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Eurozone crisis live: Spain passes bond auction test, as Bank of England holds firm Eurozone crisis live: Fitch hits Spain with 3-notch downgrade
(40 minutes later)
5.57pm: Fitch gave five reasons for cutring Spain's credit rating by three notches to BBB (see 5.43pm for the breaking news). It includes a prediction that Spain's banking sector might need a €100bn capital injection:
• The likely fiscal cost of restructuring and recapitalising the Spanish banking sector is now estimated by Fitch to be around €60bn (6% of GDP) and as high as €100bn (9% of GDP) in a more severe stress scenario compared to Fitch's previous baseline estimate of around €30bn (3% of GDP);
• Gross general government debt is projected by Fitch to peak at 95% of GDP in 2015 assuming a €60bn bank recapitalisation, compared to Fitch's forecast at the beginning of the year of 82% by the end of 2013;
• Spain is forecast to remain in recession through the remainder of this year and 2013 compared to Fitch's previous expectation that the economy would benefit from a mild recovery in 2013;
• Spain's high level of foreign indebtedness has rendered it especially vulnerable to contagion from the ongoing crisis in Greece; and
• The much reduced financing flexibility of the Spanish government is constraining its ability to intervene decisively in the restructuring of the banking sector and has increased the likelihood of external financial support.
The full statement is online here.
5.43pm: Breaking news - Fitch has just downgraded Spain to BBB, from A.
That's a three-notch downgrade, leaving Spain just two notches above Junk. Fitch also left Spain on Negative Outlook, implying further cuts are possible.
The agency blamed the cost of recapitalising its bank, its rising national debt, the likelyhood of a deep recession this year, and the danger of contagion from Greece.
More to follow!
5.32pm: Round of applause for Luis Maria Linde, who has been appointed the new governor of the Bank of Spain.
Economy minister Luis de Guindos told a congressional hearing that Linde had been chosen to succeed Miguel Ángel Fernández Ordóñez, who is stepping down a month early next week.
De Guindos said Linde has:
...special and exhaustive knowledge of the entity as well as recognised skills in national and international banking issues.
Linde, a former general director at the Bank of Spain, was seen as a front-runner having been appointed to the central bank's board just a few weeks ago.
5.26pm: Reuters is reporting that the International Monetary Fund will announce next Monday that Spain's troubled banks needs an €40bn injection of fresh liquidity.
The IMF's report will also, apparently, predict that the entire sector needs a total of €90bn of new capital, with healthier Spanish banks providing much of the difference.
"The capital shortfall for the Spanish banks will be around 40 billion euros after taking into account the capacity from some of the entities to cover expected losses with their own resources," the source told Reuters.
5.00pm: European stock markets have closed for the day, posting solid enough gains. Shares fell back from their earlier highs once it became clear that Ben Bernanke wasn't hinting at a new US quantitative easing programme. But there was still relief that China had cut its interest rates (despite predictions of a Chinese slowdown....).5.00pm: European stock markets have closed for the day, posting solid enough gains. Shares fell back from their earlier highs once it became clear that Ben Bernanke wasn't hinting at a new US quantitative easing programme. But there was still relief that China had cut its interest rates (despite predictions of a Chinese slowdown....).
David Jones, chief market strategist at IG Index, commented:David Jones, chief market strategist at IG Index, commented:
The main event for London today – or so we thought – was the Bank of England interest-rate decision. But seconds before this was announced, news broke that China had cut its interest rate, for the first time since 2008. This stole the thunder from the BoE announcement and instantly lifted a variety of risk assets. The niggling worry of course for much of this year has been the sustainability of Chinese economic expansion, with a few worrying signs that this was slowing, albeit to a rate that the rest of the world would still be more than happy with. Today's action by the Chinese central bank is seen as a shot in the arm which should be felt throughout the global economy.
/> 		The main event for London today – or so we thought – was the Bank of England interest-rate decision. But seconds before this was announced, news broke that China had cut its interest rate, for the first time since 2008. This stole the thunder from the BoE announcement and instantly lifted a variety of risk assets. The niggling worry of course for much of this year has been the sustainability of Chinese economic expansion, with a few worrying signs that this was slowing, albeit to a rate that the rest of the world would still be more than happy with. Today's action by the Chinese central bank is seen as a shot in the arm which should be felt throughout the global economy.
And here's the closing numbers:
/> 		And here's the closing numbers:

FTSE 100: up 63 points at 5447, + 1.18%
DAX: up 50 points at 6144, + 0.8%
CAC: up 12 points at 3071, + 0.4%
FTSE MIB: up 118 points at 13545, + 0.8%
IBEC: up 19 points at 6438, + 0.3%
FTSE 100: up 63 points at 5447, + 1.18%
DAX: up 50 points at 6144, + 0.8%
CAC: up 12 points at 3071, + 0.4%
FTSE MIB: up 118 points at 13545, + 0.8%
IBEC: up 19 points at 6438, + 0.3%
4.40pm: The most remarkable event today continues to be Ilias Kasidiaris, spokesman and MP for the far-right Golden Dawn party, attacking two female left-wing MPs on live TV (see 8.34am)4.40pm: The most remarkable event today continues to be Ilias Kasidiaris, spokesman and MP for the far-right Golden Dawn party, attacking two female left-wing MPs on live TV (see 8.34am)
Our Athens correspondent, Helena Smith, believes this is the first time such an event has happened since Athens embraced democracy in the 1970s. The footage has managed to unite the rest of the Greek political establishment in outrage against the neo-nazi party.Our Athens correspondent, Helena Smith, believes this is the first time such an event has happened since Athens embraced democracy in the 1970s. The footage has managed to unite the rest of the Greek political establishment in outrage against the neo-nazi party.
Helena writes:Helena writes:
The extraordinary footage quickly prompted state prosecutor Eleni Raikou to order the immediate arrest of Kasidiaris. The 31-year-old, who was elected to the 300-seat Athens parliament in the country's inconclusive election last month, is the most vocal opponent of suggestions that Chrysi Avgi is a violent organisation with a history of attacks on society's most vulnerable not least Greece's burgeoning population of immigrants.The extraordinary footage quickly prompted state prosecutor Eleni Raikou to order the immediate arrest of Kasidiaris. The 31-year-old, who was elected to the 300-seat Athens parliament in the country's inconclusive election last month, is the most vocal opponent of suggestions that Chrysi Avgi is a violent organisation with a history of attacks on society's most vulnerable not least Greece's burgeoning population of immigrants.
By early afternoon, the neo-fascist party had refused to condemn the incident despite Dimitris Tsiodras, a spokesman in the interim government, describing it as "an attack against every democratic citizen".By early afternoon, the neo-fascist party had refused to condemn the incident despite Dimitris Tsiodras, a spokesman in the interim government, describing it as "an attack against every democratic citizen".
And here's the video again, in case you missed it.And here's the video again, in case you missed it.
4.21pm: Ben Bernanke's testimony to Congress has seen the usual razor-sharp analysis of the economic situation by America's legislators, with one senator apparently blaming the US deficit on the current low interest rates (so let's not hear any more criticism of that nice George Bush junior.)4.21pm: Ben Bernanke's testimony to Congress has seen the usual razor-sharp analysis of the economic situation by America's legislators, with one senator apparently blaming the US deficit on the current low interest rates (so let's not hear any more criticism of that nice George Bush junior.)
The Fed chair has warned that the eurozone crisis is a major threat to the US, and argued that America's housing market may be stabilising.The Fed chair has warned that the eurozone crisis is a major threat to the US, and argued that America's housing market may be stabilising.
Richard Adams continues to blog the whole thing here
.		Richard Adams continues to blog the whole thing here
.
4.08pm: More interesting quotes from Fitch's Ed Parker. He's just said that the rating agency would definitely downgrade Ireland, Italy, Spain, Portugal and Cyprus if Greece were to leave the euro.4.08pm: More interesting quotes from Fitch's Ed Parker. He's just said that the rating agency would definitely downgrade Ireland, Italy, Spain, Portugal and Cyprus if Greece were to leave the euro.
It would also put the entire eurozone on negative watch.It would also put the entire eurozone on negative watch.
3.31pm: An analyst at Fitch, the rating agency, has warned that it could slash both the UK and US AAA credit ratings in 2013.3.31pm: An analyst at Fitch, the rating agency, has warned that it could slash both the UK and US AAA credit ratings in 2013.
Ed Parker, a sovereign ratings analyst, said Fitch would 'expect' to cut the UK rating if there was a "further material downturn" in the UK economy.Ed Parker, a sovereign ratings analyst, said Fitch would 'expect' to cut the UK rating if there was a "further material downturn" in the UK economy.
On America, Parker said Fitch was still concerned about America's failure to agree a plan to lower its deficit. Without a "credible fiscal consolidation plan", Fitch will downgrade the US next year.On America, Parker said Fitch was still concerned about America's failure to agree a plan to lower its deficit. Without a "credible fiscal consolidation plan", Fitch will downgrade the US next year.
This is the issue of the 'fiscal cliff' which Ben Bernanke referred to in his testimony to congress today (see 3.14pm). There is deadlock between Democrats and Republicans over tax and spending policies. Without a deal, automatic spending cuts will kick in in 2013, raising fears that US growth could be choked off.This is the issue of the 'fiscal cliff' which Ben Bernanke referred to in his testimony to congress today (see 3.14pm). There is deadlock between Democrats and Republicans over tax and spending policies. Without a deal, automatic spending cuts will kick in in 2013, raising fears that US growth could be choked off.
3.14pm: Ben Bernanke's prepared testimony is online here.3.14pm: Ben Bernanke's prepared testimony is online here.
He doesn't appear to be signalling that a third round of quantitative easing is close, saying only that:He doesn't appear to be signalling that a third round of quantitative easing is close, saying only that:
The Committee reviews the size and composition of its securities holdings regularly and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.The Committee reviews the size and composition of its securities holdings regularly and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.
Bernanke also warns that US politicians must avoid crushing the economic recovery by addressing the "urgent issue" of fiscal sustainability:Bernanke also warns that US politicians must avoid crushing the economic recovery by addressing the "urgent issue" of fiscal sustainability:
Indeed, a severe tightening of fiscal policy at the beginning of next year that is built into current law--the so-called fiscal cliff--would, if allowed to occur, pose a significant threat to the recovery.Indeed, a severe tightening of fiscal policy at the beginning of next year that is built into current law--the so-called fiscal cliff--would, if allowed to occur, pose a significant threat to the recovery.
Bernanke is now speaking. He says Europe remains a worry and the "situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely".Bernanke is now speaking. He says Europe remains a worry and the "situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely".
2.55pm: Out in Washington, Ben Bernanke is about to start being quizzed over the state of America's economy, by a joint committee on Capitol Hill.2.55pm: Out in Washington, Ben Bernanke is about to start being quizzed over the state of America's economy, by a joint committee on Capitol Hill.
My US colleagues are live-blogging the whole testimony here.My US colleagues are live-blogging the whole testimony here.
2.37pm: Stock markets are roaring away. On Wall Street the Dow Jones index has opened 119 points higher at 12537, adding to yesterday's rollicking session.2.37pm: Stock markets are roaring away. On Wall Street the Dow Jones index has opened 119 points higher at 12537, adding to yesterday's rollicking session.
In London, the FTSE 100 is up 104 points at 5489, a rise of almost 2%. The other European indices are also showing solid gains, with Germany's DAX 1.8% higher.In London, the FTSE 100 is up 104 points at 5489, a rise of almost 2%. The other European indices are also showing solid gains, with Germany's DAX 1.8% higher.
The trigger? The Chinese interest rate cut (see 12.08pm), despite warnings that it may signal a slowdown in China (see 1.40pm).The trigger? The Chinese interest rate cut (see 12.08pm), despite warnings that it may signal a slowdown in China (see 1.40pm).
There is some speculation that the move could herald a co-ordinated stimulus move by central banks around the world, even though the Bank of England didn't announce anything new at noon today.There is some speculation that the move could herald a co-ordinated stimulus move by central banks around the world, even though the Bank of England didn't announce anything new at noon today.
2.26pm: The front page of this week's Economist (out tomorrow in all good newsagents), pins the blame for the weakening global economy firmly on one woman:2.26pm: The front page of this week's Economist (out tomorrow in all good newsagents), pins the blame for the weakening global economy firmly on one woman:
"Please can we start the engines now, Mrs. Merkel?" - The Economist twitter.com/FGoria/status/…"Please can we start the engines now, Mrs. Merkel?" - The Economist twitter.com/FGoria/status/…
— Fabrizio Goria (@FGoria) June 7, 2012— Fabrizio Goria (@FGoria) June 7, 2012
My eyesight's not the best, but does that supertanker look just a little like a u-boat? Coincidence...My eyesight's not the best, but does that supertanker look just a little like a u-boat? Coincidence...
2.16pm: Our colleague Kate Connolly has more highlights of David Cameron and Angela Merkel's discussions on the eurocrisis, from the Town Hall meeting taking place in Berlin.2.16pm: Our colleague Kate Connolly has more highlights of David Cameron and Angela Merkel's discussions on the eurocrisis, from the Town Hall meeting taking place in Berlin.
#Merkel: we're working on making common currency more sustainable. Can't have one country fighting debt, other not. Nec for competitiveness#Merkel: we're working on making common currency more sustainable. Can't have one country fighting debt, other not. Nec for competitiveness
— Kate Connolly (@connollyberlin) June 7, 2012— Kate Connolly (@connollyberlin) June 7, 2012
#Merkel: money pumped to Greece = 1.5 times its GDP. Marshall Plan was 3 pc of European GDP, so by comparison v great effort#Merkel: money pumped to Greece = 1.5 times its GDP. Marshall Plan was 3 pc of European GDP, so by comparison v great effort
— Kate Connolly (@connollyberlin) June 7, 2012— Kate Connolly (@connollyberlin) June 7, 2012
#Merkel: euro probs were 10 years in the making. Will take years to fix#Merkel: euro probs were 10 years in the making. Will take years to fix
— Kate Connolly (@connollyberlin) June 7, 2012— Kate Connolly (@connollyberlin) June 7, 2012
1.40pm: China's surprise interest rate cut (see 12.08pm), which was announced just before noon UK time, has sparked speculation that the Chinese economy may be in worse shape than thought.1.40pm: China's surprise interest rate cut (see 12.08pm), which was announced just before noon UK time, has sparked speculation that the Chinese economy may be in worse shape than thought.
This at a time when there were already worries that the eurozone crisis would cause a severe economic slowdown worldwide.This at a time when there were already worries that the eurozone crisis would cause a severe economic slowdown worldwide.
Ken Peng, an economist with BNP Paribas in Beijing, said (via the FT):Ken Peng, an economist with BNP Paribas in Beijing, said (via the FT):
Cutting the interest rate definitely shows that they are concerned about downside risks to the economy.Cutting the interest rate definitely shows that they are concerned about downside risks to the economy.
Economist Michael McDonough warned that the rate cut indicates that economic data due out this weekend (including retail sales and inflation) is likely to be "very bad". McDonough also expects further moves from China to stimulate its economy:Economist Michael McDonough warned that the rate cut indicates that economic data due out this weekend (including retail sales and inflation) is likely to be "very bad". McDonough also expects further moves from China to stimulate its economy:
The move now also likely implies this is the first of several more substantial measures to support growth.The move now also likely implies this is the first of several more substantial measures to support growth.
— Michael McDonough (@M_McDonough) June 7, 2012— Michael McDonough (@M_McDonough) June 7, 2012
World First's chief economist, Jeremy Cook, also fears weak economic data from China this weekend:World First's chief economist, Jeremy Cook, also fears weak economic data from China this weekend:
Lot of Chinese data soon (retail sales, inflation, industrial production). Is the rate cut a harbinger for a poor May?Lot of Chinese data soon (retail sales, inflation, industrial production). Is the rate cut a harbinger for a poor May?
— World First (@World_First) June 7, 2012— World First (@World_First) June 7, 2012
1.26pm: While David Cameron has been performing at the "town hall" session in Berlin (see 12.34pm onwards), elsewhere in the city German politicians have been pushing ahead on one of his biggest bugbears – a Tobin tax or a levy on financial transactions.1.26pm: While David Cameron has been performing at the "town hall" session in Berlin (see 12.34pm onwards), elsewhere in the city German politicians have been pushing ahead on one of his biggest bugbears – a Tobin tax or a levy on financial transactions.
Our Europe editor Ian Traynor explains:Our Europe editor Ian Traynor explains:
The German papers are reporting a breakthrough on talks between the Merkel coalition and the opposition in the Bundestag.The German papers are reporting a breakthrough on talks between the Merkel coalition and the opposition in the Bundestag.
German government plans to model their proposals on UK stamp duty have been scrapped, according to the reports, and there appears to be agreement on a full-scale FTT which Berlin is likely to push together with France, with Cameron committed to trying to block the levy on the grounds that it will drive business from the City of London.German government plans to model their proposals on UK stamp duty have been scrapped, according to the reports, and there appears to be agreement on a full-scale FTT which Berlin is likely to push together with France, with Cameron committed to trying to block the levy on the grounds that it will drive business from the City of London.
Francois Hollande in Paris is a champion of the tax. The Merkel government has been toying with it half-heartedly. But it needs opposition backing to secure a parliamentary two-thirds majority to ratify Merkel's eurozone fiscal pact. The opposition made the Tobin tax the key condition for voting for the fiscal pact.Francois Hollande in Paris is a champion of the tax. The Merkel government has been toying with it half-heartedly. But it needs opposition backing to secure a parliamentary two-thirds majority to ratify Merkel's eurozone fiscal pact. The opposition made the Tobin tax the key condition for voting for the fiscal pact.
Government and opposition are expected to finalise the proposals on Monday at talks in Merkel's office.Government and opposition are expected to finalise the proposals on Monday at talks in Merkel's office.
Cameron is not alone in his resistance. There are plenty of dissenters in Europe on the tax. The French and the Germans are now likely to ignore the Brits and push for a eurozone Tobin tax, although at the moment only around 9 of the 17 euro countries are expected to support it. That, however, is enough for the willing countries to proceed under the Lisbon Treaty's "enhanced cooperation" rules without being blocked by other member states.Cameron is not alone in his resistance. There are plenty of dissenters in Europe on the tax. The French and the Germans are now likely to ignore the Brits and push for a eurozone Tobin tax, although at the moment only around 9 of the 17 euro countries are expected to support it. That, however, is enough for the willing countries to proceed under the Lisbon Treaty's "enhanced cooperation" rules without being blocked by other member states.
If Cameron was looking for good news in Berlin, this certainly was not it.If Cameron was looking for good news in Berlin, this certainly was not it.
Our Politics Live blog is also covering the Cameron trip to Berlin, by the way.Our Politics Live blog is also covering the Cameron trip to Berlin, by the way.
12.53pm: David Cameron was asked about the eurocrisis during his 'town hall meeting in Berlin' (my colleague Kate Connolly reports).12.53pm: David Cameron was asked about the eurocrisis during his 'town hall meeting in Berlin' (my colleague Kate Connolly reports).
The UK prime minister said that Europe's problems are partly because:The UK prime minister said that Europe's problems are partly because:
sometimes it has tried to run before it has learned to walk.sometimes it has tried to run before it has learned to walk.
Cameron also said that Britain certainly has a future within Europe, but on a 'practical level', not simply through following bureaucratic rules.Cameron also said that Britain certainly has a future within Europe, but on a 'practical level', not simply through following bureaucratic rules.
Kate reports that Angela Merkel also argued for more direct democracy at the EU level. David Cameron, though, responded that some people were reluctant to vote because they didn't believe it would change anything.Kate reports that Angela Merkel also argued for more direct democracy at the EU level. David Cameron, though, responded that some people were reluctant to vote because they didn't believe it would change anything.
#Merkel says if Europeans had direct vote, greece might be more scared about its future. 'now theyre able to solely blame the politicians'#Merkel says if Europeans had direct vote, greece might be more scared about its future. 'now theyre able to solely blame the politicians'
— Kate Connolly (@connollyberlin) June 7, 2012— Kate Connolly (@connollyberlin) June 7, 2012
To win back voters #Cam: simply voting is not enough. It's the other things that go w it. People don't vote cos don't think makes differenceTo win back voters #Cam: simply voting is not enough. It's the other things that go w it. People don't vote cos don't think makes difference
— Kate Connolly (@connollyberlin) June 7, 2012— Kate Connolly (@connollyberlin) June 7, 2012
12.34pm: Heads-up - David Cameron and Angela Merkel are holding a 'town hall' style public meeting now, with the prime minister of Norway, Jens Stoltenberg.12.34pm: Heads-up - David Cameron and Angela Merkel are holding a 'town hall' style public meeting now, with the prime minister of Norway, Jens Stoltenberg.
It is being live-streamed here, although the feed keeps crashing for me...It is being live-streamed here, although the feed keeps crashing for me...
Here's a photo from the event:Here's a photo from the event:
Cameron and Merkel together at meeting with students in Berlin Chancellery twitter.com/jamesmatesitv/…Cameron and Merkel together at meeting with students in Berlin Chancellery twitter.com/jamesmatesitv/…
— James Mates (@jamesmatesitv) June 7, 2012— James Mates (@jamesmatesitv) June 7, 2012
Our Berlin correspondent, Kate Connolly is also there, and reports that Cameron and Merkel had a friendly welcome:Our Berlin correspondent, Kate Connolly is also there, and reports that Cameron and Merkel had a friendly welcome:
Friendly welcome from #Merkel to #Cameron w red carpet, cheek kisses, thkyous, you're welcomes & 1st name terms b4 disappearing to talk EuroFriendly welcome from #Merkel to #Cameron w red carpet, cheek kisses, thkyous, you're welcomes & 1st name terms b4 disappearing to talk Euro
— Kate Connolly (@connollyberlin) June 7, 2012— Kate Connolly (@connollyberlin) June 7, 2012
12.15pm: Here's some early reaction to the Bank of England's decision to leave UK interest rates unchanged at 0.5% and resist pressure for more quantitative easing.12.15pm: Here's some early reaction to the Bank of England's decision to leave UK interest rates unchanged at 0.5% and resist pressure for more quantitative easing.
Anna Leach, CBI head of economic analysis:Anna Leach, CBI head of economic analysis:
Both official and survey data continue to present a mixed picture of the economy, so this decision would have been a tricky one.Both official and survey data continue to present a mixed picture of the economy, so this decision would have been a tricky one.
It seems that a 'wait and see' position has been adopted for the moment. The ongoing crisis in the Euro area will continue to put pressure on fragile business conditions for the foreseeable future.It seems that a 'wait and see' position has been adopted for the moment. The ongoing crisis in the Euro area will continue to put pressure on fragile business conditions for the foreseeable future.
Ranvir Singh, CEO of market analysts RANsquawk:Ranvir Singh, CEO of market analysts RANsquawk:
There's a very real danger that the decision to hold off on more QE will come to look like a missed opportunity.There's a very real danger that the decision to hold off on more QE will come to look like a missed opportunity.
If there's one thing that the Eurozone crisis has taught us, it's that inaction now can store up big problems in the future.If there's one thing that the Eurozone crisis has taught us, it's that inaction now can store up big problems in the future.

Howard Archer of IHS Global Insight:
Howard Archer of IHS Global Insight:
The Bank of England resisted the temptation to go for more Quantitative Easing at the June MPC meeting, but we suspect it may well have been a very close call. There certainly is very real pressure on the MPC to revive QE – and sooner rather than laterThe Bank of England resisted the temptation to go for more Quantitative Easing at the June MPC meeting, but we suspect it may well have been a very close call. There certainly is very real pressure on the MPC to revive QE – and sooner rather than later
12.08pm: Big news: China has just cut its interest rates, in an attempt to stimulate its economy and ward off the effects of the global economic slowdown.12.08pm: Big news: China has just cut its interest rates, in an attempt to stimulate its economy and ward off the effects of the global economic slowdown.
While the Bank of England resisted a cut to borrowing costs, the central bank of China cut its benchmark lending and deposit rates, in what looks like the first move of its kind since 2008.While the Bank of England resisted a cut to borrowing costs, the central bank of China cut its benchmark lending and deposit rates, in what looks like the first move of its kind since 2008.
UPDATE: Here are the details (via Bloomberg)UPDATE: Here are the details (via Bloomberg)
The one-year deposit rate will drop to 3.25 percent from 3.5 percent effective tomorrow, the People's Bank of China said on its website today. The one-year lending rate will fall to 6.31 percent from 6.56 percent. Banks can offer a 20 percent discount to the benchmark lending rate, the PBOC said, widening from a previous 10 percent.The one-year deposit rate will drop to 3.25 percent from 3.5 percent effective tomorrow, the People's Bank of China said on its website today. The one-year lending rate will fall to 6.31 percent from 6.56 percent. Banks can offer a 20 percent discount to the benchmark lending rate, the PBOC said, widening from a previous 10 percent.
12.00pm: Breaking news -- the Bank of England has left UK interest rates unchanged at 0.5%, and maintained its quantitative easing programme at £325bn.12.00pm: Breaking news -- the Bank of England has left UK interest rates unchanged at 0.5%, and maintained its quantitative easing programme at £325bn.
So, No Change, despite some speculation that the Monetary Policy Committee would launch more QE. Reaction to followSo, No Change, despite some speculation that the Monetary Policy Committee would launch more QE. Reaction to follow
11.53am: Just a few minutes until the Bank of England announces its decision on monetary policy.11.53am: Just a few minutes until the Bank of England announces its decision on monetary policy.
While a rate cut looks rather unlikely (especially after this morning's solid Service sector), some analysts reckon the Monetary Policy Committee could announce more quantitative easing. Unlikely, but....While a rate cut looks rather unlikely (especially after this morning's solid Service sector), some analysts reckon the Monetary Policy Committee could announce more quantitative easing. Unlikely, but....
Just over 5 minutes to the Bank of England #QE announcement. Okay services PMI numbers may have put a dampener on it but you never knowJust over 5 minutes to the Bank of England #QE announcement. Okay services PMI numbers may have put a dampener on it but you never know
— Shaun Richards (@notayesmansecon) June 7, 2012— Shaun Richards (@notayesmansecon) June 7, 2012
It has been quiet today. Too quiet. Suddenly getting worried the BOE will drop a clanger and ruin my afternoon.It has been quiet today. Too quiet. Suddenly getting worried the BOE will drop a clanger and ruin my afternoon.
— Katie Martin (@katie_martin_FX) June 7, 2012— Katie Martin (@katie_martin_FX) June 7, 2012
11.24am: Bad economic data from Ireland - the unemployment rate has risen to 14.8%, its highest level since the crisis began.11.24am: Bad economic data from Ireland - the unemployment rate has risen to 14.8%, its highest level since the crisis began.
That's much higher than the eurozone average of 11% (also a record high).That's much higher than the eurozone average of 11% (also a record high).
This comes after the Greek jobless rate also hit a new record high, of 21.9% in March.This comes after the Greek jobless rate also hit a new record high, of 21.9% in March.
11.06am: European stock markets have posted steady gains today, on continued optimism that central banks could launch new stimulus measures soon, and that a Spanish bank deal could be banged out in June.11.06am: European stock markets have posted steady gains today, on continued optimism that central banks could launch new stimulus measures soon, and that a Spanish bank deal could be banged out in June.
FTSE 100: up 37 points at 5421, + 0.7%
German DAX: up 31 points at 6125, + 0.5%
French CAC: up 20 points at 3078, +0.61%
IBEX: up 69 points at 6489, + 1.09%
FTSE MIB: up 80 points at 13508, + 0.6%		FTSE 100: up 37 points at 5421, + 0.7%
German DAX: up 31 points at 6125, + 0.5%
French CAC: up 20 points at 3078, +0.61%
IBEX: up 69 points at 6489, + 1.09%
FTSE MIB: up 80 points at 13508, + 0.6%
This follows yesterday's storming trading on Wall Street, where the Dow Jones closed 286 points higher - its best performance this year.This follows yesterday's storming trading on Wall Street, where the Dow Jones closed 286 points higher - its best performance this year.
Chris Beauchamp of IG Index finds it ironic that traders are now fixated on what Ben Bernanke and Sir Mervyn King might do:Chris Beauchamp of IG Index finds it ironic that traders are now fixated on what Ben Bernanke and Sir Mervyn King might do:
It is a somewhat baleful commentary on the state of Western capitalism that markets in the UK and US, the nations which pioneered free market economics, now deem central bank intervention to be vital to their survival.It is a somewhat baleful commentary on the state of Western capitalism that markets in the UK and US, the nations which pioneered free market economics, now deem central bank intervention to be vital to their survival.
10.24am: France just sold a range of long-term bonds for its lowest borrowing costs in the euro era, as French debt remained a safe-haven from the crisis raging in weaker regions of the eurozone.10.24am: France just sold a range of long-term bonds for its lowest borrowing costs in the euro era, as French debt remained a safe-haven from the crisis raging in weaker regions of the eurozone.
The yields on French 10-year, 15-year and 50-year bonds fell to their lowest levels since the euro was created. The 10-year yield (the interest rate, and a benchmark of market confidence) dropped to 2.46%, from 2.96% at the previous auction.The yields on French 10-year, 15-year and 50-year bonds fell to their lowest levels since the euro was created. The 10-year yield (the interest rate, and a benchmark of market confidence) dropped to 2.46%, from 2.96% at the previous auction.
That's a boost to Paris, where new president François Hollande is getting to grips with the French fiscal situation. He's already been been warned by the EC to find new deficit reduction measures...That's a boost to Paris, where new president François Hollande is getting to grips with the French fiscal situation. He's already been been warned by the EC to find new deficit reduction measures...
...but Nicolas Spiro argues that record low yields could encourage Hollande to stick with a looser fiscal policy, if he thinks the markets will bear it:...but Nicolas Spiro argues that record low yields could encourage Hollande to stick with a looser fiscal policy, if he thinks the markets will bear it:

There's a risk that the rally in France's bond market could encourage the new government of President Hollande to shy away from austerity and structural reforms. The government may take this rally as a sign that France's creditworthiness is resilient enough to withstand socially-oriented policies. Indeed there are signs this is already happening.
There's a risk that the rally in France's bond market could encourage the new government of President Hollande to shy away from austerity and structural reforms. The government may take this rally as a sign that France's creditworthiness is resilient enough to withstand socially-oriented policies. Indeed there are signs this is already happening.
10.11am: City analysts say today's Spanish bond auction is a relief, even though Spain had to pay higher bond yields (see 9.49am for the details). There is concern, though, that Italy could be dragged deeper into the crisis. Here's a round-up of fresh reaction:10.11am: City analysts say today's Spanish bond auction is a relief, even though Spain had to pay higher bond yields (see 9.49am for the details). There is concern, though, that Italy could be dragged deeper into the crisis. Here's a round-up of fresh reaction:
Nicholas Spiro of Spiro Sovereign StrategyNicholas Spiro of Spiro Sovereign Strategy
1. Although a very modestly sized auction, this was a nerve-wracking one nonetheless. The Treasury will be pleased that the sale was comfortably covered but displeased with the size of the concession. If it wasn't for its banks' continued support at auctions, Spain would be unable to sell its debt. Right now confidence in Spain is at an all-time low.

2. The sooner the uncertainty over the form and timing of the bail-out is lifted, the better. It has been a month of purgatory for the markets, to say nothing of the nightmare that Spain is living through. This has as much to do with the repeated failures of eurozone policymaking as it does with the Rajoy government's loss of credibility.

3. The bigger fear is that the longer the uncertainty about Spain persists, the more at risk Italy becomes. Part of the reason why a bail-out for Spain is fraught with complications is the risk that it further damages sentiment towards Italy.		1. Although a very modestly sized auction, this was a nerve-wracking one nonetheless. The Treasury will be pleased that the sale was comfortably covered but displeased with the size of the concession. If it wasn't for its banks' continued support at auctions, Spain would be unable to sell its debt. Right now confidence in Spain is at an all-time low.

2. The sooner the uncertainty over the form and timing of the bail-out is lifted, the better. It has been a month of purgatory for the markets, to say nothing of the nightmare that Spain is living through. This has as much to do with the repeated failures of eurozone policymaking as it does with the Rajoy government's loss of credibility.

3. The bigger fear is that the longer the uncertainty about Spain persists, the more at risk Italy becomes. Part of the reason why a bail-out for Spain is fraught with complications is the risk that it further damages sentiment towards Italy.
Alessandro Giansanti of ING (via Reuters)Alessandro Giansanti of ING (via Reuters)
It was a good auction. The amount was very limited, and especially in the five-year to the 10-year there was some cheapness on the curve that helped them rally into the auction. There is a better environment over the last few days for Spanish bonds.It was a good auction. The amount was very limited, and especially in the five-year to the 10-year there was some cheapness on the curve that helped them rally into the auction. There is a better environment over the last few days for Spanish bonds.
Talk of a rescue for Spanish banks is the thing that is reducing risk aversion in the markets.Talk of a rescue for Spanish banks is the thing that is reducing risk aversion in the markets.
9.49am: Breaking - Spain's bond auction has just finished. Bond yields have risen, but there was solid demand for the debt. And crucially, Spain sold slightly more than it was aiming for - €2.07bn in total.9.49am: Breaking - Spain's bond auction has just finished. Bond yields have risen, but there was solid demand for the debt. And crucially, Spain sold slightly more than it was aiming for - €2.07bn in total.
Here are the details:Here are the details:
€638m of two-year bonds sold at a yield of 4.335%, up from 3.463%
€825m of four-year bonds sold at a yield of 5.353%, up from 4.319%
€611m of 10-year bonds sold at a yield of 6.044%, up from 5.743%		€638m of two-year bonds sold at a yield of 4.335%, up from 3.463%
€825m of four-year bonds sold at a yield of 5.353%, up from 4.319%
€611m of 10-year bonds sold at a yield of 6.044%, up from 5.743%
UPDATE: The bid-to-cover ratios (which show how much demand there was) rose for all three bond types. Another good sign.UPDATE: The bid-to-cover ratios (which show how much demand there was) rose for all three bond types. Another good sign.
However, as we mentioned earlier, there was speculation that Spain's domestic banks might help the Madrid government by bidding heavily in the auction. We should see details of that later...However, as we mentioned earlier, there was speculation that Spain's domestic banks might help the Madrid government by bidding heavily in the auction. We should see details of that later...
Reaction to follow!Reaction to follow!
9.39am: A Greek government spokesman has also condemned the attack on two MPs launched by Golden Dawn's Ilias Kasidiaris (see 8.35am) on live TV this morning.9.39am: A Greek government spokesman has also condemned the attack on two MPs launched by Golden Dawn's Ilias Kasidiaris (see 8.35am) on live TV this morning.
The Neo-nazi party had stunned Europe by winning 21 seats in the May election, having run on a far-right anti-immigrant platform. Could this incident be the trigger for a widespread backlash against Golden Dawn?The Neo-nazi party had stunned Europe by winning 21 seats in the May election, having run on a far-right anti-immigrant platform. Could this incident be the trigger for a widespread backlash against Golden Dawn?
9.29am: Britain's service sector grew much faster than expected in May, data just released has showed.9.29am: Britain's service sector grew much faster than expected in May, data just released has showed.
The monthly PMI came in at 53.3 in May, meaning the dominant sector grew as fast as in April. Analysts has expected a drop to 52.5 (so a slowdown in growth).The monthly PMI came in at 53.3 in May, meaning the dominant sector grew as fast as in April. Analysts has expected a drop to 52.5 (so a slowdown in growth).
That may mean there's less chance of the Bank of England relaunching its quantitative easing programme at noon today.That may mean there's less chance of the Bank of England relaunching its quantitative easing programme at noon today.
9.14am: An update on the situation with the spokesman for Greece's neo-Nazi party who assaulted two MPs on live TV this morning (see 8.34am for the footage)).9.14am: An update on the situation with the spokesman for Greece's neo-Nazi party who assaulted two MPs on live TV this morning (see 8.34am for the footage)).
KKE's Liana Kanelli, the MPs who appeared to be struck several times by Golden Dawn's Ilias Kasidiaris, has told journalists that:KKE's Liana Kanelli, the MPs who appeared to be struck several times by Golden Dawn's Ilias Kasidiaris, has told journalists that:
When you're slapped by a beast, it's a slap on the cheek of every citizen.When you're slapped by a beast, it's a slap on the cheek of every citizen.
A spokesman for the New Democracy party has also condemned the incident, saying:A spokesman for the New Democracy party has also condemned the incident, saying:
The people must send them [Golden Dawn] to the dustbin of history.The people must send them [Golden Dawn] to the dustbin of history.
There are also reports from Greece that Ilias Kasidiaris lashed out at TV staff following the shocking incident:There are also reports from Greece that Ilias Kasidiaris lashed out at TV staff following the shocking incident:
#Greece After on-screen fight neonazi Kasidiaris also hit journos off screen & threatened technicians #Greece #rbnews#Greece After on-screen fight neonazi Kasidiaris also hit journos off screen & threatened technicians #Greece #rbnews
— Theodora Oikonomides (@IrateGreek) June 7, 2012— Theodora Oikonomides (@IrateGreek) June 7, 2012
Prosecutor Raikou ordered the arrest of Kasidiaris at all costs, special police forces mobilized #Greece #rbnewsProsecutor Raikou ordered the arrest of Kasidiaris at all costs, special police forces mobilized #Greece #rbnews
— Theodora Oikonomides (@IrateGreek) June 7, 2012— Theodora Oikonomides (@IrateGreek) June 7, 2012
9.00am: As European officials start thinking about what terms and conditions to impose on Spain for a future bailout of its banks funded from Europe's rescue funds, one of the main problems - concern about corruption, cronyism and political interference in savings banks - features prominently on the front page of El País this morning.9.00am: As European officials start thinking about what terms and conditions to impose on Spain for a future bailout of its banks funded from Europe's rescue funds, one of the main problems - concern about corruption, cronyism and political interference in savings banks - features prominently on the front page of El País this morning.
Giles Tremlett reports from Madrid:Giles Tremlett reports from Madrid:
The newspaper leads this morning on a story about anticorruption investigators looking into the creation of Bankia, the country's fourth-biggest lender, and its later partial flotation.The newspaper leads this morning on a story about anticorruption investigators looking into the creation of Bankia, the country's fourth-biggest lender, and its later partial flotation.
Fraud, theft and document fraud are amongst the potential wrongdoings under investigation at a bank which last summer sold itself to investors - mostly small Bankia clients - as the next great thing in European banking.Fraud, theft and document fraud are amongst the potential wrongdoings under investigation at a bank which last summer sold itself to investors - mostly small Bankia clients - as the next great thing in European banking.
Bankia itself was created at the end of 2010 by the merger of seven ailing savings banks, led by Caja Madrid. As the part-nationalised bank asks for a further 19bn euros from Europe's taxpayers, investigators will concentrate on how Bankia could go from declaring a 309 million euro profit for 2011 to then admitting net losses of 3bn.Bankia itself was created at the end of 2010 by the merger of seven ailing savings banks, led by Caja Madrid. As the part-nationalised bank asks for a further 19bn euros from Europe's taxpayers, investigators will concentrate on how Bankia could go from declaring a 309 million euro profit for 2011 to then admitting net losses of 3bn.
The suspicion is that some of the seven cajas may have hidden their own toxic real estate holes when the merger took place. The investigation is at a very preliminary stage, El Pais says.The suspicion is that some of the seven cajas may have hidden their own toxic real estate holes when the merger took place. The investigation is at a very preliminary stage, El Pais says.
El País also quotes anonymous German officials in Berlin as saying the Merkel government is now in favour of the "bailout lite" option for Spain, which would see Europe's rescue funds putting money into Spain's bank rescue fund, the so-called Frob. That would then be used to inject capital into banks that are choking on the loans they made against unsaleable real estate developments and building land.El País also quotes anonymous German officials in Berlin as saying the Merkel government is now in favour of the "bailout lite" option for Spain, which would see Europe's rescue funds putting money into Spain's bank rescue fund, the so-called Frob. That would then be used to inject capital into banks that are choking on the loans they made against unsaleable real estate developments and building land.
8.34am: Truly Astonishing. The spokesman for Greece's far-right Golden Dawn party threw several punches at a communist MP, and chucked water at another, during an appearance on Greek television this morning.8.34am: Truly Astonishing. The spokesman for Greece's far-right Golden Dawn party threw several punches at a communist MP, and chucked water at another, during an appearance on Greek television this morning.
Ilias Kasidiaris emptied his water glass at Syriza's Rena Dourou during a live debate ahead of the June 17 elections, and then proceeded to lash out at the KKE's Liana Kanelli, as this footage shows:Ilias Kasidiaris emptied his water glass at Syriza's Rena Dourou during a live debate ahead of the June 17 elections, and then proceeded to lash out at the KKE's Liana Kanelli, as this footage shows:
According to Greek newspaper Kathimerini, the police are now seeking to arrest Kasidiaris over the attack on the two female MPs. He is already facing accusations that he was an accomplice in the mugging of a student. He denies the charge.According to Greek newspaper Kathimerini, the police are now seeking to arrest Kasidiaris over the attack on the two female MPs. He is already facing accusations that he was an accomplice in the mugging of a student. He denies the charge.
UPDATE: Regular reader Kizbot gets in touch with more info about the attack:UPDATE: Regular reader Kizbot gets in touch with more info about the attack:
Golden Dawn thug Kasidiaris, repeatedly punched KKE MP Liana Kanelli (something of a national treasure here in Greece) in the face live on Breakfast TV. This is now a big story here. Reports say the guy ran out of the studio after the vicious assault.Golden Dawn thug Kasidiaris, repeatedly punched KKE MP Liana Kanelli (something of a national treasure here in Greece) in the face live on Breakfast TV. This is now a big story here. Reports say the guy ran out of the studio after the vicious assault.
Kisbot adds that Kasidiaris is an ex boxer.Kisbot adds that Kasidiaris is an ex boxer.
8.21am: George Osborne also pours cold water on the suggestion that Britain should hold an immediate referendum on its membership of the European Union. But a vote could come, if Europe looks to take more sovereignty from member states.8.21am: George Osborne also pours cold water on the suggestion that Britain should hold an immediate referendum on its membership of the European Union. But a vote could come, if Europe looks to take more sovereignty from member states.
Asked whether Europe's move to close fiscal union (and the Treaty changes that would presumbaly need) would be a good time for a national vote on the EU, Osborne argues that this will only happen if there is a proposal for more transfer of powers from Britain to the EU.Asked whether Europe's move to close fiscal union (and the Treaty changes that would presumbaly need) would be a good time for a national vote on the EU, Osborne argues that this will only happen if there is a proposal for more transfer of powers from Britain to the EU.

I think we have a very clear safeguard in the system now, which is - if there is any transfer of sovereigny from this country to Europe, there will be a referendum.
I think we have a very clear safeguard in the system now, which is - if there is any transfer of sovereigny from this country to Europe, there will be a referendum.
8.16am: More from George Osborne's interview on the Today Programme (see last post): the UK chancellor expresses solid support for the creation of a banking union across the eurozone.8.16am: More from George Osborne's interview on the Today Programme (see last post): the UK chancellor expresses solid support for the creation of a banking union across the eurozone.
Britain, though, will not join it, and will demand protection the City, he adds.Britain, though, will not join it, and will demand protection the City, he adds.
Osborne says the UK wants the euro to work, but..."there will have to be safeguards....to protect Britain's largest employer and Europe's biggest financial sector."Osborne says the UK wants the euro to work, but..."there will have to be safeguards....to protect Britain's largest employer and Europe's biggest financial sector."
On Spain, Osborne says he isn't directly involved in the negotiations, however:On Spain, Osborne says he isn't directly involved in the negotiations, however:
I am optimistic that people are working on a solution....and a solution is coming.I am optimistic that people are working on a solution....and a solution is coming.
He adds though that a Spanish rescue deal would not, itself, solve the eurocrisis.He adds though that a Spanish rescue deal would not, itself, solve the eurocrisis.
8.12am: UK chancellor George Osborne is discussing the eurozone crisis on the Today Programme on Radio 4 now (you can listen here, or catch a replay later).8.12am: UK chancellor George Osborne is discussing the eurozone crisis on the Today Programme on Radio 4 now (you can listen here, or catch a replay later).
Asked what he would do if granted the powers of a "benign dictator", Osborne says there are three things that need to happen in the eurozone:Asked what he would do if granted the powers of a "benign dictator", Osborne says there are three things that need to happen in the eurozone:
1) an immediate recapitalisation of the Spanish banking sector
2) a new Greek government that is committed to Greece remaining in the eurozone and fulfilling its obligations
2) fundamental structural changes to the eurozone, including give the European Central Bank the powers enjoyed by other central banks (such as acting as a lender of last resort).		1) an immediate recapitalisation of the Spanish banking sector
2) a new Greek government that is committed to Greece remaining in the eurozone and fulfilling its obligations
2) fundamental structural changes to the eurozone, including give the European Central Bank the powers enjoyed by other central banks (such as acting as a lender of last resort).
8.05am: New unemployment data released this morning has shown that France's jobless rate continues to climb, while in Switzerland the situation is much better.8.05am: New unemployment data released this morning has shown that France's jobless rate continues to climb, while in Switzerland the situation is much better.
The French jobless rate rose to 10% in the first quarter of 2012, up from 9.8% in the last three months of 2011.The French jobless rate rose to 10% in the first quarter of 2012, up from 9.8% in the last three months of 2011.
In Switzerland, the jobless rate dropped to 3.0% on a seasonally unadjusted rate in May, down from 3.1% in April.In Switzerland, the jobless rate dropped to 3.0% on a seasonally unadjusted rate in May, down from 3.1% in April.
7.47am: Spain hopes to sell between €1bn and €2bn of debt today, with both 10-year bonds and shorter-dated ones available.7.47am: Spain hopes to sell between €1bn and €2bn of debt today, with both 10-year bonds and shorter-dated ones available.
The auction will show how much confidence the financial markets have in Spain's borrowing costs have been at worryingly high levels for weeks, prompting budget minister Cristobal Montoro to warn on Tuesday that the country is being "shut out" of the bond market. We'll soon find out if he's right....

The key things to watch out for are 1) how much is sold; 2) the yield (effectively the interest rate) demanded by investors; 3) how many bids are received; 4) How demand is split between short and long-term bonds.		The auction will show how much confidence the financial markets have in Spain's borrowing costs have been at worryingly high levels for weeks, prompting budget minister Cristobal Montoro to warn on Tuesday that the country is being "shut out" of the bond market. We'll soon find out if he's right....

The key things to watch out for are 1) how much is sold; 2) the yield (effectively the interest rate) demanded by investors; 3) how many bids are received; 4) How demand is split between short and long-term bonds.
Brenda Kelly of CMC Markets suggests that Spanish banks could try to ensure a successful auction by buying the debt with money borrowed from the European Central Bank at low rates (through its LTRO programme - details here).Brenda Kelly of CMC Markets suggests that Spanish banks could try to ensure a successful auction by buying the debt with money borrowed from the European Central Bank at low rates (through its LTRO programme - details here).
Nicolas Spiro of Spiro Sovereign Strategy argues that if Spain can't get €2bn of debt away today then it's "game over".Nicolas Spiro of Spiro Sovereign Strategy argues that if Spain can't get €2bn of debt away today then it's "game over".
7.34am: As we reported last night, Europe's single currency could swiftly unravel unless its leaders decide within weeks to centralise budget and tax policies in the eurozonem, and agree a strategy to pool responsibility for failing banks.7.34am: As we reported last night, Europe's single currency could swiftly unravel unless its leaders decide within weeks to centralise budget and tax policies in the eurozonem, and agree a strategy to pool responsibility for failing banks.
Here's a flavour of today's front-page story on the eurocrisis:Here's a flavour of today's front-page story on the eurocrisis:
With fears of a euro meltdown having rapidly shifted from Greece to Spain, Rajoy is pleading for a direct eurozone rescue of his country's banks, to avoid the humiliation attached to requesting a national bailout.With fears of a euro meltdown having rapidly shifted from Greece to Spain, Rajoy is pleading for a direct eurozone rescue of his country's banks, to avoid the humiliation attached to requesting a national bailout.
Sources familiar with the Spanish government's thinking said its negotiating position was that the fundamental quandary facing the eurozone was not Spain, but a European failure of leadership in persuading the financial markets that the euro would be defended at all costs.Sources familiar with the Spanish government's thinking said its negotiating position was that the fundamental quandary facing the eurozone was not Spain, but a European failure of leadership in persuading the financial markets that the euro would be defended at all costs.
So Spain's goal is to get new funding for its banks, without signing up to a full bailout – and all the extra austerity measures, tough targets, and Troika assessments that would bring.So Spain's goal is to get new funding for its banks, without signing up to a full bailout – and all the extra austerity measures, tough targets, and Troika assessments that would bring.
And surely that will annoy Greece, Ireland and Portugal, who all took a bailout. As Gary Jenkins of Swordfish Research points out:And surely that will annoy Greece, Ireland and Portugal, who all took a bailout. As Gary Jenkins of Swordfish Research points out:
It appears that Spain does not want a bailout in order to recapitalise its banks, they just want cash. And it also appears that there may be plans underway to give them pretty much exactly what they want, with numerous reports suggesting that officials are working on an idea for the EFSF/ESM to lend directly to the Spanish banking rescue fund (FROB) in order for them to on-lend to the banks, thus avoiding the embarrassment of the Spanish government itself receiving a bailout.It appears that Spain does not want a bailout in order to recapitalise its banks, they just want cash. And it also appears that there may be plans underway to give them pretty much exactly what they want, with numerous reports suggesting that officials are working on an idea for the EFSF/ESM to lend directly to the Spanish banking rescue fund (FROB) in order for them to on-lend to the banks, thus avoiding the embarrassment of the Spanish government itself receiving a bailout.
But as our own Giles Tremlett explained yesterday, a deal is unlikely until the size of the black hole in Spain's banking sector is known.But as our own Giles Tremlett explained yesterday, a deal is unlikely until the size of the black hole in Spain's banking sector is known.
7.30am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis.7.30am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis.
And what a day we have ahead, with the future of the eurozone hanging in the balance. With speculation of a bailout rampant, Spain will hold an auction of government debt this morning. The sale is a crucial test of market confidence, at a time when Madrid is battling to receive help for its stricken banks, but resisting pressure for a full-scale bailout.And what a day we have ahead, with the future of the eurozone hanging in the balance. With speculation of a bailout rampant, Spain will hold an auction of government debt this morning. The sale is a crucial test of market confidence, at a time when Madrid is battling to receive help for its stricken banks, but resisting pressure for a full-scale bailout.
David Cameron and Angela Merkel will hold talks over the crisis in Berlin today, with the British prime minister expected to tell the German chancellor that a proper plan to save the eurozone is now urgently needed.David Cameron and Angela Merkel will hold talks over the crisis in Berlin today, with the British prime minister expected to tell the German chancellor that a proper plan to save the eurozone is now urgently needed.
In the City, economists and traders are poised for the Bank of England's decision on interest rates and quantitative easing. The UK central bank could fire up the electronic printing presses again, or even cut borrowing costs.In the City, economists and traders are poised for the Bank of England's decision on interest rates and quantitative easing. The UK central bank could fire up the electronic printing presses again, or even cut borrowing costs.
And if that wasn't enough, Ben Bernanke is testifying to a congressional committee today. The Federal Reseve chair will be quizzed on the state of the US economy, and might hint at new stimulus measures.And if that wasn't enough, Ben Bernanke is testifying to a congressional committee today. The Federal Reseve chair will be quizzed on the state of the US economy, and might hint at new stimulus measures.
AgendaAgenda
• Spain's bond auction: from 9am BST / 10am CEST
• UK service sector PMI for May: 9.30am BST
• David Cameron meeting Angela Merkel: all day
• Bank of England decision on rate/QE: 12pm BST
• Ben Bernanke testifies to the Joint Economic Committee 3pm BST / 10am EDT		• Spain's bond auction: from 9am BST / 10am CEST
• UK service sector PMI for May: 9.30am BST
• David Cameron meeting Angela Merkel: all day
• Bank of England decision on rate/QE: 12pm BST
• Ben Bernanke testifies to the Joint Economic Committee 3pm BST / 10am EDT