Greek finance minister hits back at IMF as bailout row deepens -as it happened
Euclid Tsakalotos says Fund is 'economising on the truth" after it insisted it wasn't demanding more austerity to make Greek bailout targets credible.
- Tsakalotos: Greece being boxed into a corner
- IMF had insisted it wasn't demanding more austerity
- WSJ: Early elections in 2017?
Earlier:
- UK inflation hits 1.2%, the highest since October 2014
- Experts: Wake-up call for families
- PwC: Weak pound is now hitting us
5.55pm GMT
With the Dow Jones Industrial Average hovering around 19,900 for the first time and Unicredit's move to shore up its balance sheet supporting banking shares, European markets are on the rise again. Investors have turned positive ahead of the Federal Reserve's expected interest rate increase on Wednesday, as the Santa rally continues. the final scores showed:
5.46pm GMT
Back with Greek prime minister Alexis Tsipras and his visit to the island of Nisyros:
Wonder whether Alexis Tsipras intended to make a point, attacking "foolish technocrats" of the IMF while standing on a volcano - Nisyros.
4.34pm GMT
The continuing rise in the US stock market ahead of Wednesday's Federal Reserve interest rate decision continues to drag Europe higher. Chris Beauchamp, chief market analyst at IG, said:
There seems no stopping the Dow, as the headline index of US stocks lurches towards the 20,000 mark. The rally was supposed to start from the middle of the month, but with the Fed looming tomorrow, everyone seems keen to jam the index higher now, regardless of the consequences. In reality, we'll probably look back on 2016 as the year when the Santa rally began in November; no one really thought Santa would be a US businessman and TV personality with a penchant for outrageous statements, but in this seventh year of the post-financial crisis rally, we really should be prepared for anything.
Perhaps the post-Fed environment will be different, but those expecting a big slump before the end of the year should be prepared for disappointment (and frankly, they'd spoil the festive mood anyway). Instead, the next two weeks will most likely see the market drift, before the real work begins anew in January.
4.31pm GMT
Meanwhile Greek prime minister Alexis Tsipras has further racheted up the pressure by announcing economic relief measures for Greeks living on far flung Aegean isles. Helena Smith reports:
Islands which have borne the brunt of Greece's refugee crisis will henceforth be exempt from a special VAT tax demanded by creditors keeping the country afloat, said Tsipras making the announcement during a flying visit to one of the isles. "Citizens on these islands must feel sure that the state is looking after them," the leader said speaking from the tiny island of Nisyros this afternoon. "They are shouldering the burden of reception and hospitality and, ultimately, the entire burden of Europe."
The prime minister, who has already raised hackles announcing a one-off Christmas bonus for pensioners surviving on a800 or less, said his leftist-led government would not buckle under pressure to rescind the measure. The supplement, he insisted, came from money saved.
"We will keep to the programme completely but we are not going to ask anyone about giving surplus money to those most in need."
3.55pm GMT
Emergency funding to Greek financial institutions from the central bank continues to fall, according to new figures.
Assistance from the Bank of Greece fell by 2.8% or a1.3bn in November to a45bn compared to the previous month.
2.48pm GMT
Ahead of the US rate decision on Wednesday - with the first hike in a year widely expected - Wall Street is on the front foot again.
The Dow Jones Industrial Average has hit a new intra-day high of 19,915, although it has come off its best level to sit at 19901, up 105 points.
2.44pm GMT
Back with Greece and the IMF's insistence it was not demanding more austerity. The eurozone appears very unhappy at the fund's comments, and called for the discussions over Greece not to be aired in public. Reuters reports:
Euro zone officials hit back at the International Monetary Fund on Tuesday for publishing an article on the way forward for Greece's fiscal and economic policy that thrust into the open a row between the lenders over Athens' bailout.
"The European institutions were surprised that the IMF staff published a blog post on the ongoing negotiations with the Greek government as new talks in Athens are starting with the aim of concluding the second review," said a spokesman for the euro zone bailout fund, the European Stability Mechanism.
2.01pm GMT
After its latest contribution to the Greek debt crisis, the IMF has also issued its latest thoughts on Austria. In its latest assessment of the country's situation it said:
Austria is stable and prosperous. Nevertheless, it can still improve its economic performance to ensure a continuing rise in incomes and employment within a stable macroeconomic environment. To this end, a comprehensive package of structural and fiscal reforms can raise low GDP growth and ensure the steady decline of public debt in the long term. Financial system stability needs to be maintained in a challenging environment.
Austria's recovery has strengthened. In 2016, we project growth at 1.4 percent, an improvement over the average growth of 0.6 percent in 2012-15. Growth has been broad based, driven by private consumption supported by income tax reductions, a recovery in investment, and higher public consumption due to spending on refugees. At 1.4 percent y/y in October, inflation remains low, but is above the Euro Area average (0.5 percent). Employment growth has picked up in 2016, catching up with the rising labor supply driven by migration and higher labor force participation. As a result, unemployment has stabilized recently, although it remains elevated relative to historical levels...
1.56pm GMT
Time for a quick look at the European markets.
The moves by Italian bank Unicredit to bolster its balance sheet have lifted the banking sector, while after the excitement of the Murdoch bid for Sky, Italian broadcaster Mediaset is also in demand after France's Vivendi said it planned to raise its 3% stake to as much as 20%.
1.40pm GMT
Shareholders in the Bank of Cyprus have overwhelmingly backed plans for a London listing.
Some 99.74% have approved the move, which will see the bank keep its listing in Cyprus but abandon its quote on the Athens stock exchange. The bank said the standard listing in London was "a key milestone" in its recovery since 2013.
1.14pm GMT
Robin Bew of the Economist Intelligence Unit, and Manos Giakoumis of analyst service Macropolis both sound pessimistic about the Greek bailout:
#Eurozone and #IMF go head to head over #Greece with IMF saying fiscal targets too demanding. Thinks Europe is just pretending will be OK
Flare-up between Athens and #IMF fuels doubts over review breakthrough https://t.co/i0K5ME3brr #Greece #politics
12.49pm GMT
Back in the UK, drivers for the Argos retail chain have called a 72-hour strike in a row over holiday pay.
The industrial action could make it harder to get presents from Argos in time for Christmas:
Related: Argos drivers to strike before Christmas
12.47pm GMT
Our friends at The Telegraph have published a handy Q&A on the Greek bailout saga, as relations between the various parties appear to deteriorate.
Here's a flavour:
Right now Greece and the EU have lined up an $86bn bailout, hoping that the IMF will join in. Germany in particular is keen to have the IMF's seal of approval, as it is seen as a sign that the deal is rigorous.
Much of the discussion currently focuses on the degree of fiscal tightening that can take place, as the IMF fears the EU is being too tough, while the EU thinks the IMF is too pessimistic over what can be achieved.
The IMF's row over Greece shows the bailout plan is fraying https://t.co/yr0XZAYHV1
12.29pm GMT
This new war of words between Greece and the IMF suggests that the Greek debt crisis, rarely dormant for long, is flaring back into life again.
The Wall Street Journal suggests today that early elections are a possibility, if Athens and its creditors cannot agree on what measure to take to ensure Greece is complying with its bailout.
The embattled prime minister Alexis Tsipras, who is due to hold talks with the leaders of Germany and France in the coming days, surprised Greeks and creditors last week with fiscal gifts that were widely seen as preparing the option of elections. He promised 1.6 million pensioners a Christmas bonus of between a300 ($319) and a800. He also suspended a planned increase in sales tax for Aegean islands that have received large numbers of Middle-East refugees. EU officials said they would study whether Mr. Tsipras's promises are compatible with Greece's bailout commitments.
Snap elections next year would lead to Syriza's defeat, party officials expect, and a new government led by the conservative New Democracy party. Syriza officials say their goal in possible elections would be to avoid being crushed-which they view as a danger if they hold on too long without concessions from creditors.
Greek drama could return in 2017 as Syriza runs out of road - IMF & German stance squeeze Tsipras https://t.co/GEIEtDK5UW w @nstamouli @WSJ
12.25pm GMT
Gabriel Sterne of Oxford Economics flags up how Greece's efforts to boost tax receipts have backfired spectacularly since its first bailout:
Deeply depressing. Not sure IMF right to pin blame on Greece. Bad program design just as culpable.https://t.co/El2H7qvgss pic.twitter.com/1g7k1l440O
12.17pm GMT
The European Commission has also been defending itself from the IMF's criticism of the Greek bailout:
"The European institutions consider that the policies of the ESM program are sound": @EU_Commission's @A_Breidthardt re #IMF blog on #Greece pic.twitter.com/gM9y0irvqj
Not very constructive IMF 's position say EU sources after IMF' s blog on #Greece
11.28am GMT
Breaking away from UK inflation, because Greece's finance minister has got in touch with us.
"In effect it is arguing for Greek pensioners and poorer wage earners to make further economies, while it economizes on the truth."
"Greece cannot modernize its economy by boosting funding for infrastructure and well-targeted social programs while exempting more than half of households from income taxes and paying public pensions at the level of the richest European countries."
"Greek expenditure on both pensions and other subsidies is about 70% of the EU average and 52% of that of Germany. Is it likely when around 45% of pensioners receive monthly payments below the poverty line of a665, and almost four million people, that is more than a third of the population, have been classed as being at risk of poverty or social exclusion, that Greece's main problem is that pensions and tax credit allowances are too generous?
At the same time, the only reason why more people are exempt from paying income tax is that fewer people have decent incomes. So the IMF that is supposedly rethinking the relationship between development and inequality, and is rightly emphasizing the importance of inclusive growth, seems to be unaware that further reducing pensions and the tax credit allowance cannot but fail to increase both inequality and social exclusion. But at least then the numbers will add up."
"Some member states were supporting the position that the 3.5% figure should be preserved for ten years; others were working towards a compromise of five years. The Greek position was that neither would work for Greece and we suggested the compromise of going down immediately to 2.5%, but agreeing with the institutions that the one percentage point reduction from 3.5% should be spent entirely on reducing taxes on small and medium sized enterprises, thus enhancing competitiveness and growth. What was the IMF response? The IMF argued within the Eurogroup that: "It doesn't matter to us whether it is three, five or ten years of high surpluses, we will still need to see more measures to make the numbers add up since we don't think that 3.5% is achievable without such measures". It did not bother to address our compromise suggestion.
So Greece has not "agreed" to anything yet. However, it is under intense pressure from its creditors to do so. The IMF has done little to alleviate that pressure. Instead of having the courage of its convictions and helping us reduce the size and/or the timespan of the surpluses, it is putting all the pressure on us to specify new austerity measures for 2019 and beyond."
Govt Spokesman: Deal with bailout lenders could be in 'first few days of January' - Athens still wants IMF in Program#Greece #Bailout pic.twitter.com/C3yWKcHcD9
11.13am GMT
Rebecca Long-Bailey MP, Labour's Shadow Chief Secretary to the Treasury, is concerned that the cost of living in Britain jumped in November
"This rise in inflation, following many independent forecasts expecting it to go up further while earnings are set to fall back in coming years, only continues to underline why Labour have been calling on the government to change direction and reverse their cuts to in-work benefits such as Universal Credit, and disabled people on ESA.
11.02am GMT
Nick Dixon, Investment Director at investment group Aegon, believes rising inflation will prompt the Bank of England to raise interest rates in 2017:
"Low interest rates are reaching the end of the road. Inflation is now on the rise and sentiment amongst monetary policy makers is hardening in the UK and US. With expectations that UK inflation will exceed its 2% target in early 2017, we can expect monetary belt tightening during the next 6-9 months.
Whilst savers will cheer signals that interest rates will follow suit, mortgage holders are already starting to see the best rates disappear and may want to speak to their adviser about fixing rates quicker than the Bank can make its move."
10.37am GMT
You can see the full inflation report here.
10.34am GMT
Andrew Sentance, PwC's chief economist, says Britain is now feeling the effect of the plunge in the pound since the Brexit vote.
And further price rises are on the horizon, he warns:
"Inflation is picking up as expected - to its highest level for over two years. Prices in the shops and on the garage forecourt are starting to reflect the big drop in sterling since the EU referendum result. Clothing prices have risen by over 4% since June and motor fuel prices are 7.4% up on a year ago.
"There is more inflation coming through the pipeline. The prices of UK manufactures are already 2.3% up on a year ago and the cost of raw materials, energy and other inputs into the manufacturing process are nearly 13% higher than a year ago. We should therefore expect inflation to rise to close to 3% by the end of next year, which will squeeze consumer spending and slow economic growth. We are leaving behind the very favourable world of near-zero inflation which has benefited consumers over the past couple of years.
UK CPI inflation up to 1.2%, with more coming through the pipeline from weak . Factory gate prices up 2.3% and manuf input prices +12.9%!
10.13am GMT
Digging into the inflation report, the ONS points out that some tech firms have been hiking their price because of the weak pound.
Here's the key section:
Prices, overall, increased by 0.5% between October and November 2016, compared with a negligible change a year ago. The upward effect came principally from data processing equipment where prices rose this year but fell a year ago, particularly for peripherals. There have been reports from some IT equipment manufacturers over the last few months of prices being affected by changes in the exchange rate with products generally being priced in US dollars.
the upward effect came mainly from clothing (in particular women's and men's outerwear) for which prices, overall, increased by 1.6% between October and November this year, compared with a fall of 0.1% between the same 2 months a year ago.
Prices, overall, increased by 0.5% between October and November 2016, compared with a fall of 0.2% a year ago. Within this group, the largest contribution to the change in the rate came from prices for furniture and furnishings, particularly leather settees. There was also an upward contribution from non-durable household goods such as household cleaner cream and bleach.
The upward contribution to the change in the rate came from motor fuels, with petrol prices rising by 1.6 pence per litre between October and November this year but falling by 1.5 pence per litre a year ago. Similarly diesel prices rose by 2.0 pence this year but fell by 0.6 pence a year ago. Fuel prices tend to reflect movements in oil prices and part of the increase in oil prices during 2016 to date can be explained by depreciation of sterling against the US dollar.
Prices, overall, increased by 0.4% this year compared with 0.1% a year ago leading to a small upward contribution to the change in the rate. The main upward effects came from: bread and cereal products such as garlic bread and pizza; and milk, cheese and eggs, particularly milk and yoghurt/fromage frais. These were partly offset by a small downward effect from confectionery.
10.02am GMT
The ONS's head of inflation Mike Prestwood, says:
"November's slight rally in the value of sterling eased the inflationary pressure on businesses importing raw materials but consumer prices continued to edge upwards, due mainly to the rising cost of clothing and fuel."
10.00am GMT
Paul Sirani, chief market analyst at city firmi Xtrade, also fears that British households face difficult times:
"Inflation has soared to a 25-month high as Brexit uncertainties and sterling's devaluation continue to filter through the UK economy.
"These latest figures are expected to limit the buoyant consumer spending which has accounted for the resilience in growth since June's referendum. Meanwhile, the increasing weakness of the Brexit-hit pound is likely to provide households with a painful few months as rising prices take their toll.
9.58am GMT
The pound has risen almost half a cent since the inflation data was released, to $1.2718.
9.57am GMT
Tom Stevenson, investment director for personal investing at Fidelity International, warns that inflation appears to be heading over the Bank of England's 2% target:
Higher inflation means the pound in your pocket won't stretch as far and many will be thinking how they can make their money work harder. There is little evidence so far that rising inflation will translate into much higher interest rates, so anyone with savings still sitting in cash will struggle to generate real returns. To stand any chance of achieving an inflation-adjusted real return they'll need to look further up the risk spectrum, investing in bonds issued by companies rather than the Government or moving into stocks and shares.
9.54am GMT
The jump in inflation last month may show that the slump in the pound since the EU referendum is now hitting families.
Hannah Maundrell of money.co.uk says it's a 'wake-up call':
"Household finances have been protected against the backlash of Brexit so far but today's higher than expected figures show it's finally starting to bite. This is the start of things to come and next year we'll be battling rising prices head on. This will get worse mid-way through the year as retailer's forward pricing starts to run out and we have to foot the bill for the real cost of purchases.
"This is an important wake up call and one we should all bear in mind as we head towards the most expensive time of the year. Blow your budget on Christmas now and you could be setting yourself up for a very difficult year ahead. There's no better argument for keeping tabs on your festive spending and only celebrating with cash you can afford to part with."
Consumer goods price inflation is positive for the first time since October 2014. pic.twitter.com/8cH7S6M0ZX
UK inflation 1.2% in November, highest in 2+ years. Factory gate prices highest since 2012.
Inflation rising, wages squeeze to intensify.
9.44am GMT
Britain's 'core consumer prices index' rate, which strips out volatile items like energy and food, has risen to 1.4%.
That suggests that underlying price pressures are building.
Headline UK CPI at 1.2%, perhaps more interestingly core CPI at 1.4%.
9.43am GMT
At 1.2%, Britain's inflation rate is heading back towards the Bank of England's 2% target:
9.35am GMT
Higher petrol and diesel costs, and a fall in food price deflation, drove UK inflation up last month.
The Office for National Statistics says:
Rises in the prices of clothing, motor fuels and a variety of recreational and cultural goods and services, most notably data processing equipment, were the main contributors to the increase in the rate.
These upward pressures were partially offset by falls in air and sea fares.
9.30am GMT
Breaking! Britain's inflation rate has jumped to 1.2% in November, up from 0.9% in October.
That's the highest level since October 2014, and more than economists had expected.
9.22am GMT
Milan's stock market is giving Unicredit's plan a thumbs-up - shares in the bank are now up 7%.
9.11am GMT
The pound is flat this morning, at $1.2685 against the US dollar, but that could change once November's inflation figures hit the wires at 9.30am.
Kathleen Brooks of City Index explains what traders will be looking for:
CPI data out later this morning is worth watching for a couple of reasons, it is expected to rise to 1.1%, which would be the fastest pace of price growth for 2 years, this comes at an interesting time for sterling as the market ponders another leg higher in its recovery.
Prices are expected to resume their upward trend after a 0.1% decline in October. Fuel price increases and a reduction in food price deflation is likely to drive CPI higher in November. The one-off factors that weighed on October prices, such as the large drop in clothing sales, are unlikely to be repeated in November.
Rising prices could also raise questions about the future for UK consumption, a key pillar of GDP growth. Retail sales have held up well in the last few months as consumers brush off Brexit-uncertainty.
9.03am GMT
London's financial markets are rather subdued ahead of November's inflation data, in just under 30 minutes.
Defensive stocks, such as consumer good firms, are in favour.
Having traded lower at 6,877.52 this morning, the FTSE100 has rebounded into positive territory, now up +14.88 points at 6,906.30 (+0.22%)
8.49am GMT
Italian bank shares are rising, as Unicredit's turnaround plan creates a little more confidence that the sector can get over its problems.
Shares in Monte dei Paschi have gained 1.4%, as traders watch to see if it can get its own cash call, of a5bn, out of the door soon.
8.39am GMT
UniCredit's revamp is a key moment in Italy's bank crisis, says Reuters columnist Neil Unmack:
A cost cull, bad debt purge and mega-cash call mean the country's biggest bank should soon be less of a worry. With Rome facing a volatile 2017, it's just as well.
[CEO Jean-Pierre] Mustier's plan is robust enough, and healthier bigger lenders could mean more options for smaller ones. Assuming Europe can muddle through, UniCredit shouldn't have to.
UniCredit detox is key moment in Italy bank reboot, writes @Unmack1 https://t.co/fzC67JokCw
8.33am GMT
After falling 4% at the start of trading, Unicredit shares are now up almost 3% as investors digest its restructuring plan.
8.28am GMT
Unicredit's rescue plan also involves purging itself of almost a18 of bad debt.
It plans to bundle these non-performing loans into new securities that will be sold off to investors.
8.20am GMT
Banking analyst Benjie Creelan-Sandford of Jefferies says Unicredit has "gone aggressive", with the restructuring plan announced today.
Creelan-Sandford explains:
Unicredit has announced a a a13bn rights issue, much of which will be consumed by writedowns and restructuring charges.
The upfront bill of a a13bn is clearly large but as we have highlighted previously we think an aggressive balance sheet clean-up paves the way for a more substantial re-rating.
8.07am GMT
Speaking of banks... Britain's government has just sold another tranche of Lloyds Banking Group shares.
This takes its stake below 7% - eight years after Lloyds (and Royal Bank of Scotland) were bailed out.
So taxpayer stake in Lloyds falls below 7%: RBS stake still 73%
8.05am GMT
The race to fend off a crisis in Italy's banking sector has taken a decisive shift this morning, as the country's biggest lender unveiled a wide-ranging restructuring plan.
Unicredit will raise a13bn by issuing new shares to investors, clean up the bad debts on its balance sheet and attempt to boost long-term productivity.
"We are taking decisive actions to deal with our NPE legacy issues to improve and support recurring future profitability to become one of Europe's most attractive banks."
Ridiculous! #UniCredit plans a13bn stock sale. The amount equals to almost the entire current market cap. https://t.co/PFYxh5SZMQ pic.twitter.com/z8EqdcGd0w
So UniCredit bites the bullet before being pushed by Monti Pashi then. Is that a good or bad sign?
7.47am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Is inflation back? We'll find out at 9.30am GMT when new cost of living data is released.
Last month's unexpected dip back below 1% y/y on the headline CPI measure had a lot to do with the negative contribution from the clothing and footwear sector. The arithmetic suggests the hurdle is low for somewhat of a reversal this month.
Furthermore, it looks likely that petrol prices will also add to the headline annual inflation rate.
Related: UK petrol prices could rise by 3p a litre after Opec oil deal
It is not the IMF that is demanding more austerity, either now or as a means to lower the need for debt relief over the medium-term.
Or to be more direct, if Greece agrees with its European partners on ambitious fiscal targets, don't criticize the IMF for being the ones insisting on austerity when we ask to see the measures required to make such targets credible.
The IMF is not asking Greece for more austerity. Read the Obstfeld/Thomsen blog just published https://t.co/f91jbcUgcY
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