Unemployment and employment statistics

Minutes of latest monetary policy committee meeting signal interest rates could rise sooner than 2016. Bank of England policymakers have been surprised at how rapidly growth has picked up and unemployment has fallen since the spring…


Powered by Guardian.co.ukThis article titled “Growing evidence of ‘robust recovery’ in UK economy, says Bank of England” was written by Heather Stewart, for theguardian.com on Wednesday 23rd October 2013 10.34 UTC

Bank of England policymakers have been surprised at how rapidly growth has picked up and unemployment has fallen since the spring, raising the prospect of an earlier-than-expected rise in interest rates.

The Bank’s nine-member monetary policy committee voted unanimously to leave policy unchanged earlier this month; but minutes of their meeting showed that a strong increase in employment, and upbeat readings from business surveys, had prompted them to upgrade their expectations for growth.

Discussing the upbeat jobs data released this month, the minutes said: “It now therefore seemed probable that unemployment would be lower, and output growth faster, in the second half of 2013 than expected at the time of the August Inflation Report.”

They described the latest news as pointing to a “robust recovery in activity” in the UK – though they also warn about the lack of the kind of rebalancing in the economy, towards trade and away from consumer spending, that the coalition was hoping for. “There is a risk that the recovery in the United Kingdom might be less well balanced between exports and domestic consumption than was ultimately needed.”

One of the Bank’s first decisions after its governor, Mark Carney, joined in July was to issue “forward guidance”, promising to keep interest rates unchanged until the unemployment rate falls to 7%, barring a surge in inflation.

When the policy was unveiled in August, Carney said he expected unemployment to remain above 7% at least until 2016; but a slew of data, including a fall in the unemployment rate to 7.7% in the three months to July, had raised doubts in markets about whether the Bank would wait so long before deciding to act. Wednesday’s minutes suggest the MPC may be coming round to the idea that the 7% threshold could be reached sooner, though the committee stressed that “it was too early to draw a strong inference about future prospects from the latest data”.

Simon Wells, UK economist at HSBC, said: “We expect the MPC to bring forward the timing of unemployment hitting the 7% threshold by around two quarters when it revises its forecasts in November.”

Discussions among MPC members also highlighted the growing strength of Britain’s housing market, which they expect to boost the economy. “Overall, indicators pointed to continued house price rises. This would increase the collateral available to both households and small businesses, which could provide some further support to activity,” the minutes say.

In the latest indication of a revival in the property market, the British Bankers Association announced on Wednesday that the number of mortgages approved by UK banks to fund house purchases reached 42,990 in September, its highest level in almost four years and well above the previous six-month average of 42,990.

The BBA data, which covers the run-up to the launch of Help to Buy mortgage guarantee scheme, shows that activity in the housing market continued to gain momentum over the summer, with house purchase loans showing the biggest increase month-on-month.

The BBA said its members approved new loans worth a total of £10.5bn in September, up from £9.9bn in August and above the six-month average of £9bn. Of this, £6.7bn was for house purchases and £3.5bn for remortgages. The remainder was other secured borrowing.

The BBA statistics director, David Dooks, said: “September’s figures build on the growing picture of improved consumer confidence, with stronger gross mortgage lending, rising house purchase approvals and increased consumer credit.”

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Just 148,000 new jobs created in US last month, while the unemployment rate falls to 7.2%. An average of just 143, 000 new hires were made each month between July and September, compared to 209,000 p/m at the end of 2012. Bond prices jump, dollar drops…


Powered by Guardian.co.ukThis article titled “Tapering off the table as US jobs data disappoints – live” was written by Graeme Wearden, for theguardian.com on Tuesday 22nd October 2013 14.51 UTC

The Royal Mail flotation has taken another twist today, with the news that a leading activist hedge fund has amassed a 5% stake.

A regulatory filing from Royal Mail this afternoon showed that The Children’s Investment Fund now owns more than 58 million of the Royal Mail’s 1bn shares, giving it a 5.8% stake (thus triggering the announcement).

This appears to make TCI the biggest private shareholder (the government was left with more than 30% of the stock after the float.)

TCI, based in London, is well-known for taking stakes in companies and agitating for change, so Royal Mail’s management could face a rough ride.

It was founded a decade ago by manager and philanthropist Chris Hohn, who co-founded the Children’s Investment Fund Foundation (CIFF) charity with his wife to help under-privileged children in the developing world.

Business secretary Vince Cable had promised that responsible, long-term investors would be favoured in the allocation process. It’s not clear how many shares TCI received in the float, and how many it has mopped up since.

Shares in Royal Mail have dropped today, down 1% at present to 492p. They floated at 330p.


Co-op Group chief stepping down

The Co-operative Group’s chairman, Len Wardle, is to step down, as the turmoil surrounding the organisation continues to swirl.

Co-op Group just announced that Wardle will make his decision official at the next half-yearly meeting of members on 2 November, and depart in May 2014. The news comes a day after US hedge funds forced it to surrender control of its Bank yesterday. 

In a statement, Wardle said he should be replaced by an independent chairman.

On 2 November I intend to give the membership my notice that I will relinquish my Chairmanship in May 2014. In August this year, I informed the Board that it was my intention to step down at the end of my term of office whilst also making clear that I wanted to drive hard the reforms to modernise the Group. During the last year, we have appointed Euan Sutherland as Group CEO and started the changes that I believe will make The Co-operative Group stronger than ever.
The Co-operative is at its best when it is reforming and I want this change to continue. I want to persuade our members that The Co-operative Group should now look to an independent chair to lead the business, working side-by-side with the members who represent the movement.
I am immensely proud to have led the Group and to have chaired The Co-operative over the last six years.

The Group’s CEO, Euan Sutherland, commented:

Firstly, I want to thank Len for his leadership and commitment to The Co-operative over the last six years. Under his guidance we have made significant progress on beginning the reform which we will announce as planned in May 2014. I look forward to working with colleagues and members to ensure that we return the business to growth over the coming years.

As I covered extensively this morning, Sutherland’s predecessor was very critical of the Co-op Group’s structure while being quizzed by MPs today. Peter Marks said partly blamed the problems at Co-op Bank on the fact the organisation has a toe in too many areas.

Wall Street has opened a little higher on the back of the US jobs data, with the Dow Jones up 28 points, or 0.17%, in early trading. The S&P 500 and Nasdaq are also gaining a little.

Back to the UK briefly — the bosses of Britain’s largest energy firms are being hauled before MPs to explain the recent rash of price hikes, after tariffs jumped by upwards of 8%.

Big six energy firms to face MPs following price hikes

Wall Street correspondent Dominic Rushe flags up one cheerful note — the drop in the US jobless rate, to 7.2%, was caused by more people getting jobs rather than simply dropping out of the labour market altogether.

Dom writes:

September’s fall appears to be driven by employment growth, one bright spark in an otherwise lacklustre report. The largest job gains were in construction, wholesale trade, and transportation and warehousing.

Employers have now added an average of 185,000 positions each month over the last year as of September, but gains have slowed in recent months. The number of long-term unemployed (those jobless for 27 weeks or more) has remained high and was little changed in September at 4.1 million. These individuals accounted for 36.9% of the unemployed. The unemployment rates for teenagers (21.4%), black people (12.9%) and Hispanics (9%) also remained high and unchanged.

Stock markets in Europe have pushed higher on the back of the disappointing jobs data from America.

The FTSE 100 is up 30 points at 6684, a gain of 0.46%, having hit the highest intraday level since the start of August.

Germany’s DAX is up another 0.8% and heading for yet another record high.

The prospect of yet more Fed stimulus is getting traders drooling, even though the real message from today’s Non-Farm Payroll is that the US labour market is weak.

Barclays also reckons the Fed will keep stimulating for several more months…

Stock markets will climb higher by Christmas as the Federal Reserve keeps pumping money into the US economy, predicts Joe Rundle, head of trading at ETX Capital.

Rundle reckons the Fed might not start tapering its bond buying programme until the middle of next year:

Jobs generation remains weak, other facets of the US economy are also suffering from weakness – yesterday’s weaker existing home sales report for example and more importantly, fiscal uncertainty in the US remains. Lawmakers will have to re-address the debt limit and funding for the Treasury early next year; this makes the Fed’s job much harder in terms of an exit plan for QE.

At the same time, if the trigger is not pulled by current head Ben Bernanke before he leaves at the end of 2013, it will be the duty of the incoming Fed President who could be Janet Yellen – an endorser of loose monetary policies [low interest rates and accommodative easing tools], otherwise known as a dove in the market.

…Most likely it will be mid-2014 or late before we see the first tapering shot fired. Risk assets are to remain well supported through to year-end; S&P500 to hit 1810 by end of 2013, FTSE100 to hit 6850.

This graph also shows how job creation in America remains subdued:

The weak US jobs report shows that the Federal Reserve was quite right last month, when it decided not to start to ‘taper’ (or slow) its programme of buying $85bn of government bonds and mortgage debt.

Economist Justin Wolfers flags up that US job creation is faltering – an average of just 143, 000 new hires were made each month between July and September, compared to 209,000 per month at the end of 2012.

David Nicholls, alliance manager at UKForex, agrees that the US labour markets looks too weak for the Fed to start tapering its bond-purchase scheme:

Today’s non-farm payroll data (148K vs 182K expected) is another nail in the coffin for tapering anytime this year.

The numbers just aren’t supporting an immediate move by the Fed, and the dollar is softening further as a result.

It’s also difficult to see that October’s data is going to be any more positive given the recent government shut down. We expect data to continue to support a delayed tapering decision this year – and that will weigh heavily on the US dollar.

Our first take on the Non-Farm Payroll is here:

The US unemployment rate remained at the lowest level since 2008 in September, according to figures released on Tuesday that were delayed by the federal government shutdown.

According to the Bureau of Labor Statistics, the unemployment rate remained “little changed” at 7.2%, with the economy adding 148,000 jobs. But the US economic recovery remains fragile, with employers adding jobs at a slower rate than the previous month.

US jobless rate ‘little changed’ at 7.2% as recovery stays on sluggish pace

Bonds jump, dollar slides after Non-Farm Payroll

The price of US Treasury bills is jumping on the news that the US jobs market was weaker than expected in September. This has driven down the interest rate (yield) on 10-year bonds to a three month low.

The dollar also took an immediate dive, pushing the pound up almost half a cent to $1.6183.

That backs up the idea that the Federal Reserve won’t start tapering its QE programme for some months….

The early reaction from analysts and economists is that September’s non-farm payroll report means the Fed will keep stimulating the US economy at its current rate until 2014.

An increase of just 148,000 new jobs is quite a miss compared to the consensus of 180,000 (some bullish analysts expected to see a >200,000 reading).

Experts on Bloomberg TV are agreed that this is a bad jobs report, particularly in the private sector where just 126,000 new jobs were created in September.

This is not what the Federal Reserve is looking to see before it starts to ease its $85bn/month quantitative easing programme, one suggests.

The US labour force participation rate is unchanged, at 63.2%.

Previous US unemployment data has been revised, too.

The Bureau of Labour Statistics says 193,000 new jobs were created in August, up from 169,000 new jobs.

But July’s data has been downgraded, to 89,000 new jobs from 104,000.

Non-Farm released

Breaking: 148,000 new jobs were created in America last month. That’s less than expected.

The jobless rate is down, though, from 7.3% to 7.2%.

City forecasts for non-farm payroll vary considerably, as ever – the consensus is that 180,000 new jobs were created in America last month, leaving the jobless rate unchanged at 7.3%.


US jobs data imminent

Right, time for the next order of business – the delayed US jobs data.

The Non-Farm payroll for September, showing how many new jobs were created in America last month, is due out any moment (8.30am New York, or 1.30pm BST)

It’s been delayed by more than two weeks by the US government shutdown, and economists are eager to learn how the labour market was performing before Capitol Hill plunged the country into uncertainty in that row over the US budget and the debt ceiling…..


That really was quite a session between Peter Marks and the Treasury committee over Co-op’s lurch into crisis (highlights start here).

The key points, I think, are:

His warning that the Co-operative Group was, and is, spread too thinly, which helped to drive Co-op Bank into such difficulties. That is going to fuel fears over the mutual’s future, now two US hedge funds have taken control of the Bank via its refinancing.

The admission that Co-op should never have merged its financial service arm with Britannia Building Society. If he had a crystal ball, he’d not have done it. (why don’t board rooms include crystal balls as standard fittings?)…

…and the insistence that the ill-fated deal to buy hundreds of Lloyds branches was not a bad decision.

Marks’ refusal to take full personal responsibility. He tried to pin the blame for the Co-op Bank/Britannia merger on the two chief executives. And while he conceded being the “driving force” behind the Lloyds bid, he said former Co-op Bank CEO Neville Richardson had played the main role.

• The declaration that a hedge fund can’t be ethical will worry any Co-op Bank customer who is worrying about its future. As Marks put it:

Hedge funds exist to maximise profits…to be ethical, you can’t do that.

This raises the issue of whether Co-op Bank should continue to use the co-operative title, now it’s under the control of two US hedge funds. As Marks said “it’s not a Co-op” any more.

And Marks’s comments on why it’s so hard for a mutual bank to compete also suggest the era is over.

• We still don’t know exactly how the Co-op was allowed to continue with the Lloyds branch bid until Spring 2013, despite concerns over its capital position. Marks blamed the PRA regulators for ‘moving the goalposts’ and forcing the Co-op to seek more capital.

• MPs didn’t look convinced. The Treasury committee seemed sceptical on occasions, and incredulous on others, as Marks tried to avoid taking blame. As Brooks Newmark put it: “It says it on the tin. You were the leader” .

And Andrew Tyrie appeared most unimpressed at the sight of another executive explained how decisions were taken collectively. Where’s the individual accountability?…


After more than two hours of grilling, Andrew Tyrie releases Peter Marks from the Thatcher Room.

It’s not been an easy morning for you, or anyone else, Tyrie remarks. But a lot of people have lost money out there, not just bond holders, so it’s important that the session took place.

Any final words?

Marks, who can’t have enjoyed the session one little bit (the accusation of selective amnesia was probably the low point), says that he’s “spent his life working for the Co-op”. What has happened is a tragedy for the company, customers, and him personally.

However, despite everything, Marks believes the Co-operative Group (whose history dates back to the Rochdale pioneers of the 19th century), still has “a good future”.

Marks defends his record

Andrew Tyrie is returning to the question of Peter Marks’s own role in the Co-op’s failures. Didn’t you make “very big mistakes”?

Marks tries to shimmy the question. Taking over Britannia was indeed a mistake, but Project Verde (the aborted bid for Lloyds’ branches) wasn’t. That deal would have given the Bank the market share it needed, and fixed many of the regulator’s worries.

He also insists that the Verde project had everyone’s support , this wasn’t Peter Marks going “gung ho”.

He also defends another scheme, Project Unity, which was designed to allow Co-op Group to sell its products across its various operations.

John Thurso MP is asking if “mutuals” have a future – was the Co-op’s Bank’s mutual status responsible for its problems, or was it a straightforward case of bad management?

Peter Marks doesn’t believe it’s mutual status was the cause, except it couldn’t raise capital as easily as a PLC (which could tap the equity markets for funds).

So is the model viable, Thurso asks?

Marks: it’s very hard for a mutual to be a “real, serious competitor” in the UK banking market, which he dubs a “high volume, low margin business”, subject to costly regulation and high capital reserve requirements.


Brooks Newmark becomes the latest MP to question Peter Marks, and to question his claim that he is not responsible for the blunders that caused Co-op’s present problems.

He dismisses Marks argument that he was only a non-executive director of Co-op Bank at the time of the Britannia merger, saying he cannot “absolve responsibility” for mistakes.

Newmark accuses Marks of being in “complete denial”:

Newmark is also homing in on KPMG, who advised Co-op on both the Lloyds branch deal and the takeover of Britannia building society (details here). Did they botch the job and give ‘bad advice’?

Marks argues that the advice was “right at the time”, and again cites Britain’s economic problems (an excuse which the committee don’t appear impressed with)

Marks suggests the Co-op should get some credit for walking away from the deal to buy hundreds of branches of Lloyds.

We’re back on the issue of Co-op’s structure, with Peter Marks repeating his earlier warning that the Group is spread over too many areas – from supermarkets to travel via funerals and legal services.

If I failed at anything, it was not getting the Group board to heed my warnings, Marks says.

Andrew Tyrie pounces. If we look for the documentary evidence of these warnings, will we find it?

Probably not, Marks concedes.

No evidence of “your devastating critique”?

Marks suggests not, but is sure his former colleagues will remember….

Co-op ex boss: Hedge funds can’t be ethical

Can a hedge fund be ethical, asks Pat McFaddon MP, pointing to the fact that two US hedge funds now have control of Co-op Bank.

“No,” Peter Marks replies. “Hedge funds exist to maximise profits…to be ethical, you can’t do that”.

In that case, McFaddon asks, should it really be called the Co-op Bank if it’s not the Co-op?

Marks says it’s difficult for him to answer that, but concedes the point.

Peter Marks blames the City regulators for ‘moving the goalposts’ on capital reserves, triggering the £1.5bn capital shortfall at the Bank.

He also insists that the Co-operative Group took seriously the warnings from Andrew Bailey, the Bank of England’s top regulator, about capital reserves and risk management.

Asked about who took the decision to abandon the bid for Lloyds branches, Marks calls it a “collective decision”

Of the Group or the Bank?

Both, Marks replies.


Jesse Norman MP asks Marks if he could face criminal charges for acting as a ‘shadow executive chairman’.

Why? Because Marks says he was a driving force behind the failed bid for Lloyds branches despite not being the Co-op Bank CEO.

Marks says not, insisting the Co-op Group board unanimously voted to look at this deal, as did the board of the Bank.

Andrew Tyrie, the highly respected chairman of the Treasury committee, is asking a lot of follow-up questions. Not a good sign….

Peter Marks: I’m ‘feeling very sad’

Ruffley then reads out details of an interview given by Marks when he stepped down from the Group this year, about how he had risen from humble roots to the top. How does he feel today?

Feeling very sad.

Now it’s David Ruffley MP’s turn.

He warns Peter Marks that his “selective amnesia” had better stop, and demands better answers about when the former Group boss became aware of Lloyds Banking Group’s concerns about its capital weakness

Were there really no alarm bells ringing a year ago?

Marks insists that it only became clear at the start of this year that there was a capital shortfall (which led to the £1.5bn capital raising exercise, in which Co-op Group will only hold 30% of its Bank).


Mark BarnierGarnier MP tells Peter Marks that Lloyds had become aware a year ago that the Co-op Bank was undercapitalised. When did he learn this?

Marks says can’t remember the details of discussions over capital shortfalls.

Barnier is quite surprised. Surely you’d remember when you first learned that your big deal started to crash? 

Marks replies that the deal wasn’t crashing at that stage.


Marks also denies shirking responsibility for Co-op Bank’s woes, saying he was absolutely prepared to take the blame for other deals that he was fully involved in. The Lloyds bank branch deal doesn’t fall into this area, he claims.

Andrew Tyrie questions whether ‘tragedy’ is the right term to use for Co-op’ Banks woes — surely a tragedy is something unavoidable. This mess was quite avoidable.

Marks disputes this, and agrees with the suggestion that the Co-op Bank was an “innocent victim” of the financial crisis.

Marks repeats that the Co-op Bank’s slide into the hands of two US hedge funds is a “tragedy”, but claims it could be a good thing for the wider Group.

It will force the Co-operative Group to focus on key areas and not stretch its capital, he suggests, harking back to his earlier warning that the organisation is spread too thinly.

Labour MP John Mann savages Peter Marks over the situation at Co-op Bank today, accusing Peter Marks and colleagues of being “totally out of your depth when trying to grow the Co-op so rapidly.”

That’s why two US hedge funds are taking control of the Co-op, right?

Marks replies that those two funds are only taking majority control of Co-op Bank, not the wider Group.

Marks says he helped to guide the Group through the “worst recession in living memory”.

Did you make disastrous errors, John Mann inquires:

Marks say that it’s harsh to use the word disastrous, but concedes there were certainly errors.

Treasury committee chairman Andrew Tyrie is digging down into the details of who was actually taking the decisions that led to Co-op Bank’s slide into trouble.

Marks isn’t taking individual responsibility for the failed bid for Lloyd’s branches, saying that Neville Richardson (the Co-op’s Bank’s former) boss took most of the key decisions.

Tyrie says it looks like another example of “everyone collectively moving forward together, and no-one actually running it”.

He asks Marks if he’s read the Banking Standards Commission’s report into the sector, and Marks concedes that he hasn’t read it thoroughly.

What’s the Commission’s key recommendation?

Marks doesn’t know.

It’s that there should be individual responsibility for key decisions, Tyrie replies,.

Marks agrees that he was the ‘driving force’ behind Co-op’s bid for the Lloyds branches, calling it a “great opportunity” to deliver the scale that Bank needed.

But wasn’t it a catastrophic misjudgement, asks Jesse Norman MP ?

No, Marks says, arguing that Co-op Bank’s fundamental problem was a lack of capital. This deal would have brought much-needed capital in.


Onto the details of Co-op’s Bank’s failed bid for the branches being spun off by Lloyds (known as Project Verde)

Was Peter Marks aware of political interference with the Verde process? “Not that I’m aware of,” he replies.

Peter Marks seems reluctant to take too much blame for the Co-op Bank’s troubles, pointing out that he wasn’t personally regulated by the Financial Services Authority to run a bank.

He’s also pinned responsibility for the Britannia merger on Neville Richardson, Britannia’s chief executive at the time who became head of Co-op Bank, and former Co-operative Financial Services boss David Anderson:

The Treasury committee are trying to get a handle on exactly who to blame for Co-op’s woes.

Marks argues that ”we all have to take some degree of responsibility, including me”.

He has concedes that Co-op Bank’s “ethical reputation has been damaged” by the PPI scandal, in which it is paying out over £200m in compensation.

Co-op Bank was forced into trouble by its take-over of the Britannia Building Society in 2009, Marks agrees. With hindsight, he wouldn’t do it again.

Former Co-op chief Peter Marks went on to warn that the Co-operative Group is spread too thinly.

Marks, who stepped down in May 2013, is being asked by Andrew Tyrie about structural problems at the Group. He says:

I think there are areas of governance within the Co-operative that absolutely need to change.

So why didn’t you change then, Tyrie inquires.

Marks replied that he wasn’t on the board of the Group.

He than warns that the group, which runs supermarkets, pharmaceutical branches, funeral services, insurance and banks, is simply involved in too many different operations.

It was, and still is, stretching its capital over too many businesses, Marks added.


Ex-Co-op boss: Bank’s problems are tragic

Over in Westminster, MPs on the Treasury committee are starting to quiz Peter Marks, the former chief executive of the Co-operative Group.

Marks is facing questions over the Co-op’s ill-fated attempt to buy hundreds of bank branches from Lloyds. That bid was scuppered by the discovery of a capital shortfall in Co-op Bank, which eventually led yesterday to the Group losing majority control of its Bank after a battle with US hedge funds.

My colleague Jill Treanor is there, and reports:

The session is being streamed live here - although it has been a little flakey…

UK public finances, the key charts

This chart, from today’s UK public finances, shows how tax receipts rose 7% year-on-year in September, after a weaker August:

And this graph shows how cumulative borrowing since April is lower than a year ago:

UK public finances show improvement

Just in: the UK borrowed less than expected in September, thanks to an increase in tax revenues.

Britain’s Public Sector Net Borrowing, excluding the cost of financial interventions, came in at £11.072bn, beating forecasts of £11.2bn and better than last year’s £12.067bn.

The Office for National Statistics reported that central government accrued current receipts rose to £44.8bn, up £2.9 billion or 7.0% compared with September 2012.

The ONS explains, though that the monthly data needs treating with caution:

The higher receipts in September 2013 (compared with September 2012) came from taxes on production and taxes on income and wealth. However, the relatively large increases seen in taxes on income and wealth have been affected by monthly volatility. These are related to timing effects which offset the falls seen in August.

The ONS also reported that Britain’s ‘underlying’ Public Sector Net Borrowing since the start of April has now reached £56.7bn, 9.4% lower than a year ago.

By other measures, though, borrowing is actually up this year (due to various one-off factors like putting the Royal Mail pension fund onto the public books last year)

I’ll post some charts now….

Charlie Bean, one of the Bank of England’s deputy governors, has urged Europe to crack on and implement banking reform.

In a wide-ranging speech to the Society of Business Economists, Bean said it was important that Europe used the window created by Mario Draghi, who he credited with saving the euro from break-up.

Bean said:

The euro area is no longer in existential crisis, in part as a result of the willingness of the European Central Bank (ECB) to take redenomination risk off the table through its Outright Monetary Transactions programme.

The countries of the euro-area periphery have also made progress in restoring
competitiveness and rebalancing the composition of demand, though there is still quite a way to go. Member states are working towards the creation of a functional banking union, which has the potential to break the link between sovereigns and banks.

And in preparation for becoming the euro-area banking supervisor, the ECB is planning a rigorous review of the quality of banks’ assets, to be followed by a set of stress tests and, if necessary, recapitalisation. Provided these carry credibility with the market, this could do much to restore confidence in the euro-area banking system.

Bean also said the UK recovery was ‘gaining traction’ (we get new GDP data on Friday), and also defended the BoE’s forward guidance (which means interest rates shouldn’t rise until the labour market improves).

Over in Luxembourg, Jean-Claude Juncker’s long grip on power could finally be slipping.

Although Juncker’s party won the most support in Sunday’s elections, it lost three seats – dropping to just 23 of the 60 seats in parliament.

Opposition parties are beginning coalition talks, as Reuters reports this morning:

Luxembourg Prime Minister Jean-Claude Juncker was facing the end of a 19-year run in power on Tuesday after the centre-right Democratic Party (DP) said it would begin coalition talks with would-be partners, the Socialists and the Greens.

Juncker’s Christian Social People’s Party (CSV) has led governments in the tiny state between France, Germany and Belgium for all but five years since World War Two, but lost three seats in an election on Sunday to leave it with just 23 in the 60-seat parliament.

That was the party’s worst showing since 1999. The Democratic Party and the Socialists both won 13 seats and the Greens six.

“We will contact them to come together tomorrow to see if there is a possibility to work together in the coming five years,” DP leader Xavier Bettel told RTL television. “It’s a realistic option.”

Juncker was a familiar face in the dark days of the eurozone crisis, as leader of the Eurogroup of finance ministers (he stepped down at the end of 2012). Now, his position as Luxembourg’s PM could be at risk…. 

Heads-up. Greek MPs will vote today on whether to withdraw funding from parties whose members face serious criminal charges – the latest step in the clampdown against the extremist Golden Dawn group.

Kathimerini explains:

Greece’s conservative-led government and leftist opposition SYRIZA have reached a common position, with the leftist party confirming last week that it will vote in favor of the bill, which has been drafted by Interior Minister Yiannis Michelakis after extensive consultation with the Parliament’s opposition parties.

Last week MPs voted by an overwhelming majority to lift the immunity of six Golden Dawn MPs, opening the way for a broadening of a criminal investigation into the ultra-right party, which is the real target of the bill being voted on on Tuesday.

Economist Shaun Richards fears Ofgem’s clampdown on energy tariffs is too late.


Downbeat news from Lufthansa has sent the German airline’s shares down almost 4% this morning.

In an unscheduled update, Lufthansa warned that restructuring costs will wipe €200m off operating profits this year, with various ‘project’ costs costing another €100m. More here.

CEO Christoph Franz has been implementing a radical shake-up of the company, cutting thousands of jobs and shifting more traffic to its budget offering, Germanwings. Analysts had expected the company to deliver operating profits of around £917m — it now says it’ll be between €600m and €700m.

A pretty mixed start to European stock market trading, with the FTSE 100 creeping higher (up 0.1%) the German DAX flat, and the French CAC down 0.2%.

The excuse is that traders are waiting for those US jobs numbers at 1.30pm BST:

Mike van Dulken of  Accendo Markets agrees, saying:

 US jobs will be the driver for a break one way of the other. Or much ado about nothing?

Asian markets had also been mixed overnight, although Australia’s A&P/ASX 200 did gain another 0.4% to a new five-year high.

Ofgem hits ScottishPower with £8.5m penalty and tightens tariff rules

After taking quite a mauling in recent weeks over its handling of the energy market, watchdog Ofgem is showing its teeth in two ways this morning.

It has told Scottish Power to repay £8.5m to customers for breaking mis-selling rules, after finding that the agents who knocked on doors and ‘phoned households to suggest they change energy supplier had misled customers.

Ofgem said the penalty would “directly benefit vulnerable consumers and compensate consumers that were misled” by Scottish Power (which ended doorstep visits in 2011).

In a statement, senior partner Sarah Harrison declared:

Today’s announcement is a clear signal to energy suppliers of the consequences of breaching licence obligations and of the importance of taking action to put things right for consumers when they go wrong.

Ofgem has also announced that new rules on energy prices come into effect today, as a time when customers are reeling from large hikes in tariffs. Details are here.

The key points:

• it will prevent firms from raising the price of ‘fixed-term deals’ (sounds fair – the clue is in the name, after all).

• Firms also won’t be allowed to simply roll a customer over onto a new fixed-term contract when their existing one ends.

• “Simpler” tariffs will come in from December, with customers also getting “clearer information” in March 2014.

A case of better late than never? 

There’s also nothing here to prevent a company hitting consumers with the hefty price hikes seen in recent days.

As Ofgem boss Andrew Wright explains, the idea is to help customers ‘vote with their feet’, to keep the industry playing fair:

In an era of rising prices it is vital that competition works as effectively as possible.

Our reforms seek to give consumers the tools they need to find the best energy deal for them and to ensure that suppliers have to treat them fairly.


Oil price drops

The oil price has dropped again overnight, with a barrel of US crude dropping to $98.79 – its lowest level since early July.

US crude dropped through the $100 mark yesterday, as data showed an rise in oil inventory levels. Traders are also calculating that the economic damage cause by the US shutdown will mean less demand.

Could be good news for motorists, if it feeds through to the pumps…


Non-Farm Payroll, the wait is over….

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

Investors and economists are waiting with eager anticipation for America’s unemployment data, eighteen days late thanks to the disruption caused by the US government shutdown shutdown.

After a Beckettian wait, we finally find out at 1.30pm BST how many jobs were created across the US last month — a key measure of the health of the world’s largest economy at the start of autumn.

Forecasts for the Non-Farm Payroll vary widely (as ever). The consensus is that 180,000 new job were created last month — there could be some lively action if this prediction is way off beam.

Under normal circumstances, the jobs data would indicate if the Federal Reserve is close to turning down the tap on its $85bn/month stimulus package. But the disruption caused by America’s government shutdown has thrown that up into the air.

What else is afoot?

Well, UK public finances are released at 9.30am – showing how much Britain borrowed to balance the books in September.

While in Parliament from 10am, MPs will be questioning the former boss of The Co-operative Group, Peter Marks, a day after the company surrendered control of its Bank to its bondholders (front page news in today’s paper)

Eurozone-wise, we’ll be watching Greece (where the Troika of lenders return next week), Portugal (whose finance minister ruled out a second bailout yesterday), and Italy (where opposition to the 2014 budget was growing).

I’ll be tracking the main events through the day – let me know what I’ve missed!


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US Non-farm payrolls reported below forecasts. Downward revisions mean 74,000 fewer new jobs for the months of June and July. Market reaction: gold up, dollar down. Greek recession slowing. UK trade deficit widens – details and reaction…


Powered by Guardian.co.ukThis article titled “US labour market misses expectations with 169,000 new jobs in August -as it happened” was written by Graeme Wearden, for theguardian.com on Friday 6th September 2013 15.45 UTC

Key event

Europe’s stock markets have closed for the week. There were decent gains in Spain and Italy (both up 1.2%) and little change in London, where the FTSE finished just 14 points higher at 6547.

And government bond yields remain higher today, pushing down bond yields (see 2.01pm)

US trading continues to be volatile, still driven by Syria-related headlines as well as today’s jobs data. The Dow Jones index is back in positive territory for the day, up 40 points at 14977….

And that’s where I’m going to clock off. Back on Monday for more of the same. Thanks, and goodnight. GW.

Back in Greece, schoolteachers have decided to take the sheen off Greek prime minister Antonis Samaras’ much-anticipated speech on the state of the county’s economy tomorrow (details at 11.18am) by announcing rolling strikes later this month.

Our correspondent in Athens, Helena Smith, reports:

Just as Antonis Samaras is preparing to talk up the Greek economy – in a speech that is expected to emphasise that the debt-stricken nation’s dependence on foreign lenders could “soon” be over – unions are girding for battle. Primary and secondary school teachers have announced five-day rolling strikes beginning September 16. Educators in both sectors voted overwhelmingly to conduct the strikes in a massive display of opposition over government plans to lay off thousands of teachers by the end of the year.

The protests, which will begin with a protest demonstration in Syntagma square tonight, are likely to wreak havoc on the education system and be a major embarrassment for a government desperately trying to keep the social peace by insisting that Greece’s days under international stewardship are now numbered. “If need be we will bring the whole system down,” exclaimed one leading unionist as she demonstrated outside the national economy ministry recently. “After so many years of recession and cuts, these measures are totally barbaric.”

Athens’ former mayor Nikitas Kaklamanis, a member of Samaras’ centre right New Democracy party, has added to the gloom telling radio listeners today that the government’s much-touted “success story” was well and truly over.

“Some time ago I asked the finance minister how many investments above one million euro, either by Greeks or foreigners, had been made in Greece in 2012 and do you know what the answer was? Four!,” he said. “To speak about development and growth when that is the official answer is to make a mockery of the situation. I believe that the success story has well and truly been relocated to the past.”

The National Institute of Economic and Social Research thinktank has predicted that the UK economy grew by a rumbustious 0.9% in the three months to the end of August, or more than 3.6% on an annualised basis.

That follows a string of strong economic data in recent weeks, and is an improvement on last month’s reading — when NIESR estimated that GDP rose by 0.7% in the May-July quarter.

The group also predicted slower growth in the months ahead:

Looking ahead, the rate of growth will likely soften, somewhat, over coming quarters. The external environment in the guise of weak demand from the Euro Area and slowing emerging markets will likely limit the rate of the UK’s economic expansion.

And even after such a good August, Britain’s GDP is still 2.7% below its pre-crisis peak, with this recovery still the slowest on record.


First it was Germany’s banks (8.07am) now it’s America’s car industry which is feeling the love from the ratings agencies…

Back in Europe, and the Open Europe thinktank has published an interesting theorette today – about how Germany’s far left Die Linke party could hold the balance of power after the general elections on 22 September:

This is how Merkel could flunk the elections: enter the Far Left

It all relies on the fact that parties need to win 5% of the vote to win seats in the Bundestag, and Angela Merkel’s coalition partners, the Free Democrats, are hovering close to the cliff-edge. Should FPD drop below 5%, Merkel’s CDU would (probably) not win a majority on their own, so Die Linke could prop up a left-leaning coalition instead.

One problem with this theory is that the Social Democrat’s have ruled out a deal with their left-wing friends (or ‘nutters’, as Open Europe puts it). But election results can lead to funny alliances….


Mohamed El-Erian, chief executive of bond trading giant Pimco, reckons the Fed could well begin tapering this month despite the weaker-than-expected jobs data.

He told Reuters:

The market is taking this morning’s somewhat disappointing data as suggesting that the Fed will not taper in September. I am not so sure that is the case. The detailed numbers also illustrate the problem of growing inequality in American society.

That’s an interesting line for El-Erian to take, given Pimco’s exposure to the US bond market (where bond prices fall when tapering looks more likely).


Capital Economics says today’s US jobs data is a “mixed bag”. The Fed could take it as a green light to start tapering its QE programme (as the unemployment rate fell), or as a warning (as June and July’s data was revised down).

Our best guess is that the cumulative evidence of improvement over the past year will convince a majority of officials that the tapering should begin at the next FOMC meeting later this month, but we’re not going to pretend this is a certainty.

That didn’t last long. The Dow is now off by 120 points, and European markets are also in the red.

I don’t think US unemployment is the reason, though. World leaders are speaking to the press in St Petersburg following the G20 summit, and there’s no breakthrough over Syria. Instead, president Putin has declared that he and president Obama are still at odds.

As our G20 live blog explains:

“We stuck to our guns,” Putin said according to a live translation.

The Wall Street opening bell has been rung, and shares are inching higher in New York.

The Dow Jones industrial average is up 47 points at 14985, +0.3%, with the S&P 500 and the Nasdaq rising by similar amounts.


Our Wall Street correspondent Dominic Rushe writes:

Unemployment in the US fell slightly to 7.3% in July, its lowest level in over four years, but the sluggish pace of recovery continued as the economy added just 169,000 new jobs.

The latest nonfarm payroll figures come at a crucial moment for the Federal Reserve, which is weighing when and whether to cut its $85bn-a-month economic stimulus programme, known as quantitative easing (QE). Fed chairman Ben Bernanke has tied cuts in QE to the health of the job market. The federal reserve open markets committee (FOMC), which is split on when to pull back on the QE programme, meets on September 17-18.

The jobless rate has now fallen from 8.1% a year ago but the pace of job creation remains slow and the Labor Department revised down its numbers for the previous two months after concluding job growth was less than expected.

The US added jobs in retail, healthcare, food services and drinking places, professional and business services, and wholesale trade in August, said the bureau of labor statistics.

Here’s his full story: US unemployment rate drops to 7.3% amid sluggish economic recovery

Another ace graph from Bloomberg’s Michael McDonough, showing how participation by young people in the jobs market has fallen steadily over the last 23 years, while it has risen among the over 65s:

And here’s another line from the Non-Farm Payroll report, looking behind that headline unemployment rate of 7.3%:

Among the major worker groups, the unemployment rates for adult men (7.1%), adult women (6.3%), teenagers (22.7%), whites (6.4%), blacks (13.0%), and Hispanics (9.3%) showed little change in August.

The jobless rate for Asians was 5.1% (not seasonally adjusted), little changed from a year earlier.

Ishaq Siddiqi, market strategist at ETX Capital, says it’s “unwise to say tapering is off the cards in September but it definitely has given the Fed and the market food for thought.

In the bond markets, government borrowing costs have dropped — another sign that the Federal Reserve is now less likely to start aggressively tapering its QE programme.

Traders are rushing to buy sovereign debt, which pushes down the yield (interest rate).

US 10-year Treasury yield: 2.88%, down from 2.97% overnight

UK 10-year gilt yield: 2.93%, down from 3% overnight

German 10-year bund yield: 1.94%, down from 2.04% overnight


Economics professor Nouriel Roubini insists today’s jobs data means the US Fed should not slow its stimulus programme yet:

Taper off?

Traders in the City and on Wall Street are calculating that today’s Non-Farm Payroll report makes it less likely that the Federal Reserve will begin slowing its stimulus package this month. And when tapering begins, it could be at a slower rate than previously expected.

With fewer jobs created in August than expected (169k vs 184k), and 74,000 fewer people hired in the previous too months, America’s labour market does not look as strong as expected.

And with the turmoil in the Middle East continuing, the Fed has other reasons to be cautious.

The Fed is currently buying $85bn of bonds each month through its quantitative easing bond-buying programme every month. So the longer it runs, and the slower it tapers, the more money will be pumped into the system.

Market reaction

Shares are rallying, gold is up, and the dollar is down since the US jobs data was released.

Most currencies are strengthening against the US dollar — sterling has gained half a cent to $1.564. Emerging market currencies are bouncing, with the Brazilian real up 1% against the dollar. The euro has gained 0.2%.

In London the FTSE 100 is up 20 points. And gold is up $20 per ounce at $1,388/oz.

Some instant reaction:

Americans are working a little longer – the average working week increased by 6 minutes (or “0.1 hour”) in August.

Average earnings rose by 5 cents to $24.05. Over the year, average hourly earnings have risen by 52 cents, or 2.2%.

At 7.3%, America’s jobless rate is its lowest since December 2008 (down from 7,4% last month).

But that may not be a good sign, because the US Labour department has also reported that the labour force participation rate has dropped to 63.2%, the lowest since August 1978. That means more people have simply dropped out of America’s potential workforce.

July’s non-farm payroll has been revised lower, to +104,000 new jobs — that’s sharply lower than the 162,000 that was reported a month ago.

And fewer new jobs were created in June as well — 172,000, not the 188,000 that was expected.

That means 74,000 fewer American jobs were created in June and July than we thought.

US Non Farm Payroll released

Breaking: The US economy created 169,000 new jobs in August.

That’s below the consensus forecast that the US non-farm payroll rose by 180,000 last month.

And the jobless rate has fallen to 7.3%. However, previous data for June and July has been revised down….

More to follow!


G20 statement released

Over to St Petersburg very briefly — the G20 communique is just hitting the wires.



Other key things to watch out for in the Non-Farm statement (coming in 8 minutes…) include …. the headline US unemployment rate (7.4% last month), the measures of average earnings (is pay going up?), and the labour force participation rate (measuring the percentage of the population available for work).

Analysts will also be watching to see if the US Labour Department revises its previous data.

This Bloomberg graph shows how the borrowing costs of major economies such as the UK and Germany, and emerging markets, have risen since the prospect of the Fed slowing, or ‘tapering’, its bond-buying programme emerged

It’s via Bloomberg’s global head of economics, Michael McDonough.


What happens if August’s US non-farm payroll is significantly different from the consensus forecast of 180,000 new jobs?

Joe Bond of City firm Abshire Smith has some suggestions for how markets could react — based on the idea that a strong reading increases the chances that the Fed will start cutting its bond-buying stimulus programme this month.

• Above 200K jobs would see the US dollar (USD) bid across the board, further weakness for emerging market currencies and gold

• 170-200K would still be bullish (average print for the year slightly north of 180K)

• Below 170K would be a poor number, with USD offered, and Gold bid

•Anything below 120K would be a huge disappointment, providing large volatility for USD and Gold.

I mentioned earlier that the consensus forecast is that 180,000 new jobs were created in the US last month. Each analyst, though, has a different guesstimate — and they range from just 79,000 to as much as 220,000, as market analysts RANsquawk explains:

Non-farm payroll coming soon…

Just 45 minutes to go until the US jobs data for August is released (at 1.30pm BST, or 8.30am EDT), and European markets are jittery. Most indices are lower, as traders wait for the big number of the day.

Chris Beauchamp of IG Index says it’s been a nervous morning after some busy days:

It’s been a busy week really; economic news, geopolitical concerns and tapering worries have all have been thrown at investors in one form or another…the overall impression is one of extreme caution.

With non-farm payrolls out today, this caution has only been heightened.

One for twitter users who want to relive the dark days of Lehman Brothers:


This chart shows how Greece’s GDP slump has slowed over the last six quarters (including the 3.8% annual contraction in the last quarter reported this morning), but is still some way from ending.


Germany has reported a sharp fall in industrial production during July.

Output across German industry dropped by 1.7% on a month-on-month basis, much worse than the 0.5% drop that was expected.

The German economy ministry said the drop was due “not least” to a strong June (when output jumped by 2%), insisting that conditions are improving:

The weak phase is over… Overall, the upward trend appears to be continuing moderately in manufacturing and significantly stronger in construction.

But with exports dropping by 1.1% in July (see 8.01am), it doesn’t feel like July was a knockout month for Germany.

Speaking of Greece… security will be tight in the city of Thessaloniki tomorrow when prime minister Antonis Samaras visits its annual trade fair

Local media report that 4,000 police officers, including motorcycle patrols and two helicopters, will be on duty at the 78th Thessaloniki International Fair (TIF), which Samaras will open with a keynote speech.

Samaras is expected to argue that the Greek economy is improving (so he should be encouraged by this morning’s GDP data).

Government opponents, though, will be holding an anti-austerity rally on Saturday, from 6pm Greek time.

Greece’s Kathimerini newspaper has more details:

The premier, who is to address businessmen in the morning and not in the traditional evening speech, will reportedly try to reassure entrepreneurs, and citizens in general, that Greece’s economy is improving, slowly but surely, and that no more austerity measures are on the cards.

Samaras is also expected to stress the importance of Greece clinching a primary surplus this year, as appears likely, as this will allow the government to offer some relief to lower-income Greeks. The premier had indicated in an interview last week that 70 percent of the primary surplus, if it is achieved, will go toward support for those on low pensions.


Greece’s long, grim depression could finally be turning a corner.

Its economy is still contracting, but at a rather slower pace.

The country’s economy shrank by 3.8% on a year-on-year basis in the second quarter of this year, updated data shows. That’s a significantly smaller decline than the 5.6% annual contraction measured in the first three months.

Greece doesn’t report quarter-on-quarter data like most other countries, so it’s hard to tell exactly how the economy performed between April and June. It’s clear, though, that the contraction must have eased.

Good timing, as the eurozone faces up to the task of patching up its finances again next year.


The British public are taking Mark Carney seriously, even if the City are not.

A quarterly survey of inflation expectations found that the number of people who expect interest rates to rise in the next 12 months has fallen to its lowest level since November 2008, at just 29%.

Inflation expectations have also fallen to the lowest since August 2012.

The survey of 2,500 Brits took between August 8th and 13th. Carney announced on August 7th that rates will not rise from their record lows until the UK jobless rate has dropped to 7% from 7.8%, which the Bank doesn’t see until 2016.

Governor Carney should be reassured by this data, particularly as inflation expectations are one factor that could force him to abandon the plan.

Some City traders, though, are pricing in a rate rise by the end of 2014.

The survey also found that public confidence in the Bank of England had dropped to a nine-month low, with a net balance of +15 people believing it was doing a good job. 

The disappointing UK trade and industrial production data this morning have prompted experts to warn that economic conditions in Britain, and beyond, may not be as rosy as hoped

Britain’s widening trade gap in July (9.40am )was primarily caused by a sharp drop in exports to countries outside the EU. Exports of all commodities except fuel fell during the month, the Office for National Statistics reported, led by a decrease in exports of “finished manufactures”.

Here’s the key points from the ONS release:

  • Seasonally adjusted, the UK’s deficit on trade in goods and services was estimated to have been £3.1bn in July, compared with a deficit of £1.3bn in June.
  • There was a deficit of £9.9bn on goods, partly offset by an estimated surplus of £6.8bn on services.
  • Exports of goods fell 7.6% on the month to £24.8bn for July 2013. Imports for the same period fell 1.0% to £34.7bn
  • In July 2013, exports of goods to countries outside of the European Union (EU) decreased by £2.2bn to £11.8bn. Exports to countries within the EU increased by £0.2bn over the same period to £13bn.

On a slightly longer-term view, imports outstripped exports over the last three months:

  • The deficit on trade in goods increased £0.3bn to £26.8bn in the three months to July 2013 from £26.5bn in the three months to April 2013. Exports of goods in the three months to July 2013 increased to £77.4bn and compared to the previous year, increased by 1.6%. Imports of goods also increased over the same period to a record high of £104.2bn and compared to the previous year, increased by 3.1%.


UK trade deficit widens and industrial production stays flat

Britain’s trade deficit more than doubled in July, and industrial production failed to grow as expected.

The data, just released, is a rare reversal for the UK after recent strong economic statistics that have suggested the recovery has legs.

The UK trade deficit in goods and services widened to £3.085bn, the worst monthly reading since October 2012. Twice as wide as June’s figure, it doesn’t suggest that that UK economy has moved into a more robust, manufacturing led revival as hoped (although these monthly readings are rather volatile).

Industrial production, meanwhile, was flat month-on-month in July, dashing hopes of a 0.1% rise. Within the data, manufacturing rose by 0.2% month-on-month, compared with hopes of a 0.3% rise.

More to follow……

There was drama in the Cyprus parliament last night where MPs rejected crucial legislation related to its bailout package, before eventually falling into line. 

A vote on laws to bring its ‘co-operation banks’ under the control of the Cypriot central bank was narrowly defeated, raising the sudden threat that its aid programme could be derailed. But after meeting late into the night, the legislation was finally approved:

Reuters reports:

 In a marathon voting session, legislators agreed to a clause enabling co-op banks to receive €1.5bn ($1.97bn) in bailout money.

In an earlier vote, it had been narrowly rejected by lawmakers from the island’s opposition left-wing parties, who oppose any bailout conditions.

Parliamentary approval for restructuring co-ops, which are small commercial lenders, is crucial to Cyprus receiving the next aid installment of €1.5bn from international lenders. The money will be ploughed into the lenders to recapitalise them. In a second vote in the early hours of Friday, parliament approved the restructuring of the co-ops, finance ministry sources said.

The second vote was in the great traditions of European Union democracy, argues Michael Hewson of CMC Markets:

There was two votes in the Cypriot parliament before politicians arrived at the “right” decision with respect to the latest bailout package in what has become a very European past time. If you don’t get the result you want in the first vote, vote again until you get the right outcome.

One more gobbet of economic news — UK house prices are rising at their fastest rate since 2010.

Halifax reported that prices jumped by 5.4% in the three months to August, compared with a year ago. However, the lender argues that the trend is slowing, as prices were only up by 0.4% last month compared with 0.9% in July.

Halifax housing economist Martin Ellis reckons:

Relatively modest economic growth and below inflation rises in earnings are likely to act as a brake on the market. Overall, house prices are expected to rise gradually over the remainder of the year.

But while prices keep rising, critics of George Osborne will probably keep warning that the chancellor is fueling a dangerous housing bubble with his ‘help to buy’mortgage subsidy scheme.

French consumer confidence is also up, rising from 82 in July in 84 in August.

Best reading since April, showing a recovery from the record low of 79 high in May and June. Still some way to get back to the long-term average of 100, though…

There’s good news for Germany’s banks this morning. Moody’s has raised its outlook on the sector from negative to stable, which removes the threat of a downgrade.

The ratings agency said the move reflected “ a year of reduced crisis-related losses and improved capital strength”. It cited four reasons for the upgrade:

  • prospects of a stable operating environment due to an improving economy and benign credit environment;
  • continued strengthening of the banks’ capital buffers due, in part, to more stringent capital requirements;
  • the stabilising effect of an ongoing reduction in high-risk assets and deleveraging; and
  • improved refinancing structures and ample liquidity buffers, which imply low funding risk.

Here’s the full statement.

Another encouraging signal for the eurozone. Worth noting, though, that we’re still waiting for the ECB’s next stress test, or asset quality review, of euro area banks…

This morning’s early trade data shows that Germany’s trade surplus has shrunk, and France’s trade deficit has widened.

German exports dropped by 1.1 % in July, dashing economist expectations of a 0.8% rise. And with imports up by 0.5%, the German surplus narrowed to €14.5bn, from €15.8bn in June.

Stefan Schilbe at HSBC Trinkaus told Reuters it was “a disappointment”, adding:

But we can be hopeful that the picture will change for the better in coming months. Leading indicators in industrial states – from the United States to Britain and the euro zone states – are pointing upwards.

Arguably a Germany that imports a little more, and exports a little less, is good for the rest of the eurozone as it tries to rebalance its economy.

Over in France, the trade deficit widened to €5.109bn in July, from €4.484bn in June. The French Customs Office blamed a jump in imports due to higher energy costs, and supplies for its aerospace industry.

Waiting for Non-Farm

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

Today’s big event in the financial world is the latest US jobs data, which will be unleashed on an expectant financial world after lunchtime in Europe (1.30pm BST, or 8.30am New York time).

The non-farm payroll always makes a splash, as it shows how many new jobs were created (or lost) in the world’s biggest economy the previous month. Today’s number is pretty special – it could prompt America’s Federal Reserve central bank to start slowing its stimulus package, if it judges that the US economy is finally strong enough to take it.

Economists expect around 180,000 new jobs were created in the US last month (excluding the agriculture sector), up from 162,000 in July. But non-farm is notoriously tricky to predict….

This graph from Marketwatch shows the monthly non-farm payroll since the start of last year — job creation has been generally steady, rather than spectacular…

The implications of the Fed ‘tapering’ its $85bn bond-buying programme are significant for the world economy. Taper anticipation is one factor pushing up government borrowing costs (the UK 10-year gilt yield hit 3% yesterday, while 10-year bund yields are over 2%).

Also coming up today, we have trade data from key European countries and the latest UK industrial output stats. Germany has already reported a surprise drop in exports in July (more to follow…)

I’ll also be watching the eurozone closely, as speculation mounts over a future aid package for Greece in 2014….


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Over 160,000 new jobs created as unemployment rate drops to 7.4%, though bond-buying program continues unchanged. The Labor Department revised down the number of jobs added in May and June, indicating fragility of the economic recovery…


Powered by Guardian.co.ukThis article titled “US jobless figure drops to lowest rate in four years” was written by Larry Elliott and Heidi Moore, for theguardian.com on Friday 2nd August 2013 14.02 UTC

The US unemployment rate fell to its lowest level in more than four years last month, but the addition of 162,000 new jobs to the world’s biggest economy was lower than expected.

Figures released in Washington showed that the pace of hiring eased slightly in July, following a slowdown in economic growth in the first half of 2013. The Labour Department revised down the number of jobs added in May and June, indicating the underlying fragility of the economic recovery.

Wall Street had been expecting a stronger report and analysts said the data might make the US Federal Reserve more wary about removing the stimulus provided by asset purchases and low borrowing costs.

The financial markets had been anticipating a rise of 184,000 in non-farm payrolls, the key measure of the health of the US jobs market. Analysts said it was also disappointing that employment in previous months had been revised down by 26,000, and that average weekly hours worked had fallen.

The unemployment rate dropped by 0.2 points to 7.4%, the lowest since the global recession was at its most intense in the winter of 2008-09. The report said, however, that part of the drop was due to some Americans leaving the labour market after giving up hope of finding work.

The Fed chairman, Ben Bernanke, has said there is “broad support” among colleagues for shutting down its bond-buying programme, costing bn (£55.8bn) per month, if the unemployment rate falls to 7%. The US is expected to reach that level around the middle of next year, and the Fed spooked markets last month when it said it might begin “moderately” tapering asset purchases by September.

The dismal jobs report indicated the underlying weakness in the American economy, according to economists.

Peter Morici, an economist and professor at the Smith School of Business of the University of Maryland, sent out a research note titled “another disappointing jobs report” and said: “Overall, the jobs count may be up but for most working families and recent college graduates the situation is grim. Adding in discouraged adults and part-timers who want full-time employment, the unemployment rate becomes 14%.”

Joseph Brusuelas of Bloomberg LP gave a similarly dire evaluation, saying that 5 million more men over the age of 20 were unemployed now than before the recession started in November 2007. He called this “the real crisis that is brewing deep inside the US labor market for men entering the peak earning years that will carry long-term implications for the overall social and economic well-being of the country”.

Brusuelas also pointed out that longer unemployment periods have made people unsuccessful in finding new jobs after they’ve lost a job.

“The average duration of unemployment is 35.6 weeks or roughly 8 months [and] has rendered some of these individuals unemployable in their former lines of work,” Brusuelas said.

James Knightly, economist at ING bank, said the markets had been hoping for a stronger report after upbeat US GDP data earlier in the week, which saw the economy grow by 1.7% in the second quarter.

He said it appeared to have “taken the wind out of the sails of those heavily backing a September start to quantitative easing tapering. Additionally, wages fell 0.1% on the month, the first fall since last October. This takes the year-on-year growth in wages down to 1.9% and is not indicative of a tight labor market.”

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Francois Hollande: post-crisis generation need help now. Schäuble and Moscovici pledge help, but no firm new plan yet. Stock markets rally. US consumer confidence index at five year high…after French consumer confidence takes a tumble…

Powered by Guardian.co.ukThis article titled “Hollande’s youth jobless warning, as strong US data fuels market rally – as it happened” was written by Graeme Wearden, for theguardian.com on Tuesday 28th May 2013 14.10 UTC

6.34pm BST

Closing summary

Time to wrap things up for the day. Here's a closing summary:

European politicians from across the region have pledged to take new steps to address the region's youth unemployment crisis, although details remain sketchy tonight.

In a speech in Paris, French president Francois Hollande warned that the post-crisis generation would "turn their backs" on the European project forever, unless leaders could reverse the rising tide of joblessness among young people .

Citizens are turning their backs on Europe and the construction of the European project.

It's the idea of Europe that is being challenged.

(see 11.35am for highlights, or watch the speech in the video above)

Hollande said the EU must agree the so-called Youth Guarantee, a proposal under which young people would be guaranteed a job or training within four months of leaving school (details at 12.03pm).

He also advocated expanding the Erasmus programme so apprentices, as well as university students, could be trained and educated in anothe country.

Several other finance ministers also pledged to do more to fight youth unemployment. Germany's Wolfgang Schauble agreed that the unity of Europe was at stake, while France's Pierre Moscovici said structural reforms could help get under 25s into jobs.

(see 10.10am onwards for details, and 12.39pm for a summary from Bloomberg).

But firm measures will probably have to wait until EU leaders meet in late June, and Angela Merkel holds a conference on the issue in Berlin on 3 July.

In other news…. the financial markets rallied sharply following strong US economic data, and the latest indications that central bankers won't halt their monetary easing measures soon.

In London, the FTSE 100 finished 107 points higher — see 5.26pm for closing prices and analyst reaction.

That followed a jump in US consumer confidence to a five-year high (see 3.06pm)….

…and the news that US house prices have risen at their fastest annual rate in almost seven years (see 2.29pm)

France's central bank governor warned that the country must cut spending. Christian Noyer also warned that the upcoming Financial Transaction Tax could harm the French banking sector (see 2.23pm)….

….while French consumer confidence tumbled unexpectedly, to its joint-lowest level in decades. (see 10.44am for details).

And the International Monetary Fund declared that it still has support in Christine Lagarde, its managing director, after her appearance at a special court last week. See 4.52pm for details.

• Italy sold two-year bonds at the lowest interest rates since the eurozone began. (see 12.47pm)

Polling data from Greece showed that New Democracy had widened its lead over the Syriza opposition (see 1.05pm)

While in the UK, a poll found that UKIP is on track to win the most votes in next year's European elections (see 1.28pm)

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

Updated at 6.39pm BST

6.03pm BST

Rajoy: we need action now on youth unemployment

Spanish prime minister Mariano Rajoy has called for more help on youth joblessness now.

Speaking at the Europe: Next Steps conference in Paris, Rajoy added that more effort is needed to help small firms access credit.

Reuters has the details of Rajoy's speech:

Spain's Rajoy said on Tuesday that both the European Investment Bank and European Central Bank should do more to help credit flow to small businesses.

Speaking at a conference on youth employment in Paris, Rajoy also said the European Union "should establish a mechanism to temporarily exclude from the national deficit, for the purposes of the excessive deficit procedure, the cost of exemptions granted from social security contributions when young people are hired."

Rajoy also welcomed the news that Angela Merkel will hold a conference on youth joblessness in Berlin on July 3:

Updated at 6.04pm BST

5.54pm BST

FT: Hollande speech shows concern is growing

French President Francois Hollande delivers his speech today. Photograph: CHARLES PLATIAU/AFP/Getty Images

The FT says Francois Hollande's speech on youth joblessness this morning (see 11.35am for highlights and video) was a sign of "growing political concern" about Europe's youth unemployment levels.

Here's a flavour:

We must act urgently – 6m youngsters are out of work in Europe … close to 14m are without work, study or an apprenticeship,” Mr Hollande said at a conference in Paris that brought together a number of EU finance and labour ministers.

He was speaking as France and Germany stepped up efforts to show they were working to tackle the problem, seen as a key element in flagging support for EU institutions and the continent’s political leadership.

Mr Hollande separately met French and German finance and labour ministers to discuss a joint initiative he said would culminate in a meeting of all EU labour ministers in Berlin in early July.

But the FT added that (as I tried to explain at 12.03pm) most of the measures outlined by Mr Hollande and the various ministers have already been "widely canvassed" by EU leaders and the commission.

More here: François Hollande raises alarm over Europe’s young jobless

Updated at 5.55pm BST

5.26pm BST

European stock markets rally – what the analysts say

Traders Dan Ryan, left, and Gordon Charlop work on the floor of the New York Stock Exchange Tuesday, May 28, 2013
Traders Dan Ryan, left, and Gordon Charlop work on the floor of the New York Stock Exchange today. Photograph: Richard Drew/AP

Europe's stock markets have closed with strong gains across the board. In London the FTSE 100 jumped more than 100 points as it recovered some of last week's losses.

Here's the closing prices

• FTSE 100: up 107 points at 6762, + 1.62%

• German DAX: up 97 points at 8480, +1.16%

• French CAC: up 55 points at 4050, +1.39%

• Spanish IBEX: up 147 points at 8511, +1.77%

• Italian FTSE MIB: up 360 points at 17519, +2.1%.

And on Wall Street, the Dow Jones and the S&P 500 are both up around 1%.

City traders are attributing the rally to two factors.

1) the strong US data this afternoon (house prices rising at their fastest level since 2006 and a five-year high for consumer confidence)

2) the latest signals from central bankers that the stimulus package isn't over (see 8.50am for details of supportive comments from the Bank of Japan and the European Central Bank).

This morning's bleak French consumer confidence data (see 10.44am), hasn't dented the rally — on the grounds that bad news means central banks won't tighten monetery policy….

Here's a selection of analyst comment this evening:

Chris Beauchamp, market analyst at IG

What a difference a weekend makes. Last week markets seemed to have assumed the world, or at least QE, was coming to an end. After a few days away, however, investors have come back with a far more positive outlook. In part they are being helped on their way by supportive comments from the Bank of Japan, which is still tightly-wedded to its easing à la outrance policy.

However, perhaps the most important factor is the growing distance from last week’s Fed minutes. Time has dulled the impact, and investors feel that they can be more relaxed about the hawkish views of a few policymakers. If last week was the dip, then it was shorter than that expected by the even the most positive of traders.

May is almost out, and the ‘go away and sell’ thesis still hasn’t kicked in.

Michael Hewson of CMC Markets

Despite there being very little evidence of a turnaround in economic fundamentals in Europe we’ve seen a complete about turn in sentiment after the sharp losses seen at the end of last week as investors pile back into equity markets on little more than continued central bank support from the Bank of Japan, and expectations of future support from the ECB after comments from ECB member Peter Praet that there was still scope to reduce rates further.

…Poor consumer confidence data from France and a sharp slide in German import prices has fuelled expectations of further easing from the ECB at next week’s rate meeting. While these expectations of further ECB generosity has helped confidence in risk assets there is no getting away from the fact that Europe’s two largest economies continue to diverge away from each other.

Consumer confidence in France sits at its lowest levels since 2008, in complete contrast to Germany where it’s at its highest levels since September 2007, with no expectation that EU leaders have any idea of what to do about it.

Viktor Nossek, head of research at Boost ETP

The FTSE 100 emerged from the Bank Holiday weekend with a bang. Thursday's sharp drop was a distant memory as the UK's flagship index brushed aside any remaining concerns.

Exceptionally strong house price and consumer confidence data from the States will only feed the feel-good factor surrounding the FTSE. On Tuesday it felt like we made another major step towards the symbolic 7000 mark.

Despite years of weak domestic demand, UK equities are looking increasingly attractive. Britain's blue chips have adjusted to the weaker demand in the economy, repaired their balance sheets and restored their dividend-paying capability.

All this despite Britain's meagre rate of GDP growth. But these days, a strong economy is no longer a prerequisite for strong profits.

4.52pm BST

IMF board backs Christine Lagarde

Just in, the executive board of the International Monetary Fund has declared that it has confidence in managing director Christine Lagarde, after a special French court decided not to place her under investigation.

Here's the full statement:

As we have said before, it would not be appropriate to comment on a case that has been and is currently before the French judiciary.

However, the Executive Board has been briefed on this matter, including on the outcome of the recent hearings before the Court of Justice of the Republic in Paris, and has reaffirmed its confidence in the Managing Director’s ability to effectively carry out her duties.

Last week, Lagarde was questioned for two days over her role in a controversial €400m payment given to French businessman Bernard Tapie while she was France's finance minister.

Following the hearing, the court decided not to place Lagarde under formal investigation. Instead the IMF chief – who has denied any impropriety – will be an "assisted witness" in the case. That means she will testify in the inquiry, but is not under suspicion of any offence.

More details here.

France's Christine Lagarde speaks to the press as she leaves the French Republic Justice Court on May 24, 2013 in Paris.
France’s Christine Lagarde speaking to the press as she leaves the French Republic Justice Court last Friday night. Photograph: JACQUES DEMARTHON/AFP/Getty Images

4.31pm BST

Marketwatch Graphics has pulled together this graph showing how US house prices are now growing at their fastest pace since before the credit crunch.

As flagged up at 2.29pm, new data released today showed prices are 10.9% higher across 20 US cities.

4.11pm BST

US Treasury bonds are dropping in value, the mirror image of shares on Wall Street.

That has pushed up the yield (interest rate) on 10-year US debt by 10 basis points to around 2.11% (ie, from 2.01% overnight).

Updated at 4.11pm BST

4.02pm BST

Moody’s hikes outlook on US banks

The good news keeps coming, for America at least. Moody's just raised its rating on the US banking system to stable, from negative, for the first time since the financial crisis struck in 2008.

3.10pm BST

That strong US consumer confidence data has sent shares on Wall Street even higher, with the Dow Jones industrial average now up 201 points at 15504.

The US dollar is also gaining against other currencies, flags up the FT's Alice Ross:

Updated at 3.30pm BST

3.06pm BST

US consumer confidence at five-year high

More strong economic data from the US — the monthly consumer confidence index has jumped to a five year high.

The US consumer confidence index came in at 76.2, up from 69 last month. Economists had expected much smaller rise, to 71.

And the expectations index, showing how upbeat people were about the future, also posted a strong rise – to 82.4 from 74.3.

Lynn Franco, director of economic Indicators at The Conference Board (which compiled the data) said Americans are "considerably more upbeat" about future economic and job prospects.

Back-to-back monthly gains suggest that consumer confidence is on the mend and may be regaining the traction it lost due to the fiscal cliff, payroll-tax hike, and sequester.

Updated at 3.35pm BST

2.41pm BST

Stock market rally continues as Wall Street opens

Stock markets are rallying strongly today, with the FTSE 100 now up by 120 points, or 1.8%, at 6775 as Wall Street opens.

The prospect of ongoing central bank help, and the better-than-expected US house price data (see 2.29pm), appear to be a heady cocktail for the markets.

In New York the Dow Jones index is up 150 points, or around 1%, while the Italian stock is up over 2%.

Here's the latest prices:

Stock market prices, May 28 2013
Photograph: Thomson Reuters

Reaction to follow….

2.29pm BST

US house prices index beats forecasts

US house prices are rising at their fastest pace in nearly seven years, according to the latest piece of upbeat American economic data.

The S&P/Case Shiller index of house prices in 20 cities showed prices rose by 10.9% in March, compared with a year ago, beating analyst forecasts.

Prices were 1.1% higher month-on-month.

2.23pm BST

French central bank governor warns on spending and FTT

While Francois Hollande was speaking in Paris this morning, France's central bank governor was calling for new spending cuts.

Christian Noyer used his annual report to the French government to warn that France must take difficult decisions on public expenditure and its welfare system.

Noyer warned that:

Over a certain threshold, which our country has probably crossed, any increase in public spending and debt has extremely negative effects on confidence.

…adding that "a profound change in public policy" is needed if the France economy is to deliver strong and lasting growth that creates jobs.

And on welfare spending, Noyer's message was clear — it must be cut.

Welfare spending accounts for around 30% of GDP and the country’s social deficit path is unsustainable as it stands.

Giving in to the temptation to keep raising social contributions leads to an increase in labour costs, which ultimately weighs on activity and jobs: the best way to deal with the problem is by tackling spending as this would erode the cost competitiveness, which is already insufficient.

You can read the whole letter here (pdf).

Towards the end, Noyer also warned that Europe's plans for a Financial Transaction Tax must be carefully defined. Otherwise, France faced "the risk of destroying entire segments of our financial industry…" he wrote.

As the Telegraph's Phil Aldrick points out, Sir Mervyn King claimed last week that there was no support for the FTT among European central bankers he'd spoken to.

Here's more coverage of the Noyer letter:

Telegraph: France's central bank head warns FTT could 'destroy' jobs

Reuters: ECB's Noyer says France must target spending

Wall Street Journal: Noyer Urges Hollande to Cut Spending, Mull Welfare Cuts

2.07pm BST

European Council president Herman Van Rompuy has added his voice to the chorus insisting that action will be taken on youth unemployment.

Speaking at the European Parliament this lunchtime, Van Rompuy pledged to "put the fight against unemployment high on our agenda" at the next EU summit in June (prompting the obvious reposte – why wasn't it there already?)

Van Rompuy said the European Council meeting is an opportunity for leaders to support the Youth Guarantee, under which all young people would be guaranteed training, further education or employment within four months of leaving school (part of the plan outlined by Francois Hollande this morning).

This should be operational by January 2014, he said.

Van Rompuy also echoed Hollande's point that Europe's young people are looking for serious progress on the issue:

We must rise to the expectations of the millions of young people who expect political action.

More here (pdf).

1.28pm BST

Open Europe/Comres poll
Open Europe/Comres poll

Speaking of opinion polls, a new survey by Open Europe/ComRes has found that Britain's UKIP party are on track to win the most votes in next year’s European elections.

The pol showed that UKIP would come first overall with 27%, closely followed by Labour on 23%. The Conservatives would come third with 21%.

The survey also found more UK citizens would vote to leave the EU (41%) than stay (37%) if an in-out referendum was held today

However, the picture changes if David Cameron achieves 'a significant return of powers' from Brussels to Westminster. Then, 47% of voters believe they'd vote to stay in the European Union,while 32% would still vote to leave.

More details here (pdf).

1.05pm BST

Greek polling data: New Democracy extends lead

Support for Greece's governing New Democracy party has risen in recent weeks, according to an opinion poll published this morning.

The survey, for Mega TV by GPO, showed that New Democracy is backed by 21.3% of voters, a 1.8% lead over the left-wing Syriza party.

Two other polls released over the weekend also put ND ahead of Syriza, with a lead of up to 2.8%. That, according to Greece's Kathimerini, is the widest lead since ND took power in a three-party coalition almost a year ago.

GPO's poll also found that the neo-Nazi Golden Dawn party remains in third place. Here's the full details:

• New Democracy: 21.3%

• Syriza: 19.5%

• Golden Dawn: 10.4%

• Pasok: 6.7%

• Independent Greeks: 6.4%

• KKE: 5.8%

• Democratic Left: 5.1%

• Antarsya: 1.8%

• New Greece: 1%

Updated at 3.43pm BST

12.47pm BST

Italy sold two-year bonds at the lowest interest rate since the euro was created this morning.

It marks a remarkable change of fortune since its future in the eurozone was in doubt 18 months ago. Today's auction was helped by speculation that the European Commission will propose ending its excessive deficit procedure against Italy tomorrow (details here)

Reuters has more details of the auction:

Rome sold €2.5 of zero-coupon bonds maturing Dec. 2014 at 1.11%, down from 1.17% at a similar sale one month ago.Italy also issued €987m of inflation-linked BTPei bonds maturing Sept. 2018, paying a yield of 1.83%.

Investors are cautiously returning to high-yielding debt after they cashed in on Italian and Spanish bonds last week on expectations the U.S. Federal Reserve may scale back its asset buying programme in the next few meetings.

12.39pm BST

Bloomberg’s take

Bloomberg sums up this morning's events thus:

Germany and France said companies in struggling euro-area countries need cheaper credit to create jobs and ease youth unemployment, as Europe’s two biggest economies seek a joint response to the debt crisis.

German Finance Minister Wolfgang Schaeuble, his French counterpart, Pierre Moscovici, and Werner Hoyer, who heads the Luxembourg-based European Investment Bank, all singled out higher company financing costs in southern Europe as an obstacle to economic recovery at a meeting in Paris today.

“An Italian or Spanish small or medium-size enterprise doesn’t fund its investments at the same rate as a German company,” Moscovici said. “The channels of financing aren’t working.” Schaeuble said soaring youth unemployment in the region undermines European unification.

More here: Franco-German Youth Jobs Push Seen Hinging on Company Credit

12.34pm BST

Italy joins Germany and France in backing more action

Italian Labour minister Enrico Giovannini has agreed that Europe must stop abandoning its young people.

Like Germany's Wolfgang Schäuble and France's Pierre Moscovici (see 10.10am onwards), Giovannini told the Europe: Next Steps conference that radical new action was now needed.

Giovannini said:

We have to rescue an entire generation of young people who are scared. We have the best-educated generation and we are putting them on hold. This is not acceptable.

Words alone, though, aren't much good to the 5.7 million young people out of work in the EU.

Francois's Hollande's speech (see 11.35am) remains the clearest 'vision' of a New Deal, but it does appear that the actual agreement may have to wait until late June. Or possibly even 3rd July, when Angela Merkel hosts a conference on the issue in Berlin.

As Reuters puts it:

While all agreed on the urgency needed to tackle youth unemployment, ministers offered no concrete plans, insisting Europe must be pragmatic and work on various strands.

Updated at 12.35pm BST

12.21pm BST

Former Italian PM Mario Monti just gave a speech at the Europe: Next Steps conference in Paris. He welcomed signs that EU leaders are giving greater attention to structural reforms, rather than just insisting on fiscal discipline.

The Berggruen Institute tweeted some of Monti's other key lines:

12.10pm BST

Charts: The youth unemployment crisis

This chart from the EC shows how youth jobless rates vary across Europe, with Greece and Spain both suffering rates over 50%.

Youth joblessness across the EU
Photograph: European Commission

And this chart grabbed from Bloomberg TV shows the highs and lows (Portugal's 38% is slightly obscured)

Youth unemployment across Europe
Photograph: Bloomberg TV

12.03pm BST

Youth guarantee explained

The European Commission released a memo this morning, outlining its own efforts on youth unemployment. Perhaps stung by events in Paris?

The memo (click here) includes full details of the Youth Guarantee which Francois Hollande says must be brought in swiftly (see 11.35am).

The EC explains:

The Youth Guarantee, based on experience in Austria and Finland, seeks to ensure that all young people up to age 25 receive a quality offer of a job, continued education, an apprenticeship or a traineeship within four months of leaving formal education or becoming unemployed.

It is based on succesful programs in Austria and Finland.

The full cost of the scheme, though, has been estimated at €21bn. That's more than three times the €6bn currently set aside, but a fraction of the economic cost of youth unemployment.

The EC reckons that unemployment benefit, lost productivity and lost tax revenue from youth joblessness comes to €153bn per year.

In addition, for young people themselves, being unemployed at a young age can have a long-lasting negative ‘scarring effect’. These young people face not only higher risks of future unemployment, but also higher risks of exclusion, of poverty and of health problems.

The memo also outlines how the Erasmus scheme is already being expanded, with a 40% increase in its budget, to allow more young people to study abroad.

11.35am BST

Video: Francois Hollande outlines New Deal

The "Europe – Next Steps" conference in Paris began with a keynote speech from Francois Hollande, in which the French president outlined his vision of a new strategy for youth unemployment.

Hollande warned that the millions of young people across Europe out of work and education are looking to their leaders for a response based on solidarity.

Hollande dubbed them the "post-crisis generation", who will "for ever after, be holding today's governments responsible for their plight".

Here's the key section (from 8 minutes, in the video embedded above)

Remember the postwar generation, my generation. Europe showed us and gave us the support we needed, the hope we cherished. The hopes that we we could get a job after finishing school, and succeed in life.

Can we be responsible for depriving today's young generation of this kind of hope?

Imagine all of the hatred, the anger, it's not anger that we're talking about in fact, it goes more than that. We're talking about a complete breakdown of identifying with Europe.

What's really at stake here is, not just 'lets punish those in power'. No. Citizens are turning their backs on Europe and the construction of the European project.

It's the idea of Europe that is being challenged.

Hollande then outlined three key areas for the New Deal which he hopes to see agreed by European leaders at the next EU summit in late June

1) EU leaders would commit to spending the €6bn assigned to fight youth unemployment "very quickly", rather than letting the money sit around.

Those areas with 25% youth unemployment or higher should get 'accelerated spending', he added.

2) EU leaders should implement a "security system" for young people who leave school without a job. After 4 months they would be able to find a job, or additional training, or an internship, or an apprenticeship.

It's a great idea, this is what we call the Youth Guarantee. But do we have the ability to implement this objective? Well, we have no choice, we have to do it now.

3) Hollande proposed opening up the Erasmus scheme, under which university students could study overseas. He wants all young people to get the opportunity:

All young people, regardless of their educational background, would be able to go and continue learning new skills in another European country.

Hollande also said small firms need to be given more help to get credit, particularly in crisis-hit countries, and urged the European Investment Bank must release funds to SMEs swiftly.

He concluded by warning that Europe faces "an emergency when it comes to youth unemployment". Hollande explained that he and Angela Merkel were in agreement over the issue, and would keep developing their "bilateral project to create more jobs for young people in Europe.

And he finished by expressing hope that EU leaders will agree wide-ranging new measures at their summit in June, which is followed by a meeting of European labour ministers in early July.

Updated at 11.48am BST

10.44am BST

Graph: French consumer confidence

This graph from Reuters underlines the seriousness of today's drop in French consumer confidence.

As well as a near-five year low, this month's reading of 78 is the joint lowest reading at least three decades:

French consumer confidence vs GDP
Photograph: Thomson Reuters

10.33am BST

Cue much milling around in Paris:

10.32am BST

Wolfgang Schäuble rounded up the first panel session in Paris (see 9.24am onwards) with a call to European youth not to lose faith.

Europe is our future. We do not have a better future than Europe.

Schäuble also denied that Europe should just copy America's approach to employment and investment:

10.23am BST

The head of the European Investment Bank, Werner Hoyer, agreed with Wolfgang Schäuble and Pierre Moscovici that youth unemployment is a threat to the European project.

Speaking on the same panel, Hoyer said the EIB had billions of euros of extra funding for projects that would benefit Europe, particularly the youth situation.

Updated at 10.27am BST

10.10am BST

Schäuble and Moscovici on youth unemployment

Wolfgang Schauble
Wolfgang Schäuble.

Germany's Wolfgang Schäuble has warned that the youth unemployment crisis threatens European stability.

Speaking at the EU: Next Steps conference in Paris, the Germany finance minster warned that EU leaders would "lose the battle for European unity" if they do not win the battle over youth unemployment.

Schäuble said the crisis in the eurozone had been stabilised, but not solved, cautioning:

We cannot keep a generation on hold

Schäuble said small firms had a crucial role to play in getting more young people into work, if they could show more innovation.

But he also warned against setting the “wrong incentives” with new aid policies, says structural reforms are needed to make Europe more competitive, adding:

Europe has twice as high social welfare costs as its competitors.

He was followed by France's Pierre Moscovici, who agreed that Europe's future was at risk:

Pierre Moscovici
Pierre Moscovici Photograph: /EU Next Steps conference

Moscovici told the conference that toung people are asking whether they should stay in Europe or not. He added:

We want Europe to be a continent where youth feels comfortable.

Moscovici agreed that Europe does need "structural reforms", adding:

We are not afraid of structural reforms in France.

So, a firm commitment to new measures on youth unemployment, but no actual details of this New Deal. Yet, anyway…

Michel Sapin, France's Labor minister, told the conference that the big decisions will be taken at an EU summit in a month's time:

Updated at 10.23am BST

9.42am BST

Live audio feed from Paris

Here's a live audio feed from the Europe: Next Steps conference, complete with an English translation:

Updated at 10.48am BST

9.34am BST

Karine Berger MP
Karine Berger MP this morning.

French socialist MP Karine Berger says European leaders needs to fix the youth unemployment crisis fast.

Speaking on Bloomberg TV a few moments ago, Berger warned that:

Otherwise, thousands of young people in Europe will be hurt forever.

Berger agreed that the structure of the labour markets need to be changed, to help young people into employment:

We need to find growth, and we need to find structural solutions.

Easier said than done, of course. Reforming labour markets is notoriously tricky politically, as it typically means making it easier to dismiss workers or to force them to take new jobs.

9.24am BST

Watch the Paris Conference here

The 'New Deal' on youth joblessness will be discussed at a conference in Paris today called Europe: Next Steps, at the Institut d'Etudes Politiques de Paris.

It's being streamed live here: Europe: les prochaines étapes

Updated at 10.47am BST

9.08am BST

French consumer confidence slides

We've had grim economic data from France this morning, where consumers are more pessimistic than any time in nearly five years.

The French monthly consumer confidence reading fell to 79, the lowest reading since July 2008, from 83 last month (where the long term average is 100).

9.05am BST

Mike van Dulken of Accendo Markets suggests that today's markets rally shows the City is more relaxed about the US Federal Reserve's plans, after last week's flap over when it will start to slow its own quantitative easing operation:

Updated at 9.12am BST

8.50am BST

Markets rally again

In London, the FTSE 100 has jumped by 100 points, or 1.5%, this morning as investors return their desks after the bank holiday weekend.

That follows a calmer day's trading in Japan, where the Nikkei finished 1.2% higher – clawing back some of last week's dramatic losses.

Other European markets are also rallying, with Germany's DAX and the French CAC up around 0.7%, while the Spanish and Italian markets are both 1.5% higher.

Traders seem to be content that central banks will maintain their stimulus measures for a while longer.

Early this morning, Bank of Japan board member Ryuzo Miyao said the BoJ would remain firm, despite the market turmoil of recent days. Miyao argued that investors should not be spooked by rising Japanese bond yields.

Even when there is upward pressure on long-term interest rates due to expectations for economic recovery, monetary policy will continue to put downward pressure on interest rates and therefore strongly support economic recovery.

And yesterday, the European Central Bank's Jorg Asmussen said the ECB wouldn't tighten policy soon:

Our monetary policy is expansive and will remain so as long as necessary. But to keep rates low for too long would create new risks.

A man walks by an electronic stock board of a securities firm in Tokyo, Tuesday, May 28, 2013.
An electronic stock board in Tokyo, where the Nikkei finished 169 points higher, up 1.2%. Photograph: Itsuo Inouye/AP

8.34am BST

The New Deal – what we know

Some details of this 'New Deal' for youth unemployment have emerged in the media in recent days.

Here's a few articles:

Bloomberg: Franco-German Youth Jobs Push Seeks to Damp National Differences

Germany and France plan to present a joint blueprint today to address soaring youth unemployment as Europe’s two biggest economies seek to find common ground in response to the euro region’s financial crisis.

“Almost 6 million unemployed young people — these are dramatic figures,” German Labor Minister Ursula von der Leyen said in an ARD television interview on May 26. “These young people need an answer now.”

The Telegraph: 'New Deal' to tackle Europe's mass youth unemployment

The "New Deal for Europe" will free up EU resources to pay for language courses and fund jobseekers' flights around the continent in search of work.

Germany is increasingly concerned about the need to rescue the country's image, and show greater solidarity with southern Europeans suffering a prolonged economic crisis.

EurActiv: Commission denies Germany's 'dangerous' criticism of youth jobs fight

As Germany and France meet today over a joint youth employment initiative, EU officials have rebuffed as “groundless” and “dangerous” criticism from the German finance minister that the Commission is failing to address joblessness, EurActiv Germany reports.

Ministers from both countries will unveil in Paris the initiative blueprint and allow the European Investment Bank to unlock billions of euros in loans to companies to create jobs for young people.

The proposals have been called a “New Deal for Europe” and echo the drive by President Franklin D. Roosevelt to cut United States unemployment in the 1930s, the Rheinische Post reported this month.

But sources say German Finance Minister Wolfgang Schäuble has angered the president of the European Commission, José Manuel Barroso. Schäuble’s complaint that the Commission has been ineffective in its approach towards fighting youth unemployment has not gone down well amongst other EU officials either.

Updated at 8.35am BST

8.16am BST

A New Deal for joblessness

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

Europe's youth unemployment crisis takes centre-stage today as Germany and France announce plans for a "New Deal" for the millions of young people out of work across the region.

Almost one in four young people are out of work in the eurozone, and the scale of the problem appears to have shaken politicians into action.

German finance minister Wolfgang Schäuble, and his French counterpart Pierre Moscovici, will meet in Paris today to agree a package of measures to address youth unemployment.

The plan is expected to focus on countries with the highest jobless rates, such as Greece and Spain. It could include creating more apprenticeships to get young people into the workplace – an area where Germany excels already – and more funding for small firms to help them hire young people.

It could also provide support for jobseekers to move across the eurozone to find work.

The scheme is also expected to involve the European Investment Bank and tap a €6bn fund set aside to address youth unemployment in the EU budget.

But will the scheme be ambitious enough to tackle a problem that is creating a lost generation and, many fear, threating social cohesion across the region?

I'll be tracking events in Paris through the day, along with other important developments across Europe and beyond.

Updated at 8.29am BST

guardian.co.uk © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Eurozone unemployment hits 12.1%. Nearly one in four young people out of work. Falling inflation makes European Central Bank rate cut more likely. Spanish GDP falls by 0.5%. Italy’s prime minister wins second confidence vote…


Powered by Guardian.co.ukThis article titled “Eurozone jobless rate hits record high as inflation falls and Spanish recession deepens – as it happened” was written by Graeme Wearden and Nick Fletcher, for theguardian.com on Tuesday 30th April 2013 08.59 UTC

5.57pm BST

Moody’s downgrades Slovenia

Well it didn't take 24 hours.

After Slovenia earlier delayed pricing a bond pending a possible rating announcement, the announcement has come.

Moody's has downgrades the country's sovereign debt rating from BAA2 to BA1 with a negative outlook. It blamed the state of Slovenia's banking sector, the marked deterioration of the government's balance sheet and uncertain funding prospects that heighten the chances that external assistance will be needed:

Slovenia's vulnerability to external shocks, like though brought about by the crisis in Cyprus, could make it difficult for the sovereign to fund itself at sustainable rates, which increases the likelihood that authorities would need to request an external assistance programme.

Here's one of our earlier pieces looking at the state of the country.

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

People take part in a demonstration gathering thousands on April 27, 2013 in central Ljubljana to protest against corruption and austerity measures in Slovenia. Photograph:  AFP/Getty Images/Jure Makovec
People take part in a demonstration gathering thousands on April 27, 2013 in central Ljubljana to protest against corruption and austerity measures in Slovenia. Photograph: AFP/Getty Images/Jure Makovec

5.44pm BST

Cyprus MPs unhappy despite bailout vote success

Back to Cyprus. The loan agreement may have been endorsed – if narrowly – but if the incendiary debate that preceded the vote is anything to go by Cyprus is far from being out of the woods, writes Helena Smith.

Indicative of the passions the EU-IMS backed rescue package has unleashed, MPs described the bailout as being far worse than the 1974 Turkish invasion of the island.

"In ten days this government has triggered ten Turkish invasions," NIkos Koulias, who sits in the House as an independent, told the parliament. "I'm not saying that the best solution is the return to the [Cyprus] pound but it will have less [adverse] effects. If we take the €10bn only to give it back to our creditors then we are worthy of our fate," said the lawmaker who voted down the agreement. 

Updated at 5.45pm BST

5.40pm BST

Italy has taken considerable reform steps, says Merkel

Here's the full quote from German chancellor Angela Merkel on Italy at her press conference with the country's new prime minister Enrico Letta, courtesy of Reuters:

We want to ensure Europe emerges from this crisis stronger than it went into it. As part of that, every country must do its part. Italy has taken considerable steps in this regard.

Letta, who is keen to push the growth agenda, said Rome was committed to maintaining budgetary discipline:

Our task is to continue with the policies of fiscal consolidation and keeping public accounts in order.

5.33pm BST

Italy’s Letta calls for same determination on growth as on consolidation

New Italian prime minister Enrico Letta has said he is committed to maintaining the public finances in order.

Speaking at a news conference in Berlin with chancellor Angela Merkel on his visit to Germany, Letta said the crisis the eurozone has been going through has not been solved because Europe has not been strong enough.

Addressing the theme of austerity versus growth, Letta said he wanted to see Europe show the same determination to pursue growthas it does to maintain sound public finances.

Merkel, speaking at a news conference with Letta, said each eurozone country must take its own steps to address its problems. Italy, she said, had already taken considerable steps in the right direction.

She said budget consolidation and growth were not contradictory, and together could lead to better competitiveness. Fighting unemployment was the central issue for Europe (one not going too well to judge by today's figures….)

German chancellor Angela Merkel and Italy's new prime minister Enrico Letta in Berlin. Photograph: AFP/Getty Images/John Macdougall
German chancellor Angela Merkel and Italy’s new prime minister Enrico Letta in Berlin. Photograph: AFP/Getty Images/John Macdougall
Letta welcomed with military honors in Berlin. Photograph: AP Photo/Gero Breloer
Letta welcomed with military honors in Berlin. Photograph: AP Photo/Gero Breloer
After you Angela.... Photograph: AP Photo/Michael Sohn
After you Angela…. Photograph: AP Photo/Michael Sohn

Updated at 5.34pm BST

5.20pm BST

European markets end on a mixed note

European markets have closed for the day and it's been a mixed performance ahead of this week's central bank meetings. Investors have been buoyed recently by the thought of more measures from the banks to stimulate the global economy, not least the ideal of an interest rate cut from the ECB. But today seems to have seen a little profit taking after the rally, given the poor economic figures from Europe and mixed data from the US. So:

• The FTSE 100 finished 27.90 points lower at 6430.12, down 0.43%

• France's Cac closed down 0.31% at 3856.75

• Germany's Dax is up 0.51% at 7913.71

• Italy's FTSE MIB has fallen 0.96% to 16,767.66

• Spain's Ibex is off 0.38% at 8419

The Dow Jones Industrial Average is currently down 0.12% or 17.31 points.

5.02pm BST

Cyprus parliament approves bailout

The Cypriot parliament has narrowly approved the EU bailout, including the hit on depositors' savings.

In a show of hands 29 members voted for approval and 27 against.

Cyprus is now expected to receive a total of €10bn in May.

Updated at 5.14pm BST

4.44pm BST

Deflation not the answer to periphery’s woes, says Capital Economics

If the peripheral eurozone economies regained competitiveness via outright deflation, their public and private sector debt levels would spiral higher as a share of GDP, prompting disaster, according to Capital Economics. European economist Ben May writes:

Our central view is that for the peripheral economies’ competitiveness to be restored over the next five years, while the rest of the eurozone continued to inflate gently, prices (as measured by the GDP deflator) would need to fall by about 23% in Greece, 12% in Italy and 6% in Spain and Portugal.

But if prices fell in line with these estimates and the real economy grew in line with the IMF’s forecasts, in 2020, Greek public debt would be around 170% of GDP, compared to the Troika’s forecast of 124%. In 2020, the Spanish, Portuguese and Italian ratios would also exceed the Troika’s
sustainable benchmark of 120% of GDP.

Yet the picture would probably be worse than this. The IMF’s GDP growth forecasts already look implausibly optimistic, even without deflation. Falling prices would have a further adverse effect. Accordingly, by 2020, government debt could equal 150% of GDP in Spain and Portugal and around 200% in Italy and Greece. Rising anxiety in the bond markets could cause debt service costs to soar, causing the debt position to worsen still further.

These debt ratios would be unsustainable. Fear of them exploding would surely prompt action to bring debt down. But more austerity in the public sector and more deleveraging in the private sector would lead to weaker growth, causing yet more deflation. Swathes of public and private sector
defaults, which would surely follow, would prompt major domestic banking crises.

So internal devaluation (i.e. deflation) would not so much solve the eurozone’s problem as shift its manifestation from one sphere to another. In conditions of heavy indebtedness, as a potential solution to the euro’s ills, internal devaluation is a snare and a delusion.

4.39pm BST

Slovenia delays bond price

Slovenia, which has come under increasing pressure following the chaotic Cypriot bailout, has delayed a dollar bond issue due to be priced today.

The country said the move was "pending a potential ratings announcement."

According to Reuters, such an announcement could come in the next 24 hours.

Updated at 4.45pm BST

4.31pm BST

Cyprus debates crucial bailout agreement ahead of vote

More news on that crucial vote in Cyprus where parliament has begun debating the island’s internationally-sponsored rescue deal ahead of the ballot. Our correspondent Helena Smith writes:

For the past few hours, Cyprus’ 56-seat House of Representatives has been fiercely debating the controversial bailout agreement in the knowledge that the island’s fate now hangs on the rescue package being endorsed.

If, as seems likely, it is passed, MPs say it will be by a whisker – with a majority of one. The swing vote is expected to come from the hardline European party following an eleventh hour pledge by the main opposition Akel and Edek parties to vote down the €10n deal.

The communist Akel, which curiously signed off on many of the measures before being ejected from power in June, has racheted up the rhetoric by calling for a referendum on whether the country should even remain in the eurozone.

Increasingly, even within the island’s business elite, there is a feeling that Cyprus would be better off if it exited the single currency and re-embraced the Cyprus pound. Calls for the island to leave the bloc have mounted as the knowledge has also sunk in that the price of international rescue funds in terms of budget cuts will be far higher than originally envisaged – at €13bn almost double the amount creditors at the EU and IMF had demanded when the agreement was initially sealed on March 25.

Visibly concerned, the island’s president Nikos Anastasiades appealed to MPS to support the bailout package ahead of the make-or-break vote. "An appeal: our country is passing through a critical time that calls for a sense of national responsibility and conduct in a manner which is consistent with the greater good," he told reporters as a visited an army camp earlier in the day.

Even if the loan deal is passed as is now expected, there is still a very real possibility that the tiny nation state whose total economic output amounts to less than 2% of the euro zone's entire GDP, will leave the 17-member bloc analysts say.

Protestors against the bailout package gather as the Cypriot parliament votes on the deal. Photograph: EPA/Katia Christodoulou
Protestors against the bailout package gather as the Cypriot parliament votes on the deal. Photograph: EPA/Katia Christodoulou

4.09pm BST

Dairy group Glanbia to create 2,000 jobs in Ireland

There was better news on the jobs from Ireland today and in one of the most stressed sectors hit by the Celtic Tiger crash – contruction. Henry McDonald in Dublin writes:

Glanbia Ingredients Ireland announced it will create more than 2,000 jobs, 450 of them in the construction sector as part of an expansion programme.

Embattled Taoiseach Enda Kenny was on hand to hear the announcement from the Republic's biggest diary ingredients company with Glanbia claiming the investment will inject a further €400 million into the country's rural economy. It will be centred on a new dairy production facility at Belview, between counties Kilkenny and Waterford in Ireland's southeast region.

According to Glanbia's chief executive Jim Bergin the plant will be entirely focused on export markets and will supply a range of nutritional powders to an increasing number of regions including the Middle East, Africa, Central America and Asia. It is yet another example of the Republic's relatively strong export sector particulary in the food industry that has remained robust in comparison to the recession battered domestic economy.

Taoiseach Enda Kenny (centre) with Glanbia chairman Liam Herlihy (right) and chief executive Jim Bergin (left). Photograph: Julien Behal/PA Wire
Taoiseach Enda Kenny (centre) with Glanbia chairman Liam Herlihy and chief executive Jim Bergin (left). Photograph: Julien Behal/PA Wire

Updated at 4.10pm BST

3.16pm BST

US consumer confidence improves but business activity misses forecasts

And after the good, a more mixed picture.

US consumer confidence increased in April, according to the conference board, with its index up from 61.9 in March to 68.1. James Knightley at ING Bank said:

The index has been rather choppy since the start of the year, which likely reflects uncertainty and worry over the degree of spending sequestration and tax rises. Nonetheless, fears over the impact on household finances seem to be easing with consumer expectations rising to 73.3 from 63.7.

Given this series has a decent correlation with consumer spending, this is an encouraging piece of news.

But a measure of US business activity showed a contraction for the first time since September 2009.

The ISM/Chicago index fell to 49% in April (anything below 50 is a contraction) compared to 52.4 in March and missing expectations of an improvement to 52.5.

Updated at 3.24pm BST

2.18pm BST

US house prices rise more than expected

More positive news from the US housing market. Single home prices rose by more than expected in February, recording their best rise since May 2006.

The S&P/Case Shiller index rose a seasonally adjusted 1.2% compared to expectations of a 0.9% rise. Year on year the rise was 9.3%. As the US Federal Reserve meets to consider its next move on measures to boost the world's largest economy, it appears the housing market is one bright spot.

2.08pm BST

Larry Elliott: ECB must heed the warning signs

Our economics editor, Larry Elliott, writes that the ECB must show decisive action on Thursday by easing monetary policy. Cutting rates, alone, isn't enough.

Larry writes:

In itself, a quarter-point cut in interest rates to 0.5% would do little to revive demand, ease the credit crunch or create jobs. Instead, it should be part of a three-pronged approach to boost growth. The cut in rates should be accompanied by an ECB announcement that it is willing to embrace the unconventional methods deployed by the Federal Reserve, the Bank of England and Japan to underpin activity. It should also be the catalyst for a less aggressive approach to cutting budget deficits, with countries given more time to bring their deficits below the eurozone ceiling of 3% of GDP.

For the past three years, macroeconomic policy in the eurozone has been run on sadomasochistic principles: that only regular doses of pain will ensure countries stick to strict reform programmes.

The upshot of this policy is clear for all to see. Businesses that are starved of credit are mothballing investment and cutting their workforce. Weaker growth means higher-than-expected budget deficits. Permanent austerity has bred social dislocation and political extremism. A different approach is needed to save the eurozone from catastrophe – starting on Thursday.

More here: European Central Bank must heed eurozone warning signs

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

1.59pm BST

Photos: Italian vote of confidence debate

A couple of photos from today's confidence debate in the Italian senate, which the new government won confortably (see 1.26pm)

Former Premier Silvio Berlusconi, tsecond from right at top, shakes hands with an unidentified lawmaker as he attends a session for a second vote of confidence to confirm the new government, in the Italian Senate in Rome, Tuesday, April 30, 2013.
Former Premier Silvio Berlusconi shakes hands with an unidentified lawmaker as he attends a session for a second vote of confidence to confirm the new government, in the Italian Senate in Rome, Tuesday, April 30, 2013. Photograph: Alessandra Tarantino/AP
Italian Prime Minister Enrico Letta gestures at the Upper house of the parliament in Rome, April 30, 2013.
Italian Prime Minister Enrico Letta gestures at the Upper house of the parliament in Rome. Photograph: GIAMPIERO SPOSITO/REUTERS

During the debate, Silvio Berlusconi warned that his party could walk away from the coalition unless prime minister Letta yields to their demands for tax cuts, and slows its austerity programme.

Reuters has the details:

In a sign of the intense pressure he will face, four-times Prime Minister Silvio Berlusconi threatened to pull his centre-right People of Freedom party out of the coalition if it does not abolish an unpopular housing tax.

Berlusconi, who is not in cabinet but is playing a decisive role behind the scenes, added that the government must re-negotiate EU deficit commitments, echoing similar comments made earlier by two of Letta's own ministers.

But Foreign Minister Emma Bonino, a former European commissioner, responded that Italy cannot alter its targets, a view repeated by a spokesman for the European Commission in Brussels. "The targets, the objectives remain those that have been agreed," Commission spokesman Simon O'Connor said.

Speaking in the Senate before the confidence vote, Letta argued that Italy's need to ease austerity during the economic slump was shared by many European countries. "What is happening in Italy is happening all over Europe," Letta said. "Either there is a common European destiny or each country will eventually decline on its own."

1.26pm BST

Italian PM wins second vote of confidence

Breaking news from Italy — Enrico Letta has romped to victory in his second confidence vote, in the upper house of the Italian parliament.

A total of 233 Senators backed Letta's govenrment, with 59 voting against. There were 18 abstentions.

Now the new Italian PM faces his third test — meeting Angela Merkel in Berlin tonight.

Letta has been guiding expectations downwards….

Updated at 1.27pm BST

1.20pm BST

Rate (cut) expectations

Mario Draghi, President of the European Central Bank, ECB (L), reacts during the awarding ceremony of the Generation Euro Student's Award in Frankfurt/Main, Germany, on April 17, 2013.
Will Mario Draghi, president of the European Central Bank, ECB, deliver the goods on Thursday. Photograph: DANIEL ROLAND/AFP/Getty Images

Several City analysts and economists reckon the European Central Bank will bow to pressure this Thursday and cut interest rates by 0.25%, from 0.75% at present.

There's not much confidence that merely trimming borrowing costs will do much good, though. Perhaps Mario Draghi will produce something more surprising?

Richard Driver, currency analyst at Caxton FX explains:

This morning’s weak eurozone growth and unemployment figures only pile further pressure on the ECB to cut interest rates.

Other than Germany’s phobia of low interest rates, there really is nothing stopping the ECB and with this morning’s eurozone inflation data coming in so weak, the ground has probably never been more fertile for a rate cut.

Whether or not an interest rate cut will make any material difference in terms of economic growth is another matter but the ECB have nothing to lose by trying now, and we think they will.

The ECB runs the risk of diminishing its own credibility if it continues to ignore the deteriorating eurozone growth profile.

The new Italian PM’s pledge to fight austerity could help usher in a new approach to the balance between debt reduction and growth-promotion in the eurozone – something clearly needs to change.

Kit Juckes of Société Générale reckons the case for easier monetary easing is "plain for all to see", with unemployment up, inflation down, and credit being squeezed. But he suggests that a scheme to help small firms borrow would be more valuable. Something similar to the UK's funding for lending scheme:

Kit writes:

The case for a rate cut in Europe is two-fold. Firstly, as my colleague Adam Kurpiel argued in last week's Fixed Income Weekly, a rate cut would probably help slow the pace at which LTROs are being repaid, and therefore reverse the apparent unwinding of QE that is happening in the Euro Zone. I don't actually know to what extent a decrease in the excess liquidity in the Euro System affects anything beyond sentiment (mopping up the excess water around an over-filled bath tub isn't the same as emptying the tub!) but sentiment would be affected.

The second reason for acting is rather more banal – they'll cut because it does no harm and at the margin may help, even if only a little. Mr Draghi is not above doing things to help sentiment and indeed, at this stage, he must be aware of the risk of disappointment if he doesn't deliver something.

Wider expectations are focused around the idea that the ECB will do something to boost the supply of credit to companies and in particular SMEs. That, in some ways, would follow the UK's FLS scheme.

Brenda Kelly, senior market strategist at IG, confirms that recent poor data is actually cheering the City:

Investors are choosing to rely on optimism that the US Federal Reserve will leave its current stimulus in place and that the European Central Bank will look to cut its key lending rate.

Some economists are even calling for a 0.5% rate cut from ECB president Mario Draghi on Thursday in light of the evident decline in the German economy.

Setting aside the dearth of positive effects a rate cut might actually bring, one could question the wisdom of such an extreme rate reduction as it would leave the ECB with even fewer stimuli in its already depleted arsenal.

12.32pm BST

Gloomy data doesn’t scare the City

The financial markets are unphased by today's record unemployment rate in the eurozone (see 10.00am onwards) and surprise drop in euro-area inflation (see 10.34am)

European stock markets are pretty flat, and the euro has only inched a little lower.

City traders are shrugging off bad news on the expectation that central banks will continue to provide fresh stimulus measures to keep the show on the road. That won't rule out isolated crises (such as Cyprus) or the sudden slump in the gold price this month, but should prevent a rout. Despite the troubles in the real economy. Or so the theory goes.

Sebastien Galy of Société Générale fears that Europe is heading for rapid "Japanification" – a sustained period of little growth and low inflation.

He writes:

We are not heading for a Lehman like moment of global deleveraging, but a series of bone jarring thuds (local bubbles) along an otherwise beautiful scenic road.

It is the same feeling you get when visiting the wildlife reserve somewhere in central africa. The beautiful ride leaves you happy you didn't fall into any sinkhole, happy the lion no one told you about was busy on a gazelle and you didn't get caught on the way back by a friendly act of spontaneous local taxation on the road back. Otherwise it was a wonderful trip.

But the tourists may be jittery (to extend the safari analogy). A Reuters poll this lunchtime found that investors have moved more assets into cash, cutting their exposure to shares (as a percentage of total wealth) to the lowest level since 2007. Perhaps they can hear that lion roaring….

Updated at 12.38pm BST

11.40am BST

Cyprus bailout vote could be tight

Today's vote in the Cyprus parliament over its international loan deal is likely to be rather close, but most analysts reckon the Nicosia government will squeeze home.

The vote is constitutionally required before Cyprus can accept the terms of its bailout, and receive the first tranche of aid. Without that loan, Cyprus risks running out of money fast.

The complications arise because prime minister Nicos Anastasiades's Disy party only holds 20 seats in the 56-seat parliament. His coalition partner, Diko, holds another 8 — and has said it will reluctantly back the deal as "there's no other choice".

That still leaves Anastasiades short of one vote for an actual majority.

Three opposition parties with a total of 25 MPs have vowed to vote against the proposal, as has one independent MP.

The two remaining MPs both represent the the European party, which appears to be taking a balanced approach to the issue. Cyprus News Agency reports that one will vote against the loan agreement and the other will support it.

That would mean a 29-27 win for Anastasiades.

The debate is due to begin at 3pm local time (1pm BST), with a vote at 7pm local time (5pm BST).

Government spokesman Christos Stylianides warned ahead of the vote that it would be a disaster of Cyprus were to reject the deal at this late stage.

We have had enough of delusions. We don't have another choice.

(more details on the voting intentions here on BusinessWeek)

Updated at 2.00pm BST

11.15am BST

Greek retail sales tumble again

We're overwhelmed by disappointing economic news today.

Retail sales in Greece have declined by 14.4% year-on-year in February – the only relief is that it's slightly less severe than January's 16.8% slump.

11.01am BST

Analyst Cormac Leech points out that Germany's insistance on keeping inflation under control risks rebounding on them:

Yesterday, German inflation data showed that the cost of living actually fell last month, by 0.5% month-on-month.

10.47am BST

Record jobless – early reaction

Here's some early reaction to today's eurozone unemployment figures, and inflation data, from City analysts and commentators:

10.34am BST

Eurozone inflation slides — interest rate cut next?

Eurostat also reported this morning that inflation across the Eurozone has fallen to just 1.2% in April. That's a sharp fall on March's 1.7%, and a much smaller rise in the cost of living than analysts had expected.

That makes it more likely that the European Central Bank will bow to pressure and cut interest rates at its next monthly meeting on Thursday.

10.28am BST

Young people (once again) suffer

The figures for youth unemployment in Europe are so depressing and alarming, and part of a pattern we've been seeing for too many months.

Nearly one in four young people in the eurozone are out of work – and more than half in Spain.

The youth unemployment rate in the European Union rose to 23.5% in March (up from 22.6% a year ago), and 24.0% in the euro area (up from 22.5%).

And the periphery of Southern Europe continues to suffer the most, reinforcing all the fears of a growing lost generation.

The highest youth jobless rates were recorded in Spain (55.9%), Italy (38.4%) and Portugal (38.3%), and the lowest in Germany and Austria (both 7.6%).

10.18am BST

Unemployment across the EU has been rising steadily for the last five years, as this graph from Eurostat today shows:

Euro area and EU27 unemployment rates, to March 2013
Euro area (blue) and EU27 (black) unemployment rates. Photograph: Eurostat

10.14am BST

See the data yourself

Today's European unemployment data is online here: Euro area unemployment rate at 12.1%

10.12am BST

More details of today's jobless data.


Unemployment rate in the euro area rose to a new record of 12.1% in March, up from 12.0% in February

There are now 19.211m people unemployed across the euro area, an increase of 1.723m in the last 12 months.

European Union

Unemployment rate in the EU was stable at 10.9% in March.

There are now 26.521m people unemployed across the euro area, an increase of 1.814m in the last 12 months.

Countries with the highest jobless rates:

Greece: 27.2% (in January)

Spain: 26.2%

Portugal: 17.5%

Countries with the lowest jobless rates

Austria: 4.7%

Germany: 5.4%

Luxembourg: 5.7%


As a clarification on the German figure: Eurostat says it uses the trend component for Germany "instead of the more volatile seasonally adjusted
data." Hence the figure of 5.4% above (which is for March) does not tally with the 6.9% jobless rate quoted below which is (a) for April and ( b) seasonally adjusted.

Updated at 3.13pm BST

10.00am BST

Eurozone unemployment data released

Eurozone unemployment has, as we feared, hit a new record high of 12.1%.

More to follow.

Updated at 10.01am BST

9.59am BST

Is Abenomics having an impact?

There are encouraging signs from Japan today that its massive monetary stimulus package is having an effect.

Amid a glut of economic data overnight, Japanese household spending rose by 5.2% in March — the fastest monthly rise in nine years.

That suggests consumers are more confident about economic prospects (or deciding that it's better to spend than safe as their central bank battles with deflation).

Japan's jobless rate also dropped, to 4.1%, while manufacturing output rose by its fastest pace in a year in April.

There are also reasons to be cautious — retail sales, for example, were weaker than expected with a 0.3% year-on-year fall.

But the talk in Toyko was the Abenomics — the prime minister's new programme to end stagnation — is working.

Yoshiki Shinke, senior economist, Dai-Ichi Life Research Institute, said:

I expect the first quarter gross domestic product growth to exceed an annualised 2 percent, and if the corporate sector catches up with households, the pace of growth could accelerate…

Recovery in exports has been slow and so has industrial output, but as a weak yen is expected to impact shipments from now on, exports and factory output will pick up in coming months.

9.40am BST

Spanish recession to continue

Looking back at Spain's ongoing recession (see 8.02am onwards), and economists fear that the contraction will be repeated through the year.

Silvio Peruzzo of Nomura doesn't expect to see growth until "some time next year", adding"

We recognize the reforms of the government have been significant, but the problem is the starting position of the Spanish economy was much worse than any other European economies and adjusting in this environment is a lengthy process.

And the latest IMF forecast is for a 1.6% contraction in Spain this year.

However, Reuters flags up that finance minister Luis de Guindos struck an upbeat tone on Spanish radio:

All the indicators which look forward in Spain point to recovery, and a much better economy than one year ago.

Is he right? Well, trade data today showed that Spain's current account deficit came in at €1.3bn in February, down from €5.88bn. Exports rose 4.4% in the month, while imports shrank by 8.2%.

9.13am BST

Italian unemployment rate sticks at 11.5%

Italy's jobless data, just released, is better than expected – but still shows a country struggling with a severe youth unemployment problem.

The overall Italian unemployment rate was recorded at 11.5% in March, in line with February (which was revised down from 11.6%).

The jobless rate among under-25s, though, rose to 38.4% from 37.8%.

The data also confirmed that Italy faces a major problem getting people into the jobs market at all — its employment rate was just 56.3% (down 0.1 percentage point).

Updated at 9.14am BST

9.02am BST

Germany's jobless total has risen by 4,000 people in April March, on a sasonally adjusted basis, worse than the 2,000 rise analysts had expected.

That leaves the German jobless rate at 6.9%, on a seasonally adjusted basis.

Updated at 9.07am BST

8.54am BST

Interesting… one of Enrico Letta's new ministers has proposed changing the terms of Europe's stability and growth pact.

Flavio Zanonato told La Repubblica that Italy wants governments to be given more flexibility on their deficit targets.He suggested that 'investment spending' — money spend on structural projects that would stimuluate long-term growth — should be excluded from the targets.

Reuters has the details:

Italy's new government wants to renegotiate the pact of stability with the European Union, the industry minister said in an interview on Tuesday.

Flavio Zanonato said Italy needed to pursue a credible economic policy to maintain its reputation in Europe and keep the spread between Italian and German bond yields low.

"But we are also interested in renegotiating with the union the pact of stability," he told La Repubblica newspaper.

Zanonato said other countries such as France were calling for similar actions. "In particular it should be possible to exclude from the pact investment spending," he said.

The stability and growth pact is notorious for being loosly applied in the early days of the eurozone (whem both France and Germany breached its deficit limits without penalty) only to now be used to force struggling peripheral countries to cut their borrowing levels….

8.38am BST

News of the deepening Spanish recession comes four days after the country's unemployment total hit a new record high of 27%. That shocking total (more details here) is one reason that today's eurozone-wide jobless rate is expected to rise again.

Spain already appears to be on track to miss its deficit reduction targets for this year — and there are signs this morning that the government may be bowing to pressure to stimulate the economy:

8.02am BST

Spanish recession continues

As feared, Spain's economy has contracted by 0.5% for the seventh quarter in a row.

Data just released confirmed analyst forecasts, with Spanish GDP now 2% smaller than a year ago as the country's austerity programme — and the wider eurozone recession — continue to bite.

7.35am BST

Eurozone jobless rate expected to hit new record

Italy's designaded Prime Minister Enrico Letta gives his first speech for confidence in front of the Deputy chamber.
Prime Minister Enrico Letta (centre) will meet Angela Merkel for talks in Berlin tonight. Photograph: Simona Granati/Demotix/Corbis

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

It could be another morning of bad economic news in Europe, as the ongoing recession hits firms and forces more people out of work.

The latest eurozone unemployment data, due at 10am BST, is expected to show the region's jobless rate has risen to a new record high of 12.1% in March (from 12% last month).

Italy's unemployment rate is also forecast to increase, showing the challenges facing its new government as it strives to drag the country back to growth.

And in Spain, new GDP data will doubtless confirm that the country's economy contracted again in the first three months of 2013 (economists expect a fall of 0.5%).

As Michael Hewson of CMC Markets puts it this morning:

The Spanish economy continues to buckle under record high unemployment of 27% and rapidly declining house price values.

With ratings agency Standard and Poor’s predicting that property prices could fall another 13% by year end the prognosis looks grim not only in Spain but for the rest of Europe as well.

A grim tale indeed, and one which will set the scene for a meeting tonight between the new Italian prime minister, Enrico Letta, and German chancellor Angela Merkel.

Having won hist first confidence vote last night (see Monday's blog), Letta faces a second one in the Italian Senate today. But visit to Berlin this evening will could be more exciting, following his pledge to spare Italy from 'fiscal consolidation alone'.

There could also be drama in Cyprus today, as its parliament votes on the terms of the country's bailout deal. The plan is expected to be passed with a narrow majority, but there could be fiery criticism of the way the deal was (mis)-handled.

I'll be following all the events through the day.

Updated at 7.52am BST

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Greek farmers join 24-hour protest against the country’s financial program. Bulgaria’s government collapses as PM announces resignation after another night of protests. Bank of England policy makers’ split over QE sends pound wobbling…

Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Austerity strike in Greece, as Bulgaria’s government falls” was written by Graeme Wearden, for guardian.co.uk on Wednesday 20th February 2013 15.47 UTC

3.47pm GMT

Spanish 2012 deficit could fall below 7% of GDP

Plenty of other interesting developments in the eurozone today.

Spain’s prime minister has predicted that the country’s deficit for 2012 will come in below 7% of GDP. That doesn’t mean it will necessarily hit the target of 6.3%, but is a sharp improvement on 2011′s 9.4%.

Mariano Rajoy made the comments during his State of the Nation address in parliament, where he also announced new measures to encourage firms to hire young people. Rajoy also defended his record:

The first objective of this government is to turn around this situation… The reality is terribly hard, no green shoots or passing clouds or early spring…

To those who are asking for relaxation, not a minute of relaxation or calmness. This has just started. The road to creating jobs is a long one.

3.21pm GMT

Video: the protests in Athens

Here’s a second video clip from Athens – showing people taking part in the anti-austerity protests:

There’s also an interview with Aleka Paparika, general secretary of the Communist Party of Greece, who explains why today’s general strike and protests took place:

The workers are suffering and they have only one choice, no other, and that is to resist as long as possible.

2.59pm GMT

How UK wages still lag behind inflation

British readers feeling the financial pinch should check out this graph tracking average earnings against inflation. It illustrates how pay packets have failed to keep pace with the cost of living since the financial crisis began.

It’s a clear explanation of why the UK economy is struggling, explains our economics editor Larry Elliott:

The graph plots the growth rates in both wages and consumer prices and shows just how prolonged and intense the squeeze has been on living standards since the financial crisis began in 2007.

In the first years of the 21st Century, wages always rose more quickly than prices, which meant consumer spending power increased year after year.

Since 2007, there has not been one period when this has been the case, although for a time in 2008 and 2009 wages and prices were growing at the same rate.

The gap widened in 2010-11 as commodity prices pushed up inflation and wages remained depressed, but narrowed in 2012 as inflation came down. In the past few months, however, the gap has widened again.

The graph comes from today’s unemployment data (see 10.50am). You can see the full report here (pdf).

Updated at 3.02pm GMT

2.43pm GMT

Here’s Reuters’ latest take on the Athens protests:

Tens of thousands of Greeks took to the streets of Athens on Wednesday as part of a nationwide strike against austerity that confined ferries to ports, shut schools and left hospitals with only emergency staff.

Beating drums, blowing whistles and chanting “Robbers, robbers!” more than 60,000 people angry at wage cuts and tax rises marched to parliament in the biggest protest for months over austerity policies required by international lenders.

In the capital, riot police fired tear gas at hooded youths hurling rocks and bottles during a demonstration, mostly of students and pensioners, which ended peacefully.

The two biggest labour unions brought much of crisis-hit Greece to a standstill with a 24-hour protest strike against policies which they say deepen the hardship of people struggling through the country’s worst peacetime downturn.

Representing 2.5 million workers, the unions have gone on strike repeatedly since a debt crisis erupted in late 2009, testing the government’s will to impose the painful conditions of an international bailout in the face of growing public anger.

“Today’s strike is a new effort to get rid of the bailout deal and those who take advantage of the people and bring only misery,” said Ilias Iliopoulos, secretary general of the ADEDY public sector union, which organised the walkout along with private sector union GSEE.

“A social explosion is very near,” he told Reuters from a rally in a central Athens square as police helicopters clattered overhead.

2.33pm GMT

The protests in Greece appear to be over, although the general strike will continue for the rest of the day.

Estimates of the number of people protesting in Athens vary from 60,000 to 100,000.

Here’s Theodora Oikonomides’s latest round-up from the scene:

  • Protests: in Athens (~70,000 people?) and Thessaloniki (~7,000 people?), plus Heraklion, Rethymno and Chania (Crete), Kalamata, Corinth and the Rio-Antirrio bridge near Patras (Peloponnese), Volos, Larissa and Karditsa (Central Greece), Preveza and Ioannina (NW Greece), Alexandroupolis and Komotini (Thrace), Drama (northern Greece), Mytilene (Lesbos, N. Aegean), Zakynthos (Ionian islands).
  • Minor clashes reported in the Exarchia neighbourhood in downtown Athens.
  • High participation of farmers who joined the demos with their tractors and who blocked traffic on the Athens-Thessaloniki highway at the Nikaia interexchange, where they have been staging a symbolic sit-in for 2 weeks.

2.16pm GMT

Water cannons were also on the streets of Athens today:

2.02pm GMT

Two more photos from Athens of clashes between a group of masked protestors and riot police. Should make clear that these appear to be an isolated incident, with most of today’s marches passing off peacefully:

That old image of Angela Merkel dressed in Nazi garb also got a run-out, on a poster held by a man with a noose around his neck:

1.37pm GMT

Back to Bulgaria…. where opposition politicians are demanding early general elections following the prime minister’s resignation (see 8.42am onwards).

Sergei Stanishev, head of the Bulgarian Socialist Party, insisted that the country couldn’t wait for the poll scheduled for July:

We need early elections because no government formed by this parliament can lead normal policy.

Prime minister Boiko Borisov has stated that his party, which holds the most seats in parliament, will not take part in any talks to form a new coalition. That suggests that July’s vote will be brought forward.

Borisov’s decision to quit after another night of occasionally bloody anti-austerity protests has been welcomed. As student Borislav Hadzhiev put it to Reuters:

He made my day

The truth is that we’re living in an extremely poor country.

1.13pm GMT

Reuters confirms that there have been scuffles in Athens, and that police used teargas.

From the terminal:

Greek police fired tear gas to disperse demonstrators in Athens on Wednesday as thousands of striking workers marched to parliament to protest austerity measures.

Reuters reporters saw riot police fire a few rounds of teargas during minor scuffles with hooded youths hurling rocks and bottles.

1.10pm GMT

It appears that some clashes in Athens took place in the Exarchia area (a downtown part of the capital) – here’s a photo from the scene of a rubbish bin upended and ablaze:

Updated at 1.20pm GMT

12.46pm GMT

Photos: Farmers join the protests

One important development in Greece today is that many farmers are taking part in the protests. Theodora Oikonomides explains this is very significant as they are traditionally loyal supporters of New Democracy, the largest party in the Greek coalition government.

Photos from Greece confirm large numbers of tractors at today’s demos:

12.35pm GMT

Some demonstrators in Athens were wearing stickers asking riot police not to attack them. The slogan reads:

Don’t hit me. I’m demonstrating peacefully, it’s my right

12.30pm GMT

Hearing of clashes between protesters and riot police in Athens, with those at the scene reporting flash grenades and teargas.

More to follow!

12.08pm GMT

This video clip shows a protestor waving a home-made guillotine at riot police:

12.03pm GMT

Financial journalist Kostas Kallergis provides these photos of protesters face-to-face with riot police in Athens:

11.58am GMT

Video: Athens at a standstill

Our videoclip from Athens shows how today’s general strike has closed train stations and banks.

Vox pop Interviews with people on the streets of Athens shows contrasting views – one man reckons the strike will achieve nothing as Greece must stick to its reform plans, while another argues that the “incompetent people” running the Greek government should quit.

11.50am GMT

S&P sees growing risk of Cyprus defaulting

Ratings agency Standard & Poor’s has warned that there’s a growing danger of Cyprus defaulting on its debts.

S&P said the risk of a Cypriot sovereign default was “material and rising”, as the country prepares to vote for its next president this weekend.

With the country’s financial aid package still to be agreed, S&P cautioned investors that Cyprus could soon be downgraded from CCC+ (just three notches above default). This would happen if bailout talks fail, or if the next government cannot implement the financial reforms demanded by lenders.

S&P’s head of EMEA sovereign ratings Moritz Kraemer said in a report:

We see at least a one-in-three chance that we could lower the Cyprus sovereign ratings again in 2013, for example if official financial assistance from the ESM and/or IMF is not forthcoming, leaving the Cypriot authorities few choices apart from to restructure its financial obligations.

We could also lower the ratings if we believe the (Cypriot) authorities are not able to fulfill the conditions that would be attached to an official assistance programme.

Updated at 12.02pm GMT

11.10am GMT

Photos and Video: the Greek protests

Latest photos from Athens show that the PAME communist union demonstration was well-attended, with thousands of people marching into Syntagma Square:

And here’s a video clip of the PAME union march (click here if you can’t see it below)

Updated at 11.12am GMT

11.00am GMT

Greek protest round-up

With the Greek protests well underway, Theodora Oikonomides (who blogs and tweets as Irate Greek), kindly rounds up the details:

1. Athens: the communist affiliated union PAME has already marched to Syntagma square, while other unions (General Confederation of Workers GSEE, civil servants ADEDY) are still gathering near the National Museum to march through downtown.

2. Thessaloniki: All unions have started marching.

3. Provinces: marches reported by the #rbnews (see below) community in Heraklion and Chania (Crete), Kalamata and Corinth (Peloponnese), Larissa and Karditsa (central Greece), Preveza (western Greece), Alexandroupolis (Thrace). Likely that more locations will be reported throughout the day.

4. Extremely heavy police presence in downtown Athens, ID checks reported as far away as Aghia Paraskevi (10km from downtown).

5. Particularly noteworthy is the active presence of farmers in all demonstrations. They joined the PAME protest in Athens with tractors. In Karditsa and Larissa, protesters intend to join a roadblock set up by farmers on the Nikaia highway interexchange more than 10 days ago.

#RBnews is shorthand for Radio Bubble, a citizen journalism initiative tracking the situation in Greece.

10.50am GMT

A quick word on Britain’s unemployment data, released this morning. It was the usual mixed picture — the number of people out of work came in at 2.501 million, putting the jobless rate at 7.8% (up from last month’s 7.7%).

But there was a 12,500 drop in the number claiming jobseekers allowance, and the number of people in employment hit a new record high of 29.730 million.

However, wage growth slowed to 1.4% per annum, meaning pay continued to lag inflation.

More here.

10.42am GMT

FTSE hits five-year high

In the financial markets, the FTSE 100 has scurried over the 6,400 point mark to a new five-year high (my colleague Nick Fletcher has more details here)

Traders are encouraged by the thought of yet more electronic money-printing from the Bank of England, and ignoring the underlying cause.

FTSE 100: up 31 points at 6410, + 0.5%

German DAX: up 10 points at 7763, + 0.14%

French CAC: down 8 points at 3726, -0.24%

Italian FTSE MIB: down 13 points at 16651, – 0.08%

Spanish IBEX: down 15 points at 8230, – 0.2%

The nagging question in the City, though, is how long can this rally last? A correction, or worse, feels inevitable at some stage…

10.28am GMT

Protesters in the town of Kalamata in southern Greece raided their underwear drawers (or someone else’s washing line!) to spell out their anti-austerity message:

Updated at 10.29am GMT

10.18am GMT

Analyst: expect more Greek unrest

Today’s strike in Greece is just a taste of the protests that will hit the country through this year, predicts Martin Koehring, Greece analyst at The Economist Intelligence Unit (EIU).

Koehring says that the strike shows “the growing gap” between the plight of ordinary Greeks and the demands of international creditors, and points out that another aid tranche is due next month…..

The people of Greece are understandably disappointed that their situation is not improving despite the country continuing to receive bail-out loans since December last year.

Indeed, the unemployment rate has soared to 27%, with youth unemployment at more than 61%.

Meanwhile, the country’s lenders are adamant that the government should shore up expenditure reduction through cuts in the public payroll. The headcount is supposed to be reduced by 150,000 by 2015 with 70,000 yet to leave.

Production of a definitive quarterly schedule is the main ‘prior action’ for release of the March €2.8bn bail-out tranche. The government is thus caught between a rock and a hard place, trying to balance the demands of its domestic and foreign audiences. We expect political risk (social unrest and the instability of the fragile three-party government coalition) to remain a major focal point in Greece this year.

10.13am GMT

Photos: Greek transport networks shuttered

Long-distance and suburban railway services in Greece are cancelled today by the strike:

Athens metro and bus services are meant to be running as normal, although several central stations (including Syntagma) are being closed for a few hours on police orders.

Updated at 11.10am GMT

10.06am GMT

Back to Greece, where the anti-austerity general strike is well underway.

A police helicopter has been circling over the centre of Athens this morning, and people on the ground report a strong police presence as union marches get underway.

No reports of any clashes at this stage., but the protests appear well-supported:

9.51am GMT

Reaction: Bank of England divided

The news of a split at the heart of the Bank of England has sparked plenty of comment in the City. Here’s some instant reaction:

9.40am GMT

Bank of England split over more QE

Crumbs – the Bank of England’s monetary policy committee was split 6-3 on whether to leave Britain’s quantitative easing programme at £375bn, or pump another £25bn of new electronic money into the economy.

And excitingly, Sir Mervyn King was one of the three doves who were outvoted. He, Paul Fisher and David Miles pushed for more QE, but were outvoted.

The news has hit sterling, knocking 0.8 of a cent off the pound to $1.535 against the US dollar. That’s a new eight-month low.

The minutes of the meeting, just released, are online here.

Updated at 9.40am GMT

9.17am GMT

Bulgaria was due to hold a general election in July — it’s not clear yet whether this will be brought forward following Boiko Borisov’s resignation.

Either way, Bulgaria joins the growing list of EU countries where the government has been brought down by the financial crisis (including Italy and Greece in November 2011 and the Netherlands in April 2012*).

* – Although Mark Rutte retained power after last autumn’s Dutch general election

9.01am GMT

Photos: Violent protests in Bulgaia last night

Here are photos of the anti-austerity protests in the Bulgarian capital, Sofia, last night which helped force the prime minister to resign this morning (see 8.42am):

8.42am GMT

Bulgarian government collapses

Breaking news from Bulgaria — the government has resigned following weeks of protest against its austerity programme.

Prime minister Boiko Borisov announced the dramatic development in parliament this morning, following violent clashes between police and demonstrators last night which resulted in 25 people being taken to hospital.

Borisov told MPs:

I will not participate in a government under which police are beating people.

That was the latest in a series of large protests against the country’s tough fiscal policies, which have led to high unemployment and slowing growth. Bulgarians are also furious over steep energy prices, which many people say are simply unaffordable.

Borisov fired his unpopular finance minister, Simeon Djankov, on Monday, but that wasn’t enough to calm the storm in Bulgaria.

Djankov’s policies had cut Bulgaria’s deficit and helped keep the country’s currency pegged to the euro (which it plans to join one day).

But the population found the cost too high to bear, and it appears that last night’s violence pushed Borisov into resigning.

Updated at 9.01am GMT

8.25am GMT

Protests begin soon

Demonstrations in Athens will begin shortly, as workers march to Syntagma Square – the scene of so many protests, and clashes, since the financial crisis began.

The PAME union will begin its protest at 10.30am local time (8.30am GMT), with other groups starting 30 minutes later., and all converging on Syntagma.

The ever-useful Living in Greece has rounded up the details (more here):

9:00: Farmers’ market vendors to protest in Kaniggos Square.Naftemporiki (in Greek)

10:00: Electric company union workers to rally outisde DEH offices. — Eleftherotypia (in Greek)

• 10:30: Health workers will gather outside the Ministry of Labor. — Naftemporiki (in Greek)

•10:30: Seafarers and dock workers will gather at Karaiskaiki Square in Piraeus. — Naftemporiki (in Greek)

10:30: PAME to start rally at Omonia Square and converge with union protest in Syntagma. — PAME Press Release (in Greek).

11:00: Union rally to start at Pedion tou Areos and move to Syntagma Square. — To Vima (in Greek)

8.12am GMT

Who’s taking part in today’s strike?

Greek university lecturer Spyros Gkelis helpfully tweets a list of employees taking part in today’s general strike:

7.59am GMT

General strike begins in Greece

Good morning, and welcome back to our rolling coverage of the eurozone financial crisis, and other key events across the global economy.

The first major anti-austerity protest of 2013 is underway in Greece, as workers across the country hold a general strike.

Big demonstrations are expected in Athens, as the people once again express their anger against the spending cuts, tax rises, and other measures being implemented in return for its aid package.

The strike has been called by Greece’s two main unions – GSEE (private sector) and ADEDY (public sector). The communist PAME union is also supporting the action.

Schools, hospitals, municipal services and transport links are – as usual – all expected to be disrupted, while many offices are also likely to be hit.

GSEE said the nationwide strike was:

Our answer to the dead-end policies that have squeezed the life out of workers, impoverished society and plunged the economy into recession and crisis.

Our struggle will continue for as long as these policies are implemented.

The strike puts more pressure on Antonis Samaras’s government, days before its international lenders send officials back to Athens to assess the country’s progress.

We’ll be tracking the action in Greece across the day.

Also coming up…. the latest UK unemployment data, and the minutes from the Bank of England’s monthly meeting, both at 9.30am GMT. They should give insight into the state of the British economy.

Updated at 8.21am GMT

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Economists warn that the continued rise in public borrowing has put Britain’s triple-A rating under threat. Global jobless to hit record 200m this year. Bank of Japan introduces inflation target of 2% and promises open ended QE to start in January 2014…

Powered by Guardian.co.ukThis article titled “UK credit rating under threat as borrowing rises again – eurozone crisis live” was written by Josephine Moulds and Nick Fletcher, for guardian.co.uk on Tuesday 22nd January 2013 15.19 UTC

3.15pm GMT

Spanish bond success eases pressure for bailout request

Spain’s successful 10-year bond (see below) eases the pressure on the country to seek a bailout. Annalisa Piazza at Newedge Strategy said:

After yesterday’s Eurogroup meeting (that somehow remained supportive on Spain) and cross-country spreads remaining under control since the start of the year, we have seen increasing speculation that Spain could possibly be able to avoid the request of a credit line to the ESM.

We still see risks for Spain in the coming months as a deeper than expected recession in 2013 would completely offset the positive effects of the fiscal consolidation process.

However, the request for aid doesn’t seem to be so imminent as expected.

Updated at 3.19pm GMT

3.07pm GMT

US existing home sales fall unexpectedly

Away from Europe, a blip in the US housing market recovery. Existing home sales unexpectedly fell by 1% in December to an annual rate of 4.94m units.

This was below the 5.1m forecast, as many Americans decided not to put their houses on the market since they were worth less than the value of their mortgage.

But despite that, the December figure was still the highest rate of sales since November 2009.

Updated at 3.11pm GMT

2.57pm GMT

EU ministers will again be tackling the thorny issue of its budget next month, according to the president of the European Council.

2.50pm GMT

Looks like things could have been stirred up by this morning’s spate of market rumours, which included speculation about the resignation of the Bundesbank head – swiftly denied as “utter garbage” – and a possible profit warning from Deutsche Bank.

Updated at 2.50pm GMT

2.15pm GMT

Confidence boost for Spain after wildly successful bond sale

And sticking with the debt markets, there has been a huge amount of demand for a new 10-year Spanish government bond.

Spain’s economy minister Luis de Guindos said demand was unprecedented, with investors putting in orders for a total of €24bn bonds; while bank desks said demand reached around €17bn.

In the end, Spain reduced the interest rate it was willing to pay on the bonds because of the huge flood of demand. But still it chose only to sell €7bn of bonds to leave appetite in the market.

Spain sold the bond via a syndicate of banks, rather than a public auction. This shows a renewed confidence from the country, as it gets to set price in a syndicated bond, rather than taking whatever price investors offer in an auction.

Final pricing of the bond was a spread of midswaps plus 365bp. That’s around 0.1% higher than current yields on Spanish 10-year bonds in the secondary market.

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

Updated at 2.45pm GMT

1.50pm GMT

Ireland could apply for ECB support in bond market

Back to Brussels, where Irish finance minister Michael Noonan has said Ireland could apply for support from the European Central Bank’s bond-buying programme – the outright monetary transactions – but only after it has completed two-longer-term bond issues.

There is no inhibition on Ireland applying for OMT, but we would need to be fully back in the market first.

European commissioner Olli Rehn said the EC was working on a series of options to help Ireland and Portugal return to the markets and that the OMT was one possibility.

1.41pm GMT

Germany and France to propose deeper economic union

Meanwhile, German chancellor Angela Merkel and French president Francois Hollande have given a joint press conference in Berlin, where they said they would put forward proposals for a deeper economic and monetary union later this year. Merkel said:

France and Germany together want, by May, to put forward proposals – in preparation for the June European Council – for the stabilisation and deepending of the economic and monetary union. It is about a deeper cooperation in economic policy with the goal of social security, employment, growth and financial stability.

Updated at 1.45pm GMT

1.32pm GMT

Already the reaction the approval of the financial transaction tax (see below) is coming in.

Predictably the UK business group the CBI bemoans the move to levy trading at banks and calls for it to be limited to the eurozone countries.

Matthew Fell of the CBI said:

The UK government is right to reject a Financial Transaction Tax as damaging for jobs and growth. It is disappointing that eurozone economies are pursuing the FTT, whose costs ultimately fall on consumers and businesses, and will be a drag on the eurozone recovery. This tax must not impinge on non-participating member states by including extra-territorial reach into financial services activity conducted in the UK. As the UK’s largest single trading partner, a healthy European economy is in everyone’s interests so we urge participating member states to reconsider this tax.

But Danish MEP and Green economic affairs spokesperson said the European Commission must quickly follow up with a detailed proposal, so that the scheme can be implemented as soon as possible.

The Greens call on the Commission to present an ambitious proposal. It should cover not only shares but also bonds and derivatives, and there should be no exemption for pension funds. The FTT should also include provisions on an ‘issuance principle’, whereby financial institutions located outside of the participating states would also be obliged to pay the FTT if they traded securities originally issued within the EU. This will also make it more attractive for other member states outside the initial 11 to join.

1.28pm GMT

European finance ministers approved the financial transaction tax, despite fierce opposition from business groups. My colleague Phillip Inman reports (in a story soon to be up online):

EU finance ministers gave their approval at a meeting in Brussels, allowing 11 states to pursue a levy on financial transactions. The UK abstained in the vote alongside Luxembourg and the Czech Republic.

Eleven countries won the EU’s backing for a financial transaction tax (FTT), with Germany, France, Italy and Spain adding their names to eurozone neighbours Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia.

The levy, which could raise as much as €35bn euros a year for the 11 countries according to one EU official, is held up as a way to restrict the exuberance of investment banks in times of economic growth.

A tax would raise the costs of individual trades, many of which economists suspect are carried out by banks to extract commission and fees from fund managers that handle large scale pension fund assets.

Opinion is divided over whether banks would continue to trade at current levels and pay the tax or cut back on the number of trades, potentially saving pension schemes millions of pounds.
Algirdas Semeta, the European commissioner in charge of tax policy, said: “This is a major milestone in tax history.”

12.32pm GMT

EU gives go ahead for Robin Hood tax

As expected, the EU finance ministers have given the go-ahead for the financial transactions tax – the so-called Robin Hood tax – for 11 eurozone countries including Germany and France.

12.06pm GMT

Lunchtime round-up

So, for a quick lunchtime round-up…

The UK’s triple-A rating is under threat as borrowing continues to rise, warn economists (see 10.28am)

The global jobless total will hit 202m this year, says the ILO (see 8.09am and onwards)

The Bank of Japan has introduced an inflation target, under pressure from the new prime minister (see 9.13am and more here)

Economic sentiment in Germany has hit a two-and-a-half year high (see 10.13am)

12.00pm GMT

Greek government threatens striking metro workers

Over to Greece, where the government has indicated that it could force striking metro staff back to work, as their prolonged walkout causes traffic chaos. Our correspondent Helena Smith reports:

With metro workers digging in their heels six days after they walked off the job, Greece’s governing coalition issued its strongest warning yet saying “there are limits” to strike action.

The walkout – the longest since the inauguration of the urban transit network in the 90s – has caused gridlock in the capital, prompting fury among Greeks. The front-page headline in today’s Ta Nea encapsulates rising passions: “1.5 million hostages on the roads of Athens” it said of the worsening traffic chaos.

Workers are protesting against collective work agreements in the civil service that the EU and IMF have demanded in exchange for emergency aid. But state-run TV channel NET insisted today that only “a minority” of the metro’s 1,300-strong staff were behind the action.

Quoting government sources, it said the government would not back down and showed the development and transport minister Kostis Hadzidakis saying: “I’m afraid the ways things are developing there is no respect for rules or limits …
what we are seeing is a minority who is threatening and a majority who are paying [the price].”

Hinting that staff would be forced to go back to work under court order, the normally mild-mannered politician warned “this will be brought under control”.

Despite courts determining their action to be “illegal and abusive”, unionists vowed to continue the strike saying their action was as much motivated by disagreement over economic reforms as the “acute heart attacks” two co-workers had suffered as a result of the transport minister’s threats.

11.50am GMT

UK manufacturing could be past its worst – economist

Back in the UK, the CBI industrial trends survey was a mixed bag. Orders (particularly export orders) fell in January but expectations for near-term output and employment improved.

Howard Archer at IHS Global Insight said:

 The overall impression is that the manufacturing sector may be past the worst after a pretty torrid 2012, but it still has its work cut out to return to sustainable growth in the face of ongoing challenging domestic and international conditions.

Signs that eurozone activity may have bottomed out around October and the recent appreciable easing of the region’s sovereign debt tensions does offer some hope for UK manufacturing exports. In addition, sterling’s recent retreat, particularly against the euro, will be largely welcomed by UK manufacturers as it should boost their competitiveness.

Taking a look at the actual numbers, the total order book balance fell back to -20% in January from -12% in December, driven by a sharp drop in export orders.

Despite that, the balance of manufacturers expecting to increase their output over the next three months climbed to 8% in January from zero in December and -9% in November.

Updated at 11.50am GMT

11.42am GMT

EU finance chiefs likely to approve Robin Hood tax

As the pictures come in from the meeting of the 27 EU finance ministers, it’s worth looking at the so-called Robin Hood tax that they have been talking about this morning.

This is the proposed levy on trading, known as the financial transactions tax, that Britain has so vehemently opposed. But reports suggest the 27 EU finance ministers will today approve it for the eurozone. Austrian Finance Minister Maria Fekter said before the meeting:

I expect that we will receive this authorisation today. This is the precondition for setting such a cooperation into motion.

We already know that Britain will abstain from the vote and Reuters is reporting that other countries have expressed concern about the impact on states that do not join the scheme.

Trading in London – Europe’s biggest financial centre – for example, will be affected, as the levy can be imposed regardless of where the transaction takes place if either the buyer or seller is based in one of the countries imposing the tax.

Updated at 11.58am GMT

11.10am GMT

Irish politicians welcome delay to EU loan repayment

But Ireland’s politicians were sounding a more positive note this morning, after the EU gave the country more time to repay its loans. Our correspondent Henry McDonald reports:

Irish finance minister Michael Noonan has said that the EU’s decision to give the Republic more time to repay its loans will boost confidence in the global markets.

Welcoming today’s decision in Brussels to extend the maturity of the rescue loans to Ireland and potentially lowering cost of the multi-billion euro bailout for Dublin, Noonan said: “We’re not talking about hundreds of millions, we’re talking about savings of a certain amount of billions. We’d have to quantify that when the work is done on it. We’re not talking about huge amounts of money, we’re talking about a significant amount.”

Noonan’s Cabinet colleague, the deputy prime minister Eamon Gilmore, however warned that “time is running out” for Ireland to get a deal on its banking debt from the country’s European partners.

The Republic is due to pay a crippling €3.1bn for the cost of rescuing the bank that nearly bankrupted the country – the Anglo Irish Bank.

Noonan, Gilmore and the taoiseach Enda Kenny have themselves banked their reputations on persuading the rest of the EU to shoulder some of the burden of the cost of rescuing Anglo. “We are now at a critical stage of the discussions with the [European Central Bank] on the promissory note,” said Gilmore. The ‘promissory note’ is Ireland’s IOU to Europe in respect to that part of the emergency loans that rescued Irish banks.

11.03am GMT

Over in Ireland, meanwhile, there are clear signs of the country’s ongoing unemployment problem. Simona Zudyte reports:

Seven days after staff denied it was shutting, the HMV store on Dublin’s Grafton Street confirms it is closing its doors for the last time. Even on Ireland’s premier shopping thoroughfare, here are signs of Ireland’s inability to curb its increasing unemployment, which is close to 15%.

10.56am GMT

Back in the UK, Labour have pounced on the poor public finance data (see 9.44am) as evidence that chancellor George Osborne’s Plan A is not working. Labour’s shadow chief secretary to the Treasury, Rachel Reeves, said:

David Cameron and George Osborne’s … failure on jobs and growth means they are now failing on the one test they set themselves – to get the deficit and debt down.
Borrowing is rising and is over £7bn higher than at the same point last year. And this is borrowing to pay for economic failure as a flat-lining economy and rising long-term unemployment have sent the welfare bill soaring and tax revenues have been revised down.
By squeezing families and businesses too hard, choking off the recovery and so pushing borrowing up not down, the government’s economic policies have badly backfired. But David Cameron and George Osborne have decided that millions of working families will pay the price with further cuts to tax credits and benefits while millionaires get a tax cut.

10.51am GMT

Cyprus could derail progress in eurozone – ECB’s Asmussen

Meanwhile, ECB board member Joerg Asmussen has said that problems in Cyprus could derail the fragile recovery in the eurozone. He said to Reuters:

Disorderly developments in Cyprus could undermine progress made in 2012 in stabilising the euro area. Cyprus could well be systemic for the rest of the euro area despite its size.

Cyprus’s economy represents just 0.2% of eurozone GDP and some states say it is not systemically relevant and therefore is not in need of a bailout. Asmussen clearly disagrees.

Under normal circumstances one would expect the direct impact of a default to be limited, and it’s obvious that without assistance [Cyprus] will default.

At the same time we should recognise that the situation is not normal. Even though the promise of the OMT and other important decisions have calmed the markets, this siutation is still fragile.

Updated at 10.52am GMT

10.28am GMT

UK to lose triple-A rating, say economists

Britain will lose its triple-A rating this year, says Rob Wood at Berenberg Bank, after public finance data showed chancellor George Osborne’s attempts to cut the deficit are failing. (see 9.44am)

The fiscal position is likely to drift further off course as the UK veers towards a triple-drip recession. There is only so long that the Chancellor’s combination of smoke and mirrors and optimistic growth assumptions can disguise the problem. The UK will probably lose its AAA credit rating this year with at least one rating agency.

James Knightley at ING notes that tax receipts are down, as the economy continues to flat-line and austerity fails.

The disappointment has come from the tax side mainly, with income tax revenues, corporation tax revenues and VAT revenues all down on the same period for financial year 2011/12. This highlights the weak state of the UK economy and the fact that austerity measures are failing to generate the improvement in government finances that were hoped for.

He too asks, how long can the UK can hold onto its AAA status?

With the US and France having been downgraded by one ratings agency in the past couple of years, another disappointing UK borrowing number and a widely expected contraction in 4Q12 GDP on Friday will intensify the threat of the UK suffering the same fate.

Howard Archer of IHS Global Insight says a downgrade would be humiliating for Osborne but would not have a great impact on the economy.

The loss of the UK’s AAA rating would clearly be seen as an embarrassment for the government given the emphasis it has frequently placed in the past on keeping the AAA rating. Indeed, Chancellor George Osborne made it a key focus for the UK’s fiscal austerity prioritization as soon as the government came to power in the summer of 2010.

However, we suspect that the loss of the AAA rating would have only limited negative impact for the UK economy. There are so few countries left now with a AAA rating, that to lose it would not be the stigma or major threat to market confidence that it would have been say a couple of years ago.

Updated at 10.28am GMT

10.13am GMT

Investor sentiment in Germany hits two-and-a-half year high

Germany’s confidence survey looks good, showing analyst and investor sentiment in the country rose sharply in January to hit its highest level since May 2010.

The ZEW index hit 31.5 for January, compared with 6.9 in December, and smashing through analyst forecasts of a reading of 12.

The report said sentiment had improved as the uncertainty over Europe had diminished. But the economic situation of important trade partners for Germany was still considered to be weak.

Overall economic perspectives for Germany over the next six months have brightened. And this boost in sentiment could soon result in companies investing more.

9.44am GMT

UK public borrowing rises as spending outstrips income

Back to the UK, where public finances continue to look pretty bad. The government borrowed (slightly) more than expected in December and spending grew faster than income.

So chancellor George Osborne continues to fail in his attempt to bring the budget deficit down.

Public sector net borrowing (excluding the impact of bank bailouts) – the government’s preferred measure – rose last month to 15.4bn, compared with 14.8bn in December 2011. Government receipts rose 3.6% on the year, while spending grew by 5.4%.

We’ll have reaction to those figures coming in shortly.

9.29am GMT

Weidmann resigning rumour DENIED

Apologies, it appears the rumour that Jens Weidmann was quitting as governor of the German central bank was unfounded. The Bundesbank press office has denied it fairly robustly. A press officer said:

This is totally utterly nonsense. I don’t know why you believe all these things on Twitter. He is right now in the weekly board meeting of the Bundesbank. He really enjoys his job.

Updated at 11.58am GMT

9.25am GMT

Rumours fly that Bundesbank’s Jens Weidmann could resign

While this is very much rumour and speculation at this stage, financial broker Abshire-Smith says there is talk in the market that the Bundesbank’s Jens Weidmann could step down.

That would be huge news for the eurozone, where Weidmann is often the only dissenting voice.

Updated at 9.33am GMT

9.18am GMT

The moves by the Japanese government to influence the Bank of Japan will trouble central bankers around the world. Jens Weidmann, governor of Germany’s Bundesbank yesterday warned of the dangers of bringing politics into central bank decisions (see 7.55am).

9.13am GMT

Bank of Japan introduces inflation target of 2%

Also overnight, the Bank of Japan has bowed to pressure from new prime minister Shinzo Abe and agreed to introduce an inflation target of 2%, in a bid to boost the economy.

In a joint statement with the government, the Bank of Japan said it would aim for a 2% annual increase in the nation’s consumer price index and take additional steps for monetary easing to achieve that goal, including “open-ended” central bank asset purchases similar to the strategy followed by the US Federal Reserve.

Japan’s economy has been plagued with debilitating deflation since the late 1990s – an all-round fall in prices, profit and incomes. But the promise of monetary easing has already weakened the yen, in a boon to the competitiveness of exporters, which make up much of Japan’s growth.

8.39am GMT

ILO urges governments to ease austerity

Having laid bare the jobless crisis around the world (see below), the ILO urged governments to ease austerity, which it said has made the global economic crisis much worse.

Austerity measures and uncoordinated attempts to promote
competitiveness in several European countries have increased the risk of a deflationary spiral of lower wages, weaker consumption and faltering global demand. In light of the global jobs and consumption deficit, countries should adapt the pace of their fiscal consolidation to the underlying strength of the economy and recognise that short-term stimulus may be needed to grow out of debt burdens.

Updated at 11.55am GMT

8.27am GMT

The true extent of the unemployment crisis is masked by a growing number of people dropping out of the jobs market altogether, the ILO said in its relentlessly gloomy report (see posts below).

That problem is particularly severe in the European Union, it said, where long-term unemployment and a weak economic outlook has discouraged people from looking for jobs.

Looking ahead, the ILO said, the global number of unemployed is expected to rise further to almost 211m over the next five years.

8.20am GMT

Global youth unemployment hits 12.6%

Youth unemployment, which is more than 50% in Spain and Greece, is a particular concern, the ILO said.

Globally, the youth unemployment rate – which had already increased to 12.6 per cent in 2012 – is expected to increase to 12.9 per cent by 2017.

The crisis has dramatically diminished the labour market prospects for young people, as many experience long-term unemployment right from the start of their labour market entry, a situation that was never observed during earlier cyclical downturns.

Some 35% of all young unemployed people have been out of a job for six months or longer in advanced economies, up from 28.5% per cent in 2007. It said:

Such long spells of unemployment and discouragement early on in a person’s career also damage long-term prospects, as professional and social skills erode and valuable on-the-job experience is not built up.

In Europe, this problem is particularly severe and the ILO estimates that 12.7% of all young Europeans are neither employed nor in education or training (almost 2 percentage points higher than at the start of the crisis).

Updated at 11.53am GMT

8.09am GMT

Recession in Europe pushes global jobless to 202m this year

The global jobless total will rise to a record 202m this year, says the UN’s jobs watchdog, the International Labour Organisation.

In a report released overnight, the ILO said there were some 197m people without a job in 2012. While almost 40m people had dropped out of the jobs market altogether as job prospects proved unattainable. The jobless total will rise by 5.1m this year and another 3m next, it predicts.

It says the recession in the eurozone has spilled over globally, primarily because of a decline in international trade.

Entering 2013, the crisis in the Euro area constitutes the single biggest risk to global employment trends for the year ahead. The financial crisis in the Euro area, brought on by a combination of banking sector distress and protracted financial and household deleveraging, coupled with high levels of sovereign debt and unsustainably high government bond yields in some countries, has emerged as a disruptive and destabilizing force not only in the Euro area itself, but also for the global economy as a whole.

And, in very strong language for such a report, the ILO lays the blame for the crisis squarely at the feet of ‘indecisive’ policymakers.

Incoherence between monetary and fiscal policies adopted in different countries and a piecemeal approach to financial sector and sovereign debt problems, in particular in the Euro area, have led to uncertainty weighing on the global outlook. Investment has not yet recovered to pre-crisis levels in many countries.

The indecision of policy-makers in several countries has led to uncertainty about future conditions and reinforced corporate tendencies to increase cash holdings or pay dividends rather than expand capacity and hire new workers.

Updated at 11.52am GMT

7.55am GMT

Bundesbank warns of currency war risk

Germany’s central banker Jens Weidmann has warned of the risk of currency wars as exchange rates become ever more politicised, writes the FT this morning.

Michael Steen in Frankfurt reports:

The erosion of central bank independence around the world threatens to unleash a round of competitive exchange rate devaluations, which leading economies have so far avoided during the financial crisis, the president of Germany’s Bundesbank warned on Monday.

Jens Weidmann, whose institution’s own fierce independence from political influence was the model for the European Central Bank when it was founded, said Stephen King, the chief economist at HSBC, was “perhaps right” in forecasting an end to the era of central bank independence.

“It is already possible to observe alarming infringements, for example in Hungary or in Japan, where the new government is massively involving itself in the affairs of the central bank, is emphatically demanding an even more aggressive monetary policy and is threatening an end to central bank autonomy,” Mr Weidmann said in a speech in Frankfurt.

“Whether intended or not, one consequence could be the increased politicisation of the exchange rate,” he said, according to a text of his speech provided by the Bundesbank. “Until now the international monetary system got through the crisis without competitive devaluations and I hope very much it stays that way.”

7.45am GMT

Today’s agenda

Merkel and Hollande will today be attending an event to commemorate the 50th anniversary of the Elysée Treaty, which normalised relations between Germany and France after the second world war. Also , the finance ministers of the 27 EU member states meet in Brussels this morning.

  • EU 27 finance ministers meet: 8am
  • UK public finances (December): 9.30am
  • Germany ZEW survey (January): 10am
  • CBI trends (January): 11am
  • Google, La Stampa, La7 briefing on Italian elections: 11am
  • Merkel, Hollande and EU’s Schulz at Elysee treaty event: 1.15pm
  • ECB’s Nowotny in discussion in Vienna: 4pm
  • ECB’s Draghi speaks in Frankfurt: 6pm
  • Bank of England’s King speaks at CBI Northern Ireland dinner: 7.45pm

Updated at 11.49am GMT

7.35am GMT

Good morning and welcome to our rolling coverage of the eurozone crisis. Overnight the International Labour Organisation put out a sobering report on global unemployment, which it expects to reach record highs this year. More on that shortly.

Later today we’ve got public finances data out for the UK, and an economic confidence survey in Germany. We’ll have details of those and all the latest developments in the eurozone and beyond, throughout the day.

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Jobless rate in the euro area hits 11.8%. Youth unemployment crisis deepens. Japan pledges to buy euro rescue bonds. Leaders of Germany and Greece are meeting in Berlin. German industrial orders dropped by 1.8% in November…

Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Unemployment rate hits new record high” was written by Graeme Wearden, for guardian.co.uk on Tuesday 8th January 2013 13.23 UTC

1.23pm GMT

My colleague Ami Sedghi has gathered all today’s unemployment statistics into a new Datablog post: Unemployment in Europe: get the figures for every country

12.10pm GMT

Photos: Antonis Samaras and Angela Merkel

Over in Berlin, Antonis Samaras and Angela Merkel have held a brief press conference before starting their meeting today.

The two leaders appeared cordial – and both told the assembled journalists that the eurozone was on the right course, but that more work was needed.

Greek prime minister Samaras said:

I would like to make clear up front that our country is undertaking great efforts that are linked with great sacrifices to get things back on track.

We are trying to win back credibility, on the part of the people of Europe and on the part of the markets.

Chancellor Merkel, though, warned that 2013 will be difficult.

We must agree on stronger economic policy cooperation by June this year, and there is plenty of work ahead of us.

Regarding Greece, Merkel said she would “of course be interested in what progress the implementation of the Greek reform programme is making”.

The Greek parliament approved that austerity package late last year (thus triggering new aid payments), but many of the measures have not been implemented.

We’re not expecting any further official comments from Merkel or Samaras today.

Updated at 12.35pm GMT

11.46am GMT

Dutch finance minister tipped for Eurogroup hot seat

Speculation is growing that Jeroen Dijsselbloem, the not-particularly-internationally-well-known Dutch finance minister, will be named as the next president of the Eurogroup.

The prestigious role (chairing the regular meetings of eurozone finance ministers) is up for grabs following Jean-Claude Juncker’s decision to step down.

Dijsselbloem’s name has been ‘in the mix’ for weeks, and Reuters is now reporting that the 46-year old fin. min. is conducting a European mini-tour, and very likely to get the job.

On Monday he met European Council President Herman Van Rompuy, as well as his colleagues from Belgium and Luxembourg.

He is expected in Rome on Tuesday and Paris on Wednesday.

“It looks like it is moving in the direction of the Dutch,” one senior euro zone policymaker said.

Dijsselbloem only became Dutch finance minister in November, but has apparently impressed his counterparts. The Wall Street Journal writes today that Dijsselbloem would be the latest low-profile official or politician to take a senior job in Europe, and also has nationality on his side:

The Netherlands, which is an important player in the euro-zone debate as one of the bloc’s most credit-worthy governments, hasn’t landed a top European job for one of its own recently.

The Italians have Mario Draghi as president of the European Central Bank. The French had Jean-Claude Trichet there for eight years, and they got Christine Lagarde as head of the International Monetary Fund. The Germans got Klaus Regling to lead the European Stability Mechanism, the euro zone’s new bailout fund. The Finnish have Olli Rehn, the EU’s economics commissioner, and the Austrians have Thomas Wieser as head of the Eurogroup Working Group, the body of senior bureaucrats that crafts the euro zone’s response to the crisis and does much of the legwork for the finance ministers.

11.09am GMT

German industrial orders dropped by 1.8% in November, according to data just released.

The drop was driven by a 4.1% slump in business from overseas, which more than cancelled out a 1.3% rise in domestic orders. Capital goods orders (ie, for large machinery) fell by 3.1%.

Another sign that the eurozone crisis has hit the region’s manufacturing core? Or just a blip – after all, orders were up 3.8% in October.

The German economy ministry isn’t panicking, saying there are signs that demand appears to be ‘stabilising’.

10.58am GMT

Eurozone retail sales, meanwhile, disappointed analysts. They inched 0.1% higher in November, but were 2.6% lower than a year earlier.

Updated at 11.12am GMT

10.56am GMT

Eurozone business sentiment rises

On a brighter note, though, economic sentiment in the eurozone has improved.

The EC’s monthly test of business morale rose in December for the second month running – beating analyst forecasts (it hit 87, up from 85.7 the previous month). That suggests firms may be growing more optimistic about Europe’s prospects.

10.40am GMT

Today’s unemployment data rather takes the shine off recent claims that the eurozone crisis is over. The immediate threat to the single currency has receded, but politicians and policymakers still face an ailing economy. Initiatives such as a banking union or the ECB’s bond-buying programme may hold the eurozone together, but they don’t deliver the hope of immediate growth.

The early reaction to the statistics focuses on the grim youth unemployment levels:

10.18am GMT

Europe’s youth jobless crisis has also worsened.

Today’s data shows that the youth unemployment rate for November was 23.7% in the European Union, up from 23.4% in October 2012.

The youth unemployment rate in the eurozone is now 24.4%, up from 23.9% the previous month.

And as usual, there are very sharp differences between northern and southern Europe.

The lowest youth jobless rates were recorded in Germany (8.1%), Austria (9.0%) and the Netherlands (9.7%).

The highest are in Greece (57.6% in September 2012) and Spain (56.5%).

10.05am GMT

New eurozone unemployment record high

Just in: the eurozone unemployment rate has hit a new record high of 11.8% in November, up from October’s 11.7%.

Eurostat reported that there are now 18.820 million people out of work in the euro area.

The wider EU unemployment rate remained at 10.7%,with 26.061m million men and women out of work.

The lowest unemployment rates were recorded in Austria (4.5%), Luxembourg (5.1%), Germany (5.4%) and the Netherlands (5.6%).

Again, the highest rates were seen in Spain (26.6%). (In Greece, the most recent data shows a 26.0% rate in September 2012).

More to follow.

10.00am GMT

WEF: Economic crisis threatens green agenda

The World Economic Forum has just warned that persistent economic weakness is sapping the ability to tackle the mounting threat from climate change.

Our economics editor Larry Elliott has the story:

Two weeks ahead of its annual meeting in Davos, the WEF said widening wealth gaps and unsustainable government debt were the two biggest risks cited by a panel of over 1000 experts and industry leaders.

Rising greenhouse gas emissions was the third most likely risk.

“Continued stress on the global economic system is positioned to absorb the attention of leaders for the forseeable future. Meanwhile the Earth’s environmental system is simultaneously coming under increasing stress,” the Global Risks 2013 report said.

“Future simultaneous shocks to both systems could trigger the ‘perfect global storm’ with potentially insurmountable consequences”.

You can see the full report here, on the WEF’s website.

Updated at 10.20am GMT

9.50am GMT

Key event

Greek prime minister Antonis Samaras has just told reporters in Berlin that his country is meeting its pledges on economic reforms.

Speaking at a conference organised by German newspaper Die Welt, Samaras said:

The glass is half-full. We are delivering and Europe is helping.

Samaras and Angela Merkel are still expected to hold a joint press conference later this morning.

Updated at 10.18am GMT

9.46am GMT

Italian youth jobless rate rises

Back in Europe, and youth unemployment in Italy has hit a new record high.

In November, 37.1% of young people across Italy were out of work – the highest since records began in 1992.

The wider jobless rate in Italy was stable, though, at 11.1%.

9.40am GMT

About that yen weakness….

I mentioned earlier that the yen had weakened against the dollar as Japan made its move around 2.20am GMT. Well, the effect didn’t last long, as this graph of the yen against the dollar shows:

That may be because traders have digested the fact that Japan will be using its existing currency reserves to buy bonds from the European Stability Mechanism, as Financial Times currency correspondent Alice Ross explains

9.02am GMT

Japan’s commitment to buying European bailout bonds is another sign that the crisis has abated, argues Takumi Nomura, a senior dealer at Bank of Tokyo-Mitsubishi UFJ.

Nomura said:

Japan has been playing a positive role in helping Europe ease the region’s debt crisis, so Mr. Aso’s comment made investors think European conditions will improve further.

Kit Juckes of Société Générale says the move adds “spice” to the speculation that was already swirling around the Japanese stimulus package expected soon.

Aso and Abe are now painted so deep into a corner on the currency that they have no choice but to deliver on promises to act aggressively….

All this talk of Japanese buying of ESM bonds helps support the Euro.

Eurozone exporters, though, might rather see a weaker euro. Although, as KhakiSuit points out below, the current fashion for a weak currency has its limits — as the Economist explains here: The weak shall inherit the earth, while there’s a robust critique here: The Currency Debasement Fallacy

Updated at 9.14am GMT

8.47am GMT

Japan’s promise to buy eurozone bailout bonds comes as the country’s new government strives to create economic growth, combat deflation, and weaken its currency.

The yen did fall against the dollar as Taro made his pledge, but quickly reversed the move [updated].

Here’s how Taro’s announcement is being reported:

Bloomberg: Japan to Buy ESM Bonds as Abe Steps Up Bid to Weaken Yen

Reuters: Japan finmin says will buy ESM bonds to help euro zone

MNI: Japan’s Aso Comments Spark Wild Moves in Euro, Yen

Updated at 9.26am GMT

8.29am GMT

Japan pledges to buy eurozone bailout bonds

Japan has announced that it will help Europe through its debt crisis by purchasing bonds issued by the eurozone bailout fund.

Speaking in Tokyo this morning the new Japanese finance minister, Taro Aso, announced that Japan plans to “continuously” take part in debt auctions conducted by the European Stability Mechanism, possibly starting today.

Aso refused to say how much Japan would buy, but insisted the plan would support Europe — and also benefit Japan by helping to weaken the yen.

Aso said:

Stability in Europe’s financial situation helps stabilise currencies including the yen.

From this standpoint and based on Europe’s further efforts on financial stability, Japan will purchase a portion of ESM bonds continuously by utilising foreign reserves.

Aso’s commitment will be welcomed in the eurozone, as the ESM is holding its first debt auction later today, selling three-month notes worth about €2bn.

The money raised from ESM bond sales is used to fund eurozone bailout programmes.

Masaaki Kanno, chief economist at JPMorgan Securities, told Bloomberg that Aso’s pledge would go down well in Europe:

The Europeans would be happy to see Japan buy ESM bonds, so Japan can avoid criticism from abroad and at the same time achieve its objective.

Japan already owns around €7bn of bonds issued by the eurozone’s temporary rescue fund, the EFSF.

8.16am GMT

Slew of data will show state of euro economy

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

There’s a busy morning ahead of us – at 10am GMT, fresh unemployment data for November 2012 will be released. Economists fear that the jobless rate across the eurozone could hit a new record high, up from November’s 11.7%.

With eurozone retail sales and economic confidence data also due at 10am GMT, and German factory orders an hour later, we should get a decent health check on Europe.

And on the political front, Angela Merkel and Antonis Samaras are meeting in Berlin today. The German chancellor and Greek PM are expected to hold a brief press conference this morning.

I’ll also be watching Italy, where the general election campaign is well under way following Silvio Berlusconi’s new alliance with the Northern League party (see yesterday’s blog…).

Updated at 9.51am GMT

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U.S. non-farm payrolls show continued trend of slow improvement. The U.S. economy added 155,000 jobs in December, while the rate of unemployment remained steady at 7.8%. U.K. services sector disappoints with unexpected first contraction in two years…

Powered by Guardian.co.ukThis article titled “US unemployment holds steady at 7.8% as economy adds 155,000 jobs” was written by Matt Williams, for guardian.co.uk on Friday 4th January 2013 14.51 UTC

The US economy added 155,000 jobs in December, continuing a trend of stubbornly slow improvement.

The Bureau of Labor Statistics said the rate of unemployment remained steady at 7.8% in December. November’s rate was revised up to 7.8% from an initially reported 7.7%.

The figures are largely in line with analysts’ expectations, with broadly distributed gains in employment across sectors from construction and manufacturing to healthcare.

“It was a decent employment report”, John Lanski, chief economist at Moody’s Capital Markets said. “I cannot see any glaring negatives in this report.”

In all, employers added 1.84 million jobs in 2012, in line with the previous year. It represents steady, if not stellar, improvements ion the jobs market. Nonetheless the gains – at roughly 153,000 additional jobs a month – represents continued momentum in the recovery from the 2007 to 2009 recession.

It also suggests that employers were not spooked by December’s fiscal cliff negotiations, which had brought America to the brink of triggering an austerity package that many economists said could plunge the US back into recession.

“Fiscal cliff related uncertainty isn’t apparent. It certainly doesn’t jump out of you in the report,” Lanski said.

There were some indications in the report of the sluggish and fragile nature of the recovery. Despite the headline rate holding steady, the number of Americans out of work increased by 164,000 to 12.2 million.

And the number of long-term unemployed remained essentially unchanged at 4.8 million, accounting for 39.1% of those out of work.

The unemployment figures come from a separate survey of households, while the payroll count comes from data from businesses. But Friday’s data suggests that layoffs continue to decline. Meanwhile the number of people seeking unemployment aid in the past month dropped to a near four-year low.

“It’s not a booming economy, but it is growing,” Jim O’Sullivan, economist at High Frequency Economics said.

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