Euro zone crisis

Euro zone crisis

IT Mon, Jan 30

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  • This event has now ended
  • 08:59
    It's a busy day for EU leaders today as they push for a pact to toughen the enforcement of budget rules.
  • 08:59
    We'll be following the events of the day live. As always, we welcome your comments and opinions.
  • 09:01
    EU leaders are aiming to conclude a two-month negotiation of their new fiscal pact that aims to avoid a repeat of the crisis that has been dragging the euro zone down for some time.
  • 09:01
    Germany has confirmed it wants an EU-appointed “budget commissioner” sent to Greece with powers to override its government’s budget policy. That demand could also apply to Ireland and other bailout countries - if they consistently missed the targets set out in its rescue plans, one source has said.
  • 09:09
    The Government, meanwhile, is facing opposition at home to the signing of the international treaty, which will impose binding obligations on the Dáil and Seanad, without a referendum.

    It's considered very likely that any decision not to have a referendum on the treaty would be challenged, which means it will end up before the courts here.
  • 09:12
    The talks are also taking their toll on the markets; the euro is off six-week highs today, with a combination of Friday's US growth figures and the crisis talks prompting cautiousness among investors.
  • 09:15
    More bad news: Spain's economy looks set to slip into a long recession after it shrank in the last three months of the year. Gross domestic product was down 0.3 per cent from the period July to September 2011.
  • 09:16
    The annual figures looka bit more positive - the economy grew by 0.3 per cent compared to a year earlier. That's a slowdown from 0.8 per cent in the previous quarter but slightly above economist expectations for growth of 0.2 per cent.

    But all eyes will likely be on the quarter-on-quarter decline.
  • 09:19
    The slowdown is mainly due to difficulties among Spain's key trade partners. The economy - like Ireland - has been supported by exports since it emerged from recession in the first quarter of 2010. Growth has been almost stangnant ever since, and only its export business kept it from slipping back.

    The slowdown is starting to hit its trade partners though, which is bad news for the economy.
  • 09:25
    And it's not likely to get any better. According to the European Commission, the 17 nations in the euro zone will grow by only 0.5 per cent in 2012. That compares with 1.5 per cent in 2011 and 1.9 per cent in 2010.
  • 09:46
    Oil prices are also down, dipping below $111. Aside from the ongoing crisis talks, the price has also been affected by the postponement of an expected Iranian vote to suspend crude exports to Europe. That comes after the EU decided to sanction Iran over its nuclear programme.

    Brent crude futures were down 55 cents to $110.91 a barrel by 0919 GMT and US crude was down 75 cents at $98.81 a barrel.
  • 09:55
    With the EU leaders meeting at 2pm in Brussels, Belgium is in the grip of a general strike, its first in almost two decades.

    It has brought the country to a partial halt - the entire rail network is closed, buses and trams are cancelled, schools and shops have shut, and production at the Audi and Volvo car plants has stopped.

    Charleroi Airport, meanwhile, has cancelled all flights, although Brussels airport is operating.
  • 09:55
    The protest is aimed at the government and EU leaders.
  • 10:47
    If you missed it, Lucinda Creighton was on RTE this morning talking about Ireland's future in the euro.

    "It would be a very sad day if we somehow decided to opt out of that (new treaty) and allowed the other 16 members of the euro zone to progress and try to find a solution without us," she said on RTE Radio 1.

    "I think it would make it almost impossible for us to continue as part of the currency union because being part of a currency union means you have to abide by the rules."
  • 11:14
    Shares continue to be weighed down by the talks. Investors are understandably cautious about the outcome of today's talks.

    The Stoxx Europe 600 Banks index was down 2.1 per cent earlier today.
  • 11:15
    The Iseq, meanwhile, is half a per cent off.
  • 11:16
    Things on the markets aren't being helped by Sarkozy's plans. He said he will unilaterally impose a financial transaction tax, causing BNP Paribas to tumble 5.4 per cent
  • 11:46
    On the markets, European shares are down nearly 1 per cent, and it looks like Wall Street will open lower too.
  • 11:46
    Some comment:

    Christoph Weil, economist at Commerzbank: "We expect the recession in the euro zone will end in the spring. But we can also see that the divergence in the euro zone is increasing and that is of great concern."
  • 11:47
    Joe Rundle, head of trading at ETX Capital: "It is all pretty negative, Greece is still trying to get a deal and there are worries about contagion. Euro zone leaders still need to come up with a solution and all the negative news is not good for consumer confidence and could lead to a snowball effect, spending could slow down and hit company earnings."
  • 11:55
    Italy was able to successfully auction nearly €7.5 billion of fresh debt in the five and 10-year sectors today, near the top end of its target amount. Its 10-year bond yields moved to 6.2 per cent.

    German government bond futures were little changed, with the front month contract up 52 ticks on the day at 139.41.
  • 11:55
    Portuguese debt, meanwhile, has come under renewed pressure from investors. An earlier rating downgrade meant index-linked investors had to sell their holdings.
  • 12:02
    It's still a few hours to go before the summit kicks off. Officially, it's supposed to focus on rekindling growth and job creation against a backdrop of cuts and austerity.
  • 12:34
    Reuters is reporting that Portugal is inching closer to needing a second bailout to avoid chaotic bankruptcy. Underwriters hiked the cost of insuring Lisbon's
    bonds to new highs and insisted it be paid up front.

  • 12:57
    The Taoiseach has arrived for the meeting and has been talking to reporters.
  • 13:02
    Arriving at the summit, Mr Kenny said he said he has nothing to fear from a referendum being required to adopt the strict new fiscal rules.

    " I have made this perfectly clear that when the text is finalised I will ask the Attorney General [Maire Whelan] formally to supply the Government with [her] response as to whether the agreed text, as finalised by the politicians, is in compliance with our Constitution.

    "If it is in compliance with Bunreacht na hEireann there will be no need for a referendum. If it's not, there will be a need. The Government has no fear or concern or anxiety about that," he said.
  • 13:25
    Divisions emerging ahead of today's meeting. Jean- Claude Juncker, Luxembourg Prime Minister and head of the group of euro-area finance ministers, said he "hopes" the Greek debt swap "will be concluded this week. Next week at the latest." However he is also reported to have said he is against Greece being singled out for an EU-imposed budget overseer.
  • 13:48
    The situation with Greece is also affecting the copper market.

    Benchmark three-month copper on the London Metal Exchange traded at $8,409 a tonne in official midday rings from $8,530 at the close on Friday, when it reached $8,679.50, the highest since September 16th.

    But it seems like prices are still headed for the biggest monthly gain since
    October, with an increase of 10 per cent.
  • 13:49
    A bit of bad economic news from the US. Consumer spending was flat in December, with households opting to save and sparking a slowdown in demand.

    Spending last month was the weakest since June. Economists had expected spending to nudge up 0.1 per cent last month.
  • 14:00
    Reuters is reporting that the prime ministers of Poland, Hungary, the
    Czech Republic and Slovakia want "further changes and additions" to the fiscal pact, citing the Hungarian prime minister's spokesman as the source. Amongst the things the four heads of government would like to get is the right for countries not yet in the euro area to take part in the currency bloc's summits.
  • 14:07
    Linda Yueh, economics editor for Bloomberg TV has just tweeted (@lindayueh) that the ECB is reportedly in the market today for Portuguese bonds. Given that both its five and ten year paper hit record euro era yields today (22.69% and 17.1% respectively) it suggests the markets are even less confident in Portugal than the numbers might suggest.
  • 14:25
    The European Council has posted video footage of the "doorstep" statements of all the European leaders as they arrived for today's summit. You'll find Taoiseach Enda Kenny on page three.
  • 14:45
    As expected, the US markets have opened lower. The Dow Jones industrial average was down 103.46 points, or 0.82 per cent, at 12,557.00. The Standard & Poor's 500 Index was down 12.60 points, or 0.96 per cent, at 1,303.73, and the Nasdaq Composite Index was down 25.81 points, or 0.92 per cent, at 2,790.74.
  • 14:48
    To tie in with today's summit the Institute of International and European Affairs has published an info-graphic giving an overview of the actions that the European authorities have taken to date to tackle the crisis. You can see it here
  • 15:06
    The FT has a draft copy of the treaty here.
  • 15:17
    Over the course of the day, the euro has fallen 1 per cent from a six-week high against the dollar, and a four-month low against the Swiss franc
  • 15:52
    French prime minister Francois Fillon has cut the nation's growth forecast for this year to 0.5 per cent. Tax receipts are expected to be down by €5 billion, though that loss will be compensated by the lower-than-expected 2011 deficit, Fillon told journalists in Paris.
  • 16:22
    The yield on Portugal's ten-year bonds, regarded as the nation's benchmark, surged 199 basis points to a euro-era record of 17.22 per cent. Portuguese credit-default swaps also rose to a record, implying a 71 per cent chance the government will default.
  • 17:00
    It's time for another tour of the markets. Most European bourses hit a two-week closing low today as talks on a Greek debt swap deal rumbled on without resolution. London's FTSE has closed the day down 62 points at 5,671, Germany's Dax is also down 67 points at 6,444 with France's CAC 40 down 53 at 3,265. Dublin Iseq index also closed the day in the red, down 26 points on 2,981. The Dow Jones in the US is currently trading at 12,581, 79 points down on the day.
  • 17:25
    Lots of reports coming out that EU leaders have agreed that the $500 bn European Stability Mechanism (ESM) i.e. the permanent bailout fund, will be in place in July, even if there is no new treaty passed by then
  • 17:51
    Bruno Waterfield, Brussels correspondent with the Daily Telegraph, tweeted (@BrunoBrussels) a few minutes ago that the summit is still discussing growth and hasn't moved on to the fiscal pact yet. Despite this we are still expecting things to come to a conclusion around 7pm Irish time.
  • 17:53
    The European Commission has just posted a link to commission president Jose Manuel Barroso presentation on growth at today's summit
  • 17:53
    Michel Barnier, the EU's financial-services commissioner intends to propose tougher rules on bankers' bonuses which he claims go against "all reason, common sense and morality." Move comes after Royal Bank of Scotland's chief executive Stephen Hester last week waived his £963,000 bonus after the UK's opposition Labour Party said it would ask the national parliament to vote on the award.
  • 18:46
    Herman von Rumpoy, president of the European Council, has just annouced that the statement on growth and jobs approved. Just the small matter of the fiscal compact to agree now, so looks like this summit will go well into extra time.
  • 19:40
    Reuters news agency is quoting unnamed diplomatic sources as saying that European Union leaders have reached agreement on a new fiscal treaty.
  • 20:18
    European Council publishes statement 'Towards growth friendly consolidation and job-friendly growth."
  • 20:28
    Irish language version of EC statement:
  • 21:05
    Twenty-five of the European Union's 27 countries have signed up to a new treaty involving tighter fiscal rules, with only Britain and the Czech Republic opposed, EU officials have said.

  • 21:05
    In a message sent on Twitter, European Council President Herman Van Rompuy said 25 of the 27 members of the union had approved of the treaty - which calls on signatories to introduce a balanced budget rule into national legislation.