More bad news from Italy, with data showing consumer confidence has hit its lowest level since records began in 1996.
The national statistics bureau ISTAT's headline consumer confidence index fell to 84.6 in January from 85.7 the month before.
That missed all forecasts in a Reuters survey of 15 analysts, who were expecting the index to pick up to 86.0.
The reading is the lowest in the seasonally-adjusted data series, which dates back to 1996, an Istat official said.
Eurozone bank lending to private sector falls
Bank lending to households and companies in the eurozone shrank again in December, suggesting appetite for credit remains low.
ECB lending data show loans to the private sector fell 0.7% compared with the same month in 2011.
The monthly flow of loans to non-financial companies fell €22bn in December, after falling by €7bn in November. The flow of loans to households dropped by €3bn, after a rise of €6bn in the previous month.
That could put a more negative spin on news out on Friday that eurozone banks repaid more of their emergency ECB loans than expected. As Gary Jenkins noted this morning:
The Spanish finance ministers said that Spanish banks repaying was a sign that the Spanish economy was on the rise. Maybe, but if that is the case there has not been a lot of data to support such an assertion recently. One could take the opposite view that early repayment is indicative of a lack of loan demand or confidence to lend, which would not be so good for the economy.
The overall figure for eurozone M3 money supply – a general measure of cash in the economy – grew by 3.3% in the year to December, slowing down from 3.8% in November.
Greek electricity workers plan strike
Over in Greece, reports have emerged that workers at the country's main power company, the Public Power Corporation, will strike on Thursday in support of public transport employees who were forced back to work at the end of last week, ekathimerini reports:
The main union representing Public Power Corporation workers, GENOP-DEI, said on Monday that its members will hold a 24-hour strike on Thursday, January 31.
The union said it was taking the action in support of metro, tram and electric railway workers in Athens who were forced to return to work on Friday after a nine-day strike over wage cuts.
The public transport workers were issued with civil mobilization orders by the government.
GENOP-DEI said that the measure was “illegal, undemocratic and unconstitutional”.
It is not clear if the strike threatens to cause any power outages.
Germany clashes with ECB over Cyprus
Meanwhile, the German finance ministry has apparently clashed with the European Central Bank (no change there then) over whether Cyprus could endanger the fragile progress made in the eurozone.
The German finance minister, Wolfgang Schäuble, has repeatedly argued that it is not yet clear whether the problems in Cyprus could be a danger to the eurozone as a whole. This is crucial as the ECB will only rescue economies considered "systemically relevant".
Der Spiegel reports – without citing any sources – that the ECB president, Mario Draghi, rebuffed Schäuble's view last week.
Draghi reportedly told Schäuble during a gathering of eurozone finance ministers that Cyprus's two largest banks have an extensive network of branches in Greece and that customers' worries over the safety of their deposits could quickly wreck a fragile calm that has returned to Greece.
A ECB board member, Jörg Asmussen, said he believed a bailout deal was possible at the end of March, after Cypriot elections on 17 February.
Berlusconi could benefit from Italian banking scandal
The Monte dei Paschi scandal (see below) has turned the spotlight on the bank's close political ties with the centre-left and on possible failings by the Bank of Italy, which was at the time led by the current European Central Bank chief, Mario Draghi.
It is thought the scandal could affect the outcome of upcoming elections in Italy. Reuters' Hugo Dixon writes:
With a general election only weeks away, Silvio Berlusconi, the former prime minister, looks as if he will be the main winner from the political spat. Mr Berlusconi’s camp has attacked Pier Luigi Bersani’s Democratic party, which is leading in the opinion polls, for being close to Monte dei Paschi, or MPS. It has also criticised Mario Monti, the current prime minister, who agreed to increase the MPS’s bailout to €3.9bn, or $5.25bn.
The scandal won’t be enough to get Mr Berlusconi back as prime minister. But it could prevent a Bersani-Monti coalition from running the country with a solid majority in both houses of parliament. If so, fears about Italian political risk could return to haunt the markets.
Monte dei Paschi scandal deepens
While over in Rome, the Bank of Italy approved €3.9bn of loans for a highly controversial state bailout of the world's oldest bank, Monte dei Paschi di Siena.
But Italians have hit back at the planned rescue, as claims emerge that the bank may have hidden details of loss–making derivatives deals from regulators. Founded in 1472, Monte dei Paschi faces losses of up to €720m from opaque derivatives trades, several of which are now under internal investigation.
There were further developments in the saga over the weekend. Our correspondent in Rome, John Hooper writes:
The left-leaning daily La Repubblica reported at the weekend that prosecutors were trying to find out what had happened to €2.6bn (£2.2bn) paid into a London bank account during the 2007 sale of Banca Antonveneta to the world's oldest bank, Monte dei Paschi di Siena (MPS), which has traditionally had links the left.
Of the total, €1bn appeared to be for a transaction with an international bank, but the other €1.6bn was apparently unaccounted for and prosecutors suspected the cash had been drip-fed back to Italy to form a slush fund, the paper said.
Irish property tax comes under fire
Over the weekend, the Irish government confirmed that it would go ahead with a property tax, agreed by parliament as part of the IMFs bailout package in 2010. My colleague Phillip Inman reports:
Plans by Ireland's government for a property tax have come under fire from the main opposition party amid concerns the move will land homeowners with a bumper bill as they struggle to pay a string of other new taxes.
Protest meetings have heaped pressure on Ireland's finance minister, Michael Noonan, to drop the plan, which is expected to raise €500m (£425m) for the cash-strapped coalition government in its first full year.
The finance ministry said at the weekend that the tax, agreed by parliament as part of the International Monetary Fund's bailout package in 2010, would go ahead alongside the first water rate bills, which are also expected to raise €500m.
Sterling tumbles on future bank governor's comments
Taking a look at the UK, the incoming chief of the Bank of England has been making waves, with his comments that monetary policy is not yet "maxed out". Speaking from Davos over the weekend, Carney said:
There continues to be monetary policy options in all major economies.
That contrasts with outgoing governor, Mervyn King, who said last week that monetary policy cannot be a panacea for boosting economic output.
The pound has been tumbling since the beginning of the year, and fell further at the end of last week after official data showed the economy contracted in the final three months of last year.
Sterling dropped to its lowest in more than 10 months agasint a basked of currencies, and a near 14-month low against the euro.
Iceland did not break the law when it failed to repay British and Dutch savers in Icesave, a European court has ruled.
This all goes back to 2008, when Britain and the Netherlands stepped in to refund people who had money in an online account run by one of the three Icelandic banks that collapsed.
The decision vindicates the Icelandic government, which has repeatedly refused to pay the British and Dutch governments directly; instead allowing the estate of the bank, Landsbanki, to repay the amounts gradually.
Now the court of the European Free Trade Association – a group with close ties to the European Union – has dismissed the case brought against Iceland for alleged failure to follow deposit protection laws.
Greek protests grow as farmers threaten blocades
Back in Greece, anti-austerity protests are intensifying as farmers also step up strike action (see below). Our correspondent Helena Smith writes:
Protesting farmers, determined to overthrow unpopular austerity policies, have begun driving their tractors onto highways pledging to cause traffic chaos if their demands aren’t met.
The lull Greece had enjoyed out of the news until the metro strike last week looked well and truly over this morning as farmers joined the onslaught against measures that are the price of further rescue funds from the EU and IMF.
Speaking on behalf of the sector, Kostas Lioliopoulos, said farmers were being “eradicated” by increased taxes and higher production costs. 'The economic crisis is killing us,' he said, adding that farmers from the region of Evros in the north to Crete in the south would wreak havoc if the governing coalition did not back down.
Many of the tractors are concentrated around arteries outside the central Greek town of Larissa but farmers, who will hold talks with political leaders, said they would start blocking off other highways if their demands weren’t met by Wednesday.
'The country will be paralysed if there is no progress,' said Lioliopoulos, the unionist.
Intensifying the strike action, rolling strikes have also been called by staff operating buses, trains and trolleys with the railway network being crippled nationwide. Doctors, nurses and ambulance workers have also said they will be walking off the job on Thursday to protest against internationally mandated funding cuts of the national health system.
Striking workers gather at the entrance of a bus depot during a 24-hour walkout in Athens. Photograph: John Kolesidis/Reuters
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