Category: Europe

Nicolas Sarkozy and Angela Merkel prior to their meeting at the Elysee Palace on Monday. Photo: Remy de la Mauvinere/AP

Nicolas Sarkozy and Angela Merkel before their meeting at the Elysee palace on Monday. Photo: Remy de la Mauvinere/AP

Welcome back to our live coverage of the eurozone crisis. By Esther Bintliff on the world news desk in London, with contributions from FT correspondents around the world.

This post should update automatically every few minutes, but it may take longer on mobile devices. All times are GMT.

 

19.40: So, after a relatively quiet morning, this afternoon and evening have proved to be a bit of a rollercoaster.

  • First, Nicolas Sarkozy and Angela Merkel surprised everyone by announcing they had reached “comprehensive agreement” on a new set of fiscal rules ahead of the EU summit later this week. Of course we knew they were going to meet, but to be honest, we hadn’t expected them to say very much in public at this stage. So stock markets rallied, bond yields fell and suddenly it looked like a resolution to the eurozone crisis might be in sight…
  • Then, just when you thought it might be safe etc etcthis story broke. In brief: Standard and Poor’s has warned Germany and the five other triple A members of the eurozone that they risk having their top-notch ratings downgraded as a result of deepening economic and political turmoil in the single currency bloc. The US ratings agency is poised to announce later on Monday that it is putting Germany, France, the Netherlands, Austria, Finland, and Luxembourg on “creditwatch negative”, meaning there is a one-in-two chance of a downgrade within 90 days.

Understandably, investors took fright, and stock markets pared many of the gains made earlier in the day. There will be more news on this story tonight – see FT.com for all the latest. In the meantime thanks for reading, and for all the comments.

Stock markets are soaring, apparently in anticipation that Europe may finally strike a deal that “saves the euro”. But here in Washington, they don’t seem so convinced.

President Obama met the leaders of the European Commission and the European Council earlier this week (Barroso and Van Rompuy, in case you have forgotten.) They outlined to him the measures that they expect the EU to take at the December 9th summit. The Commission  have also been briefing the IMF. But neither the Obama administation nor the IMF seem to be exactly jumping for joy at what they are hearing from Brussels.

The political and economic debate in Washington is normally reliably inward-looking – particularly during an election year. But, after a couple of days here, I’ve been struck by the intense interest in (and anxiety about) the European debt crisis. Yesterday, the New York Times and the Washington Post ran very similar lead editorials, imploring Germany to act.

By the end of the day, action had indeed been taken. But it was led by the Federal Reserve in the US, in co-ordination with the central banks of the euro-zone, Britain, Japan, Switzerland and Canada. Even China joined the party, by announcing the first cut in its reserve rates for almost three years.

Sarkozy after delivering a speech on the eurozone crisis in Toulon. Photo: Jean-Paul Pelissier/Reuters

Photo: Jean-Paul Pelissier/Reuters

Welcome back to the FT’s live coverage of the eurozone debt crisis and its global fallout. By John Aglionby, Tom Burgis and Esther Bintliff on the news desk in London with contributions from correspondents around the world.

Pressure is once again mounting on eurozone leaders to find a convincing solution to the sovereign debt crisis. Today:

Mario Draghi, the head of the European Central Bank made a key speech to the European Parliament, hinting at greater ECB action if governments moved towards a “fiscal compact”

  • France and Spain held bond auctions
  • French president Nicolas Sarkozy addressed the nation on his plan to resolve the crisis – he sided with Angela Merkel in calling for treaty change, said he was convinced the ECB would act “when faced with the risk of deflation that threatens Europe”, and called for greater fiscal integration
  • The Bank of England issued its six-monthly financial stability report. Sir Mervyn King, governor, said the eurozone debt crisis is triggering a spiral that is characteristic of nothing short of a crisis to the entire financial system
  • The world’s biggest economies reported key manufacturing data
  • Christine Lagarde said the G20 would commit the necessary resources for the IMF to play its “systemic role” if circumstances required (see our 19.44 update)
  • Brazil’s finance minister Guido Mantega said Brazil was willing to contribute funds to the IMF to help alleviate the eurozone crisis, noting: “This time, the IMF did not come here bringing money as in the past… This time it came to ask Brazil to lend it money and I prefer to be a creditor than a debtor.”

22.32: Tony Barber, the FT’s Europe editor in London, has been analysing the landmark speech by French president Nicolas Sarkozy and offers these insights: 

By Gideon Rachman

Could things go bad again? I mean really bad – Great Depression bad, world war bad? The kind of cataclysmic event my generation has learned to think belongs only in the history books.

As the European Union’s crisis deepens, the search is on for scapegoats. A new candidate for this role was recently brought to my attention – the Hungarians. This is not because they have done everything wrong. It’s just that when it comes to international politics, Hungary is congenitally unlucky.

A Hungarian acquaintance argues that every organisation that Hungary has joined for the last 150 years has collapsed shortly afterwards. The Hapsburgs were one of the Europe’s most successful dynasties. But then in 1867, the Austro-Hungarian empire was formed, and by 1918 it had disappeared. Hungary chose the losing side in both the first and second world wars. After 1945, it became a member of the Warsaw Pact and Comecon. Given this long record of failure, the EU should have been on its guard when it welcomed Hungary as a member in 2004.

By Gideon Rachman

Last year, Angela Merkel promised to show the markets who is boss. “There is a kind of battle over what power the financial markets have and how much room for policymaking the politicians have,” said the German chancellor. It was vital, she added, to assert the “primacy of politics”.

Yesterday evening I went to a dinner in Brussels, featuring a group of senior politicians and diplomats. These dinners can be dull. But not this one. The sense of crisis in Europe made for an extraordinary conversation. The official speeches were not that exciting – featuring the usual, “we’re living in tough times, but I’m confident we’ll see this through type of rhetoric”. But it was the talk around the tables that was so striking. Three remarks in particular stuck with me.

A tram passes the euro sign sculpture in front of the European Central Bank ( ECB) in Frankfurt, Germany. Photographer: Hannelore Foerster/Bloomberg

Welcome to our continuing coverage of the eurozone crisis. All times are GMT. By Tom Burgis, James Crabtree and John Aglionby on the news desk in London, with contributions from FT correspondents around the world.

The turmoil in the eurozone has taken a troubling turn in recent days, with anxiety spreading from Europe’s periphery to its “core” countries. Even as Italy’s Mario Monti readies his economic agenda to be presented today, investors are looking at France, the Netherlands and Austria with increasing unease and wondering whether the ECB might yet ride to the rescue. Over in Greece, today is the anniversary of 1973′s mass student protests – with demonstrators once more planning to take to the streets. And the bond markets are showing ever more strain, with today’s Spanish bond auction souring sentiment still further.

A new phase in the eurozone crisis?

In this week’s show: after a week in which the prospect of a country leaving the eurozone has been floated, where do we go from here? We look at the possibility of closer political and fiscal union in the eurozone, the state of relations between Germany and the UK, and the prospects for a financial transaction tax.

Presented by the FT’s chief foreign affairs commentator Gideon Rachman, with economics editor Chris Giles and Berlin bureau chief Quentin Peel.

The World

with Gideon Rachman

About this blog About Gideon Blog guide
Gideon Rachman and his FT colleagues debate international affairs.

Gideon became chief foreign affairs columnist for the Financial Times in July 2006. He joined the FT after a 15-year career at The Economist, which included spells as a foreign correspondent in Brussels, Washington and Bangkok. He also edited The Economist’s business and Asia sections.

His particular interests include American foreign policy, the European Union and globalisation
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Contact gideon.rachman@ft.com about The World blog.

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For views and opinions on the European Union from Peter Spiegel, Joshua Chaffin, Alex Barker and Stanley Pignal, follow the FT's Brussels blog here.

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