http://www.telegraph.co.uk/finance/debt-crisis-live/9227632/Debt-crisis-live.html
I believe that is the factor which is in shortest supply at the moment in spite of so many good individual and collective efforts [...] If there is no demand, growth will not materialise. All the reforms we are putting in place now are deflationary.
In conclusion, we see signs of a bubble in the French housing market and would not be surprised to see French house prices declining 10-20% in coming years. However, to identify a bubble is one thing; it is much harder to predict when it will burst. If sentiment improves, French house prices might be able to rise strongly on an unsustainable path for a couple of years before losing momentum. In that case, the ‘pop’ would just be larger. We find that several indicators, including demand for house loans and credit conditions, signal that the French housing market could be at a turning point. Under normal circumstances, this should not cause too much alarm. However, we are in the middle of a European confidence crisis. If focus moves from Spain to France, the crisis could escalate.
There is little doubt in our minds that the French housing market at the current juncture is vulnerable to a sharp rise in interest rates. However, we do not see this happening. We do not expect the ECB to hike rates before 2014, so lending rates may very well remain low for several years, which would help to support the current price level. However, if the housing market begins to show further signs of weakness the reaction from banks would normally be to tighten credit standards further and possibly start increasing lending rates as, for example, seen in Spain, which would put further downward pressure on the housing market.
Following much speculation it has now been confirmed that HSBC is sending over 3,100 of its staff to the back of the unemployment queues. There is no justification for this awful treatment of staff. How can the bank announce 3,167 staff cuts when it was the workforce that delivered it a profit of £13.8bn last year?
In particular in the euro area, the case for strengthening banking supervision and resolution at a euro area level has become much clearer.
The level of public debt, 65.2% of GDP in 2011, is significantly below that of its larger 'AAA' peers, Germany, France, UK and US (all above 80%). The country's strong external finances also support the rating. On top of this, the country has a track record of fiscal discipline: in the 10 years to 2007, public debt was reduced by 23% of GDP. However, this debt reduction has been almost entirely reversed, with a 20% of GDP increase from 2007 to 2011.
I have had good, constructive talks with a number of factions [...] I cannot say there is the prospect of an agreement. I can absolutely not say that, but I see reason to continue the talks.
We need growth in the form of sustainable initiatives, not simply economic stimulus programs that just increase government debt.
Construction is back in the doldrums, and the ONS said its figures showed that while some private sector projects were holding up, public sector infrastructure projects were waning, not surprising in light of the drastic public sector spending cuts under way.
12.05 Italian PM Mario Monti has joined the chorus of calls for growth in the eurozone. He told business leaders in Brussels:
I believe that is the factor which is in shortest supply at the moment in spite of so many good individual and collective efforts [...] If there is no demand, growth will not materialise. All the reforms we are putting in place now are deflationary.
Italy's Prime Minister Mario Monti addresses the audience at the start of the 10th European Business summit in Brussels on Thursday (Photo: AP)
11.45 More from the Danske Bank analysts:
In conclusion, we see signs of a bubble in the French housing market and would not be surprised to see French house prices declining 10-20% in coming years. However, to identify a bubble is one thing; it is much harder to predict when it will burst. If sentiment improves, French house prices might be able to rise strongly on an unsustainable path for a couple of years before losing momentum. In that case, the ‘pop’ would just be larger. We find that several indicators, including demand for house loans and credit conditions, signal that the French housing market could be at a turning point. Under normal circumstances, this should not cause too much alarm. However, we are in the middle of a European confidence crisis. If focus moves from Spain to France, the crisis could escalate.
11.32 Spain's housing woes have been well documented, and, as our in-house sage Ambrose Evans-Pritchard wrote last week, Holland has property market issues of its own. However, a note sent out yesterday by analysts at Danske Bank in Denmark suggests that the Frenchhousing market could be the next bubble to pop.
The bank highlights several reasons for this, including waning demand for mortgages, a sharp fall in housing starts, and tightening credit conditions. As a result, prices could fall by up to 20pc:
There is little doubt in our minds that the French housing market at the current juncture is vulnerable to a sharp rise in interest rates. However, we do not see this happening. We do not expect the ECB to hike rates before 2014, so lending rates may very well remain low for several years, which would help to support the current price level. However, if the housing market begins to show further signs of weakness the reaction from banks would normally be to tighten credit standards further and possibly start increasing lending rates as, for example, seen in Spain, which would put further downward pressure on the housing market.
10.45 HSBC is to cut 2,217 UK jobs, and redeploy 950 other workers, according to union Unite.
Ahead of an official statement by the bank, David Fleming, Unite national officer said:
Following much speculation it has now been confirmed that HSBC is sending over 3,100 of its staff to the back of the unemployment queues. There is no justification for this awful treatment of staff. How can the bank announce 3,167 staff cuts when it was the workforce that delivered it a profit of £13.8bn last year?
Harry Wilson, our banking correspondent, reported yesterday that thecuts will be targeted at back office staff.
10.11 Italy has got a short-term bond auction away this morning, selling €8.5bn of six-month debt at average rates of 1.772pc. This was much higher than the 1.119pc it had to pay in January, though demand was stronger, with 1.71 bidders for every bond on offer (vs 1.51).
Short and long term Italian borrowing rates were steady following the auction.
10.02 In fact, confidence across the eurozone continues to wane. Survey data from the European Commission showed sentiment falling to 92.8 in April, compared with 94.5 in March (against a long-run average of 100).
09.50 Italian business confidence slipped to a two-year low this morning as production expectations worsened. Italy's manufacturing-sentiment index dropped to 89.5 from a revised 91.1 in March, statistics institute Istat reported.
Economists polled by Bloomberg had predicted a reading of 92.1, which is still well below the long-run average of 100.
09.44 More from Mr Draghi (see 08.58), who has said that governments should consider creating a body to deal with eurozone bank bailouts. He said:
In particular in the euro area, the case for strengthening banking supervision and resolution at a euro area level has become much clearer.
09.23 Meanwhile, French president Nicolas Sarkozy has declared there is "no turning back" on Europe’s target to cut budget deficits.
Mr Sarkozy, who could be out of a job in less than two weeks, toldFrance's Inter Radio that the country had managed to cut its deficit faster than expected without cutting civil servant pay or pension payments.
Governments should focus on job training and innovation to boost growth, not just higher spending, he added.
Yesterday, Mr Sarkozy promised to hold a referendum on Europe's fiscal pact. Rival Francois Hollande has already stated that if he is elected, he would seek to rewrite it.
Nicolas Sarkozy talks to reporters earlier this month (Photo: AFP)
08.58 Mario Draghi, the head of the ECB, is speaking at a joint conference this morning titled Financial integration and stability: towards a more resilient single EU financial market. He told the invitation-only conference that financial integration “helps to maintain balanced monetary and financial conditions,” although the financial crisis had “demonstrated that financial integration cannot be taken for granted."
07.59 Yesterday, Fitch highlighted the political risks that surround the country's ability to meet deficit targets in 2013. However, the ratings agency said that the country was in a strong position compared with its AAA peers.
The level of public debt, 65.2% of GDP in 2011, is significantly below that of its larger 'AAA' peers, Germany, France, UK and US (all above 80%). The country's strong external finances also support the rating. On top of this, the country has a track record of fiscal discipline: in the 10 years to 2007, public debt was reduced by 23% of GDP. However, this debt reduction has been almost entirely reversed, with a 20% of GDP increase from 2007 to 2011.
Fitch will publish a ratings review of Holland by the end of June.
07.49 Politicians are making slow progress in Holland. Dutch finance minister Jan Kees de Jager has said that budget talks between members of parliament had been "constructive," although he suggested that any consensus on cuts was still premature. He told reporters:
I have had good, constructive talks with a number of factions [...] I cannot say there is the prospect of an agreement. I can absolutely not say that, but I see reason to continue the talks.
07.39 Over in Europe, the talk is no longer about a fiscal compact, but a growth one. ECB chief Mario Draghi yesterday urged the eurozone to adopt policies that would boost economic prospects. German Chancellor Angela Merkel offered her blessing. She said:
We need growth in the form of sustainable initiatives, not simply economic stimulus programs that just increase government debt.
Angela Merkel at the Chancellery in Berlin on Wednesday (Photo: Reuters)
07.36 Meanwhile, the US Federal Reserve decided to hold interest rates at 0.25pc yesterday, and reiterated its intention to keep rates at the record low level until at least the end of 2014.
The Fed raised its growth forecasts for the US for this year, and now expects the US to grow by between 2.4pc and 2.9pc in 2012, compared with between 2.2pc and 2.7pc forecast in January.
Unemployment is forecast to fall to between 7.8pc and 8pc by the last quarter of 2012, from between 8.2pc and 8.5pc as forecast in January.
07.25 The data highlighted that the construction sector was at the heart of the gloom. Angela Monaghan reports:
Construction is back in the doldrums, and the ONS said its figures showed that while some private sector projects were holding up, public sector infrastructure projects were waning, not surprising in light of the drastic public sector spending cuts under way.
The sector has been among the hardest hit by the crisis, first by a collapsing housing market, and more recently by weak confidence and the Chancellor's unwavering austerity drive. Construction companies under Labour relied on public sector spending on new schools, hospitals and other infrastructure, but those opportunities are drying up, spelling further problems ahead for the sector.
07.20 Yesterday's shock news that the UK economy is back in recession prompted a range of reactions.
PM David Cameron and Chancellor George Osborne stuck to their guns: you don't solve a debt crisis by adding more debt, both declared. Meanwhile, stock markets remained largely indifferent to the data, and economists? Well, they were more baffled than anyone else.
07.15 Good morning and welcome back to our live coverage of the European debt crisis.
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