Debt crisis: S&P slashes eurozone growth forecasts In addition to the €80bn cash component, euro- zone governments have agreed to provide the ESM with €620bn in "callable" capital. Ultimately, that would leave the ESM with €700bn to draw on, a sum that includes a buffer that wouldn't be lent out to distressed countries. Finance ministers plan to ratify the ESM on October 8. 12.26 The ECB's bond buying plan could prove dangerous in the medium term, according to Germany's economy minister. Speaking at the BDI conference where Chancellor Angela Merkel delivered a speech this morning (see 10.01), Philipp Roesler warned that sovereign bond purchases posed an inflation risk. He also said that there were "no short cuts" to budget stability, even via the ECB. 11.56 Ex-Italian PM Silvio Berlusconi has accused incumbent Mario Monti of being too "servile to Germany." In an interview with the Huffington Post, Mr Berlusconi, who is widely expected to announce his political comeback before Italian elections in the spring, said that austerity alone would risk "the end of the single currency and the destruction of Europe." [Mr Monti is too] servile to Germany, a hegemonic state that is dictating rules on discipline and austerity to other European state countries. Mr Berlusconi also repeated his criticism of the introduction of the euro but said "it would be difficult to exit the eurozone now." 11.37 Greece's finance minister Yiannis Stournaras has said that he sees a funding gap of between €13bn and €15bn if the country is given a two year extension to to meet its bail-out targets. 11.25 More lines coming out of Greece this morning, where extending the maturities of debt held by the ECB is one of the options on the table for the government to plug its ever widening financing gap. Deputy finance minister Christos Staikouras said in an emailed statement: With a view to covering the financing gap, and given that the eurosystem is holding €28bn of Greek bonds maturing in 2013-2016, the possibility of rolling over the maturities will be examined. The ECB has so far refused to face any losses on the bonds it has purchased over past years, mostly through its Securities Markets Programme. The other option would be for the country to raise money on the short term debt markets. Mr Staikouras said that Greece might have to raise more cash on the markets in 2015 and 2016 than the €10.6bn forecasts in its bail-out agreement. 11.00 The eurozone will not start to grow until at least 2014, according to new forecasts by Standard & Poor's. The rating agency said that it now expects a 0.8pc contraction in the eurozone in 2012 and zero growth in 2013. This compares with previous projections for growth of -0.7pc and 0.3pc respectively. Spain's economy is now expected to contract by 1.4pc next year, compared with previous forecasts of -0.6pc. Jean-Michel Six, an economist at Standard & Poor's, said: Recent economic indicators continue to paint a bleak picture for Europe. The data are confirming our view that the region is entering a new period of recession, after three quarters of negative or flat growth since the final quarter of 2010. But prospects continue to vary from country to country. In particular, we forecast another year of very weak growth in 2013 in France and the UK, and further declines in output in Italy and Spain. 10.45 Unconventional bank policies are the new normal, according to one of the Bank of England's ratesetters. Speaking at Richmond university in London, Paul Fisher said that recent action by the ECB, Federal Reserve in America and Bank of Japan had led "to a collective sigh of relief in recent weeks." I would caution, however, that we have been here before. Along with every other market participant I hope that this time will be different. But central banks cannot solve fundamental problems in the real economy, even using unconventional measures - they can only give the time and space for governments and private sector agents to do so. There will now be a period of opportunity for the politicians of Europe to get on with making the changes that would really make a long-term difference, such as improving competitiveness in the countries of southern Europe. To summarise my assessment of markets at this point I would no longer say that they are healing. Rather, markets are scarring over - adapting and evolving to the new environment. No one is quite sure where the process will end, but the industry has a job to do, including investing large sums of money here and now. And in some fashion, reflecting the enhanced perceptions of risk, that will continue. 10.25 Italy has paid the lowest interest rate since March to get a two-year debt auction away. The country sold almost €4bn of two year debt at average yields of 2.532pc, compared with 3.064pc at the last auction in August. Demand waned slightly, with 1.65 bidders per bond on offer (v. 1.95) 10.18 There are no plans for Germany to introduce a special tax on high earners, she says.