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Eurozone crisis live: Ireland votes on EU fiscal treaty Eurozone crisis live: Ireland votes on EU fiscal treaty
(40 minutes later)
4.09pm: Unless the Irish collectively dash to the polling booths this evening, the turnout is going to be pretty low. According to the Irish Times, returning officers across the country were reporting turnout of between 15% and 20% at 2.30pm this afternoon.
4.03pm: More from Henry McDonald in Dublin, as the referendum continues:
Despite all the doom and gloom swirling around the economy and which has dominated the discourse over today's referendum vote the Irish are going through a baby boom.
According to Ireland's Central Statistics Office today Irish women continue to have the highest fertility rate of all 27 EU member states. The average number of children per woman is 2.10.
In 2009 - the year the Celtic Tiger economy crashed - there were 75,554 children born in Ireland, the highest number in 118 years. And it was the fourth consecutive year that there was an increase in births in the Republic.
But the gloom just keeps hanging over the economy on referendum day. Although first the Irish taxpayer and later those from Stuttgart, Munich and other powerhouses in the German economy funded a bank bailout the Irish banks continue to balk at lending money.
Loans dropped by €632 million in April 2012 as the level of lending to Irish households continues to decline, the Irish Central Bank revealed today.
The Central Bank's latest data found that last month's lending was down 4 per cent on a year-to-year basis, with loans for buying property down by 2.4 per cent and loans for consumption and other purposes down 8.4 per cent.
3.50pm: The word from Ireland is that the turnout for today's referendum is pretty light, with reports of turnout below 20% (so far) in many areas.
In #Offaly turnout ranging from 11 to 15%; #Westmeath figure is about 13.5% with #Laois averaging at about 14% #EUFT #EUref
— Jack Quann (@jqbilbao) May 31, 2012
Our correspondent Henry McDonald points out that turnout for the last Nice treaty vote was 59%, so it will take a huge late surge in voting to get close to that figure.
Incidentally, this is the 33rd time Irish people have voted to amend the country's 1937 Constitution although many of these previous referenda were unconnected to EU membership.
The count will take place at Dublin Castle tomorrow, and Henry says it will be interesting to see if Sinn Fein's presidential candidate and Northern Ireland Deputy First Minister Martin McGuinness turns up, because:
...with the news that the Queen will spend two days in Northern Ireland at the end of June as part of the Diamond Jubilee celebrations McGuinness will undoubtedly be fielding further questions on whether he will meet Her Majesty during her visit.
The Sinn Fein MP and chief republican negotiator during the peace process has hinted he may be prepared to meet the Queen following her successful tour of the Republic of Ireland next year. McGuinness might be in a cheerful mood if Ireland votes No as his party will be seen as the main beneficiaries of that outcome.
3.35pm: Speaking of Angela Merkel, the German chancellor spoke about the eurozone crisis today during a summit of Baltic Sea leaders.
Merkel told reporters that she agreed that changes need to be made across Europe and the eurozone, as Olli Rehn and José Manuel Barroso argued yesterday in their report on the EU economy.
Merkel said:

I have always said we need more Europe and that will as a consequence mean that more competences are given to the European Commission...Therefore, I expressly welcome that the Commission set out recommendations for the various countries yesterday.
Merkel, the main roadblock to the introduction of eurobonds, argued that there should be 'no taboos' when the EU considers treaty changes to deliver closer fiscal union, arguing:
There are also steps to integration that will require changes to the treaty. We have not got that far yet, but there should be no taboos.
3.29pm: Christine Lagarde is to hold talks with Spain's deputy finance minister in Washington this afternoon, but the country has NOT sought official funding.3.29pm: Christine Lagarde is to hold talks with Spain's deputy finance minister in Washington this afternoon, but the country has NOT sought official funding.
That's the word from an International Monetary Fund spokesman in America in the last couple of minutes, who insisted that the IMF was not drawing up any plans to help Spain.That's the word from an International Monetary Fund spokesman in America in the last couple of minutes, who insisted that the IMF was not drawing up any plans to help Spain.
The spokesman added that the IMF will begin an annual review of the Spanish economy on June 4.The spokesman added that the IMF will begin an annual review of the Spanish economy on June 4.
3.11pm: The US stock market is not impressed by the ongoing euro woes, today's downward revision to American GDP, and the worrying jobs news.3.11pm: The US stock market is not impressed by the ongoing euro woes, today's downward revision to American GDP, and the worrying jobs news.
While the futures contracts were pointing to a positive opening, the major US markets all lost ground in early trading. The Dow was off 0.41% in the first half hour of trading.While the futures contracts were pointing to a positive opening, the major US markets all lost ground in early trading. The Dow was off 0.41% in the first half hour of trading.
European shares are also in the red, with the German DAX and French CAC both down around 0.8% right now.European shares are also in the red, with the German DAX and French CAC both down around 0.8% right now.
3.08pm: Heads-up: our web news editor Jonathan Haynes just opened a caption competition, for a photo of German chancellor Angela Merkel giving an amusing one-fingered gesture to a retreating penguin (and the prime minister of Poland), while wearing a yellow rubber glove. Enjoy yourselves (and come back afterwards).3.08pm: Heads-up: our web news editor Jonathan Haynes just opened a caption competition, for a photo of German chancellor Angela Merkel giving an amusing one-fingered gesture to a retreating penguin (and the prime minister of Poland), while wearing a yellow rubber glove. Enjoy yourselves (and come back afterwards).
2.30pm: You might remember the row that blew up after the IMF's Christine Lagarde told The Guardian that the Greek people need to stop avoiding paying taxes.2.30pm: You might remember the row that blew up after the IMF's Christine Lagarde told The Guardian that the Greek people need to stop avoiding paying taxes.
Well, Nick Malkoutzis, the deputy editor of Greece's daily English language newspaper Kathimerini, has written this article on the issue, partly based on the views of his readers.Well, Nick Malkoutzis, the deputy editor of Greece's daily English language newspaper Kathimerini, has written this article on the issue, partly based on the views of his readers.
Malkoutzis makes a series of important points, including:Malkoutzis makes a series of important points, including:
• yes, Greece has a large shadow economy, but so do many other countries both in Europe and the developing world. The country isn't uniquely sinful.
• Greeks may rely on the inefficiency of state bureaucracy to simply evade taxes, but in other countries large companies and rich individuals simply use legal tax loopholes to avoid paying tax on their earnings.		 • yes, Greece has a large shadow economy, but so do many other countries both in Europe and the developing world. The country isn't uniquely sinful.
• Greeks may rely on the inefficiency of state bureaucracy to evade taxes, but in other countries large companies and rich individuals use legal tax loopholes to avoid paying tax on their earnings.
Malkoutzis also suggests that officials and critics may not want to confront the scale of public suffering in Greece (on this point, Lagarde said she had more sympathy for children in Africa than in Athens). He concludes:Malkoutzis also suggests that officials and critics may not want to confront the scale of public suffering in Greece (on this point, Lagarde said she had more sympathy for children in Africa than in Athens). He concludes:
But, then again, stories of workers losing their jobs every day, thousands having no benefits or healthcare, sick people not being able to buy their medicines and some being pushed so far they take their own lives are not what you want to hear before bedtime. These are the kind of stories that might just keep you awake at night.But, then again, stories of workers losing their jobs every day, thousands having no benefits or healthcare, sick people not being able to buy their medicines and some being pushed so far they take their own lives are not what you want to hear before bedtime. These are the kind of stories that might just keep you awake at night.
The full piece is here.The full piece is here.
2.24pm: Sticking with the US briefly -- it's not looking good for Friday's hotly watched "nonfarm payroll" figures.2.24pm: Sticking with the US briefly -- it's not looking good for Friday's hotly watched "nonfarm payroll" figures.
The number of US workers filing for unemployment benefits jumped last week, a sign that the recovery in the job market continues to slow. Initial jobless claims rose by 10,000 to seasonally adjusted 383,000 in the week ended May 26, the Labour Department said Thursday.The number of US workers filing for unemployment benefits jumped last week, a sign that the recovery in the job market continues to slow. Initial jobless claims rose by 10,000 to seasonally adjusted 383,000 in the week ended May 26, the Labour Department said Thursday.
But US stock markets so far seem to be taking the news in their stride. The Dow Futures - an indication of the direction markets are likely to take - are up slightly ahead of the opening bell.But US stock markets so far seem to be taking the news in their stride. The Dow Futures - an indication of the direction markets are likely to take - are up slightly ahead of the opening bell.
2.06pm: Here's our Wall Street correspondent, Dominic Rushe, on the latest US GDP data (see 1.41pm)2.06pm: Here's our Wall Street correspondent, Dominic Rushe, on the latest US GDP data (see 1.41pm)
With all the talk about European austerity v US spending it's interesting to see what impact the cuts the US is making are having an impact on its GDP.With all the talk about European austerity v US spending it's interesting to see what impact the cuts the US is making are having an impact on its GDP.
The Commerce Department says government spending contributed to the slow down in economic growth. Federal government spending was down 5.9% in the first quarter after a decrease of 6.9% in the fourth. State and local spending was also cut, down 2.5%.The Commerce Department says government spending contributed to the slow down in economic growth. Federal government spending was down 5.9% in the first quarter after a decrease of 6.9% in the fourth. State and local spending was also cut, down 2.5%.
Dom's also now written a full story on the news that US GDP grew by 1.9% (annualised) in Q1 2012, not 2.2% as first estimated, here.Dom's also now written a full story on the news that US GDP grew by 1.9% (annualised) in Q1 2012, not 2.2% as first estimated, here.
1.41pm: US economic growth for the first three months of 2012 has been revised downwards. America now grew by 1.9% in the quarter on an annualised basis (or around 0.475% on the quarter-on-quarter basis used in Europe).1.41pm: US economic growth for the first three months of 2012 has been revised downwards. America now grew by 1.9% in the quarter on an annualised basis (or around 0.475% on the quarter-on-quarter basis used in Europe).
The downgrade was expected by economists, and is another indication that the global economy didn't enjoy a great start to 2012 (the eurozone stagnated, while the UK shrank by 0.3%).The downgrade was expected by economists, and is another indication that the global economy didn't enjoy a great start to 2012 (the eurozone stagnated, while the UK shrank by 0.3%).
The data also showed an unexpected drop in US corporate profitability, which fell by 4.1% in the quarter. That's the biggest drop since the last three months of 2008, when panic after the collapse of Lehman Brothers sent corporate profits falling by more than a quarter.The data also showed an unexpected drop in US corporate profitability, which fell by 4.1% in the quarter. That's the biggest drop since the last three months of 2008, when panic after the collapse of Lehman Brothers sent corporate profits falling by more than a quarter.
Economics professor Nouriel Roubini fears this is the start of a trend, as economic problems eat into the corporate bottom line:Economics professor Nouriel Roubini fears this is the start of a trend, as economic problems eat into the corporate bottom line:
Start of the profit squeeze? @MarkitEconomics: US Q1 corporate profits decline largest since Q4 2008 (-26.5 PCT) according to @Reuters #USStart of the profit squeeze? @MarkitEconomics: US Q1 corporate profits decline largest since Q4 2008 (-26.5 PCT) according to @Reuters #US
— Nouriel Roubini (@Nouriel) May 31, 2012— Nouriel Roubini (@Nouriel) May 31, 2012
1.01pm: Spain is having a relatively calm day, with bond yields falling back from danger levels. The Spanish 10-year bond yield has dropped back to 6.47%, reversing yesterday's alarming rise as concern over its banks escalated.1.01pm: Spain is having a relatively calm day, with bond yields falling back from danger levels. The Spanish 10-year bond yield has dropped back to 6.47%, reversing yesterday's alarming rise as concern over its banks escalated.
Good. But there is also worrying news from the Bank of Spain about the amount of capital leaving the country.Good. But there is also worrying news from the Bank of Spain about the amount of capital leaving the country.
Giles Tremlett reports from Madrid:Giles Tremlett reports from Madrid:
People and companies have been taking their money out of Spain at an unprecedented rate. Some €66.2bn left the country in March, according to figures published today by the Bank of Spain.People and companies have been taking their money out of Spain at an unprecedented rate. Some €66.2bn left the country in March, according to figures published today by the Bank of Spain.
That is the largest monthly amount since the statistical series started in 1990, according to El País, and raised the spectre of capital flight as people worry about the country staying with the euro.That is the largest monthly amount since the statistical series started in 1990, according to El País, and raised the spectre of capital flight as people worry about the country staying with the euro.
It was more than twice the previous month and means some €193bn have left Spain over the past nine months.It was more than twice the previous month and means some €193bn have left Spain over the past nine months.
Spanish banks lost two percent of their deposits in the same month. That is by no means a run, but it is also one of the largest figures for the past 15 years.Spanish banks lost two percent of their deposits in the same month. That is by no means a run, but it is also one of the largest figures for the past 15 years.
El Pais has a great graph showing monthly capital levels here (I've taken a small screengrab above as a teaser).El Pais has a great graph showing monthly capital levels here (I've taken a small screengrab above as a teaser).
12.36pm: Although the main referendum is taking place in Ireland today, voting has already taken place in some islands off the coast of Ireland.12.36pm: Although the main referendum is taking place in Ireland today, voting has already taken place in some islands off the coast of Ireland.
Voters on five islands in the Donegal area voted on Monday. On Arranmore, just 43 voters out of an electorate of 173 cast their vote.Voters on five islands in the Donegal area voted on Monday. On Arranmore, just 43 voters out of an electorate of 173 cast their vote.
A record low turnout, according to presiding officer Nora Gallagher who told journalists:A record low turnout, according to presiding officer Nora Gallagher who told journalists:
It's the lowest turnout ever.It's the lowest turnout ever.
On another island, Inishfree, the only man to actually live there cast his vote. Although Barry Edgar Pilcher was able to exercise his democratic right (the ballot box was actually placed on his livingroom table) a 63-year German named Hans Schleweck who resides on the mainland was disappointed to discover he could not join in the referendum.On another island, Inishfree, the only man to actually live there cast his vote. Although Barry Edgar Pilcher was able to exercise his democratic right (the ballot box was actually placed on his livingroom table) a 63-year German named Hans Schleweck who resides on the mainland was disappointed to discover he could not join in the referendum.
According to The Irish Times, Mr Pilcher then treated the returning officer, a Garda officer, and the disappointed Mr Schleweck to a tune or two on his saxophone.According to The Irish Times, Mr Pilcher then treated the returning officer, a Garda officer, and the disappointed Mr Schleweck to a tune or two on his saxophone.
12.28pm: Turnout may have been low in Ireland in the first few hours of the referendum (see 11.38am), but the main party leaders voted early.12.28pm: Turnout may have been low in Ireland in the first few hours of the referendum (see 11.38am), but the main party leaders voted early.
The Taoiseach, Enda Kenny, cast his ballot at St Patrick's National School in Castlebar, County Mayo, while deputy prime minister Eamon Gilmore voted in Shankill, south Dublin this morning.The Taoiseach, Enda Kenny, cast his ballot at St Patrick's National School in Castlebar, County Mayo, while deputy prime minister Eamon Gilmore voted in Shankill, south Dublin this morning.
For the No side, Sinn Féin president Gerry Adams cast his ballot in the constituency of Louth.For the No side, Sinn Féin president Gerry Adams cast his ballot in the constituency of Louth.
And here's a photo of a Catholic nun casting her vote at the Drumcondra polling station in Dublin.And here's a photo of a Catholic nun casting her vote at the Drumcondra polling station in Dublin.
12.22pm: Irish army bomb disposal officers have made safe a suspicious object outside the constituency office of Sinn Féin Dublin TD Mary Lou McDonald.12.22pm: Irish army bomb disposal officers have made safe a suspicious object outside the constituency office of Sinn Féin Dublin TD Mary Lou McDonald.
The suspect object was found at her office on Dublin's North Strand this morning. The military technical officers have taken the object away to determine if it was a viable explosive device.The suspect object was found at her office on Dublin's North Strand this morning. The military technical officers have taken the object away to determine if it was a viable explosive device.
2PM UPDATE: Sinn Féin later said the suspect device left at Mrs McDonald's office was a hoax pipebomb.2PM UPDATE: Sinn Féin later said the suspect device left at Mrs McDonald's office was a hoax pipebomb.
11.54am: Fitch, the rating agency, warns that "the risk of a Greek exit [from the eurozone] is material and rising".11.54am: Fitch, the rating agency, warns that "the risk of a Greek exit [from the eurozone] is material and rising".
It does not expect the euro to break up completely, though.It does not expect the euro to break up completely, though.
The warning comes in a new report, in which Fitch outlines how it would respond to a hypothetical exit from the eurozone. It explained that it would rule that the exiting country had defaulted, and would also slash ratings on companies who are based within the country, to junk status or worse....The warning comes in a new report, in which Fitch outlines how it would respond to a hypothetical exit from the eurozone. It explained that it would rule that the exiting country had defaulted, and would also slash ratings on companies who are based within the country, to junk status or worse....
Fitch said:Fitch said:
Ratings of entities from the exiting country would reflect the severe adverse effects from recession, inflation, lack of credit, bank deposit restrictions and capital controls, and potential social and political instability. Combined with the application of rating criteria on distressed debt exchanges (DDEs) to a redenomination scenario, many ratings are likely to go to low speculative-grade or default.Ratings of entities from the exiting country would reflect the severe adverse effects from recession, inflation, lack of credit, bank deposit restrictions and capital controls, and potential social and political instability. Combined with the application of rating criteria on distressed debt exchanges (DDEs) to a redenomination scenario, many ratings are likely to go to low speculative-grade or default.
11.38am: Here's some more info on turnout in the Irish referendum (see also 11.17am). RTE is reporting that by 10am turnout across Dublin polling stations was around only 4.6% of the electorate.11.38am: Here's some more info on turnout in the Irish referendum (see also 11.17am). RTE is reporting that by 10am turnout across Dublin polling stations was around only 4.6% of the electorate.
The Yes camp will be hoping for a lunchtime and later tea time surge, Henry McDonald reckons.The Yes camp will be hoping for a lunchtime and later tea time surge, Henry McDonald reckons.
On that topic...opposition party Fianna Fail has issued a statement in the last few minutes urging people to exercise their democratic franchise. Fianna Fail stands alone on the opposition benches in the Irish parliament as the party calling for a Yes vote alongside the ruling.On that topic...opposition party Fianna Fail has issued a statement in the last few minutes urging people to exercise their democratic franchise. Fianna Fail stands alone on the opposition benches in the Irish parliament as the party calling for a Yes vote alongside the ruling.
11.17am: Irish public broadcaster RTE has tweeted that by 9.30am there was only a 3.8% turn out of voters in Dublin South while the turn out in neighbouring Dun Laoghaire was a mere 3%.11.17am: Irish public broadcaster RTE has tweeted that by 9.30am there was only a 3.8% turn out of voters in Dublin South while the turn out in neighbouring Dun Laoghaire was a mere 3%.
Henry McDonald explains:Henry McDonald explains:
It's very early days of course but it is worth nothing these two constituencies south of the river Liffey have produced some of the largest pro European votes in all the referenda on the EU preceding today's one.It's very early days of course but it is worth nothing these two constituencies south of the river Liffey have produced some of the largest pro European votes in all the referenda on the EU preceding today's one.
Polls opened at 7am, allowing people to vote before work. They'll also be open until 10pm tonight.Polls opened at 7am, allowing people to vote before work. They'll also be open until 10pm tonight.
11.12am: An update from Brussels – Mario Monti is telling the Germans that they need to think again on the euro.11.12am: An update from Brussels – Mario Monti is telling the Germans that they need to think again on the euro.
Ian Traynor reports:Ian Traynor reports:
Also addressing a Brussels audience this morning, the Italian prime minister positioned himself halfway between Chancellor Angela Merkel (Frau Austerity) and President François Hollande (Monsieur Growth).Also addressing a Brussels audience this morning, the Italian prime minister positioned himself halfway between Chancellor Angela Merkel (Frau Austerity) and President François Hollande (Monsieur Growth).
He supported the Germans in resisting French calls for the European Central Bank to expand its mandate to promote growth in the eurozone, but backed the French campaign pressing Berlin for greater growth-oriented flexibility. The popular backlash in Greece and elsewhere against austerity meant that the German government had to "reflect quickly and deeply" over how to respond.He supported the Germans in resisting French calls for the European Central Bank to expand its mandate to promote growth in the eurozone, but backed the French campaign pressing Berlin for greater growth-oriented flexibility. The popular backlash in Greece and elsewhere against austerity meant that the German government had to "reflect quickly and deeply" over how to respond.
The comments come after the other Mario, Sig. Draghi, added his weight to calls for closer banking union across Europe.The comments come after the other Mario, Sig. Draghi, added his weight to calls for closer banking union across Europe.
11.03am: As flagged up earlier (see 8.57am), public anger over Ireland's debt ridden and generally loathed banks is one factor in today's referendum.11.03am: As flagged up earlier (see 8.57am), public anger over Ireland's debt ridden and generally loathed banks is one factor in today's referendum.
The news in the last 24 hours that the Irish banking sector needs another €4bn cash injection could influence voters, one way or the other. (details here)The news in the last 24 hours that the Irish banking sector needs another €4bn cash injection could influence voters, one way or the other. (details here)
From Dublin, Henry McDonald reports:From Dublin, Henry McDonald reports:
Where the money will come from is anybody's guess. Some suspect the billions could come from a second international bail out, others fear the state may have to raise the cash elsewhere to keep the Irish banking system functioning.Where the money will come from is anybody's guess. Some suspect the billions could come from a second international bail out, others fear the state may have to raise the cash elsewhere to keep the Irish banking system functioning.
Either way the prospect of Irish High Street banks getting more largesse from the taxpayer, whether they be Irish, German or whoever, will enrage most people in the state. The question is: willl this focus minds further on the necessity to stay in the eurozone because of the need for a potential second loan from Ireland's EU partners and thus boost the Yes camp or will it only compound the growing resentment against the entire financial system and provide more late ammunition for the No side?Either way the prospect of Irish High Street banks getting more largesse from the taxpayer, whether they be Irish, German or whoever, will enrage most people in the state. The question is: willl this focus minds further on the necessity to stay in the eurozone because of the need for a potential second loan from Ireland's EU partners and thus boost the Yes camp or will it only compound the growing resentment against the entire financial system and provide more late ammunition for the No side?
10.45am: A new opinion poll was published in Greece today, putting New Democracy ahead of Syriza in the run-up to the June 17 parliamentary election.10.45am: A new opinion poll was published in Greece today, putting New Democracy ahead of Syriza in the run-up to the June 17 parliamentary election.
Conducted by DATA RC between 28 and 30 May, it showed that 24.5% of people would vote for New Democracy, versus 22.1% for Syriza. The percentages rise to 28.4% and 25.6% when 'don't knows' and those who will decline to vote are excluded.Conducted by DATA RC between 28 and 30 May, it showed that 24.5% of people would vote for New Democracy, versus 22.1% for Syriza. The percentages rise to 28.4% and 25.6% when 'don't knows' and those who will decline to vote are excluded.
Previous polling has put Syriza (which has pledged to renegotiate Greece's austerity programme) in the lead, or neck-and-neck with New Democracy.Previous polling has put Syriza (which has pledged to renegotiate Greece's austerity programme) in the lead, or neck-and-neck with New Democracy.
10.22am: Mario Draghi has made an important intervention on the eurozone crisis this morning, telling the European Parliament that national governments must show proper leadership now to stem the crisis.10.22am: Mario Draghi has made an important intervention on the eurozone crisis this morning, telling the European Parliament that national governments must show proper leadership now to stem the crisis.
The head of the European Central Bank told the Parliament's economic affairs committee that there was no time to waste in fixing Spain and moving more radically towards a proper eurozone fiscal union.The head of the European Central Bank told the Parliament's economic affairs committee that there was no time to waste in fixing Spain and moving more radically towards a proper eurozone fiscal union.
As Ian Traynor explains from Brussels, after yesterday's rather impotent calls from the European Commission, Draghi is a formidable voice:As Ian Traynor explains from Brussels, after yesterday's rather impotent calls from the European Commission, Draghi is a formidable voice:
Draghi added his views to the growing clamour for a eurozone banking union, with common guarantees for depositors.Draghi added his views to the growing clamour for a eurozone banking union, with common guarantees for depositors.
Europe's political leaders need to show "vision", he said, and can't expect the ECB to act as a surrogate eurozone government. A eurozone banking union would need to be supervised centrally, include eurozone guarantees for depositors and a resolution fund, he said.Europe's political leaders need to show "vision", he said, and can't expect the ECB to act as a surrogate eurozone government. A eurozone banking union would need to be supervised centrally, include eurozone guarantees for depositors and a resolution fund, he said.
The requirement was "further centralization of banking supervision." Draghi bluntly showered scorn on the "worst possible" attempts of national authorities to deal with imploding banks, notably in Spain and Belgium.The requirement was "further centralization of banking supervision." Draghi bluntly showered scorn on the "worst possible" attempts of national authorities to deal with imploding banks, notably in Spain and Belgium.
"What Dexia shows and Bankia shows as well is that whenever we are confronted with the dramatic need to recapitalize, if you look back, the reaction of the national supervisors... is to underestimate the problem, then come out with a first assessment, a second, a third, fourth...That is the worst possible way of doing things, because everybody ends up doing the right thing but at the highest possible cost and price.""What Dexia shows and Bankia shows as well is that whenever we are confronted with the dramatic need to recapitalize, if you look back, the reaction of the national supervisors... is to underestimate the problem, then come out with a first assessment, a second, a third, fourth...That is the worst possible way of doing things, because everybody ends up doing the right thing but at the highest possible cost and price."
As Ian puts it, Draghi appears to be "cautiously enlisting in the cause of a eurozone banking union", which would open up a new front in the euro wars. He explains:As Ian puts it, Draghi appears to be "cautiously enlisting in the cause of a eurozone banking union", which would open up a new front in the euro wars. He explains:
Top people in Brussels predict a looming and bruising battle between Frankfurt and Berlin which will centre around the uses and abuses of the European Stability Mechanism, the eurozone €500bn permanent bailout fund which is to be up and running in July.Top people in Brussels predict a looming and bruising battle between Frankfurt and Berlin which will centre around the uses and abuses of the European Stability Mechanism, the eurozone €500bn permanent bailout fund which is to be up and running in July.
One of the biggest and most protracted conflicts over Greece in the past couple of years was between Angela Merkel and Jean-Claude Trichet, Draghi's French predecessor, revolving around the terms of the second Greek bailout, specifically on German demands that it include haircuts for Greece's private creditors. Merkel won, but now concedes she was wrong and that this chastening experience won't be repeated.One of the biggest and most protracted conflicts over Greece in the past couple of years was between Angela Merkel and Jean-Claude Trichet, Draghi's French predecessor, revolving around the terms of the second Greek bailout, specifically on German demands that it include haircuts for Greece's private creditors. Merkel won, but now concedes she was wrong and that this chastening experience won't be repeated.
Trichet consistently argued that Berlin's "moral hazard" argument on private lenders taking a hit and sharing the losses was misplaced and would prove disastrous, setting a precedent and deterring investors across the eurozone. He lost on Greece, but may feel vindicated by events.Trichet consistently argued that Berlin's "moral hazard" argument on private lenders taking a hit and sharing the losses was misplaced and would prove disastrous, setting a precedent and deterring investors across the eurozone. He lost on Greece, but may feel vindicated by events.
Draghi's remarks this morning presumably mean that the ESM firewall would need to be deployed for a banking union, perhaps for the direct recapitalisation of Spanish banks. This is not possible under the treaty setting up the ESM. The money can only go to governments which can then funnel it to the banks. For that to happen, though, a government has to request a bailout with all that that implies - humiliation, very tight strings attached.Draghi's remarks this morning presumably mean that the ESM firewall would need to be deployed for a banking union, perhaps for the direct recapitalisation of Spanish banks. This is not possible under the treaty setting up the ESM. The money can only go to governments which can then funnel it to the banks. For that to happen, though, a government has to request a bailout with all that that implies - humiliation, very tight strings attached.
That has been the German precondition so far. The outcome of this gathering dispute will show whether Berlin is undertaking a serious shift in its approach to the euro crisis.That has been the German precondition so far. The outcome of this gathering dispute will show whether Berlin is undertaking a serious shift in its approach to the euro crisis.
10.14am: New Greek retail sales have just been released, and they're dire.10.14am: New Greek retail sales have just been released, and they're dire.
Retail sales in March were 16.2% lower than a year ago on a volume basis, accelerating the decline in consumer spending (February's data showed a 12.9% tumble).Retail sales in March were 16.2% lower than a year ago on a volume basis, accelerating the decline in consumer spending (February's data showed a 12.9% tumble).
The bad data is hardly a surprise - and simply reinforces the point that the Greek economy, now in its 5th year of recession, is spiralling downwards.The bad data is hardly a surprise - and simply reinforces the point that the Greek economy, now in its 5th year of recession, is spiralling downwards.
This graph by Reuters' Scott Barber shows how Greek retail sales and consumer confidence began to slide as soon as the financial crisis began, and have worsened again in recent months.This graph by Reuters' Scott Barber shows how Greek retail sales and consumer confidence began to slide as soon as the financial crisis began, and have worsened again in recent months.
10.03am: Just in - inflation across the eurozone has fallen to an annual rate to 2.4% in May, from 2.6% in April. Economists had expected a smaller fall, to 2.5%.10.03am: Just in - inflation across the eurozone has fallen to an annual rate to 2.4% in May, from 2.6% in April. Economists had expected a smaller fall, to 2.5%.
This easing in the rising cost of living may give the European Central Bank more leeway on monetary policy, perhaps to lower interest rates again soon (the ECB's governing council meets next week)This easing in the rising cost of living may give the European Central Bank more leeway on monetary policy, perhaps to lower interest rates again soon (the ECB's governing council meets next week)
Update: Here's Howard Archer of IHS Global Insight on the fall in eurozone inflation:Update: Here's Howard Archer of IHS Global Insight on the fall in eurozone inflation:
May's drop in consumer price inflation eases the squeeze on consumers' purchasing power, thereby providing much needed support to growth.May's drop in consumer price inflation eases the squeeze on consumers' purchasing power, thereby providing much needed support to growth.
It also facilitates an interest rate cut by the ECB sooner rather than later, and there is an ever more compelling case for this given the current deteriorating economic growth environment in the Eurozone and the heightened uncertainty stemming from the situations in both Greece and Spain.It also facilitates an interest rate cut by the ECB sooner rather than later, and there is an ever more compelling case for this given the current deteriorating economic growth environment in the Eurozone and the heightened uncertainty stemming from the situations in both Greece and Spain.
9.52am: Polling is well underway in Ireland now on the EU fiscal treaty referendum, as the Republic's 3.3 million voters play their part today in shaping the EU's future.9.52am: Polling is well underway in Ireland now on the EU fiscal treaty referendum, as the Republic's 3.3 million voters play their part today in shaping the EU's future.
Henry McDonald reports from Dublin:Henry McDonald reports from Dublin:
Opinion polls thus far have suggested that the Irish electorate will endorse the treaty designed to impose budgetary discipline on all EU states. But a lot could depend on turn-out! Traditionally anti-European voters are more inclined to get out and vote.Opinion polls thus far have suggested that the Irish electorate will endorse the treaty designed to impose budgetary discipline on all EU states. But a lot could depend on turn-out! Traditionally anti-European voters are more inclined to get out and vote.
And in 2001 and 2008 these voters willingness to turn out at polling booths across the country's 43 constituencies proved critical in defeating first the Nice and then later the Lisbon Treaties on EU reform.And in 2001 and 2008 these voters willingness to turn out at polling booths across the country's 43 constituencies proved critical in defeating first the Nice and then later the Lisbon Treaties on EU reform.
Compared to last week's blistering sunshine much of Ireland today is wet, grey and overcast which may put off some voters from turning out and possibly boost the No camp's fortunes although all the polls have indicated the Republic will pass the treaty. Counting won't begin until 9am on Friday morning across 26 count centres in the state.Compared to last week's blistering sunshine much of Ireland today is wet, grey and overcast which may put off some voters from turning out and possibly boost the No camp's fortunes although all the polls have indicated the Republic will pass the treaty. Counting won't begin until 9am on Friday morning across 26 count centres in the state.
The result which all of Europe and beyond will be watching should be known around tea time on Friday.The result which all of Europe and beyond will be watching should be known around tea time on Friday.
9.23am: Germany's unemployment rate has dropped again -- dipping to 6.7% in May, from 6.8% the previous month.9.23am: Germany's unemployment rate has dropped again -- dipping to 6.7% in May, from 6.8% the previous month.
But on a sesasonally adjusted basis, the number of people out of work was unchanged at 2.872m, while economists had expected a drop of around 5,000. That suggests that the German employment market may be slowing down, after a decent run in recent months.But on a sesasonally adjusted basis, the number of people out of work was unchanged at 2.872m, while economists had expected a drop of around 5,000. That suggests that the German employment market may be slowing down, after a decent run in recent months.
Carsten Brzeski of ING warned that "signs are increasing that the German labour market is slowly cracking up".Carsten Brzeski of ING warned that "signs are increasing that the German labour market is slowly cracking up".
At 6.7%, the German unemployment rate is comfortably below the eurozone average of 10.9% (a 15-year high).At 6.7%, the German unemployment rate is comfortably below the eurozone average of 10.9% (a 15-year high).
9.10am: In the bond markets, the yields* on French and Austrian 10-year bonds have both fallen to their lowest level since the euro was created.9.10am: In the bond markets, the yields* on French and Austrian 10-year bonds have both fallen to their lowest level since the euro was created.
In the latest sign that investors are stashing their funds in safe European debt, the price of debt issued by France and Austra rallied this morning. This pushed the yield on France's 10-year bond down to just 2.379%, and the Austrian equivalent to 2.13%. In the latest sign that investors are stashing their funds in safe European debt, the price of debt issued by France and Austra rallied this morning. This pushed the yield on France's 10-year bond down to just 2.379%, and the Austrian equivalent to 2.13%.
In the European stock markets, shares have gained a little this morning. The FTSE 100 is up 45 points (+0.86%), and the Spanish IBEX has gained 1.2%.In the European stock markets, shares have gained a little this morning. The FTSE 100 is up 45 points (+0.86%), and the Spanish IBEX has gained 1.2%.
* - yields measure the rate of return on a bond, falling when the price rises and vice versa. So if a trader is prepared to pay more to hold a certain bond, s/he accepts a lower return.* - yields measure the rate of return on a bond, falling when the price rises and vice versa. So if a trader is prepared to pay more to hold a certain bond, s/he accepts a lower return.
8.57am: There have been signs of a certain degree of anti-German sentiment in Ireland in the run-up to today's referendum:8.57am: There have been signs of a certain degree of anti-German sentiment in Ireland in the run-up to today's referendum:
This photo was taken outside Leinster House, where the Irish Parliament is based, on Wednesday.This photo was taken outside Leinster House, where the Irish Parliament is based, on Wednesday.
It's now 18 months since Ireland signed up for its highly unpopular €85bn bailout plan, which forces hefty cuts to government spending and a raft of tax rises. The most unpopular issue, though, is that Ireland took the debts of its failing banks on to the public books. That decision helped prevent the contagion hitting other financial institutions across Europe, but in return Ireland is left paying off €31bn of promissory notes at high interest rates.It's now 18 months since Ireland signed up for its highly unpopular €85bn bailout plan, which forces hefty cuts to government spending and a raft of tax rises. The most unpopular issue, though, is that Ireland took the debts of its failing banks on to the public books. That decision helped prevent the contagion hitting other financial institutions across Europe, but in return Ireland is left paying off €31bn of promissory notes at high interest rates.
8.40am: We've just launched this Q&A explaining how the Irish referendum works.8.40am: We've just launched this Q&A explaining how the Irish referendum works.
8.32am: Polling data in the run-up to today's vote suggested that the Yes camp will win. But there are no guarantees.8.32am: Polling data in the run-up to today's vote suggested that the Yes camp will win. But there are no guarantees.
As the BBC explains:As the BBC explains:
The nightmare scenario for the government is that people wake up on Thursday morning and decide to give ministers a bloody nose by voting 'no' in the referendum.The nightmare scenario for the government is that people wake up on Thursday morning and decide to give ministers a bloody nose by voting 'no' in the referendum.
After four years of austerity measures, some anti-treaty campaigners are predicting the "revenge of the people".After four years of austerity measures, some anti-treaty campaigners are predicting the "revenge of the people".
Four opinion polls released over the weekend indicated that around 60% of voters would back the treaty. But a significant number of people have been classed as 'don't knows' in the run-up to today's vote.Four opinion polls released over the weekend indicated that around 60% of voters would back the treaty. But a significant number of people have been classed as 'don't knows' in the run-up to today's vote.
The BBC also says that some 'yes' campaigners reckon the gap could be as close as 53-47. A sign of nerves, or an attempt to encourage Yes voters to the polls?The BBC also says that some 'yes' campaigners reckon the gap could be as close as 53-47. A sign of nerves, or an attempt to encourage Yes voters to the polls?
8.28am: Last night, Irish prime minister Enda Kenny urged the Irish people to vote Yes in today's referendum on the fiscal compact. He claimed that the country's borrowing costs would leap to dangerous levels if it did not have the protection of the European Stability Mechanism.8.28am: Last night, Irish prime minister Enda Kenny urged the Irish people to vote Yes in today's referendum on the fiscal compact. He claimed that the country's borrowing costs would leap to dangerous levels if it did not have the protection of the European Stability Mechanism.
Taoiseach Kenny said:Taoiseach Kenny said:
Countries that ratify this have access to the ESM, countries that don't won't and the difference between 3% and 7%, or even 8% or 9%, is enormous in the context of availability of funding, were that ever to be necessary.Countries that ratify this have access to the ESM, countries that don't won't and the difference between 3% and 7%, or even 8% or 9%, is enormous in the context of availability of funding, were that ever to be necessary.

Ireland's 10-year bond are trading at a yield of 7.4% this morning. That's a higher rate than a country can reasonably borrow at, but not so high that investors have given up on the country (whose borrowing needs are covered until the end of 2013 by its current bailout)
Ireland's 10-year bond are trading at a yield of 7.4% this morning. That's a higher rate than a country can reasonably borrow at, but not so high that investors have given up on the country (whose borrowing needs are covered until the end of 2013 by its current bailout)
The No campaign, though, takes a very different view. It argues that rejecting the Treaty will give Ireland the authority to go back to the rest of Europe and demand a better bailout plan.The No campaign, though, takes a very different view. It argues that rejecting the Treaty will give Ireland the authority to go back to the rest of Europe and demand a better bailout plan.
Sinn Féin president Gerry Adams argued that voting No was the "patriotic thing to do":Sinn Féin president Gerry Adams argued that voting No was the "patriotic thing to do":
I ask Irish citizens not to be bullied, not to give their democratic rights away, not to give up their say over Irish economic policy and not to write austerity into the Constitution.I ask Irish citizens not to be bullied, not to give their democratic rights away, not to give up their say over Irish economic policy and not to write austerity into the Constitution.
8.08am: Irish voters face an unenviable choice today. The EU fiscal compact will force member states to hit tough budget targets, which could mean more further pain for a country that is already deep into its austerity programme.8.08am: Irish voters face an unenviable choice today. The EU fiscal compact will force member states to hit tough budget targets, which could mean more further pain for a country that is already deep into its austerity programme.
But the fiscal compact will also guarantee access to the European Stability Mechanism, Europe's new bailout fund – a financial lifeline to countries who cannot borrow in the debt markets.But the fiscal compact will also guarantee access to the European Stability Mechanism, Europe's new bailout fund – a financial lifeline to countries who cannot borrow in the debt markets.
Our leader article argues today that the pact is "an unroadworthy vehicle going the wrong way":Our leader article argues today that the pact is "an unroadworthy vehicle going the wrong way":
It's lethal not only for its occupants but other road users, it's got an oil leak and probably no brakes. Would you hitch a ride in one, if it lurched to a halt in front of you?It's lethal not only for its occupants but other road users, it's got an oil leak and probably no brakes. Would you hitch a ride in one, if it lurched to a halt in front of you?
But with no guarantee that Ireland can return to the financial markets as soon as planned, refusing a lift could be a gamble. Ultimately, it's a choice between fear and anger:But with no guarantee that Ireland can return to the financial markets as soon as planned, refusing a lift could be a gamble. Ultimately, it's a choice between fear and anger:

Fear might well win the day in Ireland: no one knows whether a Greek exit would be a blip on the screens or another Lehman Brothers. But if the firewalls are not as thick as they are cracked up to be, would Ireland be the next point of contagion? The Germans need to get a signal, but would your economy be the one wanting to send it ? It's hardly a great choice.
Fear might well win the day in Ireland: no one knows whether a Greek exit would be a blip on the screens or another Lehman Brothers. But if the firewalls are not as thick as they are cracked up to be, would Ireland be the next point of contagion? The Germans need to get a signal, but would your economy be the one wanting to send it ? It's hardly a great choice.
7.55am: Here's a quick agenda of some of the main events happening today:7.55am: Here's a quick agenda of some of the main events happening today:
• Irish referendum: all day, polls close at 10pm
• German unemployment data: 8.55am
• Eurozone inflation for May: 10am
• US Q1 GDP, second revision: 1.30pm
• Brussels Economic Forum: all day (including Olli Rehn and Mario Monti).		• Irish referendum: all day, polls close at 10pm
• German unemployment data: 8.55am
• Eurozone inflation for May: 10am
• US Q1 GDP, second revision: 1.30pm
• Brussels Economic Forum: all day (including Olli Rehn and Mario Monti).
India, Switzerland, the Philippines and Denmark are all releasing (or have already released) GDP data, so we'll keep an eye on the reaction to that data, for a more global economic perspective.India, Switzerland, the Philippines and Denmark are all releasing (or have already released) GDP data, so we'll keep an eye on the reaction to that data, for a more global economic perspective.
7.45am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis.7.45am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis.
Ireland is the centre of attention today, as it holds its referendum on whether to ratify the fiscal compact. Polls have just opened across the country, and our Dublin correspondent Henry McDonald will be following all the action throughout the day. The results itself will be released on Friday.Ireland is the centre of attention today, as it holds its referendum on whether to ratify the fiscal compact. Polls have just opened across the country, and our Dublin correspondent Henry McDonald will be following all the action throughout the day. The results itself will be released on Friday.
Elsewhere, Spain is still a major concern. The crisis over its banking sector continues, there is still no clear plan for recapitalising Bankia, and its bond yields are still dangerousy high.Elsewhere, Spain is still a major concern. The crisis over its banking sector continues, there is still no clear plan for recapitalising Bankia, and its bond yields are still dangerousy high.
We'll also be tracking the reaction to yesterday's EU report cards on the European economy, which included a call for closer banking union, and warnings that France and Spain need to do more to bring their deficits down (although Spain may be given more time).We'll also be tracking the reaction to yesterday's EU report cards on the European economy, which included a call for closer banking union, and warnings that France and Spain need to do more to bring their deficits down (although Spain may be given more time).
There's also a lot of economic data being released today, including German unemployment, eurozone inflation, French and German retail figures, and another estimate of US GDP. Busy busyThere's also a lot of economic data being released today, including German unemployment, eurozone inflation, French and German retail figures, and another estimate of US GDP. Busy busy