European debt crisis: 29 November 2011
Italians raise 7.5bn at more than 7%
Euro group meeting to hammer out details of bailout fund
Will they? Won't they? S&P mulls France downgrade
Today's agenda
Lunchtime round-up
7.38pm: Time to go. Good night and thanks for all your comments.
7.35pm: Reuters is reporting, citing an EU diplomat, that eurozone finance ministers agreed to release an 8bn aid payment to Greece which is part of the 110bn bailout package. It is the sixth instalment of loans.
6.49pm: This just in from David Gow:
Eurozone officials are ignoring the doomsayers and talking up prospects for the EFSF, claiming that investors are still showing keen interest in it. None, apparently, has asked for more than 30% first-loss guarantee on their investment in loans to distressed countries - and the geographical spread is good. It's also claimed that the spread of investors, from hedge funds to sovereign wealth funds, is excellent. And, in a new twist, the investments could be tailored both to individual countries and to different maturities: so a long-life EFSF Hellas (Greece), say.
While other officials and even ministers are admitting that the firepower of the find can only be boosted 2.5 times at most, as we reported earlier, to, say, 625bn from the 250bn left, the talk on the margins of the meeting is of 3-5 times still or 20-30% loss guarantees. And, yes, the IMF is involved too...Could be a long evening....
6.09pm: More from David Gow in Brussels.
Osborne, fresh from his drubbing by Ed Balls, is having dinner in Brussels with the nine other "outs" at a nearby hotel....The - very acid - joke is that they'll turn up for breakfast tomorrow to be to! ld by Sc huble, Juncker and the rest of the 17 "ins" what's going to happen next and then spend a few hours choosing a new boss for the European Investment Bank etc etc..second division stuff.
5.46pm: Finally, some news from Brussels - courtesy of David Gow. George Osborne headed off to Brussels straight after giving his autumn statement in parliament in London.
Eurozone ministers, who began meeting 90 minutes ago, are discussing plans to involve the European Central Bank in using its unlimited funds (in theory) to boost IMF lending to distressed sovereigns.
Here's what Didier Reynders, Belgian finance minister, said on his way in: "We will discuss with the ECB. The ECB is an independent institution, so we will put on the table some proposals and after that it is for the ECB to take the decision."
Jan Kees de Jager, his Dutch colleague, said that the main bailout find, the EFSF, could only be boosted 2.5 times at most (that is, to around 626bn, rather than the hoped-for 1tn) and added: ""We will have to look at the IMF, which can also make available additional funds for the emergency fund. I think countries in Europe and outside of Europe should be prepared to give more money to the IMF. Then you have more money but it's still not enough." Greece hopes they will now get their long-delayed "sixth tranche" - or 8bn - after tonight's meeting.
5.14pm: The French prime minister Franois Fillon has dismissed a report in the French newspaper La Tribune that suggested credit ratings agency Standard & Poor's could cut its outlook on France within day.
Fillon told Reuters: "I can tell you that La Tribune is reporting nonsense."
5.04pm: The FTSE's rally has stretched to a third day, with the bluechip index closing up 24 points at 5337, a 0.5% gain. In Germany, the Dax climbed 54 points to 5799, an increase of nearly 1%, while in France the CAC closed 13 points higher at 3026, a ! 0.5% ris e.
The latest Italian bond auction attracted strong demand, although borrowing costs hit another euro lifetime high.
Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, told Reuters:
The market is benefiting from the Italian auction that saw good bid-to-cover ratios even if it was at considerably higher levels. Once gain hope is up for some comprehensive solution for the problems of the eurozone.
But all we have at the moment are rumours and promises. If these do not morph into something more concrete, markets may once again be very disappointed. Europea leaders have got another chance ot get their act together.
3.00pm: There has been a big improvement in US consumer confidence. The consumer confidence index from the Conference Board leapt to 56 in November from an upwardly revised 40.9 in October. This should further allay recession fears.
2.34pm: I am handing over now to Julia Kollewe. Thanks for all your comments, even you, peterbracken.
2.03pm: For those interested earlier in the American Airlines story, my colleague Dominic Rushe has just filed this from New York.
1.51pm: What does the ECB's failure to offset its bond purchases mean?
Well, it may not mean very much if it is a one-off, says Gary Jenkins at Evolution Securities: "If it becomes a trend it clearly is very significant."
It has happened once before, in June 2010. Clearly if the ECB cannot offset its purchases it is effectively engaging in quantitative easing, something it says it doesn't want to do:
If they can't cover it then technically they wouldn't be able to buy so many bon! ds. But the ECB can do what they like.
Alternatively, of course, this may tell us something alarming about the banks themselves, Jenkins adds:
I think banks have to park the money there for seven days. Maybe such is the liquidity state that they only want to do it overnight. That could be just as worrying.
12.58pm: Difficult to know what exactly to make of this, but the ECB has fallen short in its attempt to offset its bond purchases.
The ECB has been in the market buying troubled eurozone countries' debt - and takes seven-day deposits from commercial banks to offset the spending, so that inflationary pressures do not build up.
It has managed to draw 194bn to offset its purchases, short of the 203.5bn it needed, Reuters reports.
12.39pm: As peterbracken so charmingly points out below the line, American Airlines has filed for Chapter 11 in the US. We'll have more elsewhere on this shortly, but here's a Bloomberg story for now if you are interested.
12.27pm: OK. Time for a quick round-up before the chancellor stands up to deliver his Autumn Statement.
Italy has raised 7.5bn at rates of more than 7%, with three-year debt costing the country 7.89%
The markets have risen despite the bad news around.
A confidential report by the European Commission - seen by the Guardian - for tonight's eurogroup meeting (from 1700CET) says: "Italy must quickly step up to the formidable challenges it is facing."
It concludes that the government has the know-how to design a "comprehensive and coherent" reform package but that "to be credible, the agenda should be ambitious, overarching, but also detailed and time-bound" and the "key reforms should be front-loaded". i.e. get on with it Mario.
The 8-page report also urges the euro area as a whole to "find credible systemic solutions to ward off further contagion and dispel any doubts about the future of the euro and the euro area." Would that it could...
It tells Italy to be guided by the principles of "social equity" if it is to win back the confidence of financial markets - commanding broad support for reforms. Since when did financial markets care a flying fig for social equity?
The report also says Italy can live through a "short-lived debt market turbulence" but warns that "persistently high interest rates increase the risk of a self-fulfilling 'run' from Italy's sovereign debt" and says bluntly: "A liquidity crisis could then turn into a solvency crisis whose repercussions for other large euro area countries would be very acute given their exposure to the Italian economy." Telling it how it is, I guess.
10.30am: Now to you and I those interest rates on Italian debt might sound huge, unsustainable even. But to the markets this is all positive news.
The euro is up - by three quarters of a cent against the dollar. Stock markets are in positive territory again, the FTSE 100 up 20 points or by 0.4%.
The fact that Italy managed to even sell its bonds, that there even is demand for Italian debt, has surprised the market in a positive way, Reuters is reporting.
In brief, ther! e was 10 .8bn worth of demand for 7.5bn of debt issued.
10.22am: Newsflash: Italy has raised 7.5bn, all at interest rates exceeding 7%.
The gross yield on the three-year bonds is 7.89%, while the ten-year bonds are at a gross yield of 7.56% and 7.28% for two different tranches.
9.51am: Ahead of the meeting of European finance ministers later today, Czech finance minister Miroslav Kalousek has delivered a decidedly off-message statement on the prospects for the meeting.
I am not very optimistic that the political establishment of the euro zone can offer such a solution that can calm the markets in a credible and strong way.
The Czech Republic is not part of the eurozone, so perhaps he is allowed to be an outrider. The Czechs are obliged to join the euro in the fullness of time, but are in no hurry to do so at the moment, perhaps understandably.
9.21am: For those who missed it too, a reminder that any bond traders who choose to take on the Italian government are taking on not just new PM Mario Monti - but also the might of the Italian footballers' association.
9.17am: Another big test for Mario Monti's new government in Italy today, as his government looks to raise between 5bn and 8bn in the bond markets.
The debt auction is a sale of three- and ten-year bonds. A month ago, Italy paid 6.06% in a 10-year auction. Today, the expectation is for an interest rate of more than 7%.
Italian ten-year debt is currently trading at a yield (interest rate) of 7.445%, up 0.165% on the day.
CMC Markets' Michael Hewson suggested on his blog earlier that "this could be another expensive auction" for Italy.!
< span>8.58am: As promised we have a live blog picking up everything from chancellor George Osborne's autumn statement later today. Follow it live here.
8.49am: Before we go any further, let's take a closer look at that Standard & Poor's report.
La Tribune says that France's triple-A credit rating is at risk.
If you want to read the article in French it's here. Google has, perhaps more entertainingly, translated the key passage thus:
According to several sources, Standard & Poor's (S & P) may well announce "shortly" the placement of the AAA rating of France as "negative outlook". This is the first step before the lowering of the rating, the highest, enjoyed the Hexagon. "It could happen in a week or maybe ten days," said a diplomatic source, who adds that there are currently an intense reflection in this direction within the agency.
The Hexagon is the colloquial name for France, a term commonly used in France but not so much elsewhere, I am reliably told.
S&P say they do not comment on rumours. La Tribune suggests that S&P planned to make the move on Friday but postponed it for unknown reasons.
8.31am: So here is the agenda for today.
At 10am we are expecting an auction of Italian debt. Mario Monti's government is looking to raise up to 8bn, hopefully not at budget-busting yields.
Eurozone finance ministers are meeting to discuss the bailout fund, otherwise known as the European Financial Stability Facility, or EFSF for short. The key issues are: can they leverage it up to create a fund that appears b! igger an d scarier to those who might try to bet against it, and will they approve the latest tranches of loans to Ireland and Greece?
A report in La Tribune suggests S&P is on the verge of moving its outlook on France's triple-A credit rating to negative. We will have all the latest.
The Autumn Statement thingummy - for those who insist on regarding it as significant, we're following it live here.
8.05am: It's 8am, which means markets have opened...and it turns out expectations for a modest rise in stocks have turned out to be wrong. The FTSE 100 is down 20 points, or 0.3%.
It's not a lot, but it is at least consistent with the general narrative of economic meltdown.
7.46am: Good morning everyone and welcome back to our live coverage of the eurozone debt crisis. Markets surged yesterday, on not a great deal of news, it must be said, and we are expecting further rises today.
There appears to be something going on today in parliament, but let's not let that sidetrack us. The real action is an Italian bond auction and the possibility of Standard & Poor's finally downgrading France.
All are key talking points in the eurozone this morning, as we head towards the inevitable fiscal union/euro break-up/eurogeddon.
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