Earlier this week, the prime minister said: "The legal position is that if there are extraordinary stresses and strains it is possible to take action to restrict migratory flows, but obviously we hope that doesn't happen."
Responding to that, Greece's Pasok party said in a statement:
...
It would be preferable if the British prime minister, rather than making remarks that are insulting or create a false sense of nervousness in the markets, elaborated on the information regarding the manipulation of the Libor interest rate and took better care of the fiscal figures of his country.
17.15 According to rating agency Standard & Poor, the eurozone's debt crisis may have reached a turning point if agreements from last week's summit are implemented correctly. Measures agreed by leaders included using joint funds to support Spain's banks, removing a clause that which gave the bloc's bailout fund priority over other bond holders and giving the ECB new supervision powers.
The agency said:
But because S&P said it saw a substantial risk that the agreements may not be put into practice, it left its eurozone ratings unchanged and warned it further cuts could be on the cards if promises were not followed through.
16.50 As the press conference finishes, some more breaking news on Germany and Italy, where it's a tale of two deficits.
Germany has halved its public deficit forecast this year, while Italy's has almost doubled. In a statement, the German finance ministry said:
Meanwhile, Mr Monti told reporters that "Italy will have a deficit of around 2pc this year," far higher than the previous estimate of 1.3pc.
16.39 Mr Monti says that youth unemployment, at 36.2pc in Italy, is unacceptable.
16.35 The EU summit wasn't just about implementing growth measures and buying the bonds of distressed countries, however. Angela Merkel whips out that age old mantra: only competitiveness guarantees employment growth.
In other words, countries must slash wages/unit labour costs if they want to grow...
Mario Monti (right) greets Angela Merkel in Rome on Wednesday (Photo: AFP).
16.25 Mr Monti says that Italy does not need help to finance its debt, and adds that the country should not be put in the same box as Portugal and Greece. He says:
16.20 Angela Merkel praises Mr Monti's efforts, and says he has taken important steps in Italy, she adds that strong EU economies are important for German stability.
16.19 He adds that Europe's leaders are happy with the outcome of the EU summit last week. He adds (translation courtesy of Bloomberg):
16.09 Mr Monti says that Italy's spending review will try to avoid a tax on consumption - i.e. no VAT hikes.
16.03 The Monti/Merkel press conference in Rome has begun. If you understand Italian, you can watch it live here.
15.45 Here's what Pierre Moscovici, France's finance minister, had to say about the ?7.2bn package of tax rises (see 12.08) aimed at meeting France's deficit reduction goals:
The largest new levy will be a one-time surcharge on wealthy individuals? assets to raise ?2.3bn. Another ?898 will be reaped by ending a payroll-tax holiday. Other steps include surcharges for oil and financial companies, each raising an additional ?550m, and a levy on dividends and stock options.
15.34 Perhaps unsurprisingly, the economic mood in Greece is not a happy one. Sentiment has fallen to a seven-month low, with manufacturing and construction worst hit. Reuters reports that the Foundation for Economic and Industrial Research found that three in five expect their economic situation to worsen in the next 12 months. The think tank said its index - based on consumer confidence gauges and indexes for business expectations in manufacturing, construction, retail and services - fell to 74.1 points in June from 76 points in May.
14.57 As if Greece's deputy finance minister didn't have enough to put up with. Police sources have told AFP that the office of poor Christos Staikouras was broken into several days ago, and the burglars made off his passport and other documents. The break-in happened at the general accounting office and comes as the country is preparing for a crucial audit by EU and IMF creditors.
14.29 As Angela Merkel prepares to meet Mario Monti, Spiegel Online says it will be a difficult meeting for the German chancellor. Here's a snippet from their longer analysis:
14.09 Reuters has a tale that Spain is putting the finishing touches to a package of spending cuts and tax rises worth up to ?30bn. The move would help the country meet its tough deficit targets for this year.
Running over several years, the programme could involve raising Spain's main consumer tax, a new energy levy, reforms to the pension system, pay cuts for civil servants, new motorway tolls and another drastic reduction in ministry and regional spending, the sources told Reuters.
Some measures may be announced next week, when the EU is likely to grant the government an extra year to cut its deficit below 3pc of output, and others could be presented over the summer and included in a multi-year budget plan due to be prepared in August.
13.28 There are suggestions today that eurozone finance ministers might meet on July 20 to finalise a rescue of Spain's banks. Sources told AFP that there was a "strong possibility" that the ministers - known as the Eurogroup, will meet on July 20 as "the auditing of four banks isn't finished in Spain"..
Spanish officials said they were negotiating with the European Commission on the details of the rescue and hoped to present a figure for the amount needed when the Eurogroup meets on July 9.
However one source told AFP "there are many things on the table for Monday, Greece among them".
13.23 A poll in Germany has highlighted the country's unease about a closer fiscal and political union championed by Angela Merkel.
Just under three quarters of Germans surveyed in the Forsa poll were against the idea of a United States of Europe under which Berlin would cede more sovereignty to EU institutions, while 59pc opposed handing budgetary powers to Brussels.
More than two thirds of those canvassed in the Forsa poll opposed joint euro zone debt liability, or euro bonds.
12.59 It seems the effects of Spain's economic woes are being felt in the art market too. John Constable's 'The Lock' has been auctioned for ?22.4m in Spain, with Baroness Carmen "Tita" Thyssen-Bornemisza claiming she decided to put the painting up for auction because her finances were suffering following the Spanish economic crisis. But, the sale has not been without controversy. The Telegraph's Catherine Gee has all the details.
12.48 With all eyes on the ECB interest rate decision due tomorrow, Jim Reid of Deutsche Bank had this to say:
We then have Friday's payrolls which have a habit of being soft this time of year. If history repeats will is frighten markets or encourage the QE3 speculation? Maybe a slightly disappointing number is the worst case scenario as it may leave markets in limbo. So an interesting end of the week awaits.
12.33 Disappointing data from Ireland. Unemployment in the country - which received an ?85bn bailout in 2010 - jumped to 14.9pc in June from 14.7pc in May.
12.24 Still with Cyprus, the newspaper Phileleftheros reported that the cost of bailing out Cyprus' banks could hit ?10bn, referring to preliminary estimates by IMF officials visiting the island.
Fitch had last week said the recapitalisation costs of Cypriot banks could be in the region of ?6bn, but acknowledged the estimates were subject to uncertainty and were conservative.
12.19 Cyprus has said that it expects negotiations to conclude with the IMF and the EU on its request for emergency financial aid by the end of July. But, the country, which is deeply exposed to Greece, has said it is too early to specify how much it might need.
Finance minister Vassos Shiarly said:
12.08 Reuters reports that France's new Socialist government has announced a raft of tax rises worth ?7.2bn, including heavy one-off levies on wealthy households and big corporations, to plug a revenue shortfall this year from feeble economic growth.
A one-off levy of ?2.3bn on those with net wealth of more than ?1.3m and ?1.1bn in extraordinary taxes on large banks and on energy firms holding oil stocks were central parts of an amended 2012 budget presented to parliament ahead of a vote later in July.
11.52 The euro is under pressure this morning as grim economic data strengthened expectations that the European Central Bank is on the verge of cutting interest rates.
At one point, it slumped to a 11-and-a-half year low against the higher-yielding Swedish crown after Sweden's central bank kept interest rates unchanged and only slightly trimmed its forecasts for future borrowing costs.
Paul Robson, currency strategist at RBS, said:
Investors will also want to see if the ECB President (Mario Draghi) will highlight downside risks to growth and inflation, which will set the ground for more easing
11.29 BREAKING .... Spanish High Court has opened a case against former Bankia chairman Rodrigo Rato and 32 top executives, Reuters reports, citing a legal source. Shareholders, who lost most of their money after investing in an initial public offering last year, had started legal claims against the bank.
Bankia was nationalised in May and Rato stepped down as chairman as it became clear the lender could not deal with growing capital shortfall from a 2008 real estate crash.
Bond yields in Europe. Data: Bloomberg
11.21 Spanish and Italian bond yields have crept up around 10 basis points each to 6.27pc and 5.7pc respectively. Still way off the high before the EU Summit agreement but not encouraging.
10.20 One bright spot. European retail sales unexpectedly increased in May. Sales advanced 0.6pc from April, when they slipped 1.4pc, the European Union?s statistics office said, as gains from France to Ireland and Portugal helped offset decreasing demand in Germany.
10.01 We mentioned earlier (09.13) that Mario Monti has been on something of a charm offensive ahead of his meeting this afternoon with Mrs Merkel. Here are a few more details of the interview he gave to Frankfurter Allgemeine Zeitung. The Italian prime minister said:
Mr Monti insisted that Italy "isn't calling for a rescue and isn't calling for eurobonds. Italy is doing everything that is being demanded of it to boost growth."
09.36 In the UK, the service sector has grown at a much weaker than expected pace. The Markit/CIPS purchasing managers' index (PMI) for the services sector sank to an eight-month low of 51.3 in June, below May's 53.3 and well shy of expectations for a more moderate easing to 52.8.
Chris Williamson, chief economist at data compiler Markit, commented:
09.31 Given the underwhelming economic data out of the eurozone this morning, equities are somewhat muted. The FTSE 100 is down 0.2pc to 5675, the CAC is off 0.7pc to 3249 and the DAX is down 0.5pc to 6544.
09.13 Bruno Waterfield also writes that Mario Monti has mounted a charm offensive ahead of his meeting with Angela Merkel in Rome today:
In an interview with FAZ today, he has played down the divisions and defended his veto waving last week as ?classic negotiating?.
?Angela plus Mario equals a step forward for European economic policy,? he said.
But will Chancellor Merkel be impressed?
Perhaps going too far in the creeping department and showing a touch of desperation, Monti pleads that his economic reform agenda actually makes him a kind of honorary German.
?It is not for nothing that I'm personally in Italy often viewed as ?very German?,? he insisted.
09.10 On the ECB interest rate note, Bruno Waterfield - the Telegraph's man in Brussels - writes to tell us:
It's not ruled out. Peter Praet, the ECB's chief economist told FT Deutschland: "There is no doctrine that the interest rate can not be less than 1.0pc"
09.07 With the eurozone's private sector downturn easing only slightly in June - with Markit's composite PMI for the region revised up to 46.4 from a preliminary reading of 46 - expectations are rising for an interest rate cut by the European Central Bank.
Chris Williamson, chief economist at data provider Markit, said:
08.58 In a sign that Europe's economic powerhouse is suffering from the ramifications of the eurozone crisis, Germany's services sector unexpectedly stagnated in June.
Markit's services Purchasing Managers' Index (PMI) fell to 49.9 in June from 51.8 in May, just below the 50 level that separates growth from contraction.
The reading was the lowest since September last year, driven by lower levels of new work for the third month running and a sharp fall in business expectations.
08.55 And in France, the contraction in the services sector eased in June. The Markit/CDAF final purchasing manufacturers' index for the services sector jumped to 47.9 in June from 45.1 in May.
But in a sign of muted sentiment, the business expectations reading dropped to 52.5 from 59.5, its biggest monthly decline since the late-2008 global financial crisis and its lowest level in more than three years.
08.51 While in Italy, services activity contracted for the 13th month running. The Markit/ADACI Business Activity Index, covering service companies from hotels to banks, edged up to 43.1 in June from May's 42.8. The fall came as the pace of job losses accelerated.
08.48 Some of this morning's first economic data has dropped.
In Spain, the Purchasing Managers' Index for the services sector, which makes up around 70pc of the country's economy, was 43.4 in June, up from 41.8 in May.
That was better than the 41.5 level forecast by economists, but still a long way from the 50 mark that divides growth from contraction.
08.37 This might not fill Mrs Merkel with confidence as she prepares to meet Mario Monti. According to a report late last night, former German chancellor Helmut Schmidt (pictured below with Margaret Thatcher in 1979) has been talking of a "profound crisis". He apparently said:
He argued that Germany has a legal obligation to continue supporting and rescuing Europe under Article 23, paragraph 1 of the German Basic Law, which requires Germany to participate in the development of the European Union:
08.30 Also on the agenda for today is a meeting between Italian prime minister, Mario Monti, and German chancellor, Angela Merkel, in Rome at 2.30pm. It will be the first time the pair have met since last week's summit.
Their meeting comes as Greece prepares for a visit from officials from the so-called Troika - the European Commission, International Monetary Fund and European Central Bank - who will be checking up on the country's progress in implementing its ?173bn bailout programme.
Greek prime minister, Antonis Samaras, and finance minister, Yannis Stournaras, will meet with EU and IMF representatives in Athens at lunchtime tomorrow.
08.25 We're expecting data later this morning which should give another indicator of the eurozone's economic health. The region's service sector PMI and retail sales data are due at 9am and 10am respectively.
08.02 Meanwhile, Christine Lagarde, the managing director of the IMF, said yesterday that the ECB should beef up its purchases of peripheral debt rather than cut interest rates. She told CNBC:
07.53 David Cameron also said yesterday that Britain could restrict immigration of Greeks and other migrants from eurozone countries affected by Europe's sovereign debt crisis in the event of "extraordinary stresses and strains". He said:
I would be prepared to do whatever it takes to keep our country safe, to keep our banking system strong, to keep our economy robust.
07.45 All eyes might be on a certain Mr Diamond today, but the debt crisis blog lives on - and so do the economic woes.
Yesterday, the International Monetary Fund warned that America's politicians risked turning a tepid recovery into a recession next year if they failed to reach agreement on how quickly to cut the US deficit.
Also, France cut its growth forecasts, as the country's PM warned of its own "crushing" national debt mountain. The government now expects the French economy to grow by just 0.3pc this year, compared with previous estimates of 0.7pc.
07.30 Good morning and welcome back to our live coverage of the European debt crisis.
Debt crisis live: archive
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