Euro Zone Debt Crisis

Euro Zone Debt Crisis

IT Tue, Nov 29

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  • 11:22
    Good morning and welcome to the liveblog on the Euro Zone debt crisis. We'll be covering events as they happen throughout the day and welcome all your comments.

    It looks like being yet another critical day for the euro zone with finance ministers set to gather in Brussels this evening for talks ahead of a crucial EU summit next week.

    Ministers will be examining whether to release a delayed €8 billion loan to Greece, money the country needs to avert bankruptcy next month.
  • 11:22
    Despite fears over the future of the euro, there's some relief forecast for homeowners with Citi predicting that euro rates will fall to 0.5 per cent next year and likely stay there until 2016.

    “The ECB is likely to cut rates to 0.5 per cent in 2012, pushing overnight rates close to zero. The UK is likely to expand quantitative easing (QE) aggressively. We expect a long period of ultra-low nominal rates (and negative real rates) in major industrial countries, with the first rate hike forecast for 2014 in the US, 2015 in the UK and 2016 in the Euro Area,” it says.
  • 11:22
    European shares fell again this morning as concern about possible ratings agency downgrades added to pressure on euro zone ministers battling to resolve the region's debt crisis.

    French daily 'La Tribune' reported Standard & Poor's could change its outlook on France's AAA rating to negative, while Moody's said it could downgrade the subordinated debt of 87 banks across 15 countries on concerns that governments would be too cash-strapped to bail them out.

    The FTSEurofirst 300 index of top European shares was down 0.6 per cent at 935.35 points at having rose 3.6 per cent yesterday, its biggest one-day rise in a month.
  • 11:23
    Italy has paid record yields of nearly 8 per cent to sell three-year paper, according to Reuters.

    The yield on a new three-year BTP soared to euro lifetime high of 7.89 per cent at the closely watched auction which allowed Rome to raise €7.5 billion. The new November 2014 issue carries a 6 per cent coupon, the highest for this maturity from 1997.

    Only a month ago, Italy had paid a 4.93 yield to sell three-year paper.

    The yield on a 10-year BTP bond due in March 2022 rose to 7.56 per cent, marking a new euro lifetime high, from 6.06 per cent at the end of October.
  • 11:23
    Major European bourses remain in positive territory this morning despite the Italian bond auction result.

    At 11am, the FTSE 100 was up 0.57 per cent. In Germany, the DAX is trading up at 1.14 per cent while in France, the CAC 40 is up 0.74. In Dublin, the Iseq index of leading shares is up 0.74 per cent to 2618.95.
  • 11:35
    Oil has risen above $110 a barrel after Italy's auction this morning and the euro has moved to a session high. European stocks are also continuing to stay positive
  • 11:58
    Reuters reports that yields on short-term Belgian debt shot up to their highest levels since November 2008 at an auction of three- and six-month treasury bills today, mirroring yesterday's increase in the price the country has to pay for its longer-term debt.

    The yield on three-month Belgian paper was 2.185 per cent, up from the 1.575 the markets had demanded on November 15th. The bid-to-cover ratio was 5.6 times.

    The yield on six-month debt was 2.438 per cent, compared to 1.086 per cent at the last auction. The bid-to-cover ratio was 2.76.
  • 12:07
    In Britain, the chancellor George Osborne has briefed his Cabinet colleagues on the Autumn statement he is to deliver shortly. Despite grim economic forecasts warning that Britain is heading back into recession, the Chancellor is expected to insist the Government’s tight spending controls have had “real benefits” for Britain.

    Mr Osborne’s lunchtime statement to the House of Commons will be immediately followed by the release of economic and fiscal forecasts from the independent Office for Budget Responsibility which are expected to confirm that the UK economy is seriously under-performing.
  • 12:29
    Here's a markets update: major European bourses are still upbeat with the FTSE up 0.23 per cent, the German Dax up 0.26 per cent and the French CAC 40 up 0.49. The Iseq index is currently bucking the trend. It's down 10.96 points or 0.42 per cent to 2,600.55.
  • 12:33
    George Osborne has begun his Autumn statement: He says that much of Europe seems to be heading towards a recession. He says the Government will do all it can to ensure that Britain does not follow suit.
  • 12:41
    Mr Osborne says the Office for Budget Responsibility (OBR) is not forecasting a recesion for Britain, but it has revised its forecasts for the next five years.

    The OBR expects 2011 growth to total 0.9 per cent, down from 1.7 per cent. It predicts 2011 growth will be 0.7 per cent. 2013 growth will be 2.1 per cent while 2014 growth will be 2.7 per cent. Growth is expected to be 3 per cent in 2015 and 2016.
  • 12:43
    Spain's central government budget deficit fell by 17 per cent year-on-year from January to October to 3.7 per cent of gross domestic product (GDP), according to new figures published today.

    The deficit was equivalent to €40.1 billion. The central government deficit does not include the social security system or regional government accounts.

    "The balance for the first 10 months of the year is €8.1 billion less than the same period a year ago, and is line one month more with forecasts to meet the government deficit target," the Treasury said in a release.

    It stressed that changes made to regional accounting rules did not make the data easily comparable with last year's.
  • 12:44
    Worries about the euro zone's debt crisis worsened in November and dragged the European Commission's economic and consumer sentiment index to a two-year low, new figures show.

    Business managers and consumers turned more pessimistic across almost all sectors of the euro zone's economy and the Commission's monthly economic sentiment index slipped to 93.7, its lowest since late 2009, and down from 94.8 in October.
  • 12:51
    British inflation expectations for the year ahead fell to the lowest level since April, a survey by Citi/YouGov, according to a new survey.

    The survey showed that the public's inflation expectations for the year ahead fell to 3.1 per cent in November from 3.4 per cent in October. Inflation expectations for the next five to 10 years inched up to 3.5 per cent in November from 3.4 per cent in October, but remain below the September level of 3.8 per cent.
  • 12:53
    Almost half of hedge fund managers believe Italy and Spain are likely to default, while Greece will exit the euro, a new survey shows.

    The survey by hedge fund research and advisory firm Aksia said 42 per cent of managers feel a debt default or restructuring by Italy and/or Spain is "definite" or a "real possibility" within the next two years.

    Some 65 per cent said European Union member states may issue eurobonds, debt that would be sold jointly for the euro zone and which paymaster Germany opposes, fearing spendthrift countries would piggyback on its low borrowing costs.
  • 12:59
    In other major economic news...American Airlines parent AMR has filed for bankruptcy after failing to secure cost-cutting labour agreements.

    With the filing, American became the final large US full- fare airline to seek court protection from creditors. The Fort Worth, Texas-based company, which traces its roots to 1920s air-mail operations in the Midwest, listed $24.7 billion in assets and $29.6 billion in debt in Chapter 11 papers filed today in US Bankruptcy Court in Manhattan.
  • 14:01
    Here's our report on George Osborne's Autumn Statement to the House of Commons in Britain earlier today....
  • 14:17
    The European Central Bank has failed to sterilise the full value of its euro zone government bond purchases in an operation today. It drew back €194 billion from banks versus a target of €203.5 billion.

    It was the first time since May it had failed to 'sterilise' the purchases but analysts remained more concerned by the higher demand for weekly funding.

    The number of banks being locked out of open markets dues to fears about their survival has continued to grow in recent weeks, leaving the ECB as the only option for funding for many.

    Moreover, this week's take up of weekly funding was higher than at any point since mid-2009.
  • 14:47
    Wall Street has opened flat this afternoon as investors there react to the Italian bonds auction.

    The Dow Jones industrial average is down 5.60 points, or 0.05 per cent, at 11,517.41. The Standard & Poor's 500 Index is up 0.08 points, or 0.01 per cent, at 1,192.63. The Nasdaq Composite Index is down 5.15 points, or 0.20 per cent, at 2,522.19.
  • 14:51
    A Reuters poll of 55 economists suggests the Bank of England will bolster its asset purchase programme early next year as the British economy struggles in the face of the euro zone debt crisis and sweeping government spending cuts.

    The economists predict the BoE will add £75 billion to the £275 billion it has already pledged to spend on mainly government bonds in a bid to boost the economy.

    Economists were evenly split in the poll as to whether financial markets had underestimated the risks to the UK economy from the euro zone debt crisis.
  • 14:54
    Discontent with the economic crisis enveloping Europe is set to spread to the streets of Britain tomorrow, as public sector workers protest against pension changes and spending cuts. Today's miserable economic forecasts in the UK suggest that Chancellor George Osborne's contention that the coalition government will "do whatever it takes to protect Britain" from the euro zone debt storm is unlikely to be enough to stave off recession. Northern Irish workers are set to be among the 2 million people who will go on strike tomorrow - the Northern Ireland Committee of the Irish Congress of Trade Unions has just released details of planned rallies and marches in Belfast, Newry, Derry, Downpatrick, Omagh and several other towns. It is expected to be the largest single day of industrial action in almost a century, according to Ictu.
  • 15:11
    Things might seem grim in Europe but consumers are feeling more positive in the US, according to a new report published this afternoon.

    US consumer confidence bounced back from a 2.5 year low in November as apprehension about job and income prospects eased, according to the report.

    The Conference Board, an industry group, said its index of consumer attitudes jumped to 56.0 from a upwardly revised 40.9 the month before. It was the highest level since July and handily topped economists' forecasts for 44.0. October was originally reported as 39.8.

    The expectations index also rose to its highest level since July at 67.8 from 50.0, while the present situation index gained to its highest level since May at 38.3 from 27.1.
  • 15:11
    In its reaction to George Osborne's rather poetically titled Autumn Statement, the trade union Unite invokes the fortunes, or rather misfortunes, of retail group Arcadia as evidence of consumers' fears. When even a "natural Tory business supporter" like Arcadia boss Sir Philip Green says he is going to close up to 275 loss-making stores because consumers are spooked, the case for a Plan B is overwhelming, says Unite general secretary Len McCluskey. Unite wants a cut in the UK's 20 per cent VAT rate - it's unlikely to happen, but if it did it would once again open up the gap in the Irish and UK VAT rates.... result: cross-border shopping.
  • 15:12
    DenKen I would just like to ask, if I may, what the unions hope to achieve with their strikes tomorrow across the U.K.?
  • 15:12
    Philip K Between the euro zone crisis, the upcoming budget which is going to take more of the taxpayer, the level of personal debt that is going to sink an awful lot of households next year I cannot see anything positive ahead for thousands of people here in Ireland. Not a sign anywhere of any goods news on the horizon. Increase on income tax, new household tax , motor tax increases, benifits cut and this is only the start of the next 3-4 budgets. No wonder everyone is depressed.
  • 15:35
    Jeweller Tiffany & Co of "Breakfast at" fame has published a trading statement highlighting "recent sales weaknesses in Europe and the eastern part of the US". Its profit outlook today missed Wall Street expectations, but are still rather high - plus sales were up 17 per cent in the third quarter. Tiffany's statement - though it was mixed and sent its shares down 7 per cent in early trading - can be taken as further evidence that luxury-end retailers continue to perform better than the less insulated mid-market.
  • 15:39
    DenKen I was just wondering if the Croke Park agreement could be a saving grace for the Irish economy or its death-knell? At least strikes are not happening yet in Ireland which is always a good thing, but the situation is not really improving to a situation whereby any decision that challenges Croke Park will not result in immediate public sector strikes. The Government in Ireland need to do more in this regard in order to at least contest the Croke Park review mechanism.
  • 15:45
    Is German chancellor Angela Merkel still bitterly opposed to the idea of eurobonds? Yes, says the BBC's Europe editor Gavin Hewitt, who's just tweeted the following:

    "Merkel quoted as telling German MP's she won't soften her opposition to euro bonds at Dec 9th European summit. "
  • 15:48
    Deposit outflows from Greek banks reached between €13 billion and €14 billion during the period September to October. Bank of Greece Govenor George Provopoulos told a parliamentary committee today that deposit outflows have continued into this month.
  • 15:53
    Euro-endgame commentary is getting down to the practical details: Bloxham Stockbrokers and its chief economist Alan McQuaid are hosting a media briefing later this week on "the possible end of the euro and what it means for Ireland". Topics on the agenda include a Strong Euro - Weak Euro two-tier currency zone, plus its alternatives, as well as consequences for Irish investments in "strong euro" countries like Germany, the likely path for interest rates and the implications for foreign direct investment. Pragmatic or premature? Well as we like to say in the media when we haven't got a clue, "time will tell".
  • 15:58
    The Bank of Portugal has today said the nation's banking system still faces growing risks of financial instabililty.

    In its year-end financial stability report, the central bank also warned that demand for loans was likely to decline as consumer confidence ebbs and unemployment grows, which would further increase credit risks.

    Earlier today, the National Statistics Institute said Portugal's economic climate indicator slumped in November to its lowest level since the start of the series as worries about Europe's economic slowdown and spreading debt crisis added to the debt-laden country's own woes.

    Portugal's austerity demanded by the terms of the EU-IMF bailout is expected to cause an economic contraction of 1.6 per cent this year and a much steeper contraction of 3 per cent next year, according to the latest forecast by the finance ministry.
  • 16:04
    Wall Street has risen following the publication of a survey which shows that consumer confidence bounced back from a 2.5 year low in November.

    The Dow Jones industrial average rose 72.81 points, or 0.63 per cent, at 11,595.82. The Standard &Poor's 500 Index put on 8.82 points, or 0.74 per cent, at 1,201.37. The Nasdaq Composite Index added 6.91 points, or 0.27 per cent, at 2,534.25.

    Shares of AMR plunged to just 24 cents a share after the parent of American Airlines filed for bankruptcy protection and named a new chairman and chief executive.
  • 17:01
    European shares hit a one-week high today after a low-volume rally extended into a third day, buoyed by positive US consumer confidence data and hopes policymakers will make progress to contain the euro zone debt crisis at tonight's meeting.

    The FTSEurofirst 300 index of top European shares provisionally closed up 0.7 per cent at 946.99 points, the highest close since November 18th. However, the index is still down more than 15 per cent in 2011.

    In London, the FTSE 100 was up 0.46 per cent. In Germany, the Dax was up 0.95 per cent while in France, the CAC40 was up 0.46 per cent.
  • 17:23
    Greece is meeting all necessary conditions to get an €8 billion tranche of financial aid from the EU and the IMF needed to avert bankruptcy, finance minister Evangelos Venizelos said this evening.

    He was speaking ahead of tonight's Eurogroup meeting in Brussels at which further funds for Greece are expected to be granted.