While Moody's says that the precise outcome of these discussions is difficult to predict at this stage, the original agreement and the funding needs of DCL suggest that the Belgian government's total exposures to the group will likely rise and, in Moody's views, could reach between 15% and 20% of GDP.
21.55 In a statement, Moody's highlighted three reasons for the downgrade:
1.) A deteriorating credit market - exacerbated by the high levels of public debt for countries such as Belgium (currently 100.7pc of GDP).
2.) Increased risks to growth in an economy that is currently deleveraging.
3.) New risks stemming from the banking sector, particularly in connection with troubled bank Dexia.
French and Belgian governments were forced to inject ?1bn each into Dexia in 2008 when the bank revealed that it had suffered �4bn of losses.
21.51 So, while everyone had their eye on Standard and Poor's to do the downgrading tonight - Moody's has jumped in and stolen the limelight.
The move by Moody's follows a similar downgrade by S&P last month.
21.49 BREAKING
Moody's has downgraded Belgium by two notches to Aa3.
BREAKING NEWS...
21.00 IMF chief Christine Lagarde has said that South Sudan will become an IMF member in early 2012.
20.49 China will probably stimulate its economy next year, shielding Latin American commodities producers from Europe's debt crisis by underpinning demand for raw materials, Nobel Prize-winning economist Joseph Stiglitz has said.
While China can be counted on to use its massive reserves to try to keep its economy from faltering, it is Europe's austere response to its own financial mess that poses the bigger threat to Latin America, the former World Bank chief economist said.
20.42 US President Barack Obama called Russian President Dmitry Medvedev to congratulate him on Russia's admission into the World Trade Organisation, the White House has said.
20.19 Update on the US markets:
Dow: unchanged
S&P 500: +0.3pc
Nasdaq: +0.6pc
20.16 In 1991, 40pc of US households bought live Christmas trees. Last year, that figure had fallen to 23pc.
A sign of a weak economy, worsening job market and financial hardship... or just can't stand sweeping up pine needles?
20.07 The Telegraph's Ambrose Evans-Pritchard has blogged in defence of the French:
19.40 We are expecting downgrades of Spain and Italy at some point tonight. Probably after US markets close. We'll have the latest here.
19.30 In case you missed it earlier, we have put together a great interactive graphic on how exchange rates would collapse after a euro break-up.
19.00 Quick update on the US markets:
Dow: -0.2pc
S&P 500: +0.2pc
Nasdaq: +0.5pc
18.48 Italian Prime Minister Mario Monti has no doubt that his country will be saved if all Italians contribute to what he hopes is the last debt reduction effort...
Shall we hand out the lifejackets now?
Here is a graph of the Italian 10-year bond yield since February:
18.43 French Finance Minister Francois Baroin has said he ?acknowledges? the move by Fitch Ratings in lowering the outlook for the country?s AAA credit rating.
The government is determined to follow its actions for growth [and] in the reduction of the public deficit.
18.23 EUR/USD spiked 25pips higher after Fitch affirmed France's AAA rating. Now up to $1.302.
18.18 Robert Zoellick, World Bank President, has said Europe needs to create a fiscal union, which can be accomplished through an expanded European Financial Stability Fund or more flexibility by the European Central Bank buying bonds.
Europe?s problems are a combination of sovereign debt, banking and competitiveness issues, Zoellick said, meaning there is no "magic bullet" that can solve the region?s crisis.
18.00 French-owned Fitch has affirmed France's AAA rating. Outlook revised to negative.
The negative outlook indicates a slightly greater than 50pc chance of a downgrade over a two-year horizon. France is the AAA euro state most exposed to the crisis.
17.55 Credit ratings agency Fitch has said:
Following the EU summit, Fitch has concluded that a comprehensive solution to the eurozone crisis is technically and politically beyond reach.
17.48 BREAKING NEWS...
Fitch has placed Belgium, Spain, Slovenia, Italy, Ireland and Cyprus on rating watch negative.
17.45 The big news for tonight is that we are expecting downgrades of Spain and Italy later tonight. S&P downgraded the US at 1am on a Saturday earlier this year.
17.41 The draft EU fiscal treaty raises the question: what if nine countries approve but other countries don't. Will there be two sets of rules in the eurozone? How will that work?
So many questions and few answers at the moment... story of the EU debt crisis.
17.36 BREAKING NEWS...
We are hearing reports that the next EU summit will be held on February 3, 2012.
17.27 Our man Bruno Waterfield in Brussels:
The new eurozone treaty has insurance, means that nine parliamentary or referendum votes would have to go against it to sink it. A senior EU official said: "If a country or two was to fail to ratify, obviously the new obligaions would not apply to them but they would apply to the others."
17.11 The Telegraph's Jeremy Warner has blogged on the France-UK row: The only trouble with France is that it is filled with Frenchmen
17.10 BREAKING NEWS...
Moody's has said that Portugal's GDP will be -2pc in 2011 and -4pc in 2012.
16.59 Nick Clegg tells French PM Francois Fillon that his remarks about the UK's credit rating were "unacceptable" and that steps should be taken ?to calm the rhetoric?.
Fillon has called Clegg from Rio to "clarify" what he meant when he criticised Britain. Fillon wanted to highlight that ratings agencies focus more on economic governance than deficit levels.
16.32 Capital Economics on the France-UK row:
France is much more vulnerable to the eurozone crisis... the UK's relative safe haven status is secure.
16.27 Here's the EU fiscal agreement draft in full:
New Treaty
16.12 The Telegraph's assistant editor Jeremy Warner has blogged on Irish growth (or lack of it):
15.54 ECB's Lorenzo Bini Smaghi sees a risk of currency wars and trade barriers, but says that emerging markets cannot escape the impact of the crisis. He also sees a risk of capital controls as a result of the crisis.
15.50 How wrong the IMF got it on the Greek crisis:
15.29 Oli Rehn, vice-president of the European Commission, has chimed in with his views on Italy. He believes it's important that the country puts a stronger emphasis on structural measures in future budgets and that it steps up the fight against tax evasion.
15.25 BREAKING NEWS...
The SEC is suing the former chief executives of Fannie Mae and Freddie Mac (Richard Syron and Daniel Mudd) over disclosures they made about sub-prime loans.
It has also charged six former executives with securities fraud.
15.23 Federal Reserve Bank of New York President William Dudley has said that leaving the euro would be hugely devastating fo a country's financial system and ability to pay debts.
15.15 Now you can decide for yourself - here's how the French and UK economies stack up against each other, so you can judge the opinions of politicians on both sides (see 09.30 post):
15.11 BREAKING NEWS...
The World Trade Organisation has approved Russia's membership.
15.08 Here's the Telegraph's Bruno Waterfield in Brussels:
The new treaty is called "international agreement on a reinforced economic union".
15.07 More on the details from the EU fiscal agreement draft. Major economic policy reforms within the eurozone will be co-ordinated with all 27 EU member states.
A eurozone summit meeting will take place twice a year.
The new fiscal compact will enter into force after nine countries have ratified it.
14.57 According to Reuters, the new EU fiscal agreement states that primary budget deficits must not exceed 0.5pc of GDP over the economic cycle, while countries can be taken to the European Court of Justice if they fail to meet targets.
The Dow Jones Industrial Average rose 93.02 points (0.78pc) to 11,961.83 in early trade. The broader S&P 500 climbed 11.66 points (0.96pc) to 1,227.41, while the tech-heavy Nasdaq Composite jumped 29.48 points (1.16pc) to 2,570.49.
14.50 Ratings agency S&P has revealed that five exporters are vulnerable to recession or may suffer a larger drop in GDP next year.
The five are: Germany, the Netherlands, Belgium, Austria and Finland.
14.45 Meanwhile, a US Treasury official has reiterated that the EU debt crisis is a serious risk to America's outlook. The official adds that the US has no intention of seeking additional funding for IMF.
14.43 Regling is full of opinions today. He has added that Italy's and Spain's borrowing needs are manageable and he doesn't believe they will lose market access. Regling also finds it surprising to constantly hear that only the ECB has the resources to tackle the debt crisis.
14.41 Klaus Regling, chief executive of the European Financial Stability Facility, has said Greece may need ?100bn for its second programme.
He has also said that bank recapitalisation in the EU may total ?50bn and that ?600bn of uncommited funds is already available to fight the debt crisis.
Will it be enough?
14.24 For all you graph addicts out there, Goldman Sachs has released its 100 favourite charts. They cover everything from Fjordic power to Chinese machinery output. Enjoy!
14.22 A background briefing on the Fiscal Stability Union is due at 3.45pm this afternoon, after the agreement reached on Decemebr 9. We'll have the latest here.
14.15 Why all the sound and fury from French politicians about the UK's finances in recent days? Channel 4's economics editor Faisal Islam has a suggestion:
@faisalislam presume with all the toys being thrown out of Parisian prams, that France is about to lose its AAA... They normally get a day or so notice
14.00 Spanish bonds are the big winner on the markets today - the yields are down substantially following yesterday's successful ?6bn bond auction.
The yield, or interest rate investors charge to hold the debt, on Italian government bonds also fell.
The positive moves came despite rumours Standard & Poor's could cut Spain and Italy's credit ratings after the market closes today (see 11.00 post).
According to Reuters, investors could be covering short-positions in Spanish debt after yesterday's sale, when the securities were said to have been snapped up by Spanish banks. With volumes low, price moves are also exaggerated.
13.51 Europe Economics economist Andrew Lilico has blogged on the ongoing English-French row:
13.33 BREAKING NEWS...
US inflation figures are out. CPI was flat month-on-month in November, 3.4pc year-on-year.
13.16 Baroness Warsi, co-chair of the Conservative Party, has dismissed the row with France as mere rhetoric, saying fighting for Britain's interests in Europe is vital.
13.08 AFP reports that a spokeswoman for David Cameron has said that Britain will attend talks on a new EU pact as "equal participants", despite the prime minister's veto of a planned treaty to resolve the crisis. She said:
You need people there from all the 27 to work out how to implement [the deal agreed at a summit last week]
She added that the delegation would attend talks "to ensure that the views of the UK are represented and our national interest is maintained".
13.00 Angela Merkel - 1. Eurosceptics - 0. The German Chancellor?s Free Democratic Party (FDP) coalition partner will continue to support the government?s line on eurozone rescues during the debt crisis, after a party vote organised by bailout sceptics was defeated. Bloomberg reports:
The internal ballot that tried to rally opposition to the future permanent rescue fund, the European Stability Mechanism, failed to muster the majority needed to change party policy, FDP leader Philipp Roesler said in Berlin today. The necessary quorum of 33.3 percent ?was narrowly missed,? he said.
The result ?once more confirms the party line,? Roesler told reporters. ?The FDP remains a party with a clear pro- European orientation.?
The ballot, organized by rebel FDP lawmaker Frank Schaeffler, threatened to destabilise Merkel?s coalition by forcing her junior coalition partner to oppose the ESM.
12.56 The Telegraph's Questor Editor, Garry White, tells Robert Miller why, despite the controversy, the black stuff still offers decent investment opportunities.
*
12.51 On to Italian shores. Italy's set to feel the squeeze. The country's government, led by prime minister Mario Monti, has won a confidence vote on its austerity package.
The Chamber of Deputies approved the ?33-bn package of tax rises and spending cuts by 495 votes to 88. It now moves to the Senate, where it is expected to be approved before Christmas, probably with another confidence vote.
12.42 Leading Telegraph commentator Jeremy Warner gives IMF's Christine Lagarde a taste of her own bitter medicine.
In his latest blog he said:
The eurozone crisis can only be resolved by Europe itself. Further handouts from the IMF may provide a little temporary relief, but it won't solve the underlying problem. Until the eurozone accepts fully fledged debt mutualisation, this is not a crisis which is going away.
12.21 More flouncing off in the EU. International Monetary Fund officials have walked away early from talks with Hungary, aimed at striking a future deal on financial assistance.
According to multiple unnamed sources, the IMF/EU team left Budapest despite a round of talks being scheduled for Friday afternoon.
Stumbling blocks were purported to be the government's new central bank bill and its decision to strip private pension fund members of their monthly pension payments for at least another year.
However, the government spokesman's office said:
Informal talks with the IMF and the European Commission have not ended because of any disagreement among the parties.
12.05 Overnight, France's Prime Minister Francois Fillon has also had a pop at the UK - clearly everyone in French officialdom got that memo.
Speaking in Sao Paolo, he said ratings agencies seemed to be ignoring the state of British government finances:
We are challenged on the European currency, first of all because we are too indebted. But we are not the only ones. Our British friends are even more indebted than we are and have a higher deficit, but the ratings agencies do not seem to notice this.
12.00 Slow going from the Greeks. A senior Troika official admitted talks on a Greek debt swap deal were making progress but there is no guarantee they will lead to a voluntary deal with the high level of participation by private bondholders needed.
The news comes as EU, IMF and ECB inspectors wrap up a one-week visit to Athens.
11.52 London City trader IG's Will Hedden is fighting back against the French.
Yields on Britain's 10-year gilts are up 1 basis point to 2.1pc.
France's dropped 9bp to 3pc and Germany's fell 2 to 1.9pc
11.50 Spain's central bank has announced the country's public debt (in the third quarter of 2011) is equivalent to 66pc of national output - up from 58.7pc at the same time last year.
This puts Spanish debt uncomfortably above the 60pc ceiling permitted under the EU's Stability and Growth Pact.
But don't expect to see much finger-pointing from eurozone neighbours - the figure is 20 points below the EU average for the whole of last year.
11.24 Christmas party hangovers are not the only drag on company productivity this festive season. Here comes the snow.
Last year's big freeze cost UK business almost �1bn a day at its peak.
Sarah Haythornwaite, marketing director at Staples UK, said:
Businesses cannot afford to ignore the prospect that there could be bad weather ahead. Last year the blizzards and deep snow that swept the country caused chaos ? and brought UK industry to its knees.
11.17 George Magnus, senior economic adviser at UBS, is trying to look on the bright side. He told BBC's Today programme:
The one glimmer of light in the aftermath of the summit is really that the eurozone banks were facing an incredibly tight funding squeeze. They couldn't really raise or renew deposits in order to fund their loans and purchases of government bonds so there was a real danger at some point before the summit, or before the ECB meeting, that we could have had some kind of banking disaster. I think that really has been negated at least for the time being.
But Magnus said that markets were sceptical about the outcome of the summit:
I think from a financial markets point of view, people are very sceptical about whether [the summit] has any real value or content at all, except perhaps to deal with the next eurozone crisis, provided they can get through this one - which is quite doubtful.
I think it's because they have misdiagnosed the causes of the crisis and ended up with a flawed political agenda and completely inappropriate political tools. When Christine Lagarde, for example, comments about the dangers of the 1930s, it's a script lifted out of that.
What European leaders are inadvertently doing is to create this enormous austerity zone in Europe against which I think all of these grandiose plans for fiscal union are almost bound to flounder.
11.12 The Telegraph have put together a futuristic chart on how exchange rates would look if the euro collapsed.
With the break-up of the single currency still a distinct possibility, according to economists and companies, the graphic depicts how much new, old currencies, such as a new Greek drachma and Portugese escudo, would be worth?
11.00 Rumours are swirling today that ratings agency Standard & Poor's could do one of its Friday night specials and downgrade the debt of Spain and Italy after the market closes tonight - it cut the US's AAA rating on a Friday night earlier this year.
Kathleen Brooks at Forex.com says:
As if to balance market sentiment the second rumour is that Spain and Italy will be downgraded by S&P after the market close this evening.
The credit rating agency has a habit of downgrading Europeans late on a Friday night and S&P put 15 out of 17 Eurozone members on negative watch earlier this month, so if it does make the move it wouldn?t be totally out of the blue.
The real surprise could be the market taking the news in its stride."
10.50 More detail on Britain's attendance at future EU meetings on the new regulations being brought in to shore up the euro by setting up more central control over eurozone nations' finances.
Poland's foreign minister said Radoslaw Sikorski UK "experts" will sit in on the meetings, which he took as a good sign that Britain is not out of the EU yet:
Over the last 24 hours we have learned that Great Britain will send experts to meetings on the new regulations.
We know that Britain has announced its participation in an experts' group which is to prepare the text of the new measures, so I think Britain's position is less determined than London tabloids would have us believe.
10.46 More from French finance minister Francois Baroin's criticism of the UK economy this morning (see 09.30 post). He said he didn't want lessons from Britain on how to run his economy:
We don't want to be given any lessons and we don't give any.
Baroin added that France is on track to meet its own deficit-reduction goals next year even if the economy enters a recession - as the national statistics office INSEE now predicts.
INSEE said late on Thursday that the French economy would contract by 0.2pc in the final three months of the year and shrink a further 0.1pc in the first quarter of 2012 - meaning the country faces a short, shallow recession.
Even if INSEE's predictions prove true, that does not change anything with regard to the objectives that we have set for 2011, they will be met.
Francois Baroin with Chancellor George Osborne earlier this year.
10.18 Sir Mervyn King, governor of the Bank of England, and Mario Draghi, president of the ECB, have both attended a conference in Italy to commemorate former Italian economy minister and ECB executive board member, Tommaso Paddoa Schioppa. New Italian PM Mario Monti was also there.
Sir Merv returned to his pet subject of stopping banks becoming too big too fail. He said:
A big concern is whether central counterparties could become too important to fail and therefore get an implicit guarantee from governments. We've seen how damaging it can be to have 'too big to fail' banks.
Mario Draghi stressed that banks using the cheap loans the ECB is making available to try and stave off a credit crunch should not be afraid of market sentiment turning against them:
We want to make it absolutely clear that in the present conditions, where systemic risk is seriously hampering the functioning of the economy, we see no stigma attached to the use of central banking credit provisions: our facilities are there to be used.
He also reiterated the point that the purchases of government debt the ECB has been making recently will not be increased - the assisstance is "neither eternal nor infinite", he said.
And the other Super Mario, Mr Monti, has said efforts to tackle the eurozone crisis should not be a form of punishment for debtor states. He said:
Europe's response to the debt crisis should be wrapped in a long-term sustainable approach, not just to feed short-term hunger for rigour in some countries.
To help European construction evolve in a way that unites, not divides, we cannot afford that the crisis in the euro zone brings us ... the risk of conflicts between the virtuous North and an allegedly vicious South.
10.05 This morning's comment from Louise Cooper (BCG Partners) sums up this morning's movement in the banking sector .
So today, Credit Agricole has said its selling its private equity business for an undisclosed sum. According to today's FT, Deutsche Bank is trying to sell its asset management business for E2bn.
Banco Santander sold its Columbian unit for $1.16bn earlier this month and Belgium's KNB group is considering selling its Polish business.
Even the EBA's less-than-stressful-stress-tests indicate Europe's banks need to raise an additional E115bn. Good luck from getting that from equity investors.
So in the absence of forced recapitalisation from governments (unpopular with voters), banks have little choice but to sell, sell, sell.
10.02 One fan, Mike Bostock, Tweets on Christopher Hitchens' financial ethos. The political journalist's death was announced today.
People who put their trust in money and capital are fools. It?s going to disappear like fairy gold - Christopher Hitchens.
09.49 Barclays Capital comments on the UK markets opening cautiously higher this morning, but says investors have short memories.
It has been all too tempting for investors to compare the current crisis with the 2008-09 episode associated with the Lehman Brothers' bankruptcy. Few would argue that the current problems are the same as then; however, there are signs that investors may be extrapolating too much from their past experiences.
This has shown up in the more aggressive downgrading of economic forecasts (compared with the modest weakening that has actually occurred) and the rapid pricing in of aggressive policy easing by various global central banks.
Hence our analysts believe the current market pessimism bodes well for high beta assets, especially equity and risky asset prices outside of Europe, such as in Emerging Markets, over the medium term.
09.45 Has Britain been forgiven? European Council President, Herman Van Rompuy announced EU leaders will hold another summit in Brussels in late January or early February to discuss economic growth and jobs.
David Cameron has been invited to the party despite last week's tantrum.
09.41 Nervous analysts. Capital Spreads' Simon Denhan said the markets didn't know what to make of overnight downgrades.
Downgrades here, downgrades there yet despite S&P and Fitch chopping the ratings of various banks not just in Spain and Europe (including the UK), but in the US too.
The moves caused a conundrum amongst investors who had welcomed yet another well subscribed Spanish bond auction and economic data that indicated glimmers of hope not only for the eurozone, but again across the pond where initial jobless claims fell to their lowest level since May 2008.
09.30 This one could run and run - France's finance minister Francois Baroin has been on French radio this morning talking up France's economy at the expense of Britain again, much as Christian Noyer did yesterday.
Monsieur Baroin said:
It's true that the economic situation in Great Britain is very worrying and that we prefer being French rather than British on the economic front at the moment.
We don't want to be given any lessons and we don't give any.
French finance minister Francois Baroin.
09.26 Taking a quick break from the eurozone crisis, supermarket Waitrose has reported a 6.3pc sales rise, assisted by shoppers stocking up with drinks ahead of the Christmas holiday.
09.14 The Daily Telegraph's Matt is having fun this morning with Christian Noyer, head of the Bank of France, who suggested if any nation should be downgraded, it's the UK.
09.07 New figures out today from the City of London Corporation and accountants PwC, show city institutions and their employees paid �63bn in tax this year. More than any other industry in the UK.
Stuart Fraser, Policy Chairman at the City of London Corporation, said:
At a time when the City?s value is being questioned, both in the UK and in Europe, these figures highlight the huge fiscal contribution it continues to makes even in this extremely challenging economic environment.
That is why we must be wary of crossing a tipping point when it comes to taxation. The European Commission?s own impact assessment highlighted that between 70 and 90 per cent of all derivatives trading could move outside of Europe if a financial transaction tax was implemented. We must continue to make the case that such a move would hurt the City, and hurt Europe.
08.58 Later today, Italian politicians hold a crucial vote of confidence on new PM Mario Monti's austerity meaures.
The government has called the vote to speed up the approval of the ?33bn package of cuts, designed to persuade bond markets that the country can manage its ?1.9 trillion (�1.6 trillion) debt pile and bring down Italy's borrowing costs.
08.48 More on that war of words between Les Rosbifs and Les Fran�ais.
David Ruffley, a Conservative member of the Treasury select committee, criticised French remarks.
This is another example of Gallic self-delusion on an epic scale. They are tied to a currency that could become a basket case at any moment.
08.41 While we're on the French - European commentator Fabrizio Goria Tweets:
08.37 The Daily Telegraph's Deputy Editor Benedict Brogan defends Britain as economic aspersions are cast by the French. Francois Baroin claims Great Britain is in a very difficult economic situation and the head of the Banque de France, Christian Noyer, says we should lose our AAA rating before France does.
Benedict argues:
But last night, they issued a statement to say that Mr Cameron had spoken to the Danish prime minister and to the president of the European Council Herman Van Rompuy. No one thinks this will be a deal of the 26 or even the 23 any more.
08.29 The Daily Telegraph's City Editor Richard Fletcher says markets today could be swayed by comments from Mario Draghi, head of the ECB, and Sir Mervyn King, Bank of England Governor, who are speaking at a conference at the Italian central bank.
He writes:
They?re bound to be asked for their latest views on Europe after Super Mario warned yesterday that embattled countries have to do the grunt work themselves when it comes to austerity and shouldn?t rely on the ECB.
08.19 Only a week after David Cameron?s demands to protect London?s financial industry, Bloomberg reports EU officials may abandon UK-backed safeguards on derivatives legislation.
Insiders said ambassadors for the EU?s 27 nations met yesterday in Brussels and discussed weakening an October agreement to grant national regulators powers over clearing houses.
Richard Reid, research director for the International Centre for Financial Regulation, said in an e-mail:
This acts as a strong reminder that exercising the UK veto last week does little to strengthen the British hand on a range of issues of great importance to the U.K. financial system.
08.06 London markets are open and trading higher:
08.00 Daily Telegraph columnist Jeremy Warner commemorates the sad death of multilateralism in this morning's paper. He debates, have too many cooks spolied any potential eurozone solution?
As ever, European leaders appear to have presumed too much in promising an additional ?200bn (�168bn) in bilateral loans to the IMF to fight the crisis. In Germany, the Bundesbank has said that the loans would be problematic unless other, non-euro, central banks participate.
Multilateralism, it seems, is no more than a fair-weather friend. With the storm clouds gathering anew, it is failing to provide solutions. The retreat into national alternatives is already upon us.
07.55 The Daily Mail's front page is a tale of behind-the-scenes political maneuvering within the Coalition. Nick Clegg and Lib Dem Cabinet ministers are today accused of plotting to persuade business leaders to undermine David Cameron's EU treaty veto.
07.50 There are doubts over the European Central Bank's move to boost bond sales (�), according to the FT. The Pink 'Un reports that eurozone governments face disappointment over their hopes that the region's banks would use new longer-term finance offered by the ECB to buy up beleagured sovereign bonds. Bankers say big European banks are unlikely to buy more government debt using the three year loans, which wll be available from the ECB for the first time next week.
07.45 Time for a bit more from this morning's papers. The Financial Times has splashed this morning on Christine Lagarde's remarks (�) in a speech at the US state department in Washington last night. The head of the International Monetary Fund warned that the global economy faces the prospect of ?economic retraction, rising protectionism, isolation and . . . what happened in the 30s [Depression]?.
Robert Winnett, The Telegraph's political editor, has also reported on Ms Lagarde's comments. He writes:
Mrs Lagarde spoke out after other European countries indicated that they were unlikely to back a new treaty designed to shore up the single currency.
Hungary and the Czech Republic said they would not agree to any new deal that involved European-wide taxes. David Cameron has already vetoed any British involvement. Yesterday, the head of the IMF described the prospects for the global economy as ?quite gloomy?.
?There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating,? Mrs Lagarde said.
"If the international community doesn?t work together, the risk from an economic point of view is that of retraction, rising protectionism, isolation."
07.35 Ed Milliband will be breathing a sigh of relief this morning. Labour has held its Feltham and Heston seat in West London in Thursday's by-election with an 8pc swing from the Tories. The by-election followed the death of Labour MP, Alan Keen, last month. Seema Melhotra held the seat with 12,600 votes, 54pc of the overall vote and 6,203 votes ahead of her closest rival, Conservative party candidate Mark Bowen. She said:
This result is a great victory for Labour which shows the progress we are making under Ed Miliband's leadership, a vote of confidence in the way Labour is changing, listening hard, winning back the trust of the people we seek to serve.
This is also a wake-up call for David Cameron. This result shows how this Tory-led government is totally out of touch.
07.30 Across the pond, American politicians have thrashed out a tentative deal to fund government agencies such as the Defense Department, and avert shutting down many of Washington's operations before their current funding expires at midnight tonight. Daniel Inouye, a Democratic senator, one of the chief negotiators on the massive spending bill, said that a deal had been struck and the full Senate could vote on the measure as early as Friday.
07.25 While James Kirkup reports that French leaders have declared a war of words on Britain:
Fran�ois Baroin, the finance minister, said Britain was ?marginalised? and faced ?a very difficult economic situation? because of Coalition policies.
The blunt remarks are the latest sign of Anglo-French tension following David Cameron?s refusal last week to back a new European treaty drawn up in response to the eurozone crisis.
George Osborne, the Chancellor, also provoked anger in France recently by suggesting it could be the next eurozone economy to experience a debt crisis. France and Germany want a new treaty to create a ?fiscal union? of eurozone members, to control their deficits and reassure the markets.
07.22 All this as Germany struggled to hold its beloved fiscal compact deal together and IMF chief Christine Lagarde warned of a 1930s-style depression. Our trio of reporters continue:
Hungarian prime minister Viktor Orban said that central Europe had the potential to become the most competitive region in Europe.
?The only kind of co-operation we can have with the eurozone is one which does not damage Hungary?s competitiveness,? he said.
A man tries to sell his car in the street at the beginning of the Great Depression in 1929 (Photo: Rex)
07.20 Louise Armitstead, Philip Aldrick and Ben Harrington report Fitch's downgrade of some of the world's most powerful investment banks yesterday evening:
Fitch cut the ?issuer default ratings? at the banks to ?reflect challenges faced by the sector as a whole?. The ratings agency said: ?These challenges result from both economic developments as well as a myriad of regulatory changes?.
07.15 A quick look at this morning's headlines:
Telegraph: Lloyds chief tells of 'torture' caused by sleep deprivation / Brussels accord on the verge of collapse
Financial Times (�): IMF chief warns over 1930s-style threats
Guardian: IMF warns that world risks sliding into a 1930s-style slump
The Times (�): Depression fears grow as France lashes out
06.15 Good morning and welcome back to live coverage of the global debt crisis.
Debt crisis live: archive
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