Which way forward? Photo: Getty
Welcome to our first eurozone live blog of 2012. By John Aglionby, Tom Burgis and Esther Bintliff on the news desk in London with contributions from correspondents around the world. All times are GMT.
It may be a new year but it’s the same old eurozone crisis. French President Nicolas Sarkozy and German Chancellor Angela Merkel held a bilateral summit in Berlin this morning.
Separately, the chair of the Swiss National Bank, Philipp Hildebrand, has resigned, sending the swiss franc to a four-month high against the euro.
17.32 That’s that for the eurozone live blog today. The key developments were:
- Angela Merkel and Nicolas Sarkozy met and declared it’s full steam ahead towards a fiscal compact for Europe, to be signed by March 1
- Philipp Hildebrand resigned as head of the Swiss National Bank, after questions were raised over a currency transaction by his wife
- The yield on German short-term debt turned negative, signalling further strains in European financial markets
- Irish consumer sentiment suffered its biggest fall in a decade
- German industrial production slipped by 0.6 per cent in November compared with the previous month, the latest evidence of Europe’s economy sputtering
We’ll leave you with a final tweet from FT markets editor Chris Adams — a reminder that, for all the cheery tones of the new year, Italian bond yields are still spreading gloom…
17.00 Caution abounds in early US trading, the FT’s Ajay Makan reports from New York.
US stocks opened higher, but traders were cautious as German bond yields went negative in a sign of risk aversion in Europe.
The market is braced for a poor start to the quarterly earnings season, with fears Alcoa may report a loss after the close on Monday.
16.55 The Swiss National Bank has announced that Thomas Jordan, hitherto vice chairman, is to take over from the outgoing Philipp Hildebrand for now, with the vacant position on the governing board to be filled as soon as possible. The SNB’s full statement is here.
16.25 To Copenhagen, on which a good chunk of the Brussels press corps has descended this week for the formal kick-off of Denmark’s six-month turn at the European Union presidency. The FT’s Peter Spiegel is there and writes:
Nicolai Wammen, Denmark’s first-ever EU minister, has started things off by insisting his government will try to keep EU decisions among all 27 member states – something that might be tough given the public positions of David Cameron, the UK prime minister, and Nicolas Sakozy, the French president.
“We do not want a club of 17 or a club of 10. We want a European Union of 27,” Wammen told the 60-odd reporters here. “The EU is a family of 27 and no less.”
Cameron, of course, forced the other 26 to draw up a new fiscal discipline treaty outside the EU when he said the UK would not participate. And Sarkozy has talked approvingly of a “two-speed Europe”, with the 17-member eurozone moving faster than the rest.
Wammen acknowledged keeping everything at 27 will be tough, insisting that “Britain is still a very important part of the European family”.
Denmark, as the only non-British EU country with a euro opt-out, has traditionally been a close UK ally on fiscal and economic issues and Wammen said he is trying to position Copenhagen as a “bridge builder” bringing the 27 back together. He took, for instance, a very pro-UK stance towards the Financial Transaction Tax, saying his government would like it to be global, not Europe-only. “This is a country of islands and bridges,” he joked.
And here, should anyone fancy a browse, are all those Danish plans for the EU presidency in full.
16.17 From Detroit comes a gloomy prognosis for the European economy, courtesy of Sergio Marchionne, Fiat’s boss. Speaking to reporters at the Detroit auto show, he said the European car market will be no better this year than in 2011, according to Reuters.
15.48 “Whether it’s the right decision we’ll see. It was a tough process getting there. I loved this job, it was a huge privilege. I fought for it like a lion.” So departs Philipp Hildebrand, now the former head of the Swiss National Bank.
15.07 And in Frankfurt, the FT’s Ralph Atkins reports that weak German industrial output figures for November have added to evidence of a marked eurozone slowdown under way, which is hitting north as well as south Europe.
Production was down 0.6 per cent compared with the previous month. It was not a dramatic slump but consistent with a modest contraction in fourth quarter German gross domestic product.
It is not all gloom. German export figures published earlier on Monday showed a 2.5 per cent increase compared with October, and it remains possible that the country will escape a recession – defined as two quarters of negative growth.
Germany’s statistical office is due on Wednesday to provide a first estimate of economic growth in 2011, and will probably give some guidance to how severe the slowdown was in the last few months of the year.
15.03 For your reading pleasure, there’s a full, updated FT story on Hildebrand’s resignation here.
14.59 Over in Bangalore, billionaire hedgie and philanthropist George Soros has been warning that the pickle we’re in is worse than 2008. Reuters quotes him thus:
“We now have a crisis, which in my opinion is even more serious than the crash of 2008,” Soros said on Monday at a business event in the southern Indian city of Bangalore.
“You had the institutions that were necessary to control the situation [in 2008] — a functioning central bank, the Federal Reserve system, and a functioning Treasury,” he said.
“In the case of the euro, you have a European Central Bank but you don’t have a European treasury. That institution is missing,” he said.
14.48 Over in Berlin, the FT’s Quentin Peel has been digesting the Merkozy comments from earlier this afternoon.
The message from Merkel and Sarkozy was grim but determined, insisting that they have “heard the message” of the financial markets, and are taking all the measures needed to stabilise the crisis in the eurozone.
Merkel issued a strong warning to Greece, urging faster progress in negotiations with private creditors on debt relief for the Greek government, while insisting that she was determined that no country should be forced to leave the eurozone.
At the same time she expressed confidence that the eurozone treaty to enforce budget discipline would be agreed by the end of the month. Sarkozy said they wanted to have it signed by March 1.
“The situation is very tense,” the French president admitted, while insisting that France had done more than expected to curb its budget deficit. Now was the moment to put the emphasis on reviving economic growth and boosting employment, he said.
As for Merkel, when challenged to see if she feared a downgrade on the triple A credit rating of eurozone states, she declared: “Fear is not the motivation of my political activity.”
14.43 In Bern, Philipp Hildebrand, who has resigned as president of the Swiss national bank amid questions over a currency transaction by his wife, has been speaking to reporters. He said the past three weeks had been “difficult” for him and his family.
“I came to the conclusion that it’s not possible for me to deliver a definite proof that my wife requested the currency transaction without my knowledge,” Hildebrand said. “Unfortunately, mistakes were made around this transaction.”
14.05 Just in case anyone was thinking about relaxing, over on FT Alphaville, Izabella Kaminska explains how the euro’s weakness against the dollar, coupled with the stand-off over Iran’s nuclear programme, has brought Europe to the brink of an energy crisis.
13.59 Nicolas Sarkozy was quick in today’s press conference to stress that France’s fiscal position will come out better than previously forecast. From Paris, the FT’s Hugh Carnegy has more.
France’s budget deficit in 2011 was “very probably below” the target of 5.7 per cent of gross domestic product, according to François Fillon, prime minister.
He said on Monday that, thanks to the centre-right government’s austerity efforts, the deficit would be €4bn less than estimated. It may be too late to stave off a widely expected downgrade of France’s triple A sovereign credit rating but Fillon said the government would continue to adjust to events to ensure it stayed on target for a reduction in the deficit to 4.5 per cent this year and 3 per cent next year.
“It is the gauge of our credibility vis-a-vis the French people and vis-a-vis the markets,” Fillon added.
The prime minister went on to say that an end to the eurozone crisis was “without doubt” NOT possible in the short term. But his hint of a further budget squeeze, if necessary, was at odds with the New Year’s eve statement by Sarkozy, who faces a tough re-election battle in April, that the emphasis now was on promoting growth and jobs – not more austerity.
13.43: Alice Ross, FT currencies correspondent, tweets:
13.32: Here’s the statement from the Swiss National Bank, confirming that chairman Philipp Hildebrand has resigned with immediate effect:
Effective immediately, Philipp Hildebrand is resigning from his office as Chairman of the Governing Board of the Swiss National Bank.
He will make a statement on his decision at 3.15 pm in the conference room of the Federal Parliament’s Media Centre, Bundesgasse 8, and will also make a number of documents available.
13.30: BREAKING – apparently Philipp Hildebrand, the Swiss central bank chief, has resigned. More on this as we get it. In the meantime, here’s a tweet from a Reuters editor:
13.28: Both Merkel and Sarkozy looked tired and took a serious tone at today’s press conference, says Quentin Peel, our Berlin bureau chief.
13.15: Herman Van Rompuy, president of the European Council, has tweeted this about the big EU summit at the end of the month:
Angela Merkel outside the chancellery on Monday. Photo: AP
13.10: Today’s talks with Mr Sarkozy mark the beginning of a busy week on the eurozone crisis for Angela Merkel, says Quentin Peel: she will meet Christine Lagarde, managing director of the International Monetary Fund, in Berlin on Tuesday evening, and Mario Monti, Italy’s prime minister, on Wednesday.
However her spokesman, Steffen Seibert, described tomorrow night’s meeting with Lagarde as “an informal meeting, an informal exchange of views”, adding that there would be no news conference after the talks.
13.04: Merkel also said eurozone leaders will discuss making the European bailout fund “more efficient”, reports Bloomberg:
Euro leaders have asked the European Central Bank to lend its expertise to make the European Financial Stability Facility more efficient, Merkel told reporters today in Berlin after talks with French President Nicolas Sarkozy.
12.58: In case we were in any doubt, Merkel reiterated: “We want Greece to remain in the euro region… The voluntary debt restructuring for Greece must be driven forward”.
12.54: Sarkozy says the treaty should be signed by March 1.
12.52: A few choice quotes from Ms Merkel:
“It is pleasing that the negotiations on the fiscal pact are coming along well, there is a good chance that we will have signed off debt brakes and everything that entails already in January, and by March at the latest.”
On the European Financial Stability Facility (EFSF), Europe’s bail-out fund:
As well as supporting rescued countries, “[it] has to be able to intervene in the primary [bond] market in emergency situations”.
On Greece, Merkel said the second Greek programme “has to be enacted quickly” in order for the next tranche of bail-out money to be released.
12.45: And they’re off!
12.39: It hasn’t started yet, but in a bit you should be able to watch LIVE as Angela Merkel and Nicolas Sarkozy give a press conference (at the moment it’s just lots of reporters shuffling in their seats in front of an empty stage…)
12.25: Irish consumer sentiment has suffered its biggest fall in a decade, reports Reuters:
“The KBC Bank Ireland/ESRI Consumer Sentiment Index fell to 49.2 in December from 60.1 in November, the largest monthly drop since August 2001. The big drop comes two months after a surge in sentiment to a 15-month high.”
12.10: As Angela Merkel and Nicolas Sarkozy meet for their first summit of the year in Berlin, Quentin Peel, our bureau chief, notes that for once, growth and employment will be top of their agenda, rather than the interminable topic of budget discipline and austerity:
Angela Merkel welcomes Nicolas Sarkozy at the chancellery in Berlin on Monday. Photo: Axel Schmidt/AP
It is the agenda that the French president wants to highlight as he starts his campaign for re-election, and the German chancellor seems to have agreed that it is time to stress a more positive policy response to the euro crisis.
But worries about Greece continue to rumble in the background. Steffen Seibert, Ms Merkel’s spokesman, repeated the message this morning that Athens must implement the full EU plan for a second bail-out programme to be launched – and that means “resolute” budget cuts. Wolfgang Schäuble, German finance minister, said in a radio interview that the Greek debt talks “could go faster. We are pushing for that”.
As for the growth agenda, German officials are adamant it does not mean a return to deficit-financed stimulus measures: they are talking about measures to increase labour mobility, and focus EU funds on job creation – especially for the young unemployed. It sounds like an old agenda warmed up, rather than any dramatic new initiatives.
Merkel and Sarkozy are due to have a “meeting with the press” at 13.30 Berlin time, which tends to mean just a couple of questions, and no formal announcements.
12.02: A little pat on the back for Belgium: the European Commission appears to be pleased with the country’s renewed efforts to tighten its purse strings after the country’s first attempt at a budget fell short of the EU’s new fiscal rules.
As our reporter Stanley Pignal wrote last night, Belgium over the weekend rushed to trim more than €1bn from 2012 public spending in an attempt to avoid the wrath of the Commission, which had threatened fines worth hundreds of millions of euros if it didn’t take immediate action.
According to Reuters, a Commission spokesman, Amadeu Altafaj, told reporters this morning:
“The [Belgian] government has decided to establish a budgetary reserve, this is on top of the measures already included in the budget, it is an important and positive piece of news, that is being taken into account in the assessment…
“The final assessment will be communicated by [European] Commissioner Olli Rehn soon, but it is clear these are bold steps that go in the right direction”.
11.06 In London, the FT’s Michael Hunter reports new unease in Europe’s debt markets.
Fresh evidence of continued strain in eurozone financial markets surfaced on Monday as the yield on German short-term debt turned negative.
In a sign that traders remain keen to seek out safety for their capital, Berlin was able to sell €3.9bn in six-month bonds at a yield of -0.0122 – the first time banks are, in effect, paying to lend a eurozone sovereign money at a primary auction.
11.00 The euro itself is stronger today against all but one of its 16 biggest peers, ahead of the Merkozy meeting today. The single currency is at its strongest against the dollar for four days.
10. 41 Reuters reports that a key measure of lending between Europe’s banks has dipped, with implications for the European central bank’s efforts to try to prevent the bloc’s sovereign debt and banking crises exacerbating the woes of the real economy.
Key eurozone bank-to-bank lending rates dropped to new nine-month lows on Monday, pulled down by the ECB’s recent record injection of almost half a trillion euros of ultra-long and cheap liquidity.
Euro zone banks received €489bn late last month in the first of two opportunities to access the 3-year loans – operations the ECB hopes will minimise the chances of them responding to the region’s debt crisis by slashing lending.
The money has unsurprisingly ballooned the amount of excess cash in the financial system and with the traditionally tense end-of-year period now fading in the rearview mirror, the funding overhang is starting to exert a freer influence on lending rates.
Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks’ appetite for lending, fell to 1.276 per cent, the lowest since early April and down from Friday’s 1.288 per cent.
10.10: Chris Adams, the FT’s markets editor has tweeted the following:
9.35: Reuters is reporting that Hungary’s currency, the forint, has rebounded further on Monday on hope that Budapest will reach a funding deal with international lenders as talks with the IMF get underway this week, giving support to other emerging European currencies.
Hungary’s government is willing to discuss any issues at the IMF talks, Prime Minister Viktor Orban said on Sunday. The IMF and European Union have both criticised a new law that they say curbs the central bank’s independence.
The country has faced a tide of market pressure over funding concerns that pushed the forint to a record low and bond yields over 11 percent.
9.25: Financial markets are starting the week in positive territory – just. But there’s plenty for traders to keep their eyes on in addition to the Merkozy summit: Fitch has downgraded Hungary to “junk” status as it begins talks with the International Monetary Fund on a financial support package, France and Germany are selling sovereign bonds and Asia has been having a choppy day. Fasten your seatbelts!
For views and opinions on the European Union from Peter Spiegel, Joshua Chaffin, Alex Barker and Stanley Pignal, follow the 