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| Eurozone crisis live: Obama warns Europe headed for downwards spiral | |
| (40 minutes later) | |
| 4.42pm: Well folks, it's time to close the blog for the weekend. Here is a summary of the day's main events: | |
| • Spain will begin hammering out a rescue package for its banks on Saturday. The view from our Brussels and Madrid correspondents is that while the government is not ready to formally request help, it will begin talks about a bailout now, with final details to be announced later this month. | |
| • Barack Obama has warned that Europe is headed for a "renewed recession". Too much austerity, with national governments cutting spending on public services and infrastructure projects as consumers reduce their outlay in order to pay off personal debts will put Europe on a "downwards spiral". | |
| • Germany suffered its steepest decline in imports in two years. In a sign that Europe's economic powerhouse is beginning to feel the pinch, imports fell 4.8% in April, suprising German economists, who had predicted a flattish 0.9% drop. The fall in exports also accelerated, to 1.7% in April from 0.9% in March. | |
| • The Greek economy contracted 6.5% in the first quarter of this year. Figures published Friday provide a graphic illustration of how the Greek recession has deepened, while the country's industrial production fell 2.2% in April versus a year ago. | |
| We'll be back on Monday to update you on that will they won't they #Spailout. | |
| 4.02pm: Barack Obama has cautioned Europe faces a "downwards spiral" unless it acts now to recapitalise its banks and stimulate growth. | |
| The US president warned too much fiscal austerity would mean a stark future for Europe, and urged governments not to rein in spending on long term projects and infrastructure at the same time as consumers are reducing spending to pay off mortgage and credit card debts. | |
| Speaking at a White House briefing, the US president told the Washington press corps: | |
| You can get on a downwards spiral where everybody is pulling back at the same time that weakens demand and further crimps the desire of companies to hire more people, and that is the pattern that Europe is in danger of getting into. Some countries have an unemployement rate of 10 or 15%. If that rate goes up to 20 or 25% that makes it harder to pay off your debts. The markets will respond to that by making it more expensive for those countries to borrow. | You can get on a downwards spiral where everybody is pulling back at the same time that weakens demand and further crimps the desire of companies to hire more people, and that is the pattern that Europe is in danger of getting into. Some countries have an unemployement rate of 10 or 15%. If that rate goes up to 20 or 25% that makes it harder to pay off your debts. The markets will respond to that by making it more expensive for those countries to borrow. |
| 3.47pm: Obama has also repeated calls for Congress to approve his jobs plan. He is now taking questions. | 3.47pm: Obama has also repeated calls for Congress to approve his jobs plan. He is now taking questions. |
| Do European leaders have a handle on what's needed to stem the crisis? | Do European leaders have a handle on what's needed to stem the crisis? |
| The challenges European leaders face are solvable. Right now their focus has to be on strengthening their overall banking system, taking a series of decisive actions that give people confidence that the banking system is solid, that capital requirements are being met, that stresses can be absorbed by the system. European leaders are in discussion about that and they are moving in the right direction. | The challenges European leaders face are solvable. Right now their focus has to be on strengthening their overall banking system, taking a series of decisive actions that give people confidence that the banking system is solid, that capital requirements are being met, that stresses can be absorbed by the system. European leaders are in discussion about that and they are moving in the right direction. |
| He said fiscal reform would not solve the crisis without growth stimulus. | He said fiscal reform would not solve the crisis without growth stimulus. |
...If europe goes into a recession that is going to have some impact on the pace of our economy. The most important thing we can do is make sure we continue to have a strong robust economy. We've got a couple of sectors in our economy that are still weak. Overall the private sector has been doing a good job creating jobs. The big challenge we have in our economy right now is state and local governement hiring has been going in the wrong direction, there have been teacher and police layoffs. The other area that has been weak is the construction sector. | If they are just cutting and cutting and cutting and their unemployment rate is going up and up and up and people are cutting back on spending, that delays the economic reforms. There is a parallel discussion taking place among European leaders about 'how do we encourage gorwth and show some flexibilty?' ...If europe goes into a recession that is going to have some impact on the pace of our economy. The most important thing we can do is make sure we continue to have a strong robust economy. We've got a couple of sectors in our economy that are still weak. Overall the private sector has been doing a good job creating jobs. The big challenge we have in our economy right now is state and local governement hiring has been going in the wrong direction, there have been teacher and police layoffs. The other area that has been weak is the construction sector. |
| 3.46pm: Tuning in to the live webcast from the White House, where Barack Obama is opining on the European and US economies, which kicked off 20 minutes late. | 3.46pm: Tuning in to the live webcast from the White House, where Barack Obama is opining on the European and US economies, which kicked off 20 minutes late. |
One of those steps is taking clear action as soon as possible to inject capital into weak banks. | One concern is Europe which faces a threat of renewed recession as countries deal with financial cirsis. There is a path out of this challenge. These decisions are in the hands of Europe's leaders. They understand the urgent need to act. There are specific steps they can take right now to prevent the situation from getting worse. One of those steps is taking clear action as soon as possible to inject capital into weak banks. |
| He also called for deeper collaboration on "budgets and banking policies" between European countries. | |
| With respect to Greece we've said that it is in everybody's interest for Greece to remain in the eurozone...The Greek people also need to recognise that their hardships will likely be worse if they chose to exit from the eurozone. />European countries have also got to promote economic growth and job creation. As some countries have discovered, it's difficult to rein in debt if your economoy isn't growing. It's a positive thing that the debate has moved in that direction. | |
| 2.57pm: This note just in from Barclays senior economist Antonio Garcia Pascual, who puts the "extreme yet plausible" cost of recapitalising Spanish banking at €126bn. | 2.57pm: This note just in from Barclays senior economist Antonio Garcia Pascual, who puts the "extreme yet plausible" cost of recapitalising Spanish banking at €126bn. |
| In a note issued Friday lunchtime, Garcia Pascual says Barclays has revised its estimates following a request on 25 May from Spain's troubled Bankia lender for €19bn in rescue loans. He writes: | In a note issued Friday lunchtime, Garcia Pascual says Barclays has revised its estimates following a request on 25 May from Spain's troubled Bankia lender for €19bn in rescue loans. He writes: |
| Following the Bankia announcement, our estimates increased roughly EUR20-30bn, bringing total baseline recapitalisation needs to EUR70-80bn. Our stress level estimate is EUR126bn under an extreme yet plausible scenario. Recently, both Fitch and S&P mentioned amounts on the order of EUR90-100bn under severe stress. | Following the Bankia announcement, our estimates increased roughly EUR20-30bn, bringing total baseline recapitalisation needs to EUR70-80bn. Our stress level estimate is EUR126bn under an extreme yet plausible scenario. Recently, both Fitch and S&P mentioned amounts on the order of EUR90-100bn under severe stress. |
| On the likelihood of Spain requesting help, he has this to say: | On the likelihood of Spain requesting help, he has this to say: |
| Even if the government argues that it does not need a programme, other governments have also denied programmes only to request them soon after. It is clear that official support would come with conditionality attached, even if focused largely on bank recapitalisation. This is perhaps why the government may be hesitant to request a programme, given the stigma attached, and the potential for strict conditionality even in areas beyond banking reforms (eg, fiscal and structural reforms), depending on the type of programme.... | Even if the government argues that it does not need a programme, other governments have also denied programmes only to request them soon after. It is clear that official support would come with conditionality attached, even if focused largely on bank recapitalisation. This is perhaps why the government may be hesitant to request a programme, given the stigma attached, and the potential for strict conditionality even in areas beyond banking reforms (eg, fiscal and structural reforms), depending on the type of programme.... |
| ...the overall cost to the sovereign will likely be c.EUR70-80bn, so a programme may not make a large difference in terms of market reaction. Fundamentally, Spain is likely to remain solvent after accounting for those bank recapitalisation costs (see Spain: Dealing with sudden reversal, 4 May 2012). This is crucial because solvency is the benchmark to understand potential PSI discussions in the future, which at this juncture appear unlikely (note that only about 20% of the Spanish government bonds are now owned by non-residents). Obviously, the higher the recapitalisation costs, the less clear-cut solvency is. This is also true because this would generally happen in a scenario of stress macroeconomic conditions, which would be reflected in worse public debt dynamics as well. One aspect in which a programme may help is to add credibility to the completion of the bank clean-up process through strict conditionality. | ...the overall cost to the sovereign will likely be c.EUR70-80bn, so a programme may not make a large difference in terms of market reaction. Fundamentally, Spain is likely to remain solvent after accounting for those bank recapitalisation costs (see Spain: Dealing with sudden reversal, 4 May 2012). This is crucial because solvency is the benchmark to understand potential PSI discussions in the future, which at this juncture appear unlikely (note that only about 20% of the Spanish government bonds are now owned by non-residents). Obviously, the higher the recapitalisation costs, the less clear-cut solvency is. This is also true because this would generally happen in a scenario of stress macroeconomic conditions, which would be reflected in worse public debt dynamics as well. One aspect in which a programme may help is to add credibility to the completion of the bank clean-up process through strict conditionality. |
| However, a programme may not be a "choice" but a "need" if Spain were to be forced by market events into an EU-IMF bail-out. If markets events accelerate the ongoing capital reversal, and spreads continue to widen, given the contagion to other weak economies (eg, Italy has been trading at a spread versus Spain of c.30-70bp for 10y bonds), it would be unlikely that the programme could be circumscribed to the banks only or even to Spain alone. And for that, there are no sufficient rescue funds readily available (ie, for multi-year full-fledged programmes for Spain and, depending on contagion dynamics, for Italy as well). | However, a programme may not be a "choice" but a "need" if Spain were to be forced by market events into an EU-IMF bail-out. If markets events accelerate the ongoing capital reversal, and spreads continue to widen, given the contagion to other weak economies (eg, Italy has been trading at a spread versus Spain of c.30-70bp for 10y bonds), it would be unlikely that the programme could be circumscribed to the banks only or even to Spain alone. And for that, there are no sufficient rescue funds readily available (ie, for multi-year full-fledged programmes for Spain and, depending on contagion dynamics, for Italy as well). |
| 2.52pm: Heads up: President Barack Obama will give his take on the eurozone crisis and the state of the US economy from the White House briefing room at 3:15pm BST. | 2.52pm: Heads up: President Barack Obama will give his take on the eurozone crisis and the state of the US economy from the White House briefing room at 3:15pm BST. |
| "He will address the state of the economy, including the situation in Europe, which continues to pose headwinds to our recovery here at home," the White House said in an update to the president's daily schedule. | "He will address the state of the economy, including the situation in Europe, which continues to pose headwinds to our recovery here at home," the White House said in an update to the president's daily schedule. |
| This is what Britain's biggest bank has to say on how much money is needed to save its Spanish competitors, according to reporter Fabrizio Goria at the Italian financial news service Linkiesta: | This is what Britain's biggest bank has to say on how much money is needed to save its Spanish competitors, according to reporter Fabrizio Goria at the Italian financial news service Linkiesta: |
| Barclays on Spain: Our stress level estimate is EUR126bn under an extreme yet plausible scenario. #Spailout | Barclays on Spain: Our stress level estimate is EUR126bn under an extreme yet plausible scenario. #Spailout |
| — Fabrizio Goria (@FGoria) June 8, 2012 | — Fabrizio Goria (@FGoria) June 8, 2012 |
| 2.24pm: It looks like the Spanish banking bailout will be discussed at a senior level on Saturday, but an announcement on the specifics may take a little longer. The Guardian's Giles Tremlett in Madrid says Spanish premier Mariano Rajoy is unlikely to formally request help until after an audit of the country's banks, scheduled for later this month. Tremlett writes: | 2.24pm: It looks like the Spanish banking bailout will be discussed at a senior level on Saturday, but an announcement on the specifics may take a little longer. The Guardian's Giles Tremlett in Madrid says Spanish premier Mariano Rajoy is unlikely to formally request help until after an audit of the country's banks, scheduled for later this month. Tremlett writes: |
| The finance ministry has said that the first part of the independent audit of Spain's banks will be done by June 21. This will be a stress test carried out by two separate consultants and covering 90 percent of the banking system. A second phase of auditing will go into greater depth, but finance minister Luis de Guindos has previously indicated that the first phase will give a good enough idea of how much money Spanish banks need. It is widely presumed that this will be when a bank bailout is formally asked for. | The finance ministry has said that the first part of the independent audit of Spain's banks will be done by June 21. This will be a stress test carried out by two separate consultants and covering 90 percent of the banking system. A second phase of auditing will go into greater depth, but finance minister Luis de Guindos has previously indicated that the first phase will give a good enough idea of how much money Spanish banks need. It is widely presumed that this will be when a bank bailout is formally asked for. |
| Peter Spiegel, Brussels correspondent at the Financial Times, has confirmation two eurozone conference calls will take place on Saturday, one with senior officials from european treasuries and a second with finance ministers themselves. | Peter Spiegel, Brussels correspondent at the Financial Times, has confirmation two eurozone conference calls will take place on Saturday, one with senior officials from european treasuries and a second with finance ministers themselves. |
| However, Spiegel says this is unlikely to lead to an immediate announcement: | However, Spiegel says this is unlikely to lead to an immediate announcement: |
| Although Madrid is expected to declare its need for outside funding for its banks on the call, the size and the structure of the bailout is not expected to be decided right away. "You don't sign on the dotted line by next week," said one person briefed on the preparations. | Although Madrid is expected to declare its need for outside funding for its banks on the call, the size and the structure of the bailout is not expected to be decided right away. "You don't sign on the dotted line by next week," said one person briefed on the preparations. |
| 1.50pm: The eurozone conference call rumours appear to be having some positive effect, regardless of whether they're true or not. Spain's IBEX 35 is trading up 1%, the only market to do so, while French, German, Italian and British indexes are all down | 1.50pm: The eurozone conference call rumours appear to be having some positive effect, regardless of whether they're true or not. Spain's IBEX 35 is trading up 1%, the only market to do so, while French, German, Italian and British indexes are all down |
| 1.35pm: Merkel has tried to ease Spanish concerns at a news conference with her latest visiting world leader, New Zealand's John Key (after hosting David Cameron yesterday). She said: | 1.35pm: Merkel has tried to ease Spanish concerns at a news conference with her latest visiting world leader, New Zealand's John Key (after hosting David Cameron yesterday). She said: |
| It is always clear that those countries that want to [make use of] solidarity make the request themselves. It's down to the individual countries to turn to us. That has not happened so far and therefore will not exert any pressure here or anything. | It is always clear that those countries that want to [make use of] solidarity make the request themselves. It's down to the individual countries to turn to us. That has not happened so far and therefore will not exert any pressure here or anything. |
| 1.15pm: Back to Spain, where rumour and counter-rumour about the possible phone call on Saturday where the country will ask the eurozone for a bailout has had another twist. Spain's deputy PM Soraya Saenz de Santamaria said no formal European meeting has been planned (but admits to not knowing every planned meeting of every minister). He added that Spain's central government will pay almost €17bn to banks in its autonomous regions and officials are still trying to work out exactly how much the banks need to survive. | 1.15pm: Back to Spain, where rumour and counter-rumour about the possible phone call on Saturday where the country will ask the eurozone for a bailout has had another twist. Spain's deputy PM Soraya Saenz de Santamaria said no formal European meeting has been planned (but admits to not knowing every planned meeting of every minister). He added that Spain's central government will pay almost €17bn to banks in its autonomous regions and officials are still trying to work out exactly how much the banks need to survive. |
| 12.45pm: Another update from Euro 2012, where fans have been putting their own spin on the financial crisis. Outside the England hotel, Spanish fans are being taunted with "You're going down with the euro". Meanwhile, the Irish are taking a stand against the German Chancellor: | 12.45pm: Another update from Euro 2012, where fans have been putting their own spin on the financial crisis. Outside the England hotel, Spanish fans are being taunted with "You're going down with the euro". Meanwhile, the Irish are taking a stand against the German Chancellor: |
| @spin1038 great picture! | @spin1038 great picture! |
| — Aurora Rose Kennedy (@Rose_Kennedyy) June 8, 2012 | — Aurora Rose Kennedy (@Rose_Kennedyy) June 8, 2012 |
| 12.30pm: Thank you Twitter. #Spailout has joined #Spanic and #Grexit as a hot new hashtag. If the hispanic bailout fails to materialise, they could soon be joined by #Spainout. | 12.30pm: Thank you Twitter. #Spailout has joined #Spanic and #Grexit as a hot new hashtag. If the hispanic bailout fails to materialise, they could soon be joined by #Spainout. |
| 12.19pm: News in from Greece where our correspondent Helena Smith says despite worsening figures on every level, the country's economic crisis has been eclipsed by the fallout over Thursday's extraordinary live TV attack of two female politicians. | 12.19pm: News in from Greece where our correspondent Helena Smith says despite worsening figures on every level, the country's economic crisis has been eclipsed by the fallout over Thursday's extraordinary live TV attack of two female politicians. |
| This morning's data shows the Greek economy contracted 6.5% in Q1 from a year ago and industrial production fell 2.2% in April versus a year ago, but the only subject of debate is the Greek parliament's very own watergate scandal. | This morning's data shows the Greek economy contracted 6.5% in Q1 from a year ago and industrial production fell 2.2% in April versus a year ago, but the only subject of debate is the Greek parliament's very own watergate scandal. |
| Footage of the far right Golden Dawn party spokesman throwing water at one of the MPs and punching another has not only become the fodder of nationwide debate – it has prompted anti-fascist groups to announce mass protests nationwide. Helena writes: | Footage of the far right Golden Dawn party spokesman throwing water at one of the MPs and punching another has not only become the fodder of nationwide debate – it has prompted anti-fascist groups to announce mass protests nationwide. Helena writes: |
| From newspapers, to TV channels, radio stations and internet news portals, the talk of Greece this morning is not of the economy but the rise in violence that Golden Dawn spokesman Ilias Kasidiaris' extraordinary on-screen assault has so shockingly highlighted. | From newspapers, to TV channels, radio stations and internet news portals, the talk of Greece this morning is not of the economy but the rise in violence that Golden Dawn spokesman Ilias Kasidiaris' extraordinary on-screen assault has so shockingly highlighted. |
| More than 24 hours have elapsed since the 31-year-old far right spokesman lashed out at left-wing MPs Liana Kanelli and Rena Dourou during a live TV debate ahead of general elections on June 17. But although Kasidiaris, now the focus of a nationwide manhunt following a state prosecutor's order for his arrest, remains at large the physical attack has put the spotlight on the neo Nazi Golden Dawn as never before. | More than 24 hours have elapsed since the 31-year-old far right spokesman lashed out at left-wing MPs Liana Kanelli and Rena Dourou during a live TV debate ahead of general elections on June 17. But although Kasidiaris, now the focus of a nationwide manhunt following a state prosecutor's order for his arrest, remains at large the physical attack has put the spotlight on the neo Nazi Golden Dawn as never before. |
| "No to Violence" proclaimed the mass-selling daily Ta Nea on its front page next to panel of pictures of some of the politicians, writers, authors and even singers who have been assaulted since the outbreak of the debt crisis because of their views. | "No to Violence" proclaimed the mass-selling daily Ta Nea on its front page next to panel of pictures of some of the politicians, writers, authors and even singers who have been assaulted since the outbreak of the debt crisis because of their views. |
| "With his fist Chrysi Avgi (Golden Dawn's) candidate MP has unmasked the neo-Nazi organization which, with the votes of 440,985 Greek men and women, got into the short-lived parliament of the 6th May," the paper wrote. "Now, no one can get off the hook by citing ignorance – these people have shown their true face." | "With his fist Chrysi Avgi (Golden Dawn's) candidate MP has unmasked the neo-Nazi organization which, with the votes of 440,985 Greek men and women, got into the short-lived parliament of the 6th May," the paper wrote. "Now, no one can get off the hook by citing ignorance – these people have shown their true face." |
| Across the media today there is much talk that in a society that has become increasingly divided between rich and poor, left and right, the attack could be a precursor of worse to come. Memories of the civil war remain vivid among the older generation. "After months of extreme hate speech violence has climaxed," wrote communications expert Vivian Ethymiopoulou in Ta Nea. "From verbal run-ins and yoghurt throwing we have officially passed to acts of personal revenge and daggers being drawn." | Across the media today there is much talk that in a society that has become increasingly divided between rich and poor, left and right, the attack could be a precursor of worse to come. Memories of the civil war remain vivid among the older generation. "After months of extreme hate speech violence has climaxed," wrote communications expert Vivian Ethymiopoulou in Ta Nea. "From verbal run-ins and yoghurt throwing we have officially passed to acts of personal revenge and daggers being drawn." |
| Thousands are expected to take the streets of at least six major cities across Greece to protest against Golden Dawn and the rise in recent months of violence against immigrants, students and workers that the extreme right has been blamed for. | Thousands are expected to take the streets of at least six major cities across Greece to protest against Golden Dawn and the rise in recent months of violence against immigrants, students and workers that the extreme right has been blamed for. |
| Meanwhile, a massive manhunt for Kasidiaris has been launched | Meanwhile, a massive manhunt for Kasidiaris has been launched |
| the spokesman of the Hellenic police force Thanassis Kokkalakis says. "There are special units all over Greece looking for him," Kokkalakis told me. "Our belief is that he is hiding in the knowledge that the arrest warrant runs out at one minute past midnight tonight. He doesn't want the media all over him, showing him in handcuffs ahead of the election." | the spokesman of the Hellenic police force Thanassis Kokkalakis says. "There are special units all over Greece looking for him," Kokkalakis told me. "Our belief is that he is hiding in the knowledge that the arrest warrant runs out at one minute past midnight tonight. He doesn't want the media all over him, showing him in handcuffs ahead of the election." |
| If police fail to arrest the Golden Dawn representative, who now faces charges of grievous bodily harm, he will be free to circulate until the wheels of Greek justice splutter into action. Golden Dawn has refused to condemn or even reprimand Kasidiaris for Thursday's assault, instead saying he was "provoked." | If police fail to arrest the Golden Dawn representative, who now faces charges of grievous bodily harm, he will be free to circulate until the wheels of Greek justice splutter into action. Golden Dawn has refused to condemn or even reprimand Kasidiaris for Thursday's assault, instead saying he was "provoked." |
| 11.58am: New source affirming that rumoured eurozone ministerial conference call is planned for Saturday. Steve Collins, London & Capital Asset Management's well informed global head of dealing has just tweeted the following: | 11.58am: New source affirming that rumoured eurozone ministerial conference call is planned for Saturday. Steve Collins, London & Capital Asset Management's well informed global head of dealing has just tweeted the following: |
| Now getting confirmation that there WILL be a conference call on Spain over the weekend ... (EUR-group) fin mins ... | Now getting confirmation that there WILL be a conference call on Spain over the weekend ... (EUR-group) fin mins ... |
| — Steve Collins (@TradeDesk_Steve) June 8, 2012 | — Steve Collins (@TradeDesk_Steve) June 8, 2012 |
| 11.52am: The eurozone has instruments ready to use should Spain ask for help recapitalising its banks, but no such request has been made, according to the European Union. | 11.52am: The eurozone has instruments ready to use should Spain ask for help recapitalising its banks, but no such request has been made, according to the European Union. |
| EU spokesman Amadeu Altafaj has given a news briefing, responding to a Reuters report that Spain is ready to request a bailout. Altafaj would not confirm the report that a conference call between the finance ministers of the euro's 17 member nations has been scheduled for Saturday morning. The suggestion is that Spain's request for help would follow the call. Altafaj said: | EU spokesman Amadeu Altafaj has given a news briefing, responding to a Reuters report that Spain is ready to request a bailout. Altafaj would not confirm the report that a conference call between the finance ministers of the euro's 17 member nations has been scheduled for Saturday morning. The suggestion is that Spain's request for help would follow the call. Altafaj said: |
| If such a request were to be made, the instruments are there, ready to be used, in agreement with the guidelines agreed in the past, in 2011. We are not at that point. | If such a request were to be made, the instruments are there, ready to be used, in agreement with the guidelines agreed in the past, in 2011. We are not at that point. |
| 11.40am: Reuters newsflash: | 11.40am: Reuters newsflash: |
| EU Commission: If a request for aid is submitted by Spain, the appropriate instruments are available and ready to be used | EU Commission: If a request for aid is submitted by Spain, the appropriate instruments are available and ready to be used |
| 11.17am: Faisal Islam, Channel 4's economics editor, points to the parallels between the Euro crisis 2012 and the Euro 2012 football tournament. It appears economic success is inversely correlated with footballing prowess. The last four cups have been won by Spain (twice), Italy and Greece, and Sunday's match between Spain and Italy is being dubbed the 'debt derby'. Optimistically, Islam adds: | 11.17am: Faisal Islam, Channel 4's economics editor, points to the parallels between the Euro crisis 2012 and the Euro 2012 football tournament. It appears economic success is inversely correlated with footballing prowess. The last four cups have been won by Spain (twice), Italy and Greece, and Sunday's match between Spain and Italy is being dubbed the 'debt derby'. Optimistically, Islam adds: |
| There has, in the past, been research showing growth is boosted in host nations, temporarily, particularly if that nation does well. It's remotely possible that the euro won't even survive Euro 2012 intact, depending on how other nations react to a new Greek government. | There has, in the past, been research showing growth is boosted in host nations, temporarily, particularly if that nation does well. It's remotely possible that the euro won't even survive Euro 2012 intact, depending on how other nations react to a new Greek government. |
| 11.13am: Apologies for our temporary absence, gremlins in the system at the end of a long week. Our blog has now been bailed out and is again live. | 11.13am: Apologies for our temporary absence, gremlins in the system at the end of a long week. Our blog has now been bailed out and is again live. |
| Back to the Reuters scoop on the Spanish bank rescue. Four senior EU officials and one German source have now told the news agency that a conference call of ministers from the 17-nation currency area would be held on Saturday to discuss a Spanish request for aid. This would be followed by an announcement on Saturday afternoon. | Back to the Reuters scoop on the Spanish bank rescue. Four senior EU officials and one German source have now told the news agency that a conference call of ministers from the 17-nation currency area would be held on Saturday to discuss a Spanish request for aid. This would be followed by an announcement on Saturday afternoon. |
| Right now, the Spanish are playing down the possibility of an imminent bailout plan, according to foreign exchange news service Ransquawk: | Right now, the Spanish are playing down the possibility of an imminent bailout plan, according to foreign exchange news service Ransquawk: |
| Spain govt says not aware of any pending announcements on bank rescue". ...any decision looks unlikely until bank audits are seen next week. | Spain govt says not aware of any pending announcements on bank rescue". ...any decision looks unlikely until bank audits are seen next week. |
| Ratings agency Fitch said the cost of recapitalisation for Spain's busted banks could be between €60bn and €100bn. | Ratings agency Fitch said the cost of recapitalisation for Spain's busted banks could be between €60bn and €100bn. |
| An International Monetary Fund report, due to be published on Monday, is expected to estimate the banks needs at the lower figure of €40bn, but market data has deteriorated since that data was collected. | An International Monetary Fund report, due to be published on Monday, is expected to estimate the banks needs at the lower figure of €40bn, but market data has deteriorated since that data was collected. |
| "The announcement is expected for Saturday afternoon" an EU official said, while the German source added "The government of Spain has realised the seriousness of their problem". | "The announcement is expected for Saturday afternoon" an EU official said, while the German source added "The government of Spain has realised the seriousness of their problem". |
| Spailout (by @presseuropit) twitter.com/FGoria/status/… | Spailout (by @presseuropit) twitter.com/FGoria/status/… |
| — Fabrizio Goria (@FGoria) June 8, 2012 | — Fabrizio Goria (@FGoria) June 8, 2012 |
| More pain for Spain as Fitch followed its sovereign debt downgrade with a lower rating for the country's utilities. Enagas and Red Electrica Corporacion have had their long term issuer default ratings reduced to A- with a negative outlook. | More pain for Spain as Fitch followed its sovereign debt downgrade with a lower rating for the country's utilities. Enagas and Red Electrica Corporacion have had their long term issuer default ratings reduced to A- with a negative outlook. |
| 9.40am: British factory gate inflation slowed to its lowest rate in two-and-a-half years in May. | 9.40am: British factory gate inflation slowed to its lowest rate in two-and-a-half years in May. |
| Hopes that easing consumer price inflation would boost consumer spending this year were lifted by news that output prices fell 0.2% from April, defying the 0.1% increase which had been forecast. | Hopes that easing consumer price inflation would boost consumer spending this year were lifted by news that output prices fell 0.2% from April, defying the 0.1% increase which had been forecast. |
| The producer prices numbers from the Office of National Statistics marked the lowest output price inflation since November 2009. Input prices fell further than at any time since December 2008, falling 2.5% compared to the 1.3% forecast. | The producer prices numbers from the Office of National Statistics marked the lowest output price inflation since November 2009. Input prices fell further than at any time since December 2008, falling 2.5% compared to the 1.3% forecast. |
| A contrasting view from the Bank of England's inflation attitudes survey, also just out, which shows Britons expect prices to climb faster over the coming year than three months ago. | A contrasting view from the Bank of England's inflation attitudes survey, also just out, which shows Britons expect prices to climb faster over the coming year than three months ago. |
| The May inflation attitudes survey showed the public think inflation will reach 3.7% over the next 12 months, up from an expected 3.5% in February, and the highest since November. | The May inflation attitudes survey showed the public think inflation will reach 3.7% over the next 12 months, up from an expected 3.5% in February, and the highest since November. |
| UBS analyst Amit Kara said: | UBS analyst Amit Kara said: |
| The procuder price numbers are clearly below market expectations, but they only really relate to goods prices in the overall inflation index and as such I don't think that will have a material impact on the policy decision. More interesting is the Bank of England inflation expectation survey which has climbed. I think given the persistence in inflation this will be of some concern to the monetary policy committee. The threshold for another round of quantitative easing is a little bit higher as a result. | The procuder price numbers are clearly below market expectations, but they only really relate to goods prices in the overall inflation index and as such I don't think that will have a material impact on the policy decision. More interesting is the Bank of England inflation expectation survey which has climbed. I think given the persistence in inflation this will be of some concern to the monetary policy committee. The threshold for another round of quantitative easing is a little bit higher as a result. |
| 9.16am: Italian industrial production fell more dramatically than expected in April, with the eurozone's third largest economy still deep in recession. | 9.16am: Italian industrial production fell more dramatically than expected in April, with the eurozone's third largest economy still deep in recession. |
| April output fell 1.9% from the previous month, far outstripping the 0.5% decline predicted by a survey of 18 analysts. | April output fell 1.9% from the previous month, far outstripping the 0.5% decline predicted by a survey of 18 analysts. |
| On a work-day adjusted basis, output in April fell 9.2%, the biggest fall since November 2009. | On a work-day adjusted basis, output in April fell 9.2%, the biggest fall since November 2009. |
| National statistics institute ISTAT marginally revised Italy's March data to a 0.6% increase, up from the 0.5% rise originally reported. | National statistics institute ISTAT marginally revised Italy's March data to a 0.6% increase, up from the 0.5% rise originally reported. |
| Breaking news from Eloi Eloi on Twitter | Breaking news from Eloi Eloi on Twitter |
| EUROGROUP CONFERENCE CALL TO TAKE PLACE ON SATURDAY TO DISCUSS DETAILS - TWO EU SOURCES | EUROGROUP CONFERENCE CALL TO TAKE PLACE ON SATURDAY TO DISCUSS DETAILS - TWO EU SOURCES |
| — Eloi Eloi (@LemaSabachthani) June 8, 2012 | — Eloi Eloi (@LemaSabachthani) June 8, 2012 |
| Spain is expected to request a bailout over the week-end, according to EU sources. The request would follow a conference call of eurozone finance ministers on Saturday. | Spain is expected to request a bailout over the week-end, according to EU sources. The request would follow a conference call of eurozone finance ministers on Saturday. |
| "The announcement is expected for Saturday afternoon," an EU official told Reuters. | "The announcement is expected for Saturday afternoon," an EU official told Reuters. |
| 8.57am: Brent crude oil prices fell below $99 this morning, as the world's top oil consumer the United States held off from a third round of quantitative easing. | 8.57am: Brent crude oil prices fell below $99 this morning, as the world's top oil consumer the United States held off from a third round of quantitative easing. |
| Bernanke's testimony to congress on Thursday offered to clues that he was close to a new round of electronic money printing. | Bernanke's testimony to congress on Thursday offered to clues that he was close to a new round of electronic money printing. |
| Brent crude for July traded $2.09 lower at $97.84 a barrel just before 9:00 BST, and is poised to fall for a sixth week in a row, its biggest losing streak since December 1998. | Brent crude for July traded $2.09 lower at $97.84 a barrel just before 9:00 BST, and is poised to fall for a sixth week in a row, its biggest losing streak since December 1998. |
| 8.48am: European stock markets have opened lower, retreating from a one-week high after Spain's savage credit rating downgrade yesterday evening and hopes of a new US stimulus round fading. | 8.48am: European stock markets have opened lower, retreating from a one-week high after Spain's savage credit rating downgrade yesterday evening and hopes of a new US stimulus round fading. |
| FTSE 100: down 37 points to 5410, -0.7% German DAX: down 61 points to 6083, -0.99% French CAC: down 34 points to 3037, -1.12% Spanish IBEX: down 64 points to 6374, -0.99% Italian FTSE MIB: down 187 points to 13356, -1.38% | FTSE 100: down 37 points to 5410, -0.7% German DAX: down 61 points to 6083, -0.99% French CAC: down 34 points to 3037, -1.12% Spanish IBEX: down 64 points to 6374, -0.99% Italian FTSE MIB: down 187 points to 13356, -1.38% |
| The Eurozone's fourth-biggest economy moved a step closer to a financial bailout on Thursday evening as ratings agency Fitch downgraded Spain from A to BBB, a notch above junk status. | The Eurozone's fourth-biggest economy moved a step closer to a financial bailout on Thursday evening as ratings agency Fitch downgraded Spain from A to BBB, a notch above junk status. |
| Fitch blamed mistakes at a European level which had allowed the financial crisis to escalate. | Fitch blamed mistakes at a European level which had allowed the financial crisis to escalate. |
| US Federal Reserve chairman Ben Bernanke disappointed investors during late European trading on Thursday when he declined to hint at a third round of quantitative easing to stimulate the economy. Koen De Leus, a strategist at KBC Securities, said: | US Federal Reserve chairman Ben Bernanke disappointed investors during late European trading on Thursday when he declined to hint at a third round of quantitative easing to stimulate the economy. Koen De Leus, a strategist at KBC Securities, said: |
| Bernanke disappointed investors who were looking for some hints about a third round of quantitative easing. Disappointment can also be deduced from a correction in gold prices. | Bernanke disappointed investors who were looking for some hints about a third round of quantitative easing. Disappointment can also be deduced from a correction in gold prices. |
| 8.19am: Mixed signals from France, where the budget deficit narrowed but the trade deficit for April came in wider than expected. | 8.19am: Mixed signals from France, where the budget deficit narrowed but the trade deficit for April came in wider than expected. |
| The national overspend fell to €59.9bn for January to April, from €61.4bn for the same period last year. Government spending rose 4.2% to €133.6bn, outpacing higher tax receipts, which rose just 2.7% to €91bn. | The national overspend fell to €59.9bn for January to April, from €61.4bn for the same period last year. Government spending rose 4.2% to €133.6bn, outpacing higher tax receipts, which rose just 2.7% to €91bn. |
| However, the trade deficit stands at €5.8bn, higher than the €5.5bn economists had predicted. | However, the trade deficit stands at €5.8bn, higher than the €5.5bn economists had predicted. |
| As Marks & Spencer announces it is to open a bank in the UK, Reuters is reporting the European commission wants to close one in Greece. The EU's sites are trained on Greece's fifth-largest lender, ATEbank, says a report citing EU sources. | As Marks & Spencer announces it is to open a bank in the UK, Reuters is reporting the European commission wants to close one in Greece. The EU's sites are trained on Greece's fifth-largest lender, ATEbank, says a report citing EU sources. |
| The EU has a say in the matter because under state aid rules it can refuse a request to rescue a bank if the Commission considers it too costly to save. The move would mark a more aggressive stance from Brussels, and the same rules would apply to Spanish and Portuguese banks. | The EU has a say in the matter because under state aid rules it can refuse a request to rescue a bank if the Commission considers it too costly to save. The move would mark a more aggressive stance from Brussels, and the same rules would apply to Spanish and Portuguese banks. |
| "We are moving into a new phase with Greece, Portugal and Spain," one source told Reuters anonymously. "Some banks are going to be squeezed. Some are going to be closed down." | "We are moving into a new phase with Greece, Portugal and Spain," one source told Reuters anonymously. "Some banks are going to be squeezed. Some are going to be closed down." |
| Banks central to a country's financial stability may need rescuing, said the source, but others may have to be let go. "ATEbank will have to be closed or wound down over time". | Banks central to a country's financial stability may need rescuing, said the source, but others may have to be let go. "ATEbank will have to be closed or wound down over time". |
| The Greek finance ministry denied the report. No decision is likely until after the country holds elections on 17 June. | The Greek finance ministry denied the report. No decision is likely until after the country holds elections on 17 June. |
| 7.45am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. | 7.45am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. |
| Pressure is building on Angela Merkel to act with signs that the eurozone crisis is beginning to impact her electorate. German imports and exports fell sharply in April, according to data published this morning. | Pressure is building on Angela Merkel to act with signs that the eurozone crisis is beginning to impact her electorate. German imports and exports fell sharply in April, according to data published this morning. |
| Europe's largest economy is beginning to feel the pinch, with seasonally adjusted imports dropping 4.8%, their worst decline in two years according to Reuters. The numbers will have surprised German economists, who mostly expected the number to remain flat, having fallen 0.9% in March. | Europe's largest economy is beginning to feel the pinch, with seasonally adjusted imports dropping 4.8%, their worst decline in two years according to Reuters. The numbers will have surprised German economists, who mostly expected the number to remain flat, having fallen 0.9% in March. |
| The fall in exports also accelerated. These were down 1.7%, up from a 0.8% fall in March. | The fall in exports also accelerated. These were down 1.7%, up from a 0.8% fall in March. |
| The news will add fuel to the lively debate on the current edition of the Economist, whose front cover calls on Merkel to restart the engines of the World Economy supertanker. | The news will add fuel to the lively debate on the current edition of the Economist, whose front cover calls on Merkel to restart the engines of the World Economy supertanker. |
| Agenda | Agenda |
| • 7:45 BST French central government budget balance • 9:00 BST Italian industrial production update • 9:30 Bank of England inflation expectations • 9:30 Producer Prices Index • 12:30 US trade balance for April | • 7:45 BST French central government budget balance • 9:00 BST Italian industrial production update • 9:30 Bank of England inflation expectations • 9:30 Producer Prices Index • 12:30 US trade balance for April |