Welcome to day four of our rolling coverage of the eurozone crisis.
All times are London time. Curated by Esther Bintliff and John Aglionby on the world news desk in London, with contributions from FT correspondents around the world.
19.20: We’re wrapping up the blog here, but many thanks for reading (and commenting). You can follow the rest of our coverage at ft.com/world and on twitter, @FTWorldNews
19.15: What are the chances of Greece being able to meet its commitment to cut the general government deficit from €24.1bn to €17.1bn this year?
It’s an incredibly tough task – equivalent to about 7.5 per cent of gross domestic product.
Kerin Hope, our Athens correspondent, has taken a good look at the numbers:
Greece faces a desperate catch-up effort to achieve this year’s budget targets after reporting the central government deficit widened an annual 22.2 per cent for the first eight months of this year.
Talks with international lenders, which resumed on Thursday, are intended to wrap up details of the 2012 budget and of structural reforms to reduce public sector spending so that Athens can receive its next €8bn slice of bail-out funding, according to Greek officials.
But the current shortfall in this year’s budget indicates new measures may be needed…
Read the full story here.
19.06: Here’s an update on today’s events:
- German politicians voted to approve the expansion of the powers of the eurozone’s bailout fund, the EFSF, with chancellor Angela Merkel winning a large majority – despite a rebellion by 15 government backbenchers
- Greece’s international debt inspectors – the troika – returned to Athens, having suspended their review earlier this month because the country was too slow in implementing reforms necessary to meet its fiscal targets. In a slightly embarrassing moment, they were unable to enter the finance ministry for their first meeting, due to the determined picketing of protesters, but they managed to reconvene later in another office. A Greek finance ministry official described the talks as taking place in a “positive and creative climate” (see our 17.23 update)
- Greek public sector workers staged symbolic “occupations” of government buildings, in protest at the government’s harsh austerity measures
- Business and consumer sentiment in the eurozone fell to 95 from a revised 98.4 in August, the European Commission in Brussels said today. That’s the lowest since December 2009 and below the 96 projected by economists, according to Bloomberg
- Traders welcomed the news that Germany had ratified the EFSF, and the unexpected upwards revision of US growth data, boosting risk assets, reports Jamie Chisholm, our global markets commentator
- German unemployment fell by more than expected in September, down by 26,000 according to the seasonally-adjusted figure, or more than 149,000 unadjusted. Economists had predicted a seasonally-adjusted drop of just 8,000
18.13: France’s President Nicolas Sarkozy wasted no time in calling Angela Merkel to congratulate her on the Bundestag vote today, reports Hugh Carnegy, our Paris bureau chief:
‘Sarko’ said the vote was “an important step” for the stability of the eurozone. France and Germany may not always see eye to eye on how to solve the crisis – but Paris knows it must stay in step with Berlin if a solution is to be found.
Speaking in Morocco where he was on a state visit, Mr Sarkozy said he had told Ms Merkel “how much we were relieved by the choice of the German parliament. The entente between France and Germany, which is necessary to bring stability to the world and to Europe, is total.”
Greek prime minister George Papandreou is due in Paris tomorrow afternoon for talks with Mr Sarkozy.
“After the meeting with Mr Papandreou I will have the chance to explain exactly the strategy of support that we owe to a European country like Greece,” he said.
18.03: Elena Panaritis, a member of the Greek parliament and an economist, has written today for the Guardian’s Comment Is Free. In a piece that mainly champions Greece’s determination to implement reform, she adds an interesting note:
“…the commitment to remain in the euro should not only be that of Greece, but shared by all other members of the euro family. The coming days, weeks and months will be a test – not only for Greece – but for the entire eurozone and its ability to get a handle on the debt crisis.”
17.23: An update from Athens. Kerin Hope, our correspondent, has managed to glean some more details about the return of troika representatives to Greece today:
Troika officials were unable to enter the finance ministry for their scheduled first meeting with finance minister Evangelos Venizelos, because militant civil service unionists had blocked the entrance to the building on central Syntagma square.
The police made no attempt to remove the picket line.
So Mr Venizelos, who is also deputy prime minister, shifted the venue across the square to his other office, in an old-fashioned building next-door to the foreign ministry.
Officials said later the meeting went was held in “a positive and creative climate after the harsh measures that had been decided and the sacrifices of the Greek people.”
It was an interesting choice of words, say analysts. They recall that Mr Venizelos described his relationship with the troika as “creative” the day after their last visit to Athens ended with talks on further economic reforms breaking down…
16.50: Alexander Nicoll, director of editorial at the International Institute for Strategic Studies (IISS), has written an interesting analysis on the significance of today’s German Bundestag vote. ”It seems a stronger bet now that the euro will not suffer a disorderly disintegration,” he says, but he goes on to argue that in future, a new eurozone structure should “lessen the pivotal role of Germany, with which Germans themselves are clearly uncomfortable”.
16.45: Hundreds of Greek civil servants blocked the entrance to eight government ministries, the national accounts office and the Greek statistical agency in Athens.
A protestor sits at the entrance to the health ministry - AP
Kerin Hope, our Athens correspondent, reports that many protesters are now staging an anti-austerity demonstration outside parliament.
16.32: Does Germany’s ratification today of new powers for the EFSF really change anything? In this video, Nikki Tait and Jennifer Hughes from the FT’s Lex team discuss the potential stumbling blocks ahead for the eurozone as approval for the second bailout inches forward.
16.25: In a new post for the FT’s A-list, George Soros argues that financial markets are driving the world towards another Great Depression – with incalculable political consequences. He suggests three bold and controversial steps to help world leaders regain control of the situation.
16.15: Greek finance minister Venizelos’s first meeting with the heads of the troika mission in Athens today took place in “a positive and creative climate“, according to a Greek finance ministry official quoted by Bloomberg. The official said that the troika reviewed recent austerity measures announced by the Greek government, and will hold more meetings with Venizelos and other government members over the next few days.
16.08: You’re probably wondering what’s going on in Greece. Well, here’s Evangelos Venizelos, finance minister, arriving at his office for a meeting with the troika’s debt inspectors:
AFP/Getty Images
16.02: Our colleagues over on Beyond Brics, the FT’s emerging markets hub, report that Jin Liqun, the chairman of China’s sovereign wealth fund, is in London for a conference and has seized the opportunity to say a few things about Europe.
“We in China are concerned about the unravelling of the situation in the (euro) region,” Jin told an Economist magazine conference.
“China cannot (give support) without due diligence. China cannot be expected to buy high risk euro zone (instruments) without a clear picture of debt workout programmes,” Jin said.
Read the full story here.
15.48: Here’s some eye-candy for you: a video in which Lawrence Summers, the former US treasury secretary and economic adviser to Barack Obama, talks to our own Martin Wolf about what Europe’s leaders should do to avert catastrophe.
15.45: Currency analysts at Brown Brothers Harriman make clear in their latest note that the eventual ratification of the EFSF by eurozone member states is far from a “silver bullet” :
“Once the EFSF has been ratified by all the eurozone governments (which is an important step in the right direction but a key vote from Slovakia still remains) we doubt that is likely to be a silver-bullet for the EZ’s problems. According to the proposals discussed following the IMF/G20/World Bank meeting, the market is focusing on the plan to use leverage to “top up” the size of the EFSF. In fact, many observers expect the EFSF to increase its firepower by allowing it to use bonds purchased with initial funds as collateral to borrow more from the private sector and buy yet more bonds.
But this is not a panacea either given that the use of leverage is not risk free and most likely would drive up the EFSF’s financing costs. In turn higher funding rates would imply higher borrowing costs for indebted governments than if the EFSF’s guarantees were increased outright, which of course may limits the facilities effectiveness…”
15.31: A good point from one of our readers in the comment section:
“Isn’t Estonia also supposed to vote today? Even if they can’t bail anyone out, their vote still matters!”
Estonia is indeed due to vote today on expanding the powers of the EFSF, the eurozone’s rescue fund. According to Reuters, the Estonian parliament has begun its final reading, with a final vote expected after 1600 GMT:
Reuters: Politicians from both the government – which has 56 votes in the 101-seat parliament – and opposition parties say the bill should now pass, although parliament had set aside all day for debate due to public opposition to the eurozone’s poorest member contributing further to bailouts.
15.19: Our correspondent in the Netherlands, Matt Steinglass, has been in touch to update us on the situation in the land of the low skies:
“The Dutch parliament’s finance committee has met to discuss the agenda at upcoming Ecofin (the EU’s economic and financial affairs council) meetings, and it’s clear that the recent reports that European leaders are working behind the scenes on a major restructuring of Greek debt are really shaking things up. The strange thing is, they may actually lead to more political support for eurozone rescue efforts.
There are two major parties in Holland that oppose aid to Greece: the far-right Party for Freedom of Geert Wilders, and the far-left Socialist Party. But both parties have always said that one reason they opposed earlier Greek debt support packages was that the packages were doomed, that Greece would default sooner or later and it was better for everyone to acknowledge this and work on a drastic haircut of Greek debt to market levels.
So here’s the interesting part: Ewout Irrgang, the Socialist Party’s representative on the Finance Committee, just said that if a serious restructuring of Greek debt is in the offing, on the order of 50 per cent, then the Socialists would reconsider their opposition to future eurozone rescue packages.
The Socialists are a big party. This could make the Dutch government’s efforts to push eurozone rescue packages through parliament a lot easier. But they shouldn’t get too excited; the Party for Freedom, which is theoretically an ally of the government, says it won’t consider supporting any rescue packages for Greece unless the country is kicked out of the euro first.”
14.58: We’ve made a change to the eurozone diary posted below (see update at 14.15). It turns out we don’t yet know exactly when Slovakia will vote on the EFSF – it was originally set to be October 11, but yesterday, prime minister Iveta Radicova (pictured right) said the vote would take place by October 17. According to Bloomberg, the two other remaining countries that are yet to vote on the EFSF are:
- Malta (due to vote next week)
- the Netherlands (where parliament is due to approve a supplementary budget, which includes the proposed EFSF changes, next week)
14.55: Here’s the full story on US growth, and a handy chart:
14.49: Ok so it’s not *strictly* eurozone, but in this world of interconnected markets, we thought you ought to know: second-quarter growth in the US has been revised upwards by a third. This from our New York reporter Shannon Bond:
The outlook for the US economy brightened a little on Thursday as data on growth and lay-offs came in slightly stronger than expected, suggesting that the world’s largest economy is resisting a dip back into recession.
Gross domestic product growth was revised upwards by a third to 1.3 per cent in the second quarter, boosted by exports and higher spending by consumers and the federal government.
Separate figures showed first-time claims for unemployment benefits fell below 400,000 to the lowest level since April, but officials said the weekly data may have been affected by difficulties calculating the seasonal adjustment.
US GDP increased at an annualised rate of 1.3 per cent, the commerce department said, faster than last month’s estimate of 1 per cent and a pick-up from the dismal 0.4 per cent recorded in the first quarter. Economists polled by Bloomberg had forecast the growth rate to be revised to 1.2 per cent.
14.44: Thanks for all the comments (if you haven’t seen them, they’re at the bottom of the blog), do keep them coming!
14.30: Tony Barber, the FT’s Europe editor, says:
Thursday’s Yes vote in Germany’s Bundestag was never in doubt. What is in doubt is whether it will make any difference at all to the outcome of the European debt crisis – or to Chancellor Angela Merkel’s understanding of what needs to be done in the next days and weeks.
Thomas Kleine-Brockhoff, a Washington-based scholar with the German Marshall Fund of the United States, makes a perceptive point in a blog posted on Wednesday:
“The central contradiction of the German crisis response is its insistence on the long-term at the expense of the short-term. In fact, some German recipes have made crisis resolution more difficult,” he writes.
“A German plan is needed, and now. This is the hour for leadership. History is calling, Madam Chancellor. Will you answer?”
14.15: We’ve had a request:
“I’m looking for a calendar that shows forthcoming important political/financial events in Europe relating to votes on EFSF, IMF visits to Greece, next bail out tranches deadlines/European elections etc?”
Your wish is our command, dear reader… well, here’s something to start off with, anyway.
Sept 30 - The Greek Prime Minister George Papandreou is expected to meet French President Nicolas Sarkozy in Paris and Austria’s lower house of parliament is set to vote on expanding the eurozone’s EFSF bailout fund
Oct 3 – Meeting of the Eurogroup (eurozone finance ministers) in Luxembourg
Oct 4 - EU Economic and Financial Affairs Council (ECOFIN) meeting, also in Luxembourg
Oct 5 - Greek public and private sector unions ADEDY and GSEE to hold a 24-hour strike against the government’s new austerity measures
Oct 6 - European Central Bank decision on interest rates, followed by press conference in Berlin; Jean-Claude Trichet’s swansong (his 8-year term expires on October 31)
Oct 13 - Eurozone finance ministers could meet again to sign off on Greek aid tranche
Oct 14 – G20 finance ministers meet in Paris
Mid-Oct – Greek state starts to run out of cash to pay pensions and salaries
Oct 17 - date by which Slovakia is due to vote on the EFSF
Oct 17-18 - EU summit: Herman Van Rompuy, president of the European council, will make proposals on fiscal union
Nov 3-4 – G20 summit in Cannes
December – Negotiations due to begin on next aide tranche for Athens
Dec 9 – EU summit at which EU leaders expected to discuss increasing the bailout fund and fiscal union
Early 2012 – Germany votes on a permanent bailout fund that will replace the EFSF
…………………………….
13.52: Nice cover design from Time magazine’s Europe edition:
The cover story by Michael Shuman is an interesting read, pinpointing why Angela Merkel is in such a tricky position, as she tries to balance the interests of domestic voters against the pressing needs of a troubled eurozone.
13.15: Some lunchtime stress relief. Our colleagues at FT Alphaville are running a caption competition for the photo of Angela Merkel we posted at 11.05. Entries are in the comments section.
13.08: Time for a quick lunchtime update:
- German politicians have voted to approve the expansion of the powers of the eurozone’s bailout fund, the EFSF, with chancellor Angela Merkel winning a large majority – despite a rebellion by 15 government backbenchers
- Greece’s international debt inspectors – the troika – are back in Athens, having suspended their review earlier this month because the country was too slow in implementing reforms necessary to meet its fiscal targets
- Greek public sector workers have staged symbolic “occupations” of government buildings, in protest at the government’s harsh austerity measures
- Business and consumer sentiment in the eurozone fell to 95 from a revised 98.4 in August, the European Commission in Brussels said today. That’s the lowest since December 2009 and below 96 projected by economists, according to Bloomberg.
- Traders welcomed the news that Germany has ratified the EFSF, although indices remain volatile, reports Jamie Chisholm, our global markets commentator.
12.55: Earlier we mentioned that eurozone business and consumer sentiment had fallen sharply in September, according to data released today by the European Commission. Stanley Pignal, our Brussels correspondent, reports:
The September fall comes on top of two large drops in July and August, prompting concern about the third quarter, which comes to a close this week.
The three month stretch was dominated by recurrent concerns about the ability of the eurozone to deal with its debilitating debt crisis…
“The index now stands at its lowest level since December 2009 and points to a slowdown in the annual rate of gross domestic product growth to around zero,” said Ben May of Capital Economics, a consultancy. “It adds to evidence that the eurozone economy may be on the brink of recession.”
12.50: James Mackintosh, the FT’s investment editor, has this to say about today’s vote:
12.40: While it was long forecast that today’s German parliamentary vote on the EFSF would be passed with the help of the opposition parties, there had been some doubt as to whether Angela Merkel would manage to retain her absolute majority. Hence big relief for Ms Merkel and her allies, reports Quentin Peel, our Berlin bureau chief:
Peter Altmaier, chief whip of the CDU/CSU group in the Bundestag, said the thumping cross-party majority should “send a very strong signal to Europe, to America and to the financial markets that Germany is prepared to assume its responsibility” in the eurozone crisis.
“It shows we are capable of acting, and we will go forward stronger from this day,” he said after the vote. “Above all, it was a good signal for the people of Germany.”
12.30: Who’s buying Greek bonds? Landon Thomas Jr. over at the New York Times has written a fascinating piece investigating why hedge funds are gobbling up the assets – it’s worth a read.
12.20: Quentin Peel, our Berlin bureau chief, says that full details of today’s vote in the Bundestag show that six members of Angela Merkel’s CDU party voted ‘No’, and one abstained, while four members of the Bavaria-based CSU voted against the measures.
“At the beginning of the week there were 11 No votes and two abstentions in the joint parliamentary group, so the frantic last-minute lobbying brought two members back into line.
In the FDP there were three No voters and one who abstained, a much smaller rebellion than might have been expected only two weeks ago. Since then, the party recorded a disastrous election result in Berlin’s city poll, having run a euro-sceptic campaign, which no doubt persuaded some potential rebels to fall back in line.
The conversion of Hermann Otto Solms, an FDP grandee and much-respected finance expert, to vote for the EFSF package may also have helped stem the rebellion.”
12.10: Just a quick note – if you find the rolling eurozone blog useful, you can also follow us on twitter, at @FTWorldnews (sometimes we even tweet faster than we blog) and on facebook.
12.02: Victory for Angela Merkel – the German chancellor retained her absolute majority. Quentin Peel, our Berlin bureau chief, explains:
Three-quarters of an hour after the vote, it emerged that Ms Merkel had saved her “chancellor’s majority” – with 315 votes from her own ranks. Her absolute majority in the Bundestag is 311.
Although the concept of an absolute majority is only relevant for a vote of confidence, loss of more than 19 supporters would have been a significant political blow. In the event, the rebellion included 15 members from the ranks of her own CDU, the CSU, and the FDP. So the chancellor has managed to win the day, but only after a long and painful process of persuading some very sceptical backbenchers.
11.58: In Greece, protests against the government’s harsh austerity measures continue apace, even as the senior negotiators from the troika resume their discussions in Athens. Kerin Hope, our correspondent, reports:
Public sector workers staged symbolic takeovers of government ministries and state organisations in Athens on Thursday. “We’ll be occupying the building continuously for the next 48 hours”, said a union official at the finance ministry where Evangelos Venizelos, the minister, was due to hold a first meeting with troika officials.
Groups of activists also held unannounced sit-ins at the development, justice, health and environment ministries and at the national accounts office, according to Adedy, the civil servants’ union.
“These are timed to coincide with the return to Greece of the troika and the barbarous new measures that have been decided to cut our salaries further and ,” said an Adedy statement.
The union said it would hold a protest in central Athens and a march to parliament on Thursday evening.
The mood in the Greek capital was already tense ahead of the troika’s arrival even before Adedy launched industrial action.
11.50: Faisal Islam, economics editor for Channel 4 news, says the “Yes” vote offers chancellor Angela Merkel “scant relief”:
“Greece is just one problem. The bigger picture is that markets seem to have factored in the expectation of a Super-Bazooka once Germany ratifies the EFSF…”
11.37: The Economist’s Charlemagne comments on today’s vote:
11.30: Forex investors have taken note of events in the Bundestag, with the euro advancing 1 per cent to $1.3663 against the dollar, 1 per cent to Y104.58 against the yen and 0.3 per cent at £0.8715 against the pound, reports our currency correspondent Peter Garnham. Here’s the euro against the dollar:
11.17: It was incredibly unlikely that the German parliament would have voted against expanding the eurozone rescue fund. What we’re interested in now is whether Angela Merkel retained her absolute majority, and by how much. We’re still waiting for more detailed results on that.
11.15: Quentin Peel, our Berlin bureau chief, confirms the vote passed with a fairly massive majority:
The result of the vote was read out by Wolfgang Thierse, deputy speaker of the Bundestag: 523 voted in favour and 85 against, 3 members abstained.
The result means that the vote passed with 85.6 per cent support in the house. But we still need to wait for the precise breakdown to see if Ms Merkel got her absolute majority based on her own supporters.
11.12: Reuters now reporting:
523 GERMAN MPS BACK MORE POWERS FOR EFSF, 85 AGAINST, 3 ABSTENTIONS- PARLIAMENTARY SOURCES
11.09: Ok before we get all excited about immediately finding out the exact result of Germany’s vote on the eurozone crisis measures – and whether Merkel has retained her absolute majority or not – Quentin Peel, our Berlin bureau chief has just let us know that Wolfgang Thierse, deputy speaker of the parliament, says it will take about *an hour* to count the vote. And relax.
11.05: Judging by this photo, Angela Merkel is feeling confident:
10.59: With voting underway in the bundestag, Quentin Peel, our Berlin bureau chief, says a big majority is expected from the rollcall vote for the total package of eurozone crisis measures, with both SPD and Greens backing the legislation:
The only question is whether Ms Merkel will win her absolute “chancellor’s majority” with at least 311 votes from the ranks of her own supporters.
10.57: The last speaker in the Bundestag has sat down and the parliamentarians have begun to vote. Quentin Peel reports:
Norbert Barthle, budget spokesman for the CDU, closed the debate with an appeal for the house to support the law “with the greatest possible unanimity.”
He said the new law, with its commitment to give the German parliament a vote on all future changes in the eurozone crisis measures, mean a totally new form of democratic legitimacy for EU legislation in Germany. “Europe relies on Germany,” he said.
The parliament is voting.
10.56: We’re getting close to the vote. Here’s another update from Quentin Peel in Berlin:
Almost at the end of the debate came the first genuine surprise: Hermann-Otto Solms, the venerable and aristocratic financial expert of the FDP, announced that he had changed his mind about the eurozone rescue fund. He had voted against the EFSF in the Bundestag last year, convinced that it would mean “an irreversible step towards a transfer union”, with the strong eurozone states having to guarantee the debts of the weakest.
He had changed his mind, he said, because since then countries such as Ireland, Portugal and Spain had demonstrated that under the pressure of the crisis measures, all had taken drastic measures to improve their government finances.
His conversion was received with enthusiastic applause from the government side of the house.
10.55: Currency analysts at Commerzbank say that while it’s more or less guaranteed that the German parliament will agree to the proposed changes to the eurozone rescue fund, it will be most interesting to see whether Angela Merkel can secure an absolute majority of 311 votes:
“That would mean that her coalition government still benefits of quite good support. A result of 311 votes or more might therefore support the euro, as the FX market is likely to interpret it as a sign of political stability in Germany.”
10.50: Here’s the latest update from Quentin Peel, our Berlin bureau chief, who is watching the Bundestag debate:
Klaus-Peter Willsch, a constant critic of the eurozone rescue measures, said he could not support his party because the measures would cause lasting damage to Europe. More and more citizens would turn away from the European Union, if ever more money was spent on bailing out debt-laden states, he warned.
“We are lending the money of our children and grandchildren,” he said. “We haven’t got it. I think it is a fundamentally false economic policy, and it goes against my convictions.” He said that private creditors rather than states should be bearing the burden.
10.48: A special treat: a peak inside the Bundestag! That’s the German finance minister, Wolfgang Schäuble, speaking.
10.44: Here’s a quick update if you’ve just joined us.
- German politicians have congregated in the Bundestag, the house of parliament, to debate and then vote on expanding the powers of the eurozone’s bailout fund, the EFSF. We’re bringing you running commentary from Quentin Peel, our Berlin bureau chief
- Greece’s international debt inspectors – the troika – are due back in Athens today, having suspended their review earlier this month because the country was being too slow in implementing reforms necessary to meet its fiscal targets
- Business and consumer sentiment in the eurozone fell to 95 from a revised 98.4 in August, the European Commission in Brussels said today. That’s the lowest since December 2009 and below 96 projected by economists, according to Bloomberg.
10.30: Data alert – economic sentiment in the eurozone region (or the 17 countries sharing the single currency) declined sharply in September, according to new figures from the European Commission. Confidence is now down across almost all sectors of the economy.
Here’s a handy chart from Markit Economics, who point out that eurozone consumer sentiment is now at a 2-year low:
10.20: More from the Bundestag. Next to speak was Philipp Roesler, leader of the FDP and economy minister. He took the stand to insist that his party was not becoming eurosceptic and was determined to ensure that the future of Europe was ensured as a “stability union” that could be sustained.
“Everything we are doing is intended to raise the acceptance of Europe” in Germany, he declared. He appealed – no doubt to his own party ranks as much as to anyone else in the house – for members to vote for the future of Europe, and not just for “party-tactical reasons”.
Norbert Lammert, speaker of the parliament, intervened to say he wanted to give the floor to two opponents of the bill, neither of whom would speak on behalf of their party group.
The first was Klaus-Peter Willsch, a leading sceptic from Ms Merkel’s Christian Democrats.
10.10: Bundestag update. Sparks are definitely flying with more opposition accusations of government zigzagging. Quentin says Carsten Schneider, the youthful budget spokesman of the SPD, turned his fire directly on Mr Schaeuble, who also happens to be one of the longest-serving members of the Bundestag.
He accused the finance minister of failing to inform the house about discussions that were certainly taking place, on seeking to “leverage” the funds available to the EFSF. Mr Schaeuble was not living up to his responsibility, he said.
“You don’t want to be transparent, because of your fear that you will lose your own majority,” he insisted. This “permanent zigzag” in government policy had made the crisis worse.
“We are voting for this law because we believe this government will not survive much longer, and we need stability in Europe,” he said. “You may get your majority today, but it won’t last much longer, and that will be a good thing for Germany,” he concluded.
10.00: Meanwhile, in Greece, the team from the troika of international lenders – the European Central Bank, the European Union and the International Monetary Fund – is due to resume its suspended review of the stricken country’s stricken reform programme. Attention is bound to focus on their meetings and discussions once the German vote is over (assuming it passes).
Not everyone in Greece is happy to see the team return. Civil servants blocked the doors of government ministries this morning in protest at the austerity measures being foisted on the country.
9.50: Back to the Bundestag and Mr Schaeuble, courtesy of Quentin. People all over the world were worried about a new financial crisis, he said.
He addressed the critics of the rescue package amongst the government supporters. “This decision is not easy for anyone,” he said.
But he insisted that the EFSF would not be secretly boosted by financial leverage. “It will not be increased. That is not under discussion”, he said.
He rejected charges from the Social Democrats that he was trying to deceive the parliament, as a defamation, “unworthy and not serious. The German financial guarantee of €211bn was strictly limited.
9.45: For all you multimedia types, here’s a video of Quentin discussing the challenges facing Merkel.
9.40: More from Mr Trittin, via Quentin. He said the crisis was not a crisis of government debt: it was a banking crisis. That was how it had begun, and was the fundamental cause. He said a “debt brake” was needed for banks, and not just for European govenrments to force them to balance their budgets.
He rounded on the chancellor for her “zigzag course”, saying it had made the crisis longer and worse.
“The world is watching this country today.” The fact that Germany’s neighbours could rely on the country in the crisis was proved because the opposition was prepared to demonstrate its responsibility and vote for the package. It was not shown by the division in the government’s ranks.
Schaeuble is on now.
9.35: Miles Johnson, FT reporter in Madrid, has answered my question about the fall-out from the Spanish government’s losing gamble on the lottery privatisation (see 9.05).
“The fact that Madrid will now not have the €7bn is unlikely to add to market jitters about its debt situation, as that figure is only the equivalent to two or three bond auctions.
More significant is the scale of the government’s weakness ahead of November’s elections which are likely to see the incumbent socialists annihilated . This was one of the government’s last big plans, and (arguably due to events outside of their control) they were unable to deliver.”
9.30: Now it’s the Green party’s turn. Quentin writes:
“Never in the history of the European Union has Germany been as isolated as it is today,” said Juergen Trittin, co-leader of the Greens in the Bundestag.
He accused the “neo-liberals” in the FDP of constantly blocking measures that would help resolve the crisis, such as the introduction of jointly-backed eurobonds, or the establishment of a proper European Monetary Fund.
While the rest of the world was begging Europe to move faster to resolve the crisis, the German government was dragging its feet.
The German chancellor said she was buying time for countries to get their debts under control, but her hesitation and policy of “little steps” had actually cost the eurozone members a lot of money.
9.25: Back to the Bundestag. Gregor Gysi, former leader of the far-left Linke party, is on his feet now, as the representative of the one party that will vote clearly against the eurozone rescue package. He regards it as nothing more than another bail-out for the banks.
Gysi, Quentin says, insisted that the Linke are for Europe, and for the euro, but not in favour of “anti-social” measures to force countries such as Greece to undergo massive austerity programmes in order to reduce their debts.
Is it possible to have one’s cake and eat it?
9.22: For all you statistics crunchers, the German unemployment figures mean unemployment, on the adjusted data , is down to 6.9 per cent from 7 per cent last month.
9.20: The markets, by the way, are mixed ahead of the German vote. Jamie Chisholm, the FT’s global markets ocmmentator, says the FTSE All-World is down 0.1 per cent, highly-rated sovereign debt is little changed, while commodities are sending different signals, with copper weak and US-traded crude higher. The FTSE Eurofirst 300 has opened with a loss of 0.4 per cent, but S&P 500 futures suggest Wall Street will rebound 1 per cent from Wednesday’s late 2 per cent slide.
9.17: Good news alert: German unemployment was down by more than expected in September, by 26,000 according to the seasonally-adjusted figure, or more than 149,000 unadjusted. Quentin says economists had predicted a seasonally-adjusted drop of just 8,000, so the German labour market continues to surprise.
“No doubt someone will use it to show that the government isn’t getting all its economic policy wrong,” Quentin says.
Surely not?
9.15: More from the Bundestag floor, courtesy of Quentin Peel.
“Only yesterday, Peer Steinbrueck was speaking in Munich, and warned that Greece needed at least 50 per cent debt relief in order to get back on its feet.
Rainer Bruederle, the parliamentary leader of the Free Democrats, the junior partner in the coalition that has been flirting with a more euro-sceptic stance, insisted that Europe was a fundamental “reason of state” for Germany.
He teased Mr Steinbrueck as a “know-all” who was really campaigning to be his party’s challenger for chancellor. “Mirror, mirror on the wall, who’s the most beautiful Socialist of all”, he mocked.
But acutely conscious that he could see a rebellion in his own party ranks, he warned that “if our money goes bad, everything will go bad”. It was essential to ensure the stability of the European currency.”
9.05: Bad news alert: Spain, in case you missed it, has scrapped the €7bn privatisation of its state lottery thanks to the turbulent markets and mounting domestic opposition. What happens now? Good question…
8.55: Quentin says that, according to the most recent estimates, the rebels will only number 14, although last-minute doubts about whether there won’t be new reforms to the EFSF, and new ideas about “leveraging” the rescue fund to increase its fire power, could increase that number.
Nail-biting stuff (or as close to that as is possible in the world of German politics).
8.50: More from Quentin Peel – the temperature is definitely rising in Berlin:
“Steinbrueck, who was Merkel’s finance minister in the last German government, and is the current favourite to challenge her for the chancellor’s job at the next election, didn’t pull his punches.
He said Ms Merkel’s strategy of seeking to ‘buy time’ for Greece and other eurozone debt-laden states had palpably failed, because matters had simply got worse. He also accused the government of increasing doubts in the German population about the euro, with the chancellor constantly changing tack on support for a coherent eurozone rescue programme.
The current package of reforms of the EFSF was certainly a necessary step, but not a sufficient one to resolve the crisis, he said. Some form of debt restructuring for Greece was inevitable, followed by a recapitalisation of the banks. Then a full-scale aid programme would be needed, involving all the means at Europe’s disposal, to revive Greek growth and make the country competitive.”
8.45: The A-List, the blog run by the FT’s comment team, has just published a trenchant attack on the Tobin tax plan by Howard Davies, a former chairman of the Financial Services Authority and now a professor of practice at Sciences Po in Paris.
“There is a Colbertian appeal to Tobin taxes. Why not take a tiny sliver off every financial trade? The golden goose will hardly notice and its hisses will be drowned out by the boos of the crowd baying for bankers’ blood. It seems likely to throw sand in the wheels of some potentially dangerous financial activity, notably high frequency trading, surely one of the dullest ways of making a living that mankind has so far devised.
Yet you cannot take €50bn out of the economy without a significant economic impact. James Tobin distanced himself from those who wanted to adopt his tax as a disguised revenue raiser. Mr Barroso clearly sees it as an added tax, not a redistribution of the burden. And he has not offered a solution to the avoidance obstacle. If there is no parallel imposition in New York, the cost to Europe of displaced activity could be large.”
8.35: Beyond the Bundestag (ie in the rest of the European Union) the main subject of debate this morning is whether renewed calls by José Manuel Barroso, the president of the European Commission, for a Tobin tax (on financial transactions) is a good idea. British business groups are, funnily enough, strongly opposed to the idea. The Confederation of British Industry described it as a “crude instrument” that would divert business activity to New York and Hong Kong.
8.25: Quentin Peel, the FT’s Berlin bureau chief says it’s curious that Volker Kauder, parliamentary leader of the Christian Democrats, opened for the government instead of Angela Merkel or Wolfgang Schaeuble, the finance minister.
“Could that mean they are nervous about the outcome being seen as a personal rebuff to the chancellor? Still, he is giving a rousing speech about how the importance of stabilising the euro and the eurozone is all about preserving the future of Europe.
‘It isn’t just about extending a rescue fund in Europe,’ he said. ‘It’s a question of preserving our future, and the perspective of the younger generation.’
He warned that “things are not going to get easier”, but he also praised the role of the Bundestag in insisting on more powers for the parliament in exchange for giving its approval to the eurozone reforms.
Peer Steinbrueck, former finance minister, is just starting up for the opposition Social Democrats.
8.20: Another day, another drama. Today’s action kicks off – or rather with true German punctuality, has just kicked off – in the Bundestag, the German parliament in Berlin. The gazillion euro question is not whether MPs will vote to expand the EFSF (that’s a given since the opposition is backing the move) but whether Angela Merkel, the German chancellor, will preserve her absolute majority. If the rebellion gets above 19 MPs then she’s in trouble. Current predictions suggest that won’t happen but nothing can be taken for granted.
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