Debt crisis: live

07.25 Billionaire investor George Soros thinks Europe should start a fund to buy Italian and Spanish bonds, warning on Bloomberg TV that a failure to produce drastic measures at this week's EU summit could spell the demise of the currency.

Quote Merkel has emerged as a strong leader. Unfortunately, she has been leading Europe in the wrong direction. Germany will only do it if Italy and Spain really insist on it, because they are the ones who are hurting.

Policy makers should create a European Fiscal Authority to purchase sovereign debt in return for Italy and Spain making budget cuts, Soros said in an interview at his house in London. Funding for the purchases would come from the sale of European Treasuries, which would have low yields because they would be backed by each euro member.

And he's obviously very keen on the plan, because he's written a paper laying out all the details and sent it to European leaders...

 

07.01 The illness of Antonis Samaras has also caused the the troika to postpone its visit to Athens, which was scheduled to begin today.

06.50 As we reported before the weekend, this week's EU summit has been hit by an untimely complication as the new prime minister and finance minister are unable to attend because of poor health.

Antonis Samaras underwent eye surgery on Saturday and Vassilis Rapanos is in hospital after suffering from nausea. Instead, Greece's foreign minister and outgoing finance minister will attend the meeting, which takes place on Thursday and Friday.

European leaders will discuss a cross-border banking union, closer fiscal integration and the possibility of a debt redemption fund. Greece will be asking for more time to complete its bailout reforms, while Germany will be doing all it can to resist.

 

06.46 Asian stocks have mostly drifted lower as investors grow cautious ahead of a critical EU summit later this week, where Greece will attempt to win some wiggle-room on the pledges it promised to enforce in return for its bailout.

Japan's Nikkei 225 is 0.42pc lower and South Korea's Kospi has slid 1.11pc.

06.38 The Bank of England could be putting the economy at risk by persisting with low interest rates and money printing, according to the world's central banking supervisor.

In an annual report spanning 214 pages, the Bank for International Settlements warned that artificially low rates and inflated asset prices could be holding back growth by masking lenders' bad debts and deterring them from cleaning up their balance sheets. Philip Aldrick reports:

"Prolonged and aggressive monetary accommodation may delay the return to a self-sustaining recovery," BIS said. "It can undermine the perceived need to deal with banks' impaired assets."

Political pressure for loose monetary policy, including quantitative easing (QE), also threatened to damage central banks' credibility and destroy their independence, BIS said.

The world's financial regulator spelt out the risks of relying too heavily on the likes of the Bank of England and other central banks as it pressed Europe's leaders to step up their efforts to fix the eurozone's problems.

06.34 Roger Bootle, who has been nominated for the Wolfson Economics Prize, writes in today's Telegraph that all the bailout systems under the sun cannot make the eurozone work:

Throwing yet more money at the vulnerable countries and calling this by a fancy name is not an answer. Just as with the Gold Standard and with Bretton Woods, the system has to break.

But doubtless the participants at this week's summit will smother themselves in every sort of illusion in order to avoid facing up to that uncomfortable reality.

In the end, market processes will overwhelm them. The bond markets are currently the most obvious threat. But I suspect that the irresistible pressure will come as depositors move more euro deposits out of the vulnerable countries and into German banks. Under the current set-up, the money is pretty much automatically recycled via the ECB to the weak banks. The result is that Greek depositors are already protecting themselves against the consequences of a Greek default and euro exit by shifting the risk onto European taxpayers.

When the country in question is Spain or Italy the amounts involved will be so huge that the ECB would have to stop its recycling activities pretty quickly. And that would send these countries into a banking crisis from which the only escape would be euro exit.

 

06.31 Stop complaining and start doing. That was the frank message from Wolfgang Schaeuble, Germany's finance minister, to Greece yesterday, as he said the country should stop asking for more help and start work on implementing the reforms it has already promised. Alistair Osborne reports:

In unusually blunt remarks, German finance minister Wolfgang Schaeuble said: “The most important task facing new prime minister [Antonis] Samaras is to enact the programme agreed upon quickly and without further delay instead of asking how much more others can do for Greece.”

His comments highlight Germany’s growing impatience with the eurozone’s problem nations in what is shaping up to be another significant week for the single currency bloc.

[...] Greece’s new three-party coalition government took charge on Thursday, vowing to renegotiate the terms of its latest €130bn bailout. It wants a two-year extension to the 2014 deadline for it to cut its budget deficit to 2.1pc of GDP from 9.3pc in 2011. Such delay would, however, require up to €20bn more foreign funding.


Wolfgang Schaeuble, Germany's finance minister

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

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