Silvio Berlusconi, Reuters
Welcome to the FT’s live blog on the eurozone crisis. Curated by Orla Ryan and John Aglionby on the world news desk with contributions from correspondents around the world. In Italy, doubts have emerged that Silvio Berlusconi can remain in power as the country’s borrowing costs continues to rise. Greece is expected to name a new leader after its two largest political parties late on Sunday decided to form a government of national unity. George Papandreou will stand down as prime minister.
18.24: That’s it for the live blog for today. For news and analysis of events in Greece, Italy and the rest of the eurozone, visit www.ft.com.
18.19: Before we wrap up the live blog, here is a summary of the day’s key events:
Silvio Berlusconi is still prime minister of Italy, despite a flurry of rumours and speculation that he would step down today. Italy’s stock and bond markets endured a volatile session, with borrowing costs continuing to rise. Fears remain that Italy will be the next casualty of the eurozone crisis.
Lucas Papademos, the man tipped to be Greece’s next prime minister has arrived in Athens on Monday as the country’s two biggest political parties raced to wrap up a deal on forming a temporary coalition government.
France’s centre-right government unveiled extra budget savings worth €18.6bn ($25.6bn) over the next two years as it sought to convince financial markets that it would not succumb to the sovereign debt crisis threatening the eurozone.
Eurozone finance ministers are meeting in Brussels but little progress is expected to be made on the two main agenda items, Greece’s €8bn euro tranche and details of how to increase the firepower of the EFSF – the bloc’s rescue fund.
A sharp fall in German industrial production in September, reported by Berlin on Monday, provided the latest evidence that growth had gone into reverse in Europe’s largest economy. Production was down 2.7 per cent on the previous month.
18.05: As eurozone finance ministers gather in Brussels, one thing is clear. Another meeting is needed, in ten days time. The FT’s Peter Spiegel reports:
Because tonight’s meeting of eurozone finance ministers is unlikely to reach any decisions on Greece’s €8bn bail-out tranche or expanding the firepower of the EFSF, EU diplomats on the sidelines of the meeting say there is serious consideration of holding another emergency get-together of the group on November 17.
The date has particular resonance in Greece: November 17, 1973 was the day Greece’s military junta violently cracked down on the “Athens Polytechnic” anti-government uprising, an event that served as a turning point in the movement to return democracy to the country. Indeed, a Marxist guerrilla organisation that operated for the next 30 years was known as the Revolutionary Organisation November 17.
November 17 has remained a traditional date for anti-government protests in Greece, and some warn that this year’s could be particularly combustible.
17.42: After a long day of rumours and denials, stock market gyrations and accusations of betrayal, Silvio Berlusconi is still prime minister of Italy. The FT’s Guy Dinmore looks at what or who could come next:
The unchallenged leader of Italy’s centre-right for nearly 18 years despite court cases and sex scandals, Silvio Berlusconi is fighting a personal vendetta to the end, accusing former allies of “betrayal” and telling them he wants “to look them in the face” should they dare to bring his government down.
In rejecting calls for his resignation, the Italian prime minister may succeed in buying limited time for his weakened coalition – but at the expense of continued paralysis in parliament that has already sent the cost of financing the country’s public debt to levels unsustainable in the long term.
Even supporters of Italy’s prime minister say the moment has come for him to decide whether his People of Liberty party will support a government of national emergency led by technocrats from outside parliament, or carry out his threat to force Italy into snap elections.
Investors and the main opposition parties alike are pressing Mr Berlusconi to make the statesman’s choice and give way to Mario Monti, economist and former European commissioner.
Wild gyrations on the Milan bourse show that Italian investors at least are betting on Mr Berlusconi’s departure, whether it comes in the next days or weeks.
A full version of this analysis can be read here.
17.30: The man tipped to be Greece’s next prime minister has arrived in Athens as the country’s two biggest political parties raced to wrap up a deal on forming a temporary coalition government. But, says Kerin Hope in Athens, it is still not clear he wants the job:
Lucas Papademos, a former vice president of the European Central Bank, will hold talks later with leaders of the governing PanHellenic Socialist Movement and conservative opposition New Democracy party
George Papandreou, the outgoing socialist premier and Antonis Samaras, conservative leaders, are both under pressure to meet a Monday night deadline set by the Greek president for announcing the new prime minister and cabinet.
Lucas Papademos
Greece’s eurozone partners have warned that they will continue blocking a €8bn loan tranche that should already have been disbursed unless the country comes up with a strong coalition committed to making a bigger push for reform.
There was no clear indication, however, that the 64-year-old Mr Papademos, an academic and central banker throughout his career, would agree to take the premier’s job. “He’s arrived with a set of conditions that would allow him lots of authority on policy decisions –more than had been expected,” said a senior socialist.
Mr Papademos’s mandate would be to implement Greece’s latest bail-out package –including a 50 per cent writedown on its sovereign debt – and take the country to elections within three months.
He is seen as the person most likely to give credibility to Greece’s last-ditch effort to avoid a disorderly default and a possible exit from the euro, after Mr Papandreou’s decision at the weekend to stand down. “We don’t want a prime minister who’s just a front man, it needs to be someone of stature who can mediate, if necessary, with the Europeans and the Fund,” said a senior socialist lawmaker.
Socialist and conservative negotiators have agreed in principle that elections would be held on Feb 19 – after parliament has approved the €130bn bail-out, the 2012 budget and further fiscal and structural reforms agreed with the European Union and International Monetary Fund.
17.00: Those hoping that tonight’s meeting in Brussels will deliver progress on the EFSF could be disappointed, writes the FT’s Peter Spiegel.
Other than Greece’s €8bn bail-out tranche, the other major agenda item at tonight’s meeting of eurozone finance ministers is finalising details on how to increase the firepower of the bloc’s €440bn rescue fund, known as the European Financial Stability Facility.
But much like the debate over the tranche, tonight’s discussions on the EFSF are likely to be inconclusive. Officials hope to have them completed by the end of the month, but some believe even that could prove optimistic. Heading into the meeting, several finance ministers made clear tonight would not produce any definitive results on leveraging the EFSF.
“The proposals to leverage up the firewall protection of the EFSF are quite good proposals, but of course it will take time before the technical work is done to make that happen,” said Ireland’s Michael Noonan.
16.44: It’s been another volatile day for shares, writes Jamie Chisholm on our markets pages. In late afternoon trade, the FTSE All-World equity index was off 0.4 per cent and industrial commodity prices were mixed, with copper down 1 per cent to $3.53 a pound and Brent crude up 1.7 per cent to $113.92 a barrel.
US markets were broadly flat on Monday. The S&P 500 was up less than 0.1 per cent to 1,253.87. The Dow Jones Industrial Average and the Nasdaq Composite index barely budged, trading at 11,982.64 and 2,685.95 respectively.
16.35: Christine Lagarde has met with President Dmitry Medvedev on her first trip to Moscow as head of the IMF. No details have as yet emerged from their talks. She is to stay in Moscow until Tuesday.
Separately, prime minister Vladimir Putin on Monday reiterated that Russia and other major emerging nations would prefer to channel any aid to the eurozone via the IMF.
We would expect that, if countries like Russia and China take part in common global efforts, that should be reflected in our status in organisations such as the IMF.
16.23: Greek finance minister Evangelos Venizelos had a “positive and productive” meeting with European Union economic and monetary affairs commissioner Olli Rehn on developments. The two met in Brussels ahead of a meeting of euro area finance ministers later today, according to an e-mailed statement from the Athens-based finance ministry.
16.07: Now Germany’s finance minister Wolfgang Schaüble has arrived at the Eurogroup meeting in Brussels. The FT’s Peter Spiegel reports:
If Greece was hoping to get a sign-off on its long-awaited €8bn bail-out tranche tonight, Germany’s finance minister Wolfgang Schaüble certainly has other ideas.
On his way into this evening’s meeting, Schaüble described the ongoing events in Athens as “cataclysmic” and said he is still waiting to see Greek commitment to the austerity path before signing off on any new loans.
“Every day a new situation,” Schaüble said. “The programme’s conditions must be met before we can decide about the payment of the tranche.”
16.05: It seems somehow fitting that the European crisis is currently centred on the two great wellsprings of European civilisation – Athens and Rome, writes the FT’s Gideon Rachman.
If Hollywood were making a film about it, it could be called – “The Decline and Fall of the Roman Empire II” and sub-titled – “This time they’re taking the rest of Europe with them.”
But, on a more contemporary note, there is another, much more contemporary, parallel between Greece and Italy that is worth highlighting. This is the level of political corruption – legal and illegal – and the way it is reflected, even now, in the privileges that parliamentarians have granted to themselves.
When I visited Greece, earlier this year, I was startled to discover that all Greek MPs still have their own cars and drivers. Their base salaries are higher than those of British MPs and – in addition – they get lavish allowances for attending committee meetings, as well as a variety of other perks. This piece from the New York Times gives a nice account of all the various perks available to Greek MPs, and what happened to one of their number who campaigned to curtail parliamentary privileges.
The Greeks, however, are on a very austere regime, compared to the Italians. Italian MPs are the best-paid in Europe. An expenses scandal earlier this year alleged that even the parliamentary hairdressers – there are nine of them – are paid over 10,000 euros a month.
15.45: With eurozone finance ministers to convene in Brussels in just over an hour, Jean-Claude Juncker, Luxembourg prime minister and chair of the meeting, told reporters what he expects from the new Greek government.
I expect that the new government will make clear very soon that what was decided on Oct. 26 and Oct. 27 here in Brussels will be adopted down to the last detail.
The finance chiefs will work on plans to increase the muscle of the region’s temporary bailout fund, the European Financial Stability Facility.
I don’t expect we’ll come to any decisions today…We now have to be informed about the exact situation in Greece, as well as about the intentions of the Italian government.
He added:
I am quite confident that now the situation in Greece is developing in the right direction.
15.43: Lucas Papademos, a Greek economist tipped to head the country’s new coalition government, is expected to arrive in Athens on Monday evening, Reuters reports.
15.35: The people of northern Europe need to understand their interests lie not in hounding the Greeks out of the euro but in keeping them in, argues Robert Jenkins, an external member of the interim Financial Policy Committee of the Bank of England.
Referendum or no, the Greek government must explain the consequences that a Greek exit from the euro would have for the Greek economy and its citizenry. For a Greek default within the euro is manageable and will be managed. Greek default outside the euro involves risks to a different order of magnitude.
He outlines his argument in full on our markets page.
15.16: European ministers are arriving in Brussels for a meeting this evening. One of the first off the block is the Greek finance minister. Peter Spiegel, the FT’s Brussels bureau chief reports:
This evening’s meeting of eurozone finance ministers doesn’t start until 5pm Brussels time, but some of the primary players have started arriving at the massive Justus Lipsius building where all EU summits are held. And one of the first was Evangelos Venizelos, the Greek finance minister who helped nudge prime minister George Papandreou to step down this morning.
Venizelos made some brief remarks to reporters as he headed into the building, acknowledging that it’s been “a difficult week” but arguing that the new government that will emerge from Papandreou’s ashes will give Greece the political ability to adopt measures EU lenders are asking for.
“We have a new government of national unity and national responsibility,” Venizelos said. “This is the proof of our commitment and our national capacity to implement the programme and reconstruct the country.”
The language is certainly intended to please his fellow eurozone ministers, who will debate whether to release the long overdue €8bn September bail-out tranche Athens has been waiting for. But EU officials have made it clear they want actions in addition to words, particularly from Venizelos, who has ruffled feathers of many members of the so-called “eurogroup” before.
Don’t expect tonight’s meeting to sign off on the €8bn tranche before the Greek parliament takes more decisive actions to approve the measures contained in the second €130bn bail-out agreed to last month.
15.10: Italian yields have fallen back, tweets Chris Adams, the FT’s markets editor.
14.54: The Chinese media remain sceptical about Europe’s bail-out plan.
Investors must get a clear idea about safety and returns before they offer money for the European Financial Stability Facility, a key part of the EU’s bail-out package for Greece, China’s official Xinhua news agency said in a Monday commentary.
It wrote:
The key question now is, how can the market and investors be given confidence in terms of security and returns
The recent referendum drama has not assuaged these concerns, it added:
Greece’s “referendum drama was a reflection of how loose the deal was, and no one could be sure that no further counter-activities would happen in the coming days”.
14.37: The European Central Bank has released its bond-buying data for last week, tweets Chris Adams, the FT’s markets editor:
14.18: The Italian prime is not giving up without a fight. Guy Dinmore in Rome outlines his options:
Silvio Berlusconi is fighting a last-ditch battle to save his slim majority in parliament, denying reports that he intends to resign tonight or tomorrow. Although managers of his centre-right People of Liberty have told the prime minister he no longer has the numbers to survive, Mr Berlusconi is trying to buy more time in which he can use his twin powers as head of government and media baron to persuade party dissidents not to “betray” him. In the past these tactics have worked when a group of wavering MPs were rewarded with posts of deputy minister. But now even long-time loyalists like former glamorous TV presenter Gabriella Carlucci are saying it is time for a change of government to save Italy from financial ruin on the markets.
Reports suggest that Mr Berlusconi will press ahead with plans to present the reform programme backed by the EU to the senate in the coming days. The ruling coalition can probably expect to survive in the senate, but may not have the numbers to defeat another vote of no-confidence which the opposition is considering calling in the lower house.
The resulting confusion can be seen on the markets with Italy’s bond yields hovering close to euro-era highs reached this morning of 6.66 per cent, dangerously close to the 7 per cent level where analysts fear Italy would lose all credibility and be forced to seek an EU-IMF bailout.
The reaction of the Milan bourse today indicates that Italy has a Berlusconi problem more than a fundamental problem. Stocks soared on the unconfirmed reports of Mr Berlusconi’s imminent resignation, lost half those gains on the denials but then bounced back close to the day’s highs, apparently demonstrating the conviction of Italian investors that the prime minister’s days are numbered.
14.07: Greek finance minister Evangelos Venizelos met European Union economic and monetary affairs commissioner Olli Rehn in Brussels on Monday, his office said in a statement. This from Reuters:
“The minister had a positive and productive discussion with commissioner Olli Rehn in light of the recent political developments,” the Greek statement said.
“The subject of talks were the procedures for the timely disbursement of the sixth loan tranche and the start of negotiations on the new (rescue) programme … and preparations of the new scheme for the private sector’s involvement (PSI).”
Venizelos will represent Greece in the Eurogroup’s meeting later on Monday and will meet with Eurogroup head Jean-Claude Juncker later in the day.
13.57: The first reaction to the French budget savings have started to filter in.
There is little in the plans to surprise Marion Laboure at Barclays Capital, though the growth forecasts are a tad optimistic:
For us there is not much in here that is surprising. It is broadly in line with what had already been leaked by the press, with the hike to VAT. The one real surprise is the move on pensions (to bring the legal age of retirement to 62 by 2017 and not 2018).
We still find that in terms of growth, the government is being a bit too optimistic for 2012 because we have a forecast of 0.7 per cent growth versus their forecast of 1 per cent. We are also slightly more pessimistic when it comes to the deficit reduction trajectory.
The CFDT Labour Union told Reuters the government missed a chance to get workers on board and behind its proposals. Damien Cerques said:
Once again this is a plan that was developed without consulting labour organisation. The government has therefore deprived itself of consensual proposals to reduce the debt: cutting the number of detaxed hours, which would have brought in 4 billion euros per year.
We see a smattering of measures on welfare: health, retirement, and family benefits.
The downward revision of benefits for family and housing is profoundly unfair and counter-productive. It hits families and youths when their buying power and social inclusion needs to be bolstered.
13.31: 
And now the photographic evidence of that Facebook denial:
13.22: Members of Greece’s international A-list don’t seem to be in any particular rush to join the coalition government announced on Sunday night, writes Kerin Hope, our correspondent in Athens. She considers the possible new appointees:
Lucas Papademos, former vice president of the European Central Bank and frontrunner for the job of temporary prime minister is making his way to Athens, but is not scheduled to arrive until this evening, the FT has learnt.
That’s a positive sign, say analysts. At least he appears willing to discuss the job.
With luck, president Carolos Papoulias may be able to make a big splash later today by announcing who will become premier while the eurogroup meeting of finance ministers is underway in Brussels.
Mr Papademos would have a strictly technocratic role: to push through half-a-dozen key pieces of legislation by January on the second €130bn bail-out and provide some much-needed macroeconomic expertise.
After retiring from the ECB, Mr Papademos took up a post as visiting professor of public policy at Harvard University’s Kennedy school of government.
There’d been speculation that he would move on to another academic job in the US, staying well away from Greece and the eurozone crisis.
But as a former governor of Greece’s central bank he’s still got an office in its imposing headquarters in central Athens. And he’s also helped out in the past by providing economic advice to the Papandreou government (though it wasn’t necessarily followed).
As for other appointments to the new cabinet, Evangelos Venizelos is expected to stay on as finance minister, along with a few other ministers involved in implementing Greece’s first rescue package.That includes environment and energy minister George Papaconstantinou, who is working closely with German investors on setting up a series of giant photovoltaic parks across Greece, as well as Andreas Loverdos, the health minister, who is about halfway through a restructuring of Greece’s inefficient state health system.
13.12: Prime minister George Papandreou and opposition leader Antonis Samaras have talked on the phone on Monday and will hold further conversations later in the day, a government official has told Reuters. The two agreed late on Sunday to form a coalition government and Monday’s talks are about agreeing on the new government’s leader.
13.00: Stocks remain weak as traders await developments in the eurozone debt saga. The latest from our market team:
The FTSE All-World equity index is off 0.2 per cent and industrial commodity prices are mixed, with copper down 0.6 per cent to $354 a pound and Brent crude up 1 per cent to $113.80 a barrel. Treasury and Bund yields are nudging lower by a couple of basis points as traders seek “havens”. S&P 500 futures are well off their lows but still point to Wall Street opening with a loss of 0.4 per cent, while the FTSE Eurofirst 300 is off 0.4 per cent. Currencies are displaying risk aversion, with the dollar index up 0.1 per cent and the euro down 0.6 per cent to $1.3758.
12.56: Greek prime minister George Papandreou held telephone talks on Monday with European Union leaders on his efforts to form a coalition government that will push through a vital bail-out deal, his office in a statement. Mr Papandreou spoke with Eurogroup head Jean-Claude Juncker, European Commission president Jose Manuel Barroso and German chancellor Angela Merkel.
12.45: The business community that first backed Mr Berlusconi now expect him to go. Rachel Sanderson in Milan reports:
Senior financial figures in Milan also expect Mr Berlusconi to leave by the end of the day or at the latest on Tuesday.
The sharp rise in share prices on Milan’s FTSE Mib index after initial talk of Mr Berlusconi’s exit is seen as increasing momentum for his ouster.
A well-placed source said Mario Draghi, the ECB president, had indirectly also played his part. The ECB undertook only limited buying of Italian bonds on Monday. Spreads over German Bunds reached a new high piling the pressure on Mr Berlusconi.
Expectations in Milan, among the business community that first propelled Mr Berlusconi to power, is that Gianni Letta, the powerful undersecretary, is the most likely to option to head up an interim government if and when Mr Berlusconi resigns. A third option could be Mr Berlusconi stepping down after a vote in parliament on Tuesday.
However, senior figures also do not rule out the arrival of a technocrat such as Mario Monti, the former EU commissioner, or Giuliano Amato, a widely-respected two-time former prime minister.
The seeds of Mr Berlusconi’s demise are widely considered to have been planted in Milan in May this year, when the city in a shock outcome failed to confirm Mr Berlusconi’s candidate as mayor and instead voted for a left-leaning independent candidate.
12.44: France has announced further plans for budget savings as it tries to protect its rating and avoid the market anxiety now engulfing Italy. Hugh Carnegy, our correspondent in Paris, has the details:
France’s centre-right government on Monday unveiled extra budget savings worth €18.6bn over the next two years as it sought to convince financial markets that it would not succumb to the sovereign debt crisis threatening the eurozone.
The measures, a mix of tax increases and spending cuts, were aimed at ensuring President Nicolas Sarkozy’s administration stays on target to reduce France’s budget deficit to 3 per cent of gross domestic product in 2013, from 5.7 per cent this year, despite it being forced to reduce its forecast for growth next year to just 1 per cent of GDP.
François Fillon, the prime minister, stressed that the measures would be worth €65bn in savings over five years, enabling France to eliminate its deficit in 2016 and stick to its aim of reducing the public debt, due to peak at more than 87 per cent of GDP in 2012.
The government’s big fear is that the fall-out from the eurozone crisis will lead to a downgrade of its triple A sovereign debt rating.
“Our economic, financial and social sovereignty demand collective and prolonged efforts and also sacrifices,” Mr Fillon said. “Our country must never be condemned to following a policy imposed by others.”
12.38: Brussels bureau chief Peter Spiegel has the latest on the Italian economy watchers:
At the European Commission’s regular mid-day press briefing today, Amadeu Altafaj-Tardio, the spokesman for economic issues, said the Commission’s Italian monitoring team is expected to arrive this week. After agreement Friday in Cannes, the International Monetary Fund will be sending its own team at the end of the month.
But just what will they be monitoring? According to Christine Lagarde, the IMF chief, they will be reporting on the Berlusconi government’s progress in implementing promised economic reforms contained in a 14-page letter the Italian government sent to the European Union two weeks ago. It contains a laundry list of reforms Silvio Berlusconi is vowing to implement.
A copy of the letter has been posted on our Brussels blog.
12.28: Preparations to create Greece’s new coalition government are under way. Far-right party LAOS, which has 16 deputies in Greece’s 300-seat parliament, has outlined its demands. This latest report from Reuters:
Greece’s far-right LAOS party is ready to join a new coalition government on the condition that it does not approve further austerity measures or forced privatisations, the party’s leader said on Monday.
“We will back this effort, under three conditions: no more cuts of wages and pensions, no concession of national sovereignty, no fire sales (of state assets),” LAOS party leader George Karatzaferis said.
12.20: Mr Berlusconi has on his Facebook page denied rumours that his resignation is imminent.
12.16: German finance minister Wolfgang Schäuble has denied that Europe would need to rescue Italy as it did Greece, saying Italy’s request to be monitored by European officials and the IMF should help it regain market confidence. He said the country was too big to be rescued by the EFSF bail-out fund and would not need such help anyway.
This is what he told the Reuters news agency in Finland.
Italy has to stick to what has been announced. If Italy will deliver, will reduce its debt, there is no problem
12.07: Speculation is growing that Mr Berlusconi is poised to resign. This is the latest report from Guy Dinmore in Rome:
Unconfirmed reports that Silvio Berlusconi was about to resign sent stocks soaring on the Milan bourse while bond yields fell from record highs reached earlier on Monday.
Giuliano Ferrara, editor of Il Foglio and a former minister under Mr Berlusconi, said on his newspaper’s website that it was clear that Italy’s prime minister was about to resign.
“It is a question of hours, some say of minutes,” he wrote.
A financial source close to the prime minister also told the Financial Times that Mr Berlusconi intended to step down later on Monday.
Having spent the weekend in Rome trying to stave off a revolt within his People of Liberty party, Mr Berlusconi left the capital on Monday morning to go to Milan where his family-run media empire is based. He was said to be expected to return to Rome in the evening.
12.03: The latest factory data from Germany paints a bleak picture. From our correspondent Ralph Atkins in Frankfurt:
A eurozone recession – possibly serious – is looking ever more likely. Germany has reported industrial production fell by 2.7 per cent in September compared with the previous month – much more than expected.
Overall, industrial production in the third quarter was still 1.7 per cent higher than in the second quarter. So Germany’s third quarter growth figures should look quite robust. But the latest data suggested that by the end of the quarter, industrial production had already gone into reverse.
That makes at least a technical recession – two consecutive quarters of contraction – very likely over the winter in Europe’s largest economy. And other eurozone countries – notably Italy – are expected to fare even worse.
Last week, Mario Draghi, the new European Central Bank president, foresaw a eurozone “mild recession” by the year end. That could look optimistic – especially if the eurozone debt crisis does not calm soon.
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