Crisis coverage from the Telegaph

European Commission president warns of a crash that would instantly wipe out half of the value of Europe’s economy, while the head of the eurozone crisis fund said Italy "doesn't have much time to reassure the markets".

the Telegraph,

11 November, 2011


More live coverage at: http://www.telegraph.co.uk/finance/financialcrisis/8846201/Debt-crisis-live.html

• Barroso warns EU collapse 'will spark depression’

• US Treasury Sec Geithner: Europe must move quickly

• Stock markets rise strongly on Italy bond sale

• EU crisis fund chief calls on Italy to act fast

• Italy to discuss fresh austerity measures today

• European growth for 2012 cut to 0.5pc from 1.8pc

• Cameron: Italy's state is danger to the EU

European markets have risen on opening.

FTSE 100 up 0.32pc to 5462.08

French CAC 40 up 0.30pc to 3074.17

German DAX up 0.43pc to 5892.99

Italian FTSE Mib up 0.82pc to 15342.88

08.10 U.S Treasury Secretary Timothy Geithner said Europe remains the “central challenge” to global growth and must “move quickly” to restore financial stability.

Geithner, who is in Honolulu attending the 21-nation Asia- Pacific Economic Cooperation conference, said in prepared remarks that the APEC countries are all directly affected by the Eurozone crisis and he encouraged them “to take steps to strengthen growth in the face of these pressures from Europe.” He told a news conference:

As the United States continues to work through the problems that caused our crisis and Europe confronts a period of slower growth, Asian economies will need to do more to stimulate domestic demand growth -- both so they are less vulnerable to slowdowns, such as the situation in Europe, and so they can continue to contribute to global growth.

These economies, including the United States, have the capacity to do things now to make growth stronger both to offset some of the pressures they’re facing in Europe but also because the world as a whole - even when Europe stabilizes you are going to see growth damaged by the magnitude of the crisis so far. So there is a very strong rationale in those economies that have the capacity to do it to act now to strengthen growth.

07.56 Jeremy Warner writes: The Euro is being held together only by fear

There has been a lot of "thinking the unthinkable" over the past week. If the euro is ultimately unsustainable, why not just face up to reality and let this grand exercise in political hubris go?

Would the consequences really be quite as bad as conventional analysis makes out? These questions need deconstructing.

The announcement of a referendum last week by Greek (then) prime minister George Papandreou prompted German Chancellor Angela Merkel and French premier Nicolas Sarkozy to ask in exasperation whether Greece wanted the euro or not.

Their intention was to frighten the Greeks into submission, and it worked. Papandreou is gone, and a government of national unity is being formed under the fully signed up eurocrat Lucas Papademos. Berlin and Paris have got their way.

07.46 Ambrose Evans-Pritchard, international business editor, writes: a new recession threatens the globe as debt crisis grows

Europe's escalating debt crisis has cast a black shadow over the world's fragile recovery, threatening to tip large parts of the global economy into a deep downturn and even outright recession.

The OECD's index of leading indicators for China, India, Brazil, Canada, Britain and the eurozone have all tipped below the warning line of 100, with the pace of the decline in Europe exceeding the onset of the Great Contraction in early 2008.

Professor Simon Johnson, a former chief economist at the IMF, rattled nerves earlier this week by warning the world is "looking straight into the face of a great depression".

The grim data is coming thick and fast. Japan's machinery orders fell 8.2pc in September as the post-Fukushima rebound lost steam and the delayed effects of the super-strong yen began to bite. Export orders have been declining for eight months. "Outright contraction is possible in the quarters ahead," said Mark Cliffe from ING.

07.42 Klaus Regling, the head of the eurozone crisis fund, has called on Italy to act swiftly to reassure markets about its financial and political stability.

Italy doesn't have much time to reassure the markets. The country needs a functioning government as soon as possible.

07.09 Quick piece of corporate news. Barclays Bank has agreed to sell Barclays Capital's management buy-out business, Barclays Private Equity, to its management team, who are re-launching the business as Equistone Partners Europe.

Equistone will continue to manage its existing three funds on behalf of its existing investors in those funds. Barclays remains an investor alongside those funds and the largest single investor in Equistone's investments to date.

The value of the gross assets disposed of is expected to be approximately £45m. The transaction is not expected to have a material impact on Barclays earnings per share or capital ratios.

06.45 Writing in the Financial Times today, respected economist Nouriel Roubini isn't too positive of Italy's chance of staying in the eurozone:

"Italy may, like other periphery countries, need to exit the euro and go back to a national currency, thus triggering an effective break-up of the eurozone... Italy and other illiquid, but solvent, sovereigns need a 'big bazooka' to prevent a run on their public debt. The trouble is, however, that there is no credible lender of last resort in the eurozone."