This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.guardian.co.uk/business/2012/jun/07/eurozone-crisis-spain-auction-bailout-rescue
The article has changed 22 times. There is an RSS feed of changes available.
| Version 3 | Version 4 |
|---|---|
| Eurozone crisis live: Spain passes bond auction test as rescue looms | Eurozone crisis live: Spain passes bond auction test as rescue looms |
| (40 minutes later) | |
| 10.24am: France just sold a range of long-term bonds for its lowest ever borrowing costs , as French debt remained a safe-haven from the crisis raging in weaker regions of the eurozone. | |
| The yields on French 10-year, 15-year and 50-year bonds fell to their lowest ever levels. The 10-year yield (a benchmark of market confidence) dropped to 2.46%, from 2.96% at the previous auction. | |
| That's a boost to Paris, where new president François Hollande is getting to grips with the French fiscal situation. He's already been been warned by the EC to find new deficit reduction measures. | |
| 10.11am: City analysts say today's Spanish bond auction is a relief, even though Spain had to pay higher bond yields (see 9.49am for the details). There is concern, though, that Italy could be dragged deeper into the crisis. Here's a round-up of fresh reaction: | |
| Nicholas Spiro of Spiro Sovereign Strategy. | |
| 1. Although a very modestly sized auction, this was a nerve-wracking one nonetheless. The Treasury will be pleased that the sale was comfortably covered but displeased with the size of the concession. If it wasn't for its banks' continued support at auctions, Spain would be unable to sell its debt. Right now confidence in Spain is at an all-time low. 2. The sooner the uncertainty over the form and timing of the bail-out is lifted, the better. It has been a month of purgatory for the markets, to say nothing of the nightmare that Spain is living through. This has as much to do with the repeated failures of eurozone policymaking as it does with the Rajoy government's loss of credibility. 3. The bigger fear is that the longer the uncertainty about Spain persists, the more at risk Italy becomes. Part of the reason why a bail-out for Spain is fraught with complications is the risk that it further damages sentiment towards Italy. | |
| Alessandro Giansanti of ING (via Reuters) | |
| It was a good auction. The amount was very limited, and especially in the five-year to the 10-year there was some cheapness on the curve that helped them rally into the auction. There is a better environment over the last few days for Spanish bonds. | |
| Talk of a rescue for Spanish banks is the thing that is reducing risk aversion in the markets. | |
| 9.49am: Breaking - Spain's bond auction has just finished. Bond yields have risen, but there was solid demand for the debt. And crucially, Spain sold slightly more than it was aiming for - €2.07bn in total. | 9.49am: Breaking - Spain's bond auction has just finished. Bond yields have risen, but there was solid demand for the debt. And crucially, Spain sold slightly more than it was aiming for - €2.07bn in total. |
| Here are the details: | Here are the details: |
| €638m of two-year bonds sold at a yield of 4.335%, up from 3.463% €825m of four-year bonds sold at a yield of 5.353%, up from 4.319% €611m of 10-year bonds sold at a yield of 6.044%, up from 5.743% | €638m of two-year bonds sold at a yield of 4.335%, up from 3.463% €825m of four-year bonds sold at a yield of 5.353%, up from 4.319% €611m of 10-year bonds sold at a yield of 6.044%, up from 5.743% |
| UPDATE: The bid-to-cover ratios (which show how much demand there was) rose for all three bond types. Another good sign. | UPDATE: The bid-to-cover ratios (which show how much demand there was) rose for all three bond types. Another good sign. |
| However, as we mentioned earlier, there was speculation that Spain's domestic banks might help the Madrid government by bidding heavily in the auction. We should see details of that later... | However, as we mentioned earlier, there was speculation that Spain's domestic banks might help the Madrid government by bidding heavily in the auction. We should see details of that later... |
| Reaction to follow! | Reaction to follow! |
| 9.39am: A Greek government spokesman has also condemned the attack on two MPs launched by Golden Dawn's Ilias Kasidiaris (see 8.35am) on live TV this morning. | 9.39am: A Greek government spokesman has also condemned the attack on two MPs launched by Golden Dawn's Ilias Kasidiaris (see 8.35am) on live TV this morning. |
| The Neo-nazi party had stunned Europe by winning 21 seats in the May election, having run on a far-right anti-immigrant platform. Could this incident be the trigger for a widespread backlash against Golden Dawn? | The Neo-nazi party had stunned Europe by winning 21 seats in the May election, having run on a far-right anti-immigrant platform. Could this incident be the trigger for a widespread backlash against Golden Dawn? |
| 9.29am: Britain's service sector grew much faster than expected in May, data just released has showed. | 9.29am: Britain's service sector grew much faster than expected in May, data just released has showed. |
| The monthly PMI came in at 53.3 in May, meaning the dominant sector grew as fast as in April. Analysts has expected a drop to 52.5 (so a slowdown in growth). | The monthly PMI came in at 53.3 in May, meaning the dominant sector grew as fast as in April. Analysts has expected a drop to 52.5 (so a slowdown in growth). |
| That may mean there's less chance of the Bank of England relaunching its quantitative easing programme at noon today. | That may mean there's less chance of the Bank of England relaunching its quantitative easing programme at noon today. |
| 9.14am: An update on the situation with the spokesman for Greece's neo-Nazi party who assaulted two MPs on live TV this morning (see 8.34am for the footage)). | |
| KKE's Liana Kanelli, the MPs who appeared to be struck several times by Golden Dawn's Ilias Kasidiaris, has told journalists that: | KKE's Liana Kanelli, the MPs who appeared to be struck several times by Golden Dawn's Ilias Kasidiaris, has told journalists that: |
| When you're slapped by a beast, it's a slap on the cheek of every citizen. | When you're slapped by a beast, it's a slap on the cheek of every citizen. |
| A spokesman for the New Democracy party has also condemned the incident, saying: | A spokesman for the New Democracy party has also condemned the incident, saying: |
| The people must send them [Golden Dawn] to the dustbin of history. | The people must send them [Golden Dawn] to the dustbin of history. |
| There are also reports from Greece that Ilias Kasidiaris lashed out at TV staff following the shocking incident: | There are also reports from Greece that Ilias Kasidiaris lashed out at TV staff following the shocking incident: |
| #Greece After on-screen fight neonazi Kasidiaris also hit journos off screen & threatened technicians #Greece #rbnews | #Greece After on-screen fight neonazi Kasidiaris also hit journos off screen & threatened technicians #Greece #rbnews |
| — Theodora Oikonomides (@IrateGreek) June 7, 2012 | — Theodora Oikonomides (@IrateGreek) June 7, 2012 |
| Prosecutor Raikou ordered the arrest of Kasidiaris at all costs, special police forces mobilized #Greece #rbnews | Prosecutor Raikou ordered the arrest of Kasidiaris at all costs, special police forces mobilized #Greece #rbnews |
| — Theodora Oikonomides (@IrateGreek) June 7, 2012 | — Theodora Oikonomides (@IrateGreek) June 7, 2012 |
| 9.00am: As European officials start thinking about what terms and conditions to impose on Spain for a future bailout of its banks funded from Europe's rescue funds, one of the main problems - concern about corruption, cronyism and political interference in savings banks - features prominently on the front page of El País this morning. | 9.00am: As European officials start thinking about what terms and conditions to impose on Spain for a future bailout of its banks funded from Europe's rescue funds, one of the main problems - concern about corruption, cronyism and political interference in savings banks - features prominently on the front page of El País this morning. |
| Giles Tremlett reports from Madrid: | Giles Tremlett reports from Madrid: |
| The newspaper leads this morning on a story about anticorruption investigators looking into the creation of Bankia, the country's fourth-biggest lender, and its later partial flotation. | The newspaper leads this morning on a story about anticorruption investigators looking into the creation of Bankia, the country's fourth-biggest lender, and its later partial flotation. |
| Fraud, theft and document fraud are amongst the potential wrongdoings under investigation at a bank which last summer sold itself to investors - mostly small Bankia clients - as the next great thing in European banking. | Fraud, theft and document fraud are amongst the potential wrongdoings under investigation at a bank which last summer sold itself to investors - mostly small Bankia clients - as the next great thing in European banking. |
| Bankia itself was created at the end of 2010 by the merger of seven ailing savings banks, led by Caja Madrid. As the part-nationalised bank asks for a further 19bn euros from Europe's taxpayers, investigators will concentrate on how Bankia could go from declaring a 309 million euro profit for 2011 to then admitting net losses of 3bn. | Bankia itself was created at the end of 2010 by the merger of seven ailing savings banks, led by Caja Madrid. As the part-nationalised bank asks for a further 19bn euros from Europe's taxpayers, investigators will concentrate on how Bankia could go from declaring a 309 million euro profit for 2011 to then admitting net losses of 3bn. |
| The suspicion is that some of the seven cajas may have hidden their own toxic real estate holes when the merger took place. The investigation is at a very preliminary stage, El Pais says. | The suspicion is that some of the seven cajas may have hidden their own toxic real estate holes when the merger took place. The investigation is at a very preliminary stage, El Pais says. |
| El País also quotes anonymous German officials in Berlin as saying the Merkel government is now in favour of the "bailout lite" option for Spain, which would see Europe's rescue funds putting money into Spain's bank rescue fund, the so-called Frob. That would then be used to inject capital into banks that are choking on the loans they made against unsaleable real estate developments and building land. | El País also quotes anonymous German officials in Berlin as saying the Merkel government is now in favour of the "bailout lite" option for Spain, which would see Europe's rescue funds putting money into Spain's bank rescue fund, the so-called Frob. That would then be used to inject capital into banks that are choking on the loans they made against unsaleable real estate developments and building land. |
| 8.34am: Truly Astonishing. The spokesman for Greece's far-right Golden Dawn party threw several punches at a communist MP, and chucked water at another, during an appearance on Greek television this morning. | 8.34am: Truly Astonishing. The spokesman for Greece's far-right Golden Dawn party threw several punches at a communist MP, and chucked water at another, during an appearance on Greek television this morning. |
| Ilias Kasidiaris emptied his water glass at Syriza's Rena Dourou during a live debate ahead of the June 17 elections, and then proceeded to lash out at the KKE's Liana Kanelli, as this footage shows (the first copy was taken down, but I've found a new one): | |
| According to Greek newspaper Kathimerini, the police are now seeking to arrest Kasidiaris over the attack on the two female MPs. He is already facing accusations that he was an accomplice in the mugging of a student. He denies the charge. | According to Greek newspaper Kathimerini, the police are now seeking to arrest Kasidiaris over the attack on the two female MPs. He is already facing accusations that he was an accomplice in the mugging of a student. He denies the charge. |
| UPDATE: Regular reader Kizbot gets in touch with more info about the attack: | UPDATE: Regular reader Kizbot gets in touch with more info about the attack: |
| Golden Dawn thug Kasidiaris, repeatedly punched KKE MP Liana Kanelli (something of a national treasure here in Greece) in the face live on Breakfast TV. This is now a big story here. Reports say the guy ran out of the studio after the vicious assault. | Golden Dawn thug Kasidiaris, repeatedly punched KKE MP Liana Kanelli (something of a national treasure here in Greece) in the face live on Breakfast TV. This is now a big story here. Reports say the guy ran out of the studio after the vicious assault. |
| Kisbot adds that Kasidiaris is an ex boxer. | Kisbot adds that Kasidiaris is an ex boxer. |
| 8.21am: George Osborne also pours cold water on the suggestion that Britain should hold an immediate referendum on its membership of the European Union. But a vote could come, if Europe looks to take more sovereignty from member states. | 8.21am: George Osborne also pours cold water on the suggestion that Britain should hold an immediate referendum on its membership of the European Union. But a vote could come, if Europe looks to take more sovereignty from member states. |
| Asked whether Europe's move to close fiscal union (and the Treaty changes that would presumbaly need) would be a good time for a national vote on the EU, Osborne argues that this will only happen if there is a proposal for more transfer of powers from Britain to the EU. | Asked whether Europe's move to close fiscal union (and the Treaty changes that would presumbaly need) would be a good time for a national vote on the EU, Osborne argues that this will only happen if there is a proposal for more transfer of powers from Britain to the EU. |
I think we have a very clear safeguard in the system now, which is - if there is any transfer of sovereigny from this country to Europe, there will be a referendum. | I think we have a very clear safeguard in the system now, which is - if there is any transfer of sovereigny from this country to Europe, there will be a referendum. |
| 8.16am: More from George Osborne's interview on the Today Programme (see last post): the UK chancellor expresses solid support for the creation of a banking union across the eurozone. | 8.16am: More from George Osborne's interview on the Today Programme (see last post): the UK chancellor expresses solid support for the creation of a banking union across the eurozone. |
| Britain, though, will not join it, and will demand protection the City, he adds. | Britain, though, will not join it, and will demand protection the City, he adds. |
| Osborne says the UK wants the euro to work, but..."there will have to be safeguards....to protect Britain's largest employer and Europe's biggest financial sector." | Osborne says the UK wants the euro to work, but..."there will have to be safeguards....to protect Britain's largest employer and Europe's biggest financial sector." |
| On Spain, Osborne says he isn't directly involved in the negotiations, however: | On Spain, Osborne says he isn't directly involved in the negotiations, however: |
| I am optimistic that people are working on a solution....and a solution is coming. | I am optimistic that people are working on a solution....and a solution is coming. |
| He adds though that a Spanish rescue deal would not, itself, solve the eurocrisis. | He adds though that a Spanish rescue deal would not, itself, solve the eurocrisis. |
| 8.12am: UK chancellor George Osborne is discussing the eurozone crisis on the Today Programme on Radio 4 now (you can listen here, or catch a replay later). | 8.12am: UK chancellor George Osborne is discussing the eurozone crisis on the Today Programme on Radio 4 now (you can listen here, or catch a replay later). |
| Asked what he would do if granted the powers of a "benign dictator", Osborne says there are three things that need to happen in the eurozone: | Asked what he would do if granted the powers of a "benign dictator", Osborne says there are three things that need to happen in the eurozone: |
| 1) an immediate recapitalisation of the Spanish banking sector 2) a new Greek government that is committed to Greece remaining in the eurozone and fulfilling its obligations 2) fundamental structural changes to the eurozone, including give the European Central Bank the powers enjoyed by other central banks (such as acting as a lender of last resort). | 1) an immediate recapitalisation of the Spanish banking sector 2) a new Greek government that is committed to Greece remaining in the eurozone and fulfilling its obligations 2) fundamental structural changes to the eurozone, including give the European Central Bank the powers enjoyed by other central banks (such as acting as a lender of last resort). |
| 8.05am: New unemployment data released this morning has shown that France's jobless rate continues to climb, while in Switzerland the situation is much better. | 8.05am: New unemployment data released this morning has shown that France's jobless rate continues to climb, while in Switzerland the situation is much better. |
| The French jobless rate rose to 10% in the first quarter of 2012, up from 9.8% in the last three months of 2011. | The French jobless rate rose to 10% in the first quarter of 2012, up from 9.8% in the last three months of 2011. |
| In Switzerland, the jobless rate dropped to 3.0% on a seasonally unadjusted rate in May, down from 3.1% in April. | In Switzerland, the jobless rate dropped to 3.0% on a seasonally unadjusted rate in May, down from 3.1% in April. |
| 7.47am: Spain hopes to sell between €1bn and €2bn of debt today, with both 10-year bonds and shorter-dated ones available. | 7.47am: Spain hopes to sell between €1bn and €2bn of debt today, with both 10-year bonds and shorter-dated ones available. |
| The auction will show how much confidence the financial markets have in Spain's borrowing costs have been at worryingly high levels for weeks, prompting budget minister Cristobal Montoro to warn on Tuesday that the country is being "shut out" of the bond market. We'll soon find out if he's right.... The key things to watch out for are 1) how much is sold; 2) the yield (effectively the interest rate) demanded by investors; 3) how many bids are received; 4) How demand is split between short and long-term bonds. | The auction will show how much confidence the financial markets have in Spain's borrowing costs have been at worryingly high levels for weeks, prompting budget minister Cristobal Montoro to warn on Tuesday that the country is being "shut out" of the bond market. We'll soon find out if he's right.... The key things to watch out for are 1) how much is sold; 2) the yield (effectively the interest rate) demanded by investors; 3) how many bids are received; 4) How demand is split between short and long-term bonds. |
| Brenda Kelly of CMC Markets suggests that Spanish banks could try to ensure a successful auction by buying the debt with money borrowed from the European Central Bank at low rates (through its LTRO programme - details here). | Brenda Kelly of CMC Markets suggests that Spanish banks could try to ensure a successful auction by buying the debt with money borrowed from the European Central Bank at low rates (through its LTRO programme - details here). |
| Nicolas Spiro of Spiro Sovereign Strategy argues that if Spain can't get €2bn of debt away today then it's "game over". | Nicolas Spiro of Spiro Sovereign Strategy argues that if Spain can't get €2bn of debt away today then it's "game over". |
| 7.34am: As we reported last night, Europe's single currency could swiftly unravel unless its leaders decide within weeks to centralise budget and tax policies in the eurozonem, and agree a strategy to pool responsibility for failing banks. | 7.34am: As we reported last night, Europe's single currency could swiftly unravel unless its leaders decide within weeks to centralise budget and tax policies in the eurozonem, and agree a strategy to pool responsibility for failing banks. |
| Here's a flavour of today's front-page story on the eurocrisis: | Here's a flavour of today's front-page story on the eurocrisis: |
| With fears of a euro meltdown having rapidly shifted from Greece to Spain, Rajoy is pleading for a direct eurozone rescue of his country's banks, to avoid the humiliation attached to requesting a national bailout. | With fears of a euro meltdown having rapidly shifted from Greece to Spain, Rajoy is pleading for a direct eurozone rescue of his country's banks, to avoid the humiliation attached to requesting a national bailout. |
| Sources familiar with the Spanish government's thinking said its negotiating position was that the fundamental quandary facing the eurozone was not Spain, but a European failure of leadership in persuading the financial markets that the euro would be defended at all costs. | Sources familiar with the Spanish government's thinking said its negotiating position was that the fundamental quandary facing the eurozone was not Spain, but a European failure of leadership in persuading the financial markets that the euro would be defended at all costs. |
| So Spain's goal is to get new funding for its banks, without signing up to a full bailout – and all the extra austerity measures, tough targets, and Troika assessments that would bring. | So Spain's goal is to get new funding for its banks, without signing up to a full bailout – and all the extra austerity measures, tough targets, and Troika assessments that would bring. |
| And surely that will annoy Greece, Ireland and Portugal, who all took a bailout. As Gary Jenkins of Swordfish Research points out: | And surely that will annoy Greece, Ireland and Portugal, who all took a bailout. As Gary Jenkins of Swordfish Research points out: |
| It appears that Spain does not want a bailout in order to recapitalise its banks, they just want cash. And it also appears that there may be plans underway to give them pretty much exactly what they want, with numerous reports suggesting that officials are working on an idea for the EFSF/ESM to lend directly to the Spanish banking rescue fund (FROB) in order for them to on-lend to the banks, thus avoiding the embarrassment of the Spanish government itself receiving a bailout. | It appears that Spain does not want a bailout in order to recapitalise its banks, they just want cash. And it also appears that there may be plans underway to give them pretty much exactly what they want, with numerous reports suggesting that officials are working on an idea for the EFSF/ESM to lend directly to the Spanish banking rescue fund (FROB) in order for them to on-lend to the banks, thus avoiding the embarrassment of the Spanish government itself receiving a bailout. |
| But as our own Giles Tremlett explained yesterday, a deal is unlikely until the size of the black hole in Spain's banking sector is known. | But as our own Giles Tremlett explained yesterday, a deal is unlikely until the size of the black hole in Spain's banking sector is known. |
| 7.30am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. | 7.30am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. |
| And what a day we have ahead, with the future of the eurozone hanging in the balance. With speculation of a bailout rampant, Spain will hold an auction of government debt this morning. The sale is a crucial test of market confidence, at a time when Madrid is battling to receive help for its stricken banks, but resisting pressure for a full-scale bailout. | And what a day we have ahead, with the future of the eurozone hanging in the balance. With speculation of a bailout rampant, Spain will hold an auction of government debt this morning. The sale is a crucial test of market confidence, at a time when Madrid is battling to receive help for its stricken banks, but resisting pressure for a full-scale bailout. |
| David Cameron and Angela Merkel will hold talks over the crisis in Berlin today, with the British prime minister expected to tell the German chancellor that a proper plan to save the eurozone is now urgently needed. | David Cameron and Angela Merkel will hold talks over the crisis in Berlin today, with the British prime minister expected to tell the German chancellor that a proper plan to save the eurozone is now urgently needed. |
| In the City, economists and traders are poised for the Bank of England's decision on interest rates and quantitative easing. The UK central bank could fire up the electronic printing presses again, or even cut borrowing costs. | In the City, economists and traders are poised for the Bank of England's decision on interest rates and quantitative easing. The UK central bank could fire up the electronic printing presses again, or even cut borrowing costs. |
| And if that wasn't enough, Ben Bernanke is testifying to a congressional committee today. The Federal Reseve chair will be quizzed on the state of the US economy, and might hint at new stimulus measures. | And if that wasn't enough, Ben Bernanke is testifying to a congressional committee today. The Federal Reseve chair will be quizzed on the state of the US economy, and might hint at new stimulus measures. |
| Agenda | Agenda |
| • Spain's bond auction: from 9am BST / 10am CEST • UK service sector PMI for May: 9.30am BST • David Cameron meeting Angela Merkel: all day • Bank of England decision on rate/QE: 12pm BST • Ben Bernanke testifies to the Joint Economic Committee 3pm BST / 10am EDT | • Spain's bond auction: from 9am BST / 10am CEST • UK service sector PMI for May: 9.30am BST • David Cameron meeting Angela Merkel: all day • Bank of England decision on rate/QE: 12pm BST • Ben Bernanke testifies to the Joint Economic Committee 3pm BST / 10am EDT |