Around the horn in Europe - items from the day from the players - Draghi has set expectations high for Thursday ECB Governing Council Meeting !

http://www.guardian.co.uk/business/2012/jul/27/eurozone-crisis-live

'DRAGHI TO PRESENT PLAN TO BUNDESBANK HEAD'

Speaking of Draghi...a story has hit the wires tonight that the ECB president will hold talks with Jens Weidmann (president of the Bundesbank) in the 'coming days' to hammer out a new raft of measures to address the crisis.

According to Bloomberg News, Draghi's plan includes a new bond purchase scheme, a cut in eurozone interest rates, and a new Long Term Refinancing Operation (ie, more cheap loans for the banks).

Bloomberg reports:

Having secured the backing of governments in Spain, France and Germany, Draghi is now seeking to win over ECB policy maker for a multi-pronged approach to reduce bond yields in countries such as Spain and Italy, the officials said on condition of anonymity because the talks are private.

The story has sent stocks rallying on Wall Street, where the Dow Jones is now up 201 points at 13089, a 1.57% gain.

Spoiler alert! Chris Adams of the FT reckons he knows how the talks will play out:

Chris Adams@chrisadamsmkts

Those ECB-Buba talks in full - Draghi: "Si" Weidmann: "Nein" Draghi: "Si" Weidmann: "Nein" Draghi: "Si; Weidmann: "NEIN, NEIN, NEIN"...

27 Jul 12

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At which point the police show up.

and.......

Greece is not the only euro zone country to be scoured over by a high level mission of troika auditors this week. As Helena Smith says a delegation of top ranking officials from the EU, ECB and IMF have also been in Cyprus.

Monitors from the EU, ECB and IMF wrapped up their week long mission to the east Mediterranean island with a much anticipated meeting of top level officials at the finance ministry. In yet another twist to Europe's seemingly never-ending debt crisis, it has emerged that the views of both sides are hugely divergent.

Not only does the island republic require a much larger rescue package than originally thought, there are widely differing opinions on the measures the Greek Cypriot government will have to take to trim budgets.

"HOW MUCH?" (Photo: KATIA CHRISTODOULOU/EPA)

This photo shows Delia Velculescu (right) the head of Troika IMF and European Central Bank official Philipp Rother at the House of Representatives in Nicosia, Cyprus, today.

Helena continues:

Finance ministry officials now admit that the remote EU state will need around €11bn to recapitalise its banking system - and not the €2.3bn first estimated when it applied to the rescue fund.

Finance minister Vassos Shiarly was quoted as telling Stockwatch, a Nicosia-based financial website, that the bailout agreement with the International Monetary Fund, the European Union and the European Central Bank will be completed in September. Two to three months would be required to determine the amount that would eventually be needed, he said.

As in Greece where troika officials are not expected to complete a review of the country's troubled finances until September, the drama on the Mediterranean isle has a post-summer come-back date.

Watch this space!

and.......

IMF: SPAIN FACES A LOST DECADE OF GROWTH

Spain faces a lost decade of growth, with the current double-dip recession lasting for at least another 18 months, the International Monetary Fund warns.

In its latest report on the Spanish economy, just released, the IMF warned that the scale of the Spanish downturn poses a threat to the rest of Europe.

The Fund said the outlook for Spain was “very difficult” and that the fresh austerity measures announced by the government of prime minister Mariano Rajoy would have “a significant impact on growth”.

UPDATE:

The IMF now estimates that Spanish GDP will shrink by -1.7% in 2012, and a further -1.2% in 2013. It then sees a 0.9% expansion in 2014.

It also warns that Spain is threatened by several downside risks – including the danger that Rajoy's policies fail to stop capital leaving the country; or the impact of "further stress" elsewhere in the euro area.

and.......

News in from Athens where our correspondent Helena Smith says troika officials are now holding talks with the socialist leader and former finance minister Evangelos Venizelos following their earlier meeting with conservative prime minister Antonis Samaras.

Helena writes:

It's a busy day for the visiting monitors who have spent the day in back-to-back meetings with the major players of Greece's political establishment.

Venizelos, whose socialist Pasok party is participating in Athens' left-right coalition government, has made clear that he will raise the politically sensitive issue of extending the debt-stricken country's fiscal adjustment program from two to four years. With patience waning among international creditors over the lack of headway Athens has made in implementing reforms, Venizelos' appeals are expected to fall on stony ground. Any prolongation will be costly with the EU's core creditor members almost certain to baulk at handing out another 20 bn euro - the estimated cost of extending the program.

The former finance minister, who lead negotiations of the €130 bailout accord agreed for Greece by the EU, ECB and IMF ealier this year, argues that a worse-than-expected recession has made extending the program imperative. The Greek economy, already plagued by a fifth year of recession, is projected to shrink by nearly 7% this year - defying forecasts that it would contract by 4.5% at the most.

Holding talks with the debt auditors earlier, prime minister Antonis Samaras emphasised that while Greece would adhere to its side of the deal - and press ahead with unpopular structural reforms and austerity measures -- his government would also riase the issue of the loan agreement being "re-adjusted" at the next EU summit due to take place in October.

Meanwhile, the fall-out from remarks made by Greece's former representative to the IMF, Panaghiotis Roumeliotis continue to inflame. The erstwhile envoy caused ructions earlier this week when he declared in an interview with the New York Times that Greece's IMF-dicated fiscal adjustment program was doomed to failure. "We knew at the Fund from the very beginning that this program was impossible to be implemented because we didn’t have any -- any -- successful example,” he said. "The argument that is used usually by the troika in order to criticize Greece -- and to ignore their mistakes -- is that the deep recession is because of the nonimplementation of the structural reforms.”

Opponents of Athens' internationally-sponsored bailout, lead by the far left main opposition Syriza party, have pounced on the remarks seeing them as further proof that whatever Greece does in terms of implementing reforms it will not succeed in saving itself from economic armageddon.
IMF officials were cited in the Greek media as expressing disbelief over Roumeliotis' comments with one telling Skai radio that the former IMF representative had actively supported the fiscal reforms suggested by the Washington-based body to overcome the country's debt crisis.

and......