Japan downgraded by fitch and items of interest concerning Europe .

http://www.guardian.co.uk/business/2012/may/22/eurozone-crisis-greece-eu-summit-tsipras

12.12pm: Elsewhere in the global debt crisis, Japan has seen its credit rating slashed by Fitch today.

The credit rating agency warned that Japan's huge, and rising, national debt, was a serious threat to its credit worthiness, as it cut its long-term foreign currency rating to A+, from AA.

Fitch's Andrew Colquhoun said Japan's debt pile would swell to 239% of GDP by the end of 2012, much worse than any other major economy, and questioned Tokyo's commitrment to dealing with it, adding:

The country's fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk.

Japan has avoided a serious debt crisis, until now, because much of its sovereign bonds are snapped up by domestic buyers -- which allowed its debts to swell so high.

12.02pm: Here's a full update on the situation in Greece ahead of next month's elections, from our correspondent Helena Smith.

She reports that the political scene in Greece has changed dramatically over the 16 days since the last election, as shown by Greek politics's oldest enemies – the liberal leader Dora Bakoyiannis and conservative New Democracy head Antonis Samaras – kissing and made up in the name of forging "a patriotic pro-European front" (see 8.44am)

the May 6th ballot was dominated by a single debate: whether Greeks backed, or didn't back, the excoriating terms of the €130bn EU-IMF bailout [widely referred to as the memorandum] propping up the moribund Greek economy.

But this time round anger over the memorandum has been replaced, squarely, by fear over the return of the drachma – embodied by Tsipras despite the young politician's insistence even in Paris yesterday that he is "pro euro" and "pro monetary union."

With the fear factor now dominating the agenda – and reinforced to large degree by the recent intervention of David Cameron and other foreign leaders – the "pro European, pro-memorandum" front appears to be gaining the upper hand. Away from the hero's welcome that Tsipras has received in Europe, in Athens at least he has also been perceived to be making a series of strategic mistakes.

Contradictory statements on economic policies by senior cadres in his Syriza party have not gone down well. Nor have his own less than diplomatic remarks in Paris regarding the new French president Francois Hollande's ability to remain faithful to the growth policies he has long advocated.

"With the change of agenda there is a new dilemma dominating the debate, namely one of the euro versus the drachma," says Spiros Rizopoulos a prominent Athens-based political and corporate communications strategist.

"There has been a mental leap which might not necessarily be true but Tsipras is increasingly being associated with [fears of the return of] the drachma. He and senior Syriza cadres are making one mistake after another," added Rizopoulos, who like many analysts pointed out that the party's internal divisions and "various factions and fractions" were also to blame for the alliance's lack of ability to always sound coherent on economic matters.

Commentators also argue that Tsipras must move swiftly to the centre if he is to maintain his momentum. Helena points to the latest polling:

On Sunday a Public Issue poll conducted for the Greek newspaper Kathimerini showed New Democracy catching up with 24% of the vote compared to Syriza's 28 %. Both parties had won 18.85% and 16.78% at the last election.
The socialist Pasok, which won 13.18% on May 6, was shown garnering 15% compare to 8% for the anti-austerity conservative Independent Greeks and 7% for the pro-European Democratic Left.

Interestingly, ratings for the communist KKE party fell to 5% (from the 8.48% it gained on May 6) while the neo- Nazi Golden Dawn was seen as clinching 4.5 % compared to the 6.97% it had won at the last election.

9.52am: Spain has seen its borrowing costs rise again, an auction of €2.5bn of short-term debt this morning.

The Spanish Treasury sold €1.5bn of three-month bills, at an average yield* of 0.846% – up from 0.63% at an auction last month. The yield on €1bn of six-month bills also rose to 1.737%, from 1.58% last month.

Rising yields is a sign that investors are pricing Spanish debt as more risky. More reassuringly, though, Spain received bids for over €10bn of debt, so was able to sell the full amount on offer.

Reaction to follow...

* - effectively the interest rate that Spain will pay to bond buyers

9.27am: The OECD also slashed its forecast for the eurozone economy in 2012 this morning to a contraction of 0.1%, from growth of 0.2%.

Within that forecast, the OECD expects Europe's two-speed economy to continue, with peripheral countries in the south suffering deep recessions.

OECD chief economist Pier Carlo Padoan told Reuters:

We also see flat growth in the euro area which hides important differences, with northern countries growing and southern countries in recession.

9.19am: The spiraling eurozone crisis - and the region's focus on austerity - risks blowing the world's economic crisis off course, the Organisation for Economic Co-operation and Development has just warned in its latest assessment of the global economy.

In an important intervention, the OECD signal to Germany that it should drop its resistance to new measures to ease the crisis, or risk dragging the global economy back into a repeat of the recent downturn.

Pier Carlo Padoan, the OECD's chief economist, said:

The risk is increasing of a vicious circle, involving high and rising sovereign indebtedness, weak banking systems, excessive fiscal consolidation and lower growth.

It added that further easing was possible in Europe -- pointing out that the euro area could move toward common euro bonds, and that its firewall could be used to directly recapitalise banks.

8.02am: Evidence that the eurozone crisis is casting a shadow the global financial markets: Temasek Holdings, Singapore's sovereign wealth fund, has predicted that "markets may be entering a period of stress in the next 12 to 24 months due to the eurozone crisis". More here.

German finance minister Wolfgang Schäuble made a similar comment last week, saying the crisis will last another two years.

7.59am: Austria's finance minister has launched an outspoken attack on the new president of France ahead of tomorrow's summit.

Maria Fekter claimed that François Hollande's proposals, including the introduction of eurobonds, were "nonsense", and would push Europe deeper into the debt crisis. Fekter told Austrian newspaper Oberoesterreichische Nachrichten that:

Growth financed by debt? Those are the recipes from the day before yesterday.

The arguments that France's new president François Hollande is putting forward again are nonsense and got us into this whole mess in the first place.

Fekter's comments do chime with the concerns of some Germans, who fear that Hollande is planning to make them pay for the French banking sector's heavy exposure to Greece (where SocGen and Credit Agricole both own subsidies).

Fekter does have previous form on speaking out of turn - last week shemanaged to upset Germany by suggesting that Greece could be thrown out of the European Union.