1.35pm: Nikos Nikolopoulos’s resignation means that the current Greek government has suffered three resignations since Antonis Samaras was sworn in as prime minister on 20 June.
Vassilis Rapanos resigned as finance minister on 25 June after being hospitalised, swiftly followed by deputy merchant marine minister Giorgos Vernikos, who faced conflict of interest charges over his ownership of an offshore company.
Ministerial resignations have been a regular feature of Greek political life since the financial crisis began. The final days of George Papandreou’s administration was pockmarked by defections, which all-but eliminated his majority by November 2011 (when he was succeeded by technocrat Lucas Papademos).
1.09pm: Nikos Nikolopoulos has released an official statement explaining why he resigned as deputy labour minister today.
As suspected (see 12.17pm), Nikolopoulos is disapppointed by the way the new Greek government has approached negotiations with its international lenders.
He said:
The sole reason of my resignation is my personal conviction that the issue of renegotiating with the troika, as well as the correction of significant distortions in labour, pension, social security and welfare issues, should have been emphatically put on the table from the start.
Samaras’s approach to the negotiations with the Troika has been to reiterate his commitments to Greece’s financial targets, while pushing for changes to some of the most punishing elements of the plan. Nikolopoulos, though, argues that he’s not taken a firm enough line.
12.17pm: There are reports from Athens in the last few minutes that deputy labour minister Nikos Nikolopoulos has resigned.
It appears that Nikolopoulos has quit in protest at Antonis Samaras’s refusal to renegotiate changes to Greek labour laws with the Troika. That’s an early blow the government, just hours after winning its vote of confidence.
More to follow.
11.43am: Portugal’s banks borrowed a record amount from the European Central Bank last month, as the country remained locked out of the money markets.
The Bank of Portugal reported this morning that its commercial banks have now borrowed a total of €60.5bn from the ECB, up 3% from May.
Portugal’s reliance on the ECB actually fell in April, following the central bank’s second huge injection of liquidity. But it rose in May, as fears grew that the country may need a second bailout when the €78bn package agreed in April 2011 expires.
11.24am: From Brussels, my colleague Ian Traynor explains what has gone wrong in Europe since the ‘breakthrough summit’ of 28th and 29th June:
The summit resolved to break the invidious link between failing banks and weak sovereigns by agreeing to use eurozone bailout funds to recapitalise banks directly and not via governments, to avoid pushing up debt levels.
But since the summit, creditor eurozone governments have backtracked on the pledges amid furious debate and rancour over what was actually agreed and how the accord will be implemented.
While the Germans and other north Europeans insist that direct bank injections can only be contemplated once a new regime of eurozone banking supervision is in place (likely to take a year), senior Eurogroup officials signalled that even in the event of bailout funds going straight to banks, the host country would still be burdened.
Were the main bailout fund, the European Stability Mechanism, to take equity in troubled banks, the host government would need to underwrite the risk and be liable if the bank went bust, the officials involved in preparing tonight’s meeting said.
“The ESM is able to take an equity share in a bank but only against full sovereign guarantees. It remains the risk of the sovereign. There’s some degree of mystification going on here,” said a senior official.
As if to back up that point, we’re getting newsflashes from the European Commission’s daily briefing in Brussels, that sovereign guarantees may not be needed, but the details ‘remain to be negotiated’.
Developing….
Ian also says there is speculation in the corridors of power that fresh emergency talks may be needed, especially if tonight’s eurogroup meeting goes badly:
The ministers are expected to try to reach a “political understanding” on a memorandum of understanding between the eurozone and Madrid to be finalised later this month. In Brussels there is talk of new emergency Eurogroup talks around July 20 or even an extraordinary summit. Or ministers could confer by video-conference instead before the August holiday.
11.15am: European stock markets are mostly in red this morning, with Spain showing the biggest losses. Here’s a round-up:
FTSE 100: down 26 points at 5636, – 0.45%
German DAX: down 15 points at 6394, -0.25%
French CAC: down 17 points at 3151, -0.5%
Spanish IBEX: down 106 points at 6632, -1.5%
Italian FTSE MIB: down 5 points at 13727, -0.1%.
Traders in the City are in a downbeat mood, with Chris Beauchamp of IG Index blaming “the US economy and the interminable eurozone crisis”:
It might be a new week, but the same old problems remain. Friday’s weaker non-farm payrolls report saw only 80,000 jobs added to the US economy in June, below expectations, adding to the perception of a slowing US economy. Meanwhile, eurozone finance ministers meet in Brussels, ostensibly to build on the decisions announced at the summit two weeks ago….
A light economic calendar means that markets will hang on every word and rumour that emerges from the eurozone meeting today, but ultimately the lack of real progress means that the post-summit euphoria will continue to fade.
11.08am: Investors paid Germany for the chance to own its short-term debt this morning.
Germany sold €3.29bn of six-month bills at a record low yield of -0.034%. A minus yield means buyers effectively paid more than the face value of the debt, even before you consider the effect of inflation.
That suggests that investors are so worried about the prospect of losses in other assets that they’re prepared to take a guaranteed small loss by buying bunds (rather, say, than by holding euros, equities or a sovereign bond from a riskier country).
10.55am: Pessimism is rife ahead of this afternoon’s eurogroup meeting, amid fears that last month’s Summit deal is unravelling.
With Spain’s 10-year bond yields in the ‘danger zone’ (7.1% as I type), a series of experts are warning that eurozone finance ministers will struggle to make progress at this afternoon’s meeting — where they will try to flesh out the deal agreed by EU leaders 10 days ago.
Megan Greene of Roubini Global Economics reckons Europe’s could soon be gathering for another emergency meeting, if the financial markets give last month’s ‘progress’ the thumbs-down.
The frantic backtracking seen since the Summit has undermined confidence in one of the key breakthroughs — a pledge to use eurozone bailout funds to
recapitalise banks directly and not via governments. Marketwatch dubs this “Merkel’s Law of Permanent Disappointment” – after the German chancellor suggested that nothing had really changed, and that closer banking union is really about “joint supervision” rather than “collective liability”.
Elizabeth Afseth of Investec fears we will see little progress this evening (and tomorrow, when all 27 EU finance ministers meet):
Nobody has any trouble understanding German reluctance to agree to such, both in terms of having to pay up for others’ excesses as well as in terms of a moral hazard argument.
But with investor confidence at a low and the weaker countries struggling to finance themselves the alternative is a break-up of the currency union, and that is likely to be more costly to Germany than a well structured banking union and some (hopefully temporary) regional transfers.
Tomorrow, the German Constitutional Court will consider a request to slap a temporary injunction on the European Stability Mechanism (ESM). If that happens, the crisis really will ignite…
9.43am: Investor confidence across the eurozone dropped to a new three-year low last month, according to data just released.
The monthly Sentix survey (which tracks investor sentiment across the single currency region) dropped to -29.6 this month (from -28.9 in June). That’s the lowest level since July 2009, when the eurozone was in recession. July’s drop was mainly caused by a drop in confidence with Germanby.
The German research institute blamed global jitters over the eurocrisis, saying:
The euro land virus has proliferated…The weakness in euro land is spreading to the rest of the world…
9.22am: Wolfgang Münchau of Eurointelligence has predicted this morning that the eurozone crisis will last for the next two decades.
Münchau (a trenchant critic of Europe’s approach to the crisis) argues that last month’s Summit simply proved that euro leaders cannot guide the region out of the current mess:
They agreed that there shall be no common bank recapitalisation until a full banking union is established. And the Bundesbank has reminded us that the latter is not possible without a political union.
The logical implication is that we won’t solve the crisis for the next 20 years.
More here (if the FT paywall lets you through).
9.05am: Speaking of Spain, there’s an interesting story in the Financial Times about its banking bailout.
The FT reckons Spain is ready to create a single “bad bank” to house the toxic assets that are dragging down its banking sector. Madrid has been resisting this idea until now*, arguing that pumping more capital into the banks would suffice. But it could now cave in over the ‘bad bank’ idea, in return for the bailout aid agreed last month.
The FT says:
After repeated attempts to contain the problems in the Spanish banking sector, Madrid is prepared to establish a sector-wide body if it is a condition of accessing EU aid, Spanish officials said.
Such a move would potentially assuage eurozone concerns about how to oversee rescued banks because it would create a centrally-administered body that would be easier to monitor.
8.58am: Worrying signs in the bond markets this morning – the yield on Spanish 10-year sovereign debt has crept over the 7% mark.
At 7.1% (up from 6.978% overnight), this is the highest level since the EU summit at the end of June.
This reflects the uncertainty over how the measures agreed at the summit will be implemented, and opposition in countries such as Germany and Finland to some of the proposals.
Michael Hewson of CMC Markets comments:
The post meeting optimism from the late June EU Summit has all but evaporated as once again different political interpretations get put on the outcomes of what was supposedly agreed at the meeting.
8.44am: After the result came in, Greek prime minister Antonis Samaras declared that he now has more authority to argue Greece’s case within the eurozone.
Samaras told Associated Press that:
with such a vote of confidence, I simply have a greater ability to speak up at the Eurogroup.
This afternoon’s eurogroup could be a bruising session for Greece, though. Finance minister Yannis Stournaras revealed last week that an official from one of Greece’s creditors warned that he would experience “a tough time” at the meeting.
Stournaras will update the rest of the eurogroup on the state of play within Greece. If he cannot persuade Greece’s lenders that it is committed to the financial plan, its next tranche of aid (due on 20 August) could be at risk.
8.24am: Antonis Samaras’s government won its vote of confidence comfortably overnight.
Every member of the three parties which make up the coalition administration backed the motion, giving Samaras 179 votes in the 300-seat assembly.
The vote followed three days of heated debate over Greece’s austerity programme, with many MPs warning that the terms of the deal need to be relaxed again.
Greek Prime Minister Antonis Samaras is congratulated by his MPs after a vote of confidence procedure in the Greek Parliament in Athens. The three-parties coalition government won a vote of confidence early Monday. Photograph: Alkis Konstantinidis/EPA
Samaras told parliament that “growth and investments” were the only way to keep Greece in the euro, and rejected claims that its aid deal should be torn up. The PM said:
We don’t want to change the targets of the bailout but that which is causing recession and hampering us from attaining those goals.
But Alexis Tsipras of the Syriza party (the largest opposition group), attacked the bailout as a “political and economic crime” as he railed against the government.
Tsipras told Samaras’s government:
You are not pro-Europeans, you are Merkelists. Berlin will lead Europe to dissolution.
Here’s a picture of Tsipras during his speech last night.
Finance minister Yannis Stournaras, though, told MPs that international lenders have already cut Greece plenty of slack, and the country can’t simply demand further changes. He said:
The Eurozone and the international community have provided Greece, in loans and grants, with a total of €500bn, more than 250% of our GDP….
The loans are provided with an interest of 3.5% and a very long repayment period…Without that money, our standard of living would regress back to that in 1960.
8.15am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis.
Coming up … the new Greek government won a confidence vote in the early hours of the morning. We’ll have full details and reaction shortly.
Elsewhere … finance ministers from the euro countries are heading to Brussels to hold talks on the debt crisis. The Eurogroup meeting will discuss how to implement the decisions taken at the EU summit at the end of last month – including how to bail out the Spanish banking sector. The situation in Greece will also be discussed…
Photograph: Yorgos Karahalis/Reuters
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