And we’re off! Michael Noonan begins by saying that Ecofin made ‘concrete progress’ on three issues — bank resolution mechanisms, the EU budget, and tax evasion.

(remember, it’s being streamed here)

The European Council has issued a statement, confirming that EU ministers agreed to give the commission a mandate to negotiate amendments to the EU’s agreements with Switzerland, Liechtenstein, Monaco, Andorra and San Marino on the taxation of savings income (tax evasion, basically)

It’s online here: Savings taxation: Council go-ahead to negotiate with Switzerland, Liechtenstein, Monaco, Andorra and San Marino.

Here’s a flavour:

The decision represents an important step in the EU’s efforts to clamp down on tax evasion and tax fraud.

The aim is to ensure that the five countries continue to apply measures that are equivalent to the EU’s directive on the taxation of savings income, which is being updated. The Commission will negotiate on the basis of a draft directive amending the savings directive (2003/48/EC), aimed at improving its effectiveness and closing certain loopholes so as to prevent its circumvention.

The Wall Street Journal has summed up the lack of progress over bank resolution mechanisms today (as covered in the blog from 12.11pm onwards)

EU Ministers Split on Protection for Depositors (paywall).

Here’s a flavour:

German Finance Minister Wolfgang Schäuble, along with his Dutch and Danish counterparts, backed a tough approach in which uninsured depositors would contribute on the same level as senior bondholders when problems arose.

While that would help limit the losses borne by other classes of creditors, some worry it could jeopardize financial stability and scare off savers.

At the other end of the spectrum, France’s Finance Minister Pierre Moscovici said uninsured depositors should be excluded from sharing losses as a general rule, with a resolution authority able to question that in individual cases.

Other ministers backed a mixed approach under which uninsured depositors would be tapped, but only after all other creditors had been bailed in. Such “depositor preference” is supported by the European Commission and European Central Bank, and is already status quo in countries such as the U.S.

Algirdas Semeta, Commissioner for Taxation, says he is disappointed that finance ministers didn’t reach agreement on the tax evasion directive today (thanks to obstruction from certain members).

The issue will be considered at an EU summit next week (on May 22nd), he adds.

But Germany’s Wolfgang Schäuble is more positive, saying it would be wrong to think there is ‘frustration’ at the Eurogroup today. He points out that leaders have reached “unanimous agreement” on a mandate for negotiations with Switzerland over tax evasion.

The question today is whether finance ministers back an amended EU Savings Directive, or not.

Maria Fekter, Austria’s finance minister, says that the existing directive has never worked because its scope is too limited.

So she is minded to back the new directive, but “not today” as there is insufficient harmonisation with the rest of the world.

I accept the text, but not adopted today, because we then have the situation that we in Europe are going further [than other countries].

EU finance ministers are discussing the issue of tax evasion, and whether to share more information on savings accounts (a big issue for George Osborne today – see 11.18am).

Portugal has no intention selling its gold reserves to fund any future aid package, the head of the country’s central bank has pledged.

Bank of Portugal Governor Carlos Costa insisted today that Portugal was not falling off track with its bailout programme. Asked about the possibility of a gold sale in future, Costa replied:

It is not applicable in Portugal.

Portugal holds 382.5 tonnes of gold, according to recent estimates. That’s worth around $19bn (€14.6bn) at current prices — around 25 times more than Cyprus’s reserves.

Costa also ruled out revising his economic forecasts, even though the bank expects a 1.1% increase in GDP in 2014, while the Lisbon government only expects 0.6% growth.

The economic crisis which is hitting faith in the EU (see opening post onwards) has also thumped British Land.

The company announced today that the value of its European portfolio has fallen by 17%, mainly due to the biting recession in southern Europe.

British Land now plans to dispose of its continental businesses.

My colleague Nick Fletcher has the full story here: British Land plans European exit as economic crisis hits property values

The lack of clear agreement between finance ministers has alarmed author Lawrence McDonald, who points out that Europe has had years to reach a deal:

The Cyprus bailout has put the issue of bank failures in the forefront of many people’s minds, especially after its government briefly planned to tax all savers.

Eurogroup ministers now all insist that ‘insured depositors’ are safe. But those guarantees are only as strong as the government that stands behind them, as Sony Kapoor of the ReDefine thinktank points out:

European commissioner Michel Barnier isn’t convinced by Pierre Moscovici’s suggestion that Europe should not lay out a clear “depositor preference”

Moscovici is pushing for ‘flexibility’ over who picks up the bill, rather than a fixed order for which creditors suffer losses when a bank is in trouble.

Barnier didn’t mince his words, either, telling the room (in French) that:

I have some difficulty, to be frank with you, with Pierre’s proposal.

(quote via the FT’s Peter Spiegel)

Ireland’s Michael Noonan, who is chairing the meeting, summed up the meeting by claiming that finance ministers were homing in on an agreement.

But the watching journalists aren’t sure that’s quite right:

(our 12.11pm post summed up the differing views too)

Now George Osborne speaks, saying that “flexibility with restraint” is the key to succesful, workable, rules for failing European banks.

The UK chancellor says it is essential that small savers (with up to €100,000) are completely protected under rules for handling a bank that needs to be recapitalised, or wound down.

Osborne points out that the decision of whether to put senior bondholders ahead of uninsured depositors, or behind them, is tricky. A “clear creditor hierarchy” can be evaded, he explains.

Here’s Osborne’s thinking:

If bondholders face the first hit, then corporations could get round the rules by moving money from bonds into bank deposits. But on the other hand, protecting all deposits could be controversial in a country such as Cyprus where many were held by businessmen from outside the eurozone. Should they really be protected ahead of European banks?

Osborne also backed an idea mentioned by Dutch finance minister Jeroen DIjsselbloem, of a ‘bailinable buffer’ in case banks hit trouble. The UK, though, can’t afford to set its own fund up, though, given the size of its banking sector.

And before anyone suggested a new levy, Osborne added that Britain has “the highest bank taxes of any country around this table.

EU finance ministers are still at odds over how to resolve failing banks.

The public session (streamed live here) has heard a range of views over bank resolution mechanisms. The debate revolves around how creditors are ‘bailed in’ to fund future rescue deals, and in what order of priority.

Jörg Asmussen of the ECB said was “essential” that ministers reach agreement quickly, so that bank resolution can be introduced in 2014.

we need to establish a clear pecking order for the bail-in.

Sweden’s Anders Borg warned that introducing rules that would ‘bail-in’ large creditors could be destabilising for EU countries who are not in the euro. They cannot rely on the ECB to step in, he warned.

Spain’s Luis De Guindos was also concerned about the implication of exposing depositors with more than €100,000 in the bank to losses. That could easily prompt a bank run, even among smaller savers, he warned:

France’s Pierre Moscovici called for flexibility, saying a ‘discretionally approach’ is best when deciding who should take the hit.

But Koen Geens of Belgium argued in favour of clear rules:

As did Germany and Denmark:

Our Europe editor, Ian Traynor, has dubbed the Pew’s report into Europe “a catalogue of unremitting gloom (unless you’re a German)”

The report (see 8.17am onwards for details) is the latest sign that the Franco-German alliance at the heart of Europe is wobbling, he says.

Ian writes:

It is striking how the policy responses of EU leaders to the currency crisis are at such odds with public opinion, as centrifugal political action clashes with centripetal national moods.

The crisis management of the past three years has essentially seen Berlin, Brussels, and others resort to technocratic fixes in an incremental process of pooling economic and fiscal policy powers in the eurozone.

Outside of Germany, however, public support for surrendering such powers from the national level to Brussels, as is happening, is declining rapidly, generating an ever widening “democratic deficit” in the EU that the leaders regularly bemoan but have done nothing to address.

Here’s Ian’s full analysis: Eurozone crisis sees Franco-German axis crumbling

Over in Brussels, finance ministers from across the EU have gathered for today’s Ecofin event. On the agenda, the push towards banking union and the details of the 2013 EU budget.

Here’s a few photos of the pre-meeting banter:

The agenda for the meeting is online here:

ECONOMIC and FINANCIAL AFFAIRS Council meeting, Brussels, 14 May 2013

In summary (all times approximate)

• Banking Recovery and Resolution – from 10am BST/11am CEST

• Any other business – from noon BST/1pm CEST

• Draft Amending Budget No 2 to the General Budget 2013 – from 1.30pm BST/2.30pm CEST

• Savings taxation (relating to how savings income is taxed, and potential tax evasion) – from 2.15pm BST/3.15pm CEST

• Press conference: 5pm BST/6pm CEST

The news that German investor confidence has barely improved (see 10.23am) has disappointed financial analysts.

They say it shows that the eurozone recession is grinding on, while Germany itself appears to be stabilising.

Here’s a round-up of reaction, from the Reuters terminal:

Lothar Hessler of HSBC Trinkaus

We had expected a better result after industrial orders and output and exports all rose recently. Also the European Central Bank cut rates.

The data nevertheless point to a stabilisation of the German economy. It is growing again. But the euro zone is still in a recessionary phase. That in turn dampens the upswing here.

David Brown of New View Economics

Germany and the troubled Eurozone economies are poles apart in terms of where they are in the recovery cycle and Eurozone policymakers should not confuse them.

While Germany continues to pull away, the rest of the Eurozone still needs a lot more stimulus efforts from the ECB and government fiscal policies before the Euro area is off the recession rocks.

Thilo Heidrich of Postbank

Basically, the ZEW index remained below expectations. Above all, a strong stock exchange performance and good industrial data from Germany had led people to expect something better.

On the other hand, the data points to a continued expectation among participants of economic stabilisation or a slight recovery.”

…

And Mike van Dulken of Accendo Markets points out that ZEW took the shine of this morning’s decent industrial production data (see 10.12am)

From Pew to ZEW…and the closely watched survey of economic sentiment has shown that German analysts and investors are still alarmed by the troubles in the eurozone.

The ZEW index inched higher to 36.4, from 36.3, dashing forecasts of a larger rise on the back of recent decent data.

A separate measure of current conditions dropped to 8.9 this month from 9.2 in April – suggesting the German economy is struggling to bounce back from its contraction at the end of 2012.

Clemens Fuest, president of the ZEW Institute, commented:

Despite mostly positive economic data for the German economy, the ZEW indicator remains at the level of the previous month.

This may be due to the still poor economic situation in the euro zone, that is also reflected by the recent ECB interest rate cut

Reaction to follow….

Italy’s government debt has risen to a new alltime high of €2.035 trillion in March – the Bank of Italy reported.

Quick bit of housekeeping. Here’s what’s coming up in the eurozone

• Ecofin finance ministers meeting in Brussels begins: 10am BST/11am CEST

• Ecofin press conference: 5pm BST/6pm CEST (estimated!)

• Spanish debt auction: morning

• German ZEW survey of economic sentiment: 10am BST

• ECB’s Jörg Asmussen speaking in Berlin: 5pm BST.

(via RanSquawk)

Good morning, and welcome to our rolling coverage of the eurozone financial crisis, and other key events in the global economy.

Public support for the European project has fallen and distrust between countries is growing, according to a new survey released overnight that shows the damage caused by the region’s debt crisis over the last few years.

The well-respected Washington-based Pew Research Center warned that support for the EU has slid over the last 12 months, from 60% in 2012 to just 45% this year.

In a report titled “The New Sick Man of Europe: the European Union”, Pew showed that backing for European integration tumbling in France.

The people of Europe are increasingly gloomy about economic conditions, disillusioned about their leaders, and losing faith in the whole idea of European Unity, the poll found.

As Pew put it:

The effort over the past half century to create a more united Europe is now the principal casualty of the euro crisis. The European project now stands in disrepute across much of Europe….

The prolonged economic crisis has created centrifugal forces that are pulling European public opinion apart, separating the French from the Germans and the Germans from everyone else.

The southern nations of Spain, Italy and Greece are becoming ever more estranged as evidenced by their frustration with Brussels, Berlin and the perceived unfairness of the economic system.

Pew surveyed over 7,600 people in March in eight countries – Germany, France, the UK, Italy, Spain, Poland, Greece and the Czech Republic.

It also found that Angela Merkel remains the most popular leader in Europe, by a wide margin. Not just at home — Merkel won majority approval for her handling of the European economic crisis in five of the eight nations surveyed.

Other leaders, though, are in the doghouse, Pew says:

Compounding their doubts about the Brussels-based European Union, Europeans are losing faith in the capacity of their own national leaders to cope with the economy’s woes. In most countries surveyed, fewer people today than a year ago think their national executive is doing a good job dealing with the euro crisis.

The full report is here.

Pew’s report comes as European finance ministers gather in Brussels today to discuss how to implement banking union across the eurozone. Perhaps they’lll find time to chat about these findings in the corridors…

I’ll be tracking all the developments through the day, including more highlights of the Pew survey, and reaction to its findings.