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| Eurozone crisis live: Greek politicians scramble for votes | Eurozone crisis live: Greek politicians scramble for votes |
| (31 minutes later) | |
| 11.06am: UK, US and French triple-A ratings are under pressure, Fitch analysts said on their so-called Viking Tour, which stopped in Oslo today. | |
| Ed Parker of Fitch also highlighted the differences between Italy and Spain. He said Italy's banks were much stronger, but the economy remains at risk as it is very dependent on borrowing costs. | |
| The Spanish bank bailout has stabilised Spain's sovereign rating at its current level, Fitch said, although a worsening of its situation and the euro crisis could change that. The ratings agency expects Spain to miss 2012 and 2013 deficit targets significantly. | |
| 10.42am: News in from Athens where our correspondent Helena Smith says the political thermometer ahead of Sunday's crucial poll is as hot as the blistering temperatures in Greece. | |
| As the first summer heatwave descends on Greece, temperatures on the political scene have also shot up, with the conservative New Democracy and radical left Syriza parties – the two main contestants in Sunday's poll – exchanging barbs over the Spanish bailout. | |
| While Syriza contends that the €100bn lifeline thrown to Spain is further evidence of a "structural crisis in the eurozone itself," New Democracy has been busily arguing that the bailout is further proof that when you negotiate with Europe, rather than clash with it, it pays off. "Just think, at a time when a country like Spain negotiates, some argue that we have to clash with Europe," said Antonis Samaras the conservative party leader. | |
| With a televised press conference later today, Alexis Tsipras will attempt to quell fears that his radical Left Coalition party will scrap the bailout agreement Greece signed up to with its international creditors. | |
| Many worry Greece will be taken on an adventure if the leftists emerge as the front-runner in an election that, like last month's poll, will almost certainly not produce an outright winner. | |
| Tellingly, Gikas Hardouvelis, chief economist to Lucas Papademos, the technocrat prime minister who headed a six month cross-party government until May, told a local radio station this morning that "they [the EU] are totally bored of us … the most important message that we must send out is that we want to stay in the eurozone because if we leave the eurozone it is very likely that we will leave the European Union, too." As I type, the socialist Pasok party leader and former finance minister, Evangelos Venizelos, is visiting president Carolos Papaoulias to brief the head of state on his meeting in Rome yesterday with Mario Monti. The Italian prime minister reportedly underlined the importance of Greece "remaining in the eurozone". Venizelos, who negotiated the second €130bn EU-IMF support package for Athens, presented a list of revisions to the deal which has whipped up widespread opposition with its draconian spending cuts and tax increases. | |
| Emerging from the talks in Rome, he said that the proposed changes had been greeted positively "as long as Greece has a comprehensive plan, social consensus, political unity and is willing and capable to push through wide-ranging reforms." | |
| Venizelos has repeatedly said that Greece cannot navigate the crisis with a one-party government and that it is urgent a national unity government is formed. "Internally, there is not the luxury for a government to be opposed by a big and strong opposition," he told an Italian newspaper. There are not a few who believe that while Syriza would never admit it openly, the party's real aim is to come a close second in the poll to enable it to be the voice of the opposition on the streets. | |
| 10.38am: While Greece sells €1.6bn of 182-day treasury bills with a yield of 4.73%. | 10.38am: While Greece sells €1.6bn of 182-day treasury bills with a yield of 4.73%. |
| 10.29am: The diverging fortunes of different eurozone countries are being made very clear in the debt markets. | 10.29am: The diverging fortunes of different eurozone countries are being made very clear in the debt markets. |
| Austria's borrowing costs fell this morning at a sale of €1.1bn of 10 and 50-year bonds. The average yield on the 10-year was 2.36%, compared with 2.63% in May. The 50-year bond had an average yield of 3.02%. | Austria's borrowing costs fell this morning at a sale of €1.1bn of 10 and 50-year bonds. The average yield on the 10-year was 2.36%, compared with 2.63% in May. The 50-year bond had an average yield of 3.02%. |
| 10.19am: The International Swaps and Derivatives Association (ISDA) has said the Spanish banking bailout is unlikely to trigger payouts on Spain's credit default swaps. | 10.19am: The International Swaps and Derivatives Association (ISDA) has said the Spanish banking bailout is unlikely to trigger payouts on Spain's credit default swaps. |
| For definitions of bond market and eurozone-related terminology, take a look at our eurozone crisis glossary. | For definitions of bond market and eurozone-related terminology, take a look at our eurozone crisis glossary. |
| 10.12am: Olli Rehn, vice-president of the European Commissioner said this morning that European Union heads of government will discuss ideas like a fiscal and financial union and a growth compact at their upcoming summit in late June. He told the European Parliament: | 10.12am: Olli Rehn, vice-president of the European Commissioner said this morning that European Union heads of government will discuss ideas like a fiscal and financial union and a growth compact at their upcoming summit in late June. He told the European Parliament: |
| At the summit...heads of state and government will discuss the next phase of deepening the economic union. | At the summit...heads of state and government will discuss the next phase of deepening the economic union. |
| Rehn also urged parliament to move quickly to approve the so-called "two-pack" fiscal EU rules, which would give Brussels more influence over member state budgets and countries facing financial threats. | Rehn also urged parliament to move quickly to approve the so-called "two-pack" fiscal EU rules, which would give Brussels more influence over member state budgets and countries facing financial threats. |
| He said if there is no deal on the two-pack rules between the parliament, member states and the European Commission soon, it would send a signal that European policy makers are failing "to live up to our political responsibilities." | He said if there is no deal on the two-pack rules between the parliament, member states and the European Commission soon, it would send a signal that European policy makers are failing "to live up to our political responsibilities." |
| 9.58am: Some more reaction to the UK's industrial production figures (see 9.29am). David Tinsley at BNP Paribas says: | 9.58am: Some more reaction to the UK's industrial production figures (see 9.29am). David Tinsley at BNP Paribas says: |
| The outturn in overall industrial production implies a pretty poor start to the second quarter. With core manufacturing production probably falling in May and June too, if the PMIs are a guide, then it will take a bounce in the other areas of industrial production to stop the Q2 data looking bad. It is increasingly hard not to come to the conclusion that the UK manufacturing sector is becoming overwhelmed by the recessionary gales blowing across the Channel. | The outturn in overall industrial production implies a pretty poor start to the second quarter. With core manufacturing production probably falling in May and June too, if the PMIs are a guide, then it will take a bounce in the other areas of industrial production to stop the Q2 data looking bad. It is increasingly hard not to come to the conclusion that the UK manufacturing sector is becoming overwhelmed by the recessionary gales blowing across the Channel. |
| 9.47am: More on Italian bond (BTP) yields (which have dropped back slightly to 6.14%). Marc Ostwald at Monument Securities says on FT Alphaville that investors are wrong to draw a line from Spain to Italy: | 9.47am: More on Italian bond (BTP) yields (which have dropped back slightly to 6.14%). Marc Ostwald at Monument Securities says on FT Alphaville that investors are wrong to draw a line from Spain to Italy: |
| Once again we must highlight that while the high level of BTP yields does no favours for the Italian banks, the fact that while Italy's debt to GDP metrics at 120% plus are ugly, its overall outstanding govt debt stands at just short of €2.0 Trln, but the financial sector has savings and assets in excess of €8.4 Trln, and Italy also has a mortgage to GDP ratio just south of 20% (the Netherlands by contrast has an equivalent ratio of 110%!) – so Italy is in fact rather like Japan rather than the popular myth that says it is similar to Spain, Ireland, Portugal, let alone Greece. | Once again we must highlight that while the high level of BTP yields does no favours for the Italian banks, the fact that while Italy's debt to GDP metrics at 120% plus are ugly, its overall outstanding govt debt stands at just short of €2.0 Trln, but the financial sector has savings and assets in excess of €8.4 Trln, and Italy also has a mortgage to GDP ratio just south of 20% (the Netherlands by contrast has an equivalent ratio of 110%!) – so Italy is in fact rather like Japan rather than the popular myth that says it is similar to Spain, Ireland, Portugal, let alone Greece. |
| 9.41am: On a monthly basis, UK manufacturing looks even worse; down 0.7% compared with forecasts of a 0.1% drop. Industrial production was unchanged over the month, compared with forecasts of a 0.1% lift. | 9.41am: On a monthly basis, UK manufacturing looks even worse; down 0.7% compared with forecasts of a 0.1% drop. Industrial production was unchanged over the month, compared with forecasts of a 0.1% lift. |
| Philip Shaw of Investec says: | Philip Shaw of Investec says: |
| The manufacturing figures are very disappointing and highlight the pressure the sector's under given the gravity of the debt crisis in the euro area, but also the lack of confidence at home. | The manufacturing figures are very disappointing and highlight the pressure the sector's under given the gravity of the debt crisis in the euro area, but also the lack of confidence at home. |
| The wider measure of industrial production is even worse, albeit due to the shutdown of an oil platform in the North Sea. Overall it could be touch and go whether we get a rebound in GDP in Q2, though much depends on the construction output figures. And policywise, MPC members will no doubt be giving serious thought to sancitoning more QE at some stage over the next couple of months. | The wider measure of industrial production is even worse, albeit due to the shutdown of an oil platform in the North Sea. Overall it could be touch and go whether we get a rebound in GDP in Q2, though much depends on the construction output figures. And policywise, MPC members will no doubt be giving serious thought to sancitoning more QE at some stage over the next couple of months. |
| 9.28am: CORRECTION, the forecast for manufacturing was for an increase of 0.4%, so results were much worse than expected... | 9.28am: CORRECTION, the forecast for manufacturing was for an increase of 0.4%, so results were much worse than expected... |
| UK industrial production fell 1% in April compared with the same month last year, in line with expectations. Manufacturing fell by 0.3%, compared with forecasts of an increase of 0.4%. | UK industrial production fell 1% in April compared with the same month last year, in line with expectations. Manufacturing fell by 0.3%, compared with forecasts of an increase of 0.4%. |
| 9.17am: And sticking with bond yields for a second, Ed Conway at Sky gives us some historical context to Spanish borrowing costs (now up at 6.66%). | 9.17am: And sticking with bond yields for a second, Ed Conway at Sky gives us some historical context to Spanish borrowing costs (now up at 6.66%). |
| Bailout hangover worsens: Spanish govt borrowing rates hit 6.6%. If this continues cld hit highest level since mid-90s twitter.com/EdConwaySky/st… | Bailout hangover worsens: Spanish govt borrowing rates hit 6.6%. If this continues cld hit highest level since mid-90s twitter.com/EdConwaySky/st… |
| — Ed Conway (@EdConwaySky) June 12, 2012 | — Ed Conway (@EdConwaySky) June 12, 2012 |
| 9.05am: In the case of Italian bond yields (see 8.49am), economist Shaun Richards notes that investors are increasingly worried about Italy's contribution to Spain's bailout. | 9.05am: In the case of Italian bond yields (see 8.49am), economist Shaun Richards notes that investors are increasingly worried about Italy's contribution to Spain's bailout. |
| More and more are focusing on the extra 19.2 billion #Euros that Italy will guarantee to Spain as her ten year bond yield rises to 6.1% | More and more are focusing on the extra 19.2 billion #Euros that Italy will guarantee to Spain as her ten year bond yield rises to 6.1% |
| — Shaun Richards (@notayesmansecon) June 12, 2012 | — Shaun Richards (@notayesmansecon) June 12, 2012 |
| 8.49am: Spanish and Italian bond yields - or borrowing costs - are on the rise. | 8.49am: Spanish and Italian bond yields - or borrowing costs - are on the rise. |
| Italian yields are up at 6.17% (their highest level since January), while Spanish yields have climbed to 6.53%. | Italian yields are up at 6.17% (their highest level since January), while Spanish yields have climbed to 6.53%. |
| Bond investors are nervous that the EU will use the european stability mechanism to lend money directly to Spain. That would push existing holders of Spanish government bonds down the pecking order, ie the ESM will be paid back before them in the case of a default. Gary Jenkins of Swordfish Research reflected on the situation in his morning comment: | Bond investors are nervous that the EU will use the european stability mechanism to lend money directly to Spain. That would push existing holders of Spanish government bonds down the pecking order, ie the ESM will be paid back before them in the case of a default. Gary Jenkins of Swordfish Research reflected on the situation in his morning comment: |
| I wonder if yesterday's bond market reaction will lead to a change of tack from the EU. They do not seem to understand the basic principle that they are reliant upon bond investors and thus they should be trying to encourage them to buy, not discourage them. There was unofficial confirmation that the ESM would be used and subordination would take place although funny enough late in the afternoon as Spanish and Italian yields got smacked there were headlines on Reuters suggesting that maybe there wouldn't be subordination and maybe they could use the EFSF initially before passing the loans onto the ESM….it really does look like they didn't even consider this aspect of the bailout and there are times when they do almost appear to be making it up as they go along. | I wonder if yesterday's bond market reaction will lead to a change of tack from the EU. They do not seem to understand the basic principle that they are reliant upon bond investors and thus they should be trying to encourage them to buy, not discourage them. There was unofficial confirmation that the ESM would be used and subordination would take place although funny enough late in the afternoon as Spanish and Italian yields got smacked there were headlines on Reuters suggesting that maybe there wouldn't be subordination and maybe they could use the EFSF initially before passing the loans onto the ESM….it really does look like they didn't even consider this aspect of the bailout and there are times when they do almost appear to be making it up as they go along. |
| 8.27am: There are conflicting messages coming out about Spain's banking bailout. Spanish prime minister Mariano Rajoy says the deal comes with no conditions, while the European Commission has said Spain will not receive any special treatment. It seems the vice-president of the EC was unwilling to clarify things when questioned by Dow Jones reporter Matina Stevis last night. | 8.27am: There are conflicting messages coming out about Spain's banking bailout. Spanish prime minister Mariano Rajoy says the deal comes with no conditions, while the European Commission has said Spain will not receive any special treatment. It seems the vice-president of the EC was unwilling to clarify things when questioned by Dow Jones reporter Matina Stevis last night. |
| Last night in Strasbourg, I asked Olli Rehn if aid wd be withheld from Spain should it miss its 2012 5.3% deficit target. He didn't respond | Last night in Strasbourg, I asked Olli Rehn if aid wd be withheld from Spain should it miss its 2012 5.3% deficit target. He didn't respond |
| — Matina Stevis (@MatinaStevis) June 12, 2012 | — Matina Stevis (@MatinaStevis) June 12, 2012 |
| 8.17am: Markets across Europe are struggling to make any headway this morning, as investors continue to digest news of Spain's banking bailout. | 8.17am: Markets across Europe are struggling to make any headway this morning, as investors continue to digest news of Spain's banking bailout. |
| UK's FTSE: up 0.07% at 5436 points Germany's DAX: unchanged Spain's IBEX: down 0.4% Italy's FTSE MIB: down 0.2% France's CAC: up 0.2% | UK's FTSE: up 0.07% at 5436 points Germany's DAX: unchanged Spain's IBEX: down 0.4% Italy's FTSE MIB: down 0.2% France's CAC: up 0.2% |
| 8.09am: There's more evidence that companies are feeling the pain from the eurozone crisis. BAA's statistics this morning are particularly stark, with a dramatic drop in traffic from countries at the centre of the storm. My colleague Dan Milmo reports: | 8.09am: There's more evidence that companies are feeling the pain from the eurozone crisis. BAA's statistics this morning are particularly stark, with a dramatic drop in traffic from countries at the centre of the storm. My colleague Dan Milmo reports: |
| BAA said passenger numbers between Britain's largest airport and Greece dropped 11.3% compared with May last year, with traffic to and from Italy falling 9.2% and Spain by 2.5%. Portugal was the biggest faller, declining by 11.4%. BAA said that Heathrow carried 5.8 million people overall last month, a fall of 0.6% on the same period last year. | BAA said passenger numbers between Britain's largest airport and Greece dropped 11.3% compared with May last year, with traffic to and from Italy falling 9.2% and Spain by 2.5%. Portugal was the biggest faller, declining by 11.4%. BAA said that Heathrow carried 5.8 million people overall last month, a fall of 0.6% on the same period last year. |
| 7.59am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. All eyes will be on Spanish and Italian bond yields today, following Spain's banking bailout. And Greek politicians are campaigning furiously ahead of the elections this weekend, with Antonis Samaras and Alexis Tsipras due to speak later. | 7.59am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. All eyes will be on Spanish and Italian bond yields today, following Spain's banking bailout. And Greek politicians are campaigning furiously ahead of the elections this weekend, with Antonis Samaras and Alexis Tsipras due to speak later. |
| Italy's prime minister Mario Monti is due to meet Swiss president Eveline Widmer-Schlumpf to discuss tax. While the German chancellor Angela Merkel and her finance minister will be speaking at an economics conference in Berlin. | Italy's prime minister Mario Monti is due to meet Swiss president Eveline Widmer-Schlumpf to discuss tax. While the German chancellor Angela Merkel and her finance minister will be speaking at an economics conference in Berlin. |
| This is today's agenda: | This is today's agenda: |
| • Sweden CPI for May: 8.30am • UK industrial output for April: 9.30am • UK manufacturing output for April: 9.30am • Andreas Dombret, board member of the Bunedsbank, speaks: 11am • French president Francois Hollande speaks: 1.30pm • UK GDP estimate by NIESR: 3pm • IMF chief Christine Lagarde speaks: 3pm • Joerg Asmussen, ECB board member, speaks: 3.30pm • ECB financial stability review: 4pm • US monthly budget statement for May: 7pm | • Sweden CPI for May: 8.30am • UK industrial output for April: 9.30am • UK manufacturing output for April: 9.30am • Andreas Dombret, board member of the Bunedsbank, speaks: 11am • French president Francois Hollande speaks: 1.30pm • UK GDP estimate by NIESR: 3pm • IMF chief Christine Lagarde speaks: 3pm • Joerg Asmussen, ECB board member, speaks: 3.30pm • ECB financial stability review: 4pm • US monthly budget statement for May: 7pm |
| In the debt markets, the UK is selling five-year Treasury gilts. Austria is selling €1.1bn of 50 and 10-year bonds and the Netherlands is selling €1.5bn-2.5bn in 20-year bonds. Belgium, Greece and the US are selling short-dated treasury bills. | In the debt markets, the UK is selling five-year Treasury gilts. Austria is selling €1.1bn of 50 and 10-year bonds and the Netherlands is selling €1.5bn-2.5bn in 20-year bonds. Belgium, Greece and the US are selling short-dated treasury bills. |