Debt crisis: Live – Telegraph.co.uk

All in all this is an outlier which we shouldn’t take too seriously but I
think the impact of it will be to mean that Q1 consumer spending will have
come in more strongly than we anticipated.

It might add an extra tenth to the GDP growth rate compared to what we were
initially expecting so I think it’s the kind of figure which might be just
enough to avoid a double dip in the UK GDP.

09.37 The health of the manufacturing industry has dramatically
improved over the past year, writes
James Hurley, leading experts to predict that the sector could “drive
the UK’s recovery”.

Parts of the sector have shown 73pc fewer signs of distress – such as
county court judgments and late filing of accounts – at the start of 2012
compared with the same period last year, research has found.

The Bank of England’s regional agents have also spotted the improving
health of manufacturers, pointing to a “modest increase” in output
thanks to export growth and “repatriation” of production.

09.18 We mentioned earlier on (07.23) that the EC is proposing
a new budget for 2013 that increases the UK’s contribution to
Brussels by £900m. That works out as an annual total of £666 for
each household in the UK. Should the EU budget be raised next year? Cast
your votes below.

Should UK households be made to pay another £666 to the EU?

09.08 German business confidence data has beaten expectations by rising
in April. The Ifo economic institute’s business climate index edged higher
to 109.9 points in April from 109.8 points in March; analysts were expecting
a dip.

08.50 Spain’s ten-year bond yield edged above 6pc again this morning,
but has since slipped back under – just – to 5.934pc. Meanwhile, in Germany,
the ten-year yield reached a record low of 1.597pc, but has climbed to
1.692pc.

08.31 European markets are up and running for the day, setting
themselves up for a third straight session of losses by slipping in the
first half hour of trading. This weekend’s IMF meeting was causing concern,
despite suggestions this morning that its $400bn fundraising target was in
sight, as Brazil demanded more power as a condition for lending extra cash. Markus
Huber, head of German high net worth trading at ETX Capital, said:

If Brazil really digs its heels, I don’t think the market will be too kind
to it. There has to be unity, that’s they only way investors think the
crisis can be contained.

The FTSE 100 has dropped 0.27pc, the CAC has slipped 0.57pc and
the DAX is up – marginally – by 0.02pc.

08.07 All this talk of the IMF being likely to reach its $400bn target
has pushed the euro up in Asia, to $1.3159 and 107.23 yen in Tokyo, compared
with $1.3134 and 107.19 yen late yesterday.

07.51 We mentioned earlier this morning (06.56) that the
Japanese finance minister thinks the IMF had a good chance of reaching its
$400bn target to increase its bailout firepower. Now ECB Governing Council
member Klaas Knot has said in an interview with De Telegraaf
that it should hit at least $350bn:

Even though the IMF money is not specifically designed for Europe, the
European debt crisis is now the biggest threat to the world economy. So that
the IMF will focus on this. That’s a lot of money we are talking about,
sufficient to keep countries such as Italy and Spain within the fold.

The new European emergency fund now has €800bn. The European central banks
have €150bn loans to the IMF. Japan has pledged $60bn, Britain $15bn,
Sweden, Denmark and Norway together now more than $30bn. China, still about
$40bn to $50bn. That is all together about $350bn. With help from countries
like Russia, Brazil, Saudi Arabia and India, a sum of between $400 and $500
billion is in easy reach.

07.23 The big news overnight is that the EC is to defy austerity plans
by demanding an EU budget increase of 7pc – meaning that British
taxpayers will have to sent an extra £900m to Brussels next year. The
Daily Telegraph has learnt that a draft Brussels budget for 2013 sets a “substantial”
spending increase of £7.4bn, which is over 4pc above the rate of EU
inflation. The document will be unveiled on Wednesday, and go up for
approval at a Brussels summit in June.

Douglas Carswell, the Conservative MP for Clacton, called on David
Cameron to refuse to pay:

We should tell them, here’s our frozen contribution, if you don’t like it,
tough. In Britain the Treasury phones government departments and tells them
what money there is. We should extend the same principle to the EU budget.

07.16 Asian stock markets fell overnight. Strong earnings reports from
Morgan Stanley, eBay, Southwest Airlines and Bank of America in the US
weren’t enough to offset weak jobs data out last night.

The Labor Department said weekly applications for unemployment benefits were
down 2,000 to 386,000 – but anything above 375,000 is generally considered
to be a warning sign that the unemployment rate isn’t falling.

Tokyo’s Nikkei 225 dropped 0.4pc and Hong Kong’s Hang Seng shed
0.3pc.

07.11 Controversy is raging in Germany over back-door rescues, writes Ambrose
Evans-Pritchard, with soaring “payments” by the Bundesbank
going to shore up Europe’s monetary system:

Professor Hans-Werner Sinn, head of Germany’s IFO Institute, said German
taxpayers are facing a dangerous rise in credit risk from a plethora of
bail-out schemes. “The euro-system is near explosion,” he told
Austria’s Economics Academy on Thursday.

Dr Sinn said Germany is on the hook for much of the €2.1 trillion (£1.72
trillion) in rescue measures for EMU debtors – often by the back-door – that
will saddle Germans with ruinous losses one day. “It is a horror
scenario,” he said.

06.56 It seems that the IMF will get the donations it needs to increase
its firepower to $400bn. Japan’s finance minister Jun Azumi (who
himself pledged $60bn this week) said:

I think it is becoming highly possible that we will achieve a sum near the
targeted $400 billion. I think this will give relief and stability to the
global economy.

06.20 A quick look at this morning’s newspaper front pages:

06.15 Moody’s has said that Italy
and Spain cannot sustain their current borrowing costs and face a “high
risk of default”.

“The
European Central Bank will need to buy more government bonds, and we cannot
rule out further liquidity injections into the banking sector,” the
Moody’s economists said. “In the medium term, changes will be needed in
the design, and possibly the membership, of the single-currency union.”

Citigroup backed the view, warning that Spain will need a bail-out by the
EU, ECB and International Monetary Fund within months. “Spain will need
to enter some form of a Troika program” some time this year, Citi’s
economists said in a note.

06.10 Telegraph commentator Jeremy Warner pointed out the
appropriate nature of Christine
Lagarde’s latest accessory – a crutch. Ms Lagarde is seeking
donations to boost a firewall to protect the eurozone, but she faces an
unphill task and there’s no certainty such protection will even work, Jeremy
writes.

There always seems to be some kind of accoutrement on hand when Christine
Lagarde, the International Monetary Fund’s managing director, makes her
public appearances. In Davos this year, she’d brought her “little bag”
to collect money for eurozone bailouts.

For this week’s spring meeting of the IMF in Washington DC, she’s brought a
crutch. This time it’s not deliberate. She’s recently undergone a knee
operation. Yet it seems no less appropriate. The world economy is on
crutches too.

In requesting additional funds, Madame Lagarde has stressed again today
that no country has ever lost money lending to the IMF. This is of course
true, but then there is always a first time, and the eurozone crisis, an
advanced economy fiscal meltdown quite without precedent in the IMF’s 67
year history, may well be it. The amounts at stake are also much larger than
ever before, and the possibility of an eventual break-up of Europe’s
monetary union make the risks much higher.

06.05 Yesterday IMF director-general Christine Lagarde was on
the offensive, trying to drum up more financial support for her “firewall”.
She has $320bn, and she’s after a further $80bn. Speaking at the start of
the IMF spring meeting in Washington last night, she said it was “in
the UK’s interest” to commit more funds, adding:

We expect our firepower to be significantly increased as an outcome of this
meeting.

06.00 Good morning and welcome back to our live coverage of the
European debt crisis.

Debt crisis
live: archive