Britannia Radio

merkozy speaks - they are truly mad

http://www.telegraph.co.uk/finance/financialcrisis/8846201/Debt-crisis-live.html#disqus_thread

23.05 Meanwhile, Sarkozy accepted that there will be a bail-out according to certain rules.

It is not up to us to tell Greece what to do. We are not asking for anything other than Greece obeys the rules. It is up to them whether they accept the rules or not. There is not enough leadership [in the euro zone]. This is not a pleasant situation to be in but this is where we are.

HE DOES NOT MEAN LEADERSHIP HE MEANS POWER - IE IF THEY HAD MORE POWER THEY COULD SQUASH GREECE

23.03 The press conference by Merkel and Sarkozy has just ended. Strong words from both leaders. They have said that the EU is more important than Greece . This from Merkel:

With Europe we have the admiration of whole world.

NOTHING MODEST ABOUT HER THEN!!

The euro zone needs coordinated and agreed response to take forward the agreement of last week. The psychological situation has changed due to Greece 's referendum. The Greeks decided to hold this referendum without warning. But we will not abandon principles of democracy.

NOW THAT IS FUNNY!!!! THE EU WOULD NOT RECOGNIZE DEMOCRACY IF IT BIT THE LEADERS IN THEIR BUTTS

We cannot put at stake the great work of unification of the euro .

NOZZINK MUST STAND IN THE WAY OF THE PROJEKT!!!!!!! IT IS THE EURO OR WAR!!!!!!

PLEASE GOD DO NOT LET THESE PEOPLE HAVE GUNS.

Financial Crisis

Debt crisis: live

Greek government is split over holding a referendum to decide whether to stay in the euro, and EU leaders say there will be no more bail-out money until a vote, as the G20 gets started.

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Chancellor Angela Merkel with President Nicolas Sarkozy after crisis talks with Greece's Prime Minister George Papandreou Photo: REUTERS/Christian Hartmann

By Amy Wilson, and Szu Ping Chan

10:10AM GMT 03 Nov 2011

Comments

This page will automatically update every 90 secondsOn Off

• Reports: Greek PM may be forced out, unity govt formed
• Greek finance minister does not back PM's referendum call
• Greece given ultimatum by France and Germany over euro
• Italian bond yields hit new highs as no new austerity agreed
• China says cannot add to bail-out fund due to uncertainty
• UK at '70pc risk' of recession if no action taken in Europe

Latest

11.10 Reuters is reporting that Greek Socialist MPs (supposedly George Papandreou's own party) are putting together a proposal to get rid of the PM and set up a coalition government headed by former European Central Bank deputy Lucas Papdemos.

However it is also being reported that Papandreou has not resigned and won't resign, according to his spokesman.

We'll keep you posted...

10.55 Telegraph foreign correspondent Damien McElroy is in Athens, taking the temperature on the ground as the Greek government seems to come close to collapse. He reports:

Greeks watching on appalled at events in the national parliament where MPs are swarming in and out without giving any clear sense of the best outcome. Latest rumour is that four ministers are boycotting the cabinet meeting called for noon.

Up and coming opposition MP Kyriakos Mitsotakis just told us that Papandreou is a goner. There should be a caretaker government in the run up to new elections - or talks on a national unity government.

Either way the current parliament should back last month's bailout. The political class seem determined to bury the referendum stillborn.

10.50 David Cameron is of course in Cannes today, and is expected to arrive at the summit some time after 11am London time.

He'll join the other leaders for a series of meetings and a working lunch and dinner, discussing the state of the world economy and trade.

10.35 It's not just Italy - French government debt is also coming under pressure today.

The yield, or interest rate, on 10-year French government bonds has climbed 9 basis points to 3.16pc.

France succeeded in selling €6.96bn of bonds this morning, but at a price. The average yield on bonds maturing in 10 years was 3.22pc in the auction, up from 2.9pc the last time France sold 10-year debt just a month ago.

Earlier, Spain also got its bond auction away, selling €4.5bn of three and five-year bonds, but at higher rates than at the last auction.

Five-year bonds attracted average yields of 4.848pc, compared with 4.489pc in September.

Marc Ostwald at Monument Securites, said:

They [Spanish bonds] are not catastrophic but they're moving into an area which creates more and more problems.

On France, he added:

The cover is not too bad. They've hit their target, which is the most important thing. The problem as ever (is) not the yield level relative to market levels but that the yield levels are at these levels.

Will it stop French spreads widening? No.

Of the bigger countries, France is one which really needs to implement a lot of reforms, particularly if there is some resolution which creates an EFSF and ESM to which France needs to contribute heavily and hasn't got the money to do it without reform.

_{Getting to grips with the timetable? World leaders, including Angela Merkel (centre), IMF chief Christine Lagarde and European Commission head Jose Manuel Barroso convene in Cannes (Photo: Getty)}

10.30 Although the timetable is likely to go awry given the events in the eurozone, here is the G20 timetable for the next two days of summiteering, as things stand.

10.25 The BBC's economics editor Stephanie Flanders says the disruption casued by the prospect of a referendum on the Greek bail-out means "the game has changed." She writes:

The change is that for President Sarkozy and Chancellor Merkel, keeping Greece in the euro is no longer priority number one. And a eurozone without Greece is no longer necessarily the worst outcome.

There is a weary sense among officials here in Cannes that Greece is reaching the end of the road, and the priority now must be to contain the damage.

That is why the talk is all of accelerating the creation of the European Stability Mechanism, the successor to the EFSF. And of additional IMF funds to backstop the entire system.

If and when it happens, that new money won't be for Greece: it will be there to persuade the financial markets, finally, that the resources are there to protect everyone else from any Greek fallout.

10.15 Back at home, Britain's closely watched Markit/CIPS service sector survey has come it at 51.3.

This means the sector, which accounts for 75pc of national output, is growing (any reading above 50 indicates expansion), but at a slower pace than expected.

George Buckley at Deutsche Bank, said:

Things could have been a lot worse. We have had three very different PMI surveys, with strength in construction, weakness in manufacturing and something in between for services. It has weakened but it could have been a lot worse given what we have seen in markets over the past month.

_{The Markit survey includes hotels and restaurants, business services, financial services and transport companies, but not retailers or
wholesalers, which are considered too volatile (photo: Getty).}

10.10 If George Papandreou loses his position as Greek PM, that's likely to take the possibility of a referendum off the table. But as Wall Street Journal Brussels reporter Charles Forelle points out, that won't be the end of the matter:

@charlesforelle For euro-zone, snap elections in Greece could be nearly as destabilizing as a referendum.

09.55 An event that would be a big deal on a normal day - the first interest rate announcement from the European Central Bank under new chief Mario Draghi.

There's pressure from some quarters for a rate cut, after the ECB put rates up twice earlier this year, to ease the pressure on Italy's borrowing costs. However economists expect rates to stay unchanged at 1.5pc.

Mr Draghi's comments in the press conference that follows the decision will also be very closely watched for indications the ECB will keep buying Italian and Spanish government debt.

^{Mario Draghi will give his first press confeence as head of the ECB today.}

09.50 President Obama started by thanking his “excellent friend” for the hospitality extended to him. He says they have:

...worked together on a wide range of issues and I always welcome his frank and honest assessment [that has] reaffirmed our strong and enduring ties. France is not only our oldest ally but also one of our closest.

I think its no surprise that we focused on strengthening the global economy [and the] most important aspect of our talks over the next two days is to resolve the crisis in Europe.

President Obama added that they discussed the situation in Greece, as well as security issues. He ended his statement by congratulatingPresident Sarkozy on the birth of his daughter, Giulia. He adds:

I am confident that Julia inherited her mother's looks rather than her father's - and I think that's a good thing.

_{Barack Obama and Nicolas Sarkozy shake hands as they hold a joint press conference ahead of the start of the G20 Summit of Heads of State in Cannes (Photo: Getty).}

09.30 President Obama and Nicolas Sarkozy are now addressing the press at the start of the G20.

But as Bruno Waterfield reports, the eurozone members of the group will be having their own meeting later:

Eurozone huddle will take place in wings of the G20 today. France, Germany, Italy and Spain as well as Draghi, Barroso and Van Rompuy. Top of the agenda: how to deal with a euro exit for Greece.

09.25 More colour from Cannes, courtesy of AFP, where PresidentObama was overheard telling the rest of the G20 ministers:

I was hoping to come and see some movies.

Presidents Obama and Sarkozy will hold a press conference after their bilateral meeting.

09.25 Greek contagion has spilled onto France's streets....literally - as this tweet from ITV business editor Laura Kuenssberg shows:

@ITVLauraK Weird - just walking past rue venizelos in Cannes...that s the name of the Greek finance minister.

09.15 Lots of rumours swirling that George Papandreou will be out on his ear as Greek PM, and that the referendum will not happen as a result. A summary of those rumours:

• Greek SKAI radio reporting that Angela Merkel asked for a national unity government to be formeed without Mr Papandreou
• Bloomberg reports that the referendum is a "thing of the past" quoting former defence minister Yannos Papantoniou
• Greek socialist politician Elena Panaritis will vote against the confidence motion, says Dow Jones, which would leave Mr Papandreou undermined because he has such a slim majority

09.10 Bruno Watefield reports from Brussels that for Greece, leaving the euro would also mean leaving the EU - and goodbye to all those subsidies, He writes:

Until Merkel and Sarkozy's press conference last night, the line was that leaving the eurozone was impossible without also bombing out of the EU altogether.

An official I spoke to this morning, a self-confessed constitutional obsessive, told me that while the controversial Lisbon Treaty provides a voluntary exit clause from the EU there is no legal way out from the single currency.

A country can leave the EU, meaning for Greece that it would lose billions in regional and farm subsidies, but there is no route to exit the euro and to remain in the Union.

If there is a vote it would have to be all or nothing.

09.05 European shares are all trading lower as uncertainty over Greece and Italy increases.

The FTSE 100 is off 0.4pc at 5,462 points, while the CAC is down 0,6pc in Paris and the DAX declined 0.8pc.

09.00 Kenneth Rogoff, the Harvard economics professor, told Radio 4's Today programme he thought Greece was "going to end up defaulting hugely".

He believes the debt-laden country has too many problems and is only staying the eurozone "because they are being bribed to stay in".

On the future of the eurozone, he says fundamental reforms are needed and plans going forward - with or without Greece - about how to manage the region:

"Otherwise even three bazookas won't save the euro."

08.55 BREAKING The Greek cabinet is holding an emergency meeting at 10am London time. Is George Papandreou going to be holding on to the title of prime minister for much longer?

08.50 Italy's borrowing costs have hit new euro-era highs of 6.343pc, and are teetering closer to the 7pc level widely regarded as "the point of no return".

At those levels, Italy has to borrow more just to service the interest on its loans rather than paying anything back.

This is the same point that prompted Greece and Portugal to seek bailouts, though most economists fear that Italy, as Europe's third largest economy, could be too big to save.

08.46 While President Obama, flanked by French President Nicolas Sarkozy greets 'fans' in the Cannes rain to talk about all things Greece and G20 - the BBC's Andrew Neil points out there's a much bigger elephant in the room:

08.45 A bit of colour from the streets of Cannes as US President Barack Obama arrives and sprinkles a bit of stardust over proceedings.

From Sky's economics editor Ed Conway:

08.40 More from Benedict Brogan, the Telegraph's deputy editor, on the Mer-kozy ultimatum issued to Greece last night: swallow the austerity pill or get no more bailout.

Since Greece needs €8bn by next month to pay its workers' wages, that's a significant threat - without a bailout, the country would be forced into an uncontrolled default and probably out of the euro.

Angela Merkel anticipated that yesterday: "The referendum will revolve around nothing less than the question: does Greece want to stay in the euro, yes or no?"

It's questionable how credible a threat that is: €8bn is pocket change relative to the pandemonium that an unmanaged Greek exit from the euro would cause.

On his blog, Nick Robinson reports that Britain is considering upping its contribution to the IMF, which might have to step in to prevent collapse. That would be politically difficult, but as Robinson points out, George Osborne has been very careful not to rule out the possibility.

08.20 It's easy to forget the eurozone crisis is not just an abstract concept discussed at summits, but a real-life problem hurting businesses and economies.

A reminder of that from France's biggest bank BNP Paribas, this morning.

BNP has reported a 72pc fall in third-quarter profit because of a writedown on Greek sovereign debt and losses from selling European government bonds.

08.10 The looming spectre of Italy - whose debt is seen by many economists as the biggest problem in the eurozone, rather than Greece, because of its sheer size - is still to the fore today.

The country's cabinet held an emergency meeting last night to try and accelerate budget reforms designed to lower debt.

However the meeting broke up without agreeing on any new measures, leaving Prime Minister Silvio Berlusconi with nothing to take to the G20 meeting or to soothe investors nerves.

Ambrose Evans-Pritchard , the Telegraph's International Business Editor, reports on the worsening situation in Italy as the eurozone economy slows and its borrowing costs rise:

Italy’s press reported the drastic steps to be pushed through by decree being discussed last night may include levies on bank accounts, as occurred during the ERM crisis in July 1992 as a last-ditch move to save the lira.

Such one-off moves do nothing to lift Italy out of its stagnation trap. The country is suffering the delayed effects of a 30pc to 40pc loss of labour competitiveness against Germany within EMU, an overvalued euro externally against China, and a 70pc collapse in foreign direct investment (FDI) flows into Italian plant since 2007.

Capital flight from Italy has become a grave threat. The central bank reported a €21bn (£18bn) exodus in August, following a €20bn loss in July. “I fear these figures are likely to get worse, “ said Rony Hamaui from Milan’s Catholic University.

08.05 Telegraph commentator Jeremy Warner says the only person who can take the action required to draw a line under the eurozone crisis is Mario Draghi, the new head of the European Central Bank.

So will the eurozone tragedy end in "an orgy of murder and violence" as the theatrical genre would dictate? Or will the ECB sidestep the rules and lend without limit, as the Bank of England and US Fed have done, to restore confidence?

Jeremy writes:

Two options are open to the eurozone in supporting its over-indebted periphery. Either the excess debt can be paid for by taxpayers in the more solvent core, or it can be bought up by the central bank.

Politically, it’s proving virtually impossible to persuade hard-working Germans to pay for profligate Greeks and Italians. The bail-out fund has thus been made too small and ineffectual to offer meaningful support.

In any event, it is only there at all as a surrogate for the European Central Bank, which refuses to do its proper job as lender of last resort, and provide the unlimited liquidity necessary to douse the flames.

08.00 The London markets are now open and are trading lower, as expected:

The FTSE 100 slid 79 points, or 1.5pc, to 5,405.5 shortly after the open.

07.55 As we have seen in recent months, the politics of the debt crisis are inseparable from the economics. As Channel 4 News's economics editor Faisal Islam points out with regards to the falling-out between the Greek PM and finance minister:

@faisalislam Context: In 2007, Venizelos the finance minister, challenged Papandreou for Pasok leadership, got 38%. Febrile political atmos in Athens

07.50 While Greek PM George Papandreou's intentions in holding the referendum (see 07.45 post) are good ones, they overlook the fact that Greece is soon to run out of money.

He must also win a vote of confidence in the Greek parliament tomorrow, and that's not looking too hopeful, as even the country's finance minister,Evangelos Venizelos, has come out against the referendum. He said:

Greece's place in the euro is a historical conquest by the Greek people that cannot be placed in question... this cannot be made dependent on a referendum.

He also said that the €8bn (£6.9bn) tranche of aid to stop the country from falling into bankruptcy should be given without delay and not linked to the referendum.

He should be so lucky...

^{Evangelos Venizelos says Greece should be given the a second $8bn tranche of aid without delay}

07.45 To recap on some of last night's action, this is what Greek PMGeorge Papandreou had to say by way of an explanation for why he has called a referendum on the bail-out agreement.

We believe in the benefits for growth, lowering our burden of debt, a strong package of support for the next few years. We can put our house in order and make a viable economy. But this comes with responsibilities.

It is Important that the Greek people make a decision on important developments. It is our democratic right and Greek people, I believe, are mature and wise enough to make the decision. We're very proud to be part of the eurozone. It is crucial we show the world we can live up to our obligations. It is crucial to our future in eurozone.

I informed Mr Sarkozy and Ms Merkel that we need to have wide consensus because this programme is difficult to implement. The essence is not only of the bail-out programme but whether we want to be in eurozone. But the Greek people want us to be in eurozone.

But Friday's confidence vote is our first battle. I hope we will win.

I want the Greek people to speak and they will speak soon.

07.40 Looking ahead to the European market opening, indices are expected to show steep declines.

The FTSE 100 is expected to drop 1.8pc to 5,385 while the CACis forecast to slip 3pc in Paris and the DAX to open down 2.7pc in Germany.

07.25 President Obama and the rest of the G20 leaders are all now in or on their way to Cannes for a two-day summit which will no doubt be dominated by the eurozone.

It seems a long time since Obama swept to power on the slogan 'Yes we can' - but could he resurrect it as 'Yes we Cannes' to try and gee up Europe's jaded leaders, attending their third summit in just over a week?

^{President Obama arriving at Nice airport this morning on his way to the G20 summit.}

07.10 This morning's newspapers have all focused on Europe - and even The Sun has it's take with the headline: Stop taking the Michael, George

The Telegraph: Greece told aid deal is in jeopardy

The Times (£): Do you want to stay in the euro? That's the question, Greece told

The Financial Times (£): Europe piles pressure on Athens

The Guardian: A new deal for Greece: vote yes or you don't get the cash

07.05 Overnight European leaders have drawn a line in the sand over Greece, saying a referendum called unexpectedly by embattled Prime Minister George Papandreou will determine whether debt-laden country stays in the euro - and vowing Athens will not get new aid until the result is in.

The vote is scheduled for early December and should the Greeks reject the austerity plan attached to bailout funds, as agreed last week, it could lead to a messy default on the country's debt and a wider financial crisis.

06.55 Asian stock markets fell as a European deal to bail Greece out of its financial mess appeared to be on the verge of unraveling.

Hong Kong's Hang Seng fell 1.9pc, South Korea's Kospi lost 1.5pc and Australia's S&P/ASX 200 shed 0.3pc. Japanese markets were closed for a national holiday. Markets in mainland China edged higher on hopes of more easing by the government.

Credit Agricole CIB said in a research note that tensions will remain high until a Greek referendum now set for early December.

Ahead of the vote markets will remain highly nervous and risk aversion will remain elevated. Consequently risk assets are set to face further pressure.

In the US, Wall Street ended higher after an increase in hiring by private companies helped lift shares. Automatic Data Processing said company payrolls rose by 110,000 in October, more than economists had expected.

The Federal Reserve said on Wednesday the economy was likely to expand modestly over the next two years, but chairman Ben Bernanke cautioned that the pace of economic growth will likely be "frustratingly slow" The Fed said it would not take any more steps to help the economy for now, but it left open the possibility of more steps later.

The Dow Jones ained 1.5pc to close at 11,836.04, while theS&P 500 rose 1.6pc.

06.50 Good morning and welcome back to our live coverage of the continuing global debt crisis. Log on throughout the day for the latest news and views.

Read all our latest news on the financial crisis, or take an in-depth look at events over the past mont