Shares push higher after Putin press conference eases some of the tension in Ukraine. Relief rally seen on trading floors around the world. Interfax reports that some Russian troops have returned to base. Flooding hits UK housebuilding…


Powered by article titled “Stock markets rally as Ukraine crisis eases a little – business live” was written by Graeme Wearden, for on Tuesday 4th March 2014 14.26 UTC

On income inequality….

Just stumbled on an interesting blogpost on income inequality, on Columbia Management’s site.

It explains how the failure of lower-paid workers’ pay packets to keep pace with the 5% top earners was an important cause of the 2008 financial crisis, as it drove demand for (then-easy) credit.

You may have known that already. But this post also flags up another important point – the trend began earlier than many might think,with the wealthiest starting to claim an increasingly large slice of the pie from the mid-1980s onwards.

Marie Schofield, chief economist at Columbia, and Toby Nangle, head of multi asset allocation, write:

The roots of the great financial crisis and the slow post-recovery period can be traced to many factors, but a predominant one is the rise in income inequality.

What is not generally known is that this is not a new or recent development—income inequality for both wages and earnings in the U.S. (and other advanced economies) began to rise starting in the 1980s.

The income share of the top 5% in the U.S. income distribution was a fairly constant 20% from 1960 to 1980, with income gains for the top 5% and for the bottom 95% fairly close at near four percent annually. After 1980 the income share of the top 5% rose steadily in the U.S. lifting their income share to 35% by 2012.

Here’s their key points:

  • The rise in income inequality was a root cause of the U.S. financial crisis and the slow post-recovery period.
  • Mediocre income gains for middle income households have contributed to the slow recovery of U.S. consumption and economic growth.
  • As pressure continues to build to address income inequality, we expect the government to lead on this issue and private sector to lag.

More here: The role of income inequality


The US stock market is also tipped to rally around 1% when it opens, in around 20 minutes

Lunchtime round-up: Markets bounce back

World stock markets have bounced back after Russia took some steps to calm the crisis sparked by its military action in Ukraine.

Shares rallied in Moscow, and on European stock markets across the region — although the situation remains tense and fluid.

Scott Meech, co-head of European equities at Union Bancaire Privee (UBP), says:

“It’s still a very worrying situation but seems to have calmed down a bit. That’s why we’re seeing a bit of a recovery.”

The FTSE 100 gained over 100 points at one stage, clawing back all Monday’s losses. And the MICEX index jumped 5%, having tumbled 10% yesterday.

Short-term relief gushed through trading floors after the news broke this morning that the Kremlin had told troops on military exercises in Western Russia, near the Ukraine border, to return to their bases. This calmed fears that they could soon be sent into eastern Ukraine.

At a press conference, President Putin told reporters that his decision to send troops into Crimea would not provoke war.

Putin also said that former Ukranian president Yanukovych had no political future, and claimed that events in Kiev are unconstitutional. Highlights here.

The ruble has risen around 0.8% against the US dollar, to 36.1 ruble to the $1, having hit an alltime low of 36.5 yesterday night.

The recovery came after it emerged that Russian and Ukranian billionaires had lost almost $13bn in Monday’s selloff.

In other news…

Cyprus’s parliament has approved a privatisation plan, as part of its bailout.

Activity in Greece’s manufacturing sector has risen, but workers are still being laid off

Britain’s construction sector was hit by February’s floods, with house-building growth slowing last month.

EC commissioner Michel Barnier has criticised banks who are doing everything possible to avoid Brussels’ clampdown on bonuses.

REMINDER: Our liveblog on Ukraine is here.


Cyprus approves asset sale plan in second vote

Just in, the Cyprus parliament has approved plans to privatise its electricity operator, telecoms provider and port authority as demanded by its lenders, a week after failing to approve the package.

30 MPs voted in favour of the plan, with 26 voting against. It paves the way for future tranches of Cyprus’s bailout to be paid.

Last Thusday, MPs narrowly failed to approve the plan – as striking workers protested in Nicosia.

Reuters has more details:

Cyprus’s parliament approved a roadmap for privatisations on Tuesday, averting a showdown with international lenders insisting on state selloffs as part of a €10 euro ($13.77 billion) bailout.

In a show of hands, 30 lawmakers in the 56-member parliament endorsed a guideline for asset sales just before a deadline for approval expired on March 5.

Parliament’s rejection of an earlier privatisation motion on Feb. 27 risked derailing the bailout accord brokered with the European Union and International Monetary Fund in March 2013.

Democratic Party MPs, who had opposed the plan last week, changed sides and backed it today.

PhD student George Iordanou isn’t impressed:


Barnier: Some banks doing their utmost to dodge bonus rules

Over in Brussels, the EC Commission has issued a rebuke to banks who are trying to dodge its controls on bank bonuses.

Michel Barnier, the EU commissioner for the single market, said he was determined to enforce transparency over bankers pay. He made the comments as the Commission formally adopted curbs on bankers pay, limiting bonuses to 100% of basic salary or 200% if shareholders give their approval.

Last month, HSBC was criticised for giving senior staff new ‘allowances’, worth £32,000 a week to its CEO.

Barnier didn’t name names, but declared that Brussels remains committed to the new rules. He said:

Some banks are doing their utmost to circumvent remuneration rules.

The adoption of these technical standards is an important step towards ensuring that the capital requirement rules on remuneration are applied consistently across the EU. These standards will provide clarity on who new EU rules on bonuses actually apply to, which is key to preventing circumvention.

In addition, the European Banking Authority has a mandate to ensure consistent supervisory practices on remuneration rules among competent authorities. The Commission will remain vigilant to ensure that new rules are applied in full.”

Key event

Here’s our Russia correspondent Shaun Walker on the Putin press conference, which came a few hours after the Kremlin calmed the situation by saying some troops on active duty in Western Russia will return home.

Vladimir Putin is confident Russia‘s take over of the Crimean peninsula – where 16,000 pro-Russian troops are in control of the region’s security and administrative infrastructure – will not descend into war.

During a live address on Russian television, the president insisted that the armed forces of Russia and Ukraine were “brothers in arms”.

“We will not go to war with the Ukrainian people. If we do take military action, it will only be for the protection of the Ukrainian people,”said Putin, adding that there was no scenario in which Russian troops would fire “on women and children”.

The Russian president continued: “Ukraine is not only our closest neighbour it is our fraternal neighbour. Our armed forces are brothers in arms, friends. They know each other personally. I’m sure Ukrainian and Russian military will not be on different sides of the barricades but on the same side. Unity is happening now in the Ukraine, where not a single shot has been fired, except in occasional scuffles.”

Putin denied that the Russian-speaking soldiers occupying key Crimean military sites were Russian special forces, saying they pro-Russian local self-defence forces.

“There are many military uniforms. Go into any local shop and you can find one,” he said.

More here: Russian takeover of Crimea will not descend into war, says Vladimir Putin


The ruble is also gaining more strength, up 1.4% against the US dollar — to 36.08 rubles to the $1.


Putin also had an impact on the Moscow stock market. It has now recovered almost half of Monday’s losses — with the MICEX up over 5%.

So roughly speaking , close to 50% of the $58bn wiped off the value of Russia’s biggest companies has been added so far back today. Or around half a Sochi Olympics….

London stock market recovers all Monday’s losses

The FTSE 100 just hit its highest level of the day, up 105 points or 1.7% at 6813.

That means it has clawed back all Monday’s 101-point losses, and then a bit — as Vladimir Putin made his first press conference since the Crimea crisis began.

These news flashes appeared to be the catalyst for the triple-digit gains – calming concerns over Moscow’s plans.




Reminder – our Ukraine liveblog has full coverage of Putin’s press conference.

Shares are rallying higher as a relaxed-looking Vladimir Putin continues to defend his actions in Crimea (full coverage here).

The FTSE 100 now up 96 points — much higher and it will have recovered all yesterday’s losses (when it fell 101 points).

Putin: Market reaction is ‘temporary and tactical’ state of affairs

Vladimir Putin has described the turmoil in the financial markets as a tactical and temporary state of affairs, during his ongoing press conference on Ukraine (live on Sky News now, and streamed here).

The Russian president also tried to pin some of the blame for the volatility on America, saying that there was already a degree of nervousness in the markets due to certain US policies (ie, the slowing of the Federal Reserve’s huge stimulus programme).

As Haroon Siddique is covering in his liveblog (here), Putin also told reporters that the overthrow of former Ukrainian president Yanukovych is unconstitutional. He said:

The interim president is not legitimate. From the legal perspective it is Mr Yanukovych who is president.

He also planning to host the G8 summit in June – but Western leaders “don’t need to” come if they don’t want to.


Ukraine’s stock market is also surging today, up more than 7% with every share gaining ground.

The UAX had yesterday matched Moscow with an 11% tumble.

Russian market continues to rise

The Russian stock market has continued to romp ahead, with the MICEX up almost 4.5% now.

Airline group Aeroflot is up 6.4% on optimism that Russia will escape economic sanctions, and also reflecting the falling oil price (down around 1% this morning).

European markets are also buoyant.

  • FTSE 100: up 72 points at 6780, +1%
  • German DAX: up 84 points at 9443, +0.9%
  • French CAC: up 59 points at 4350, +1.4%

David Madden of IG reckons confidence has returned to the equity markets has been restored, as the stand off between Ukraine and Russia is no longer on red alert.

The prospect of war is dwindling as Russian troops have been recalled to their bases – but we are not out of the woods yet.

The drop in equity markets yesterday, and correction back today, highlights how volatile an issue this is. We may have pulled back most of yesterday’s losses but the rally is fragile.

Heads-up, Russian president Vladimir Putin is due to appear on TV shortly – it should be streamed here. (and covered in our Ukraine liveblog)

Back on the Ukraine crisis. Jamie McGeever of Reuters has tweeted a handy chart showing which countries are most dependent on Russia’s Gazprom.

10 countries, from Finland to Bulgaria, get at least 80% of their gas supplies from the company, it appears:

This may help explain by European leaders have been more cautious than Washington about hitting Moscow with tough sanctions (see today’s Guardian front page story)

Activity among Britain’s civil engineering firms jumped at the fastest pace since at least April 1997 last month, making it the best performing area of construction, Markit reported.

That suggests that while flooding was bad news for housebuilders (see here), it meant more work for builders who could handle large infrastructure projects.

Some UK building firms are also expecting a boost from the recent flooding, with pressure to avoid a repeat of the disruption suffered by thousands of families.

Markt reports:

Construction firms noted greater spending among local authorities on capital projects and maintenance, in some cases in response to recent flooding and adverse weather conditions.

UK construction sector hit by bad weather

Britain’s builders were hit by the heavy rain and flooding last month, but still recorded decent growth.

Markit’s UK construction PMI, which measures activity across the sector, fell back to 62.6 in February from from 64.6 in January (which was the highest since August 2007).

Any reading over 50 shows the sector expanded.

Building firms reported that the flooding which struck parts of the UK hit efforts to build new homes. House-building growth fell to a four-month low.

But in brighter news, job creation hit a three-month high.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said:

“Bad weather took a bite out of progress in house building, but UK construction remains on a strong growth trajectory in February.

The sector was fuelled by the strongest rise in civil engineering activity in the survey’s history, as an increase in spending was recorded on investment and infrastructure projects in response to recent flooding.

Even though both housing and commercial activity suffered a slide in pace of growth in February, the overall performance was one of continued expansion.


Greek factories still laying people off

Over to Greece, where the battered factory sector continues to shed staff despite a rise in business activity, according to Markit’s monthly healthcheck.

The Greek manufacturing PMI (based on interviews with purchasing managers) rose to a 66-month high of 51.3, up from 51.2 in January. That indicates another rise in activity.

But while new orders and output rose, employment continued to drop.

Markit warned:

The pace of job shedding was in fact slightly faster than one month before.

The survey found “anecdotal evidence” of increased demand for Greek manufactured goods from both the domestic market and foreign clients.

But it also reported that output prices fell at the fastest rate in four months, as deflation continues to grip Greece.

Follow our Ukraine liveblog here

My colleague Haroon Siddique is anchoring the Guardian’s Ukraine crisis liveblog again today – here:

Ukraine crisis: Shots fired at Crimea airbase – live updates

This graph shows how the Micex index (+3.4%) has only recovered a third of yesterday’s losses – meaning those Russian billionaires who lost $13bn on Monday have still shed a hefty chunk of wealth:


Today’s rally stock market rally underlines just short-term and reactive the financial markets can be, with news flashes and tweets swiftly pored over by investors and ‘black box’ trading machines.

As Kit Juckes, Societe Generale’s foreign exchange expert, puts:

Tensions in the Ukraine and Crimea have (temporarily) been eased. Russian troops have finished their ‘military exercise’ and financial market tension is melting away. And no, of course it’s not ‘all over’.

The economic fallout, notably in Russia, will be significant and building political stability in the Ukraine remains a huge challenge. But financial markets are short-sighted animals and everything is calmer.


Bloomberg has calculated that Russia and Ukraine’s billionaires saw $12.8bn wiped off their collective fortunes yesterday, as global stock market slid. (details here).

Stock markets bounce back in relief rally

European stock markets are bouncing back, following the Russian stock market higher on hopes that the Ukraine crisis may be easing a little.

News that Russian troops close to the Ukraine border will return to their camps by Friday sent the main indices bouncing back.

Investors are calculating that the risk of military conflict between the two countries had fallen.

The FTSE 100 index has leapt 80 points, or 1.2%, recovering most of yesterday’s 101-point slide.

Germany’s DAX, which is heavy with companies with large exposure to the Russian economy is up almost 1%. It tumbled 3.4% yesterday, in its biggest one-day slide since November 2011.

Spain, Italy and France are all up over 1%.

And in Moscow, the MICEX is almost 4% higher as traders rush to buy stocks, a day after battling to dump their portfolios.

The ruble is still also up 0.8% against the US dollar at 36.3 to the $.

Ishaq Siddiqi of ETX Capital says share are rallying because “global markets have been anxious that the mobilisation of Russian troops could mean something more serious.”

He added:

Market sentiment remains fragile and anxious at best with traders transfixed with developments in the Ukraine.

Russian troops began the military exercises almost a week ago, close to the country’s border with Ukraine. Their presence had stoked fears that that could be mobilised into pro-Russian areas of eastern Ukraine.

Bloomberg flags up that the exercises are ending ‘on schedule’, with the troops now expected back at their bases by this Friday, March 7.

Here’s Associated Press take on the latest developments in Ukraine:

Vladimir Putin ordered tens of thousands of Russian troops participating in military exercises near Ukraine’s border to return to their bases as U.S. Secretary of State John Kerry was on his way to Kiev.

Tensions remained high in the strategic Ukrainian peninsula of Crimea with troops loyal to Moscow fired warning shots at protesting Ukrainian soldiers.

It was not clear if Putin’s move was an attempt to heed the West’s call to de-escalate the crisis that has put Ukraine’s future on the line.

It came as Kerry was on his way to Kiev to meet with the new Ukrainian leadership that deposed a pro-Russian president, and has accused Moscow of a military invasion. The Kremlin, which does not recognize the new Ukrainian leadership, insists it made the move in order to protest millions of Russians living there.

AP’s full story is online here.


UPDATED: Oil is also falling, with Brent crude dropping almost 1.5% to $109.60 per barrel.


The gold price has dropped almost 1% this morning, down $11 per ounce at $1,338, having soared to a four-month high yesterday on the back of the Crimea crisis.

Russian MICEX claws back some losses

Good morning.

The Russian stock market is rallying this morning after yesterday’s torrid selloff, on reports that Vladimir Putin has instructed troops on military exercises in Western Russia, close to Ukraine, back to base.

Interfax reported early this morning that Putin had ordered “Russian military units and divisions involved with surprise drills to return to their permanent bases”.

There’s no specific reference to Crimea, though, after days of growing pressure on Moscow over the occupation of the peninsula over the weekend.

Stocks leapt in Moscow as the news broke. After spiking 5%, the MICEX index settled up around 3% — clawing back around a quarter of Monday’s heavy losses in which around $55bn was wiped off the market.

The ruble is also strengthening having hit record lows yesterday. It’s up around 0.8% at 36.2 rubles to the US dollar.

Oil and gold have also dropped in early trading, reflecting relief that the threat to the global economy could be easing.

The news comes as John Kerry, US secretary of state, heads to the Ukranian capital, Kiev, later today, as Western government’s debate how best to respond to Putin.

Here’s our latest Ukraine news story from last night: Ukraine crisis: US-Europe rifts on Russia surface

I’ll be tracking the latest development in the financial markets, the world economy, the eurozone and business through the day. © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.


Fears over emerging markets, the US economy, and the prospect of another debt ceiling battle in Washington all hit shares hard in Asia. UK construction activity jumps. Nikkei falls 4.2%. Wall Street opens a little higher after Monday’s rout…


Powered by article titled “UK construction sector hits 6.5 year high; Asian markets tumble – business live” was written by Graeme Wearden, for on Tuesday 4th February 2014 16.32 UTC

Haldane: EM turbulence caused by countries pushing ‘individual’ policies

Andy Haldane, one of the Bank of England’s brightest and most senior officials, has waded into the emerging markets turbulence by warning that certain countries are pursuing ‘individual’ policies rather than caring about the wider financial system.

In a speech delivered in Oxford this afternoon, Haldane said leaders and policymakers had failed to co-ordinate policies in a better way.

Reuters is there, and reports:

Turmoil in some emerging markets reflects a failure of advanced and developing economies to learn from the financial crisis and coordinate economic policies in a better way, a senior Bank of England official said on Tuesday.

“Individual countries act in their own best interests without taking into account the broader best interest of the financial system as a whole,” said Andy Haldane, the BoE’s executive director for financial stability.

“What is going on with the head-to-head combat is people pursuing policies of individual countries,” Haldane said in a speech at the University of Oxford.”What is at stake is the system as a whole,” he added.

The comments come just a few days after India’s central bank chief, Raghuram Rajan, said international monetary co-operation has broken down as the Federal Reserve tapered, or slowed, its bond-buying stimulus programme – despite the recent upheaval in emerging markets

Haldane’s comments are being interpreted as an nudge to the Federal Reserve too:

Look who’s back — Stephen Hester, the former chief executive of Royal Bank of Scotland, has just been appointed as the new CEO of insurance group RSA.

He’ll succeed Simon Lee, who quit in December as the insurer posted its third profit warning.

Running RSA will be a challenge, given the recent discovery of problems at its Irish division. But I guess it’ll be less hassle than cleaning up Fred Goodwin’s mess, being lambasted by the media over the Libor scandal and PPI misselling, and apologising for RBS’s tech problems.

Hester might even get to keep a few bonuses, having surrendered most of his during his time at RBS….

A couple more interesting points from George Osborne – asked whether the UK recovery is sustainable, he told the Lords economics committee that potential risks include “the weakness of some eurozone countries”, adding that some US economic data in the last couple of weeks has been “a little bit soft”.

The chancellor added that it’s “also worth having on one’s radar the problems in some emerging markets”, as a problem in an emerging market can cause ructions in other parts of the financial system.

Osborne also indicated he had little time for the ‘secular stagnation’ theory being pushed by former US Treasury secretary Larry Summers (with whom Osborne had an entertaining dust-up at Davos).


UK chancellor, George Osborne, is being questioned by the House of Lords economic affairs committee now — he’s started by telling their lordships that Britain is leading Europe on shale gas, and denying that the government isn’t showing leadership over the issue.

It’s being streamed live here.


Our politics liveblogger Andrew Sparrow is tracking all the action here: George Osborne questioned by Lords eocnomic affairs committee: Politics live blog

Here’s a flavour:

Q: If shale drilling takes off, will that have an impact on gas prices?

Osborne says he thinks it will have some impact. But it won’t be as dramatic in the US, he suggests. He says the gas market in the UK is more open, and so the gas price in the UK tracks the world price. But if the gas price overall came down, Britain would benefit.

Just in — US factory orders fell by 1.5% in December, which is actually a better result than expected.

The decline was mostly due to a big drop in transportation orders – strip that out and orders were up by 0.2%, which may calm fears of a US slowdown (although no promises!)

Shares moved a little higher on the news, with the FTSE 100 now up 8 points and the Dow Jones 60 points higher, or 0.4%.

Reuters correspondent Blaise Robinson reports that the emerging market wobbles have made some investors appreciate the virtues of good old Europe:

Over on Wall Street, shares are inching higher in early trading as investors try to put yesterday’s heavy selloff behind them.

The Dow Jones index is up 39 points at 15413, +0.3%, with the other indices also slightly higher.

Hardly a bounce-back, though after the biggest one-day fall in seven months — investors may be sitting tight having seen the Asian selloff earlier today, where the Nikkei slumped 4.2% and the Hang Seng fell over 2% into an official correction (10% off its recent peak).

New Microsoft boss takes Wilde swing

Microsoft’s new chief executive, Satya Nadella, wins instant brownie points by quoting Oscar Wilde (sort of), in his letter to staff this morning

Here’s a flavour:

What do we do next?

To paraphrase a quote from Oscar Wilde — we need to believe in the impossible and remove the improbable.

This starts with clarity of purpose and sense of mission that will lead us to imagine the impossible and deliver it. We need to prioritize innovation that is centered on our core value of empowering users and organizations to “do more.” We have picked a set of high-value activities as part of our One Microsoft strategy. And with every service and device launch going forward we need to bring more innovation to bear around these scenarios.

Next, every one of us needs to do our best work, lead and help drive cultural change. We sometimes underestimate what we each can do to make things happen and overestimate what others need to do to move us forward. We must change this.

Finally, I truly believe that each of us must find meaning in our work. The best work happens when you know that it’s not just work, but something that will improve other people’s lives. This is the opportunity that drives each of us at this company.

Many companies aspire to change the world. But very few have all the elements required: talent, resources, and perseverance. Microsoft has proven that it has all three in abundance. And as the new CEO, I can’t ask for a better foundation.


• – the actual Wilde quote is “Man can believe the impossible, but man can never believe the improbable” (see Collins Dictionary)….

….Not to be confused with Conan Doyle’s “Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth“.


Satya Nadella becomes Microsoft CEO

The long search for Microsoft’s next chief executive is over – with the software giant announcing that (as rumoured) Satya Nadella will take the helm.

Nadella had been running Microsoft’s cloud and enterprise computing division, and will succeed Steve Ballmer to become only the third CEO in the company’s history. In another switch, Bill Gates is shifting from the chairman’s role to become ‘technology advisor’ — meaning he’ll spend more time with the company’s staff.

Nadella faces a tough task, given Microsoft’s loss of influence as the technology world in the post-PC world.

In a video message, Gates said Nadella is the “tough leader” the company needs.

In it, Gates declares that “The opportunity for Microsoft is greater than ever before”, from making Office more interactive to perhaps building a new Cloud platform to connect to “all sorts of different devices”.

Speaking of the Anglo Irish Bank trial, here is a mural of the busted financial institution’s uncompleted HQ that never was, down in Dublin’s docklands.

The painting comes complete with images of the tapes that recorded some Anglo executives laughing, joking and even singing about how Irish and German taxpayers were going to rescue themselves and their bank from the abyss.

This anti-Anglo Irish Bank image close to the iconic Ha’penny Bridge on the river Liffey is a 15 minute stroll north towards the criminal courthouse where some of the other Anglo Irish executives stand trial tomorrow morning (from Sean O’Neil and Henry McDonald).

The price of Brent crude oil has dropped through the trading session, as this week’s disappointing US and Chinese manufacturing surveys suggested weaker demand for energy.

Brent is currently down 0.4 of a cent per barrel at $105.6.


BP sounds alarm on Scottish vote

After reporting falling profits this morning, BP has also waded into the issue of Scottish independence by warning that the issue raises “big uncertainties”.

Speaking to the BBC this morning, Bob Dudley said he was concerned by the “question mark” over whether an independent Scotland would keep the pound. He said:

“We have a lot of people in Scotland. We have a lot of investments in Scotland. My personal view is that Great Britain is great and it ought to stay together.”

Last week, Bank of England governor Mark Carney warned that an independent Scotland would have to give up some control over fiscal policies if it wanted to keep using sterling.


Over in Ireland, a petrol bomb attack was launched at the company once run by the country’s former richest man, Sean Quinn, last night – a day before the start of a huge trial into the collapse of Anglo Irish Bank.

The attack brought down telephone and broadband links around the headquarters in County Fermanagh, cutting of around 200 people (there’s a photo here).

Our Ireland correspondent, Henry McDonald, reports:

Ireland’s one-time richest man Sean Quinn is one of 800 people who is scheduled to give evidence in Dublin at one of the biggest financial crime trials in European history.

Ex-billionaire Quinn became bankrupt after borrowing billions from the now defunct Anglo Irish Bank when he started to play the global property casino.

Quinn’s gamble spectacularly backfired after the world property crash left him owing billions and resulted in him losing control of his other businesses.

The case against three senior Anglo Irish Bank executives begins on Wednesday morning at Dublin’s Central Criminal Court and could last up to six months (here’s our preview)

Ahead of what will eventually be a momentous day when Sean Quinn finally gets called to the witness box, the former tycoon has other worries today about his old business base in Co.Fermanagh.

Two petrol bombs were thrown close to the headquarters of the former Quinn family business on the Ballyconnell Road in Derrylin close to the border with the Irish Republic. The damage done last night has cut off phone and broadband coverage in the rural area where Quinn was once king.

The petrol bomb attack is the latest in a string of incidents where properties belonging to the Quinn family were damaged.

Last month, a bus was set on fire at the entrance to three of its businesses in Rakeelan, Ballyconnell, across the border in County Cavan.

In December, a fuel tanker was set on fire after being driven into the former headquarters of the Quinn Group in County Fermanagh, Northern Ireland. It was renamed Aventas last November.



Two small earth tremors in 2011 haven’t deterred shale gas firm Cuadrilla with pushing on with its fracking activities in the picturesque Lancashire countryside.

Cuadrilla announced this morning it would dig up to eight wells at two sites in the county – at Roseacre Wood, near Elswick, and to the west of the delightfully named village of Little Plumpton.

From our environment desk, Adam Vaughan reports that Cuadrilla is promising to be a good neighbour as it blasts the bedrock with high-pressure fluids to release gas.

However, Friends of the Earth’s north-west campaigner, Helen Rimmer, said:

“These plans will be met by stiff opposition from local people rightly concerned about having the UK’s first attempted multiple-well fracking operation under their feet.

Cuadrilla claims to be a good neighbour, but it still hasn’t cleared up the mess from the botched fracking operation that caused earth tremors only a few miles from one of the proposed sites.”


Here are the key quotes from the FCA’s Martin Wheatley to MPs this morning, on its investigation into allegations that foreign exchange rates have been rigged by traders:

“I would be surprised if we got to conclusions within this year. I hope that we will next year.

“We are still in the investigation phase … The allegations are every bit as bad as they have been with Libor,”

FCA: FX rigging ‘every bit as bad’ as Libor

Back in parliament the head of the City watchdog, Martin Wheatley, has told MPs that claims that foreign exchange traders collaborated to fix currency bench markets are just as serious as the Libor rate-rigging scandal.

Wheatley said the Financial Conduct Authority was taking allegation of FX benchmark-rigging very seriously, calling them “every bit as bad” as the Libor affair. He said the allegations had cast doubt on the reliability of foreign exchange rates, and also said the regulator is probing other benchmarks…..

However, he wouldn’t give clear details about how the FCA investigation was proceeding — and indicated we might not get results until 2015, or even later.



Many major banks have suspended foreign exchange traders since the news broke last autumn that the daily ‘fixes’ (which determine the official exchange rate between currencies) could have been manipulated.

HSBC and Citigroup both suspended traders last month.

After yesterday’s 326-point tumble, the Dow Jones industrial average is expected to stagger back off the mat with a small rise when trading resumes later today.

David Madden, market analyst at IG, says the Asian tumble and the prospect of another US debt ceiling fight continues to cast a shadow over the City.

Stocks are offside, but holding up relatively well considering the massive selloff in Japan overnight as fears over emerging-market exposure echoed around the world. Traders are treading lightly, not wanting to get stung if there is a sudden exodus from equities into cash or bonds.

The US debt-ceiling deadline is approaching again and, as on the past two occasions, dealers are anticipating downgrade speculation and a slide in stocks.

BP is still suffering from the Gulf of Mexico disaster, and the oil titan’s asset-stripping programme may be topping up the compensation pool but is it is taking its toll on production levels. Ocado’s deal with Morrisons helped to increase the former’s revenue, but was not enough to stop it delivering a loss for 2013.

The FTSE 100 is currently down 27 points, but there are deeper losses in Germany where the DAX has dropped 100 points, or 1.1%.

The Treasury Select Committee is grilling the Financial Conduct Authority’s John Griffith-Jones and Martin Wheatley about the regulator’s performance since taking over from the FSA. My colleague Sean Farrell is following events:

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.

FTSE 100 at 5-month low, UK 10-year bond yields hit 2.5%. Britain’s borrowing costs at their highest since October 2011. Greek reshuffle expected. Spain and Italy’s borrowing costs rise in early trading. Liquidity clampdown sent Chinese stocks reeling…


Powered by article titled “Stock markets fall and bond yields rise after China enters bear market territory – as it happened” was written by Graeme Wearden, for on Monday 24th June 2013 14.19 UTC

7.19pm BST

Closing summary

Time to stop for the day, after a session dominated by financial news (there was a dearth of eurozone political and social developments today, I'm afraid):

My colleagues Jill Treanor and Phillip Inman have filed a full report on today's market action. Here's a flavour:

Fears that the Federal Reserve is preparing to remove its stimulus from the US economy coupled with anxiety that China is being gripped by its own credit crunch sent jitters through global stock and bond markets.

The rout hit yields on UK government bonds – gilts – which hit their highest level since October 2011 in what analysts said was one of the most rapid moves ever witnessed on the market. Yields, which move inversely to price, on 10 year gilts have now risen a full percentage point to edge towards 2.6% in just two months, a rapid pace of change in the potential cost of government borrowing that could in turn increase the price at which companies and households borrow.

The FTSE 100, which only in May was testing all-time highs, lost another 70 points to sit just above 6,000 – a key level it only moved through at the start of 2013 – while the Dow Jones Industrial Index in the US suffered a 200 point loss in the first half an hour of trading. Commodity prices, such as copper, were also lower.

Yields on US government bonds, known as Treasuries, also hit two year highs as investors digested recent remarks by Fed chairman Ben Bernanke that he might begin to slow down the central bank’s bn monthly purchases of bonds which are being used to simulate the economy.

Governments in the eurozone, particularly the fragile economies of Spain and Italy, also faced their highest borrowing costs since May as yields rose on fears about the action of the Fed.

The full story is here: Fed fears and China credit crunch concerns send jitters through markets


• The closing European stock market prices are covered at 6.02pm

• The details of China's rout overnight, as its clampdown on shadow banking continues, are in the opening post

• And the latest bond yields are rounded up at 6.24pm

• Secret tapes have added weight to the theory that Anglo Irish bank deliberately misled the Dublin government when it sought financial help, as explained at 2.29pm

• Details of Silvio Berlusconi's conviction, jail term, and ban from public office start at 4.33pm onwards

• And don't miss Richard Fisher, head of the Dallas Federal Reserve, on 'feral hogs' and 'cold turkey' at 6.57pm.

I'll be back tomorrow. Until then, thanks and goodnight.

Updated at 7.19pm BST

6.57pm BST

Fed’s Fisher hogs limelight with turkey talk

Just time to flag up some remarkable quotes from a (non-voting) member of the Federal Reserve's Open Market Committee, Richard Fisher.

Speaking in London tonight, Bank of Dallas president Fisher backed withdrawing the Fed's stimulus package, in a gradual fashion.

Fisher (one of the Fed's more hawkish members) declared:

I'm not in favour of going from wild turkey to cold turkey over night.

But Fisher didn't stop there with the animal analogies. In an interview with the Financial Times he laid into the the “feral hogs” of financial markets, who he said were overreacting to the prospect of the Fed tapering its bond-buying.

The Fed won't be knocked off-course by a few days of turbulence, he insisted, as that would encourage speculators to wade in and try to force a u-turn. He's not forgotten the sight of George Soros 'breaking' the Bank of England over two decades ago.

Or, as Fisher put it:

My personal feeling is that you don’t walk up to a lion and flinch.


I don’t think anyone can break the Fed . . . . But I do believe that big money does organise itself somewhat like feral hogs. If they detect a weakness or a bad scent, they’ll go after it.

Full interview here: FOMC member warns off ‘feral hogs’ in markets

6.28pm BST

Our Wall Street correspondent, Dominic Rushe, sums up the action in New York so far: US stock markets fall sharply over Fed comments and China growth concerns

Here's a flavour:

Gus Faucher, senior economist with PNC Bank, said the US sell-off was an overreaction that was unlikely to continue.

"I think the fundamentals in the US are solid," he said. "The economy is continuing to expand, companies continue to add jobs, demand is holding up, profits continue to improve." The sell-off was probably a "necessary correction" after major gains in recent months, he said.

6.24pm BST

Bond yields rise across the board

The fact that Britain's borrowing costs hit a 20-month high today will probably get plenty of attention tonight and tomorrow. But it's really part of a broader theme today, with US Treasury yields rising again as the Fed prepares to slow its monetary easing.

And to address a point IfigEusLannuon raised this morning (in the comments), the difference, or 'spread', between different countries is increasing — showing that weaker countries are being seen as a proportionately bigger risk.

In particular, the spread between German yields and those of Spain and Italy have widened.

Here's the details of the key 10-year bond yields tonight:

• UK: 2.545%, up 13.8 basis points (ie, 0.138% higher than Friday)

• US: 2.599%, up 8bp

• Germany: 1.8%, up 8bp

• France: 2.449%, up 12bp

• Spain: 5.07%, up 18bp

• Italy: 4.82%, up 24bp

• Portugal: 6.848%, up 39bp

• Greece: 11.6%, up 32bp

(all yields are from Tradeweb, via Reuters)

US Treasuries are under the closest scrutiny (although Spain also merits attention at >5%). John Higgins of Capital Economics reckons that there's little danger of a 'bloodbath' in the Treasury market, given the Fed's strategy for slowing QE.

Higgins explains:

The central bank is poised to trim its purchases rather than halt them all of a sudden, and it could well step them up again to prevent any rise in yields that it considers “disorderly”.

Finally, and perhaps most importantly, we don’t expect the federal funds rate to be hiked for perhaps a year and a half or so after unconventional easing is first scaled back.

The upshot is that while the best days for Treasuries are probably now over, we think there is no need to hit the panic button.

Updated at 6.42pm BST

6.02pm BST

Markets close with shares in retreat

After another day of heavy selling, UK gilts have closed at their weakest point in 20 months and the FTSE 100 has closed at its lowest level since early January.

And that picture is mirrored across the markets, with all the major indices posting substantial losses and bond yields up — particularly in the eurozone periphery.

As I've been mentioning through the day, the turbulence is being blamed on two factors; fears that China is heading into liquidity crunch as its central bank squeezes shadow banks; and lingering worries about America's quantitative easing stimulus programme being slowed soon.

Here's a full round-up of the closing equity markets:

FTSE 100: down 87 points at 6029, -1.42%

German DAX: down 96 points at 7692, – 1.24%

French CAC: down 62 points at 3595, -1.71%

Spanish IBEX: down 147 points at 7553, -1.91%

Italian FTSE MIB: down 142 points at 15112, – 0.93%

There were only six risers on the FTSE 100, where the list of biggest losers included several mining giants (Vedanta, GlencoreXstrata, Anglo America and Rio Tinto).

FTSE 100 top fallers, close of trading, June 24
Photograph: Thomson Reuters

Michael Hewson of CMC Markets explained:

Fears of a continued cash squeeze in the Chinese banking system has seen European markets continue their soft tone on fears that a dislocation in the Chinese banking system will cause further downward revisions in forward expectations for Chinese growth over the coming months.

This uncertainty combined with rising apprehension over the pace of future asset purchases from the Federal Reserve has seen stock markets pick up where they left off last week and hit fresh lows for 2013, as investors mull over the twin impact of the removal of the unlimited free money that they have become used to over the last three years. It is probably more than anything else that motivated the weekend warning from the Bank of International Settlements that monetary policy was now reaching the limits of its effectiveness and as such central banks should focus on preparing their escape routes.

The biggest decliners have once again been the basic resource stocks as concerns over Chinese demand continue to bear down on the mining sector as it continues to hit fresh three year lows on virtually a weekly basis.

Updated at 6.03pm BST

4.53pm BST

President of the court Giulia Turri (C) reads the sentence for former Italian prime minister Silvio Berlusconi in Milan June 24, 2013.
President of the court, Giulia Turri (centre), reads the sentence for former Italian prime minister Silvio Berlusconi in Milan a few minutes ago. Photograph: ALESSANDRO GAROFALO/REUTERS

Here's Reuters' early story on Berlusconi's conviction this afternoon:

A Milan court sentenced former Italian prime minister Silvio Berlusconi on Monday to seven years in jail and banned him from public office after finding him guilty of paying for sex with a minor and abusing his powers of office to cover up the affair.

The verdict adds to mounting complications facing Prime Minister Enrico Letta, whose fragile left-right coalition government is supported by Berlusconi's centre-right People of Freedom (PDL) party.

Berlusconi was found guilty of paying for sex with former teenaged nightclub dancer Karima El Mahroug, better known under her stage name "Ruby the Heartstealer", during the now notorious "bunga bunga" sex parties at his palatial home near Milan.

The panel of three judges, all women, also found the 76 year-old former premier guilty of abuse of office by arranging to have her released from police custody when she was detained in a separate theft case.

Berlusconi will not have to serve any jail time unless the sentence is confirmed on appeal.

Updated at 5.00pm BST

4.45pm BST

Regarding Berlusconi's conviction and sentencing, this preview piece by Lizzy Davies sets out the background of the trial, and the role of nightclub dancer Karima el-Mahroug, or Ruby Rubacuori (Heartstealer).

4.33pm BST

Berlusconi sentenced to seven years and banned from office

Silvio Berlusconi verdict
Silvio Berlusconi verdict Photograph: /Sky News

Breaking news: Silvio Berlusconi has been sentenced to seven years in jail and banned from public office having been found guilty of paying for underage sex, and abuse of office.

The sentence, handed down in the last few moments, is actually more severe that the prosecution in the case dubbed Rubygate had sought.

However, the former PM is not being led down to the cells… instead the verdict will now go to an appeal.

Still, the decision of the three judges raises fresh concerns over the stability of Italys coalition, as Berlusconi's party could potentially withdraw their support for prime minister Enrico Letta.

Updated at 4.43pm BST

3.19pm BST

Wall Street has kept falling – with the Dow now down 220 points, or nearly 1.5%.

Marketwatch confirms that the prospect of a liquidity crunch in China is a big worry today, as much as the Fed's plans to slow its asset purchase scheme:

U.S. stocks are declining “due to the concern over the state of the Chinese economy and the implications for the rest of the world,” said Stephen Pope, managing partner at Spotlight Ideas, in an email

“I am convinced we have overdone the downside with regard to that [Federal Reserve] story, but now with China we have another excuse to trade with timidity.”

And here's confirmation that all the main markets are in the red again:

Stock markets, 3pm, 24th June 2013
Photograph: Thomson Reuters

2.49pm BST

Wall Street opens, and shares fall

Wall Street is open, and shares are falling in early trading, following today's losses in Europe and the China rout (see 1.13pm for the round-up).

The Dow Jones industrial average is down 160 points at 14638, or -1/1%, with similar falls on the S&P and the Nasdaq.

And with government bond yields still around their earlier highs, the other poing to flag up is that volatility (as tracked by the 'fear index, Vix) is up 11%:

2.29pm BST

The Anglo Irish Tapes

Irish Independent, June 24

The most remarkable story of the day comes from Ireland. Secret tapes released this morning give the clearest signal yet that senior bankers at Anglo Irish Bank deliberately tricked the Irish government into a rescue deal on 2008.

The recordings, released by the Irish Independent today, show John Bowe and Peter Fitzgerald discussing their request for €7bn of emergency funding to keep Anglo Irish running, once the financial crisis struck.

The final bill was €30bn, helping to precipitate Ireland's own bailout.

There have long been suspicions that Anglo's management knew the full scale of the crisis and hid it from the Dublin government, who fatefully decided to pick up the bill on the taxpayers' behalf.

Our correspondent in Ireland, Henry McDonald, explains:

On tape Fitzgerald asks Bowe how did he arrive at the figure of €7bn to which the latter replies: "Just as Drummer [the then Anglo Irish Bank CEO David Drumm now in exile and disgrace in Boston] would say, 'picked it out my arse.'"

The conversation also tends to back up the view that Anglo Irish bankers knew that €7bn would never be enough to save the bank but once they had hoodwinked the Dublin government the taxpayer would keep picking up the tab.

In their exchange Bowe says: "Yeah, and that number is seven, but the reality is that actually we need more than that. But you know the strategy here is you pull them in, you get them to write a big cheque and they have to keep, they have to have support their money, you know."

Here's Henry's full story: Irish bankers 'hoodwinked' government over bailout, secret recordings show

And you can listen to the recordings on the Irish Independent's site (the third recording, 'strategy', is the real humdinger).

1.55pm BST

On the subject of Britain's rising borrowing costs to a 20-month low, maverick Tory MP Douglas Carswell tweets:

The yield on UK 10-year bonds is a decent indication of how much it will cost George Osborne to sell new debt to service the deficit.

Last month, 10-year gilts were yielding just 1.6%. They've risen sharply since, but today's rise to 2.5% is still low on historic terms.

10-year gilts were yielding 5% in July 2008, shortly before the collapse of Lehman Brothers, as this graph shows:

UK 10-year bond yields, to June 24
Photograph: /Thomson Reuters

The big question, though, is how much will they rise in the month ahead? A return to higher bond yields might be welcomed as a sign that normality is returning to the markets, yet it could inflame the crisis by

1) forcing sizeable losses on investors who bought bonds when yields were at record lows (and thus prices at record highs).

2) pushing up sovereign borrowing costs – potentially a problem for countries running sizeable deficits (the UK is on track to borrow some £120bn this year, or around 7.4% of GDP).

Updated at 3.04pm BST

1.13pm BST

Markets hit new lows for the day

The selloff in Europe's stock markets is accelerating, with the FTSE 100 now down 85 points at 6030, its lowest level since early January.

And with bonds falling, Britain's borrowing costs are at their highest level since October 2011.

Other European markets are also falling deeper into the red, with Spain's IBEX and France's CAC both down by over 2%.

And Wall Street is also expected to join the selloff in a couple of hours, with the Dow Jones expected to shed 150 points as US traders react to China's tumbling stock market (as explained this morning, Chinese indices suffered their worst day's trading in nearly four years as the clampdown on its shadow banking sector continues).

Fawad Razaqzada, market strategist at GFT Markets, said China's liquidity squeeze came as investors were still digesting the prospect of the Federal Reserve winding down its stimulus programme.

Razaqzada explained:

Surging interbank lending rates in China are pointing to a liquidity squeeze and there's little apparent sign of intervention by government to ease the situation.

As a result the Shanghai composite is off by over 5% and markets elsewhere in the region are telling a similar tale…

This does mean that just as traders were coming to terms with the end of QE, there's another significant factor they need to be pricing into the market, too.

And that 'pricing in' process has seen government bonds under the cosh again, as nerves stalk the trading floors

Prices are falling across the board and driving up interest rates — both for riskier eurozone members and 'safe-haven' countries such as the US.

UK gilts are falling in line with the market, which pushes Britain's borrowing cost to a 20-month high of 2.55% (for 10-years).

Here's the latest 10-year bond yields (the classic measure of borrowing costs):

Spain: 5.03%, up 14 basis points (14bp) [from 4.89% on Friday]

Italy: 4.79%, up 20bp

Greece: 11.62%, up 30bp

US: 2.63%, up 12bp

UK: 2.55%, up 14bp

France: 2.53%, up 20bp

Germany: 1.82%, up 10bp

Here's a selection of instant reaction:

Updated at 1.27pm BST

12.34pm BST

ERT sit-in continues

People gather outside the ERT office to show their support, on 24 June.
People gather outside the ERT office to show their support earlier today. Photograph: Nikolas Georgiou/Demotix/Corbis

Also in Greece, employees of its ERT state broadcaster are continuing their sit-in at its Athens HQ.

Despite repeated demands for them to exit the building, the occuption is entering its 14th day, with increasingly weary-looking staff continuing to broadcast.

The Greek finance ministry called on workers to leave "to allow for the unhindered and immediate implementation" of the Council of State's decision last (that a limited service should be restored, but ERT should still close).

A giant monitor in the courtyard displays an ERT broadcast.
A giant monitor in the courtyard outside ERT’s headquarters displays an ERT broadcast. Photograph: Nikolas Georgiou/Demotix/Corbis

12.17pm BST

Greek reshuffle on cards today

Greece's Prime Minister's Antonis Samaras leaving his office in Athens June 24, 2013
Greece’s prime minister’s Antonis Samaras leaving his office in Athens this morning. Photograph: JOHN KOLESIDIS/REUTERS

Over in Greece, the two parties which still make up the country's coalition are discussing a cabinet reshuffle today.

Following the exit of Democratic Left on Friday, prime minister Antonis Samaras and Evangelos Venizeloz of Pasok must now reshape their government.

Kathimerini has mopped up the latest chatter, including the suggestion that Venizelos might become foreign minister (our correspondent Helena Smith explained last week that the Pasok leader wanted his party to have more prominence in the government:

Here's the latest:

According to sources, the ratio of New Democracy to PASOK ministers in the new cabinet will be 2:1.

There were rumors that Venizelos may assume the post of foreign minister, currently held by Dimitris Avramopoulos, as well as the position of deputy prime minister. Among those expected to keep their posts are Development Minister Costis Hatzidakis, Public Order Minister Nikos Dendias, Tourism Minister Olga Kefaloyianni and Education Minister Constantinos Arvanitopoulos. Finance Minister Yannis Stournaras is also expected to remain in place.

There's no immediate risk of the government collapsing. Samaras still controls 153 of the 300 seats in parliament, and Dem. Left could still support him in key votes despite quitting the coalition.

11.52am BST

The copper price has dropped to a new three-year low this morning.

Fears over China's slowing economy are being blamed, along with the US dollar strengthening again as investors pull money out of bonds and shares.

Having fallen last week, copper dropped again this morning to as low as ,613. China mops up around 40% of world copper output, so the new push against risky lending in its shadow banking sector is also hitting the metal.

From the WSJ:

“The outlook for Chinese demand in the short term is negative,” Phillip Futures Investment Analyst Joyce Liu said, adding that tight liquidity will mean higher costs for companies importing copper into China.

11.00am BST

FTSE 100, the details

Here's a graph showing how the FTSE 100 has now shed all its gains through the year after today's drop, and a list of the top fallers on the index.

FTSE 100 over the last year, to June 24
Photograph: Thomson Reuters
FTSE 100 top fallers, June 24
Photograph: Thomson Reuters

10.13am BST

FTSE hits five-month low as Chinese bear market looms

The FTSE 100 index of leading shares has dropped to its lowest level since January, as the slump in China's stock market overnight hits Europe's stock markets.

After a slow start, the main European indices are all falling again, adding to last week's hefty losses. The Footsie fell as low as 6057, a drop of 58 points. Spain's IBEX is the worse performer, down 1.5%.

The Chinese benchmark index, the CSI 300, is now in a 'bear market' — its 6.3% tumble this morning means its more than 20% off its peak.

The China selloff (sparked by the clampdown on its shadow banking - see 8.39am) and the Federal Reserve's plan to turn the stimulus tap down are proving a nasty cocktail for the markets.

Mike van Dulken, head of research at Accendo Markets, said the worries over the Fed were being "compounded" by the liquidity sqeeze in China and fears over its domestic economy, adding:

One thing this sell-off has demonstrated is how much more quickly markets tend to correct, even after a sharp ascent like that from mid-April.

Commodity prices are also slding again, pushing the price of a barrel of Brent crude oil below 0/barrel. Gold is also down again, losing another to ,281 per ounce.

There's no real let-up in the market gloom — as Aurelija Augulyte of Nordea Markets points out:

9.40am BST

Encouraging economic data from Germany – where business morale has risen for the second month in a row.

The IFO index rose to 105.9, from 105.7 in May, with German companies saying they are more confident of an economic revival later this year. No signs of full-blown euphoria, just a steady improvement in business confidence.

The recent huge flooding in parts of Germany also didn't cause any alarm, it seems.

Dr Jörg Zeuner of KFW summed it up:

Companies remained confident in June and continue to expect a good domestic economy. The devastating floods in Southern and Eastern Germany hardly influenced this outlook.

That's a good signal and confirms our expectations of a moderate economic revival in the second half. Risks in the international environment continue, such as recently the fierce reaction of investors to the monetary policy comments from the U.S. central bank.

9.26am BST

Kit Juckes, Société Générale's top currency expert, reckons that the US Federal Reserve may attempt to stop the government bond selloff in the next few days – having lit the touchpaper last week.

He writes:

At some pont this week (and I'm betting it is before Wednesday evening), the Fed will make sufficiently clear its concerns about market turmoil to stop the relentless rise in Treasury yields.

Of course, now that the genie has been let out of the bottle and the great big carry bubble has been burst, we won't go back to the halcyon days before taper entered the dictionary, but we will get a little bit of relief.

9.09am BST

Verdict expected in Silvio Berlusconi’s underage sex trial

Over in Milan, the underage sex case brought against Silvio Berlusconi is about to be resolved — in a development that could have serious political implications.

The judges hearing the case against the former Italian prime minister, who still has considerable political influence, just retired to consider their verdict.

The allegations against Berlusconi revolve around 'Ruby the heart stealer', a nightclub dancer. If convicted, the two-time PM could be jailed for four years.

Italy's treacle-slow political system means that Berlusconi would not be immediately incarcerated even if found guilty — he could make two appeals first.

But as my colleague Lizzy Davies explains, the case has a political dimension – especially given Berlusconi's other legal problems:

There are concerns…that the real effect of a guilty verdict could be on the country's unstable political landscape and Enrico Letta's government, which almost every day sees fresh bickering between Berlusconi's People of Freedom party (PdL) and the centre-left Democratic party (PD).

For the moment, Berlusconi is insisting that he supports the government regardless of his legal problems. But there is anger among the ranks of the PdL, and some party figures would like to see their leader withdraw support from the coalition if his "persecution" by the courts continues – a move that would trigger fresh elections.

Walston said the risk of immediate political instability as a result of the Ruby trial was small. A far bigger concern for Berlusconi and his allies is a tax fraud case in which he has already exhausted one appeal and is approaching a definitive ruling by the court of cassation, Italy's supreme court.

If that conviction is upheld, a four-year jail sentence – and, crucially, a five-year ban on public office – would come into force.

Here's Lizzy's full story on the case: Silvio Berlusconi's underage sex trial verdict expected

8.54am BST

UK gilt yields also up

Britain's government debt is also falling this morning, pushing up the yield on UK gilts. The 10-year version is now trading at a yield (interest rate) of 2.45%.

It's a small move – up from 2.41% on Friday night. But the yield has been climbing higher for the last seven weeks – at the start of May, 10-year gilts were yielding just 1.62%….

Updated at 8.54am BST

8.43am BST

Another sign of jitters this morning — the Euro STOXX 50 Volatility index has hit a four-month high in early trading.

8.39am BST

China’s stock market routed by liquidity fears

China's CSI 300 market, to June 24
China’s CSI 300 market over the last 3 months, which has tumbled as fears over its shadow banking sector grew. Photograph: /Thomson Reuters

China's stock market has suffered its biggest daily fall in almost four years, as the crackdown on its shadow banking system continues.

The benchmark CSI300 index slumped by 6.3%, its biggest daily fall since 31 August 2009. Financial stocks were particularly badly hit.

Stocks tumbled after China's central bank signalled that its crackdown on the country's shadow banking sector would continue, fanning fears of a credit crunch.

The People's Bank of China stated this morning that liquidity in the country's financial system was "reasonable" — which was taken a signal that it would maintain the liquidity squeeze that began last week.

PBOC also declared that China's commercial banks need to 'improve' the way they manage liquidity and control risks. In other words — help us stabilise the market by cleaning up your balance sheets.

The PBOC appears to be determined to clamp down on riskier areas of banking, such as underground lending and speculation, which increase leverage in the Chinese financial market – at a time when the wider economy is strugglng.

Reuters has more details:

"It's much easier to borrow money today, but costs remain high. Our business is apparently affected, but mainly on side business, such as wealth management," said a trader at a mid-sized commercial bank in Shanghai.

"Maybe this is what the central bank hopes as the government is calling for more money to be used for real economy."

On a positive note – the interest rate China's banks charge to lend money to each other fell this morning.

8.16am BST

As this graph shows, Spain's borrowing costs hit a near three-month high this morning, but are still lower than a year ago when a bailout looks likely:

Spanish 10-year bond yields, over the last two years. Photograph; Thomsen Reuters
Spanish 10-year bond yield, over the last two years. Photograph; Thomsen Reuters

Updated at 8.16am BST

8.00am BST

Bond yields on the rise again

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

The government bond sell-off which began last week continues in earnest this Monday morning, putting renewed presure on Spain and Italy

Sovereign debt is falling across the board in early trading, pushing up the borrowing costs of countries around the world. And some of the eurozone's weaker members are being hit hard.

As I type, Spain's 10-year bond yield just hit 5% for the first time since the start of April, up from 4.88% on Friday. Italy's debt is also being pummelled, driving its 10-year yield up to 4.71% (from 4.58%).

These bond yields are still some distance away from the danger zone (typically 7% is seen as the level where countries risk being locked out of the markets).

But the speed of the reversal is a concern, as the markets remain spooked by the prospect of the US Federal Reserve withdrawing its stimulus measures.

It looks like we're in for a rough ride for a while. As Ian WIlliams of Peel Hunt put it:

The transition towards a more growth-driven phase of market performance is likely to remain bumpy though the summer as the long awaited improvement in corporate earnings has been slow to emerge.

US Treasuries (America's government debt) is also sliding again this morning, pushing up its own 10-year bond yields by another 10 basis points (0.1%) to 2.61%.

Meanwhile, over in China, fears over the ongoing liquidity squeeze in its banking system have sent its stock markets tumbling, in their biggest daily fall in four years (more on this shortly).

Plenty to watch in the markets today…..

While in the political sphere, I'll be monitoring events in Athens where the ruling coalition is down to just two parties after Democratic Left quit the government last Friday….

Updated at 8.14am BST © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Bundesbank warning over slipping deficit targets. Vodafone: ‘Severe’ economic weakness in Southern Europe. Parliamentary Committee approves plan to bail-in large depositors. UK inflation falls more than expected to 2.4% y/y in April from 2.8%…


Powered by article titled “Eurozone crisis as it happened: Italian PM warns EU could ‘implode’ without action on growth and jobs” was written by Graeme Wearden and Nick Fletcher, for on Tuesday 21st May 2013 17.21 UTC

6.21pm BST

Protests over Papandreou’s talk on Greek crisis

Over in Greece, there is much ado over former prime minister George Papandreou giving a talk on the crisis that has rocked the country at an upcoming Ted X convention in Edinburgh. Helena Smith in Athens says:

On hearing of the politician’s participation in a panel entitled “moments of truth,” outraged Greeks (for although they are anonymous that is what the protestors are presumed to be) immediately launched a protest campaign that has already drawn thousands of signatories. 

“George Papandreou lead Greece into the embrace of the IMF … and [with it] into a deep humanitarian crisis,” said the protestors in a statement that referred to the galloping unemployment, poverty and unprecedented number of suicides that stewardship under the IMF has also unleashed. “At the same time Papandreou continues to support the neo-liberal policies that drove the country to its present plight while he travels in luxury around the world giving lectures on the lessons he has learned from the Greek crisis.”

This is not the first time that Papandreou has been openly criticised for capitalising on the crisis – the politician’s decision give a course about his experience at Harvard university’s JFK school last year sparked similar anger. But it is the first time that protestors have taken to the internet to vent their spleen – with the pressure now mounting (2824 signatures had been gathered by this afternoon) it remains to be seen whether he will be forced to pull out of the conference.

Chief executive of Russian energy company Gazprom, Alexey Miller (L), leaves the Maximos mansion after a meeting with Greek prime minister Antonis Samaras. Photograph: EPA/Alexandros Vlachos
Chief executive of Russian energy company Gazprom, Alexey Miller (L), leaves the Maximos mansion after a meeting with Greek prime minister Antonis Samaras. Photograph: EPA/Alexandros Vlachos

Meanwhile Papandreou's arch rival — Greece's current prime minister Antonis Samaras, has spent the afternoon in talks with the head of Gazprom as the country attempts to expedite it’s much-delayed privatisation drive. 

This is the third time since March that Gazprom chief Alexei Miller has flown into Athens for talks. The Russians have made no secret of the fact that they want to buy Despa, the Greek natural gas company long seen as a jewel in the crown of Greece’s privatisation program which protestors say is yet another humiliation the country is being forced to endure as a result of IMF intervention.

And on that note, it's time to close up for the day. Thanks for all the comments, and we'll be back tomorrow.

5.13pm BST

European markets end on strong note

European markets made a positive finish to the day, boosted by comments from Federal Reserve member James Bullard suggesting there would not be an early end to the central bank's bond buying programme.

The FTSE 100 finished up 48.24 points at 6803.87, its highest finish since its record close on 30 December 1999

• Germany's Dax rose 0.19% to 8472.2, reversing an early fall

• France's Cac closed 0.33% higher at 4036.18

• But Italy's FTSE MIB fell 0.45% although it was well off its lows

• Spain's Ibex ended 0.6% lower

The Dow Jones Industrial Average is currently 48 points or 0.32% higher.

4.36pm BST

Fed’s Bullard says bond buying should continue

Recent comments from US Federal Reserve members seemed to suggest a tapering off of its bond buying programme.

But James Bullard, president of St Louis Federal Reserve Bank, said the centrel bank should keep buying bonds, while adjusting the pace depending on economic conditions.

And in a speech to the Goethe University in Frankfurt, he said the ECB should consider asset purchases if inflation fell further. He said, as reported by Reuters:

Quantitative easing is closest to standard monetary policy [once interest rates get near zero], involves clear action and has been effective.

3.23pm BST

Germany and Spain agree deal to combat youth unemployment

Still with unemployment, one of the biggest issues facing the eurozone (and indeed elsewhere), Germany has agreed a deal to help reduce youth unemployment in Spain.

Under the terms of the agreement between the two countries, Germany will create 5,000 jobs a year for young Spanish workers. El Pais reports:

A memorandum of understanding in this area was signed Tuesday in Madrid by Spanish Labor Minister Fátima Báñez and her German counterpart Ursula Von der Leyen. It includes work combined with professional training and stable posts for qualified workers.

Báñez welcomed Germany’s “commitment” toward helping young Spaniards, adding that the accord would provide “many opportunities for many young Spanish people which today, because of the crisis they do not have in Spain, and which, however, they can have in other European Union countries on a temporary basis.”

The accord calls for the interchange of workers and cooperation in the area of labor affairs. There are currently 43,548 Spaniards affiliated with the German Social Security system, and 37,797 Germans in the Spanish system.

Both countries also agreed to work together on initiatives at the EU level to reduce youth unemployment. “This cooperation between Spain and Germany will very soon show itself in additional joint measures that will make a better life for our young people possible,” the two countries said in a statement

3.19pm BST

Samaras hopes to attract outside investment to tackle jobless crisis

Greek prime minister Antonis Samara said his recent trips to China and Azerbaijan would help attract outside investment into the country and combat its chronic unemployment problem.

According to a report by ekathimerini, Samaras said after a meeting with Greek president Karolos Papoulias in Athens:

We have consolidated Greece’s position in Europe and now we are consolidating it on a global level.

He said unemployment, which reached a record 27% in February was “the country’s biggest problem.”

Greek prime minister Antonis Samaras after his meeting with Greek president Karolos Papoulias. Photograph: AP Photo/Petros Giannakouris
Greek prime minister Antonis Samaras after his meeting with Greek president Karolos Papoulias. Photograph: AP Photo/Petros Giannakouris

Updated at 3.51pm BST

2.53pm BST

Opening rise on Wall Street lifts European markets

An opening rise on Wall Street has given a lift to global markets.

The Dow Jones Industrial Average has added 49 points or 0.3% in early trading, ahead of a congressional testimony from US Federal Reserve chairman Ben Bernanke on Wednesday. The meeting will be closely watched for any comments on the Fed's bond buying programme, and whether its quantitative easing could be coming to a close. Recent remarks by Fed members have suggested that actions to boost the economy could start tapering off.

With the money taps providing a major influence on the stock market rally, any signs they will be switched off could see shares decline from their recent peaks.

At the moment though, investors are still in the mood to wait and see. So with the positive start in the US, the FTSE 100 is at its best levels of the day, up around 25 points at 6781and close to its 2000 peak of 6798. Higher than that, and we are back in territory last seen in 1999, and not far off the all time peak of 6930.

Meanwhile European markets have also seen a turnaround after the US open. Both Germany's Dax and France's Cac 40 had drifted lower during the morning, but are now up around 3 points.

Italy's FTSE MIB and Spain's Ibex 35 are both in negative territory but are off their worst levels.

2.24pm BST

Interesting blogpost on Open Europe today, suggesting that the solution to Britain's "Europe problem" could be a new kind of membership of the EU, dubbed EEA plus.

This 'special status’ would give Britain the benefits of the single market, along with votes on issues that are relevent to the European Economic Area. 

Thus, the UK could keep influence on issues that really matter to it, like the financial system. It could also exclude itself from areas where closer integration wasn't desirable. So neither In nor Out.

Another great advantage of this model is that it could provide an institutional wrapping for all those countries that for one reason or another cannot be full EU members, and certainly not eurozone members: the UK, Norway, Switzerland and maybe even Turkey. It would be a new mode of European membership – and, if the UK can get its act together, very much the "economic growth" tier.

EEA plus: a model for the future of the UK in Europe?

And I'm handing over to my colleague Nick Fletcher. Thanks all. GW

1.42pm BST

Protester on St Peter’s Basilica in Rome

Italian businessman Marcello De Finizio stands on the dome of St Peter's basilica to protest against austerity measures on May 21, 2013 at the Vatican.
Photograph: ANDREAS SOLARO/AFP/Getty Images

An Italian businessman continues to hold a one-man anti-austerity demonstration on the dome of St Peter's basilica, having scaled it yesterday to protest against the European Union's economic policies.

Marcello Di Finizio, who owns a restaurant in Trieste restaurant, dodged security and scaled the basilica on Monday afternoon.

Authorities have been trying to persuade the 47-year-old man to come down, but so far without success.

Di Finizio, who has climbed the 137-metre dome twice before, is holding a banner which reads:

Stop this massacre, the political horror show is continue….help us Pope Francis..

Italian businessman Marcello De Finizio stands on the dome of St Peter's basilica to protest against austerity measures on May 21, 2013 at the Vatican. The businessman hung  a banner saying:
Photograph: ANDREAS SOLARO/AFP/Getty Images
Italian businessman Marcello di Finizio stands by his banner with writings against the Italian Government and the Euro as he protests on St. Peter's 130-meter-high (42-feet-high) dome, at the Vatican, Tuesday, May 21, 2013.
Photograph: Alessandra Tarantino/AP

Updated at 1.51pm BST

1.04pm BST

Letta demands EU action on growth and jobs

The Italian prime minister has warned that the European Union could implode unless leaders do more to deal with its economic crisis and the record levels of youth unemployment.

Enrico Letta, whose popularity has fallen steadily since he was sworn in last month, told the Senate in Rome this morning that EU leaders must show decisive action.

Otherwise, he warned, voters will reject the European project at the ballot box.

Here are Letta's key quotes (via the Ansa newswire)

I have the impression that the EU cannot keep going as it has up to today, with timidness or a lack of decisions.

Either it accelerates or it risks imploding…. As things are, I don't think it can hold up and the people will be the ones who make it implode the next time they vote.

Letta was briefing MPs before leaders gather for the next Council of Europe meeting on Wednesday. He said youth unemployment had to be an "absolute" priority, adding:

The EU is in a crisis of legitimacy over the lack of results [on youth joblessness].

The record levels of youth unemployment (over 60% in Greece now), so seem to have shaken European leaders and top officials in Brussels into action.

There's a great piece on this issue in Germany's Spiegel newspaper, which lambasts leaders for talking about the problem, but not fixing it.

Jobless Youth: Europe's Hollow Efforts to Save a Lost Generation

Here's a flavour:

Perhaps it takes reaching a certain age to recognize the problem. "We need a program to eliminate youth unemployment in Southern Europe. (European Commission President José Manuel) Barroso has failed to do so," says former German Chancellor Helmut Schmidt, now 94. "This is a scandal beyond compare."

Economists also argue that it's about time Europe did something about the problem. "The long-term prospects of young people in the crisis-ridden countries are extremely grim. This increases the risk of radicalization of an entire generation," warns Joachim Möller, director of Germany's Institute of Employment Research, a labor market think tank.

"It was a mistake for politicians to acknowledge the problem but do nothing for so long," says Michael Hüther, head of the Cologne Institute for Economic Research, which is closely aligned with employers. And Wolfgang Franz, former chairman of the German Council of Economic Experts, says that "unconventional approaches" are called for to combat not just youth unemployment but also its long-term negative consequences.

"Someone who is unemployed in his or her younger years will spend a lifetime struggling with poorer career opportunities and lower pay," he adds.


The Italian public are demanding action too, with well-attended protests over the weekend demanding a new economic plan:

Thousands of people protested in Rome urging Prime Minister Enrico Letta to focus on creating jobs.
Photograph: Francesco Fotia/Demotix/Corbis

Updated at 1.12pm BST

12.09pm BST

Pound thumped by inflation data

Pound vs Dollar, May 21 2013
Pound vs US dollar today. Photograph: Thomson Reuters

The pound has fallen more than one cent against the US dollar today following the news that UK inflation fell more than expected in March.

The drop in the consumer prices index, from 2.8% to 2.4%, means there's more chance the Bank of England will ease monetary policy again soon. Especially with new governor Mark Carney arriving this summer:

Andy Scott, account manager at HIFX, commented:

Whilst the economy seems to be showing some more positive signs of recovery, it’s still very sluggish and there’s still the risk of seeing further contractions unless the pace of recovery picks up, especially with the eurozone still in recession.

The new governor will no doubt be keen to make his mark at the Bank when he starts in July and he may well opt for additional quantitative easing to further aid the recovery.

Updated at 12.09pm BST

11.53am BST

The overview of the Bundesbank's latest monthly report is online here (pdf).

Its upbeat assessment of the German economy is accompanied by this warning:

However, the poor economic conditions prevailing in many parts of the euro area and the current problems associated with the sovereign debt crisis mean that macroeconomic risks remain high.

11.29am BST

Bundesbank urges rigour over deficit targets

Bundesbank, German Federal Bank facade.
Photograph: imagebroker/Alamy

Gerrmany's economy is on track for a solid recovery in the current quarter, the Bundesbank has predicted in its new monthly report on Europe's largest economy.

The German central bank also warned European leaders not to relax their deficit targets too much, as this would – in its view – hurt credibility in the eurozone.

The Bundesbank pointed to a recent rise in production orders across the country's manufacturing base:

Overall economic activity is expected to improve markedly in the second quarter of 2013, a view that is supported not only by the likely catching- up effects in response to the weather-related downturn in construction activity during last winter.

With industrial new orders picking up appreciably after a poor start to the year, there is reason to hope that exports and investment in machinery and equipment – the demand components that can usually be relied upon most to set the pace for the German economy – will recover as well.

Last week's GDP data showed that Germany grew by just 0.1% in the first three months of 2013, as the wider eurozone shrank by another 0.2%.

And on the issue of flexibility when applying deficit-reduction rules, the report said:

The binding effect (of the rules) threatens to be damaged from the start if the impression arises that necessary deficit reduction could perpetually be pushed back as long as sufficient political pressure is applied.

(quotes via Reuters)

The key word here is 'perpetually', I suspect. Spain and France are already being offered more time to get their deficits below the EC's 3% target — without any alarm in the financial markets.

Updated at 11.51am BST

11.07am BST

Key event

Interesting piece in the Wall Street Journal today about how the eurozone crisis has prompted a surge in grass root politic:

It looks at the Spanish municipality of Torrelodones, where housewife-turned-mayor Elena Biurrun has thrown out official perks and used the savings to improve school and local infrastructure since being elected two yeas ago:

Here's a flavour:

At her inauguration Ms. Biurrun choked up before a jubilant crowd.

Then she began slashing away. She lowered the mayor's salary by 21%, to €49,500 a year, trimmed council members' salaries and eliminated four paid advisory positions.

She got rid of the police escort and the leased car, and gave the chauffeur a different job. She returned a carpet, emblazoned with the town seal, that had cost nearly €300 a month to clean. She ordered council members to pay for their own meals at work events instead of billing the town.

"I was so indignant seeing what these people had been doing with everyone's money as if it were their own," Ms. Biurrun said.

10.37am BST

European markets dropping back

After yesterday's record high on the German DAX, European stock markets are mostly down this morning. In London, though, the FTSE could hit another 12-year high today, after closing at its highest level since September 2000 yesterday.

European stock markets, May 21 2013, morning
Photograph: Thomson Reuters

Traders are anticipating the prospect of central bankers starting to withdraw the drip of monetary stimulus, especially with the Fed's Ben Bernanke testifying at Capitol Hill tomorrow.

It's the old argument over whether we're experiencing a bubble that's threatening to pop, or if the central banks are cannily guiding us to a point where genuine confidence and economic fundamentals take over.

As Yusuf Heusen, sales trader at IG, explains:

Perhaps global growth doesn’t merit markets at these highs, but liquidity-boosting actions from central banks take precedence.

The City is also absorbing a profits warning from cruise liner firm Carnival, as my colleague Nick Fletcher explains: FTSE heads for new 13 year high, but Carnival sinks 13% after warning on earnings…

… and the surprise departure of G4S boss Nick Buckles, 10 months after its Olympic security debacle.

Updated at 11.58am BST

9.50am BST

Economist Rob Wood of Berenberg Bank agrees that UK inflation is heading higher, despite this morning's surprise drop:

The squeeze on consumers from higher inflation will get worse before it gets better, but today's data highlights that underlying inflationary pressures remain well contained.

Inflation is likely to peak, probably around the 3 percent mark maybe a touch below, this summer which is much better than it seemed a few months ago.

9.47am BST

UK inflation, the early reaction

Duncan Weldon, the TUC's senior policy officer, cautions against getting too excited by today's drop in inflation:

While Societe Generale's Kit Juckes warns that the cost of living will probably head higher:

And IG's Chris Beauchamp reckons it gives the new Bank of England governor, Mark Carney, more leeway to waggle the monetary policy levers:

9.37am BST

UK inflation drops

Just in, UK inflation has fallen for the first time since last September.

The Consumer Prices Index came in at 2.4% last month, the Office for National Statistics reported. That's a surprise drop after March's 2.8%, and closer to the Bank of England's official target of 2%.

Lower fuel and lubricant costs were the prime factor, the ONS said.

Good news for the UK, although real wages are still failing to keep pace (they're rising by around 0.8% annually, on average).

Reaction to follow.

Updated at 9.38am BST

9.26am BST

Draft law to bail-in large depositors approved

Europe has moved a step closer to bailing in large depositors in future bank rescues, as happened in Cyprus this year.

Last night, the European Parliament's economics committee approved draft legislation under which customers with more than €100,000 would be liable to fund a rescue package. Smaller savers, though, would still be protected.

This new bank recovery and resolution mechanism is meant to end the era of taxpayer-funded bank rescues. Bank of England Deputy Governor Paul Tucker called it a milestone towards a world where governments were no longer willing to rescue banks that are “too big to fail”.

Under the EU proposal, a bank would dip into large deposits of over €100,000 once it had exhausted other avenues such as shareholders and bondholders, Reuters explains.

There could still be a battle, though, over who stands first in line for losses.

Sven Giegold, a German Green lawmaker, explained:

The struggle will be how binding the bail-in and the hierarchy of liabilities is.

That issue of seniority of claims is explained well by Frances Coppolo, former banker, here: The equivalence of debt and equity.

It explains how, if bank is in trouble, losses are initially suffered by shareholders, before working their way down this table:

Bank liability structure
Photograph: Frances Coppola

So for all the talk about Cyprus being unique, its bailout was clearly a watershed, as Matina Stevis of the Wall Street Journal points out:

8.52am BST

Vodafone warning on Southern Europe

Good morning, and welcome to our rolling coverage of the latest developments in the eurozone financial crisis and across the global economy.

The economic crisis in Southern Europe has been laid bare by Vodafone this morning.

It warned shareholders that it has been scorched by the ongoing slump in demand in Spain, Italy, Portugal and Greece, blaming "severe macroeconomic weakness" across the region.

Vodafone is taking a new £1.8bn impairment charge on its Spanish and Italian operations, taking its total writedowns on Southern Europe this year alone to a hefty £7.7bn.

Revenue in Southern Europe are down by 16.7%. Some of that can be blamed on competition, but mostly its due to the biting recession in the eurozone's weaker members, amid austerity cuts and record unemployment.

Vittorio Colao, chief executive, didn't pull his punches either, saying;

The macroeconomic environment in Southern Europe has been very challenging.

And today's financial results back this up — with a 12.8% tumble in service revenue in Italy, partly driven by "the severe macroeconomic weakness". In Spain, they fell 11.5%.

In Greece, too, revenues are down by 13.4%.

OK, a nation's mobile phone bill isn't exactly the last word in financial modelling. But it just shows what an economic crisis means in practice — for companies, fewer calls means less business, while for consumers it's another sign that they simply can't afford to spend what they used to.

As usual, I'll be tracking all the news through the day….

Updated at 8.57am BST © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

US jobs data smashes forecasts. S&P 500 remains over 1,600 for the first time ever, while the Dow Jones rallies above 15,000. US and German stock markets hit record highs. European Commission Spring Forecasts show deepening recession…


Powered by article titled “US jobless rate falls to four-year low as EC cuts eurozone growth forecast – as it happened” was written by Graeme Wearden, for on Friday 3rd May 2013 16.14 UTC

5.44pm BST

Closing summary

It's all over in Europe, after a busy week. We've had May Day rallies, a Greek strike, the ECB monthly meeting, and more economic news (mostly bad) than I'd like to remember.

A very brief recap of today's two main stories

The US labour market is recovering faster than we thought. Today's jobs data showed 165,000 new positions were created in April, with another February and March's total revised higher by 114,000 new jobs. See here onwards.

Europe's economy is in worse shape than the European Commission had previously admitted. The EC's new growth forecasts predict a 0.4% drop in GDP this year, and show that France and Spain will both miss the official deficit targets this year. Here's a summary from earlier.

Commissioner Olli Rehn also claimed that Britain had no flexibility to ease fiscal policy (see here)

In other news

• Markets have posted strong gains, with the German DAX closing at its highest ever level, and the US Dow Jones and S&P 500 both hitting record highs (see here)

• ECB policy maker Ewald Nowotny suffered a nasty dose of over-interpretations over negative interest rates (see here)

• Finland's AAA credit rating has been affirmed by Fitch (see here)

• A MP representing the Greek nei-Nazi Golden Dawn party, who is accused of trying to pull a gun on the mayer of Athens (and punching a girl in the melee) could face charges. (see here).

Have great weekends all. Thanks, and goodnight!

Updated at 6.43pm BST

5.14pm BST

Late news from the rating agencies — Fitch has just affirmed Finland's AAA rating, with a stable outlook.

Finland's rating is underpinned by a combination of strong governance, high income per capita, a positive net international investment position and an impeccable debt service record. Government borrowing is currently strongly placed in financial markets. The strength of public finances is a key support to the rating despite the more pressing issue of population aging.

Public finances remain robust compared to peers. This provides Finland with some scope to absorb unexpected shocks and is reflected in the Stable Outlook. At 53% of GDP in 2012, general government debt is in line with the 'AAA' median and well below eurozone rating peers, including Germany ('AAA'/Stable). While the government has acknowledged that it will fail to meet its objective to reduce the central government deficit to no more than 1% of GDP by 2015, Fitch expects debt to GDP will remain below the EU threshold of 60% of GDP during the remainder of the parliamentary term of the current administration.

With pension fund assets over 70% of GDP the government has a net asset position, one of only six countries in the OECD and only second to Norway when measured relative to GDP. This is a mitigating factor towards the rising cost of an ageing population for the government for the short to medium term. The impact of an ageing population on public finances, however, will accelerate from 2020 and the government will need to implement further reforms of pensions to restore long run sustainability.

Here's the statement: Fitch Affirms Finland at 'AAA'; Outlook Stable

5.05pm BST

Dax hits record high as markets rally

Germany's DAX stock exchange has closed at its highest ever level, as the rally sparked by today's forecast-beating American jobs data.

The DAX jumped by 160 points, or 2%, to 8122 points.

Here's a graph showing how Europe's markets closed, and the latest details from Wall Street.

Stock markets closing prices, May 3 2013
Photograph: Thomson Reuters

As you can see, the S&P 500 remains over 1,600 for the first time ever, while the Dow Jones has dropped back below 15,000 having hit its own intra-day record high earlier.

Updated at 5.49pm BST

4.16pm BST

In Greece, MPs are to decide whether the Golden Dawn MP accused of trying to pull a gun on the mayor of Athens should face charges.

The parliament will be asked to consider whether to lift the immunity from prosecution of Giorgos Germenis, who is also said to have accidentally hit a 12-year girl in the face when trying to strike the mayor.

Kathimerini reports:

The Athens public prosecutor was on Friday to forward the case file on Golden Dawn deputy Giorgos Germenis to Parliament so MPs can decide on whether to lift the extreme rightist's immunity and allow him to face charges in connection with the attempted assault on Thursday of Athens Mayor Giorgos Kaminis.

Police forwarded the prosecutor the file on Germenis which relates to the charges of attempted bodily harm and verbal abuse. According to witnesses, Germenis tried to punch Kaminis after the mayor asked police to stop Golden Dawn from distributing food in Syntagma Square on Thursday. The lawmaker's punch missed the mayor and hit a 12-year-old who had visited a municipal office where candles for Orthodox Easter were being distributed. She was not seriously hurt.

Parliament must now decide whether to lift Germenis' immunity.

3.30pm BST

The Dow Jones industrial average just broke over the 15,000 mark for the first time:

Anyone who was quick to 'Sell in May' may be feeling a bit bruised.

Updated at 3.30pm BST

3.09pm BST

Two more gobbets of US economic data have landed – and they are not as good as the jobs report.

New orders at US factories fell by 4.0% in March, a bigger-than-expected drop.

And the monthly measure of the services sector showed that growth slowed in April to a nine-month low. The ISM non-manufacturing index fell to 53.1, down from 54.4 in March.

Updated at 3.09pm BST

2.56pm BST

Capital Economics: a soothing non-farm payroll

Here's Capital Economics's take on the US jobs data:

The better than expected 165,000 increase in non-farm payrolls in April, combined with the 114,000 upward revision to the gains in the preceding two months, will go a long way toward soothing fears of another spring slowdown.

With the unemployment rate edging down to a four-and-a-bit-year low of 7.5%, the Fed may yet begin to slow the pace of its asset purchases sometime in the second half of the year.

2.45pm BST

Wall Street surges on jobs data

Wall Street is open, and shares are racing higher as traders welcome the better-than-expected jobs data.

The S&P 500 has broken above the 1,600 point mark for the first time ever, and the Dow Jones industrial average has jumped 154 points to 14985, + 1.05%.

European stock markets are also jumping — on optimism that America's economy is in better shape.

FTSE 100: up 80 points at 6541, +1.2%

German DAX: up 138 points at 8099, + 1.74%

French CAC: up 48 points at 3907, + 1.26%

Italian FTSE MIB: up 155 points at 16903, + 0.9%

Spanish IBEX: up 156 points at 8562, + 1.8%

Now we just need to move this optimism into the real European economy….

Updated at 2.49pm BST

2.23pm BST

Today's US unemployment data is also another reminder of how bad the situation in Europe has become. The eurozone's jobless rate has now hit 12.1%, and the EC expects it will average 12.2% this year (see this post from earlier today)

The US jobs market is also looking healthier than the UK, where the unemployment rate hit 7.9% in the three months to February.

2.10pm BST

Our Wall Street correspondent, Dominic Rushe, has filed his first news story on the US jobs data:

US unemployment hits lowest rate in four years on strong April jobs figures

World markets soar as monthly report blows past estimates, with 165,000 jobs added and a jobless rate of 7.5%

2.06pm BST

Despite the strong payroll data, there was no jobs growth in America's construction or manufacturing sectors last month.

1.57pm BST

Some detail on today's US jobs data:

The 165,000 new jobs created in April were focused on these areas: professional and business services, food services and drinking places, retail trade, and health care.

Tthe number of long-term unemployed (those jobless for 27 weeks or more) has fallen by 258,000 to 4.4 million.

But there are also two data points that may signal economic weakness:

• The number of people working part time because their hours had been cut back or because they were unable to find a full-time job rose by 278,000 to 7.9 million…

• …and the average working week for all employees on private nonfarm payrolls decreased by 0.2 hours in April to 34.4 hours.

And finally, the labour force participation rate — the percentage of people who are either in work, or looking for it – was flat month-on-month at 63.3%.

1.44pm BST

Markets surge on non-farm payroll data

The news that the US economy created 165,000 new jobs in April, and that an extra 114,000 more jobs were created than we thought in March and February, has cheered the markets.

The FTSE 100 has jumped by 54 points to 6513, up 0.8%.

And Wall Street is expected to rally when trading begins in under an hour's time:

The dollar is also rallying against other currencies, up 1% against the yen, as the US economy looks healthier than 20 minutes ago.

Updated at 1.46pm BST

1.36pm BST

See the non-farm payroll data for yourself

You can read the details of the US jobs data here, on the Bureau of Labor Statistics website:

Employment Situation Summary

1.34pm BST

US jobless rate drops

The better-than expected rise jobs data from the US has pushed down the unemployment rate to 7.5% in April, from 7.6% in March.

1.30pm BST

Non-Fam Payroll

Breaking: The US economy gained 165,000 new jobs in April. Beating forecasts.

March's number has been revised higher to 138,000, from the 88,000 that was so disappointing.

And February's non-farm payroll has also been revised higher, to 332,000 from 268,000.

Updated at 1.33pm BST

1.26pm BST

Nowotny: What I meant was….

Screeching tires and the smell of burning rubber from Bratislava this afternoon.

ECB governing council member Ewald Nowotny has told reporters that his comments about Mario Draghi's comments on negative interest rates being over-interpreted have been (wait for it) over-interpreted.

Nowotny said he was "a bit astonished" to see the euro rise this morning, after he said there was "no short-term relevence" to Draghi's statement yesterday that the ECB was technically ready to charge banks who left deposits with them (see 8.59am).

Reuters has the new Nowotny comments:

"I was a bit astonished by the reaction of the markets to my comments concerning the deposit facility," Nowotny told reporters in Bratislava.
"What I wanted to make very clear is: yes, there has been of course a discussion about going into negative territory and we are open minded about it but it is nothing that has immediate effect," he said.
"That is what I really meant," he added. "Not that it is something that has to be excluded in principle. It is just an ongoing discussion. We are open minded about it but it is not something that will lead to a short-term result."
"I felt overinterpreted by the markets," the Austrian National Bank head said.

The euro is still trading above .31, a gain of almost half a cent today.

If Nowotny feels over-interpreted again, I'm sure he'll let us know.

Updated at 1.29pm BST

1.16pm BST

Electionista has wrapped up the latest political polling data from Italy and Germany:

In Italy:

And in Germany:

1.05pm BST

Read This

Excellent blogpost on yesterday's ECB press conference by @pawelmorski, City fund manager, on Mario Draghi's failure to announce any decisive new measures to help the weakest areas of the eurozone, and why the much-expected cut in interest rates really isn't enough.

We know – in as much as we know anything in economics that that 25bps cut will not add sufficient liquidity where it is needed. It may pump up Bund prices, and even help property owners in Helsinki or Munich, but money is not flowing to the companies and individuals that need it at the periphery for sure, and increasingly to the semi-core. This is like calling the Fire Brigade and being put on hold with periodic “Your Call Is Important to Us”‘s.

The conference unfolded in the manner of those 1960s sitcom marital scenes when the husband comes home on his Wedding Anniversary with some ragged daffodils bought at a petrol station and an extra-large Toblerone. At first the wife is indulgent, waiting for the curtain to be swept aside and the string quartet and banquet revealed (maybe those much-leaked plans to siphon funds to smaller firms?).

Then, as incredulity turns to rage, the husband gets self-righteous and defensive. He has, after all, been slaving away all day for the money to pay for these delightful flowers and delicious treats;


More here: Mario Draghi: Your Call Is Important To Us

12.47pm BST

Non-Farm Payroll preview…

Here's RanSquawk's video preview of the US jobs data for April, due for release in 45 minutes.

Marketwatch has also written a preview, here. It explains that economists expect another 135,000 new jobs were created last month, while "another soft number would raise alarm"

Business Insider has rounded up some of the best analyst predictions:

IT'S JOBS DAY IN AMERICA: Here's Everything You Need To Know To Get Ready

12.35pm BST

Spring forecasts: a rapid round-up

EU commissioner Economic and Monetary Affairs Olli Rehn attends a press conference on the spring European Economic Forecast on May 3, 2013 at the EU Headquarters in Brussels.
EU commissioner Economic and Monetary Affairs Olli Rehn today.

So a quick recap of the key points from the EC's Spring Forecasts (see 10.08am for details)

The eurozone recession will be deeper. The EC now expects a 0.4% drop in GDP in 2013, revised down from 0.3%, and a 1.2% rise in 2014, down from 1.4%.

Unemployment will remain a crisis. The euro area rate is expected to rise to 12.2% in 2013, and be 12.1% in 2014. The EC also pointed to the risks of "social cohesion" from the jobless rates in some countries — but continues to push for countries to lower their deficits to meet its stability and growth pact.

France, Spain, Italy and the Netherlands will all remain in recession this year.

Spain and France will be given another two years to hit the EC's deficit targets. Both are on track to run deficits significantly over 3% of GDP this year (6.5% for Spain, 3.9% for France). 

Britain hasn't got room to ease. The EC forecasts a deficit of 6.8% in the UK in 2013. According to Rehn, the UK's debt levels mean that:

There is really no case for a discretionary fiscal loosening in the UK.

And Italy is only expected to trim its deficit to 2.9% of GDP this year. That suggesting little room for additional stimulus measures without breaching the 3% target.

12.17pm BST

Analysts: EC forecasts are too upbeat

Martin Koehring, European Analyst at The Economist Intelligence Unit fears that the EC has not cut its growth forecasts enough.

The EIU predicts that eurozone GDP will shrink by 0.7% this year and only recover by 0.5% in 2014 (rather than Olli Rehn's forecast of -0.4% this year and +1.2% in 2014).

Koehring fears that austerity programmes and the weak eurozone banking sector will be a bigger drag on growth than the EC believes:

Although financial markets in the euro area have stabilised and country borrowing costs have remained low, ongoing fiscal austerity will continue to limit consumer and business spending in 2013-14.

Banks also remain hesitant to lend and demand for credit is low; we expect this to remain the case despite the recent interest rate cut by the European Central Bank.

Major downside risks even to our more downbeat forecast persist, particularly a deterioration of the euro zone debt crisis, highlighted by the uncertain situations in Cyprus and Italy.

Sony Kapoor of the Re-Define think tank agrees:

11.45am BST

Media reaction

In the FT, Peter Spiegel focuses on the fact that Spain, France and the Netherlands are all expected to miss the target of bringing their deficts below 3% of GDP this year:

Here's the story: EU economies to breach deficit limits as economic picture darkens

Three of the eurozone’s five largest economies will bust through EU-mandated deficit limits this year as the bloc’s recession continues to deepen, according to highly anticipated European Commission forecasts published on Friday.

In addition to the anticipated breaches by France, Spain and the Netherlands, the currency union’s third-largest economy, Italy, will come within a hair’s breadth of missing the limit of 3 per cent of economic output, with a 2013 deficit forecasted at 2.9 per cent.

And in the Wall Street Journal, Matina Stevis points to the desperate state of the European jobs markets

EU Paints Gloomier Picture for Economy

Dire jobs conditions and a protracted drying-up of credit to households and businesses will keep Europe's economy in a deeper-than-expected contraction in 2013 and slow down its return to growth in 2014, the European Commission said in its spring economic forecasts Friday.

The 27-nation European Union economy will shrink by 0.1% in 2013, the EU's executive said. Its winter forecast published in February had projected a 0.1% growth rate. The 17-member euro area will suffer a 0.4% economic contraction this year, while the earlier forecast was a 0.3% contraction. The spring forecasts mark a small-scale calibration of the winter ones, taking into account economic performance in the early months of the year.

Unemployment will remain at historic highs, with the EU's jobless rate seen at 11.1% for this year and next. In the euro zone, 12.2% of the workforce will be out of work in 2013 and the situation will hardly get better in 2014, when the rate is seen at 12.1%. Greece and Spain will see record jobless rates of 27% this year, a vastly different story to Austria's unemployment rate, seen at 4.7% in 2013.

11.33am BST


That follows Olli Rehn's comments that it makes sense to give France two more years to get its deficit below 3% — to 2015, rather than 2013.

Updated at 11.33am BST

11.19am BST

12 months ago, the EC was predicting growth of 1% this year — not the 0.4% contraction in today's forecasts, as Charles Forelle of the WSJ points out:

11.04am BST

Rehn: UK can’t loosen fiscal policy

Britain's high debt levels mean it cannot risk a fiscal stimulus, claims Olli Rehn.

Asked about the UK economy at today's briefing, commissioner Rehn pointed to the fact that the level of public debt is likely to rise close to 100% next year (under the EU's calculations).

There is really no case for a discretionary fiscal loosening in the UK

It is important that the UK follows through with consistent fiscal consoliation… to reach a sustainable fiscal position.

The EC expects the UK economy to "improve gradually" with 0.6% GDP growth this year, then 1.7% in 2014.

10.59am BST

Olli Rehn, presenting the Spring 2013 forecasts
Photograph: EC

Slovenia is unlikely to get its deficit below 3% as soon as planned, Olli Rehn says, and the EC would want to see new economic reforms in return for extending the deadline.

Asked about whether Slovenia could avoid international help, Rehn said:

The stock of problems is not as vast as for many other countries, while the trend is very negative

Therefore Slovenia's economic situation is stilll manageable as long as decisive action is taken without delay.

10.47am BST

Rehn: Spain and France should get more time

Speaking in Brussels, Olli Rehn has told reporters that the EC is prepared to give France and Spain two more years to get their deficits below 3% of GDP.

Rehn said:

For France and Spain is is very obvious that it is more reasonable to have a correction of the excessive deficit over another two years.

But other countries, though, should stick to their existing plans

Today's forecasts show that France is expected to run a deficit of 3.9% in 2013, and 4.2% in 2014.

On Italy, Olli Rehn says that he has been speaking with the country's new finance minister, and is looking forward to receiving details of how Enrico Letta's government plans to meet its own deficit reduction targets.

10.27am BST

Read the EC’s Spring forecast

10.26am BST

More details of the EC growth forecasts from the Brussels press pack:

10.18am BST

EU: joblessness could affect social cohesion

The EC sees no hope of early relief in the unemployment market. It predicts that the jobless rate in the eurozone will reach 12.2% for 2013, and 12.1% in 2014*.

It added:

While the risks to the economic outlook have become more balanced on the back of important policy decisions since last summer, downside risks remain predominant.

Very high levels of unemployment in some Member States could affect social cohesion and become persistent if further reforms are not undertaken.

* – updated

Updated at 11.36am BST

10.15am BST

The EC has also cut its forecast for growth in 2014, from 1.4% to 1.2%.

So, a deeper recession (with a 0.4% drop in GDP this year) and a slower recovery next year.

Updated at 10.16am BST

10.08am BST

EC cuts growth forecasts

Breaking news: the European Commission has cut its growth forecasts for the euro area, and warned that unemployment levels in some regions are unacceptably high.

In its Spring forecasts, the EC predicted that eurozone GDP would fall by 0.4% this year, worse than the 0.3% decline pencilled in previously.

For bailed-out, buffeted Cyprus, the EC now predicts a 8.7% tumble in economic output this year.

Lots more to follow…

Updated at 10.13am BST

10.02am BST

EC’s new Spring forecasts

Over in Brussels, commissioner Olli Rehn is announcing the EC's new economic forecasts — there's a live feed here.

10.01am BST

UK service sector output at post-Olympic high

Punchy economic news in the UK – with the service sector growing at its fastest rate in eight months in April.

Markit's PMI came in at 52.9, up from 52.4, while the measure of new orders was the strongest since last May.

That's an encouraging signal for UK economic growth this quarter (after dodging recession in Q1).

9.53am BST

Key event

European sovereign debt is rising in value this morning, driving down borrowing costs across the region.

Spain's 10-year bond yields have dropped below the 4% mark for the first time since 2010, while Italy's 10-year debt is yielding just 3.74%.

Very little of note in the stock markets, with the FTSE 100, the DAX and the CAC basically flat.

9.39am BST

India cuts interest rates

India cut its interest rate for the third time this year earlier today, in an attempt to stimulate the country's economy.

The Reserve Bank of India (RBI) lowered its key rate to 7.25% from 7.5%, but warned that it didn't see much opportunity for further easing.

India cut its growth forecast to 5% earlier this year, from over 6%. But inflation is too high for the RBI to consider cutting much further — with its consumer prices index recorded at 10.39% in March.

In a statement the RBI said it:

cannot afford to lower its guard against the possibility of resurgence of inflation pressures.

India's other challenge is that it's running a sizable current account deficit, which jumped to a record of 6.7% (partly due to the cost of importing commodities such as oil).

Indranil Pan, an economist at Kotak Mahindra Bank in Mumbai, reckons that it's fanciful to expect the RBI to revitalise India's economy alone:

Rate cuts are not the answer to resolve growth problems. The push has to come from the government by cutting wasteful expenditure and improving infrastructure bottlenecks.

Economist Shaun Richards wrote a nice piece about the challenges facing the Indian central bank, back in February: The Reserve Bank of India is taking quite a gamble with India’s economic future

8.59am BST

ECB tries to calm negative rate talk

Yesterday's ECB meeting still looms over the European markets today, with one of the Bank's governing council members trying to dampen talk that the ECB might impose a negative deposit rate on banks*.

Ewald Nowotny reckons people got too excited about Mario Draghi's comment that the ECB was "technically ready" to cut its deposit rate into negative territory, from 0.0% today.

Nowotny told reporters in Bratislava that:

Markets have over-interpreted the discussion yesterday.

Of course, this is one of many options. But it is not an option that is relevant in the near future and it would need many aspects to analyse … side effects and psychological effects. So, this is nothing that is of short-term relevance.

That's helped to send the euro popping back against the US dollar, up 0.3% this morning at just over .31.

Updated at 9.00am BST

8.46am BST

US jobs data dominates the markets

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

It's a quieter morning after the drama of yesterday, when the European Central Bank slashed borrowing costs to a record low of 0.5% and hinted at imposing negative interest rates on banks which stash money with it overnight.

The big action will come this afternoon – when America reports its employment data for April. The non-farm payroll (always 'eagerly awaited') will give us a decent idea of how the world's largest economy is performing, particularly as last month's reading was extremely weak.

All week, economists have been cutting their forecasts for how many new jobs were created in America. They started at 155,000, but now it's down to around 140,000.

Another disappointing reading might well add to fears that America's economy has entered a softer patch, with analysts already expecting GDP growth to slow this quarter as the 'sequester' government cutbacks hit home.

Meanwhile, there's lots of analysis and reaction from the ECB to wade through (more to follow), and the EC is releasing its new Spring Economic Forecasts.

I'll also be watching the usual hotspots of action, such as Italy, Cyprus and Greece — where there's outrage after a Golden Dawn MP apparently tried to pulled a gun on the Athens mayor and accidentally punched a 12 year old girl.

I wish I was making that up, but as Kathimerini explains:

A crackdown by municipal authorities on an attempt by extreme-right Golden Dawn to distribute free food in central Syntagma Square on Thursday prompted one of the party’s MPs to attempt an assault on Athens Mayor Giorgos Kaminis during which the MP apparently tried to pull out a gun.

According to witnesses, Giorgos Germenis tried to punch Kaminis after the mayor asked police to stop Golden Dawn from distributing food in Syntagma. Police were sent to the square early on Thursday and used tear gas to force members of Golden Dawn to retreat from the area, taking with them a refrigerated truck containing meat, potatoes and other food.

A few hours after the police crackdown, Germenis visited the offices of City Hall’s solidarity initiative, which happens to be close to Golden Dawn’s old headquarters near Larissis railway station, while workers were giving Easter candles to children and their parents.

Witnesses said the MP lunged at Kaminis and tried to punch him but hit a 12-year-old girl instead, leaving her with a lightly bruised forehead. According to municipal employees, and to Kaminis, Germenis had a gun in his trouser pocket and tried to pull it out but was stopped by security guards.

Updated at 8.52am BST © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

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


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

5.18pm BST

European markets edge lower after positive week

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

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

• Germany's Dax was down 0.23%

• France's Cac closed 0.79% lower

• Italy's FTSE MIB ended down 0.51%

• Spain's Ibex dropped 0.81%

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

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

5.10pm BST

IMF welcomes Spanish announcement

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

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

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

4.14pm BST

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

4.06pm BST

Greece prepares to vote on controversial reforms

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

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

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

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

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

Helena adds:

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

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

3.53pm BST

European Commission welcomes Spanish deficit target delay

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

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

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

3.01pm BST

US consumer sentiment better than expected in April

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

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

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

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

2.19pm BST

French socialists accuse Merkel of causing crisis

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

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

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

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

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

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

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

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

2.09pm BST

Syriza party in lead in new Greek poll

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

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

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

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

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

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

Updated at 2.12pm BST

2.04pm BST

Spain softens its commitment to austerity

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

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

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

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

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

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

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

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

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

1.47pm BST

US government spending falls again

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

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

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

Rob Carnell at ING said:

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

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

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

Updated at 1.54pm BST

1.42pm BST

US stock market futures fall after GDP numbers

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

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

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

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

1.34pm BST

US GDP grows by less than expected 2.5%

Breaking news

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

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

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

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

Updated at 3.27pm BST

1.22pm BST

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

1.09pm BST

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

Here's a live link (in Spanish).

Updated at 2.50pm BST

1.06pm BST

Spain slashes growth forecasts

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

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

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

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

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

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

Updated at 1.10pm BST

11.50am BST

Hollande’s party blasts Merkel, says Le Monde

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

Our Europe editor Ian Traynor tweets:

11.09am BST

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

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

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

Updated at 11.13am BST

10.58am BST

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

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

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

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

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

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

Updated at 11.03am BST

10.33am BST

Worst of crisis is over, says ECB’s Provopoulos

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

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

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

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

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

10.15am BST

Italian bond auction sees record low yields

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

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

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

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

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

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

Berlusconi however has ruled himself out of being a minister:

Updated at 10.21am BST

10.04am BST

Stock markets slip back

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

• The FTSE 100 is down 34.57 points or 0.54%

• Germany's Dax has dropped 0.68%

• France's Cac is 1.01% lower

• Italy's FTSE MIB is 0.93% down

• Spain's Ibex is off 0.97%

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

9.36am BST

Cyprus bank deposits fall in March

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

Martin van Vliet at ING said:

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

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

Updated at 9.39am BST

9.31am BST

ECB’s Asmussen on rate cuts

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

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

Updated at 9.48am BST

9.21am BST

Bundesbank reportedly unhappy at ECB – again

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

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

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

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

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

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

8.49am BST


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

 8:15 ECB's Asmussen Speaks in Frankfurt

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

11:00 ECB Announces 3-Year LTRO Repayment

Midday Spain unveils new reform programme

13:30 US GDP

13:30 US Personal Consumption

14:30 ECB Governing Council Member Nowotny speaks in Prague

14:55 University of Michigan confidence index

Updated at 9.15am BST

8.37am BST

Spanish reforms and US GDP in the spotlight

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

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

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

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

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

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

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

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

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

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

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

Updated at 8.51am BST © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Spain’s Labor ministry reports a 1.2% rise in unemployment in February. Eurogroup finance ministers to discuss aid package for Cyprus, while Italy could see reelection. Weekend protests in Lisbon. Beppe Grillo meets new parliamentarians…

Powered by article titled “Eurozone crisis live: Spanish jobless total hits five million; Cyprus bailout talks resume” was written by Graeme Wearden, for on Monday 4th March 2013 16.00 UTC

4.00pm GMT

Osborne faces (losing?) battle over bonus caps

Today’s eurogroup meeting is, for once, just a taster ahead of the big action tomorrow — a clash between Britain and the rest of the EU over the plan to cap bankers bonuses.

George Osborne, the UK chancellor, is hoping to make last-ditch changes to the plan, announced last week, to cap performance-related payouts at 100% of salaries. He’s likely to fail.

Our Europe editor, Ian Traynor, sets the scene:

In a highly unusual defeat for the British financial services sector, illustrating the UK’s deepening isolation in Europe and the reluctance of EU partners to do Britain any more favours, finance ministers of the other 26 are expected to endorse new legislation to slash “fat cat” bonuses.

The decision to limit bonuses ordinarily to a year’s salary was made last week at hard-fought negotiations between the European Parliament and officials from the 27 member states. Despite David Cameron’s denunciation of the deal and Osborne’s pledges to contest it, the decision appears irreversible. The UK is unable to wield a veto as Tuesday’s decision can go to a qualified majority vote if necessary.

Britain has been unable to muster enough allies to block the proposal. Its likeliest supporters, Sweden, The Netherlands, and, most crucially, Germany have all come out in favour of capping bonuses.

After David Cameron’s success over the EU budget, it looks like Britain is returning to familiar isolation, as it cannot block the plan. However, Osborne could perhaps win some concessions…. More here

2.31pm GMT

The early news from the Five Star Movement meeting is that Beppe Grillo has reiterated that the party will not support any government in a vote of confidence (which is essential for a new administration to take power):

2.10pm GMT

Key event

Here’s a live feed of the Five Star Movement’s meeting:

2.05pm GMT

Watch Five Star Movement live

The meeting between Beppe Grillo and the new Five Star Movement parliamentarians has begun in Italy, and is being live-streamed at Grillo’s site (click here).

Unfortunately, the site appears to be struggling under the weight of traffic. I’ll try and embed the livestream. Otherwise, I’ll drop in the highlights ASAP.

1.42pm GMT

Jeroen Dijsselbloem, Dutch finance minister and the new head of the Eurogroup, has told reporters in Brussels that he hopes to make progress on Cyprus’s bailout application today.

Dijsselbloem said he was looking forward to meeting the “new colleague from Cyprus”, following last month’s presidential election. However, the big breakthrough won’t come today.

Dijsselbloem added:

Of course we’re very glad that there is a new government that we can work with, to find a solution for Cyprus.

As I’ve said before we’re probably going to reach an agreement in March, that’s what we’re aiming at, and it’s going to be an agreement that works on stabilisation, both for Cyprus and the eurozone as a whole.

The full video clip is here.

Updated at 2.19pm GMT

1.14pm GMT

Latvia to eurozone: room for one more?

Latvia has taken the plunge and decided to apply to join the eurozone.

Finance minister Andris Vilks told reporters this morning that the application will arrive in Brussels tomorrow, adding:

This is a day that will enter Latvia’s history.

It’s caused a bit of a buzz in Brussels, where eurocrats see it as a sign that the euro project is still on the road.

Our Europe editor, Ian Traynor, told us all two weeks ago that the application would come in March. That article is well worth a read, with prime minister, Algirdas Butkevicius, explaining exactly why Latvia still wants to join the euro club. It’s all about the security:

“We see it as a kind of insurance mechanism,” said Dombrovskis. “We don’t expect to go back into a crisis. We’re sticking with prudent fiscal policies and we don’t expect to overheat our economy again.

“And whatever happens to the euro happens to us anyway. Our economy is completely euro-ised: 80% of borrowing, households and businesses, is in euros. This will help financial and economic stability.”

12.29pm GMT

In Italy, masks and meetings

The political situation in Italy remains masked (ahem) in uncertainty today.

Last night, centre-left leader Pier Luigi Bersani threw down a challenge to the Five Star Movement (M5S) warning leader Beppe Grillo that “we’ll all go home” unless he backed a temporary government.

Speaking on Italian TV, Bersani declared that:

“He heads a movement that has a third of the Chamber, he needs to decide what he will do or we will all be sent packing, including Grillo.

Bersani’s failure to win a majority in the Italian Senate, and his refusal to form an alliance with Silvio Bersluconi, leave the former communist dependent on some kind of agreement with M5S.

Grillo himself has taken to wearing a mask in public, in an effort to deter journalists from asking about his plans. Over the weekend he indicated that he might support a government that was committed to cleaning up Italian politics (a prospect he saw as somewhat remote)

The situation could develop today – Grillo is due to meet with his new parliamentarians to discuss strategy. And Bloomberg are reporting that M5S is considering abstaining in an up-coming confidence vote. That, if it happened, would help a minority government to be created.

Here’s the Bloomberg story:

Beppe Grillo’s senators-elect, who hold a blocking minority in Italy’s upper house of parliament, may consider staging a confidence-vote walk-out to allow a political rival to form a government and ease gridlock.

Grillo’s Five Star Movement is seeking to influence the program of Italy’s next government and would require policy concessions in exchange for a walk-out, said two senators-elect who declined to be identified because no deal has been made. Five Star won’t vote to support any government, they said.

Walking out would lower the threshold for achieving a majority in the Senate confidence vote, making it easier to secure enough backing for a new government.

Updated at 12.35pm GMT

11.01am GMT

Eurozone investor confidence slides

The political mess in Italy has alarmed investors, whose growing confidence over the euro area has taken a knock this month.

The monthly eurozone investor confidence index, conducted by Sentix, has dropped to -10.6, down from -3.6 in February. That shows that investors across the eurozone have grown more nervous, reversing a six-month trend.

Sentix blamed the Italy election results:

The reason for this setback is obvious: it is the outcome of the election in Italy which has caused uncertainty over the country’s future development to skyrocket….This has had a negative impact on the whole euro zone.

Updated at 11.31am GMT

10.40am GMT

Chinese stock market tumble hits Europe

Most of Europe’s stock markets have fallen this morning, after the main Chinese indices suffered an alarming sell-off.

Overnight the CSI 300 share index (which includes the biggest companies on the Shanghai and Shenzhen markets) slumped by 4.6%, its biggest daily fall since November 2010. The Shanghai Composite index shed 3.7%, with property companies the biggest fallers.

The selloff was prompted by a new clampdown on speculators, and plans to force second home owners to pay higher interest rates and larger deposits

Some traders also blamed an investigation into China’s ‘ghost towns’ — newly built residential areas where no-one actually resides — by CBS News’s 60 Minutes. 

It showed images of vacant shops, empty streets, and half-built apartments where work appears to have suddenly stopped – suggesting that the Chinese property bubble may be bursting….

Here’s a video clip:

And here’s the situation in Europe:

FTSE 100: down 24 points at 6353, – 0.4%

German DAX: down 42 points at 7665, -0.5%

French CAC: down 8.5 points at 3691, – 0.23%

Italian FTSE MIB: down 146 points at 15528, -0.93%

Spanish IBEX: up 22 point at 8210, +0.3%

Updated at 10.40am GMT

10.15am GMT

Sharan Burrow, head of the international Trade Union Movement, argues that the International Monetary Fund should heed the public anger in Portugal.

She argues that austerity is being challenged across Europe, with Dutch unions now clashing the Netherlands government over a €4bn cuts package.

In the Netherlands, the government wants new wage freezes and tax rises after an official estimate that the Dutch budget deficit will hit 3.3% in 2013 and 3.4% per cent in 2014, over the EU’s 3% target.

Ton Heerts, head of the FNV federation of unions, has slammed the proposal as “stupidest thing you could do right now”, warning it will make the Dutch recession even worse (the FT has more details).

10.03am GMT

Photos: the Lisbon Protests

Here’s a few snaps from Saturday’s anti-austerity demonstrations in the Portuguese capital:

Updated at 11.30am GMT

9.50am GMT

Why Portugal is seeking new baIlout terms

Last weekend’s protests in Portugal were some of the largest seen in Europe during the crisis.

Organisers said that half a million people joined the demonstrations in Lisbon, with hundreds of thousands more attending other protests st some thirty cities (photos to follow).

The huge crowds in Lisbon’s Praca do Comercio square chanted, “It’s time for the government to go”, and there were also slogans declaring “Austerity Kills” and “Screw the Troika”.

Last week, Portugal’s government insisted it could not change its austerity programme, saying it would be “rudderless in a sea of storms” if it couldn’t rely on the support of the International Monetary Fund and the IMF.

However, Portual is expected to tell Eurogroup members today that it needs to be given an extra year to hit its bailout targets – a recognition that its recession is deeper than official forecasts.

As the Wall Street Journal explains here (with a handy graphic):

Portuguese officials acknowledge they overestimated tax revenues and underestimated how much money the country would have to spend on social benefits to the unemployed. They say Portugal has been hit hard by a deeper-than-expected slowdown in the euro zone, with which it does most of its trade.

Labor unions and opposition parties have accused the government of blindly making spending cuts and raising taxes without realizing that they would contribute to a downward economic spiral.

Full story: Portugal to Seek New Bailout Terms

9.12am GMT

Eurogroup to also consider Ireland and Portugal

Euro finance ministers will begin today’s Eurogroup meeting at 3pm Brussels time, or 2pm GMT. A press conference is expected at 8pm GMT.

Matina Stevis, the WSJ’s Brussels hotshot, flags up that ministers will consider whether to extend Ireland and Portugal’s financial reform programmes, but doesn’t believe any decisions will be taken:

Updated at 9.13am GMT

9.03am GMT

Spanish unemployment rises again

Gloomy economic news from Spain this morning – the number of people registered as out of work has risen by 1.2% last month, breaking through the 5 million barrier.

The Labour ministry reported that the number of registered jobless in Spain rose by another 59,444, as the country’s economy continued to contract.

The data doesn’t include around 1 million people who are out of work, but not registered as such.

The austerity programme being implemented by the current government is widely blamed for stifling economic growth and driving people out of work.

As this chart shows, employment in Spain has been falling since the financial crisis began, a trend that accelerated in the last two years:

Updated at 9.31am GMT

8.42am GMT

Eurogroup to debate Cyprus bailout again

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

The finance ministers of the eurozone will have a lot to chew on today when they gather in Brussels this afternoon for the latest Eurogroup meeting.

Top of the list – Cyprus’s bailout, which is back on the agenda following the election of Nicos Anastasiades last week. The €17bn package had stalled over the country’s reluctance to sell state assets, and Germany’s concerns that much of the aid would (it claims) benefit criminals who use the island’s banking sector for money-laundering.

The eurogroup is also expected to discuss the situation in Italy, mired in political uncertainty following last month’s general election.

Ministers are likely to insist that Italy sticks to its commitments, following last week’s rise in Italian bond yields — despite the wave of support for anti-austerity candidates, which leaves president Giorgio Napolitano struggling to form a government.

The talk this morning is that a second technocratic government could be installed, or that fresh elections will be called this summer.

And ministers may also be alarmed by the huge protests in Portugal over the weekend, with mass rallies urging the Lisbon government to halt its austerity programme. Europe’s drive for spending cuts and tax rises has already been shaken by the Italian election results. Could the Portuguese protests help to turn the tide?

As usual, we’ll be tracking the latest development through the day.

Updated at 8.59am GMT © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

G7 will not target exchange rates, but is concerned about the recent yen moves. Yen weakening to be discussed at the G20 meeting this weekend. Mariano Rajoy says Spain will return to growth in 2013. UK inflation sticks at 2.7% in January…

Powered by article titled “Eurozone crisis live: G7 warns of currency war risks” was written by Josephine Moulds and Nick Fletcher, for on Tuesday 12th February 2013 12.46 UTC

2.08pm GMT

G7 concerned about yen movement, says official

The earlier G7 statement on currencies was apparently misinterpreted, and was designed to express concern about the Japanese yen. That’s what a G7 official is saying, according to various wires.

We reported on the concerns about a currency war earlier.

Updated at 2.11pm GMT

1.56pm GMT

France unlikely to meet 2013 deficit target, says state auditor

France has very little chance of meeting its target of cutting its deficit to 3% of output this year, according to the country’s state audit body.

The court of auditors – not part of the government – called on the EU to clarify how it would deal with member states if they did overshoot their budget target.

France has promised to cut its nominal deficit to 3% from 4.5% in 2012, but a deteriorating economy has meant the target has seemed increasingly unlikely to be achieved.

Updated at 2.21pm GMT

12.46pm GMT

Meanwhile, Germany’s deputy finance minister has told DJ/FX Trader that they expect Ireland to exit its bailout programme at the end of this year, and Portugal could could follow it.

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

Updated at 1.48pm GMT

12.42pm GMT

There is a feeling that the G7 is protesting too much about the currency wars.

12.41pm GMT

No exchange rate problem in Europe

The EU finance chiefs and European policymakers have emerged from their meeting and are being grabbed by reporters on their way out.

A few lines coming through.

German finance minister Wolfgang Schaüble says we have no exchange rate problem in Europe “yet”. He says there were intense money-laundering talks with Cyprus. He adds:

The crisis is not over, we’re on a good track.

Spanish finance minister Luis de Guindos says the Ecofin meeting did not discuss losses to Cypriot savers. He says the rise in the value of the euro shows investor confidence.

While the vice-president of the European commission, Olli Rehn, says the EC is not working on any sovereign debt restructuring plan for Cyprus. Asked if depostiors in Cyprus could lose money, he says:

We are working on a solution for Cyprus that would ensure its financial stability and debt sustainability.

Updated at 12.42pm GMT

12.25pm GMT

UK inflation report preview

Looking ahead to the Bank of England’s inflation report out tomorrow, which will be scoured for clues that the central bank intends to carry out more stimulus in the coming months.

Howard Archer of IHS Global Insight says:

We suspect that the February Inflation Report will leave the door open to more QE. Once again the Bank of England will likely have the dismal task of raising its consumer price inflation forecasts and cutting its GDP growth projections. This has been the depressing trend for some considerable time now.

With economic activity likely to remain fragile and limited, we believe that the Bank of England will eventually decide to give the economy a further helping hand with another £50 billion of QE. This could well happen in the second quarter, or it may come soon [after] Mark Carney takes over as Bank of England Governor in July.

Updated at 12.28pm GMT

12.19pm GMT

Finmeccanica chief executive arrested

Over to Italy, where the police have arrested the chief executive of the country’s biggest defense and aerospace group, Finmeccanica, which owns the part-British helicopter group AgustaWestland. The Wall Street Journal reports:

[Giuseppe] Orsi is under investigation in a bribery case related to the €560 million ($750 million) sale of 12 helicopters by a Finmeccanica division to India in 2010, according to Finmeccanica and the prosecutor in the case. Mr. Orsi hasn’t been charged.

Mr. Orsi has over the past months repeatedly denied making any bribes.

The company Finmeccanica and its helicopter division, AgustaWestland, are also themselves under investigation in the case, according to the company and the prosecutor. Both companies have denied wrongdoing.

12.06pm GMT

No sign of a currency war – economist

Here’s Christian Schulz of Berenberg Bank on the G7 currencies statement:

The statement shows that the G7 are united and continue to cooperate. No sign of a currency war. Despite criticism from some such as Germany’s Bundesbank, the G7 do not seem to be too worried by the Japanese move to increase their inflation target and more aggressive easing.

In particular the eurozone and the ECB, which have recently borne the brunt of the adjustment, seem unphased by the euro at $1.35 and ¥126. More ECB action than the very modest verbal intervention by ECB president Draghi to slow the appreciation remains unlikely.

He says it looks like it would take a lot for the countries to intervene in the currency markets.

The G7 would only cooperate and potentially intervene in case of abrupt exchange rate movements, which could hurt the economy. This might address French concerns a bit by slowing further appreciation of the euro. However, the threshold for interventions seems to be high, as the 25% depreciation of the Japanese yen against the euro since July has not triggered one.

11.51am GMT

Spain and Italy borrowing costs rise

Italy and Spain have both issued short-term debt today and it seems political instability in both countries has driven borrowing costs higher.

Spain sold €5.6bn of short-term debt, with higher borrowing costs on its 12-month bills. The average yield on the 12-month debt came in at 1.548%, up from 1.472% in January.

Reuters said the rise in yields showed the corruption scandal within the ruling People’s party and an economy mired in recession is starting to weigh on investor appetite.

Italy, meanwhile, secured an average yield of 1.09% on its 12-month debt, up from 0.86% last month, but still way below last year’s peak of 3.97%.

It is thought that traders are reacting to political tensions ahead of the elections this month.

Updated at 11.57am GMT

11.27am GMT

UK pay falls behind inflation

The team on the Guardian’s datablog has plotted how pay has fallen behind inflation in the UK, squeezing household budgets. They write:

Living standards have been falling consistently over the past twelve months, as inflation has run well above the rate of pay increases, which the latest labour market data showed averaging at less than 2%.

11.20am GMT

UK inflation beyond Bank of England’s control – economist

So for a bit more reaction to the UK’s 2.7% rate of inflation. Labour have predictably gone for the “out-of-touch government” line.

Shadow treasury minister Cathy Jamieson said:

This out of touch Government has got its priorities all wrong. Instead of giving a £3 billion tax cut to the very richest George Osborne should be acting to kick-start our economy and help people on modest incomes who are feeling the squeeze.

While Chris Williamson of Markit says the factors driving inflation higher are largely beyond the control of the Bank of England.

Looking into the detail of the January inflation data, the main upward pressures came from an 8.5% jump in alcohol and tobacco prices, a 19.7% leap in education costs due to the rise in tuition fees, a 3.5% increase in utility prices and a 4.2% upturn in food prices. All of these are sources of inflation which are not related to (or affected by) central bank policy. They are either “administered prices”, reflecting changes in government policy and taxation, or are prices set globally, as in the case of oil and many food commodity prices.

Weak demand is meanwhile keeping price pressures low elsewhere in the economy – as is illustrated by a mere 0.2% year-on-year increase in clothing prices, which dropped 5.4% in January, and a modest 0.8% rise in prices for household goods, which fell 2.3% during the month. There is little that can therefore be done to bring inflation down further for the goods and services that are typically influenced by domestic monetary policy, as these prices are already falling.

He expects the Bank of England to turn a blind eye to the causes of higher inflation and instead push on with demand-boosting stimulus to help revive the economy.

But, he says, policy will probably be kept on hold (and the quantitative easing programme maintained at current levels) until a clear picture emerges of how the country has fared in the first quarter.

Updated at 11.35am GMT

11.10am GMT

OECD urges global tax avoidance clampdown

Meanwhile, an OECD announcement has been rather overshadowed by the G7 currency statement.

The Paris-based thinktank has called for a clampdown on tax avoidance by large multinational companies. Reuters reports:

A sweeping overhaul of international corporate tax rules is urgently needed to stop savvy big companies escaping the payment of billions of euros to cash-strapped governments, the OECD said on Tuesday.

Governments face growing demands from voters to force big companies with extensive international business to pay more tax in wake of mounting evidence that many use differences between different countries’ rules to reduce their tax bill.

Updated at 11.36am GMT

11.06am GMT

Hopes that G20 will echo G7 commitment to floating exchange rates

Currencies will be on the agenda again at the G20 meeting in Moscow later this week, and there are hopes they will issue a similar statement.

ECB vice-president Vitor Constancio told Reuters today that they too should reaffirm their commitment to floating exchange rates.

We, of course, want that everyone else respects those principles.

Asked what he expected to come out of the G20 meeting, he said:

I expect that these principles will be reaffirmed, pure and simple.

But there is some scepticism that any agreement could be reached at the larger group of 20. Channel 4′s economics editor says:

Constancio also said there was no currency war going on at the moment.

10.44am GMT

The G7 comprises the US, UK, France, Germany, Italy, Canada, and crucially Japan. But traders say the statement did not go far enough to calm the brewing currency wars.

10.35am GMT

Heated currency rhetoric prompted G7 statement

There is growing concern about the potential for currency wars, as countries fight to remain competitive in the global market.

The problem arises when individual countries undertake measures to stimulate their economies – like the huge quantitative easing programme in the US – that devalues their currency, making their exports look cheaper on the international markets.

But, while the US Federal Reserve and the Bank of Japan are rapidly printing money, the ECB is reining in its stimulus, with banks paying back some of the cheap money it doled out last year.

That could drive the euro even higher, which is the last thing the eurozone economy needs right now.

French finance minister Pierre Moscovici yesterday warned of the effect a rising euro could have on European growth. But he was rebuffed by German officials, who promptly said that exchange rates should not be manipulated.

The heated rhetoric has obviously got some people worried, prompting the G7 statement today. Reuters has a good backgrounder here.

Updated at 10.37am GMT

10.12am GMT

Rajoy says ‘business as usual’

Mariano Rajoy’s message was one of business as usual, reports our correspondent in Madrid, Giles Tremlett, who is at the Economist conference, where the Spanish prime minister was speaking.

He writes:

A characteristically bland appearance by Mariano Rajoy at The Economist conference in Madrid this morning did not produce startling headlines but did show that the Spanish PM is forthrightly intent on continuing with both austerity and reforms.

The word corruption, which is what most worries Spaniards after unemployment and recession, did not pass his lips – and he did not accept that the two party system in Spain has become a problem, increasing corruption levels and damaging the country’s reputation elsewhere.

He continues to insist that Spain will grow again towards the end of the year or next year. He clearly is not interested in changing the constitution either to allow Catalonia a right to self-determination or to change the system of political parties and the way it operates.

More reforms will come this year to further reduce the size of the public administration and to turn Spain itself into a single market, getting rid of barriers erected by regional governments.

The overall message was one of business as usual in government – Rajoy’s priority is the economy and other matters appear to be simple distractions.

Updated at 10.34am GMT

10.08am GMT

The G7 says it will consult closely with regards to actions in foreign exchange markets. It reaffirms that fiscal and monetary policies oriented towards domestic objectives and countries will not target exchange rates.

The (rather brief) statement in full:

We, the G7 Ministers and Governors, reaffirm our longstanding commitment to market determined exchange rates and to consult closely in regard to actions in foreign exchange markets. We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates. We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will continue to consult closely on exchange markets and cooperate as appropriate.

10.04am GMT

G7 will not target exchange rates

As leaked, the G7 has reaffirmed its commitment to exchange rates set by the market. It says:

Disorderly movements in exchange rates have adverse implications for stability.

9.58am GMT

UK inflation will hit 3% this year

Britons will continue to suffer rapidly rising prices for some time, according to the experts. Our economics editor, Larry Elliott, reports:

The Bank of England is predicting that it will be up to two years before annual price increases fall back to the Government’s 2% target.

Jeremy Cook, chief economist at foreign exchange company World First said: “While this figure suggests that inflation has stabilised within the target range we expect this to be the last reading for a while that sees CPI below the 3.0% level. While the Bank of England’s asset purchase programme isn’t in itself inflationary, the devaluation of sterling is. Our largest import through 2013, because of the Bank’s monetary policy, will be inflation.

“Home-grown price pressures are also increasing with transport, food and utilities boosting upwards in the latter part of 2012; this will continue to erode wage value through 2013, hurting consumer confidence and limiting spending.”

But the government argued that it was not all bad. A Treasury spokesman said:

Inflation is down by almost a half from its peak of 5.2 per cent. The government has taken continued action to help with the cost of living, by announcing a further increase in the tax-free personal allowance and freezing fuel duty for more than two years.

Updated at 10.13am GMT

9.53am GMT

The statement on currencies, we are expecting in eight minutes, will reaffirm that G7 members will not target exchange rates, Dow Jones reports, citing and EU source.

Updated at 10.13am GMT

9.50am GMT

UK inflation will stay above 2% target – economist

UK inflation is likely to stay above the Bank of England’s 2% target for a while yet, says Capital Economics.

Vicky Redwood writes:

Inflation held at 2.7% for the fourth month in a row in January (in line with the consensus forecast) and is likely to rise a bit further before falling later this year.

Given the clues in last week’s MPC statement, it looks like tomorrow’s Inflation Report will show inflation projected to be above its target for most of the next two years, partly reflecting the inflationary impact of sterling’s recent fall. Nonetheless, the Committee has already said that it is prepared to “look through” the increase.

Indeed, if the economy continues to struggle, above-target inflation should not be a barrier to further stimulus. What’s more, we still expect inflation to fall back towards the end of this year as underlying price pressures fade further.

The main factor keeping inflation high was, apparently, alcohol, where prices recovered after the Christmas sales.

9.33am GMT

UK inflation sticks at 2.7%

In the UK, inflation remains stubbornly high at 2.7%. Although that was slightly better than forecasts of a rise to 2.8%.

The wider measure of retail prices came in slightly higher than expected at 3.3%.

We’ll have all the reaction to that news, as it comes in.

9.24am GMT

G7 to make statement on currencies

Having said that the meeting of the 27 European finance ministers may not be that dramatic, it seems there will be a statement on currencies.

Reuters is reporting that the G7 will publish a statement on currencies at 10am, citing a source at the Ecofin meeting of the finance chiefs.

9.19am GMT

There’s nervousness in the markets ahead of the UK inflation figures (due out in 10 minutes). The pound has fallen to a six-month low against the dollar and slipped against the euro, with investors reportedly anxious about the bleak outlook for the UK economy.

Updated at 10.14am GMT

9.13am GMT

And that is that. Unsurprisingly, there were no questions allowed from the floor. But we’ll have plenty more from Spain during the day, when ECB chief Mario Draghi comes to town.

9.11am GMT

Draghi’s OMT decision was correct – Rajoy

Rajoy says Draghi’s decision to announce the OMT bond-buying programme was correct. The pair meet later in the day to discuss it further. Spain is not yet eligible for ECB help in bringing its borrowing costs down because it is not part of a bailout programme.

He concludes:

I promised not to raise taxes. I have not kept my promises, but I think I have carried out my duties.

Updated at 9.21am GMT

9.02am GMT

Asked about the financing of political parties, Rajoy says that it is not so much a problem with the regulations but with compliance with the regulations. Still, he confirms that there will be an announcement with regards to improvements in this area in the coming days.

Updated at 11.33am GMT

8.53am GMT

Catalonia will not separate from Spain – Rajoy

Rajoy insists that Catalonia will remain part of Spain.

Updated at 9.26am GMT

8.46am GMT

Rajoy says doubts over Spain’s public finances have been removed, and the focus for Spain is now on growth.

Updated at 10.15am GMT

8.36am GMT

The Economist is asking whether the Spanish people have lost faith in their two main parties.

Rajoy gives a very long answer. He says Spain is lucky in that it does not have extremist parties.

It is true that there are lots of things that can improve. But Spain is a country with a free press.

8.30am GMT

Spanish PM predicts economy will grow by end of 2013

Rajoy says Spain’s economy will return to growth in the latter part of 2013 and in 2014.

Updated at 9.26am GMT

8.24am GMT

Spanish PM Mariano Rajoy has started his speech at the Economist conference, but so far it’s all about the Spanish economy. You can watch him live here. We’ll wait and see if the Economist questions him on the secret payments scandal.

The magazine last week printed a scathing critique of Rajoy, calling for a public inquiry into the scandal. It wrote:

The problem facing Spain is that the only people who can clean up this mess are those who created it. Alongside a proper inquiry, Mr Rajoy should start cross-party talks to reform the party system. Otherwise both he and his traditional opponents may drown in a wave of angry populism.

Updated at 10.15am GMT

7.57am GMT

Banks should pay to wind down rivals – ECB

Banks should pay to wind down their failing rivals, but sometimes taxpayer money will be needed in this process, ECB vice-president Vitor Constancio said this morning.

Reuters reports:

There may be a need for “temporary use of public money when, for example, a bridge bank needs to be created” Cosntancio told a bank regulation conference in Helsinki.

The contribution of public money should be in the form “of credit lines that need to be repaid later on”.

He added that banks should be the first line of funding for any bank resolution schemes.

Updated at 10.16am GMT

7.51am GMT

Moody’s cuts growth outlook for G8

Also overnight, rival ratings agency Moody’s cut its outlook for the world’s advanced economies, even as risks to the global economic recovery appear to be diminishing.

It now forecasts real GDP growth for the G8 will be around 1.4% in 2013, 0.2 percentage points lower than its previous forecast in November, reflecting recent weak data.

Despite this revised outlook, Moody’s said factors that may have derailed economic growth have abated following a relative period of calm in global financial markets, with the US steering clear of the fiscal cliff, and the eurozone debt crisis continuing to ease.

7.47am GMT

S&P upgrades Ireland to ‘stable’

There was good news for Ireland overnight, when ratings agency Standard & Poor’s joined Fitch in lifting the country’s sovereign debt rating outlook to stable, after Dublin struck a bank debt deal that improved its chances of exiting its bailout programme by the end of 2013.

Ireland has been subject to biting austerity but looks like it could be on the road to recovery, with economic indicators starting to point the right way. Yesterday, data showed consumer confidence in the country (measured ahead of the bank deal) surged in January from 49.8 to 64.2.

Updated at 7.48am GMT

7.40am GMT

Cyprus banks checked for money laundering before bailout

Eurozone finance ministers yesterday came to what looked like a compromise over Cyprus, with a private company dispatched to look into claims of money laundering on the island before it gets any European aid.

My colleague Phillip Inman reports in today’s paper:

European finance ministers have insisted that Cyprus allows private investigators to check the island’s banks for breaches of money-laundering rules ahead of a €17bn (£14.5bn) rescue deal.

The Eurogroup said investigators would be despatched in a matter of days to the capital Nicosia and will report back to its next meeting in March.

The move follows allegations that Russian oligarchs have deposited billions of roubles in illegal funds in the island’s banks. It was agreed by Cyprus’s government despite concerns that the country is rapidly running out of cash.

Jeroen Dijsselbloem, the Dutch finance minister and head of the Eurogroup, which is comprised of the 17 eurozone members, said the investigation was a precondition for any discussion of the terms of a bailout.

“We have agreed a private firm needs to get involved and we have agreed we need a report in March,” he said.

7.34am GMT

Good morning and welcome back to our rolling coverage of the eurozone crisis and other global economic events.

Spanish prime minister Mariano Rajoy could face his first public grilling this morning, since the scandal enveloping his ruling PP party broke.

Then, later in the day, ECB chief Mario Draghi will speak in Spain’s parliament to discuss the bond-buying programme.

Over in Brussels, the finance chiefs of all 27 EU member states meet this morning but the agenda (for once) is light and nothing conclusive is expected to come of it.

Back in the UK, the ONS will issue key inflation numbers, although markets will await tomorrow’s quarterly inflation report from the Bank of England for clues over where monetary policy is headed.

Updated at 8.14am GMT © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Luis Bárcenas, the man at the heart of the Spanish illegal payments scandal, questioned today. Greek seaman strike broken. Scuffles as Athens farmers hand out food. IFS report: UK missing budget targets. Berlusconi’s popularity keeps rising…

Powered by article titled “Eurozone crisis live Greek ferry workers end strike as crowds flock for free food” was written by Graeme Wearden, for on Wednesday 6th February 2013 17.30 UTC

5.30pm GMT

Greek government holding talks over industrial unrest

Over to Greece again — where we learn the governing coalition partners are now holding talks to discuss how best to handle a range of pressing issues including the resurgence in industrial action

Our correspondent Helena Smith reports that leaders have also been meeting Germany’s main opposition leader today.

She writes:

Prime Minister Antonis Samaras began the talks with his junior partners against a backdrop of protests and mounting discontent. The government’s recourse to mobilization of striking seamen today, and metro workers a few weeks ago, has deeply troubled both of his power-sharing partners especially Fotis Kouvellis, head of the small Democratic Left party. Aides say the meeting will also focus on protesting farmers. The socialist Pasok leader, Evangelos Venizelos, is particularly concerned by the looming showdown between farmers who are enraged by higher taxes and production costs and have threatened blockades of central arteries up and down the country, and a government that under pressure from international lenders has almost no room for manoeuvre.

Meanwhile, says Helena, the German chancellor Angela Merkel’s challenger in the country’s autumn general election has also been visiting Athens – and, it would seem, saying all the right things.

She writes:

He may be gaffe prone back home but in Greece Peer Steinbruck, the Social Democrat candidate for the German chancellorship, has been busy making statements that are music to the ears of those who met him today. The politician said it was clear that the debt-choked country “needs time to succeed in its stabilisation and for people to regain confidence.”

After holding talks with his fellow Social Democrat Evangelos Venizelos, the German leader insisted that confidence in Greece was vital if it was to lure foreign investment again.

“Confidence is absolutely necessary for investments not just from Greeks but foreigners because very simply … austerity alone cannot bring results,” he said noting that Greek workers and pensioners had already suffered cuts in the range of 30 and 40 percent.

The social democrat who was also given an overview of the Greek economy by finance minister Yiannis Stournaras added that “measures that would not be imposed on our own people should not be imposed on another country.”

5.05pm GMT

Berlusconi’s popularity keeps rising

Hello again. Some rather alarming news from Italy – Silvio Berlusconi narrowed the lead of front-runner Pier Luigi Bersani to within the margin of error of an opinion poll for the first time.

With the elections taking place on February 24th and 25th, the coalition of Berlusconi’s People of Liberty Party and the Northern League is now attracting 29.4% of the vote, up 0.1%.

Bersani’s left-leaning coalition is polling at 33.1%, down 0.2 percentage points.

The polling data has a margin of error of 4%, so Berlusconi could actually be ahead — having pledged to abolish Italy’s unpopular property tax.

The election is likely to be decided in a couple of regions, including Lombardy in the north. It’s looking increasingly close….

More here

2.27pm GMT

Germany cool on France’s euro views

Germany has hit back at the suggestion from the French president, François Hollande, that the euro was overvalued – and that new exchange rate controls are needed.

German chancellor Angela Merkel’s spokesman, Steffen Seibert, argued that the euro was not overvalued, if you took a long view.

Via Reuters, here are the quotes from Seibert:

If you look at the historic context, the German government is of the view that the euro is not overvalued at the moment.


There will certainly be a conversation about that … but the view of the German government is that exchange rate policy is not a suitable instrument to increase competitiveness…You only achieve short-term impulses through targeted devaluation. A long-term strengthening of competitiveness is not achieved in that way


Our basic conviction is that exchange rates should reflect economic fundamental data.

PS: updates may be light this afternoon due to other events….

Updated at 2.40pm GMT

12.51pm GMT

Poland’s central bank has cut its headline interest rate by a quarter-point, to 3.75%, in the latest example of monetary policy easing.

12.50pm GMT

Photos: Protests in Athens

Here are some more photos from the protests at Athens’ Piraeus port today: (see 11.20am):

Updated at 1.53pm GMT

11.34am GMT

Video: Free food giveaway in Athens

Meanwhile, Helena reports that Greek media are running shocking footage showing desperate Greeks fighting with one another earlier today outside the agriculture ministry in central Athens, where farmers, protesting agianst production costs, were handing out free fruit and vegetables.

Here are two clips from the scene:

In commentary run alongside the video, the Greek news portal Newsit described the scenes that followed the farmers’ decision to set up a makeshift market as “chaotic.”

Newsit added:

These people are not beggars, they are the victims of an economic crisis that like a hurricane has swept over and levelled entire families.

They are people next door who until yesterday had jobs and lead a normal life. Today, these people, swallowing their pride and dignity, are going wherever they can to find a little free food, standing in line as they did today in Vathis square.

Updated at 11.41am GMT

11.20am GMT

Protests as Greek ferry workers forced back to work

A huge rally is underway in the port of Piraeus, in Greece, as protesters gather in solidarity for striking seamen who were forced to return to work this morning or be sacked.

Other workers are now striking in sympathy.

Our correspondent Helena Smith reports:

Thousands of communist militants, unionists and other supporters have converged on Pireaus to denounce the government’s decision to mobilise seamen this morning.

The KKE communist party leader Aleka Papariga also joined the rally as political forces opposed to the strident terms of the bailouts debt-received Greece has received from the EU and IMF hit back in solidarity for the seaman.

Crews and dock workers returned to work under threat of being fired — with the first ferries setting sail and riot police leaving the port — but other sectors have now walked off the job in a massive display of support for the strikers. At noon local time employees operating bus lines, trolleys and the suburban railway network began a four-hour work stoppage as the civil servants union, ADEDY, and the country’s biggest private sector force, the General Confederation of Greek Labour (GSEE), retaliated with a 24-hour strike.

Both unions have released withering statements decrying the conservative-dominated coalition’s “undemocratic” decision to break up the seamens’ strike.

The ADEDY union said:

ADEDY wholeheartedly denounces the government decision to move ahead with the policy of mobilizing striking seamen.

It is the second time in less than two weeks that it has resorted to this anti-democratic practice of penalizing workers and strike action, confirming with its action that democracy, and the fundamental rights of workers, have effectively been suspended.

The government, ADEDY continued, should know that the “systematic undermining” of the hard-earned rights of unions and workers “violate the country’s constitution and international and European treaties protecting the rights of workers.” The use of martial law “in a democratic European” was outrageous.

The president of the Panhellenic Union of Seamen, Antonis Dalacogiorgos, said protesters would march on the merchant marine ministry within the day while the union’s central committee would also meet to decide on what course of action to take.

Updated at 11.26am GMT

11.07am GMT

How eurozone breakup would send UK national debt soaring

Another line from the IFS Green Budget – it predicts that a euro breakup would send UK into a deep recession, pushing national debt above 100% of GDP.

Here’s the graph (via Sky’s Ed Conway, whose also at the IFS briefing)

Updated at 11.10am GMT

10.33am GMT

IFS Green budget predicts more blues for the UK

Bad news for chancellor George Osborne, and the rest of the UK, from the Institute for Fiscal Studies.

In its latest Green Budget, the IFS warned that Britain will have borrowed £64bn more than expected by the time of the next general election in 2015.

It also predicted that 1.2m public sector jobs will have been cut by 2018 – 300,00 more than previously estimated.

The Guardian’s economics editor, Larry Elliott, is at the event, and radios in that:

The UK’s leading tax and spending experts said that the public finances would be in a worse state in 2015 than permitted under the plans made by the last Labour government to tackle the deficit.

In its annual health check on the public finances, the IFS said the chancellor was allowing extra borrowing to take the strain during the current parliament at the expense of another bout of austerity after the 2015 election.

On the eurozone, the report (produced with Oxford Economics) predicted a 0.2% contraction this year – with the risks ‘balanced’ (so a less worrying situation than last year).

Updated at 11.01am GMT

10.08am GMT

Key event

Japan’s Nikkei index closed at its highest level for four and a half years this morning.

It jumped by 3.8% in its biggest one-day rally in almost two years, finishing 416.83 points higher to 11,463.75.

The trigger was the news yesterday that Bank of Japan governor Masaaki Shirakawa is stepping aside three weeks early – meaning the process of priming the printing presses, driving inflation towards 2% and going for growth can begin a bit earlier.

Updated at 10.26am GMT

9.46am GMT

ArcelorMittal dented by Euro woes

Europe’s economic woes have hurt the world’s largest steelmaker, ArcelorMittal.

ArcelorMittal posted a net loss of $3.99bn (€2.94 billion) for the 2012, with sales down 14%.

The heavy loss was mainly due to a $4.8bn of charges and write-downs related to its European operations, where it has closed one factory in Belgium and mothballed another two, in Spain and France.

Chief executive Lakshmi Mittal pointed the blame firmly at Europe:

2012 was a very difficult year for the steel industry, particularly in Europe where demand for steel fell a further 8.8%.

He added that this year will also be tough:

Although we expect the challenges to continue in 2013, largely due to the fragility of the European economy, we have recently seen some more positive indicators.

The closure of ArcelorMittal’s plant in Belgium will cost 1,300 jobs, and is deeply unpopular. Workers took to the streets to protest late last month:

Updated at 9.47am GMT

9.35am GMT

Shares up again

European stock markets are mostly up again in early trading, clawing back some more of Monday’s losses. Eurozone fears continue to abate….

FTSE 100: up 32 points at 6314, +0.5%

German DAX: up 18 points at 7683, +0.25%

French CAC: up 10 points at 3705, +0.28%

Spanish IBEX: up 52 points at 8144, +0.6%

Italian FTSE MIB: down 13 points at 16698, – 0.07%

Mike van Dulken, head of research at Accendo Markets, says trader are:

prepared to overlook eurozone woes, giving greater weight to the improved [economic] macro outlook.

Updated at 9.42am GMT

9.26am GMT

Speaking of Greece… there is deep concern that the country’s neo-Nazi Golden Dawn party has begun a support drive in Germany.

Golden Dawn has set up a cell in the southern German city of Nuremberg, from where it plans to target young Greeks who have moved to Germany seeking employment.

As we reported last night:

Greek community leaders in Germany have condemned the arrival of the party, also known as Chrysi Avgi, and called on authorities to clamp down on a group that they said had shown its readiness to use violence in Greece and could attempt to do the same in Germany.

Golden Dawn, which has close to 20 seats in the Greek parliament, has described the move on its website as the “answer of expat Greeks to the dirty hippies and the regime of democratic dictatorship in our homeland”.

More here

Updated at 9.27am GMT

9.06am GMT

Riot police sent into Piraeus harbour

Here’s the latest details of the attempt to break the Greek seaman’s strike this morning, via AFP:

Riot police were sent to Greece’s main harbour, Piraeus, early on Wednesday to end a strike by seamen that has disrupted ferry services to the country’s myriad islands for nearly a week.

Television footage showed a cordon of riot police deployed at the harbour to keep a strike support force away from ships taking on passengers and cargo.

8.37am GMT

High court judge to quiz PP ex-treasurer

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

The Spanish cash-for-contracts row that broke last week continues to dominate our attention this morning. Luis Bárcenas, the former treasurer of the governing People’s party, will face an anti-corruption prosecutor today.

Bárcenas will be quizzed on those dramatic allegations that he ran a secret scheme where senior party officials received secret payments from business people, who were rewarded with government contracts.

High court judge Pablo Ruz has also begun a probe, after documents dramatically published last week showed that up to €22m was concealed in a secret ‘slush fund’ run by Bárcenas. If true, those involved could have broken rules on money laundering and tax fraud.

El Pais reports this morning that Ruz’s investigation isn’t limited to Bárcenas:

Ruz has also issued an injunction against Jesús Sepúlveda, the former mayor of Pozuelo, an upscale Madrid dormitory town, to answer questions on alleged irregular payments and gifts made to him and his family by the Gürtel corruption ring in the period 2000-2005.

Sepúlveda is the former husband of Health Minister Ana Mato, who has denied receiving luxury goods and trips as gifts from the ring.

Despite the legal activity, speculation that the scandal could force Mariano Rajoy to resign as prime minister have somewhat died down. There’s a growing belief that Spain’s slow-moving legal system means Rajoy is safe, for a while at least…

Also coming up this morning… Greek police will attempt to end a six-day strike by its seamen. As Helena Smith reported from Greece last night:

The Greek government said that as of 6am Wednesday protestors will be issued with mobilisation papers that will give them little choice but to return to work or be fired.

Addressing reporters, Kostas Mousouroulis, the merchant marine minister, said: “The government has made every possible effort to satisfy the demands of seamen. We exhausted dialogue and came up with specific solutions.

We’ll be tracking the latest developments in Spain, Greece, and beyond through the day – including the OECD’s latest verdict on the UK economy (at 3pm GMT).

Updated at 8.55am GMT © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.