19.16 Ailing Spanish bank CAM - which has been under state control since July - has posted a €1.7 billion loss.
18.36 We have a video for you of David Cameron's speech in Berlin. The PM insisted he and German Chancellor Angela Merkel shared productive talks on the future of the eurozone. But he made it clear that the two countries do not agree completely on how to deal with the crisis.
18.02 Time for a quick recap of events so far today:
• Merkel, Cameron meet, fail to agree on eurozone Tobin Tax.
• Italy's technocratic government passes second confidence vote
• Protesters occupied an empty UBS office in London
• Germany plans to prevent British referendum on overhaul of EU
• Wolfgang Schäuble predicted the end of the British pound
17.36 Philip Aldrick tells us in his latest blog that we should get used to living with the eurozone crisis - it's the new normal.
There are two main schools of thought when it comes to fixing the eurozone debt crisis at the moment. The first is that matters will come to a head around Spring and a solution will be found. The second is that matters will come to a head around Spring and the euro will implode, pitching the world into another great recession. But there is a third scenario...
17.04 Just to put today's market falls into context, we've pulled together a graph looking at the drop over the week and year. You can hide the year bars by clicking on "Year change" to get a closer look at this week.
16.46 European markets have closed for the day. Watching Merkel and Cameron strive for unity and miss did little for investors' confidence.
Cameron again called for the ECB to step in and buy up bonds on a massive scale, while Merkel reiterated her opposition to that plan. Merkel's idea for a eurozone Tobin Tax was met with equal distate from Cameron.
Angus Campbell, head of sales at Capital Spreads, said:
Ongoing fears over the eurozone debt crisis were capped today by wrangling between the two powerhouses France and Germany as to exactly how the ECB might be able to use its considerable resources to put an end to the crisis. Not even a dip in Italian and Spanish government bond yields was enough to tempt the bulls to dip their toes in today.
With Germany calling the shots and being reluctant to unleash the ECB’s firepower we could possibly have come to a dead end for the eurozone. The markets are crying out for Merkel to make the ECB the lender of last resort, but understandably she doesn’t want to expose her tax payers to such a risk.
16.35 The fact that details of the Irish budget - notably a planned VAT hike from 21pc to 23pc - were given to the Bundestag before being revealed in Ireland is "regrettable", says an EC spokesman:
We understand that the Irish authorities are upset, any leak of confidential information is regrettable. We share the relevant, necessary information with ministries of finance, what happens next is the sole responsibility of the ministries.
16.19 The euro gained today on hopes that the ECB could help troubled eurozone countries. It rose 0.4pc to $1.3509, pulling away from a five-week low of $1.3420 struck yesterday.
Tom Levinson, a foreign exchange strategist at ING, said:
The ECB would have to be involved in any potential solution (for the crisis) for it to be credible, so I would expect that to give the euro a bit of a lift.
Whether it will persist or not is highly debatable. This is a knee-jerk euro reaction and I think it will struggle to hold around this level.
15.56 It will be a busy week for Italy's new government, which holds its first cabinet meeting Monday.
On Tuesday Mario Monti travels to Brussels to meet EU president Herman Van Rompuy.
Thursday will see three-way talks with France and Germany in Strasbourg, to "ensure that Italy pays a permanent contribution from now on".
"It will be an very informal meeting, but a work-heavy one. We've already started exchanging ideas," said Monti.
He will now be racing to implement reforms demanded by Europe, while an IMF monitoring team makes its way to Italy.
15.39 Mario Monti has said that there's no reason to change the mandate of the ECB, despite calls from some quarters to take a more central role in tackling the debt crisis.
ECB decisions are taken "in the frame of an European institution which I personally don't see any reason to change," he said.
15.25 Mario Monti has sailed through two confidence votes, and now officially gains entry to the eurozone finance leaders' club. He's due to meet Sarkozy and Merkel on Thursday in Strasbourg.
15.15 This video of Ukip leader Nigel Farage venting his fury at the "Agatha Christie"-like bumping-off of European leaders and replacement by eurocrats has now been viewed almost 80,000 times.
15.10 Italian bond yields were trading below 7pc today, coming back 10 basis points to 6.69pc.
Reports said the ECB is buying Spanish and Italian government debt, helping yields come down. When yields fall, it indictes investors see the bond as less risky.
Spanish bond yields also slipped from yesterday's record high, falling back 7 basis points to 6.35pc. France's yields also came down by 10 basis points to 3.51pc.
14.47 Monti has cruised through a vote of confidence in the Italian Chamber of Deputies, taking 556 votes to 61. It follows a confidence vote in the Senate on Thursday, and gives his unelected government of technocrats a greater mandate.
It comes as Silvio Berlusconi gave his blessing for Monti to hold power until 2013 - the next scheduled elections, having previously warned his supporters could "pull the plug".
"I think this government will operate in a way that serves the country for the whole remaining period," he said.
14.45 US markets have now opened, rebounding slightly from a 4pc loss so far this week.
Five minutes into trade, the Dow Jones was up 0.26pc, the S&P 500 added 0.36pc and the Nasdaq gained 0.03pc.
14.24 Mario Monti: I am the Saddam Hussein of business
The interim prime minister and advisor to Goldman Sachs made the extraordinary comparison in a speech to the Italian Parliament amid fears he will favour business interests. He insisted he had defied US power while at the European Commission. During his time in Brussels, the steely Monti took on - and won against - US corporate giants Microsoft and General Electric over breaches of European competition laws.
Allow me to speak clearly on the question of conflicts of interest, of 'powerful forces' and other far-fetched expressions which I find offensive. I don't know any powerful forces in Italy... but I had the privilege to see almost all the strong powers in the world during my work as a competition commissioner.
Those powerful forces still remember it: (such as) the day I blocked a merger between two big American groups, even though the president of the United States intervened. The Economist wrote that the American business world considered Mario Monti to be the Saddam Hussein of business.
Comparisons between the deposed Iraqi leader and technocrat Monti are, of course, ludicrous. Saddam was elected.
Saddam won 100pc of the Iraqi vote, which is more than can be said for Mario Monti
14.14 Cyprus will need a bail-out unless there are tough spending cuts and tax hikes immediately, warns finance minister Kikis Kazamias.
He says he's looking at freezing government workers' salaries for two years, introducing a scaled surtax on private sector salaries above €2,500 and an additional levy of 0.5pc on domestic company turnover.
And all of that would be on top of the €840 million austerity package which formed part of the 2012 budget.
14.01 The occupation of the UBS office in London already has a website: www.bankofideas.org.uk. Looking at the registration details we can see that it was purchased yesterday - just ahead of the overnight occupation - by a Daisy Golding.
13.47 Here's Cameron at the news conference with Angela Merkel
13.34 We have more on the overnight occupation of an empty UBS office in London, which has been labelled a "public repossession" by anti-fiscal consolidation protesters.
The office block becomes their third location in London, after St Paul’s Cathedral and Finsbury Square. But unlike the first two this is apparently not a residential occupation and protesters are planning to use it instead as a "Bank of Ideas" which will be open to the public from tomorrow.
Occupy London supporter Jack Holburn said:
Whilst over 9,000 families were kicked out of their homes in the last three months for failing to keep up mortgage payments – mostly due to the recession caused by the banks – UBS and others financial giants are sitting on massive abandoned properties.
As banks repossess families’ homes, empty bank property needs to be repossessed by the public. Yesterday we learned that the Government has failed to create public value out of banking failure. We can do better. We hope this is the first in a wave of ‘public repossessions’ of property belonging to the companies that crashed the global economy.
The protesters have arranged a series of events in the office tomorrow, including talks from Palestinian activists, comedy from Josie Long and a session led by "trader" Alessio Rastani.
Occupy London campaigners take over derelict building
13.22 Journalist Matt Frei asked whether Cameron's "big bazooka" - a leveraged EFSF rescue fund - was now a 'BB gun'. Cameron's response did not go down terribly well in some quarters. A Labour researcher tweets:
Cam first embarrasing himself with his Australian accent and now tries to translate bazooka. "Superwaffe" is superweapon - close. #eurozone
See also: David Cameron's imitation of Julia Gillard 'worst Australian accent ever'
13.15 Cameron evades a straight question on whether the ECB should be a lender of last resort, and instead reiterates their common ground on fiscal discipline, deficit reduction, competition etc. This is the big split between the pair.
But amid the warm words the row was clear. Cameron said: "We should use all the means at our disposal."
Merkel quickly replied: "The British demand that we use a large amount of firepower to win back credibility for the euro zone is right. But we have to take care that we don't pretend to have powers we don't have. Because the markets will figure out very quickly that this won't work."
13.14 Cameron says the long term solution to the euro crisis needs to involve proper rules on fiscal discipline. Merkel says the zone has "lost credibility", and needs to win it back.
13.09 "We did not make any progress," on a European financial transaction tax, Merkel says. Cameron and Merkel agree a global tax would be ok. Cameron says the bank levy is a "fair and proper contribution" to paying down the deficit but Europe-only tax would drive financial services out of Europe.
"Britain is in Europe because we are a proud trading nation," Cameron says, calling for a completion of the single market in energy and services. "On those things Britain and Germany are very closely allied."
13.05 "We'll have a British question first," says Cameron, cutting off a German journalist midflow.
The October 27 package - a firewall, writing down Greek debts - needs to be implemented, Cameron says.
"People in Europe seem to be all excited about whether we stood together. We have stood together. In a world of 7bn people Europe doesn't stand a chance [if it doesn't]," Merkel says, downplaying the reports of rows. "We shouldnt be lead astray by the small hiccups... To all those that are writing about us, rest assured we live well together in Europe."
13.04 Cameron: "We've had very good discussions between very good friends." They are in "absolute agreement" on the need to tie European budget growth to inflation, on the need for deficit reductions, and for boosting competitiveness and deregulation in the European market.
A strong and sustainable euro is in the British national interest, he says.
"It's obvious we don't agree on every aspect of European policy" Cameron says, citing Treaty modifications, but they are solvable.
"Germany has her interests, and so does Britain... We've agreed to work together to achieve our respective interest."
He says it was good to see Merkel again.
12.56 Cameron and Merkel are up.
Merkel says she and Cameron share a vision of a strong Europe in the world.
On the euro area, she would like to "state very clearly" that she believes Britain has a "sensible interest" in the success of the euro. The the key issue is the restoration of confidence. The rules must be enforced - the stability and growth pact has been broken more than 60 times.
As such there must be changes to the Treaty for eurozone members. "We both have interests, but we have strong bonds of friendship which bring us work together closely," she says.
12.52 Handelsblatt has published a "fictitious speech" for David Cameron ahead of his meeting with Merkel. Ostensibly it looks some vintage German humour.
Under the headline: “Frau Merkel, holen Sie die Big Bazooka raus” – or Mrs Merkel, bring out your big bazooka, the German writer chooses an obvious way in:
“It’s a pleasure to be back in Berlin. Sorry I’m speaking English – I know I’m in Europe and you all speak German but this new practice has not yet reached the British shores.”
‘Cameron’says he’s here to give some “very frank words about how you deal with the euro crisis”.
But then we see that it's been written by Andrew Gowers, former editor of the FT - so is he trying to present the arguments in an amusing way, or is the UK view ridiculous to Germany? Perhaps it's just lost in translation?
Anyway here are the highlights.
“You think that a political union is the answer to the euro chaos. You have called for "more Europe, not less" . We can never accept, of course - you know how those damn backbenchers hit me in the neck. But I have to admit that your position is logical. Neither George Osborne or I see how the euro will survive with out far more fiscal integration.”
“But this is an amusing insignificance” because “after all I have a veto”….. “This is not the issue of the day. My concern is not with treaty changes but frankly more immediate problems."
“The financial transactions tax… I must be against it, otherwise I would be hanged in the City. But just between us: I agree with the Archbishop of Canterbury, that it's not a stupid idea."
“You have a goal to save the euro but you don’t have the funds….investors don’t believe you have the strategy to keep your promises. They fear that the major euro countries – Italy, Spain, even France – are struggling to pay their debts. They don’t believe there’s been sufficient support so far and they hold you responsible for the situation. That's not fair: I know that your hands are tied by the Federal Constitutional Court, Parliament and the public."
"Germany has achieved a lot – new governments in Athens, Lisbon, Dublin and Rome and probably Madrid on Sunday. They will all adopt your policy of budget cuts. To quote your party leader: you speak German. But it will fail without short-term financial support.”
The Cameron/Merkel press conference starts in five minutes. This is a photo taken on my Blackberry from behind the podium showing what the Prime Minister David Cameron will be looking at. Would you like to be in his shoes?
That device on the stand is a radio headset for listening to translators.
12.36 Don't write Cameron's Berlin mission for a bigger ECB role off yet: despite German terror at the prospect of inflation, a survey of 50 bond strategists by Reuters news agency has given an even probability of the ECB printing money under quantitative easing - as the Bank of England and Federal Reserve have done.
The most likely date would be March 2012. Twenty-five of 49 respondents thought the ECB would become a lender of last resort - whatever Draghi &co may insist about maintaining the bank's "credibility" and "indepedence" now.
12.32 The ECB has been "agressively" buying Italian government bonds, keeping them below the unsustainable 7pc waterline. It has also been supporting Spanish bonds.
It means 10-year US notes have fallen as a comparative safe haven, down to 1.99pc. The premium on swapping euros for dollars rose to 136 basis points, the highest since the 2008 financial crisis.
12.19 More demands from the European Banking Congress to not deploy the European Central Bank as lender of last resort.
Josef Ackermann, chief executive of Deutsche Bank, said the ECB should resist buying more sovereign bonds - as it has been doing, pulling down the yields on Italian and Spanish bonds. He said:
The ECB's primary role should not be to take up these bonds
And Jens Weidmann, president of German central bank the Bundesbank and a member of the ECB governing council, said:
The lack of success in containing the crisis does not justify overstretching the mandate of the central bank and making it responsible for solving the crisis.
And ECB president Mario Draghi is dismayed that the hard-fought deal on the EFSF rescue fund - Cameron's "big bazooka" - has been a damp squib.
Where is the implementation of these long-standing decisions? We should not be waiting any longer
Press conference now due to start at 1.45pm local time (12.45pm in the UK). Sample questions for Cameron and Merkel at the press conference, from my Twitter feed @christopherhope
For Merkel: in what way does Germany have any real control over what the ECB does?
Ask Merkel which Eurocrat she would most prefer to run the British government - Mandelson, Ashton or Kinnock?
Ask Cameron why he is avoiding a referendum on renegotiation in light of the Telegraph's story on Berlin evading referenda?
My favourite so far: Ask Merkel if she was on a sinking ship who would she save, Germany or the Euro?
12.13 Christopher Hope in Berlin has seen:
A tense Prime Minister David Cameron, in the back of his official car with union flags fluttering on the bonnet, arriving for talks with Angela Merkel in Berlin. The plan now is for lunch, talks and then the all-important press conference. I wonder what's on their menu?
11.59 Anti-deficit reduction protestors have squatted an empty office block in Hackney, East London. It is owned by UBS, the investment bank.
The Guardian - which is running live coverage of the squat - says one of the the speakers tomorrow is Alessio Rastani, a "trader". Well, of sorts.
11.42 Some very dark noises from policy makers and central bankers at the European Banking Congress meeting today in Frankfurt.
Jozef Makuch, ECB council member, was asked if the eurozone was entering a recession. He said:
I don't know if recession is the right word, we might have some months below zero, but for technical recession, it should be a longer period. Downside risks (to the euro zone economy) are materialising, some of them. I am not happy about that.
Thomas Mirow, president of the European Bank for Reconstruction and Development - which doles out cash to central Europe and central Asia - warned Eastern Europe could by a credit crunch as banks refuse to lend and pull their cash out the European periphery. He called for ECB spending:
We have to take care that because of unsolved problems in western Europe, the contagion effects go ahead (and affect eastern Europe). I am worried because these countries have gone through a very difficult time.
11.36 "Every German is very much scared about inflation," said Michael Fuchs, deputy leader of Mrs Merkel's CDU party this morning, on why the ECB should not print cash to escape the crisis.
Sebastian Payne has pulled together this graphic on inflation rates in the eurozone.
11.25 More from Christopher Hope in Berlin: Britain is a "diseased empire" says Der Spiegel.
More bad news for David Cameron here in Berlin. Leading German newsmagazine Der Spiegel is cranking up the pressure, publishing a story on its website branding Britain a “diseased empire”, battling with high levels of youth unemployment.
Der Spiegel says many problems in the UK are “home made”, with a situation that “is now even more dramatic than on parts of the continent” with bad news published daily by the Government. Chancellor George Osborne’s plan to cut the deficit to zero by 2015 is “utopian”, the magazine says, and therefore "obsolete".
This lunchtime's press conference will be "exciting" says the news magazine. Not half.
11.15 Eurogroup head Jean-Claude Juncker told a German broadcaster on Friday that heavily indebted countries like Britain should not try to dictate the bloc's response to the euro zone debt crisis.
Juncker told Deutsche Welle Britain's debt was higher than the currency bloc's average and its budget deficit was twice as high.
"I am in favour of dialogue, but I am against being dictated to by those who are doing worse than we are," Junker said.
If you're out shopping on Willy-Brandt-Strasse today and you spot David Cameron, consider giving him a hug; he's a little lonely in Europe today.
11.05 A dispatch from senior political correspondent Christopher Hope, who's with the Prime Minister in Berlin:
It's minus four here in Berlin - but not as freezing as relations between Britain and Germany. I've just been turned away from the Chancellery and told to come back for the press conference at 12.45pm local time, which we think means the meeting between David Cameron and Angela Merkel will have already happened. This is likely to make it a lot spicier. So far, all we know is that the British press can ask one question: if I am chosen, what should ask?
Let him know your question suggestions via @christopherhope on Twitter or in the comments below.
10.56 Ratings agency Fitch has downgraded the Italian public housing authority, ATC Torino, to A- (stable) from A.
10.41 Some good news: Greece's budget forecasts are better than expected, with the 2012 deficit expected to drop to 5.4pc of GDP in 2012 from 9pc this year. It had been forecast to drop to 6.8pc.
The improved figures are attributable to the expected cancellation of 100 billion euros in privately-held Greek debt agreed last month, as well as savings achieved by the government.
The figures are contained in the budget which will be presented for approval in parliament this morning.
The budget draft forecast a fourth year of recession, with the economy contracting 2.5pc. Revenue in the first 10 months of the year was down 4.1pc compared to last year.
10.26 Another blow to Cameron before his Berlin mission has begun in earnest: Jose Manuel Gonzalez-Paramo, an executive board member of the ECB, has backed up Draghi in indicating the European Central Bank won't be a lender of last resort.
"The sovereign debt crisis is primarily the responsibility of the governments. One can ask the ECB to act, but only within its mandate," he said in Madrid this morning.
10.01 German finance minister Schäuble predicts the end of the British pound
That's the top story from German newspaper Die Welt today. Wolfgang Schäuble tells the paper that the more successful the stabilisation of the eurozone is, the faster it will be that "others that are still outside the eurozone will see the benefits of this common currency."
He told the paper that he thought Europe would one day be united under a single currency, though it would take a little while longer. But he added: "It will probably be sooner than many people believe today in the British Isles."
It's a fascinating insight into the view from Berlin. But critics may say the comments make Herr Schäuble Europe's Comical Ali - the Iraqi information minister who against all evidence insisted there were no American troops in Baghdad.
09.50 Disappointing news for Cameron: Mario Draghi, the chief of the European Central Bank, is standing firm against pressure to rescue the eurozone, citing its independence and anti-inflation role. Echoing the German position, he said eurozone nations need to get their books in order. He said:
Credibility implies that our monetary policy is successful in anchoring inflation expectations over the medium and longer term. This is the major contribution we can make in support of sustainable growth, employment creation and financial stability.
It was in the hands of the politicians to solve the debt crisis, Draghi insisted.
National economic policies are equally responsible for restoring and maintaining financial stability. Solid public finances and structural reforms - which lay the basis for competitiveness, sustainable growth and job creation - are two of the essential elements.
09.22 More on David Cameron's breakfast from Bruno Waterfield in Brussels:
A commission insider tells me that David Cameron and Jose Manuel Barroso broke their fast on "eggs, bacon and croissant - the best of English and continent breakfast".
The view from the Kremlinologists is that the menu reflects the European Commission president's wish to draw Britain into the heart of Europe rather than isolating it from the continental eurozone - or something. Readers might have their own interpretation.
Keeping up the Kremlin theme, the Brussels press statement, on what were tense talks on the euro crisis and treaty change, is certainly rather in the 'onwards ever, backwards never' Soviet style.
"President Barroso and Prime Minister Cameron agreed on the importance of prioritising the decisive action needed to ensure the stability of the euro area as well as fast-tracking measures to stimulate growth and jobs. They both underlined the central importance of further developing the single market to deliver its full growth potential in the interests of businesses and citizens across the Union and especially to help small and medium sized enterprises."
09.18 "Hungary is likely to be central Europe's first casualty of the eurozone crisis," says Reuters Breakingviews. "Growth is poor, debt is high, and a credit ratings downgrade to junk is likely. The risks of deleveraging by Western banks are large. Hungary needs IMF funds."
09.14 The ECB is buying Italian government bonds, traders told Reuters. It has caused the spread on Italian 10-year bonds yields to narrow against German bunds to below 500 basis points. The spread now stands at 496 basisi points, down from 504 on closing yesterday.
08.39 David Cameron is breakfasting in Brussels, ahead of an 11.30 press conference in Berlin. Bruno Waterfield writes:
David Cameron is in Brussels where he is having breakfast with Jose Manuel Barroso, the European Commission President.
The Prime Minister last breakfasted in the Commission's Berlaymont HQ, where a monastery was demolished for the 1960s modernist office block, on his first trip to Brussels after winning elections last year.
Then in a break with tradition, he was served a full English breakfast - an all time first for the commission which usually serves up a cold buffet of sliced ham, cheese, bread and croissants.
As neither Mr Cameron or Mr Barroso is giving a press conference, EU Kremlin watchers will be monitoring the breakfast menu, full English or euro continental, as a measure of whether he is more in or out amid talk of a two tier Europe.
After breakfast, the PM walks across the Rue de la Loi to another even uglier euro quarter office block, the Justus Lipsius for a meeting with Herman Van Rompuy, the EU president.
There he will be offered coffee and, if he chooses, a Ferrero Rocher chocolate,the diplomat's favourite according to the ads, which are presented to visitors in bowls by the leather armchairs in Mr Van Rompuy's private office.
08.33 Now online: the German plan to derail the British referendum on the EU, as leaked to our correspondent Bruno Waterfield.
The German original:
And an English translation by Pawel Swidlicki at the Open Europe think tank:
08.19 Dr Michael Fuchs, deputy parliamentary leader of Mrs Merkel's party, tells Radio 4 Today why Germany will resist David Cameron's demand to use the ECB as lender of last resort and prop up the Eurozone.
She is totally right. Printing money is not a good way. We have to get the countries first to do their home work of why they are in a mess. They spent too much money and have to clear out their budgets first. If the ECB starts spending where is the pressure for countries to do these reforms.
We don't want to run Europe, but if we have a currency union we have to have a certain fiscal union. It can't be that one country has 200pc deficit and another is only 60pc."
He said Germany was still haunted by the impact of inflation in the 1920s and 1948.
Printing money means inflation. Inflation costs all the people in Europe. The Germans have it in their genes, they are against inflation. Every German is very much scared about inflation.
He said he was content with the ECB buying bonds and 'sterilising' them - buying other assets against them. He added Germany already supplies 30pc of the ECB funds.
A dear loaf: Weimar Germans buy bread using baskets of devalued notes
08.12 He told you so: The New York Times has a fine profile of Bernard Connolly, "Europe's most persistent prophet of doom."
“The current policy of lending plus austerity will lead to social unrest,” Mr. Connolly told investors and policy makers at a conference held this spring in Los Angeles by the Milken Institute, arguing the case that Greece, Italy, Portugal and Spain could not simply cut their way to recovery.
“And one should not forget that of the four countries we are talking about, all have had civil wars, fascist dictatorships and revolutions. That is history,” he concluded, his voice rising above the chortles and gasps coming from the audience and the Europeans on his panel. “And that is the future if this malignant lunacy of monetary union is pursued and crushes these countries into the ground.”
Ten years ago the European Court of Justice found the European Commission was entitled to sack Connolly over his 1995 critique of monetary integration, The Rotten Heart of Europe, saying it was lawful to suppress speech that "damaged the institution's image."
07.55 The BBC's Robert Peston says it is "predictable" the implicit interest rate on 10-year loans to Spain could now exceed Italy's, due to Spain's high government, business and personal debts.
07.45 Stefanie Bolzen, from the German newspaper Die Welt, tells Radio 4 Today there will be a "clash of civilisations" as Cameron meets Merkel and urges the ECB to become a lending of last resort. Germany is still haunted by memories of hyper-inflation of the 1920s.
"We don't want tax cuts. We want fiscal consolidation. We like saving a lot. We don't want to open the floodgates of the ECB."
"We will give security to the Euro, but in return, we will become the Eurozone and the Euro will become a bit more German."
Merkel doesn't want to be running Europe, Miss Bolzen says. "But because of the strength of Germany it has to lead".
Our senior political correspondent Christopher Hope will have the latest from Berlin - follow him on Twitter.
07.38 The Euro has strengthened against the pound, up 0.2pc to 85.62p.
Markets have fallen in Asia this morning after bonds in Spain reached 14-year highs of nearly 7pc: Japan's Nikkei 225 index slid 1.3pc to 8,379.48 and Hong Kong's Hang Seng dropped 1.8pc while Australia's S&P ASX 200 declined 1.9pc. Mainland China's benchmark Shanghai Composite Index shed 1.4pc. South Korea's Kospi dropped 2.2pc to 1,835.90.
Jackson Wong, a vice president at Tanrich Securities, said:
Everyone is sitting on cash and not wanting to get into the market right now until there's a clearer picture in Europe. Every time when there is news about Europe it's negative.
Until they have a valid solution to solve - or at least contain - the current worries, I don't think the market will bounce back.
07.23 More on those warning signs of a credit crunch. Eurozone governments aren't the only ones struggling with financing: European companies are facing higher capital costs as the debt crisis deters bank lending and investors.
Banks are lending less and at higher rates, forcing companies onto public markets where investors are increasingly selective - dragging on sickly economies.
"Access to capital is going to become increasingly more difficult for some companies, and we are increasingly talking to companies who say pricing is going up and covenants are getting tighter," Michael Smith, a debt cpaital markets banker at Investec, told the Wall Street Journal.
07.18 Chinese home prices slumped in 33 of 70 cities monitored by the government in October, with values slipping 4.6pc in Wenzhou. Prices also slipped in Beijing, Shanghai, Shenzhen and Guangzhou in signs the property bubble is bursting after the government expanded property curbs.
07.02 The UK's biggest four banks have shrunk their lending exposure to the Eurozone periphery by 25pc, the FT reports.
Interbank loan volumes have been cut 24 in the three months to the end of September to £10.5bn, reflecting the sharp increase in risk in south Europe. The biggest reductions have come from Greece and Spain, while HSBC cutting its exposure by 40pc.
It raises the spectre of a credit crunch in the Eurozone as trust between banks evaporates. "The authorities will have welcomed the pullback from the sovereign risk. But what they will be much concerned about is when the big banks start to withdraw interbank liquidity. That kind of thing is a real concern," said KPMG's Jon Pain.
06.52 David Cameron is meeting with Angela Merkel in what are likely to be tense talks in Berlin, after meeting Barroso in Brussels. He will tell her that he backs her plans to strengthen economic union in the Eurozone, it is reported, but only if the City of London is protected from the Tobin tax, which the Germans and French back.
It will be seen as British obstruction by Merkel's allies - Voker Kauder, the parliamentary leader of Germany's ruling CDU party, accused the UK of "defending only its own interests".
Angela Merkel and David Cameron: suggest your captions in the comments below.
06.39 Today's page 1 Telegraph story: Germany has a secret plan to derail a British referendum on the EU, Bruno Waterfield reports.
Germany has drawn up secret plans to prevent a British referendum on the overhaul of the European Union amid concerns it could derail the eurozone rescue package, leaked documents obtained by The Daily Telegraph disclose.
The leaked memo, written by the German foreign office, discloses radical plans for an intrusive new European body that will be able to take over the economies of beleaguered eurozone countries.
It discloses that the EU’s largest economy is also preparing for other European countries, which are too large to be bailed out, to default on their debts — effectively going bankrupt. It will prompt fears that German plans to deal with the eurozone crisis involve an erosion of national sovereignty that could pave the way for a European “super state” with its own tax and spending plans set in Brussels.
06.35 Jeremy Warner writes: Don't blame City speculators for Europe's ills. It's the euro, stupid.
The French propensity to blame Anglo-Saxon speculators, particularly those in London, whenever the politicians aren't getting their way, is well known. Never mind the fundamentals, if the economy hits choppy waters, it's London's financial markets that are invariably found to be the culprits.
As long as widening eurozone bond spreads were confined to the periphery, it was possible to blame lazy Greeks, feckless Italians and rotten government for the euro's travails. They'd brought it on themselves. But now the phenomenon has spread to the French core, and is even lapping at the edges of the mighty Germany itself, an older enemy has been identified – les speculateurs, lodged like pirates, in their offshore haven across the Channel.
Unfortunately, it's a mindset no longer confined to France. Never far from the surface, it has come to dominate eurozone thinking with regard to the UK. For many, Britain's non participation in the euro, and its strong association with the financial service industry, are seen as one and the same thing.
06.30 And Louise Armitstead writes that German Chancellor Angela Merkel has charged Britain to “work with us on the euro” or risk being “left behind”:
The German Chancellor will demand British support for treaty changes to allow greater intervention in national economies – powers she says are vital to stem the crisis engulfing Europe’s core.
Amid soaring bond yields and plunging markets, Ms Merkel’s political deputy said he was “baffled” by British reticence because London could be hardest hit. Michael Meister told reporters: “I’m baffled that in Great Britain there doesn’t seem to be a clear view of the consequences a collapse of the euro would have for the City of London.”
06.20 More on our lead business story, where it seems confidence in Europe's "anchor debt" has waned. Ambrose Evans-Pritchard says eurozone sentiment is now so low that Asian investors have begun to spurn German bonds, as they deem EU leaders incapable of agreeing on any coherent policy:
Andrew Roberts, rates chief at Royal Bank of Scotland, said Asia's exodus marks a dangerous inflexion point in the unfolding drama. "Japanese and Asian investors are for the first time looking at the euro project and saying `I don't like what I see at all' and fleeing the whole region.
"The question on everybody's mind in the debt markets is whether it is time to get out Germany. The European Central Bank has a €2 trillion balance sheet and if the eurozone slides into the abyss, Germany is going to be left holding the baby. We are very close to the point where markets take a close look at this, though we are there yet," he said.
Telegraph: Asian investors sell bunds amid European rout
Financial Times: Peripheral eurozone bank loans slashed (£)
Guardian: CBI: Eurozone has failed to stop bushfire
Independent: City tells Virgin to expect tough fight from big banks
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