Wednesday, 20 June 2012

Eurozone crisis live: Greece announces new government

? A conservative-led Greek government has been agreed
? Jobless rate falls but benefit claimants rise in the UK
? Bank of England split over QE
? Today's agenda
? US Federal Reserve extends Operation Twist

5.37pm: The Federal Reserve has indeed extended its stimulus programme Operation Twist.

The programme was set to end this month, but given the weakness in the US economy, it has said it will buy another $267bn in longer dated securities by the end of the year.

More detail is expected when Federal Reserve chairman Ben Bernanke gives his press conference later. To follow the US developments, read the separate live blog by my colleague Dominic Rushe.

And with that it seems an opportune moment to sign off here. So thanks for all your comments, and join us again tomorrow.

5.13pm: European markets have now closed and it's generally a pretty positive picture.

Mainly thanks to hopes that central banks will ride to the rescue of the global economy with more stimulus measures, it has to be said. In the UK the latest Bank of England minutes suggested further quantitative easing could be on the cards, but the real focus is on Ben Bernanke and the US Federal Reserve, and any moves it makes to boost the US economy in around half an hour's time. There is room for a lot of disappointment here...

Still, for the moment, let's stay positive. The FTSE 100 closed 35.98 points higher at 5622.29, Germany's Dax is up 0.45%, France's Cac is 0.28% better and Italy's FTSE MIB has climbed 2.13%. In Spain, the Ibex is up 1.5% and the country's bond yields have edged down to 6.75% despite confusion about what, if anything, the G20 agreed about using bailout funds to buy sovereign debt.

An auditors' initial report on Spain's banking sector - which could indicate whether the promised ?100bn injection of funds will be enough - is due on Thursday. That will decided whether the Spanish government formally requests the bank aid at a Eurogroup meeting.

With a new Greek government formed, the Athens market closed 0.49% better.

Angus Campbell, head of market analysis at Capital Spreads, said:

The FTSE has been boosted once again by the prospect of further stimulus from central banks across the globe as the latest minutes from the Bank of England all but confirmed we'll see another round of QE next month from them. From the moment the minutes were released buyers came into the market and pushed the FTSE back above the 5600 level. Also, this evening expectations are high for an extension of Operation Twist from the US's Federal Reserve.

For now the two elephants in the room, namely Greece and Spain, have morphed into kittens following the Spanish bailout and newly formed Greek coalition today. Now investors are focusing on the prospect of more money being pumped into the system in a bid to prevent a slump in global growth.

The Dow Jones Industrial Average by the way has slipped lower ahead of the Fed, down 22 points at the moment.

4.36pm: The composition of Greece's new cabinet is expected to be announced tomorrow. Helena Smith writes:

It will not be a government of technocrats, insiders say, although the new finance minister is expected to be an expert in the field. Sources confirmed that the most likely candidate for the post remains Vassilis Rapanos, a highly regarded economist who is head of the National Bank of Greece [as we suggested earlier].

"This is a political government," said one insider who is well briefed on matters in the conservative New Democracy party. "It went through two elections. Why should we go through two elections if politicians can't rule," he asked. "It may have a few technocrats. There is a bi-partisan agreement that a technocrat should definitely be in the post of finance minister."


The socialist Pasok leader Evangelos Venizelos and the Democrat Left leader Fotis Kouvelis will meet the newly sworn in prime minister at 7pm to discuss strategy ahead of tomorrow's euro group meeting of finance ministers. Caretaker finance minister Giorgos Zanias, who is expected to remain on in the role of deputy economy minister, will also attend the meeting. Zanias will represent Greece at the euro group.

4.16pm: After Tuesday's rise the Dow Jones Industrial Average is edging lower, on nervousness ahead of the US Federal Reserve's latest statement and a press conference from chairman Ben Bernanke.

As we have seen, expectations are high that Bernanke will announce some sort of stimulus for a weakening US economy, but the chances of disappointment are also quite high. My colleague Dominic Rushe has previewed the Fed decision but here is a flavour:

Many analysts are expecting the Fed to renew a plan known as "Operation Twist" ? aimed at lowering the cost of borrowing. Most stop short of believing the Fed will launch a third massive round of bond buying in order to stimulate the economy, a move known as quantitative easing (QE3).

The weak jobs numbers and slowing factory output and retail sales figures are likely to lead to Fed officials lowering their forecasts for US growth this year. In Mexico the G20 group of world leaders appeared to have made little progress on a co-ordinated plan to tackle Europe's escalating issues.

Bernanke will give further details about the thinking behind any move at a press conference this afternoon.

4.04pm: For those wondering how Antonis Samaras has ended up as Greek prime minister, Helena Smith in Athens sends the following:

After almost three months of political uncertainty, Greece's political elite is determined to prove that political stability has returned to the country.
Samaras was sworn in partly to appease markets and partly to "send a message" to foreign governments that stability has returned, his closest aides say.

"We wanted to send a message to markets and foreign governments that we have a leader and tomorrow we will have a government," one aide just told me. "We didn't want to protract the sense of instability and insecurity. We wanted to show that things are rolling, they are being resolved, that step by step, day by day, stability is returning to Greece."

3.50pm: A couple of polls to keep us going as we wait for Ben Bernanke to save the world with more stimulus for the US economy, or disappoint the world by falling short of expectations.

On the Fed:

And on Greece:

3.27pm: My first task is to point you in the direction of your next Christmas or birthday present:

3.10pm: Ahead of the football match between Germany and Greece on Friday, Forbes has published the 10 most likely outcomes. Among our favourites:

Unemployment on the Greek team reaches record highs. Only 6 players remain and the goalkeeper has moved back in with his parents.

Corporate sponsors are asked to take a 75% haircut on all their advertising. The Coca Cola sign now just reads "Coc".

And on that note, time to hand over to my colleague Nick Fletcher.

3.03pm: News in from our correspondent in Athens, Helena Smith.

Samaras has just put his signature to the document declaring him the new prime minister of Greece. He is expected to pop next door, from the presidential palace into the prime minister's office, to take over from caretaker prime minister Panaghiotis Pikramennos.

There has been loud applause as Samaras emerged from the palace and walks into the prime minister's office. Looking very solemn, he said: "With the help of God we will do whatever passes from our hands to get out of this crisis," his first statement as PM.

2.57pm: There's some damning comment by Richard Barley on the Wall Street Journal (behind paywall) about the idea coming from the G20 that the eurozone use its bailout funds to buy up bonds from crisis-stricken nations. He writes:

A critical problem is the cap on the size of the EFSF and ESM... To be credible, a market backstop needs to be either effectively or actually unlimited. Without a banking license to increase their firepower?something long opposed by Germany?the EFSF and ESM meet neither of those criteria in the face of the combined ?2.2 trillion of Spanish and Italian government securities in issue. The market might swiftly seek to test Europe's commitment to purchases.

2.45pm: Antonis Samaras has been sworn in as the new prime minister of Greece. The leader of conservative party New Democracy told President Karolos Papoulias he had the numbers to form a stable, long-term government with centre-left parties. He said:

Our efforts have yielded a parliamentary majority to form a durable government.

2.37pm: Quick look at the markets. The Dow Jones has opened slightly higher ahead of the interest rate announcement by the Federal Reserve and subsequent press conference. The market is expecting an extension to the Fed's programme to buy long-dated bonds, known as Operation Twist.

UK FTSE 100: up 0.2%, or 11 points, at 5597
US Dow Jones: up 0.13%
France CAC 20: down 0.22%
Germany DAX: up 0.21%
Spain IBEX: up 0.77%
Italy FTSE MIB: up 1.6%

2.16pm: Back to the MPC decision on QE. Our economics correspondent Phillip Inman has been talking to Jonathan Portes, the head of the National Institute of Economic and Social Research.

Portes says he is in favour of more QE, but sympathises with the hawks on the committee who argue that incremental increases are only having a marginal effect. The hawks like Paul Tucker, Charlie Bean and Spencer Dale, say banks horde much of the cash from selling bonds to the central bank. What does make it through to business lending is too small to boost investment and affect GDP growth.

He says: "Marginal changes in QE have shown themselves to not have much effect. We can see decreasing marginal returns from the policy."
Which only goes to show that fiscal policy needs to come into play, says Portes, with the Treasury playing a key role in boosting investment.

2.12pm: UK house prices inched up 0.4% in May from a year earlier, according to Land Registry data, which tracks actual prices of houses bought and sold.

2.01pm: Spanish bond yields are still heading down. The yield on the 10-year debt ? effectively the interest rate ? is currently 6.79%. Italian 10-year bonds are yielding 5.77%. FT markets editor Chris Adams suggest investors are expecting some kind of stimulus.

1.41pm: Looking back on the G20 briefly, Gary Jenkins has published some wonderfully dismissive comments on the G20 communique. Point 6 of the communique said:

Euro Area members of the G20 will take all necessary policy measures to safeguard the integrity and stability of the area, improve the functioning of financial markets and break the feedback loop between sovereigns and banks.

Jenkins' opinion:

Ah yes, break the feedback loop. Good luck with that. I presume it means no more medium term LTRO's, no recapitalisation of banks by the ESM/EFSF via the sovereign and a change in the risk weighting of government debt in order to dissuade banks from holding so many of the damned things. That should break the feedback loop pretty quickly. Break pretty much everything actually.

1.23pm: Over in Athens, Helena Smith reports that head of the socialist PASOK party Evangelos Venizelos is currently meeting Democrat Left leader Fotis Kouvelis.

Ahead of the meeting the Democrat Left leader pledged that his party would give the new government a vote of confidence.

Negotiations were underway to draw up a new policy program that would remove commitments that had "bloodied Greek society," Kouvelis said. "I hope that by the evening the agreement on [the government's] program will have been completed," he said. Support by the party for the new administration depended exclusively on the policies it would pursue.

"The country has to have a government, it has to be represented, for us the question of [its] policies is the big issue," he said.

1.14pm: Back to the debt markets, where the European Financial Stability Facility has added ?1bn to a bond maturing in May 2019. The yield on the seven-year bond ? effectively the interest rate the bailout fund must pay to borrow the money ? was 2.4%.

1.10pm: My colleague Phillip Inman has written more on the Bank of England split over QE.

The governor of the Bank of England, Sir Mervyn King, was blocked from pumping �50bn of electronic money into the economy earlier this month after he was outvoted on the central bank's interest rate setting body.

Minutes of the monetary policy committee meeting reveal a majority voted to keep rates on hold and stick with the current �325bn of quantitative easing (QE) at its June meeting.

1.07pm: For those looking for news on the UK unemployment data, we've got a PA story up on the site, more in the paper tomorrow. PA reports:

The government was hit with a mixed bag of unemployment data on Wednesday as the headline jobless rate fell but the number of dole claimants rose.

The jobless total dropped 51,000 to 2.61 million in the quarter to April, while the number of people claiming Jobseeker's Allowance in May rose by 8,100 to 1.6 million, ending two months of declines. Economists had expected a fall of around 3,000.

The number of people in work saw its biggest increase since the quarter to August 2010 as the employment rate increased by 166,000 to almost 29.28 million ? nearly equally split between full and part-time workers.

Almost 8 million people are now in a part-time job, while those working part-time because they cannot find full-time work increased by 25,000 to 1.4 million.

12.59pm: Some scepticism from Feature Story News director Olly Barratt about the new Greek government's staying power...

12.48pm: Our correspondent Helena Smith reports from Athens after the announcement of a new government in Greece (see 12.35pm).

Evangelos Venizelos, the socialist Pasok leader, has said the next two weeks will be critical for the debt stricken country. In a televised address Evangelos Venizelos said the new government's top priority will be the formation of "a national team" to renegotiate the ?130bn bailout agreement Athens has signed with its creditors at the EU and IMF. "Our first test will be the EU summit on June 28 where our battle to revise the terms of the loan agreement with our creditors will begin," he said. "It is a pity that Syriza has refused to participate in this team," he added referring to the far-left party's refusal to take part given that it will be the country's main opposition party.

Venizelos, who ironically negotiated the accord when he was finance minister in an interim government headed by the technocrat Lucas Papademos, announced that like the Democratic Left and Pasok MPs would support the new coalition but not participate in the cabinet.

12.35pm: [Fanfare] Greece has a government, according to socialist leader Evangelos Venizelos.

It doesn't yet have a cabinet however. Venizelos says that will be discussed by Wednesday evening. And the key issue is to form a bailout renegotiation team, he says.

With talk that Angela Merkel and Antonis Samaras will attend Germany's Euro 2012 quarter final with Greece on Friday, that might be the ideal opportunity to start "renegotiating."

12.20pm: Greek television is reporting that the political parties have agreed that National Bank chairman Vassilis Rapanos will become finance minister.

11.54am: The Bank of England started its new round of stimulus today, allotting the full �5bn of six-month funding to the banks, in the hope they will lend it out to the wider economy.

The extended collateral term repo (ECTR) facility ? announced last Thursday ? allows banks to borrow central bank funds in return for lower-quality collateral than they would usually be able to use, including residential mortgage-backed securities, and student loans.

The �5bn was the minimum the bank would offer and some analysts expected more.

11.39am: French president Francois Hollande is lobbying to get French finance minister Pierre Moscovici installed as head of the Eurogroup, rather than German candidate Wolfgang Schaeuble, reports German newspaper Handelsblatt (in German).

Luxembourg's Jean-Claude Juncker has said he'll step down as chairman of the forum of the eurozone finance ministers this year, citing the heavy workload and his health.

Schaeuble has said he wants the job but Hollande is thought to be anxious about appointing a champion of austerity to such a key role.

If Germany gets the Eurogroup job, France gets to appoint their man as head of the bailout fund the European Stability Mechanism and vice versa.

Hollande is expected to put his petitions to Angela Merkel, Italy's Mario Monti and Spain's Mariano Rajoy at their talks in Rome on Friday.

11.25am: More retractions on the use of bailout funds to buy up bonds, reported in the Guardian, FT, Telegraph and many more.

The European Commission has said there has been no formal request to relieve tension in the bond markets using bailout funds. It also came up with the rather nice metaphor that such a mechanism would only be 'financial paracetamol'.

11.17am: Robert Jenkins, an external member of the Financial Policy Committee, has given a speech to an audience of traders in which he provides a good illustration of what is going on the eurozone - and crucially warns of the possibility of "state intervention" of the kind that took place post-war. The FPC formally meets on Friday and is the body that sits inside the Bank of England looking for systemic risk in the financial system. My colleague Jill Treanor reports:

Jenkins points out that the eurozone had worked - until now - on the basis that there was no "cross-border" risk between one country and another.

But the Greek crisis has introduced doubts that all countries are the same. "The spectre of cross border risk is back. Its impact is difficult to quantify but must not be underestimated. Creditors in the north are cutting back facilities to the south. Company treasurers sweep their euro balances daily. Float has fallen. Trade terms have tightened, security holdings have shifted, and direct investments delayed. Meanwhile, concerned citizens are withdrawing their euros - just in case. Many appear to be concerned. Have you tried to buy a flat in London lately? You have competition. Property agents openly refer to the "Bank of Belgravia." Want to open an account in Lugano? Get in line".

He notes that "capital is leaving the very countries that need it - and flowing to the countries that don't". While the European Central Bank has been stepping in to provide liquidity, he said that "is not enough to contain an accident" and that confidence must be restored in the "entire euro construct'.

And, he points out "out global financial system is accident prone. This is party because of the numbers have become too big". He also points that "limitless liquidity" in the system is fading and that government will intervene to try to protect their countries.

"Short-selling bans in Europe and bond purchase penalties in Brazil
are a foretaste of the future. I recommend that you send your best and your brightest to the library to research state intervention in the post war period. It could come in handy. For like clean air and water, market
liquidity is no longer limitless and no longer free".

11.11am: Reader apint4me asks in the comments below whether Denmark's negative bond yields are linked to belief that the currency may lose its peg to the euro. They are. As Bluebay's Mark Dowding explained in the blog yesterday:

The Danish krone is pegged to the euro. In a way, you are prepared to buy Danish bonds with a negative yield in the hope of the euro breaking up and the Danish krone going up in value vs. the euro.

Arguably if you are buying a bond with a negative yield you are guaranteeing you get back less than you are paying for it in the first place. Your only chance of making a profit is in the hope you make a foreign exchange gain.

10.58am: More news from Greece where Helena Smith says thousands of Greeks have rushed to receive free fruit and vegetable handouts in Athens. Helena reports:

An estimated 25 tons of fruit and vegetables, sent to the capital by producers on Crete, were snapped up by thousands of Greeks who, on hearing of the free handouts began lining up in Athens' central Pedio tou Areo park from early in the morning.

Producers who had intended to start distributing some 2,700 crates of fresh fruit and veg at 10 AM were forced to begin several hours earlier because of the crush. Each crate contained up to 12 kilos of produce worth around ?13 if bought at the local market. In barely three hours the entire lot had gone ? testimony, once again, to the hard times so many Greeks are enduring after waves of pay and pension cuts and tax increases in a fifth straight year of recession.

"It's almost too good to be true," one radio new anchor said. The head of the agricultural association behind the move described it as "act of solidarity."

"Producers on Crete are sending a message of solidarity to Greeks who have a problem coping and can no longer buy our produce. We also have the same problems and so must help one another."

The mayor of Athens Yiorgos Kaminis who also backed the iniative said "there aren't words to thank them."

10.54am: Dow Jones currencies editor Katie Martin, for one, is not holding her breath (until the Greek coalition is announced, see 10.50am)

10.50am: Back to Greece where Fotis Kovelis of the Democratic Left has come out of a meeting with Antonis Samaras. A tweet from Greece that suggests an agreement may now come today or tomorrow.

10.43am: Over to the debt markets, where Germany's borrowing costs rose very slightly at the auction of two-year treasury notes. The average yield - effectively the interest rate Germany pays on the debt - was 0.1% compared with 0.07% at the auction in May.

10.32am: Speculation is rising in the Danish media that the Danish kroner's peg to the euro won't hold, writes madeupname2 in the comments below. Earlier this week the governor of the Bank of Denmark declared his readiness to lower Danish interest in an attempt to maintain the peg. Article with a reference to the currency issue in Danish here.

10.22am: News in from Athens where our correspondent Helena Smith says power-sharing negotiations currently underway between the country's political leaders are likely to be prolonged according to local media reports. Helena writes:

Although no one doubts that a new three-party government will be announced, Greek media reports are now suggesting the power-sharing talks could continue through to Thursday.

"The belief that the exploratory mandate that Antonis Samaras has in his hands expires this afternoon is wrong. The mandate expires tomorrow afternoon since it is only then that the three-day period foreseen by the constitution is completed," wrote the well-briefed Newsit media portal. "So the three leaders still have time to continue negotiations."

The coalition would probably be sworn in Friday, it added. Whenever it is officially announced the new government will be a test case in the politics of compromise. "Everyone has to put water in their wine," said Andreas Papadopoulos, spokesman of the small Democratic Left party whose MPs will support the coalition although not participate in the cabinet. "Our priority will be to stop some of the measures that are hurting ordinary Greeks," he told Flash radio saying the ?11bn in spending cuts that had been agreed to in June [in return for rescue funds from the EU and IMF] "have to be blocked."

But in addition to allaying the social cost of biting austerity measures, Papadopoulous insisted that it was crucial Greece also make the changes to its ailing public sector that are long overdue. Reforms include a massive ?19bn privatization program of loss-making state utilities. "Our European partners will cut us some slack if they see that we are also pressing ahead with reforms." he said.

As I write, a stormy session of Pasok's parliamentary group is taking place. The party's leader Evangelos Venizelos is under immense pressure from party cadres with insiders describing an atmosphere of "open warfare."

While some leading Pasok members have said it is crucial that they "actively participate" in the coalition, others, including Venizelos, would prefer that the party appointed technocrats in the place of politicians.
Venizelos is expected to present the party's decision on the matter when he meets Samaras at 10.30 BST.

10.09am: A doom-laden note from Barclays, courtesy of Italian reporter Fabrizio Goria:

10.01am: Swiss investor sentiment plunged to its lowest level in five months in June, adding to signs that the eurozone crisis will drag on growth. The ZEW survey fell by 39.4 points to -43.4 in June. That compares with a 4 point drop in May. The eurozone is Switzerland's biggest trading partner.

9.48am: And for some alternative TV listings inspired by the eurozone debacle, check out the comment from Pollitoingles below.

Coming up: Snog, Marry, Avoid! Yes, you guessed it: Speed Dating - Greek Stylee! Is N.D. going to get off with Pasok? - It looks like they might, but is the chemistry right? Will they be stood up or will it be just a quick knee-trembler in Syntagma? Ah! The home of Democracy!

9.41am: Here's some analyst reaction to the Bank of England minutes, which showed a 5-4 split over QE (see 9.28am). Vicky Redwood at Capital Economics writes:

The Committee discussed cutting interest rates further but, while it will keep the option open, thought that it would have no advantage over just doing more QE. It was also cool on the idea of cutting the rate paid on banks' reserves. Overall, then, more stimulus looks close, and for now, the Committee still seems to think that more QE (albeit complemented by the credit easing announced last week) is the best way to go. We're sticking with our forecast of another �50bn of gilt purchases at July's meeting.

9.33am: We'll have the full story on the economic releases out of the UK up on the site shortly. In the meantime, reaction from Twitter seems to be that the close call on QE means there will be an extension of the stimulus programme next month. Independent economist Shaun Richards notes:

9.28am: UK benefit claimant count rose by 8,100 in May, compared with forecasts of a drop of 3,000.

And the Bank of England's MPC voted 5-4 to keep quantitative easing on hold in June. Intriguingly, governor Mervyn King voted for an extra �50bn of stimulus but was voted down.

9.18am: The euro project is doomed, says US business magnate Donald Trump. He told CNBC:

Europe is a total mess. I know so many people over there and they don't know what's happening. The whole euro thing will eventually be doomed. I can't see Germany bailing out other countries because the German people are hard-working people... I see a lot of these countries going back to their own currencies and the world will continue.

9.12am: In Italy, industrial orders fell 1.9% in April, slightly less than expectations of a 2% fall. That follows a month-on-month rise of 3.5% in March.

Over the year, orders slumped 12.3% much worse than expectations of an 8.6% drop. They fell 14.3% year-on-year in March.

9.02am: Germany producer prices are slightly weaker than expected. The producer price index dropped 0.3% in May, compared with expectations of a 0.2% drop, and following a 0.2% lift in April. Over the year, the producer price index ticked up 2.1%, compared with expectations of a 2.2% increase.

8.52am: Another tweet from the news site on the formation of the Greek coalition (see 8.42am). It seems we do not yet have the formal agreement, but it should be coming at 11am BST.

The site also has a story on the possible make-up of the new cabinet. It reports:

Samaras looks certain to become prime minister and he is thought to favor Vassilis Rapanos, the president of National Bank, as finance minister. Samaras is also considering the appointment of Christos Staikouras, an ND deputy and economics professor, as deputy finance minister in charge of revenues. The head of the IOBE think tank, Yannis Stournaras, is also being touted for a role in the new administration's financial team.

8.42am: Talking about Greece, ekathimerini.com is reporting that the democratic left has agreed to join the coalition but won't join the cabinet. We'll have more from Athens later. The news site reports:

The central committee of Democratic Left, which is set to be the junior partner in a three-party coalition government, approved in the early hours of Wednesday a proposal for the leftists to support the new administration but not provide any members for its cabinet.

The meeting ended at 1.30 a.m. after 70 percent of members approved party leader Fotis Kouvelis's proposal that Democratic Left remain out of the cabinet. The party may ask for some figures who are ideologically aligned with Democratic Left, although not members, to join the government.

8.40am: A nice literary allusion that could be applied to the G20, from the managing director of Greek market research company TNS ICAP.

8.28am: Labour leader Ed Miliband has put out his reaction to the G20 plans, or lack of them, for the eurozone.

He is due to speak at the awards for consumer group Which? later, where he'll say that the summit had produced "no progress" on Europe or global employment and growth.

"This G20 summit should have marked a decisive shift towards jobs and growth, which is vital if we are to get deficits down. Unfortunately this has not happened because too many governments, our own included, seem to think more of the same is the answer.

"The result is a summit that appears to offer no progress for Europe and no global plan for jobs and growth. It is a summit of division when the world needs unity. And a summit of inaction when people, in Britain and across the world, are crying out for action."

8.24am: In the debt markets, yields on Spanish 10-year government bonds - essentially the interest rate - have dropped below 7%. They are currently trading at 6.95%. The yield on Italian 10-year debt has dipped below 6% and is currently at 5.84%.

8.20am: Quick look at the markets, which are struggling for direction.

UK FTSE 100: down 0.07%, or 4 points, at 5582
Germany DAX: flat
France CAC 40: up 0.1%
Spain IBEX: up 0.2%
Italy FTSE MIB: up 0.1%

8.04am: The Bank of England publishes minutes from their last meeting this morning, which should shine a light on the debate over whether to introduce more quantitative easing.

Then later, the Federal Reserve will announce its interest rate decision. Markets are hoping that it will step in with a new round of Operation Twist, whereby the Fed sells medium-term bonds and uses the proceeds to buy longer-term bonds. Here's today's agenda:

? German producer prices for May: 7am
? Italy industrial sales for April: 9am
? UK Bank of England minutes: 9.30am
? UK unemployment figures for May: 9.30am
? Swiss ZEW business confidence for June: 10am
? US Fed interest rate decision: 5.30pm
? Angela Merkel meets Dutch PM Mark Rutte: 6.30pm
? Fed chairman Bernanke holds press conference: 7.15pm

In the debt markets, Germany is selling ?5bn of 2-year treasury bills at 11.30am and the UK is selling �5bn of 6-month paper.

7.23am: Good morning and welcome to our rolling coverage of the eurozone debt crisis.

There's some confusion this morning over what was agreed at the G20 summit in Mexico to prevent the euro from imploding. Patrick Wintour, who is reporting from the summit, says reporters were briefed that European leaders are set to announce a plan to buy up Italian and Spanish bonds with the ?750bn bailout fund, while German officials said nothing had yet been decided.

The FT has a similar story saying Angela Merkel was non-committal about the idea on Monday night, adding: "Officials said Ms Merkel had subsequent conversations on the sidelines of the summit which led her interlocutors to believe 'she may be willing to do more'."

The Wall Street Journal says the Spanish prime minister is trying to persuade his peers to allow the ?100bn bank bailout to be lent directly to the banks.

The official communique meanwhile was typically vague. Gary Jenkins of Swordfish Research notes:

What is apparent is that there was not the normal briefing where everyone gets the same story, which suggests that they still haven't got a clue what they are actually going to do.

Josephine Moulds
Nick Fletcher

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Source: http://www.guardian.co.uk/business/2012/jun/20/eurozone-crisis-live-g20-bid-to-cut-borrowing-costs

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