Europe

Thursday

David Blackburn

The markets rout

The recent rally on the markets is now the most distant memory. Stocks continued to fall today amid concerns about the European sovereign debt crisis, negligible growth figures in the developed world and cooling Asian economies. Robert Peston has an excellent account of the causes and effects of the latest rout. Banking stocks were brutalised, with Barclays and RBS both shedding more than 10 per cent of their value, with Lloyds and HSBC not far behind. Continental banking stocks were similarly mauled, with Soc Gen losing 12.34 per cent and Commerzbank being shorn of 10.42 per cent of its value. But the unease spread across exchanges as investors put their money in the safest havens.

James Forsyth

Dark days

There’s a pessimistic mood in Westminster at the moment, a sense of gloom about the economic prospects of the West. The government expects there to be another round of the European sovereign debt crisis this autumn and believes that the problems of the eurozone will take at least a decade to resolve. No one I’ve spoken to really believes that the plan Merkel and Sarkozy announced on Tuesday will be enough to keep the markets at bay for long. Looking across the Atlantic doesn’t raise spirits either given the state of both the American economy and political system. But the global economic situation will get an awful lot worse if the Chinese bubble bursts.

Wednesday

David Blackburn

This isn’t just any solution; this is an M&S solution

Banks and financial institutions endured a painful day’s trading, following Angela Merkel and Nicolas Sarkozy’s announcement yesterday that the Eurozone should adopt a ‘Tobin tax’, a charge on financial transactions. Once again, M&S chose piecemeal changes over the grand structural scheme desired by markets. The Tobin tax was just one proposal of three. The other two were: to create “genuine economic governance of the Eurozone” under, for the moment, EU President Herbert van Rompuy. The second: to impose a ‘Golden Rule’ on the budgets of Eurozone members. The ‘Golden Rule’ will bind national parliaments to agree to limits on national debt levels and impose statutory requirements on mastering budget deficits.

Tuesday

David Blackburn

Government expected to renew growth strategy

The word flying around Westminster this evening is that the government is going to announce a fresh package to stimulate growth tomorrow. In line with recent reports, the expectation is that new enterprise zones will be unveiled. Enterprise zones are, of course, the linchpin of the chancellor’s current strategy, offering generous tax breaks for start-up industries, relaxed planning regulations and investment in state-of-the-art broadband, so this would not be a novel move. But an announcement would be timely nonetheless.

Monday

James Forsyth

Battle of the century

The American historian Walter Russell-Mead has a cynical — but very possibly accurate — take on what the French are trying to persuade the Germans to accept with their plan for Eurobonds: 'France’s clear short term goal is to commit Germany to underwrite debts from weak EU states.  That not only staves off a crisis that threatens to engulf France; by putting Germany on as a co-signer for Greek, Italian and Spanish loans, France will ensure that Germany’s credit rating will not be better than France’s. The French will accept almost any German rules to limit the ability of countries like Greece to run up new debts.

David Blackburn

Back to the drawing board as Eurobonds look dead in the water

Watch her lips: no Eurobonds. Angela Merkel’s Finance, Minister Wolfgang Schauble has told Der Spiegel: "I rule out Eurobonds for as long as member states conduct their own financial policies and we need different rates of interest in order that there are possible incentives and sanctions to enforce fiscal solidity.” Merkel’s government is making its depositions ahead of tomorrow’s Eurozone summit, rebutting the moves made by other member states over the weekend to introduce Eurobonds, a step towards political integration. Those proposals were backed by Nicolas Sarkozy, with whom Merkel is meeting in private this afternoon.

Friday

David Blackburn

Desperate times

You have to hand it to the Eurocracy: it is nothing if not determined. The recent horrors on the stock market have concentrated minds in Brussels and across continental capitals. The headline news is that France, Italy, Spain and Belgium have placed a temporary ban on short-selling, but that’s just one counter-measure that has been introduced in the last 24 hours. And you’ll notice that these schemes are piecemeal; there is no grand plan as yet to calm the markets. First, Spain has bent a suppliant knee before the European Commission to secure restrictions on Romanians seeking work. This is momentous: the first time that border restrictions have been re-imposed within the EU.

Wednesday

Alex Massie

Regression to the Mean

Via Art Goldhammer, a new paper examining trends in public disorder across europe from 1919 to our own blessed unhappy time. Here's the chart: The authors explain their methodology: "We look at five different types of instability – anti-government demonstrations, riots, assassinations, general strikes, and attempted revolutions – in Europe over the period 1919-2009. The data comes from a large-scale international data collection (Banks 1994), and is based on an analysis of reporting in the New York Times. The individual indicators are then aggregated by summing them up for each country and year. This gives the variable called CHAOS. Figure 1 shows how it evolved over time since 1919, presenting the mean and the maximum.

Monday

Peter Hoskin

Osborne’s debt dilemma

If there's one sentiment that defines George Osborne's article for the Telegraph today, it’s that there is no need for us Brits to panic. The economic convulsions of the past few days, contends the Chancellor, serve to prove that the coalition was right to approach deficit reduction as it has. "The alternative of more spending and yet more borrowing is now frankly ludicrous," he says, "and places those who advocate it on the outer fringes of the international debate." He has a point. As I blogged on Saturday, there are reasons to believe that we'd be hurtling towards a credit downgrade and higher borrowing costs were it not for the fact that our debt-GDP ratio is set to decline by 2015.

Friday

Peter Hoskin

The markets wax and wane

CoffeeHouser 'Ben G' had it right in his comment underneath my earlier post: 24 hour news really does struggle in the face of economic crisis. This morning, all the talk was of a debt-induced apocalypse. Earlier this afternoon, the headlines were about the markets "rallying" after better-than-expected data on the US labour market. And now the BBC website's main headline is that "turmoil in the stock market persists," despite those very same labour market figures. Oh yes, it's difficult to present a consistent front as the money merchants sway and buckle in the breeze. That said, the economic fundamentals remain discouraging. It shouldn't be forgotten that yesterday's losses were extraordinary; in many cases, the worst since the early days of the Credit Crunch.

Peter Hoskin

Fasten your seatbelts…

It has, to paraphrase Margo Channing, already been a bumpy night — and it's only going to get bumpier today. The latest news is how the Asian markets have trembled at what's happening in the West. Japan's main stock index is down 3.7 per cent. Australia's is down 4.2 per cent. Hong Kong's 5.3 per cent. And even oil futures joined in with the collective nosedive, which is continuing as the European exchanges open this morning. All of which adds to the catalogue of horror that was written yesterday. CoffeeHousers will read plenty of grim comparisons in the papers today, not least that yesterday's plunge in the Dow Jones was the worst since 2008.

Thursday

David Blackburn

Capital punishment to be debated in parliament?

Sir George Young has graced the pages of the Daily Mail this morning, arguing that MPs cannot ignore the clamour for a debate on the death penalty, as examined in depth by Pete last weekend. The Leader of the House’s intervention is the greatest indication yet that parliament will discuss the issue for the first time since the passage of the Human Rights Act in 1998. This has not come as a bolt from the blue. A string of e-petitions will mature soon and capital punishment is expected to be near the top of the list, as it always is when the public is asked for its opinion.

Monday

David Blackburn

Petrol woes set to continue

Despite small falls in petrol prices last month, the consequence of a supermarket price war according to the AA, motoring becomes ever more expensive. Political campaigns have opened as pressure builds at the pumps; and these campaigns have been co-opted by influential organs such as the Sun. The government has reacted: taking part in the International Energy Agency’s decision to release reserves onto the market to counter those members of OPEC that connive to sustain high oil prices. The government has also relaxed some of its windfall taxes on companies operating in the North Sea.

Daniel Korski

Massacre in Hama hastens the need to tackle Assad

Syrian President Bashar Al Assad has praised his troops for ‘foiling the enemies’ of his country. Some enemies. 140 civilians are said to have died in a pre-Ramadan crackdown on protesters, adding to the toll of 1,600 civilians who have been killed since anti-government demonstrations began in mid-March. Details of the events in Hama are unclear because journalists have been kept out of Syria. But the pattern of events is familiar: protests against the Assad regime emerge; the army moves in to kill demonstrators; more protests then take place, which leads to more killings. Meanwhile, the international community stands by.

David Blackburn

Bitter Turkish delights

Turkish accession to the EU is apparently no more than a dream of those who desire it at present, but it remains a point of contention across Europe. The British government, for instance, are in favour of enlargement, believing Turkey’s economy to be essential to Europe’s continued economic strength. Accession would also hamper the goal of political integration in the EU, which is expedient to Britain. Not everyone in Britain shares the government’s unqualified enthusiasm for Turkey. The Home Affairs Committee has issued a report this morning, criticising aspects of the government’s policy and insisting on careful management of accession.

Wednesday

David Blackburn

Rengotiating the loan with Ireland

All eyes were on Greece at last week’s crisis summit in Brussels, but other indebted countries took advantage of Angela Merkel’s generous mood. In line with concessions made to Greece, the Irish secured a substantial cut in interest repayments on its bailout loan: the rate has fallen from 6 per cent to somewhere between 3.5 per cent and 4 per cent, and the loan period has been extended from seven to 15 years. This was a long-term goal of Enda Kenny’s government and the renegotiations are being heralded as a major victory. But the matter does not end there.

Thursday

David Blackburn

Is Merkel getting her way?

Below, courtesy of the Telegraph, is a leaked copy of the draft proposals on managing the Greek debt crisis.There are no measures to reduce Greece's debts to sustainable levels; subsidy is the preferred route. This will presumably hit German taxpayers the hardest, but Merkel has managed to obtain private sector involvement, a clear German objective in these discussions.  However, this course is likely to lead to Greece’s selective default as creditors buy back bonds. The European Central Bank has declared that it is happy to allow this and will continue to accept government bonds in the event of sovereign default.

David Blackburn

Loyal Clegg’s slippery tongue

Oddly, David Cameron’s most voluble supporter throughout the phone-hacking psychodrama has been Nick Clegg. The deputy prime minister took to the airwaves when no Tory dared or wanted to. Earlier today, Clegg gave a speech-cum-press conference and he defended the prime minister again, saying that he had very little to add to Cameron’s statement yesterday. He also defended Cameron over unanswered questions about Rupert Murdoch’s purchase of BskyB; Clegg said that Cameron had “nothing to do” with the deal, although he added that Vince Cable’s reservations had been vindicated. Clegg then elaborated on media regulation. Unsurprisingly, he insisted that the status quo must change.

David Blackburn

Common Franco-German position on Greek debt

As I wrote earlier this morning, rumours of a ‘common Franco-German position’ on Greek debt were circulating in the early hours. Details are now emerging. Nicolas Sarkozy has dropped plans to impose a 0.0025 per cent levy on Eurozone bank assets, which was opposed by Angela Merkel for being much too cumbersome. In return, it seems that Merkel is prepared to consider the French-led plan of bond rollover. Merkel is also keen that private sector holders of Greek bonds pay their share of this second bailout. According to the FT, she favours a bond-swap deal, whereby bonds that will mature in the next eight years are swapped for new 30 year bonds paying a lower rate of interest.

David Blackburn

Getting a grip of the crisis

“I’m very worried, this building [the Treasury] is very worried and this government is very worried,” said George Osborne of the unfolding crisis in the Eurozone. In an interview with the FT, the chancellor goes on to say that he is in constant contact with his continental counterparts and urges them once again to “get a grip”. Eurozone leaders are meeting today to discuss further loans to Greece. Three options are being considered: first, an extension of the European Financial Stability Facility; second, private sector creditors re-lend money for a longer period and at a lower rate; third, impose a tax on banks to secure revenue for Greece.