an outright majority in the upper house, where the balance will be held by Beppe Grillo’s Five Star Movement (M5S). Grillo has ruled out supporting either side in his drive to sweep away Italy’s existing political parties and the cronyistic culture they support – a sentiment he appeared to reiterate after the count by insisting the M5S was not planning on “any stitch-ups, big or small” and lambasting Berlusconi’s voters for committing “a crime against the galaxy”

7.57am GMT

Italian and Spanish borrowing costs jump

Alarming moves in the bond markets too, where Italian government debt is being sold off sharply, dragging Spain down too.

The yield (or interest rate) on 10-year Italian bonds has jumped dramatically to 4.82%, from just 4.37% last night. That’s a truly dramatic move, and means traders are rushing to sell their Italian bonds.

Spanish 10-year bonds, another key benchmark, are now yielding more than 5.4%, from 5.1% last night.

It’s a picture we’ve seen before in the eurozone crisis, when fear grows over a peripheral country’s ability to repay their debts.

Updated at 10.31am GMT

7.49am GMT

Euro falling towards $1.30

The uncertainty in Italy has sent the euro reeling, now down by nearly 3 cents against the US dollar since the first predictions from Italy.

It just hit a low of $1.3034 – having received a thorough hoofing during Asian trading dominated by talk that the the eurozone’s economic plans were in deep trouble.

As Paul Bloxham, HSBC’s chief economist for Australia, told CNBC:

We’re now left in limbo and we don’t know what the election result means for the reform agenda and the policies Italy needs to implement. It’s not a helpful outcome at all.

Updated at 10.31am GMT

7.38am GMT

Markets expected to tumble

City traders are expecting big losses when trading begins.

IG is forecasting that the main Italian index, the FTSE MIB, will fall by over 400 points, or 2.5%. It also reckons the FTSE 100 will dive by 100 points in London.

Markets hate uncertainty, as Chris Weston, IG’s chief market strategist, explains:

We simply don’t know the state of play with Italian politics, and markets find sellers in times of instability.

The President will take centre stage now and either form a ‘grand coalition’, although this seems unlikely. It has been speculated that Mr Bersani may look to team up with Beppe Grillo’s Five Star movement (again unlikely), or ultimately fresh elections will be called down the track.

This is a story of anti-austerity and one where most hadn’t expected the anti-austerity / anti-European parties to do anywhere near as well as they have. The Italian voter has spoken out and this has thrown up political instability as perhaps the number one issue facing Europe in 2013.

7.15am GMT

Italian Senate split after shock election

Good morning. European financial markets are expected to tumble this morning after Italy’s general election left the country deadlocked

After a dramatic day in Italy, the centre-left group led by Pier Luigi Bersani has won a narrow victory in the lower house of parliament.

The Senate, though, appears to be deeply split with no party winning sufficient seats to control it.

And the really big shock for the European establishment is the success of the Five Star Movement, led by comedian Beppe Grillo. It has won more votes than any other party – a remarkable achievement, which shows deep anger in Italy against the political status quo.

But it was a bad night for Mario Monti, whose centrist pro-reform coalition was a distant fourth place – failing to win enough seats in the Senate to form a coalition with Bersani.

There is talk that a second election will be needed to break the deadlock, unless political leaders can somehow agree a workable coalition.

The euro has already fallen sharply in overnight trading, and traders are braced for a big sell-off when European stock markets open in one hour’s time.

Just when when politicians and financial markets have grown confident (some might say complacent) that the worst was over, the eurozone debt crisis has flared back into life.

We’ll be tracking all the developments through the day …

Updated at 10.30am GMT © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

European Commission now believes eurozone GDP will shrink by 0.3% this year. Italy goes to the polls this weekend in a general election that could sooth the eurozone, or inflame it. Anti-austerity Beppe Grillo ‘gaining support’ as election looms…

Powered by article titled “Eurozone crisis live: EC admits recession will be deeper than feared” was written by Graeme Wearden (7.45am-2.30pm) and Nick Fletcher (now), for on Friday 22nd February 2013 15.47 UTC

3.47pm GMT

Street newspaper to be launched in Athens next week

A street newspaper to be sold by homeless and unemployed people will be launched in Greece next week.

The paper, called Shedia (‘Raft’) will be sold in Athens and becomes the 122nd street paper to join the Glasgow-based International Network of Street Papers (INSP).

According to a press release, Shedia has recruited over 70 vendors ahead of the launch next Wednesday and will sign up more once it hits the streets.

Vendors buy the magazine for €1.50 and sell it for €3, keeping the proceeds. Chris Alefantis, founder of Shedia said:

Following years of preparations, the country’s only street paper is about to be launched. Fighting poverty and social exclusion is at the forefront of our campaign, particularly considering the desperate economic hardship that Greece and its people are currently faced with.

3.39pm GMT

Iberia staff protest airline’s planned job cuts

On the last day of the current five day strike by Iberia airline staff in Spain, there have been protests at airports in Madrid and Barcelona.

According to AP, several thousand protesters gathered inside the largest terminal of Madrid’s international airport, blowing whistles and air horns in a noisy demonstration against the airline’s 3,800 planned job cuts. In all the unions plan 15 days of strikes.

3.20pm GMT

Belgian business confidence improves

Business confidence in Belgium rose to a 10 month high in February, but was still in negative territory.

The index came in at -11 compared to -13.2 in January and expectations of around -12. The improvement came as manufacturers said they were increasingly positive about the outlook. The news follows the German Ifo index, which showed its biggest monthly rise since July 2010.

On the Belgian figures, Philippe Ledent at ING said:

After a very disappointing result in January, Belgian business confidence rebounded in February. In the manufacturing sector, which constitutes the biggest part of the index, confidence increased by 2.8 points, after a drop by the same amplitude last month. A healthier assessment of inventories and better confidence in future demand are driving this slight recovery. Confidence also increased in the service sector, for the second month in a row.

Even if the short term outlook remains quite subdued, today’s business confidence confirms that the Belgian economy is probably turning the corner. To be sure, full year growth is likely to remain limited in 2013, to the tune of 0.2%. But compared to last year (-0.2%), this has to be considered as good news.

3.09pm GMT

Italian bond auctions to provide early election reaction

One of the first indications as to how the markets view the Italian election outcome will come early next week as the country issues more bonds. Reuters reports:

Italy may have to pay a big premium to sell bonds next week if the market gets rattled by an indecisive election result that puts in doubt reforms needed to spur growth and cut the country’s debt.

A sale of inflation-protected bonds on Monday will be the first test of investor demand as Italians go to the polls to choose a new government that will have to deal with the country’s mammoth €2trn of public debt.

This will be followed up by an auction of an estimated €7bn of conventional bonds on Wednesday, expected to include a new 10-year benchmark paper. The Italian Treasury [is] the sole scheduled issuer in the euro zone primary market next week.

Markets are widely expecting the centre-left party of Pier Luigi Bersani to win the February 24-25 vote and rule in coalition with technocrat centrist Mario Monti, with a comeback by former Prime Minister Silvio Berlusconi – reviled by markets – largely dismissed.

This has kept Italian bond yields steady in recent weeks after an initial sell-off in early February, with benchmark 10-year debt yields within the 4.10%-4.75% range that has prevailed so far this year.

2.33pm GMT

Am scooting now, so Nick Fletcher will guide the blog into port. Have good weekends all (I’ll be in the office on Sunday, so expect I’ll be tweeting the latest Italian developments then too). GW

2.20pm GMT

Photos: Monti goes for youth vote at final rally

Italy’s outgoing premier, Mario Monti, has held his final pre-election rally in Florence today:

Can’t find a transcript yet, but Monti’s official Twitter feed has been tweeting various pledges, including several aimed at younger Italians:

Young people are paying for 20 years of inefficiency, so our priority is to create new jobs


Now that our public finances are no longer temporary, I promise to make the lives of our young people less precarious

Updated at 2.21pm GMT

2.05pm GMT

Reuters has just published an article warning that Italy’s next prime minister faces an extremely difficult task.

Here’s the first section (full story here):

Italy’s new government, after elections this weekend, must cut bureaucracy and taxes and reform an ineffective legal system if the shrinking economy is to be jolted back to life, businesses and foreign investors say.

Italians vote on Sunday and Monday for a successor to Mario Monti’s technocrat government whose austerity policies saved Italy from a Greek-style debt crisis but did nothing to pull it out of deep recession. Italy’s economy has contracted for six consecutive quarters, shrinking 2.2 percent last year, and companies say it is time to pull down the barriers that have hampered Italian businesses and put foreign investors off Italy for years.

“I would like a government that truly thinks about growth and that could bring Italy out of the quicksand,” said Massimo Scaccabarozzi, CEO of pharmaceutical company Janssen-Cilag SpA, a unit of Johnson & Johnson.

“It’s no secret that we are bottom of the list when it comes to ease of business.”

It also points out Italy ranks 73rd out of 183 countries as a place to do business, according to the World Bank index.

“The new government must simplify procedures, make the system more transparent and figure out how to cut labour costs,” said Fabio Gianisi, a Milan lawyer who advises Chinese and Russian investors with an interest in Italy.

1.43pm GMT

Europe’s stock markets have not been hit by this morning’s predictions of a deeper eurozone recession (10.09am onwards), or the latest talk of a hung Italian parliament (see 11.52am).

FTSE 100: up 49 points at 6340, + 0.78%

German DAX: up 85 points at 7668, + 1.13%

French CAC: up 72 points at 3697, +2%

Italian FTSE MIB: up 292 points at 16302, +1.8%

Spanish IBEX: up 137 points at 8151, + 1.7%

And in the bond market, Spanish and Italian sovereign debt has strengthened slightly. The yields on their 10-year bonds are down 4 basis points, or 0.04%, at 5.16% (Spain) and 4.43% (Italy).

1.03pm GMT

Pier Luigi Bersani, whose centre-left Democratic Party is most likely to win Italy’s general election, is pledging to push European leaders to rethink their approach to the crisis:

12.35pm GMT

Re-Define: Time for a Grand Bargain for the eurozone

Sony Kapoor, head of the Re-Define thinktank, says today’s warning of a deeper eurozone recession is the fault of European leaders for pursued “economically illiterate, socially destructive, self-defeating polices” since the financial crisis began:

This self-defeating policy must change, he argues. Here’s a flavour:

Instead of a more relaxed fiscal and monetary policy supporting the structural reforms that were necessary, as we have been suggesting for a long time now, the EU has followed a deeply flawed policy of fiscal contraction. This is the result of the application of a ‘small economy mentality’ that prevails in the German economic debate to what is the largest economic area in the world. The current economic policy betrays a level of macroeconomic illiteracy that is shocking for an otherwise well-educated policy-making elite.

Instead of on focussing on a 5-10 year strategy and a financially, politically and socially sustainable adjustment path for rebalancing, EU leaders have taken a very short-termist view of policy. At the same time that they rant against the short-termism of financial markets, their own policies have been even more myopic. What may be rational for a small country in the short-run, which is the policy lens they have used, will be self-defeating and irrational for the EU-wide economy over a longer horizon.

Re-Define argues that Europe’s leaders are failing their own test, of reducing fiscal deficits and stabilizing debt to GDP ratios, even if we ignore the ripping of the region’s social fabric.

Instead of the current policies Re-Define proposes a “grand political bargain”, which addresses the imbalances across the eurozone and creates a fairer balances between fiscal consolidation and growth:

What we need at this point is a grand political bargain, and that is one that only Mrs Merkel can offer. We will require a period of five to ten years of adjustment in the European economies which needs to happen both in deficit countries as well as surplus ones not suffering from the immediate crisis. During the course of this adjustment, financial support needs to be made available at reasonable cost to the economies to provide political and economic space for structural reforms and medium-term fiscal adjustment.

Without such a grand political bargain, which gives certainty, predictability and which puts us onto an economically, financially socially and politically sustainable path we are in deep-deep trouble. But such a bargain is not likely, at least not before the German elections. Let us see what happens after, but we are not holding our breath.

The full article is here.

11.53am GMT

Anecdotal evidence of Grillo’s impact on the race:

11.52am GMT

John Hooper: Beppe Grillo’s popularity is scaring Bersani, and bad for Monti

Back to Italy, and there are reports that Beppe Grillo’s radical Five Star movement is polling in second place, ahead of the Berlusconi-Northern League alliance.

Our Southern Europe editor, John Hooper, provides this punchy analysis of the general election campaign:

Pier Luigi Bersani this morning switched his attack to Beppe Grillo, and got personal. One of Grillo’s vulnerabilities as a paladin of the people is the considerable wealth he has amassed – a product of his successful career as a comedian.

“I’m the son of a mechanic, not abillionaire”, said Bersani.

His remark added substance to a report in Corriere della Sera this morning that Bersani’s aides are now thoroughly alarmed by Grillo’s progress in the final stages of the campaign.

Without quite saying so (because Italian publications are banned from carrying poll results in the last two weeks before the vote), Corriere indicated clearly that surveys conducted for the Democratic party showed Grillo’s Five Star Movement (M5S) overtaking Silvio Berlusconi’s Freedom People (PdL) movement to regain the second placeit held for a while early last summer.

Now, if you look here, you will see the rather more heavily disguised results of a poll carried out by a firm that has consistently favoured Berlusconi. It does not show Grillo in second place, but it does show him on 19%, which is a huge leap – of about six per cent – since the polling ban came into effect.

(As this Google translation may explain, they’ve pretended the election is a horse race – perhaps the losers will show up in UK supermarkets).

Back to Hoops:

That is bad enough for Bersani’s PD. But just as worryingly, there is mounting evidence from the same un-publishable polls that the alliance flung together by the outgoing prime minister, Mario Monti, is fading rapidly. That makes psephological sense.

Monti and Grillo both represent alternatives to the established
parties. Trend lines drawn through poll results by the Termometro Politico web site have been showing for some time that support for their two parties is inversely correlated.

If Monti and his pals were to take only 10% of the vote, say, we might well get either a hung parliament or a centre-left that could only pass legislation with more help than Monti can offer. Even if the radical left-wing alliance headed by a state prosecutor, Antonio Ingroia, can muster enough votes for a seat or two, that is going to mean going cap in hand to Grillo.

Updated at 12.04pm GMT

11.27am GMT

LTRO repayments are lower than expected

The European Central Bank has just spooked the markets by reporting that fewer banks than expected have taken the chance to repay ultra-cheap loans handed to them just over a year ago.

The ECB reported that 356 banks will hand back a total of €61.1bn of Long Term Refinancing Operation (LTRO) funding, sharply lower than the €130bn analysts had expected.

Banks didn’t have to hand back the money today – last month, though, the amount repaid early was much large than expected. That was taken as a sign that bankers were more optimistic about the situation. So what’s changed?…

Updated at 11.28am GMT

11.06am GMT

A quick chart of the European commission’s revised forecasts for 2013, from my colleague Nick Mead.

10.57am GMT

Here’s some early reaction to the EC’s predictions of a deeper eurozone recession:

10.40am GMT

And here’s our early news story on the EC’s forecasts: Eurozone economy to shrink again in 2013, EU says

10.34am GMT

This table compares today’s forecasts to the previous EC estimates (via Reuters)

10.26am GMT

The new EC forecasts

Bit hard to read, I’m afraid, but this table shows the EC’s new forecasts (you can see a clearer version on page 13 of this pdf)

10.18am GMT

EC: jobless crisis has grave social consequences

Marco Buti, the EC’s director general for Economic and Financial Affairs, warns in today’s Winter Forecasts that Europe’s unemployment crisis is deepening.

Buti wrote:

Employment is forecast to shrink further for some quarters, and unemployment remains unacceptably high in the EU as whole and even more so in the Member States facing the largest adjustment needs.

This has grave social consequences and will, if unemployment becomes structurally entrenched, also weigh on growth perspectives going forward.

The most recent data shows that the Eurozone unemployment rate is 11.7%.

10.11am GMT

See the Forecasts yourself

The EC’s new Winter Forecasts for 2012 to 2014 can be downloaded as a pdf here.

10.09am GMT

EC slashes growth forecasts

Breaking news: the European Commission has slashed its growth forecasts for the eurozone, and now believes the single currency region will not return to growth this year.

In its Winter Forecasts, the EC predicted that eurozone GDP would shrink by 0.3% during 2013, not manage the 0.1% growth pencilled in previously.

The EC warned that Europe’s unemployment crisis was a desperately serious problem.

It warned that Italy would shrink by 1% in 2013, not the 0.5% contraction it had expected. And for Cyprus, it now sees a 3.5% plunge in GDP, down from a 1.7% drop before.

Germany is expected to grow by just 0.5% this year, not 0.8%. While France will manage a measly 0.1% growth, not 0.4%.

More to follow!

9.57am GMT

In Germany, businesses are more confident

German business confidence has jumped this month, as Europe’s biggest economy shrugged off the suffering elsewhere in the eurozone.

The monthly IFO survey (which measures morale at 7,000 German firms), has risen to 107.4 for February, up from 104.3 in January.

That’s the biggest month-on-month rise since the summer of 2010.

Economists see it as another sign Germany has returned to growth after shrinking by 0.6% in the last three months of 2012. Extra information on that GDP decline was also released this morning – it showed that falling demand for exports knocked 0.8% off GDP, while domestic demand contributed 0.2% of growth.

9.29am GMT

Photos: The Grillo effect

Five-Star Movement leader Beppe Grillo held a rally in Viterbo, north of Rome, last night — and his supporters packed the place:

Grillo is the wildcard in the Italian election. He’s playing the game his own way — avoiding the usual round of TV interviews in favour of web campaigning and barn-storming rallies.

Grillo’s message is that the old politics is dead and must be chopped out, by a new wave of MPs untainted by sleaze and corruption. Alongside a euro referendum, he wants to give people more control over political decisions (allowing them to vote on whether a new road or hospital is built).

He also argues that Europe’s malaise is so great that radical measures – including rewriting all major Eu treaties – are needed.

Euronews has a decent explanation of Grillo’s policies here, concluding:

The comedian from Genoa is the figurehead leading a team of politically-untested candidates – and Italians have heard big promises so many times. Feeling terribly let down by the mainstream, many potential voters, undecided, seemed caught in the glare.

Bloomberg is unimpressed, warning in an editorial:

In his way, Grillo is a visionary, but he says Five Star won’t join any coalition government and he won’t serve in parliament. Instead, he promises to oppose and obstruct, and says his goal is to have enough legislators in parliament to topple the next government. If Grillo can suck enough votes away from other parties on Feb. 24-25, then he could make the formation of a stable government impossible from the outset, forcing new elections.

This would be a replay of the damage wrought by the upstart Syriza party in the first of Greece’s repeat elections last year. Think of the lost time and the instability that resulted, and then multiply that mayhem by eight to reflect the size of Italy’s economy.

The markets may not like it, but it’s called democracy.

8.55am GMT

Markets rise again

European stock markets are clawing back some of Thursday’s big losses, suggesting they’re not as nervous about Silvio Berlusconi romping to triumph this weekend.

FTSE 100: up 45 points at 6337, + 0.7%

German DAX: up 42 points at 7630, +0.6%

French CAC: up 38 points at 3662. +1%

Italian FTSE MIB: up 211 points at 16221, +1.3%

Spanish IBEX: up 109 points at 8123, + 1.35%

Yesterday’s selloff was triggered by the latest minutes from the US Federal Reserve, which showed concern over its quantitative easing programme.

Traders have now had more time to digest this, and concluded that there’s no risk of the Fed tightening policy soon.

As Chris Weston of IG explains:

We know there are hawks within the Fed’s ranks, many of them non-voters and what the minutes (as opposed to the actual FOMC statement) gives is a chance for non-voters to express their view….

while at the margin the minutes were hawkish there were still some clear dovish underlying themes that will see the Fed firmly in the market till the end of the year.

8.48am GMT

Italian election explainer

A quick run-through the details of the Italian election:

There are four groups fighting for votes in Italy.

1) The centre-left coalition led by the Democratic Party, and its leader Pier Luigi Bersani.

2) The alliance between People of Freedom, Silvio Berlusconi’s party, and The Northern League

3) Mario Monti’s centrist coalition — comprising MPs running under the Civic Choice with Monti for Italy banner, along with Christian Democrats Future, and Freedom for Italy./

4) The Five Star Movement — comedian Beppe Grillo’s group. He is winning popular support on a platform demanding fundamental changes on public water, transportation, development, internet availability, and the environment.

The far-left FARE party is also fielding candidates.

The political set-up

The parties are fighting for seats in the Chamber of Deputies (the lower house of parliament), and in the Senate (or upper house).

There are 630 MPs in the Chamber of Deputies, where Bersani is expected to win the most votes. The convoluted Italian political system ensures he’ll then get a majority of seats.

The Senate consists of 315 elected member. Here, the winning party in each region is guaranteed 55% of available seats, with the other parties sharing the remaining 45% of the seats based on voting share.

Given the Senate’s political power, the key question is whether Bersani wins an outright majority (158 seats), or can hit that total through an alliance with Mario Monti. This depends on the results of the four swing states – Lombardy, Campania, Sicily and Veneto.

Political commentator Alberto Nardelli reckons a centre-left majority can’t be ruled out, given “recent polling and trends in Lombardy and Sicily”.

Nardelli also predicts that Beppe Grillo’s Five Star Movement will come third with more than 15%, with Monti’s centrist coalition lagging behind.

8.14am GMT

Italian election looms

Good morning, and welcome to another day of rolling coverage of the latest developments in the eurozone, and the global economy.

Election fever is mounting as the Italian general election campaign enters its final couple of days. Voters head to the polls on Sunday, for a poll that has major implications for the whole eurozone.

If a clear winner emerges (most likely the centre-left group led by Pier Luigi Bersani), then Italy is likely to continue on the path of financial reforms and austerity set by Mario Monti – who could even join Bersani in a coalition.

But there’s a strong chance that the election will result in a divided parliament, leaving Italy’s next leader struggling to govern effectively.

With a ban on new opinion polls, speculation over the result is rife. Investors dread the prospect of a resurgent Silvio Berlusconi holding the balance of power, while analysts aren’t convinced that even a Bersani-Monti coalition could hold power for long.

As Eoin Ryan of IHS Global Insight puts it:

A surge in support for anti-austerity parties is raising chances of an indecisive election result and post-vote political instability.

Berlusconi’s breezy promise to eliminate Italy’s much-loathed new property tax has lured some floating voters back to his People of Freedom party.

There is also significant support for Beppe Grillo, the (professional) comedian whose radical manifesto includes a referendum on Italy’s eurozone membership. In the complex world of Italian electoral mathematics, a strong performance by Grillo’s Five-Star Movement could scupper Bersani’s hopes of winning enough seats to govern.

One thing is clear – it’s going to be fascinating to watch…. © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Berlusconi agrees coalition with Northern League and says he wants to be economy minister. John Hooper: deal could scupper centre-left. Stock markets fall. European Commission president Jose Manuel Barroso declares that the euro has been saved…

Powered by article titled “Eurozone crisis live: Silvio Berlusconi reaches Italian election deal” was written by Graeme Wearden, for on Monday 7th January 2013 14.29 UTC

2.29pm GMT

Round-up: Reaction to Berlusconi’s move

The Berlusconi-Northern League alliance is getting plenty of coverage today – here’s a round-up.

My colleague in Rome, Lizzy Davies, points out that Mario Monti has thrown himself into the election race:

Since declaring his intention to take part in the election in order to keep Italy on the road to fiscal discipline and economic recovery, Monti, 69, has abandoned much of his studiously apolitical image. He has engaged in multiple television and radio interviews and even a live Twitter Q&A session in which – to the dismay of some supporters – he used smiley emoticons and the thoroughly unprofessorial exclamation “wow!”.

He has also sharpened his criticism of Berlusconi, describing him as politically and personally volatile and drawing attention to the former prime minister’s often contradictory statements.

Bloomberg has the full quote from Berlusconi about his political ambitions, and it’s a peach:

“In Italy, the prime minister has no real power beyond setting the agenda for cabinet meetings,” Berlusconi said on RTL. “The position that seems to me would allow me to take advantage of all my experience would be finance minister, which would allow me to demonstrate once again that I have no political ambitions.”

AP points out that the relationship between Berlusconi and the Northern League has been pretty rocky:

While the Northern League has ruled in coalition with Berlusconi three times, the relationship has been rocky at best — with the League being behind the downfall of previous Berlusconi governments.

(although Silvio continues to blame his November 2011 ousting on an international plot to drive up Italy’s borrowing costs)…

And Reuters argues (like John Hooper at 10.27am) that the alliance could be rather bad news for left-leaning rivals:

By allying with the League in its northern strongholds, Berlusconi hopes to be able to stymie a centre-left government in parliament.

The League wants strict controls on immigration and favours giving more power and autonomy to Italy’s 20 regions. It wants more tax revenue to go directly to the regions, saying the rich north is picking up the tab for a south it brands as corrupt and economically backward.

1.12pm GMT

Back to Italy, and analysts reckon that Silvio Berlusconi’s new alliance with his old friends at the Northern League will prompt other parties into action

Silvio Peruzzo of Nomura has predicted new talks between the centre-left parties and Mario Monti, who is running at the head of a centrist coalition.

Peruzzo said (via Bloomberg):

The immediate consequence of the pact is that Monti’s negotiation power vis-a-vis the center-left has increased very dramatically…

It will certainly accelerate the dialog [between the two sides].

Meanwhile, some photos of Berlusconi announcing his new alliance this morning (on Italian radio) have arrived, showing the media mogul in good spirits.

12.53pm GMT

Political developments in Greece – the junior coalition partner Democratic Left has expelled two of its MPs today.

Odysseas Voudouris and Paris Moutsinas received their marching orders after supporting a move to extend a probe into the Lagarde List of potential tax evaders to include Evangelos Venizelos, former finance minister and current leader of the Pasok party (another coalition member).

Voudouris and Moutsinas have been on thin ice since last November when they disobeyed orders to abstain on the 2013 austerity budget and voted against it.

The move cuts the government’s majority in the 300-seat parliament to 164, down from 179 when the coalition was formed in June.

Updated at 1.14pm GMT

11.49am GMT

Barroso: Threat against the euro has been overcome

Just in – European Commission president Jose Manuel Barroso has declared that the euro has been saved.

Speaking in Lisbon this morning, Barroso argued that the worst of the eurozone crisis is behind us. He said:

I think we can say that the existential threat against the euro has essentially been overcome.

In 2013 the question won’t be if the euro will, or will not implode.

But is Barroso right?

His comments are more upbeat than Angela Merkel’s New Year message (she argued that the crisis ‘certainly wasn’t over’). And several analysts, such as Larry McDonald, argue that Europe is a long way from fixing itself:

Few analysts are predicting a euro break-up this year. Instead, a long grind is forecast. But in the long term, public anger could derail the eurozone – especially if economic conditions don’t improve.

As Gary Jenkins of Swordfish Research puts it:

Aside from Greece the risk is very much that the economic hardship continues in certain countries that lead to even higher levels of unemployment and eventually results in political change as continued austerity becomes unpalatable for the people.

So a slower burning risk which will only play itself out as the next couple of years develop.

Updated at 12.16pm GMT

10.55am GMT

Elsewhere in the eurozone… Greek prime minister Antonis Samaras is jetting to Berlin today for dinner with ECB president Mario Draghi, and then a meeting with Angela Merkel on Tuesday.

The two leaders will discuss recent developments in Greece, according to Merkel’s spokesman Steffen Seibert, who indicated that it will be a cordial event:

It is natural that we should take the opportunity to underline once again the progress that has been made in Greece in terms of structural reforms.

Update: We’re expecting statements from Merkel and Samaras at 10.30am GMT tomorrow, before they actually sit down. That may limit their usefulness….

Updated at 11.00am GMT

10.40am GMT

Silvio Berlusconi didn’t skimp on ceremony when he announced the deal with the Northern League this morning, declaring:

Habeamus papam

which is the term used when the Vatican has agreed on a new Pope.

That’s via the FT, which also flags up that the agreement was signed at 1.30am this morning.

Updated at 10.40am GMT

10.27am GMT

Analysis: Why Berlusconi’s Northern League deal really matters

Here’s Southern Europe editor John Hooper’s explanation of how the alliance between the People of Liberty Party and the Northern League could have a major impact on next month’s election:

To understand why Berlusconi’s pact with the Northern League is so important you need to start with the Italian constitution. Unlike Britain and France, Italy has a parliament in which the two chambers have equal powers. So, to govern Italy (if anyone can be said to have governed Italy!), you need a majority in BOTH houses.

In 2005, Berlusconi’s then government brought in a new electoral law that made it perfectly feasible for a party to win the popular vote and take control of the lower house, the Chamber of Deputies, but fail to get an outright majority in the Senate. The reason is that, in each region, the party topping the poll in the Senate vote gets a hefty bonus to give it 55% of the upper house seats in that region. So parties whose following is concentrated in a particular region (like
the Northern League) can achieve a disproportionate representation.

Then, as now (see below), the centre-left was ahead in the polls and it was an open secret that Berlusconi – acknowledging he could not win the election – wanted to lay a minefield for the likely victors. The centre-left did indeed win in 2006, but obtained only a razor-thin majority in the upper house and fell after two tumultuous years of knife-edge votes in the Senate.

At which point prime minister Romano Prodi left office to be replaced by…. (yup, you’ve guessed it).

John adds:

That – more than a Berlusconi victory – is the threat now. The
League’s votes should deliver him two of the most populous of Italy’s 20 regions, Lombardy and Veneto. Seventy three of the 315 seats in the next Senate will be decided in just those two constituencies.

10.05am GMT

Stock markets drop back

Europe’s three largest stock markets have fallen this morning, as has the euro:

FTSE 100: down 16 points at 6074, – 0.25%

German DAX: down 28 points at 7747, -0.4%

French CAC: down 14 points at 3716, -0.4%

Spanish IBEX: up 4 points at 8439, +0.04%

Italian FTSE MIB: down 26 points 16933, – 0.15%

It appears that the wave of optimism following the US fiscal cliff short-term fix has petered out, as traders face the fact that America’s debt problems are far from solved.

Peter O’Flanagan of Clear Currency commented:

Fiscal concerns are still likely to be a major issue for the next several months and despite coming to an agreement on smaller scale tax hike hikes, these will still pose as headwinds to economic growth.

9.33am GMT

Berlusconi: I’d rather be economy minister than PM

Silvio Berlusconi says he will be the “leader of moderates” in next month’s election, thanks to the alliance with the Northern League announced this morning (see 8.23am onwards).

However, he says he isn’t planning to be prime minister (hmmmm), suggesting his close ally Angelino Alfano was more likely to take the reins in the event of a right-wing triumph.

Speaking to Italian radio, Berlusconi added that he would prefer to serve as economy minister – news which rather tickled our Southern European editor, John Hooper:

Updated at 9.33am GMT

9.15am GMT

Latest Italian polling data

Opinion polling data released yesterday showed that Italy’s left-wing Democratic party (PD) is holding a solid lead.

However, Silvio Berlusconi’s PDL and Mario Monti’s new centrist coalition have both gained support.

IPSO reported that the PD is on track to win 32-33% of votes, rising to 38-39% when votes for its electoral allies are included.

PDL is polling at 17-19%, up from 13p-16% a month ago.

Mario Monti’s group have 14-15% of support, up from 10% a month ago (before Monti formally announced his plans).

IPSO also found that a Berlusconi-Northern League partnership could win 28% of the vote.

Updated at 9.23am GMT

8.49am GMT

Italian bond yields rise

Italian sovereign debt has fallen in value this morning.

The Italian 10-year bond has lost around 1%, pushing up its yield (the measure of borrowing costs) up to 4.322% (from 4.27% on Friday).

Not a big move, but perhaps a sign that Berlusconi’s new alliance is causing some concern:

Updated at 8.50am GMT

8.42am GMT

To reach this deal, Silvio Berlusconi has made peace with his former ally, Roberto Maroni, who leads the Northern League.

The two men had been allies in the same government, but fell out at the end of 2011 – Maroni was one of the ministers who publicly called for Berlusconi to step down.

So why have they kissed and made up? Well, both men have a lot to gain from the alliance. The Northern League’s support has fallen below the 8% level that determines whether a party wins a seat, so Maroni must hope the deal will help avoid a political wipeout.

But the talks haven’t been easy. As the Financial Times reports:

Mr Maroni has demanded that Mr Berlusconi give up his candidacy as prime minister and to guarantee that a large slice of tax revenues from the north remain there, rather than be diverted to subsidising the weaker south.

Mr Berlusconi, insisting that a deal could be reached, said in a television interview that he could even serve as foreign or finance minister in a future coalition with the Northern League, although few politicians take that possibility seriously.

Updated at 9.24am GMT

8.23am GMT

Silvio Berlusconi reaches coalition deal

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

Let’s start with some breaking news from Italy: Silvio Berlusconi has reached a deal with his former allies, the Northern League, in a move that may seriously undermine his centre-left rivals in next month’s general election.

Berlusconi’s PDL (People of Liberty) party and the Northern League will run as a coalition in February’s vote, competing together in the crucial seats in Northern Italy.

The two parties (and former coalition allies) reached the agreement following behind-the-scenes negotiations. By teaming up, PDL and the League won’t split the vote in northern regions such as Lombardy, increasing their chances of success and making it harder for the left-wing Democratic party to win there.

Political analysts believe the deal cuts the odds of Pier Luigi Bersani’s Democrats winning an overall majority – potentially destabilising the euro area.

Here’s some early reaction to the news:

With the Democratic party ahead in the polls, and technocratic PM Mario Monti also picking up support, next month’s election is going to be fascinating -– especially with Berlusconi determined to play a part.

I’ll be tracking reaction to the deal, and other developments, through the day …

Updated at 9.25am GMT © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Mario Monti “meeting potential allies” today. Berlusconi hits back at outgoing PM. More troubles for Spain’s Bankia as the bank’s shares tumbled by another 14% today. U.S. jobless claims drop more than forecast to the lowest level in four and a half years…

Powered by article titled “Eurozone crisis live: Monti and Berlusconi set for election battle” was written by Graeme Wearden, for on Thursday 27th December 2012 14.14 UTC

2.14pm GMT

Bankia shares tumble as investors face total wipeout

Shares in Spain’s Bankia have tumbled by another 14% today after it emerged that investors in the deeply troubled bank will be all-but wiped out.

Last night, Spain’s bank rescue fund revealed that Bankia has a negative valuation of €4.2bn. The price of recapitalising the group, it seems, is that its shareholders will see their stakes cut to virtually nothing.

The news is another bitter blow to hundreds of thousands of small shareholders who took part in Bankia’s floatation in the summer of 2011, and have already seen their investments shrivel (it was nationalised back in May after being brought down by its toxic debt mountain)

Bankia is receiving €18bn through the recapitalisation of the Spanish banking sector but as one source explained to Reuters:

Are we looking into leaving shareholders with something? Yes. How much? That’s too soon to say. Will it be very little? For sure…..

But that will be purely symbolic. I can assure you they will lose up to the shirt on their back.

Bankia shares lost another €0.093 to €0.59 today, having floated at €3.75 17 months ago. Shareholders may feel they lost their shirts some time ago….

Updated at 2.14pm GMT

1.42pm GMT

US jobless data beats forecasts

Amid a quiet day for economic news, the number of Americans signing on for unemployment benefit for the first time has fallen close to its lowest level in four and a half years.

The US labour department has just reported a weekly jobless claims total of 350,000, a drop of 12,000, suggesting that America’s economy is ending the year healthily. However, Reuters cautions against reading too much into the data – as the numbers for 19 states had to be ‘estimated’ because federal workers were on holiday…

1.04pm GMT

Photos: Medical staff protesting in Spain today

Protests have been taking place in Madrid today against the Spanish government’s plans to cut health spending, and proposals to privatise some public hospitals and health centres.

Medical staff again urged Spain’s politicians to ditch the plans, warning they will hurt patients by eroding the quality of care:

12.32pm GMT

Lagarde: Gerrmany should resist rapid fiscal consolidation

Looking through the European papers, Der Spiegel is reporting that Christine Lagarde fears Germany may hamper the eurozone recovery by imposing domestic spending cutbacks after autumn’s general election.

The head of the IMF has apparently warned that Germany should resist any major fiscal consolidation efforts until the euro periphery is stronger.

Here’s a taste:

Germany and other countries “can afford to move ahead with consolidation at a slower pace than others,” Lagarde said. “That serves to counteract the negative effects on growth that emanate from the cuts made in crisis countries.”

The comments follow a report – denied by Berlin – that the German finance ministry is preparing a programme of tax hikes and spending cuts for 2014 (even though Germany appears to be on track to hit its target of a balance budget early)

Updated at 1.05pm GMT

12.18pm GMT

The euro has been gaining ground in the currency markets this morning, up 0.4 of a cent against the US dollar now at $1.3265.

Stock markets also remain calm (see also 10.04am), while traders await a breakthrough in the US fiscal cliff talks.

As fund manager Arnaud Scarpaci of Montaigne Capital in Paris put it to Bloomberg:

If there isn’t an agreement tonight, we can start worrying. If there is an agreement, we can have a little rally.

Meanwhile the FTSE 250 (composed of mid-value companies) hit a new lifetime high this morning. It’s gained around 23% this year — underlining how share prices shrugged off the eurozone crisis and the general economic malaise.

Updated at 12.35pm GMT

11.25am GMT

Key event

Over in Greece, the saga of the “Lagarde List” of alleged tax evaders rumbles on.

Greek newspaper Kathimerini reported last night that government officials have collected a new copy of the list (which was originally handed to Athens in 2010 and then curiously mislaid) from the French government.

Prosecutors are now checking whether this new list matches the existing version (which was produced by former finance minister Evangelos Venizelos in October).

Some media outlets claim that the new copy contains hundreds of extra names - running to 2,500 potential tax dodgers, not the 2,000 or so on the Venizelos list.

One source told Kathimerini:

The lists are being crosschecked name by name, amount by amount and if any differences are found, political and judicial responsibilities will be sought.

10.42am GMT

Italian debt auction proceeds smoothly

The Italian government has successfully raised almost €12bn this morning, despite the country’s political uncertainty.

The Italian treasury sold €8.5bn of six-month bills at an average yield (interest rate) of 0.949%, up from 0.919% in November – and the highest borrowing rate since October.

It also sold €3.25bn of two-year bonds at lower yields – 1.884% compared with 1.923% last month.

With fewer bond traders around, the sale looks like a success:

Updated at 10.42am GMT

10.16am GMT

Bundesbank chief: Italy must stick with Monti’s reforms

Back to Italy, and the head of the Bundesbank has warned that investors would lose faith in the Italian government if the reform programme put underway by Mario Monti faltered.

Jens Weidmann, Germany’s top central banker, told business news magazine Wirtschaftswoche that it would be “disastrous” if the country’s targets were called into question by next February’s election:

Italy suffers from low growth, low productivity and lack of innovation. But under the Monti government, Italy has set ambitious goals for reform in order to regain the confidence of investors, and had success with it.

Weidmann added that central bankers were not “sweepers”, there to clean up the mess created by politicians.

He was also cautious about suggesting the worst of the eurozone crisis was over, saying:

We have progressed a long way, but we must not underestimate the distance ahead.

The full interview is online here.

10.04am GMT

The financial markets are calm this morning as traders return to work following the Christmas break.

The major European indices are slightly higher, despite the fiscal cliff deadlock (see 9.56am). Here’s the latest prices:

FTSE 100: up 13 points at 5967, + 0.2%

German DAX: up 15 points at 6751, + 0.2%

French CAC: up 23 points at 3675, + 0.6%

Spanish IBEX: up 4 points at 8303, + 0.05%

Italian FTSE MIB: up 83 points at 16415, + 0.5%

And earlier this morning, Japan’s Nikkei closed at a 21-month high.

9.56am GMT

Geithner warns US could breach debt ceiling

The other big news this morning is that negotiations over the US fiscal cliff have still not reached a conclusion.

With the deadline to reach a deal looming, US Treasury secretary Tim Geithner warned yesterday that “extraordinary measures” might be needed to prevent the US hitting its $16.4tn (£10.16tn) debt ceiling.

Geithner warned Congress that the uncertainty over America’s tax and spending policies for 2013 meant the country risked breaching its borrowing limits.

He said the Treasury could raise $200bn through “extraordinary measures” – but warned that it wasn’t clear how much time that would buy.

US president Barack Obama has now cut short his holiday in Hawaii, heading back to Washington late last night….

Here’s our full story from late last night: US Treasury warns of ‘extraordinary measures’ amid fiscal cliff deadlock

Updated at 9.57am GMT

9.37am GMT

Berlusconi blasts Monti

The battle has already escalated this morning — with SIlvio Berlusconi launching an attack against Mario Monti on Italian TV today.

Berlusconi told Rai 1′s Unomattinathat Monti’s government had been ‘crushed’ by pressure from the rest of the eurozone, and repeated his pledge to abolish a key property tax.

Linkiesta’s Fabrizio Goria has tweeted the key quotes:

This comes after Monti was notably scathing about Berlusconi on Sunday, telling reporters that he was “struggling trying to follow” the PDL leader’s thinking…

9.26am GMT

A quick recap….

In case you’re been distracted by Christmas, here’s how events have unfolded in Italy in the last few days:

• The election battle really got underway last Friday, when Mario Monti formally stepped down: Mario Monti resigns as prime minister of Italy.

• On Sunday, Monti declared that he would be prepared to lead a group of parties who backed his reform agenda: Mario Monti considers return as Italian prime minister

• That agenda – including economic reforms and fiscal responsibility – was launched online on Christmas Eve: Mario Monti announces reform agenda for Italy

Monti also appears to have joined Twitter, tweeting late on Christmas Day that:

Together we have saved Italy from disaster. Now politics is due for renewal. Complaining does not help, you must work. “Let’s go” in politics!

9.05am GMT

Good morning, and welcome back to our rolling coverage of the eurozone financial crisis – and other events across the world economy as we edge nearer to the end of 2012.

With Boxing Day behind us, a meaty scrap is underway in Italy. Having resigned as Italian prime minister, Mario Monti is holding negotiations that could see him stay on as PM after next February’s elections.

Monti is expected to meet with prospective coalition partners today to discuss electoral strategy, and ‘candidate lists’ for the upcoming election.

He published his agenda for Italy last weekend — the big question for Italy (and arguably the eurozone too) is whether he will rally enough support for a credible election bid.

The Financial Times believes Monti is gearing up for a clash with his predecessor, Silvio Berlusconi, reporting this morning that:

Italy’s centrist politicians are rallying behind Mario Monti’s offer to lead an alliance into elections in February, setting the stage for a confrontation with Silvio Berlusconi in his attempt to return to power.


His decision to seek a second stint as prime minister, while not yet official, could lead to an even more fragmented parliament than had been expected. It injects a fourth element into a battle between the centre-left Democrats, Mr Berlusconi’s centre-right People of Liberty and the anti-establishment Five Star Movement.

And Berlusconi’s party has already hit back, accusing Monti of mishandling the Italian economy over the last 13 months.

As PDL member Anna Maria Bernini put it:

It is shocking to see how a man can present himself as a saviour after bringing the country to recession, taking all the merit (for successes) and attributing all the disasters to others.

So it’s looking like a tasty battle, which will play a significant part in Europe’s fortunes in 2013.

I’ll be tracking the developments in Italy, and beyond, through the day….

Updated at 9.08am GMT © Guardian News & Media Limited 2010

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