Eurozone crisis live: Euro ministers reject Greek debt deal

Eurozone crisis live: Euro ministers reject Greek debt deal







9.38am: Here's more detail on the UK's public finance figures for December.

Public borrowing in the financial year so far is now £103.3bn, down from £114.6bn at this stage last year. Tax receipts were boosted by the levy imposed on banks while government spending also fell slightly.

But the bad news is that public sector net debt (excluding the impact of the banking bailouts) rose to £1.004 trillion in December, the highest since records began in 1993 and equivalent to 64.2% of GDP.

9.33am: Stronger tax receipts - boosted by the bank levy - meant the UK government borrowed less than expected last month. But Britain's total debt rose above the £1 trilllion mark for the first time on record, according to official figures.

The Office for National Statistics said public borrowing excluding banking bailouts - the government's preferred measure - fell to £13.7bn last month from £15.9bn in December 2010.

Including the cost of bailing out banks, as well as some revenues from the sector, borrowing came in at £10.8bn in December, down from £13.9bn a year earlier.

9.07am: Can the eurozone avoid slipping into recession? asks financial data group Markit. Its PMI survey for the eurozone rose to 50.4 in January, from 48.3 in December, indicating the currency bloc's economy is expanding again.

The services PMI improved to 50.5 from 48.8, while manufacturing was still in decline, with the index at 48.7 versus 46.9. All readings are five-month highs but remain at historically subdued levels, Markit noted.

 8.50am: There are rumours that Portugal may need a second bailout. Despite Lisbon's labour market reforms, financial markets fear the country could be next in line to default after Greece - whose debt deal with private creditors has just been rejected by eurozone finance ministers. According to financial data firm Markit, Portuguese debt insurance costs have hit record levels.

8.45am: It looks like the German economy had a decent start to the year (and will avoid recession). The latest PMI survey shows manufacturing in Europe's largest economy grew in January for the first time since September. This briefly boosted the euro to $1.3021 from $1.3006.

According to Markit, which compiles the surveys, the German services PMI rose to 54.5 from 52.4 in December, while the manufacturing PMI poked its head above 50 - the line that separates expansion from contraction - and registered 50.9 versus 48.4 in December. The composite PMI hit a seven-month high.

 8.42am: Some sad news from Italy, where a demonstrator taking part in a truck drivers' protest against rising fuel prices has been run over and killed in an apparent accident.

The Italian man was run over by a truck driven by a German in the northern town of Asti, Italian police said.

As we reported yesterday, truck drivers in Italy have blocked roads across the country to protest against government reforms to open protected sectors including transport up to competition to create more jobs. The truckers demand easier rules on claiming reimbursement of excise duties on fuel, caps on insurance costs and a crackdown on unlicensed operators.

Other groups - railway workers, petrol station owners, pharmacists and lawyers - have also threatened to strike.IMF boss Christine Lagarde, pictured yesterday in Berlin. Photograph: Jens Meyer/AP

8.21am: Christine Lagarde, managing director of the International Monetary Fund, took to the radiowaves this morning to discuss the latest developments.

Lagarde told Germany's Deutschlandradio that she was "determined to be positive" about the Private Sector Involvement (PSI) talks, adding that:


Everybody has to participate.

Yesterday, Lagarde urged European leaders to increase the firepower of their bailout fund to avoid dragging the global economy down. She warned that the world risked an economic spiral reminiscent of the 1930s.

8.12am: European stock markets have fallen in early trading, following eurozone finance ministers' refusal to accept Greek bondholders' 'maximum offer'.

Germany's Dax dropped 1%, while the FTSE 100 index in London and Spain's Ibex have both lost 0.6% while Italy's FTSE MIB and France'sCAC slipped 0.4%.

So, not a panic selloff. Michael Hewson, market analyst at CMC Markets, said traders are managing to remain "sanguine" about the slow progress (and lack of progress) of the Grek talks:


It would appear that last night's rejection by European finance ministers of the private creditors' so-called line in the sand of a 65%-70% haircut, and a 4% coupon hasn't really impacted sentiment that much.

7.47am: Here's today's agenda:

• Manufacturing and services PMIs for January for France, Germany and the eurozone - 8am-9am GMT
• UK public finances for December - 9.30am GMT
• IMF publishes its latest World Economic Outlook report: 3pm GMT

European bond auctions:
Netherlands bond auction - 9am GMT
Spain bill auction - 9.30am GMT
Malta bill auction - 10am GMT

+ US Federal Open Market Committee starts two-day meeting

7.42am: Here's a round-up of how the eurozone finance minister's decision has been reported overnight.

Reuters warned that the disagreement "increases the risk that it will prove impossible to strike a voluntary restructuring deal between Greece's creditors and the Greek government", adding:


Negotiations over what's called 'private sector involvement' (PSI) have been going on for nearly seven months without a concrete breakthrough. Failure to reach a deal by March, when Athens must repay 14.5 billion euros of maturing debt, could result in a disorderly default.

Bloomberg says that the deadlock is "reminiscent of October's bargaining over bond losses and risks disrupting the January 30 summit [of EU leaders]".


Brinkmanship over Greece clouded progress toward new fiscal rules and a beefed-up rescue fund, denting newfound confidence in the anti-crisis strategy and threatening to overshadow next week's summit of European leaders.

And The Daily Telegraph explained:



Talks to restructure Greece's debt hit a new impasse after eurozone finance ministers rejected an offer from private bondholders because the cost of sweeteners on new Greek bonds were too high.

The ministers have sent the offer back for negotiations," said an official last night. "The ministers want a lower coupon than presented in the offer."Eurogroup president Jean-Claude Juncker: Greek creditors must accept higher more losses. Photograph: John Thys/AFP/Getty Images

7.29am: Jean-Claude Juncker, the chairman of the Eurogroup countries, was adamant this morning that Greece's creditors must accept a lower interest rate on the new, longer-dated bonds that are expected be issued in exchange for their existing Greek holdings.

Juncker told reporters in Brussels that:


Ministers asked their Greek colleagues to pursue negotiations to bring the interest rates on the new bonds to below 4% for the total period, which implies the interest comes down to well below 3.5% before 2020.

Juncker also declared that "It's obvious that the Greek program is off track", indicating that he expects bondholders to take greater losses.

This raises the stakes between Greece and its bond-holders. Last weekend, the Institute of International Finance said that it had already made its "final" offer to Greece.

7.20am: Good morning, and welcome to another day of our live coverage of the eurozone debt crisis....

...a crisis which deepened in the last few hours after eurozone finance ministers rejected the offer from Greece's creditors to restructure its debts.

Following yesterday's meeting in Brussels, ministers insisted that banks must accept a lower interest rate on the new Greek bonds that they will receive as part of the deal. The 4% or higher coupon demanded by the Institute of International Finance (IIF) (who represent Greek creditors) is simply not acceptable, they said.

The move is likely to raise fears that Greece will not agree a deal with its lenders in time. We'll be tracking all the reaction and developments this morning.

Later today the International Monetary Fund will publish its latest economic forecasts for the world economy. A draft version of the report leaked last week, so markets are already expecting the IMF to slash its growth predictions.

On the economics front: the latest UK public finances data will be released this morning, and we'll also get a healthcheck on Europe's manufacturing and services sectors.

There's also a few bond auctions to look forward to, from Spain, the Netherlands and Malta.

We'll also keep an eye on events in Davos, where the World Economic Forum officially begins tomorrow.