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| Eurozone crisis live: Greek exit fears growing as coalition talks continue | Eurozone crisis live: Greek exit fears growing as coalition talks continue |
| (40 minutes later) | |
| 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. 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 | |
| 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. | |
| 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. | 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. | 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. | But in return for accepting such low yields, Germany didn't manage to sell the full €5bn of debt on offer. |
| 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: | 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. | 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. | 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." | 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, the paper closest to the party 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." | "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, the paper closest to the party 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: | 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 | • 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 |
| 9.57am: Analysts at Credit Suisse are concerned that the political crisis in Greece could spark a new run on its banks. | 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. | 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. | 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. | 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. | 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. | 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. |
| 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. | 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: | 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 | 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. | 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. |
| 9.17am: 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. | 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%. | 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. | * - 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. | The euro has also fallen again today. It's currently trading at $1.2981 against the US dollar. |
| 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. | 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: | 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. | 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. | 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. | 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. | The current political situation in Greece means that the divorce may come much sooner, and the split could get very ugly. |
| 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. | 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. | 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. | 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. | 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. |
| 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. | 8.39am: Do you believe Greece will exit the euro, or can the single currency hang together? Either way, you can vote in our poll. |
| 8.35am: 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. | 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? | 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: | 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. | 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. | Full details here. |
| 8.20am: European markets have just opened for trading, and it's a calm picture after the big losses suffered yesterday: | 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% | 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% |
| 8.14am: 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%. | 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. | 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: | 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. | 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. | 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. |
| 8.00am: Good morning, and welcome to our rolling coverage of the eurozone crisis. | 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. | 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. | 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. | 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. | 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. |