6.40pm: Another dramatic day in the eurocrisis is drawing to a close. Here’s a summary of the key events:
Dutch prime minister Mark Rutte has resigned after crucial negotiations over the country’s budget collapsed over the weekend. Rutte submitted his cabinet’s resignation to Queen Beatrix of the Netherlands this afternoon, following an emergency cabinet meeting. Rutte is likely to continue as a caretaker leader while Dutch politicians decide how to proceed.
The crisis was triggered by far-right leader Geert Wilders. He has refused to support up to €16bn of austerity cutbacks, without which the Dutch government would be unable to lower its deficit to 3% of GDP next year. Wilders called the plan an attack on the Dutch elderly.
The political crisis in the Netherlands flared up as the first round of France’s presidential election ended. François Hollande is now a clear favourite to beat Nicolas Sarkozy in the run-off in two weeks time, which could reshape the political balance of Europe. Far-right leader Marine Le Pen also polled surprisingly strongly.
Stock markets were spooked by the developments in the Netherlands and France. Surprisingly weak economic data from the eurozone, which suggested that its recession could be deeper than feared, also alarmed investors. The FTSE 100 shed 106 points, while the German DAX fell by 3.3%.
Tomorrow, Dutch politicians will debate the crisis.
We’ll be back tomorrow to track the crisis. Until then, thanks for reading and for so many excellent comments (as ever!). Goodnight!
6.12pm: The next stage in the Dutch political crisis will come tomorrow, when lawmakers debate how to proceed over the 2013 budget.
5.58pm: On top of the political crisis in the Netherlands, and Nicolas Sarkozy’s poor showing in yesterday’s French presidential ballot, there have also been important developments in the Czech Republic in the last few days, with tens of thousands of protesters hitting the streets of Prague over the weekend.
Ian Traynor.Our Europe editor Ian Traynor argues tonight that these three separate events illustrate a major turning point is the eurozone crisis. He writes:
For more than two years the mainstream political elites of Europe have been battling to save the single currency, seeking its salvation in a German-scripted programme of austerity and legally enshrined fiscal rigour that curbs the budgetary sovereignty of elected governments.
In elections in France on Sunday, in the Royal Palace in The Hague on Monday, and on Wenceslas Square in Prague on Saturday, a democratic backlash appeared to be gathering critical mass as the economic prescriptions of the governing class collided with the street and the ballot box, probably bringing down three European governments.
Paul Nieuwenburg, a political scientist at Leiden University, has predicted that the upcoming Dutch elections will centre on the issue of Europe, with Geert Wilders having already called (last month) for a return of the Dutch gilder.
For the past 18 months, the finance minister, Jan Kees De Jager, has been the loudest advocate of the most rigorous austerity for the bailed out countries of the eurozone and of the punitive new fiscal rules.
Hoist on its own petard, his government has fallen because it cannot agree on the spending cuts required to meet the new rules by next year.
But the Dutch economy is fundamentally sound and prosperous with low unemployment. The head of the national office of budget forecasters, Coen Teulings, says the government simply needs time to make the structural changes required to comply with the rules.
To insist that all this be done within a year, entailing huge savings and cuts that will make a relatively benign situation worse, represents a triumph of dogma over pragmatism.
5.47pm: The leader of the opposition Dutch Labour party, Diederik Samsom, has criticised prime minister Mark Rutte for mishandling the negotiations over the Netherland’s budget.
Samsom accused Rutte of “dropping the ball at the worst possible moment” for the Dutch economy. He also rejected the suggestion that fresh elections might not be held until the autumn, saying:
We have to deliver clarity to the country as soon as possible.
The latest polling data (see 12.28pm) suggested that Samson’s party (Pvda) would win 24 seats at a general election, down from 30 last time. That polling took place before the collapse of budget talks, though…..
5.19pm: City analysts are warning this evening that the Dutch government could be caught in limbo for months, following the resignation of Mark Rutte and his cabinet.
Without the promise of support from Geert Wilders’ Partij voor de Vrijheid (which walked out of the budget talks this weekend), Rutte’s minority government doesn’t have the votes to get the 2013 budget approved.
Marco Wagner, Commerzbank economist, fears that the Dutch government could simply be “unable to get important reforms approved by parliament” until fresh elections are caused, telling Bloomberg:
This suggests that the 3 percent target* will be missed in 2013 and the country’s AAA rating is at risk.
* – Under Brussels’ rules, eurozone governments should cut their deficits to 3% of GDP next year.
5.11pm: The gap between Dutch government bonds and German bunds (seen as the safest sovereign debt in Europe) widened to a three-year high today.
Netherlands’ debt has typically been seen as a low-risk place to invest. But investors have been getting edgier recently. Today, Dutch 10-year bonds are yielding 2.43%, up 0.11 basis points. That compares with just 1.56% for German 10-year bonds, or 2.12% for UK 10-year gilts.
These rates reflect the value of government debt in the ‘secondary bond market’, and are only a guide to the actual cost of borrowing. The full impact of the crisis will be clearer tomorrow, when the Dutch Treasury will auction up to €2.5bn of bonds (one set maturing in 2014, the second in 2037).
4.43pm: European stock markets are splattered with red ink, as the Netherlands crisis prompted a heavy selloff across the region.
The German DAX tumbled by 3.39%, as unexpectedly poor data from Germany’s factories added to fears over the resignation of Dutch PM Mark Rutte. France’s CAC 40 ended 2.8% lower.
In Amsterdam the main market, the AEX, closed 2.5% lower at 301.27 as traders reacted to the political crisis that grips the nation.
In London, the FTSE 100 finished 1.85% lower at 5665, having shed 106 points – its biggest fall since 10 April.
4.29pm: Another snap from the Netherlands…
… this time showing how a small group of journalists and the public gathered outside the gates of Huis ten Bosch, the royal palace in The Hague, while prime minister Mark Rutte was tendering his government’s resignation to Queen Beatrix.
Political uncertainty and yet more disappointing European manufacturing PMI data has put the skids under European markets today as investors rush for the exits as the uncertainty, that had until recently been confined to the southern European economies, starts to spread to the northern core economies of Holland and France.
The plague of the European sovereign debt crisis looks set to claim the scalp of yet another government as the Netherlands’ government falls over disagreements with respect to cuts to the country’s budget as politicians seek to bring it into line with the fiscal compact agreed in December.
The likelihood of a new socialist French President has also spooked markets who fear that, if elected François Hollande, will be less free market friendly which could put him on a collision course with Germany.
4.00pm: The collapse of the Dutch government is a key moment in the history of the eurozone — the first time that a northern European government at the core of the single currency union has been brought down since the crisis began.
The list of other European leaders forced to resign, or seek early elections includes:
George Papandreou, who resigned as Greek prime minister in November 2011
Silvio Berlusconi, who resigned as Italian prime minister in November 2011 (what a month that was!)
Brian Cowen, who was forced to call an early Irish general election in March 2011, and lost heavily to Enda Kenny
Iveta Radicova, who was ousted as Slovakia’s prime minister last month, five months after losing a confidence vote over the European bailout.
Borut Pahor, whose rein as Slovenia’s prime minister ended in February 2012, after also losing a confidence vote over the euro crisis
3.40pm: Having handed his cabinet’s resignation to Dutch monarch Queen Beatrix (see 3.07pm), prime minister Mark Rutte is due to address the Dutch parliament on Tuesday to discuss ‘interim budget cuts’, and also the question of when new elections will be held.
According to experts in Dutch politics, it is unlikely that general elections would be held before September, suggesting that Rutte would continue to govern as a caretaker leader for several months. Opposition figures, though, have already called for elections to be held as soon as possible — perhaps in mid-July….
And as reported earlier (12.28pm), the latest opinion poll data show that Rutte’s party would win the most seats in a general election, but would be far short of a majority.
Dutch prime minister Mark Rutte leaving royal palace Huis ten Bosch today.
3.33pm: If you’re just joining us, here’s a recap:
The Dutch government has beenforced to offer its resignation after talks over its austerity budget for 2013 collapsed over the weekend. The political crisis was triggered by far-right leader Geert Wilders, who refused to support plans to make up to €16bn of cutbacks.
Without the backing of Wilders’Partij voor de Vrijheid, prime minister Mark Rutte’s coalition government was left without a clear majority in the Dutch parliament (PVV wasn’t a formal coalition partner, but was offering support to Rutte in parliament).
After holding an emergency cabinet meeting today to discuss the crisis, Rutte headed to the Dutch palace for a regular meeting with Queen Beatric — where he offered his resignation.
The crisis in The Hague threatens to escalate the euro debt crisis, and raises new questions over the ability of eurozone leaders to enforce their new fiscal pact. It comes a day after the first round of the French presidential election was won by Francois Hollande, who has pledged to challenge Europe’s focus on austerity.
The financial markets have reacted to the latest developments by falling sharply. In London, the FTSE 100 is nursing a triple-figure loss (down 120 points at 5650 right now).
3.07pm: It’s official, Dutch prime minister Mark Rutte has offered his cabinet’s resignation following the collapse of talks over its austerity budget
The decision means that Rutte becomes the latest eurozone leader to fall victim to the eurozone crisis.
From Associated Press:
The Dutch government information service says that Prime Minister Mark Rutte and his Cabinet have resigned after failing to reach agreement on reducing the country’s budget to meet European guidelines.
The information service said Monday that Rutte had met with Queen Beatrix and she had accepted his resignation, asking him to tend to pressing matters of state with a caretaker government for the time being.
According to Reuters, Rutte has said that Queen Beatrix asked the cabinet to remain in place in the meantime — and to “do what is necessary for the country’s good”.
Iceland’s former prime minister Geir Haarde, who faced charges over the global financial crisis.
2.59pm: Important developments in Iceland in the last few minutes — Reuters is reporting that former prime minister Geir Haarde has beenfound guilty of one charge relating to the financial crisis.
Haarde has also been cleared of several other charges, adds Reuters (which confusingly initially reported that Haarde has been cleared). More as it comes though — here’s some detail of the trial, which began seven weeks ago.
2.44pm: Wall Street is sharing in the global market selloff, with the Dow Jones index falling over 1%, or 134 points, at the start of trading in New York.
Europe’s stock markets are hitting new lows, as the escalating eurocrisis threatens to provoke a full-blown rout. The major indices have fallen by at least 2%, with the FTSE 100 down 119 points at 5652, and Amsterdam’s AEX down 7.46 points at 301.74.
The German DAX is the worst performer — down 3.3% today.
2.09pm: There’s no word on whether Mark Rutte has officially tended his government’s resignation. He has arrived at the Dutch royal palace for his regular weekly meeting with Queen Beatrix this afternoon (see photo above).
….while Reuters quotes two sources who say Rutte will write to parliament this afternoon, offering his cabinet’s resignation.
1.38pm: We’ve just received a photo from inside a meeting of Dutch political leaders today
emergency Dutch cabinet meeting:
Despite the political crisis, a couple of attendees are still managing to smile. But not Geert Wilders (at the far end of the table). He looks straight-faced (and perhaps even a little sheepish?) after he brought the administration down by rebelling over the government’s budget plans.
UPDATE: Thanks to @WvSchaik for pointing out that this is not the Dutch cabinet meeting, as first reported. Looks like there was a translation error in the picture caption, which I didn’t spot. Apologies for the confusion.
1.29pm: The stock market sell-off has accelerated in the last hour, with the FTSE 100 now down by 101 points at 5670 (a fall of 1.7%), and the Amsterdam index down 8.32 points at 300.88 (down 2.7%).
The euro is also being hit by the triple whammy of the Dutch political crisis, bad economic data (see 9.59am), and the French presidential election results (see 9.17am). It just hit a new 20-month low against the pound of 81.575p.
1.22pm: And here’s a photo from within the Dutch parliament this morning:
It shows far-right leader (and austerity budget rebel) Geert Wilders in a corridor waiting for a meeting with the President of the House of Representatives to discuss the political crisis that grips the Netherlands today.
1.05pm: As this photo shows, there were protests at The Hague as Mark Rutte’s cabinet gathered for today’s emergency meeting.
Here you can see Henk Bleker, state secretary for Economic Affairs, Agriculture and Innovation, arriving. The placard behind him reads “what is there to laugh at”, below a picture of a beaming Rutte.
12.28pm: The latest opinion polling data from the Netherlands shows that 11 parties would probably win seats in a general election, and that no leader would secure an overall majority.
A poll published yesterday, conducted by Maurice De Hond, showed that Mark Rutte’s People’s Party for Freedom and Democracy (VVD)would hold the most seats – 33, up from 31 at the 2010 election.
But the big winner would be the eurosceptic Socialist (SP) party, which is on track to double its number of MPs from 15 to 30.
The poll also indicates that Geert Wilders’s Party for Freedom (PVV) would secure 19 seats, down from 24, while the Christian Democrat (CDA) party’s powerbase would shrink to 11 seats, from 21.
The Dutch Labour (Pvda) party would secure 24 seats, down from 30, while the Democrats 66 (D66) party would win 15 seats, up from 10 at present.
Smaller parties would take the remainder of the 150 seats in the Netherlands’ parliament.
There may be some Schadenfreude within the eurozone corridors of power, given the tough line that the Netherlands has taken with other struggling European countrie since the debt crisis began.
Reuters has already found one Brussels diplomat who sees rich irony in Rutte’s predicament, saying:
First you have a big mouth towards budget offenders and then you yourself can’t deliver, and instead have to have new elections only one-and-a-half years after the new government took office.
The collapse of the current administration doesn’t necessarily mean that the country will fail to bring its deficit into line by 2013, of course. In theory Rutte, De Jager et al could still manage to persuade the Dutch parliament to support a 2013 budget that brings the deficit down next year. But without the support of Geert Wilders’ Partij voor de Vrijheid (Party for Freedom), the task could be much harder.
11.43am: Dutch broadcasters are now reporting that PM Mark Rutte will meet with Queen Beatrix at around 2pm local time (1pm BST) to tender his government’s resignation.
11.29am: Dutch finance minister Jans Kees De Jager has insisted that the Netherlands can still hit its budget targets, despite the apparent collapse of the country’s coalition government today (there’s no official word from The Hague yet).
De Jager, who had taken a hard line during previous episodes of the eurocrisis, claimed that the Dutch situation was “better than peripheral countries”, and that the country could continue demanding fiscal discipline.
De Jager added that the current government (which could remain in power for another five months), would seek support for its austerity measures within the Dutch parliament, even though the far-right Freedom Party has now walked away.
UPDATE: Now have the key quote from De Jager:
For me it is important, as a message to financial markets, that no matter the circumstances, the Netherlands will continue to strive for budgetary discipline.
Queen Beatrix (left) could be receiving a visit from PM Rutte imminently.
11.13am: Several Dutch government ministers refused to speak to the media as they left this morning’s emergency cabinet meeting in The Hague. That follows reports that they had agreed that prime minister Rutte should tender the cabinet’s resignation to Queen Beatrix of the Netherlands.
Under Dutch electoral rules, it is unlikely that an election could be held before September. Brussels, though, wants to see the details of next year’s austerity budget in a week’s time.
11.05am: Breaking news from the Netherlands — Dutch broadcaster RTL reports that prime minister Mark Rutte will offer the cabinet’s resignation to the country’s monarch, Queen Beatrix.
Rutte’s decision comes after this morning’s emergency cabinet meeting, which was called after his far-right junior coalition partner walked out of negotiations over the country’s austerity budget (see 7.50am for details)
More as we get it….
10.51am: Despite boasting a AAA credit rating, the Netherlands actually posted a larger deficit in 2011 than Portugal or Italy.
Data released this morning by Eurostat (the EU’s statistics office) showed that the Dutch deficit was 4.7% of GDP in 2011. That compares with 4.2% for Portugal and 3.9% for Italy, although rather better than Spain’s 8.5%.
The austerity negotiations in the Netherlands had floundered over the government’s attempt to cut its defiict to 3% in 2013. After walking out of the talks on Saturday, Geert Wilders condemned the 3% target as a “‘strangulation limit” and vowed to fight the next election on the issue of Europe and the euro.
Antonis Samaras addresses supporters during a pre-election rally at Zappeion hall in Athens.
10.23am: Meanwhile, over in Greece there have also been developments this weekend with Antonis Samaras, the man tipped to win general elections on May 6, unveiling his own economic policies to exit the crisis.
Helena Smith, our correspondent in Athens, has all the details:
No country is more desperate for growth than Greece, the country that triggered the debt crisis. Presenting his economic policies to a nation now wearily preparing to go to the polls, Antonis Samaras, the leader of the centre right New Democracy party said he was poised to make a root-and-branch change of the way Greece works.
“Our aim to change everything, both the system of governance and the economic policy,” he said.
New Democracy, he said, would take an axe to the public sector by slashing “state wastefulness” and privatizing “whatever can be privatized.” What it would not do was add to the tax burden of Greeks already subjected to a barrage of new levies as part of austerity measures prescribed by the country’s international creditors at the EU and IMF.
“The middle class, the hardest hit by taxes, needs to breath,” said Samaras unveiling the program. “People don’t have money to pay new taxes,” added the leader referring to the unprecedented cuts ordinary Greeks have sustained to pensions and wages since the outbreak of the crisis in Athens in late 2009.
“The only thing to do is to reduce wasteful public spending, which is huge.”
What Greece needed was a flat 15% corporate tax rate, lower sales taxes to boost growth and investment and an amnesty for those bringing deposits back to Greece [around €20 bn is believed to have left the country in an unprecedented cash flight]. Further across-the-board cuts that have plunged the economy into its worst recession since WWII would be avoided because they were “self-defeating.”
“The turnaround must begin. Out of a million businesses in Greece in 2009, 250,000 have closed and 300,000 can no longer pay [taxes] and also face closure which will make unemployment soar … especially among the young for whom the jobless rate is more than 50%.”
Pundits believe New Democracy will come out on top in the vote described as “critical” by Samaras, Helena explains. But polls show that the party is unlikely to capture enough votes to win an outright majority – which opens the way to political instability if New Democracy is also unable to form a coalition government with Pasok, the centre-left party that backs the tough reforms and austerity measures demanded of Athens in return for aid.
If both parties are unable to garner at least 50% of the vote with anti-austerity groups instead coming to the fore, analysts fear that Greece will be in for a period of intense political and social turmoil as the opponents to the measures step up protests and strikes. “It’s a hair-raising prospect that would be the worst possible scenario for Greece,” said a senior official in the interim coalition government that under the stewardship of unelected technocrat Lucas Papademos has ruled the country since November last. “It’s vital that the two [main] parties cooperate again but, even more significantly, much will depend on them also clinching at least 50 % of the vote. If not, the anti-austerity front will be emboldened to step up protests and strikes which would be very debilitating to implementing reforms.”
Although Samaras, crucially reiterated his commitment to the EU-IMF reform program, lenders worry that the leader will under popular pressure to “renegotiate” the measures adding to the fiscal pressure on Greece.
10.10am: The political uncertainty in France and the Netherlands, and today’s poor eurozone economic data, are conspiring to forcing stock markets to new lows.
The Dutch stock market has been hit hard, as prime minister Mark Rutte holds an emergency cabinet meeting to discuss whether to seek a general election.
Here’s a round-up:
Dutch AEX: – 2.49%, down 7.69 points at 301
German DAX: -2.38%, down 160 points at 6589
FTSE 100: -1.5%, down 90 points at 5681
French CAC: -1.58%, down 49 points at 3138
Spanish IBEX 35: -2.9%, down 205 points at 6834
Joshua Raymond of City Index confirmed that the collapse of Dutch austerity talks had spooked investors, saying:
Once again we have Political turmoil threatening to destabilise financial markets over the eurozone debt crisis with the Netherlands coalition government failing to agree on budget cuts and as a result appearing to be on the brink of fresh general elections.
9.59am: The eurozone remains mired in recession, and could suffer a deeper downturn than previously feared.
That’s the message from today’s economic data from Markit, showing that the eurozone’s manufacturing output slumped to its lowest level since June 2009 (46.0 on its PMI survey), while its services sector fell to a five month low (47.9).
Both sectors suffered from falling orders, and rising unemployment. The decline was driven by poor performances in Germany and France (see 8.38am).
Martin van Vliet of ING commented:
Today’s dismal PMI figures clearly indicate that the Eurozone economy remains in dire straits. Our base case scenario is still for a gradual return to modestly positive growth in the second half of this year, but with the lingering debt crisis and the ongoing drag from fiscal policy, the risks are clearly skewed to a more protracted recession.
9.37am: The Spanish central bank has reported this morning that Spain has slumped back into recession.
In its latest monthly report, the Bank of Spain said it believes that the country’s GDP fell by 0.4% in the first three months of 2012. That follows a 0.3% contraction in Q4 2011, and zero growth in the third quarter of last year.
9.17am: François Hollande has pledged to challenge Europe’s obsession with austerity if (as seems likely) the socialist leader succeeds Nicolas Sarkozy as France’s president.
The prospect of eurozone’s fiscal compact being renegotiated has caused some alarm in the markets today. Jane Foley of Rabobank says the uncertainty could hit the euro (which has already fall today to around $1.314).
While the lack of growth in the Eurozone region clearly does need to be addressed, the fears of investors is that fiscal reform could be watered down which could open the path for a longer and potentially deeper bout of contagion in the debt markets.
ButElisabeth Afseth of Investec argues that a Hollande presidency could bring clear benefits to the eurozone.
It may not be such a bad thing for Europe to get a fresh face with a different opinion as the current austerity-only drive is not working, though it is probably too optimistic too hope Hollande will be able to bring about the environment for change that is required to get Europe out of its current problems…. I can’t see drastic labour reforms coming from that front.
Still – a little less focus on austerity may make the Germans think about how else they can bring about fiscal discipline to their troubled neighbours…
François Hollande speaks to supporters after winning the first round of the French presidential elections.Hollande won the first round of the Presidential election with 28% of the vote, followed by Nicolas Sarkozy with 27% and Marine Le Pen with 20%.
Nicolas Doisy of Cheuvreux, part of Crédit Agricole, says the results show the French people do not support economic reforms. Doisy writes:
The main message from the first round is indeed that a large section of the population already rejects the policies called by the economic situation, who-ever the next President is.
They fear that the so-called French social model will broken with deep fiscal austerity and the liberalisation of the labour market and non-financial services.
My colleague Alexandra Topping is covering all the reaction to yesterday’s vote in this live blog.
9.10am: Last month, our European editor Ian Traynor explained in detail how the Dutch government was in crisis over its budget cuts, having previously taken such a hard line against other Eurozone countries.
As one of the most vocal cheerleaders for the rigid new rules the Rutte government has put its own credibility on the line. The Dutch are the authors of a radical proposal for establishing a new eurozone budget tsar to enforce fiscal rectitude across the 17 countries.
“The government’s in a fix,” says Paul Nieuwenburg, a political scientist at Leiden University. “It’s a problem of image. Having such a big mouth on Greece and seizing the moral high ground, they are now morally obliged to stick by the rules. Things have become very complicated. That’s why Rutte has withdrawn into splendid isolation and they won’t talk to the media.”
The full piece is well worth a read, to understand how Mark Rutte’s alliance with Geert Wilders has come unstuck.
9.05am: The emergency Dutch cabinet meeting was due to start in The Hague around half an hour ago.
Before it began, minister for international cooperation Ben Knapen admitted that a general election now seems ‘inevitable’. Knapen told news programme RTL Z that:
It is important that everyone who bears responsibility stays calms and makes sure we get an orderly budget. We do have big problems.
Back on March 5, Wilders claimed that the euro was not in the interests of Dutch people, saying:
We want to be the master of our own house and our own country, so we say yes to the guilder. Bring it on.
Wilders’ Partij voor de Vrijheid don’t simply want freedom from the single currency either. PVV campaigns on an anti-immigration platform, while Wilders himself was acquitted of hate speech charges last Juneover a series of attacks on Islam.
8.38am: The latest economic data from France and Germany paints an unexpectedly bleak picture, and added to the gloom in the financial markets.
Germany industrial sector suffered its sharpest contraction in three years this month. The monthly manufacturing PMI fell sharply to 46.3, from 48.4 in April (on this index, the 50-point mark separates expansion from contraction).
While France’s manufacturing output picked up (to 47.3), its service sector PMI fell to a six month low of 46.4. And in another blow, French manufacturing sector confidence also dropped in April — with factory owners saying they were worried by falling overseas orders.
With the eurozone already thought to be in recession, this is not a great start to the second quarter of the financial year.
8.22am: The Netherlands is one of just four eurozone members who still holds an AAA credit rating with all three major credit rating agencies.
Analysts believe that the political crisis that now grips the country could prompt a downgrade. Without the support of Geert Wilders’ Freedom Party, Mark Rutte is clinging onto power as the leader of a minority party. He admitted over the weekend that elections are the “logical next step”.
Arnold Heertje, a former political economics professor at the University of Amsterdam, predicted:
This story is going to cost the Netherlands their triple A….Interest rates on the bond markets will increase.
In the bond markets this morning, the spread betweeen German and Dutch bond yields has hit a three-year high. That follows a rush into German debt, driving down the yield (effectively the interest rate) on 10-year bunds to a record low.
8.07am: Shares are falling across Europe at the start of trading. Here’s a summary:
UK FTSE 100: – 0.7% at 5727, down 44 points
French CAC: – 1.1%
German DAX: -1.3%
Italian FTSE MIB: -1.7%
Netherlands AEX: – 1.1%
The political crisis in the Netherlands, and the French presidential election results, are both causing some concern. On top of that, the latest economic data from China shows that its factory output fell again last month.
Cameron Peacock, market analyst at IG, commented:
Stage one of the French election results, (while mildly encouraging for Sarkozy) continue to suggest a change in government for France, which has the potential to rock the dynamic of the region’s ‘power rankings’, while the collapse of austerity talks in the Netherlands could jeopardise Holland’s prized AAA rating and threatens to destabilise one of Europe’s more functional governments.
Geert Wilders, pictured leaving the Catshuis in The Hague, the official residence of the Dutch Prime minister on Saturday.
7.50am: The political crisis in the Netherlands was triggered by right-wing leader Geert Wilders, who heads the Partij voor de Vrijheid (PVV) or Party for Freedom.
For weeks, prime minister Mark Rutte has been holding talks over around €16bn of budget cuts. Wilders has now thrown that 2013 budget into uncertainty by walking out of negotiations over the Dutch austerity plans on Saturday.
Wilders says his party could not support the tough cutbacks demanded by the European Union. He criticised the EU for making “attacks on our elderly”, claiming:
Money is being taken from the wallets of pensioners.
Rutte is now due to hold emergency cabinet talks today. Without the support of Wilders’ Freedom Party, he may be forced to quit and call snap elections. Louise Armitstead of the Daily Telegraph reckons Rutte’s resignation could come today.
7.45am: Good morning, and welcome to our rolling coverage of the eurozone debt crisis.
Today is going to be dominated by Holland, and Hollande. The Netherlands is gripped by a political crisis after talks over its austerity budget collapsed over the weekend. Mark Rutte, the Dutch prime minister, has called crisis cabinet talks today, after his coalition partner – Partij voor de Vrijheid, or Party for Freedom – walked out of negotiations over deep spending cuts.
The Dutch crisis comes as the financial markets digest the results of the French presidential elections. Socialist François Hollande secured a clear lead over Nicolas Sarkozy in the first round of voting – victory in two weeks time would have significant ramifications for the eurozone.
With City traders predicting that European stock markets will fall this morning, it could be a lively day …
(www.guardian.co.uk / 23.04.2012)