Debt crisis: as it happened May 22, 2012 I have to say that I think both of them were reading a completely different report from the one published, one which owes more to their own fevered imagination than what the IMF actually said. This is the danger of adopting an extreme, contrary position - that basically you begin to see everything through a particular prism, plucking out the little bits that support your case and disgarding everything else. For sure, the IMF assessment did say that more monetary stimulus was needed. It also said that if things deteriorate a lot further, then further fiscal stimulus should be considered. But there was high praise for the fiscal consolidation thus far, and Ms Lagarde said that when she thought about where the UK would have been without deficit reduction, it made her "shiver." This doesn't seem to me like a ringing endorsement of the "spend until we are broke" approach advocated by Professor Krugman and other uber-Keynsians. I would none the less acknowledge that having just received an extra £10bn of UK money, the IMF was hardly likely to be critical. Unlike many others, the UK doesn't need an IMF bailout, so that's good enough. 18.34 Mr Rehn reiterated the commission's call for EU member states to commit a further €10bn euros to the EIB "to allow it to do more for growth and jobs." Some northern states, including Germany and Austria, have expressed concerns that the extra funding would only add to countries' debt levels. 18.25 Olli Rehn, the EU's commissioner for economic and monetary affairs, has also been talking about "project bonds" today (see 16.15). In a statement he said: The Project Bond Initiative by the EU and the EIB will support the financing of commercially viable infrastructure projects in the area of transport, energy and communications infrastructure. The main objective is to attract debt capital market financing at a time when these projects are heavily dependent on bank lending, which is hardly available with long-term maturities. Already in its pilot phase, project bonds could unlock up to €4.6 billion of investment in infrastructure and innovation, based on the leveraging effect of €230 million from the EU budget. Over the past two years, the Commission has put forward several ideas and initiatives to use public investment in a targeted manner to mobilize further private investment and to channel it to growth-enhancing projects and support green growth. 17.45 So stock markets today have taken heart on hopes tomorrow's EU summit will produce some positive steps for addressing the debt crisis. Bond markets have also responded - the yield on Spanish and Italian 10-year government bonds both fell by 13 basis points, to 6.16pc and 5.81pc respectively. But despite several nations, including Britain, rallying to France's call for common euro-area bonds, what is actually the likely outcome? With Germany still dismissing the idea, not much, says Matteo Regesta, a strategist at BNP Paribas: Tomorrow's meeting will not deliver any landmark solution. The market is likely to be more prone to disappointment. 17.20 Fitch, the ratings agency, held its annual banking conference in London today. Among the subjects discussed was Fitch's view that the European Central Bank is increasingly likely to do another round of cheap loans, to keep some banks in the troubled eurozone nations afloat. Fitch said: The likelihood that a third longer-term refinancing operation (LTRO) will be needed by certain banks in 'peripheral' eurozone countries is increasing due to worries over eurozone sovereigns, limited deleveraging ability and flat-to-negative deposit trends. The timing of any further LTRO is uncertain, but is unlikely to be imminent without a further significant shock, such as a Greek exit from the eurozone. If a third LTRO is needed, we believe it will be provided. Deposits in the Spanish, Italian, Portuguese, Greek and Irish banking sectors are either steady or have been falling, preventing banks from tapping customers for more funding. We believe banks will also struggle to achieve significant deleveraging because so many are trying to offload assets and because the assets they are trying to get rid of can be illiquid loans where there are some concerns over valuations. 17.05 If you wondered what goes on in Brussels ahead of one of the increasingly frequent leaders' meetings, the EU has made a video to show us, just in time for tomorrow's get-together. It's not just stockpiling croissants and making sure Merkel and Hollande aren't sitting next to each other apparently... 16.50 European markets are closed and have ended the day higher: The FTSE 100 closed the day almost 100 points higher, up 1.9pc to 5,403.28, while the CAC also added 1.9pc in Paris and the German DAX rose 1.7pc. In Spain, the IBEX climbed 2.1pc and the FTSE MIB jumped 3.4pc in Italy. 16.40 And Bruno Waterfield offers his view from Brussels of project bonds: 16.15 The catchphrase of the day in the eurozone - and sadly it's not the buzziest one you've ever heard - is "project bonds." What are they and why do they matter, I hear you cry... Well, the idea is to use €230m from the 2012-2013 EU budget to leverage up to €4.5bn on the back of the European Investment Bank to attract private sector investment in five or six major transport, energy or digital economy schemes. In that way, capital can be accessed for profitable projects despite the risk-averse state of the banking system. The scheme was approved by the European parliament and the EU today, but still needs the approval of the 27 memebr states. So nothing as exciting or potentially game-changing as eurobonds sadly... 15.35 Markets have rallied across Europe and the US this afternoon, on hopes tomorrow's EU leaders summit will produce more action to deal with the region's debt crisis. A recovery in the US property market also boosted sentiment. Sales of existing homes (ie. not brand-new houses) rose for the first time in three months, with the level of sales at its highest level for almost two-and-a-half years. Existing home sales increased 3.4pc to an annual rate of 4.62m units last month, the highest since May 2010. Selling prices also picked up - the median price for a home resale jumped to $177,400 in April, up 10.1pc from a year earlier. That was the biggest year-over-year increase since January 2006. Eurozone consumer confidence climbs to -19.3 in May from revised -19.9 in April. 15.02 Tsipras: "If we win election, we will stop austerity programme." 14.44 Alexis Tsipras, the leader of Greek anti-austerity party Syriza, has said a rejection of the programme won't mean expulsion from the euro, and urges Germans to choose Greece for their holidays. Tsipras - who is Berlin for talks with leaders of Germany's anti-capitalist Left Party - says Greece needs policies that can be implemented, and attacks European leaders for their "anti-European policy." Tsipras: "Greek public sector is not over-staffed... voting for Syriza means a chance to save the euro." 14.30 US markets are under way. Dow and Nasdaq both open up 0.1pc. Facebook falls 7.5pc - IPO at $38, price now $31.60. In Europe: 14.21 Greek Socialist Evangelos Venizelos has said French President Francois Hollande "wants to help Greece" and has propsed extending bailout programme by three years. He adds that there is no more room for wage or pension cuts. 14.12 This sums up the eurozone problem nicely: Meanwhile, UBS has said that "if a Greek exit from the euro is contemplated, then banks runs in Ireland, Portugal and Spain have to be considered as viable risks." 14.06 Olli Rehn, EU Commissioner for Economic Affairs, says Greece needs to implement reforms. "There is no easy way," he adds. Rehn also urges swift adoption of financial transaction tax proposal. UK is against such a move. 13.55 European Central Bank vice-president Vitor Constancio says the worst will not happen to the eurozone, he doesn't think Greece can leave. However, this doesn't mean Greece will not face a difficult situation. 13.51 Eurobonds may not solve the "growth issue" in the euro area, former European Central Bank executive board member Lorenzo Bini Smaghi has said. A European solution is necessary to avoid turbolence but it's not enough for growth. Internal imbalances should be addressed nationally. 13.43 Barclays Research has said that the likelihood of a pro-Europe coalition in Greece has increased. Meanwhile, Deutsche Bank wants Greece to form a new currency, which would "allow Greece to engineer an exchange rate devaluation with a eurozone exit." 13.34 Ever wondered what goes on backstage at an EU summit? Well, wonder no longer: 13.05 Time for an update on the markets: Markets rising on speculation that European leaders will agree on fresh action to tackle the region's debt crisis when they meet tomorrow. 12.55 More woe for Greece. Air Berlin, Germany's second largest airline, and Rewe, the retail and tourism group, have both said that bookings to Greece have been around 30pc below that of last year. 12.48 UK inflation has fallen more than expected to 3pc. Here is a graph showing how the rate has changed since 2000. 12.42 The Italian Industry Minister Corrado Passera has said government debts to Italian companies amount to more than €100bn. PM Mario Monti has agreed on legislation to deliver €20bn to €30bn this year in back payments owed to firms. Monti adds that Italy is en route to structurally balanced budget in 2013. 12.41 Portugal has started a new review of its €78bn bailout programme with the IMF and EU, with a minister saying no changes were planned despite rising tensions around Greece. "It will be about putting into action all of the programme, principally the structural reforms," said Economy Minister Alvaro Santos Pereira. He said carrying out the reforms would "allow us recover the credibility we lost" in the markets. The talks between Portuguese officials and the international creditors are expected to last two weeks and are key for Portugal getting the next €4bn out of its bailout, worth €78bn overall. 12.38 Former French president Nicolas Sarkozy, who was voted out two weeks ago, and his wife Carla are reportedly enjoying a holiday in one of the Moroccan king's residences in Marrakesh. "The residence belongs to the royal family and is located in the heart of the palm grove," an official told AFP on condition of anonymity. The residence where Sarkozy is recharging his batteries is generally reserved for the king's guests. It is very secluded, shielded from the press and the ex-president has been jogging in the palm grove. Sarkozy arrived last week and is expected to stay until May 31. 12.28 Jeremy Warner has blogged on this morning's events: Rare praise for the beleaguered Chancellor. All in all, it was a good day for the UK Government on the economic front. Two laudatory reports, inflation back at 3pc, sparing the Governor of the Bank of England the embarrassment of his tenth consecutive letter of explanation, and the borrowing figures looked pretty good, too. Mr Osborne should enjoy the sunshine while he can. It's unlikely to last. 12.17 Germany will stand firm against eurobonds at June summit, official says (see 11.28 for contrasting opinion). Same official states that Spanish government has made clear "again and again" that it does not want to tap EFSF funds. Well, no one WANTS to tap EFSF funds... 12.11 Athens Stock Exchange hits 22-year low - has fallen 2.7pc today. Here it is from 1995 until the present day. High was in September 1999 (5,667.6001), now at 728.9300. 11.50 German Chancellor Angela Merkel has found it "astonishing" that her drive for European governments to balance their budgets has provoked such a debate. The current discussion in Europe and even beyond its borders "gives the impression that, for us, saving, as such, is pleasurable," Merkel said. It's just about not spending more than you collect. It's astonishing that this simple fact leads to such debates. 11.40 Germany to issue two-year bonds at zero interest rate for first time. 11.28 EU "on the path" towards common eurobond issuance, European Commission spokesman Olivier Bailly. This directly contradicts an earlier quote from a German government official. 11.26 David Smith, economics editor at the Sunday Times, has noted the fallout from the IMF's findings: 11.24 Two videos from the IMF event earlier today. George Osborne: "The eurozone is our greatest threat" Christine Lagarde: "More QE may be necessary" 11.21 EU summit tomorrow will not be a meeting to discuss Greece specifically, says German offical. Adds that eurobonds won't be on the agenda, rules out statement on Greece 11.18 So, here's a quick recap of this morning's events. The OECD has warned that UK households are facing a further 18-month-long squeeze on their finances. Leaves 2012 growth forecast unchanged at 0.5pc, unemployment will peak at 9pc in 2013. Consumer prices will rise faster than disposable incomes both this year and next. The IMF has told the UK to ease austerity if the eurozone crisis triggers a fresh "shock" and pushes the economy deeper into recession. UK needs "Plan B" of temporary tax cuts and increased infrastructure spending. Government praised for efforts, Bank of England criticised, arguing that the latter should consider cutting interest rates further, as well as expanding its £325bn quantitative easing programme. UK inflation has fallen to 3pc - its lowest level for more than two years. Fitch has downgraded Japan by two notches to A+. 11.12 Quick update on the markets: 11.06: German Chancellor Angela Merkel says growth and consolidation are no contradiction. 11.03 Fitch: Spanish Bank estimate of €30bn recapitalisation is "optimistic." 10.53 Credit Agricole asked Bank of Greece on Sunday to get liquidity. Central government budget deficit of €9.1bn in January to April, versus target of €11bn. 10.41 Italian statistics agency Istat forecasts Italy GDP falling 1.5pc this year and rising 0.5pc in 2013. The OECD sees Italy's economy shrinking 1.7pc and 0.4pc. Italian government sees GDP falling 1.2pc this year. 10.40 OECD's economic outlook: 10.31 So far Lagarde has praised the UK's efforts but has criticised the Bank of England. Says UK should consider cutting VAT and prepare a "plan B." 10.30 Lagarde: "I hope that whoever wins Greek elections will engage in constructive dialogue to implement plans. IMF has to look at all alternatives on Greece. If new Greek government has better ideas, we will listen. The same reforms will have to be made whoever wins Greek election. 10.27 Lagarde: "I shiver when I think of where the UK would be if it had done nothing about deficit." 10.19 Lagarde says European work on firewall is clearly a work in progress. Structural reforms are needed to boost eurozone growth, more needs to be done to protect eurozone. 10.16 Lagarde praises Osborne's "courageous" stance in giving money to IMF. 10.12 IMF chief Christine Lagarde - giving speech at Treasury - says UK growth is too slow and unemployment too high. She says that "unfortunately the recovery in the UK has not taken hold." 10.09 George Osborne has revealed the Treasury is planning for a Greek exit from euro: While we work for the best, we prepare for something worse. He adds that we are reaching a critical point in the eurozone. 10.05 Fitch downgrades Japan to A+ with a negative outlook Cut of two notches. Joins Slovakia, Estonia and Malta on A+. Fitch says Japanese fiscal consolidation plan "looks leisurely." The International Monetary Fund has warned the British Government it should ease its austerity programme if the eurozone crisis triggers a fresh "shock" and pushes the economy deeper into recession. 09.59 On that fall in UK inflation to 3pc, Jeremy Cook, chief economist at currency experts World First, said: This 3pc figure comes on the back of a substantial shift lower in the price of a barrel of oil, coupled with the strengthening of the pound in the past few weeks. Unfortunately, this will provide no genuine comfort to households, given that wage growth is nowhere near this number. Of course, the slip in CPI will give those people who believe that further QE is needed to keep the UK economy going more room to manoeuvre. This is ahead of tomorrow's publication of the minutes from the latest Bank of England meeting that we expect to show only one vote for another round of QE. This is the first print within the target zone since late 2009 although the defining characteristic of the UK inflation picture through the crisis has been its 'stickiness'; its refusal to fall. We expect the CPI figure to remain around 3pc for the rest of the year. 09.55 More from the OECD, which has warned that there will be "incalculable consequences" if Greek austerity programme is not implememnted. 09.52 Fitch says euro cannot be broken by markets. 09.47 Spain has sold €1.51bn of three-month bills versus €720m at previous auction. However, bid-to-cover fell to 3.9 versus 7.6. Sells €1bn of six-month bills versus €1.2 at previous auction, bid-to-cover 4.3 versus 3.3. Borrowing costs rise. Meanwhile, the country's teachers at all levels of are on strike to protest billions in spending cuts enacted as part of an austerity drive. 09.44 Loads of data out this morning! UK April budget surplus £16.5bn versus a deficit of £9.1bn a year ago - one-off boost from the transfer of state-owned Royal Mail pension assets. 09.41 IIF says Spanish banks could need another €76bn. UK inflation has fallen to 3pc, beating analyst estimates of 3.1pc. RPI falls to 3.5pc, missing estimates of 3.4pc.