http://www.telegraph.co.uk/finance/debt-crisis-live/9298932/Debt-crisis-live.html
12.22 Hellenic Financial Stability Fund chief says final bank recapitalisation to be done by September. Adds that €18bn recapitalisation will protect deposits.
12.19 A 60-year-old Greek man has hanged himself at a public park, just a couple of meters away from his home in Nikaia suburb of Athens.
Police found a hand-written note in his pocket, it read:
I committed a big crime, to go self-employed at the age of 40, and be drawn by debts. Now the mal… of 61 years old must pay, I hope my grandchildren will not be born in Greece that will soon be composed of no Greeks… Unless there was a politician with b… of Thatcher type for us and the state so we would comply.
12.15 Euro has spiked on that release, FTSE 100 claws back losses to trade down 1.3pc, IBEX doing better at 0.6pc down.
12.11 EU adds that the 17 countries that use the euro should consider setting up a “banking union” that allows them to share the burden of bank failures.
To further stop expensive bank bailouts from pulling down governments’ own finances, allowing the eurozone’s new rescue fund to directly boost the capital of banks “might be envisaged,” the European Commission said. Spain called for this measure earlier in the week.
12.10 The European Commission also highlights “structural challenges” for the UK:
• Private debt levels are still too high.
• The economy has too many people with low skills
• There is a lack of high-quality and affordable childcare
• There is a significant shortage of housing and house prices remain too high
• A persistently negative net export position has hit competitiveness.
The lack of skills is damning:
“There is a persistently large number of functionally illiterate and innumerate adults in the UK, usually with no qualifications.”
It said the country could gain significant economic and social benefits from doing more to address the needs of this group, including increasing their capacity to benefit from vocational training.
Apparently Britain has higher levels of early school leavers than the EU average for all subgroups except for migrants.
12.03 Other highlights from the EU's report:
SPAIN In 2012, Spain's economic activity is expected to contract by 1.8pc, and by 0.3pc in 2013. Unemployment is foreseen to increase further to 25.1pc in 2013, also for the young.
FRANCE In 2012, France's economic activity is expected to grow by 0.5pc, before regaining momentum in 2013 to reach 1.3pc. Unemployment is foreseen to increase further to 10.2pc.
GERMANY In 2012, Germany's economic activity is expected to significantly slow down as compared to 2011. Real GDP is projected to increase by 0.7pc. Unemployment is foreseen to further drop to 5.5pc.
GREECE The recovery previously announced for next year will be further delayed with, at best, a stagnation of activity in 2013. It is only in 2014 that positive annual growth rates are expected to return.
IRELAND Ireland’s economy returned to modest, export-driven growth of 0.7pc in 2011. While employment contracted by 2.1pc in 2011 as a whole, it grew by a seasonally adjusted 0.6pc in the final quarter of 2011. Unemployment is expected to reach 14.3pc in 2012.
ITALY In 2012, Italy's economic activity is expected to contract by 1.4pc, and gradually recover in 2013. The unemployment rate is foreseen to increase further to 9.5pc this year and 9.7pc in 2013.SPAIN: In 2012, Spain's economic activity is expected to contract by 1.8pc, and by 0.3pc in 2013. Unemployment is foreseen to increase further to 25.1pc in 2013, also for the young.
12.00 BREAKING NEWS...
Brussels has released its financial reports on eurozone countries.
In the UK this year, economic activity is expected to remain subdued, with growth of 0.5pc, before regaining momentum in 2013. Unemployment is forecast to reach 8.5pc.
The report card for the eurozone as a whole is gloomy. The EU says that over the last year the crisis in the euro area went through its most acute phase to date.
At its centre was a dangerous feedback loop between sovereigns, the banking system and the deteriorating economic outlook. As banks in Europe hold large amounts of domestic sovereign debt, concerns about the sustainability of sovereign debt spilled over to the banking sector. In turn, banks’ limited capacity to absorb losses added to the sovereign risk as governments were perceived as ultimate backstops for ailing financial institutions. Finally, feeble growth prospects – weakened further by private and public deleveraging – increased the concerns about debt sustainability and banks' profitability, led to higher debt refinancing costs and endangered debt sustainability in a self-fulfilling way.
The report highlights the spread of contagion to vulnerable euro statesthat has revealed or compounding various home-grown problems.
Markets remain exceptionally tense and vigilant and confidence is still weak, it said, stressing the need to continue with reform efforts to address the medium- and longer-term challenges of the euro area, in particular to:
• revive growth and increase growth potential
• reduce the high debt burden in the public and private sector in a well-coordinated manner across countries in a way that does not excessively constrain economic growth
• continue financial repair in particular to ensure a sound banking sector, able to provide healthy financing to the economy.
However, the report concludes more steps will be necessary in the medium term.
11.47 Citigroup says €800bn+ ECB support required in event of contagion.
11.37 Ambrose Evans-Pritchard has commented on the declining money supply in Europe:
Clearly the sugar rush from the ECB's three-year credit blitz has worn off, leaving behind some very toxic effects. Those banks in Italy and Spain that used the money to play the Sarkozy redemption trade by purchasing sovereign debt – some with ten times leverage – are in serious trouble. Today's spike in Italian yields shows that they are running out of LTRO money to keep the game. Spanish five-year debt is over 6pc. Muy feo. Quite why anybody thought that a €1 trillion liquidity blitz through the banks is better than €1 trillion in genuine QE is beyond me. I think the ECB has twisted itself in knots to comply with a dysfunctional mandate, enshrined in the dysfunctional Maastricht treaty. One error begets another.
11.32 French government doesn't see Greek exit, spokeswoman says.
11.23 Spanish 10-year bond yields hit 6.71 (euro-era high), Italy's 6.13pc.
11.08 Irish unemployment unchanged at 14.3pc.
11.01 ECB says none of eight EU countries under review meets required standards to join euro. Latvia and Lithuania need price stability to join.
10.36 ECB denies rejecting Bankia plan and says it stands ready to give advice on the development of Spanish bank recapitalisation plans.
Spanish Economy Minister Luis De Guindos says country's bank rescue fund FROB to raise funds for Bankia on the market (but FROB only contains €4bn).
He adds that government is convinced new Greek elections are "fundamental factor" behind rise in debt spread, 500 basis point spread "not sustainable" (now at 535bps). Also says Spanish Treasury is "perfectly financed". De Guindos is sure Greece will choose a "stable" government.
10.32 Some breaking news back in the UK, the editors of the Daily Mirror and Sunday Mirror - Richard Wallace and Tina Weaver- have been made redundant and will leave the company with immediate effect.
10.22 Italy sells €3.391bn of June 2017 bonds at 5.66pc versus 4.86pc in April.
Also, €2.341bn of September 2022 bonds at 6.03pc gross yield versus 5.84pc at previous auction.
Both auctions saw less bonds sold than maximum.
Bad news, borrowing costs rise for Italy. Ten-year bond yield rising, now 6.13pc. Spain's at 6.68pc.
10.04 Bank of Spain Governor Miguel Angel Fernandez Ordonez: We don't know how big Bankia bailout will be. Government still hasn't decided on how to rescue lender.
10.01 Euro area economic confidence in May falls to 90.6 versus 92.9 in April. Analysts expected 91.9 - worst since October 2009.
Consumer confidence unchanged at -19.3.
09.52 Italian industrial output will drop 0.6pc this month as a result of two earthquakes, with “lasting” consequences on output, employers lobby Confindustria has said.
09.43 Spain to recapitalise Bankia with cash via Treasury debt sales, according to news agency EFE.
Spanish Economy Minister Luis De Guindos tells Parliament that the ECB didn't reject any plan on Bankia. Adds taxpayer will recover funds injected into lender.
09.37 JP Morgan's chief European economist, David Mackie, believes a Spanish bailout may total €350bn through to the end of 2014, with €75bn for bank recapitalisations.
09.26 Bank of England policymaker Paul Fisher: "No one is trying to anticipate a euro break-up but it can't be ruled out."
09.21 Bank of Spain Governor Miguel Angel Fernandez Ordonez has said the ECB can't resolve Europe's underlying problems. Adds that it is crucial for Spain to address its deficit. Country might need more cuts of tax hikes to reach goal; main problem is confidence, which has worened due to handling of bank crisis. Tax take could be lower than expected this year.
Current European economic situation similar to start of 2008 crisis, and 2011 shows how difficult it is to cut a deficit in a recession.
09.15 UK 10-year bond y-ields drop to 1.743pc - lowest in 318 years.
Growth in eurozone money supply, a key indicator of demand in the economy, slowed in April, the European Central Bank said on Wednesday. The M3 indicator rose 2.5pc last month, following a gain of 3.1pc in March.
09.02 Italian producer prices rise at annual rate of 2.5pc in April - slowest since March 2010. Prior rate 2.8pc, forecast 2.3pc.
08.56 The timeline for implementation of tougher banking rules designed to prevent another global financial crisis will not change due to turmoil in the eurozone, a senior regulator has said.
The so-called Basel III rules mandating banks increase their capital-to-assets ratios will be rolled out as planned from next year to 2019, Financial Stability Board chief Mark Carney said.
"I wouldn't characterise that timeline as being aggressive. It's a consensus-driven timeline. It's not going to change," the Bank of Canadagovernor told reporters.
08.54 Essayist Nassim Taleb, author of The Black Swan, has said a break-up of the euro is "not a big deal" as problems in the US are more serious.
[A break-up of the euro] is not a big deal. When they break it up, there will be a lot of fun currencies. This is why I am not afraid of Europe, or investing in Europe. I’m afraid of the United States. Of course Europe has its problems, but it’s in much better shape than the United States. We [the US] have zero interest rates. If interest rates go up in the United States, you can imagine what the deficit would be. Europe is like someone who is ill but is conscious of it. In the United States we are ill, but we don’t know it. We don’t talk about it.
The best thing Europe ever did is managing to have members bickering with each other, so you don’t have the big government. Centralized government doesn’t work. In Europe they tried to have a powerful Brussels, but what happens when you have a powerful Brussels? You have lobbies hijacking Brussels.
08.37 El Economista reports that Spain may resume its short-selling ban on banks.
08.32 ECB says Greek banks to regain access to refinancing operation soon.
08.28 US economist Paul Krugman tells BBC that the UK's austerity push is "deeply destructive". Advises Irish to vote "no" in referendum on fiscal compact.
Tánaiste Eamon Gilmore has said the matter of Ireland being "in" or "out" of fiscal compact based on May 31 referendum vote. Irish bond yield curve inverts for first time since January.
08.27 Spanish PM Mariano Rajoy: Europe must take measures to help liquidity. EU must help with debt sustainability. Europe must discuss role of ECB in the future.
Rajoy says EU should discuss eurobonds as part of integration.
08.15 Spain did not consult ECB on any Bankia plan, says Spanish Economy Ministry. First option remains to tap markets to recapitalise lender. Bankia trading halted again after lender's shares fall 15pc.
08.14 Italian bond yields rise 9 basis points to 6.01pc. Crosses 6pc "danger level". Spanish bond spread versus GErman bunds widens to record 515 basis points.
Italy to sell five and 10-year bonds today.
08.12 IBEX now down 2.2pc after just 10 minutes of trading. Spanishbank governor leaving early and fears over country's banking sector hitting shares this morning.
08.06 Spanish CPI (EU harmonised year-on-year) falls to 1.9pc in May from 2pc. Consumer prices index falls to 1.9pc from 2.1pc.
Rajoy says EU should discuss eurobonds as part of integration.
08.15 Spain did not consult ECB on any Bankia plan, says Spanish Economy Ministry. First option remains to tap markets to recapitalise lender. Bankia trading halted again after lender's shares fall 15pc.
08.14 Italian bond yields rise 9 basis points to 6.01pc. Crosses 6pc "danger level". Spanish bond spread versus GErman bunds widens to record 515 basis points.
Italy to sell five and 10-year bonds today.
08.12 IBEX now down 2.2pc after just 10 minutes of trading. Spanishbank governor leaving early and fears over country's banking sector hitting shares this morning.
08.06 Spanish CPI (EU harmonised year-on-year) falls to 1.9pc in May from 2pc. Consumer prices index falls to 1.9pc from 2.1pc.
07.55 The Irish central bank has reportedly said that the country's lenders need a further €3bn to €4bn over the next five to six years.
07.46 Lack of Chinese stimulus affecting markets this week. Here isLinda Yueh at Bloomberg:
07.36 Michel Sapin, French labour minister, says he doubts April unemployment figures will be good when they are released at 5pm (UK time).
07.30 Asian markets have sunk this morning on growing concerns that Spain could be forced into seeking a bailout while China dashed previous hopes it will introduce fresh stimulus measures to boost its economy.
Tokyo fell 0.28pc, Seoul was 0.27pc lower, Hong Kong tumbled 1.95pc and Shanghai slipped 0.26pc.
07.25 Spanish newspaper El Pais says EU could give Spain another year to meet budget deficit goal of 3pc of GDP. Could be delayed to 2014. EC asks for measures including VAT rise.
07.20 Interesting comment piece in the FT this morning, entitled "Spain must avoid an Irish turn".
'We are not going to let... any bank fall... if that happens the country will fall,”'Mr Rajoy said on Monday. That is the message Ireland’s government insisted on as it piled private banks’ debts on to its puny sovereign shoulders. By the end of 2010 markets had lost faith in Dublin’s ability to repay and it was strong-armed into a eurozone rescue loan.
Ireland’s folly made clear that the interdependence of sovereigns and national banks is at the heart of the monetary union’s present dysfunction. But to judge from Mr Rajoy’s words, Madrid will tighten this deadly embrace instead of loosening it – even as its sovereign bond spreads hit euro-era records...
Converting Bankia’s non-deposit liabilities could recapitalise it to the hilt. But it may be too late, not least politically: shareholders, who would be hit first, are often Bankia depositors lured into buying the bank’s stock. Still, Madrid can signal how future capital needs will be met – in Bankia or elsewhere. Promising that no bank will fall is what truly brings a country down.
07.15 European Union countries could be obliged to bail out one another's struggling banks, according to a draft EU law that marks a big step towards greater EU financial integration likely to upset some members, particularly Germany.
The European Commission, the EU's executive, will propose the rules on June 6, to grant local regulators what one official described as "aggressive intervention powers" to take control of stricken banks, break them up and impose losses on their bondholders.
07.10 Vulnerable eurozone giants are braced for annual economic and public finance reports from Brussels today that may demand policy changes - or else threaten fines.
Issued today for only the first time since Brussels was given the power to fine spendthrift states, all eyes will be on Spain, Europe's fourth-biggest economy.
The results are out at 12pm (UK time). We'll have the latest here.
07.07 Meanwhile, Ambrose Evans-Pritchard reports a stabilisation plan gaining momentum in Germany that could see Europe’s debtors pawning their gold for what Ambrose describes as "Eurobond Redemption":
The German scheme -- known as the European Redemption Pact -- offers a form of "Eurobonds Lite" that can be squared with the German constitution and breaks the political logjam. It is a highly creative way out of the debt crisis, but is not a soft option for Italy, Spain, Portugal, and other states in trouble.
The plan is drafted by the German Council of Economic Experts and inspired by Alexander Hamilton’s Sinking Fund in the United States -- created in 1790 to clean up the morass of debts left by the Revolutionary War. Flourishing Virginia was comparable to Germany today.
Chancellor Angela Merkel shot down the proposals last November as "completely impossible", but Europe’s crisis has since festered, and her Christian Democrat party has since suffered crushing defeats in regional elections.
This demand could enflame opinion in Italy and Portugal. Both states have kept their bullion, resisting the rush to sell by Britain and others. Italy has 2,451 tonnes of gold, valued at €98bn in March.
07.00 It just gets worse. Yesterday, Spanish retail sales plunged a record 9.8pc last month, underscoring a dangerous economic slide that could derail Madrid's efforts to shore-up its banks and struggling regions.Louise Armitstead reports:
It came as Madrid, which has insisted it can cope without a bail-out, forged ahead with eleventh-hour reforms, as its stocks fell and its benchmark borrowing costs hit 6.5pc, with a fresh low against German bunds. The euro dropped to a near three-and-a-half year low against the pound.
Traders, meanwhile, targeted Spanish banks and Bankia in particular. The newly nationalised lender managed to shock markets again with the disclosure that its bosses shared a €22m pay-out despite needing a €19bn state rescue. Bankia's parent company restated its 2011 results to reflect a €3.3bn loss as opposed to a €41m profit.
Mariano Rajoy's government appeared to scrap plans to inject Bankia with government debt but analysts said botched nationalisation plans had already seriously damaged Spain.
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