A euro sculpture in front of the European Central Bank building in Frankfurt. Photograph: Michael Probst/APThat's it for tonight but thanks for staying with us. Alex Hawkes will be back tomorrow morning but here's a catch up on the day.
• Details of the possible sanctions that could be imposed on sinning eurozone members have been leaked to the Guardian
• David Cameron says he will veto any EU treaty changes that go against Britain's interests
• The Irish government has announced more swingeing tax increases to cut its deficit
• Trouble is brewing in Athens where another austerity package is being debated in parliament
• And S&P has defended its decision to place 15 eurozone members on negative watchTime to close up soon but a closing short from our very own prime minister David Cameron who has said tonight that he will block any European treaty changes that hurt Britain's interests. In what is seen as a piece of sabre-rattling, CAmeron said that if eurozone countries want to use the "institutions of Europe" to rescue the single currency, they will have to back a number of "British safeguards" in return. That would likely include such things as a guarantee of no Robin Hood tax on the City. Cameron said:
The most important British interest right now is to sort out the problem in the eurozone that is having the chilling effect on our economy that I have spoken about.
That obviously means eurozone countries doing more together and if they choose to use the European Treaty to do that, then obviously there will be British safeguards and British interests that I will want to insist on. And I won't sign a treaty that doesn't have those safeguards in it, around things like, of course, the importance of the single market and financial services.
Now if they choose to go ahead with a separate treaty, then clearly that is not a treaty that Britain would be signing or would be amending but, of course, if they want to use the European institutions, then we will be insisting on the safeguards and the protections that Britain needs.
Over in Greece they're trying to get another austerity package through parliament and there's an angry crowd gathering again outside the building, says Helena Smith in Athens.
For the first time since the non-elected technocrat, Lucas Papademos, was elevated to the seat of government, violence has returned to the streets of Athens with disgruntled youths fighting pitched battles with riot police in Syntagma square and leaving a trail of destruction behind them.
As thousands more gather to mark the third anniversary of the police shooting of Alexis Grigoropoulos, the teenager whose death has come to signify the rage and desperation of a generation of Greeks, the hallmarks of their fury is everywhere to be seen: in the smashed windows of shops and banks, the broken cameras, the torched bus stops, the axed pavements. Riot police, who have ringed the Greek parliament where debate on next year's hard-hitting budget is currently underway, are bracing for further clashes when protestors, who have shouted themselves hoarse chanting anti-austerity slogans, march to the spot in central Athens where Grigoropoulos was shot dead.
This is the first time that police have fired tear gas at protestors since Papademos, a former vice president of the European Central Bank, took office and with hooded, black-clad youths throwing petrol bombs, marble slabs and slabs of wood at police, a spokesman said reinforcements have been brought in for the night. "With the vote in parliament coinciding with the anniversary we are not taking any chances," he said.
The head of sovereign ratings at S&P, John Chambers, has been justifying the agency's decision to place 15 eurozone countries on negative watch on BBC News. Asked if the Merkozy summit yesterday had changed his view, Chambers said that it was still important for leaders "to take measures" to tackle indebtedness and to utilise the "resources of the euro area" to find a solution.
Asked about why Germany had been lumped in with everyone else, he said that the problems are "affecting all countries in the euro including creditors" such as Germany. He said Europe's strongest economy could be "affected through its banking sector" if bad debts came home to roost.
And was he any more optimistic after yesterday's mini-lunch summit thing. "A little more optimistic, but still concerned," he said.
The markets have closed now in Europe and despite fears of a bloodbath they've had a very quiet day. The FTSE100 finished up just 0.76 points at 5568.72 while Germany was down 1.27%. The euro and the pound were both down slightly against the dollar.
it's suddenly got busy this afternoon. Our correspondent Henry McDonald has filed from Dublin where the coalition has been presenting the latest part of its austerity budget, majoring on tax increases.
Anyway, here's some of the budget detail:
• VAT up 2%
• Taxes on interest earned from savings, the so-called DIRT tax will rise from 27% to 30%.
• Annual household charge of €100
•Carbon tax on fossil fuels to rise from €15 per tonne to €20
• Motor tax up next year to generate €47m
• Duty on cigarettes to rise 25 cents but no rise in alcohol tax
• Plan to reduce debt from 10% of GDP to 8.6% next yearPotently, Henry points out, it comes on the 90th anniversary of the Anglo Irish Treaty which led to the civil war and later the foundation of the modern Irish state — now diminished in stature in the eyes of many by having to go cap in hand to the IMF etc for a bailout.
German finance minister Wolfgang Schauble and US treasury secretary Timothy Geithner (left) have been giving a press conference in Berlin in the last few minutes. They were trying to talk up the prospects of getting a deal done at this week's summit with Geithner saying that he has been "encouraged by developments" in Europe in the past couple of weeks. Schauble chipped in that Europe has been "very grateful" for the constructive role played by the New York-based IMF in trying to resolve the crisis.
Kind words all round. But you suspect that behind closed doors Geithner might have been a bit more direct, possibly involving the words "act", "together", "get", "your", "about *@&$!*§ time".
To France where a poll shows that Nicolas Sarkozy is 10 points behind socialist challenger Francois Hollande in his bid to be re-elected as president next year. There's still some way to go but the survey by Ipsos Logica Business Consulting showed Hollande would take 60% of votes in the last round of a two-stage election due to start next April. That was a slight improvement on recent polls for Sarkozy but it was carried out last week before Sarko's uncomfortable day yesterday when he had to make the best of an capitulation to Frau Merkel. The next poll should be interesting, especially if it looks like Sarko is about to preside over the downgrading of France's AAA rating.
Ian adds that while the paper will be discussed ahead of this week's crunch EU summit to help reach a consensus, the punitive nature of some of the suggestions risks setting off an almighty row.
In addition to stripping countries of their voting rights, the paper suggests the potential for harmonising pension reforms, social security systems, labour market policy, and financial regulation: "Consideration could be given to use legislation to define minimum common features," it says.
Great scoop from our Europe editor in Brussels, Ian Traynor, who has got hold of a paper from the the office of European president Herman von Rumpoy detailing ways sinning eurozone countries could be punished for not meeting future fiscal rules. The full story is here but here is the top line. Ian writes:
The European commission could be empowered to impose austerity measures on eurozone countries being bailed out, usurping the functions of government in countries such as Greece, Ireland, or Portugal. Bailed-out countries could also be stripped of their voting rights in the EU, under radical proposals being discussed at the highest level in Brussels before this week's crucial EU summit on the sovereign debt crisis.
If you've been wondering how eurozone economies and others are curently ranked by Standard & Poor's then look at this interactive prepared by our markets expert Nick Fletcher and the Guardian graphics team.
OK everyone. We are switching over - Martin Farrer is taking the blog from here. Thanks for all your comments today - it appears most of you don't have much time for credit ratings agencies...
Standard & Poor's has now put the EFSF, the EU bailout fund, on negative watch.
Michael Hewson of CMC markets tweets:
@michaelhewson
S&P says EFSF may lose triple A rating if ANY AAA euro member downgraded #efsf #euroFollowing the move by Central Banks last week to provide dollar liquidity, the Bank of England this morning announced its own sterling liquidity facility.
The full release is here. The Bank is keen to stress there isn't a sterling squeeze right now - which might be caused by banks hoarding sterling in a crisis - but in case there is one, the facility is there.
We are awaiting a vote in Greece tonight on the country's 2012 austerity budget. But ahead of that, there have been some clashes in Athens, our correspondent Helena Smith reports:
The violence erupted outside the sandstone parliament building as protesting students marked the third anniversary of the police shooting of Alexis Grigoropoulos, the teenager whose death ignited an orgy of violence with thousands of rioting young Greeks taking the nation by storm in 2008.
In order to show restraint, riot police avoided engaging with the youngsters, as many chanting 'remember, remember the 6th of december' amid anti-austerity slogans, lobbed rocks in the direction of the parliament.
But, with thousands of far-left, anti-establishment demonstrators also expected to take to the streets ahead of the government's austerity vote, authorities have stepped up security placing hundreds of riot police on guard around the 300-seat House.
We have the latest data on the ECB's 'sterilisation' programme - the means by which it offsets its purchases of eurozone debt.
It does so in order to ensure that it isn't just printing money - with the inflation risk it fears that would cause.
Anyway, last week the programme caused some anxiety, after the ECB failed to fully cover its purchases.
Was this a one-off, or did it indicate that banks do not want to leave their cash with the ECB for seven days, i.e. was it another indicator of severe financial stress in the system?
Well, this week the ECB covered its purchases. It needed €207bn and it was offered €246bn. The good news is that last week's failure has not become a trend.
The bad news is that, as Louise Cooper of BGC Partners noted this morning, the credit markets are still showing "showing serious signs of stress":
So yesterday I highlighted that over the last two days there had been large usage of the ECB's emergency funding facility. Well yet again overnight €7.764bn of emergency funding had been lent out by the ECB, at a penal interest rate of 2% (normally only about €1bn is borrowed overnight from this facility.) This could well indicate a bank (or more) with funding difficulties. And also this week saw the Spanish oil giant, Repsol issue a 5 year €850m bond at a interest cost of 4.3%, lower than that of its sovereign state Spain whose 5 year borrowing costs are currently 4.6%. So the Spanish company is regarded as a better credit risk that the Nation. That is highly unusual and shows the level of fear amongst government bond investors.
I have neglected to mention, but you may be interested to know – we had two bits of data from the eurozone this morning.
German industrial orders rose suprisingly following strong demand for capital goods from abroad. The month-on-month change was +5.2, more than double the highest forecast.
Also, Eurostat released its second reading of eurozone growth figures – the first estimates coming out in November – confirming that growth stood at just 0.2% in the third quarter.
A quick recap of the morning's events.
• Stock markets fell early on following a threat from Standard & Poor's that it could downgrade 15 eurozone states.
• Governor of the Bank of France and ECB policymaker Christian Noyer said S&P's modelling has become "political" rather than based on economic fundamentals. Eurogroup chairman Jean-Claude Juncker meanwhile called S&P's criticism a "wild exaggeration and unfair".
• US Treasury secretary Tim Geithner has arrived in Germany on his European tour.
After falling early on, the markets are pretty much treading water now. The FTSE 100 is up, but only by four points, or less than 0.1%.
The German DAX remains 0.6% down and the French CAC down 0.1%.
In the UK the stocks that are up are those on the more "defensive" side – cigarette and pharmaceutical companies and others that investors think might be more resilient in a downturn.
I mentioned earlier that US Treasury secretary Timothy Geithner is continuing his tour of Europe.
He has now arrived in Germany, and while we do not know exactly what he is telling European leaders and officials, the suggestion is that he is urging them, like many, to take a firmer approach.
Domenico Lombardi, a former IMF board member who is now a scholar at the Brookings Institution in Washington, told Reuters:
I think the secretary will bring the message that time is running out and this is the last chance the Europeans have to fix the situation before we have a full-blown systemic crisis.
I think the US tone will be much more firm. It has changed from being more interlocutory to more authoritative.
The BBC's Mark Mardell has an interesting analysis of Geithner's visit here, in which he says:
The very fact Mr Geithner is doing all this is a deliberate signal. It suggests that the White House is still worried that the eurozone countries won't do enough, and need to be kept up to the mark (or perhaps from returning to it).
One more link before we move on to other stories in the eurozone crisis today.
City AM editor Allister Heath says S&P has shown "bravery uncharacteristic of the times we live in" by threatening a downgrade of eurozone states.
I'm no defender of the rating agencies, who performed appallingly during the bubble (and have a long history of being overly optimistic, including in the run up to the Asian crisis of 1997 and the Russian default of 1998). Their opinions – for that is all they are – are given far too much weight by the authorities, who have built their ratings into numerous regulations (and until very recently artificially restricted the number of agencies with official recognition).
The only thing that is ridiculous is that so many euro states still retain their AAA status, he argues.
He concludes by saying that the eurozone "remains in deep crisis".
A further reaction to the S&P move from earlier – from Eurogroup chairman Jean-Claude Juncker:
I am not unsettled by this, but I am astonished, after the significant efforts in recent days to overcome the crisis, such as savings programmes in Italy and Ireland.
It is a wild exaggeration and also unfair.
German finance minister Wolfgang Schaeuble is speaking now about the downgrade threat.
The initial indications are that he has said the decision will encourage the eurozone to make the right decisions at the summit this weekend.
Governor of the Bank of France and ECB policymaker Christian Noyer has attacked Standard & Poor's, saying credit ratings agencies' methods for assessing sovereign creditworthiness have become increasingly political.
The agencies were one of the motors of the crisis in 2008. Are they becoming a motor in the current crisis? That's a real question we all need to think about.
When you look at the way S&P formulated its argument, you can see that they have changed their methods. The methodology has become much more political and less linked to economic fundamentals.
It is worth noting that the market is now only a little off where we were yesterday. The FTSE 100 is down five points, or less than 0.1%. European stock markets have fallen further – the German DAX is still down 0.9%.
We have some reaction from ministers of eurozone countries affected by the S&P announcement.
French foreign minister Alan Juppe has admitted that France may have more to do than other countries to protect its AAA rating:
We know we have more efforts to make than others, that's certain. It's a threat, it's not a decision. Of course it must be taken seriously.Austrian finance minister Maria Fekter meanwhile says she does not "at the moment" expect the country to lose its AAA rating.
"We have very stable facts," she was quoted as saying by the Austria Press Agency.
The other big event (or non-event, according to your point of view) yesterday was the Merkel-Sarkozy summit. The big criticism is that what was agreed will do nothing to solve the immediate crisis.
As our own Larry Elliott put it: "The plan does more to prevent a future crisis than it does to ameliorate the current one."
Jeremy Warner at The Telegraph agrees:There was no solution offered to the looming funding crisis faced by Italy and Spain – and perhaps others too – and there was no plan for growth. Still, no matter; markets are determined to believe that salvation is at hand.
The S&P announcement came out late last night – at around 9:30, having been rumoured in media reports earlier.
But even so, it's worth just looking again at what S&P said.
The five reasons given are:
(1) Tightening credit conditions across the eurozone;
(2) Markedly higher risk premiums on a growing number of eurozone sovereigns, including some that are currently rated 'AAA';
(3) Continuing disagreements among European policymakers on how to tackle the immediate market confidence crisis and, longer term, how to ensure greater economic, financial, and fiscal convergence among eurozone members;
(4) High levels of government and household indebtedness across a large area of the eurozone; and
(5) The rising risk of economic recession in the eurozone as a whole in 2012. Currently, we expect output to decline next year in countries such as Spain, Portugal and Greece, but we now assign a 40% probability of a fall in output for the eurozone as a whole.
BBC business editor Robert Peston says S&P's move to put 15 eurozone nations on negative watch is "logical but tactless":
S&P says it wants eurozone leaders to understand how much is at stake if this week's summit is another damp squib. But if its actions were to set off a panic that were, for example, to tip a bank over the edge, then it could be accused of destabilising attempts to reform the eurozone in an orderly way.
Michael Hewson, an analyst at CMC Markets, says meanwhile:
This action by Standard & Poors more or less kills the EFSF stone dead as it would mean that it would be unlikely to carry a triple "A" rating, especially if France is downgraded, which now seems increasingly likely.The downgrade threat also makes it much more politically difficult for countries that have a large eurosceptic element such as Finland, who are also more fiscally conservative.
Given they have been more fiscally conservative they probably have more to lose and it rather begs the question, why ratify a treaty change that could well precipitate a ratings downgrade?
It also seems likely to raise the political pressure in Germany with respect to the costs of closer integration.
This, it would seem, is the price of admission towards closer fiscal integration, the question now being asked around Europe in the triple "A" countries is whether it's a price worth paying?
And, as predicted, the markets are down on the open. The FTSE 100 is down 34 points in early trading, a fall of 0.6%. The French CAC is down 0.8% and the German DAX 1.4%.
Italian ten-year bond yields are up slightly after yesterday's huge falls - to 6.1%, up 0.084% on the day.
Morning everyone and welcome back to our live coverage of the eurozone debt crisis.
After yesterday's Merkozy summit, the big news this morning is that Standard & Poor's has put 15 of the eurozone nations on negative watch – meaning their credit ratings could be imminently downgraded. S&P says it will come to a decision once this week's summit is over.
A ratings downgrade could not only make debt more expensive for the eurozone states, but it could also make life difficult for the EFSF, the bailout fund, which derives its credit rating from those of its sovereign backers. It may not be able to leverage itself up to become the "big bazooka" EU officials wanted it to be.
We will have all the political and market reaction to S&P's decision – European markets are expected to fall this morning.
Also today, the Greek parliament will vote on its budget for 2012, we have details coming of Ireland's 2012 budget, including €3.8bn in further austerity measures, and US Treasury secretary Tim Geithner is continuing his grand tour around Europe.
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