Around the horn in europe - The Telegraph liveblog....

11.16 While in Germany, the country has paid its lowest ever interest rate to get two-year debt away at an auction.

Germany sold €4.21bn of two-year debt at average yields of 0.14pc, compared with 0.31pc at the last auction in March. There were 1.8 bidders for every bond on offer.

11.09 The pain in Spain continues.

Bad bank loans touched an 18-year high in February, as banks continued to struggle with the burst of the property bubble. In a report titled titled "data on doubtful loans," the Bank of Spain said the amount of loans where a borrower had not made a payment for three months or more rose to 8.15pc of total loans, the highest since 1994, and up from 7.91pc in January.

Spanish house prices have collapsed by 20pc since their peak in 2007 - 2008, though some economists suggest the figure is closer to 30pc.

10.55 Another reason why the Bank of England should put the brakes on QE has been highlighted today: inflation.

Speaking at a conference in Liverpool, deputy BofE governor Paul Tuckersaid:

Though [inflation] has fallen significantly over the past six months, from over 5 percent to 3.5 percent on yesterday's reading, it remains uncomfortably above target [...] The MPC will guide inflation back to target in the medium term, but in the near term there is considerable uncertainty about the path that it will follow.

Data yesterday showed that the annual rate of inflation ticked up unexpectedly in March, to 3.5pc (from 3.4pc in February). Stubbornly high inflation make further bond purchases through QE less likely, given the programme's potential to further fuel inflation.

10.38 Spain should not look to the ECB to save the day, according to one of its key policymakers.

Jens Weidmann, who also heads Germany's Bundesbank, said that the recent spike in Spanish borrowing costs should be taken as an incentive for the country to speed-up reforms. He said:

We shouldn't always proclaim the end of the world if a country's long-term interest rates temporarily go above 6 percent

That is also a spur for policymakers in the countries concerned to do their homework and to win back (market) confidence through the pursuit of the reform path.

Mr Weidmann also highlighted the limits of the ECB's Securities Markets Programme, which has so far hoovered up €214bn of peripheral debt in an attempt to keep borrowing costs down for these countries. He told Reuters:

The limits of the SMP have become apparent [...] At the same time, the programme has not been ended by the ECB Council. Benoit Coeure described that.

I don't think you will find any colleague (on the ECB Council) who is of the view that the Eurosystem (of euro zone central banks) is there to ensure a particular interest rate level for a particular country.

10.27 Commenting on the minutes, Richard Driver, analyst at Caxton FX, said:

The MPC minutes have thrown up a major surprise in revealing only one vote for further quantitative easing.

Few would have expected Adam Posen to abandon his overly dovish stance and the market will be encouraged that he feels the UK economy is not in need of further help for now. This week’s rise in UK inflation clearly provides an insight into Posen’s rationale.

The MPC’s view that inflation may be more resistant to decline in the medium term does suggest QE is less likely. The market may well get overexcited to see Posen stand aside but the truth is that today’s news by no means closes the door to further QE from the BoE.

Nonetheless with global and domestic growth on such an uncertain footing, regardless of the IMF’s upgraded forecasts, the likelihood of further QE remains finely balanced. Much depends on next week’s Q1 UK GDP figure – a negative figure will confirm a technical recession and QE will definitely be back on the cards then.

10.23 Following the release of the Bank of England minutes, the pound did this:

10.09 Meanwhile, UK unemployment data is out. Long-term unemployment has hit a 16-year high, while record numbers of Britons are being forced to work part-time as they cannot find full-time jobs. More from Louisa Peacock:

The number of people being forced to work shorter hours because they could not find full-time jobs has surged by 89,000 between December and January to reach 1.4m - the highest figures since comparable records began in 1992.

The rise in part-time working helped to ease overall unemployment, which fell for the first time in almost a year by 0.1pc, or by 35,000, over the period to reach 2.65m.

Women bore the brunt of joblessness, with an extra 8,000 becoming unemployed in the three months to February, reaching 1.14m - the highest figure in 25 years.

The number of unemployed men was 1.51m over the period, down 43,000 from the three months to November.

However, the Office for National Statistics (ONS) said changes to the way women's benefits are calculated, such as moving single mothers off lone parents' allowance and onto Jobseeker's Allowance (JSA), account for some of the rise in female unemployment.

Problems in the eurozone also "intensified" last month, according to the BofE:

...financial market concerns about the indebtedness and competitiveness of some euro-area countries remained and, if anything, had intensified on the month. Even if the worst risks did not crystallise, the process of rebalancing was likely to act as a persistent drag on the euro-area periphery as fiscal consolidation continued and real incomes were depressed. And, notwithstanding the recent decline in bank funding costs, there remained a high degree of uncertainty over how this rebalancing would unfold. Failure to tackle successfully the vulnerabilities in the euro area, and any related intensification of financial market stresses, could result in a much weaker and more challenging external environment for the United Kingdom.

09.42 The Bank of England also said it had not ruled out "GDP falling for three successive quarters," which would throw the UK back into recession. More from the minutes:

With output having already contracted in the fourth quarter of last year, the Committee could not rule out the publication of official data showing GDP falling for three successive quarters. Nevertheless, the Committee’s judgement was that, abstracting from both the puzzling weakness in measured construction output and the impact of one-off factors, the economy appeared likely to be expanding, albeit only modestly, in the first half of the year.

09.09 Forget Spain, Portugal may have to return to Brussels for another bailout, according to its prime minister. Pedro Passos Coelho writes in the FT that he is "confident about the reform plan we have in place and our ability to return to the markets on time if we deliver it". However, his admission that "circumstances beyond our control [could] obstruct our return to market financing," has led to more rescue talk. He writes:

We are utterly committed to fulfilling our obligations. But while we are optimistic, we must also be realistic and pragmatic.

This is why we accept that we may need to rely on the commitment of our international partners to extend further support if circumstances beyond our control obstruct our return to market financing. All we can know for certain is that our commitment to deliver on the terms and conditions of our adjustment programme is unwavering.

Always look on the bright side, eh?

_{Portugal's PM Pedro Passos Coelho (Photo: Reuters)}

08.44 Don't underestimate the will of the euro elite, writes Martin Wolf in today's Financial Times, who adds that the fear of falling apart is the main reason why the euro club is sticking together:

The principal political force is the commitment to the ideal of an integrated Europe, along with the huge investment of the elite in that project. This enormously important motivation is often underestimated by outsiders. While the eurozone is not a country, it is much more than a currency union. For Germany, much the most important member, the eurozone is the capstone of a process of integration with its neighbours that has helped bring stability and prosperity after the disasters of the first half of the 20th century. The stakes for important member countries are huge.

Thus, the big idea that brings members together is that of their place within Europe and the world. The political elites of member states and much of their population continue to believe in the postwar agenda, if not as passionately as before. In more narrowly economic terms, few believe that currency flexibility would help. Many continue to believe that devaluations would merely generate higher inflation.

If this were a mere marriage of convenience, a messy divorce would seem probable. But it is far more than such a marriage, even if it will remain far less than a federal union. Outsiders should not underestimate the strength of the will behind it.

08.05 Over in the eurozone, which the IMF predicts will contract 0.3pc this year rather than 0.5pc, Italy is to cut its growth forecast for this year.

Prime Minister Mario Monti is expected to admit that Italy's economy will shrink by as much as 1.2pc this year - far more than the 0.4pc contraction the government has previously forecast, according to a leaked draft.

The new forecasts chime with reports last week in Italian business daily Il Sole 24 Ore, which said that the Italian economy would shrink by between 1.3pc and 1.5pc this year, that also cited leaked documents.

07.35 IMF growth forecasts dominate the business pages this morning. It warned yesterday that Britain faces another £50bn of spending cuts and tax rises to cover the costs of age-related care and put the national debt under control. Philip Aldrick reports:

To bring public debt down from 82.5pc to 60pc of GDP and pay for rising health and pension costs, the UK will need "a fiscal adjustment strategy" over the next 18 years equivalent to 11.3pc of national output, or roughly £170bn, according to IMF estimates. By comparison, the existing £123bn austerity programme is equivalent to 7.5pc of GDP.

Greece and Portugal, both of which have received bail-outs, will need austerity programmes amounting to 10.7pc and 8.1pc of GDP respectively.