Debt crisis: live
German Chancellor says she would give up sovereignty to achieve closer economic and political ties in the Europe as Mario Monti is appointed prime minister and finance minister of Italy and BoE warns on eurozone.
3:54PM GMT 16 Nov 2011
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• Bank of England slashes UK growth forecast to 1pc next year
• UK youth unemployment passes 1m mark for the first time
• Italy's Mario Monti named Prime Minister and Finance Minister
• Merkel willing to cede some national sovereignty to EU
• Barack Obama 'deeply concerned' at market turmoil
• Markets fall, Spanish economy stalls, Italy bond yields pass 7pc
• UK youth unemployment passes 1m mark for the first time
• Italy's Mario Monti named Prime Minister and Finance Minister
• Merkel willing to cede some national sovereignty to EU
• Barack Obama 'deeply concerned' at market turmoil
• Markets fall, Spanish economy stalls, Italy bond yields pass 7pc
Latest
15.54 The Greek bail-out is at risk - from the country's new Government.
As we mentioned earlier, George Karatzaferis, head of the LAOS party, and Antonis Samaras, head of the New Democracy conservatives, have both refused to put their signatures to pledges that they will implement harsh austerity measures.
That makes two out of the three parties which form the new coalition Government led by former European Central Bank deputy chief Lucas Papademos.
In essence, the Government claims that it intends to pass the measures, but refuses to make that promise in writing. Antonis Samaras toldPapademos in parliament today:
What additional confirmation could be needed, beyond the fact that we are voting for your administration? Do votes in Greek parliament not carry institutional and constitutional force?But the UE is demanding that Greece put pen to paper before it hands over €8 billion in bail-out cash. Without that money Greece will run out of funds in a matter of weeks.
15.40 With unemployment casting a shadow over the UK today, let's look at the Misery Index. As Ed Conway points out on his Sky News blog, this measure takes the unemployment rate and the inflation rate and combines them to get a general feel for how squeezed the average person is.
With unemployment at 8.3pc and the 5.6pc Retail Price Index inflation and you get 13.9pc - not the highest in living memory, but not far off. Not the gloomiest news on this blog so far today, but not far off.
15.29 George Karatzaferis, head of Greece's LAOS far-right nationalist party, has said "no signature is needed" on reform pledges to the EU.
That means two party leaders out of the three supporting the new coalition government have rejected calls to individually sign up to the pledge.
Without agreeing to the reform, Greece can't get its next €8 billion in bail-out cash.
15.19 US markets have slid after the ECB's purchase of sovereign debt failed to stem a eurozone bond sell-off. Basically, Wall Street doubts the ability of governments to contain the crisis.
The Dow Jones is off 0.93pc, the S&P 500 has slid 0.81pc and theNasdaq is down 0.7pc.
French borrowing costs rose, with the yield premium of the French 10-year government bond over German Bunds rising to a new euro-era high near 2pc.
15.09 But now some good news!
Portugal has said the EU and IMF approve debt, economic reform progress.
14.54 Moving slightly north to Holland. Dutch finance minister Jan Kees de Jager has announced that Holland is prepared for a eurozone break-up.
Will it happen?
Another sign of contagion? - Belgian October Federal budget deficit €2.63bn vs previous €1.67bn surplus.
14.50 Maria Cannata, head of Italy’s debt agency has said that "AAA-rated countries such as France are showing signs of contagion", adding that France’s bond spreads are “worrying" and EU needs to be more "courageous".
Country will also sell €430bn-worth of bonds in 2012.
14.46 US markets have opened:
The Dow Jones Industrial Average plummeted 120.71 points (1pc) to 11,975.45; the S&P 500 shed 11.52 points (0.92pc) to 1,246.29, while the tech-heavy Nasdaq Composite lost 22.13 points (0.82pc) to 2,644.07.14.43 The Irish Prime Minister Enda Kenny is appearing to back Geoge Osborne's rejection of the Financial Transaction Tax, saying that it would harm Ireland.
14.42 A great price on how Goldman Sachs links the three new euro chiefs.
The new president of the European Central Bank, Mario Draghi, Italy’s new prime minister, Mario Monti, and the new Greek prime minister Lucas Papademos all reportedly have the US investment bank as a common denominator.14.23 BREAKING NEWS...
US factories made more cars, electronics and equipment in October. Overall output rose 0.7pc after a revised 0.1pc fall in September, figures from the Federal Reserve showed.
14.18 European markets chief Michel Barnier (below) has said he is working on "a toolbox" for crisis resolution, to be presented in coming weeks.
14.02 The Telegraph's Nick Squires reports from Rome on Mario Monti's appointment as Italian PM and Finance Minister: Mario Monti appoints himself economy minister as he unveils government
"Mario Monti, nicknamed 'Super Mario' for his intellect, diplomatic skills and 10-year record as a European competition commissioner, will as expected double up as both prime minister and economy minister."He said he hoped the new government would be able to restore market confidence in Italy and bring to an end a period of heightened political tension."
13.58 Wolfgang Schäuble, Germany's finance minister, has said that there are contagion risks in the euro region, echoing Barroso's comments earlier today. He added that using the ECB to resolve the crisis would create more problems in the long run and that the Federal Reserve is no model for the European Central Bank.
Meanwhile, German Chancellor Angela Merkel reportedly holds new Italian Prime Minister Mario Monti in “very high regard” as a politician her spokesman told reporters in Berlin.
“It’s to be hoped” that Monti will press ahead to implement Italy’s pledges to tackle its debt and restore dented market confidence, her spokesman added, revealing that Merkel will quickly seek talks with Monti when he assumes office.
13.49 Here's something to think about: Italy's new cabinet includes no politicians, one banker, and a defence minister who's commanded two submarines.
13.47 A few weeks ago, Lord Wolfson (below) announced a £250,000 prize for the person who could figure out how a country could leave the eurozone. Given what is happening to the euro, it seemed an awful lot of money to spend on a sub-section of the real question: namely, how Europe can maintain monetary stability and promote growth. The euro, as Gideon Rachman pointed out in the FT last week, is a means to an end, not an end in itself.
It seems Lord Wolfson agrees that he asked too narrow a question and has reformulated the task. The winner will now have to answer what will be the best way of ejection from the Euro "to be managed to provide the soundest foundation for the future growth and prosperity of the current membership?" Much better.
13.34 BREAKING NEWS...
US CPI 3.5pc in October year-on-year, up from 3.9pc. Fell 0.1pc month-on-month.
13.33 Labour leader Ed Miliband has finally got around to commenting on the unemployment figures:
This is a terrible day for Britain with the news that the number of young people who cannot find work has risen over one million. Instead of blaming everyone else and trying to find excuses in the eurozone, the Government should recognise that the British economy has been flatlining for a year - long before this recent crisis began. David Cameron needs to start listening, take some responsibility and change course.Long before this recent crisis began?! Didn't it start with Labour? Anyway, here is what Business Secretary Vince Cabkle thinks:
13.25 Time for an update on the markets:
FTSE 100: -0.7pc
CAC: +0.1pc
DAX: -0.9pc
IBEX: +0.7pc
MIB: -0.04pc
12.59 It looks like European Union leaders have told the European Parliament that they are pushing for greater intervention into countries' governance.
Jose Manuel Barroso said that for countries running excessive deficits he would propose giving the European Commission power to make recommendations on draft national budgets before they are voted on by parliaments.
While Herman Van Rompuy said governments should also consider giving a central eurozone body the power to more directly intervene in the budget process of member states.
12.35 Germany is prepared to cede some national sovereignty to the EU to achieve closer economic and political ties, Chancellor Angela Merkelhas said, adding that the EU cannot solve its problems without a treaty change.
Germany wants a strong European Union with 27 members... also wants a 17-member eurozone as strong and that inspires confidence. We are prepared to give up a piece of national sovereignty to achieve that.12.27 BREAKING NEWS...
Mario Monti tells Italian president he will lead new government and be finance minister. Banker Corrado Passera the new Minister for Economic Development. Cabinet to be sworn in at 4pm (GMT)
12.25 Following on from data earlier that said Spain's economy failed to grow in the third quarter (see 8.03), the country has said 2011 economic growth will be close to 0.8pc
12.19 More market rumours: ECB is reportedly buying Italian bonds again; LCH margin hike on Spanish bonds (meaning it will be more expensive for investors hold such bonds).
12.18 We're hearing reports that PM-designate Mario Monti could also propose himself as interim Italian Economy Minister.
12.12 Andrew Lilico, an economist with Europe Economics and a member of the Shadow Monetary Policy Committee, reveals why we should worry more about Greece than Italy: The surprising history of Italy and sovereign default
"Italy faced a similar debt to GDP ratio to today in the 1990s, without defaulting or inflating or growing fast, and did so at higher interest rates than it is being charged even at current elevated levels."12.06 And the day's events don't end there. We are expecting the new Italian PM Mario Monti to unveil his new government shortly. And the Greek PM Lucas Papademos is facing a confidence vote, too.
We'll have the latest here when they happen.
11.53 And to top it all of, more job cuts:
British Gas is planning to cut 850 jobs.
Bank of America, the second-biggest US lender by deposits, has reportedly cut part of its top-ranked Merrill Lynch & Co equities division in Europe. The cuts affected specialist sales and generalist sales, two people told Bloomberg. The pair declined to be identified because the information isn’t public.
Meawnhile, French bank BNP Paribas are to axe 1,400 jobs around the world; while the Paris commercial court has ordered that French cross-Channel ferry operator SeaFrance be put into liquidation, rejecting two bids to save a firm that employs more than 1,000 people.
11.49 It's been a sobering morning, what with the unemployment data:
and the Bank of England cutting growth forecasts - this from James Igoe, private client director at the stockbrokers XCAP:
Mervyn King's confidence that inflation has peaked and will fall dramatically next year was in sharp contrast to his gloomy prediction for the economy as a whole. His bullish assertion that inflation will fall sharply in 2012 will allay fears of an interest rate rise. But his carefully chosen words contained a thinly-veiled prediction of bad times ahead for the economy. With the UK economy so heavily geared on the eurozone, the debt crisis across the Channel poses a serious threat for Britain.11.46 It looks like the ECB has stopped buying bonds in Italy and Spain as the yields are rising again.
11.43 Italy not publishing preliminary GDP for the third quarter (that bad?!), as country's 10-year bond yields rise above "unsustainable" 7pc level.
11.41 Mervyn King's speech has not helped the markets:
FTSE 100:-1.1pc
DAX: -1pc
CAC: -0.2pc
IBEX: -0.6pc
MIB: -0.4pc
11.37 King finishes the press conference. Here are the highlights:
Revises growth down to 1pc next year
Expects inflation to fall sharply at the beginning of next year
Uncertain future but UK cannot control eurozone debt crisis
The financial sector has not come out of crisis, bank spreads still impacting on financing
The ECB is justified to think it is governments' job to solve euro problems
Uk banks in better shape than those in EU
11.30 Mervyn King interrupts Sky's Ed Conway for trying to ask too many questions. He has had three/four, more than any other journalist today.
11.27 Barack Obama on the eurozone debt crisis (see 07.32):
11.25 King: "Central banks dont have real resources, they create money. People who put pressure on the ECB misunderstand the problem, this is an issue for governments."
11.09 King: "Our banks are in a healthier position that those on the continent. Special Liquidity Scheme virtually entirely repaid by banks.
"I'm not going to advise Germany or any other country what to do. We need a credible plan so those nations that have lost competitiveness regain it.
"Inflation is way above target, we want to bring it back to target. That's the big picture, what we're focusing on. We're not in the game of getting inflation low and keeping it there for a bit to make ourselves look good."
11.05 France has said it is confident that the ECB will take necessary measures to ensure financial stability of the eurozone.
11.02 King: "A lot of people who have bandied about the term 'lender of last resort' don't actually know what it means."
It is only done for institutions with good collateral at a penalty rate - which is a "million miles" away from ECB buying bad debt.
He adds that the ECB is justified to think it is governments' job to solve euro problems.
"I have no problem with using a sticking plaster, but use the time it gives you to get proper treatment."
10.59 Treasury maintains that the UK government is doing all it can to protect the UK economy and ensure it remains a relative safe haven.
10.57 Bank of England's Charlie Bean says he doesn't want sharp deleveraging of economy at this point and that quantitative easing has helped.
10.55 Mervyn King:
Once the euro adjustment is over then UK growth will pick up again. This isn't a liquidity problem. This is reducing underlying macro-economic imbalances. The long view is that we have to put the UK trade deficit right. Slow, gradual pick-up in take-home pay should have impact on consumption."Everyone is concerned unemployment has risen, particularly youth unemployment. It's bound to be difficult for new entrants into the labour force. I'm sure the government feels that's a matter of concern."
He adds:
"European imbalances have to be tackled together."
10.47 Mervyn King adds that the financial sector has not come out of crisis, bank spreads still impacting on financing. He says the Bank of England will have to watch carefully as uncertainty created by world events is likely to have an impact on investment spending.
10.42 Bank of England Governor Sir Mervyn King speaking on the UK economy:
The lack of a credible euro crisis plan is the biggest risk to UK. The mood in markets has taken a turn for the worst and this affects sentiment and bond yields. The underlying probelms of trade imbalnaces and indebtedness remain, so the journey to a balanced economy will be long and arduous."The outlook for world growth has worsened, and this is also true in the UK.Activity could be flat until middle of next year. This is a difficult economic environment. Growth over the next few quarters likely to be markedly worse than predicted in August.
"Inflation has fallen back, and we are confident that it will fall sharply at the start of next year. Inflation should slow throughout 2012. 2013/14 inflation is more likely to below target than above. The key uncertainty on inflation is the impact of euro crisis on economic output. The inflation outlook is particularly uncertain and there are limits to what domestic monetary policy can achieve.
"We do not have a crystal ball."
10.36 BREAKING NEWS...
Bank of England slashes growth forecast. Growth rate of around 1pc next year, inflation forecast also cut. Expected to be 1pc-2pc in 2013.
10.22 The Bank of England is to give its verdict on UK growth at 10.30am, we'll have the latest here.
10.16 The Telegraph's retail editor Harry Wallop has an interesting example of just how bad the UK jobs market is at the moment:
"Sign of how bad jobs market is: Royal Mail received 110,000 applications for 18,000 temp Christmas jobs."About 1m more people out of work today than four years ago.
10.13 Obviously Mario Monti is late... (see 09.54)
10.04 Back to the UK and here is a graph comparing inflation withwage growth. Not a pretty sight.
10.01 BREAKING NEWS...
Eurozone inflation stable at 3pc.
09.54 If you've finished digesting those UK jobless figures, in just five minutes we are expecting new Italian PM Mario Monti to announce his government.
09.49 UK wage inflation has fallen to 2.3pc from 2.8pc.
Carmen Watson, managing director of Pertemps Recruitment Partnership, said of the jobs figures:
We are in danger of seeing an entire generation of young people that is falling through the holes in the system designed to create employment. It may be too early to expect to see the results of the Government’s Work Programme, which was introduced earlier this year, but in the meantime, thousands more young people are becoming disaffected by the harsh and challenging conditions we’re seeing in the job market.09.36 Employment Minister Chris Grayling says unemployment figures are "bad news", adding that "these figures show how much our economy is being affected by the crisis in the eurozone".
09.31 BREAKING NEWS...
2.62m people out of work in the UK in September, a 15-year high. Now been eight consecutive months of rises. Youth unemployment crosses 1m mark at 21.9pc.
09.29 We are expecting UK unemployment figures any second...
09.24 John Swinney has launched an unprecedented attack onGeorge Osborne, accusing the Chancellor of “sabotaging” inward investment to Scotland.
The Scottish Finance Secretary claims Mr Osborne is running scared of internal Conservative criticism from the north of England and jealous of Scotland’s achievements in attracting new business.
It came on the day internet giant Amazon opened centres in Dunfermline and Edinburgh, creating 3,000 jobs. The claim was rejected by the Treasury as “ridiculous”.
09.00 Jean-Claude Juncker, President of the Euro Group, says he is looking at private sector involvement under the The European Stability Mechanism.
08.58 Stock markets are... up!
FTSE 100: +0.04pc
CAC: +0.5pc
DAX: +0.2pc
IBEX: +0.8pc
MIB: +1.3pc
08.56 The ECB is reportedly buying Italian, Portuguese and Spanish bonds. Yield on 10-year Italian is just under 7pc at the moment.
08.45 More politicians pile in to criticise the EU: Canada's finance minister, Jim Flaherty, is "frustrated" at the lack of action by Europe's leaders to solve their continent's crippling debt problem.
I think you'll understand if I express the view that some of us are frustrated by the failure for clear and decisive action now in Europe because it endangers other economies in the world.08.42 In his daily email, Telegraph Deputy Editor Benedict Brogan has looked at David Cameron's relationship with Nicolas Sarkozy:
At some point, David Cameron will have to go to Paris to make Britain's case on the future of the EU. He knows that France has invested itself in a sacred union with Germany, and that he would be reckless to bet against its durability.08.36 José Manuel Barroso, President of the European Commission, says the eurozone is now facing a truly systemic crisis and stronger commitment is needed from all countries. He adds that a debate on treaty change must not be used as an excuse not to act now and that thebailout fund must be as flexible as possible:
We are indeed now facing a truly systemic crisis that requires an even stronger commitment from all and that may require additional and very important measures. We will not make the eurozone stronger through fragmentation of the EU.08.20 We are hearing reports that the managing director of the Institute of International Finance, Charles Dallara, is to meet Greek PM Lucas Papademos and finance minister Evangelos Venizelos for debt talks today.
08.18 Herman Van Rompuy, President of the European Council, is tweeting like crazy at the moment:
The markets are underestimating EU governance progress. Time to de-dramatise the debate on a two-tier Europe: a better structured Eurozone is in everybody's interest. The European Parliament is a rich source of ideas, a laboratory of proposals for the development of our Union. I look forward to hearing its views & ideas.08.13 Yield on Italian 10-year bonds eases slightly to 6.91pc - still close to the danger level of 7pc at which most economists agree borrowing costs could become unsustainable.
08.04 European markets are open. FTSE 100 falls 32 points, or 0.6pc, to 5,482. DAX down 59.85 points, or 1.01pc, at 5,873.29. CAC loses 0.35pc to 3,038.60.
08.03 BREAKING NEWS...
Spanish GDP flat in the third quarter compared with the second, up 0.8pc year-on-year.
07.59 Everyone is having a say this morning. Finland's finance ministerJutta Urpilainen (below) has not only said there is mistrust between euro countries but that her nation is against the idea of common euro bonds. She adds that the EFSF bailout fund needs to be in shape to prevent contagion, but it is impossible to say if decisions on levaging the fund will be made in December.
Seems to me like she is calling for the fund to be increased yet again.
07.48 China Central Bank says sees no quick end to European debt crisis.
07.46 That market turmoil is stemming from uncertainty in Greece, Italyand Spain. The latter is selling as much as €4bn of bonds due 2022 tomorrow , while France will auction notes maturing from 2013 to 2016.
Spain is also facing elections on Sunday.
07.32 US President Barack Obama says he is "deeply concerned" at European market turmoil. He adds that China must "rethink" its attitude to trade.
07.30 Hurrah! I've found someone who is positive about the Italian economy. Step forward legendary fashion designer Giorgio Armani:
"I believe all this will end very soon. We have to remember that Italian people are very strong in being able to be up and running again. This is testified by history. What is needed is a strong surge of national unity and massive determination to get things going again. At such a challenging time, the indispensible qualities are cohesion, a sense of untiy and hope for the future."
07.20 Economist Nouriel Roubini is tweeting as he lands in Zurich:
Contagion has spread from periphery to core of the EZ as spreads widened in France, Belgium, Austria and Finland.07.17 Quick bit of corporate news. Game Group has suffered an 8.6pc fall in like-for-like sales in the 41 weeks to November 12. British interdealer broker ICAP posted a dip in first-half earnings. Earnings per share for the six months to September fell 6pc to 19.6p, compared with a forecast for 19.85p in a Thomson Reuters I/B/E/S poll.
Big fall for Game, big games such as Battlefield 3 and the new Call of Duty should help though.
07.11 Tottenham Hotspur is planning to de-list from trading on the AIM to become a private company.
06.46 Further to the Bank of England's growth forecast later today,economists aren't feeling positive.
06.38 Moody's has put Italy's UniCredit on review for a possible downgrade
06.26 Some big stories expected today
The Bank of England is expected to downgrade UK growth
Italian PM Mario Monti is set to go to the President with his new government at 10am GMT
Greek PM Lucas Papademos will face a confidence vote, which he is expected to win
UK unemployment figures are expected to show more than 1m youngsters are out of work.
06.22 The Telegraph's top finance story this morning is Germany demanding that Britain give more to the European Union, and cannot “get away” with not contributing to the rescue package.
Ministers have instead called on the Germans to allow the European Central Bank effectively to print money to rescue beleaguered economies. The Prime Minister will travel to Berlin on Friday for what are expected to be tense negotiations with Angela Merkel, the German chancellor, over the crisis.06.20 It's Wednesday morning, let's kick off with the national newspaper front pages:
Daily Telegraph: 'Killed for the colour of his skin'
Times (£): Britain and Germany clash over euro crisis
Independent: Another fine mess for the Home Secretary
Financial Times (£): Eurozone bonds hit by mass sell-off
Daily Mail: Europe speaks German now!
06.15 Good morning and welcome back to our live coverage of the continuing global debt crisis. Log on throughout the day for the latest news and views.
Read all our latest news on the financial crisis, or take an in-depth look at events over the past month.
