Debt crisis: as it happened, April 18, 2012 Fitch Ratings has issued the clearest warning to date that Holland faces losing its AAA rating if it fails to deliver austerity cuts or lets political conflict intrude on economic management. "The Dutch are on the edge of a negative rating action," said Chris Pryce, Fitch's expert on the Netherlands. The first move is likely to be a switch from stable to negative outlook rather than a full downgrade. We will hold a rating committee meeting in June. They run risks if they keep letting debt rise: a cautious approach would be advisable," he told the Telegraph. The warning comes as Dutch property tips into deeper slump, with the inventory of unsold homes nearing South European levels. Household debt is the eurozone's highest at 249pc of income, compared with 202pc in Ireland, 149pc in the UK, 124pc in Spain, 90pc in Germany, 78pc in France and 66pc in Italy - according to Eurostat data from 2010. 20.25 Hmm... A spanner in the works for Christine Lagarde's fundraising mission at this week's IMF meeting in Washington. Canada has said it won't make a commitment to increasing the IMF's resources to tackle the eurozone crisis. An official from the finance minstry told Reuters that Europe already has significant resources to deal with its own problems. As you may recall, the Telegraph reported on Monday that George Osborne was willing to commit another £10bn to the IMF as long as all the major non-eurozone nations, apart from the US, agreed to do so. That would be the UK, Canada, Japan, Australia, China and India. Japan has already put its hand in its pocket, but with Canada ruling itself out, we shall see what this means for Britain... 19.55 The euro has fallen against the pound and the dollar today, as concerns about Spain's ability to borrow at an affordable rate increased. The country is due to auction €2.5bn of two-year and ten-year government bonds tomorrow, and the cost it pays to rase the money will give a clear picture of investor sentiment. Tomorrow's Spanish auction is a key driver, and it's a tough call. Spain needs to be financed by another $50bn as of the balance of this year, and the key thing is, can they maintain market access? The euro slipped 0.1pc against the dollar to $1.3111, and was down 0.7pc against the pound to 81.83p. The pound got a boost today after the minutes of the latest Bank of England rate-setting meeting showed policymakers' enthusiasm for more quantitative easing (QE) is waning. 19.35 The total value of financial support for Greece, provided by EU nations and the IMF, will be €380bn, according to Jose Manuel Barroso, head of the European Commission. Statistics fans, that equates to €33,600 for every one of Greece's 11m-strong population, and 177pc of the country's GDP. We'll let those figures speak for themselves... The €380bn is made up of €40bn of routine EU finance from 2007-2013, €100bn by way of private-sector debt written off by investors and €240bn in special bailout loans and aid from eurozone or EU partners and the IMF. 18.25 Two big political events are coming up which could whip up the eurozone crisis even further - the election in France and the election in Greece. Polls are still showing that Nicolas Sarkozy is likely to lose to Socialist contender Francois Hollande in France, but Greece looks in danger of failing to elect a majority winner. The latest poll from Greece shows the two main parties in the present ruling coalition could carry on ruling together with a very small majority. The conservative New Democracy and the Socialist PASOK party, who have both backed the short-term government of technocrat Lucas Papademos, would still jointly win 40.1pc of the vote or 158 of the country's 300 parliamentary seats - a result which would allow them to renew their coalition, according to a survey by pollster Marc for the Ethnos newspaper. 17.50 Some good news for Ireland - the state-owned property agency, set up to take more than €70bn of risky land and real estate loans off the books of the country's troubled banks, will make a €1bn profit this year. Finance minister Michael Noonan said the National Asset Management Agency (NAMA) will beat an earlier estimate of €600m for profit before impairments for 2011. The impairment charge is expected to come in at around €810m, taking net profit down to €200m. NAMA is counted as a liability for the Irish government, so its results are closely watched because any loss would push up Ireland's national debt, expected to peak at 119pc of GDP next year. 16.50 European markets have closed the day lower - yesterday's strong rally proved short lived. The FTSE 100 closed down 0.4pc at 5,745.29 points, while the CAC fell 1.6pc in Paris and the German DAX lost 1pc. Spain's IBEX lost a dramatic 4pc and the Italian FTSE MIB fell 2.4pc. What happened in Spain? Lorcan Roche Kelly, chief Europe strategist at Trend Macrolytics, has an explanation: 15.55 The oil price has taken a tumble today - Brent crude has fallen below $118 a barrel, as the dollar strengthened and concerns about the impact of the eurozone crisis on global growth and demand for resources continued. 15.20 Another interesting graph from the IMF report suggests that in four years time, Italy will be in a worse position than Spain in terms of the amount it has to pay to service its debt, even if funding conditions improve. More from the report: Within the euro area, Italy is facing a particular challenge as high current debt levels interact negatively with elevated marginal funding costs (see Table 2.1 in the full report for more). Even under the complete policies scenario, the average interest rate on Italy's public debt rises somewhat by 2016, to about 4.6pc. But it would climb to 5.3pc if current yield levels are maintained, as assumed under the current policies scenario, and exceed 5.7pc under the increase in marginal funding costs assumed under the weak policies scenario. Spain's debt dynamics are also challenging, though for different reasons: the country starts from relatively low levels of indebtedness, but unlike Italy continues to run sizable primary deficits, which push up debt levels even if interest rates remain contained. Benchmark 10-year borrowing costs are currently at 5.48pc for Italy, and 5.8pc for Spain. The "adverse" risk scenario assumes that an interest rate shock, averaged over all bond maturities under consideration, is (in basis points), for Belgium, 85; France, 88; Germany, 95; Italy, 93; Japan, 34; Spain, 98; United Kingdom, 102; United States, 114 (Source: IMF) 15.00 Mr Vinals, director of the IMF's monetary and capital markets, said he is "not aware" of any discussions between the IMF and the EU about an injection of capital for Spain's banks. Folllowing the remarks from the German finance ministry (see 13.08 post) earlier today, saying there was no discussion of a bailout for Spain underway, it looks like there's no reason to expect imminent action to improve Spain's finances. 14.40 The IMF's global financial stability report is out, and it finds that European banks have plenty of work to do. Banks are under pressure to preserve capital, and are therefore likely to cut back on lending over the next two years, dragging down growth in the region even further. Large banks based in the EU may have to sell up to $3.8 trillion of assets by the end of 2013, equivalent to 10pc of their total assets. The IMF said some "deleveraging" or reduction in credit made available, is necessary, but Jose Vinals of the fund said: Like Goldilocks, the amount, the pace of deleveraging must be just right. 14.17 The road to recovery requires an important balance between growth and austerity, according to Timothy Geithner, US treasury secretary. He told an audience at the Brookings Institution: To try to do it all up front, the risk is you're undermining the prospects for some stability in growth, some recovery in growth, and you may end up undermining and setting back the cause of reform. 14.03 Italy has cut its 2012 economic growth forecast and moved the goalposts on its balanced budget rule. The Italian economy is now expected to contract by 1.2pc this year from 0.4pc previously, The revision was largely expected, following a series of leaked reports in the media. The Italian government, which had vowed to balance the budget in 2013, now expects a shortfall of 0.5pc of GDP next year, and a balanced budget in 2014. In a statement, the Italian government said: Despite the progress made, there is still a long way to go in a context that is more favourable but still characterised by elements of uncertainty. PM Mario Monti added: The financial crisis is exacting a huge price on Italian families and young people. Italian PM Mario Monti addresses the media on Wednesday (Photo: EPA) 13.52 You can watch EC president Jose Manuel Barroso deliver his speech on jobs and growth in Greece here. 13.39 A 42-page report compiled by the European Commission on Greece has been leaked to the Greek media. The report, due to be presented at the European Parliament shortly and obtained by Athens News, recommends an overhaul of the wage-setting system, including a cut in unit labour costs by 15pc, a reduction in red tape, and privatisation of the country's remaining state-owned gas and electricity companies. It outlines a 30, yes, THIRTY point plan which "if implemented by Greek authorities by the end of 2012, with our support, should quickly unblock growth." 13.23 King of Spain has apologised for going on an elephant-hunting trip in Botswana while his country was struggling with recession. As King Juan Carlos left hospital, the 74-year-old said he was "very sorry. I made a mistake. It won't happen again. The trip came to light when the king was rushed to hospital for an operation after falling over and breaking his hip. A man holds a placard reading "King, abdication! Juan Carlos, caught. You are fired!" before Spanish King Juan Carlos left hospital on Wednesday after breaking his hip on an African elephant hunting trip, which provoked a scandal at home (Photo: Getty) 13.08 There has been "no discussion" of a Spanish bailout among Germany's legislators, according to a finance ministry spokesman. Martin Kotthaus told reporters in Berlin: The Spaniards have adopted very good measures and are very engaged in resolving their problems. 12.58 Some lunchtime viewing for you. Chris Grayling, employment minister, has said that UK unemployment "is the top priority for Government": 12.37 Mr Lewis continues: Mr Osborne could be in for a torrid time as well, as he seeks yet again to explain away a recession as merely a result of distortions in the statistics. An impartial observer might conclude the Chancellor has a strong personal interest in seeing that the problems at the ONS are sorted out. Yet, as the years go by, the quality of ONS output appears to go from bad to worse. For the time being, MPC members will be prepared to believe, with some justification, that underlying GDP growth is stronger than the official figures indicate. 12.25 Meanwhile, Stephen Lewis at Monument Securities takes a closer look at this morning's Bank of England minutes, the likelihood of recession, and the "puzzling weakness" in UK construction data (see 09.42): ...the MPC believes the current "recession" is largely the product of dubious statistics. The ONS's relatively new series of construction output data were notably weak in December and January, as indeed they had been in the corresponding months of 2010-11, when they subsequently recovered smartly It seems there are problems in compiling the official construction numbers. This is important because these figures are a significant input into the overall GDP data. One question that arises is how the ONS gets away with continually providing such problematic output, when economic and political issues of major moment hang on the figures it produces. After all, MPC members are worrying that an appearance of recession in the ONS's numbers may precipitate the real thing through their impact on confidence in the household and business sectors if the media latch on to questionable ONS numbers and, on that basis, propagate a recession story 12.13 It's a raucous session in Parliament today, and Mr Cameron seems to be asking as many questions as he has been asked by Mr Miliband. In response to a question by Lincoln MP Karl McCartney on Standard & Poor's affirmation of the UK's AAA credit rating last week, Mr Cameron says it is important to keep on top of the UK's debt and deficit so it can maintain its prized rating. 12.10 Paul Waugh, editor of PoliticsHome, tweets: 12.03 PMQs in parliament is underway. Watch it live here. Labour leader Ed Miliband asks PM David Cameron if he can confirm that abolishing the 50p rate of tax will put £40,000 back in the pockets of the richest. Mr Cameron retorts by asking Mr Miliband why he hasn't mentioned the fall in unemployment. Mr Miliband says that a million young people out of work is not a cause for celebration. 11.57 The Bank of England also published its monthly regional agents' summary today, which reports on the state of UK business conditions from firms across all sectors of the economy. James Hurley, our Business Club editor, says it doesn't make for particularly heartening reading, particularly when it comes to companies' ability to access finance: Existing credit facilities with banks are being made more costly when firms come to renew them, arrangement fees are rising, and collateral requirements on new lending are becoming more stringent, the agents said, based on their conversations with around 700 companies. It's also interesting that the agents note that business owners are being encouraged to use asset-backed forms of lending - such as invoice finance - rather than overdrafts by banks, "which many [owners] are reluctant to do." Banks always claim they're not pushing entrepreneurs into invoice finance, while entrepreneurs insist they're getting the hard sell. It looks like the agents are offering some evidence to support the company owners' argument. As usual, small and medium-sized firms typically found it more difficult to secure credit than large ones, and cash flow is being squeezed as suppliers tighten up on payment terms, while customers push to extend them, the agents said. Not new problems, but it's worrying that we're not seeing more signs of them easing. There was, however, some better news in the form of tentative signs of a rise in activity in the housing market, investment intentions pointing to a gradual rise in capital spending over the coming year and export growth remaining 'robust'. Small and medium-sized firms typically found it more difficult to secure credit than large ones, according to the Bank of England (Photo: Alamy) 11.46 Some of Europe's stock markets have fallen heavily. The CAC 40 is Paris is now down by 1.3pc, while the benchmark indices in Spain and Italy are now down by 3pc and 2.2pc respectively. 11.39 The Footsie is still treading water this morning. Here's Rachel Cooper with more: A smattering of miners gained ground in morning trading. But, the FTSE 100 lost 14 points to 5752 as it paused for breath following Tuesday's strong gains. 11.26 Amid all the money-printing and unemployment news this morning, official eurozone data has shown that construction output across the eurozone fell by 7.1pc in February compared with the previous month. Germany may be leading the recovery in many respects, but construction output in the country dived 17.1pc in February, according to EU statistics office Eurostat. Italian construction output fell by 10pc, while output in the UK increased by 5.7pc. 11.16 While in Germany, the country has paid its lowest ever interest rate to get two-year debt away at an auction. Germany sold €4.21bn of two-year debt at average yields of 0.14pc, compared with 0.31pc at the last auction in March. There were 1.8 bidders for every bond on offer. 11.09 The pain in Spain continues. Bad bank loans touched an 18-year high in February, as banks continued to struggle with the burst of the property bubble. In a report titled titled "data on doubtful loans," the Bank of Spain said the amount of loans where a borrower had not made a payment for three months or more rose to 8.15pc of total loans, the highest since 1994, and up from 7.91pc in January. Spanish house prices have collapsed by 20pc since their peak in 2007 - 2008, though some economists suggest the figure is closer to 30pc. 10.55 Another reason why the Bank of England should put the brakes on QE has been highlighted today: inflation. Speaking at a conference in Liverpool, deputy BofE governor Paul Tucker said: Though [inflation] has fallen significantly over the past six months, from over 5 percent to 3.5 percent on yesterday's reading, it remains uncomfortably above target The MPC will guide inflation back to target in the medium term, but in the near term there is considerable uncertainty about the path that it will follow. Data yesterday showed that the annual rate of inflation ticked up unexpectedly in March, to 3.5pc (from 3.4pc in February). Stubbornly high inflation make further bond purchases through QE less likely, given the programme's potential to further fuel inflation. 10.38 Spain should not look to the ECB to save the day, according to one of its key policymakers. Jens Weidmann, who also heads Germany's Bundesbank, said that the recent spike in Spanish borrowing costs should be taken as an incentive for the country to speed-up reforms. We shouldn't always proclaim the end of the world if a country's long-term interest rates temporarily go above 6 percent That is also a spur for policymakers in the countries concerned to do their homework and to win back (market) confidence through the pursuit of the reform path. Mr Weidmann also highlighted the limits of the ECB's Securities Markets Programme, which has so far hoovered up €214bn of peripheral debt in an attempt to keep borrowing costs down for these countries. The limits of the SMP have become apparent At the same time, the programme has not been ended by the ECB Council. Benoit Coeure described that. I don't think you will find any colleague (on the ECB Council) who is of the view that the Eurosystem (of euro zone central banks) is there to ensure a particular interest rate level for a particular country. 10.27 Commenting on the minutes, Richard Driver, analyst at Caxton FX, said: The MPC minutes have thrown up a major surprise in revealing only one vote for further quantitative easing. Few would have expected Adam Posen to abandon his overly dovish stance and the market will be encouraged that he feels the UK economy is not in need of further help for now. This week's rise in UK inflation clearly provides an insight into Posen's rationale. The MPC's view that inflation may be more resistant to decline in the medium term does suggest QE is less likely. The market may well get overexcited to see Posen stand aside but the truth is that today's news by no means closes the door to further QE from the BoE. Nonetheless with global and domestic growth on such an uncertain footing, regardless of the IMF's upgraded forecasts, the likelihood of further QE remains finely balanced. Much depends on next week's Q1 UK GDP figure - a negative figure will confirm a technical recession and QE will definitely be back on the cards then. 10.23 Following the release of the Bank of England minutes, the pound did this: Adam Posen's defection to the "no change" camp has reined in expectations that the BofE will pump more money into the UK economy in the short-term. The pound rose to a 19-month high against the euro, to €1.222, while it climbed to a session high against the dollar, at $1.5974. 10.09 Meanwhile, UK unemployment data is out. Long-term unemployment has hit a 16-year high, while record numbers of Britons are being forced to work part-time as they cannot find full-time jobs. More from Louisa Peacock: The number of people being forced to work shorter hours because they could not find full-time jobs has surged by 89,000 between December and January to reach 1.4m - the highest figures since comparable records began in 1992. The rise in part-time working helped to ease overall unemployment, which fell for the first time in almost a year by 0.1pc, or by 35,000, over the period to reach 2.65m. Women bore the brunt of joblessness, with an extra 8,000 becoming unemployed in the three months to February, reaching 1.14m - the highest figure in 25 years. The number of unemployed men was 1.51m over the period, down 43,000 from the three months to November. However, the Office for National Statistics (ONS) said changes to the way women's benefits are calculated, such as moving single mothers off lone parents' allowance and onto Jobseeker's Allowance (JSA), account for some of the rise in female unemployment. 09.54 Problems in the eurozone also "intensified" last month, according to the BofE: ...financial market concerns about the indebtedness and competitiveness of some euro-area countries remained and, if anything, had intensified on the month. Even if the worst risks did not crystallise, the process of rebalancing was likely to act as a persistent drag on the euro-area periphery as fiscal consolidation continued and real incomes were depressed. And, notwithstanding the recent decline in bank funding costs, there remained a high degree of uncertainty over how this rebalancing would unfold. Failure to tackle successfully the vulnerabilities in the euro area, and any related intensification of financial market stresses, could result in a much weaker and more challenging external environment for the United Kingdom. 09.42 The Bank of England also said it had not ruled out "GDP falling for three successive quarters," which would throw the UK back into recession. More from the minutes: With output having already contracted in the fourth quarter of last year, the Committee could not rule out the publication of official data showing GDP falling for three successive quarters. Nevertheless, the Committee's judgement was that, abstracting from both the puzzling weakness in measured construction output and the impact of one-off factors, the economy appeared likely to be expanding, albeit only modestly, in the first half of the year. 09.37 A new arch-dove has emerged in the Bank of England's Monetary Policy Committee (MPC). MPC minutes show that David Miles, former chief economist at Morgan Stanley, voted for an extra £25bn of money printing this month. Adam Posen, who kept banging the drum for more quantitative easing (QE) long before the rest of the committee decided to resume its asset purchases last year, chose to keep QE unchanged. The Bank of England voted in February to increase its quantitative easing programme by £50bn to £325bn. This will be completed next month. 09.16 Portugal hopes to return to the markets late next year. Its benchmark 10-year borrowing costs are currently at 11.8pc. By comparison, Spain currently pays a rate of 5.8pc, while Italy's 10-year borrowing costs are currently at 5.47pc. 09.09 Forget Spain, Portugal may have to return to Brussels for another bailout, according to its prime minister. Pedro Passos Coelho writes in the FT that he is "confident about the reform plan we have in place and our ability to return to the markets on time if we deliver it." However, his admission that "circumstances beyond our control [could] obstruct our return to market financing," has led to more rescue talk. We are utterly committed to fulfilling our obligations. But while we are optimistic, we must also be realistic and pragmatic. This is why we accept that we may need to rely on the commitment of our international partners to extend further support if circumstances beyond our control obstruct our return to market financing. All we can know for certain is that our commitment to deliver on the terms and conditions of our adjustment programme is unwavering. Always look on the bright side, eh? Portugal's PM Pedro Passos Coelho (Photo: Reuters) 08.44 Don't underestimate the will of the euro elite, writes Martin Wolf in today's Financial Times, who adds that the fear of falling apart is the main reason why the euro club is sticking together: The principal political force is the commitment to the ideal of an integrated Europe, along with the huge investment of the elite in that project. This enormously important motivation is often underestimated by outsiders. While the eurozone is not a country, it is much more than a currency union. For Germany, much the most important member, the eurozone is the capstone of a process of integration with its neighbours that has helped bring stability and prosperity after the disasters of the first half of the 20th century. The stakes for important member countries are huge. Thus, the big idea that brings members together is that of their place within Europe and the world. The political elites of member states and much of their population continue to believe in the postwar agenda, if not as passionately as before. In more narrowly economic terms, few believe that currency flexibility would help. Many continue to believe that devaluations would merely generate higher inflation. If this were a mere marriage of convenience, a messy divorce would seem probable. But it is far more than such a marriage, even if it will remain far less than a federal union. Outsiders should not underestimate the strength of the will behind it. 08.36 Stock markets are trading flat this morning. The FTSE 100 in London is little changed, at 5,770.34, while the CAC 40 in Paris has dipped 0.3pc to 3,282.69 and Frankfurt's DAX is down 0.24pc at 6,784.55. 08.18 She may have been lying low lately, but German Chancellor Angela Merkel is back, and on a very colourful campaign trail. The Chancellor opened her bid to win back voters yesterday at her local constituency in north Germany. After blending-in with the locals (see right), she told supporters at a rally that belt-tightening and protecting market confidence was the only way to tackle Europe's debt crisis: It's partly about still being able to shape our own future We have to watch out that high interest rates on our debt don't lead to the point where we can't decide and shape anything anymore. 08.05 Over in the eurozone, which the IMF predicts will contract 0.3pc this year rather than 0.5pc, Italy is to cut its growth forecast for this year.