6.07pm: And with that it’s time to close up for another day.
We’ll be back again tomorrow to look at – among other things – the latest developments with the Greek bond swap and the protests across the eurozone.
Meanwhile goodnight, and thanks again for all the comments.
6.06pm: News from Athens where Helena Smith says local media are reporting on the outcome of talks in Berlin between the head of GSEE, the country’s biggest private sector trade union, and German chancellor Angela Merkel. And it seems that, predictably, both sides did not see eye to eye.
Ioannis Panagopoulos, who heads the General confederation of Greek Workers, used the occasion to speak of the “disastrous effects” relentless tax increases, pay cuts and job losses were having on Greece. During the course of their meeting he presented the chancellor with ‘facts and figures’ explaining why such policies were failing to either boost the country’s competitiveness or improve its debt load. “Instead these dangerous policies have failed and are leading the Greek economy to a slow death,” he was reported as saying.
Merkel listened intently – this being the first audience she has ever had with a Greek trade unionist. But she stuck to her ground saying it was “clear” both sides had “different views.”
However, the German leader (perhaps mindful of the country’s 2013 autumn election and Germany’s own Greek community) said she would be willing to meet Greek trade unionists again, adding this might even happen during “a visit to Athens.”
5.49pm: A General Confederation of the Portuguese workers union worker shows a banner with the pictures of Portuguese prime minister, Pedro Passos Coelho, and German chancellor Angela Merkel, during a march to Portuguese parliament in Lisbon.
Note the representation of a worker being crushed by the Troika et al…..
5.40pm: European Council President Herman Van Rompuy has said it is too early to call it a post-crisis period, but Greece, Portugal and Ireland have made impressive efforts.
No arguments that the crisis is far from over. You only have to look at the economic data, not to mention the demonstrations in Greece, Portugal and Italy. And his comments come as Ireland goes back into recession….
He also says bond spreads are a sign of confidence, but given they continue to widen in Italy and Spain, this is an odd sort of confidence.
5.21pm: Many in Europe have been uneasy with the major credit ratings agencies during the course of the financial crisis.
Now the EU’S markets watchdog – the grandly named European Securities and Markets Authority – has said in a new report it had found several shortcomings at the Big Three. These included a lack of adequate transparency, and it said it had not determined whether any of them constituted a breach of credit rating agency regulation.
It said it would follow up on its observations with each of the agencies in the first half of 2012.
4.54pm: Economist Nouriel Roubini is in gloomy mood, and not surprisingly given the day’s economic data:
Eurozone deep in recession given PMIs, China slowing sharply as PMI shows, UK & Canada retail sales down, US’ ISM new orders/inv ratio down
— Nouriel Roubini (@Nouriel) March 22, 2012
4.44pm: Fears of a global economic slowdown after poor manufacturing figures from Europe – notably Germany – and China have sent stock markets sharply lower.
The FTSE 100 – which lest we forget was testing the 6000 barrier a matter of days ago – has ended 46.30 points lower at 5845.65.
China’s manufacturing sector contracted for the fifth month – meaning mining shares were among the main fallers – while manufacturing activity declined in both France and Germany, while Ireland fell back into recession.
On the European markets, Germany’s Dax has lost 1.27%, France’s Cac is down 1.56% and Spain’s Ibex is 1.62% lower. In America the Dow Jones Industrial Average is off 0.54% at the moment, the downbeat mood tempered by better than expected weekly jobless claims. They dipped to 348,000 from a slightly upward revised 353,000 the prior week, compared to expectations of 350,000.
Angus Campbell, head of market analysis at Capital Spreads, said:
The markets have been due a correction for some time now since the prolonged failure for the index to push on beyond the 6000 level. The only question is whether this retracement has further to go and judging by the nervousness creeping in things could get cheaper before they test the year’s highs again.
4.28pm: Union-led marches are taking place in Portugal this afternoon, as part of today’s general strike.
This photo, taken in Lisbon, shows protestors are linking their actions to other demonstrations around the globe, including the Occupy movement’s ongoing activies in Oakland, California.
And with that I’m handing over to my colleague Nick Fletcher.
4.08pm: Michael Saunders of investment bank Citi is concerned by the news that Ireland is back in recession.
Saunders warned that Ireland’s commitment to fiscal consolidation will be blown away if the country cannot return to economic growth. And that would put its return to the financial markets in peril.
Here’s what Saunders wrote to clients:
Ireland’s economy faces a range of major headwinds, with heavy fiscal tightening, large deleveraging by banks and households, and high trade exposure to Europe. The government’s commitment to fiscal consolidation cannot be doubted, but their fiscal consolidation plans will only succeed in returning Ireland to fiscal sustainability if the economy picks up as well. Indeed, the end-2011 budget assumes that real GDP will rise by 1.3% this year. By contrast, we believe the economy will markedly undershoot official forecasts, with GDP probably shrinking this year.
As a result, tax revenues will probably undershoot official forecasts, and the fiscal deficit will probably overshoot. Ireland is often held up as a success story among high deficit euro area countries, but in practice current policies probably will not succeed in returning the economy to fiscal sustainability.
3.51pm: The head of the Portuguese union that called today’s general strike has vowed to press on with more industrial action in future, and admitted that today’s turnout wasn’t great.
Armenio Carlos, leader of the General Confederation of Portuguese Workers, said it was hard to persuade workers to down tools when they are already struggling to earn enough to survive.
He warned, though, that if Portugal risks disaster if it continues to impose tough austerity, saying:
This is the same path that was taken by Greece, which resulted in a huge failure.
A government spokesman criticised the strike, which has caused widespread disruption to transport links. Luis Marques Guedes said the walkout will “just worsen” Portugal’s economuis position, adding:
We have the feeling that the great majority of Portuguese agrees with the government on this.
Certainly, none of the pictures I’ve seen today from Portugal compare to the scenes we’ve regularly seen Athens. But the protests in Greece have escalated in recent years — once austerity really began to bite…..
3.21pm: From Bologna, my colleague Andrea Vogt has the full story about the industrial unrest in Italy:
As Prime Minister Mario Monti’s labor minister made a last-ditch effort to get various parties at the negotiating table to agree on labor reforms, Italian factory workers began walking out in protest on Thursday.
In La Spezia and Genoa, workers from Fincantieri declared a strike and occupied one factory. In Turin, 800 employees from the aerospace company Alenia blocked traffic, while in Pisa, striking workers at the Piaggio factory blocked traffic on the Florence-Pisa-Livorno motorway in both directions.
Monti’s labor market reforms are a key part of a larger effort to revitalize Italy’s flagging economy. He passed austerity measures and reformed the pension system, but Thursday’s factory walk-outs are the first concrete signal that this round of reform may be in political trouble. The centre-left Democratic Party was split, with at least one prominent leader strongly warning Monti against trying to force through reforms without the support of Italy’s largest union, the CGIL. Opposition appeared to be mounting against attempts to amend Article 18, the Worker’s Statute offering wide protections against firing workers. But the industry association Confindustria also held firm Thursday, saying any further concessions from the government would be unacceptable.
Business leaders say the reforms are needed to spark growth, attract investment and modernize the workforce, but unions warn they would lead to major lay-offs by making it easier to fire workers. The reforms also include a number of safety-net protections, as well as incentives for hiring and retaining more women and young people, significantly underemployed in Italy’s workforce.
Monti had hoped a reform could be fine-tuned by the end of this week and sent to parliament, but it now appears there’s little hope for a package everyone can agree on.
2.05pm: Helena Smith, our correspondent in Athens, says a crucial cabinet meeting has just got underway to discuss the all-important issue of expediting structural reforms and liberalizing “closed shop” professions – starting with taxi drivers.
Faced with a backlog of draft laws that still need to be passed before the current parliament is dissolved, Greece’s technocrat prime minister Lucas Papademos has called the meeting to urge his cabinet to press ahead at breakneck speed with reforms.
Filippos Sachinidis, making his maiden appearance as finance minister at the meeting, will address the issue of opening up some 150 closed shop professions seen as a major impediment to energizing the Greek economy. The new minister is also expected to discuss a new tax collection law in light of Athens’ urgent need to increase state revenues and meet budget deficit targets.
With general elections expected to be held as early as April 29 (the centre right New Democracy party is keen that the poll takes place before anti-austerity protestors mark May Day) the interim coalition government has barely a month to complete its mission of ratifying all the reforms demanded of Greece in return for its latest €130 loan package.
Meanwhile, a report by the country’s court of audit is causing waves with the revelation that Athens overborrowed to the tune of €64.5bn euro in 2009, the year the conservative New Democracy party lost power to the socialist Pasok.
The 1000-page report said Greece overstepped budget targets because it was unable to keep “budgetary expenses” under control.
Readers will recall that the Euro debt crisis exploded onto the scene when the newly installed Pasok government, discovering the overruns in December 2009, was forced to upwardly revise the country’s public deficit from around 5% of GDP to 15.4% of national output.
1.45pm: My colleague Phillip Inman has written a news story about Ireland’s slide back into recession – here.
1.18pm: In Italy, Mario Monti also faces the prospect of a general strike soon after negotiations over labour reform broke down last night.
Italians are already getting a taste of what could be in store — around 800 aerospace workers held protests in central Turin today to protest about Monti’s plan to ditch some of the protections enjoyed by workers. Associated Press reports that the demo blocked traffic in the city.
The reforms centre on part of Italy’s labour law which means a company can be forced to re-employ employees who are fired for disciplinary or economic motives, if the decision cannot be defended in court. Critics say these rules prevent firms taking on full-time workers. Monti’s government aso wants to make it more atractive to employ young people, and implement a new unemployment compensation scheme.
But last night, Italy’s biggest union CGIL announced it would hold an 8-hour general strike to protest the changes.
That news has hit Italian government debt today, pushing up the yield on its 10-year bonds to 5.07% (matching the rise in Spanish debt reported at 10.58am)
The biggest fear for Monti is that his coalition might fracture over the labour reforms.
12.54pm: The Portuguese general strike appears to be proceeding peacefully.
This picture shows police officers standing guard at Caes do Sodre station in Lisbon.
For some Portuguese residents, the strike (the eighth called by the CGTP union since the crisis began) is just an unwelcome hassle.
While waiting for a bus Ana Maria Verissimo, a cleaning lady, told Reuters:
They go on strike and hurt us. This won’t resolve anything. They’ll have to find another way. If I go on strike, my pay cheque will be lower at the end of the month.
But Luis Antonio, a plumber, said he was taking part (with his manager’s blessing), and blamed Portugal’s political class for the country’s position:
My boss wants us to strike, so I will go for that…The fault of this is those who govern us, not Germany.
12.46pm: Over in Portugal, it appears that transport links have been badly hit by the general strike.
The union which called the action, CGTP, has not said how many workers have taken part. But the Portuguese railway system appears to be badly disupted, while Lisbon’s underground has been closed since midnight.
CGTP also said that rubbish collectors, ports and some schools had shut down across the country.
This picture show a picket at Sao Bento station in Porto (the bib reads “General Strike”).
12.26pm: Missed this last night (was probably recovering from the Budget). Greece has denied a report that it paid €72m in fees to the advisers who handled its debt swap.
However, the Private Sector Involvement was still lucrative for some investment bankers. Lazard Freres is in line to receive up to €25m for its role in the PIS, while legal firm Cleary Gottlieb Steen & Hamilton has already been paid €6.52m.
The ‘closing agents’ of the bond swap (named previously as Deutsche Bank and HSBC, according to Reuters) will be paid €4m.
Speaking of the Budget, my colleague Andrew Sparrow is covering all today’s developments in his Politics Live blog, here (no need for my help today ).
12.15pm: Speaking of Germany……. a stream of high level Greek officials are holding talks in Berlin.
Anna Diamantopoulou, the powerful minister development minister now overseeing the disbursement of crucial EU structural funds for the debt-stricken country, has flown Berlin for a two-day visit.
Helena Smith our correspondent in Athens, explains:
Greece’s most senior woman politician, Diamantopoulou, who is also a former European commissioner, will address the German parliament, hold talks with finance minister Wolfgang Schauble and be a keynote speaker at a leading German think tank.
Aides said her central goal was to convey the sacrifices made by Greeks over the last two years, the significant fiscal adjustment that Greece has achieved as a result of austerity and the institutional changes achieved “at all levels.”
“It is important that progress be acknowledged,” said one official.
The politician is not the only Greek official in the German capital.
Ioannis Panagopoulos, who heads the General confederation of Greek Workers or Gsee (the country’s biggest private sector labour force), has been invited by German trade unionists to visit Berlin where he, too, is expected to explicate on “the consequences of austerity” in a meeting with Angela Merkel the chancellor herself.
The talks take place at 2 PM German time.
But Panagopoulos will not be singing from the same hymn sheet as Diamantopoulou. He is a vehement opponent of the fiscal remedies that EU member states, lead by Germany, say are vital for Greece’s economic recovery.
Gsee’s spokesman, Stathis Anestis, explained: “His message will be stop the austerity and self-defeating policies and focus instead on policies that will promote development, employment and social cohesion.”
Nevertheless, the talks are seen as proof of the thawing of relations between the two countries following resolution of the second EU-IMF sponsored bailout agreement for Greece.
On the eve of the visit, Wolfgang Schauble – in a departure from his often stern approach to Athens – had words of encouragement for a country that he said should be “left in peace” to pursue reforms.
“Greece will have to first of all follow the path of sustainable economic growth,” he said. “We will support the efforts for economic growth through the provision of European and bi-lateral assistance.”
Berlin, it should be remembered, has spearheaded financial assistance for Greece, providing the vast majority of funds for the two financial support programs propping up its near bankrupt economy. The two bailouts amount to a whopping €240bn
11.48am: Mario Draghi, head of the European Central Bank, has sparked interest amongst economic thinkers this morning by predicting that the worst of the Euro crisis is over.
As our Berlin correspondent, Kate Connolly, reports, Draghi used an interview in the tabloid Bild to seek to allay German fears over the threat of inflation following recent price rises, particularly in the energy sector.
Draghi told the paper:
The worst is over, but there are still risks. The situation is becoming more stable (and) the most important Euro zone figures, like inflation, the current account balance and above all budget deficits are better than for example in the USA. Investor confidence is returning and the ECB has not had to buy any government bonds as a support for weeks.
The ball is now in the governments’ court. It’s up to them to make the Eurozone crisis-proof for the long term.
Kate reports that the paper presented Draghi with a so-called ‘pickelhaube’ or Prussian spiked helmet, a play on German concerns a year ago that an Italian was to be head of the ECB. Its front page then showed Draghi in a photomontage wearing a spiked helmet, under the headline: “Of all people, an Italian is supposed to take care of the Euro”.
He laughed off the depiction, saying: “Prussianism is a good symbol for the ECB’s most important task: to ensure price stability and to protect European savers”.
Draghi sought to dampen German fears over inflation, saying: “Should the inflation outlook deteriorate we will take preventative action”. But he stressed that taking into account the oil price rise and recent tax increases by several governments “we have been stable at 1.5 per cent for months.”
11.32am: Here are some more details on Ireland’s recession (see 11.04am for more details).
Interestingly, it was caused by a 1.1% drop in exports, suggesting Ireland is suffering from the slowdown in the global economy. That’s particularly worrying following this morning’s PMI data, showing German and French factory output fell this month.
Here’s some early economist reaction (via Reuters):
Dan McLoughlin of Bank of Ireland:
The big risk to all the forecasts now is that they’re all predicated on exports continuing to be the main drivers of growth.
Consequently the data we got today from the euro zone in terms of the PMIs, particularly on the manufacturing side, would tend to suggest that the risks to that export forecast are certainly on the downside.
David Duffy, of the Economic and Social Research Institute:
Really it’s as you’d expect. More or less on track. Much of the domestic
economy is weak.
Conall Mac Coille of Davy Stockbrokers:
Consumer spending and investment bounced back as we expected, but
exports contracted on the quarter, highlighting the danger that a key
platform for growth is being eroded by the euro area slowdown.
11.04am: Just in – Ireland has fallen back into recession.
Economic data released at 11am GMT showed that GDP in the last three months shrank by 0.2%. That followed a 1.1% contraction in the third quarter of 2011 (revised up from a previous estimate of a 1.9% fall).
Ireland thus joins Greece, Belgium, Portugal, Italy, the Netherlands and Slovenia in recession.
Because Ireland is home to many international companies, it is also worth looking at its Gross National Product (GNP), which discounts output from these firms.
But on GNP terms, Ireland is shrinking even faster. GNP fell by 2.2% in the fourth quarter of last year, following a 1.9% decline in Q3 2011.
As economist Shaun Richards reminds me, GNP is particularly important for the Irish government as it represents taxable revenue:
— Shaun Richards (@notayesmansecon) March 22, 2012
10.58am: In the bond markets this morning, Spanish debt has weakened – pushing the yield on its 10-year bonds above 5.5% for the first time since January.
Portuguese debt actually strengthened slightly, but with a 10-year yield of 12.6% the country is still being priced as a major risk.
10.28am: Today’s general strike comes as some economists and investors speculate that Portugal will need a second bailout.
Dutch finance minister Jan Kees de Jager touched on this issus this morning as he addressed the Netherlands’ parliament
De Jager, who is one of the eurozone’s more hardline finance ministers, told MPs that Portugal was “a different story” than Greece. True enough — Portugal’s problem, really, is that it has only managed very weak growth over the last few years.
Does that mean Portugal will not need fresh aid? De Jager was unclear on this point. He said that Portugal’s fiscal programme agreed with the IMF was on track, but also cautioned that he could not rule out further debt restructuring within Europe (but wouldn’t be drawn on Portugal specifically).
Patients now face higher charges for services, and there is concern that this may have contributed to a rise in the mortality rate in February (although the government blames cold and flu outbreaks).
10.07am: Word from Lisbon is that transport services have been badly hit by the general strike
The Lisbon subway, which carries more than a half-million passengers every weekday, stayed closed. Train, bus and ferry companies in the capital and the second-largest city Porto provided only occasional services. Long traffic queues built up on roads into both cities as commuters resorted to their cars.
Flights are still operating at Lisbon’s airport, though.
There are also reports that some schoolchildren were sent home, because teachers and auxiliary staff did not show up for work, and that some medical appointments have been cancelled.
GCPW, which called the strike (more details at 8.16am). has more than 600,000 members, mainly public sector and manual workers.
9.58am: Just to add to the economic gloom, UK retail sales have suffered their biggest fall since last May. Sales volumes fell by 0.8% in February, compared with January.
January’s figures, which were surprisingly good, have also been revised down sharply, to show growth of just 0.3%, not the 0.9% initially thought.
9.28am: City analysts say this morning’s poor PMI data (see 9.08am) is very disappointing. Here’s a quick round-up:
Silvio Peruzzo of RBS:
It’s a disappointing reading. It suggest that some of the optimism that was built in the last couple of months was overdone as far as the manufacturing sector is concerned for the big countries.
Howard Archer of IHS Global Insight
The Eurozone is far from out of the economic woods and is finding it hard to return to growth after GDP contracted by 0.3% quarter-on-quarter in the fourth quarter of 2011.
Indeed, the surveys reinforce our belief that it is more likely than not that the Eurozone will suffer further modest contraction in the first quarter of 2012 which will put it back into recession.
9.25am: You can see the full PMI data online here, in several European languages.
9.08am: The eurozone economy is weaker than thought, and heading into a full-blown recession.
That’s the message from this morning’s purchasing managers’ indexes (PMIs), covering the manufacturing and services sectors in March. They show that activity in both sectors fell sharply this month
The flash manufacturing PMI for the full eurozone came in at 47.7, below the forecast of 49.5. Any number below 50 would indicate that the sector contracted. The flash services PMI fell to 48.7, from 48.8 in February.
This meant the ‘composite PMI’, a combined measure of the euro economy, fell to 48.7 from 49.3 in February, showing activity fell more sharply.
As reported at 8.39am, the fall was driven by surprisingly poor performances in both France and Germany.
Chris Williamson of Markit, which compiles the data, said the data showed that 2012 could be a very poor year for the eurozone. Having contracted in the last three months of 2011, it now looks very likely that GDP shrank in the current quarter too. Williamson said:
The Eurozone economy contracted at a faster rate in March, suggesting that the region has fallen back into recession.
As this graph shows, there is a clear correlation between the PMI data and GDP.
8.50am: The weak economic data from France and Germany (see 8.39am) has sent stock markets falling across Europe. Here’s the details:
FTSE 100: down 48 points, or 0.8%, at 5843.
French CAC: down 34 points, or 0.95%, at 3494
German DAX: down 60 points, or 0.86%, at 7010.
8.39am: Disappointingly data from France and Germany has raised fears that the eurozone’s two largest economies are struggling.
Both countries reported that their manufacturing output dropped this month, while their services data was also a concern.
The French manufacturing PMI came in at 48.1, below the 50 point mark that seperates expansion from contraction (data via Markit), Economists had expected a repeat of February’s 50.0 (which showed that output was flat).
Germany posted a manufacturing PMI of 48.1, much worse than the 51.0 that was forecast. That’s its first contraction in 2012.
Chris Williamson, Markit economist, said the data raised fears that the debt crisis had been more damaging than thought, adding:
While Germany may avoid a recession, it’s growth is by no means robust. It’s just scraping through.
Seperate data showed that France’s service sector was flat this month, with a PMI of 50.0, while Germany’s came in at 51.8, down from 52.8 in February.
We get the full eurozone PMI data for both services and manufacturing at 9am GMT.
8.34am: There are reports from Portugal that the metro systems in Lisbon and Oporto, Portugal’s second-largest city, have shut down because of the strike, and that the ferry service linking the two sides of the Tagus river in Lisbon is also suspended.
8.16am: Today’s general strike has been called by Portugal’s largest union, the General Confederation of Portuguese Workers (CGTP). It is opposed to labour law reforms, which remove restrictions on hiring and firing staff, and lowers the compensation payments due to workers.
CGTP, which has strong communist links, hopes that all major public transport services would join the stoppage, including trains, the Lisbon underground and the ferry boats that take workers across the Tagus River to the capital. That would mean that people could be unable to reach their workplace, even if they don’t support the action.
Portugal’s second largest union, UGT, does not support the action. It has called for restraint, warning that otherwise Portugal could see the regular demonstrations, and violence, seen in Greece.
Jose Adelino Maltez, a political scientist at Lisbon Technical University, told Reuters that Portugal is unlikely to grint to a halt:
I don’t expect the country to stop, but we can expect a strong showing, maybe with some export-oriented companies halting output to give a signal that there is a strong unionized force in Portugal to be reckoned with.
8.11am: Here’s today’s agenda:
• General strike in Portugal: all day, with protest marches expected in Lisbon this afternoon
• Dutch finance minister Jan Kees De Jager adddresses parliament: 9am GMT / 10am CET
• Eurozone flash manufacturing+services data: 9am GMT / 10am CET
• UK retail sales for February: 9.30am GMT / 10.30am CET
• Eurozone industrial new orders: 10am GMT / 11am CET
8.00am: Good morning, and welcome to our rolling coverage of the eurozone debt crisis.
Today we’re looking at Portugal, where a general strike has been called in protest at the tax rises and spending cuts being imposed by the Lisbon government. Unions have vowed to bring the country to a standstill, but it’s not clear whether the public will respond.
Elsewhere, the Netherlands’ finance minister, Jan Kees de Jager, is due to address parliament in the Hague this morning on the debt crisis.
On the economic front, we get manufacturing, services and consumer confidence data from across the eurozone, plus the latest UK retail sales.
There’s also some disappointing economic data from China to digest – factory output fell in March to a four-month low. Not a good sign for the global economy.