Euro Zone Debt Crisis

Euro Zone Debt Crisis

IT Mon, Nov 7

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  • 12:24
    Another week, another crisis in the euro zone. Rumours abound that Italy's embattled prime minister Silvio Berlusconi is about to resign. He looks like being the second major casualty of the financial crisis in as many days following the departure of Greece's prime minister George Papandreou yesterday.

    Normally, the uncertainty of such an impending collapse in Italy would send stocks spiralling down, but in the topsy-turvy debt crisis world of 2011 European markets have turned positive on news of Berlusconi's imminent demise.

    Earlier, the country's borrowing costs hit a record high of 6.58%, its highest level since the euro was established in 1999.
  • 12:36
    Is this man the next political victim of euro zone debt crisis?
    Is this man the next political victim of euro zone debt crisis?
  • 12:48
    Hold on a minute! It looks like the wily old Signore Berlusconi is staging one of his tailor-made recoveries. He has just denied reports he was about to resign on his Facebook page.

    "Rumours of my resignation are baseless," the emabttled leader said. Two journalists close to the PM reported earlier that he would resign within hours. Well, you didn't expect a man who has survived 50 confidence votes since 2008 to go down that easy, did you?

    Nevertheless his parliamentary majority looks shaky at best ahead of the tomorrow's key budget vote which may force him out should he lose.
  • 13:03
    As Italy takes centre stage from their colleagues in Athens, we are really beginning to see the true nature of contagion. Italy’s benchmark 10-year bond yields are now trading just under 6.7 per cent.

    In terms of precedence, the other three EU bailout recipients [Greece, Ireland and Portugal] slipped over the edge at 7 per cent and were forced to seek outside help. Louise Cooper of BGC Capital suggests Italy will require €300 billion in debt relief “just to stand still”.
  • 13:16
    Markets are in see-saw mode again. Bouncing up and down on rumours and counter rumours regarding Berlusconi's fate. Here's a snapshot: FTSE 5,502 (-24.8), Dax 5,977 (+11.8), Cac 40 3,129 (+5.29), Iseq 2,674 (+9.6)

    Rumours of Berlusconi's imminent departure had earlier caused shares across Europe to rally. Peter Thal Larsen on Twitter says "when the mere rumour of your imminent resignation causes a pan-European market rally, it really is time to go."
  • 13:26
    One of the journalists behind the earlier rumours of Berlusconi's imminent exit has just tweeted that the emabttled PM changed his mind after a lunch in Milan with his children. Not wanting to stereotype but it's hard to imagine other European leaders, at a time like this, having a crisis lunch with family members.
  • 13:36
    The news from Italy has somewhat overshadowed machinations in Greece today. However,
    Papandreou has apparently telephoned other EU leaders [Merkel, Barroso and Juncker] on his efforts to form a coalition government that will oversee the implementation of the country’s austerity programme.

    Merkel has praised Papandreou's efforts to resolve a political stalemate. Papandreou has already confirmed he will not lead the cabinet. What a week for the Greek leader!
  • 13:46
    One's Berluconi's ministers has just stated that Italy must hold elections if Berlusconi's centre-right government fails to command a majority in parliament in tomorrow's crunch vote.

    "If we have the majority we'll carry on, otherwise there'll be elections,"Gianfranco Rotondi, a minister without portfolio, told reporters. I imagine Merkel and Sarkozy are probably choking on their lunchtime bagels at the thought of an extended interregnum in Italy and all the market uncertainty that's likely to accompany it.
  • 13:50
    Berlusconi has survived 50 confidence votes since 2008.
    Berlusconi has survived 50 confidence votes since 2008.
  • 13:54
    We all suspected it but this Reuter's feature suggest the Frankfurt Group - Merkel, Sarkozy, ECB President Mario Dragh, Barroso, Juncker, Olli Rehn and Herman van Rompuy - are now formulating Europe's crisis response. They've even got the lapel badges to prove it!
  • 14:02
    Greece remains in politcal limbo today as talks on the formation of an emergency coalition continue. Former European Central Bank vice president Lucas Papademos is being tipped as the most likely candidate to head any new adminstration. Papademos is apparently not even in the country, however, which doesn't bode well for a speedy resolution.
  • 14:06
    Bloomberg is reporting that EFSF has revived the €3 billion bond sale to fund the Irish bailout which was pulled last week when Papandreou announced the Greek referendum. Sources are telling the news agency that the February 2022 bonds are being offered at a yield of about 10 basis points more than its existing 2021 notes however
  • 14:27
    FT Alphaville reporter Jospeh Cotterill (@jsphctrl) has tweeted that "order book for EFSF €3bn bond still under €3bn (despite huuge spread): O.M.G." Not a ringing endorsement for Ireland if they don't get this one away
  • 14:37
    It’s been a hectic morning in Europe. Here’s a summary:
    - Berlusconi clinging to power
    - Italian 10-year bond yields soar to 6.6%
    - Stock markets in see-saw mode again
    - Political limbo in Greece as coalition talks continue
    - France announces €7 billion austerity plan
  • 14:57
    Three main Irish banks [AIB, BoI and IL&P] have issued €16.5 billion of Government-guaranteed bonds in the past two weeks. The banks have been using self-issued government guarantee bonds since they were locked out of the market just prior to the EU-IMF bailout in first half of 2010.

    Sounds technical but essentially the banks are allowed issue bonds to themselves and cash them in with the ECB.  All in all, it reflects the ongoing weakness of the banking system.
  • 15:10
    It called the "flight-to-quality flow" in trading circles. It is defined as the flow of funds from riskier to safer investments in times of marketplace uncertainty. Essentially, we're seeing demand for relatively safer German and US bonds rise as debt crisis contagion spreads across southern Europe.
  • 15:19
    Berlusconi and his aides are trying to win back support for tomorrow's crunch vote on a state financing bill. If Berlusconi loses he could resign or be ordered by the president to call elections. Reports suggest the opposition might abstain to expose Berlusconi's lack of support. Whatever happens we're again heading for another cliffhanger moment in the euro's debt crisis saga.
  • 15:34
    A statue of Greek philosopher Socrates is seen outside the Athens Academy
    A statue of Greek philosopher Socrates is seen outside the Athens Academy
  • 15:49
    It's hardly surprising that Berlusconi is staging a fight back after being all but written off the political stage earlier today. What is surprising, however, is the 75-year-old media magnate's use of Facebook, rather than the official channels, to deny rumours of his imminent resignation. One colleague suggests he needed to stay in control of the message at such a politically sensitive juncture, another criticises me for trying to apply logic to the Italian leader.
  • 16:01
    French banks' hefty exposure to Italy is shifting into the spotlight ahead of Societe Generale and Credit Agricole's third-quarter earnings due this week, according to Reuters.

    Both SocGen and its smaller rival are already seen taking a hit from Greece's recession-hit economy, via local subsidiaries and sovereign debt holdings, but a spike in Italy's borrowing costs today will likely refocus investors on their exposure to the euro zone's number three economy, it says.
  • 16:06
    European Union Economic and Monetary Affairs Commissioner Olli Rehn says the EU faces a "virtual standstill" in economic growth towards the end of this year.

    Rehn told a European Parliament committee today in Brussels that the slowdown is linked to a "profound lack of confidence" in the economy as well as occasionally in EU policy-making and the answer must be to resolve the region's debt crisis.

    He said a national-unity government in Greece is the "only convincing way of restoring confidence.Similiarly, Rehn said Italy's latest budget plans will be an "important step" to address country's economic weaknesses
  • 16:11
    Lucas Papademos, a Greek economist and former ECB vice-president, who is one of the names being tipped as a possible head of the new coalition government, will arrive in Athens this evening, according to Reuters
  • 16:27
    Channel 4 News's economics editor Faisal Islam has just tweeted that the "books have been closed" on the €3 billion bond sale to fund the Irish bailout which was pulled last week when Papandreou announced the Greek referendum. The last EFSF auction was nine times oversubsribed, Islam says, corresponding to €45 billion of orders. Islam is suggesting the response this time has been less than positive.
  • 16:32
    The yield on Italy's benchmark 10 year bond is on the rise again - now at 6.7 per cent having peaked at 6.8 per cent earlier Now in the territory where Ireland and Portugal were bounced into bailouts
  • 16:36
    Ireland's ten year bonds have also had a bad day - yield is now 8.2 per cent, having opened at 7.7 per cent
  • 16:49
    Tui Travel, Europe's largest tour-operator which owns Falcon Holidays here, has had to issue a statement in relation to a report in Germany that it was asking hoteliers in Greece to sign new contracts under which the tour operator would be entitled to payment in the new currency if Greece left the euro zone.

    Tui said it always seeks to avoid any adverse impact from currency developments. "TUI Travel, as a responsible publicly listed company, always
    seeks to avoid any possibility of being adversely affected by currency and macro-economic situations and plans accordingly. This may mean that from time to time we seek amendments to contracts with our suppliers."
  • 16:55
    British Prime Minister David Cameron has just made a statement in the Commons on last week's G20 meeting. Key quote: "In short, the World sent a clear message to the Eurozone at this summit: Sort yourselves out and then we will help. Not the other way round." Full text available here:
  • 17:16
    Cormac You've messed up Ireland's bond yields there. I assume you are getting your information from bloomberg, where the 10 year bond was discontinued in October (presumably due to the maturity profile of Irish debt) so that one day snapshot is actually from last month. The 9 year yield is the one to follow now ( Yield is at 8.24, compared to 8.18 on Friday.
  • 17:17
    Eagle-eyed reader Cormac spotted an issue with our bond yield data - our apologies
  • 17:19
    The FTSEurofirst 300 index of top European shares fell 0.6 percent to a provisional close of 974.03 points, having been down almost 2 percent in early trade. But Italy's benchmark outperformed, up 1.3 percent, clawing back some of Friday's heavy losses.
  • 17:28
    Despite all the will-he-stay-or-will-he-go drama in Italy, it was a relatively flat finish for equity markets across Europe. While the major stock markets closed slightly in the red, in Dublin the Iseq ended ever so fractionally up. This was thanks largely to Ryanair's share price ascent following its announcement of a 10 per cent lift in its full-year earnings guidance. Dealers reckon market fragility will continue into tomorrow unless the second day of the Ecofin meeting of finance ministers produces "the big bazooka" moment. "They need a more convincing message to get people outside Europe to invest in the EFSF," said one Dublin equities dealer. “Yes the resources are there, but do the people with the resources want to pay."

    In the meantime, Italy's 10-year bond yield hovers dangerously close to the levels that obliged Greece, Ireland and Portugal to agree to bailouts. Bondwatch resumes tomorrow...
  • 17:54
    Euro finance ministers are gathering in Brussels: Italy's Finance Minister Giulio Tremonti (R) walks past France's Economy and Finance Minister Francois Baroin (L), Germany's Finance Minister Wolfgang Schaeuble (2nd L) and Spain's Economy Minist
    Euro finance ministers are gathering in Brussels: Italy's Finance Minister Giulio Tremonti (R) walks past France's Economy and Finance Minister Francois Baroin (L), Germany's Finance Minister Wolfgang Schaeuble (2nd L) and Spain's Economy Minist
  • 18:23
    We're calling it a night on the liveblog for today but events at Ecofin meeting in Brussels, Greece's negotiations on a new government and Belusconi's fight for survival will be reported on the website and in tomorrow's paper.