http://www.guardian.co.uk/business/2012/jun/06/eurozone-crisis-ecb-interest-rates
It's not all good news for Germany, though - industrial output in Europe's largest economy fell by 2.2% in April, more than twice as large a drop as expected.
The German government played down the significance of the news, pointing to the 2.2% jump in output in March and suggesting that many Germans took the last day of the month off to create a four-day weekend*, with May Day being celebrated on Tuesday 1 May [not the following Monday, as in the UK]
Taken alongside the very weak Spanish industrial data this morning, which showed an 8.3% drop in output (see 8.18am), the clear message is that Europe's manufacturing base suffered a bad April - as the crisis began to intensify.
Germany's borrowing costs continue to fall to record levels as investors seek a safe place for the money.
The Bundesbank sold €3.98bn worth of five-year bonds this morning, at an average yield of just 0.41% (down from 0.56% at a previous auction). That's the lowest return ever accepted by investors when buying this kind of German debt.
Back to Spain, where economy minister Luis de Guindos has attempted to calm speculation that a banking bailout is close.
De Guindos told reporters in Brussels that nothing would happen regarding recapitalisation until the ongoing audit of the Spanish banking sector had been completed. That assessment could be completed by the end of June, and analysts believe it could find a black hole of up to €70bn. A separate IMF survey is due on 11 June.
De Guindos promised that he'd not discussed a rescue deal during his trip to Brussels, and also pledged that Spain was not getting ready to ask for help.
I have absolutely not discussed any intervention in Spain's banks today... we are not preparing anything...
But in the City, pragmatic analysts predict Spain can't hold this position for long. Gary Jenkins of SwordFish Research writes:
What they want is to have their cake and eat it, with the ESM /EFSF providing money directly to the banks. The problem with this is not just the basic fact that it is not allowed (rules can be changed…) but the precedent that it would set and the longer term implications of any such move.Headlined "Panic has become all too rational", Wolf argues that all the ingredients are in place for a repeat of the Great Depression. Here's a flavour:How much pain can the countries under stress endure? Nobody knows. What would happen if a country left the eurozone? Nobody knows. Might even Germany consider exit? Nobody knows. What is the long-run strategy for exit from the crises? Nobody knows. Given such uncertainty, panic is, alas, rational. A fiat currency backed by heterogeneous sovereigns is irremediably fragile.Before now, I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate and failure to stay ahead of events. Perhaps the panic will vanish. But investors who are buying bonds at current rates are indicating a deep aversion to the downside risks. Policy makers must eliminate this panic, not stoke it.In the eurozone, they are failing to do so. If those with good credit refuse to support those under pressure, when the latter cannot save themselves, the system will surely perish. Nobody knows what damage this would do to the world economy. But who wants to find out?Just in -- eurozone GDP was flat in the first quarter of 2012 compared with the prevous quarter, Eurostat just announced. That is confirmation of the initial estimate.However, on a year-on-year basis, it now believes that GDP fell by 0.1% (rather than 0% as first estimated last month).So, confirmation that the eurozone was stagnant rather than actually shrinking in the first three months of 2012. But that's mainly due to strong growth in Germany - while many countries including Italy, Spain, Greece, Portugal and the Netherlands all contracted.GDP across the wider European Union was also flat, with the UK shrinking by 0.3%.
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