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| Eurozone crisis live: Greece likely to hold new elections after second attempt to form government fails | |
| (40 minutes later) | |
| 8.00am: Good morning, and welcome to our rolling coverage of the eurozone crisis. | |
| Today, the battle to form a new Greek government continues. Alexis Tsipras, leader of Coalition of the Radical Left party (Syriza), will use his mandate to attempt to reach a deal with other parties. But an agreement looks elusive, and it appears that another election will be held soon. | |
| Tsipras's call yesterday for Greece to ditch the austerity measures agreed with its lenders continues to reverberate, fuelling predictions that the country could quit the eurozone. | |
| Agenda-wise, there's very little economic data coming up, apart from trade figures from Germany and France. In the bond markets, both Germany and the UK are due to sell debt. | |
| And one for UK readers: the state opening of parliament takes place this morning. The Queen will outline the government's legislative programme, including a new banking reform bill to split retail and investment banks. | |
| 8.14am: Overnight, Asian markets fell as the threat of a disorderly Greek exit from the eurozone continued to alarm investors. Japan's Nikkei shed 1.5% to close at a three-month low, mirroring the selloff in Europe yesterday. In China, the Shanghai Composite fell 1.7%. | |
| Exporters and mining companies were badly hit, reflecting fears that the euro could implode and push the economic crisis into a new phase. | |
| As Francis Lun, managing director of Lyncean Holdings in Hong Kong, explained: | |
| If Greece repudiates the agreement signed by the previous government, the most likely scenario is Greece will default. | |
| And then all hell will break loose, and Greece will get kicked out of the eurozone. It's like the end of the world for the eurozone. | |
| 8.20am: European markets have just opened for trading, and it's a calm picture after the big losses suffered yesterday: | |
| German DAX: +21 points at 6466, up 0.33% />French CAC: +4.5 points at 3129, up 0.14% />UK FTSE 100: - 2 points at 5552, down 0.01% | |
| 8.35am: Germany's exports and imports both hit record monthly levels in March, according to data released this morning, indicating that Europe's largest economy continues to defy the worst of the economic crisis. | |
| The Federal Statistics Office reported that exports rose by 0.9% to €91.8bn, its highest ever, while imports rose 1.2% to €78.1bn. This indicates that Germany may have returned to growth in the first three months of 2012, having shrunk at the end of last year. So, no double-dip recession in Germany? | |
| Here's some comment from Christian Schulz of Berenberg Bank: | |
| German exports have proved astonishingly strong in the first quarter. Good business overseas more than compensated for falling demand from the euro zone countries. | |
| Full details here. | |
| 8.39am: Do you believe Greece will exit the euro, or can the single currency hang together? Either way, you can vote in our poll. | |
| 8.53am: Alexis Tsipras is expected to hold meetings today with the leaders of the two other large parties - Antonis Samaras of New Democracy and Evangelos Venizelos of Pasok. | |
| The tone for these negotiations was set yesterday, when Tsipras said Samaras and Venizelos should accept that Greece's commitments under the second aid deal were 'null and void'. Both men rejected the idea. | |
| Tsipras will hold the mandate to create a new government until Thursday night. But, if talks with ND and Pasok flounder, the Syriza coalition might have to accept that it cannot form a government. Then, the mandate would pass to Pasok. | |
| If none of the parties can reach a deal, the Greek president will then attempt to broker one. If that fails, fresh elections will be called and a caretaker government will run Greece in the interim. | |
| 9.04am: Megan Greene of Roubini Global Economics has written an interesting piece today about the situation in Greece, considering how a second election could pan out. | |
| Greene writes: | |
| It is possible that Syriza will be emboldened by its performance in the first elections and will continue to push its anti-bailout platform, picking up even more support in the second elections. | |
| On the other hand, Greeks may decide instead to vote for the devil they know and cast their ballots for ND and Pasok. ND in particular has been outspoken in criticizing Syriza, rightly claiming that a rejection of the bailout could well result in Greece's exit from the EZ. Voters in Greece are overwhelmingly still in favour of EZ membership, and consequently may come flocking back to the two traditional parties. Furthermore, ND and Pasok are nationwide party machines. With abstention rates at record highs, they may succeed in mobilizing voters in a second election. | |
| Greene has been arguing (rather persuasively) for months that Greece would exit the euro, probably in 2013, through an 'amicable devorce' in which the Troika would provide extra funding to help the country cope. | |
| The current political situation in Greece means that the divorce may come much sooner, and the split could get very ugly. | |
| 9.17am: Fears of a Greek exit from the eurozone have sent investors flocking into 'safe havens' such as German bonds, and out of debt issued by peripheral countries. | |
| The yield* on Spanish 10-year bonds has just risen through 6% - a sign that investors are getting jittery about the crisis spreading from Greece. In contrast the German 10-year bund's yield had hit a new record low of 1.532%. | |
| * - yields are a measure of the rate of return on a bond. A rising yield indicates that a bond has fallen in value. | |
| The euro has also fallen again today. It's currently trading at $1.2981 against the US dollar. | |
| 9.34am: Another sign of growing tension -- the cost of insuring French, Spanish and Italian debt (using a credit default swap) against default has risen. | |
| Here are the latest prices: | |
| Spanish five-year CDS: +19 basis points at 512bp />Italian: + 20 basis points at 450bp />French: + 10 basis points at 211bp | |
| That means it would cost €512,000 each year to insure €10m of Spanish debt. Rising CDS prices generally indicate that traders believe the risk of a country defaulting on its debts has risen. | |
| 9.57am: Analysts at Credit Suisse are concerned that the political crisis in Greece could spark a new run on its banks. | |
| In a new research note, Credit Suisse said current events are likely to accelerate the steady withdrawal of funds from Greek banks. Bank deposits are already 30% below their peak - as some people have shifted money overseas, and others have used up their savings to keep afloat. | |
| This chart shows how deposit levels in Greek banks has fallen every quarter since the end of 2009. | |
| />Deposit flight has tended to accelerate in periods of particular uncertainty. So a prolonged period of political volatility, in which Greece's membership of the euro may become more openly debated, is likely to lead to renewed deposit flight. | |
| That would further undermine the stability of the banks and economic activity. Given that the political volatility in Q4 last year led to a 6% drop in deposits, over a month of political uncertainty could push deposit flight to unmanageable rates. | |
| Credit Suisse also estimated that the chances of Greece leaving the euro in the next 12 months has now risen to 15%. Two scenarios make this possible -- either the anti-bailout Syriza party succeeds in forming a coalition, rejects the IMF/EU demands outright, and is denied funds, or a unity government tries, and fails, to renegotiate the bailout terms. | |
| 10.15am: Breaking news in from Greece where our correspondent Helena Smith, says mandarins in the EU should be braced for yet more tough language from Alexis Tsipras by lunchtime! /> />Helena writes: | |
| Sources at Syriza have confirmed that the leftist leader is about to send a letter to the European Commission, the EU's executive branch and the European Central Bank, explaining why Greece can no longer commit to the the hard-hitting austerity program it signed up to in return for its second aid package. | |
| The missive, which is expected to land on the desks of European commission president José Manuel Barroso, EU president Herman Van Rompuy and ECB president Mario Draghi by lunchtime, repeats the five points Tsipras made when he received a mandate to form a government on Tuesday. | |
| Aides close to the leader said the letter made clear, in no uncertain terms, that the controversial loan agreement outlining the terms on which Greece has and will receive rescue funds from both the EU and IMF was "null and void." "It has been deligitimised by the people," said one aide - referring to Sunday's earthquake election where anti-austerity parties opposing the conditions, now widely referred to as the "anti-memorandum" front, won over 65 % of the popular vote. "Greece has been turned into a prison and we have to somehow get out of it." /> />But Tsipras is also believed to have recomfirmed Greece's desire to remain in the single currency. Syriza officials, once again this morning, were at pains to stress that the party's objective was not to leave the euro zone - or "backpeddle on our European orientation." | |
| "What Syriza is against is the memorandum which is cruel and unfair and has robbed Greeks of their democratic and social rights," Nikos Filis, editor of the Avriani newspaper, told me. "Greece is proving to be a laboratory. What has happened here will happen elsewhere in Europe as we have seen in France. The emphasis has to be on growth and development if the single currency is to be saved." | |
| And here's a reminder of Tsipras's five-point plan to save Greece: | |
| • Cancelling the bailout terms, particularly cuts to wages and pensions />• Scrapping laws that abolish workers rights, particularly a law abolishing collective labour agreements />• Promoting changes to deepen democracy and social justice />• Investigating Greece's banking system />• Setting up an international committee to find out the causes of Greece's public deficit and putting on hold all debt servicing | |
| 10.29am: Germany has succeeded in selling new five year bonds at a record low interest rate, but didn't manage to sell as much as hoped. | |
| The Bundesbank sold €4bn of bonds maturing in April 2017 at a yield of just 0.56%, down from 0.8% at the last auction of five-year debt. Such a low cost of borrowing shows that buyers were prioritising safety over rate of return. | |
| But in return for accepting such low yields, Germany didn't manage to sell the full €5bn of debt on offer. | |
| 10.52am: The UK has sold €2bn of 30-year gilts at lower borrowing costs, showing that the eurozone crisis has not dampened demand for British debt. | |
| The yield on the sale dropped to 3.224% (from 3.341%). Ed Conway, Sky News's economics editor, reckons today's this is lowest price ever: | |
| UK govt sells £2bn of 30-year bonds at 3.224% - the lowest interest rate for such a maturity EVER. Covered v healthy 2.22 times | |
| — Ed Conway (@EdConwaySky) May 9, 2012 | |
| The successful auction has sent gilts rallying in the general bond market, with prices hitting record high levels since. /> />Update: I'm reminded that the usual proviso applies to UK gilt yields -- they're also so low because the Bank of England has been buying hundreds of billions of pounds worth through its quantitative easing programme. | |
| 10.56am: There have been some political developments in Athens, where Alexis Tsipras and his Coalition for the Radical Left (Syriza) is attempting (with limited signs of success) to form a government. | |
| Antonis Samaras, the New Democracy leader who won the largest share of the vote last Sunday, has told local media that he is keen to form a "centre-right front", indicating that he is not about to form an alliance with Tsipras. | |
| Samaras has also declared that New Democracy is "the only pillar of stability" in Greece, and remains committed to the country staying within the Eurozone. | |
| There are also reports that Pasok leader Evangelos Venizelos will not take up the 'mandate' to form a government should his negotiations with Syriza go badly today (those talks start at 6pm local time, or 4pm BST). | |
| In theory, the mandate would pass to Veniselos if Tsipras failed to form a government (he has until the end of Thursday). If Venizelos turns down the chance to go through the motions, that could mean new elections are called sooner. From Athens, Channel 4's Faisal Islam reports that this could happen tomorrow: | |
| Smart money in Greece on an election rerun being called Thurs. Radical left leader will fail to form govt. Centre left Pasok will pass. | |
| — Faisal Islam (@faisalislam) May 9, 2012 | |
| 11.22am: Nick Malkoutzis, deputy editor of the Kathimerini newspaper, reports that Greece's two main unions, GSEE and ADEDY, have declined an invitation to meet with Syriza leader Alexis Tsipras today. | |
| 11.44am: European stock markets are now falling steadily, amid steady chatter over the Greek crisis. | |
| The selloff has hit Spain, where the IBEX has tumbled by 3.45% to 6764, a decline of 242 points. The Italian FTSE MIB is also suffering, down 1.6% | |
| In London, the FTSE 100 has dropped 57 points, or 1%, to 5497, adding to yesterday's 100 point drop. Germany's DAX is down 0.44%, and the French CAC is down almost 1%. | |
| The euro is also edging lower ($1.297), as City analysts keep predicting that Greece and the eurozone could part company. | |
| As Bank of America Merrill Lynch said in a research note: | |
| As long as political uncertainty continues, the Greek presence in the euro area in its current form could be seen to be at risk, in our view. | |
| 12.09pm: The sharp fall on the Spanish stock market today (the IBEX is down 3.5%) is partly due to the prospect of the Madrid government having to rescue its banks. | |
| There are (unconfirmed) reports today that Spanish banks will be instructed to raise €35bn to cover property loans that have turned toxic. Analysts believe the sector will not be able to manage such provisions without public sector help. That, in turn, would drive up the Spanish government's own borrowing needs. | |
| Gilles Moec, an analyst at Deutsche Bank commented: | |
| More public cash will raise funding costs for the government but it's worth the risk. | |
| Another trigger for today's stock market losses (see 11.44am for details) is a report from German business newspaper Handelsblatt that politicians in Berlin are making plans for Greece to exit the euro. | |
| The article is online here. It includes a quote from Klaus-Peter Willsch of the CDU party, along the lines that Greece should be offered the chance to leave the euro in a controlled manner, while remaining in the EU. | |
| Willsch also criticised the 'dogma' that states no country is allowed to leave the euro zone, saying this has caused too much damage to Europe. | |
| 1.01pm: Alexis Tsipras is reportedly seeking to hold talks with France's president-in-waiting. | |
| In an interesting development, Tsipras has put a request for a meeting through to François Hollande. It's not clear how soon Tsipras hopes to meet the triumphant socialist. Both left-wingers have a packed schedule – Hollande getting to grips with the situatoin in France, and Tsipras labouring to form a new Greek government. | |
| It may suggest that Tsipras is maneuvering himself to be seen as the leading left-wing leader in Greece, having won more votes than Pasok (the Panhellenic Socialist Movement, which governed Greece before the current coalition was formed). | |
| Hollande's demands for a pro-growth agenda and a reform of the EU fiscal pact must appeal to Tsipras, who also ran on an anti-austerity platform. | |
| 1.17pm: The euro sell-off is contining. It just hit a new three-and-a-half month low of $1.2937 against the US dollar. That means it has lost a cent and a half since Sunday evening. | |
| Peter O'Flanagan of Clear Currency explains that investors are moving their money into the US dollar and the Japanese yen, away from riskier assets such as commodies, driven by fears of disorder in the eurozone. | |
| With Spanish bond yields still over 6%, and most stock markets down, it's turning into another poor day in the markets. Two factors are being blamed -- the instability in Greece, and the speculation of a Spanish banking bailout (see 1.09pm). | |
| 1.46pm: Events in Europe are going to hit Wall Street, it appears. The futures market is predicting that the Dow Jones will fall almost 100 points when trading begins in 45 minutes time. | |
| 1.55pm: One bit of good news for Greece, the European Union is still planning to hand over the next tranche of the country's loan tomorrow, worth €5.2bn. | |
| That's just been confirmed by EU spokeman Amadeu Altafaj in Brussels. | |
| Greece needs the money to service existing debts which come up for repayment. This chart from Credit Suisse shows Greece's debt repayment schedule for the rest of the year: | |
| Nearly €5bn needs to be repaid this month alone. Money in, money out.... | |
| 2.14pm: Traders simply cannot get enough of Germany's debt. The yield on 10-year bunds has dropped below the 1.5% mark for the firs time ever in the last couple of minutes, showing that German bonds are being valued at unprecentedly high levels. | |
| 2.23pm: The prime ministers of Spain and Portugal have vowed to work closely together to ride out the eurozone crisis. | |
| Mariano Rajoy and Pedro Passos Coelho just released a joint statement after holding a joint summit at the Customs House in Porto, Portugal. | |
| They said they would co-operate together at European level, to deliver progress on youth employment and economy stimulus. Both countries suffering some of the highest jobless rates in the EU. | |
| Portugal's Pedro Passos Coelho didn't break ranks with the EU party line, though, saying that there could not be any growth without budget consolidation. Critics of austerity that there's not much sign of grow with budget consolidation. | |
| Speaking of Portugal... it has agreed to suspend four public holidays for the next five years, in an attempt to stimulate the economy. As Matthew Sparkes points out over on the Daily Telegraph, this includes a holiday celebrating independence from Spanish rule. | |
| And, inspired by the spirit of co-operation shown in Portugal, I'm handing this over to my colleague Nick Fletcher. | |
| 2.52pm: The global market rout of the past couple of days is continuing in America now Wall Street has opened. | |
| The Dow Jones Industrial Average is down 106 points in early trading - another fall of almost 1% - and so there is no impetus for a recovery in Europe. The FTSE 100 is currently down 56 points or just over 1%, France's Cac is 1.2% lower and Germany's Dax is down 0.6%. The Athens market is getting off comparatively lightly, down just 0.25% but Spain is really feeling the pain - the Ibex is off 3.2%. | |
| As well as the uncertainty over Greece - will it get a government? will it default on its debts? will it leave the euro? - the state of Spain's banks is also causing concern to investors. | |
| The Spanish goverment was expected to announce plans to support its banking system on Friday, but the country's ABC newspaper is reporting [in Spanish] the bailout of Bankia - the third largest bank in Spain - could be announced this afternoon. The report says the government will convert the €4.5bn or so it has pumped into the bank into shares, giving it around 45% of the bank. | |
| However Spain's prime minister Mariano Rajoy, speaking after their joint summit, seemed to reaffirm that decisions on the banking measures will indeed be taken on Friday. | |
| 3.18pm: Back in Greece, Helena Smith reports that the centre-right bloc holds the key to the country remaining in the eurozone. | 3.18pm: Back in Greece, Helena Smith reports that the centre-right bloc holds the key to the country remaining in the eurozone. |
| Earlier we reported that New Democracy leader Antonis Samaras, who won the largest share of the vote in Sunday's election, was keen to form a "centre-right front", indicating that he is not about to form an alliance with the left's Alexis Tsipras. Tsipras currently has the mandate to form a government but this is looking unlikely. Helena writes: | Earlier we reported that New Democracy leader Antonis Samaras, who won the largest share of the vote in Sunday's election, was keen to form a "centre-right front", indicating that he is not about to form an alliance with the left's Alexis Tsipras. Tsipras currently has the mandate to form a government but this is looking unlikely. Helena writes: |
| The olive branch extended by Antonis Samaras, the conservative New Democracy leader, is a highly significant move even if it is also an act of self-preservation. | The olive branch extended by Antonis Samaras, the conservative New Democracy leader, is a highly significant move even if it is also an act of self-preservation. |
| The Socialist Pasok party, which with 13.2% of the vote sunk to its lowest levels ever in Sunday's election, is a dead duck, analysts say. "It has lost every trace of confidence or ability almost to react," one insider has just told me. | The Socialist Pasok party, which with 13.2% of the vote sunk to its lowest levels ever in Sunday's election, is a dead duck, analysts say. "It has lost every trace of confidence or ability almost to react," one insider has just told me. |
| Pasok cadres have confirmed that while the party's head, the former finance minister Evangelos Venizelos will meet Alexis Tsipras later this afternoon, he will NOT try to form a government should the leftist's efforts collapse as now looks likely. | Pasok cadres have confirmed that while the party's head, the former finance minister Evangelos Venizelos will meet Alexis Tsipras later this afternoon, he will NOT try to form a government should the leftist's efforts collapse as now looks likely. |
| There is a growing sense that a new round of elections are now inevitable – either on June 10 or June 17. Helena says: | There is a growing sense that a new round of elections are now inevitable – either on June 10 or June 17. Helena says: |
| In this context the appeal by Antonis Samaras, the conservative leader, to form a "pro-European centre-right front" that would take in parties which failed to cross the three percent threshold into parliament, is a rallying cry to all those who want to keep Grexit at bay. Four parties did not cross the threshold in Sunday's ballot some by just a couple of thousands votes – the right-wing LAOS, the liberal Democracy Alliance, the centrist Drassis party and the centrist Dimiorgia Xana. Together they account for over 6% of the vote. The popular right Independent Greeks party, which broke away from New Democracy in February clinched 10.6 % of the vote. | In this context the appeal by Antonis Samaras, the conservative leader, to form a "pro-European centre-right front" that would take in parties which failed to cross the three percent threshold into parliament, is a rallying cry to all those who want to keep Grexit at bay. Four parties did not cross the threshold in Sunday's ballot some by just a couple of thousands votes – the right-wing LAOS, the liberal Democracy Alliance, the centrist Drassis party and the centrist Dimiorgia Xana. Together they account for over 6% of the vote. The popular right Independent Greeks party, which broke away from New Democracy in February clinched 10.6 % of the vote. |
| To merge all the forces Samaras will have to eat humble pie — he has been at daggers drawn with almost every single leader for years. "The move is as much about countering the criticism he now faces that by lurching the party so much to the right — and flip-flopping over austerity measures — he effectively destroyed the centre right which, more than any other movement, identifies itself with the country's European orientation," said another insider. "And the results have been devastating for Greece's future in the EU." | To merge all the forces Samaras will have to eat humble pie — he has been at daggers drawn with almost every single leader for years. "The move is as much about countering the criticism he now faces that by lurching the party so much to the right — and flip-flopping over austerity measures — he effectively destroyed the centre right which, more than any other movement, identifies itself with the country's European orientation," said another insider. "And the results have been devastating for Greece's future in the EU." |
| If a centre-right front is created in time for the next elections the chances of a further rise in the popularity of Syriza could be neutralised. That would be a very important step in lowering the anti-austerity rhetoric and warming hearts in Brussels. "Amending the memorandum [of terms outlined in the loan agreement] is one thing, destroying it is quite another," said Samaras as he extended the appeal in an address to party cadres. | If a centre-right front is created in time for the next elections the chances of a further rise in the popularity of Syriza could be neutralised. That would be a very important step in lowering the anti-austerity rhetoric and warming hearts in Brussels. "Amending the memorandum [of terms outlined in the loan agreement] is one thing, destroying it is quite another," said Samaras as he extended the appeal in an address to party cadres. |
| 3.26pm: All eyes are on Greece and Spain at the moment in terms of the eurozone crisis, but there are still tensions elsewhere. | |
| Olli Rehn, the European commissioner for economic and monetary affairs, has weighed in on the Netherlands, saying the country must stick to its plans to cut its budget deficit to 3% of GDP next year. There had been reports the country might seek to have the target eased as the backlash against austerity gathers pace, but Rehn said in a statement: | |
| />It is essential for the sake of confidence in the Dutch economy that the country pursues its fiscal consolidation efforts with determination. Rumours of a relaxation of the rules of the stability and growth pact are unfounded. | |
| 3.40pm: Contrary to what we thought earlier, there is now talk that the EU may delay the latest €5.2bn bailout payment to Greece, due tomorrow. The news has sent the euro tumbling even further, with the single currency down at $1.2929: | |
| Breaking: Euro-zone countries are debating a potential delay to 5.2 billion euros in bailout aid to Greece wsj.com | |
| — Wall Street Journal (@WSJ) May 9, 2012 | |
| However Reuters is reporting EU sources saying the EFSF - the bailout fund - is more likely than not to agree tomorrow's payment. | |
| 3.49pm: More on the €35bn extra provisions for Spanish banks we mentioned previously. Reuters says: | |
| Spain stepped up efforts to save its troubled banks on Thursday with a plan to make them recognise huge losses from a property crash. | |
| The centre-right government will demand that banks set aside €35bn against loans to the moribund building sector, on top of €54bn the banks are already provisioning, financial sources said late on Tuesday. | |
| 3.56pm: Potentially bad news for Alexis Tsipras, the leader of Greece's left coalition who is attempting to form a new government. | |
| After a meeting with Tsipras, the leader of the Independent Greeks party which came fourth in the weekend's election, said there was not enough support for an anti-EU bailout government. Panos Kammenos said: | |
| It is an established fact there is not a sufficient majority to form an anti-bailout front. | |
| As well as being music to Brussel's ears, this could also give the impetus back to New Democracy leader Antonis Samaras who is trying to drum up support ahead of any new elections. | |
| 4.14pm: More on the possiblity of Greece not receiving its next tranche of bailout money, given the uncertainty and political posturing which has followed the weekend's inconclusive election. Ian Traynor writes: | |
| Several eurozone countries are reluctant to release €5.2bn to Greece on Thursday because of the turmoil and the chances that Greece could renege on the terms of its €130bn euro bailout. A heated debate was being conducted among eurozone finance ministries on Wednesday over whether to hand over the latest tranche, with several unnamed countries resisting, according to EU sources. | |
| To complicate matters it is the Europe Day holiday today in the EU. (You can make up your own jokes) | |
| 4.22pm: More on the Spanish banks. Giles Tremlett in Madrid reports: | |
| Spain's government is preparing a partial nationalisation of one of the country's big four high street banks, Bankia, according to numerous reports in Madrid. | |
| Bankia's board has this afternoon voted José Ignacio Goirigolzarri in as new chairman of both the bank and its parent company BFA following the dramatic resignation of former IMF boss Rodrigo Rato. The board meeting is continuing, with Goirigolzarri widely reported to be set to ask the government to convert a €4.5bn loan to BFA from its bank restructuring fund into shares. El País says that will give the government control over the bank. | |
| A government announcement may come tonight or tomorrow. There are unconfirmed reports that Bankia and BFA, where many of the group's toxic real estate assets are parked, will merge. | |
| Santander, BBVA and CaixaBank — the other three big Spanish entities — are not in danger of any similar moves. | |
| 4.37pm: Now here's a surprise: | |
| Reports that French President Hollande and German Chancellor Merkel have declined to meet SYRIZA leader Tsipras due to protocol. #Greece | |
| — Kathimerini English(@ekathimerini) May 9, 2012 | |
| 5.00pm: European markets have closed and although there was a bit of a late rally after Wall Street recovered some of its early losses, it is still not a pretty picture. | |
| The FTSE 100 has fallen 24.50 points to 5530.05, its third day of losses. At one point the index was as low as 5464. | |
| France's Cac is off 0.2% while Germany's Dax has bucked the downward trend, edging up 0.47%. But the Athens market is down 0.87%, and Italy's FTSE MIB has fallen 1.18%. | |
| But the worst damage has been done to the Spanish market, with the Ibex down 2.77% to a nine year low. Greece's current turmoil continues to unnerve investors - especially with some posturing over whether it will receive tomorrow's €5.2bn bailout tranche. And Spain itself has come under pressure ahead of Friday's expected rescue of some of the bank's caught up in the country's property slump. There is talk they need to make an extra €35bn of provisions on top of €54bn already made. | |
| In the US the Dow Jones Industrial Average is down around 64 points, but off its worst levels. | |
| 5.12pm: German pressure on Greece not to abandon its bailout agreement seems to be growing, but it's a risky game being played. Ian Traynor in Brussels writes: | |
| />A dangerous war of nerves is building between Greece and the eurozone. We'll see who blinks first. It may not end well. | |
| Amid the high drama in Athens and the tales being put around Brussels that the eurozone is split on whether to cough up €5.2bn in bailout money for Greece tomorrow (most of which is returned to the troika or the ECB and eurozone central banks next week), Guido Westerwelle, German foreign minister, has just become the first Berlin cabinet member to threaten to kick Greece out. The German on the ECB board, Joerg Asmussen, did the same yesterday. | |
| "We want Greece to stay in the eurozone, but the agreed reforms have to be implemented," Westerwelle said today. "If Greece halts its reform course, I can't see the corresponding tranches [of bailout funds] being paid out." | |
| Wolfgang Schaeuble, the powerful German finance minister, waded in in what appears to be an orchestrated warning to Athens. "The Greek nation knows what it has to do," he said. "Most Greeks want to stay in the euro. We need to make it clear to them that the terms for that are the fulfilment of the reform requirements of the aid programme. You cannot have the one without the other." | |
| 5.17pm: The repercussions of the French election - and in particular president-elect Francois Hollande's antipathy to the EU fiscal treaty - spread well beyond the country itself. Henry McDonald in Dublin writes: | |
| France's new Socialist president has no intention of interfering with Ireland's referendum, a relieved Enda Kenny said today. | |
| The Irish Premier had telephone talks with Francois Hollande and claimed that the new head of state in Paris understands and respects the needs of Irish voters. | |
| The Irish electorate goes to the polls on 31 May to either ratify or reject the EU fiscal treaty which President Hollande says he wants to amend with a growth-stimulus package. | |
| Proponents of a No vote particularly Sinn Fein have claimed that the Socialist Party victory in France and now the stunning gains of the Greek far left will allow Ireland plenty of room to renegotiate the austerity measures contained in the lastest EU treaty to be put to a referendum. | |
| Speaking after his conversation with Hollande today, Kenny said: "President-elect Hollande is fully sensitive and cognisant of the concerns of Ireland; of the fact that our people are holding a referendum on May 31 on the text of the treaty signed on March 2 and agreed by 25 states." | |
| 5.25pm: More on the eurozone's budget deficit targets. The EU is due to announce on Friday - the same day we expect news on Spanish bank refinancings - its economic forecasts for the 27 EU countries. According to Reuters: | |
| Spain is set to miss its deficit reduction targets this year and next unless it takes new measures, the European Commission will forecast on Friday, but Madrid insists the targets will be met, Spanish and EU officials said. | |
| Spain's borrowing costs have soared on investor concerns that the government may have to bail out the banking sector. Madrid has promised to reduce the public deficit to 5.3% of GDP this year from 8.5% in 2011, and to 3% in 2013. | |
| However, the Commission will say that unless policies change, Spain will have a budget shortfall of 6% this year and just short of 4% in 2013, two EU officials said. | |
| Madrid, under intense market pressure to demonstrate its public finances are be sustainable, is adamant it will meet the targets, although no new measures are in the pipeline for now. | |
| 5.52pm: Greece's socialist leader Evangelos Venizelos has reportedly rejected joining a coalition with Alexis Tsipras' Syriza party. But he said he would try to form a government if (when?) he receives a mandate from the president. | |
| Whether he has any more luck than the efforts so far, would seem unlikely, paving the way for new elections. | |
| 5.59pm: All the talk has been about Greece potentially leaving the euro, and the devastation that may cause. How much worse would it be if one of the major countries left, say Spain. | |
| US economist Nouriel Roubini has been on CNBC and that seems to be his prognosis: | |
| Roubini to @CNBC: Eventually Spain could exit the eurozone. #SALT2012 | |
| — CNBC (@CNBC) May 9, 2012 | |
| Nouriel Roubini to @CNBC: Next year could be a "perfect storm for global markets." #SALT2012 | |
| — CNBC (@CNBC) May 9, 2012 | |
| Roubini to @CNBC: If Greece exits the Eurozone next year, will lead to "contagion."- cnb.cx/KmyLI7 | |
| — CNBC (@CNBC) May 9, 2012 | |
| 6.22pm: Interesting snap from Reuters. ECB Governing Council member Ewald Nowotny, amid talking about inflation and the bank's monetary policy, has come out with this about Greece: | |
| You can't help somebody who is not prepared to do his own part. | |
| Along the lines of Germany's back the bailout terms or risk losing the next payouts. | |
| And with that, I'm handing over to my US colleagues to follow all the evening's developments. | |
| 1.52pm ET/6.52pm BST: It's Tom McCarthy here in New York taking over for London. | |
| Our Wall Street correspondent Dominic Rushe summarizes what's at stake this evening: | |
| The Eurozone crisis is entering a new and potentially dangerous phase tonight. Officials are debating when and whether to handover a €5.2bn payment to Greece as the country's politicians rail against the terms of the bailout. | |
| The payment is due Thursday and tonight the board of the European Financial Stability Facility is discussing whether or not it will go ahead. | |
| "Normally, the payment is due since legally, nothing has changed in Greece. But I can't exclude that some people may have second thoughts about it," a spokesman for Eurogroup president Jean-Claude Juncker told The Wall Street Journal. | |
| With the Greeks seemingly unable to form a government, and its politicians and people hitting back against the austerity measures drawn up by Germany, there's mounting speculation that Greece could be out of the Eurozone unless a compromise can be reached. | |
| "As long as political uncertainty continues, the Greek presence in the euro area in its current form could be seen to be at risk, in our view," Bank of America Merrill Lynch said in a research report. | |
| 2.02pm ET/7.02pm BST: For the last twelve hours or so we've been running a poll of readers asking whether you think a Greek exit from the eurozone is a done deal. There's still plenty of time to vote: the poll will remain live for two days. | |
| At the risk of influencing the opinions of those who have yet to vote, we thought we'd share the stark results so far: Voters believe a Greek exit from the eurozone is a fait accompli by a margin of almost 3-1. | |
| Do you agree? Let us know. | |
| 2.14pm ET/7.14pm BST: New York University economics professor and renowned prophet of economic end times Nouriel Roubini, aka Dr. Doom, says Europe is suffering a "slow motion train wreck" – and the boxcars could be piling up for years. | |
| "Europe will be lucky if it ends up in stagnation like Japan for the next ten years," Roubini told CNBC. Earlier in the day, Roubini said that Spain could exit the eurozone in three years from now. | |
| No reports on whether he said so through a barely suppressed smile. | |
| 2.40pm ET/7.40pm BST: Two bits of breaking news: | |
| First, a new tranche of bailout funds scheduled to go to Greece tomorrow will be delivered as planned, according to reports out of the European Financial Stability Facility meeting. | |
| However it is unclear whether the full €5.2bn will be disbursed; the EFSF is discussing a smaller payout as a way of sending a signal to Greece that the bailout is not unconditional. | |
| Second, Greek Radical Left leader Alexis Tsipras has announced that his party has failed to form a government, despite its best efforts, the AP reports. The announcement sets the stage for new elections. | |
| 2.50pm ET/7.50pm BST: Dominic Rushe surveys the US market reaction – or non-reaction – to news from Europe: | |
| />US stock markets seem to be assuming that either a deal will get done in Europe or that Greece doesn't matter that much anymore. It's probably the former. | |
| Certainly Greece seems to have lost its power to shock. The Dow is now off just 0.36%, 45 points. It had been down 184 points earlier in the day. | |
| Last year a Greek riot would have sent US markets into a tailspin. The assumption seems to be that for all the posturing, Greece will get its money. | |
| 2.59pm ET/7.59pm BST: The InTrade market agrees with participants in our online poll: Greece is now overwhelmingly likely to exit the eurozone, the hive mind believes. | |
| Likelihood of Eurozone exit soars on @Intrade -- 69% by yearend 2014, 54% by 2013, 35% by 2012. twitter.com/esoltas/status… | |
| — Evan Soltas (@esoltas) May 9, 2012 | |
| 3.36pm ET/8.36pm BST: US stocks: immune to all that overseas clamor? Here's Dominic Rushe: | |
| US stock markets have largely shrugged off the Euro woes. The Dow is now down just 0.67%. Jack Ablin, investment guru at Harris Private Bank, says this may be the shape of things to come. | |
| "I think the US is slowly coming to the conclusion that we are decoupling from Europe much as we did from Japan when it entered its lost decade. There is no doubt in my mind that there will be bumps along the way but the US is worrying less about what is happening in Europe." | |
| 3.42pm ET/8.42pm BST: Breaking News: Greece will be denied a full transfer of bailout funds scheduled to arrive Thursday. My colleague Ian Traynor reports from Brussels: | |
| />The top dogs at the eurozone's current temporary bailout fund, the EFSF, have confirmed they are releasing money to Greece tomorrow after a day of dispute, but that they are also sending a signal to the recalcitrant by withholding some 20%, or a billion euros, of what should have been delivered. | |
| An EFSF statement said: "The Board has confirmed the release of the outstanding amount of €5.2 bn from the first instalment of €39.4 bn by the end of June. An amount of €4.2 bn will be disbursed on 10 May. The remaining funds of €1.0 bn are not needed before June and will be disbursed depending on the financing needs of Greece. As with previous disbursements to Greece, the EFSF will transfer the €4.2 bn into a segregated account which will be used for debt service payments." | |
| The "debt service payments" means that most of the money will be returned to the eurozone. The "depending on the financing needs" means "behave or else." | |
| 4.38pm ET/9.38pm BST: Nick Malkoutzis of Inside Greece says the rejection of the mainstream parties does not necessarily mean a rejection of a bailout arrangement that could keep Greece in the eurozone: | |
| Representatives of the Coalition of the Radical Left (SYRIZA) and the Independent Greeks, as well as others, have suggested that Sunday's outcome is proof that 68 percent of voters reject the terms of the EU-IMF bailout. In fact, so emboldened by his party's remarkable surge to 16.78 percent, SYRIZA leader Alexis Tsipras is poised to write to EU officials to declare the loan deal null and void because of the way people voted on Sunday. This is presumptuous on behalf of the leftist leader. | |
| It's true that PASOK and New Democracy, the two that signed the latest loan agreement, only gathered a combined record low of 32 percent but that doesn't mean that every other vote was cast as a flat rejection of the bailout mechanism. | |
| Democratic Left, which won 6.11 percent of the vote, has asked for Greece to disengage from the memorandum but has not asked for an immediate rejection. After all, remaining in the eurozone is one of the party's red lines. That's why its leader, Fotis Kouvelis, has given only qualified support to Tsipras, saying he would back a SYRIZA administration only if it's a majority government. | |
| 5.30pm ET/10.30pm BST: We're going to wrap up our live blog coverage of the eurozone crisis. Here's a summary of the latest developments: | |
| • Greece is likely to hold new elections after a second try at forming a government failed. Alexis Tsipras, head of the Radical Left coalition Syriza, said the party's best efforts at forming a governing bloc had fallen short. | |
| • European wariness about moving forward with the Greek bailout is resurgent. €1bn will be held back from a bailout tranche scheduled for Thursday. The EFSF announced the money would be disbursed "depending on the financing needs of Greece." As if those were in doubt. | |
| • The EU is due on Friday to announce its economic forecasts for the 27 EU countries. It's the same day that news on Spanish bank refinancings is expected. The banks will be looking for an "extra" €35bn, according to multiple sources. /> />• The euro slumped to $1.2945 on the sharpened impression that the currency zone is in the process of falling apart. US markets largely shrugged off the news overseas. | |