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| Eurozone crisis live: Focus shifts to Italy ahead of bond auctions | Eurozone crisis live: Focus shifts to Italy ahead of bond auctions |
| (31 minutes later) | |
| 9.21am: Italian prime minister Mario Monti has met the leaders of the parties backing him in parliament this morning, trying to drum up support for his reforms. He called on the EU to come up with a credible plan to stimulate growth, including greater public investments and eventually euro bonds. | |
| The 28 June must put a "credible emphasis on growth," Monti told the lower house of parliament this morning. The interest rate on Italian 10-year bonds touched 6.3% ysterday, the highest level since January, and the spread with benchmark German Bunds widened to 490 basis points. Today Italian yields have eased to 6.112%. | |
| If there are better prospects for growth, then spreads will narrow and Italy will be "protected from contagion," Monti said. He added the country was "fully" on the path to meeting its budget goals. | |
| 9.07am: Turning to Greece, Schäuble told La Stampa that it was not inevitable that Greece would leave the euro after this weekend's elections. | |
| Greece must carry out significant structural adjustments to sort out its lack of competitveness and its weak public finances. There is no other way. If Greece were to leave the euro, this would not change its need to carry out reforms. | |
| George Osborne suggested yesterday that Greece may have to exit the eurozone so Germany can convince voters to pour more money into the troubled currency. | |
| 9.03am: Spain's Inditex, the world's largest clothes retailer, has provided some much needed cheer this morning. The company, which owns Zara, Massimo Dutti and a clutch of other brands, beat forecasts with a 30% rise in net profit to €432m (£347m) and sales of €3.4bn. Read more here. | |
| 8.55am: Oops. Huge apologies for mistranslating German finance minister Wolfgang Schäuble's comments earlier - I blame Google translate which turned "Monti's path" into "mountain path". He actually said this: | |
| If Italy continues along Monti's path, there will be no risks. | If Italy continues along Monti's path, there will be no risks. |
| Spain too is on the right path. It does not need an aid programme. It has a specific problem with its banking sector and I am sure it will solve it. | Spain too is on the right path. It does not need an aid programme. It has a specific problem with its banking sector and I am sure it will solve it. |
| 8.47am: Spanish and Italian bond yields have eased a tad today. Spanish ten-year yields have edged down 2 basis points to 6.714% while Italy's are at 6.088%, a 7 point fall. And interest rates on German Bunds are up slightly, by 7 points to 1.5%. | 8.47am: Spanish and Italian bond yields have eased a tad today. Spanish ten-year yields have edged down 2 basis points to 6.714% while Italy's are at 6.088%, a 7 point fall. And interest rates on German Bunds are up slightly, by 7 points to 1.5%. |
| 8.37am: Echoing Schäuble's comments that Italy is not in danger, the chief economist of the Paris-based Organisation for Economic Cooperation and Development has also warned against a panic. | 8.37am: Echoing Schäuble's comments that Italy is not in danger, the chief economist of the Paris-based Organisation for Economic Cooperation and Development has also warned against a panic. |
| Pier Carlo Padoan said in an interview with Italian daily Il Messaggero: | Pier Carlo Padoan said in an interview with Italian daily Il Messaggero: |
| There are no changes to the country's economic fundamentals that can justify an attack on Italy. Among OECD countries, Italy is one of the closest to a stabilisation of its debt. If there wasn't the contagion factor, steps taken so far towards recovery would be the right ones. | There are no changes to the country's economic fundamentals that can justify an attack on Italy. Among OECD countries, Italy is one of the closest to a stabilisation of its debt. If there wasn't the contagion factor, steps taken so far towards recovery would be the right ones. |
| However, he admitted that if government borrowing costs remain high for long, Italy would face severe consequences. He also urged bolder steps on growth and criticised European governments for often intervening too late and with insufficient measures. Italian ten-year bond yields are above the key 6% level again, albeit falling 7 basis points this morning to 6.089%. Padoan said: | However, he admitted that if government borrowing costs remain high for long, Italy would face severe consequences. He also urged bolder steps on growth and criticised European governments for often intervening too late and with insufficient measures. Italian ten-year bond yields are above the key 6% level again, albeit falling 7 basis points this morning to 6.089%. Padoan said: |
| The current situation reflects the fact that it is not clear to markets what political leadres and policymakers want to do. It is therefor urgent to break this vicious circle. | The current situation reflects the fact that it is not clear to markets what political leadres and policymakers want to do. It is therefor urgent to break this vicious circle. |
| 8.31am: Italy is not in danger, Germany's finance minister Wolfgang Schäuble has declared in an interview with Italian newspaper La Stampa. He says that Italy won't be the next "contaminated" country. "For Italy, no danger if it follows the path of the Mountains," the headline reads. The question is, is he saying that because Germany doesn't want to bail out Italy as well? | 8.31am: Italy is not in danger, Germany's finance minister Wolfgang Schäuble has declared in an interview with Italian newspaper La Stampa. He says that Italy won't be the next "contaminated" country. "For Italy, no danger if it follows the path of the Mountains," the headline reads. The question is, is he saying that because Germany doesn't want to bail out Italy as well? |
| Calling on Italian readers to provide a translation of the rest... | Calling on Italian readers to provide a translation of the rest... |
| 8.11am: While the pressure on Spain and Italy is rising, things look a bit more relaxed in Cyprus. | 8.11am: While the pressure on Spain and Italy is rising, things look a bit more relaxed in Cyprus. |
| The cash-strapped island is now eyeing a bilateral loan rather than an EU bailout as indicated on Monday to recapitalise its second largest bank although both options remain open, according to reports. | The cash-strapped island is now eyeing a bilateral loan rather than an EU bailout as indicated on Monday to recapitalise its second largest bank although both options remain open, according to reports. |
| The euro zone minnow, shut out of capital markets for more than a year, must find the equivalent of 10% of its GDP by the end of the month to strengthen Cyprus Popular Bank if no private investor comes forward. | The euro zone minnow, shut out of capital markets for more than a year, must find the equivalent of 10% of its GDP by the end of the month to strengthen Cyprus Popular Bank if no private investor comes forward. |
| Russia is back in the frame as a potential lender, the island's newspapers reported. Cyprus, which represents 0.2% of the eurozone's economy, already received a bilateral €2.5bn euro loan from Russia, a close business partner, last year. Media reported that Cyprus has sounded out Russia on a new loan, but China has also been tipped as a possible lender. | Russia is back in the frame as a potential lender, the island's newspapers reported. Cyprus, which represents 0.2% of the eurozone's economy, already received a bilateral €2.5bn euro loan from Russia, a close business partner, last year. Media reported that Cyprus has sounded out Russia on a new loan, but China has also been tipped as a possible lender. |
| Efforts are underway to borrow from a third country with "more favourable terms", Haravghi, the mouthpiece of Cyprus's ruling AKEL Communist party, reported on its frontpage. | Efforts are underway to borrow from a third country with "more favourable terms", Haravghi, the mouthpiece of Cyprus's ruling AKEL Communist party, reported on its frontpage. |
| Indeed, assked whether the prospect of bilateral lending was distant, finance minister Vassos Shiarly told state TV in an interview on Tuesday night: "I would say not." He also reiterated earlier comments that the island would not "wait until the last day" to take action to prop up the bank, either through bilateral lending or by resorting to the European Financial Support Facility. | Indeed, assked whether the prospect of bilateral lending was distant, finance minister Vassos Shiarly told state TV in an interview on Tuesday night: "I would say not." He also reiterated earlier comments that the island would not "wait until the last day" to take action to prop up the bank, either through bilateral lending or by resorting to the European Financial Support Facility. |
| Popular and the island's other main bank, Bank of Cyprus, were hit heavily by writedowns on Greek debt. Bank of Cyprus has almost completed its recapitalisation privately. | Popular and the island's other main bank, Bank of Cyprus, were hit heavily by writedowns on Greek debt. Bank of Cyprus has almost completed its recapitalisation privately. |
| Moody's yesterday cut the credit rating of Bank of Cyprus and put Popular on review for a downgrade, citing the increased risks of a possible Greek exit from the eurozone. | Moody's yesterday cut the credit rating of Bank of Cyprus and put Popular on review for a downgrade, citing the increased risks of a possible Greek exit from the eurozone. |
| 8.06am: There has been a rise in ECB lending, reflecting Greek and Spanish bank runs. Eurosystem gross lending to banks in euros rose by a further €8.5bn last week, necessitating increased borrowing from the ECB and national central banks. Lending has increased by €52.8bn over the last five weeks. | 8.06am: There has been a rise in ECB lending, reflecting Greek and Spanish bank runs. Eurosystem gross lending to banks in euros rose by a further €8.5bn last week, necessitating increased borrowing from the ECB and national central banks. Lending has increased by €52.8bn over the last five weeks. |
| Simon Ward, chief economist at Henderson Global Investors, has crunched the numbers. | Simon Ward, chief economist at Henderson Global Investors, has crunched the numbers. |
The gross figure comprises "lending related to monetary policy operations" and "other claims", under which the Greek and Irish "emergency liquidity assistance" (ELA) operations are recorded. The latter component fell by €61bn last week as a recapitalisation of Greek banks allowed them to switch from ELA into the weekly refinancing operation – lending under this operation surged by €68.2bn. | The gross figure comprises "lending related to monetary policy operations" and "other claims", under which the Greek and Irish "emergency liquidity assistance" (ELA) operations are recorded. The latter component fell by €61bn last week as a recapitalisation of Greek banks allowed them to switch from ELA into the weekly refinancing operation – lending under this operation surged by €68.2bn. |
| "Lending related to monetary policy operations" will rise further this week since €150.7bn has been drawn down in the weekly and one-month refinancing operations settling tomorrow versus a maturing total of €132.4bn. | "Lending related to monetary policy operations" will rise further this week since €150.7bn has been drawn down in the weekly and one-month refinancing operations settling tomorrow versus a maturing total of €132.4bn. |
| Greece and Spain probably account for the bulk of the €52.8bn lending rise over the past five weeks. Calendar May figures show an increase in Banco de Espana lending to banks of €26.3bn. Banca d'Italia lending, by contrast, was little changed – up by only €0.6bn. The gap between the €52.8bn system-wide rise over the past five weeks and the €26.3bn Spanish increase in May suggests that Greek banks have suffered an outflow of up to €26bn, equivalent to 6% of their total assets at the end of April and 15% of their domestic deposit base. | Greece and Spain probably account for the bulk of the €52.8bn lending rise over the past five weeks. Calendar May figures show an increase in Banco de Espana lending to banks of €26.3bn. Banca d'Italia lending, by contrast, was little changed – up by only €0.6bn. The gap between the €52.8bn system-wide rise over the past five weeks and the €26.3bn Spanish increase in May suggests that Greek banks have suffered an outflow of up to €26bn, equivalent to 6% of their total assets at the end of April and 15% of their domestic deposit base. |
| The increase in Eurosystem lending has been "financed" by the Bundesbank. | The increase in Eurosystem lending has been "financed" by the Bundesbank. |
| 8.02am: European stock markets have edged higher in the first few minutes of trading. Germany's Dax, France's CAC and Italy's FTSE MiB are all up 0.3% while Spain's Ibex is 0.1% higher. The FTSE 100 index in London has gained 0.2%, about 10 points to 5483. | 8.02am: European stock markets have edged higher in the first few minutes of trading. Germany's Dax, France's CAC and Italy's FTSE MiB are all up 0.3% while Spain's Ibex is 0.1% higher. The FTSE 100 index in London has gained 0.2%, about 10 points to 5483. |
| 7.59am: German consumer prices fell 0.2% in May, taking annual inflation to 1.9% - the lowest rate since December 2010 and compared with 2.1% in April. The figures are in line with analysts' expectations. | 7.59am: German consumer prices fell 0.2% in May, taking annual inflation to 1.9% - the lowest rate since December 2010 and compared with 2.1% in April. The figures are in line with analysts' expectations. |
| 7.49am: Here is today's agenda: | 7.49am: Here is today's agenda: |
8.30am Italian prime minister Mario Monti speaks before parliament on Europe 10am April Eurozone industrial orders 1.30pm US retail sales for May Angela Merkel to meet opposition leaders | 7am German inflation for May 8.30am Italian prime minister Mario Monti speaks before parliament on Europe />11am Italian one-year bill auction 10am April Eurozone industrial orders 1.30pm US retail sales for May Angela Merkel to meet opposition leaders to discuss ESM ratification, fiscal compact |
| All times London time (BST) | All times London time (BST) |
| 7.30am: Good morning and welcome back to our live coverage of the eurozone crisis and world economy. Well the relief over the Spanish banking bailout was certainly short-lived. Interest rates on Spanish 10-year government bonds began rising on Monday afternoon again and hit 6.8% yesterday, a rate not seen since the pre-euro days of the 1990s and closer to the key 7% level that proved unsustainable for Greece, Ireland and Portugal. | 7.30am: Good morning and welcome back to our live coverage of the eurozone crisis and world economy. Well the relief over the Spanish banking bailout was certainly short-lived. Interest rates on Spanish 10-year government bonds began rising on Monday afternoon again and hit 6.8% yesterday, a rate not seen since the pre-euro days of the 1990s and closer to the key 7% level that proved unsustainable for Greece, Ireland and Portugal. |
| Italian bond yields also moved higher, with pressure building on the eurozone's third-largest economy ahead of two bond auctions. Italy is due to sell one-year bills today and three-year bonds tomorrow. Austria's finance minister piled on pressure yesterday by suggesting Italy could need a bailout because of its high borrowing costs. | Italian bond yields also moved higher, with pressure building on the eurozone's third-largest economy ahead of two bond auctions. Italy is due to sell one-year bills today and three-year bonds tomorrow. Austria's finance minister piled on pressure yesterday by suggesting Italy could need a bailout because of its high borrowing costs. |
| Stock markets seesawed yesterday although stocks staged a small rally late in the day amid hopes that central banks could spring into action. | Stock markets seesawed yesterday although stocks staged a small rally late in the day amid hopes that central banks could spring into action. |
| Charles Evans, a member of the US Federal Reserve's rate-setting committee and president of the Chicago Fed, suggested that more easing could well be required to help jobs growth, ahead of next week's Fed meeting. | Charles Evans, a member of the US Federal Reserve's rate-setting committee and president of the Chicago Fed, suggested that more easing could well be required to help jobs growth, ahead of next week's Fed meeting. |
| Meanwhile European Central Bank policymaker Josef Makuch, who heads the central bank of Slovakia, said "the ECB will do what is needed" - suggesting interest rates could fall to zero, something that president Mario Draghi hinted at last week. However this was tempered by his comments that more LTROs weren't on the table. | Meanwhile European Central Bank policymaker Josef Makuch, who heads the central bank of Slovakia, said "the ECB will do what is needed" - suggesting interest rates could fall to zero, something that president Mario Draghi hinted at last week. However this was tempered by his comments that more LTROs weren't on the table. |
| In Greece, daily cash withdrawals have increased from around €100m to €500m a day, as fears grow that this weekend's election result could be a precursor to the beleaguered country leaving the single currency. | In Greece, daily cash withdrawals have increased from around €100m to €500m a day, as fears grow that this weekend's election result could be a precursor to the beleaguered country leaving the single currency. |
| Today, German chancellor Angela Merkel is meeting opposition leaders to try to agree when the ratification of the new bailout mechanism, the ESM, and the fiscal compact can take place - ahead of the EU summit on 28/29 June. | Today, German chancellor Angela Merkel is meeting opposition leaders to try to agree when the ratification of the new bailout mechanism, the ESM, and the fiscal compact can take place - ahead of the EU summit on 28/29 June. |