Euro zone crisis
Spain sells 4.6 bln euro of government bonds
Spain sold 4.61 billion euros of government bonds on Thursday, paying the least since February to borrow over 10 years and selling more of the paper than expected (reporting by William James).
Investors bid for 1.9 times the amount on offer of the 10-year bond, compared with 2.8 times at the previous sale on Sept. 20 and down from a 2012 average at 10-year sales of 2.7 times.
The average yield at the 10-year sale fell to 5.46 percent from 5.67 percent last month and an average this year of 5.91 percent.
Investors bid for 2.6 times the amount offered for a three-year bond, below the 2012 average of 2.87 times at such sales this year. The average yield for the paper fell to 3.23 percent versus a 2012 average of 3.83 percent.
Spain also sold four-year bonds, with yields falling and the bid/cover ratio rising compared with the previous sale.
Reaction to Spain debt sale
ANNALISA PIAZZA, MARKET ECONOMIST, NEWEDGE STRATEGY, LONDON
"Today's auction went very well, following yesterday's rebound of the Spanish debt. Dealers willing to close their shorts and hope of some relevant decision on the future of Spain in the coming weeks have been supportive factors at today's auction."
ARTIS FRANKOVICS, STRATEGIST, NOMURA, LONDON
"Overall the auction was pretty good. They managed to issue slightly above the target and the bid to cover ratios were decent and the premiums were pretty good. The major part for me was that they managed a higher allocation at the long end which is very encouraging. But it was somewhat expected given Moody's decision and improving risk sentiment.
"It seems like Moody's has averted one of the tail risks but as it happens it could swing completely the other way in a very short time. If the market sentiment continues to improve we'll probably see them tap bonds with higher maturity... But I doubt at this stage they will issue a new 10-year bond because it's a high risk strategy. Risk sentiment could deteriorate."
ELISABETH AFSETH, FIXED INCOME ANALYST, INVESTEC, LONDON
"It's good news they've sold a reasonable amount in the 10-year."
"Given that I think they might try to hold back before asking for any support. It's difficult to know when they will ask for it or if they will try to avoid it altogether.
"Given this kind of market access it is also difficult for other countries to justify providing that support.
"I still think they will ask for help at some point. There are plenty of risks regarding the regional budget and regional politics, the banking recapitalisation and the potential for that to increase ... and the lack of economic growth.
"I would be surprised if yields pushed much lower from here given all these risks."
MICHAEL LEISTER, STRATEGIST, COMMERZBANK, LONDON
"Very good auction across the board. The headline figures look nice, the bid cover ratios are strong and yields are on the downside. What is also indeed strong is the pricing side of things.
For example, the tail on the 10-year is one basis point, and for the five year it's two (basis points). Compared to the average, and when we keep in mind what happened in the first quarter of the year when we were used to double digit tails... clearly this shows demand is very robust for this paper. For now the market is willing to give it another go.
"We shouldn't be carried away, it's very much in line with expectations in terms of the auction optics and the market reaction. Of course at some stage there's a risk of profit taking but at this point in time the market sentiment is constructive."
MARC OSTWALD, STRATEGIST, MONUMENT SECURITIES, LONDON
"All around very good. They have sold very evenly which is always a good sign, it wasn't all loaded into the shorter-dates. The cover was solid."
"Of course, one has to add, in Spain's case, that a lot of the reason for the big squeeze at the moment is the fact that so many people see the OMT (Outright Monetary Transactions) as making short positions very difficult to justify.... So in many senses it's a very false market because it's not really telling you (whether) people feel comfortable about the outlook for Spain."
PETER CHATWELL, STRATEGIST, CREDIT AGRICOLE, LONDON
"Strong auctions in all maturities, and it may be significant that the 10-year was well bid given that this is a long way beyond OMT (Outright Monetary Transaction) territory and the bond trades over par. This is a step in the right direction and these results may themselves encourage further buying.
Would your finances get you kicked out of the Eurozone? The Guardian website has this rather nifty tool which lets you see if your finances would "withstand close scrutiny from the mighty Troika." For the record, I'm Holland. Take the quiz here.
Protests in Athens
We're starting to get pictures in from the protests taking place in Greece. I'll post a few in a moment. Judging by the images and comments from Athenians on Twitter, the crowds are quite considerable.
In syntagma - small standoff between police and demo - immediate firing of flash bangs and gas— Paul Mason (@paulmasonnews) October 18, 2012
I insist on quick progress on actions: implement the 120 bn € package, progress on Single Market, achieve Digital Single Market by 2015 1/2— Herman Van Rompuy (@euHvR) October 18, 2012
Greek police fire teargas at anti-austerity protest
Harry Papachristou, reporting from Athens, says Greek riot police have fired teargas to disperse demonstrators protesting outside parliament. Tens of thousands of Greeks have taken to the streets, he says, and tensions began to rise when protestors began hurling petrol bombs and stones at police blocking off parts of the main square before parliament.
The BBC's Business Editor Robert Peston also asks if the banking union has pushed the UK towards the EU exit. He writes:
The reason this kind of so-called "banking union" matters is that in time (though we don't quite know when, but probably next year) it will be the trigger for transferring the financial burden of bailing out and strengthening Spain's chronically weak banks from the beleaguered and over-stretched Spanish state to all eurozone members, via the European Stability Mechanism or ESM (the currency union's new bailout fund).
In that sense, banking union is actually a precursor to the kind of fiscal burden-sharing by all eurozone members which many regard as the sine qua non of eurozone survival...
But there is a less welcome corollary for the UK of eurozone banking union, which is that it creates an identity of interest on banking and financial matters for the 16 members of the eurozone. This introduces the serious risk that the UK will always be outvoted when decisions are taken on the regulation of banking and finance in the European Union.
Read the full post here.
Regional vote is big test for Spain's Rajoy
Sarah Morris and Ibar Aibar, Reuters correspondents reporting from Santiago de Compostela, write:
Spain's Prime Minister Mariano Rajoy faces a high-stakes election in his home region of Galicia on Sunday in which voters could punish him for his handling of the euro zone debt crisis.
Spain's Prime Minister Mariano Rajoy faces a high-stakes election in his home region of Galicia on Sunday in which voters could punish him for his handling of the euro zone debt crisis.
The vote has become a referendum on Rajoy's bank bailout, spending cuts and tax hikes and the seeming inevitability of a second euro zone aid package, which officials have told Reuters could be sought next month.
"I think the People's Party (PP) will be punished," business owner and PP supporter Agustin Garcia-Monton said after attending mass in the cathedral of the pilgrimage town of Santiago de Compostela, where Rajoy was born.
European sources and analysts said Rajoy wanted to wait until after the election to make an aid request as he feared tough attached conditions, such as a reform of the pension system, could anger voters. Elections also take place in the Basque country on October 21.
His party risks losing its absolute majority, and power altogether, in Galicia's legislature. This would be a major psychological blow to Rajoy, whose conservative PP party has ruled his homeland for 24 of the past 31 years.
September public borrowing falls more than expected
Britain's public finances deficit was smaller than expected in September, the Office for National Statistics says. Reuters' David Milliken and Peter Griffiths report:
Budget deficit widened less than expected last month, and borrowing in previous months turned out to have been less, reducing the chance Chancellor George Osborne will miss his deficit reduction goal for the current tax year.
Public sector net borrowing excluding financial sector interventions - the government's preferred measure - fell last month to 12.809 billion pounds from 13.501 billion in September 2011, the Office for National Statistics said.
This was below economists' average forecast in a Reuters poll for 13.5 billion pounds, as tax receipts kept up with the growth in government spending.
Reaction to public borrowing figures
DAVID TINSLEY, BNP PARIBAS
"There were two surprises in the data, one is the slightly better figure for the month of September but two is the quite large downward revision to the deficit figures of previous months... so that still means that the deficit is coming in a bit on the high side I think, relative to the OBR's forecast but it makes the picture look a lot better than it did last month and it does highlight how you can't take these data for granted in terms of they are very volatile and prone to revision.
"All is not lost in terms of the public finances for this year, the situation doesn't look quite as bad as we thought before the release.
PHILIP SHAW, INVESTEC
"September's figures have come in a little better than expected. For this financial year so far it appears that the increase in borrowing wasn't quite as bad as feared a couple of months ago."
"At the margin it's good news because while it suggests the OBR will have to push up its borrowing forecasts for this year and next it may be that it will only be a limited upward revision."
"With the economy this fragile we think it would be extremely unlikely if the Chancellor were to tighten fiscal policy at this stage."
"There is an awful lot of work to be done on the public finances and one must bear in mind that underlying borrowing is increasing this year. But a couple of months ago the situation looked a lot more serious."
MARTIN BECK, CAPITAL ECONOMICS
"September's UK public finances brought some better news for the Chancellor after the run of poor borrowing numbers earlier in the year.
"Nevertheless, if the trend in the first six months of the fiscal year continues, it still looks like borrowing for 2012/13 will overshoot the OBR's forecast of 120 billion pounds (ex. Royal Mail effects) by about 7 billion pounds.
"Given this deterioration and increasing concerns over the true impact of deficit reduction on the economy, the Chancellor may be compelled to alter his fiscal rules at December's Autumn Statement."
BRIAN HILLIARD, SOCIETE GENERALE
"Better than expected. I think the key thing is in the revisions which seem to take it down by about 6.5 billion in the fiscal year to date compared to the previous estimates.
"That obviously very good news for the government. It's still an overshoot compared to the plans but it does make their life a bit easier.
"It could be well below 10 (billion) overshoot compared to last year. This is much, much better than they would have though only a month ago."
London protests, Spain strikes
Strikes and protests abound. After yesterday's action in Greece, Spain's two largest labour unions have called a general strike for November 14, the second against the conservative government since they took power. It'll coincide with industrial action in Portugal on the same day.
"Next November 14 we will have the first Iberian general strike in history," Fernando Lezcano, a spokesman for the Spain's largest union Comisiones Obreras, said. (reporting by Jose Elias Rodriguez).
Meanwhile, Tens of thousands are expected to march through London on Saturday in what is likely to be the largest demonstration in Britain this year against government austerity measures.
"The evidence is mounting that austerity is failing," said TUC General Secretary Brendan Barber. "More than 2.5 million people are out of work, a further three million are not working enough hours to make ends meet and wages have been falling every month for the last three years." (reporting by Andrew Roche).
Greek poll shows boost for anti-bailout leftists
Harry Papachristou, one of our correspondents in Athens, writes:
Greece's main opposition Syriza and the far-right Golden Dawn parties are surging in popularity among voters angry at a new wave of wage and pension cuts demanded by foreign lenders, a poll showed on Friday.
If elections were held today, Syriza would win with 30.5 percent of the vote compared with 27 percent for New Democracy, which leads the three-party coalition backing Greece's foreign bailout, pollster VPRC said in a survey for the "Ellada Avrio" newspaper.
Greeks' frustration with their political leaders has grown as the coalition prepares to push through the new round of austerity measures to appease lenders and secure more bailout aid and keep the country afloat.
Almost nine in ten Greeks were dissatisfied with their government and 81 percent believed the country was on the wrong track. The share of undecided voters stood at 60 percent, the poll said.
Backing for the ultra-nationalist Golden Dawn, which has been linked to a rise in attacks against migrants in recent months, stood at 14 percent, double their take in June elections that gave the party a foothold in parliament. That would make the group the country's third largest party.
The party's rabidly anti-immigrant message has stuck a chord with many voters as EU/IMF imposed austerity propels unemployment levels to a record 25 percent.
Golden Dawn denies it is neo-Nazi but bears a Swastika-like emblem and its supporters have been seen giving Nazi-style salutes. The party's leader, Nikolaos Mihaloliakos, has denied the Holocaust occurred while one lawmaker, Eleni Zaroulia, called immigrants "sub-humans" in parliament on Thursday.
Backing for the government's two junior coalition partners, the Socialist PASOK and the Democratic Left, stood at 5.5 percent each, well below their results in the June election when they took 12.3 percent and 6.3 percent of the vote respectively.
Summit closing press conference
Watch the closing press conference live on the Council of the European Union's website.
Merkel speaking in Brussels
Some comments from the German Chancellor as the EU summit comes to a close. Merkel says it will take time to develop a new banking supervisor, it is not achievable within one or two months. Only when we have this banking supervisor set up, however, can we have direct capitalisation of banks by the European Stability Mechanism.
Merkel adds that she told the Greek PM Samaras that Greece has a good chance of developing within the euro zone if it sticks to reforms.
Rajoy comments from Brussels
Spanish PM Mariano Rajoy says no decision has yet been made on a request seeking financial aid, but if the decision needs to be made, Spain will take it.
It is important that the ECB bond-buying plan exists, and it's always possible to activate it, he adds. The general strike called for November 14 doesn't help in solving Spain's problems, he says.
Cameron speaks at EU summit closer
Britain is prepared to block any European Union budget deal that it deems unacceptable and against its national interests, Prime Minister David Cameron says.
"I think it would be good to have a deal, it's good to settle these issues, but it just would not be acceptable to see some huge increase in EU spending at a time when other budgets are being cut."
"So the British public expects a tough approach, a rigourous approach and that's exactly what they'll get, and if we can't get a deal .... if there isn't a deal that's good for Britain, if there isn't a deal that's available, then there won't be a deal."
Greece says was granted more time to meet bailout targets
Greek Finance Minister Yannis Stournaras confirms that Greece has been granted an extension to meet its bailout targets. Lefteris Papadimas and Harry Papachristou report from Athens:
Greece's lender have given the country more time to meet its deficit targets under a 130-billion-euro bailout, the country's finance minister said on Wednesday.
"Today, we obtained the extension," Yiannis Stournaras told lawmakers.
Greece has been seeking a two-year extension to its fiscal adjustment programme in order to soften the impact of a new round of austerity measures it is about to take under pressure from its EU and IMF lenders.
There seems to be some confusion over whether Greece has indeed finalised an agreement with the Troika over its bailout package.
After initially announcing that a deal had been reached, Greek finance minister Yannis Stournaras later said: "To a great extent, the negotiations have been completed. But even now, we are trying for improvements."
His German counterpart, Wolfgang Schäuble, says he cannot confirm whether Greece has received a two-year extension on bailout targets. Reuters Andreas Rinke reports:
Euro zone finance ministers have not yet received a report from Greece's so-called troika of international lenders and hence have not yet decided on whether to grant Greece more time to meet its targets, a German Finance Ministry spokesman said.
"The sole basis for the euro group's (euro zone finance ministers) decision over the second Greek programme is the troika report. We don't have this yet," he said.
Draghi press conference in Berlin
After speaking to German MPs, Draghi is now giving a press conference in the Bundestag.
Draghi says he told German lawmakers the his bond-buying plan was fully in compliance with the ECB's mandate of price stability for the euro zone. He adds that progress has been made on the Greek bailout but there has been no final decision.
Draghi says not aware of any Greek bailout decision
Michelle Martin in Berlin reports:
European Central Bank President Mario Draghi said on Wednesday international lenders had made progress in their review of Greece's implementation of austerity measures but he was not aware they had decided on extending its bailout yet.
Asked about reports that Greece will be granted two more years, Draghi told reporters in Berlin: "The review is not yet finished. I understand progress has been made, but some parts need to be defined, and I don't know anything more than that."
Good morning, and welcome back to our live coverage of the euro zone crisis, and other related economic events.
This morning will be dominated by Britain's GDP figures, which are out at 0930 BST. Prime Minister David Cameron hinted during yesterday's PMQs that the numbers will be positive, when he said "The good news is going to keep coming."
Britain probably out of recession as one-offs boost growth
Sven Egenter reports from London:
Britain probably came out of recession between July and September, economic growth numbers are widely expected to show later on Thursday, but the dangers of a relapse loom large.
A Reuters poll showed that Britain's economy is expected to post 0.6 percent quarterly growth after companies recovered production lost due to an extra public holiday in June and ticket sales for the Olympic and Paralympic Games added a boost.
Such a rise would be the strongest in two years and a relief for the government of Conservatives and Lib Dems, under pressure after a series of gaffes and from public disenchantment with efforts to erase a huge budget deficit.
The Reuters poll reflected the unusually large degree of uncertainty caused by one-off influences on economic output.
Forecasts for the gross domestic product (GDP) data, which the Office for National Statistics will publish at 9:30 a.m, ranged widely from unchanged GDP to a 1.1 percent rise, following the 0.4 percent drop in the second quarter.
Confidence in Cameron slips as gaffes mount
If today's GDP figures are positive, then it will be good news at last for Cameron. As my colleague Mohammed Abbas explains in this must-read piece, things haven't been going the PM's way recently.
Confidence in Prime Minister David Cameron is slipping after the delayed resignation of a senior minister for swearing at a police officer added to a pile of gaffes damaging his Conservative Party.
Upstaged by the charismatic and popular mayor of London, Cameron can ill afford to appear bumbling at a time when restiveness within his own party is on the rise and a fight is brewing over Britain's ties with Europe.
Yet, his public relations team seems unable to dispel a growing perception of chaos in Cameron's office - stumbling from one crisis to another and bogged down in trivialities as it struggles to reduce a big budget deficit.
MOSCOW Russian President Vladimir Putin said on Wednesday that Russia would send ideas to Washington within a week to follow up his talks with U.S. President Joe Biden on the Ukraine crisis.