Euro zone crisis
INTERACTIVE: Debt crisis numbers
- Hollande party split on French deficit goal
French President Francois Hollande faced divisions in his party on Tuesday over a 2013 budget crucial to his credibility with euro zone partners, after top Socialists publicly questioned next year's deficit target.
The split over the cut in the budget shortfall is the latest political embarrassment for Hollande just as surveys show his popularity ratings have nose-dived since his election on a perception he is not doing enough to kick-start the economy and tackle unemployment at 13-year highs.
- Spanish PM says won't seek bailout this weekend: media
Spanish Prime Minister Mariano Rajoy told regional leaders of his party that the state would not seek a euro zone bailout this weekend, news agency Europa Press reported on Tuesday.
GREECE: A small group of disabled citizens displays its disapproval of austerity cuts by heckling Troika representatives at the Ministry of Labour on October 2. The protest follows similar action on Monday.
Credit : Newsbeast.gr
GREECE: Report from local outlet Newsbeast:
With boos at troikanous answer yesterday Greeks. Today, after yesterday’s jeering them out of the Treasury, about twenty people from Disabled Struggle Coordination Committee denounced the Troika representatives outside the Ministry of Labour on the Stage. however, the chief, Paul Thomsen, arrived some time in the ministry later as it had been known that there are protesters outside. So the security officers tried to put him into the ministry avoiding protestors. Thus, in going from gallery to gallery not to confront the demonstrators. Earlier, the U.S. ambassador visited the building phase to express its support for the Greek government and the belief that our country will not come off the euro area.
ITALY: A transport strike affected cities and towns across Italy on October 2. Trade unions are protesting against the stagnation in talks on the national trade contract that expired in December of 2007. This video, uploaded by Italian news organization Tele Galileo, shows the strike in the town of Terzi.
- Good morning, and welcome to our live coverage of the ongoing euro zone crisis. Plenty going on today, including a meeting of euro zone finance ministers in Luxembourg for a day of talks. This will also mark the formal launch of Europe's €500bn bailout fund, the European Stability Mechanism (ESM).
We'll also be keeping an eye on events in Greece, where talks with Troika officials continue, and Spain, which is still umming and ahhing over when it is going to ask for EU help.
As my colleague Jeremy Gaunt puts it: "The euro zone crisis comes down to two things at the moment - waiting and wanting. The waiting is 1) for Spain to decide when it is going for EU help and 2) for the Troika to report on whether Greece is going to get any more money. The wanting is for explanations of just how a lot of the euro zone’s plans will come to fruition, not the least being the bank recapitalisation that was supposed to have been agreed.
"Spain is clearly the headline issue. The ECB says it is ready to buy bonds... but Rajoy remains coy."
- Single euro zone budget gains momentum ahead of summit
Debate about the idea of creating a separate budget for euro zone countries is intensifying in the run-up to an EU summit later this month, with less opposition to the proposal than many officials first expected, diplomats say.
At a private dinner held last week among the EU ambassadors of several northern European countries, including Britain, Denmark, the Netherlands and Finland, those present were surprised to find a fair degree of consensus on the proposal.
"I wouldn't say that there was strong support for it, but there was certainly a feeling that this is an idea that should be explored in more detail," said one diplomat briefed on the discussion that took place at the gathering.
- The markets are sensitive to events in Spain. Here's more from my colleague Jeremy Gaunt:
"The markets care. Here’s how one Barclays analyst put it:
Gains in equity markets and risk currencies continue to be modest and we think the reason is Spain’s delay in requesting help. We think Spain will request assistance before the EU summit on October 18-19. But the risks of delays are not small, despite Draghi’s latest statements. If Spain decides to wait until the Cataluña elections on November 25, we would suggest taking a more cautious approach towards risky assets, as market stress will then be needed to prompt a request for help.
In other words, if Spain does not act soon, markets are going to get impatient and a lot of what has driven the crisis in the past will come back."
- FTSE sags, earnings outlook in focus
The FTSE 100 fell early on Monday, exhibiting weakness after gains in the previous session and overnight falls in Asia, with some caution building among investors ahead of the start of the new earnings season.
By 08:05 a.m., the FTSE 100 was down 40.75 points, or 0.7 percent, at 5,830.27, erasing Friday's gains with concerns over the third-quarter earnings season, which begins in earnest in the United States on Tuesday, mounting after a batch of downbeat updates.
- Merkel to face protests on first crisis visit to Greece
German Chancellor Angela Merkel will tell Greeks she wants to keep their country in the euro when she visits Athens this week, but she faces a hostile reception from a people worn down by years of austerity and recession.
Many Greeks blame Merkel, who has publicly chastised them for much of the past three years, for the nation's plight. Opponents, some of whom have caricatured her as a bullying Nazi, have promised protests on Tuesday during her first visit to Greece since the euro zone crisis erupted there in 2009.
- Euro zone sentiment rises for 2nd straight month in October
Euro zone sentiment improved for the second consecutive month in October with investors' expectations boosted by monetary easing from central banks and by the top German court's approval for a new permanent bailout fund for the European currency bloc.
Sentix research group said on Monday its index tracking investor sentiment in the euro zone strengthened to -22.2 from September's -23.2, though it fell short of expectations in a Reuters poll that sentiment would rise to -20.8.
A sub-index of current euro zone sentiment rose modestly to -34.5 from -34.8 while the expectations component strengthened for the third straight month to -9.0 from -10.8, "which generally signals a change in trend", Sentix said in a statement.
- Euro zone to launch bailout fund with Spain in focus
My colleague Jan Strupczewski has the latest on the formal launch of the ESM. He writes:
Euro zone finance ministers will launch their 500 billion euro ($653.00 billion) permanent bailout fund on Monday, putting in place a major defence against the debt crisis that now threatens Spain.
The fund, called the European Stability Mechanism (ESM), will be used to lend to distressed euro zone sovereigns in return for strict fiscal and structural reforms that aim to put economies that have lost investor trust back on track.
It is part of the single currency area's drive for an overhaul of its economic structures and deeper integration, a discussion that will be taken forward on Monday with talks on an idea to create a single euro-zone budget.
Euro zone finance ministers, who form the ESM's board of governors, will hold their inaugural meeting in Luxembourg two years after EU leaders endorsed the idea of setting up such a permanent institution.
"The ESM will be operational as of Monday," said a euro zone official, linked to the ESM.
The fund's lending capacity will be based on 80 billion euros of paid-in capital and 620 billion of callable capital, against which the ESM will borrow money on the market to lend it on to governments cut off from sustainable market funding.
It will reach its full capacity gradually by 2014.
Its first task will be to lend to Spain for the recapitalisation of its banking sector, hit hard by a collapse of the real estate market - a programme inherited from the temporary European Financial Stability Facility (EFSF).
Madrid is likely to ask for about 40 billion euros to recapitalise its banks following independent assessments of the sectors' needs -- well within the 100 billion euros set aside by euro zone finance ministers for the purpose in July.
The ESM money would flow to Spain in November, after European Commission competition authorities approve conditions for the recapitalisation for each bank.
- Reuters Breakingviews editor Hugo Dixon has just published his latest column. in it, he asks, 'What is a crisis?'
The credit crisis burst into the open five years ago. The euro crisis has been rumbling for over two years. The term “crisis” isn’t just on everybody’s lips in finance. Wherever one turns – politics, business, medicine, ecology, psychology, in fact virtually every field of human activity – people talk about crises. But what are they, how do they develop and what can people do to change their course?
- Austria dislikes the idea of creating a separate budget for euro zone countries before it is clear what such a plan aims to achieve, the finance ministry says.
Reuters' Michael Shields sends us this quote from a ministry spokeswoman: "The finance ministry takes a sceptical view of a central budget. Before talking about a central budget one would have to decide which areas one wants to mutualise at all. Speaking about a budget without knowing what for will certainly not lead to the desired results."
- Global economic outlook weakens slightly: OECD
The outlook for the world's major economies including the United States and Germany has deteriorated slightly, the Organisation for Economic Co-operation and Development (OECD) said on Monday.
In its latest monthly report on the global economy, the Paris-based think-tank said its composite leading indicator (CLI) for the 33-nation OECD area fell to 100.1 in August from 100.2 in July, pointing to an ongoing trend of weakening growth.
The CLI for the euro area fell to 99.4 from 99.5, while the Group of Seven major nations - France, Germany, Italy, Japan, Britain and the United States - slipped by one point to 100.2.
- Lithuania to reject austerity, quick euro entry in vote
Austerity-weary Lithuanians are set to eject the country's ruling centre-right coalition in an election this month, a move likely to delay the moment the small European Union member state joins the euro and to ease ties with Russia.
However, the new government, which opinion polls show is likely to be a broad coalition led by the centre-left Social Democrats, is expected to largely stick to austerity as the Baltic state cannot afford to be frozen out of debt markets.
A pensioner pushes a riot policeman during scuffles between protesting pensioners and police near the EU offices October 8, 2012. About 500 pensioners participated in an anti-austerity march at the EU offices in central Athens a day before German Chancellor Angela Merkel visits Greece. About 6,000 policemen will be deployed in the capital for her 6-hour visit, turning the city centre into a no-go zone for protest marches planned by labour unions and opposition parties. REUTERS/Yannis Behrakis
Pensioners shout slogans against the EU and the government during a march towards the EU offices in central Athens October 8, 2012. REUTERS/Yannis Behrakis
- Germany says Merkel visit to Athens does not mean aid for Greece
German Finance Minister Wolfgang Schaeuble said on Sunday that Chancellor Angela Merkel's trip to Greece this week did not mean the debt-stricken country would receive the next tranche of aid from its bailout.
"The chancellor will not discuss with Greece a matter which the troika must report on first," Schaeuble told broadcaster ZDF in an interview, referring to the "troika" of the International Monetary Fund, European Commission and European Central Bank.
- The euro has risen to a three-week high against sterling at 80.855 pence.
- German finance minister Wolfgang Schäuble says Spain does not need an aid programme.
- Those comments from German Finance Minister Wolfgang Schaeuble in full:
"Spain needs no aid programme," Schaeuble said as he arrived a meeting of euro zone finance ministers in Luxembourg, reiterating a point he has made repeatedly in recent weeks.
"Spain is doing everything necessary, in fiscal policy, in structural reforms. Spain has a problem with its banks as a consequence of the real estate bubble of the past years.
"That's why Spain is getting help with banking recapitalisation. And of course Spain, like other countries, is suffering from the problem of contagion, speculation on financial markets... but Spain needs no aid programme. That's what the Spanish government says again and again."
The finance ministers, known as the Eurogroup, are meeting to discuss Spain's borrowing costs and its economic reforms as well as other eurozone related issues.
- Schaeuble also commented on Chancellor Merkel's visit to Greece:
"The chancellor is not the troika (EU/ECB and IMF inspectors). The chancellor is travelling to greece just like she travels to many other european countries and just like the greek prime minister came to Berlin.
"We have intensive bilateral cooperation to help Greece in building a competitive economy.
"Germany is doing whatever we can do to help Greece on its difficult path. But the troika has a job of its own. It has to report whether Greece is fulfilling the obligations from the second aid programme and if the troika can report that then the conditions for the disbursment of the next tranche are given. But that's not on the agenda of the visit in Athens."
- Eurogroup Chairman Jean-Claude Juncker has also been speaking in Luxembourg.
On the idea of single euro zone budget, he said: "I myself am not opposed in principle to a euro zone budget.
And on Greece: "I don't think that we will have any major decisions on Greece (today). We will be briefed by our Greek colleagues and by the troika (the inspectors from the European Commission, IMF and ECB) on the negotiations between Greece and the troika.
Finally, when asked about a decision soon on Greece: "Hope never dies."
- EU Economic and Monetary Affairs Commissioner Olli Rehn comments on the ESM:
"The inauguration and start of operations of the European Stability Mechanism is a very important milestone for the euro zone and the the European Union. It provides the euro zone with a robust and permanent firewall and it provides us with a strong toolbox of effective and flexible instruments.
"Thinking of where we were two and a half years ago when we had no instruments of crisis management, we had to create the Greek loan facility and the temporary European facility, we are moving forward and we are supplementing the economic and monetary union with one important building block.
"Nobody is in party mood but I am less pessimistic for the moment for the euro zone than in the spring."
Spanish industry workers take part in a protest against government austerity measures in Madrid October 8, 2012. Spain's central bank chief undercut the government's proposed 2013 budget on October 4, saying it was based on over-rosy forecasts for economic growth and tax revenue, as Prime Minister Mariano Rajoy weighs when to seek an international bailout. The banner reads " Don't hit me , I am a college .... from the industry sector ". REUTERS/Juan Medina
- Speaking at a press conference, Klaus Regling, the head of the European Financial Stability Facility (which as of today becomes the ESM) says the ESM is now "fully operational".
Regling adds that the instruments of the ESM are the same as the EFSF, namely country programme loans, precautionary interventions and bank recapitalisation via country treasuries.
- Dutch Finance Minister Jan Kees de Jager on Greece:
"Greece must find away out of its crisis through reforms and (fiscal) consolidation. That cannot be done by other countries. They must do that. We are waiting for the Troika report, we can't get ahead of ourselves, but it is really up to Greece to resolve this on its own. That is all important and the ball is in their court. There are risks attached (to the loans to Greece)."
Pensioners burn an EU flag during a march towards the EU offices in central Athens October 8, 2012. About 500 pensioners participated in an anti-austerity march at the EU offices a day before German Chancellor Angela Merkel visits Greece. About 6,000 policemen will be deployed in the capital for her 6-hour visit, turning the city centre into a no-go zone for protest marches planned by labour unions and opposition parties. [REUTERS/Yannis Behrakis]
- Spain doesn't need help, euro zone ministers say
"Spain needs no aid program. Spain is doing everything necessary, in fiscal policy, in structural reforms," German Finance Minister Wolfgang Schaeuble told reporters as he arrived for a gathering that will also discuss plans to establish a single supervisor for euro zone banks. (read more...)
Eurozone finance ministers and European Central Bank representatives pose for a group photo during a meeting of the Board of Governors of the European Stability Mechanism (ESM) ahead of an eurogroup meeting in Luxembourg October 8, 2012. Euro zone finance ministers will launch their 500 billion euro permanent bailout fund on Monday, putting in place a major defence against the debt crisis that now threatens Spain. The fund, called ESM, will be used to lend to distressed euro zone sovereigns in return for strict fiscal and structural reforms that aim to put economies that have lost investor trust back on track. [REUTERS/Yves Herman]
- Thousands of Greek protesters tell Merkel she is not welcome
About 8,000 demonstrators chanted anti-austerity slogans and hoisted banners warning Angela Merkel she was not welcome in Greece at a protest on Monday, the eve of a visit by the German chancellor.
Organized by labor unions fed up with wage and benefit cuts during three years of austerity, the demonstration was called before Merkel announced she was coming to Greece in a gesture of support for the government's fiscal reform efforts.
But protesters did not miss the opportunity to vent their anger at Merkel, whose insistence on a tough reform program many Greeks blame for their country's plight. The main banner in front of parliament was a large German flag emblazoned with the words "Angela, you are not welcome!". (read more...)
Greece's Finance Minister Yannis Stournaras (L) talks with Director of the International Monetary Fund (IMF) Christine Lagarde (R) at a eurozone finance ministers meeting in Luxembourg October 8, 2012. Euro zone finance ministers will launch their 500 billion euro permanent bailout fund on Monday, putting in place a major defence against the debt crisis that now threatens Spain. [REUTERS/Yves Herman]
Video: Protesters gather in Greece's Syntagma Square
Video: Demonstrators march on Patras in protest of Angela Merkel's visit to Greece
A banner bearing the colours of the German flag is placed in front of the Greek parliament by anti-austerity protesters in Athens October 8, 2012. The banner reads "Angela don't cry", in reference to German Chancellor Angela Merkel. About 6,000 policemen will be deployed in the capital for her six hour visit, turning the city centre into a no-go zone for protest marches planned by labour unions and opposition parties. [REUTERS/Yannis Behrakis]
- Good morning, and welcome back to our live coverage of the euro zone crisis. German Chancellor Angela Merkel is in Athens today to meet with Greek Prime Minister Antonis Samaras. We're expecting a press conference sometime this afternoon.
The Greek people aren't happy, and a number of protests are expected across the city. Despite official attempts to curb protests (demonstrations have been banned in certain parts of the city), a large turnout is expected and 7,000 police have been deployed to keep the peace.
- Elsewhere, EU finance ministers are still meeting in Luxembourg, so we'll be keeping a close eye on events there also.
- IMF warns global economic slowdown deepens, prods U.S., Europe
The IMF said the global economic slowdown is worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.
Global growth in advanced economies is too weak to bring down unemployment and what little momentum exists is coming primarily from central banks, the International Monetary Fund said in its World Economic Outlook, released ahead of its twice-yearly meeting, which will be held in Tokyo later this week.
"A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component," it said.
"The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges."
- The IMF has also said that it expects Spain to miss its deficit targets in 2012 and 2013.
Reuters' Julien Toyer reports:
Spain will miss its deficit targets in 2012 and 2013 and its debt will jump to more than 90 percent of gross domestic product next year as it recapitalises its banking sector, the IMF said on Tuesday.
The International Monetary Fund said in its fiscal monitor report that the country's deficit would reach 7 percent of GDP in 2012 and 5.7 percent in 2013, compared with European Union-agreed targets of 6.3 percent of GDP this year and 4.5 percent of GDP next year.
- More from the IMF, this time concerning Great Britain. This comes from my colleague David Milliken:
IMF says UK should defer spending cuts if growth disappoints
Britain should defer spending cuts planned for next year if growth turns out to be much weaker than forecast, the International Monetary Fund said on Tuesday.
The IMF said Britain's deficit-cutting plans were already behind forecast, but that Chancellor George Osborne should be prepared to slow them further in the short term if other measures failed to boost demand.
The IMF's budget assessment came hours after it sharply downgraded Britain's growth outlook, predicting the economy would shrink 0.4 percent this year, before growing by a tepid 1.1 percent in 2013.
The reports will make uncomfortable reading for Osborne, who will unveil updated growth and budget forecasts on December 5. Many economists already believe he will struggle to meet his goals of eliminating the structural budget deficit within five years, and putting net debt as a share of GDP on a downward path by 2015.
The IMF said a first line of defence against weaker growth would be for the Bank of England to loosen monetary policy and for the government to allow total unemployment benefit payments to rise if joblessness increased.
But if that failed to spur growth, Osborne should postpone some of the cuts planned under his flagship austerity programme to future years, it added.
"If growth should fall significantly below current ... projections, countries with room for manoeuvre should smooth their planned adjustment over 2013 and beyond. This includes ... the United Kingdom," the IMF said. The IMF gave a similar message in May, when it forecast 2.0 percent growth for 2013.
- Despite the IMF warning, David Cameron isn't for turning. Speaking on Sky News, the PM said:
"What we need in Britain is not 'Plan B', which is more borrowing. How can you borrow your way out of a debt crisis?
"What we need is what I call 'Plan A+', we need to keep our plans, difficult though they are to cut public spending and deal with the deficit, but we need to add to that every measure that business has been asking for. And that's what we're doing.
"The IMF are not saying change course, they are saying stick to your plan unless things get dramatically worse."
(Reporting by Matt Falloon, Reuters)
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