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Eurozone crisis live: Bundesbank blasts ECB ahead of EU summit Eurozone crisis live: Bundesbank blasts ECB ahead of EU summit
(40 minutes later)
10.59am: Ireland's forthcoming referendum on the EU Fiscal Pact has taken its first casualty with the grandson of the Republic's founding father Eamon de Valera resigning in protest at his party's call for a Yes vote.
Henry McDonald reports from Dublin:
Fianna Fail deputy leader Eamon O Cuiv agreed to resign from his post over the party's pro-treaty stance. He will also step dow as Fianna Fail's spokesman on Communications, Energy and Natural Resources.
His departure from Fianna Fail's frontbench is a blow to the Republic's main opposition party as it prepares for its annual conference this weekend - the first since it was dumped out of power in last year's general election suffering its worst defeat in history.
Fellow Fianna Fail TD Willie O'Dea stressed that the party was united on the issue of the referendum on the treaty.
O'Dea also said he believed Mr Ó Cuív would only be "temporarily" off the party's front bench. He said while he sympathised with Mr Ó Cuív's stance, he felt that opposing the treaty was not the right option.
Ó Cuív is also understood to have withdrawn his name from consideration for the position as Vice-President of the party. The position is to be decided at the party's Ard Fheis this weekend.
10.38am: Germany appears to have dropped its opposition to enlarging the European firewall (as ballymichael was swift to flag up in the comments below). The word from Berlin is Angela Merkel has told her cabinet colleagues that Berlin must drop its veto to enlarging the firewall above €500bn.
Munich's Sueddeutsche Zeitung reported that Merkel told colleagues that:
We will not be able to resist this pressure for very long.
Ian Traynor, our Europe correspondent, explains:
The conventional figure given for the topped up bailout fund is €750bn – €500bn from the new permanent European stability mechanism from July plus the existing €250bn that remains in the current temporary European Financial Stability Facility, although the €130bn for the new Greek bailout is to come from the EFSF.
Merkel's apparent u-turn comes despite a senior Berlin official insisting on wednesday that the time was not right to talk about boosting the eurozone's firepower. Germany has been isolated in its resistance, with even euro crisis allies such the netherlands in favour of increasing the bailout fund.
The decision is to be taken at the end of march ahead of the spring meetings of the IMF and World Bank in Washington in April. The Americans, the Chinese, the British, and the IMF are all pressing the eurozone – and Germany in particular – to put up much more funds.
A €750bn pot would make Germany, as Europe's largest economy, liable for €280bn.
According to Sueddeutsche Zeitung, Merkel is said to believe that the increased firepower is now not really needed for substantive reasons, but is required for "psychological" purposes.
One proposal from berlin is to allow both pots of money, the ESM and
the EFSF, to co-exist for one year, the newspaper added.
10.12am: The eurozone unemployment rate has hit a new record, showing the urgent need for EU leaders to make progress on a growth strategy at this afternoon's Summit.
Eurostat just reported that unemployment across the 17 members of the single currency hit 10.7% in January. Across the 27 members of the EU, the rate came in at 10.1%.
Click here for a PDF showing the full results.
The youth unemployment situation remains dire, with 5.507 million people under the age of 25 unemployed across the EU - that's 269,000 more than a year ago.
The worst youth unemployment is in Spain (at 49.9%), followed by Greece (48.1%) and Slovakia (36.0%).
The lowest levels were seen in Germany (7.8%), Austria (8.9%) and the Netherlands (9.0%).
9.47am: If you're interested in the details of a Greek credit event and the triggering of credit default swaps, Lisa Pollock of FT Alphaville did a great two-part explainer here and here last week. It remains a great read – explaining how CDS holders could still lose out even if the contract are triggered, and warning that the CDS market could still be discredited even if ISDA does rule that a credit event has taken place.9.47am: If you're interested in the details of a Greek credit event and the triggering of credit default swaps, Lisa Pollock of FT Alphaville did a great two-part explainer here and here last week. It remains a great read – explaining how CDS holders could still lose out even if the contract are triggered, and warning that the CDS market could still be discredited even if ISDA does rule that a credit event has taken place.
9.37am: Just in – a second question has been posed over whether Greece has triggered a credit event.
9.37am: Just in – a second question has been posed over whether Greece has triggered a credit event.
You can see it here, on the website of the International Swaps and Derivatives Association [whose role includes deciding if bond issuers have defaulted on their bonds].You can see it here, on the website of the International Swaps and Derivatives Association [whose role includes deciding if bond issuers have defaulted on their bonds].
This question comes just a couple of hours before ISDA was due to hold a teleconference call to consider a different question on whether the proposed 53% haircut being taken by its lenders, and the insertion of Collective Action Clauses into Greek bonds (allowing Athens to force lenders to take the trim), equate to a credit event.This question comes just a couple of hours before ISDA was due to hold a teleconference call to consider a different question on whether the proposed 53% haircut being taken by its lenders, and the insertion of Collective Action Clauses into Greek bonds (allowing Athens to force lenders to take the trim), equate to a credit event.
It's an important question, as it would trigger Greek credit default swaps (although the net value of those contracts is now only around €3.2bn when last measured).It's an important question, as it would trigger Greek credit default swaps (although the net value of those contracts is now only around €3.2bn when last measured).
So how does the new question differ from the old one?So how does the new question differ from the old one?
Well, the old question focused on the decision to allow the European Central Bank and National Central Banks to dodge the 53% haircut, and receive new loans. That put them above other creditors in the 'pecking order', it suggested.Well, the old question focused on the decision to allow the European Central Bank and National Central Banks to dodge the 53% haircut, and receive new loans. That put them above other creditors in the 'pecking order', it suggested.
The new question focuses on the bond-swap, or Private Sector Involvement, itself, asking whether a credit event has happened because:The new question focuses on the bond-swap, or Private Sector Involvement, itself, asking whether a credit event has happened because:
a reduction in the amount of principal or premium payable at maturity or at scheduled redemption dates of the Designated Securities has been agreed between the Hellenic Republic and a sufficient number of holders of the Designated Securities to bind all holders of the Designated Securities.a reduction in the amount of principal or premium payable at maturity or at scheduled redemption dates of the Designated Securities has been agreed between the Hellenic Republic and a sufficient number of holders of the Designated Securities to bind all holders of the Designated Securities.
ISDA hasn't said whether it accept this second question, though.ISDA hasn't said whether it accept this second question, though.
Hope that makes sense, and isn't too wordy. Will try and get some expert comment.....Hope that makes sense, and isn't too wordy. Will try and get some expert comment.....
In the meantime, the Wall Street Journal has an interesting piece about ISDA, calling it "A secretive panel of representatives from 15 large banks, hedge funds and investment houses" here.In the meantime, the Wall Street Journal has an interesting piece about ISDA, calling it "A secretive panel of representatives from 15 large banks, hedge funds and investment houses" here.
9.31am: Britain's manufacturing sector grew in February, but at a slightly slower rate than in January.9.31am: Britain's manufacturing sector grew in February, but at a slightly slower rate than in January.
Markit just reported that the UK PMI came in at 51.2 last month, down from 52 the previous month,. That's below forecasts, but still strong enough to suggest that the sector will post growth during this quarter.Markit just reported that the UK PMI came in at 51.2 last month, down from 52 the previous month,. That's below forecasts, but still strong enough to suggest that the sector will post growth during this quarter.
9.12am: More gloom for Italy, where the unemployment rate has hit its highest level since at least 2004.9.12am: More gloom for Italy, where the unemployment rate has hit its highest level since at least 2004.
Instat reported that the seasonally adjusted jobless rate, which tracks people taking unemployment benefit, rose to 9.2% in January (from 8.9% in December).Instat reported that the seasonally adjusted jobless rate, which tracks people taking unemployment benefit, rose to 9.2% in January (from 8.9% in December).
That's someway below the eurozone average (which hit 10.4% in December - we get January's figures at 10am GMT). Youth unemployment, though, remained painfully high, with 31.1% of 15-24 year olds out of workThat's someway below the eurozone average (which hit 10.4% in December - we get January's figures at 10am GMT). Youth unemployment, though, remained painfully high, with 31.1% of 15-24 year olds out of work
Italy's other problem is the low percentage of people actually in work. The employment rate inched up to 57%, from 56.9% in December, someway below the eurozone average.Italy's other problem is the low percentage of people actually in work. The employment rate inched up to 57%, from 56.9% in December, someway below the eurozone average.
9.01am Greece's manufacturing output has slumped to a record low level, according to Eurozone data just released.9.01am Greece's manufacturing output has slumped to a record low level, according to Eurozone data just released.
Markit's monthly PMI data [a survey of purchasing managers] for Greece came in at 37.7 for February, down from 41 in January. That's the lowest level ever recorded for Greece since Markit began its survey 13 years ago, and another sign that Greece's economy is slumping.Markit's monthly PMI data [a survey of purchasing managers] for Greece came in at 37.7 for February, down from 41 in January. That's the lowest level ever recorded for Greece since Markit began its survey 13 years ago, and another sign that Greece's economy is slumping.
The overall figure for the eurozone came in at 49.0, just below the 50 mark that seperates expansion from contraction. So the wider eurozone manufacturing sector continues to shrink, but at a slower pace than in January.The overall figure for the eurozone came in at 49.0, just below the 50 mark that seperates expansion from contraction. So the wider eurozone manufacturing sector continues to shrink, but at a slower pace than in January.
The picture was pretty bleak in Spain, where the manufacturing PMI came in at 45.0. That's the 10th month in a row where Spain's manufacturing sector has shrunk.The picture was pretty bleak in Spain, where the manufacturing PMI came in at 45.0. That's the 10th month in a row where Spain's manufacturing sector has shrunk.
Italy also contracted again, but at a slower rate. Its PMI of 47.8 is the highest since last September, but the seventh contraction in a row.Italy also contracted again, but at a slower rate. Its PMI of 47.8 is the highest since last September, but the seventh contraction in a row.
8.32am: Mario Monti, Italy's technocratic prime minister, has warned that reforming the Italian economy will take many years.8.32am: Mario Monti, Italy's technocratic prime minister, has warned that reforming the Italian economy will take many years.
Monti, who is aiming to erase Italy's deficit in 2013, said in a Bloomberg interview broadcast this morning that he can only begin the task of deregulating the economy and overhauling its welfare system.Monti, who is aiming to erase Italy's deficit in 2013, said in a Bloomberg interview broadcast this morning that he can only begin the task of deregulating the economy and overhauling its welfare system.
The former EU commissioner, who is expected to only serve one term as PM, said:The former EU commissioner, who is expected to only serve one term as PM, said:
We will not complete a generational change -- that is, a change which normally requires a generation -- in 12 or 15 months...But it's important to kick-start it.We will not complete a generational change -- that is, a change which normally requires a generation -- in 12 or 15 months...But it's important to kick-start it.
Here's a clip of the interview:Here's a clip of the interview:
Monti has repeatedly promised to liberalise the schlerotic Italian economy, just as soon as he'd implemented tough spending cuts. But, as our correspondent Tom Kington reports from Rome, Monti's much heralded liberalisation plan was looking like a damp squib this week after Italy's tough business lobbies fought hard to water down the measures: Monti has repeatedly promised to liberalise the sclerotic Italian economy, just as soon as he'd implemented tough spending cuts. But, as our correspondent Tom Kington reports from Rome, Monti's much heralded liberalisation plan was looking like a damp squib this week after Italy's tough business lobbies fought hard to water down the measures:
The bill, which emerged from Senate commission hearings earlier this week and is due to be voted on in the Senate, reveals Italy's taxi drivers have got one over the prime minister who humbled Microsoft when he was the EU's competition commissioner.The bill, which emerged from Senate commission hearings earlier this week and is due to be voted on in the Senate, reveals Italy's taxi drivers have got one over the prime minister who humbled Microsoft when he was the EU's competition commissioner.
Original plans to give the right to determine taxi fleet numbers in Italian cities to a national authority were killed off, meaning local mayors maintain that right and will be unlikely to risk taxi drivers' votes by upping numbers, which is bad news for anyone who has tried to call a cab in Rome on a rainy night.Original plans to give the right to determine taxi fleet numbers in Italian cities to a national authority were killed off, meaning local mayors maintain that right and will be unlikely to risk taxi drivers' votes by upping numbers, which is bad news for anyone who has tried to call a cab in Rome on a rainy night.
Tom says that Maurizio Gasparri, a former minister in Silvio Berlusconi's government, was in the forefront of the fight to keep the cabbies happy. Monti has also faced an army of lobbyists representing other business groups who "prowled the corridors outside the Senate commission, buttonholing senators when they dared to go to the bathroom".Tom says that Maurizio Gasparri, a former minister in Silvio Berlusconi's government, was in the forefront of the fight to keep the cabbies happy. Monti has also faced an army of lobbyists representing other business groups who "prowled the corridors outside the Senate commission, buttonholing senators when they dared to go to the bathroom".
The scene, said Corriere della Sera, was a part souk, part tube station.The scene, said Corriere della Sera, was a part souk, part tube station.
Tom continues:Tom continues:
Italian lawyers and architects have also been able to scotch plans hatched by the government to force them to give clients estimates for services.Italian lawyers and architects have also been able to scotch plans hatched by the government to force them to give clients estimates for services.
One Italian think tank, the Bruno Leoni Institute, said, the watering down of the liberalisation package proves that Italy is "unreformable".One Italian think tank, the Bruno Leoni Institute, said, the watering down of the liberalisation package proves that Italy is "unreformable".
8.18am: Germany's patience with Mario Draghi may finally have snapped.8.18am: Germany's patience with Mario Draghi may finally have snapped.
The president of the Bundesbank, Jens Weidmann, has warned the European Central Bank president that yesterday's Long Term Refinancing Operation (in which €529bn was loaned to European banks on generous terms) poses significant dangers to the eurozone economy. In a letter to Draghi, Weidmann urged the ECB boss to return to safer monetary policies.The president of the Bundesbank, Jens Weidmann, has warned the European Central Bank president that yesterday's Long Term Refinancing Operation (in which €529bn was loaned to European banks on generous terms) poses significant dangers to the eurozone economy. In a letter to Draghi, Weidmann urged the ECB boss to return to safer monetary policies.
The letter was revealed by Germany's Frankfurter Allgemeine Zeitung. It says that Weidmann warned that the ECB is risking its reputation, and was wrong to relax its collateral rules – which means banks can put up a wider range of assets in return for their loans.The letter was revealed by Germany's Frankfurter Allgemeine Zeitung. It says that Weidmann warned that the ECB is risking its reputation, and was wrong to relax its collateral rules – which means banks can put up a wider range of assets in return for their loans.
Weidmann also warned that if banks are unable to repay these loans in three years time, the individual central banks who stand behind the ECB could not cover the losses. As Frankfurter Allgemeine Zeitung points out:Weidmann also warned that if banks are unable to repay these loans in three years time, the individual central banks who stand behind the ECB could not cover the losses. As Frankfurter Allgemeine Zeitung points out:
The letter is evidence of the growing unrest in the Bundesbank.The letter is evidence of the growing unrest in the Bundesbank.
The letter comes as the boss of Standard Chartered, Peter Sands, warned that central bankers are sowing the seeds of the next crisis by offering so much liquidity today.The letter comes as the boss of Standard Chartered, Peter Sands, warned that central bankers are sowing the seeds of the next crisis by offering so much liquidity today.
As we report here:As we report here:
Breaking ranks from his fellow bosses, Sands, whose bank is focused mainly in Asia, said: "Banks are still going to have to refinance their loans in three years time. It's not clear what the exit strategy is, nor is it possible to predict what the long-term consequences will be."Breaking ranks from his fellow bosses, Sands, whose bank is focused mainly in Asia, said: "Banks are still going to have to refinance their loans in three years time. It's not clear what the exit strategy is, nor is it possible to predict what the long-term consequences will be."
He added that the crisis and the west's policy response had accelerated the shift in "power and dynamism" from the developed world to emerging markets.He added that the crisis and the west's policy response had accelerated the shift in "power and dynamism" from the developed world to emerging markets.
8.05am: Although the EU summit doesn't begin until this afternoon, we should hear from Angela Merkel shortly. There's also plenty of economic news this morning, and Ben Bernanke will be testifying to Congress again.8.05am: Although the EU summit doesn't begin until this afternoon, we should hear from Angela Merkel shortly. There's also plenty of economic news this morning, and Ben Bernanke will be testifying to Congress again.
Here's the agenda:Here's the agenda:
• Angela Merkel addresses Bundestag on EU Summit agenda - from 8am GMT
• Eurozone manufacturing PMI data - 9am GMT
• UK manufacturing PMI data - 9.30am GMT
• Eurozone unemployment data for January - 10am GMT
• Eurogroup meets to discuss Greece - 1pm GMT
• Ben Bernanke testifies to the Senate banking committee - from 3pm
• EU summit begins in Brussels - from 4pm		• Angela Merkel addresses Bundestag on EU Summit agenda - from 8am GMT
• Eurozone manufacturing PMI data - 9am GMT
• UK manufacturing PMI data - 9.30am GMT
• Eurozone unemployment data for January - 10am GMT
• Eurogroup meets to discuss Greece - 1pm GMT
• Ben Bernanke testifies to the Senate banking committee - from 3pm
• EU summit begins in Brussels - from 4pm
7.55am: Good morning, and welcome to our rolling coverage of the eurozone debt crisis.7.55am: Good morning, and welcome to our rolling coverage of the eurozone debt crisis.
Later today, EU leaders will convene in Brussels to discuss the European economy. The summit is being billed as a chance to focus on growth and employment – two areas where the EU is struggling.Later today, EU leaders will convene in Brussels to discuss the European economy. The summit is being billed as a chance to focus on growth and employment – two areas where the EU is struggling.
Before the meeting, the eurogroup (finance ministers from across the eurozone) will discuss Greece again – and consider whether it has met the conditions for its second rescue plan.Before the meeting, the eurogroup (finance ministers from across the eurozone) will discuss Greece again – and consider whether it has met the conditions for its second rescue plan.
Another Greek development today: the International Swaps and Derivatives Association (ISDA) which oversees the credit default swap, will consider this morning whether a credit event has occured in Greece. This could finally decide whether Greek credit default swaps are triggered – although we may not get an answer until Monday.Another Greek development today: the International Swaps and Derivatives Association (ISDA) which oversees the credit default swap, will consider this morning whether a credit event has occured in Greece. This could finally decide whether Greek credit default swaps are triggered – although we may not get an answer until Monday.
There's also a backlash gathering pace following the €529bn of cheap loans made by the European Central Bank yesterday.There's also a backlash gathering pace following the €529bn of cheap loans made by the European Central Bank yesterday.