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Economics, Governance

The Debt Crisis – Live, June 1, 2012

This ‘live’ page is updated every 90 seconds. All I can do, therefore, is display for you a small window into what is being said today in Europe. It looks to me like the panic is beginning to set in. The IMF and the ECB already have said they will not be helping out, but I don’t think people realize quite yet that this time they, indeed, mean what they say. Read what Berlusconi says, and then look at the reason insurers are quitting the scene, plus the negative data for the US – and more. All this news comes at the beginning of a 4-day long, celebratory Jubilee weekend in England! Have a look for yourself to see what I’m talking about. ~J

by 4:44PM BST 01 Jun 2012
The Telegraph, UK

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17.24 Jose Manuel Barroso, the head of the European Commission, has also welcomed Ireland’s Yes vote. In a statement, he said:

QuoteIrish citizens have participated in an intense debate on the Treaty and on what it will mean for them.

This Treaty is a key component of the EU’s response to the current economic crisis. Restoring sustainability to public finances remains an important objective. I know that many voiced their concerns about the need for growth during the campaign. The European Commission believes that stability and growth go together and that we cannot have one without the other. The Commission will continue to build on its agenda for structural reform and targeted investment to boost growth. Earlier this week we published proposals designed to get the EU growing again which we hope will be strongly supported in Ireland.

16.44 Some incendiary comments via Open Europe from Silvio Berlusconi today – not a name which crops up as regularly on the live blog as it used to:

QuoteWe must tell Europe with strength that the ECB has to start printing money. The ECB has to change its mission. I’ll tell you the crazy idea that I have in mind: let’s start printing euros with our national mint.

If Europe doesn’t pay attention to our demands, we should say ‘ciao ciao’ and leave the euro. Leaving the euro wouldn’t be the end of the world. Britain is a solid country and has never joined the euro.

16.31 European trading floors have shut up shop (for two days on the continent, four in the UK). Weak manufacturing and employment data from the eurozone this morning eroded early gains and sank the markets into negative territory, then awful job creation data from the US pushed them even deeper.

The FTSE 100 slumped 1.14pc, the DAX tumbled 3.42pc and the CAC lost 2.21pc.

Angus Campbell, head of market analysis at Capital Spreads, said:

QuoteThe day before a four-day weekend could not have started off any worse when we were hit by a terrible piece of economic data that showed the UK manufacturing sector is shrinking at its fastest pace in three years and then when the US came into the fray they shocked the market with an even worse piece of unemployment data. The combination of the two was enough send the FTSE into a tailspin as investors were unwilling to go into the Jubilee with too much exposure, especially when other markets are open when London is closed Monday and Tuesday.

Across the Atlantic things are looking similarly bleak, with the Dow Jonesnow in negative territory for the year and down 1.71pc on the day, the S&P 500 slipping 2.07pc and the Nasdaq losing 2.01pc.

16.10 EU president Herman Van Rompuy has welcomed Ireland’s vote:

QuoteThe Irish people have given their endorsement and commitment to European integration. This result is an important step towards recovery and stability.

15.43 Official results are now in: 60.3pc voted “yes”. Turnout was over 50pc in the end, despite the gloomy weather.

15.37 We don’t yet have a definite response from the Irish referendum, but Reuters is reporting – having done their sums – that a “yes” result is a certainty:

QuoteWith results declared in 41 out of Ireland’s 43 constituencies, the yes camp has a lead of over 300,000 votes. That is more than the 200,000 or so electors entitled to vote in the 2 constituencies yet to declare, meaning it is now impossible for the ‘no’ camp to overtake the ‘yes’ camp. With counts now completed across much of the country, the fiscal treaty currently has the backing of 60.2 percent of those who voted.

15.17 A second insurer has stopped offering cover to shipments of raw materials and products to Greece. Earlier in the week Euler Hermes had taken the step, and today Atradius followed suit. But Greece’s ESEE retail federation warns it could have “catastrophic” effects:

QuoteInsurance companies contribute significantly to the creation of a climate of security and trust in the market. This development has extremely alarming – if not catastrophic – consequences for trade and domestic industry. Shortages on shelves are already evident, as is the risk of the domestic market collapsing.

Their argument is that Greece could elect an anti-austerity government which would force it out of the euro. The drachma would then plummet against the single currency, making it unlikely that suppliers would get paid and causing a drastic increase in claims.

14.35 The US markets are open and, as predicted, they’ve fallen: first there was poor unemployment and manufacturing data from the eurozone, then overwhelmingly poor jobs data from the US itself.

The Dow Jones is off 1.15pc, the S&P 500 has slipped 0.23pc and the Nasdaq has fallen 1.42pc.

14.11 An update on Ireland’s referendum from Bruno Waterfield. Despite fears of a low turnout it looks like the majority of people cast their votes, and the majority of that majority voted for austerity.

14.04 “Print baby, print.” That’s the prediction from Jason Conibear, market analysis director at Cambridge Mercantile:

QuoteFollowing a morning of weak PMIs, this stupendously poor non-farm payrolls data adds a funereal tone to markets as they slide towards June 17. The global economy is in a seriously bad way and we’re running out of options to turn things around. More QE is now looking highly likely, in both the US and UK. Print baby, print.

13.54 Ranvir Singh, chief executive of RANsquawk, brings us some comment on those US jobs figures:

QuoteThe unemployment rate has risen to 8.2pc, and the pace of job creation has clearly gone way off the boil. Such poor performance caused an immediate fall on the markets, and will lead to increased pressure on the Fed to provide further stimulus. The current Operation Twist programme expires at the end of June, and a further extension now looks highly likely.

With the Eurozone crisis far from resolved and Chinese growth slowing, America’s recovery had provided one rare glimmer of light in the world economy. No longer.

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