Debt crisis: as it happened - 29 October, 2012

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Mario Monti and Mariano Rajoy were both cool on German plans to allow the EU to intervene in countries' budgets and propose changes before they are agreed in parliaments.

• Germany rattled as taxpayer losses loom in Greece • Forgiving Greek debt 'not an option for ECB' • Monti and Rajoy to meet in Madrid • German wages see sharpest rise in almost four years • Draghi backs Schaeuble's 'super commissioner' plan • US economy expands by 2pc in third quarter

= Latest =

17.47 Markets have ended the day on a downbeat note. The FTSE 100 eased 0.2pc to 5795; the CAC (Frankfurt: 924169 - news) fell 0.76pc to 3408; Germany's DAX (Xetra: ^GDAXI - news) dropped 0.4pc to 7203; Spain's IBEX fell 0.6pc to 7728. Amid political anxiety in Italy, its MIB sank 1.51pc to 15349.

With that, we're shutting up shop on Debt Crisis Live today and will be back tomorrow morning. Thanks for reading and commenting.

17.41 Reuters reports that Greece's PASOK party has given its strongest hint yet that it intends to provide the support the government needs to get cuts demanded by foreign lenders approved in parliament. More from the newswire:

Athens has been locked for months in talks with its European Union and International Monetary Fund lenders on a package of €13.5bn in cuts and tax measures.

A final agreement to secure aid to save it from bankruptcy has been held up by the refusal of the Democratic Left party, the smallest partner in the three-party coalition, to back some private-sector wage cuts included in the package.

But the Socialist PASOK, the second-biggest coalition partner, will not be swayed by the Democratic Left's refusal, a senior party official said ahead of a formal decision expected at a meeting of party lawmakers on Tuesday. The party has so far been sharply critical of labour reforms but has not explicitly said if it will vote for or against the measures.

17.27 The US stock market is to remain closed tomorrow due to Hurricane Sandy. CNBC reports that this is the first two-day weather-related shutdown of the markets since 1888 .

17.20 Spain has released the details of its 'bad bank' this afternoon. The bank will mop up the toxic property assets held by the country's lenders. Spanish lenders who are transferring their real estate assets into the bad bank will have to do so at a steep discount, taking a sharp haircut on their investments. The bad bank will pay a discount of an average of 45.6pc to take on soured property loans.

The Bank of Spain's Deputy Governor said the bad bank will reduce the capital needs of Spanish lenders by between €5bn and €6bn.

17.03 Cantabria has become the ninth Spanish region to seek rescue funds from central government, according to AFP . The newswire reports that the regional government has made a request for €137.2m to finance its deficit for this year.

The Spanish government last month launched the €18bn fund for troubled regions, from which nine overall have now requested funds totalling more than €17.6bn.

16.35 Away from the eurozone, New Yorkers are bracing themselves against the onslaught of Hurricane Sandy. Goldman Sachs (NYSE: GS - news) is taking no risks, surrounding its office with sandbags. Courtesy of Stephen Foley on Twitter, here's a pic:

16.03 Optimism that international lenders will grant Greece more time to fix its budget has eased fears that the eurozone will break up , according to a survey. Investors' fears that Greece could leave the currency bloc within the next year fell sharply this month, according to Sentix research group's Euro Breakup Index. The index found that only one investor in three among those surveyed now expect at least one country to quit the bloc within the next year, down from 51.9pc in September.

15.21 Like Mariano Rajoy, Mario Monti was cool on plans for an EU 'super commissioner'.

The plan drawn up by German Finance Minister Wolfgang Schaeuble would bolster the power of the EU's economic and monetary affairs commissioner, giving them power to intervene in countries' budgets and propose changes before they are agreed in parliaments. But, Monti said the a budget commissioner would be a sign of mistrust.

One of his best lines to come out of the press conference was that Europe (Chicago Options: ^REURUSD - news) is 'facing adolescent difficulties'.

Twitter: Fabrizio Goria - Italian PM Monti Says Eu Facing Adolescent Difficulties "spots & mood swings"

15.05 Mario Monti has fielded questions about his political future during his press conference after Silvio Berlusconi threatened to topple Monti's government. The leader of the centre-right People of Freedom (PDL) party - the largest in parliament - said the party would decide in the coming days whether to end its support for Monti in a move that could trigger an early election.

But Monti dismissed fears that his government could fall. He said he did not consider Berlusconi's comments to be a threat to him and the unelected ministers in his technocrat government. Monti added that he and his colleagues had not sought office and were only serving a limited term. He indicated he intended to continue until elections expected in April.

14.50 Mariano Rajoy has said that he is personally against the idea of a European Commissioner with increased budgetary powers and believes the issue should be dealt with as part of a wider debate on the future of the eurozone. He said:

We need to fix these objectives - fiscal union, banking union, political union...And we must set a time scale. We are giving a message that we really want greater European integration. We can't say something is this first, then something else, without saying where we're going.

This is an idea, that considered on its own, I personally don't like. As part of a variety of measures for fiscal union, it could be considered.

14.33 And at another press conference, Mariano Rajoy and Mario Monti are speaking following their meeting in Madrid. The pair have said that they support keeping Greece in the eurozone. Rajoy said:

Our commitment towards the euro is unshakeable and we will take any measures necessary to guarantee its stability and irreversibility.

Rajoy has also said that Spain does not need European aid for now. He adds that the country will call for a rescue package if it is thought to be in the interests of Spaniards.

14.25 Speaking of Francois Hollande , the French president has given a press conference in the midst of his meetings at the OECD. According to flashes coming through on Bloomberg , he has said that the eurozone is "close to exiting crisis" and that he wants to find a "durable" solution to the Greek issue at the forthcoming Eurogroup meeting.

13.49 Along with the IMF (Other OTC: IMFAF.PK - news) and World Trade Organisation, Francois Hollande is also meeting the chairman of Google (NasdaqGS: GOOG - news) today. It's likely Eric Schmidt will be asked about creating jobs and paying more taxes in France when he meets the French president.

Bloomberg reports that Hollande will discuss Google’s role in boosting France’s technology startups and how the world’s largest search engine can support the production of local cultural content. He is banking on start-ups to hire people as France confronts a 13-year-high jobless rate.

The meeting, planned months ago, comes as the French socialist government looks for ways to get internet companies to pay more taxes on revenue earned in France. Companies like Google, Amazon.com (NasdaqGS: AMZN - news) and Facebook would be subject to new taxes on advertisement, e-commerce and video-on-demand revenue under a draft law that will come up for debate in the French Senate on January 31.

13.39 Reuters is reporting that Greek lenders will delay posting their six-month results by one more month to the end of November (Xetra: A0Z24E - news) , pending their recapitalisation from the EU and IMF. The government had previously pushed back the reporting deadline to October 31.

13.07 And further data out of Germany show that inflation held steady at 2pc in October.

12.45 Data out from the Federal Statistics Office in Germany today show that German wages had their sharpest rise in almost four years in July. That is in stark contrast to the pay cuts and job losses seen in most of the eurozone.

German wages rose by 3.2pc year-on-year in July, the highest increase since a 3.4pc expansion in October 2008. The wage increases measured in the quarterly sample taken in July were due mainly to higher wage rounds agreed in the chemicals and metals industries, the statistics office said. In May, Germany's largest industrial union IG Metall clinched a deal that secured its 3.6m workers their biggest pay rise in 20 years with a 4.3pc pay increase. Two months earlier, public sector workers won a 6.3pc raise over two years.

12.37 AFP reports that Greek finance minister, Yannis Stournaras , is to meet the Greek banking federation today to talk about recapitalising banks with money expected from international creditors.

Stournaras and Georges Zanias, head of the Union of Greek Banks, were to meet with bank executives at lunchtime to work out details of how to help institutions hit by the write down of more than €100bn in privately held government debt in March.

The European Union's temporary rescue fund has earmarked around €50bn for the task, and much of an EU-IMF lifeline worth another €31.5bn is also expected to help banks restore solid balance sheets so they can provide more support to the wider Greek economy.

11.52 This won't be music to Francois Hollande 's ears as he heads into crisis talks with the heads of the IMF, World Trade Organisation and other economic bodies (see 09.22).

As the French president holds talks on the debt crisis and ways to spur growth, the heads of 98 of the biggest French businesses pleaded the case for a €30bn cut in welfare charges paid by French employers over two years, and large cuts in public spending.

Hollande, who is on the ropes in opinion polls, faces the headache of fulfilling pre-election pledges to create jobs and kickstart growth while applying austerity measures to plug a €37bn hole in public finances.

In an open letter to the president, Afep, which represents more than 90 of France's top companies, wrote:

With a record public spending of 56pc of gross domestic product, we have reached the limit of what is tolerable.

The letter continued:

For companies, the working costs must be reduced by at least €30bn over two years by cutting the employers' portion of welfare charges.

The business leaders also called on the French government to slash public spending by €60bn - or 3pc of gross domestic product - over five years. But French finance minister Pierre Moscovici rejected the demand for huge tax cuts for companies, saying he did not "think" that this could be done.

According to AFP, he said this was because the Afep's suggestion that the cut in employers' welfare charges could be offset by reduced public spending and an increase in value-added tax would cut into "the purchasing power of the French", who were "clients" of these firms.

11.32 Such is the degree of uncertainty in Greece that the country is considered a riskier investment than Syria .

Ekathimerini reports that an annual survey of finance directors by BDO found that the debt crisis remains one of their key concerns, so much so that Greece is considered a riskier place to invest and set up a business than war-torn Syria. Here's more from the Greek news site:

Only Iran and Iraq are considered more risky than Greece, which also struggles to convince its international creditors that it deserves bailout loans to avoid bankruptcy and a possible euro exit.

"CFOs are becoming increasingly wary of Southern Europe, parts of which they now see as risky as the politically unstable countries of the Middle East," said BDO chief executive Martin Van Roekel.

Greece isn't the only country in the 17-country group that uses the euro in the survey's top 10 riskiest countries to invest in. Spain, which even as the eurozone's No. 4 economy with a long-standing relationship with Latin America, stands at No. 7.

This reluctance by finance directors, particularly from fast-growing economies such as Brazil and China, to invest in Europe's indebted countries goes to the heart of the financial crisis. A major part of these countries' recovery is dependent on the private sector stepping in to fill the investment gap left by cuts in government spending.

11.08 The Greek haircut debate rumbles on. Angela Merkel's spokesman has said that German law would not allow a second debt haircut for Greece while new aid for the country is being discussed. Responding to questions about a new writedown of Greek debt to enable it to stay in the eurozone, Steffen Seibert said:

German budget law, in article 39, says that credits can only be given when it is considered unlikely that there will be a default. We would be tying our own hands with such a measure and it would certainly not be in Greece's interests.

10.55 A job advert posted by the European Central Bank , which is looking to recruit a Greek lawyer-linguist, has provoked interest on Twitter.

Twitter: Fabrizio Goria - Ahem, ready for Grexit? RT @ecb : Job Alert: Greek Lawyer Linguist (50%) Legal Services Frankfurt am Main http://t.co/fBS53VHv

Twitter: Megan Greene - ECB seems to be beefing up its legal dept, particularly with Greek and Spanish speaking lawyers. Ominous.

10.40 Italy has sold €8bn of six-month bills at an auction this morning. Rome's borrowing costs eased to 1.35pc, having paid 1.5pc on the same maturity at a sale at the end of September.

Nicholas Spiro, of Spiro Sovereign Strategy, said that tomorrow's auction of long-dated paper will be a more important test of sentiment. He pointed to "heightened political risk" in Italy, where a threat by former Italian prime minister Silvio Berlusconi to topple premier Mario Monti's government provoked an outcry across the political spectrum on Sunday.

Berlusconi accused the government of "fiscal extortion" and said Mr Monti's policies were creating a "spiralling recession".

Despite that, Mr Spiro noted that the Italian Treasury got all it debt out the door today at a lower yield. "Mr Berlusconi's posturing is no competition for the 'Draghi effect', he said, adding:

The external backdrop is more important in perceptions of Italy's creditworthiness than the domestic one. However, there's a degree of market complacency regarding Italian political risk. The political scene in Italy is becoming more populist and less and less supportive of Mr Monti's economic agenda. Even if an early parliamentary election is averted, the politics of economic reform in Italy are going from bad to worse.

09.59 At 08.40, we mentioned Ambrose's story this morning that the EU-IMF troika of inspectors in Greece has called on European bodies and official creditors to write off a chunk of their loans .

This has rattled Germany and ECB policymaker, Ewald Nowotny, has come out and said the bank could not participate in a public sector writedown of Greek debt as this would amount to indirect state refinancing. He said:

From the ECB's perspective, a debt waiver is not possible as that would correspond to indirect state financing. Hence, the ECB cannot take part in such an operation, which would quasi concern the public sector.

Spain's efforts to rescue its economy by introducing harsh austerity measures has prompted protests.

09.50 Spain is to announce details of its 'bad bank' today. The deputy governor of the Bank of Spain will outline details of the bank, known as SAREB, at 5pm in Madrid. The bank will soak up toxic property assets held by the country's lenders.

09.33 And on that meeting between Mario Monti and Mariano Rajoy , happening in Madrid at lunchtime, Bloomberg writes that the pair will be trying to mask a growing divide over Europe's new bailout strategy. The newswire reports:

While both have jointly argued against extra budget austerity as the price for help from the European Central Bank, their interests diverge when it comes to whether they should ask for assistance together. A go-it-alone strategy by Spain would probably cut Italy’s borrowing costs while leaving Rajoy to weather the political flak of seeking emergency funds.

“Rajoy was probably pressed by Monti in August to accept a pre-emptive” bailout, said Gilles Moec, co-chief European economist at Deutsche Bank AG (Xetra: 514000 - news) in London. “It would have made things so much smoother in Europe and for Italy as well. Rajoy is very much following his own route now.”

European officials are waiting for Spain to trigger a bailout plan unveiled by ECB President Mario Draghi last month and designed to draw a line under the region’s debt crisis.

While Draghi’s plan to buy potentially unlimited quantities of government debt has soothed markets for now, a botched Spanish rescue could still trigger further turmoil.

09.22 Another meeting happening today is between French president, Francois Hollande , and heads of the World Bank and other economic bodies. They will meet later this morning at the Paris headquarters of the OECD to discuss the debt crisis and ways to kickstart growth.

An official told AFP that Hollande had called the meeting "to discuss international economic issues and economic and social recovery ... to spur growth, jobs and competitiveness".

Those attending include World Bank chief Jim Yong Kim, the International Monetary Fund's Christine Lagarde, World Trade Organisation head Pascal Lamy, International Labour Organisation Secretary General Guy Ryder and the OECD's Angel Gurria.

They will all then go on to Berlin to hold talks with Angela Merkel on Tuesday.

Hurricane Sandy has forced markets to close in America.

09.19 Traders are battening down the hatches this morning as Hurricane Sandy forces stock markets to close in America. It will be the first time markets have closed since the September 11 terrorist attacks .

Markets on this side of the Atlantic (Frankfurt: 640218.F - news) are down, with the FTSE 100 (FTSE Index: EO100.FGI - news) off 0.45pc to 5780; the CAC down 0.91pc to 3404; the IBEX fell 0.37pc to 7746 and the DAX (EUREX: FDAX.EX - news) fell 0.45pc to 7198.

09.06 A VAT rise has done little to boost consumer appetite in Spain. Official data out this morning shows Spanish retail sales slipped 10.9pc year-on-year in September. That follows a 1pc rise in sales taxes at the beginning of that month.

08.48 Also over the weekend, Mario Draghi moved to defend his bond-buying plans and also to back Wolfgang Schaeuble's 'super commissioner' plan , which would allow the EU to intervene in countries' budgets and propose changes before they are agreed in parliaments.

Draghi told Spiegel that he supported a plan drawn up by the German finance minister to bolster the power of the EU's economic and monetary affairs commissioner. He said:

I am fully in favour of it. Governments would be wise to seriously consider it. I firmly believe that, in order to restore confidence in the euro area, countries need to transfer part of their sovereignty to the European level .

Draghi also reiterated his defence of the ECB's disputed programme of buying the bonds of debt-wracked countries to drive down their borrowing costs, which has proved unpopular in Germany.

He hit back at the charge the scheme would lead to inflation and stressed his determination to keep price rises in check:

Because of inflation, my family lost a large part of its savings at that time. You can therefore rest assured that I am personally and not only professionally committed to delivering price stability .

The European Central Bank has helpfully uploaded a full version of Draghi's interview, which you can read here .

08.40 Are taxpayer losses on the horizon in Greece? Ambrose Evans (Other OTC: EVAN.PK - news) -Pritchard , the Telegraph's International Business Editor, reports that the 'troika' has called on European bodies and official creditors to write off a chunk of their loans, paving the way for first taxpayer losses since the sovereign debt crisis began .

A draft version of the Troika report obtained by Spiegel magazine said EMU governments and the European Central Bank must accept their share of losses in order to bring Greece’s public debt back to 120pc of GDP by 2020, deemed the sustainable level.

Greece must carry out a further 150 reforms, some involving a drastic loss of sovereignty. Troika payments will be held frozen in a special account under creditor control.

The Troika will have power to raise taxes automatically. There must be new laws to make it easier to fire workers and adjust the minumum wage.

In exchange, Greece should be given two extra years until 2016 to meet budget targets, costing up to €38bn.

German finance minister Wolfgang Schauble said over the weekend that taxpayer "haircuts" were unthinkable. "The question has very little to do with the reality in eurozone member states," he said.

08.35 On the agenda today is a meeting between Mario Monti and his Spanish counterpart, Mariano Rajoy . They are having a chinwag in Madrid at lunchtime.

Meanwhile, the European Central Bank governing council member, and Bundesbank president, Jens Weidmann is speaking in Frankfurt this morning.

On the data front, German inflation figures are out as are Spanish retail sales.

08.30 Good morning and welcome to Monday's Debt Crisis Live.