Greece’s bailout crisis deepens as the European Commission rips up its previous growth forecastsGreece vs the creditors: the state of playSummary: EC piles pressure on AthensGreek 2015 growth slashed to 0.5%, from 2.5%FT: IMF taking hard line on GreeceIntroduction: Greek ministers hold crunch meetings 7.04pm BST Hello again: Just to flag up a few newsflashes from Frankfurt tonight, following the talks between Greek deputy PM Dragasakis and ECB president Mario Draghi.Nothing too spectacular, but at least both sides are talking....#ECB: Draghi and #Greece DepPM Dragasakis reviewed Greek economy and reviewed ongoing Brussels negotiations ~BBG#Greece Deputy PM @YDragasakis told #ECB President that reaching an agreement is a realistic & visible target (via @MegaGegonota) #ec #imf 5.51pm BST As the Greek talks drag on with little sign of agreement, and next Monday’s eurogroup meeting suddenly not expected to produce much progress, stock markets turned sharply into negative territory. Disappointing US trade figures also added to the uncertain mood as did the forthcoming UK election. The final scores showed: 5.43pm BST Greek gov't 'non paper' on current state of negotiations, kindly translated into English by @GreekAnalyst: https://t.co/vljoZIgS5I #GreeceHere’s the start of the document: 5.06pm BST Greece is considering plans to slow any capital flight, the Times is reporting.Greek surcharge on cashpoint withdrawals & financial transactions attempts to slow capital flight/raise cash http://t.co/hVmXDMTpPA 3.53pm BST Here’s Bloomberg’s take on Greece blaming its creditors for the current impasse:Greece blamed international creditors for the failure to find an agreement in bailout talks, saying a deal won’t be possible until they agree on a common set of demands.A Greek official said that the European Commission and the International Monetary Fund are confronting the country with too many red lines and aren’t coordinated enough with each other. 3.50pm BST And here is the European Commission:.@pierremoscovici met @yanisvaroufakis to take stock of significant progress made by Brussels group, and prep useful Eurogroup on Monday 3.24pm BST So many conflicting comments coming out about where Greece and its creditors stand. French finance minister Michel Sapin said after meeting his Greek counterpart Yanis Varoufakis that “we have the scope to reach a good compromise..There is no other solution than an accord.”Greece Gov Official - Disagreements between EU and IMF are creating obstacles in negotiations on Greece. 3.11pm BST More on the growing feeling that no deal between Greece and its creditors will be reached next week, this time from the chairman of the eurogroup working group Thomas Wieser, talking to CNBC. Reuters reports:Greece and its European creditors will not reach a comprehensive agreement by next week, as it was expected, the chairman of the eurogroup working group, Thomas Wieser, told US TV channel CNBC on Tuesday, but expressed confidence that a deal will be reached before a real crisis or bankruptcy occurs.“We will get a deal,” Wieser was quoted as saying on CNBC’s webpage. “I think all of the polls show in Greece, the Greek population is firmly convinced its future is in euro. It has given a mandate, which is quite clear it seems to me and it seems to the Greek politicians, [to] do whatever it takes to come to a conclusion with the creditors.”Greek Debt Deal Needed By Beginning Of June, EU's Wieser Says 3.06pm BST And in contrast to Markit, the Institute for Supply Management is reporting the pace of growth in the services sector rose to a five month high in April.An increase in business activity offset a fall in exports, pushing the ISM services index to 57.8 from 56.5 in March and above forecasts of a figure of 56.2. 2.54pm BST Back with the US, and signs of a slowdown in growth in the service sector.The Markit purchasing managers index for services came in at 57.4 in April, down from an initial reading of 57.8 and the 59.2 figure for March. There was a dip in new business growth but the employment component frost to a 10 month high of 55 from 54 in March. Markit chief economist Chris Williamson said:Robust service sector growth adds to evidence that the economy is far from stalling, as indicated by the GDP numbers seen as the start of the year, supporting the [Federal Reserve’s] view of the economy growing at a moderate rate. 2.50pm BST It appears the “crunch” eurogroup meeting on May 11 will be nothing of the sort. No solutions expected, just more talks about progress (or lack of it?)Varoufakis Sees No Accord On Greece At May 11 EurogroupGreek Finance Minister Varoufakis hopes talks next Monday will be a fruitful, however no accord is likely in his view (@RANsquawk)EC: Greece Deal At May 11 Eurogroup Is UnlikelyEC: Debt Sustainability Being Linked With Pension Reforms By IMF -‘IMF Wants To Remain In Greece If Conditions Met’We r definitely going to have a discussion on May11th that will confirm the progress that has been achieved says @yanisvaroufakisSeems like EU and Greek side converging that on May 11th #eurogroup no solution should be expected just progress report. 2.36pm BST Time for a recap.The rise in uncertainty since the autumn of 2014 and the slowdown in the recovery have had a significant impact on Greece’s public finances, resulting in a significant shortfall in state revenues at the end of 2014 and in the first two months of 2015. The poor revenue collection around the turn of the year resulted in a significantly weaker-than- expected fiscal outcome for 2014.#EC slashes 2015 #Greece GDP growth forecast to 0.5%, raises debt/GDP estimate to 180%. http://t.co/CJSmvCL4E3 #economy #ecb #imf“The European economy is enjoying its brightest spring in several years, with the upturn supported by both external factors and policy measures that are beginning to bear fruit.But more needs to be done to ensure this recovery is more than a seasonal phenomenon.”“People are fed up...But withdrawing ELA altogether would be a nuclear bomb.” 2.07pm BST Greece’s stock market has fallen deeper into the red; the main Athens index is down 4.5% today. Bank shares are leading the fallers, as traders react to reports that the IMF was pushing for a new debt writedown. 1.57pm BST The surge in America’s monthly trade deficit means that the US economy “undoubtedly contracted slightly in the first quarter of 2015”, says Paul Ashworth, Chief US Economist at Capital Economics.But he expects growth to bounce back in the second three months of this year, meaning America would avoid falling into a technical recession. 1.48pm BST Just in.... America’s trade deficit has widened unexpectedly to its largest since the financial crisis began, suggesting that its economy could actually be contracting.The US commerce department says that the US trade deficit surged to a jaw-dropping $51.4bn in March, up from $35.9bn in February. Looks like another downward revision to US Q1 GDP...$DXYGDP for Q1 now looking at a -0.5 number ? https://t.co/w1PzU2DFzJSurge in imports likely to result in Q1 GDP being revised below zero...looking a lot like last year (minus the mid-year surge). 1.13pm BST Remember the oil price crash of autumn 2014? Well, it’s a different story today - US crude oil just hit the $60/barrel mark for the first time this year.WTI CRUDE RISES TO $60 A BARREL FOR FIRST TIME SINCE DEC. 11 12.56pm BST We’ve not heard much from Greece’s finance minister today.... but Yanis Varoufakis has just arrived in Brussels, for talks with Pierre Moscovici.Cue the usual scrum to catch a glimpse of Varoufakis; despite the recent reshuffle of Greece’s negotiating team, he retains his magnetic attraction to the media.And the #Greek fin min @yanisvaroufakis is in the house. Media frenzy the least I can say pic.twitter.com/W47AzKtRfh 12.41pm BST Germany’s finance chief, Wolfgang Schäuble, has denied that the International Monetary Fund pushed the eurozone to cut Greece’s debt burden last month.“The IMF of course did not make such a comment,” Schäuble said, noting however that Thomsen had been clear that Greek finances were deteriorating because of a pause in reforms linked to the election there.Thomsen did say things “had become more difficult,” Schäuble said.With the large surplus now turning into a sizeable deficit, Greece’s debt levels would begin to spike again. This would force either Athens to take drastic austerity measures or eurozone bailout lenders to agree to debt write-offs to get Athens’ debt back on a sustainable path, the IMF believes. Officials said Mr Thomsen specifically mentioned the need for debt relief during the three-hour meeting.“The IMF thinks the gap between the two realities is very large right now,” said one senior official involved in the talks. He noted that both Athens, which was resisting new economic reforms, and eurozone creditors would probably fight the IMF on the issue.Wolfgang still reading his script https://t.co/0pCD4KmMHU 12.14pm BST Don’t take the risk of a Greek exit lightly.“Italy’s government considers short-sighted and dangerous to underestimate the Greek crisis.” 12.11pm BST Another interesting development. A senior Greek privatisation official has told Reuters that Athens is eager to crack on with two deals, seemingly in a bid to placate its lenders.That includes reopening bidding for a majority stake in Piraeus Port, and agreeing a €1.2bn deal with German operator Fraport to run regional airports in Greece. 11.19am BST Over in Athens, the stock market has fallen by 3% today. 11.15am BST The Greek government has revealed that prime minister Alexis Tsipras and German chancellor Angela Merkel held a telephone call last night:As #Greece seeks solution in bailout negotiations, PM #Tsipras spoke with #German Chancellor #Merkel by phone last night, his office says. 11.09am BST And that’s the end of the press conference. Brussels reporters have scrambled for country-specific briefings, so I suspect we’ll hear more shortly.... 11.05am BST Could Greece be given some new liquidity assistance at the next eurogroup meeting, on May 11?Moscovici replies that he hopes to see significant progress by the time eurozone finance ministers meet on May 11, but doesn’t go any further. 11.04am BST Last night, EC president Jean-Claude Juncker warned that “Anglo-Saxons will try to break up the eurozone” if Greece were to exit the single currency.Bruno Waterfield of The Times asks Pierre Moscovici what Juncker meant, exactly.....Eurozone a single currency, decision to join irreversible. If one country leaves then you have the question who's next,@pierremoscovici 10.59am BST You can read the Commissions’s concerns about Greece on page 80 of the new Spring Forecasts.This charts show how growth is expected to flag this year, and deflation likely to continue until 2016: 10.53am BST Today’s forecast also contain bad news for Finland; the EC has slashed its growth forecast this year from 0.8% to just 0.3%.Finland is also expected to run a deficit above 3% of GDP this year, breaching EU rules. Brussels is planning to give the new Finnish government some advice next week:Moscovici on #Finland, breaking debt rules: Next week we will provide our country specific recommendations. There will be food for thought. 10.43am BST Finally, the EC allow a question on Greece.The FT’s Peter Spiegel gets the mike, and whether today’s growth downgrade mean that more needs to be done in the current negotiations to get Greece’s bailout programme back on track.#Moscovici giving long answer on #Greece but not really saying too muchMoscovici ruining all the fun by answering Greek related questions in French... #EC 10.33am BST The outlook for Europe’s economy looks brighter than at any time since the financial crisis began in 2008, according to today’s report.It says:The recovery from the crisis and the double-dip recession has been a long and tedious one, marked by numerous setbacks, but now there are clear indications that a cyclical upswing is underway, supported by economic tailwinds. 10.28am BST The EC’s new Spring forecasts are online here (pdf). 10.26am BST Despite Greece’s woes, the EC believes Europe’s economy is healing -- with faster-than-expected growth forecast this year. In the EU, the #deficit is forecast to decline from 2.9% of GDP in 2014 to 2.5% this year and 2.0% in 2016 @ecfin #ECForecastThe fiscal outlook is improving: in the euro area, the #deficit is forecast to fall from 2.4% of GDP in 2014 to 2.0% this year #ECForecastAnnual consumer price #inflation in both the EU and euro area is expected to rise from 0.1 % this year to 1.5 % in 2016 @ecfin #ECForecast#BREAKING The Eurozone deflation that wasn't. https://t.co/DmBOnNwnVG 10.23am BST European Commissioner Pierre Moscovici is outlining today’s growth forecasts now.He tells reporters in Brussels that the EC was forced to cut its forecast for 2.5% growth in Greece this year, to just 0.5%, given recent events.In the light of the persistent uncertainty [in Greece], a downward revision has been unavoidable. 10.18am BST I’ll collect all the growth forecast together shortly, but in the meantime this map shows the hot spots and the laggards:#ecforecast for #EU - GDP up to 1.8% in 2015, 2.1% in 2016 http://t.co/PvwXoZE3z5 pic.twitter.com/zQ1BJEdLmE 10.15am BST New @EU_Commission forecast for #Greece pretty dire, but based on assumption of bailout deal "by June" & subsequent return to biz confidence 10.12am BST The EC is also warning that Greece is failing to get to grips with tax collection.In forecasts, @EU_Commission says #Greece tax collection at end-2014 was so low that 2014 primary surplus only 0.4%, down from 1.7% estimate 10.12am BST The EC is warned that Greece’s recovery has stalled since the previous government called snap general elections at the end of last year.Political uncertainty has been fuelled by the “lack of clarity” over the present administration’s polities, it says, adding that the Greek factory sector is still locked in a depression.#ecforecast Grim for Greece pic.twitter.com/e0N1fTV9Lf 10.06am BST The EC has also slashed its forecast for Greece’s growth rate this year, in another signal that its bailout programme is off track.Brussels now expects Greece’s GDP will expand by just 0.5% in 2015, down from a previous forecast of 2.5%.In new forecasts, @EU_Commission slashes #Greece outlook. 2015 growth to 0.5% from 2.5% in Feb. Debt from 170.2% to 180.2%Both from the European and IMF perspective, the programme must be fully funded...The bigger the hole, the more funds must come in. 10.02am BST Breaking: The European Commission has raised its growth forecast for the eurozone this year, from 1.3% to 1.5%. 9.52am BST Reminder, it’s nearly time for the European Commission to publish its new spring forecasts (live feed here from 10am BST/11am Brussels time)Press conference w/@pierremoscovici on #ecforecast @ 11am here: http://t.co/rmUNKa0V6h pic.twitter.com/Pls6L6NFo9 9.43am BST Growth in Britain’s construction sector slowed last month, as Thursday’s general election casts a shadow over building work.Although the sector expanded, growth was the weakest in almost two years, with firms reporting a sharp drop in new work. But it’s not all bad -- firms are still hiring new workers.“April’s survey highlights another growth slowdown across the UK construction sector, with new work expanding at the weakest pace for almost two years. “The uncertain general election outcome appears to have put some grit in the wheels of decision making. Construction firms widely noted delays with clients’ budget setting and a reduced propensity to commit to new projects. 9.23am BST Greek 10Y bonds wider by 52bps over German 10Ys after FT article suggesting Greece may lose support of IMF weighs on Greek assets 9.18am BST Greek bonds are weakening this morning, after it emerged that the International Monetary Fund believes Greece’s finances are badly off track (see earlier post for details).The yield (effectively the interest rate on Greece’s two-year bonds has jumped by more than one percentage point this morning to 20.7%, up from 19.5% on Monday night. 8.58am BST Austria’s finance minister, Hans Jörg Schelling, has warned that there’s no guarantee of a deal with Greece in time for next week’s meeting of eurozone finance ministers (on May 11)Schelling added that Greece has made some compromises, but is still holding firm on other issues. 8.52am BST What can Greece hope to achieve by meeting Mario Draghi today?Well, according to the Kathimerini newspaper, Greek deputy PM Dragasakis has an “optimistic plan” to push the ECB to lift its restrictions preventing Greece issuing more short-term debt. More here. 8.42am BST Spain’s unemployment total has fallen by a record amount last month, as the country’s recovery continues to gain pace.The number of people unemployed across Spain tumbled by over 118,000 in April, twice as much as economists had expected.Nearly 5x as fast as the average (-25k) for the last seven Aprils.Spain registered unemployment falls 118.923 in April, government claims biggest monthly fall on record. pic.twitter.com/Pu30h04uUg 8.36am BST Athens could come under even more pressure if the European Commission downgrades its economic forecasts for Greece this morning, points out analyst Yannis Koutsomitis.#EU Commission to publish Spring 2015 Economic Forecast today. Possible revision of #Greece growth forecast wll heavily affect bailout talks 8.34am BST The BBC ran an interesting piece last night, explaining how Greece’s government has already missed a swath of payments to Greek workers and companies.That doesn’t count as an official default, of course, but it underlines how perilous Greece’s financial position has become this year.A junior doctor told the BBC that although wages were paid regularly to medical staff, the government was more than four months behind on payments for on-call time.“Last week we got paid on-call time for the month of December,” she said.Greece's undeclared domestic default http://t.co/GX8YqOTSUS 8.21am BST Eurozone crisis experts are alarmed by the news that the IMF could pull funding for Greece unless it receives debt relief.Here’s some early reaction:#IMF gradually pulling rug out from under #Greece by saying that #eurozone Govs need to take debt rightdown before they’ll extend bailoutFocus remains on Greece with the latest reports suggesting the IMF could reduce financial aid to the nation....IMF may hold back its half of the €7.2bn bailout aid that Greece needs. Without the funds, Greece could run out of cash this month. 8.14am BST A new Greek opinion poll shows that a majority of the population want to stick with the euro, with roughly a third favouring Grexit.Macedonia Uni poll for Skai TV In referendum on euro with new MoU vs drachma, what would you choose? Euro 55.5% Drachma 35% N/A 9.5% #GreeceMacedonia Uni poll for Skai TV If Samaras was in power, economic situation would be Worse 56.5% Same 21.5% Better 15.5% N/A 6.5% #Greece 8.12am BST Overnight, Australia’s central bank cut interest rates to a fresh record low of 2%.The move (covered in this liveblog), is intended to ward off an economic slowdown in Australia. But if the RBA hoped to weaken the Aussie dollar, it’s been disappointed -- the currency did drop (as you’d expect) before bouncing back smartly:Do "currency wars" reach a new phase when rate cuts don't have any negative effect? RBA cut, A$ up.So RBA cut, bonds yields up, Shares down and aud up. Maybe better if held and kept easing bias #ausecon Related: Reserve Bank of Australia cuts interest rates to 2% – live 8.04am BST Today’s meetings are overshadowed by the news that the International Monetary Fund fears that Greece’s debt mountain has become unsustainable again.According to the Financial Times, the IMF believes Greece may run a primary budget deficit of 1.5% this year, far from the 3% surplus it was aiming for. Greece is so far off course on its $172bn bailout programme that it faces losing vital International Monetary Fund support unless European lenders write off significant amounts of its sovereign debt, the fund has warned Athens’ eurozone creditors.The warning, delivered to eurozone finance ministers by Poul Thomsen, head of the IMF’s European department, raises the prospect that it may hold back its portion of a €7.2bn tranche of bailout aid that Greece is desperately attempting to secure to avoid bankruptcy.IMF says #Greece now running primary deficit of nearly 1.5% of GDP; warns #eurogroup debt relief may be necessary http://t.co/qsM7aGUqWS 7.47am BST Good morning. We’re back after Monday’s Bank Holiday break to track the latest developments around Greece’s bailout talks, plus the world economy, the financial markets, the eurozone and business.Coming up....Greece’s government is scrambling to reach a breakthrough over its bailout before running out of cash. Related: Greece vows to pay debts as it awaits handout from international creditors Continue reading...
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