Welcome to our continuing 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. This post should update automatically every few minutes, although it may take longer on mobile devices.
01.11: As we close the blog this evening, here are some highlights from the latest FT story written after the close of the meeting:
- Jean-Claude Juncker, the Luxembourg prime minister who heads the group of eurozone finance ministers, said officials remained steadfast in preventing a Greek default and signalled a new €109bn bail-out for Greece.
- A deal was reached to accommodate Finland’s demand that it get Greek collateral in exchange for participating in the new bail-out.
- For the first time, eurozone finance ministers discussed increasing the firepower of the €440bn bail-out fund.
22.55: Peter Spiegel, our Brussels bureau chief, has said the meeting of the eurozone finance ministers has finished for the day. Updates to follow shortly after the press conference.
19.48: We’re going to pause the blog here for a little while, to wait for the Eurogroup of finance ministers to conclude their meeting. As and when they say something interesting, our colleagues in the US will update you here and of course, on FT.com. Thanks for reading today and for all your comments, we’ll be back tomorrow – to discuss the results of tonight’s talks, and to follow the ECOFIN (EU Economic & Financial Affairs Council) meeting, which is also in Luxembourg (clearly it’s the place to be).
19.25: In Greece, demonstrations have again taken place in protest at the drastic austerity measures. On Monday, 300 high school students took to the streets and clashed with police.
A high-school student confronts riot police in protests on Monday October 3. Photo: John Koselidis/Reuters
High school protesters in front of the Greek parliament on Monday. Photo: AFP/Getty Images
19.05: Readers have supplied some brilliant suggestions for Shakespeare quotations that could be applied to the eurozone (see Comment section at the end of the blog). Here are a few:
User4985532 | October 3 7:01pm
The Tempest seems the appropriate Shakespearean source both to describe the present situation and the future of the single currency:
Our revels now are ended. These our actors,
As I foretold you, were all spirits, and
Are melted into air, into thin air:
And like the baseless fabric of this vision,
The cloud-capp’d tow’rs, the gorgeous palaces,
The solemn temples, the great globe itself,
Yea, all which it inherit, shall dissolve,
And, like this insubstantial pageant faded,
Leave not a rack behind.
“They are in debt stepp’d so far, that should they wade no more, returning were as tedious as go o’er”
Macbeth, with apologies to the Bard
18.45: “Where are the Italians?” This is not the question of a geography naif, but rather the words of a French banker who spoke to our capital markets editor Richard Milne, this week…
“When a crisis hits a company, its executives quickly tend to hit the road on investor roadshows. The eurozone debt crisis has shown it is the same with countries. Greece, Ireland, Portugal and Spain have all been aggressive in sending not only public debt managers but also senior politicians around the globe to make their cases.
But one name is conspicuously missing. “Where are the Italians?” a senior French banker asked me this week. It is a question being asked in Milan as well as London and New York.
That Italy has been poor at presenting itself is unlikely a surprise to many. But its recent mismanagement is unnecessarily threatening the country and its financial system…”
Read the full story here.
18.36: Peter Thal Larsen has posted this chart from analysts at Espirito Santo,which illustrates the ‘short term liquidity robustness of large cap European banks’ (HT @jamescrabtree)
18.05: The French President Nicolas Sarkozy will go to Berlin on Sunday for talks with Angela Merkel, says Hugh Carnegy, the FT’s Paris bureau chief:
“The trip will constitute another of their habitual pre-euro summit meetings to coordinate their positions (to the irritation of some smaller countries which see them as dictating policy). Sarko said at the end of last week that there was a “perfect identity of views” between France and Germany on the crisis.
That’s stretching it a bit. Suggestions from some quarters in Germany and elsewhere last week that the deal with private sector bondholders agreed in July should be unstitched to make them take a bigger haircut did not go down well in Paris – mainly because it was seen as opening up a whole complex process of renegotiation which would be destabilising in itself. But Paris knows it cannot afford to be seen to differ from Berlin – that would also be very destabilising. “There’s always the capacity to forge a compromise,” said one French official.”
17.50: How is Europe’s economic crisis affecting people on the ground? Victor Mallet, the FT’s Madrid bureau chief, visited a town in Spain that has itself almost gone bankrupt.
“In the past four years we have lost 25 per cent of our income,” says José María Fraile, the town’s mayor. “At the moment there’s no liquidity … The [credit] window has closed.”
Mr Fraile is negotiating with trade unions to fire 190 people, a quarter of the city’s workforce, as a way to save money. One private company responsible for sports facilities has obtained a court order to sequester municipal assets to cover millions of euros of unpaid debts. Valoriza, another company, is owed €80m for years of garbage collection and cleaning.
Read the full story here.
17.40: The board of Dexia, the Franco-Belgian banking group, is holding emergency talks to consider strategic options including an effective break-up of the struggling bank, reports Stanley Pignal.
People familiar with the talks said Dexia was looking a setting up a “bad bank” to hold a portfolio of assets which has long burdened Dexia. A state guarantee by Belgium and France would be available if required.
The existing activities of the group in France and Belgium would be either merged or develop partnerships with other entities, said people familiar with the talks.
In particular, financing for French municipalities could be done in conjunction with the Banque Postale and the Caisse des Dépôts et Consignations, the French sovereign wealth fund which is a shareholder in both Postale and Dexia…
Full story here.
17.30: A few more comments on the best borrowings from literature to describe the eurozone crisis… (see our 15.55 and 16.20 posts)
Michael Steen, an FT news editor, argues Macbeth not a great comparison:
Another reader suggests WH Auden:
While Serena Tarling, FT Asia news editor, proposes a classic:
17.21: A quick update on the day so far:
- Markets remain in bearish mode, spooked by Greece’s statement on Sunday that it would miss its budget deficit target this year because of a deeper than expected recession (it now expects a deficit of 8.5 per cent of GDP, compared to the 7.6 per cent agreed in its bailout terms)
- Greece also unveiled sharp cuts in its budget for next year, including the immediate dismissal of thousands of public sector workers
- Europe’s manufacturing sector contracted for a second consecutive month in September, adding to fears the region is heading back into recession. PMI data – a manufacturing gauge based on a survey of purchasing managers in the 17-nation eurozone – fell to 48.5 from 49 in August, London-based Markit Economics said today. A reading below 50 indicates contraction
- However US manufacturing data came in better than expected, with production swinging back to growth after a month of contraction
- Eurozone finance ministers (the so-called Eurogroup) have begun their meeting in Luxembourg to discuss ways to stem the crisis – including the possibility of leveraging the EFSF, the eurozone’s rescue fund
- The European Central Bank said it bought €3.795bn worth of bonds between Sept 22-28, down from €3.95bn the previous week and taking the programme’s total to €160.5bn
- Christian Noyer, a member of the ECB, said he was “open” to a scheme that would allow the EFSF (the eurozone’s rescue fund) to be leveraged (see 11.52 update)
- The Franco-Belgian bank Dexia was put on negative downgrade watch by Moody’s
16.58: Here’s the latest from Peter Spiegel, our Brussels bureau chief, who is patiently stationed at the “refurbished warehouse” where the eurozone finance ministers are meeting in Luxembourg today:
All eurozone finance ministers have made it into their meeting, but it was the man in the spotlight — Greek finance minister Evangelos Venizelos — who seemed most eager to talk to assembled reporters as he headed in. Not only did he address the cameras in English, but his staff distributed a transcribed version of his remarks within minutes of his making them. Here they are in full:
“Greece has decided all the necessary and difficult measures to fulfil its obligations towards its institutional partners. The new budget is very ambitious. Our target is to present, for the first time after many years, a primary surplus of €3.2bn [in 2012]. This procedure of fiscal and financial consolidation in the last two years is very strong and very fast, and we are now ready to present results.
“In 2009, the primary deficit was €24bn. This year, the primary deficit is €2.3bn. Next year, in 2012, we expect a primary surplus of €3.2bn.
“Greece is a country with structural difficulties, but Greece is not the scapegoat of the euro area. Greece is a proud country. We have the potential and ability to go ahead despite the deep [cumulative] recession of 12 per cent of GDP in the least three years.”
16.53: Here’s Jean-Claude Trichet arriving at the Eurogroup meeting in Luxembourg. But just what is in that bag? Let’s hope it’s a magic eurozone elixir of life. Or else a silver bullet.
16.43: Some more comments from those chatty eurozone finance ministers as they headed into their Eurogroup meeting:
- Elena Salgado, Spain: “I think it would be useful for the EFSF to have more capacity, not a larger fund per se, more flexibility and more capacity. We will be deciding (the issue of leverage) among ourselves later today.”
- Michael Noonan, Ireland: “I think the Greek authorities are making good progress and I hope that will be reflected in the (EU/IMF) Troika’s final report.”
- Luc Frieden, Luxembourg: “With regards to Dexia, there is no need for special worry. We are following that situation closely.”
16.36: The euro is taking a hammering, says Chris Adams, FT markets editor:
16.31: This from Bloomberg:
European governments are close to resolving Finland’s demand for collateral to underpin bailout loans, removing an obstacle to Greece’s second rescue package, three people familiar with the discussion said. Finance ministers meeting in Luxembourg today will consider whether the proposal is acceptable to all 17 euro countries. The goal is a package with relatively unattractive terms so that Finland would be the only country to force Greece to put up collateral, said the people, who declined to be identified because the talks are private.
Under the proposal, Greece would put up collateral in exchange for Finland’s loans, the people said. Finland in turn will forgo potential earnings from the Greek rescue deal, such as profits earned by the European Financial Stability Facility, and the collateral might have junior status in case of a default, the people said.
Important to note that there have been a few false starts on resolving this issue already, so we’ll have to wait and see whether today’s eurogroup meeting manages to agree on it…
16.20: Evangelos Venizelos, the Greek finance minister who arrived in Luxembourg earlier, told reporters:
“(Greece is taking) all the necessary difficult measures in order to fulfil its obligations towards its institutional partners. The new budget, the budget for the new year, is very ambitious, our target is to present for the first time after many years a primary surplus of €3.2 bn. This procedure of fiscal and financial consolidation for the last two years is very strong, very fast, but we are now ready to present results.”
“Greece is a country with structural difficulties, but Greece is not the scapegoat of the eurozone. Greece is a proud country. We have the possibility and the capability to go ahead, despite a deep recession – a cumulative recession of 12 per cent of our GDP in the last three years.”
16.10: In response to the question, ‘Which are the best Shakespeare quotes to describe the eurozone crisis?’ (see our 15.55 update) Stefan Stern tells me:
16.05: Finance ministers from across the eurozone are arriving for the Eurogroup meeting, and our Brussels bureau chief Peter Spiegel is there! Here’s the proof – a picture he’s taken, which shows Elena Salgado, the Spanish fin min, arriving for the talks. Admittedly, it’s quite a small pic, so you’ll just have to take our word for it…
15.55: At times of political and economic crisis, the works of Shakespeare offer commentators an endless seam of inspiration. The front page of today’s International Herald Tribune is a good example. In a story headlined “Buying time to prop up EU safety net”, Steven Erlanger and Stephen Castle borrow thus from the bard:
Europe’s long debt crisis, and the halting steps to resolve it, can seem a bit like the agonies of Macbeth: ‘Tomorrow, and tomorrow, and tomorrow, creeps in this petty pace from day to day, to the last syllable of recorded time.” The 17 countries of the euro zone do not have that much time, of course.
Quite good. But personally, if I was going to quote the Scottish play in regard to the eurozone crisis, I’d probably have gone for Lady Macbeth’s “Screw your courage to the sticking place” – a good one for Greek prime minister Papandreou perhaps? And in reference to any eurozone decisions on Greece – particularly the option of an orderly default – “If it were done when ’t is done, then ’t were well/ It were done quickly“. If you have more apt quotes, let us know in the comments.
15.25: US manufacturing data may have surprised to the upside, but Nouriel Roubini cautions against any over-excitement:
15.20: George Osborne, Britain’s chancellor, gave a speech today at the Conservative party conference in Manchester. Apart from announcing plans for a new scheme called “credit easing” to help provide more loans for small business, and making some jokes at the expense of colleagues such as Eric Pickles, he also made some comments about the eurozone:
“The eurozone’s financial fund needs maximum firepower. The eurozone needs to strengthen its banks.
And the eurozone needs to end all the speculation, decide what they’re going to do with Greece, and then stick to that decision.
Britain is not immune to all this instability. Indeed, the resolution of the eurozone debt crisis is the single biggest boost to confidence that could happen to the British economy this autumn…”
15.10: US stocks have pared their losses after manufacturing data came in a bit better than expected. This from Chris Adams, the FT’s markets editor:
15.07: Gideon Rachman has blogged on “America’s Indignados” – the protesters who have marched on Wall Street in anger at rising inequality and the apparent cosy relationship between banks and policymakers. ”The wave of global unrest has now arrived on America’s shores,” comments Gideon. For more on the Occupy Wall Street movement, read this FT story by Shahien Nasiripour in New York and Robin Harding in Washington.
14.45: Wall Street’s S&P 500 opened with a loss of 0.4 per cent, following Friday’s 2.5 per cent slump, while the FTSE Eurofirst suffered a fall of 1.9 per cent on a struggling banking sector, says Jamie Chisholm in his latest markets update.
Neil Mellor, a currency strategist at Bank of New York Mellon, comments:
“There is a prevalence of gloom across markets; but it appears justified, and until investors truly feel that the worst may be over, then confidence, the sine qua non of economic recovery, will remain conspicuous by its absence.”
14.35: The Lex Column has a fairly downbeat message on Greece today. The title of its note is simply: “Greece: a lost cause”. From which:
“No amount of fiddling, massaging or austerity is going to get the country to meet its fiscal targets for 2011. It may be that the Greek government is ducking the most difficult challenges because it lacks political courage. But that hardly matters. Athens is in a vicious spiral that poses a grave threat to the eurozone. It is time for policymakers to get their priorities right. The task now is not to save Greece, but to save the eurozone.”
And the way to save the eurozone, according to Lex?
“Allowing Greece to default within the eurozone – including as a prelude to its exit from the bloc – is the way to achieve that.”
14.20: Nick Malkoutzis, deputy editor of the English language edition of Kathimerini (a Greek daily newspaper) comments on the announcement yesterday that Greece would miss its deficit targets:
14.04: Is bartering making a comeback in Greece? The New York Times published a fascinating story over the weekend, describing the “creative ways” in which ordinary Greeks are trying to cope with a radically changed economic climate (HT @blakehounshell)
13.50: Greece has unveiled a draft budget for 2012 that aims to compensate for a higher-than-projected deficit this year and create a primary surplus as agreed with international lenders, reports Kerin Hope in Athens:
Evangelos Venizelos, the finance minister, said in a written statement to parliament that the budget reinforces “a difficult fiscal adjustment effort – transforming a primary deficit of €24bn in 2009 into a €3.2bn primary surplus in 2012.”
A €5bn package of tax increases and spending cuts for 2012 on top of €2.1.bn in the fourth quarter would “correct for slippages” this year, he said.
“We have merged the fiscal targets of 2011 with those of 2012 as agreed with the troika (experts from the European Union and International Monetary Fund) in terms of absolute figures,” Mr Venizelos said…
Platon Monokroussos, head of markets research at EFG Eurobank, said: “The overall deficit target this year remains ambitious.”
“But the execution of the budget is likely to improve thanks to new taxes as well as earlier measures such as the recent hike in value-added tax,” he said.
13.39: Here’s an update from Peter Spiegel, our Brussels bureau chief, who is in Luxembourg for the eurogroup meeting of finance ministers today, and who has gleaned some interesting news:
For those keeping track in their eurozone crisis calendars, the big date to watch is the next summit of European Union presidents and prime ministers on October 17 and 18. But in a change in normal protocol, all 27 will meet just on the first day of the summit; EU diplomats say they’ve been informed that only the 17 leaders of the eurozone will be invited to stay on Day 2.
A simple scheduling issue, allowing eurozone heads of government more time to debate? Or is something more afoot?
“That’s the question, but I don’t believe in coincidence,” said one EU diplomat. “Past euro-summits, albeit scarce, preceded the [full] European Councils.”
By meeting with the core 17 members only, eurozone leaders will be able to set policy unmolested by their northern and eastern EU partners, who in the past have been able to weigh in after the euro leaders have banged their heads together. The EU diplomat noted that agenda setting is a classic form of soft power diplomacy, articulated most clearly by American political scientist Joseph Nye. French president Nicolas Sarkozy has long been the driver behind excluding the 10 non-euro countries from their gatherings, with German chancellor Angela Merkel being dragged along only reluctantly. “Agenda setting is not neutral, and this one favours the French,” the diplomat said.
13.15: The Franco-Belgian bank Dexia was today put on a negative downgrade watch by Moody’s, with the credit ratings agency citing concerns about a further deterioration in the group’s liquidity position. Stanley Pignal, Brussels correspondent, reports:
“The three main operating entities of Dexia are being targeted for a possible re-rating, which would come on top of a downgrade in early July. Shares in the group dropped 9 per cent in morning trading on the news.
Moody’s said “worsening funding conditions in the market” for banks triggered its new stance and reiterated its July concern.
“In Moody’s view, Dexia has experienced further tightening in its access to market funding – even to short-term unsecured funding – since the most recent rating action on 7 July,” it said.
Dexia is majority owned by the French, Belgian and Luxembourg governments and state-led bodies such as the Caisse des Dépôts et Consignations, the French sovereign wealth fund…
Dexia has ample capital reserves under the Basel II framework, and passed the recent stress tests with a core tier one ratio of 10.4 per cent. But it is short of tangible equity, another measure of capital favoured by analysts, with only about €5bn left.”
12.45: As the eurozone crisis rolls on, it can be hard to remember the big picture.
Stephen King and Janet Henry, economists at HSBC, put out a very interesting report on Friday, in which they use some appropriately vivid imagery to warn that the costs involved in fixing the euro’s weaknesses would be far lower than the costs of failure:
“When teenage romance ends, there may be tears and tantrums but there’s no lasting damage. A messy divorce is likely to be a lot more painful, particularly if children are involved. Some splits – the break-up of the Beatles, for example – lead to near-universal grief.
A fracturing of the euro, however, would surely take suffering to a whole new level. Lehman was bad enough for the world economy and its financial markets but, under any plausible scenario, a break-up of the euro would be far worse. It must not be allowed to happen. The currency equivalent of marriage guidance must do its job well.”
12.30: Peter Spiegel, our Brussels bureau chief, is in Luxembourg today to report on the meeting of eurozone finance ministers (the eurogroup). But why Luxembourg? And can we expect any grand announcements after the meet?
European Union ministerial meetings are moved to Luxembourg for three months out of the year — April, June and October — so eurozone finance ministers will be gathering tonight in a refurbished warehouse on the outskirts of the Grand Duchy’s capital for the latest in a series of summits on Greece and the ongoing debt crisis.
Like Marseilles (4 weeks ago), Wroclaw (3 weeks ago) and Washington (2 weeks ago), not much is expected to be decided this evening (ministers are scheduled to begin at 5pm local time), since everyone is anxiously awaiting a report from the so-called “troika” of international lenders — the IMF, European Central Bank and the European Commission — on how big Greece’s budget gap is and whether they’re doing enough to fill it.
That report isn’t expected to arrive for at least another week, which is why the finance ministers have tentatively scheduled another meeting on October 13 to review the report. Whether that will be in Luxembourg’s converted warehouses, or back in Brussels, is another thing that has yet to be decided.
12.20: The eurozone’s finance ministers are meeting this afternoon in Luxembourg to discuss Greece, the crisis and the fact that it’s been so unseasonably hot recently (just kidding about that last one). They’re not due to start arriving until about 4pm, so they’ll probably kick off at about 5pm, says Peter Spiegel, our Brussels bureau chief, who is on the scene. In the meantime, Olli Rehn, the European commissioner for economic and monetary affairs – pictured right – has given a few hints as to the kind of things they’re due to discuss, reports Bloomberg:
“We are reviewing options and options including the ECB and not including the ECB are certainly something we will discuss today in the meeting,” Rehn told reporters in Luxembourg. “We are reviewing options over optimizing the use of the EFSF in order to have more out of it and have it more effective as a financial firewall to contain contagion in financial markets, and in this regard leveraging is one of the options.”
12.09: Christian Noyer, who gave a keynote speech at a symposium in Tokyo today, apparently told Japan’s finance minister that Greece’s debt woes weren’t having a major effect on France’s financial institutions. Bloomberg got the story from a Japanese finance ministry official who spoke on condition of anonymity. We wonder if investors in Belgian-French bank Dexia beg to differ with Monsieur Noyer. Shares in the lender are down 10 per cent today, because of its large exposure to Greece (it held €3.8bn of Greek sovereign bonds at the end of June and had a credit risk exposure to the country of €4.8bn).
11.52: Christian Noyer, a member of the European Central Bank and governor of the Bank of France, has given a speech at a conference in Tokyo.
According to Reuters, he said he was “open” to a scheme that would allow the EFSF (the eurozone’s rescue fund) to be leveraged:
“It would be unrealistic to expect an increase in the EFSF itself but I am personally open to any scheme that would allow existing commitments to be leveraged to provide greater intervention capacity.”
11.44:
People burn copies of emergency tax notices in Thessaloniki on Friday September 30. Photo: Nikolas Giakoumidis/AP
11.40: An update from Kerin Hope, our Athens correspondent, who says that the Greek finance ministry has warned that this year’s upwardly revised budget deficit target – 8.5 per cent instead of 7.6 per cent of gross domestic product – could be higher still by December.
“There are three critical months ahead… and achieving the deficit depends on the response of the state mechanisms as well as of the citizens”, the finance ministry said in a statement sent to parliament this morning along with the 2012 draft budget.
If the country fails to make “a national collective effort, the deficit could rise by another 0.5 percentage points of GDP,” it added.
Greeks are due to pay two extra taxes in the fourth quarter – a “solidarity tax” of 2-5 per cent of their annual income, plus a tax on property based on surface area.
But the latest demands appear to have re-invigorated the country’s grassroots “I won’t pay” movement with demonstrators in the last few days taking to the streets to burn letters from the tax authorities demanding the solidarity contribution.
11.30: A quick update if you’ve just joined us.
So far…
- Markets are in bearish mode, spooked by Greece’s statement on Sunday that it would miss its budget deficit target this year because of a deeper than expected recession (it now expects a deficit of 8.5 per cent of GDP, compared to the 7.6 per cent agreed in its bailout terms)
- Greece also unveiled sharp cuts in next year’s budget, including the immediate dismissal of thousands of public sector workers
- Europe’s manufacturing sector contracted for a second consecutive month in September, adding to fears the region is heading back into recession. PMI data – a manufacturing gauge based on a survey of purchasing managers in the 17-nation eurozone – fell to 48.5 from 49 in August, London-based Markit Economics said today. A reading below 50 indicates contraction.
What else is going on today?
- Eurozone finance ministers (the so-called Eurogroup) will meet this afternoon in Luxembourg to discuss ways to stem the crisis – including the possibility of leveraging the EFSF, the eurozone’s rescue fund
- The European Central Bank is due to reveal how much it spent last week on government bonds
10.48: Another Monday, another market rout. Here’s what the FTSE 100 has been doing:
Jamie Chisholm, our global markets commentator, explains in his latest update:
Markets have started the new quarter as they finished the last: in distinctly bearish mode, ravaged by their old nemesis the eurozone fiscal crisis as worries about Greece’s ability to avoid default continue to hit sentiment.
There is a clear “risk off” trend, with the FTSE All-World index down 1.2 per cent, the dollar up 0.2 per cent on a trade-weighted basis and yields on US Treasury benchmarks dipping as bolt-holes are sought. Commodities are weak with Brent crude down 0.7 per cent to $102.07 a barrel, while gold is up 2.4 per cent to $1,661 an ounce…
10.10: Monthly manufacturing figures out today show that good economic times are far from close to returning. The Spanish manufacturing purchasing managers’ index, for example, slumped to its lowest level since June 2009 – coming in at 43.7 from 45.3 in August. For anyone who doesn’t follow the Markit survey regularly, any figure above 50 indicates an expansion of activity.
Having said that, here’s a small GOOD NEWS ALERT (we’re taking all we can get today).
Sentiment among large Japanese manufacturers has turned mildly positive as the economy recovers from the March earthquake and tsunami and resulting nuclear crisis, according to the Bank of Japan’s Tankan survey.
10.00: One doesn’t have to read beyond the first sentence of FT columnist Wolfgang Münchau’s latest piece to see just how bearish he has become.
“We are now in the state of the crisis where people get truly desperate.”
He goes on to conclude:
“European laws and current political preference are inconsistent with the survival of the eurozone. Something will have to give. A CDO is not a solution to the crisis. It is the last confidence trick in the toolbox of the truly desperate. The eurozone is about to kick the can a final time.”
Ouch.
9.55: Hello. The above image is indicative of the current level of confidence that the Greek debt crisis is reaching any sort of calm conclusion. Markets are falling this morning on the announcement that Greece won’t meet its 201 and 2012 deficit targets.
For those of you that missed the announcement out of Athens last night, the latest 2011 budget deficit forecast is 8.5 per cent, greater than the 7.6 per cent target. The corresponding figures for 2012 are 6.8 per cent and 6.5 per cent respectively.
But, as Ben Hall, the FT’s Europe news editor says, the fact that Greece will miss the deficit targets it set out earlier this year should come as no surprise:
“Otherwise, why would Athens be cobbling together yet more painful austerity measures, including fresh tax rises, cuts to pensions and temporary lay-offs for public sector workers.
The key question for Athens and for its international lenders is now likely to be how much of the latest shortfall is due to the deeper than expected recession this year (an expected contraction of 5.5 per cent of GDP) and how much stems from Greece’s failure to get its house in order (poor revenue collection, slow implementation, lack of spending control). This calculation is likely to be central to the discussions among international lenders on whether to sign off on the next aid tranche to Greece and on a second rescue package.”
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