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Eurozone crisis live: Spanish borrowing costs hit new high as market rally fades Eurozone crisis live: Spanish borrowing costs hit new high as market rally fades
(40 minutes later)
4.16pm: German chancellor Angela Merkel is making her first comments on the Greek election, from the G20 summit in Los Cabos in Mexico.
And it seems she's sticking - unsurprisingly - to her hard line stance. Reuters quotes Merkel as saying there cannot be any loosening of Greece's reform pledges after the election.
She expects the quick formation of a new government, one that will fulfill the commitments already made by Greece to its international lenders.
But she sees no reason to speak about a new aid package for Greece on top of the two already agreed. [Does this mean she doesn't think Greece will need one, or that it won't get one even if it asks.....]
3.41pm: Some snippets from Reuters sources revealing parts of the draft communique from the G20:3.41pm: Some snippets from Reuters sources revealing parts of the draft communique from the G20:
The group urges the eurozone to find ways to break the "feedback loop" between sovereign states and banks (let's hope there are some suggestions as to how to do this...)The group urges the eurozone to find ways to break the "feedback loop" between sovereign states and banks (let's hope there are some suggestions as to how to do this...)
It also says it looks forward to the eurozone working with the new Greek government to ensure the country remains on the reform path and inside the single currency.It also says it looks forward to the eurozone working with the new Greek government to ensure the country remains on the reform path and inside the single currency.
And here's the G word: the G20 says, according to Reuters, that its top priority remains "strong, sustainable and balance growth" that reduces unemployment. And so say all of us.And here's the G word: the G20 says, according to Reuters, that its top priority remains "strong, sustainable and balance growth" that reduces unemployment. And so say all of us.
Update: something else that may or may not be in the communique:Update: something else that may or may not be in the communique:
G20 draft communique: "the shrimp ceviche is very good"G20 draft communique: "the shrimp ceviche is very good"
— zerohedge (@zerohedge) June 18, 2012— zerohedge (@zerohedge) June 18, 2012
3.33pm: In the US there was some positive economic news, after several days of lacklustre data.3.33pm: In the US there was some positive economic news, after several days of lacklustre data.
Signs that the American housing market might be edging back to recovery came from the National Association of Home Builders, whose sentiment index rose a point to 29 in June, its highest level in five years. So the Dow Jones Industrial Average, after an early drop in sympathy with European markets, is now down just 15 points.Signs that the American housing market might be edging back to recovery came from the National Association of Home Builders, whose sentiment index rose a point to 29 in June, its highest level in five years. So the Dow Jones Industrial Average, after an early drop in sympathy with European markets, is now down just 15 points.
However there are other signs of the US economy's continuing weakness, as the US Federal Reserve meets for its latest meeting starting on Tuesday, amid much discussion as to whether it will opt for some sort of economic stimulus. My colleague Dominic Rushe says:However there are other signs of the US economy's continuing weakness, as the US Federal Reserve meets for its latest meeting starting on Tuesday, amid much discussion as to whether it will opt for some sort of economic stimulus. My colleague Dominic Rushe says:
Oil prices are dropping in the US, another sign that traders fear the economy is slowing. Futures contracts for light, sweet crude for July delivery fell $1.69, or 2%, to $82.34 a barrel on the New York Mercantile Exchange.Oil prices are dropping in the US, another sign that traders fear the economy is slowing. Futures contracts for light, sweet crude for July delivery fell $1.69, or 2%, to $82.34 a barrel on the New York Mercantile Exchange.
The Federal Reserve meets this week and Phil Flynn, an analyst at Price Futures Group in Chicago, said with the Greek crisis now over (for now) and the "right" party in power, traders were assuming the likelihood of further government economic stimulus was receding. For how long is anyone's guess.The Federal Reserve meets this week and Phil Flynn, an analyst at Price Futures Group in Chicago, said with the Greek crisis now over (for now) and the "right" party in power, traders were assuming the likelihood of further government economic stimulus was receding. For how long is anyone's guess.
3.24pm: Here's a positive response to the Greek election result: ratings agency Fitch says that Greece and Europe have come back from the brink. It will not now put eurozone sovereign ratings on negative watch, as it previously said it might:3.24pm: Here's a positive response to the Greek election result: ratings agency Fitch says that Greece and Europe have come back from the brink. It will not now put eurozone sovereign ratings on negative watch, as it previously said it might:
The narrow victory of New Democracy in the Greek parliamentary elections means the near-term risk of a Greek disorderly debt default and exit from the euro has fallen. A new government that is supportive of the EU-IMF programme is likely to be in place prior to the EU Leaders Summit on 28-29 June.The narrow victory of New Democracy in the Greek parliamentary elections means the near-term risk of a Greek disorderly debt default and exit from the euro has fallen. A new government that is supportive of the EU-IMF programme is likely to be in place prior to the EU Leaders Summit on 28-29 June.
Consequently, Fitch will not place all eurozone sovereigns on Rating Watch Negative as it had indicated would be the case if a Greek euro exit were a probable near-term event.Consequently, Fitch will not place all eurozone sovereigns on Rating Watch Negative as it had indicated would be the case if a Greek euro exit were a probable near-term event.

But that does not mean all is now rosy in the euro-garden:
But that does not mean all is now rosy in the euro-garden:
The crisis in Greece and the eurozone remains intense. Fiscal austerity and painful structural reform combined with a strong parliamentary opposition led by Sryzia means that the new Greek government is likely to be fragile.The crisis in Greece and the eurozone remains intense. Fiscal austerity and painful structural reform combined with a strong parliamentary opposition led by Sryzia means that the new Greek government is likely to be fragile.
While the risks from Greece have fallen for now, the severity of the systemic crisis engulfing the eurozone is unlikely to diminish until European leaders articulate a credible road-map that would complete monetary union with much greater fiscal and financial integration.While the risks from Greece have fallen for now, the severity of the systemic crisis engulfing the eurozone is unlikely to diminish until European leaders articulate a credible road-map that would complete monetary union with much greater fiscal and financial integration.
3.18pm: Mark under too good to be true. Earlier it was reported that Ireland's EU and IMF lenders were considering doubling the repayment term of its €85bn bailout to 30 years.3.18pm: Mark under too good to be true. Earlier it was reported that Ireland's EU and IMF lenders were considering doubling the repayment term of its €85bn bailout to 30 years.
But an EC spokesman has knocked this one down in no uncertain terms:But an EC spokesman has knocked this one down in no uncertain terms:
Reports that the Troika is considering changes to the loan repayment schedule for Ireland are not true.Reports that the Troika is considering changes to the loan repayment schedule for Ireland are not true.
— Simon O'Connor (@ECspokesSimon) June 18, 2012— Simon O'Connor (@ECspokesSimon) June 18, 2012
2.50pm: Despite the uncertainty caused last week by the Greek election and rising Spanish bond yields, the European Central Bank avoided intervening in the bond markets.2.50pm: Despite the uncertainty caused last week by the Greek election and rising Spanish bond yields, the European Central Bank avoided intervening in the bond markets.
For the 14th week in a row, the ECB bought no government bonds last week, sticking to its policy even as market volatility continued. But ECB president Mario Draghi said on Friday the economy faced serious risks, prompting talk the bank could cut interest rates or take other actions before too long. But no bond buying as yet. Annalisa Piazza at Newedge Strategy said:For the 14th week in a row, the ECB bought no government bonds last week, sticking to its policy even as market volatility continued. But ECB president Mario Draghi said on Friday the economy faced serious risks, prompting talk the bank could cut interest rates or take other actions before too long. But no bond buying as yet. Annalisa Piazza at Newedge Strategy said:
Despite record high yields for Spanish and Italian bonds, the ECB seems reluctant to re-activate the securities market programme [ie bond buying]. Now that the short-term risks of a euro-breakup have diminished, the ECB is likely to remain mainly focused on the fiscal and political intergration of the EMU countries. In our view, additional SMP is quite unlikely near term but we still expect the ECB to cut rates in order to revive the sluggish economyDespite record high yields for Spanish and Italian bonds, the ECB seems reluctant to re-activate the securities market programme [ie bond buying]. Now that the short-term risks of a euro-breakup have diminished, the ECB is likely to remain mainly focused on the fiscal and political intergration of the EMU countries. In our view, additional SMP is quite unlikely near term but we still expect the ECB to cut rates in order to revive the sluggish economy
2.33pm: For anyone expecting something of substance on the eurozone crisis from the G20 meeting, Sky's Ed Conway is here to dash even your slimmest hopes:2.33pm: For anyone expecting something of substance on the eurozone crisis from the G20 meeting, Sky's Ed Conway is here to dash even your slimmest hopes:
White House briefing that there won't be any big euro solution coming out of the G20. "That would happen in Brussels, not Los Cabos"White House briefing that there won't be any big euro solution coming out of the G20. "That would happen in Brussels, not Los Cabos"
— Ed Conway (@EdConwaySky) June 18, 2012— Ed Conway (@EdConwaySky) June 18, 2012
Almost all US focus here is on bilateral meeting between Obama & Putin - first since Putin re-elected. Syria top of agenda. Euro way downAlmost all US focus here is on bilateral meeting between Obama & Putin - first since Putin re-elected. Syria top of agenda. Euro way down
— Ed Conway (@EdConwaySky) June 18, 2012— Ed Conway (@EdConwaySky) June 18, 2012
2.27pm: Spain is planning to issue up to €5bn in 12 and 18 month bonds on Tuesday and Thursday, even as its bond yields continue to climb.2.27pm: Spain is planning to issue up to €5bn in 12 and 18 month bonds on Tuesday and Thursday, even as its bond yields continue to climb.
Analysts said the Spanish treasury was being cautious in its issuance programme, given that funding for 2012 is already at 60% - the last thing it wants is an undersubscribed auction to put more pressure on its debt.Analysts said the Spanish treasury was being cautious in its issuance programme, given that funding for 2012 is already at 60% - the last thing it wants is an undersubscribed auction to put more pressure on its debt.
The 10 year yield is currently at 7.2%, another new high in the euro's lifetime.The 10 year yield is currently at 7.2%, another new high in the euro's lifetime.
2.12pm: Our Wall Street correspondent Dominic Rushe has just sent this:2.12pm: Our Wall Street correspondent Dominic Rushe has just sent this:
The Greek election result doesn't seem to have allayed US fears. US markets look set to open down if the futures markets can be trusted, the Dow Jones futures are currently down 0.55% and the S&P 0.56%.The Greek election result doesn't seem to have allayed US fears. US markets look set to open down if the futures markets can be trusted, the Dow Jones futures are currently down 0.55% and the S&P 0.56%.
Last week the Dow ended up for the second consecutive weeks and has been up three of the last four weeks. But both Fed chairman Ben Bernanke and the president have warned that "headwinds" from Europe could still blow the fragile US recovery off course.Last week the Dow ended up for the second consecutive weeks and has been up three of the last four weeks. But both Fed chairman Ben Bernanke and the president have warned that "headwinds" from Europe could still blow the fragile US recovery off course.
2.08pm: I am handing over to my colleague Nick Fletcher now. Thanks for all your great comments and see you soon.2.08pm: I am handing over to my colleague Nick Fletcher now. Thanks for all your great comments and see you soon.
1.21pm: Ireland's EU and IMF lenders are considering doubling the repayment term of its €85bn bailout to 30 years from 15, according to state broadcaster RTE.1.21pm: Ireland's EU and IMF lenders are considering doubling the repayment term of its €85bn bailout to 30 years from 15, according to state broadcaster RTE.
12.40pm: The Guardian's political editor Patrick Wintour has sent this from Mexico, fresh off the plane where David Cameron briefed journalists.12.40pm: The Guardian's political editor Patrick Wintour has sent this from Mexico, fresh off the plane where David Cameron briefed journalists.
David Cameron has urged the Greek political parties to form a government quickly in the wake of Sunday's elections, warning that delay could prove "very dangerous".David Cameron has urged the Greek political parties to form a government quickly in the wake of Sunday's elections, warning that delay could prove "very dangerous".
He was speaking as he arrived in Los Cabos on Monday for the start of a two day summit of G20 world leaders. Cameron held a conference call with eurozone leaders in Downing Street to discuss the Greek elections
before heading for the summit.		He was speaking as he arrived in Los Cabos on Monday for the start of a two day summit of G20 world leaders. Cameron held a conference call with eurozone leaders in Downing Street to discuss the Greek elections
before heading for the summit.
Cameron said: "It looks as if the outcome of the Greek elections looks positive in terms of a clear commitment to staying in the eurozone and accept the terms of the memorandum, but those parties that want that to happen cannot afford to delay and position themselves. If you are a Greek political party and you want to say in the eurozone and you want to accept the consequences that follow from that in the memorandum you have got to get on with it and help form a government to deliver that. I think delay could be very dangerous I think that point wasmade on the call last night."Cameron said: "It looks as if the outcome of the Greek elections looks positive in terms of a clear commitment to staying in the eurozone and accept the terms of the memorandum, but those parties that want that to happen cannot afford to delay and position themselves. If you are a Greek political party and you want to say in the eurozone and you want to accept the consequences that follow from that in the memorandum you have got to get on with it and help form a government to deliver that. I think delay could be very dangerous I think that point wasmade on the call last night."
He did not rule out the idea of some renegotiations between the Greeks and the eurozone over the terms of the bailout, but indicated that Britain would not be a central figure in this decision since the UK is not contributing to the bailout.He did not rule out the idea of some renegotiations between the Greeks and the eurozone over the terms of the bailout, but indicated that Britain would not be a central figure in this decision since the UK is not contributing to the bailout.
12.33pm: The euro has retreated after touching a one-month high against the dollar in early trading as euphoria over the Greek election result dissipated. It is now trading at $1.2637.12.33pm: The euro has retreated after touching a one-month high against the dollar in early trading as euphoria over the Greek election result dissipated. It is now trading at $1.2637.
Jane Foley, senior FX strategist at Rabobank, said:Jane Foley, senior FX strategist at Rabobank, said:
The euro is already off... displaying that while we have a decent result in the Greek election, everybody knows it's going to be a long, rocky road and we are nowhere near the end of Greece's problems.The euro is already off... displaying that while we have a decent result in the Greek election, everybody knows it's going to be a long, rocky road and we are nowhere near the end of Greece's problems.
Even if we carry on getting a better outcome with respect to Greece we have still got Spain and problems there.Even if we carry on getting a better outcome with respect to Greece we have still got Spain and problems there.
12.17pm: In Spain, miners' protests have turned more serious, as you can see from this picture. About 8,000 workers are protesting against cuts in coal subsidies at more than 40 coal mines in northern Spain.12.17pm: In Spain, miners' protests have turned more serious, as you can see from this picture. About 8,000 workers are protesting against cuts in coal subsidies at more than 40 coal mines in northern Spain.
12.13pm: Over on our business blog, the Guardian's banking correspondent, Jill Treanor, has looked at the increasing rate of Greek bank withdrawals. More here.12.13pm: Over on our business blog, the Guardian's banking correspondent, Jill Treanor, has looked at the increasing rate of Greek bank withdrawals. More here.
To understand all the fuss about a potential Greek exit from the eurozone, think about the impact that it would have the banking system alone. Some €44bn (£35bn) of bank deposits have been already withdrawn from the country's banks between April 2011 and 2012 and the fear was that this trend would accelerate after Sunday's elections.To understand all the fuss about a potential Greek exit from the eurozone, think about the impact that it would have the banking system alone. Some €44bn (£35bn) of bank deposits have been already withdrawn from the country's banks between April 2011 and 2012 and the fear was that this trend would accelerate after Sunday's elections.
The outcome of the elections - and the chance that the pro-bailout, pro-European New Democracy party will be able to form a government - may have taken the pressure off bank deposits for now. Speculation about a Greece exit from the eurozone - which would cut the value of deposits inside bank accounts as the currency devalues - is fading for now. But this chart, produced by Royal Bank of Scotland analysts, shows just how serious the situation has already become.The outcome of the elections - and the chance that the pro-bailout, pro-European New Democracy party will be able to form a government - may have taken the pressure off bank deposits for now. Speculation about a Greece exit from the eurozone - which would cut the value of deposits inside bank accounts as the currency devalues - is fading for now. But this chart, produced by Royal Bank of Scotland analysts, shows just how serious the situation has already become.
12.05pm: Time for a lunchtime round-up. A relief rally in the first hour of trading - after Greece avoided "Drachmageddon" - soon showed signs of fading, with the stock markets turning negative. European shares have recovered somewhat since then, with the FTSE now up 18 points at 5497, a 0.4% gain. Germany's Dax has climbed 42 points, or 0.7%, to 6272, while France's CAC has edged up nearly 6 points, or 0.2%, to 3093.12.05pm: Time for a lunchtime round-up. A relief rally in the first hour of trading - after Greece avoided "Drachmageddon" - soon showed signs of fading, with the stock markets turning negative. European shares have recovered somewhat since then, with the FTSE now up 18 points at 5497, a 0.4% gain. Germany's Dax has climbed 42 points, or 0.7%, to 6272, while France's CAC has edged up nearly 6 points, or 0.2%, to 3093.
Spanish and Italian bond yields are surging again: the Spanish ten-year has jumped 22 basis points to a new euro era high of 7.149% while the Italian equivalent is a shade over 6%, up 13 bps.Spanish and Italian bond yields are surging again: the Spanish ten-year has jumped 22 basis points to a new euro era high of 7.149% while the Italian equivalent is a shade over 6%, up 13 bps.
Meanwhile, G20 leaders are meeting in the Mexican resort of Los Cabos. David Cameron is due to arrive there shortly.Meanwhile, G20 leaders are meeting in the Mexican resort of Los Cabos. David Cameron is due to arrive there shortly.
11.18am: Open Europe, the thinktank, has also looked at why Greece doesn't just leave the euro now and move forward?11.18am: Open Europe, the thinktank, has also looked at why Greece doesn't just leave the euro now and move forward?
There are clear economic benefits to Greece leaving the euro, but the risks involved in an imminent exit could well outweigh these benefits in the short term. We estimate that if Greece left the euro now, it could still need between €67bn and €259bn in external short-term support, potentially split between the IMF, the Eurozone and non-euro countries including the UK. These figures do not include longer-term support or contagion costs to the rest of the Eurozone.There are clear economic benefits to Greece leaving the euro, but the risks involved in an imminent exit could well outweigh these benefits in the short term. We estimate that if Greece left the euro now, it could still need between €67bn and €259bn in external short-term support, potentially split between the IMF, the Eurozone and non-euro countries including the UK. These figures do not include longer-term support or contagion costs to the rest of the Eurozone.
A Greek exit and the withdrawal of ECB support would almost certainly lead to the undercapitalised Greek banking sector collapsing. To avoid a massive bank run and huge losses to pensions, we estimate that banks and pensions funds between them would instantly need a €55bn injection of fresh capital, which would be difficult for Greece to afford without external support.A Greek exit and the withdrawal of ECB support would almost certainly lead to the undercapitalised Greek banking sector collapsing. To avoid a massive bank run and huge losses to pensions, we estimate that banks and pensions funds between them would instantly need a €55bn injection of fresh capital, which would be difficult for Greece to afford without external support.
The new Greek Central Bank would also need to create at least €128bn worth of the new currency (63% of Greek GDP) in liquidity to help keep Greek banks afloat. This could trigger high levels of inflation, though these might only be temporary.The new Greek Central Bank would also need to create at least €128bn worth of the new currency (63% of Greek GDP) in liquidity to help keep Greek banks afloat. This could trigger high levels of inflation, though these might only be temporary.
Despite a compromise being likely in the short term, as Greece approaches a balanced budget and a more stable banking sector, though still messy, an exit will look increasingly attractive – particularly if the only alternative for Athens is to permanently give up economic and political sovereignty.Despite a compromise being likely in the short term, as Greece approaches a balanced budget and a more stable banking sector, though still messy, an exit will look increasingly attractive – particularly if the only alternative for Athens is to permanently give up economic and political sovereignty.
11.16am: Thinktank Open Europe estimates that the EU countries have a total exposure of €552bn to the Greek economy. This comes through various sources including the two direct bailouts, central bank lending (ECB monetary policy, ECB Securities Markets Programme, Target 2 and Emergency Liquidity Assistance) and exposure of these countries' banking sectors to Greece. This has increased by a massive 67% since June 2011.11.16am: Thinktank Open Europe estimates that the EU countries have a total exposure of €552bn to the Greek economy. This comes through various sources including the two direct bailouts, central bank lending (ECB monetary policy, ECB Securities Markets Programme, Target 2 and Emergency Liquidity Assistance) and exposure of these countries' banking sectors to Greece. This has increased by a massive 67% since June 2011.
10.41am: The FTSE has nudged back into positive territory, trading up 4 points at 5482. Germany's Dax is 0.8% higher while France's CAC is up 0.3%.10.41am: The FTSE has nudged back into positive territory, trading up 4 points at 5482. Germany's Dax is 0.8% higher while France's CAC is up 0.3%.
10.05am: It's worth noting that the other weekend election result - France has elected a socialist dominated National Assembly, giving François Hollande strong backing for his growth agenda - still needs to be digested.10.05am: It's worth noting that the other weekend election result - France has elected a socialist dominated National Assembly, giving François Hollande strong backing for his growth agenda - still needs to be digested.
9.48am: With the Greek election out of the way, attention has turned to Spain again. The country's borrowing costs have hit a fresh peak of 7.14%, up 22 basis points on the day - the highest ever seen during the euro's lifetime. German Bunds, meanwhile, have fallen to a yield of 1.4%.9.48am: With the Greek election out of the way, attention has turned to Spain again. The country's borrowing costs have hit a fresh peak of 7.14%, up 22 basis points on the day - the highest ever seen during the euro's lifetime. German Bunds, meanwhile, have fallen to a yield of 1.4%.
A bond trader told Reuters:A bond trader told Reuters:
Markets are looking to fade the relief rally, and Spain is suddenly blowing out again. It looks like it is going to be under pressure until at least Thursday, but really it is hard to see what can stop [Spanish yields] rising even then.Markets are looking to fade the relief rally, and Spain is suddenly blowing out again. It looks like it is going to be under pressure until at least Thursday, but really it is hard to see what can stop [Spanish yields] rising even then.
Spain holds an auction of short-term debt tomorrow followed by a five-year bond sale on Thursday.Spain holds an auction of short-term debt tomorrow followed by a five-year bond sale on Thursday.
9.37am: Greece as victim? Here is American economist and Nobel Prize winner Paul Krugman's latest column in the New York Times.9.37am: Greece as victim? Here is American economist and Nobel Prize winner Paul Krugman's latest column in the New York Times.
Ever since Greece hit the skids, we've heard a lot about what's wrong with everything Greek. Some of the accusations are true, some are false — but all of them are beside the point. Yes, there are big failings in Greece's economy, its politics and no doubt its society. But those failings aren't what caused the crisis that is tearing Greece apart, and threatens to spread across Europe.Ever since Greece hit the skids, we've heard a lot about what's wrong with everything Greek. Some of the accusations are true, some are false — but all of them are beside the point. Yes, there are big failings in Greece's economy, its politics and no doubt its society. But those failings aren't what caused the crisis that is tearing Greece apart, and threatens to spread across Europe.
No, the origins of this disaster lie farther north, in Brussels, Frankfurt and Berlin, where officials created a deeply — perhaps fatally — flawed monetary system, then compounded the problems of that system by substituting moralizing for analysis. And the solution to the crisis, if there is one, will have to come from the same places.No, the origins of this disaster lie farther north, in Brussels, Frankfurt and Berlin, where officials created a deeply — perhaps fatally — flawed monetary system, then compounded the problems of that system by substituting moralizing for analysis. And the solution to the crisis, if there is one, will have to come from the same places.
9.33am: Trevor Greetham, director of asset allocation at Fidelity Worldwide Investment, is sceptical about the austerity mantra:9.33am: Trevor Greetham, director of asset allocation at Fidelity Worldwide Investment, is sceptical about the austerity mantra:
It is increasingly obvious that a policy of all out austerity is failing to reduce government debt. Moreover, global growth is slowing and it will take substantial action from central banks to turn the cycle back up again.It is increasingly obvious that a policy of all out austerity is failing to reduce government debt. Moreover, global growth is slowing and it will take substantial action from central banks to turn the cycle back up again.
The Greek election outcome was good news as a coalition led by the anti-reform party Syriza could have led to a disorderly Greek exit from the euro, triggering massive and destabilising deposit flight from other peripheral euro area nations and a marked increase in financial stress.The Greek election outcome was good news as a coalition led by the anti-reform party Syriza could have led to a disorderly Greek exit from the euro, triggering massive and destabilising deposit flight from other peripheral euro area nations and a marked increase in financial stress.
However, a new Greek coalition government is unlikely to be able to restore economic growth or deliver effective reform without substantial financial help from the rest of the euro area. Meanwhile, the market focus will shift back to the larger economies of Spain the Italy which are also struggling against a weakening global growth backdrop.However, a new Greek coalition government is unlikely to be able to restore economic growth or deliver effective reform without substantial financial help from the rest of the euro area. Meanwhile, the market focus will shift back to the larger economies of Spain the Italy which are also struggling against a weakening global growth backdrop.
It will take substantial action from the world's largest central banks to turn the global growth cycle back up again. In the meantime, we remain cautious on stocks and commodities, preferring gilts, global property and cash in our multi asset funds.It will take substantial action from the world's largest central banks to turn the global growth cycle back up again. In the meantime, we remain cautious on stocks and commodities, preferring gilts, global property and cash in our multi asset funds.
9.24am: The relief rally didn't last long. Markets have gone into reverse: Spanish 10-year government bond yields have topped 7% again, trading at 7.139% now, up 22 basis points on the day, while the Italian equivalent is back through 6%, at 6.074%, up 14 bps.9.24am: The relief rally didn't last long. Markets have gone into reverse: Spanish 10-year government bond yields have topped 7% again, trading at 7.139% now, up 22 basis points on the day, while the Italian equivalent is back through 6%, at 6.074%, up 14 bps.
The FTSE is down 13 points, or 0.25%, at 5465. Spain's Ibex is down 0.7% and Italy's FTSE MiB has tumbled 0.9%.The FTSE is down 13 points, or 0.25%, at 5465. Spain's Ibex is down 0.7% and Italy's FTSE MiB has tumbled 0.9%.
And the euro has dropped to $1.2628.And the euro has dropped to $1.2628.
8.45am: Spanish prime minister Mariano Rajoy was equally delighted with the election outcome, which he described as "good news for Greece, very good news for the European Union, for the euro and also for Spain".8.45am: Spanish prime minister Mariano Rajoy was equally delighted with the election outcome, which he described as "good news for Greece, very good news for the European Union, for the euro and also for Spain".
I am totally convinced that this strengthens the euro. The euro project is irreversible and we must continue to make progress on it.I am totally convinced that this strengthens the euro. The euro project is irreversible and we must continue to make progress on it.
Both Spain and Italy saw their borrowing costs rise to near unsustainable levels last week amid fears about a possible Greek exit from the eurozone. Bond yields have fallen back this morning.Both Spain and Italy saw their borrowing costs rise to near unsustainable levels last week amid fears about a possible Greek exit from the eurozone. Bond yields have fallen back this morning.
Rajoy said he was in favour of European fiscal integration and a banking union.Rajoy said he was in favour of European fiscal integration and a banking union.
It's true that some things take time but it's also true that we need to take steps in the right direction.It's true that some things take time but it's also true that we need to take steps in the right direction.
8.42am: Meanwhile, the White House in Washington said:8.42am: Meanwhile, the White House in Washington said:
We hope this election will lead quickly to the formation of a new government that can make timely progress on the economic challenges facing the Greek people.We hope this election will lead quickly to the formation of a new government that can make timely progress on the economic challenges facing the Greek people.
As President Obama and other world leaders have said, we believe that it is in all our interests for Greece to remain in the euro area while respecting its commitment to reform.As President Obama and other world leaders have said, we believe that it is in all our interests for Greece to remain in the euro area while respecting its commitment to reform.
8.38am: In Germany, finance minister Wolfgang Schäuble said the government saw the Greek election result as a "decision by Greek voters to forge ahead with the implementation of far-reaching economic and fiscal reforms". Not sure that's right - it looks like voters were driven by fear of the unknown.8.38am: In Germany, finance minister Wolfgang Schäuble said the government saw the Greek election result as a "decision by Greek voters to forge ahead with the implementation of far-reaching economic and fiscal reforms". Not sure that's right - it looks like voters were driven by fear of the unknown.
Schäuble added:Schäuble added:
This path will be neither short nor easy but is necessary and will give the Greek people the prospect of a better future. In order to succeed, the programme requires political stability.This path will be neither short nor easy but is necessary and will give the Greek people the prospect of a better future. In order to succeed, the programme requires political stability.
The German foreign minister Guido Westerwelle said, rather ominously:The German foreign minister Guido Westerwelle said, rather ominously:
We want Greece to stay in the euro; we want Greece to continue wanting to belong to Europe. But Greece will decide now on its own path; you cannot stop anyone who wants to go.We want Greece to stay in the euro; we want Greece to continue wanting to belong to Europe. But Greece will decide now on its own path; you cannot stop anyone who wants to go.
What we cannot accept is the agreements that have been made being declared null and void. There can't be substantial changes to the agreements but I can imagine that we would talk about the timelines once again, given that in reality there was political standstill in Greece because of the elections, which the normal citizens shouldn't have to suffer from.What we cannot accept is the agreements that have been made being declared null and void. There can't be substantial changes to the agreements but I can imagine that we would talk about the timelines once again, given that in reality there was political standstill in Greece because of the elections, which the normal citizens shouldn't have to suffer from.
8.29am: What's the view from Rome? John Hooper reports.8.29am: What's the view from Rome? John Hooper reports.

Italy's prime minister, Mario Monti, said he was delighted by the Greek vote, "which is also a great sign for Europe". Mr Monti was speaking to journalists on his arrival in Los Cabos, Mexico, where he is due to attend the G20 meeting.
Italy's prime minister, Mario Monti, said he was delighted by the Greek vote, "which is also a great sign for Europe". Mr Monti was speaking to journalists on his arrival in Los Cabos, Mexico, where he is due to attend the G20 meeting.
The outcome was generally greeted with huge relief in Italy, which was widely seen as next in line for euro debt contagion. Last week, its borrowing costs soared and the Milan bourse slumped as doubts spread about the efficacy of the Spanish bail-out.The outcome was generally greeted with huge relief in Italy, which was widely seen as next in line for euro debt contagion. Last week, its borrowing costs soared and the Milan bourse slumped as doubts spread about the efficacy of the Spanish bail-out.
La Repubblica was not alone this morning in reminding its readers of those concerns. "The good news is that the euro is not going to sink today in the waters of the Piraeus", wrote Maurizio Ricci. "The bad news is that nothing rules out the terminal collapse of the single currency within a few weeks or months: not necessarily in the waters of the Piraeus; it could happen instead on the spacious boulevards of Madrid or Barcelona."La Repubblica was not alone this morning in reminding its readers of those concerns. "The good news is that the euro is not going to sink today in the waters of the Piraeus", wrote Maurizio Ricci. "The bad news is that nothing rules out the terminal collapse of the single currency within a few weeks or months: not necessarily in the waters of the Piraeus; it could happen instead on the spacious boulevards of Madrid or Barcelona."
Mr Monti, though, was determinedly optimistic. He said the Greeks had "understood the importance of the value of the EU". During his flight to Mexico, he had taken part in a video-conference with other EU leaders. The Italian prime minister, who is known for his dry sense of humour called it a "very high-level encounter".Mr Monti, though, was determinedly optimistic. He said the Greeks had "understood the importance of the value of the EU". During his flight to Mexico, he had taken part in a video-conference with other EU leaders. The Italian prime minister, who is known for his dry sense of humour called it a "very high-level encounter".
8.22am: The group of eurozone finance ministers said last night that the troika - officials from the IMF, ECB and European Commission - would return to Athens as soon as a new Greek government is in place to discuss next steps for the bailout adjustment programme, which is already off track. Here is the statement in full.8.22am: The group of eurozone finance ministers said last night that the troika - officials from the IMF, ECB and European Commission - would return to Athens as soon as a new Greek government is in place to discuss next steps for the bailout adjustment programme, which is already off track. Here is the statement in full.
8.17am: Here are some analysts' views on the Greek election results.8.17am: Here are some analysts' views on the Greek election results.
Analysts at Barclays Capital said:Analysts at Barclays Capital said:
The results appear close to what the markets had been expecting. The fact that the centre-right New Democracy has won the most votes will be viewed as market friendly because it reduces the likelihood of a near-term Greek exit from the euro area, and will be viewed as making successful negotiations with the troika somewhat more likely. Already on Sunday night euro area officials and the IMF have expressed their willingness to look at adjusting some elements of the programme, in particular its timing. Overall, however, we expect the effect on the euro and risky currencies and assets to be muted.The results appear close to what the markets had been expecting. The fact that the centre-right New Democracy has won the most votes will be viewed as market friendly because it reduces the likelihood of a near-term Greek exit from the euro area, and will be viewed as making successful negotiations with the troika somewhat more likely. Already on Sunday night euro area officials and the IMF have expressed their willingness to look at adjusting some elements of the programme, in particular its timing. Overall, however, we expect the effect on the euro and risky currencies and assets to be muted.
Michael Hewson, senior market analyst at CMC Markets UK:Michael Hewson, senior market analyst at CMC Markets UK:
The challenges facing the Greek economy remain mountainous and the general feeling remains predominantly that the day of reckoning has merely been delayed. The outcome of the Greece election could prove to be one of those results that could end up being potentially toxic to the winner, given that the next government could well preside over Greece's eventual exit from the euro.The challenges facing the Greek economy remain mountainous and the general feeling remains predominantly that the day of reckoning has merely been delayed. The outcome of the Greece election could prove to be one of those results that could end up being potentially toxic to the winner, given that the next government could well preside over Greece's eventual exit from the euro.
Michael Derks, chief strategist at forex broker FxPro:Michael Derks, chief strategist at forex broker FxPro:
The euro is now at $1.27 for the first time in four weeks, and from a technical perspective the price action looks encouraging.Not surprisingly, both the dollar and the yen have given back some ground whilst the pound has again underperformed. Bond yields of both Italy and Spain are lower in early trading, whilst Bund yields are higher.The euro is now at $1.27 for the first time in four weeks, and from a technical perspective the price action looks encouraging.Not surprisingly, both the dollar and the yen have given back some ground whilst the pound has again underperformed. Bond yields of both Italy and Spain are lower in early trading, whilst Bund yields are higher.
It remains to be seen how long the relief lasts. Greece remains on a financial precipice, with the government essentially out of money, deposits fleeing the country and tax avoidance now an epidemic. Also, there are justifiable doubts over whether Greek politicians will be able to form a properly-functioning government, one able to actually implement the troika's demands.It remains to be seen how long the relief lasts. Greece remains on a financial precipice, with the government essentially out of money, deposits fleeing the country and tax avoidance now an epidemic. Also, there are justifiable doubts over whether Greek politicians will be able to form a properly-functioning government, one able to actually implement the troika's demands.
8.08am: On bond markets, Italian ten-year yields have fallen back below 6%, trading at 5.9% this morning. The Spanish equivalent also dropped, by 4 basis points to 6.88%.8.08am: On bond markets, Italian ten-year yields have fallen back below 6%, trading at 5.9% this morning. The Spanish equivalent also dropped, by 4 basis points to 6.88%.
8.02am: European stock markets follow in Asia's footsteps. The FTSE 100 index in London leapt more than 75 points in the first minute of trading and is now up about 70 points at 5551, a 1.3% gain. Spain's Ibex jumped 1.7%, Italy's FTSE MiB is up 1%, Germany's Dax 1.3% and France's CAC is 1.1% ahead.8.02am: European stock markets follow in Asia's footsteps. The FTSE 100 index in London leapt more than 75 points in the first minute of trading and is now up about 70 points at 5551, a 1.3% gain. Spain's Ibex jumped 1.7%, Italy's FTSE MiB is up 1%, Germany's Dax 1.3% and France's CAC is 1.1% ahead.
7.52am: There is very little in terms of economic data scheduled for today, so the two-day G20 meeting in the resort of Los Cabos in Mexico will take centre stage. "European leaders are expected to come under increasing pressure to deal more decisively with the financial crisis as many nations outside Europe like China and the US are being negatively impacted ever more by the ongoing turmoil in financial markets," said Mark Huber at ETX Capital.7.52am: There is very little in terms of economic data scheduled for today, so the two-day G20 meeting in the resort of Los Cabos in Mexico will take centre stage. "European leaders are expected to come under increasing pressure to deal more decisively with the financial crisis as many nations outside Europe like China and the US are being negatively impacted ever more by the ongoing turmoil in financial markets," said Mark Huber at ETX Capital.
The first news is expected to come at lunchtime UK time when David Cameron lands in Mexico, having briefed journalists on the plane. Los Cabos is seven hours behind the UK.The first news is expected to come at lunchtime UK time when David Cameron lands in Mexico, having briefed journalists on the plane. Los Cabos is seven hours behind the UK.
7.44am: The euro hit a one-month high against the dollar this morning, rising to $1.2748, and Asian stock markets rallied. Japan's Nikkei closed up 1.8% while Hong Kong's Hang Seng and Singapore's Straits Times both added about 1%.7.44am: The euro hit a one-month high against the dollar this morning, rising to $1.2748, and Asian stock markets rallied. Japan's Nikkei closed up 1.8% while Hong Kong's Hang Seng and Singapore's Straits Times both added about 1%.
Taisuke Tanaka, chief FX strategist at Deutsche Securities, told Reuters:Taisuke Tanaka, chief FX strategist at Deutsche Securities, told Reuters:
This election result should keep hopes alive that Greece will stay in the euro. There are massive short positions on the euro. Market players now need to consider whether the euro has more downside or upside, ahead of eurozone policymakers' meetings in coming days. I think risk curencies could recover some of their lost grounds.This election result should keep hopes alive that Greece will stay in the euro. There are massive short positions on the euro. Market players now need to consider whether the euro has more downside or upside, ahead of eurozone policymakers' meetings in coming days. I think risk curencies could recover some of their lost grounds.
7.17am: Good morning. Welcome back to our rolling coverage of the eurozone debt crisis. Greece has avoided "Drachmageddon" as voters handed the conservative, pro-bailout parties a narrow victory. The New Democracy party will try to form a new coalition. So Greece remains in the euro, at least for now.7.17am: Good morning. Welcome back to our rolling coverage of the eurozone debt crisis. Greece has avoided "Drachmageddon" as voters handed the conservative, pro-bailout parties a narrow victory. The New Democracy party will try to form a new coalition. So Greece remains in the euro, at least for now.
Surprisingly, it's also still in the Euro after its win against Russia on Saturday night, and will face Germany in the European championships quarter final on Friday.Surprisingly, it's also still in the Euro after its win against Russia on Saturday night, and will face Germany in the European championships quarter final on Friday.
Gary Jenkins of Swordfish Research said:Gary Jenkins of Swordfish Research said:
That will be worth watching … Today and this week it will be Spanish bond yields that will probably be the most watched asset on the capital markets. You would expect them to benefit from the general relief rally that is expected to occur today (for a while at least) but then again you would have expected them to perform reasonably well on Friday and they didn't. Whilst one should not take too much notice of any one day relative trading pattern it most have been of some concern to European officials that Spanish bonds did not join in Friday's mini rally.That will be worth watching … Today and this week it will be Spanish bond yields that will probably be the most watched asset on the capital markets. You would expect them to benefit from the general relief rally that is expected to occur today (for a while at least) but then again you would have expected them to perform reasonably well on Friday and they didn't. Whilst one should not take too much notice of any one day relative trading pattern it most have been of some concern to European officials that Spanish bonds did not join in Friday's mini rally.