The permanent loss of national sovereignty over government budgets to Brussels is being demanded by Germany at a time when eurozone taxpayers - and primarily German taxpayers - look likely to be called on to foot the bill for solving the eurozone crisis. A new "banking union" currently being fleshed out will make the eurozone as a whole collectively responsible for any losses associated with future bank bailouts, irrespective of which country the troubled bank happens to be located in. There is however still uncertainty as to whether this sharing of risks will also apply to the rescue of Spain's banks that is currently being prepared, or whether the Spanish government will instead be required to guarantee the bailout.Meanwhile, expectations are growing that Greece will be given a further write-off or "haircut" of its debts, including possible relief on its debt repayments to the eurozone's bailout funds or the European Central Bank. Mr Schaeuble ruled out any direct debt forgiveness on Sunday. "You don't give a debtor who doesn't service your debt claims new money," he told Deutschlandfunkradio. "We would be prevented by law from doing any more." He did however leave the door open to an arrangement under which new bailout loans could be used by Greece to buy back its private sector debts at what are currently cheap market prices. Greece has also been asking for two more years to meet the spending cuts demanded by international creditors. On Wednesday, the Greek Finance Minister Yannis Stournaras had claimed that a deadline extension had been agreed. But both Mr Draghi and Mr Schaeuble have denied this was the case, pointing out that the negotiations over the release of Greece's next tranche of bailout money were not yet complete.

The ECB declined comment on Friday

"Private creditors have already suffered big writedowns on their Greek bonds under a second bailout for Athens sealed in February, but this was not enough to put the country back on the path to solvency and a further restructuring is on the cards. The latest aim is to reduce Greece's debts by a further €70bn to €100bn, several senior eurozone officials familiar with the discussions told Reuters, cutting its debts to a more manageable 100pc of annual economic output. This would require the European Central Bank and national central banks to take losses on their holdings of Greek government bonds, and could also involve national governments also accepting losses. The favoured option is for the ECB and national central banks to carry the cost, but that could mean that some banks and the ECB itself having to be recapitalized, the officials said. The ECB declined comment on Friday".

Spain is Bust. Italy is pretty much bust and if the truth be told is bust. Ditto Portugal.. Greece is just the weakest and as such fell first.
You have to let people including Governments fail if they are incompetently run. Let them go to the wall and any bank that was dumb enough to buy debt from these States.

Gloomy economic data released on Thursday showed that the eurozone's manufacturing and services sectors both contracted this month. Analysts said this piles pressure on the European Central Bank to step in to stop the economy worsening, at a time when Europe's debt crisis is threatening the world economy. "The recovery has finished, we are now contracting," said Chris Williamson, chief economist at Markit, which published the data. Surveys of purchasing managers' indices show that eurozone service industries are shrinking for the first time in two years, while manufacturing output hit a two-year low. The Markit eurozone services survey, which gauges business activity at firms from banks to restaurants, slumped to 49.1 this month from August's 51.5. This is the first time since August 2009 that the services index has fallen below the 50 mark that separates growth from contraction. The composite PMI, which combines the services and manufacturing data, fell to 49.2, its first contraction since July 2009, from 50.7 last month. Factory output contracted for the second month running, with the manufacturing PMI dropping to 48.4. "Today's flash eurozone PMI figures make grim reading and raise the spectre a renewed economic downturn in the 17-country region. The current [composite] index level indicates that the eurozone recovery has ground to a complete halt," said Martin van Vliet, an ING economist. "The figures reinforce our suspicion that the eurozone economy as a whole might contract slightly in the second half of this year. At the same time, with ongoing fiscal austerity and political leaders still way behind the curve in terms of resolving the debt crisis, we cannot dismiss the risk of a full-blown recession. "This data will amplify pressure on the ECB to come to the rescue and use the remaining scope for monetary stimulus," he said. The ECB has been criticised for raising interest rates earlier this year, and some economists believe it may have to perform a U-turn. "Pressure is mounting on the ECB to quickly reverse its recent monetary policy tightening cycle rather than just halting it, with a near-term interest rate cut," said Archer.The eurozone's private-sector economy is shrinking for the first time since the depths of the last recession, sparking warnings that the region's economic recovery is over.

Juncker said Greece needed to adopt a process similar to the Treuhand agency, used by Germany to sell off 14,000 former East German firms between 1990 and 1994 – even though Treuhand failed to deliver any profit, oversaw huge job losses and eventually closed its books with a deficit. But he did appear to acknowledge that the Greeks were hostile to foreign officials appearing to take charge: "One cannot be allowed to insult the Greeks. But one has to help them. They have said they are ready to accept expertise from the eurozone." Athens, together with European leaders and the IMF, must now start work on a second €110bn bailout for Greece, which must be finalised by September and is likely to include private-sector involvement. The European commission conceded on Saturday, after the two-hour Eurogroup teleconference agreed the fifth tranche payout, that any plan to cut Greece's debt of 160% of economic output would be at risk of being derailed by internal unrest or external economic conditions. Growth just one percentage point below expectations, it said, would push Greece's debt to 170% of GDP, and rising, past 2020. For the first time, the commission's report also discusses debt restructuring, including a possible 40% "haircut" – a forced reduction in the value of Greek bonds – which would devastate Greek banks and, the report warns, could reverberate on Ireland, Portugal and Spain.

Analysts are increasingly questioning the French and German governments' plan for holders of Greek bonds to swap them for new loans as part of a fresh aid package. The Greek prime minister, George Papandreou, met his side of the rescue bargain last week by winning MPs' approval for radical new austerity measures, including €50bn of privatisations, public sector wage cuts and widespread civil service job losses. But eurozone ministers have so far failed to agree details of a new rescue, expected to be up to €110bn. The debt-swap proposal, which French and German banks have agreed to, involves offering new 30-year loans in exchange for expiring bonds, to meet Germany's demand that investors bear some of the costs of a new Greek bailout. But analysts say it is likely that ratings agencies could still brand the plan a default. That would trigger chaos in world markets, as investors were forced to slash the value of their Greek debts - and could also lead to Portugal and Ireland, the other bailed-out eurozone states, having their debts downgraded. Simon Derrick, chief currency strategist at BNY Mellon, said: "When you compare the French plan to what the ratings agencies have said, it looks as though they would make it a default." Standard & Poor's said no final decision would be made on the scheme until the full details were published but pointed out a recent statement setting out the reasons a debt-swap might still constitute a default. "While an exchange offer for longer-dated bonds may appear to be 'voluntary', we may conclude that investors have been pressured into accepting because they fear more adverse consequences were they to decline the exchange offer," S&P said.

Global economic recovery slips into lower gear as industrial activity dips - A sharp bounce in stock markets following agreement in the Greek parliament to pursue EU-sponsored austerity measures became more muted after it became clear a global slowdown in manufacturing was firmly under way. "Over the past two months, [euro-zone manufacturing] output growth has weakened to the greatest extent since late-2008," said Chris Williamson, chief economist at Markit, which compiled the surveys. The US was the only bright spot, adding to expectations the economy may be recovering from a recent slowdown. The US Institute for Supply Management said its index of national factory activity rose to 55.3 from 53.5 the month before. The reading beat expectations for a decline to 51.8, according to a Reuters poll of economists. The UK's Markit/CIPS purchasing managers' index showed a bigger than expected drop to 51.3 from 52 in May, revised from 52.1. David Noble, chief executive at the Chartered Institute of Purchasing & Supply, said: "The UK's manufacturing sector is slipping into 'growth-lite' mode, a far cry from the strong expansion seen earlier in the year." For the second quarter as a whole, the average PMI reading of 52.6 is the lowest since the recovery began in the autumn of 2009. Export orders and employment slowed to the weakest growth rate since last September. Rob Dobson, senior economist at Markit, said: "It is worrying to see that slowdown is not just being driven by the demise of domestic market strength, with growth in new exports having also slowed since the start of the year as the global economic recovery drifts into a softer patch." Input price inflation slowed sharply to the slowest rate in one-and-a-half years, reflecting recent falls in the cost of oil and other commodities. Output price inflation – measuring the prices charged by manufacturing – was the weakest since last December.

Total Lloyds job cuts now almost 45,000 - Lloyds Banking Group boss announces 15,000 job cuts - António Horta-Osório stamped his mark on Lloyds Banking Group on Thursday, cutting 15,000 jobs and pledging to revitalise the Halifax brand in an effort to help taxpayers make a profit on their £20bn investment in the bailed-out bank. On a bleak day for employment in the banking industry, HSBC also cut 700 jobs at its UK arm to save £9m – a sum officials at Unite noted was the same as the bonus of chief executive Stuart Gulliver. While unions were furious about the scale of the job losses at Lloyds – which are now on track to touch 45,000 as a result of the rescue of HBOS during the 2008 crisis – the City applauded the actions of Horta-Osório, who was presenting the outcome of a strategic review he conducted after taking the helm of Lloyds on 1 March. The Portuguese-born banker, who was lured from Spanish bank Santander, was at first unrepentant about the scale of the job cuts although later admitted: "I do regret that we have to do this. I would prefer to put this bank back on its feet without reducing staff." But, he insisted the cuts were essential. "We have to do this. This bank has lost money, it's losing money this year on an after-tax basis. "We have to get this bank back on to its feet to support the UK economy and we have to pay taxpayers' money back," he said.

Research published today by Ricoh Europe reveals that European businesses could be missing out on potential profit increases of €46 billion, due to the existing, inefficient methods used to process information. TheRicoh Process Efficiency Index shows that employees across Europe responsible for managing business critical document processes spend approximately 362 million hoursof their time per year on the function, which amounts to an overall business cost of €147 billion. The Index examines how European organisations are managing their business critical document processes; those that occur regularly and repeatedly and have a direct impact upon businesses interactions with clients and employees. For example, purchase orders, patient records or invoices. The study also identifies the areas for improvement and the economic return that those improvements could deliver. Carsten Bruhn, Executive Vice President, Ricoh Europe said: "This report is essential reading for every European CIO. It highlights that if European businesses are to meet the challenge of competing with emerging markets, it is essential that they look at the efficiency of their business critical document processes." "The Index clearly illustrates how outdated, manual processes have multiple impacts on the business. For example, if critical information is processed using traditional hard-copy methods, business risk is enhanced as they are less likely to be backed-up. They are also easier to lose, making them more prone to security breaches. It is also inevitable that employees are spending unnecessary time processing business documents, instead of focusing on the core business transactions and customer service."

GREECE - The votes are just in, and the €28bn (£25bn) austerity bill has been passed, but Greece's troubles are still a long way from being resolved. What has the Greek parliament just voted through? The programme covered €28bn of spending cuts and tax rises, and permission for €50bn of asset sales. Measures include cuts to public sector pay, a new solidarity levy on income, and cutbacks in government spending. Here's a full rundown of the key measures. Does this mean victory for prime minister George Papandreou? Not yet. The Greek parliament will reconvene on Thursday to vote on an enabling law that will allow the government to speed up the pace of reform. This will also include a specific breakdown of some of the fiscal measures, including the tax changes and a €50bn privatisation programme. Analysts believe this could be even tighter than Wednesday's vote, given Papandreou's narrow majority. Why did MPs agree to these measures? Greece has been struggling to meet the conditions of the original €110bn rescue loan agreed with the EU and the International Monetary Fund last year. Eurozone finance ministers had insisted on tougher austerity measures in return for the next slice of the package, worth €12bn. What would happen if Greece did not receive the €12bn? More than €6bn of Greek government bonds mature in July, meaning they must be repaid then. Another €6.6bn matures in August. Greece cannot roll the debt over by issuing new bonds, as the financial markets are now demanding ludicrously high interest rates on Greek government borrowing. The €12bn tranche of aid is already earmarked to cover these payments – without it, an immediate disorderly default looked inevitable.

French finance minister Christine Lagarde has become the new head of the IMF after the fund's board confirmed her appointment following a meeting in Washington. Lagarde, who takes over from Dominique Strauss-Kahn, is the first woman to hold the post. She will begin her five-year term on 5 July. After the board's announcement, Lagarde tweeted: "The results are in: I am honored & delighted that the Board has entrusted me with the position of MD of the IMF!" Official confirmation came after the US hadformally endorsed Lagarde's candidacy. Treasury secretary Tim Geithner said: "Minister Lagarde's exceptional talent and broad experience will provide invaluable leadership for this indispensable institution at a critical time for the global economy. We are encouraged by the broad support she has secured among the fund's membership, including from the emerging economies." French president Nicolas Sarkozy was quick to show his support for his compatriot. He said in a statement: "The French presidency rejoices that a woman is taking on this important international role." Chancellor George Osborne hailed Lagarde's appointment as "good news for the global economy and for Britain." He said: "She is the best person for the job, which is why Britain was one of the first countries to propose her. She has been a strong advocate for countries tackling high budget deficits and living within their means." Lagarde has the support of most European countries, and is seen as an ideal candidate to handle the IMF's ongoing bailout of weak eurozone countries. Many observers felt the time had come for a non-European to take the post, but despite initial coolness towards her candidacy China and Russia backed Lagarde's appointment. Along with the US, she has the explicit support of nations including Indonesia and Egypt, representing more than half the IMF's 24 voting board members. The executive board represents the 187 members of the IMF.

EUOBSERVER / BRUSSELS - European lenders are considering the 'first draft' of a plan put forward by French banks for a rollover of some 70 percent of the banks' holdings of Greek debt. Unveiled by French President Nicholas Sarkozy on Monday (27 June), the plan would involve private bondholders agreeing to re-invest back in Greece half the amount of their holdings as they matured, swapping the debts for new longer-dated bonds. The maturity on the new bonds remains up for discussion, with some German sources saying the suggested extension to 30 years is too long, but the aim is to partially free the country from having to repay its debts in the near term, relieving some pressure from the insolvent nation. A further 20 percent of debts coming due would be invested in triple-A bonds via a special purpose vehicle. EU nations are hoping to convince private creditors to engage in such voluntary rollovers amounting to around €30 billion, representing just under a third of the amount of a potential second bail-out of the country. The French scheme was considered alongside other options at a meeting in Rome on Monday night of some of the most powerful figures in international banking, with executives flying in to talks with eurozone and European Central Bank representatives regarding the voluntary rollover.

CITIZEN ADVICE - The economic downturn is pushing consumers into the hands of con merchants and rogue traders who have "never had it so good", Citizens Advice warned this week. The national charity says the current economic conditions have led to an unprecedented boom in that exploit people's need to save money on bills, increase their income, and find work and affordable housing. It says there is a growing problem with unscrupulous employers advertising fake "jobs" that require fees to be paid in advance. Increasingly, it adds, "phantom flats" are offered to would-be tenants, who are then asked to prove they can pay the rent by transferring money to the landlord: money they never see again. It also warns that some money transfer services and classified ad websites can sometimes be channels for fraud. The warning chimes with Guardian Money's postbag, which is increasingly seeing complaints about bogus websites offering desirable products such as cameras at low prices. Fraudsters set up the sites, trade for a short time and then disappear with the cash. If a camera or pair of designer jeans looks too cheap, there is usually a reason why, say police. Meanwhile, as the summer music festival season gets underway, fans are being urged to be on their guard against sophisticated online rip-offs run by organised gangs of "cyber criminals", in which they are duped into buying fake or non-existent tickets. Experts at Get Safe Online, a government-backed initiative, are warning that the problem will get worse as the wave of events provides rich pickings for the fraudsters. More than one in 10 people (or their friends and family) say they have already been a victim of an online ticketing scam. According to Get Safe Online, criminals are increasing efforts to dupe consumers into visiting fake ticket websites. They are passing off their operations as supposedly genuine businesses, and are often willing to make significant investments for high returns. For example, they will often pay for search advertising (such as Google AdWords) so their fake sites appear at the top of event search results. And they even enlist professional web designers so that their sites appear genuine. One method used by scammers is targeting band websites, forums and social networking sites. Posts will be displayed from "fans" claiming they have bought tickets from a certain site and encouraging those not yet successful in getting theirs to visit it. More consumers are then driven to the fake site.

GREECE, WHO'S EXPOSURE IS IT ? - It's not the direct exposure, it's the indirect exposure and the implications of an unruly default that I would be worried about. French and German banks bought Greek bonds, and they took out insurance against default. Who did they take out that insurance with? The US and UK banks. There has to be a loser – who's the loser?" A fresh bailout for Greece will go ahead on condition that its parliament votes for new austerity and reform programmes. It is expected to total about €110bn, with about €30bn coming from bondholders, €30bn from privatisations and the rest from eurozone members and the IMF. Persuading the private sector to play a part is seen as crucial to the chances of averting a Greek disaster and was a key part of German chancellor Angela Merkel's pitch in Brussels. Without this, EU leaders fear Greece will default, triggering payouts on a web of complex financial insurance products and creating chaos in world markets as investors struggle to work out who owes what. Some analysts fear default could create a "Lehman moment", like the aftermath of the collapse of the giant US investment bank in 2008, when investors lost confidence in each other and the world financial system froze up. At the inaugural press conference for the Bank of England's new financial policy committee, governor Sir Mervyn King described the deteriorating situation in the eurozone as a "mess" and warned that, although Britain's banks own a relatively small number of Greek bonds – about £3bn worth – there could be dramatic knock-on effects if a default resulted in a loss of confidence throughout the global financial system. That gives Treasury officials a strong incentive to ensure that the banks sign up. Without a voluntary agreement from investors, the powerful credit ratings agencies will declare that Greece has defaulted, spreading chaos. US Federal Reserve governor Ben Bernanke last week urged European governments to resolve the Greek crisis or risk threatening "the European financial system, global financial system, and European political unity".

Global stock markets bounced back on Friday after European Union leaders reached agreement on a €120bn (£105bn) bailout for Greece. Most Asian markets were up, with the Nikkei in Tokyo gaining 0.85% to 9678.71 and Hong Kong's Hang Seng rising 1.6% to 22,115.24. The FTSE 100 index in London opened 75 points higher. On Thursday, it closed down 98.61 points at 5674.38 after downbeat comments on the state of the economy from the US Federal Reserve chairman, Ben Bernanke. European leaders agreed on Thursday night to launch a fresh bailout of Greece, assuming the country passes an austerity package next week. Britain is to be spared from taking part in the rescue after leaders accepted David Cameron's argument that the bailout should be borne by the eurozone. The rescue will be provided by Greece's "euro partners and the International Monetary Fund", meaning that Britain is exempt from the European part of the package. Germany had been insisting that the bailout should be partly funded by all 27 EU members, but backed off. Without the final tranche of last year's €110bn bailout – €12bn from the eurozone and the IMF – Greece would be broke by mid-July. Brent crude oil rebounded by more than a dollar to $108.70 a barrel on Friday morning, after tumbling 6% on Thursday when the International Energy Agency announced the release of 60m barrels of emergency oil supplies on the market in an attempt to stem soaring petrol and other energy prices. US crude climbed to $92.34 a barrel. It is only the third time in the 37-year history of the IEA that oil has been released in this way and follows repeated calls on Opec to turn on the taps and bring down the price of oil.

Much of Europe is now engaged in achieving quick reduction of public deficits through drastic reduction of public expenditure and it is crucial to scrutinise realistically what the likely impact of the chosen policies may be, both on people and the generating of public revenue through economic growth. The high morals of "sacrifice" do, of course, have an intoxicating effect. This is the philosophy of the "right" corset: "If madam is at all comfortable in it, then madam certainly needs a smaller size." However, if the demands of financial appropriateness are linked too mechanically to immediate cuts, the result could be the killing of the goose that lays the golden egg of economic growth. This concern applies to a number of countries, from Britain to Greece. The commonality of the "blood, sweat and tears" strategy of deficit reduction gives some apparent plausibility to what is being imposed on more precarious countries like Greece or Portugal. It also makes it harder to have a united political voice in Europe that can stand up to the panic generated in the financial markets. In addition to a bigger political vision, there is a need for clearer economic thinking. The tendency to ignore the importance of economic growth in generating public revenue should be a major item for scrutiny. The strong connection between growth and public revenue has been observed in many countries, from China and India to the US and Brazil. There are lessons from history here, too. The big public debts of many countries when the second world war ended caused huge anxieties, but the burden diminished rapidly thanks to fast economic growth. Similarly, the huge deficits that President Clinton faced when he came to office in 1992 melted away during his presidency, greatly aided by speedy economic growth. The fear of a threat to democracy does not, of course, apply to Britain, since these policies have been chosen by a government empowered by democratic elections. Even though the unfolding of a strategy that was not revealed at the time of election can be a reason for some pause, this is the kind of freedom that a democratic system does allow the electorally victorious. But that does not eliminate the need for more public discussion, even in Britain.

The International Finance Corporation (IFC), member of the World Bank Group, and the European Bank for Reconstruction and Development (EBRD) granted a 114.8 million euros loan to Cernavoda Power company to co-finance the construction and exploitation of the 138 MW wind farms Cernavoda I and II, reads a release issued by the two banking institutions. EBRD and IFC each grant a 57.4 million euros loan for Cernavoda Power, whose majority shareholder is EDP Renovaveis, to finance the construction and exploitation of the wind farms.
This is the first "project finance"-type of investment of EBRD and IFC in the renewable energy sector in Romania.
"Supporting the projects devoted to renewable energy is one of the key priorities of EBRD. The Cernavoda-based wind farm will make a major contribution to expanding the capacity to generate wind energy in Romania and to reaching the EU renewable energy standard figures," said Nandita Parshad, EBRD head of power and energy utilities.
The Cernavoda-based wind farm located in the south-eastern region of Dobrogea will become one of the largest wind parks in Romania. Cernavoda I is operational now generating already 69 MW while Cernavoda II will be put into operation soon only to generate another 69 MW. Its total capacity will represent the fourth part of the total capacity of generating wind energy in Romania. AGERPRES

Greece's embattled prime minister has survived the first of a trio of tests that could sink the Greek economy and lay waste to Europe's single currency by winning a parliamentary vote of confidence in his reshuffled government. George Papandreou must now try to drive through a package of savage spending cuts and national assets sales in order to secure a new EU bailout. With the complex effort to stave off a Greek sovereign default moving towards a climax and anti-government and anti-EU protesters laying siege to central Athens, Papandreou won the vote by 155-143 in the 300-seat chamber. Brussels and other EU capitals anxiously watched the drama in Athens prior to a crucial summit of EU leaders. "Good news for Greece and for the EU as a whole," said Jose Manuel Barroso, the president of the European commission. Papandreou's victory removed "an element of uncertainty from an already very difficult situation. His government can now focus all efforts on building support in parliament for the ambitious series of fiscal measures and privatisations." The vote kicked off a crucial three weeks that could make or break the euro. Leaders in Brussels spoke of the worst crisis in Europe since the second world war, the International Monetary Fund (IMF) set ultimatums before the 17 countries of the single currency, and international ratings agencies classified the bailout terms for Greece as a likely default. In order to secure an immediate €12bn lifeline and then EU agreement on a second bailout running to more than €100bn over three years, Papandreou now has to persuade parliament to back a radical programme of spending cuts, tax increases, and a mass assets sell-off by the end of next week

Euro Has Become Greatest Threat to Continent's Future - Finland is a country that is often held up as a successful model for other European countries, but the success of the right-wing populist "True Finns," who captured 20 percent of the vote in April's parliamentary elections, came as a wakeup call to the political establishment in Brussels. As the skeptics gain ground throughout the EU, anti-European sentiments are growing in even the core countries of the union, like France and Germany. The euro, created with the aim of permanently uniting Europe, has become the greatest threat to the continent's future. A collapse of the monetary union would set Europe back by decades, dealing it a blow from which it might never recover, especially with Europe's position already threatened by the fast-growing Asian economies. How is a fragmented Europe to prevail against this new competition? This is why Europe's politicians want to defend the euro at all costs, and why they are approving one bailout package after the next. They are playing for time, hoping that the markets will settle down and the reforms will take hold. The business community is supporting their efforts, too. In a major advertising campaign scheduled to run in leading publications this week, top German business executives, including ThyssenKrupp Chairman Gerhard Cromme, Siemens CEO Peter Löscher and Daimler CEO Dieter Zetsche, promote the monetary union and insist: "The euro is necessary." They argue that ailing member states must be assisted financially, and that the common currency is "absolutely worth this commitment."

The rising cost of buying insurance through so-called credit default swaps (CDSs) on Greek debt came amid continued prevarication among eurozone finance ministers about releasing bailout funds to the indebted country and a warning that Italy's credit rating might be cut. According to Gavan Nolan, credit analyst at Markit, to insure €10m (£8.8m) of Greek debt would cost €2m every year for five years. No other country is as expensive to insure. Venezuela is the next most expensive, but even then is almost half the cost. The Greek government faces a confidence vote on Tuesday, which is adding to anxiety among investors, particularly as European finance ministers have said the bailout needs to be accompanied by austerity measures. Stock markets in Europe were weak on the opening, but a strong start by Wall Street helped to contain losses among European shares, with the FTSE 100 and the German stock market both ending 0.3% lower. However, the Italian market was down further as investors reacted to a warning by Moody's that it might downgrade the country's debt rating. With the cost of insuring against a Greek default rising, City sources were pointing to the potential controversy about whether the country's debt would be tackled in a such a way as to avoid the insurance sold through CDSs paying out. Some sources said they were concerned that if holders of CDSs became entitled to payouts it would cause the institutions that sold the insurance to make multimillion pound payments.

EUROZONE - European stock markets fell sharply on Monday morning following the failure of eurozone leaders to reach agreement on financial aid for Greece over the weekend. Traders were disappointed that Greece has still not been guaranteed the next €12bn (£10.5bn) instalment of its original bailout. The lack of detail over a second Greek rescue package also concerned the City, amid speculation that a disorderly Greek default would send panic through the eurozone, and beyond. The FTSE 100 shed 64 points, or just over 1%, in early trading to 5650. The sell-off was led by the banks, with the Royal Bank of Scotland and Lloyds Banking Group both losing almost 3% of their value. The French CAC fell more sharply, losing 1.7% when after the official opening was delayed by technical problems. Germany's DAX was down 1.25%. Cameron Peacock, market analyst at IG Markets, said the financial markets were in "skittish" mood. "Markets simply don't like uncertainty so the expectation is that traders will remain risk averse, pushing equities – and the euro – lower as a result," said Peacock. "Even on the assumption that the next round of funds is released to Athens, there's no shortage of speculation that in the longer term Greece will continue to struggle," he added. Eurozone finance ministers met over the weekend in Luxembourg, in an effort to reach agreement on the desperately needed €12bn tranche of funding, and the details of the new rescue deal. The talks broke up in the early hours of Monday, with the final decision postponed until early July. This means the money will only be granted if the Greek parliament agrees a new round of deeply unpopular austerity cutbacks.