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Eurozone crisis live: Greece government talks continue as euro exit fears grow Eurozone crisis live: Greece government talks continue as euro exit fears grow
(40 minutes later)
8.12am: This morning's GDP data from France and Germany adds another twist to Angela Merkel and François Hollande's meeting today. A stagnating French economy could reinforce Hollande's case for a new growth pact, while Merkel's domestic audience may feel that they are on the right path. 8.44am: The recession in the Netherlands has continued, with data just released showing that the Dutch economy shrank by 0.2% in the first three months of 2012.
Our Europe editor Ian Traynor has predicted that Hollande faces a baptism of fire when he arrives in Germany fresh from his inauguration: That's the third quarterly contraction in a row, at a time when the Netherlands faces political uncertainty following the collapse of its government last month.
Hollande goes to Berlin on the first day of his presidency buoyed by a fresh and powerful mandate from the voters of France. Merkel, in office seven years and squaring up for a third term next year, looks diminished by the calamity on Sunday in the big state of North-Rhine Westphalia where her CDU slumped by 8 points to record its worst postwar performance there. And outside the eurozone, Hungary has suffered its first fall in GDP since 2009, with a 0.7% drop in output in Q1 2012.
The post-industrial region is highly indebted and the CDU fought a failed campaign arguing for spending cuts and austerity. The opposition Social Democrats and Greens won an absolute majority, begging the question of why the voters of France, Greece, Spain and elsewhere should buy Merkel's policies if the people of Düsseldorf don't. Other data has been more optimistic this morning, with Austria growing by 0.2% in the first three months of 2012.
"No one is buying anything any more in Europe," complained Hollande's party spokesman, Benoît Hamon, on Sunday. "We want Mrs Merkel to hear this message … We didn't have an election to get a European president called Mrs Merkel who has the power to decide everyone else's fate." 8.22am: European stock markets have recovered in early trading, thanks to the better-than-expected economic data from Germany this morning (see 7.52am).
FTSE 100: up 27 points, or 0.4%, at 5487
German DAX: up 45 points, or 0.7%, at 6497
French CAC: up 26 points, or 0.8%, at 3084
Spanish IBEX: up 41 points, or 0.6%, at 6852
Italilan FTSE MIB: up 88 points, or 0.6%, at 13744.
8.12am: This morning's GDP data from France and Germany adds another twist to Angela Merkel and François Hollande's meeting today. A stagnating French economy could reinforce Hollande's case for a new growth pact, while Merkel's domestic audience may feel that their economy is performing quite well as things stand.
Our Europe editor Ian Traynor has predicted that Hollande faces a baptism of fire when he arrives in Germany fresh from his inauguration:
If the Frenchman has the advantage of freshness to the German's slightly jaded air, the underlying reality is of German strength and relative French weakness. The crisis of the past two years has laid bare the myth that the traditional Franco-German relationship at the EU's core is a partnership of equals.
"France has much less clout in the EU than Germany. The financial crisis and the euro crisis have highlighted the vulnerabilities of the French economy: its waning competitiveness," wrote Charles Grant, director of the Centre for European Reform.
Merkel may be weakened at home as a result of the North-Rhine Westphalia defeat and increasingly isolated internationally for her euro policies which are also under fire from Washington and the International Monetary Fund.
But she remains personally popular in Germany and by far the most powerful EU leader. She has no intention of reopening her eurozone fiscal pact, which Hollande has consistently criticised. But the new French leader also looks likely to make a difference.
After years of Merkel and Sarkozy cutting deals in private and then presenting faits accomplis to the rest of Europe, Hollande will be less open to doing Berlin's bidding.
7.52am: Germany's economy roared back to growth in the first three months of 2012, according to data released this morning.7.52am: Germany's economy roared back to growth in the first three months of 2012, according to data released this morning.
Germany GDP increased by 0.5% between January and March, recovering from the 0.2% contraction in the final three months of 2011. Much better than the 0.1% expansion pencilled in by City economists.Germany GDP increased by 0.5% between January and March, recovering from the 0.2% contraction in the final three months of 2011. Much better than the 0.1% expansion pencilled in by City economists.
Net exports were the main driver of growth quarter-to-quarter, another indication that Germany has not been badly hit by the eurozone crisis.Net exports were the main driver of growth quarter-to-quarter, another indication that Germany has not been badly hit by the eurozone crisis.
So, no double-dip in Europe's powerhouse economy. But also a sign that the eurozone's two-speed economy may be getting worse (data released last month showed that Spain is in recession, and more data will be released this morning).So, no double-dip in Europe's powerhouse economy. But also a sign that the eurozone's two-speed economy may be getting worse (data released last month showed that Spain is in recession, and more data will be released this morning).
Jeremy Cook, chief economist at World First, argues that the data shows the impossibility of setting monetary policy across such divergent economies:Jeremy Cook, chief economist at World First, argues that the data shows the impossibility of setting monetary policy across such divergent economies:
German GDP of 0.5% further emphasises the fact that a strong Europe is impossible with a strong GermanyGerman GDP of 0.5% further emphasises the fact that a strong Europe is impossible with a strong Germany
— World First (@World_First) May 15, 2012— World First (@World_First) May 15, 2012
7.42am: The news that the French economy stagnated in the first three months of 2012 underlines the challenge faced by new president François Hollande.7.42am: The news that the French economy stagnated in the first three months of 2012 underlines the challenge faced by new president François Hollande.
Paris-based national statistics office Insee reported this morning that French GDP was unchanged compared with the fourth quarter (when it expanded by a meagre 0.1%).Paris-based national statistics office Insee reported this morning that French GDP was unchanged compared with the fourth quarter (when it expanded by a meagre 0.1%).
Hollande could take comfort in the fact that the French economy isn't actually suffering an Anglo-Saxon double-dip recession. But looking into the figures, it was flattered by an increase in government spending, while business investment fell by 0.7% (which could hit growth down the line).Hollande could take comfort in the fact that the French economy isn't actually suffering an Anglo-Saxon double-dip recession. But looking into the figures, it was flattered by an increase in government spending, while business investment fell by 0.7% (which could hit growth down the line).
Economists warn that the French economy is on a slippery path, making it hard for Hollande to reduce the deficit without crushing growth. As Societe Generale economist Michel Martinez put it (via Bloomberg):Economists warn that the French economy is on a slippery path, making it hard for Hollande to reduce the deficit without crushing growth. As Societe Generale economist Michel Martinez put it (via Bloomberg):
The new government faces a high-wire act.The new government faces a high-wire act.
A hardening budget stance will only make things more difficult in the months ahead....Too heavy tax increases could cause growth to falter.A hardening budget stance will only make things more difficult in the months ahead....Too heavy tax increases could cause growth to falter.
7.40am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis.7.40am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis.
Coming up.... in Greece, another round of last-ditch, make-or-break talks will take place in Athens today, nine days after the general election. President Karolos Papoulias will propose setting up a 'government of technocrats', after the leaders of the main political parties failed to form a coalition.Coming up.... in Greece, another round of last-ditch, make-or-break talks will take place in Athens today, nine days after the general election. President Karolos Papoulias will propose setting up a 'government of technocrats', after the leaders of the main political parties failed to form a coalition.
The Greek crisis will also dominate a meeting of EU finance ministers in Brussels today. After Monday's heavy falls on world stock markets, leaders are under relentless pressure to solve the crisis.The Greek crisis will also dominate a meeting of EU finance ministers in Brussels today. After Monday's heavy falls on world stock markets, leaders are under relentless pressure to solve the crisis.
Economically it's a big day, with eurozone GDP for Q1 2012 being released. We've already had data from France (which stagnated with 0% change to GDP), and Germany (which smashed forecasts with a 0.5% rise). More on these shortly.....Economically it's a big day, with eurozone GDP for Q1 2012 being released. We've already had data from France (which stagnated with 0% change to GDP), and Germany (which smashed forecasts with a 0.5% rise). More on these shortly.....
And on the political front, François Hollande is being sworn in as France's new president, and will immediately fly to Germany to meet with Angela Merkel to discuss the crisis.And on the political front, François Hollande is being sworn in as France's new president, and will immediately fly to Germany to meet with Angela Merkel to discuss the crisis.