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On Tuesday, the editor of the Financial Times, Lionel Barber, gave the commencement address at Barcelona’s Esade Business School. His theme was the eurozone crisis – but he began with a story from the earlier, headier days of the new millenium, when the Spanish economy was displaying “sustained dynamism”, in the words of the IMF.
In the summer of 2001, I interviewed José María Aznar and Silvio Berlusconi in successive weeks. Aznar was at the height of his powers. He had just successfully pressed for better budget terms at an EU summit, and boasted of quietly smoking a fat cigar until Chancellor Schroeder and others came round to his demands.
A few weeks later I was in Rome at Silvio Berlusconi’s private villa next to the Spanish steps. Inside, the roses were purple, the ceilings were high and the women statuesque. When I insisted in conducting my interview in French, il Cavaliere responded by crooning an old Edith Piaf song. Then I mentioned I had just interviewed his old friend Aznar at the Moncloa. “Well,” said Mr Berlusconi, suddenly serious, “Spain is a great success story. Madrid is one of the great cities, bustling with commerce and trade. If Italy does not reform, it will be overtaken by Spain in the next decade.”
The EU summit that begins on Thursday has enjoyed less fanfare – and less frenzied speculation over its potential outcomes – than many others. But don’t be fooled: it still matters. Here’s why. Read more
We’ve got plenty on the US, as the election draws ever closer, but Spain’s woes are also attracting a great deal of attention:
Here’s what we’ve been chatting about after the weekend:
We’ve enjoyed reading these articles from all over the world:
Welcome to the FT’s live blog assessing the outcome of an extraordinarily dramatic night in Brussels. Markets have responded powerfully with sharp moves in equities, bonds and currencies after EU leaders agreed measures that will see a shift towards central supervision of eurozone banks in exchange for short-term support on Italian and Spanish sovereign debt. We will bring you details of the overnight deal and trace reaction.
18.10: We’re wrapping up the live blog after a day that started very early in Brussels. The action is now shifting over to Berlin, where the German parliament will hold a key vote to approve the ESM and the previously agreed fiscal discipline treaty. For updates on the Bundestag this evening from our own Gerrit Wiesmann, please follow FT.com.
In the meantime, here are some of the highlights from a busy day following the summit’s late-night deal. Read more
Spain reluctantly accepted a bailout for its struggling banks last weekend but it has not restored market confidence – the government’s borrowing costs have soared to their highest level since the birth of the euro. Meanwhile Greece is holding a general election this weekend. No party is likely to win an overall majority, the country’s exit from the eurozone is a distinct possibility and as much as €500 million is leaving its banks each day. Gideon Rachman is joined by Victor Mallet in Madrid, Kerin Hope in Athens and Chris Giles in the studio to discuss the crisis. Read more
The initial rally that greeted news of the eurozone’s €100bn emergency loan for Spanish banks petered out so quickly that you might have missed it altogether if, say, you’d had a lie-in on Monday morning. Clearly this was not how it was meant to be. The eurozone ministers who agreed the deal with Spain on a two hour conference call on Saturday must have hoped it would buy them at least a few full days of investor confidence. Instead, the yield on Spain’s 10-year bonds rose to a fresh euro-era high today. Here are some of the best news stories, analyses and comments on Spain’s so-called ‘bailout-lite’, from the FT and elsewhere: Read more
The market reaction to the Spanish bailout continues to validate the infallible eurocrisis trading rule of “buy on the summit, sell on the communiqué”. Why so negative, especially for Spanish sovereign debt?
As has been extensively pointed out, the Spanish rescue is a roundabout way to do a bank recapitalisation. Instead of taking direct equity stakes in the banks, the EFSF/ESM has had to lend via FROB, Spain’s bank rescue fund, thus increasing Spain’s sovereign debt load and raising all sorts of tortuously tricky questions about seniority.
So why do it this way? It’s the old story of policy architecture not reflecting the realities of the world economy. Read more
Could the IMF help bail out Spain? Tricky one. As goes the EU, so goes the IMF, only more so. Read more
How much infrastructure does a European country need? The question occurs to me every time I hear about the European Union’s plans for a “growth pact” to complement “austerity”. One invariable component of these well-intentioned plans is extra investment in roads, railways, airports and so on.
The assumption seems to be that austerity-asphyxiated European countries, many of which are in the Mediterranean, will breathe more freely if they receive funds to build more infrastructure. If so, it is a lazy assumption. Read more
Today we’re looking at Greece. Yup, again. But over the last week, the possibility that the Mediterranean country of 11 million people might actually leave the eurozone – a scenario long considered taboo – has become increasingly plausible. European policymakers and central bankers have gone from repeated assurances that a ‘Grexit’ would never, EVER happen, to a gradual admission that, yes, it’s possible. And if that’s the case, then the threat of contagion to the larger eurozone economies of Spain and Italy – and thus the broader single currency project – is magnified. Much will rest on the outcome of fresh elections in Greece on June 17. In the meantime: Read more
Last week it emerged that almost one in four Spaniards is unemployed. For young people, the situation is worse – the jobless rate among under 25-year-olds has reached an eye-watering 52 per cent. As incomes have fallen, many householders find it more difficult to keep up with their mortgage payments; eviction notices – like the one received in January by Luisa Pinales, pictured above – have been served. Meanwhile, the centre-right government of Mariano Rajoy is hewing desperately to a programme of austerity, in the hopes of meeting an EU-imposed target of reducing Spain’s budget deficit to 3 per cent of gross domestic product in 2013. To get a sense of how difficult that will be, consider that in 2011, Spain’s budget deficit was 8.5 per cent of GDP. Investors in the sovereign debt markets can sense the scale of the challenge, and have demanded a higher premium for lending to the beleaguered government. Read more
On Monday Cristina Fernández, Argentina’s president, announced the renationalisation of the oil company YPF, ousting the Spanish group Repsol as majority owner and prompting a furious response from Madrid. With Spain and the European Union pondering how best to respond, we cast an eye back at ten of the most momentous nationalisations of resource/commodity institutions. (We are omitting the across-the-board, everything-must-go nationalisations of Russia and China after their respective Communist revolutions, for reasons of space). Read more
Welcome to our continuing coverage of the eurozone crisis. All times are London time. Curated by Esther Bintliff and John Aglionby on the world news desk in London, with contributions from FT correspondents around the world. This post should update automatically every few minutes, although it may take longer on mobile devices.
01.11: As we close the blog this evening, here are some highlights from the latest FT story written after the close of the meeting:
- Jean-Claude Juncker, the Luxembourg prime minister who heads the group of eurozone finance ministers, said officials remained steadfast in preventing a Greek default and signalled a new €109bn bail-out for Greece.
- A deal was reached to accommodate Finland’s demand that it get Greek collateral in exchange for participating in the new bail-out.
- For the first time, eurozone finance ministers discussed increasing the firepower of the €440bn bail-out fund.
What is the ECB doing?
The ECB has reopened what had become a dormant programme of buying the debt of various eurozone countries in the secondary market. It’s a fire-fighting measure to try to calm markets. Having bought Greek, Irish and Portuguese bonds, they are for the first time this week now buying Italian and Spanish debt.