Germany refuses to rethink Greek bailout - European debt crisis live
1.40pm: German foreign minister Guido Westerwelle has rejected the notion that the debt deal agreed in Brussels last week could be renegotiated to give Greece more generous terms.
Speaking in Istanbul (where he was attending an international conference on the future of Afghanistan), Westerwelle said Germany was still committed to helping Greece through the crisis, but would not ease the country's obligations.
Here are Westerwelle's key quotes from Istanbul, via AFP.
The whole programme we just agreed last week cannot be placed back on the table,"
We are committed to solve the situation. For us there is no doubt that we will do everything.
We showed solidarity in the EU but we accept that every country in the EU does its own homework which means reforms are necessary.
I'm hearing from Berlin that Angela Merkel is just starting to give a press conference, with Turkish PM Recep Tayyip Erdogan (my colleague Helen Pidd predicted this morning that the pair will have had an awkward meeting)
1.12pm: Wall Street correspondent Dominic Rushe reports that:
There was a bit – emphasis on bit – of good economic news ahead of the opening of the US exchanges. The latest closely watched jobs survey from Automatic Data Processing said the US added 110,000 new private-sector jobs in October, above the 100,000 new jobs that had
been expected.
September's number was revised upwards to 116,000, bringing some cheer to the market ahead of Friday's monthly non-farm payrolls report.
The Dow Futures – and indication, although not always a good one, of which way the markets will go, was up about 38 points 30 minutes before the US markets opened. Yesterday was the second straight day of losses on the US markets with the Dow closing down 2.97%.
1.01pm: Yiannis Koutelidakis of Fathom Financial Consulting in London has put together an interesting theory to explain Papandreou's decision to call a referendum. Here is is in full:
• Reasons behind the decision to go on with a referendum would include the desire to force the opposition's hand. They have so far been free riding on the government's unpopular decisions when they know full well they will eventually be forced to do more of the same when they take power.
• One can speculate that the Greek PM wants to apply pressure on EMU partners to secure a better deal for the second Greek bailout.
• What the PM hopes to gain from a "Yes" vote is justification and moral authority in carrying out the reforms. It is still however a high stakes game.
Article 44 of the Greek constitution stipulates that a referendum can be called for:
• So-called national issues with the support of a simple majority of at least 151 MPs out of 300 total, or...
• Any proposed law with a supermajority of 180 MPs but with the caveat that the proposed law cannot refer to fiscal matters.
• Hence the Greek PM will likely call for a referendum under option 1 since option 2 would fall foul of the exception and require 180 MPs when the ruling Socialists have only 152.
Greek people are extremely likely to vote "No" even if that is not a certainty yet.
• Recent polls by the To Vima newspaper have shown that 59% of respondents do not agree with the deal struck on Thursday the 27th at the same time as a large majority (73%) want Greece to remain a part of the Eurozone.
• Thus it is possible that the ruling party will link the two issues in an attempt to force the outcome.
This would be the closest we have come so far to what Fathom has always termed a disorderly default or a default of, rather than within, the Euro. Since the referendum will not happen until January (unless political pressure is applied to force the Greek PM's hand for an earlier date) this means two months of added uncertainty for financial markets.
On Twitter, Louise Armistead of the Daily Telegraph argues that a referendum is far from certain at this stage:
@larmitstead : Hurdles Greek referendum must clear b4 result is relevant: PM confidence vote; Pres approval; 40pc Greek turnout. Markets are relaxed.
12.40pm: The Greek government is pushing on with the idea of holding a referendum in December - despite loud rumbles of opposition from Brussels this morning.
Athens correspondent Helena Smith has the details:
Sources at the Greek Interior Ministry have come up with two magic dates: December 5th and December 12th as potential days on which the referendum could be held. Angela Merkel and Nicholas Sarkozy are expected to impress on Papandreou the need to get the vote over and done with as soon as possible when they meet him at the G20 gathering in Cannes this evening.
Rumours currently doing the rounds in the birthplace of democracy suggest that Papandreou is also expecting to come under intense pressure over how he frames the referendum with a clearly miffed Sarkozy insisting that it be "all about" the desire of Greeks to remain in the euro.
And if the Greeks vote it down? The prime minister's aides say contrary to market expectations it "won't be the end of the world." Instead, the embattled PM will call early elections .....
12.18pm: The Greek debt crisis has just been raised on the floor of the House of Commons, during Prime Minister's Questions.
Alistair Darling, who was chancellor of the exchequer until last May's general election, tells PM David Cameron there is an "urgent need" for the G20 to produce more details on the eurozone rescue package agreed last week. George Osborne's predecessor also warned that Europe still does not have the funding in place to cope with another serious crisis (he may be suggesting an Italian bailout, or a Greek default...)
Cameron says Darling is right. There is an urgent need to put "meat on the bones" on the deal agreed in Brussels, although he argues that some progress was made (such as the 50% haircut on Greek debt and the need to recapitalise banks using a "credible stress test").
Cameron also resists any temptation to comment on the Greek referendum, saying he "can't interfere with Greece's domestic politics".
My colleague Andrew Sparrow has full coverage of PMQs on his live blog here.
11.58am: The latest Libor (London interbank offered rate) data, which track how much London banks are paying each day for their short-term funding, is just out.
The three-month sterling Libor rate has risen, to 0.98956% from 0.98869% on Tuesday. What does that mean? Banks are charging each other slightly more than yesterday to lend pounds, suggesting increased nervousness. However, we're still below the levels reached last week just before the bailout deal was agreed.
Three-month dollar Libor has also risen, to 0.43306% from 0.43167%. That's a bigger move than for sterling, and also more relevant as yesterday's figure was already the highest since August 2010.
Three-month Euro Libor fell, though, to 1.52188% from 1.52563% on Tuesday - when markets were baulking at the Greek referendum plan.
In short, nothing to panic about. But the very fact people are talking about Libor again is a sign of unease (although the Wall Street Journal argues that it underestimates the true problems in the banking sector)
11.49am: In the reader comments, BenCaute asked for more information on European sovereign debt today. So here goes.
The most significant change is in the price of French 10-year bonds, where the yield (or interest rate) has risen to 3.14%, up 0.18% overnight.
The yield on Italian 10-year bonds is up slightly on the day, at 6.25% [remember that 7% is the cut-off point that historically has triggered a bailout]. Spain's yields are basically flat, at 5.5%.
German yields are up slightly, at 1.84%, as are the yields on UK 10-year gilts, at 2.297%. So both countries are priced as safer bets than France right now.
For background, yesterday's drama sent Italian interest rates soaring, and pushed down German and UK yields sharply.
As Michael Hewson, market analyst at CMC Markets, said:
Italian bond yields surged yesterday as investors' dumped Italian debt, and are likely to remain under pressure while markets fret about the state of Italy's finances and the political will to deal with them in the wake of events in Greece.
11.36am: At this stage, we don't know exactly what question will be posed in the upcoming referendum, so Papandreou could phrase it in a way that encourages people to stick with the status quo.
But Charles Jenkins, economist with The Economist Intelligence Unit, warns this morning that the Greek people will face a quite unenviable decision:
The referendum will have to be held quickly to avoid a financial collapse occurring first. It will present the Greek public with the most invidious choice that has been faced in any EU country since the Second World War.
Either choice will lead to a massive further decline in living standards.
Jenkins adds that while the cabinet approval of a referendum is one success for Papandreou, he still has to win the confidence vote in parliament on Friday and then win the referendum itself if he is to stay in office.
11.24am: The European bailout fund has confirmed to RTÉ News that it has postponed a plan to sell €3bn worth of Irish Government bonds (as was rumoured earlier this morning).
A spokesman for the Luxembourg-based European Financial Stability Facility said the delay was due to "market conditions" - a reference to the financial turmoil triggered by the Greek referendum.
Asked when the bond auction might take place, the spokesman said it would be "not too long" but could not be more specific.
11.10am: It's another busy day for Angela Merkel as she gears up for emergency talks with Nicolas Sarkozy this evening in Cannes ahead of the g20 Summit.
My colleague Helen Pidd reports:
Helen Pidd Helen Pidd.
Before the German chancellor can get on a plane she has an awkward meeting with the Turkish PM, Recep Tayyip Erdogan. Erdogan has accused Germany of leaving Turkey "high and dry" over its bid to join the European Union in an interview with the tabloid Bild this morning.
Interesting that Turkey still wants to join the EU given the mess it is in.
The chancellor has yet to speak publicly about George Papandreou's controversial decision to put the Greek bailout to a referendum. No doubt she will be asked about it at a press conference she is holding with Erdogan at 2.15pm CET (1.15pm GMT: streamed live here
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In the meantime, though, opposition politicians in Germany are trying to gain political capital out of the messy situation. The Irish Times reports today how Sigmar Gabriel, the chairman of the Social Democratic Party and potential future chancellor, said in Dublin on Tuesday that the measures being imposed on Greece are "mad" and amounted to an "evil circle".
He then used every German politician's favourite scare tactic by mentioning the Nazis and how the financial turmoil of 1920s Weimar Germany paved the way for Hitler's rise to power.
In the Financial Times Deutschland, Germany's finance minister Wolfgang Schäuble insisted Greece still had
Germany's support.
I've always said: if Greece is willing to put in the effort and take on the burden of the rescue programme and reforms, if it wants to stay in the Eurozone, then we will support them.
Schäuble added that he believed the Greeks would support the rescue plan in any referendum.
And finally, you know something is getting serious when Bild starts
running a live blog
The three-million-selling tabloid is furious after discovering that the next tranche of bailout money will be transferred to the Greek government by November 11, despite Papandreou's referendum bombshell. Bild says that €8bn are heading to Greece, of which €1.7bn originate in Germany.
Antonis Samaras Greek main opposition party leader, Antonis Samaras. Photograph: Louisa Gouliamaki/Getty Images
10.49am: Fresh political developments from Greece, via Helena Smith.
Greece's main opposition conservative leader Antonis Samaras is about to meet with his parliamentary group to decide on the strategy the party will pursue following Papandreou's declaration of the plebiscite.
Samaras has said he will do "whatever it takes, at whatever cost" to stop the "dangerous" referendum from taking place.
This might mean withdrawing of his MPs from the 300-seat house, a move that could force early elections. Its likely to be an interesting session .... but perhaps not as interesting as the speech George Papandreou is preparing ahead of his own meeting this evening with G20 host Nicholas Sarkozy who is still smarting from his "friend's" decision to hold the ballot.
10.35am: Paul Donovan of UBS has posted his latest podcast. He compares Papandreou's trip to Cannes to a little boy summoned to the headmaster's office for not playing nicely with the other children – and for resisting when bigger children tried to hit him with sticks.
Paul Donovan of UBS
"Good politics doesn't necessarily make good economics," he adds.
"Economically the devastation of Greece's decision continues to the wrought. Greece feels the effect of course, but started from an economically awful position.
"The real impact is with bond yields rising in countries like Italy and France, threatening credit growth and economic growth."
10.15am: Rumours are sweeping the City that the organisation set up to fund Europe's bailouts - the European Financial Stability Facility - may have postponed plans for a sale of €3bn of debt today.
Although the talk is that the sale is "delayed rather than cancelled", it's a worrying development.
As Mike van Dulken of Accendo Markets says, this has been a pretty tough week for the new head of the European Central Bank, Mario Draghi (who only started on Tuesday):
@Accendo_Mike :EFSF bond auction may be delayed until after G20. Poor old Draghi - talk about poisoned chalice #outofthefryingpan
Joseph Cotterill of FT Alphaville points out that the EFSF is running behind schedule on bond issuances:
@jsphctrl Once upon a time the EFSF planned to issue up to €33bn in 2011 (via an investor pres). So far: €13bn not including AWOL Irish issue
Speaking of Mario Draghi, Fabrizio Goria of Linkiesta reports that the ECB president will not attend tonight's showdown talks in Cannes. Instead, he is only expected to arrive sometime on Thursday afternoon, after the ECB holds its monthly press conference after setting interest rates.
9.50am: Helena Smith has been busily analysing today's Greek media. She reports that....
...Greek papers this morning are saying the famous 6th tranche of aid (the €8bn euro needed to cover public sector payments by Nov 10th when the government has admitted it will run out of cash) is now in question following Prime Minister George Papandreou's deeply controversial decision to put last week's latest EU/IMF rescue package for the country to popular vote.
Prominent commentator Ioannis Pretenderis, in the usually pro-government Ta Nea, wrote that:
The prospect of a referendum is catastrophic. First because it throws the agreement struck on October 26th up in the air and will lead the country to bankruptcy.
At this moment, in the general European uproar, not even the sixth aid instalment is guaranteed. Secondly, because it cunningly turns the question of the governance of the country into one about its European perspective. Third and worst of all, because it turns the European future of Greece that was always a given into something that is questionable.
I don't know the motives or thought process that lead Papandreou to make this decision.
Already, the damage is huge, almost irreparable."
Helena says that such stinging rebukes are being much echoed in the ranks of Papandreou's ruling Pasok party which has been in melt-down since the surprise announcement was made:
An emergency meeting of the entire cabinet, called by the embattled leader after the defection of an MP showed all the signs of becoming a full-on mutiny, went on into the early hours as ministers voiced their shock and disgruntlement over the decision.
With tensions running so high Pasok insiders say it's far from assured that the government will receive a make-or-break vote of confidence that Papandreou has called for midnight Friday.
Live blog: news flash newsflash
9.34am: The latest eurozone economic data is in, and it is bad.
Manufacturing output declined by its fastest rates since July 2009 last month. The monthly survey of Purchasing Managers across the whole of the eurozone came in at 47.1 for October -- any number below 50 means the sector shrank.
Looking at individual countries....Germany's PMI fell to 49.1, from 50.3 in September. That is the first time in two years that German factory output has declined.
Greece's manufacturing output suffered the most, though. Its PMI fell to just 40.1, from 43.2 in September - a sign that the country's economy continues to contract sharply as the austerity measures bite. It's the worst figure since March 2009.
Seperately, PMI data for the UK construction sector has also been released. It shows a better picture - activity hit a five-month high, with the PMI up at 53.9 from 50.1 in September.
UPDATE: Confusingly, UK manufacturing PMI came out yesterday [Europe is running a day behind due to some public holidays]. It fell to 47.4 from 50.8 in September. More here.
9.10am: The notion that a Greek referendum can be organised or held by December - an idea put forward by the interior minister after last night's marathon cabinet meeting - is viewed with disbelief in Brussels.
David Gow has more details:
Instead of an early referendum, senior EU officials are saying this morning that a final bailout deal - the second programme, including a voluntary deal on haircuts for bondholders and worth around €100bn - could not be concluded before January, and could possibly drag into February.
That means two months of uncertainty - unless Papandreou goes for broke with a simple plebiscite on membership of the eurozone.
Seen as a loose cannon long before this bombshell, the Greek PM faces the wrath of Zeus from Merkozy tonight in Cannes.
8.39am: Here's a run-down of today's events. There's plenty of important economic news due this morning, with the heavy political action expected in the afternoon and evening.
• German unemployment data: 8.55am GMT / 9.55am CET
• Eurozone PMI manufacturing data: 9.00am GMT / 10am CET
• UK PMI construction data: 9.30am GMT
• Greek debate on Friday's confidence vote begins: 4pm GMT / 6pm EET
• US Federal Reserve interest rate decision: 4.30pm GMT / 12.30pm Eastern
• EU leaders hold meetings in Cannes: from 6pm GMT / 7pm CET
• Fed chair Bernanke speaks at press conference: 6.15pm GMT / 2.15pm Eastern
The European Financial Stability Fund is also expected to price some bonds today, which will be a test of investor confidence in the eurozone.
8.34am: The other interesting development following the cabinet meeting is that the referendum may be brought forward to December (having originally been pencilled in for January).
Interior minister Haris Kastanidis just told state television that there was "a possibility" of holding the ballot next month, "if Greece and its international partners work out the details of the bailout agreement earlier than planned".
8.29am: Despite the show of support last night, some members of Papandreou's cabinet do appear to harbour concerns.
From AP:
Government officials said two ministers still had strong reservations with the idea of a referendum, which will be the first in Greece since the country voted to abolish the monarchy in 1974.
8.20am: So what happened at last night's cabinet meeting? We know that it ran for seven hours (after starting late), finally finishing at 3am Greek time (1am GMT).
According to government spokesman Ilias Mossialos, government ministers expressed "total support for the initiatives taken by the prime minister." That doesn't exactly chime with the growing mood of opposition among the Pasok party yesterday.
George Papandreou's office has released a statement, showing the prime minister insisted that the Greek people must give their approval to the next stage of austerity:
The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro.
No one will be able to doubt Greece's course within the euro.
Only if you win, though, Prime Minister....
According to Associated Press, Papandreou also insisted that the rules of democracy must be observed:
We will not implement any program by force, but only with the consent of the Greek people.
This is our democratic tradition and we demand that it is also respected abroad.
8.00am: Good morning, and welcome to another day of drama in the European debt crisis.
We said yesterday that George Papandreou had a history weathering political crises. Well, the great survivor has done it again – after a marathon cabinet meeting, he has persuaded his cabinet that Greece should indeed hold a referendum on the eurozone rescue plan.
We'll be following all the developments from Greece, where the parliament is expected to start debating a confidence vote this afternoon.
World leaders are also heading to Cannes, ready for the G20 which begins on Thursday. Angela Merkel, Nicolas Sarkozy and other key players are due to meet with Papandreou late tonight to discuss the situation.
Asian markets have fallen overnight, but traders are predic