Welcome to the FT’s live coverage of the eurozone crisis. Curated by John Aglionby and Tom Burgis in London, with contributions from correspondents around the world. All times are GMT.
Another week, another crisis summit. A day after the Greek cabinet unanimously backed prime minister George Papandreou’s call for a referendum on the eurozone deal hammered out by European leaders last week, the global summit circus descends on Cannes, in southern France, for a (planned) gathering of leaders of the Group of 20 leading economies. Formal talks start on Thursday but key meetings are being held today, notably involving Mr Papandreou – who has been summoned to Cannes to meet Nicolas Sarkozy, the French president, and Angela Merkel, the German chancellor.
00.00 The witching hour seems an appropriate time to call a halt. Thank you for clicking. We shall be back in the morning.
23.33 A final file from our team in Cannes, Rome and Athens.
European leaders suspended an overdue tranche of €8bn in international aid to Athens and demanded Greece make a clear decision on whether it wanted to leave the eurozone at a dramatic meeting on the sovereign debt crisis on Wednesday night. Full Version
23.08 Fuller version of what Papandreou said: “The Greek people want us to remain in the eurozone. We are part of the eurozone and we are proud to be part of the eurozone. Being part of the eurozone means having many rights and also obligations. We can live up to these obligations. I do believe there is a wide consensus among the Greek people and that’s why I want the Greek people to speak”
23.06 Now Papandreou talking, insisting that Greece CAN live up to its eurozone responsibilities … he doesn’t define what those responsibilities might be, though
23.03 Greece will receive no more European bailout aid until it has put an end to uncertainty and agreed to meet its commitments to the euro zone, say Merkozy
22.44 Leaders emerge from the Papandreou meeting. German Chancellor Angela Merkel said the Greek referendum would determine whether Greece was to stay in the euro.
“The referendum will revolve around nothing less than the question: does Greece want to stay in the euro, yes or no?” Merkel told reporters in Cannes.
But looks like the referendum wording will be left up to the Greeks themselves.
22.23 This just in from Guy Dinmore in Rome
“Silvio Berlusconi failed on Wednesday night to overcome internal government divisions and push through immediate legislation on structural reforms ahead of Thursday’s summit of the Group of 20 leading economies.
“Italy’s prime minister had hoped to have a decree agreed by the cabinet in his hands to take to Cannes and to calm markets that have pushed Italian bond yields close to euro-era highs. But government sources said disagreements between Giulio Tremonti, the finance minister who is insisting on fiscal discipline, and Mr Berlusconi who was backed by other ministers, prevented a deal being reached.”
21.27 While we wait for the end of the Papandreou inquisition, news comes from the Elysee that all the eurozone members who belong to the G20 will have a further follow-up meeting about Greece on Thursday morning at 10.30am local time, before the main G20 event swings into gear over lunch. France, Germany, Italy and Spain (not a member of G20 but an invited ‘guest’ – there’s a whole other story about who is in and who is out of the G20) will attend, along with the IMF, ECB, the European Commission and the European Council. That means Merkozy, Berlusconi, Zapatero, Lagarde, not Draghi who is staying away from Cannes because of his first ECB council meeting in Frankfurt), Barroso and Van Rompuy.
Answers on a postcard, please, for all the first names.
21.14: No word yet from the Papandreou meeting. In the meantime, Gavyn Davies has blooged on the huge call the ECB’s new chief faces immediately:
“In Mario Draghi’s first meeting as the new president of the ECB on Thursday, he already faces a decision which could determine the eventual fate of the euro.”
20.59: Even as Nicolas Sarkozy was schmoozing Hu Jintao over dinner this evening, China’s deputy finance minister suggested Beijing is not prepared to ride to the rescue with an investment in Europe’s rescue fund. Zhu Guangyao told reporters in Cannes:
“There are no concrete plans yet so it’s too early to talk about further investments in these tools …
“Like our European friends, we did not expect the Greek [call for a] referendum.”
20.38: Across the Atlantic, Michele Bachmann, US presidential hopeful and darling of the Tea Party, has had her say on the Greek bail-out. According to the Des Moines Register, she told local radio:
“It’s just like if you have a child who’s a 16-year-old who’s overspending their money and they crack up the car and they end having to go to jail. The worst thing you could do as a parent is go and bail that child out of their own irresponsible behavior.”
20.28: Journalists have been given a tantalising glimpse of the room where George Papandreou is to be beaten black and blue hold discussions with his fellow leaders and it transpires the Greek PM is not alone after all (see 20.06). The FT’s Hugh Carnegy reports:
“It turns out that Evangelos Venizelos, Greece’s finance minister, is at the meeting. He is sitting alongside his prime minister at an oval table in a meeting room at the G20 conference centre, the two of them opposite Sarkozy and Merkel. Herman Van Rompuy, the EU president, is sitting to Papandreou’s right. Wolfgang Schäuble, the German finance minister, was pulled up in his wheelchair to the right of Ms Merkel. Christine Lagarde, head of the IMF, was also at the table. The cameras have now been ushered out – let the fireworks begin.”
20.21: More from Peter Spiegel by the red carpet in Cannes:
“Whether it’s a good sign for European efforts to get China to contribute to their new bail-out fund or not, Hu Jintao just left the conference centre with a hearty send-off by Sarkozy. The meeting was supposed to end a half hour ago, so read into that what you will. Now the Papandreou meeting can begin in earnest.”
20.13: Oh to be a fly on the wall as Merkel, Sarkozy and the others vent their spleen at George Papandreou. The last time Cannes saw such awkwardness, Lars Von Trier was going on about Nazis…
20.06: The FT’s Hugh Carnegy, also in Cannes, has spotted the Greek premier making his solitary way into tonight’s meeting:
“George Papandreou arrived a few minutes after Mr Barroso and crew, cutting a lonely figure as he walked all alone past the banks of photographers and reporters and on to his grilling. There was not an aide in sight – nor, indeed, his finance minister Evangelos Venizelos. Mr Papandreou, a folder under his arm, waved to the media group but said nothing as he was greeted by an escort and accompanied inside.”
19.59: Peter Spiegel, our man dangling from the security barriers in Cannes, says the leaders have started arriving:
“The big meeting with George Papandreou is close to getting under way. Dignitaries are arriving here at the conference centre, though not with the kind of fanfare Hu Jintao, the Chinese president, received when he arrived for dinner with host Nicolas Sarkozy earlier in the evening. The first to go in was José Manuel Barroso, the European Commission president, and his entourage, which includes Olli Rehn, the Commission’s economic chief who was just raised to the position of Commission vice president.”
19.43: Amid all the intrigue, Alan Beattie, the FT’s international economy editor, has reached for his Ovid to try to make sense of the Greek developments:
“A whimsical aside from the IIF’s Charles Dallara – who represents Greek bondholders – at the end of a media conference call on the Greek bail-out. He noted that Athena was the Greek goddess of wisdom and a famous weaver of tapestries, and hoped she could inspire modern Athens to create its own tapestry of a better future.
Hold on a second. Wasn’t it Athena who lost a weaving contest to a mere mortal and first beat her up and then turned her into a spider in a fit of rage? (The mortal was Arachne; hence ‘arachnid’.) Not sure who plays the spider in this case, though it feels a bit like the whole eurozone is hanging by a thread just at the moment.”
19.25: To Rome, where Silvio Berlusconi has summoned his ministers for an emergency cabinet meeting to pass economic reforms which are supposed to be presented to the rest of the G20 leaders tomorrow. The FT’s Guy Dinmore reports:
“Umberto Bossi, blunt talking leader of the Northern League and a key ally in Berlusconi’s coalition government, says there is ‘no point’ in calling for the prime minister’s resignation. ‘Berlusconi won’t do it,’ he told reporters. Asked what he thought about opposition demands for an emergency government headed by a respected technocrat like former European commissioner Mario Monti, Mr Bossi was reported to have given a ‘raspberry’ which can be an Italian euphemism for Mr Bossi’s middle finger.
Last week Mr Bossi blocked moves by Mr Berlusconi’s People of Liberty party to reform the seniority pension system that allows workers to retire in their 50s if they have paid 40 years of contributions. Today he said such a move would ‘unleash a revolution’.
Meanwhile the committee for safeguarding financial stability, chaired by Giulio Tremonti, finance minister, concluded that Italy’s economic fundamentals and the banking system were sound. Officials scotched media speculation that Italy was about to go cap in hand to the IMF for emergency loans. Mr Tremonti was among various politicians trooping up the hill of the Quirinale today to meet Giorgio Napolitano, president, fuelling yet more rumours that the minister’s constant battles with Mr Berlusconi had persuaded him to discuss the possibility of a change of government.”
18.51: Over to Washington, where a call for the G20 to “focus on the underlying, systemic causes of the current financial crisis” goes out from the Task Force on Financial Integrity and Economic Development, a consortium of governments and research and advocacy organizations including Transparency International and Global Witness.
“As the living standards and job prospects of billions of people suffer, the fundamental injustice of the current financial system has led to the groundswell of anger represented by the ‘Occupy’ movements around the world. Many of the ill effects currently suffered by ‘rich country’ economies have been endured by the developing world for decades.”
18.36: To the Greek parliament in Athens. In contrast to the febrile mood of developments today, the FT’s Kerin Hope reports that the start of the three-day debate on the government’s confidenc emotion is proving “exceedingly dull”.
“Only a handful of cabinet ministers from the governing socialists are on the front benches with Panos Beglitis, the defence minister and a loyal supporter of the premier, taking the top-ranked seat. Papandreou has departed for Cannes. Finance minister Evangelos Venizelos left on a separate flight, having been discharged from hospital after making a swift recovery from a stomach ailment.
The socialists are speaking first and everyone’s getting 15 minutes to display their loyalty to the government. Things should heat up on Thursday evening when Papandreou and the conservative opposition leader Antonis Samaras are both due to speak. A roll-call vote will be held at midnight on Friday .
But the most closely-watched speech will be that of Vasso Papandreou, a former development minister and European Union commissioner, who could bring the government down if she, or any of her group of dissident backbenchers, abstains from voting.”
18.29: More from Cannes. The senior European official was who briefing Peter Spiegel (see 18.13), also made clear that senior European officials had received a letter from Papandreou, the Greek PM, yesterday in which he proposed reopening negotiations over the €130bn rescue – and then putting the final memorandum between the EU and Greece up for a popular vote. Peter says:
“The official said European leaders would reject that proposal: ‘The idea that was in the letter of prime minister Papandreou to have a negotiation of a new programme and then at the end put the memorandum of understanding up for a referendum – it’s simply not possible. Nobody is going to negotiate with a threat of a referendum on their head.’
The anger towards Papandreou was palpable (see 17.27). The official was withering in his analysis of what the Greek government had done – forcing European leaders to go through months of tortuous negotiations only to have the rug pulled out from under them at the last minute:
‘We come to an agreement and two days afterwards they say we cannot implement the agreement? This is not serious. This is not serious. They have to clarify the position they have as a country. They want to clarify it with a referendum? Great. That is their right. But in that case, they should understand that they will not receive money before this matter is solved. Why should somebody put their money not knowing if they’re willing to pay?’
And there was one last harangue: “I really think our Greek friends have a tendency to procrastinate. We are no longer in that phase. We now have to have a decision. Unfortunately, they are postponing decision that are critically important not only for them but for others.’”
18.13: Back to Cannes, where Peter Spiegel has more on what is likely to be a testy meeting later this evening:
“The meeting between the so-called “Frankfurt Group” of European leaders – France’s Nicolas Sarkozy, Germany’s Angela Merkel, and the heads of every major EU institution – and Greek prime minister George Papandreou begins in a couple of hours, but already there are signs it’s not going to be friendly.
According to a senior European leader who briefed a small group of reporters ahead of the meeting here in Cannes, members of the Frankfurt Group have already told Papandreou that they do not intend to pay out a much-needed €8bn tranche of bail-out aid until the Greek government decides whether it wants to proceed with the second rescue or not. They are not going to pay the money and then wait for a referendum.
The official said José Manuel Barroso, the president of the European Commission and an attendee at this evening’s meeting, called Papandreou this afternoon to lay out the Europeans’ position and the line is expected to be repeated at the meeting tonight. Without the aid, which was supposed to be paid out last month, a Greek default would almost certainly come in mid-December, when a huge €12bn bond payment is due. Here are some excerpts from what the senior official told us:
‘It seems to me very difficult for the countries and the IMF, according to their own rules, to agree on the [€8bn] tranche before this matter is clarified. In principle, what is the subject of the referendum? The subject of the referendum is: Are we or are we not going to make this adjustment programme. Are we or are we not going to respect these commitments? Why should the countries that are expected to commit money, put the money before this question is answered … If they want to have a referendum, that’s of course their right, and we very much respect democracy. But in that case, they probably should not expect the others to pay out money before they get the answer.’”
18.04: Peter Spiegel and Hugh Carnegy, the FT’s duo in Cannes, report a significant development:
European leaders threatened to cut off an already overdue tranche of €8bn in international aid to Greece as they piled pressure on Athens over its plan to hold a referendum on the eurozone’s latest rescue plan for the debt-crippled country.
Jose Manuel Barroso, president of the European Commission, delivered the warning by telephone to George Papandreou hours before the Greek prime minister was due in Cannes for a showdown meeting with President Nicolas Sarkozy of France and German chancellor Angela Merkel and other key leaders, a senior European official said.
Full story coming soon on FT.com
17.58: As night falls in Cannes ahead of tomorrow’s G20 summit, a round-up of today’s developments:
- Greece plans to hold a referendum on the country’s future membership of the EU and eurozone, rather than a more narrow question relating to the terms of its latest bail-out
- Nicolas Sarkozy and Angela Merkel are to meet George Papandreou this evening to demand more clarity on the shock Greek referendum plan, which has undermined what market confidence there was in the eurozone’s rescue deal agreed at last week’s summit
- For the second time in a week, Silvio Berlusconi is racing to finalise a package of economic reforms before flying off (to Brussels last week, to Cannes tonight) to present them to his fellow leaders. The Italian cabinet will gather to pass emergency legislation from 7pm London time
- The eurozone rescue fund postponed a €3bn bond issue, intended to go towards the Irish bail-out, for lack of demand
- After the heavy losses of Monday and Tuesday, markets nudged higher, although the spread of Italian borrowing costs over Germany’s remained close to the levels that have forced other eurozone nations to seek bail-outs
17.27: Peter Spiegel, FT Brussels bureau chief, has been speaking to a senior European official about Greece’s referendum plans. The official delivered this pretty withering assessment:
“I have no words to describe what I feel regarding Greece. A country in this kind of situation and they are making politics. Not only are they putting at risk their country, which I think is incredible, but they are putting at risk the euro area stability, and this is too much.”
17.05: Anyone wanting cheering up should look away now. Simon Johnson, MIT Sloan School of Management professor and former chief economist at the IMF, has called for reform of the global financial system.
Speaking at the fourth annual CFA Institute European Investment Conference in Paris, Prof Johnson said:
“We have built a dangerous financial system in the United States and Europe… We must step back and reform the system.”
“The last crisis cost 50% of GDP and involved the socialisation of losses… but even that has failed to address the fundamental issues. We are looking straight into the face of a great depression.”
16.55: Markets round-up: Telis Demos writes from New York that the FTSE All-World equity index is holding its gains, up 1.3 per cent, halting a two-day slide of 6 per cent, with the mood becoming a tad more optimistic as bulls punt that the recent pullback was overdone. The S&P 500 index is still up 1.5 per cent at 1,236.
16.50: The US Federal Reserve has held rates steady at near-zero and did not offer a new liquidity programme that some traders may have been looking for, writes Telis Demos, FT reporter in New York .
The Fed continued to cite downside risks and slower-than-hoped-for inflation, but said it would only continue to extend the maturity of its portfolio, known as “Operation Twist”, a move begun this summer as markets tumbled sharply on rising fears of a repeat global recession.
The surprise was that the only dissent to the decision came from Charles Evans, the Chicago Fed president, who has been a “dove” in favour of more aid to markets in recent speeches.
Ben Bernanke, Fed president, is due to hold a press conference in just over an hour.
16.45: Alan Beattie, the FT’s international economy editor, reports from Washington that the Institute of International Finance, a global association of financial institutions, has urged G20 leaders to stop demonising the finance sector and imposing onerous regulations on banks if they want lending and the world economy to recover.
The IIF, which has been negotiating with Greece on behalf of private investors in its sovereign debt, also defended the offer it made last week for a reduction of 50 per cent in the face value of Greek bonds.
Charles Dallara, managing director of the institute, said he said he was confident the proposal – a deeper cut than its first offer in July – would put Greece on a sustainable path towards growth and stabilising its debt, though could not give an absolute guarantee. “With the massive debt reduction and restructuring…I see Greece moving back into spontaneous capital market access within a few years,” he said.
But asked by reporters if he could reassure bondholders that there would be no deeper restructuring than the current offer, Mr Dallara said: “It is a very strong word. I wish I could reassure [about] a lot of things in life I can’t reassure.”
16.38: G20 summit press conferences in Cannes have been scheduled for 18.15 (17.15GMT) tomorrow and 14.15 (13.15GMT) on Friday.
Reuters
16.30: Guy Dinmore reports from Rome that Ignazio Visco, the new head of the Bank of Italy, has urged Silvio Berlusconi’s government to honour its commitments to the European Union by reducing high levels of public debt and introducing structural reforms “consistently and rapidly”.
“To regain investors’ confidence and achieve the lasting reduction of sovereign risk, to preserve the stability of the financial system, it is necessary to proceed resolutely with the consolidation of the public finances. With equal determination, the impediments to a sustained growth of the economy must be removed,” Mr Visco says.
Mr Visco’s first major statement as governor, contained in the central bank’s latest Financial Stability report, was issued as Mr Berlusconi’s cabinet prepared to hold an emergency session to draw up legislation on reforms. The Italian prime minister is to present his plans to the G20 summit in Cannes tomorrow.
While noting the significant increase in Italy’s sovereign spreads, Mr Visco points to strengths in the Italian economy, including “the trend towards the consolidation of the public accounts, the low level of private sector debt, the absence of imbalances in the real-estate market, and limited foreign debt.”
The rise in Italian bond yields “does not appear to take full account of the strengths of the Italian economy”, the report says. However it notes that a significant amount of government bonds mature in the first four months of next year, with a graph indicating a total of about 150bn euros.
The report says that if Italy meets its fiscal consolidation targets then the debt to GDP ratio should fall or stabilise “even if interest rates on government securities were to undergo significant increases.” However it does not define “significant”, with the report written before the recent spike in yields on Italy’s benchmark 10-year bond over 6.1 per cent.
The report warns that Italian companies are experiencing weakening economic activity with business surveys pointing to further declines and a worsening of terms for access to credit. “If these expectations materialize, the financial condition of many firms could worsen in 2012,” the report says.
On Italian banks it noted that their exposure to Greece, Portugal and Ireland is “very low” in securities and CDS markets. Italian banks have reduced their foreign exposure and shifted towards central and eastern Europe, it says. “Banks’ profitability is stable,
but the prospects are clouded by developments in the real economy and the strains in the financial markets. The containment of costs will have to play a key role in recouping profitability.”
On Italy’s debt outside the public sector, the report notes that the total financial debt of households and non-financial firms amounted to 126 per cent of GDP at the end of 2010, compared with 168 per cent in the euro area, 166 per cent in the United States, and more than 200 per cent in the United Kingdom.
16.25: Richard Stovin-Bradford and Nikki Tait of the FT’s Lex team discuss the implications of Mr Papandreou’s decision to hold a referendum.
16.10: More from Tony Barber and Kerin Hope in Athens, after speaking to “sources close to Pasok”:
Mr Papandreou believes that he can win a referendum by phrasing the question as a matter of Greece’s destiny as a member of the European family of nations. Moderate, middle-class and fundamentally pro-European Greeks would in theory vote ‘Yes’, enabling the international financial support schemes for Greece to continue, even though the country is experiencing its worst economic crisis since the 1940s.
16.00: BREAKING NEWS FROM ATHENS: Tony Barber and Kerin Hope report from Athens that sources in the ruling Pasok socialist party say the referendum will be in mid-December. More crucially:
Greek voters would be asked not to approve or reject the terms for Greece’s next financial rescue, which European leaders set at a Brussels summit last week, but a broader question centred on support for Greece’s membership of the European Union and 17-nation eurozone.
However, see 9.00. It’s by no means guaranteed that the referendum will happen…
15.40: Sign of the times – bond market volatility is extremely high at the moment, James Mackintosh, the FT’s investment editor has tweeted.
15.15: Photographic interlude – anti-globalisation protesters know how to catch people’s attention. Here they gather in Nice, close to Cannes, ahead of the start of the summit tomorrow, to campaign for a financial transaction tax.
AP
AP
15.00: What’s Ms Merkel wanting from her meeting with Mr Papandreou on the French Riviera? In a word, clarity, writes Quentin Peel, the FT’s Berlin bureau chief.
“We want to put this plan into practice, but for this we need clarity, and the meeting tonight should help with precisely this,” she said before she left for the meeting in Cannes with Mr Papandreou and other European leaders.
Her spokesman, Steffen Seibert, said the timeframe for any referendum was critical, as was the question to be asked of Greek voters.
“The time until the referendum must not be lost time for Greece nor for the eurozone,” he said. “We have to talk to the Greek government about what time frame they envisage, and above all what question they will ask people.”
Quentin adds:
There is confusion in Berlin about the question to be put, considering that all the austerity measures agreed by the Greek government have already been approved by the Greek parliament. The only new part of the agreement reached at the eurozone summit last week were the proposals for private creditor participation in a debt swap – involving a 50 per cent haircut on the face value of bonds – and the agreement that €30bn in rescue funds would be put up as a “sweetener” to encourage participation.
14.40: How much will the G20 summit achieve? Not a huge amount if the UK position is anything to go by, writes Chris Giles, the FT’s economics editor, before he set off for southern France.
Even though Britain is largely watching from the sidelines, its position on the G20 becomes more difficult to explain by the hour. Officials say the UK wants a successful G20 summit to stress the importance of implementation of the already agreed eurozone rescue package and take forward the G20′s action plan for jobs and growth.
Britain supports other countries contributing extra money to help the eurozone, but refuses to stump up extra cash itself. It also rejects International Monetary Fund involvement apart from the possibility of administering the European special purpose vehicle to boost the firepower of the European Financial Stability Facility.
More than that, some hope is being given to the action plan on jobs and growth. But since no one can highlight any policy that any country has taken because of the G20 process rather than something it would have done anyway, the G20 is also irrelevant here.
This does not suggest a very substantive summit unless leaders rip up the agenda and act bold, as the Group of Seven did in October 2008.
Reuters
14.30: Jose Manuel Barroso, the European Commission president, has issued the following appeal for national and political unity in Greece.
“In the European Union we have agreed on far reaching measures to support Greece. But for those measures to be implemented it is critically important to have stability in the country.
Without the agreement of Greece to the EU/IMF programme, the conditions for Greek citizens would become much more painful, in particular for the most vulnerable. The consequences would be impossible to foresee.
That is why I call on the government and the political leaders of Greece to show that they are ready to work for national political unity and for achieving the broad support needed for the implementation of the programme. Indeed, the Commission has been asking for this kind of support since the beginning of the crisis.
If this support was important yesterday, it is absolutely crucial today”.
Will the Greeks listen? Hmm…
14.15: Hugh Carnegy, FT Paris bureau chief, reports that business leders from G20 countries have, unsurprisingly, called for ‘stronger and more coordinated leadership’ from their political counterparts to counter the financial crisis and flagging economic growth. The so-called “B20″ wrote in a report to the summit:
“Global growth is decelerating and investor confidence is eroding even as the fiscal and social aftershocks of the 2008-2009 financial crisis persist in many countries… Stronger and more coordinated leadership from G20 leaders is necessary to reverse these trends.”
13.35: Here’s the FT’s full story on the eurozone resuce fund, the EFSF, postponing its €3bn bond issue. Daid Oakley and Sid Verma write:
Many investors were unwilling to buy the debt because of the market volatility and the lack of clarity over the structure of the European Financial Stability Facility, which is still being decided as policy-makers attempt to increase its leverage and fire-power.
Some investors offered excuses and cited “exceptional circumstances” for the delay, while another said:
“This is a fund that is supposed to have the fire-power of €1 trillion, yet it can’t even raise €3bn. That is very worrying.”
13.25: Stateside goodish news alert: US companies added more jobs than expected in October, while planned lay-offs fell to the lowest level in four months in a sign that the job market is stabilising, though at a weak level of activitiy.
Shannon Bond, FT reporter in New York, writes that the private sector added 110,000 jobs last month, beating economists’ estimates of 100,000 new positions, and September’s total was revised up to 116,000 from 91,000, according to ADP, the payroll processor.
Later today many eyes will be on the Federal Reserve, which holds its rate-setting meeting, and Ben Bernanke, its chairman, which hosts a press conference. The announcement on rates is due at 4.30pm GMT. The press conference starts at 6.15pm. Our colleagues at Alphaville will be live blogging it from just after 6pm.
13.20: Lunchtime markets update. It’s pretty much as you were, with the FTSE All-World equity index flat – up 0.2 per cent, halting a two-day slide of 6 per cent. Jamie Chisholm, the FT’s global markets commentator, said the mood is “becoming just a tad more optimistic as bulls punt that the recent pullback was overdone”.
12.50: François Fillon, the French prime minister, has finished his meeting with French bankers – with Christian Noyer, governor of France’s central bank also present. Jennifer Thompson, FT reporter in Paris says that Mr Fillon said bonuses distributed by French banks for 2011 will be down “significantly” compared to 2010.
French banks, which have to find another €8.8bn to cover their part of the €106bn capital shortfall among lenders identified by Europe’s leaders, will also be required to present a detailed a plan by mid-December of how they will meet the target. However they will not need state capital to boost their capital base Mr Fillon added
11.55: Worrying comment from Gary Jenkins at Evolution Securities on the delayed sale of EFSF bonds:
I always thought that a AAA rated government guaranteed vehicle was supposed to benefit from volatile market conditions as there was a natural flight to quality….the frightening thing is that the EFSF might just have become a credit….and that’s not good….put another way, the vehicle that is supposed to borrow on behalf of countries that can’t borrow…cannot borrow….
11.00: Reverse ferret. The Bank of Italy has denied the bond swap operation report and will be issuing a statement shortly.
10.55: Eurozone bond markets are experiencing a bumpy ride today, tweets Michael Hunter, of the FT’s markets desk.
Chris Adams, FT markets editor, writes that the EFSF €3bn 10-year bond issue will probably be priced over the next two weeks.
10.35: Chris Adams, the FT’s markets editor, tweets about the Bank of Italy’s decision reportedly preparing an emergency operation to swap Italian debt held by domestic banks for pledge by them to buy more at longer maturities.
10.30: Bad news alert from Germany. Ralph Atkins in Frankfurt reports that unemployment has risen for the first month since February 2010 on a seasonally-adjusted basis. Ralph says there is no need to panic yet.
The rise was only by 10,000 and not sufficient to suggest a trend change. Apart from the odd blip, German joblessness has been falling steadily for more than two years and Alexander Koch, economist at Unicredit in Munich, says German companies’ plans “do not signal an imminent turnaround”. German media will anyway focus on the unadjusted data – which fell again.
10.25: Update from Kerin Hope, the FT’s Athens correspondent.
Tuesday evening’s emergency Greek cabinet meeting to discuss Mr Papandreou’s referendum proposal started two hours late and lasted well into the early hours.
According to a government spokesman, the prime minister
stuck to his position: “The government has made a choice, which has drawn a fierce reaction, to ask all of society what kind of a country it wants in the future.”
An adviser to Mr Papandreou told the FT that the premier was prepared for a showdown with “forces opposed to progress” – a reference to a close-knit network of leading business groups, politicians and the Greek media that socialist reformers believe have been undermining the implementation of measures agreed with the European Union and International Monetary Fund.
It now looks as if the vote – originally planned for January – will be brought forward to December, according to another official. Depending of course, on whether Mr Papandreou wins Friday night’s parliamentary vote of confidence.
10.15: Italian market optimism is starting to ebb, Guy Dinmore reports from Rome. By 11am (10am GMT), the FTSE MIB index had given up its gains and was trading down 0.8 per cent. Italian banks were also in the red.
10.10: Ralph Atkins, the FT’s correspondent in Frankfurt, writes that Mario Draghi, the European Central Bank president, will not be travelling to Cannes. He will stay in Frankfurt for the ECB governing council meeting, which starts formally on Thursday morning but kicks off informally this afternoon.
It was probably not a hard first decision for Mr Draghi, who took office only on Tuesday. His absence will send a signal to eurozone politicians that it is up to them to sort out Greece. There will be no early opportunity for Nicolas Sarkozy to tell him the ECB has simply to buy government bonds on a massive scale.
Mr Draghi has to think hard about the ECB’s next steps – and ensure the governing council backs him. The ECB’s five other executive board members will also remain in Frankfurt. Instead a senior manager, below board level, will travel to Cannes.
10.00: Interesting chart tweeted by Scott Barber, Reuters’ financial graphics editor – showing just how rapidly the Greek economy has driven off a cliff.
9.55: Update from Guy Dinmore, the FT’s Rome correspondent about the hectic series of ministerial meetings in the Italian capital as Silvio Berlusconi tries to stem the tide of market attacks on Italy’s bonds, but so far with nothing to show in the face of growing calls for the prime minister’s resignation.
The prime minister has called another meeting of key ministers this morning after late night talks that produced an impression of great activity but with little result. The full cabinet is to meet this evening with the aim of agreeing on a series of legislative measures to push through economic reforms demanded by the EU and ECB which Mr Berlusconi can then present to the G20 in Cannes tomorrow.
Meanwhile later today Giulio Tremonti, finance minister, is to chair a meeting of the financial stability committee that also includes Ignazio Visco, the new governor of the Bank of Italy, plus the heads of the insurance sector and the market watchdog Consob.
A spokesman for Mr Tremonti denied reports that the minister had suggested last night to Mr Berlusconi that he step down. There seems little chance that the prime minister will quit unless forced by a vote in parliament, but momentum is building outside the government for the introduction by Giorgio Napolitano, head of state, of an emergency technical administration, with Mario Monti, economist and former European commissioner, the name most often mentioned as a possible prime minister.
Mr Napolitano issued a statement last night urging rapid passage of reforms and in his clearest indication to date suggested he was looking at alternatives to the current centre-right coalition, although it is clear he lacks the constitutional powers to dismiss the prime minister.
“In the current critical moment, the country can count on a broad range of political and social forces conscious of the need for a new perspective of broadly shared choices which Europe, international opinion and economic and financial actors urgently expect of Italy,” the presidential statement said. “The head of state considers it his duty to verify whether the conditions exist to implement such a perspective.”
Speculation is also mounting that the government will be forced to adopt extraordinary measures to reduce Italy’s €1,900bn debt, possibly through a wealth tax, a property tax or a levy imposed on bank deposits.
Yields on Italy’s 10-year bonds eased a little this morning but remain dangerously above 6.0 per cent, while the spread with German bonds also narrowed slightly to 427 points. Traders noted that the yield gap between Italian and Spanish bonds was widening considerably in Spain’s favour, reflecting the political uncertainty in Rome. On the Milan bourse Italian banks regained some ground after yesterday’s sharp losses. One trader saw the moves as a “typical dead cat bounce”.
9.40: And for those of you with a longer-term perspective, here’s a timetable of forthcoming events in the eurozone crisis:
| November 3-4 G20 summit in Cannes November 4 Greek vote of confidenceEarly November Sixth €8bn Greek bail-out tranche dueMid-November Greece starts to run out of money to pay pensions and salaries. Sixth €8bn bail-out tranche needed beforehandBefore end of November Eurozone finance ministers to agree on models to leverage the eurozone rescue fund – the European financial stability facility – from €440bn ($600bn) to more than €1,000bnNovember 28 US-EU summit in WashingtonDecember Seventh €5bn bail-out tranche for Greece dueDecember International Monetary Fund, European Commission and European Central Bank to finalise details of €130bn second Greek rescue packageDecember 9 Summit of EU leaders in BrusselsJanuary Private creditors to finalise agreement on Greek debt to achieve a 50 per cent haircut, leading to maximum debt level of 120 per cent of gross domestic product by 2020, with a €30bn “sweetener” from the EFSFJanuary Possible date for Greek referendumJune 30 Deadline for European banks to raise more capital on the markets or seek state help |
9.35: Key meetings today: Sarkozy and Merkel meet at 17.30 local (16.30GMT). They meet Papandreou at 20.30 (19.30GMT). Sarkozy’s working dinner with Hu is being squeezed in-between.
9.25: News out of Italy: The Orwellian sounding Financial Stability Safeguard Committee, chaired by finance minister Giulio Tremonti, is to meet at 3pm. The committee members are the governor of Banca d’Italia Ignazio Visco, the general manager of the Treasury Vittorio Grilli, the chairman of ISVAP, the insurance industry supervisory body, Giancarlo Giannini. and the chairman of CONSOB, the stock market regulator, Giuseppe Vegas.
'Life, not the Stock Exchange', say antiglobalisation protesters in Nice, just down the road from Cannes - Reuters
9.10: Hugh Carnegy, The FT’s Paris bureau chief, writes that it’s going to be “quite a day for Nicolas Sarkozy”. Instead of the smooth build-up to tomorrow’s G20 in Cannes he sought, he woke up to near apocalyptic coverage in the French press.
‘Crash!’, ‘Chaos’, ‘The euro in peril’ and ‘A clap of thunder from Greece’ were among the headlines.
Attention will focus on the emergency meetings called in Cannes this evening of the key eurozone protagonists – Mr Sarkozy, Ms Merkel, the European commission and council leaders, the ECB and the IMF – followed by a showdown with Papandreou.
French officials have made it clear Mr P will be told in no uncertain terms that Greece has to meet its commitments under the October 27 eurozone rescue deal, whether or not it holds a referendum.
Mr Sarkozy, fuming over the surprise referendum call, wants the Greek government and the Greek parliament to approve the deal as soon as possible so implementation can go ahead.
There is also likely to be pressure on the Greeks over the timing and the question to be put in any plebicite. France doesn’t want the referendum process dragging on for months and apparently would prefer the question not to be specifically about the October 27 plan but about Greece’s euro membership.
Between the two eurozone crisis meetings, Mr Sarkozy will have a working dinner wiith President Hu Jintao of China. Not the most auspicious timing to be asking Mr Hu for Chinese funding for the euro bail-out fund.
At the start of the day in Paris, Mr Sarkozy was meeting leaders of the B20 group of business chiefs, their trade union equivalents, the L20, and NGO representatives – all pressing their own agendas on the G20.
His prime minister François Fillon meanwhile was convening the French banks in Paris to discuss their recapitalsation plans, an all-the-more acute issue after the slump in bank shares in Tuesday’s market chaos.
Oh, and thousands of anti-globalisation demonstrators have been on the streets of Nice, just down the coast from Cannes.
Bonne journée, Monsieur le President!
9.00: Part of the reason for the market rally could be because it is far from certain that Mr Papandreou will be able to jump through the myriad hoops required to hold a referendum. Kerin Hope, the FT’s Athens correspondent, writes that its chances of happening are “increasingly remote”.
- First, Mr Papandreou’s Socialist party must win a parliamentary vote of confidence set for Friday night. That is already looking uncertain following two defections and one threat by Socialist lawmakers opposed to the plan.
- If he scrapes through with a marginal majority, the prime minister must then ask Carolos Papoulias, the president, to endorse the proposal. That is by no means certain.
- If Mr Papoulias does agree, it is unclear whether the 40 per cent of Greek voters required to legitimise the referendum process will actually bother to turn out.
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