Debt crisis: as it happened, April 26, 2012 Barclays Capital and Deutsche Bank were the buyers, the New York Fed said, winning out in a competitive bid. The price won't be disclosed until July, but it "significantly exceeds" what the New York Fed paid. One man's meat is another man's poison... 20.30 Jeremy Warner says the notion of a federal banking system for the eurozone, with a single system of regulation, supervision and regulation - and most controversially, for bailouts, is "now being widely promoted by eurocrats." As our quotes from the deputy leader of the ECB in the 18.25 post show, it's gaining traction. Jeremy writes: There is, of course, nothing particularly new in the proposal; for many economists, it's long been seen as an essential precondition for successful monetary union, at least as important as the federalisation of fiscal and political systems. The one cannot work without the others. The dollar, for instance, couldn't function effectively without a federal banking system, if only for this rather obvious reason; many US banks are of a size that would overwhelm the ability of the individual states in which they are based to underwrite them. Take the example of Citigroup, with assets at the last count of nearly $2 trillion. If it had been solely Citi's home state of New York that had been responsible, Citi would have taken New York down with it when it went bust in the sub-prime banking crisis three years ago as surely as the Irish banks have sunk Ireland, and Spanish banks are now bankrupting Spain. 19.35 More from Holland: Finance minister Jan Kees de Jager said a new budget proposal has the support of a parliamentary majority and meets the eurozone budget conditions - the strict conditions were what caused the Dutch government to collapse earlier this week. In a letter to parliament, Mr de Jager (pictured below) said: 19.30 As reported earlier by Dutch TV, it has been confirmed that the country's politicians have agreed a budget for 2013. Arie Slob, leader of the Christian Union party, said: I am very pleased that a number of parties have taken responsibility. It was necessary - to restore confidence with the people in the country, but also to tackle the crisis. Politicians said budget which has been agreed cut Holland's deficit to the EU target ceiling of 3pc, Reuters reported. 19.10 Investors looking for a Chinese-led rescue of the world economy may be waiting in vain, because the rally in China's property market has already peaked, and the consequences for its economy will follow, says Ambrose Evans-Pritchard. After listening to a talk by Xianfang Ren, Beijing analyst for IHS Global Insight, Ambrose writes: Residential investment typically peaks at 8pc to 9pc of GDP for emerging nations during their catch-up growth spurts. It is already 12pc in China. Japan's ratio peaked in 1973, long before the property price bubble burst. China has almost certainly peaked too on this crucial measure. The minimum down-payment rate on mortgages is 30pc, so leverage is in theory low. How this can be the case when the IMF says that the house price to incomes ratio is 16 to 18 times in the Eastern cities of Beijing, Tinajing, Shanghai, Shenzhen, and Guangzhou has long been a mystery. At first sight China looks fine. Unfortunately, there is a big problem of misclassification of loans. The financial system has much larger exposure to real estate than appears, and the weak links are the real estate trusts and non-bank lending. The smaller developers are cash-flow constrained and will find it hard to roll over debts. Any defaults will have to be recognised immediately. This may be happening already, since housing sales slumped 25pc in the first quarter. 18.40 If you're reading this in a packed commuter carriage, you'll be amazed to hear that someone has found something to admire in Britain's railway system. Greece has said it is considering breaking up its state-owned railway and selling the rights to differnt routes to private companies, as happened in the UK. Costas Mitropoulos of HRADF, Greece's privatisation agency, said: HRADF is considering the launch of a tender process through which the sale of train slots on different parts of the network will be offered to interested operators. Interested investors, as in Britain, will pay a cash consideration for the operation of the slots, using their own resources, as well as personnel. The proceeds from the railway sale are meant to help Greece meet its target of €19bn from sales of state assets by 2015. 18.25 There's been a conference on financial integration in the EU going on today, and this has brought up the subject of eurozone-wide bailouts for banks in the different nations. Vitor Constancio, vice-president of the ECB said: For the biggest systemically relevant banks, there are around 36 big banks, we really need a resolution fund, because that is the only way of overcoming the very thorny question of burden sharing in a crisis. And who would contribute to this regional bank rescue fund? Eurozone taxpayers and taxes on the region's banks, was Mr Constancio's answer. He said the eurozone should have a body like the FDIC (Federal Deposit Insurance Corporation) in the US, which was created to guarantee deposits and wind down failed banks. Mr Constancio went on: The FDIC resolved, liquidated and restructured more than 400 banks since the crisis began, some of them sizable in European terms. Given the eurozone nations don't want to pay to bail each other out, is it believable they would ever agree to be liable for each others' bank debts? 17.40 European shares have presented another mixed picture today. The FTSE 100 closed up 0.5pc to 5,748.72 points and the German DAX also added 0.5pc. However France's CAC closed down 0.1pc, the IBEX lost 1.3pc in Spain and Italy's FTSE MIB fell 0.7pc. 17.05 A clue into the levels of property losses Spanish banks may be harbouring - Santander, the Spanish banking giant which owns Abbey National in Britain, said it has another $1.3bn of property losses to write off. The losses on toxic property assets in its home country will be taken throughout 2012. 16.25 It looks like the Netherlands is coming close to solving its budget crisis, which brought down the government earlier this week. The leaders of the Liberals and the Christian Democrats, the two parties making up the caretaker government, and two smaller opposition parties, have all agreed to a budget plan for 2013, according to the Dutch public TV channel NOS. 15.45 Bond markets in Europe's indebted nations are more relaxed than stock markets today: Yields on Italian 10-year bonds are flat at 5.61pc, while on Spanish debt, yields were only 3 basis points higher at 5.782pc. 15.15 Politicians in Holland are close to agreeing budget cuts that would put a 3pc of GDP deficit target next year "within reach." Jan Kees de Jager, the country's finance minister, believes a deal is still possible. A ministry spokeswoman told Reuters: It is not yet the end of the race. The parties will now go back to their own factions. Dutch politicians will debate the budget in parliament at 5pm UK time. 14.40 Stock markets in the US have opened flat. The Dow Jones industrial average is up by 0.1pc at 13,106.69, while the broader S&P 500 is flat at 1389.85. In Europe, Italian and Spanish stock markets have fallen on a combination of disappointing corporate and economic data. The FTSE Mib in Milan is down by 1.6pc, while Madrid's IBEX 35 index has fallen by more than 2pc today. Britain's benchmark FTSE 100 index is down by 0.3pc. Matthieu Giuliani at Banque Palatine told Bloomberg: After the euphoria of the ECB capital injection, we've come back to reality Economic statistics will continue to be difficult considering countries" deficits and the fact that they aren't attacking the problem. Growth in the macroeconomy won't be found soon. 14.30 More on Ireland's tentative return to the bond markets (see 13.01). The country's debt agency will start re-issuing short-term bills in the summer, but will await the result of its May 31 referendum on the EU's fiscal compact first. Michael Noonan, finance minister, suggested a "no" vote could make a return to the markets difficult, and prevent Dublin from accessing future bailout funds. Certainly it would be a big factor, it would make it very difficult. 14.03 The number of Americans claiming unemployment benefit for the first time fell slightly last week, at 388,000, from a revised 389,000 the previous week. However, the less volatile four-week moving average rose to a three-month high of 381,750. 13.31 Ireland has met its 2011 fiscal targets by a "healthy margin," according to a troika statement. Representatives from the ECB, IMF and EU said that consolidation remains on track for this year, with 2012 growth still expected to be a modest 0.5pc. The statement added: The benefits of continued competitiveness gains are limited by relatively low trading partner growth, while domestic demand continues to decline and the banking sector faces difficult market funding conditions. Technical work on further financial sector reforms to support prospects for recovery in domestic demand and Ireland regaining market access continues. Overall, strong policy efforts by the Irish authorities, together with the support of Ireland's partners, will be needed to achieve the goals of the program in these challenging circumstances. Ireland's 2011 budget deficit is estimated to be 9.4pc of GDP, within its 10.6pc target. However, Eurostat highlighted on Monday that this figure does not include the €5.8bn bailout Ireland gave to two of its banks. When you take this into account, Ireland's budget deficit came in at 13.1pc last year. 13.22 It's a tale of two credit ratings this lunchtime. Norway's AAA rating has just been affirmed by Standard & Poor's, which said: The ratings on Norway reflect our view of the government's strong fiscal and external positions, which continue to benefit from significant tax revenues related to the oil and gas sectors. Policymakers' long-standing prudent management of this natural wealth, and the openness and relatively diversified structure of Norway's economy further support the rating. However, we consider the relatively indebted private sector to be a ratings weakness. Household debt to disposable income is estimated at 200%; while household assets at 214% of disposable income are substantial, they are subject to market and interest rate risk. ...while over in Hungary, things aren't quite as rosy. Fitch has warned that it could throw the country's credit rating deeper into junk if it did not secure an EU/IMF bailout. The country, which is rated "BB+" (or just below investement grade) by the ratings agency, caused uproar in Brussels when PM Viktor Orban tried to weaken the authority of Hungary's central bank. Mr Orban has since agreed to back down. In a statement, Fitch said: Given that the dispute between Hungary and the EU has been going on for several months and the Hungarian government has often expressed an unwillingness to back down on key issues, negotiations could be lengthy and at risk of setbacks. The longer-term concerns we voiced when we downgraded Hungary to 'BB+' from 'BBB-' in early January have not gone away. These include Hungary's exposure to the eurozone economy and eurozone banks, its high public and private indebtedness, policy unpredictability, and the scope for fiscal slippage Hungary's rating could be lowered if timely assistance is not secured, or if we see a deeper-than-expected economic contraction, a material weakening in the government's commitment to fiscal consolidation, or destabilising unorthodox policy measures. Hungarian PM Viktor Orban (Photo: Reuters) 13.01 More from Ireland, where finance minister Michael Noonan has said the country will return to the bond markets this summer. Ireland's benchmark borrowing costs are currently at 6.567pc. The country went to Brussels with its begging bowl 15 days after yields on 10-year bonds went above 7pc. 12.46 Following the UK economy's shock contraction last quarter, Bank of England policymaker Martin Weale has left the door open for more money printing. In an interview with BBC Radio Newcastle, he said: I have found the figures something of a disappointment, worse than I expected I'm certainly feeling that the argument (for QE) is stronger than it would have been if the economy had shown economic growth. Mr Weale has traditionally sat on the "hawkish" side of the fence in terms of monetary policy, although he changed his stance last year when the Bank relaunched its quantitative easing programme. 12.28 Ireland has passed its latest 'troika test', according to the country's finance minister. Michael Noonan said that officials from the ECB, IMF and EU were satisfied with the country's progress following a €85bn bailout in 2010. Following the review, more money from the sale of Ireland's state assets will now be used to stimulate the economy than previously agreed. Troika officials will hold a conference call at lunchtime with more details. We'll bring you more then. 12.05 Italian PM Mario Monti has joined the chorus of calls for growth in the eurozone. He told business leaders in Brussels: I believe that is the factor which is in shortest supply at the moment in spite of so many good individual and collective efforts If there is no demand, growth will not materialise. All the reforms we are putting in place now are deflationary. Italy's Prime Minister Mario Monti addresses the audience at the start of the 10th European Business summit in Brussels on Thursday (Photo: AP) 11.53 Reader Brian Gilbert isn't convinced by Andrew Tyrie's comments this morning on the IMF's role in the current crisis, describing them as "weasel words": He says the IMF can withhold funds from the EU until the EU has a sustainable plan. Given that it is never likely to come up with one does he really believe the IMF will never come up with funds? 11.45 More from the Danske Bank analysts: In conclusion, we see signs of a bubble in the French housing market and would not be surprised to see French house prices declining 10-20% in coming years. However, to identify a bubble is one thing; it is much harder to predict when it will burst. If sentiment improves, French house prices might be able to rise strongly on an unsustainable path for a couple of years before losing momentum. In that case, the "pop" would just be larger. We find that several indicators, including demand for house loans and credit conditions, signal that the French housing market could be at a turning point. Under normal circumstances, this should not cause too much alarm. However, we are in the middle of a European confidence crisis. If focus moves from Spain to France, the crisis could escalate. 11.32 Spain's housing woes have been well documented, and, as our in-house sage Ambrose Evans-Pritchard wrote last week, Holland has property market issues of its own. However, a note sent out yesterday by analysts at Danske Bank in Denmark suggests that the French housing market could be the next bubble to pop. The bank highlights several reasons for this, including waning demand for mortgages, a sharp fall in housing starts, and tightening credit conditions. As a result, prices could fall by up to 20pc: There is little doubt in our minds that the French housing market at the current juncture is vulnerable to a sharp rise in interest rates. However, we do not see this happening. We do not expect the ECB to hike rates before 2014, so lending rates may very well remain low for several years, which would help to support the current price level. However, if the housing market begins to show further signs of weakness the reaction from banks would normally be to tighten credit standards further and possibly start increasing lending rates as, for example, seen in Spain, which would put further downward pressure on the housing market. 11.10 George Osborne was right to cough-up an extra £10bn to boost the IMF's war chest, according to Treasury Select Committee chairman Andrew Tyrie. In a lecture in the City this morning, Andrew Tyrie argued that the IMF is best placed to stem the eurozone debt crisis which "threatens the prosperity of the UK, the region and possibly the globe." 10.45 HSBC is to cut 2,217 UK jobs, and redeploy 950 other workers, according to union Unite. Ahead of an official statement by the bank, David Fleming, Unite national officer said: Following much speculation it has now been confirmed that HSBC is sending over 3,100 of its staff to the back of the unemployment queues. Harry Wilson, our banking correspondent, reported yesterday that the cuts will be targeted at back office staff. 10.20 The FTSE 100 index is up by 0.4pc this morning. Chris Beauchamp at IG Index brings us more: A third successive up day for the FTSE has seen the leading index advance by around 25 points in morning trading A plentiful corporate calendar this morning in the UK is also keeping traders busy, with Unilever, Kazakhmys, Shell, Barclays and Whitbread all updating the market. Also in the news today is Astrazeneca, which dropped 4% on news of a boardroom coup, which comes in the wake of a sharp drop in profits. You can read more about Astrazeneca's woes here. 10.11 Italy has got a short-term bond auction away this morning, selling €8.5bn of six-month debt at average rates of 1.772pc. This was much higher than the 1.119pc it had to pay in January, though demand was stronger, with 1.71 bidders for every bond on offer (vs 1.51). Short and long term Italian borrowing rates were steady following the auction. 10.02 In fact, confidence across the eurozone continues to wane. Survey data from the European Commission showed sentiment falling to 92.8 in April, compared with 94.5 in March (against a long-run average of 100). 09.50 Italian business confidence slipped to a two-year low this morning as production expectations worsened. Italy's manufacturing-sentiment index dropped to 89.5 from a revised 91.1 in March, statistics institute Istat reported. Economists polled by Bloomberg had predicted a reading of 92.1, which is still well below the long-run average of 100. 09.44 More from Mr Draghi (see 08.58), who has said that goverments should consider creating a body to deal with eurozone bank bailouts. In particular in the euro area, the case for strengthening banking supervision and resolution at a euro area level has become much clearer. 09.23 Meanwhile, French president Nicolas Sarkozy has declared there is "no turning back" on Europe's target to cut budget deficits. Mr Sarkozy, who could be out of a job in less than two weeks, told France's Inter Radio that the country had managed to cut its deficit faster than expected without cutting civil servant pay or pension payments. Governments should focus on job training and innovation to boost growth, not just higher spending, he added. Yesterday, Mr Sarkozy promised to hold a referendum on Europe's fiscal pact. Rival Francois Hollande has already stated that if he is elected, he would seek to rewrite it. Nicolas Sarkozy talks to reporters earlier this month (Photo: AFP) 08.58 Mario Draghi, the head of the ECB, is speaking at a joint conference this morning titled Financial integration and stability: towards a more resilient single EU financial market. He told the invitation-only conference that financial integration "helps to maintain balanced monetary and financial conditions," although the financial crisis had "demonstrated that financial integration cannot be taken for granted." 08.29 Stock markets are pretty flat this morning. The FTSE 100 is down by 0.2pc, while the CAC 40 in Paris and Frankfurt's DAX have fallen 0.3pc. Borrowing costs across Europe have eased. Yields on Spanish 10-year debt have fallen by 5 basis points to 5.7pc, while Italy, which holds a short-term debt auction this morning, has seen benchmark yields fall by 6 basis points to 5.55pc. 08.10 How much does it cost to resdesign a logo with a few lines and an EU flag? Well, if you work for the European Commission, the answer is £325,000. The EC spent more than £300,000 creating a logo with the "swerving, modernist outline," i.e., lines that bend a bit, to replace various commission logos with a single design. Bruno Waterfield reports: 07.59 Yesterday, Fitch highlighted the political risks that surround the country's ability to meet deficit targets in 2013. However, the ratings agency said that the country was in a strong position compared with its AAA peers. The level of public debt, 65.2% of GDP in 2011, is significantly below that of its larger 'AAA' peers, Germany, France, UK and US (all above 80%). The country's strong external finances also support the rating. On top of this, the country has a track record of fiscal discipline: in the 10 years to 2007, public debt was reduced by 23% of GDP. However, this debt reduction has been almost entirely reversed, with a 20% of GDP increase from 2007 to 2011. Fitch will publish a ratings review of Holland by the end of June. 07.49 Politicians are making slow progress in Holland. Dutch finance minister Jan Kees de Jager has said that budget talks between members of parliament had been "constructive," although he suggested that any consensus on cuts was still premature. I have had good, constructive talks with a number of factions I cannot say there is the prospect of an agreement. I can absolutely not say that, but I see reason to continue the talks. 07.39 Over in Europe, the talk is no longer about a fiscal compact, but a growth one. ECB chief Mario Draghi yesterday urged the eurozone to adopt policies that would boost economic prospects. German Chancellor Angela Merkel offered her blessing. We need growth in the form of sustainable initiatives, not simply economic stimulus programs that just increase government debt. Angela Merkel at the Chancellery in Berlin on Wednesday (Photo: Reuters) 07.36 Meanwhile, the US Federal Reserve decided to hold interest rates at 0.25pc yesterday, and reiterated its intention to keep rates at the record low level until at least the end of 2014. The Fed raised its growth forecasts for the US for this year, and now expects the US to grow by between 2.4pc and 2.9pc in 2012, compared with between 2.2pc and 2.7pc forecast in January. Unemployment is forecast to fall to between 7.8pc and 8pc by the last quarter of 2012, from between 8.2pc and 8.5pc as forecast in January. 07.25 The data highlighted that the construction sector was at the heart of the gloom. Angela Monaghan reports: