Monday, July 23, 2012

Around the horn in Europe - German yield on its ten year bond hits 1.126 ! US ten year just printed 1.406 at 6.57 EST . 37 percent of stocks on the Milan Bourse are halted. Ten big Italian cities have gaping financial holes - not a shocker ( similar to the problems with Spain's Regions .) crisis in credit land for Spain reflected in ten year yields at 7.50 and two year debt at 6.74 - meanwhile two year debt for Switzerland , Germany , Denmark and Finland is in negative yield territory ! More calls from Germans for Greece to depart , 6 more Spanish Regions are set to join Valencia in the Regions bailout line . Stocks falling in Europe otday as one would expected - Happy Monday ......

http://www.zerohedge.com/news/lch-adds-margin-call-injury-hikes-spanish-italian-bond-margins


LCH Adds Margin Call To Injury, Hikes Spanish, Italian Bond Margins

Tyler Durden's picture
Submitted by Tyler Durden on 07/23/2012 13:19 -0400



Hopefully nobody will be surprised to learn that after Spanish bonds closed at all time records earlier, just shy of 7.50%, that LCH has decided to hike margins on not only Spanish bonds, in the 7-30 year duration windows (from 11.80% to 12.20% for the benchmark 10 Year), but also on Italian bonds, at both the short and long-end, which are now also rapidly approaching the 7% threshold, pushing the 7-10 Year duration window from 9.50% to 11.65%, and which will approach it much faster now that there will be even more forced margin selling to cover collateral calls.
Spain:
Italy
Source: LCH


and.....

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100019006/who-will-hold-the-troika-to-account-for-asphyxiating-greece/

Who will hold the Troika to account for asphyxiating Greece?

By  Economics Last updated: July 23rd, 2012
Who will be held responsible for what has happened to Greece?
Germany has clearly taken the decision to expel Greece from the euro, whatever the new Greek government does.
Vice-Chancellor Philipp Roesler says the "horror" of Greek exit has worn off. The markets will hardly miss a beat when the day comes.
Greece has already failed to complete 210 targets imposed by the EU-IMF Troika.
"Unfortunately it is likely that Greece will not be able to fulfil the requirements. And I say quite clearly, if Greece fails to comply, there should be no more payments to Greece. I have to say I am more than sceptical," he said.
Before we all join together to kick the Greeks when they are down, let us be clear why the country has kept missing the targets.
The Troika originally said that Greece' economy would contract by 2.6pc in 2010 under the austerity regime, before recovering with growth of 1.1pc in 2011, and 2.1pc in 2012.
In fact, Greek GDP has been in an unbroken free-fall. It did not grow last year. It contracted a further 6.9pc, and is now expected to shrink 6.7pc this year.
This was entirely predictable – and was predicted by many critics – since Greece faced an IMF-style austerity package without the usual IMF cure of devaluation. The Troika's ideology of "expansionary fiscal contraction" – which the IMF has to its credit since abjured, but the fanatics in charge still swear by – is breaking a whole society on the wheel.
The result of this Great Depression – as the Greek prime minister calls it – is in implosion in tax revenues. The budget deficit has remained stuck near 9pc of GDP despite draconian wage cuts and hospital closures.
Roughly speaking, the Troika has misjudged the scale of economic decline over three years by 12pc of GDP.
"That is a massive miscalculation," said David Bloom, head of currencies at HSBC.
"The collapse has been exponential. Greek GDP is contracting faster than they can reduce debt. The Troika really has a duty to give Greece the next tranche of money," he said.
As for the failure to carry out the privatisation programme (mostly property), how on earth is Greece supposed to comply? Mass sales of real estate right now would tip the property market into an even deeper downward spiral, taking the economy with it.
It is a lonely task sticking up for the Greeks – given the sins of their elites over the last decade – but do we really have to put up with the false narrative coming from the EU's creditor core, and the self-serving eyewash by the policy architects of this disaster in Brussels, Frankfurt, and indeed Washington?
What Mr Roesler really means is that Germany is not willing to spend any taxpayer's money on Greece. Not one euro.
Previous losses were entirely concentrated on pension funds, insurers, banks, and other private holders who took a 75pc haircut – punished for their loyalty – but there is not much more to be squeezed out of them.
Any further aid puts creditor governments directly at risk. That's what this is all about.
OK, but please cut out the humbug, the rhetoric about Europe's unshakeable will to hold EMU together, the flowery promises to uphold the cause of peace and comity in Europe.
It is all just squalid calculation, and a lot of lies.

and.....

http://www.guardian.co.uk/business/2012/jul/23/spain-crisis-talks-germany-bailout-eurozone

Spain in crisis talks with Germany over €300bn bailout

Luis de Guindos to meet Germany's Wolfgang Schäuble over spiralling bond yields in eurozone's fourth biggest economy
Spain Luis De Guindos Spanish parliament in Madrid
Spain's finance minister, Luis de Guindos, faces the press before a parliamentary hearing. He will meet his German counterpart to discuss Spain's spiralling bond yields. Photograph: Susana Vera/Reuters
Germany's finance minister, Wolfgang Schäuble, will meet his Spanish counterpart, Luis de Guindos, for crisis talks on Tuesday amid fears that spiralling bond yields in the eurozone's fourth biggest economy will force it to seek a €300bn bailout from the European Union and the International Monetary Fund.
Interest rates on Spain's 10-year borrowing rose to 7.59% – the highest since the euro was created – and the stock market in Madrid fell by 5% in morning trading following fresh bad news about the financial health of the country's regions.
Hints from politicians in Berlin that Germany is preparing the ground forGreece to leave the single currency also unsettled markets, with hefty falls in equity prices on European bonuses and the euro under pressure on the foreign exchanges. London's FTSE 100 index was down 100 points at midday, at 5551.
Dealers were unimpressed by de Guindos's claim that Spain would not become the fourth eurozone country to require a formal bailout, afterMurcia on Sunday became the second Spanish region to request financial assistance from the government. The Spanish finance minister categorically denied that a bailout was imminent, but media reports from Spain suggest up to six regions could require financial aid, with Catalonia next in line.
"What began as a Spanish banking bailout looks to be moving rather quickly towards a possible sovereign bailout. Overlay that with increasingly negative news on Greece and you get a fairly negative mix, so the path of least resistance for the euro is down," said Jeremy Stretch, currency strategist at CIBC.
The cost of bailing out Spain would dwarf the packages already agreed for the three smaller eurozone countries – Greece, Ireland and Portugal – and would heap pressure on monetary union's third biggest economyItaly.
Officials from the EU, the European Central Bank and the IMF arrive in Athens on Tuesday to push for new austerity measures in return for financial help, but a leading German conservative prompted renewed speculation of Greece leaving monetary union when he said the new coalition government headed by Antonis Samaras should start paying half of its pensions and state salaries in drachmas as part of a gradual exit.
Alexander Dobrindt, general secretary of the Christian Social Union (CSU), the Bavaria-based sister party of Chancellor Angela Merkel's Christian Democrats (CDU), has long argued that Greece would be better off outside the eurozone.
"With Greece we have reached the end of the road. There must not be any further aid. A country which does not have the will to fulfil the conditions, or is not able to do so, must get a chance outside the euro," Dobrindt told the daily Die Welt.

and......

http://www.guardian.co.uk/business/2012/jul/23/spain-markets-eurozone-crisis

Panic selling of shares in Spain as country's bond yields go above 7.5%

Big falls on world financial markets as fears grow of second successive eurozone summer crisis
Ibex Spain
A view of a board displaying the IBEX index at the stock exchange headquarters in Madrid on Monday. The euro dipped below $1.21 on foreign exchange markets for the first time in two years. Photograph: Ballesteros/EPA
Spain announced tough curbs on the short-selling of shares on the Madrid stock exchange on Monday after fears of a second successive summer crisis for the eurozone triggered big falls on the world's financial markets.
Interest rates on US Treasury bonds dropped to levels not seen since the 19th century as investors sought safe havens in anticipation that Greece would be the first country to exit the 17-nation single currency area.
Madrid announced that it would ban short-selling – the process whereby dealers sell shares they do not have in the hope of buying them back more cheaply later – after the interest rate on 10-year Spanish bonds rose to 7.59%, a level unprecedented since the birth of monetary union more than a decade ago.
Speculation that Spain will become the fourth eurozone country after Greece, Portugal and Ireland to require formal assistance from the International Monetary Fund (IMF) and the rest of Europe sent share prices tumbling by 6% in early trading.
Other European bourses were also gripped by panic selling – Italy also announced a short-selling ban – as it became clear that more Spanish regions, including Catalonia, would follow Valencia in asking for financial help from Madrid.
Nick Parsons, of National Australia Bank, said: "It looks as if we are in for another August crisis. The question for Europe is whether things have got better over the past year, and the answer is no. Very little progress has been made."
Markets were also unsettled by reports that the failure of Greece to stick to its austerity programme will lead to the IMF cutting off support.
The IMF said it was still working with Athens to get the programme back on track, adding that its officials would be arriving in Athens on Tuesday for talks with the coalition government.
Reports from Berlin suggested that the mood in Germany is hardening towards providing any more assistance to Greece unless fresh austerity measures are both agreed and implemented.
Markets fear that in the absence of bailout cash Greece could be unable to pay its debts by the middle of next month.
Spain's emergency action to ban short-selling led to a late rally in share prices, although analysts warned that the respite was likely to prove temporary.
Spain's borrowing costs soared higher on Monday, taking it closer to a dangerous national bailout as concern switched from the country's ailing banks to its struggling regional governments.
The IBEX index in Spain closed 1.1% down on the day, registering smaller falls than in Germany's DAX (3.2%), France's CAC (2.9%) and Italy's FTSE MIB (2.8%).
In London there was not a single gainer in the FTSE 100, which closed 2.1% lower after a fall of more than 117 points.
New York's Dow Jones Industrial Average was down more than 100 points by lunchtime, while fears that Europe's recession-hit economy would drag down global growth led to a drop of $3 a barrel in the price of oil.
Spain's finance minister, Luis de Guindos, was adamant on Monday that his country would not need to ask for more outside help following the decision by last month's European summit to provide €100bn (£78bn) for Spain's banks. De Guindos, who will travel to Berlin on Tuesday for talks with Germany's finance minister, Wolfgang Schäuble, said: "Markets are overreacting."
Jonathan Loynes, of Capital Economics, said: "It looks almost certain that Spain will need a sovereign bailout as well as a banking package.
"People were hoping that the eurozone crisis would die down over the summer and we could all forget about it until September. It doesn't look like that."
Analysts estimate it would cost at least €300bn to bail out the eurozone's fourth-largest economy for the next two and a half years, with estimates going as high as €400bn.
European commissioner Joaquin Almunia suggested on Monday that Spain should try to activate the recently-approved bond-buying powers of the eurozone's rescue funds.
De Guindos is likely to repeat Spanish pleas for pressure to be put on the European Central Bank (ECB) for it to buy Spain's debt and help push down yields.
"Spain right now is the breakwater in the current uncertainty surrounding the euro. But this goes beyond Spain," De Guindos said, adding that the country had done its part by approving economic reforms.
ECB president Mario Draghi said in a Sunday interview in France's Le Monde newspaper that buying sovereign bonds was not part of his job.
The Bank of Spain, meanwhile, confirmed on Monday that Spain's double-dip recession was getting worse. The country's economy shrank by 0.4% in the second quarter, compared with 0.3% in the first three months of the year.
A €65bn austerity package approved earlier this month has not calmed markets and is expected to deepen Spain's double-dip recession even further.
The government now believes recession will extend into next year, with the economy shrinking another half a percent in 2013. Spain's 24% unemployment rate is also thought to be set to remain steady until well into next year.
Louise Cooper, of BGC Partners, said the €100bn package agreed for Spain's banks would not be nearly enough to deal with the country's debt problems. "I think the austerity package is the last thing Spain needs at the moment," she said.

and....







http://www.zerohedge.com/news/blacklist-ten-italian-cities-verge-financial-collapse


The "Blacklist" - Ten Italian Cities On Verge Of Financial Collapse

Tyler Durden's picture
Submitted by Tyler Durden on 07/23/2012 07:24 -0400




Last week when we wrote about the imminent default of Sicily which Mario Monti tried to sweep under the rug by demanding the local governor resign for not masking the situation with lies, and doing all he can to prevent the advent of reality, we noted, rather sarcastically, that the "resignation of Sicily Governor Lombardo will somehow allow all those who care about the fundamentals of Italy to stick their heads in the sand... at least until Sicily is followed by Calabria, Campania, Lazio, Abruzzo, Tuscany, Lombardy, Umbria, Liguria, Veneto and so on. At least the governors of those respective provinces now have an advance warning what the endgame is." Sure enough, now that this particular floodgate has also been opened, it is only fitting that in the aftermath of this weekend's main news that a total of 6 Spanish regions will demand bailouts, that Italy follow suit with its own blacklist, and as La Stampa has reported, there are now ten major Italian cities at risk of an imminent financial collapse, yet another factor pushing Italian yields well on their way to the country's own 7% rubicon, now at 6.34%.


From La Stampa, google translated:
There are ten major Italian cities with more than 50 000 inhabitants, who are a step away from the crash.

Naples and Palermo at the top of the "black list", although a task force for weeks at Palazzo Chigi is doing everything possible to avoid the worst.

Then Reggio Calabria, finished in red already in 2007-2008 and is now being investigated by the judiciary. And then so many other governments, large and small (like Milazzo), perhaps far virtuous, could be forced to ask for the "collapse", which means dissolution
of the council, entrance of the Court of Auditors and prefectural commissioner.

The last shot, or if you want the coup de grace, it is to come: it is a provision inserted in the decree on the spending review that in the folds of the new rules that impose the "harmonization of accounting systems and financial statements" requires to devalue the 25% of the residual assets accumulated to date. These revenues accounted for but not yet cashed, as may be the proceeds of fines and waste tax.

Key figures, which serve to "make" the budget of an institution that often, in practice, these voices swells while knowing they will not be able to collect 100% of the amounts to be budgeted. Proceeds often very short questions, which now can no longer serve to make ends meet.

"At risk are at least a dozen large cities' trust in the government technicians who are monitoring the situation.

"The situation is becoming more difficult every day,"confirms the president of ANCI Graziano Del Rio. Pointing the finger at yet another cut in transfers, against the measures introduced by the spending review, and that raises the alarm of many fellow mayors. "

Because he who defaults first, always defaults first.
and.... 








http://ftalphaville.ft.com/blog/2012/07/23/1092581/not-wanting-to-be-left-out-spains-cds-widen/


Not wanting to be left out, Spain’s CDS widen

Posted by Lisa Pollack on Jul 23 11:19.
Credit default swaps also want in on the “Spain’s [insert financial instrument] reach record highs” headlines. And they got their way on Monday morning:
The above chart is intraday data for the 5-year maturity point. Context around the deterioration is here on FT Alphaville. What we’ll give you on this post is a bit of context relative to other sovereign CDS, with the exact mix decided by the constituents of the Markit iTraxx SovX Western Europe index:
Portugal and Cyprus CDS are actually in quoted in upfront terms, e.g. Portugal closed at 26.93 per cent on Friday. Spain is still trading in running spread terms — 603bps at Friday’s close — and is in increasingly worse shape than veteran bailee Ireland.
Interestingly, France is having a particularly bad morning in terms of the amount it’s widening relative to its level, but we’re not taking too much of a message from that.
As to whether swaps referencing the Spanish sovereign trade much in this market, they are the fifth largest single-name CDS out there: after France, Germany, Italy and Brazil, when measured by net notional outstanding. The amount of interest in them has, however, been decreasing since the autumn of last year, according to the below data from DTCC:
(Note: y-axis not at zero.)
Take bets now on how many times the headline “Cost of credit default 
insurance
swaps reach fresh high” gets written over the next couple of weeks, but by the looks of it, somewhat more dramatic ones may fill that space.

and more Alphaville.......

Some Monday morning yield curves

Posted by David Keohane on Jul 23 08:26.
That’s Germany at the bottom, Italy in the middle and Spain going basically flat from 3-year out (click to enlarge):



and......






http://www.businessinsider.com/us-yields-record-lows-2012-7



The trading week has started and it's risk off.  Markets in Asia and Europe are getting slammed on renewed fears that Greece and Spain may not meet its debt obligations.
This has sent investors and traders into low-risk asset classes like US Treasury securities.  The US 10-year Treasury note yield sank to 1.40% earlier today.
Here's chart of the 10-year note from Bank of America's Michael Hartnett.  It shows that the borrowing costs have never been this low.
10 year treasury 1790

and.....


http://www.zerohedge.com/news/spanish-10-year-trades-ugly-side-750


Spanish 10 Year Trades On The Ugly Side Of 7.50%

Tyler Durden's picture
Submitted by Tyler Durden on 07/23/2012 06:39 -0400




The last time a sovereign bond issue was imploding at this rate without the ECB's intervention, Silvio Berlusconi was about to be forcibly retired. This time, however, we fail to see what the assorted globalist elements will benefit by having Rajoy forcibly displaced: after all he has been a studious and versatile pawn of the status quo. That said, stick a fork in Spain, and all those newsletter writers who were saying to buy its bonds, or equities: at last check the IBEX was down nearly 5%, after falling by the same amount on Friday. This is the equivalent of the Dow Jones tumbling by just about 600 points. The catalyst - the 10 Year which touched on 7.565% minutes earlier, as virtually all hope is now lost - it is now every country and region for himself, and he who panics first, panics best.

Monday, July 23, 2012 3:32 AM




Full Spanish Bailout Coming Up; New Record High Yields on Spanish Bonds; Misguided Faith in Can-Kicking


Inquiring minds are watching the implosion of Spanish bonds.


Spain 10-Year Government Bonds





Spain 2-Year Government Bonds
Spain 2-Year Government Bonds



5.76% was the previous close. Yield is currently up 44.5 basis points at 6.2%. The high yield was 6.255%, easily topping the previous high of 6.09%.

Full Spanish Bailout Coming Up



 "The financial credibility of Spain is close to zero. Fiscal credibility is zero. The political credibility is zero. Investors have been sentenced to Spain. The Government has wasted no time in recent months has squandered the credit granting him an absolute majority, has lost some confidence in European institutions and the whole market with a succession of errors, many of them for a bad communication strategy is correct now without success. Too late? Can not say such things in public, but without a change of attitude are you doomed to a full recovery. "


"I see little chance that Spain is free," says Ken Rogoff, a Harvard professor and head of the IMF execonomista. "Spain will continue with serious growth problems and stop until there is a massive deleveraging. This can be achieved with painful structural reforms, especially in the labor market. Also with a sustained inflation in countries like Germany, which can be ruled out given the degree of obsession with the ECB. And take away significant restructuring and debt, the best approach but politically the most difficult. Most likely, this is made more than a decade of anemic growth and high unemployment, combined to a greater or lesser extent with the previous recipes, "says Rogoff, who predicts a sort of social depression (if it is not as friction unemployment 25%). 


Wolfgang Münchau, who heads the think tank Eurointelligence Brussels, says the austerity measures at the trough "are really crazy, prolong and deepen the recession even raise the deficit contractionary effect. It is amazing that governments keep repeating mistakes made decades ago. " With these rods, there is little room: "Spain is no longer fully sovereign, because the government can no longer funded. Yes, I expect a complete audit, "says Martin Wolf resounding, economic commentator for the Financial Times header.
Misguided Faith in Can-Kicking

As is typical, that translation is a bit choppy. However, one can surely get the gist of it.

Also as usual, Wolfgang Münchau misdiagnoses the problem. Hiking taxes is a problem, but so is Keynesian claptrap. It is not feasible for governments to spend their way out of problems. Nor is it possible for monetary stimulus to solve the problem.

If such proposed solutions actually worked, Japan would not be in dire straits today.

Keynesian and monetary stimulus proposals are nothing more than gigantic can-kicking exercises. They only appear to work because experience shows the can will be kicked much further than anyone thought possible. The intermediate result is misguided faith in can-kicking.


The final result however, is typically something that ends up like Greece or Japan, with can-kicking proponents like Münchau and Paul Krugman, screaming every step of the way for still more can-kicking as the solution.




and.......




http://www.guardian.co.uk/business/2012/jul/23/eurozone-crisis-spain-bond-yields1

MARKETS CONTINUE TO FALL

European stock markets have suffered a heavy, wide-ranging sell-off this morning, driven by speculation over a possible full-blown Spanish bailout (see 8.14am and 10.52am) and a Greek exit from the euro (see 10.29).
Concerns over eurozone debt are now raging, after a few weeks out of the spotlight. City traders fear that the crisis is entering a new phase, with renewed fears that the eurozone could splinter.
The Spanish and Italian stock markets have suffered the deepest losses, reflecting fears over both country's credit-worthiness. Spain's 10-year bond yields remain above the 7.5% mark, a euro-era record).
Here's a late-morning roundup:
Spain's IBEX 35: - 251 points at 5995, - 4.02%
Italy's FTSE MIB: -603 points at 12462, - 4.62%
FTSE 100: - 97 points at 5554, - 1.7%
German DAX: -115 points at 6514, - 1.7%
French CAC: -66 points at 3127, -2.09%
David Jones, chief market strategist at IG Index, said that fears over Spain's financial health are driving markets down:
The familiar worries started on Friday with Spanish region Valencia requiring assistance from the government – and speculation over the weekend is suggesting there could be a further six regions that require help.

In addition there are also murmurings that due to its inability to meet the terms of its bailout, Greece will receive no further IMF aid [see 10.29].
Jones also points out that, back in August 2011, the FTSE 100 shed 1000 points in just two weeks, adding:
There is nothing to suggest that today's slide heralds a drop of this magnitude, but traditional low summer volumes could well accentuate market nerves in the days ahead.




Interesting developments in Germany.
1) A government spokesman has said they have not received any signal from the IMF that it is refusing to provide more support for Greece (as discussed at 10.29).
2) German finance minister Wolfgang Schäuble is planning to meet with Spain's Luis de Guindos tomorrow.

Megan Greene, eurocrisis expert at Roubini Global Economics, has predicted that European leaders could be forced to call another emergency summit soon, unless Spain's bond yields drop back.















http://www.telegraph.co.uk/finance/debt-crisis-live/9419838/Debt-crisis-live.html


13.06 Italian schools may not be able to open after the summer break if a latest round of spending cuts is implemented, according to body that represents Italian provinces.
Giuseppe Castiglione, the president of the Union of Italian Provinces (UPI) said:
QuoteWith these cuts we won't be able to guarantee the opening of the school year.



11.50 Greece will not receive its next bail-out tranche until September at the earliest, the European Commission has reiterated.
A spokesman said:
QuoteThe decision on the next disbursement will only be taken once the ongoing review is completed [...] over the last few months, significant delays in programme implementation have occurred due to the double parliamentary elections in the spring.
Two Greek government bonds totalling €3.1bn will mature on August 20.
Athens could be forced to raise money on the debt markets to repay them - at a very high cost.




11.20 Another record. German 10-year bond yields are now at a record low of 1.126pc. Earlier today, the country sold 12 month debt at average yields of -0.054pc.



11.08 Trading has been suspended in several stocks on the Milan stock exchange. Trader "Eloi Eloi" tweets:
11.01 The pain in Spain is spreading to Italy. Italian daily La Stampa is reporting that ten Italian regions, including Campania and Sicily, are facing trouble with their finances.
Citing government sources, the Italian daily said that big holes had been revealed in municipal accounts and that "at least 10 big cities" faced problems.
Last week, Sicily's mayor, Leoluca Orlando, said Italy's economic crisis risked sparking 'civil war' in Sicily.
10.40 Europe's crisis may have cranked up another notch, but as our international business editor Ambrose Evans-Pritchard pointed out to me this morning, one country we should be worried about is China.
China's benchmark index fell to its lowest level in more than three years today, after a member of its monetary policy committee said that economic growth will slow this quarter.
Song Guoqing said China’s economic growth may cool to 7.4pc. He said:
QuoteThe consensus is that China’s economic growth rate will be close to 8pc in the coming months, but I personally am more pessimistic because there are problems on the export side.
The Shanghai Composite index fell 1.3pc to 2,141.40 today.
10.25 Forget Spain's ten-year borrowing costs. Two-year debt yields inSpain - at 6.74pc - are also headed towards 7pc danger levels.
Compare this with the borrowing costs of Switzerland, Denmark,Germany and Finland, which are currently borrowing at negative rates. This means investors are willing to pay to hold the debt of these countries.
10.12 Read what you will out of this:
Spain's Economy Minister Luis de Guindos has told Reuters that the country will "absolutely not" need a full scale bail-out. Spain has already been granted up to €100bn in aid for its battered banks.
10.00 Spanish stock markets have now fallen 4.5pc today, while in Italy, shares are down by 3.3pc. The FTSE 100 in London has dropped 1.6pc.
09.49 Back to Spain, where the economy posted a 0.4pc contraction in the second quarter, a sharper fall than the 0.3pc contraction recorded in the first three months of the year, according to the Bank of Spain.
09.42 More harsh language from the Germans this morning. German MPAlexander Dobrindt has called for Greece to start paying half of its pensions and state salaries in drachmas as part of a gradual exit from the eurozone. He told Die Welt:
QuoteWith Greece we have reached the end of the road. There must not be any further aid. A country which does not have the will to fulfil the conditions, or is not able to do so, must get a chance outside the euro.

Mr Dobrindt has long called for Greece to exit the euro.


Back to the drachma? German MP Alexander Dobrindt has called for Greece to start paying half of its pensions and state salaries in drachmas as part of a gradual exit from the eurozone (Photo: AP)


09.16 The protests in Spain have attracted high profile support. Here's actor Javier Bardem joining protests last Thursday. The No Country for Old Men star marched under a banner which read, "Culture is not a luxury".


Spanish actor Javier Bardem and his brother Carlos applaud as they attend a protest against government austerity measures in Madrid last week. The placard reads, "Our cuts will be with a guillotine" (Photo: Reuters).


08.45 On Friday, Valencia became the first Spanish region to seek a bail-out from a new fund setup by the Spanish central government, which is itself under heavy financial strain.

Later that evening, El Pais reported that six more regions had joined the bail-out queue - Catalonia, Castilla-La Mancha, Baleares, Murcia, the Canary Islands and Andalusia.

On Sunday, the head of the local government in Murcia said in an interview that the region would be the second to make a formal request for aid.

Ramon Luis Valcarcel said that he hoped that the cash injection would be available for September.

This morning, business daily El Confidencial reports that Catalonia will request €3.5bn from the bail-out pot.

And here we are today...

08.36 After falling almost 6pc on Friday, the IBEX 35 in Madrid fell by 3pc this morning to 6,062.30, while the FTSE Mib in Milan has fallen 2.6pc to 12,728.31. London's benchmark FTSE 100 index edged down 1.3pc to 5,578.77.
The yield on 10-year Spanish government bonds hit 7.53pc this morning - a euro-era high.
Meanwhile, for the first time since the beginning of 2009, it now costsItaly more to borrow than it does Ireland (6.348pc v 6.2797pc).


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