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Eurozone crisis live: Spanish bond yields soar as bailout gets thumbs down Eurozone crisis live: Spanish bond yields soar as bailout gets thumbs down
(40 minutes later)
4.29pm: The European Central Bank has said the Spanish bailout would stabilise the country - although the markets don't seem to be sure of that - but put the onus on EU governments to solve the current crisis.
In its latest financial stability review it said eurozone tensions had risen since April but were lower than at the end of last year. It saw three key risks: falling bank profits; excessive deleveraging by banks; and a potential aggravation of the debt crisis. Its conclusion:
All in all, developments in the last few weeks have continued to illustrate the persistent negative interplay of key risks, and underscore the need for concerted and comprehensive decisions of Member States to put an end to the turbulence that has been affecting the euro area for over two years.
So now tell the Member States to stop arguing and come up with a comprehensive solution....(and there goes a flying pig).
4.20pm: Meanwhile there has been some reaction to Spain's remarks denying it is like African state Uganda.
Over the weekend it was reported that Spain's Prime Minister Mariano Rajoy texted his finance minister, during the bailout negotiations, to big up Spain at the expense of the likes of Uganda. According to El Mundo he said: "We're the number four power in Europe, Spain is not Uganda."
Which has resulted in a Twitter hashtag of UgandaisnotSpain and tweets such as:
Dear Rajoy, you're right. Spain is not Uganda. Spain's GDP growth is negative, Uganda's GDP growth is 5.2%. #UgandaisnotSpain #ajstream
— TMS Ruge (@tmsruge) June 11, 2012
Careful with that social media.....
4.11pm: Some snippets coming out of the press conference by Greek left winger Alex Tsipras, who has caused such consternation by threatening to rip up the country's bailout agreement if he's voted in on Sunday.
He is promising to cut high ministerial salaries and restore the minimum wage to €751, and will write off household debts. And he has come out fighting against those who say that a win for his party Syriza would destroy the country, calling them irresponsible. Earlier today one of the party's leading candidates quit, saying its election would be catastrophic for the country.
Tsipras said said the country had to choose between the current bailout terms, with the memorandum of understanding as backed by rival New Democracy, or a new way (courtesy of Greek journalist Efthimia Efthimiou):
#Greece2012 Tsipras: There are two ways. Either a leftist govt with syriza in its core, or a govt of MoU with ND
— Efthimia Efthimiou (@EfiEfthimiou) June 12, 2012
#Greece2012 Tsipras: If we continue implementing MoU, country will be destroyed. We will tell this to EU partners, will try to communicate
— Efthimia Efthimiou (@EfiEfthimiou) June 12, 2012
But there is a perhaps more conciliatory tone towards the EU:
#Greece2012 Tsipras: We will try to convince ECB to guarantee citizens deposits
— Efthimia Efthimiou (@EfiEfthimiou) June 12, 2012
3.56pm: And here's another vote of confidence in the eurozone project (sarcasm for those not aware):3.56pm: And here's another vote of confidence in the eurozone project (sarcasm for those not aware):
Spain cut from 10/1 to 5/1 to be out of Euro before end of this year; 4/1 to be 1st country out at any time. #EuroSpain cut from 10/1 to 5/1 to be out of Euro before end of this year; 4/1 to be 1st country out at any time. #Euro
— William Hill (@sharpeangle) June 12, 2012— William Hill (@sharpeangle) June 12, 2012
The punters are speaking...The punters are speaking...
3.31pm: Spanish bond yields are now at 6.8%, while Italy's are at 6.24%.3.31pm: Spanish bond yields are now at 6.8%, while Italy's are at 6.24%.
This is dangerous territory, and is not the reaction policymakers would have wanted after the weekend's news on the Spanish bank bailout. Investors clearly are not buying into any of the supposedly positive statements coming out of EU officials and government ministers. Indeed according to Bloomberg figures (we normally use Tradeweb but this shows a worse picture so we present it here anyway) Spanish yields are the highest since the mid 1990s. For balance Tradeweb says it's the highest since November 2011. Not so bad, but still bad.This is dangerous territory, and is not the reaction policymakers would have wanted after the weekend's news on the Spanish bank bailout. Investors clearly are not buying into any of the supposedly positive statements coming out of EU officials and government ministers. Indeed according to Bloomberg figures (we normally use Tradeweb but this shows a worse picture so we present it here anyway) Spanish yields are the highest since the mid 1990s. For balance Tradeweb says it's the highest since November 2011. Not so bad, but still bad.
And the ratings agencies continue to exert their influence. Fitch, after downgrading Spain's Santander and BBVA on Monday, have now cut another 18 Spanish banks. The reason is the same - Spain is expected to remain in recession this year and next - but the timing means another dose of bad news when politicians are trying to play up positives.And the ratings agencies continue to exert their influence. Fitch, after downgrading Spain's Santander and BBVA on Monday, have now cut another 18 Spanish banks. The reason is the same - Spain is expected to remain in recession this year and next - but the timing means another dose of bad news when politicians are trying to play up positives.
3.00pm: Away from the immediate eurozone crisis, Christine Lagarde, the head of the International Monetary Fund, is speaking in Washington on sustainability. Phillip Inman writes:3.00pm: Away from the immediate eurozone crisis, Christine Lagarde, the head of the International Monetary Fund, is speaking in Washington on sustainability. Phillip Inman writes:
Lagarde warned today that the world risks a triple crisis of declining incomes, environmental damage and social unrest unless countries adopt a more sustainable approach to economic growth.Lagarde warned today that the world risks a triple crisis of declining incomes, environmental damage and social unrest unless countries adopt a more sustainable approach to economic growth.
Ahead of the Rio+20 Earth summit later this month, she said the rich should restrain their demands for higher incomes while there are still 200m people worldwide looking for a job and poverty is on the rise.Ahead of the Rio+20 Earth summit later this month, she said the rich should restrain their demands for higher incomes while there are still 200m people worldwide looking for a job and poverty is on the rise.
Giving her clearest backing yet to green taxes and a range of measures to protect the environment, she argued for taxes on petrol-guzzling cars among a range of green measures to tackle climate change.Giving her clearest backing yet to green taxes and a range of measures to protect the environment, she argued for taxes on petrol-guzzling cars among a range of green measures to tackle climate change.
"It has been twenty years since world leaders first went to Rio to commit to the noble goal of protecting the planet for future generations. And now, twenty years on, we will be journeying back to Rio to affirm our commitment to sustainable development—the idea that we should strive for economic growth, environmental protection and social progress at the same time," she said."It has been twenty years since world leaders first went to Rio to commit to the noble goal of protecting the planet for future generations. And now, twenty years on, we will be journeying back to Rio to affirm our commitment to sustainable development—the idea that we should strive for economic growth, environmental protection and social progress at the same time," she said.
More on the site soon.More on the site soon.
2.34pm: Nothing like the bond markets to dampen the mood. The yield on Spain's 10-year bonds has risen to 6.75%, their highest level since November 2011.2.34pm: Nothing like the bond markets to dampen the mood. The yield on Spain's 10-year bonds has risen to 6.75%, their highest level since November 2011.
And with that, it's time to hand over to my colleague Nick Fletcher.And with that, it's time to hand over to my colleague Nick Fletcher.
2.27pm: More on the global firewall (see 2.09pm) from Linkiesta columnist Fabrizio Goria. But who's IMF chief Christine Lagarde, who's ECB president Mario Draghi, and who is the EU president Herman Van Rompuy?2.27pm: More on the global firewall (see 2.09pm) from Linkiesta columnist Fabrizio Goria. But who's IMF chief Christine Lagarde, who's ECB president Mario Draghi, and who is the EU president Herman Van Rompuy?
The Intergalactic Troika #GlobalFirewall twitter.com/FGoria/status/…The Intergalactic Troika #GlobalFirewall twitter.com/FGoria/status/…
— Fabrizio Goria (@FGoria) June 12, 2012— Fabrizio Goria (@FGoria) June 12, 2012
And with that we promise we'll stop with the silly jokes.And with that we promise we'll stop with the silly jokes.
2.23pm: Over in Ireland, Henry McDonald reports that the leader of Ireland's main opposition party in the Dail has said the bank debt deal for Spain is "too little, too late".2.23pm: Over in Ireland, Henry McDonald reports that the leader of Ireland's main opposition party in the Dail has said the bank debt deal for Spain is "too little, too late".
Striking a somewhat apocalyptic tone about the eurozone, Fianna Fail chief Micheal Martin criticised the deal because he claimed it did not break a link between private bank and sovereign debt.Striking a somewhat apocalyptic tone about the eurozone, Fianna Fail chief Micheal Martin criticised the deal because he claimed it did not break a link between private bank and sovereign debt.
Martin also criticised the Fine Gael/Labour coallition for not insisting on a new deal that would break that link.Martin also criticised the Fine Gael/Labour coallition for not insisting on a new deal that would break that link.
2.09pm: A senior German official says Europe has done its part and now needs a global firewall, prompting plenty of derisive comments on Twitter. Some of our favourites (cut and pasted in because Twitter's playing up)...2.09pm: A senior German official says Europe has done its part and now needs a global firewall, prompting plenty of derisive comments on Twitter. Some of our favourites (cut and pasted in because Twitter's playing up)...
@FGoria: Aliens and Predators say will provide resources to ‪#UniversalFirewall

‏@zerohedge: Who will be on the other side of the Global Firewall? Uranus?		@FGoria: Aliens and Predators say will provide resources to ‪#UniversalFirewall

‏@zerohedge: Who will be on the other side of the Global Firewall? Uranus?
1.56pm: German chancellor Angela Merkel said there would be conditions attached to Spain's banking bailout.1.56pm: German chancellor Angela Merkel said there would be conditions attached to Spain's banking bailout.
Speaking in Berlin, she said European states must be prepared to give up national sovereignty and stressed that liability and control have to go together, prompting some wry comments on Twitter.Speaking in Berlin, she said European states must be prepared to give up national sovereignty and stressed that liability and control have to go together, prompting some wry comments on Twitter.
Merkel says better EU banking supervision requires giving up more national supervision......(not included in line is...to Germany)Merkel says better EU banking supervision requires giving up more national supervision......(not included in line is...to Germany)
— Joshua Raymond (@Josh_CityIndex) June 12, 2012— Joshua Raymond (@Josh_CityIndex) June 12, 2012
She also reiterated her opposition to eurobonds (where debt issued by one eurozone country would be underwritten by all 17) saying "simply borrowing" is not the answer to solving the euro debt crisis. Discussing eurobonds would push Europe down the wrong path, she said, and potentially create an even worse disaster.She also reiterated her opposition to eurobonds (where debt issued by one eurozone country would be underwritten by all 17) saying "simply borrowing" is not the answer to solving the euro debt crisis. Discussing eurobonds would push Europe down the wrong path, she said, and potentially create an even worse disaster.
1.41pm: Over in Spain, there is growing frustration about the government's refusal to answer questions on the country's banking bailout. Giles Tremlett from Madrid reports:1.41pm: Over in Spain, there is growing frustration about the government's refusal to answer questions on the country's banking bailout. Giles Tremlett from Madrid reports:
Spain's prime minister Mariano Rajoy is in no hurry to explain the up to €100bn bailout of his country's banks to the Spanish parliament in Madrid.Spain's prime minister Mariano Rajoy is in no hurry to explain the up to €100bn bailout of his country's banks to the Spanish parliament in Madrid.
His People's party (PP) today blocked attempts to bring him to parliament soon. It now seems that it will be a full month after the bailout was announced before he explains to parliament - where he has an absolute majority - what the deal really means.His People's party (PP) today blocked attempts to bring him to parliament soon. It now seems that it will be a full month after the bailout was announced before he explains to parliament - where he has an absolute majority - what the deal really means.
The PP is arguing that the full bailout details will not be available until after two independent audits of the banking sector (due by June 21) are done and a European summit is held at the end of this month.The PP is arguing that the full bailout details will not be available until after two independent audits of the banking sector (due by June 21) are done and a European summit is held at the end of this month.
His party has also blocked attempts to set up a special parliamentary committee to investigate Bankia, which was part-nationalised last month and now needs an extra €23bn - even though it persuaded 350,000 small investors to buy shares last year.His party has also blocked attempts to set up a special parliamentary committee to investigate Bankia, which was part-nationalised last month and now needs an extra €23bn - even though it persuaded 350,000 small investors to buy shares last year.
That leaves Spain's courts in charge of the investigation.That leaves Spain's courts in charge of the investigation.
1.32pm: Helena Smith has sent a bit of background on Greek party Syriza following the shock news that one of its leading candidates has quit the party (see 12.47pm).1.32pm: Helena Smith has sent a bit of background on Greek party Syriza following the shock news that one of its leading candidates has quit the party (see 12.47pm).
Syriza, a coalition of leftist groups ranging from traditional Marxists to ex euro communists and socialists, has been split over its economic and foreign policies not least the euro and whether Greece should dump the single currency for the drachma. Many have accused the party of being "hopelessly contradictory" in its attitude towards Europe.Syriza, a coalition of leftist groups ranging from traditional Marxists to ex euro communists and socialists, has been split over its economic and foreign policies not least the euro and whether Greece should dump the single currency for the drachma. Many have accused the party of being "hopelessly contradictory" in its attitude towards Europe.
Alexis Tsipras, the party's leader, will attempt to "set the record straight" by allaying fears that Syriza is intent on taking Greece out of the euro zone at a press conference later today.Alexis Tsipras, the party's leader, will attempt to "set the record straight" by allaying fears that Syriza is intent on taking Greece out of the euro zone at a press conference later today.
12.47pm: Over to Greece again where Helena Smith says the unexpected defection of one of Syriza's leading candidates has sent shock waves through the ranks of the leftist party this morning. We're compiling all the news from Athens, on our 2012 Greek elections blog.12.47pm: Over to Greece again where Helena Smith says the unexpected defection of one of Syriza's leading candidates has sent shock waves through the ranks of the leftist party this morning. We're compiling all the news from Athens, on our 2012 Greek elections blog.
In a short but nonetheless scathing letter, Nikos Hanias, Syriza's candidate in Corinth, lambasted the party saying its elevation to power "if only for an hour" would be catastrophic "for Greece and our children."In a short but nonetheless scathing letter, Nikos Hanias, Syriza's candidate in Corinth, lambasted the party saying its elevation to power "if only for an hour" would be catastrophic "for Greece and our children."
In the explosive letter, sent to the general secretary of the party's central committee, Hanias, a veteran leftist wrote: "It is shameful and dishonourable that by exploiting the justified rage of society, you are gambling with our future, betting on the non-existent possibility that our creditors are bluffing without proposing something if the case is the contrary, especially when you know that your maximalist and surreal positions have no contact with reality."In the explosive letter, sent to the general secretary of the party's central committee, Hanias, a veteran leftist wrote: "It is shameful and dishonourable that by exploiting the justified rage of society, you are gambling with our future, betting on the non-existent possibility that our creditors are bluffing without proposing something if the case is the contrary, especially when you know that your maximalist and surreal positions have no contact with reality."
Closing the missive the left-wing candidate said he could no longer participate in a party that he described as being "extremely dangerous for the Greek people and its future."Closing the missive the left-wing candidate said he could no longer participate in a party that he described as being "extremely dangerous for the Greek people and its future."
Clearly taken aback, Syriza called Hanias' extraordinary move – barely five days before critical elections – "an inexplicable and immoral act that is inappropriate for anyone in politics and more so for an active leftist."Clearly taken aback, Syriza called Hanias' extraordinary move – barely five days before critical elections – "an inexplicable and immoral act that is inappropriate for anyone in politics and more so for an active leftist."
12.33pm: A quick look at the markets, which have largely moved higher this morning, though traders say sentiment remains fragile.12.33pm: A quick look at the markets, which have largely moved higher this morning, though traders say sentiment remains fragile.
UK FTSE: up 0.35% at 5451 points
France CAC: up 0.32%
German DAX: up 0.42%
Spain IBEX: up 0.6%
Italy FTSE MIB: down 0.48%		UK FTSE: up 0.35% at 5451 points
France CAC: up 0.32%
German DAX: up 0.42%
Spain IBEX: up 0.6%
Italy FTSE MIB: down 0.48%
12.24pm: The European Central Bank is not discussing a third round of the long-term refinancing operation (LTRO), council member Jozef Makuch said. He also said the bank's bond-buying programme - the Securities Markets Programme (SMP) - was on hold for now.12.24pm: The European Central Bank is not discussing a third round of the long-term refinancing operation (LTRO), council member Jozef Makuch said. He also said the bank's bond-buying programme - the Securities Markets Programme (SMP) - was on hold for now.
Rumours were circulating this morning that the ECB was buying up Italian bonds (BTPs) via the SMP, but traders dismissed them. One said:Rumours were circulating this morning that the ECB was buying up Italian bonds (BTPs) via the SMP, but traders dismissed them. One said:
BTPs bouncing on SMP buying rumour....we see nothing behind this and do not believe it. More likely to do with the positive Fitch report suggesting that Italy is different from Spain and therefore unlikely to need emergency loans.BTPs bouncing on SMP buying rumour....we see nothing behind this and do not believe it. More likely to do with the positive Fitch report suggesting that Italy is different from Spain and therefore unlikely to need emergency loans.
Yields on Italian 10-year bonds have dropped back from a peak of 6.2% this morning to 6.14%. The yield on Spanish 10-year bonds continues to rise and is currently at 6.67%.Yields on Italian 10-year bonds have dropped back from a peak of 6.2% this morning to 6.14%. The yield on Spanish 10-year bonds continues to rise and is currently at 6.67%.
12.11pm: Some light relief from Dow Jones' currencies editor on comments from Bundesbank board member Andreas Dombret (see 12.04pm).
12.11pm: Some light relief from Dow Jones' currencies editor on comments from Bundesbank board member Andreas Dombret (see 12.04pm).
Buba's Dombret: Euro Can Make It,But EMU is at Crossroads [dj]>He shd ask Rod Hull for directions (apols for that gag, esp to nonUK readers)Buba's Dombret: Euro Can Make It,But EMU is at Crossroads [dj]>He shd ask Rod Hull for directions (apols for that gag, esp to nonUK readers)
— Katie Martin (@katie_martin_FX) June 12, 2012— Katie Martin (@katie_martin_FX) June 12, 2012
12.04pm: There's more coming out of the Bundesbank, this time from board member Andreas Dombret. He says banks should not rely on the ECB providing unlimited liquidity as an alternative to adjusting their business practices, as the policy will be removed before it creates risks to financial stability.12.04pm: There's more coming out of the Bundesbank, this time from board member Andreas Dombret. He says banks should not rely on the ECB providing unlimited liquidity as an alternative to adjusting their business practices, as the policy will be removed before it creates risks to financial stability.
He says monetary policy cannot extinguish the eurozone fire; it is up to fiscal policy foremost to tackle the crisis.He says monetary policy cannot extinguish the eurozone fire; it is up to fiscal policy foremost to tackle the crisis.
He's optimistic that the Spanish aid package will mitigate negative feedback loops between banks' deleveraging and the real economy.He's optimistic that the Spanish aid package will mitigate negative feedback loops between banks' deleveraging and the real economy.
And he talks tough on Greece saying it must stick to agreed austerity and reform measures. "No ifs, no buts".And he talks tough on Greece saying it must stick to agreed austerity and reform measures. "No ifs, no buts".
11.41am: There's some hot words and hasty retractions breaking out between Austrian finance minister Maria Fekter and Italian prime minister Mario Monti.11.41am: There's some hot words and hasty retractions breaking out between Austrian finance minister Maria Fekter and Italian prime minister Mario Monti.
Fekter yesterday declined to rule out the possibility that Italy would have to seek financial aid from its European partners, given its escalating borrowing costs.Fekter yesterday declined to rule out the possibility that Italy would have to seek financial aid from its European partners, given its escalating borrowing costs.
Monti hit back saying the comments were "completely inappropriate". Feckter has now back-tracked saying she does not expect Italy to aply for aid, saying: "We have no indication that Italy will make an application. I do not see it this way."Monti hit back saying the comments were "completely inappropriate". Feckter has now back-tracked saying she does not expect Italy to aply for aid, saying: "We have no indication that Italy will make an application. I do not see it this way."
Monti was speaking at a joint press conference with Swiss federation president Eveline wdmer-Schlumpf, following their discussions about a tax agreement to collect a one-off levy on undeclared money stashed in Swtizerland. On these, Monti only said:Monti was speaking at a joint press conference with Swiss federation president Eveline wdmer-Schlumpf, following their discussions about a tax agreement to collect a one-off levy on undeclared money stashed in Swtizerland. On these, Monti only said:
There's the will to conclude the negotiations well and soon.There's the will to conclude the negotiations well and soon.
11.30am: Germany's central bank said a European banking union would only made sense if backed up powers to stop countries breaking budgetary rules. Bundesbank vice president Sabine Lautenschlaeger said:11.30am: Germany's central bank said a European banking union would only made sense if backed up powers to stop countries breaking budgetary rules. Bundesbank vice president Sabine Lautenschlaeger said:
In a banking union, a crisis in one country's banking system may require the use of taxpayer money from other countries. Whoever is footing the bill must also have a right of control, particularly when it comes to the large sums that are seen in banking crises.In a banking union, a crisis in one country's banking system may require the use of taxpayer money from other countries. Whoever is footing the bill must also have a right of control, particularly when it comes to the large sums that are seen in banking crises.
She accepted that it is not clear what politicians mean by banking or fiscal union, but said that a banking union would bring advantages if it implied more integrated banking supervision or greater firepower to wind down national banks and prevent bank runs.She accepted that it is not clear what politicians mean by banking or fiscal union, but said that a banking union would bring advantages if it implied more integrated banking supervision or greater firepower to wind down national banks and prevent bank runs.
11.17am: Various newspaper articles this morning are betting on Cyprus requesting a bailout imminently. Daniel Dombey writes in the Financial Times (behind paywall):11.17am: Various newspaper articles this morning are betting on Cyprus requesting a bailout imminently. Daniel Dombey writes in the Financial Times (behind paywall):
Cyprus has said it could request an international bailout within days, reflecting growing expectations it will become the fifth eurozone country to seek rescue funds.Cyprus has said it could request an international bailout within days, reflecting growing expectations it will become the fifth eurozone country to seek rescue funds.
Vassos Shiarly, finance minister, said the cash-strapped country's predicament was exceptionally urgent because of bank capitalisation rules due to come into effect on June 30. But he also suggested Nicosia could seek aid for more than just the banking sector. Cyprus has been shut out of international capital markets for about a year.Vassos Shiarly, finance minister, said the cash-strapped country's predicament was exceptionally urgent because of bank capitalisation rules due to come into effect on June 30. But he also suggested Nicosia could seek aid for more than just the banking sector. Cyprus has been shut out of international capital markets for about a year.
"There are only a few days left," Mr Shiarly said, referring to the choice facing the country as to whether request EU aid."There are only a few days left," Mr Shiarly said, referring to the choice facing the country as to whether request EU aid.
Alkman Granitsas in the Wall Street Journal writes:Alkman Granitsas in the Wall Street Journal writes:
According to several European officials, the size of any bailout would be unlikely to exceed €3 billion to €4 billion ($3.8 billion to $5 billion), a sum that wouldn't strain the resources of the euro zone's bailout funds.According to several European officials, the size of any bailout would be unlikely to exceed €3 billion to €4 billion ($3.8 billion to $5 billion), a sum that wouldn't strain the resources of the euro zone's bailout funds.
However, some European officials said the main impact of Cyprus's request on Monday might be to send a further signal that contagion is spreading in the euro zone.However, some European officials said the main impact of Cyprus's request on Monday might be to send a further signal that contagion is spreading in the euro zone.
11.06am: UK, US and French triple-A ratings are under pressure, Fitch analysts said on their so-called Viking Tour, which stopped in Oslo today.11.06am: UK, US and French triple-A ratings are under pressure, Fitch analysts said on their so-called Viking Tour, which stopped in Oslo today.
Ed Parker of Fitch also highlighted the differences between Italy and Spain. He said Italy's banks were much stronger, but the economy remains at risk as it is very dependent on borrowing costs.Ed Parker of Fitch also highlighted the differences between Italy and Spain. He said Italy's banks were much stronger, but the economy remains at risk as it is very dependent on borrowing costs.
The Spanish bank bailout has stabilised Spain's sovereign rating at its current level, Fitch said, although a worsening of its situation and the euro crisis could change that. The ratings agency expects Spain to miss 2012 and 2013 deficit targets significantly.The Spanish bank bailout has stabilised Spain's sovereign rating at its current level, Fitch said, although a worsening of its situation and the euro crisis could change that. The ratings agency expects Spain to miss 2012 and 2013 deficit targets significantly.
10.42am: News in from Athens where our correspondent Helena Smith says the political thermometer ahead of Sunday's crucial poll is as hot as the blistering temperatures in Greece.
10.42am: News in from Athens where our correspondent Helena Smith says the political thermometer ahead of Sunday's crucial poll is as hot as the blistering temperatures in Greece.
As the first summer heatwave descends on Greece, temperatures on the political scene have also shot up, with the conservative New Democracy and radical left Syriza parties – the two main contestants in Sunday's poll – exchanging barbs over the Spanish bailout.As the first summer heatwave descends on Greece, temperatures on the political scene have also shot up, with the conservative New Democracy and radical left Syriza parties – the two main contestants in Sunday's poll – exchanging barbs over the Spanish bailout.
While Syriza contends that the €100bn lifeline thrown to Spain is further evidence of a "structural crisis in the eurozone itself," New Democracy has been busily arguing that the bailout is further proof that when you negotiate with Europe, rather than clash with it, it pays off. "Just think, at a time when a country like Spain negotiates, some argue that we have to clash with Europe," said Antonis Samaras the conservative party leader.While Syriza contends that the €100bn lifeline thrown to Spain is further evidence of a "structural crisis in the eurozone itself," New Democracy has been busily arguing that the bailout is further proof that when you negotiate with Europe, rather than clash with it, it pays off. "Just think, at a time when a country like Spain negotiates, some argue that we have to clash with Europe," said Antonis Samaras the conservative party leader.
With a televised press conference later today, Alexis Tsipras will attempt to quell fears that his radical Left Coalition party will scrap the bailout agreement Greece signed up to with its international creditors.With a televised press conference later today, Alexis Tsipras will attempt to quell fears that his radical Left Coalition party will scrap the bailout agreement Greece signed up to with its international creditors.
Many worry Greece will be taken on an adventure if the leftists emerge as the front-runner in an election that, like last month's poll, will almost certainly not produce an outright winner.Many worry Greece will be taken on an adventure if the leftists emerge as the front-runner in an election that, like last month's poll, will almost certainly not produce an outright winner.
Tellingly, Gikas Hardouvelis, chief economist to Lucas Papademos, the technocrat prime minister who headed a six month cross-party government until May, told a local radio station this morning that "they [the EU] are totally bored of us … the most important message that we must send out is that we want to stay in the eurozone because if we leave the eurozone it is very likely that we will leave the European Union, too."

As I type, the socialist Pasok party leader and former finance minister, Evangelos Venizelos, is visiting president Carolos Papaoulias to brief the head of state on his meeting in Rome yesterday with Mario Monti. The Italian prime minister reportedly underlined the importance of Greece "remaining in the eurozone". Venizelos, who negotiated the second €130bn EU-IMF support package for Athens, presented a list of revisions to the deal which has whipped up widespread opposition with its draconian spending cuts and tax increases.		Tellingly, Gikas Hardouvelis, chief economist to Lucas Papademos, the technocrat prime minister who headed a six month cross-party government until May, told a local radio station this morning that "they [the EU] are totally bored of us … the most important message that we must send out is that we want to stay in the eurozone because if we leave the eurozone it is very likely that we will leave the European Union, too."

As I type, the socialist Pasok party leader and former finance minister, Evangelos Venizelos, is visiting president Carolos Papaoulias to brief the head of state on his meeting in Rome yesterday with Mario Monti. The Italian prime minister reportedly underlined the importance of Greece "remaining in the eurozone". Venizelos, who negotiated the second €130bn EU-IMF support package for Athens, presented a list of revisions to the deal which has whipped up widespread opposition with its draconian spending cuts and tax increases.
Emerging from the talks in Rome, he said that the proposed changes had been greeted positively "as long as Greece has a comprehensive plan, social consensus, political unity and is willing and capable to push through wide-ranging reforms."Emerging from the talks in Rome, he said that the proposed changes had been greeted positively "as long as Greece has a comprehensive plan, social consensus, political unity and is willing and capable to push through wide-ranging reforms."
Venizelos has repeatedly said that Greece cannot navigate the crisis with a one-party government and that it is urgent a national unity government is formed. "Internally, there is not the luxury for a government to be opposed by a big and strong opposition," he told an Italian newspaper.
There are not a few who believe that while Syriza would never admit it openly, the party's real aim is to come a close second in the poll to enable it to be the voice of the opposition on the streets.		Venizelos has repeatedly said that Greece cannot navigate the crisis with a one-party government and that it is urgent a national unity government is formed. "Internally, there is not the luxury for a government to be opposed by a big and strong opposition," he told an Italian newspaper.
There are not a few who believe that while Syriza would never admit it openly, the party's real aim is to come a close second in the poll to enable it to be the voice of the opposition on the streets.
10.38am: While Greece sells €1.6bn of 182-day treasury bills with a yield of 4.73%. 10.38am: While Greece sells €1.6bn of 182-day treasury bills with a yield of 4.73%.
10.29am: The diverging fortunes of different eurozone countries are being made very clear in the debt markets.10.29am: The diverging fortunes of different eurozone countries are being made very clear in the debt markets.
Austria's borrowing costs fell this morning at a sale of €1.1bn of 10 and 50-year bonds. The average yield on the 10-year was 2.36%, compared with 2.63% in May. The 50-year bond had an average yield of 3.02%. Austria's borrowing costs fell this morning at a sale of €1.1bn of 10 and 50-year bonds. The average yield on the 10-year was 2.36%, compared with 2.63% in May. The 50-year bond had an average yield of 3.02%.
10.19am: The International Swaps and Derivatives Association (ISDA) has said the Spanish banking bailout is unlikely to trigger payouts on Spain's credit default swaps.10.19am: The International Swaps and Derivatives Association (ISDA) has said the Spanish banking bailout is unlikely to trigger payouts on Spain's credit default swaps.
For definitions of bond market and eurozone-related terminology, take a look at our eurozone crisis glossary.For definitions of bond market and eurozone-related terminology, take a look at our eurozone crisis glossary.
10.12am: Olli Rehn, vice-president of the European Commissioner said this morning that European Union heads of government will discuss ideas like a fiscal and financial union and a growth compact at their upcoming summit in late June. He told the European Parliament:10.12am: Olli Rehn, vice-president of the European Commissioner said this morning that European Union heads of government will discuss ideas like a fiscal and financial union and a growth compact at their upcoming summit in late June. He told the European Parliament:
At the summit...heads of state and government will discuss the next phase of deepening the economic union.At the summit...heads of state and government will discuss the next phase of deepening the economic union.
Rehn also urged parliament to move quickly to approve the so-called "two-pack" fiscal EU rules, which would give Brussels more influence over member state budgets and countries facing financial threats.Rehn also urged parliament to move quickly to approve the so-called "two-pack" fiscal EU rules, which would give Brussels more influence over member state budgets and countries facing financial threats.
He said if there is no deal on the two-pack rules between the parliament, member states and the European Commission soon, it would send a signal that European policy makers are failing "to live up to our political responsibilities."He said if there is no deal on the two-pack rules between the parliament, member states and the European Commission soon, it would send a signal that European policy makers are failing "to live up to our political responsibilities."
9.58am: Some more reaction to the UK's industrial production figures (see 9.29am). David Tinsley at BNP Paribas says:9.58am: Some more reaction to the UK's industrial production figures (see 9.29am). David Tinsley at BNP Paribas says:
The outturn in overall industrial production implies a pretty poor start to the second quarter. With core manufacturing production probably falling in May and June too, if the PMIs are a guide, then it will take a bounce in the other areas of industrial production to stop the Q2 data looking bad. It is increasingly hard not to come to the conclusion that the UK manufacturing sector is becoming overwhelmed by the recessionary gales blowing across the Channel.The outturn in overall industrial production implies a pretty poor start to the second quarter. With core manufacturing production probably falling in May and June too, if the PMIs are a guide, then it will take a bounce in the other areas of industrial production to stop the Q2 data looking bad. It is increasingly hard not to come to the conclusion that the UK manufacturing sector is becoming overwhelmed by the recessionary gales blowing across the Channel.
9.47am: More on Italian bond (BTP) yields (which have dropped back slightly to 6.14%). Marc Ostwald at Monument Securities says on FT Alphaville that investors are wrong to draw a line from Spain to Italy:9.47am: More on Italian bond (BTP) yields (which have dropped back slightly to 6.14%). Marc Ostwald at Monument Securities says on FT Alphaville that investors are wrong to draw a line from Spain to Italy:
Once again we must highlight that while the high level of BTP yields does no favours for the Italian banks, the fact that while Italy's debt to GDP metrics at 120% plus are ugly, its overall outstanding govt debt stands at just short of €2.0 Trln, but the financial sector has savings and assets in excess of €8.4 Trln, and Italy also has a mortgage to GDP ratio just south of 20% (the Netherlands by contrast has an equivalent ratio of 110%!) – so Italy is in fact rather like Japan rather than the popular myth that says it is similar to Spain, Ireland, Portugal, let alone Greece.Once again we must highlight that while the high level of BTP yields does no favours for the Italian banks, the fact that while Italy's debt to GDP metrics at 120% plus are ugly, its overall outstanding govt debt stands at just short of €2.0 Trln, but the financial sector has savings and assets in excess of €8.4 Trln, and Italy also has a mortgage to GDP ratio just south of 20% (the Netherlands by contrast has an equivalent ratio of 110%!) – so Italy is in fact rather like Japan rather than the popular myth that says it is similar to Spain, Ireland, Portugal, let alone Greece.
9.41am: On a monthly basis, UK manufacturing looks even worse; down 0.7% compared with forecasts of a 0.1% drop. Industrial production was unchanged over the month, compared with forecasts of a 0.1% lift.9.41am: On a monthly basis, UK manufacturing looks even worse; down 0.7% compared with forecasts of a 0.1% drop. Industrial production was unchanged over the month, compared with forecasts of a 0.1% lift.
Philip Shaw of Investec says:Philip Shaw of Investec says:
The manufacturing figures are very disappointing and highlight the pressure the sector's under given the gravity of the debt crisis in the euro area, but also the lack of confidence at home.The manufacturing figures are very disappointing and highlight the pressure the sector's under given the gravity of the debt crisis in the euro area, but also the lack of confidence at home.
The wider measure of industrial production is even worse, albeit due to the shutdown of an oil platform in the North Sea. Overall it could be touch and go whether we get a rebound in GDP in Q2, though much depends on the construction output figures. And policywise, MPC members will no doubt be giving serious thought to sancitoning more QE at some stage over the next couple of months.The wider measure of industrial production is even worse, albeit due to the shutdown of an oil platform in the North Sea. Overall it could be touch and go whether we get a rebound in GDP in Q2, though much depends on the construction output figures. And policywise, MPC members will no doubt be giving serious thought to sancitoning more QE at some stage over the next couple of months.
9.28am: CORRECTION, the forecast for manufacturing was for an increase of 0.4%, so results were much worse than expected...9.28am: CORRECTION, the forecast for manufacturing was for an increase of 0.4%, so results were much worse than expected...
UK industrial production fell 1% in April compared with the same month last year, in line with expectations. Manufacturing fell by 0.3%, compared with forecasts of an increase of 0.4%.UK industrial production fell 1% in April compared with the same month last year, in line with expectations. Manufacturing fell by 0.3%, compared with forecasts of an increase of 0.4%.
9.17am: And sticking with bond yields for a second, Ed Conway at Sky gives us some historical context to Spanish borrowing costs (now up at 6.66%).9.17am: And sticking with bond yields for a second, Ed Conway at Sky gives us some historical context to Spanish borrowing costs (now up at 6.66%).
Bailout hangover worsens: Spanish govt borrowing rates hit 6.6%. If this continues cld hit highest level since mid-90s twitter.com/EdConwaySky/st…Bailout hangover worsens: Spanish govt borrowing rates hit 6.6%. If this continues cld hit highest level since mid-90s twitter.com/EdConwaySky/st…
— Ed Conway (@EdConwaySky) June 12, 2012— Ed Conway (@EdConwaySky) June 12, 2012
9.05am: In the case of Italian bond yields (see 8.49am), economist Shaun Richards notes that investors are increasingly worried about Italy's contribution to Spain's bailout.9.05am: In the case of Italian bond yields (see 8.49am), economist Shaun Richards notes that investors are increasingly worried about Italy's contribution to Spain's bailout.
More and more are focusing on the extra 19.2 billion #Euros that Italy will guarantee to Spain as her ten year bond yield rises to 6.1%More and more are focusing on the extra 19.2 billion #Euros that Italy will guarantee to Spain as her ten year bond yield rises to 6.1%
— Shaun Richards (@notayesmansecon) June 12, 2012— Shaun Richards (@notayesmansecon) June 12, 2012
8.49am: Spanish and Italian bond yields - or borrowing costs - are on the rise.8.49am: Spanish and Italian bond yields - or borrowing costs - are on the rise.
Italian yields are up at 6.17% (their highest level since January), while Spanish yields have climbed to 6.53%. Italian yields are up at 6.17% (their highest level since January), while Spanish yields have climbed to 6.53%.
Bond investors are nervous that the EU will use the european stability mechanism to lend money directly to Spain. That would push existing holders of Spanish government bonds down the pecking order, ie the ESM will be paid back before them in the case of a default. Gary Jenkins of Swordfish Research reflected on the situation in his morning comment:Bond investors are nervous that the EU will use the european stability mechanism to lend money directly to Spain. That would push existing holders of Spanish government bonds down the pecking order, ie the ESM will be paid back before them in the case of a default. Gary Jenkins of Swordfish Research reflected on the situation in his morning comment:
I wonder if yesterday's bond market reaction will lead to a change of tack from the EU. They do not seem to understand the basic principle that they are reliant upon bond investors and thus they should be trying to encourage them to buy, not discourage them. There was unofficial confirmation that the ESM would be used and subordination would take place although funny enough late in the afternoon as Spanish and Italian yields got smacked there were headlines on Reuters suggesting that maybe there wouldn't be subordination and maybe they could use the EFSF initially before passing the loans onto the ESM….it really does look like they didn't even consider this aspect of the bailout and there are times when they do almost appear to be making it up as they go along.I wonder if yesterday's bond market reaction will lead to a change of tack from the EU. They do not seem to understand the basic principle that they are reliant upon bond investors and thus they should be trying to encourage them to buy, not discourage them. There was unofficial confirmation that the ESM would be used and subordination would take place although funny enough late in the afternoon as Spanish and Italian yields got smacked there were headlines on Reuters suggesting that maybe there wouldn't be subordination and maybe they could use the EFSF initially before passing the loans onto the ESM….it really does look like they didn't even consider this aspect of the bailout and there are times when they do almost appear to be making it up as they go along.
8.27am: There are conflicting messages coming out about Spain's banking bailout. Spanish prime minister Mariano Rajoy says the deal comes with no conditions, while the European Commission has said Spain will not receive any special treatment. It seems the vice-president of the EC was unwilling to clarify things when questioned by Dow Jones reporter Matina Stevis last night.8.27am: There are conflicting messages coming out about Spain's banking bailout. Spanish prime minister Mariano Rajoy says the deal comes with no conditions, while the European Commission has said Spain will not receive any special treatment. It seems the vice-president of the EC was unwilling to clarify things when questioned by Dow Jones reporter Matina Stevis last night.
Last night in Strasbourg, I asked Olli Rehn if aid wd be withheld from Spain should it miss its 2012 5.3% deficit target. He didn't respondLast night in Strasbourg, I asked Olli Rehn if aid wd be withheld from Spain should it miss its 2012 5.3% deficit target. He didn't respond
— Matina Stevis (@MatinaStevis) June 12, 2012— Matina Stevis (@MatinaStevis) June 12, 2012
8.17am: Markets across Europe are struggling to make any headway this morning, as investors continue to digest news of Spain's banking bailout.8.17am: Markets across Europe are struggling to make any headway this morning, as investors continue to digest news of Spain's banking bailout.
UK's FTSE: up 0.07% at 5436 points
Germany's DAX: unchanged
Spain's IBEX: down 0.4%
Italy's FTSE MIB: down 0.2%
France's CAC: up 0.2% 		UK's FTSE: up 0.07% at 5436 points
Germany's DAX: unchanged
Spain's IBEX: down 0.4%
Italy's FTSE MIB: down 0.2%
France's CAC: up 0.2%
8.09am: There's more evidence that companies are feeling the pain from the eurozone crisis. BAA's statistics this morning are particularly stark, with a dramatic drop in traffic from countries at the centre of the storm. My colleague Dan Milmo reports:8.09am: There's more evidence that companies are feeling the pain from the eurozone crisis. BAA's statistics this morning are particularly stark, with a dramatic drop in traffic from countries at the centre of the storm. My colleague Dan Milmo reports:
BAA said passenger numbers between Britain's largest airport and Greece dropped 11.3% compared with May last year, with traffic to and from Italy falling 9.2% and Spain by 2.5%. Portugal was the biggest faller, declining by 11.4%. BAA said that Heathrow carried 5.8 million people overall last month, a fall of 0.6% on the same period last year.BAA said passenger numbers between Britain's largest airport and Greece dropped 11.3% compared with May last year, with traffic to and from Italy falling 9.2% and Spain by 2.5%. Portugal was the biggest faller, declining by 11.4%. BAA said that Heathrow carried 5.8 million people overall last month, a fall of 0.6% on the same period last year.
7.59am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. All eyes will be on Spanish and Italian bond yields today, following Spain's banking bailout. And Greek politicians are campaigning furiously ahead of the elections this weekend, with Antonis Samaras and Alexis Tsipras due to speak later.7.59am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. All eyes will be on Spanish and Italian bond yields today, following Spain's banking bailout. And Greek politicians are campaigning furiously ahead of the elections this weekend, with Antonis Samaras and Alexis Tsipras due to speak later.
Italy's prime minister Mario Monti is due to meet Swiss president Eveline Widmer-Schlumpf to discuss tax. While the German chancellor Angela Merkel and her finance minister will be speaking at an economics conference in Berlin.Italy's prime minister Mario Monti is due to meet Swiss president Eveline Widmer-Schlumpf to discuss tax. While the German chancellor Angela Merkel and her finance minister will be speaking at an economics conference in Berlin.
This is today's agenda:This is today's agenda:
• Sweden CPI for May: 8.30am
• UK industrial output for April: 9.30am
• UK manufacturing output for April: 9.30am
• Andreas Dombret, board member of the Bunedsbank, speaks: 11am
• French president Francois Hollande speaks: 1.30pm
• UK GDP estimate by NIESR: 3pm
• IMF chief Christine Lagarde speaks: 3pm
• Joerg Asmussen, ECB board member, speaks: 3.30pm
• ECB financial stability review: 4pm
• US monthly budget statement for May: 7pm		• Sweden CPI for May: 8.30am
• UK industrial output for April: 9.30am
• UK manufacturing output for April: 9.30am
• Andreas Dombret, board member of the Bunedsbank, speaks: 11am
• French president Francois Hollande speaks: 1.30pm
• UK GDP estimate by NIESR: 3pm
• IMF chief Christine Lagarde speaks: 3pm
• Joerg Asmussen, ECB board member, speaks: 3.30pm
• ECB financial stability review: 4pm
• US monthly budget statement for May: 7pm
In the debt markets, the UK is selling five-year Treasury gilts. Austria is selling €1.1bn of 50 and 10-year bonds and the Netherlands is selling €1.5bn-2.5bn in 20-year bonds. Belgium, Greece and the US are selling short-dated treasury bills.In the debt markets, the UK is selling five-year Treasury gilts. Austria is selling €1.1bn of 50 and 10-year bonds and the Netherlands is selling €1.5bn-2.5bn in 20-year bonds. Belgium, Greece and the US are selling short-dated treasury bills.