Debt crisis: as it happened - August 30, 2012

With that, we're shutting up shop on Debt Crisis Live for today. Thanks for reading and commenting.

18.14 Portugal has today kicked off the privatisation of its national ANA airport authority in accordance with the country's 2011 EU-IMF bailout agreement.

The cabinet has approved the law privatising ANA, which operates the airports in Lisbon, Porto, Faro and the Azores archipelago.

A government spokesperson said the privatisation "will be done through a direct sale to one or several national or foreign investors" as well as through a public offering of five percent of the capital "exclusively reserved to company employees".

17.51 This afternoon, the International Monetary Fund has reiterated its support for Greece ahead of next week's return of international inspectors overseeing its progress under the bailout programme. Gerry Rice, an IMF spokesman, told a regular briefing:

QuoteThe IMF is supporting Greece, has been supporting Greece and continues to support Greece in its efforts to overcome the economic crisis.

"And that's again precisely what the mission will be discussing with the Greek authorities" when the delegation from the IMF, the European Union and the European Central Bank returns to Athens "next week," he added.

The duration of the visit will depend on the progress in discussing what more needs to be done "to return Greece to the path of sustainable growth," he said.

17.13 Mats Persson, director of Open Europe, has blogged for the Telegraph this afternoon on the question of "will Spanish depositors kill the euro?" Here's a taster:

There?s a school of thought out there that Spanish depositors will determine the fate of the euro. The theory is simple: if or when Greece exits the euro, Spanish depositors will panic. Seeing that it?s possible for countries to leave the single currency ? previously a no-go ? Spanish depositors will rush to empty their accounts. Spanish banks, and therefore the Spanish state, won?t survive the night. Default and a euro exit become inevitable, leading Italian depositors to go through the same drill. The euro will come crashing down.

This line of thought is popular in senior political circles in the UK for example, which partly explains why some senior British politicians call on the ECB, EFSF, ESM ? and all other forms of quick money ? to "stand behind the euro", in order to keep Greece inside at any cost. But is this analysis right?

16.59 The euro has weakened against the dollar in afternoon trading, slipping to around $1.2503. Traders cited some corporate buying of the dollar.

16.34 Meanwhile, in Estonia, the parliament approved the eurozone's permanent rescue fund. Politicians voted 59 to 34 to ratify the European Stability Mechanism.

Ahead of the vote, Jaanus Tamkivi, the parliamentary head of the senior ruling party, the Reform Party, said:

QuoteI certainly won?t agree with those saying that after today?s vote, Estonia will hemorrhage money. Still, I also don?t agree with those saying the guarantees we are providing now can?t ever materialise. But we have to be optimists.

16.30 Slovakia's prime minister has been speaking today about the future of the eurozone and he reckons there is a 50-50 chance of the currency bloc breaking up. Robert Fico said:

QuoteI am worried about a eurozone collapse, of course. It will depend on how we handle the situation in some countries like Greece and Spain. It also depends on how individual eurozone countries react to documents that concern strengthening European integration... I see a eurozone breakup as realistic as holding together, 50 to 50.

15.40 Another chinwag in the offing. European leaders are set to hold an extra summit in the second half of the November to discuss the EU's next long-term budge (in Brussels, this goes by the snappy title of a "multiannual framework" and usually covers a seven-year period). They will also meet earlier on October 18-19, but officials have said that those discussions are likely to be dominated by the debt crisis.

14.55 Mr Rajoy is asked once again if Spain will ask Brussels for a full-scale international rescue. He replies:

QuoteIn the same way as when we asked for the help for the financial sector because we thought it was good for Spain, so that credit recovers and so that there would be economic growth and jobs, when its known exactly what?s on offer, I will take a decision.

14.41 Speaking of Mr Draghi, it looks like he has a lot on his plate next week, so much so that he's had to cancel another appearance at the European Parliament.

Mr Draghi was due to participate in a public debate with Olli Rehn, the European Union commissioner for economic affairs and Michel Barnier, the commissioner for financial services, but will now address legislators behind closed doors at a shorter hearing on Monday, according to a spokesman.

On Tuesday, Mr Draghi said he would will not attend the US Federal Reserve's Jackson Hole gathering of central bankers later this week due to a heavy workload. The ECB meets to decide interest rates next week. It has also been creating plans to buy-up the debt of struggling nations.

14.35 Mr Hollande says large differences in borrowing costs between eurozone countries can justify ECB intervention, but it's up to the central bank to decide how it will act, and that he does not wish to make the task for Mr Draghi even harder. He said:

Quote The ECB's mandate includes price stability and monetary policy. When you see such wide gaps in yields, that could be a justification for an intervention in the name of monetary policy.

14.32 Mr Rajoy adds:

14.24 It will be difficult for Spain to comply with its deficit goals (it will have to cut its public deficit by 2.6pc of GDP in one year), but the government will achieve its targets, says Mr Rajoy. He adds that the government will do its best to pass the 2013 budget without raising taxes.

Spanish Prime Minister Mariano Rajoy and French President Francois Hollande give a press conference after their meeting at the Moncloa Palace in Madrid on Thursday (Photo: AFP).

14.22 A few lines from the press conference, courtesy of those multi-lingual folk at Open Europe:

14.14 A press conference held by French and Spanish leaders Francois Hollande and Mariano Rajoy has started. You can watch it live here.

Mr Rajoy begins by saying that the pair discussed the steps Europe must take to tackle the debt crisis. The pair will meet again on October 10 for another jaw-jaw ahead of a crucial EU summit on October 19, he adds.

14.05 Shares in state-owned lender Hellenic Postbank were suspended this afternoon, a day after finance minister Yiannis Stournaras told a parliamentary committee that bank "had been judged unviable".

Mr Stournaras' admission sent the shares plunging almost 30pc on Thursday morning.

The shares were suspended after the company said it would be "unable to release the annual financial report for the fiscal year 2011 on time," according to a stock exchange statement.

The response by its workers? More strikes.

The union that represents Hellenic Postbank workers said in a statement that it had called a new 24-hour strike in protest against the Greek finance ministry?s decision to not to give the bank an extension to report earnings.

13.48 Francois Hollande has been holding talks with Spanish PM Mariano Rajoy in Madrid today. The pair are expected hold a press conference this afternoon.

Spanish Prime Minister Mariano Rajoy and French President Francois Hollande take a walk before their meeting at the Moncloa Palace in Madrid on Thursday (Photo: Reuters).

13.20 Greece may have avoided a bail-out if tax dodgers had not "robbed" the country of the crucial income needed to invest in areas such as education, according to former PM George Papandreou.

Mr Papandreou (pictured, below) said more measures were needed to tackle tax evasion. Speaking at the opening of a Socialist International conference, he said:

QuoteWhether it is in developed or developing nations, it is our citizens that are being robbed

I know this, Greece is suffering from this. Had this alone been tackled, Greece would have most likely never have needed a bail-out.

Yet Europe, the G8, G20, the banking system despite my pleas as prime minister, despite token reference in our council of G20 decisions, have done nothing to change this.

Last month, campaign group Tax Justice Network estimated that the world's wealthiest individuals had stashed $21 trillion (?13 trillion) worth of assets in tax havens such as Swizerland and the Cayman Islands.

13.07 The bill for bailing-out Spain's regions just keeps on rising. A spokeswoman for the region of Valencia told AFP that it will ask for a rescue of more than ?4.5bn (?3.6bn) from the central government.

Yesterday, a spokesperson told Bloomberg that Valencia would need "at least ?3.5bn" to rebuild its balance sheet.

Spain has set aside ?18bn to help struggling regions to pay their bills on time. Valencia said yesterday that it would also need money to settle bills from previous years.

12.10 Time for a quick market update.

Traders are remaining cautious on the eve of a speech from Federal Reserve chairman Ben Bernanke in Jackson Hole. The FTSE 100 in London is currently trading flat, at 5,731.45, while the CAC 40 in Paris has fallen 0.5pc to 3,295.36 and the IBEX 35 index in Madrid is down 1.14pc at at 7,222.6.

12.00 Meanwhile, Greece's prime minister Antonis Samaras (above) has told his countrymen that Greece would effectively exit the euro and crumble without the next round of spending cuts, due to be implemented in 2013-14.

"Many of these cutbacks are difficult, painful," Samaras said. "But they are also inevitable. For without them the country would return to zero credibility and effectively leave the euro. Which would ... destroy the country."

The next package of spending cuts will be the last. "The Greek economy can take no more," said Samaras.

11.41 The German economy would shrink by around 10pc if the euro collapsed, according to a key government adviser.

Lars Feld, one of the five "wise men" of Germany (one of them is a woman, by the way), told a meeting of journalists on Wednesday:

QuoteWhen a good part of the claims [recent estimates by the group suggest Germany's gross claims from the eurozone atood at about ?3.5 trillion] would go in default, there would be insolvencies in small and medium-sizes firms and the economy would be hit. This drop could amount to between 7pc and 10pc of [German] gross domestic product.

A Greek exit on its own could also cause widespread damage, because of the risk of contagion, he said, adding that Europe had very few tricks up its sleeve when it came to resolving the crisis. "Many of them are not especially pretty," he said.

11.29 Speaking in Austria, European Commission President Jose Barroso said that the ECB will do whatever is necessary to keep the euro going, reiterating what many European leaders have said in recent months.

?We need to sustain the euro and I have no doubt we are going to do it,? Barroso said.

Barroso also hit back at eurozone critics, telling his audience in Austria that the the idea of a euro exit undermines the european project.

"We need to sustain the euro and I have no doubt we are going to do it,? he said.

Mr Barroso also hit back at eurozone critics, telling his audience in Austria that the the idea of a euro exit undermines the european project. (Photo: AP).

10.48 Analysts said that the auction result suggested that traders are still nervous about holding Italian debt. Nick Stamenkovic at RIA Capital Markets, said:

QuoteThe good news is that they've managed to meet their target. Reception to the 10-year is OK but hardly spectacular.

The fact that with all the speculation about what the ECB is going to do, yields are only 14 basis points lower than at the end of July suggests that investors are still demanding quite high risk premiums to hold Italian debt.

Domestic investors are more than happy to buy short-term debt [...] but overseas investors still require significant premium to be attracted to the longer end. On the back of this news the curve may start to steepen.

10.37 Italy has got a crucial debt auction away this morning, where it has managed to sell long-term debt at slightly lower rates.

The country sold ?4bn (?3.1bn) of ten-year government bonds at average yields of 5.82pc. This compares with 5.96pc in July and is the lowest interest rate since the end of March. Demand was also stronger, with 1.42 bidders for every bond on offer, compared with 1.29 bidders at the last auction.

It also sold ?2.5bn of five year debt at average yields of 4.73pc. This compares with 5.29pc in July.

10.35 European business confidence fell to its lowest level in three years in August, with retailers and construction managers feeling particularly downbeat.

The European Commission's Economic Sentiment Indicator (ESI) for the eurozone fell to 86.1 in August, from 87.9 in July. This is well below the long-run average of 100, and less than the 87.5 forecast by analysts in a Bloomberg poll.

The wider EU measure fell to 87 in August, from 89 in July.

In a statement, the EC said:

QuoteIn both areas, the loss in confidence was particularly strong among consumers, retail trade and construction managers. In the services sector the loss in confidence was marked in the euro area but more contained in the EU as a whole. On the contrary, while confidence in industry decreased in the EU, it remained broadly stable in the euro area.

10.08 More comments are coming out of Beijing, where China has said that it may be willing to buy-up more European debt to support the struggling region. Mr Wen said:

QuoteChina is willing, on condition of fully evaluating the risks, to continue to invest in the euro zone sovereign debt market, and strengthen communication and discussion with the European Union, the European Central Bank the IMF and other key countries to support the indebted euro zone countries in overcoming hardships.


Angela Merkel and Wen Jiabao (right) talk with Germany's foreign minister Guido Westerwelle (left), and economy minister Philipp Roesler (second left)

09.58 Philipp Roesler, the German economy minister who claimed last month that a Greek exit from the eurozone had "lost its terror," has repeated his comments in an interview today, declaring that he had no reason to change or withdraw his remarks.

Mr Roesler told German daily Die Zeit: "I have no reason to change my statements or even withdraw them". Other MPs' comments had been even more "dangerous" than his, he added.

Mr Roesler, who has long voiced concerns over Greece's ability to meet its austerity targets, reiterated that if Greece did not deliver on its promises, it would receive any more bail-out cash.

"Anyone who breaks promises, can get no more money," he said.


Philipp Roesler stands by his comment that a Greek exit from the eurozone has "lost its terror" (Photo: AFP).

09.40 Commenting on the rise in joblessness, Carsten Brzeski, of ING, said the figures are a clear sign that the days of a strong, esilient German labour market are over.

"The most alarming signal from today's report is the fact that the non-seasonally adjusted monthly increase is the highest August increase since 1993," he said. "A clear signal that the best times of the German labour market are over.

"The strong labour market has been one of the main drivers of German growth in the first half of the year. Low unemployment, record high employment and wage increases supported private consumption and helped cushioning the industrial slowdown.

"Looking ahead, however, it is doubtful whether private consumption can really take over the baton as main growth driver for the German economy."

09.30 Back home in Germany, there's disappointing news for Merkel as the latest joblessness figures reveal the number of people out of a job rose for a fifth month in a row in August. The increase was slightly greater than expected, at 9,000, taking the total number out of work to 2.9m.

The figures are sobering reminder that even Europe's strongest economy is suffering as a result of the eurozone crisis.


The number of people out of a job in Germany rose for a fifth month in a row in August (Photo: ALAMY).

08.53 Angela Merkel may be far away in China, but the rumours continue in Europe. Following her meeting yesterday with Mario Monti, reports in the Italian media suggest that she wants the Italian PM to adopt a wait and see approach when it comes to a potential bail-out.

Government officials told Italian daily Corriere della Sera that Mrs Merkel thinks that Italy and Spain should wait and see what effect the bail-out of Spain's battered lenders will have on markets before requesting aid.

08.50 It's been a busy morning for Merkel, who's clearly been working the room. In the first of several big deals agreed, Airbus Industries committed to invest $1.6bn (?1bn) in an aircraft final assembly plant in Tianjin, Wen's hometown. While Volkswagen, the biggest car manufacturer in Europe, signed a $219m deal to invest in an eco-friendly production plant.

In a further agreement, 50 Airbus A320 jetliners valued at $3.5 billion will be bought be a state-owned Chinese company. The two leaders also agreed to do an increasing amount of their trade in euros and yuan.


50 Airbus A320 jetliners valued at $3.5 billion will be bought be a state-owned Chinese company (Photo: EPA).

08.23 During the talks, Merkel reiterated that the eurozone has an "absolute political will" to stabilise the single currency.

08.11 The global jaw-jaw continues. This morning, German Chancellor Angela Merkel met Chinese Premier Wen Jiabao for talks in Beijing.

This is Mrs Merkel's second visit to China this year, and she is accompanied by the biggest German delegation to visit the country.

In a press conference following the meeting, Mr Wen said that fears over a Greek eurozone exit remained his primary concern. He said:

QuoteThe main worries are two-fold: first is whether Greece will leave the eurozone. The second is whether Italy and Spain will take comprehensive rescue measures: resolving these two problems rests with whether Greece, Spain, Italy and other countries have the determination for reform.

German Chancellor Angela Merkel and Chinese prime minister Wen Jiabao walk along an honour guard after Merkel's arrival in the Great Hall of the People in Beijing, China, 30 August 2012 (Photo: EPA).

08.05 Europe's politicial and economic leaders clashed yesterday over debt crisis resolutions, underscoring the sense of chaos and disunity between Brussels and the key eurozone economies, writes Louise Armitstead:

At a summit in Berlin, Angela Merkel and Mario Monti publicly stated they disagreed over the role of Europe?s new big bazooka bail-out fund. The Italian prime minister said the European Stability Mechanism (ESM) should have a bank license to be able to properly bring down Club Med borrowing costs. The German Chancellor said the plan was ?incompatible? with EU treaties - and that she was backed by Mario Draghi, president of the European Central Bank,

Meanwhile Mr Draghi launched an attack on Germany: in an article for Die Welt, he argued that the ECB would need "exceptional measures" to curb the crisis and that Berlin?s interpretation of the bank?s mandate was too narrow.

Angela Merkel talks to Mario Monti in Berlin on Wednesday (Photo: Reuters)

08.00 Good morning and welcome back to our live coverage of the European debt crisis.

Debt crisis live: archive

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