16.48 The Parliamentary Commission on Banking Standards is set to call for a "nuclear option" for government to forcibly break up banks' retail and investment arms if they fail to comply with new ring-fencing rules. Commission members, due to report the conclusions of their review of the Banking Reform Bill, expressed concern over the lack of detail in the bill, fearing its demands could be watered down in future.
16.03 The European Central Bank has announced a shake-up of responsibilities among its executive board, putting new arrival Yves Mersch - formerly governor of Luxembourg's central bank - jointly in charge of heading up plans for the eurozone banking union alongside vice president Vitor Constancio.
Yves Mersch, who joined the executive board this week. In his former role as governor of Luxembourg's central bank, he was a member of the ECB's broader policy-making governing council
15.39 Latvia's finance minister has told Reuters the country will apply to join the euro in February, despite scepticism from inside and outside its borders. While opinion polls show a majority of Latvians oppose joining the single currency, and other eurozone nations may not be convinced the country can thrive in the bloc, finance minister Andris Gilks said he will ask for a European Commission assessment of its readiness in February. His confidence stems from Latvia's economic recovery and early repayment of its IMF bail-out loan in full. He said:
We can look at the past three years. Latvia was predictable. If we look now, we have the fastest economic growth, but at the same time, the price growth is very restrained.
With that, we shouldn't have any negative surprises here. I think we've earned respect.
A Latvian coin
15.10 The Santa Claus Rally is coming to down, according to market analysts, who have observed an upswing in European trading volumes today. The Stoxx Europe 600 Index saw trade activity 38pc higher than the average of the last 30 days. The boost could indicate the beginning of a rise commonly seen in the last five days of the year and the first two in January.
Stephane Ekolo, chief European strategist at Market Securities in London told Bloomberg:
Higher volume may have to do with Friday?s last option expiry for the year, some optimism on the fiscal cliff and the fact that strategists are bullish on prospects for 2013. The Santa Claus rally may be around the corner.
14.25 Spanish economy minister Luis de Guindos has revealed plans to fully compensate those who lost investments by purchasing complex financial instruments they did not understand. His plans will give the hundreds of thousands of Spaniards misleadingly sold high-risk instruments a chance to claim compensation for the losses which followed the banks' ?37bn bail-out.
Spain's economy minister Luis de Guindos
13.33 Hungary's central bank has cut its interest rate - the highest in the EU - for the fifth time in as many months. The Magyar Nemzeti Bank lowered the two-week deposit rate to 5.75pc from 6pc, continuing a trend of lowering the rate by a quarter point every month. The bank's president is due to appear at a news conference this afternoon to explain the decision, which is perceived as risky in the face of high inflation of 5.2pc.
The headquarters of the Hungarian National Bank in downtown Budapest
12.47 Bloomberg reports that central bank chiefs from across the world are set to meet as early as January 6 to revisit the terms of the Basel III rules drafted in 2010. At the heart of discussion will be requirements on how much liquid capital banks must hold as a proportion of their total balance sheet, which the regulations say should be enough to survive a 30-day credit squeeze. Central bankers, including ECB President Mario Draghi, say this restriction could drag down interbank lending, and slow economic recovery.
Basel in Switzerland, where the new bank regulations were drafted in 2010
12.37 EU lawmakers have admitted they will fail to meet the globally-agreed January deadline for the implementation of tougher capital requirements on banks. A meeting planned for today to thrash out the final details of a deal after talks last week stopped short of full agreement has been postponed. The move sees the EU join the US in delaying the introduction of the regulation, known as the Basel III rules, which are widely expected to come into force one year later than planned, in January 2014.
The Basel III rules will force banks to triple the amount of capital they hold over six years
12.23 The Icelandic government is divided on entering the EU as its edges closer to membership of the union. A parliamentary committee on foreign relations has sought to push back further negotiations, putting it at odds with the coalition government which wants to advance closer to entry. Anti-EU sentiment has been growing in the island nation which has enjoyed a robust economic recovery after its financial collapse in 2008 while the eurozone remains sluggish. In a recent poll, 53.5pc Icelanders want to drop the entry bid, 36.4pc want to join and 9.9pc were undecided.
11.55 DIrector of think tank Open Europe, Mats Persson, has argued the UK has more choice than 'all or nothing' in Europe in his Telegraph blog.
David Cameron yesterday let slip ? for the first time ? that he considers a future for the UK outside the EU "imaginable". The "desirable" outcome, however, was Britain remaining a member of the EU and single market but "where we are unhappy with parts of the relationship we shouldn't be frightened of standing up and saying so."
Cameron has therefore upped the game. It's increasingly difficult for him not to frame the issue as a choice between "renegotiation or Brixit" (as opposed to the status quo and Brixit or status quo or renegotiation).
Read his post here.
11.36 Bailed-out Portuguese bank Caixa Geral de Depositos is under investigation by EU competition regulators over whether dividends paid out by one of its units breached the conditions of its state aid package. The state-owned bank received a ?1.65bn capital injection provided it refrained from paying dividends and coupons on the aid money. The EU antitrust authority said in a statement:
The Commission will investigate whether the dividend payments involve a misuse of the rescue aid that CGD had received and whether they constitute, in turn, state aid to the recipients.
Portuguese Finance Minister Vitor Gaspar announcing the state aid package for Portuguese banks in June
11.24 In the UK, the squeeze on consumers has not let up as inflation held steady at 2.7pc in November, after economists expected a fall. Rising food and energy costs offset falling petrol prices, keeping inflation at its highest since May.
11.11 Ireland's latest GDP figures were released this morning, showing the economy grew 0.2pc in the third quarter, putting the government on track to meet its modest growth targets for the year. Quarter two was also revised up to 0.4pc compared with 0pc previously. Conall MacCoille, chief economist at Davy Stockbrokers, said the figures were a positive sign:
The first half of the year is a good bit stronger than the data had shown before so that means if growth is flat in the final quarter, you get 0.7 percent for the year. I think most people will be revising up their forecasts by almost half a percentage point on the back of this.
10.47 Back to Greece, where charities have collected more than four tonnes of food in a one-day donation drive for Athenians in need. Read the story by Greek news website ekathimerini.com read here.
10.42 Sluggish growth in the eurozone has taken a toll on Sweden, where the central bank has cut its key interest rate by a quarter point to 1pc. Swedish central bank the Riksbank said in a statement:
The weak developments in the euro area are having a clear effect on the Swedish economy. International trade has been weak for some time now.
Swedish households and companies now have a more gloomy outlook and consumption and investment are weak. The situation on the labour market has also deteriorated and the number of redundancy notices has risen in recent months.
Aurora borealis glows over a pine forest near Kiruna, Sweden
10.22 A Greek official, speaking to news agency AFP, said Greece is set to receive its long-awaited ?34.3bn tranche of bail-out cash in full by Wednesday, after an initial payment of ?7bn was made on Monday. Athens will use ?11.3bn to finance its debt buyback programme, with the rest set to recapitalise Greek banks, said the source.
10.13 Spain has been urged by the EU to further clamp down on costs relating to its aging population, in a report released just hours after retirees took to the streets to protest government plans to stop pensions rising in line with inflation (see 08.17). The EU fiscal stability report said Spanish public pension spending will exceed the European average until 2060, and, following its current trajectory, the country's debt burden would rise to 114pc of GDP in 2020, and 129pc in 2030. The European Commission report said:
Further containing age-related expenditure growth appears necessary to contribute to the sustainability of public finances in the long term [in Spain].
Spanish prime minister Mariano Rajoy
09.51 Back to Ireland, which is next in line for the rotating EU presidency, taking over from Cyrpus in the new year. In an interview with the Financial Times, Irish premier Enda Kenny has made clear his government will continue to fight for debt relief for rescued Irish banks while acting as an impartial chair on the rest of the EU agenda. Speaking on the rescue of the Irish banking system which has left the country with a ?64bn debt pile, he said:
Because of the fact that the country that I lead politically was the only one that had a policy imposed on it from Brussels and from Frankfurt at that time - that a bank would not be allowed to fail - we've had to shoulder a unique burden from any other country in Europe.
Irish prime minister Enda Kenny, whose government is poised to take over the EU rotating presidency in the new year
09.26 And while Italy's president expressed his concerns to politicians, comedian Roberto Benigni sent a similar message to everyone else, in a somewhat more exaggerated fashion. The Oscar-winning director of Holocaust tragi-comedy 'Life is Beautiful' devoted an entire stand-up routine to the shortcomings of the Italian constitution last night. On Silvio Berlusconi's plans to stand for election, he said:
He's back. Lord help us! He's got nothing to lose, he's done it all now - orgies, lawyers, minors. He's just having a crazy time! Mario, do us a favour [and run for election].
Italian comic Roberto Benigni, who held nothing back in ridiculing former prime minister Silvio Berlusconi
09.16 Italian president Giorgio Napolitano expressed his "regret and worry" that the government had come to an "abrupt" end, as he addressed party leaders and public figures yesterday. He was referring to Mario Monti's sudden resignation announcement on December 8 after Silvio Berlusconi's People of Freedom (PDL) party withdrew its support from his technocrat government. Mr Napolitano, a sagacious figure in Italian politics, said:
The judgment of the results obtained [by Mr Monti's government] can diverge and can diverge even more in the fire of the electoral campaign, but I want to put you on guard that this fire of polemics does not burn the confidence that Italy has gained from the international community and on markets.
The country and our comon future is at stake, not only a bundle of votes for this or that party.
Italian president Giorgio Napolitano
09.01 European markets have opened and rose in early trading.
08.26 The IMF has recommended Ireland delays any further austerity measures - after six straight budgets aimed at cutting costs and raising taxes - as it released its next tranche of bailout cash of ?890m to the Celtic nation. David Lipton, the first deputy managing director at the IMF, said he predicted Dublin would comfortably hit the 8.6pc GDP deficit target for 2012, but warned if growth slowed, the government should resist deeper austerity measures. He said:
This baseline outlook is subject to significant risks from any further weakening of growth in Ireland's trading partners, while the gradual revival of domestic demand could be impeded by high private debts, drag from fiscal consolidation, and banks' still limited ability to lend.
Nonetheless, if next year's growth were to disappoint, any additional fiscal consolidation should be deferred to 2015 to protect the recovery.
08.17 Overnight we had protests across Spain. One group out in force was the nation's retirees, opposing the government's decision to stop pensions rising in line with inflation. The government is also mulling plans to increase the retirement age and restrict index-linking of pension payouts, aimed at saving ?100bn -10pc of GDP - per year.
Demonstrators in Madrid. The signs read: "Cuts for bankers and priests" and "The pension, my right!"
06.00 Good morning and welcome to our live coverage of the eurozone debt crisis.
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