• Coalition for Radical Left overtakes New Democracy
• Democratic Left calls for unity government
• Venizelos gets government mandate
• Angela Merkel: no debt-fuelled growth
• Ladbrokes suspends betting on Grexit
• Polls: Greece likely to leave euro
• Today’s agenda
8.08pm: Time to wrap things up here (you guys can keep at it in the comments though )
Here’s a closing summary:
Talks over the formation of a new Greek government have continued today. Pasok’s Evangelos Venizelos accepted the mandate, and after meeting with the Democratic Left party he declared that a National Unity government should be created to steer Greece through the next few years.
New polling data has shown a rise in support for anti-bailout party Syriza. The poll showed that Syriza would be the biggest party if new elections were held.
In the UK, the Bank of England left interest rates unchanged. It also decided not to increase its quantitative easing programme, leaving it pegged at £325bn.
Europe’s debt crisis remained worrying. The Dutch central bank warned of a Japanese-style lost decade while Ladbrokes suspended betting on Greece leaving the euro this year.
Angela Merkel remained firm to the cause of fiscal consolidation. The German chancellor (when not rummaging in her handbag), warned that debt-fuelled growth would only make the crisis worse.
And that’s very much your lot. Thanks for reading, commenting, and assisting. Tomorrow will be another interesting day, as Venizelos inches towards a unity government. Until then, goodnight!
Here’s the bar chart showing the projected votes (as blogged here)
7.25pm: The Institute of International Finance (which represented Greece’s creditors in its recent debt deap deal), has expressed concern over the deadlock in Greece.
#Greece deadlock in forming gov after elections is increasing concern it may be forced out of the euro: IIF (bankers’ group negotiated PSI)
— Linda Yueh (@lindayueh) May 10, 2012
If Greece were to quit the euro, the IIF’s members would be hit with some pretty huge losses, just a few months after finally agreeing the deal that knocked around €100bn off the country’s debt pile
6.43pm: Here’s how tonight’s new polling data from Greece (see 6.30pm) would translate into actual seats (again via the invaluable Efthimia Efthimiou:
Syriza: 128* (up from 52 in last Sunday’s election)
New Democracy: 57 (down from 108)
Pasok: 36 (down from 41)
Independent Greeks: 29 (down from 33)
KKE: 20 (down from 26)
Golden Dawn: 16 (down from 21)
Democratic Left: 14 (down from 19)
So, no party would have the 151 seats needed for a parliamentary majority. But the logistics of a coalition would be quite different.
* – this assumes that Syriza (a coalition of several parties) would qualify for the 50-seat bonus that goes to the party with the highest share of the vote (New Democracy last time). Under Greek election law, a coalition wouldn’t usually get it, but Syriza’s could potentially change its status.
Also worth flagging up that Syriza, or the Coalition for the Radical Left, appears to have slightly softened its opposition to the Greek aid deal. As blogged at 4.39pm, its leader Alexis Tsipras urged European leaders to “rethink” the entire agreement with Greece, but didn’t declare it “void” (as initially declared earlier this week).
6.30pm: The first opinion polling data since Sunday’s election has just been released, and it shows that support for the anti-bailout party Syriza has gained ground against the other parties.
Syriza has overtaken New Democracy, indicating that it could win the most seats if a second Greek election were run in June.
Here, via Greek journalist Efthimia Efthimiou, is the “projected vote” that the main candidates would receive (polling by Marc).
Syriza: 27.7% (up from 16.78% in last Sunday’s election)
New Democracy: 20.3% (up from 18.8%)
Pasok: 12.6% (down from 13.1%
Independent Greeks: 10.2% (down from 10.6%)
KKE: 7% (down from 8.48%)
Golden Dawn: 5.7% (down from 6.97%)
Democratic Left: 4.9% (down from 6.1%)
6.08pm: Here’s some reaction to the idea of a new unity government in Greece (see 4.58pm onwards).
David Jones, chief market strategist at IG Inde, said shares had been lifted by ‘whispers’ of progress in Greece (the FTSE 100 ended 13 points higher), but…
The battle-weary traders of the European debt crisis have witnessed too many false dawns already over the last couple of years, and the more cynical among them would appear to be happy to sit this one out and see what the next 24 hours bring.
Business man James Wilkins is unimpressed by Democratic Left’s decision to reverse its position on Greece’s financial programme. He emails:
If “Democratic Left ” changes side in order to keep the old guard in their well paid jobs I fear for the future of this country. Greeks voted overwhelmingly for change. They will not be satisfied until they get it. The old political establishment really, really do not understand!
And a Greek twitter user called @teacherdude also pointed out that many people dropped their support for mainstream parties such as Pasok.
If ND/PASOK/Democratic Left form govt, then things will get very ugly as ppl voted against austerity are forced to have 4 more years of it.
— teacherdude (@teacherdude) May 10, 2012
5.31pm: Another positive development, EU officials have told Reuters that the rest of the eurozone is prepared to fund Greece until the end of June, if new elections had to be held.
That takes away the fear that Greece could suddenly run out of cash while the democratic process takes its course.
5.15pm: Evangelos Venizelos issued a rallying cry to Greece’s pro-European parties to work together, after his meeting with the Democratic Left party.
I call on all Greek citizens to support our … proposal for a national unity government consisting of all forces wanting Greece in Europe and in the euro.
Put alongside Democratic Left’s call for an ‘ecumenical’ government, it shows that the two leaders are both gunning for unity.
Of course, there are democratic ramifications — didn’t the majority of Greek people vote for a change and reject the mainstream parties who were sticking with the bailout plan?
4.58pm: Important developments this evening in Greece – the Democratic Left Party has proposed the creation of an all-party unity government.
Party leader Fotis Kouvelis has called on other parties to suport his proposal of an ‘ecumenical’ government. That would allow the deadlock over the Greek bailout to be broken, and keep Greece in the euro.
Here’s the statement Kouvelis made on live TV (via Keep Greece Talking):
I offered Venizelos to form an ecumenical government with trustworthy political personalities, a government to last until the EU elections of 2014 and thus under two conditions: That the country remains in the EU and the euro zone and that it will work towards a gradual disengagement from the Memorandum of Understanding.
As reported at 4.17pm, the Democratic Left has dropped its previous hard line against Greek austerity. Kouvelis’s plan appears to be that the government would be designed to rule until 2014.
Whisper it quietly, but Greece might just get itself a workable government after all.
4.39pm: Another reason to be slightly more optimistic — Syriza has sent a letter to the European authorities about the Greek bailout terms. But rather than a flat-out rejection, Alexis Tsipras has a subtler message — saying all side must “rethink the entire context of the existing strategy.”
A softening of the language from Syriza would help to mend bridges with Brussels, and perhaps indicate political progress in Greece.
4.17pm: The Wall Street Journal is postulating that Evangelos Venizelos has got a decent chance of agreeing a new government.
The key is that the leftist party Democratic Left has broken ranks with fellow left-leading party Syriza, and could form a coalition with Pasok in the national interest (something ballymichael put his finger on hours ago).
Democratic Left has released a statement criticising Syriza, saying “Their insistence on renouncing the loan agreement will lead to bankruptcy and a break from the euro zone”. With Democratic Left’s seats in play, a deal could be on.
A senior Pasok official told the WSJ that:
After Democratic Left’s statement we may have a realistic chance for a breakthrough in forming a government.
A reminder of the maths: Democratic Left won 19 seats in the election, while Pasok has 41, and New Democracy has 108. So those three parties could together control a majority in the Greek chamber.
Venizelos is expected to meet with Antonis Samaras, ND head, tomorrow.
3.42pm: Economists in the City, and beyond, are divided over Greece’s future in the eurozone.
Reuters has polled 65 economists over the last two days, as the political crisis in Athens has raged. Thirty five of them reckoned that Greece will still be in the euro at the end of 2013, despite the current uncertainty.
3.11pm: On the newswires, the details of a meeting of EU ministers taking place next Monday, May 14*.
On the agenda — the political deadlock in Greece, the crisis in the Spanish banking sector, the situation in the Netherlands (now its government has collapsed), and the ongoing financial progammes in Ireland and Portugal.
The next day, France’s new president will fly to Berlin for talks with Angela Merkel.
Hollande will fly to Berlin to meet Merkel on afternoon of May 15, just after he takes power, says AFP
— Angelique Chrisafis (@achrisafis) May 10, 2012
* – Europe editor Ian Traynor corrects me that this is not a new meeting, as breathlessly scribbled earlier. #ahem
3.05pm: Pictures from Evangelos Venizelos’s meeting with president Karolos Papoulias today have just arrived.
Both men appeared cheerful and relaxed for the cameras. But Papoulias must be getting a little weary of all these politicians dropping in. It’s not like he’s being paid….
2.38pm: Shares are rallying in Greece this afternoon.
The main Athens index is up by 4.6%, with the banking sector jumping 15%. That’s small comfort to investors who saw the index hit a 20-year low this week, down 89% since autumn 2007. But it may reflect optimism that Venizelos can somehow pull a coalition deal out of the fire.
2.22pm: Golden Dawn’s web site was suspended by the blogging platform WordPress today, for violating the terms of its service.
There had been calls for the fascist party’s site to be taken down after it published an attack on Greek journalist Xenia Kounalaki, who had written that Greeks should ignore Golden Dawn (full details here).
That article was seen as a barely concealed threat against Kounalaki, saying she should “watch her back”. Golden Dawn (which shocked much of Europe by winning 21 seats) has also demanded that journalists stood up when its leader entered a press conference this week, prompting fears that press freedom was being eroded.
Golden Dawn has now created a new web site on WordPress, on which it attacks the “dirty and illegal” suspension of its original site. It also vowed to “uproot the pustule of foreign occupation in Greece” (thanks to @Finisterre67 for the translation)
1.46pm: Regular reader Fripouille kindly flags up that Le Figaro’s website is leading with a rather pessimistic view of the current situation. From a sunny Lyon, he writes:
It’s a longish article predicting that Greece may well go bust before the end of June and leave the Eurozone, with catastrophic consequences, and a reader poll in which 80% of voters think that Greece should leave the Eurozone, just days after the country elected an anti-austerity president who said that Greece should be helped.Go figure…
It’s an interesting read, outlining how a Syriza-led government could lead to euro exit, a 50% devaluation, and financial turmoil. If your French isn’t up to much, this link takes you to a Google translation.
1.34pm: Evangelos Venizelos faced the traditional media scrum after picking up the mandate to form a government from the Greek president.
Venizelos told reporters that he would approach every parties that wants to keep Greece in the eurozone, to see if a deal somehow be agreed.
Things are not easy and I don’t claim to be optimistic but I am determined to serve the national interest.
Venizelos’s pitch is that while Greeks are weary of austerity, they desperately want stability, and have not voted for a euro exit.
12.52pm: Evangelos Venizelos is now getting stuck into negotiations with other parties in Athens. He’s expected to meet with Democratic Left leader Fotis Kouvelis at 6pm Athens time (4pm BST).
There’s a good analysis of the current situation here by Nick Malkoutzis of Ekathimerini He explains:
Greece is trying to complete a multiple-choice test in which all the answers are wrong. Sunday’s elections could have hardly produced a more fragmented result, one from which you can add up the numbers any way you want but not get the response you’re looking for.
Efforts to form a unity government are due to fall flat — barring a last-minute successful intervention from President Karolos Papoulias. They seemed doomed to failure because none of the parties are taking on board constructive messages from the election result.
A second election would change this dynamic, if any of the main parties managed to significantly increase their share of the vote. So leaders such as Venizelos, Antonis Samaras and Alexis Tsipras can all gain (or lose) support by their behaviour during the mandate process.
12.35pm: The Dutch central bank has warned today that Europe faces a Japanese-style lost decade, unless the eurozone crisis can somehow be resolved.
In its latest semi-annual risk report on the Dutch financial sector, De Nederlandsche Bank said low economic growth, weak consumer spending, poor company investment and tougher borrowing conditions could combine to create a repeat of the long period of stagnation seen in Japan.
Especially peripheral countries are vulnerable because of weak government finances, a fragile banking sector and weak economic performance….
“The European banking sector is not succeeding sufficiently to regain market confidence and is too dependent on central bank funding.
The implication is that any further escalation of the crisis, such as a Greek exit, would deal a hefty blow to the Euro banking sector.
Reuters has more details, and explains:
The bank, which is led by Klaas Knot, who is also a European Central Bank governing council member, said the risk of a double dip recession had become reality in Europe. The ECB’s three-year money operations to banks had averted acute liquidity risks but problems in the Dutch banking sector and euro zone remained.
12.15pm: Evengelos Venizelos has officially been handed the mandate to form a Greek government.
He now has three days to negotiate with other leaders. On past form, he may not need the full 72 hours. New Democracy handed back the mandate with almost indecent haste on Monday, and even Alexis Tsipras of Syriza gave up within two days.
12.00am: The Bank of England has decided against increasing its quantitative easing programme beyond £325bn, at today’s meeting of the Monetary Policy Committee. It also voted to leave UK interest rates unchanged at 0.5%.
So no change at the UK central bank, and no statement either. There had been some speculation that the QE budget programme could be increased again today, as the Bank has now bought €325bn of gilts.
11.45am: After yesterday’s toing-and-froing, the European Financial Stability Fund has confirmed this morning that it has sent €4.2bn to Greece today. €1bn has thus been held back, while Europe assesses the sitution/puts pressure on Athens.
Klaus Regling, head of the EFSF, said this €1bn would not be dispatched until the IMF, EU, ECB Troika has conducted a visit to Greece, assessed the situation, and agreed Greece’s financial program for the second half of 2012.
11.33am: Evangelos Venizelos has been addressing Pasok’s group of MPs-elect in Athens. Here are some highlights:
In a signal that he might seek changes to Greece’s austerity programme, Venizelos described the bailout as a “continuous negotiation”, with new talks taking place every three months (ie, the Troika’s regular assessments of whether Greece is on track).
Venizelos also said that he would be prepared to support a Leftist government, as long as it favoured Greece remaining within the euro. He also defended Pasok’s role in the crisis, as the party licks its wounds following Sunday’s elections. According to Venizelos, only Pasok proposed a “viable crisis exit plan”.
He also argued that the Greek people had signalled in Sunday’s elections that they want a change of course, are divided on how the country should proceed, but remain committed to the euro.
Here’s some instant reaction from Greeks on Twitter:
Greek unemployment going up 1% every 3/4 months and Venizelos says more austerity will change that. He’s the “responsible choice”
— teacherdude (@teacherdude) May 10, 2012
it’s obvious that the ppl wanted a coalition govt and for greece to remain in euro, but no more painful mzrs: venizelos to pasok MPs #rbnews
— Diane Shugart (@dianalizia) May 10, 2012
11.00am: File this under worrying. ECB governing council member Ewald Nowotny has said that it is “premature” to discuss Greece exiting the eurozone.
Quizzed by reporters in Vienna about the prospects of the country leaving the single currency, he replied:
I think this is a premature discussion.
Nowotny appears to be hinting that the discussion might move beyond premature into topical, as Greece will not get more help unless reforms are implemented.
What we have to discuss now, and what we have to concentrate on, is to solve the situation that we see now. And the key for solving this lies with the Greek government and political system.
Nowotny also warned that time is “flying”, given Greece’s funding needs (a €450m repayment is due later this month).
10.48am: Ladbrokes, the UK betting group, has today suspended betting on Greece exiting the euro by the end of the year.
A Ladbrokes spokesman just told me that they took the decision after a steady stream of bets from punters, looking to profit from a Grexit. Ladbrokes had been offering 4-6 yesterday (so a €6 bet would return €4, plus the stake), but cut it to 1-3 this morning. He explained:
While we’re not sure what is going on in Greece, it is safer for us to suspend betting rather than keep cutting the odds.
Apparently, Ladbrokes would have paid out on a government statement that Athens was pulling out of the euro, rather than the actual reissuing of the drachma.
Perhaps the IMF should have wagered its $600bn firewall on a Greek euro exit while it had the chance…
UPDATE: At the risk of leading you all astray, Paddy Power are still taking bets.
Ladbrokes out but Paddy Power still taking bets on Grexit, still odds *against* 6-4 paddypower.com/bet?action=go_…
— P M (@Pawelmorski) May 10, 2012
10.32am: Greek unemployment hit a new record high of 21.7% in February, data released this morning showed.
The Hellenic Statistical Authority reported that the percentage of people out of work rose again, from 21.3% in January 2012. In February 2010, the jobless rate was 15.2%.
The youth unemployment crisis also deepened, with 53.8% of 15-24 year olds now out of work.
The headline jobless figure also shows a gender imbalance, with 25.7% of females out of work and 18.6% of males.
In another blow to the battered Greek economy, its industrial output slumped by 8.5% year-on-year in March – a decline that accelerated from February’s -8.3% figure.
10.10am: Here’s a bit more detail of Angela Merkel’s speech to the Bundestag today, in which she rejected calls for Europe to abandon austerity measures.
Merkel told MPs that Europe’s only hope is to implement structural reforms alongside austerity measures. As reported at 9.01am, Merkel was clear that growth could only come alongside debt reduction, not through more borrowing.
Growth through structural reform is important and necessary – growth through debt would throw us back to the beginning of the crisis.
At the moment, though, most of Europe has no growth at all (even France is stagnating, as we blogged at 8.21am).
9.54am: If a new Greek government can’t be formed, an interim prime minister will need to hold the fort for a few weeks while second election are held.
But who could it be? Lucas Papademos, who ran the country for the last six months, is certainly one option. But there is also speculation in the newspapers today that Fotis Kouvelis, the leader of the Democratic Left party, could play the elder statesman.
As ballymichael points out in the comments below, Democratic Left have been indicating that they’re prepared to put differences aside and make coalition deals with other parties, due to the critical nature of the situation.
9.27am: French bank BNP Paribas has calculated the impact of a Greek exit for the euro on its economy. It’s not a pretty picture.
BNP analysts estimate that a Grexit would quickly wipe 20% of Greek GDP, send inflation soaring by 40-50%, and send Greece’s debt/GDP ratio soaring over 200%.
Obviously such predictions are broadbrush — the details would depend on how large a devaluation Greece would take if it returned to the drachma. But it shows the immediate chaos that could be triggered if Greece should leave the eurozone.
9.13am: Eurozone economic data released this morning was less grim than feared.
Italy industrial output actually grew by 0.5% in March, better than expected, and clawing back most of the 0.7% slump seen in February. That still means Italian industrial output is 5.8% lower than a year ago.
While in France, industrial production fell by 0.9% in March, versus February (mainly due to lower energy consumpion as the weather got warmer). Manufacturing output picked up by 1.4% – better news, following the worrying Chinese export data released this morning (see 8.21am).
9.01am: Angela Merkel is addressing the German parliament this morning, and it appears that The Lady’s Not For Turning.
Chancellor Merkel told the Bundestag that:
Debt-fuelled growth will take Europe back to the beginnings of the crisis.
Our Europe editor Ian Traynor reckons the speech looks like an attempt to put François Hollande ‘back in his box’, following the French president’s demands to rewrite the fiscal pact.
8.57am: Over in Spain, taxpayers have woke up to find they now own 45% of Bankia, Spain’s fourth largest bank.
The move leaves many unanswered questions, as our Madrid correspondent Giles Tremlett explains:
The most important ones are: Will Bankia need more public money, and how much (reports suggest it needs up to €10bn euros more)? And will the government nationalise any more former savings banks as it reportedly prepares to require them to set aside up to €42bn more against toxic real estate?
Answers, presumably, will come by tomorrow, when the cabinet sits.
An independent valuation of Bankia’s parents company, BFA, may also alter the percentage of the bank that ends up in state hands, according to El País. Finally, what happens to the former savings banks – like Caja Madrid – who, until now, jointly owned most of Bankia? They run large cultural foundations and social welfare schemes. What happens to all that?
8.41am: Here’s a round-up of what City analysts are saying about the Greek crisis today:
The Greek public may not favour leaving the Euro and there may not be any mechanism by which a country can be thrown out of the currency union, but if Greece abandons the austerity and reform programme, it is not too hard to think of options the rest of the euro area have for effectively expelling Greece.
The EU is reported to have with-held some funding already, paying over enough to allow Greece to repay bonds owned by the ECB and EIB, but with-holding about €1bn of funds due to Greece under the agreed programmes. While Greece is special case as is so often pointed out by Eurozone politicians, an exit from the Eurozone sets a precedence and may stoke contagion fears.
Gary Jenkins of Swordfish Research
I liked Mr Schäuble’s comment regarding any prospect of the terms agreed by the Troika and Greece being changed; “Any doubt cast on them would immediately trigger catastrophic uncertainty in the financial market…”
I am not so sure about that but what might trigger catastrophic uncertainty is if Greece leaves the Eurozone whilst undertaking a disorderly default…..
If Greece were to default on the monies lent by the Troika (and bonds held by the ECB) that the financial fallout (which would be bad enough) might be eclipsed by the medium term political fallout. Difficult to persuade voters to put money into further bailout entities when you have just made one of the worst lending decisions ever. So ultimately if Greece can put together some kind of government over the next month then a renegotiation of the terms might well be on the table.
Michael Hewson of CMC Markets
The tone from Germany in particular [yesterday] was uncompromising, leave if you wish but there will be no renegotiation and no more money.
The game certainly does appear to be changing with talk of a Greek exit now being openly discussed something that would have been unheard of a year ago. For now new elections look the mostly likely outcome, as the baton moves to PASOK to try and form a government.
8.31am: Just to clarify one point – Evangelos Venizelos will formally receive the mandate from Greek president Karolos Papoulias at 1pm local time (or 11am BST) (I’d initally suggested that Venizelos already had it).
8.21am: The Bank of France has warned this morning that the French economy is part-way through a six-month period of stagnation.
In its latest economic forecasts, the central bank predicted zero growth in the April-June quarter, on top of the 0% expected in the first three months of the year (official figures will be released next week).
The forecast came after the latest export and import data from China was released, raising fears about a sharp slowdown in its economy.
Chinese exports rose by 4.9% in April from a year earlier, down from the 8.9% annual growth seen in the previous month. That, economists fear, shows that the global economic recovery is losing pace — and the eurozone crisis is being blamed.
Alistair Thornton of IHS Global Insight in Beijing told the BBC:
It is clear that the situation in Europe is dragging on China’s export performance, and in turn on its overall growth.
8.02am: A Greek exit from the euro is inevitable, according to almost three-quarters of people who have voted in our online poll. You can still have your say too (currently, 73% of voters say Greece is bound to leave the single currency, with 27% saying it can hang on).
Bloomberg has also polled its investors, analysts and traders, and found that 53% believe at least one country will quit the euro by the end of 2012. Details here.
7.50am: It seems implausible that Evangelos Venizelos will succeed in assembling a workable coalition in Greece. The talks that have already taken place this week have shown that the gulf between the pro-bailout parties (Pasok and New Democracy), and those who oppose it (most other parties) is too wide.
Still, Venizelos has promised to do his best, once he receives the ‘mandate’ to form a government. Here’s what he told reporters in Athens:
I will continue the effort because it is in the nation’s interest.
Prolonging this uncertainty only hurts the country and its economy, and in the end, the weakest and the unemployed.
7.45am: Here’s today’s agenda:
• Government negotiations in Greece: ongoing (will update with firm times)
• French industrial production for March: 7.45am BST / 8.45am CEST
• ECB monthly report: 9am BST / 10am CEST
• Italy industrial production for March: 9am BST / 10am CEST
• Bank of England decision on interest rates/QE: noon BST
• America’s trade balance for March: 1.30pm BST / 8.30am ET
7.40am: Good morning, and welcome to our rolling coverage of the eurozone crisis.
Today we’re inching closer to new elections in Greece, as negotiations over the formation of a coalition rumble on. The mandate to form a new government will pass to the Pasok party, who must now try to succeed where New Democracy and Syriza failed.
Tensions in Brussels are also heightened, following yesterday’s decision to withhold 20% of Greece’s bailout funds until the sitution becomes clear (as covered in last night’s liveblog).
And Spain’s decision to nationalise Bankia, it’s third-largest bank, has also driven the crisis into a new phase.
Also coming up, the Bank of England is holding its monthly monetary policy meeting. Could we see more quantitative easing? And there’s plenty of industrial and production data due out today, which will show the state of the eurozone economy. Plus the monthly report from the European Central Bank, following its lively meeting in Barcelona last week.