• Spanish parliament meets for first time since election
• UK inflation is 4.8%
• Latest German ZEW survey, US retail sales, and Federal Open Market Committee meeting
• Live blogging now: @alexhawkes
Some more from Jose Manuel Barroso:
I hope that we can work constructively with the UK government to make sure that the fiscal compact now agreed dovetails neatly with the European Union treaties so that the interests of all member states and institutions are respected.
It is in all of our interests to have a government of the United Kingdom that fully engages with the other member states and the European institutions.
A bit of context for the Spanish T-bill auction mentioned earlier.
The rate for the 12-month debt was 1% lower than before, but that is comparing with an auction in November, when Spanish yields spiked. A 4% yield on 12-month debt is still a level not seen since 2007.
"Today's yields remain elevated," said senior fixed income analyst at Rabobank Richard McGuire.
David Gow says I may have underplayed the significance of Jose Manuel Barroso's comments earlier.
Barroso has blown apart Dave's main justification that he was "defending the single market" by saying his six-point demand threatened it - and he, Barroso, tabled a compromise talking about protecting the single market and, specifically, financial services. The pent-up venom towards the UK is also now spewing out in the European Parliament - including from anglophiles.
What people don't seem to get is that Merkel also went out of her way to help Dave as she doesn't want Germany irrevocably tied to France and is closer on economic policy etc to the UK. But the demands he tabled at 3am on Friday last week, senior sources say, were for an effective veto on all single market legislation: "obviously, out of the question." What if Merkel had demanded special protection for the German car industry - VW (soon to be the world's biggest car-maker), Mercedes and BMW? Or Sarko for the French energy sector - EDF/GDF Suez/Areva? Cameron would have gone crazy...
Sharon Bowles, a Lib Dem MEP and the chair of the European parliament's Economic and Monetary Affairs committee, has issued a strong statement criticising David Cameron's negotiations last week.
Bowles is under pressure, the FT reported this morning, and may become the victim of an anti-UK backlash in Brussels, so this piece of positioning will not harm her at all:
I abhor Cameron's use of the veto.
His demands were not 'moderate'. They were a mix of attempts to reverse agreed positions disguised by inaccurate invocations of conclusions from regular meetings of Finance ministers and interference in current legislative dossiers. It was a power grab, reneging on agreed legislation. Crafted as a wolf in sheep's clothing, it may have fooled some in the UK, but not us.
Asked to save the euro, Mr Cameron gave in to his eurosceptic party. He has jeopardised UK interests, including those of the City, when there was nothing in the European Council agreement threatening the UK.
After all, what was the purpose of the Vickers report; of higher capital requirements; and of tighter UK financial market rules, other than to respond to UK taxpayers´ demand for a safer City of London. We should be following that path alongside our European partners in harmony, not in antagonism.
In this crisis, there is no worse time for Cameron to have turned his back on Europe. His veto has made the summit result harder to deliver, more intergovernmental, and less democratically accountable.
Reuters earlier repeated the obligatory line every time Italian bond yields come down - namely that the ECB is in the market, according to unnamed traders.
The Italian ten-year bond yield is now up 11 basis points to 6.715%.
The Spanish debt auction seems to have gone well.
Spain raised €3.4bn in 12-month bills at a yield of just over 4%, a full 1% lower than last time out. The offer was covered three times over.
The €1.5bn of 18-month debt meanwhile was covered five times over, and attracted a yield of 4.22%, lower than the 5.16% last time out.
The Times today has an interesting snippet on the EU negotiations over the new treaty.
If you have a subscription you can read it here.
The key paragraph says:
Britain looks likely to be joined by Sweden outside the new bloc, doubling the strength of the outer core against an inner 25.
Chris Williamson, chief economist at Markit, is first off the mark (at least in terms of press releases sent to me) to comment on the UK inflation figure.
The much anticipated easing in UK inflation appears to be gaining traction. Inflation fell for the second month running in November, dropping from 5.0% in October to a three-month low of 4.8%. Supermarket prices wars, lower petrol costs, falling food prices and retailer discounts for winter clothing lines that struggled to sell in November's warm weather all contributed to the easing.
Despite the easing, however, the rate of inflation signals more pain for households in the coming months, as prices for goods and services continue to rise more than twice as fast as incomes. With inflation at 4.8% but employee pay growth at just 2.3% per annum, real incomes are still falling at a rate which will inevitably squeeze consumer spending in the lead up to Christmas and early next year.
With consumer spending accounting for around two-thirds of all spending in the UK economy, this will act as a substantial dampener on economic growth, and the combination of weak consumer spending with public sector spending cuts and falling demand for UK exports means there is a strong chance of the UK dipping back into recession as we move into 2012.
Looking further ahead, inflation is likely to fall sharply in the new year, which will reduce the squeeze on incomes and should help to lift economic growth later in the year. With last January's VAT rise falling out of the annual comparisons, and global food and energy price inflation dropping sharply, a marked fall in inflation to a rate of perhaps 3% could be seen as early as the end of the first quarter.
How far inflation falls later in 2012 remains a big uncertainty. The Bank of England is projecting the rate will drop to nearer 1.5% by the middle of next year, below the Bank's 2% target. That may be a little optimistic, given the steep rises in utility prices that have been pushed through by the energy companies in recent months. On the other hand, the recent steep downturn in survey measures of prices charged for goods and services by companies suggests that inflation has a long way to fall, and that deflationary pressures have grown considerably as the economic outlook at home and abroad has darkened. An inflation rate close to the Bank's target looks a reasonable forecast for mid-2012.
Newsflash: November CPI is 4.8%, exactly in line with expectations.
One thing worth keeping a close eye on is the Euro itself.
Mario Monti said last week that one of the things to note about the crisis was that the euro remained strong despite the debt issues.
Well it dipped against the dollar yesterday and is now trading at $1.3180 (one euro buying you that much in dollars, that is).
The euro was lower in October, so it isn't plumbing the depths yet.
European Commission president Jose Manuel Barroso has said that Britain's demand for special treatment for financial services would have harmed the single market.
The United Kingdom, in exchange for giving its agreement, asked for a specific protocol on financial services which, as presented, was a risk to the integrity of the internal market. This made compromise impossible.
Canaryatthewharf below the line asks about Commerzbank.
The German lender is said by Reuters to be in talks with the German government over further state aid.
Alread 25% owned by the state, it needs to find €5.3bn by mid-2012 to meet European Banking Authority capital rules.
The German finance ministry is saying only: "As a stakeholder in Commerzbank the government is in regular contact."
One to watch.
The Dutch economy is already in recession, according to independent government agency the CPB.
It is forecasting the Dutch economy will contract by 0.5% in 2012.
I mentioned the Italian bond yields earlier. They are rising again this morning, as the falls that preceded last week's summit are all unwound.
The yield on the 10-year bond is, according to Reuters, up 16 basis points on the day to 6.764%. If we carry on at this rate we should reach 7% by mid-morning.
The FTSE 100 has risen by 7 points, or by 0.1%, in early trading.
The French CAC is up by 0.1% and the German DAX by 0.2%
Spain will be a key focus today, not only because its parliament is meeting for the first time since the election.
Credit ratings agency Moody's has also just put eight Spanish banks on review for possible downgrade.
The banks are: Banco Cooperativo, Banco Sabadell; Bankia and its holding company, Banco Financiero y de Ahorro (BFA); Bankinter, CaixaBank and its holding company, La Caixa; Confederacion Espanola de Cajas de Ahorro (CECA); Caja Rural de Granada; Ibercaja Banco; and Lico Leasing.
Because of the weaker expectations for Spanish growth, the banks' income will be smaller, Moody's said. In addition it sees "increased loss expectations with respect to their commercial real estate exposure".
Separately, Moody's has downgraded the subordinated debt of 21 Spanish financial institutions.
In addition, Spain is going to the debt markets today, just as yields on its debt are also rising. Spanish 10-year bonds are up 10 basis points this morning to 5.9%.
Morning everyone and welcome back to our coverage of the eurozone debt crisis.
I know, it seems like we haven't really been away. My colleague Graeme Wearden was live blogging events until late last night.
One key event worth recapping from his coverage is the suggestion that German politicians want to have a vote on last week's summit deal. That suggests the politics of getting any inter-governmental treaty signed by 26 countries will be fiercely complicated.
In the UK, the coalition looked yesterday as if it would not bust apart as a result of Cameron's "veto". Patrick Wintour this morning has more on the recriminations in Whitehall.
Today the key item on the UK agenda is inflation figures at 9:30am - which could provide some relief for the coalition in the form of a distraction. The forecasts suggest CPI will be down a touch to 4.8%.
Elsewhere, the Spanish parliament meets again for the first time since new prime minister Mariano Rajoy was elected last month.
The most worrying thing from yesterday's events, perhaps, were the bond markets: with no sign of the ECB looking to deal with the debt issues afflicting much of the eurozone, Italian borrowing started to climb again. The 10-year bond yields were pegged back eventually to 6.6% yesterday.
The bad news? They're climbing again this morning.
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Source: http://www.guardian.co.uk/business/2011/dec/13/eurozone-crisis-inflation
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