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| Eurozone crisis live: Spain to stay in recession until 2014, says EC | Eurozone crisis live: Spain to stay in recession until 2014, says EC |
| (40 minutes later) | |
| 11.51am: We're zipping about a bit here but some very interesting comments from Francois Hollande this morning. He says that outgoing president Nicolas Sarkozy underplayed how bad the French fiscal situation had become and that today's EC forecasts confirm his suspicions. | |
| However, he says it won't mean that he will try to water down his campaign pledge to balance the books while finding growth. | |
| "No, we had already expected this," Hollande said on TV. | |
| 11.33am: Over to Madrid, where our correspondent Giles Tremlett says that there will be news about Spain's bank reforms after 2pm. Read about it here live. | |
| 11.21am: Ian Traynor, our man in Brussels, notes that the EC's spring forecasts are a good test of whether or not Europe's austerity drive is working. He's been in the presser with Olli Rehn this morning and has sent these observations: | 11.21am: Ian Traynor, our man in Brussels, notes that the EC's spring forecasts are a good test of whether or not Europe's austerity drive is working. He's been in the presser with Olli Rehn this morning and has sent these observations: |
| To judge by national debt levels (rising) and the reasons adduced for this, it would appear not. | To judge by national debt levels (rising) and the reasons adduced for this, it would appear not. |
| The EC says: "Government debt to GDP ratios are forecast to increase in most member states. In the euro area, increasing interest payments and low growth are contributing to push up debt ratios." | The EC says: "Government debt to GDP ratios are forecast to increase in most member states. In the euro area, increasing interest payments and low growth are contributing to push up debt ratios." |
| That sounds like a downward spiral. Overall debt ratio in EU likely to rise to 87% next year from 86% this year. It's worse in the eurozone, increasing from 92% to 93%. | That sounds like a downward spiral. Overall debt ratio in EU likely to rise to 87% next year from 86% this year. It's worse in the eurozone, increasing from 92% to 93%. |
| So, is austerity working, reporters asked Rehn: | |
| "That's too simple, simplistic," comes the reply, before replaying his riff on investment, "project bonds", the European Investment Bank etc | "That's too simple, simplistic," comes the reply, before replaying his riff on investment, "project bonds", the European Investment Bank etc |
| 10.51am: Unlike Spain, Italy seems to have escaped censure from headmaster Rehn. He sees growth there at -1.4 this year but back into the black next year at 0.4%. There's also an improved deficit picture falling from -2% this to -1.1 next - well within the EU targets. | 10.51am: Unlike Spain, Italy seems to have escaped censure from headmaster Rehn. He sees growth there at -1.4 this year but back into the black next year at 0.4%. There's also an improved deficit picture falling from -2% this to -1.1 next - well within the EU targets. |
| And in more good news, there was decent demand for short-term Italian debt this morning which helped to push Italian 10-year yields down slightly ahead of bigger sales next week. | And in more good news, there was decent demand for short-term Italian debt this morning which helped to push Italian 10-year yields down slightly ahead of bigger sales next week. |
| Italy sold €7bn of 12-month Treasury bills at an average 2.34%, down from 2.84% in mid-April, Reuters reports. The sale was covered 1.79 times versus a bid-to-cover ratio of 1.52 in April. | Italy sold €7bn of 12-month Treasury bills at an average 2.34%, down from 2.84% in mid-April, Reuters reports. The sale was covered 1.79 times versus a bid-to-cover ratio of 1.52 in April. |
| 10.43am: The EC figures are a bit more optimistic on unemployment but still bad as far as Spain goes. It says the jobless total there will climb to 25.1% next year from 24.4% this year - by far the highest rate in the EU. Greece is the next worst at 19.7% this year, falling to 19.6% next, so ever so slightly better news for Athens. | 10.43am: The EC figures are a bit more optimistic on unemployment but still bad as far as Spain goes. It says the jobless total there will climb to 25.1% next year from 24.4% this year - by far the highest rate in the EU. Greece is the next worst at 19.7% this year, falling to 19.6% next, so ever so slightly better news for Athens. |
| At a news conference in Brussels, Rehn has been adding to the earlier statement about Spain. He says: | At a news conference in Brussels, Rehn has been adding to the earlier statement about Spain. He says: |
| The commission has full confidence in the determination of the Spanish government to meet the fiscal target in line with the pact. For Spain, the key to restoring confidence and growth is to tackle the immediate fiscal and financial challenges with full determination. | The commission has full confidence in the determination of the Spanish government to meet the fiscal target in line with the pact. For Spain, the key to restoring confidence and growth is to tackle the immediate fiscal and financial challenges with full determination. |
| This calls for a very firm grip to curb the excessive spending of regional governments. | This calls for a very firm grip to curb the excessive spending of regional governments. |
| Rehn added that by the end of this month the EC would be able to assess what extra measures Madrid would need to take to meet its deficit targets. | Rehn added that by the end of this month the EC would be able to assess what extra measures Madrid would need to take to meet its deficit targets. |
| 10.33am: More on the figures from Brussels. The overall EU-wide budget deficit is seen coming in at 3.5% this year, down from 4.5%. Next year they say it will be 3.25%. | 10.33am: More on the figures from Brussels. The overall EU-wide budget deficit is seen coming in at 3.5% this year, down from 4.5%. Next year they say it will be 3.25%. |
| Olli Rehn, the monetary affairs commissioner, also reckons that the UK economy will grow at 1.7% next year - the same as Germany. | Olli Rehn, the monetary affairs commissioner, also reckons that the UK economy will grow at 1.7% next year - the same as Germany. |
| 10.17am: Back again. Sorry for delay. Slight technical hitch. The EC forecasts make grim reading, especially for Spain. | 10.17am: Back again. Sorry for delay. Slight technical hitch. The EC forecasts make grim reading, especially for Spain. |
| The EC says Spain will remain in recession this year and next unless it changes policies. Spain says it can reduce its budget deficit to 5.3% this year but that looks very difficult now with the EC forecasting it to come in at 6.4%. | The EC says Spain will remain in recession this year and next unless it changes policies. Spain says it can reduce its budget deficit to 5.3% this year but that looks very difficult now with the EC forecasting it to come in at 6.4%. |
| The EC says: | The EC says: |
| Whereas the (5.3 percent) target of the central government should be within reach, deviations are projected at this stage for regional governments. This reflects the standard no-policy-change assumption and the fact that not all consolidation measures at regional level for 2012 have been specified yet. | Whereas the (5.3 percent) target of the central government should be within reach, deviations are projected at this stage for regional governments. This reflects the standard no-policy-change assumption and the fact that not all consolidation measures at regional level for 2012 have been specified yet. |
| It has also revised down its forecast for growth in Spain from -1% in February to minus 1.8%. Tough to see where deficit-reducing growth is coming from there. Also, the Commission forecast it would still contract by a further 0.3 percent next year. | It has also revised down its forecast for growth in Spain from -1% in February to minus 1.8%. Tough to see where deficit-reducing growth is coming from there. Also, the Commission forecast it would still contract by a further 0.3 percent next year. |
| 10.01am: The EC forecasts are out and they're none too pretty. | 10.01am: The EC forecasts are out and they're none too pretty. |
| It predicts that Spain's budget deficit will balloon to 6.4% of GDP this year compared with a previous forecast of 5.9%. | It predicts that Spain's budget deficit will balloon to 6.4% of GDP this year compared with a previous forecast of 5.9%. |
| Here are some other highlights: Portuguese deficit will be 4.7% (was 4.5%) Greece 7.3% (7%) Italy 2% (2.3%) France 4.5% (5.3%) Germany 0.9% (1%) | Here are some other highlights: Portuguese deficit will be 4.7% (was 4.5%) Greece 7.3% (7%) Italy 2% (2.3%) France 4.5% (5.3%) Germany 0.9% (1%) |
| More shortly. | More shortly. |
| 9.40am: UK factory gate inflation did not fall as much as expected last month. The ONS says that producer prices rose 3.3% last month compared with 3.7% in March. This was the lowest since December 2009 but well above the forecast of 2.9% and will highlight the continued risk of consumer inflation rising. | 9.40am: UK factory gate inflation did not fall as much as expected last month. The ONS says that producer prices rose 3.3% last month compared with 3.7% in March. This was the lowest since December 2009 but well above the forecast of 2.9% and will highlight the continued risk of consumer inflation rising. |
| 9.31am: The EC forecasts aren't out yet but, in a little blog exclusive, we understand that Rehn will forecast the French deficit to be 4% next year. That's bad news for Hollande who expects to meet the fiscal target of 3% while spurring growth. | 9.31am: The EC forecasts aren't out yet but, in a little blog exclusive, we understand that Rehn will forecast the French deficit to be 4% next year. That's bad news for Hollande who expects to meet the fiscal target of 3% while spurring growth. |
| 9.07am: Things would be greatly helped if the Greeks could sort themselves out of course. To that end socialist leader Evangelos Venizelos is meeting his conservative counterpart Antonio Samaras today to see if they can put together a government of national unity. | 9.07am: Things would be greatly helped if the Greeks could sort themselves out of course. To that end socialist leader Evangelos Venizelos is meeting his conservative counterpart Antonio Samaras today to see if they can put together a government of national unity. |
| The talks between the two leaders, whose usually dominant parties were hammered in Sunday's election, represents the last chance for Greece to get a government without fresh elections. | The talks between the two leaders, whose usually dominant parties were hammered in Sunday's election, represents the last chance for Greece to get a government without fresh elections. |
| We'll get more on this as it happens. | We'll get more on this as it happens. |
| 8.54am: As promised, we've now got some words on the slowdown in China here. | 8.54am: As promised, we've now got some words on the slowdown in China here. |
| Although China grew by 8.1% in the first quarter, that's not great by its recent standards and was down from 8.9% in the fourth quarter of 2011. Many experts are therefore talking about the need for new stimulus measures there to keep the growth up above 8%. | Although China grew by 8.1% in the first quarter, that's not great by its recent standards and was down from 8.9% in the fourth quarter of 2011. Many experts are therefore talking about the need for new stimulus measures there to keep the growth up above 8%. |
| Here's Lorraine Tan, director of equities research at credit ratings agency Standard & Poor's: | Here's Lorraine Tan, director of equities research at credit ratings agency Standard & Poor's: |
| Now that you have the European uncertainty coming back in a bigger way, I think people are going to hold back a bit longer. The key will be for China to grow at least 8 percent this year to help fuel global growth and demand. | Now that you have the European uncertainty coming back in a bigger way, I think people are going to hold back a bit longer. The key will be for China to grow at least 8 percent this year to help fuel global growth and demand. |
| 8.48am: Also expected today are the European Commission's economic forecasts which our Europe editor, Ian Traynor, pictured, points out could be quite tricky for newly elected french president Francois Hollande. Here's Ian: | 8.48am: Also expected today are the European Commission's economic forecasts which our Europe editor, Ian Traynor, pictured, points out could be quite tricky for newly elected french president Francois Hollande. Here's Ian: |
| After a week of ferocious political austerity-v-growth argument across Europe, triggered by Francois Hollande's triumph last weekend and the electoral fallout in Greece, sobering statistics are expected from the European Commission this morning when Olli Rehn presents his spring forecasts on deficits, debt, and unemployment levels in the European economy. | After a week of ferocious political austerity-v-growth argument across Europe, triggered by Francois Hollande's triumph last weekend and the electoral fallout in Greece, sobering statistics are expected from the European Commission this morning when Olli Rehn presents his spring forecasts on deficits, debt, and unemployment levels in the European economy. |
| Apart from the usual suspects - the Greek calamity and the worsening situation in Spain - many eyes will be on the figures for France and what they indicate about Hollande's ambitions. | Apart from the usual suspects - the Greek calamity and the worsening situation in Spain - many eyes will be on the figures for France and what they indicate about Hollande's ambitions. |
| The new regime in Paris has said it is committed to meeting the budget deficit target of 3% next year while relaxing austerity and trying to spur growth. The expectation in Brussels is that Rehn's figures will emphasise the daunting challenges faced by Hollande. The policy prescription is bound to be one of belt-tightening rather than stepping off the brakes. | The new regime in Paris has said it is committed to meeting the budget deficit target of 3% next year while relaxing austerity and trying to spur growth. The expectation in Brussels is that Rehn's figures will emphasise the daunting challenges faced by Hollande. The policy prescription is bound to be one of belt-tightening rather than stepping off the brakes. |
| The Dutch, also in a deficit mess despite their preaching of fiscal orthodoxy, will also be taken to task. Speculation is rife, however, that Mariano Rajoy in Spain might be given a bit more time to meet the eurozone targets. | The Dutch, also in a deficit mess despite their preaching of fiscal orthodoxy, will also be taken to task. Speculation is rife, however, that Mariano Rajoy in Spain might be given a bit more time to meet the eurozone targets. |
| 8.39am: It's suddenly looking quite lively today. The unexpected news from JP Morgan last night has clearly upset market sentiment but a 75% fall in profits at Credit Agricole in France - blamed on losses in Greece - has added to renewed unease about the banking sector. | 8.39am: It's suddenly looking quite lively today. The unexpected news from JP Morgan last night has clearly upset market sentiment but a 75% fall in profits at Credit Agricole in France - blamed on losses in Greece - has added to renewed unease about the banking sector. |
| Given that we're also expecting a big announcement from Spain today about what they plan to do about their banks and the market reaction seems a bit easier to fathom. | Given that we're also expecting a big announcement from Spain today about what they plan to do about their banks and the market reaction seems a bit easier to fathom. |
| 8.27am: Markets all over Europe are down as well, following overnight falls in Asia. The Ibex in Madrid, which hit a 9-year low this week, is down 1.25%. The CAC in Paris is off 1% while the Dax in Frankfurt is down 0.6%. | 8.27am: Markets all over Europe are down as well, following overnight falls in Asia. The Ibex in Madrid, which hit a 9-year low this week, is down 1.25%. The CAC in Paris is off 1% while the Dax in Frankfurt is down 0.6%. |
| 8.21am: The FTSE100 in London is down nearly 26 points, not helped by the overnight revelations that a trader here known as the London Whale has cost JP Morgan $2bn. | 8.21am: The FTSE100 in London is down nearly 26 points, not helped by the overnight revelations that a trader here known as the London Whale has cost JP Morgan $2bn. |
| Banks taking a bit of a pasting - Barclays down 2.3%, ditto RBS, which has also announced 500 job cuts in Holland. That's around 25% of its headcount in Amsterdam where it has operations as a result of its ill-fated takeover of ABN Amro. That, truly, is the deal that keeps on giving. | Banks taking a bit of a pasting - Barclays down 2.3%, ditto RBS, which has also announced 500 job cuts in Holland. That's around 25% of its headcount in Amsterdam where it has operations as a result of its ill-fated takeover of ABN Amro. That, truly, is the deal that keeps on giving. |
| 8.11am: Good morning and welcome to the live blog. The action today promises to be mainly in Spain where the cabinet is meeting to discuss banking reforms and how much taxpayer money might be needed to support the country's creaking banking system. See here for an excellent summary of how things have gone wrong there. | 8.11am: Good morning and welcome to the live blog. The action today promises to be mainly in Spain where the cabinet is meeting to discuss banking reforms and how much taxpayer money might be needed to support the country's creaking banking system. See here for an excellent summary of how things have gone wrong there. |
| Otherwise the markets are set to open sharply down after figures from China showed that its economy is still slowing down. Story coming on that soon. Could be a big day for "hard landing/soft landing" debates. | Otherwise the markets are set to open sharply down after figures from China showed that its economy is still slowing down. Story coming on that soon. Could be a big day for "hard landing/soft landing" debates. |
| We've also got UK producer prices at 9.30am to look forward to. | We've also got UK producer prices at 9.30am to look forward to. |