February 11, 2012 ? 2:26 am
The Greek Government heads for a reshuffle as five cabinet members resign and cast doubt over the implementation of tough austerity measures required to secure a 130bn bailout package, while PM Lucas Papademos warns default would be ?uncontrolled chaos?.
Papademos: Greece faces ?uncontrolled chaos? if it defaults Greek Government reshuffle after five cabinet resignations Barclays (LSE: BARC.L ? news ) profits down 3pc at 5.9bn, bonus pool falls Bounty of 1 placed on troika heads by Greek police Juncker: 325m of extra Greek spending cuts needed Standard Poor?s cuts ratings for 34 Italian banks
= Latest =
22.15 News coming in from Athens now ? the Greek cabinet have approved a draft bill spelling out the reforms it is being required to make in order to receive the 130bn bail-out it needs.
As mentioned earlier today, the draft bill must be passed by Parliament which is due to vote on it on Sunday.
21.21 The US markets have drawn to a close for the week, slipping lower as serious doubts emerged over Greece?s debt deal.
The Dow Jones was down 0.69pc, the SP 500 (SNP: ^GSPC ? news ) was also off 0.69pc and the Nasdaq (Nasdaq: ^NDX ? news ) dropped 0.8pc.
21.02 We created a poll earlier on ( 17.50 ) that asked if Greece can remain in the eurozone. There?s still plenty of time to vote.
Can Greece remain in the eurozone?
20.44 Federal Reserve Chairman Ben Bernanke has issued a call to action to restore US housing markets, saying depressed house prices and sales are a serious drag on the economic recovery:
The state of housing has been an impediment to a faster recovery. We need to continue to develop and implement policies that will help the housing sector get back on its feet.
20.01 Bloomberg has seen an emailed transcript from tonight?s Greek cabinet meeting, sent by Papademos?s office. The PM reportedly said:
Some say default would be preferable. They are woefully mistaken. What is of the essence right now is to do whatever we can to approve the new plan and let the loan accord proceed.
He added that a default would halt the payment of wages and pensions and shut down schools, hospitals and businesses. He spoke after five ministers resigned in two hours and protesters clashed with police in Athens.
19.26 More now on the SP downgrade of 34 Italian banks (see 18.41 ). It?s been around a month since the rating agency knocked the whole country down two-notches, to BBB+ from A.
This latest move has hit Italy?s biggest financial institutions, including UniCredit (MDD: UCG.MDD ? news ) , Intesa Sanpaolo (Dusseldorf: 575913.DU ? news ) , Banca Nazionale del Lavoro and Mediobanca (Xetra: 851715 ? news ) .
Since coming to power in November (Stuttgart: A0Z24E ? news ) , Prime Minister Mario Monti has pushed through a harsh austerity plan which helped to bring Italy?s 10-year borrowing rate closer to 6pc after hovering around 7pc late last year. But Italy still has sky-high public debt.
19.11 We?ve more on the Greek resignations now. Three of them were down to the LAOS ministers still in the cabinet when the party pulled its support from the coalition. While they say they?ve lost faith in the Government, they?ll still vote for the austerity measures. Of course, with just 16 out of the 300 seats in parliament, they don?t have enough clout to derail the plans anyway? The socialist minister has resigned because of the employment changes included in the austerity package.
18.54 The UK economy still has seven more hard years to go before we pay down our debts, writes Jeremy Warner .
There is no quarrelling with the fact that relative to others, the UK is a massively indebted country. If government, households and banks are all deleveraging in tandem, you have to wonder where on earth the growth is going to come from.
No wonder the economy is going nowhere. The UK has lost its three biggest sources of demand and frankly, it?s very hard to see net trade replacing them.
18.41 AFP is reporting that SP has downgraded 34 Italian banks. We?ll bring you more as we have it.
18.27 President Barack Obama?s budget request to Congress on Monday will forecast a deficit of $1.33tn this year, according to draft documents seen by The Wall Street Journal. That?s higher than the $1.296tn figure last year.
18.20 Papademos has pledged to do ?everything necessary? to rescue the 130bn bail-out package for Greece, and said that any senior members of Government who opposed him would be ousted. Of course, several have already resigned and saved him the effort. He added that he was aiming for 19bn in income from privatisations.
18.06 Greece faces ?uncontrolled chaos? unless it can avoid default, warns Prime Minister Lucas Papademos , adding that the country could see an end to recession if it can push through a new debt deal:
A disorderly default would plunge our country in a disastrous adventure. It would create conditions of uncontrolled economic chaos and social explosion?this is an hour of historic responsibility.
17.53 Austria has announced a five-year, 26.7bn austerity plan. We?ll bring you more details as they come in
17.50 With the possibility of a Greek cabinet reshuffle, can the country hope to remain in the eurozone? Time for a poll?
Can Greece remain in the eurozone?
17.43 US Treasury yields slumped today as the situation in Greece became less stable and investors sought safe havens for the weekend. David Keeble , global head of interest rates strategy at Credit Agricole (Milan: ACA.MI ? news ) Corporate Investment Bank in New York (Frankfurt: A0DKRK ? news ) , said:
It?s all about Greek headlines now. Markets are facing another face-off and generally speaking, investors don?t like being short Treasuries when these things are going on.
Benchmark 10-year Treasury notes dropped yields to 1.965pc, down 6 basis points from Thursday.
17.32 As if the situation in Greece wasn?t confusing enough, Reuters is now reporting that an anonymous Government sources claims that there will be no rehuffle today.
17.27 While we wait for news to emerge from the Greek cabinet meeting, this graph sheds a lot of light on why there are protests in Greece today?
Chart: Unemployment rates in Europe (Chicago Options: ^REURUSD ? news ) (source: Eurostat)
17.07 There have now been five resignations from the Greek cabinet:
Transport (Euronext: IXSTP.NX ? news ) minister Makis Voridis (LAOS) Asst. defence minister George Georgiou (LAOS) Deputy shipping minister Adonis Georgiadis (LAOS) Deputy agriculture minister Asterios Rontoulis (LAOS) Asst. foreign minister Mariliza Xenogiannakopoulou (Socialist)
A cabinet meeting is currently underway in Athens, but there are presumably far more spare seats than usual.
16.54 Time for a chart showing the performance of European markets over the last few weeks. As usual, you can hide individual markets by clicking on their name to get a closer look at those remaining. It all looks plain sailing until you get close-up?
Chart: European markets
16.38 European markets have now closed for the day/week. Troubles in Greece have caused investors some concern?
The FTSE 100 ended down by 0.74pc, the DAX (Xetra: ^GDAXI ? news ) lost 1.4pc and the CAC (Frankfurt: 924169 ? news ) slipped 1.48pc.
Angus Campbell , head of sales at Capital Spreads, said:
A classic case of buy the rumour sell the fact as confidence had grown in the run up to the announcement of a deal on Greece?s debt yesterday but it then swiftly dawned on investors that actually passing the austerity measures into law, which is due to happen this week end, will not be plain sailing. On top of this by no means has it changed the overall picture regarding the sovereign debt crisis. Greece might live to fight another few months, but if they ever require another bailout again they won?t be able to rely on the EU and IMF (Berlin: MXG1.BE ? news ) and it really will be default time.
16.16 It?s hard to keep track of all these resignations, they?re coming in thick and fast?
Four Greek cabinet members have now resigned in protest at EU demands for more austerity: deputy foreign minister Mariliza Xenogiannakopoulou of the majority Socialist party, the right-wing LAOS party?s transport minister and deputy ministers for merchant marine and agriculture.
16.09 The Greek police federation Poasy is now offering a bounty of 1 for each of the mission chiefs from the troika, dubbing them, quite poetically, as the ?undertakers of our people?s dreams?. Obviously they think that the Greek people don?t need much of a financial incentive to assist in bringing them in?
For two years, the national federation of police officers has warned you that the policies you dictate and demand to be implemented at gunpoint will explode social cohesion and kill off any hope to restore the Greek economy. We will ask for the immediate issue of arrest warrants.
15.50 It?s official: Greece is headed for a reshuffle. Three far-right members of the coalition government have now resigned over austerity cuts. An official speaking to AFP says the dissenters would be replaced:
Whoever does not agree with the government policy will be replaced.
15.27 The Bank of England?s decision to unleash a further 50bn of quantitative easing will significantly reduce the UK?s need to tap the private sector to fund its budget deficit, says Fitch Ratings:
In addition to the direct benefit of meeting some of the UK?s financing needs, quantitative easing has also played a positive role in keeping the UK?s bond yields low.
Here?s a reminder of just how big the BoE?s QE programme has become:
Chart: Bank of England quantitative easing
15.14 We have a video for you now of the Greek protests.
15.06 A junior minister in Greece?s far-right party, LAOS, has quit over the thorny issue of austerity measures. Deputy agriculture minister Asterios Rontoulis has already offered his resignation to Prime Minister Lucas Papademos .
There are three LAOS members still in government ? a minister and two junior ministers ? and they?re rumoured to be preparing their own resignations. That would force a cabinet reshuffle.
15.02 Greece isn?t the only eurozone country to be hit by protests against austerity measures today. Riot police in Brussels have been drenched by disgruntled firefighters who broke through a barricade near the PM?s office.
14.45 US stocks have dropped in the first few minutes of trading, as the Greek debt deal faces new political problems.
The SP 500 fell 0.93pc to 1,339.32, the Nasdaq dropped 0.95pc to 2,899.56 and the Dow Jones (DJI: ^DJI ? news ) was down 0.87pc to 12,777.92.
14.32 The threat of arresting the troika seems like a drastic move, but the Greek police are the ones who have to maintain order during regular strike protests, which, in Athens, quite often involve petrol bombs and flying bricks. It?s easy to see how that would start to grate?
Here?s a slideshow of images from today?s protest: Violence erupts as Greek unions begin 48 hour strike
14.16 The eurozone crisis just took a strange turn: the Greek police union is threatening to issue arrest warrants for the troika for forcing deeply unpopular austerity measures on the country.
In a letter obtained by Reuters , the Federation of Greek Police accused officials of ?blackmail?. It said that their key target was the IMF?s top official for Greece, Poul Thomsen . The union said:
Since you are continuing this destructive policy, we warn you that you cannot make us fight against our brothers. We refuse to stand against our parents, our brothers, our children or any citizen who protests and demands a change of policy.
We warn you that as legal representatives of Greek policemen, we will issue arrest warrants for a series of legal violations ? such as blackmail, covertly abolishing or eroding democracy and national sovereignty.
13.58 We sometimes do a recap of the day?s events here on the live blog. EC President Herman Van Rompuy has given a speech in India today, which basically reads as a recap of the entire history of the EU and the eurozone crisis. We?ve dropped a bit of this below, but the whole speech is online here if you?re interested.
In the past two years, we have been (and we are) facing a crisis of public debt in the eurozone. It started in Greece two years ago almost to the day when the government was close to financial collapse.
Within the currency area, the economies and financial institutions have become so closely interdependent, that all national leaders were heavily involved. The stakes were and are still high. The financial stability of the eurozone needed to be preserved with all possible means.
In the past two years, we have been (and we are) facing a crisis of public debt in the eurozone. It started in Greece two years ago almost to the day when the government was close to financial collapse.
Within the currency area, the economies and financial institutions have become so closely interdependent, that all national leaders were heavily involved. The stakes were and are still high. The financial stability of the eurozone needed to be preserved with all possible means.
13.41 AFP is reporting that the US trade deficit in 2011 was $558bn, more than half of which went to China. We?ll bring you more on that as it comes in.
13.33 This Greek tweeter (who happens to live in Berlin) is losing patience with George Karatzaferis:
Twitter: Christos K ? Right wing Karatzaferis is ?threatening? to leave the Greek coalition. I hope the he at least will keep this promise.
13.04 Reuters reports that protestors in Athens drew parallels between Greece?s current plight ? where it faces the prospect of bankruptcy unless it agrees to unprecedented austerity demanded by eurozone leaders ? with its seven years under military dictatorship.
Songs from the struggle in the 1960s and 1970 were played over loudspeakers in Syntagma Square, central Athens. Police said two officers were injured and three protesters arrested.
12.50 European markets have reacted badly to the dissenting voice of Mr Karatzaferis, even though his LAOS Party alone could not prevent the bailout agreement from being passed in parliament.
The DAX was down 1.6pc, the CAC 40 (Paris: ^FCHI ? news ) was 1.2pc lower, while the FTSE 100 was down 0.7pc.
12.13 Spanner in the works time. The Greek far-right party leader, George Karatzaferis , said he could not vote in favour of the 130bn proposed bailout package proposed for the country.
In inflammatory comments made at a press conference, Mr Karatzaferis also said the IMF mission chief for Greece should be persona non grata in the country.
I explained to the other political leaders that I cannot vote for this loan agreement. If we want things to go forward, Poul Thomsen must be declared persona non grata for Greece.
We are not going to vote. Humiliation was imposed on us. I do not tolerate this. And I do not allow it, no matter how hungry I might be.
Ouch.
11.55 News that Greece will auction 1bn of three-month debt on Tuesday, February 14. Will it have a happy ending? A photograph of the Greek protests in Athens, with police outnumbering protestors by about 10:1 here?
11.47 Meanwhile, an observation from David Smith, economics editor at The Sunday Times, on the use of UK monetary policy for political point scoring, following the Bank of England?s decision yesterday to extend quantitative easing by 50bn.
Twitter: David Smith ? We?ve come full circle. George Osborne attacked QE as a response to government?s policy failures in 2009. Ed Balls is doing the same now.
11.45 Breaking: Riot police clash with Greek protestors in Athens. More soon.
11.34 The unresolved situation in Greece has hit European markets, the euro, and now gold prices . Spot gold was down 0.8pc $1,716.49 an ounce, while US gold (Dusseldorf: 981039.DU ? news ) futures for February delivery were down $21.30 an ounce at $1,719.90.
11.25 Veteran City commentator David Buik of BGC Partners gives his own, colourful take on the Barclays chief executive and his potential bonus.
Bob Diamond will make his peace with the board of directors, who will decide his emoluments in his capacity as CEO of Barclays not as some spotty nosed youth who trades complicated derivatives indifferently. I suspect we may have to wait 3 weeks before we know for sure what he has taken out of the ring.
Mr Diamond is articulate, sensitive and ambitious stupid he is not. Whatever he is allocated he deserves in the name of capitalism and free enterprise and the political lynch mob baying for blood, can frankly whistle!
11.12 Here are those Barclays protest photos I promised.
Customers gathered outside a branch of the bank in Holborn, central London, objecting to the 1.5bn bonus pot set aside for its investments bankers. Protestors from the ?Move Your Money? campaign are hoping to encourage customers to close their Barclays accounts.
Meanwhile the Association of British Insurers criticised Barclays for the size of its bonus pool, and said it appeared to be ?business as usual.?
Robert Talbut , chairman of the ABI investment Committee:
ABI members have asked all UK listed banks for a shift in the balance between maintaining capital strength, delivering returns to shareholders and reward to employees. Whilst overall bonus levels at Barclays have been reduced, for Barclays Capital, this reduction is only in line with the fall in profit before tax.
This appears to be very close to business as usual. It is not the signal of the change required in order to improve the investment case.
Investors have shrugged off earlier concerns about the fall in profits, with Barclays shares now up about 3pc at 240p.
10.43 The Telegraph?s assistant editor, Jeremy Warner , says in his latest blog that Europe is deliberately trying to push Greece out.
There is only one way of interpreting the set of fresh demands tabled by eurozone finance ministers last night in return for agreeing a new 130bn bailout for Greece that they are now quite deliberately trying to push Greece out of the euro. All pretence at European solidarity has been abandoned, to be replaced by the vengeance of Shylock.
To push Greece out is of course the right approach for all. There is now no chance whatsoever of Greece making it in the eurozone. Economically and politically, the country is in meltdown.
Nobody in their right mind would invest in Greece right now, knowing that at any moment Greece might leave the euro and that overnight, they will therefore lose half to two thirds of their money.
10.15 Breaking: European Commission President Jose Manuel Barroso says he is confident that a second bailout package for Greece will be finalised next week. Speaking at an EU-India summit he said:
We are now in the final stages of a second financial assistance programme for Greece . I am confident that a solution will be reached next week as it is critical for Greece and its citizens and for the whole euro area.
I call on the responsibility of Greek leadership and all members of the euro zone to rapidly attain this goal, which is important not only for the euro area, but also for the global economy.
To restore competitiveness and confidence in their economy, they need to make some structural [changes]. We are confident that Greece will remain in eurozone. We are working with Greek friends.
10.07 The official UK inflation rate ? the Consumer Prices Index ? has remained significantly above target for months and hit a high of 5.2pc in September, before falling to 4.2pc in December. The January inflation data will be published by the Office for National Statistics next week.
Alan Clarke, economist at Scotiabank commented on this morning?s factory gate inflation data from the ONS:
The trend is your friend and this latest sign of stickiness reaffirms my feeling that consumer price inflation will prove higher than most, including the Bank of England expect.
09.52 In other UK news factory gate inflation came in higher than expected, rising 0.5pc in January, following a 0.2pc fall in December. Economists were forecasting a 0.1pc rise.
This is bad news for Bank of England policymakers, who have persistently argued that inflation is set to fall sharply in the coming months. Lower inflation was the Bank?s main justification for pumping 50bn of additional stimulus into the economy, announced yesterday.
A reminder of what the Bank said:
In the light of its most recent economic projections, the Committee judged that the weak near-term growth outlook and associated downward pressure from economic slack meant that, without further monetary stimulus, it was more likely than not that inflation would undershoot the 2 per cent target in the medium term.
09.45 The Telegraph?s James Quinn is tweeting on Barclays:
Twitter: James Quinn ? Biggest issue for investors in Barclays results is admission 13pc return on capital desire now likely to take longer despite cost cuts
Twitter: James Quinn ? Barclays never releases CEO bonus on same day as results: 2010 pay report published on march 7 last year. Diamond critics will have to wait
09.33 The euro is down from two-month highs, at $1.3270, as fears of a messy Greek default persist. Many investors will have gone home last night thinking the funding package was finally sealed but alas no.
09.27 European markets are still lower, down by less than 1pc across the board. Meanwhile news that protestors have gathered outside a London branch of Barclays . Pics to follow.
09.19 Urquhart Stewart, director at Seven Investment Management, is sceptical that Greece has the ability to implement austerity measures on the scale demanded by the rest of the eurozone:
We know they?re (Greece) not going to be able to fulfill the expectations and even if they do sign up for it they won?t be able to carry it out. It seems inevitable Greece is going to go to a euro lite, or exit the euro altogether.
As Greece moves towards a final resolution, you?ll see some nervousness, I don?t think that?s necessarily a reason to be selling but you might sit on the sidelines and wait for the next news to come through. Use the volatility.
09.01 Back to the eurozone as the continued uncertainty surrounding the Greek debt deal sent UK and German gilt yields lower as investors shy away from risk and seek save haven assets.
08.52 Barclays shares are creeping back into positive territory. The bank has cut the bonus pool at its investment banking division by 32pc to 1.5bn. Mr Diamond conceded he needed to be ?sensitive to the public mood?, as pay and bonuses in the sector remain highly controversial.
The World Development Movement said the 1.5bn investment banking pot could pay for school meals for two years for 23m hungry children in Africa.
Christine Haigh of the WDM:
Big bonuses encourage bankers to take big risks, not only with financial stability through their debt-based investment, but also with people?s lives.
The kind of ?success? Barclays has rewarded its executives for contributes to price spikes that put the price of food beyond the reach of the world?s poorest people.
08.39 Barclays reported a 5.9bn pre-tax profit for 2011, down 3pc, and below analyst forecasts of 6.1bn. Chief executive Bob Diamond said the bank was operating in a ?challenging economic, market and regulatory environment.?
08:24 European markets are not liking the renewed uncertainty in Greece.
The FTSE 100 , CAC 40 in Paris, and Dax in Frankfurt are all down this morning. The FTSE is also being dragged down by the banking sector, after Barclays revealed it may miss its medium-term profitability target following its worst quarter in three years at the end of 2011.
Lloyds and RBS (LSE: RBS.L ? news ) also down this morning.
07.59 While Jeremy Warner , assistant editor, asks if yesterday?s deal means a euro crisis has been averted . His response? Don?t believe a word of it.
No one honestly believes the eurozone crisis has been vanquished, but since early January there has been a lull in the storm and even a sense of beginning to get on top of things. The European Central Bank?s promise of unlimited liquidity for the stricken banking system seems to be turning things around. Successful resolution of the Greek debt talks has added to the impression of a crisis in retreat.
Regrettably, it?s a view which is almost certainly wrong, both in political and economic terms. The ECB?s actions have bought time, but haven?t addressed the causes of the crisis. The problem of widely divergent competitiveness uncorrected by free-floating exchange rates remains exactly the same as before.
07.55 Mohamed El-Erian , chief executive of Pimco, the world?s largest bond fund, examines the Greek dilemma in an article in today?s FT :
Greece?s seemingly endless negotiations stem from two factors that threaten to derail the deal long before any of its durable benefits materialise. First (OTC BB: FSTC.OB ? news ) , it is never easy to reach agreement among parties that have very different perceptions of both the problem and its solution. This is especially true in Greece where all three parties to the negotiations (the government, official creditors and private creditors) feel they have already been asked to do a lot, without seeing any actual or potential reward for their sacrifices.
Successive Greek governments have been forced into several rounds of austerity measures in the past two years. Yet still every meaningful indicator of Greece?s economic and financial state has worsened. This sad reality is also relative to what was anticipated in the recent series of adjustment programmes.
07.50 This morning?s business pages are of course focusing on Greece as the tortuous debt negotiations continue:
07.18 It then emerged later last night that the finance ministers? group would be seeking even more spending cuts from Greece.
Reuters reported that Jean-Claude Juncker , head of the group, said another 325m of ?additional structural spending cuts? would have to be found by next Wednesday, when the finance ministers meet again.
Louise Armitstead and James Hurley report:
Politicians in Athens ended a four-day stand-off and approved a tough austerity package in a bid to avoid bankruptcy, despite warnings it was the ?tombstone of Greek society.?
The agreement was initially heralded as the breakthrough to unlock a 130bn (109bn) international bail-out package to avoid Greek bankruptcy. However, the chairman of a meeting of the 17 eurozone finance ministers last night said fresh conditions will have to be met before the bail-out is endorsed.
Jean-Claude Juncker said an extra 325m (273m) in savings for 2012 will be needed. The Greek parliament will also have to agree the deal on Sunday and politicians will have to promise to stick with the package after elections in May.
?We did not yet have all necessary elements on the table to take decisions today,? Mr Juncker, the Luxembourg prime minister, said.
That?s bound to go down well in Athens , where a 48-hour strike begins today.
07.11 Greek politicians finally reached an agreement on austerity measures needed to secure the 130bn (109bn) bail-out yesterday. But don?t get too excited yet.
Then it was time for the eurozone finance ministers? meeting, which last night ended without any kind of agreement, as had been indicated earlier in the day. As German finance minister Wolfgang Schuble said on his way into the meeting:
We have come very far, but we are still not far enough. But I think it?s good that we have intermediate results and that we tell Greece and Greece?s negotiating partners clearly what the conditions for a second bailout are and that?s what we will do tonight.
You don?t need to wait around because there will be no decision. Greece has to implement what it has not implemented from the first programme before we can decide on a second. We will hold our talks now, but as far as I know we still don?t have the conditions that were clearly required.
07.05 Good morning and welcome back to our live coverage of the eurozone debt crisis.
Debt crisis live: archive
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