A screen in Hong Kong displaying the Hang Seng index’s turbulent day today. Image AP
Welcome back to the FT’s coverage of the eurozone crisis and its global fallout. Curated by John Aglionby, Tom Burgis and Orla Ryan on the news desk in London and with contributions from correspondents around the world. All times are GMT.
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Market reaction to events in Italy shows that the crisis is now truly global. Markets are looking for more clarity from Rome on timings, particularly of the austerity vote. Meanwhile the saga of finding a new Greek prime minister rumbles on.
Silvio Berlusconi, the Italian prime minister, at last week's G20 summit in Cannes
At the European Commission’s regular mid-day press briefing today, Amadeu Altafaj-Tardio, the spokesman for economic issues, said the Commission’s Italian monitoring team is expected to arrive this week. After agreement Friday in Cannes, the International Monetary Fund will be sending its own team at the end of the month. Read more
The first thing we like to turn to when getting these kinds of reports is the analysis of just how big the financing hole is for Greece – and how international lenders intend on filling it.
According to page 62 of the report (see the pdf here), the IMF has a slightly lower estimate of how big the Greek hole is than the European Commission: it believes Athens will need €103.4bn in new bail-out funds through 2014, while the Commission thinks it will be closer to €115bn.
Potentially more interesting, however, is how they propose to fill the hole. Read more
Acting IMF chief John Lipsky arrives for EU meetings in Luxembourg on Monday
Did the International Monetary Fund really mean to take a swipe at Europe’s continued bickering over how to deal with private holders of Greek bonds? According to John Lipsky, the Fund’s acting managing director, the tough language may have been the result of an editing hiccup. Read more
Greek riot police confront protestors in front of parliament in Athens on Wednesday
Just as one Greek crisis appears to be dissipating, another one flares up that risks pushing Athens into default in a matter of weeks. For those struggling to follow along, here’s another one of our quick primers – and a guide for what to watch for in the coming days.
For much of the last month, officials have been fretting that unless they can piece together a new €120bn bail-out for Greece by next week, Athens would run out of money. The first default by an advanced economy in 60 years would ensue, potentially wreaking havoc across the eurozone.
The reason behind the fear was a complicated domino effect that started with the International Monetary Fund: the IMF was going to withhold its €3.3bn in aid due this month unless the European Union could ensure Greece could pay its bills for another year. Greece, however, is going to be unable to pay its bills next year without a new bail-out. Read more
Financial commentators, like financial markets, move in herds. Is the herd wrong about Greece?
The herd takes the view that Greece will sooner or later have to restructure its debt. According to herd thinking, the €110bn rescue plan arranged for Greece by its eurozone partners and the International Monetary Fund merely buys some time for the Greek government – and for its European bank creditors. The herd predicts a “haircut”, or loss, for Greek bondholders of 30 to 50 per cent of the face value of their bonds. All this is likely to happen towards the end of 2011 or in early 2012, says the herd. Read more
Rumours are flying thick and fast that the troubles of Spain’s banking sector will require emergency attention at Thursday’s summit of European Union leaders in Brussels. But it appears highly improbable that Spain will ask for help from the emergency financial stabilisation fund that EU finance ministers agreed to set up last month. For one thing, the fund is not yet fully up and running. For another, the Spanish government is emphatically not shut out of credit markets – a point underlined this morning by the successful issuance of €5bn worth of short-term government bills.
But it is worth repeating that Spain is not Greece. The Greek crisis originated in decades of mismanagement of the public finances, plus an unhealthy culture of corruption and use of the state for political patronage. Although such practices are not unknown in Spain – and not unknown in the US, China and numerous other countries, for that matter – they have never attained Greek levels. Read more
Better late than never. That is one way of looking at the three-year, €110bn rescue plan for Greece that was announced on Sunday by eurozone governments and the International Monetary Fund. It took seven months of indecision, bickering and ever-mounting chaos on the bond markets for the eurozone to get there, but in the end it did – and it may just have saved European monetary union as a result.
Looked at in a different light, however, the rescue package does not appear to be such a masterstroke. For its underlying premises are, first, that there should under no circumstances be a restructuring of Greek government debt, and secondly, that Greece’s troubles are unique to itself and need not be considered in a context of wider eurozone instability. Both premises are open to question. Read more
Peter Spiegel is the FT's Brussels bureau chief. He returned to the FT in August 2010 after spending five years covering foreign policy and national security issues from Washington for the Wall Street Journal and the Los Angeles Times, focusing on the wars in Iraq and Afghanistan. He first joined the FT in 1999 covering business regulation and corporate crime in its Washington bureau, before spending four years covering military affairs and the defence industry in London and Washington.
Joshua Chaffin is one of the FT's EU correspondents, covering areas including policies on trade, the environment and energy. He has worked in the FT's Brussels bureau since late 2008 and before that was an FT correspondent in New York and Washington DC.
Alex Barker is EU correspondent, covering the single market, financial regulation and competition. He was formerly an FT political correspondent in the UK and joined the FT in 2005.
James Fontanella-Khan is FT's Brussels correspondent, covering media, telecom and internet regulation as well as justice, employment and social affairs and its impact on eastern Europe. He was formerly an FT correspondent in India. He joined the FT in 2006.