17.41 There will be a meeting between Angela Merkel, Francois Hollande, Mariano Rajoy, Mario Monti and David Cameron tonight to discuss the debt crisis.
17.06 UKIP leader Nigel Farage, in a column for the Evening Standard this afternoon - unforunately written while markets appeared to be set to end the day negative - writes that Greece's only option is to flee the euro and starting printing drachma:
Greek unemployment hit a record high this year, reaching 22.6 per cent in the first quarter, double the eurozone average. Among 15- to 24-year-olds, this soars to 57.3 per cent. It is thus not surprising that anti-bailout party Syriza saw most of its support coming from the youth vote. With the country still in recession, there?s no way they can pay back their debts. And with no actual solution to their problem, young people know they need dramatic action.
What Greece needs is to return to the drachma, to get back to competitiveness. With the reintroduction of the drachma, imports would become more expensive and there would be demand domestically for more-affordable Greek-made products. There would be a huge surge in tourism as sun-seekers flocked to Greek beaches, delighting in the low prices. It would kick-start the economy: there would be job creation.
16.51 European markets have closed for the day, making strong gains despite turmoil in the eurozone on the hope of more stimulus from the US Fed. Neil MacKinnon, an analyst at VTB Capital financial group, said:
The eurozone crisis is entering a dangerous and existential phase with the rise in Spanish bond yields pointing to the need for a bailout, while in Greece, the political situation looks fragile and not strong enough to diminish the scenario of a Greek exit.
The FTSE 100 has gained 1.73pc, the DAX has risen 1.84pc and the CAC ended the day 1.69pc higher.
And US stocks are echoing the gains, as the US Fed starts its two-day meeting and analysts wait for any indication that furthe QE could be on the way.
The Dow Jones is 0.91pc higher, the S&P 500 has risen 0.93pc and the Nasdaq has soared 1.22pc.
16.08 Number 10 backs David Cameron over call for French to come to UK for better tax deal.
PM was answering a question partly in jest but there is also a serious point.
16.01 BREAKING NEWS...
EU leaders approve amendment to scrap use of credit ratings.
15.49 Greece's ND, PASOK and DIMAR parties are to meet for talks on forming coalition in 10 minutes.
15.46 Christopher Vecchio, Currency Analyst at DailyFX, believes the Federal Reserve will launch more QE tomorrow:
Despite the terrible Spanish debt auction figures ? a clear sign that borrowing costs are rising sharply and that a bailout will be necessary soon if relief does not come. The progress made by Spanish debt can be attributed to two hopes: first that the European Union will give leeway to Greece and work more closely for a mutually acceptable political path; and that the Federal Reserve will introduce another large quantitative easing package tomorrow.
?To dismiss such rumors about Greece?s bailout, it?s important to recognize and consider that Germany holds all of the bargaining chips in these bailout negotiations. In a speech yesterday, German Chancellor Angela Merkel said that there would be ?no leeway? on Greece?s commitments, in sharp contrast to the hopeful comments made by an anonymous European Union official. As has been the case this entire crisis, what Germany says goes, and there?s little more to speculate on beyond that. Combined with a disappointment tomorrow by the Fed, the EURUSD is primed to be stopped short of its weekly high set at 1.2747 after the Greek elections and could trade back towards 1.2450 within the coming days.
15.24 Merkel says she needs to wait for the next Troika report on Greece.
15.22 Quick look at US markets: Dow up 0.8pc, Nasdaq up 1.1pc, S&P 500 up 0.8pc.
15.11 BREAKING NEWS...
Merkel expects Spain to submit a formal request for bank aid soon.
She also pushed for tough measures to prevent protectionism.
15.03 French President Francois Hollande says the IMF is not there to backstop the eurozone, even if it has done for countries such as Greece. Adds that interest rates in Spain and Italy are "not acceptable". Hollande says mechanism will soon be in place for Spanish bank bailout.
German Chancellor Angela Merkel refuses to speculate on easing Greek terms, says country must stick to rules. She adds that banks are not sufficiently capitalised pose a danger to a stable economy. She says G20 talked about a need for "clarity" on Spain aid request.
14.53 Italian PM Mario Monti has said that the G20 statement later will have indirect reference to Spain. He adds that Euro heads will make crisis decisions within next 10 days.
Does he mean the EU meeting on June 28/29?
14.18 At the G20 Summit in Mexico, David Cameron has slammed French President Francois Hollande's tax-and-spend approach to resolving the eurozone crisis.
"I think it's wrong to have a completely uncompetitive top rate of tax," he said, and promised to "roll out the red carpet" for France's wealthy and businesses if Hollande's government goes ahead with a campaign pledge to increase the tax rate on earnings above ?1m to 75pc.
Cameron said he'll "welcome more French businesses to Britain and they can pay tax in Britain and pay for our health service and schools and everything else".
14.12 Time for a markets update:
FTSE 100 +1.3pc
CAC +0.4pc
DAX +0.6pc
IBEX +1.8pc
MIB +2.4pc
13.59 Meanwhile, Tim Worstall, senior fellow at the Adam Smith Institute, believes the minimum wage causes youth unemployment:
If you raise the price of something then people will buy less of it. Raise the price of labour and fewer people will be employed. This was all pointed out when the NMW was introduced but as has been said since, the promised wave of mass unemployment didn't happen. Why not?
Simply put it depends upon what the minimum wage is. If it's less than 45pc or so of the average wage then the effects will be very small. Some tens of thousands of people perhaps and we'll not really notice that given that the economy as a whole creates and destroys 2m to 3m jobs a year. However, once that wage starts to get over 50pc of the average wage, then we start to see the effects. As a percentage of youth wages, what is the youth minimum wage? Answer: for 18-21-year-olds, 65pc; for 16-18 year-olds, 76pc. So, in that 18-21 year group, we?ve a minimum wage which is 65pc of the mean wage. Well into our territory where we expect to see substantial employment effects. For 16-18 year olds, the minimum wage it?s ?3.68??76pc.
Ooops!
13.54 Ambrose Evans-Pritchard has decried that Europe's crisis has nothing to do with the US:
As for the EU itself, the organisation toppled the elected governments of Italy and Greece last year, replacing them with EU technocrats.
It ignored the NO votes to the European Constitution in France and The Netherlands, ramming through the slightly-altered text as the Lisbon Treaty without referendums ? except in Ireland. When the Irish voted NO to that as well, they too were ignored.
That was the moment when the EU crossed the line altogether and lost fundamental legitimacy (at least for me). Lisbon is a rogue Treaty. Mr Barroso ? charming though he may be ? is a rogue president of a rogue Commission.
The whole construct has become authoritarian and will become autocratic if this crisis is exploited to force through fiscal union.
13.27 Marc Ostwald of Monument Securities writes that this morning's Spanish bond auction, where borrowing costs almost doubled, could highlight the need for an outright bailout:
The key point is that if Spanish Banks are demanding such a huge concession (the post auction rally highlights how harsh the concession was) at Bill (and one presumes also at Thursday's Bono) sales, Spain needs not only an ESM package to recapitalize its banks, it also needs an outright bail-out package, and it is becoming very difficult to see how it can manage without that beyond the end of Q3, unless yields fall dramatically!
As suggested in our preview: The issue is in fact about the breadth of estimates (official and market) about how much is needed to recapitalize Spain's banks (EUR 40 to 279 Bln) and as my (German) father used to say: "wer soll das bezahlen?" (who is going to pay for that?), and on the follow when will Spain be forced into requesting a full bail-out (one estimate just published suggests EUR 300 Bln would be needed), which should or would be the cue for Germany to say auf wiedersehen to the Euro.
A final point is the fact that this Spanish banking system collapse comes less than 20 years after the last one - the compare and contrast with Sweden and Scandinavia is poignant!
12.41 Back in the UK, and FSA chief executive Hector Sants has donated his ?143,750 bonus to charity The Art Room. He received a total ?835,731 remuneration package for the year to the end of March.
12.27 Democratic Left MP Odysseas Voudouris says Samaras should not be PM. Fellow Democratic Left MP colleague Nikos Tsoukalis says question of who will be PM in new government "remains open".
Linda Yueh at Bloomberg:
Nick Malkoutzis, deputy editor of Greece's Kathimerini:
12.15 Time for an update on the markets:
FTSE 100 +0.9pc
CAC flat
DAX +0.3pc
IBEX +1.3pc
MIB +1.2pc
Ishaq Siddiqi, market strategist at ETX Capital Market:
Despite the uptick, uncertainties over the health of Spain and Italy hamper the markets? enthusiasm to build risk. Elevated Spanish bond yields - though slightly easing from previous session highs - continues to sound off alarm bells. A delay in the deadline for a group of auditors who will compile full reports on the capital needs of Spain?s toxic banking system further underpinned the rumblings in the country?s financial sector. The attention will now be on Spain?s government bond sale on Thursday.
11.49 Eurogroup chief Jean-Claude Juncker has admitted that the Greek austerity programme could be stretched over a longer period, according to Austrian state radio ORF.
11.43 ING says Spain may need a ?250bn bailout, which would be "too large" for the EFSF.
11.41 The head of Milan's Scala opera house and the world famous conductor Daniel Barenboim have taken a 10pc salary cut to help slash the company's debt.
After several years of culture budget cuts, imposed as a debt-laden Italy struggles to fend off the eurozone crisis, 11 department heads, including the choral and ballet directors, have also agreed to take the cut.
"This will not resolve the economic situation but it sends a clear message: we want to find every solution possible to support the theatre, in this moment of uncertain financial stability," Scala head Stephane Lissner said.
The opera house's debt this year is forecast to drop from ?7m to ?4.5m thanks to sponsors, savings and the rise in takings.
11.26 The EU Commission says it is not talking about any new memorandum of understanding for Greece and wants to ensure the country makes its reforms.
11.10 Quick bit of corporate news. US giant Walgreens is paying $6.7bn for a 45pc stake in Alliance Boots. Walgreens has an option to buy outright in three years, at a total cost of $16.2bn.
Meanwhile, RBS is cutting 618 branch-based financial advisers.
10.52 European shares rising now. Here's Ilya Spivak, currency strategist at DailyFX:
European shares are on the upswing after an unexpected drop in UK CPI boosted expectations that the Bank of England would offer further stimulus as well as amid reports that Greek politicians were close to forming a ruling pro-bailout coalition.
A government comprised primarily of the mainstream New Democracy and Pasok parties will then seek to ease austerity measures tied to the second EU/IMF bailout. Early bits of draft language from the G20 summit communiqu? due to emerge after the sit-down in Mexico concludes today sees European leaders pledging to ?take all necessary policy measures? to contain the crisis and avoid contagion, which is likely adding to the chipper mood on signs that international leaders are stepping up pressure on the EU to get its house in order.
Traders appear to be overlooking a sharp drop in the ZEW gauge of German investor confidence, which is not unreasonable considering anything but a slump in June as Greek election jitters gripped financial markets would have been somewhat perplexing.
10.38 The Telegraph's Jeremy Warner on the UK's inflation figures:
Economist Nouriel Roubini on the eurozone:
10.36 German Savings Banks Association rejects using savings to rescue foreign banks.
10.17 Alex Spillius, the Telegraph's Greece correspondent, on how the new government should be formed:
Plenty of commentators in Athens are arguing that the new government should include some technocrats as well as politicians. The argument is that Greece?s politicians can?t be trusted to put politics aside, even in this national emergency.
?Even if the Europeans dropped money all over Athens from helicopters it wouldn?t matter if the people on the ground weren?t up to the job,? writes Alexis Papaxelas in Kathimerini.
The caretaker administration that stewarded the country during the two elections showed Greece had talented, determined people, he said, without holding out much hope that his wish would be fulfilled.
10.02 Unnamed EU official says union expects to revise bailout terms with Greece.
Meanwhile, German economic sentiment plunges 27.7 to -16.9. Figures blamed on worsening Spanish bank sector and insecurity over Greek elections.
10.00 Update on the markets.
FTSE 100 +0.6pc
CAC -0.1pc
DAX +0.2pc
IBEX -0.1pc
MIB -0.3pc
09.52 Greek Democratic Left chief Fotis Kouvelis says there will be a government but it may not be formed today.
Still some outstanding issues between political leaders.
09.40 BREAKING NEWS...
Spain sells ?2.4bn of 12-month bills versus ?2.19bn at previous auction. Yield of 5.074pc versus 2.985pc. Bid to cover 2.2 versus 1.8.
Sells ?640m of 18-month bills versus ?710m at previous auction. Yield of 5.107 versus 3.302pc. Bid to cover 4.4 versus 3.2.
Meanwhile, Denmark has sold two-year note at a negative yield for the first time.
09.38 Nomura says the Spanish solvency risks, and not Greece, is the primary focus for the eurozone.
Spain now saying that only the detailed audit of it banks will be delayed until September. Its initial report is still out in July.
09.30 BREAKING NEWS...
UK inflation slows to 2.8pc in May from 3pc in April. Analysts expected 3pc. 30-month low.
Chris Adams at the FT:
Jeremy Cook, chief economist at currency brokers World First:
While oil prices were rising, news channels went bananas for a ?petrol crisis?, but there has been virtually no coverage of the 26pc fall in the price of Brent crude since March, as it has been drowned out by the on-going crisis in the eurozone.
This, alongside the continuing lack of demand due to fears over the global economy, has meant that inflation has continued to fall closer to target through the coming months.
2.8pc is the lowest level since December 2009 and will trigger a sigh of relief from Threadneedle St. as it gives the Bank of England further leeway with possible further expansionary monetary policy, such as interest rate cuts or additional asset purchases.
09.21 Irish finance minister Michael Noonan believes the 2012 8.6pc deficit target is "easily realisable".
09.11 German Constitutional Court says government did not inform Parliament sufficiently about configuration of ESM. Upholds lawsuit against ESM. Euro falls to $1.2585.
09.03 Meeting between New Democracy leader Antonis Samaras and Democratic Left chief Fotis Kouvelis has ended.
Kouvelis says the country needs a government and renegotiation on certain aspects of [bailout] memorandum, "we have conditions". He adds that a government is possible if there is an agreement on policy platform and "trustworthiness of personalities". Process of forming government "moving forward at a pace". Will would meet Samaras again later today.
Alex Spillius, the Telegraph's Greece correspondent, said:
The presence of Kouvelis in an ND-led coalition would give not only an additional 17 members of parliament but anti-bailout credibility with the Greek people. The veteran Kouvelis wants to do the right thing ? his pre-election speeches stressed the need for ?national stability?.
But many in his own party don?t want to join on any terms. They fear that associating themselves with the bailout could lead to electoral oblivion next time, as it did for L.A.O.S, a right-wing Orthodox party that supported the international deal in March and now has precisely zero seats.
Evangelos Venizelos, PASOK leader: "Our premise remains that the country should get a government with a specific programme, both for the internal affairs but also for the political renegotiation of the memorandum.
"We are proposing a framework. I have raised the issue of the reliability of individuals. I expect very specific answers from Mr Samaras. The process must be speeded up. The country must have a government soon. In the next few hours, it could be possible to move ahead if there is convergence on these points."
08.50 Nick Malkoutzis, deputy editor of Greek newspaper Kathimerini:
08.42 Peter Spiegel from the FT is at the G20 Summit:
08.26 Cyprus' Finance Minister Vassos Shiarly has said financing to recapitalise the country's banks is a priority, and the issue is urgent.
Options still open on funding, including bilateral loan or help from EFSF.
08.23 In a new blog today, the BBC's Robert Peston looks at the possibility of British banks being downgraded and Bank of England support:
First, some time in the coming days - and the banks think probably this week - Moody's will announce downgrades of most of them. For the European banks, Moody's and the other credit rating agencies are seen as grim reapers, going from country to country pronouncing in more-or-less all of them that the banks are less strong than they once were.
Bankers concede to me that - in these more anxious times - they can't be certain that the downgrades will have zero effect on their ability to borrow. Which gives a clue as to why the Bank of England has launched the insurance scheme of the ECTR at this juncture and in a bit of a hurry.
08.20 New Democracy leader Antonis Samaras is meeting Democratic Left chief Fotis Kouvelis now.
Samaras has made it clear that he will seek a renegotiation of the second memorandum of understanding with the EU and IMF. The devil will be in the details, but speaking late last night after meetings on forming a coalition he suggested the revisions would not be minor.
He said: "We will simultaneously have to make some necessary amendments to the bailout agreement, in order to relieve the people of crippling unemployment and huge hardships."
08.19 Fitch has released a statement on the Bank of England's plan to start offering cheap cash loans to banks next week as part of a package of measures to ease the flow of credit to the economy.
A Bank of England liquidity facility should strengthen confidence in the UK banking sector by providing a more explicit promise of short-term liquidity support during any future market-wide shortage. The impact of a separate "funding-for-lending" plan from the government and the BoE will depend on the final details, but is likely to be broadly neutral for banks if they pass on lower funding costs to their borrowers.
Under the liquidity plan, the BoE will activate the extended collateral term repo facility that it first announced in December. By offering to lend against a wide range of collateral, we believe the BoE is sending a clear signal that it is ready to continue to offer large-scale support if a further deterioration of the eurozone crisis were to disrupt liquidity. The facility is broadly similar to the SLS facility, now repaid, offered during the 2008-2009 market turbulence.
The details of the "funding-for-lending" programme are yet to be decided, but it will provide funding to banks over several years at rates below current market ones, passing on the UK sovereign's lower cost of funds to banks. While lower funding costs would normally help boost bank margins, the package is intended as a stimulus for the wider economy and we therefore expect it to be structured to try to ensure banks pass on the lower costs to customers.
Such a programme could help increase lending to small and medium-sized enterprises that have previously baulked at the current cost of borrowing, but would be broadly neutral for the banks themselves. Both plans were announced by BoE governor Mervyn King and chancellor of the exchequer George Osborne last week.
08.00 European markets are open. FTSE 100 rises 0.1pc, CAC up 0.5pc, IBEX up 0.3pc, MIB up 0.3pc, DAX up 0.2pc.
07.52 All eyes will be on Greece today. Can New Democracy, which won Sunday's election, form a coalition? The entire world seems to be urging them to do it as soon as possible, including David Cameron: "I think a delay could be very dangerous."
In his daily email, the Telegraph's Head of Business, Damian Reece, said:
In Greece today the efforts of Antonis Samaras, leader of the New Democracy party, will continue to form as wide a coalition government as possible. But as we report this morning, the country is going to have to renegotiate the ?130bn (?104bn) bailout agreed earlier this year, in effect asking for a third bailout. Samaras is hoping to announce a new government by the end of today.
The G20 in Mexico is also continuing today. UK Chancellor George Osborne will be giving a briefing at 3pm (UK time), followed by the summit's communique and a press conference with IMF chief Christine Lagarde at 11.30pm (Uk time).
07.50 France's business confidence indicator has fallen to 92 in June from 93 in May.
07.40 The Bank of Spain asked the four auditors examining the balance sheets of Spanish lenders to delay their reports to conduct a more thorough study.
The auditors? reports on Spain?s 14 main banking groups will now be published in September instead of by July 31.
This is very bad news, just adds to nervousness over country's financial health.
07.38 Foreign ownership of Japanese debt jumped to record 76 trillion yen (?614bn) in 2011.
07.26 Spanish 10-year bond yields have fallen slightly this morning to just above 7pc, Italy's just above 6pc.
ING and BNP both believe that the ECB will buy sovereign bonds again if Spain hits 7.5pc.
07.20 Spanish police are now patrolling farmland after the economic crisis saw a spike in people stealing crops.
In villages near farming areas, several thousand paramilitary Civil Guards, regional and local police are even setting up checkpoints to sniff out stolen fruit or farming equipment such as copper wire used in irrigation systems. The Civil Guard says sometimes its officers mount "cage operations" - sealing off whole villages to check cars and trucks.
"This has emerged because of social alarm. Because of the crisis, crime is up," said the local police chief Ernesto Banos. "And when cherry season comes around, people say, 'what now, cherries? OK, let's go get them."
06.45 Asian stock markets have mostly fallen this morning, as relief from Greece's election results evaporated amid worries that the financial crisis in the 17 nations that use the euro was far from over.
Japan's Nikkei index has fallen 0.8pc, Hong Kong's Hang Seng Index has lost 0.5pc and South Korea's Kospi is 0.1pc down.
06.43 The Seychelles has postponed the planned introduction of VAT on July 15 because of the global economic crisis, President James Michel has said.
06.40 Spain is likely to pay record prices to borrow at debt auctions today.
The yield on Spanish 10-year bonds hit a fresh high of above 7pc on Monday as initial relief over the victory of pro-bailout parties in Greece gave way to ongoing fears of deeper problems facing the bloc.
Spain's Treasury will issue between ?2bn and ?3bn of 12- and 18-month debt today.
06.34 IMF chief Christine Lagarde has revealed that member states have promised a total of $456bn for its new crisis fund, $26bn more than a target set in April. The UK has pledged $15bn.
China will contribute $43bn, state news agency Xinhua confirmed on Tuesday morning. Lagarde said:
Countries large and small have rallied to our call for action, and more may join. I salute them and their commitment to multilateralism. As a result, total pledges have risen to $456bn, almost doubling our lending capacity.
06.30 While Jeremy Warner writes that we shouldn't expect any solutions from the international junketing in Mexico:
Few G20 meetings are anything other than a waste of space, but this one more so than most, for the latest slowdown in the world economy is something that can only be convincingly dealt with by Europe. And as we already know, Europe is seemingly quite incapable of sorting out the hopeless muddle it has inflicted on itself.
Angela Merkel, the German Chancellor, has welcomed the outcome of the Greek election, but it must have been through gritted teeth. In fact, New Democracy's narrow victory is the worst possible outcome for Berlin. What a relief that Greece has voted to remain in the euro, German policymakers profess in public. Not, they mutter as an aside.
06.20 7,300 miles away in Athens, things aren't much better. Louise Armitstead and Alex Spillius report that Greece could be knocking on Brussels' door for a third bail-out as soon as a government is formed:
While Antonis Samaras, leader of Greece's New Democracy party, scrambled to forge a coalition with Pasok, his officials admitted their first task would be to renegotiate the ?130bn (?104.4bn) bail-out agreed in May.
Dimitrios Tsmocos, a senior economic adviser, said Mr Samaras intends to "honour Greece's contractual obligations but will actively and aggressively renegotiate the memorandum". Another senior aide warned of a "social explosion" in Greece if the bail-outs terms were not relaxed.
Athens has to reduce its budget deficit to below 3pc of GDP by 2014 and find a further ?11bn in public spending cuts from 2014 to 2016. But spiralling economic woes have already driven Greece off course.
However, experts warned Greece will need another cash injection if the terms are relaxed. Joerg Asmussen, executive board member of the European Central Bank, said: "If one is pressing to shift fiscal targets, one should be so honest to also say that as long as a country is running a primary deficit, extending the fiscal targets will automatically mean that there will be an additional external financing need.
06.15 The leaders of the world's 20 most powerful economies may have been soaking up the sun in Mexico yesterday, but the focus remained 6,000 miles away in Madrid, as Spain pleaded for the European Central Bank to step in and stop the country's economy from spiralling out of control. Ambrose Evans-Pritchard reports:
Cristobal Montoro, the economy minister, warned that Spain is now in a "critical" condition and pleaded with the European Central Bank to act with "full force" to defeat markets hostile to the euro project.
Bank of America said Spain may need a second rescue to tide it through the next three years, pushing the total loan package towards ?450bn ? a sum that would test the EU bail-out machinery and cause serious knock-on effects for Italy. A draft communique from the summit of G20 leaders in Mexico said Europe will take "all necessary measures" to hold the eurozone together and break the "feedback loop" between sovereign states and banks.
A separate text for next week's EU summit vowed to "mobilise all levers and instruments", though details were thin. Italy said it would push for a "semi-automatic mechanism" ? probably involving the ECB ? to cap the bond yields of states in trouble.
06.00 Good morning and welcome to our coverage of the European debt crisis.
Debt crisis live: archive
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