Around the horn in Europe

First look at items of interest from Europe. The ECB , The European Commission said in a statement that the government in Budapest had taken "no effective action" to get its deficit back within the EU's 3pc of GDP threshold.
Hungary , Germany , Greece and Italy have things to ponder in the early morning news.

11.26 Ratings agency Fitch has said that the ECB should ramp up its buying of eurozone debt to support Italy and prevent a "cataclysmic" euro collapse.

11.24 The European Union executive has proposed to slap new sanctions on crisis-hit Hungary for failing to act to reduce its deficit in line with agreed targets.

^{The Hungarian parliament}

The European Commission said in a statement that the government in Budapest had taken "no effective action" to get its deficit back within the EU's 3pc of GDP threshold.

Germany sells five-year debt at auction below 1pc for the first time. Average yield 0.9pc, bid/cover 2.8.

Jeremy Cook, chief economist at foreign exchange company World First, said:

This news comes a couple of hours after the initial estimate of German GDP for Q4 last year was revealed as 'roughly' -0.25pc, a number which could be revised lower. This represents bad news for the entire eurozone. If Germany’s not growing, nobody will be.

10.04 The Danish central bank has published its stress list... and it shows one bank is in dire need of capital immediately.

Contagion?

09.43 Meanwhile, over in Greece, an EU official has admitted that the country will probably need more money than agreed in October. EU leaders are to meet on January 30 to discuss a €30bn payout.

09.40 A new EU fiscal treaty is set to include an escape clause that allows the suspension of a balanced-budget rule during a period of economic downturn or other exceptional event, according to a draft of the document obtained by Reuters.

The document reads:

Temporary deviation from the medium-term objective will only be allowed in cases of [an] unusual event outside the control of the contracting party with a major impact on the financial position of the general government or in periods of severe economic downturn for the euro area, the EU or the concerned contracting party.

Loopholes already?!

Meanwhile, here is Spain's manufacturing PMI (it's down 7pc):

Roubini's verdict: "Charts look like a free fall"

09.07 Top economist Nouriel Roubini has said that eurozone data suggest begninning of a double-dip recession. He adds that austerity measures will make conditions worse and the EU could break up in three to five years.

08.17 The ECB deposit facility has hit another overnight record of €485.9bn.

What happened to lending to businesses?!

06.50 The big news this morning is that Italian PM Mario Monti has said that the European Union must recognise Italy's efforts in fighting the sovereign debt crisis or risk the third-largest eurozone economy falling into the hands of anti-EU populists. Monti said:

I cannot be successful with my policies if the policies of the EU do not change. If that doesn't happen, Italy - which has always been a pro-European country - could flee into the hands of populists.

Elsewhere, the Government yesterday sold bonds at a negative interest rate as investors effectively paid to lend money to the UK. For only the second time ever, the Treasury sold government bonds - known as gilts - that will pay returns below the level of inflation.