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| Eurozone crisis live: EU heading for showdown over growth | Eurozone crisis live: EU heading for showdown over growth |
| (40 minutes later) | |
| 10.18am: UK banks are strong enough to survive if Greece quit the eurozone, but should keep strengthening themselves to ride out a crisis that is changing 'hour by hour'. | |
| That's the message from Michael Cohrs, a member of the Bank of England's Financial Policy Committee (FPC) , who also told us that the Committee is on "alert stations" for the crisis to intensify. | |
| My colleague Jill Treanor reports: | |
| "British banks are ready for Greece," Cohrs said. "They have thought about their direct exposures to Greece and they have marked them to appropriate levels, their liquidity is strong and they have enough capital to withstand shocks from Greece. If it goes further it's not clear, and that is why we have been encouraging them to raise more capital because nobody knows where it will stop or it won't stop." | |
| You can read more of the interview (Cohrs's first since joining the FPC), here. | |
| 10.00am: A political spat is breaking out in the UK over David Cameron's warning to the Greece electorate (see 8.15am) | |
| Ed Balls, Labour's shadow chancellor, accused Cameron of exacerbating the eurozone crisis by "posturing" over Greece. Balls also criticised the G8 leaders for not making more progress at last weekend's summit. | Ed Balls, Labour's shadow chancellor, accused Cameron of exacerbating the eurozone crisis by "posturing" over Greece. Balls also criticised the G8 leaders for not making more progress at last weekend's summit. |
| Speaking on Radio 4's Today Programme, Balls said: | |
I don't think David Cameron's posturing helps at all, I think it just makes it worse. | I don't think David Cameron's posturing helps at all, I think it just makes it worse. |
| Spain and Italy are huge. Our country, our companies, are exposed to them. There is no plan to stop contagion to Spain and Italy. If that happens it is absolutely catastrophic for Britain, Europe and the world and we have come out of a summit with no plan and Britain still supporting the [Angela] Merkel view that we don't need a plan. | Spain and Italy are huge. Our country, our companies, are exposed to them. There is no plan to stop contagion to Spain and Italy. If that happens it is absolutely catastrophic for Britain, Europe and the world and we have come out of a summit with no plan and Britain still supporting the [Angela] Merkel view that we don't need a plan. |
| When not watching penalty shootouts, G8 leaders managed to agree an official communique which said the top priority was to "promote growth and jobs," while also stating that "the right measures are not the same for each of us" (which rather sounds like Merkel digging her heels in). | When not watching penalty shootouts, G8 leaders managed to agree an official communique which said the top priority was to "promote growth and jobs," while also stating that "the right measures are not the same for each of us" (which rather sounds like Merkel digging her heels in). |
| 9.37am: France's new foreign minister has "done a Cameron" and told the Greek people that next month's election is a vote on their future within the eurozone. | 9.37am: France's new foreign minister has "done a Cameron" and told the Greek people that next month's election is a vote on their future within the eurozone. |
| Laurent Fabius told French radio station Europe1 this morning (via Dow Jones): | Laurent Fabius told French radio station Europe1 this morning (via Dow Jones): |
| If [Greek voters] want to stay in the euro, and I think a majority of them want that, they cannot vote for parties that eventually make them exit from the euro zone | If [Greek voters] want to stay in the euro, and I think a majority of them want that, they cannot vote for parties that eventually make them exit from the euro zone |
| What's at stake is whether Greeks stay in euro or not.... | What's at stake is whether Greeks stay in euro or not.... |
| This is becoming a theme – European leaders offering 'helpful advice' to Greece. Clearly the underlying message is that voting for Syriza (the Coalition for the Radical Left that surged to second place in this month's election) is a dangerous gamble. | This is becoming a theme – European leaders offering 'helpful advice' to Greece. Clearly the underlying message is that voting for Syriza (the Coalition for the Radical Left that surged to second place in this month's election) is a dangerous gamble. |
| My colleague Helena Smith met with Syriza's leader, Alexis Tsipras, last week During the interview, Tsipras argued forcefully that his party did not want to break up the eurozone, saying: | My colleague Helena Smith met with Syriza's leader, Alexis Tsipras, last week During the interview, Tsipras argued forcefully that his party did not want to break up the eurozone, saying: |
| We are not against a unified Europe or monetary union. | We are not against a unified Europe or monetary union. |
| We don't want to blackmail, we want to persuade our European partners that the way that has been chosen to confront Greece is totally counter-productive. It is like throwing money at a bottomless pit. | We don't want to blackmail, we want to persuade our European partners that the way that has been chosen to confront Greece is totally counter-productive. It is like throwing money at a bottomless pit. |
| But Tsipras also remained adamant that Greece's current austerity plan is is misguided and lacks legitimacy, and must be torn up. And given there is no legal way to exit the eurozone, Syriza argues that Greece, not the rest of Europe, ultimately holds the trump cards. | But Tsipras also remained adamant that Greece's current austerity plan is is misguided and lacks legitimacy, and must be torn up. And given there is no legal way to exit the eurozone, Syriza argues that Greece, not the rest of Europe, ultimately holds the trump cards. |
| 9.19am: Jörg Asmussen, Germany's representative on the executive board of the European Central Bank, issued his own warning shot this morning that eurobonds will not be accepted now. | 9.19am: Jörg Asmussen, Germany's representative on the executive board of the European Central Bank, issued his own warning shot this morning that eurobonds will not be accepted now. |
| Asmussen also said that the eurozone fiscal pact needs to be ratified "quickly", rather than opened up again, as European leaders such as François Hollande are demanding. | Asmussen also said that the eurozone fiscal pact needs to be ratified "quickly", rather than opened up again, as European leaders such as François Hollande are demanding. |
| Speaking ahead of Wednesday's informal summit, Asmussen said the fiscal pact must not be renegotiated or watered down, but added that it could still be complemented with new growth measures. | Speaking ahead of Wednesday's informal summit, Asmussen said the fiscal pact must not be renegotiated or watered down, but added that it could still be complemented with new growth measures. |
| Those measures could be financed by the European Investment Bank through 'project bonds' (borrowing to pay for infrastructure), Asmussen said, but that are not the same as eurobonds, he added. | Those measures could be financed by the European Investment Bank through 'project bonds' (borrowing to pay for infrastructure), Asmussen said, but that are not the same as eurobonds, he added. |
| Another indication that Wednesday's meeting is going to be rather punchy – and that leaders may struggle to make real progress (again). Asmussen also said it was crucial that Europe's new bailout fund, the ESM, is in place by 1 July. | Another indication that Wednesday's meeting is going to be rather punchy – and that leaders may struggle to make real progress (again). Asmussen also said it was crucial that Europe's new bailout fund, the ESM, is in place by 1 July. |
| 8.55am: A German government minister swiftly rejected France's proposal that eurobonds should be introduced now. | 8.55am: A German government minister swiftly rejected France's proposal that eurobonds should be introduced now. |
| In a sign that Wednesday's summit meeting could be combative, deputy finance minister Steffen Kampeter insisted earlier this morning that Germany would not accept collective borrowing until the underlying problems in the eurozone were fixed. | In a sign that Wednesday's summit meeting could be combative, deputy finance minister Steffen Kampeter insisted earlier this morning that Germany would not accept collective borrowing until the underlying problems in the eurozone were fixed. |
| Speaking after French president Hollande announced that he will propose eurobonds at Wednesday's meeting, Kampeter told Deutschlandfunk radio that eurobonds would be: | Speaking after French president Hollande announced that he will propose eurobonds at Wednesday's meeting, Kampeter told Deutschlandfunk radio that eurobonds would be: |
| the wrong prescription at the wrong time, [causing] the wrong side effects. | the wrong prescription at the wrong time, [causing] the wrong side effects. |
| Kampeter added: | Kampeter added: |
| We have always said that as a first step we need solidity in European finances, and that is the fiscal compact. | We have always said that as a first step we need solidity in European finances, and that is the fiscal compact. |
| The battle is joined... | The battle is joined... |
| 8.50am: European stock markets are a mixed picture this morning. The three biggest markets are a little higher, but shares have contined to fall in Spain and Italy. | 8.50am: European stock markets are a mixed picture this morning. The three biggest markets are a little higher, but shares have contined to fall in Spain and Italy. |
| FTSE 100: up 21 points, or 0.4%, at 5288 German DAX: up 9 points, ot 0.16%, at 6281 French CAC: up 10 points, or 0.35%, at 3018 Spanish IBEX: down 35 points, or 0.5%, at 6531. Italian FTSE MIB: down 82 points, or 0.6%, at 12973 | FTSE 100: up 21 points, or 0.4%, at 5288 German DAX: up 9 points, ot 0.16%, at 6281 French CAC: up 10 points, or 0.35%, at 3018 Spanish IBEX: down 35 points, or 0.5%, at 6531. Italian FTSE MIB: down 82 points, or 0.6%, at 12973 |
| 8.33am: As well as eurobonds (see 8.22am), EU leaders are also likely to discuss whether the European bailout fund should be allowed to recapitalised struggling banks directly, at Wednesday's informal summit. | 8.33am: As well as eurobonds (see 8.22am), EU leaders are also likely to discuss whether the European bailout fund should be allowed to recapitalised struggling banks directly, at Wednesday's informal summit. |
| This would provide a new way of supporting Spain's battered banks. The idea has been rejected by Berlin, but is popular with many other players in the crisis in - including the International Monetary Fund. | This would provide a new way of supporting Spain's battered banks. The idea has been rejected by Berlin, but is popular with many other players in the crisis in - including the International Monetary Fund. |
| A third option on the table is whether to allow the European Central Bank to buy unlimited quantities of sovereign debt issued by weaker members of the eurozone (Italy and Spain, primarily), to restore market confidence. | A third option on the table is whether to allow the European Central Bank to buy unlimited quantities of sovereign debt issued by weaker members of the eurozone (Italy and Spain, primarily), to restore market confidence. |
| City analysts aren't convinced that leaders will make significant progress in Brussels. | City analysts aren't convinced that leaders will make significant progress in Brussels. |
| Michael Hewson of CMC Markets commented: | Michael Hewson of CMC Markets commented: |
| These measures are likely to continue to be resisted by Germany despite the urgency of the situation in Europe. The fact is that even if these measures were agreed, which remains unlikely, they would be impossible to implement quickly given that some of them would need unanimous approval as well as constitutional approval in some cases, which could take months. | These measures are likely to continue to be resisted by Germany despite the urgency of the situation in Europe. The fact is that even if these measures were agreed, which remains unlikely, they would be impossible to implement quickly given that some of them would need unanimous approval as well as constitutional approval in some cases, which could take months. |
| 8.22am: European leaders are set to discuss a series of proposals to address the crisis, including eurobonds and new powers to recapitalise struggling banks, at an informal summit on Wednesday. | 8.22am: European leaders are set to discuss a series of proposals to address the crisis, including eurobonds and new powers to recapitalise struggling banks, at an informal summit on Wednesday. |
| The gathering, in Brussels, is likely to put more pressure on Angela Merkel to bow to pressure on issues such as collective borrowing. | The gathering, in Brussels, is likely to put more pressure on Angela Merkel to bow to pressure on issues such as collective borrowing. |
| France's new president, François Hollande, has already identified the battleground, telling reporters after the G8 summit ended that he will present clear proposals to stimulate the European economy. | France's new president, François Hollande, has already identified the battleground, telling reporters after the G8 summit ended that he will present clear proposals to stimulate the European economy. |
| Hollande said: | Hollande said: |
| I will outline all growth proposals at this informal meeting on May 23.... | I will outline all growth proposals at this informal meeting on May 23.... |
| Within this packet of proposals there will be Eurobonds and I will not be alone in proposing them. I had confirmation on this at the G8. | Within this packet of proposals there will be Eurobonds and I will not be alone in proposing them. I had confirmation on this at the G8. |
| The meeting is meant to allow leaders to discuss possible growth measures, but the escalating crisis has given the talks new impetus -- and encouraged supports of eurobonds to push for their introduction again. | The meeting is meant to allow leaders to discuss possible growth measures, but the escalating crisis has given the talks new impetus -- and encouraged supports of eurobonds to push for their introduction again. |
| As the FT puts it: | As the FT puts it: |
| Their resurrection is the latest sign François Hollande's election in France has shifted the terms of the eurozone crisis debate, giving advocates of such measures – who include José Manuel Barroso, president of the European Commission, and Mario Monti, Italian prime minister – a powerful new ally. | Their resurrection is the latest sign François Hollande's election in France has shifted the terms of the eurozone crisis debate, giving advocates of such measures – who include José Manuel Barroso, president of the European Commission, and Mario Monti, Italian prime minister – a powerful new ally. |
| It also reflects the growing belief among some leaders that instability in Greece necessitates revisiting the crisis procedures to ensure they are sufficient to deal with a Greek eurozone exit. | It also reflects the growing belief among some leaders that instability in Greece necessitates revisiting the crisis procedures to ensure they are sufficient to deal with a Greek eurozone exit. |
| Merkel has argued that eurobonds (where a euro-member's borrowing is guaranteed by the rest of the eurozone) cannot be introduced until there is closer fiscal union across the region. Those on the other side of the argument warn, though, that time is too short. | Merkel has argued that eurobonds (where a euro-member's borrowing is guaranteed by the rest of the eurozone) cannot be introduced until there is closer fiscal union across the region. Those on the other side of the argument warn, though, that time is too short. |
| 8.15am: Good morning, and welcome to our rolling coverage of the Eurozone financial crisis. | 8.15am: Good morning, and welcome to our rolling coverage of the Eurozone financial crisis. |
| Coming up ... we'll be tracking all the latest developments in Greece, where election fever is in full cry. | Coming up ... we'll be tracking all the latest developments in Greece, where election fever is in full cry. |
| Financial markets are digesting last weekend's G8 summit – where world leaders failed to make a 'big leap forward' in addressing the eurozone crisis. | Financial markets are digesting last weekend's G8 summit – where world leaders failed to make a 'big leap forward' in addressing the eurozone crisis. |
| Overnight, David Cameron has weighed in on the Greek elections – saying voters must choose between meeting their commitments, or leaving the eurozone. | Overnight, David Cameron has weighed in on the Greek elections – saying voters must choose between meeting their commitments, or leaving the eurozone. |
| Speaking at the Nato summit in Chicago, Cameron warned: | Speaking at the Nato summit in Chicago, Cameron warned: |
| It's not for me to say what Greek parties should and shouldn't stand on and how the Greek elections should work. But it's very important that everyone is clear that the choice Greece faces is maintaining its commitments and maintaining itself in the eurozone, or deciding that is not the path it wants to take. What would be bad for Greece, bad for Europe and bad for the world is if we just allowed the can to be kicked further down the road with an inconclusive outcome. What's required is decisiveness, strong action by all governments. This is a moment of clarity. | It's not for me to say what Greek parties should and shouldn't stand on and how the Greek elections should work. But it's very important that everyone is clear that the choice Greece faces is maintaining its commitments and maintaining itself in the eurozone, or deciding that is not the path it wants to take. What would be bad for Greece, bad for Europe and bad for the world is if we just allowed the can to be kicked further down the road with an inconclusive outcome. What's required is decisiveness, strong action by all governments. This is a moment of clarity. |
| "There needs to be a resolution because it's the lack of resolution that's leading to a lack of confidence. | "There needs to be a resolution because it's the lack of resolution that's leading to a lack of confidence. |
| We've seen mixed trading in Asia overnight, after Friday's heavy selloff, and traders in London don't expect a strong recovery today. | We've seen mixed trading in Asia overnight, after Friday's heavy selloff, and traders in London don't expect a strong recovery today. |
| Also on the agenda, Belgium, the Netherlands, Germany and France are all selling government debt this morning. | Also on the agenda, Belgium, the Netherlands, Germany and France are all selling government debt this morning. |