Euro zone debt crisis
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Yesterday, Greek Prime Minister George Papandreou unexpectedly called a referendum on the latest EU bailout deal, but what's happened since then? Here's the latest update from Reuters correspondents Dina Kyriakidou and Lefteris Papadimas:
"Greece's prime minister won the backing of his cabinet on Wednesday to hold a referendum on a 130 billion euro (111.7 billion pounds) bailout package but will find the stunned euro zone leaders who engineered the deal last week harder to convince.
Some of his party lawmakers called for him to quit, accusing him of endangering Greek euro membership with his shock decision to call a popular vote, a move that pummelled the euro and global stocks. But the cabinet support at least gives him a stay of execution before a confidence vote in parliament on Friday.
"The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro," George Papandreou told a cabinet meeting that lasted seven hours, a statement from his office said. "No one will be able to doubt Greece's course within the euro."
After the show of unity at home, Papandreou will face the leaders of France and Germany, who summoned him for crisis talks in Cannes, before a G20 summit of major world economies, to push for quick implementation of the bailout deal.
Papandreou's gamble guarantees weeks of uncertainty just when the 17-nation European currency area is desperate for a period of calm to implement the remedies agreed to overcome its sovereign debt crisis.
"This announcement took the whole of Europe by surprise," French President Nicolas Sarkozy said in a rare televised address on the steps of the Elysee palace in Paris. "The plan ... is the only way to solve Greece's debt problem."
Japan's finance minister, Jun Azumi, echoed his comments, as the Nikkei share average fell 2.2 percent on Wednesday. "Everyone is bewildered," he said.
Greek government spokesman Ilias Mosialos said the referendum would take place "as soon as possible, right after the basics of the bailout deal are formulated."
Greek officials have suggested it would probably be held in mid-January but the interior minister said it could happen as early as December, if details of the bailout agreement are nailed down earlier than envisaged.
Opinion polls suggest most Greeks think it is a bad deal, but much will depend on how Papandreou frames the debate, either on the bailout -- and hence the painful cuts that will follow -- or membership of the euro, which itself remains popular." -
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Xiao Minjie, chief economist at FuNNeX Asset Management in Tokyo, says the current environment is worse than three years ago when the collapse of Lehman Brothers triggered a financial market meltdown.
"Investors don't want to take risks, halting both inflows to and outflows from funds," Xiao says.
"Lehman was a problem of a single financial institution. We now face an issue of sovereign debt and fiscal problems that is far more complicated to resolve." -
Here's a timetable of some of today's events in Europe. Euro zone PMI manufacturing data is due at 9am GMT, UK PMI construction data at 9:30am GMT, the Greek PM faces a confidence vote at 4pm GMT and the showdown between EU leaders in Cannes kicks off at 6pm GMT.
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GERMAN OCT FINAL PMI MANUFACTURING: 49.1 V 48.9Eby World_First via twitter 11/2/2011 9:02:42 AM -
Germany remains stronger than rest of Europe on PMI basis. Unfortunately a strong Germany means a weaker Europeby World_First via twitter 11/2/2011 9:02:43 AM
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*GERMAN UNEMPLOYMENT ROSE ADJ. 10,000 IN OCT.; FCST 10,000 DROPby World_First via twitter 11/2/2011 9:02:44 AM
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EURO ZONE OCT FINAL PMI MANUFACTURING: 47.1 V 47.3E lowest july 2009 - If you thought Q3 was bad for Europe, wait for Q4by World_First via twitter 11/2/2011 9:02:44 AM
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All manufacturing PMIs showing that manufacturing is circling the drain it seemsby World_First via twitter 11/2/2011 9:03:00 AM
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Greece's planned referendum on its latest bailout deal may be brought forward by about a month to December, the country's interior minister said on Wednesday.
"There is a possibility to hold the referendum earlier (than January), within December," Interior Minister Haris Kastanidis said on state television.
This would happen if Greece and its international partners work out the details of the bailout agreement earlier than planned, Kastanidis said. Kastanidis had said earlier this week that the referendum would most likely be held in January. But government spokesman Ilias Mosialos said earlier on Wednesday, without elaborating, that it would be held as early as possible. -
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Everybody says Greece is the cradle of democracy. Why the surprise then? It is time the 'democratic deficit' of the whole Euro project, so much talked about by think tanks and media alike, is finally addressed. Stop the hypocrisy and put your words where your mouth is. Why is the Euro core so angry? Because it is all about them and they have fudged the issue with their voters for years. How can they expect the social pain of Greece's turnaround to be dished out without a public mandate. Of course the Greece need to go through it but not because some arrogant foreign leader tells them so. -
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Markit economist Sarah Bingham said: "The outlook for the sector remains uncertain, with October seeing a further weakening in sentiment regarding business expectations. Furthermore, the increase in employment recorded was fractional, despite the rise in new business and activity. This suggests that constructors remain tentative about the longevity of the sector's growth profile."
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This is from Reuters correspondent Harry Papachristou:
Greece's opposition has reacted with outrage to the sacking of its military chiefs, calling it a bid to stack the armed forces with party loyalists before a possible government collapse over the country's debt crisis.
The socialist government late on Tuesday replaced the heads of the army, navy and air force and the chief of joint chiefs of staff in what officials described as a long-planned move largely unrelated to political turmoil.
"We won't accept this decision," the main opposition conservative New Democracy party said.
Greek governments have exerted tight control over the country's armed forces since the collapse of a seven-year military junta in 1974.
Army chiefs are often selected on the basis of party loyalty as part of a deeply-entrenched system of political patronage. The outgoing military leadership was appointed in August 2009 by the previous conservative administration, just before national elections were called. -
Greek Finance Minister Evangelos Venizelos will accompany PM Papandreou to today's emergency talks with the leaders of France and Germany in the French Riviera resort of Cannes, a finance ministry official said. Venizelos has been discharged from an Athens hospital where he had checked in for stomach problems. "He is feeling much better and he will accompany the prime minister to Cannes," the official said.
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After early gains, European shares have resumed their sell-off. Stocks turned negative, adding to a sharp two-session drop as investors dumped banking shares on fresh euro zone concerns. At 10am GMT, the FTSEurofirst 300 was down 0.6%, Banco Popolare was down 3.3% and BBVA down 2.9%. The FTSE 100 is currently down 0.12%
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Take a closer look at euro zone manufacturing data - Euro factories sink deeper into decline - PMI
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The European Financial Stability Facility (EFSF) has decided not to go ahead with a 3 billion euro bond sale that was due to take place today. A source familiar with the matter said: "The EFSF has no immediate urgency to fund and felt that doing a deal today might be rushing things, especially given recent market volatility. The issuer did not want to give the impression that it was being opportunistic. The last couple of days have been terrible and had they gone ahead with the deal, it could have been viewed as desperation."
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an interesting article from the Spiegel praising Papendrou's move for calling a referendum www.spiegel.de and here the google translated version translate.google.com
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Some more reaction to the poor manufacturing data. Alan Clarke, economist at Scotia Capital, said: "It makes grim reading. If there was any doubt that the euro zone was headed for recession, these data should confirm it."
Rob Dobson, senior economist at Markit, added: "Output, new orders and new export orders all suffered their fastest declines since mid-2009, against a backdrop of weak domestic market conditions, the ongoing debt crisis and a darkening outlook for the global economy.
"The only possible bright spot was an easing in inflationary pressures, allowing manufacturers to hold fire on further selling price increases." -
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Reuters' Stephen Brown and Alexandra Hudson have more on Germany's reaction to Greece's referendum bombshell:
Germany's finance minister and other senior officials urged Greece on Wednesday to stick to the aid plan agreed with the euro zone and IMF and to avoid the dangerous instability posed by the prospect of a referendum on the latest bailout deal.
"It would be helpful if clarity is achieved as soon as possible on which path Greece wants to take," Finance Minister Wolfgang Schaeuble told the Hamburger Abendblatt newspaper.
After EU leaders agreed last week on measures to help Greece and stabilise the 17-member currency union, Greek Prime Minister George Papandreou stunned his euro zone partners and shook financial markets by calling a referendum on the planned 130 billion euro bailout package.
Chancellor Angela Merkel and French President Nicolas Sarkozy have summoned Papandreou to crisis talks in Cannes on Wednesday before a summit of G20 world economies.
German European Commissioner Guenther Oettinger said Papandreou's actions had "made the situation considerably worse for countries which don't have the highest credit rating, and the danger of further setbacks is rising."
He told Die Welt newspaper that the Greek leader should have given European leaders advance warning of his referendum plans at their twin summits last week. The mass-circulation Bild daily said "even the chancellor was taken by surprise."
"My worry is that we will have an unstable situation until the referendum. The Greeks have many good grounds to vote for the package. The steps we decided on are a good opportunity for their country. But there's a lot of frustration and resignation in Greece. If the Greeks actually vote no, the consequences are unforeseeable," said the European energy commissioner.
Schaeuble said in an interview in the Hamburger Abendblatt that he "assumed Greece is aware of its responsibility and will go along with the measures that were agreed together and unanimously." He echoed that comment in a separate interview with the Financial Times Deutschland.
But Manfred Weber, the German vice-chairman of the centre-right bloc in the European Parliament, warned that Athens was "playing with fire. If the Greeks vote no, there will be no alternative but a sovereign default. -
Rating agency Standard and Poor's said it does not expect immediate changes in the sovereign ratings of euro zone states as a result of their guarantees to the region's beefed-up EFSF rescue fund.
But some countries' ratings might be affected as the European Financial Stability Facility expands its operations and their liabilities towards the fund rise, it said in a statement.
That would only in the "currently unexpected event" that countries participating in the programme defaulted on their EFSF obligations and guarantees were called, triggering additional borrowing needs. -
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France will seek to rein in spending in an upcoming round of belt-tightening, Budget Minister Valerie Pecresse said on Wednesday, as the government seeks new savings to keep in line with European deficit targets.
President Nicolas Sarkozy's government is expected to unveil new deficit-cutting measures worth 6 to 8 billion euros after France cut its official growth forecast for next year to 1 percent from 1.75 percent previously.
"We have to make efforts. What I hope is that these efforts will mostly be savings on the spending side," she said on the parliamentary news channel. "Nothing is decided yet." -
Reuters' Anooja Debnath has more on the downturn in factory data, which suggests recession is on the horizon.
Broken down by country, in Germany, the economic engine of the euro zone economy, manufacturing activity contracted for the first time in just over two years.
But the euro rose 15 pips to $1.3780 after the German data were released, on slight relief the figures weren't worse.
Spanish factory activity shrank for a sixth straight month, while conditions in Italy, increasingly the focal point of worry in the still-raging euro zone debt crisis, deteriorated much more sharply than expected to a 28-month low.
The Italy manufacturing PMI fell 5 points to 43.3, the biggest one-month fall since the survey began in 1997, suggesting an economy deep in recession.
French manufacturing was also on the back foot in October, with new orders drying up and a fall in output.
Ireland was the only euro zone economy not to report a fall in factory activity.
For the euro zone as a whole, the new orders index fell for the fifth month running, plummeting to 43.4, the fastest rate of decline since May 2009. As a reliable forward-looking indicator, that bodes poorly for factory activity in November.
While firms hired more workers for the 18th consecutive month, hiring was the weakest since June 2010. Euro zone unemployment rose to 10.2 percent in September, nudged up by Spain, where unemployment reached 22.6 percent. -
The Bank of Italy has denied a report that it is preparing emergency intervention over Italian government bonds held by Italian banks. According to Italian daily Il Messagero, the BOI was preparing intervention in which it could, for example, take on short term bonds held by Italian banks in exchange for commitment for them to acquire new longer term debt.
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