Greek reform deal 'unlikely before Easter'

Graeme Wearden (untile 2.30) and Nick Fletcher

from Economics | The Guardian on 2015-03-31 17:00 (#646V)

All the latest economic and financial news, including developments around Greece's debt negotiations, new eurozone unemployment and inflation data, and updated UK growth stats

6.00pm BST

A last day slide has not prevented European markets from recording a positive three monthly performance. The FTSE 100 has climbed 4.93%, its biggest increase since the three months to March 2013, but it was outshone by the FTSEurofirst 300 - up16% over the quarter, its best first quarter since 1998 - and Germany's Dax, up 22%.

The European Central Bank's quantitative easing has been one of the main factors behind the market surge, but the end of the quarter seems to have prompted investors to take profits. Underwhelming eurozone data, continuing worries about Greece, uncertainty over the timing of a US rate rise and another slump in the oil price all combined to take the shine off shares.

4.23pm BST

Greek deposit outflows slowed to a3bn in March, according to a Bloomberg report:

The outflow brings net withdrawals in four months to about a28bn, cutting the deposit total to about a137bn, the lowest in more than 10 years.

ECB policy makers hold a weekly review on Wednesday of their Emergency Liquidity Assistance, which is keeping Greek lenders afloat, according to two people familiar with the matter who asked not to be named because the talks are private. Last week it made more than 1 billion euros available, raising the limit to just over a71bn.

3.46pm BST

Portugal will benefit from its structural reforms and accelerating economic growth in the years ahead, but its large debt burden remains a challenge, ratings agency Moody's has said in its annual analysis of the county:

"We expect Portugal's real economic growth to accelerate to 1.7% and 1.8% in 2015 and 2016, respectively, from 0.9% in 2014, on the back of stronger domestic demand and renewed strength in exports. The implementation of broad structural reforms over the past several years should support a stronger economic growth path, while fiscal consolidation measures will help gradually reduce the country's debt burden. However, Portugal's debt levels still remain very high," says Kathrin Muehlbronner, a vice president -senior credit officer at Moody's.

3.36pm BST

#ECB balance sheet has expanded by a whopping a93bn as banks took a95bn in TLTRO loans and ECB bought govt bonds. pic.twitter.com/A5Imrmpte7

3.05pm BST

US consumers are becoming increasing confident, according to the latest conference board survey.

The March consumer confidence index came in at 101.3, better than the 96 figure expected by economists. This was up from a February figure of 98.8, itself revised up from 96.4.

2.58pm BST

Stock markets have been enjoying a good first quarter, not least thanks to the start (at last) of the European Central Bank's quantitative easing programme.

But March is ending on a downbeat note, with a spate of profit taking hitting Wall Street, which had just opened. The Dow Jones Industrial Average, up 263 points on Monday, is currently down around 119 points.

2.29pm BST

Angela Merkel and Francois Hollande are giving a press conference in Berlin now.

The two leaders say France and Germany have come closer in recent months, as they face terrorism in Paris and the Germanwings disaster together.

#Hollande: In the past few weeks the German-French 'friendship' has become more of a 'brotherhood.'

#Merkel: I won't pin down any dates, programme runs to the end of April, the faster Greece responds, the faster we can help. Work ongoing.

#Merkel: There is more work to do with the institutions after talks tomorrow. Confident that will be done.

2.16pm BST

Time for a recap.

Hopes of an breakthrough between Greece and its creditors before the Easter break are fading today.

"Both sides agreed that the process of fact-finding currently underway in Athens should be intensified."

Goldman Sachs after trip in Athens: The path to a political agreement between #Greece & its international creditors is still unclear #banks

Goldman Sachs: Those we speak with ultimately expect negotiations to continue until summer #Greece

"Greece, as an EU member state, can be a link, a bridge between the West and Russia."

1.32pm BST

Greek Euro parliamentarians are also expressing confidence that an agreement will be found in time, adds our correspondent Helena Smith in Athens.

Drawn-out negotiations were part of the horse-trading to be expected in any negotiation, they say.

"The government has to be tough to reach a workable compromise.

I am actually quite optimistic."

"The Greek side has well-founded positions ... in quite a few instances these positions have been accepted, while in others there are disagreements".

1.23pm BST

Over in Athens, officials are putting on a brave face on the situation, as technical team heads back from Brussels (see earlier post).

"The sessions took place in a very good climate with a mutual desire for an agreement to succeed. Greek representatives had the opportunity to present the list of reforms that the Greek government had prepared at length,"

"Both sides agreed that the process of fact-finding currently underway in Athens should be intensified."

1.20pm BST

Money continues to flow out of shares today, and into safe-havens such as German debt.

The price of Germany's two-year bonds has hit a new all-time high, pushing down the yield (the rate of return on the bond) below -0.25%.

Here we go again. German 2-year bond #yield sets another record low. -0.257%(!) pic.twitter.com/qLOr73vhUn

1.03pm BST

A senior member of Angela Merkel's Conservative bloc has resigned from his parliamentary seat, saying he cannot support the chancellor's handling of the Greek debt crisis.

Peter Gauweiler also quit the vice-presidency of the conservative Christian Social Union (CSU) party, which is allied with Merkel's CDU party.

"I have been publicly pressured to vote in the Bundestag for the exact opposite, on the grounds that I am a vice-president,"

"This is incompatible with my interpretation of the duty of a legislator."

12.24pm BST

Officials in Athens remain optimistic that a deal over Greece's reform plans can be reached soon, according to Greek journalist Efi Egthimiou.

#Greece govt official say BG meeting ended last night, was in a very good mood, there's common will in order a deal 2b reached (@capitalgr )

12.18pm BST

The European Commission insist that negotiations with Greece have certainly not ended permanently.

"The constructive talks are ongoing since Friday, but we are not there yet, so this is why the talks should continue.

The Eurogroup working group will discuss the matter at its next meeting."

Euro-area call on Greece scheduled for tomorrow @ 3pm CET

11.39am BST

The technical negotiations between Greece and its creditors in Brussels have ended, it appears, without agreement on the country's reform plan.

Greek insiders, though, say that progress has been made - although slowly - and talks could restart next week.

Talks between officials from Greece and its EU/IMF lenders in Brussels have ended without a deal on the country's reform plans and may continue next week, three Greek government officials said on Tuesday.

A fourth source close to the talks said the halt in negotiations was not a sign of a rupture but an indication of slow-moving progress in the discussions, which may be continued in Athens on Wednesday.

#BrusselsGroup talks concluded; #Greece delegation returning to Athens, officials say agreemnt v close, even in next 1~2 days, @tvxs reports

11.24am BST

Back to the looming issue of Greece..... and European Council president Donald Tusk has warned that an agreement is unlikely before the Easter break, but could come by the end of April.

Speaking in Madrid, Tusk explained that the technical talks over Greece's economic reforms are very complex, and thus:

I don't foresee any breakthough before Easter.

#Tusk @eucopresident in #Spain: Press conference extract on the reform programme of #Greece http://t.co/PhSM5f8EVr pic.twitter.com/PoV6aQXapC

11.00am BST

Here's my colleague Katie Allen's take on today's UK GDP report:

The UK economy grew faster than expected in the final months of last year, helped by a long-awaited rise in exports, according to new official figures.

In a welcome boost to the Conservatives ahead of May's election, GDP growth for the fourth quarter of 2014 was revised to 0.6%, up from a previous estimate of 0.5% and matching the pace of expansion in the third quarter. For the year as a whole, growth was upgraded to 2.8%, from 2.6%, and was the fastest expansion since 2006.

10.53am BST

The pound has jumped against the euro since this morning's flurry of data was announced.

Sterling is up around one eurocent at a1.377, a one-week high, as traders learn that UK growth was faster than expected in the last quarter.

The euro is now down 11% against the dollar since January and heading for its worst quarter of all time. ECB trade-weighted a down 8% in Q1

10.44am BST

The chancellor didn't waste any time reacting to the new growth figures:

Hat trick of good news just out from ONS: GDP revised up, consumer confidence up, living standards up. #LongTermEconomicPlan working

GDP revised upwards from 2.6% to 2.8% for 2014. Confirms UK as clearly fastest growing major advanced economy

10.37am BST

Andrew Sentance, senior economic adviser at PwC, suggests that the UK might be the fastest growing advanced economy this year, as in 2014.

Here's his take on the new growth data:

"It is not surprising to see GDP being revised up for Q4 and for 2014 as a whole. A whole raft of other data points to a strong year for the British economy - including business surveys, car sales, retail sales and falling unemployment.

"The other encouraging thing about these figures is that they show that growth is being led by investment and exports - both of which rose by over 5% year-on-year in the final quarter of last year. Exports of services are also growing at over 5% with export-oriented services industries at the leading edge of the UK economic recovery. That is supported by the strong growth we are seeing in professional and business services - the strongest growing sector in the UK economy last year.

10.25am BST

Kit Juckes of French bank Socii(C)ti(C) Gi(C)ni(C)rale is alarmed to see Britain's current account deficit hitting a record high, at 5.5% of GDP.

He writes:

Trade balance improved, but the investment income balance didn't. The regional current account deficit with the EU (28.3bn) is particularly ugly.

It's going to take years to turn these trend round, which are born of low investment returns in Europe vs the UK and the long-term erosion of the overall net foreign asset position of the UK. Needless to say, such a big balance of payments hole is unhelpful at a time of political uncertainty, reflective of a country living beyond its means and really scary if the UK, or global economies were to slow sharply.....

Annual UK Current Account (percentage of GDP) 1948-2014. pic.twitter.com/aUABFFvG2h

10.20am BST

Here's some early expert reaction to today's UK GDP report

Real household disposable income per head, consumption per head and GDP per head now all above where they were at last election

Looks like real net disposable income per head is 0.2% up on Q2 2010, which is good, though other real income measures a bit of a way to go.

Per capita GDP, most simple proxy for living standards, still below crisis peak, but well above 2010 levels: pic.twitter.com/fa7pN2gpHa

10.16am BST

Here's a great chart showing unemployment in some of the eurozone's larger economies over the last 25 years.

EZ unemployment rates pic.twitter.com/vnfti1hhqe

10.11am BST

The Eurozone's jobless rate was 11.3% in February, the lowest since May 2012 -- but also worse than expected.

Eurostat reports that unemployment across the euro area fell from 11.4% in January -- having revised up its previous estimate of 11.2%.

Eurozone unemployment at 11.3% in February: Greece: 26.0% Spain: 23.2% Italy: 12.7% France: 11.6% Germany: 4.8% http://t.co/llSUmcTYDe

10.03am BST

Just in: Prices across the eurozone fell by 0.1% this month, up from -0.3% in February.

Once again, falling energy prices dragged down the cost of living, while service sector and food costs are rising.

Services is expected to have the highest annual rate in March (1.0%, compared with 1.2% in February), followed by food, alcohol & tobacco (0.6%, compared with 0.5% in February), non-energy industrial goods (-0.1%, stable compared with February) and energy (-5.8%, compared with -7.9% in February).

Euro area annual inflation up to -0.1% in March 2015 - flash estimate from #Eurostat http://t.co/g8SLdY3BGS

9.59am BST

Some political context:

Past decade or so, UK quarterly economic growth: pic.twitter.com/tVHKegsmer

9.59am BST

Nice milestone RTRS-UK 2014 CURRENT ACCOUNT BALANCE 5.5 PCT OF GDP, LARGEST DEFICIT AS A PERCENTAGE OF GDP SINCE RECORDS BEGAN IN 1948

9.58am BST

Britain's current account is not for the faint-hearted.

The deficit in Britain's trade and overseas investments has hit 5.5% of GDP, which is the largest deficit since records began in 1948.

Current account deficits don't matter until they matter. And then they can matter a lot...

9.51am BST

One note of caution, the UK economy is still effectively smaller than before the financial crisis struck, once you adjust for population changes.

9.47am BST

The Conservative Party must be cheering the news that growth was a little faster than previously thought in the last quarter:

UK growth upward revision a timely boost for Cameron ahead of Thursdays #leadersdebate #GE2015

9.46am BST

Britain's service sector led the way in the last quarter, with growth of 0.9%.

Industrial production rose by 0.2%, while construction output shrank by 2.2%.

9.41am BST

9.34am BST

Breaking: The UK economy grew by 0.6% in the last three months of 2014, higher than the 0.5% previously estimated.

The Office for National Statistics has also revised up its estimate for year-on-year GDP growth to 3.0%, up from 2.7%.

More good news! UK GDP was estimated to have increased by 2.8% in 2014 (revised up 0.2%) #GBP

9.28am BST

European stock markets are on track for their strongest quarterly growth in many years, despite Greece's debt problems.

The launch of the ECB's quantitative easing programme has helped fuel a remarkable stock market rally. Germany's DAX has surged by 23% during 2015, which we think is the biggest quarterly jump since 2003.

Europe stocks climb, head for best first-quarter gain since '98

This is a sentiment driven market and when you see a record 1.14 million new A-share accounts last week you know that rampant speculation is underway.

Of top 5 equity markets, only 1 is European (and it's not in eurozone) pic.twitter.com/TbiRy4v7eF http://t.co/x7WnVZIFpm pic.twitter.com/6heogPcKib

9.15am BST

Hopes that Italy's economy was healing have just taken a knock.

Italy's confidence up, Italy's unemployment up as well. The economy has stopped contracting, but still losing ground vis-a-vis its EU peers

9.06am BST

Just in: Germany's unemployment rate has hit a new all-time low of 6.4%, as Europe's largest economy continues to recover.

*GERMAN UNEMPLOYMENT RATE FELL TO RECORD LOW OF 6.4% IN MARCH *GERMAN UNEMPLOYMENT FELL 15,000 IN MARCH; EST. 12,000 DROP

8.44am BST

Jeremy Cook, chief economist at World First, confirms that the lack of progress over Greece's economic reforms is hurting the euro today.

He writes:

Last night showed us that the Greek government and the European architects of Greece's bailout program remain very far apart on what needs to be, and can be done for the former's economy.

On every agenda item of what the austerity and bailout program needs, Greece disagrees. The program calls for a VAT increase on the tourism sector, the Greek government has said no. Pension reform has been shot down and public sector wages will remain protected.

8.31am BST

Veteran investor Mark Mobius has offered Greece some much-needed solidarity today.

Mobius, who runs Templeton's emerging markets fund, told Greek financial daily Naftemporik that:

"Greece will stay in the euro zone, there is no issue.....The stock market is cheap and we are buyers."

Templeton's #MarkMobius tells the Greek press "Greece will stay in the euro zone. The stock market is cheap and we are buyers."

8.21am BST

Good news for the town of Swindon this morning - Japanese automaker Honda has announced a 200m upgrade to its car plant.

That means Swindon will be ready to produce the next-generation five-door Civic, calming fears over the factory's future.

8.17am BST

In the UK, Kingfisher has announced it will close around 60 B&Q stores as new CEO Vi(C)ronique Laury implements her plans for the company.

Laury is speaking to reporters now, saying she hopes the impact on jobs will be 'neutral'; some workers can be redeployed, with Kingfisher also opening more Screwfix outlets.

"In the short term, whilst we remain encouraged by the improving economic backdrop in the UK, we remain cautious on the outlook for France, our biggest market."

Kingfisher says doing notably better in UK than in France. But it's closing 60 stores in the UK...

8.04am BST

Russia's TASS news agency is running quotes from Alexis Tsipras, saying that Greece opposes the sanctions imposed on Moscow over the Ukraine conflict.

Bloomberg have picked them up too:

*GREEK PM TSIPRAS SAYS COUNTRY OPPOSES RUSSIA SANCTIONS: TASS

#Tsipras says #Greece can be bridge between Russia, West: Tass

If the Tass report is accurate and Tsipras just broke rank with EU, might hint he sees nothing left to lose, i.e. no deal on bailout

7.58am BST

The euro is likely to keep falling, thanks to Greece's debt problems and the ECB's new stimulus package.

That's according to Shusuke Yamada, a Tokyo-based currency strategist at Bank of America Merrill Lynch, who told Bloomberg that:

"Markets are becoming more sensitive to the Greek issue.

In addition, the European Central Bank's quantitative easing is keeping downward pressure on the euro. Fundamentals point to euro selling."

7.45am BST

The euro has fallen back this morning after Greece failed to agree a package of economic reforms with its lenders on Monday, as hoped.

The single currency has fallen half a cent against the US dollar, hitting $1.078, as traders reacted to last night's events in the Athens parliament, and the prospect of more deadlock ahead.

Ready to rumble: EURUSD breaks below 1.0800. Now Euro trades at $1.0789. pic.twitter.com/3KsDLBvBH0

It is true that we are seeking an honest compromise with our lenders but don't expect an unconditional agreement from us."

ND's Samaras tells Greek govt: 'We will support you, but not on anything. If you push the country back to recession and deficits, we won't'

Samaras says Tsipras imagined he'd get money without terms but ended up getting terms without money #Greece

"The brinkmanship continues as both sides continue to stare at each other over the political void. Despite Greece hurtling towards bankruptcy, an agreement continues to evade."

The euro is under renewed pressure on persistent concerns about Greece.

7.43am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

There's a lot of talk at present that Europe's economy is healing, and we'll get a proper healthcheck today with new inflation data for this month, and the February unemployment report, both at 10am BST.

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