This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.bbc.co.uk/go/rss/int/news/-/news/business-16082755

The article has changed 9 times. There is an RSS feed of changes available.

Version 0 Version 1
European Central Bank expected to cut interest rates European Central Bank cuts interest rates back to 1%
(about 2 hours later)
The European Central Bank is expected to cut interest rates when it announces its latest monthly decision later. The European Central Bank has cut interest rates back to their historic low of 1%, as expected by markets.
It is tipped to cut eurozone rates by another quarter-point to 1%. The quarter-point cut comes as crisis and recession threaten the eurozone.
But its actions, and the words of ECB President Mario Draghi, will be more closely scrutinised than ever as the ECB is also thought to be preparing a bailout for the Italian government. The decision comes just ahead of a "do-or-die" Brussels summit of EU heads to hammer out a plan to save the euro.
The meeting comes just ahead of a "do-or-die" Brussels summit of EU heads to hammer out a plan to save the euro. All eyes will now be on the ECB President, Mario Draghi, at a post-meeting press conference. The ECB is also thought to be preparing a bailout for the Italian government.
The two-day summit ending on Friday is expected to agree tough new rules and automatic fines to ensure that eurozone governments cut their borrowing to below 3% of their GDPs. It is the second such rate cut since Mr Draghi took over the ECB presidency last month.
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full
The first cut, the day he took over, reversed the central bank's policy direction. Under his predecessor, Jean-Claude Trichet, the ECB had begun raising rates over the summer to ward off higher inflation.
The second cut has returned rates to the 1% level that prevailed from the summer of 2009 to the end of 2010, in response to the global financial crisis and recession.
There is speculation that Mr Draghi may be planning to push interest rates down to almost zero by next year, and then embark on a programme of "quantitative easing" - buying up government debts - similar to that already implemented by the US Federal Reserve and the Bank of England.
Italy plan
The two-day EU summit ending on Friday is expected to agree tough new rules and automatic fines to ensure that eurozone governments cut their borrowing to below 3% of their GDPs.
It will also seek to boost the eurozone governments' own bailout capacity.It will also seek to boost the eurozone governments' own bailout capacity.
Leaders still hope to find a way to double or triple the size of the eurozone governments' bailout fund - the European Financial Stability Facility (EFSF) - from its current 440bn euros (£375bn; $590bn).Leaders still hope to find a way to double or triple the size of the eurozone governments' bailout fund - the European Financial Stability Facility (EFSF) - from its current 440bn euros (£375bn; $590bn).
However, in recent weeks, financial markets have signalled that they do not view the EFSF as a credible solution to the crisis, because Italy and its debts are seen as simply too big for other eurozone governments to rescue.However, in recent weeks, financial markets have signalled that they do not view the EFSF as a credible solution to the crisis, because Italy and its debts are seen as simply too big for other eurozone governments to rescue.
Italy plan
Attention has instead turned to the ECB and its potentially unlimited ability to create the euros needed to rescue Italy.Attention has instead turned to the ECB and its potentially unlimited ability to create the euros needed to rescue Italy.
Last week, Mr Draghi hinted at "robust action" in a speech to the European Parliament, but highlighted the need for governments to take the lead, saying that "sequencing matters".Last week, Mr Draghi hinted at "robust action" in a speech to the European Parliament, but highlighted the need for governments to take the lead, saying that "sequencing matters".
This has been widely interpreted as a demand for an agreement on government borrowing limits in Brussels on Friday as a precondition for the ECB rescuing Italy.This has been widely interpreted as a demand for an agreement on government borrowing limits in Brussels on Friday as a precondition for the ECB rescuing Italy.
Italy's 10-year cost of borrowing - which had risen above the 7% level widely deemed to be unsustainably expensive - has fallen back below 6% in expectation of an ECB bailout. Italy's 10-year cost of borrowing - which had risen above the 7% level widely deemed to be unsustainably expensive - href="http://www.bloomberg.com/apps/quote?ticker=GBTPGR10:IND" >has fallen back to 6.125% in expectation of an ECB bailout.
Analysts expect this rescue to take the form of a loan from the central bank to the International Monetary Fund. Analysts expect think this rescue may take the form of a loan from the central bank to the International Monetary Fund.
The IMF would then in turn provide the loans - with tough conditions attached - needed by Rome.The IMF would then in turn provide the loans - with tough conditions attached - needed by Rome.
The ECB is banned from lending directly to eurozone governments, although this has not stopped it from buying up existing Italian and Spanish debts in the financial markets.The ECB is banned from lending directly to eurozone governments, although this has not stopped it from buying up existing Italian and Spanish debts in the financial markets.
Recession
The quarter-point interest rate cut expected by markets would be the second since Mr Draghi took over the ECB presidency last month.
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full
That first rate cut, the day he took over, reversed the central bank's policy direction. Under his predecessor, Jean-Claude Trichet, the ECB had begun raising rates over the summer to ward off higher inflation.
Markets will also pay close attention to the ECB's forecasts for the eurozone economy.
At the last meeting, the ECB slashed its growth forecasts. Since then, data has continued to point to a recession in Europe, particularly in the crisis-hit countries of Spain and Italy.
A further lowering of forecasts may be taken as a sign that the ECB is set to continue to cut the cost of borrowing.
There is speculation that Mr Draghi may be planning to push interest rates down to almost zero by next year, and then embark on a programme of "quantitative easing" - buying up government debts - similar to that already implemented by the US Federal Reserve and the Bank of England.
Bank collapseBank collapse
The ECB is also expected to announce further measures to support the eurozone's banks.The ECB is also expected to announce further measures to support the eurozone's banks.
Some banks have increasingly been relying on existing emergency loans from the ECB, as they find it harder to borrow money from markets.Some banks have increasingly been relying on existing emergency loans from the ECB, as they find it harder to borrow money from markets.
Meanwhile, other, stronger, banks have been depositing more cash with the central bank - a sign that they do not trust lending the money to their peers.Meanwhile, other, stronger, banks have been depositing more cash with the central bank - a sign that they do not trust lending the money to their peers.
Last week, the ECB joined with the US Federal Reserve, the Bank of England and three other major central banks in announcing an agreement that would ensure that their banks had access to foreign currency emergency loans.Last week, the ECB joined with the US Federal Reserve, the Bank of England and three other major central banks in announcing an agreement that would ensure that their banks had access to foreign currency emergency loans.
The surprise move sparked speculation that one or more major European banks could be on the point of collapse, because of their inability to borrow in US dollars.The surprise move sparked speculation that one or more major European banks could be on the point of collapse, because of their inability to borrow in US dollars.
Meanwhile, banks in Greece are facing an accelerating withdrawal of deposits by ordinary citizens worried that the country may soon exit the eurozone.Meanwhile, banks in Greece are facing an accelerating withdrawal of deposits by ordinary citizens worried that the country may soon exit the eurozone.
Greece's central bank governor, Georgios Provolopoulos, told Germany's Der Spiegel magazine on Tuesday that the bank run was making it harder for the Greek banks to support the country's economy.Greece's central bank governor, Georgios Provolopoulos, told Germany's Der Spiegel magazine on Tuesday that the bank run was making it harder for the Greek banks to support the country's economy.
The ECB has been providing the cash needed by Greek banks to pay out to their fleeing depositors.The ECB has been providing the cash needed by Greek banks to pay out to their fleeing depositors.
But this has, in turn, put strains on the system of eurozone central banks and has increased the ECB's exposure to potential losses if Greece does ultimately stop paying its debts or leave the eurozone.But this has, in turn, put strains on the system of eurozone central banks and has increased the ECB's exposure to potential losses if Greece does ultimately stop paying its debts or leave the eurozone.