Debt crisis: as it happened, April 24, 2012 It's Mrs Merkel's nightmare, he writes: Europe's political centre is starting to crumble, replicating the pattern of the early 1930s as the crisis ground into its third year under a similar mix of fiscal and monetary contraction. Elected governments have already been swept away - or replaced by EU technocrats without a vote, indeed to prevent a vote - in every eurozone state where unemployment has reached double-digits: Spain (23.6pc), Greece (21pc), Portugal (15pc), Ireland (14.7pc) and Slovakia (14pc). The political carnage has been striking. Ireland's Fianna Foil, creator of the Irish free state, has lost every seat in Dublin. Greece's Panhellenic Socialist Movement (PASOK) - torch-bearers of Greek democracy since the Colonels - has fallen to 14pc in the polls and faces ruin next month. This week the tornado has smashed into the core, bringing down Holland's govenment and probably the French leader Nicolas Sarkozy as well in a cacophany of anti-EU diatribes. 20.30 Despite the uproar in the Netherlands yesterday and the likely defeat of her ally Nicolas Sarkozy in the second round of the French election, Germany's Angela Merkel is still banging the drum for austerity across Europe. In a rare concession, the German Chancellor admitted that austerity alone would not solve the crisis but she insisted that the wave of political opposition to fiscal discipline was wrong. "We're not saying that saving solves all problems," Ms Merkel said at a conference in Berlin. [But] you can't spend more than you take in. You can't live your whole life this way. Everybody knows this. 20.10 It's not just stock markets which have had a better day than yesterday - bond markets and the euro have also recovered some ground. Yields fell on Spnish, Italian and Dutch government bonds after relatively successful debt auctions. Holland sold €2.5bn of bonds, with strong demand, while Spain had to pay almost double the cost it paid recently to borrow €725m in three-month bonds and €1.2bn of six-month bonds. However investors cheered the fact it managed to reach the top end of its target of raising between €1bn and €2bn in the bond sale. The euro gained about 0.3 percent to $1.3189. The dollar was also down against a basket of major trading-partner currencies. 18.55 Following this afternoon's debate in the Dutch parliament - and more importantly, following yesterday's resignation by the cabinet - the biggest opposition parties have refused to back the austerity measures needed to meet the eurozone's budget targets - namely getting the budget deficit down to 3pc of GDP - as laid down in the treaty agreed in December. Mark Rutte, whose minority government collapsed yesterday when he failed to reach agreement with the more right-wing Freedom Party on the budget measures, nust now seek to make up a majority by courting a group of fringe parties. Socialist leader Emile Roemer said: I understand that you have to bring finances in order but you cannot cut rigorously because it hurts the economy and people. Three percent is not feasible. 18.15 Taking a look at US markets, shares on Wall Street are also higher today: The Dow Jones is up 0.6pc at 13,009.85, while the S&P 500 is 0.3pc higher at 1,371.75. 17.45 Ratings agency Fitch is defending itself against the earlier anger of MP David Ruffley (see 11.29 post and 15.21 video), who walked out of a Treasury Select Committee session calling Fitch MD David Riley 'complacent and smirking.' Fitch says the MPs were working with "flawed briefing notes" which confused the research of different ratings agencies, and says it won't "accept public castigation" as a result of incorrect notes. The agency said: Specifically, the line of questioning which concerned Fitch's comment on the UK budget published on 21st March was, we are now satisfied, conflated with and erroneously associated with a copy of Standard & Poors BICRA Report published on January 21st 2012. This gave rise to obvious confusion when they were presented as being joint pieces of work and Fitch was asked to account for both documents. We cannot accept public castigation which is based entirely or significantly on poorly prepared briefing notes and believe that we are entirely within our rights to respectfully correct the public record and the reputation of our analysts. 17.20 David Miles, the Bank of England policymaker, has told Bloomberg News he would not be surprised if the UK first-quarter growth figure due to be reported tomorrow was "a small negative number." He said in an interview with the newswire: It seems pretty likely that right now, growth in the economy is pretty weak, probably marginally positive, but pretty weak. It wouldn't be a great surprise if the GDP number was a small negative number. The weakness of demand, given the amount of spare capacity in the economy, still made a strategy of having monetary policy even more expansionary the right one. On reflection that seems to me still the right strategy. Mr Miles was the only member of the MPC to vote in favour of more quantitative easing at the Bank of England's latest meeting. 17.05 European shares have closed the day higher, after yesterday's sharp falls: The FTSE 100 rose 0.8pc to 5,709.49 points, while the CAC climbed 2.3pc in Paris and the German DAX added 1pc. Spain's IBEX rose 2.2pc and the FTSE MIB was up 2.5pc in Italy. 16.40 Returning to the issue of Britain's national debts (see 10.23 post), Telegraph commentator Jeremy Warner says that although spending cuts may be filtering through into the official figures, the austerity measures have barely begun - and that what is being cut by central government is investment - entirely the wrong thing to reduce. Even under the Government's quite optimistic assumptions on deficit reduction, it will be some years before the public sector returns to balanced budgets. The Office for Budget Responsibility forecasts that as a result, net debt will continue to rise as a proportion of GDP for at least the next three years, peaking in 2014/15 at 76.3pc. The International Monetary Fund, which uses a less flattering methodology, puts the peak at 88.6pc. Not good, not good at all, and something of a reality check for those who think that Government actions to date have succeeded in reversing the problem. In fact, we've barely made a start. The great bulk of the spending cuts is still to come. Yet there is one aspect of the public finances where the "deficit deniers" do have a point. As far as I can see, virtually all the real terms cuts being achieved in departmental spending are at the expense of net investment, rather than current spending. This is not at all satisfactory as an approach to deficit reduction. Investment is the easiest thing to cut, which is why it tends to get chopped first in any fiscal consolidation. In fact it is current spending on entitlements and bureaucracy which should be taking the hit, while investment in the future is the bit of spending which should be stepped up. 15.21 Here's another chance to see MP David Ruffley lose his rag with Fitch MD David Riley at today's Treasury Select Committee hearing: 15.18 US markets have been trading for the best part of an hour. The Dow Jones industrial average has climbed back above the 13,000 mark, to 13,000.73, while the S&P 500 is up by 0.3pc, at 1,370.95. 15.04 Whether it's Sarkozy or Hollande who leads France through the next phase of the debt crisis, the country remains an "important partner" in Europe, Germany's finance minister said on Tuesday. "I have not the slightest doubt of that," said Wolfgang Schaeuble. 14.23 More from Mr Wilders, courtesy of Open Europe: 14.13 What's a percent or two between fiskalpakt friends? Mr Wilders told parliament that a budget deficit of 3pc of GDP is not sacred. It could be 4pc, he added. Earlier, Diederik Samsom, the leader of the opposition Labour party said that the 3pc of GDP target existed "with the addition that you don't need to comply if there are exceptional circumstances in the economy." He suggested a deficit target of 3.6pc in 2013. Brussels' new fiscal pact gives the European Court of Justice the power to fine countries up to 0.1pc of GDP if they fail to stick to the newly enshrined rules. In 2011, Holland's GDP was €602bn, according to Eurostat. A €600m fine isn't exactly pocket change. 14.08 Emotive language from Mr Wilders: 14.01 Holland's austerity package is "bad for the Netherlands" he insists (Wilders said last week that his party would not allow Dutch citizens to "pay out of their pockets for the senseless demands of Brussels"). Geert Wilders arrives for a debate about the government's resignation caused by a crisis over budget cuts on Tuesday (Photo: Reuters). 13.59 Far-right Freedom Party leader Geert Wilders is speaking now. 13.35 Follow think tank Open Europe on Twitter for more live updates from Holland. You can also watch the debate live here. 13.21 Meanwhile, Stephanus Blok, a member of Mr Rutte's VVD party, criticised the government for spending too much money, and Alexander Pechtold of Holland's Democraten 66 party picked-up on Mr Rutte's comments that talks had stalled for seven weeks, declaring that one and a half years had been wasted on all talk and no action. 13.14 A debate in the Dutch parliament is underway. Mark Rutte, who was the Dutch PM until yesterday, told legislators that his resignation was unavoidable after seven long weeks of talks. He added that the country could not afford to stand still, and that he hoped political parties would work together to help Holland through difficult circumstances. Standing still is not good for the Netherlands. The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford those are the facts and nobody can run away from them. I'm standing here without pretences, it is up to parliament and the voters. 13.08 Spain is in "an extremely fragile moment" as a country, and must implement austerity measures if it is to overcome the crisis, its Treasury minister has declared. Cristobal Montoro told parliament: We are in an extremely delicate moment as a country, an extremely fragile moment as a country This is the most austere budget since democracy, and it is aimed at being the most realistic that Spain needs to overcome this crisis situation. 13.00 Time for a quick look at the markets. After yesterday's rout, The FTSE 100 in London is currently up by 0.5pc at 5,692.92, while the CAC 40 in Paris has ticked up 1.3pc to 3,138.94 and the FTSE Mib has gained 1.7pc to 14,086.48. Following a range of debt auctions this morning, benchmark 10-year borrowing costs in Holland and Spain have fallen by 9 and 7 basis points respectively. 12.29 If you want to watch today's best bits from the TSC hearing, Michael Fallon's Scotland question starts at about 32 minutes, while David Ruffley throws a wobbly at around 48 minutes. To elaborate on Louise Armitstead's tweet (see 11.08), although none of the ratings agencies wished to speculate on what Scotland's credit rating would be if it split from the UK (S&P's Moritz Kraemer said it would be "irresponsible to speculate," while Alastair Wilson at Moody's said that any prediction would be "highly speculative and misleading"), Fitch's David Riley said he was "not aware of a situation where [Fitch] had assigned a AAA rating on a new sovereign nation." Credit ratings for countries are similar to the ones assigned to Joe Public, he added: History and track record can be important in terms of building credibility and in our rating model for example we have an explicit model for payment records. You get a benefit from having a clean payment record and your history is affected if you have a history of adverse payments. 11.36 Meanwhile, German Chancellor Angela Merkel has said that enforcing budget discipline is the "primary" challenge faced by Europe's policymakers, though austerity isn't the only solution to the crisis. "We're not saying that saving solves all problems," she said, adding that "we have to get back to [the] situation" where low-debt is the norm. German Chancellor Angela Merkel walks past guests on her way to the podium to speak during a meeting on the government's demographic strategy at the Chancellery in Berlin on Tuesday (Photo: AFP/Getty). 11.29 David Ruffley - the chap who has just stormed out of the TSC hearing, is the same Mr Ruffley who was hit by a train in 2010 an apparent suicide attempt. 11.08 More from the ratings agencies on the Scottish independence debate: 11.04 Things are hotting up at the TSC (see 10.29): 10.53 Mr Provopoulos also said that deposits in Greek banks had declined by €70bn since the end of 2009. The restoration of confidence could initially restore €10bn to €15bn in deposits. 10.45 Greece's central bank governor predicts that the economy will shrink by 5pc this year, compared with previous estimates of a 4.5pc contraction. George Provopoulos told bank shareholders this morning that Greece had no room for complacency, and warned that the country must stick to its guns and implement austerity measures - or else. If following the election doubts emerge about the new government and society's will to implement the programme, the current favourable (!!!) prospects will reverse. 10.29 The three main ratings agencies (Fitch, Moody's and Standard & Poor's) are in the Treasury Select Committee hot seat for the third time this morning. You can watch the hearing live here. Louise Armitstead, our chief business correspondent, is also there. Follow her on Twitter for more live info. 10.23 And UK borrowing is up, though downward revisions in previous months have enabled the government to meet its full-year target of £126bn. More here. 10.06 While I've been bleating on about Holland, Spain has seen its borrowing costs double at two short term debt auctions this morning. The average interest rate at an auction of three-month Treasury bills was 0.634pc, up from 0.381pc at the last auction. Six-month debt attracted average rates of 1.580pc, compared with 0.836pc a month ago. However, appetite for Spanish debt remained strong. Demand outstripped supply in the three-month auction by a ratio of 7.6 to one. 09.59 Gavan Nolan at Markit has compiled a graph for us that shows how the cost of insuring Dutch debt against default has risen over the past six months. As the chart shows, until last autumn, insuring Dutch debt against default was cheaper than insuring UK or German debt. Oh how times have changed. Dutch credit default swap (CDS) spreads are currently trading at 135 basis points. This means it costs £135,000 a year over five years to insure £10m of Dutch government debt, compared with £91,000 for Germany. 09.53 Dutch borrowing costs have eased following the auction. Benchmark 10-year yields are down by 4 basis points at 2.367pc, while yields on two-year debt are down by . 09.42 Commenting on the auction, one trader told Reuters: This is a good result in the circumstances. It looked bad yesterday but they managed to sell this in a couple of minutes Especially selling 1 billion euros of the long-dated bond is a good sign. 09.19 Demand looks strong. Steve Collins, head of dealing at London & Capital Asset Management, offers further insight: 09.14 The results of the Dutch bond auctions are in. The country sold almost €2bn of its €2.5bn target at two separate auctions. The country sold €1bn of two-year debt at average rates of 0.523pc, and almost €1bn of 25-year bonds at average yields of 2.782pc. It's hard to find comparisons, but at its last auction of 30-year debt in March, the Dutch government paid average rates of 1.37pc. 09.05 While we await the results of the Dutch auction, a new report by the World Economic Forum (WEF) looks at the future of manufacturing. David Cameron promised to place manufacturing back at the heart of the British economy when he became PM, but it looks like he has a hard task ahead. According to the WEF, manufacturing growth in developed countries such as the UK has slowed considerably over the past decade: With the exception of Germany, manufacturing growth in developed nations, including the United States, Japan, the United Kingdom and Canada slowed considerably between 2000 and 2009 compared to the 1990 to 2000 period, while manufacturing growth accelerated in most other nations in the world, particularly in China. While Japan's manufacturing GDP held steady in absolute terms, and the United States actually increased, China passed all other nations in the world to become the world's largest manufacturer in terms of GDP. Manufacturing then: And now: 08.36 Geert Tomlow, former member of the Dutch right wing PVV party, which has brought down the country's government by refusing to back an austerity budget, admitted on Radio 4's Today programme: Holland has fallen into its own trap. He said the Dutch in the past had demanded strict austerity in Greece and other struggling eurozone economies to meet a 3pc deficit target but now had to concede that they can't meet the target either. Mr Tomlow said that the Dutch people had seen the country spend money on Greece and other ailing economies and were asking "who's helping us?." He added that the eurozone may have to have introduce a northern and southern euro - or even split into three - to cope with the current crisis. 08.30 An interesting op-ed in today's Financial Times by Harvard professor Kenneth Rogoff compares the euro club to a young couple with a joint account. At first, the relationship flourishes, but it's not long before problems emerge: Eventually, the quartet decides that dinners will be even more fun, and the bank will give them an even better deal, if they expand the arrangement. So the siblings persuade a few cousins to join. Pretty soon, their phones are ringing off the hook with family members they have not seen in years. Cousin Kendra, a marginally employed chef with precarious finances, is nevertheless welcomed in hopes she will employ her culinary skills to enrich group meals. Life is not without its problems. Everyone is irritated at first cousin Nigel, who lives just across the river yet insists on managing his own finances. He is still invited to meals, though his cooking skills are hardly up to Cousin Kendra's. She, in turn, exhibits little enthusiasm for balancing her chequebook, and the bank sends ever more frequent warnings that her overdrafts would have to be covered by the others. Shortly after joining, a couple other cousins have taken advantage of their new prime customer bank status to buy extravagant apartments with jumbo loans at far lower interest rates than they were ever afforded in the past. The whole complex scheme seems to survive against all odds until one day things suddenly start to collapse.