European Crisis Live: OECD slashes Eurozone Growth Forecast Amid Debt Crisis

1555 BST: One more item

Bloomberg is reporting that EU Leaders may discuss using the European Stability Mechanism, it's permanent bailout fund, to directly recapitalize banks at tomorrow's Summit. It's not the worst idea in the world, and it's a darn sight better than the limp menu of EIB injections and "project bonds" but it does create a few political headaches.

As mentioned, the ESM hasn't been signed-off by most European parliaments - including Germany. Furthermore, Ireland's Fiscal Pact vote is still to come. Still it's worth exploring the potential of the ESM's balance sheet, even if the authority to use it hasn't quite been established yet.

Right ... I'm off for the day. We'll crack on tomorrow with much more to talk about, I'm sure. Thanks again for reading!

Martin

1435 BST: This election might actually *be* a referendum

... and it's not in Greece. It's worth remembering that the Netherlands (the heretofore Robin to Angela Merkel's Austerity-First Batman) will go to the polls on 12 September in an election that is the direct result of a political row of the very same spending cuts Dutch Prime Minister Mark Rutte had demanded of his European brethren.

Today, the man who toppled that government, Freedom Party leader Geert Wilders, today filed a lawsuit in The Hague to prevent the current caretaker government from voting to approve Dutch participation in the permanent EU rescue fund, the €700bn European Stability Mechanism (ESM). Wilders says such a vote should only be held after the national elections in September.

He has a point - the government was dissolved last month and this vote would place a permanent responsibility on the Dutch people - but legal experts say he's unlikely to win.

Still, he's raised a very interesting talking point for the fall ...

1410 BST: More concerned about *if* I get paid ...

... as opposed to *What* I get pad

Germany's "on-the-run" two-year bond, known as a Schatz, is currently trading at 0.061 percent (bid-side yield). It carries a coupon of 0.25 percent. Inflation in Germany is 2.2 percent.

Germany will tomorow sell €5bn in new two-year bonds with no coupon whatsoever.

1325 BST: Weak Sterling .... BoE rate cut?

Sterling is trading 0.25 percent lower, at 1.5785, against the US dollar after this morning's tame inflation figures and a public call by the head of the IMF for the Bank of England to lower its key lending rate.

April inflation, annualised, slowed the most in more than two years, the ONS said. According to RBS economists, the 3 percent headline figure and the downward trend in core inflation "is particularly welcome as it lowers a potential barrier to further QE - or possibly even a Bank Rate cut - if the MPC deems further loosening to be necessary."

Both of those tools were mentioned in Christine Lagarde's press conference this morning after the conclusion of the IMF's annual review of the British economy. Her prompting of Osborne to re-visit certain aspects of his "austerity first" policy has been seized by many of the Chancellor's critics (and those of BoE Governor King) as evidence of failed fiscal and monetary policies.

Former MPC member and now Dartmouth College Economy Professor Danny Blanchflower, (his name's David, of course, but this is his Twitter handle) who once described King as a "tyrant", Tweeted today: "IMF calls for more monetary stimulus and if no take off more fiscal stimulus Hugely embarrassing for failed Osborne"

1210 BST: OECD Bites

Eurozone: (-0.1 percent 2012; +0.9 percent 2013)

"The risk is increasing of a vicious circle, involving high and rising sovereign indebtedness, weak banking systems, excessive fiscal consolidation and lower growth"

United Kingdom: (+0.5 percent 2012; +1.9 percent 2013)

"Fiscal consolidation is a drag on growth ... However ... fiscal policy remains heavily constrained. The ambitious government plan to restore fiscal sustainability remains on track and appropriate despite disappointing economic growth "

Germany: (+0.6 percent 2012; +1.9 percent 2013)

"Strong labour market performance, low deleveraging needs and favourable financing conditions will contribute to the rebound in private consumption and investment ... The expected recovery of world trade should further improve business confidence and mitigate negative spillovers from weakness in the rest of the euro area."

United States: (+2.4 percent 2012; +2.6 percent 2013)

"The programmed expiration of tax cuts and emergency unemployment benefits, together with automatic federal spending cuts, would result in a sharp fiscal retrenchment in 2013 that might derail the recovery ... The programmed expiration of tax cuts and emergency unemployment benefits, together with automatic federal spending cuts, would result in a sharp fiscal retrenchment in 2013 that might derail the recovery,"

China: (+8.2 percent 2012; +9.3 percent)

"As the inventory cycle turns, and fiscal and monetary policy become more expansionary, growth should pick up in the course of 2012 and stabilise at over 9 percent in 2013 ... "Capital outflows should be liberalised with appropriate sequencing so as to help create a more balanced two-way market for renminbi

1135 BST: For the record

What *does* appear to be on the agenda, according to Societe Generale economist James Nixon:

1. A €10bn increase in capital for the European Investment Bank

2. Marking greater proactive use of EU structural funds to aid development in poorer countries

3. Introducing commonly-backed "project bonds" to fund the pan-European infrastructure projects (infrastructure, by the way, is this weeks magical economic elixir)

"It is this final proposal that is proving the most controversial, with France in particular pushing project bonds as a sort of Trojan horse that may potentially end up being a stepping stone on the way to common European government financing achieved through full Eurobonds."

1125 BST: Managing expectations

Germany is already downplaying the importance of tomorrow's "informal" EU Leaders' Summit in Brussels via a spokesperson who says, rather incredibly, that it's *not* and emergency meeting to discuss the situation in Greece. Hmmm ... what, exactly, *would* need to happen for it to be considered and emergency?

The leaders will also not discuss the issue of Eurobonds, according to the spokesperson, reiterating a long-established view, and will not discuss loosening deficit reduction goals.

... and why would they?

1035 BST: Rare moments of clarity

Christine Lagarde is playing a blinder in her London press conference following the IMF's annual review of the British economy. Speaking to the inevitable questions regarding Europe and Greece, the IMF head says she hopes that whoever wins on 17u June will engage in constructive dialogue with the Troika regarding structural reforms and lending agreements. She also adds that while IMF lending decisions are "rules based" she's more than happy to listen to any new ideas the elected Greek leadership may have.

I could be wrong, but this does seem to sound like a rare bit of respect being granted to the Greek political process and it's refreshing NOT to have to hear someone outside of Greece refer to the vote as a "referendum on the single currency."

1025 BST: Better late than never

In all the OECD, IMF, Inflation hallabaloo, I missed the Spanish T-Bill auction! Anyway, Spain borrowed €2.5bn in 3-month and 6-month bills at an average yield of 0.846 percent and 1.737 percent respectively. Demand for the shorter bills fell (€3.9 bid for every €1 for sale) from the April auction, but rose (€4.3 bid for every €1 for sale) for the longer-dated paper.

Still, it's worth comparing Spain's 6-month borrowing costs of 1.74 percent are still 30 basis points higher than Germany's 10-year borrowing costs. Not sure this is progress.

1015 BST: Lagarde and Osborne commenting on IMF annual review:

... and it feels as if they're agreeing to disagree. IMF head Christine Lagarde says the UK's fiscal prudence has bought credibility at a time of global crisis, but says it should at least seek budget-neutral measures to boost infrastructure spending and "shield the poor". Furthermore, the woman who ran France's finances (the nation of 37 consecutive years of deficits) says Britain needs to consider more stimulus if economic growth weakens.

Chancellor Osborne likes the first part of her comments, saying that he's working for the best, but preparing for the worst, but instead focuses on the fact that the IMF supports his deficit reduction plans.

1005 BST: BREAKING NEWS: Fitch downgrades Japan

Debt rating cut to A+ with a negative outlook for the world's third-largest economy.

US dollar rises quickly to 79.85 against the Yen.

1000 BST: IMF takes a swing

So, that was an enjoyable 30 mintues for the UK government. After boasting of slowing inflation and record monthly cash surpluses, the killjoys at the International Monetary Fund release a statement saying Britain needs to do more to ensure the economy will shake-off the current recession and urges a re-think on austerity measures from Prime Minister David Cameron and Chancellor George Osborne.

The IMF also takes a pop at the Bank of England, urging it to either expand its current £325bn programme of quantitative easing or reduce interest rates from the current record-low 0.5 percent in order to spark growth in the £1.1tn economy.

0950 BST: About that debt ...

Downing Street will surely hype its April borrowing figures, which show a record monthly cash surplus of £23.2bn. But the ONS says the figures were inflated by a £28bn transfer of assets from the Royal Mail pension fund to the government's books, which Chancellor George Osborne announced at his 21 March budget. What he's unlikely to reiterate, however, is the fact that £37.5bn in pension liabilities will be taken on by the taxpayer as part of the arrangement, although those numbers are spread out over a 20-year period. Still, it's an $8.4bn hole that has to be filled.

0940 BST: One less thing on the to-do list:

Her Majesty's Treasury Tweets:

Inflation down to 3.0%, for the first time in this Parliament no open letter from the Governor of the Bank of England to the Chancellor

0935 BST: UK Inflation

Consumer prices rise at the slowest year-on-year pace for about two years, with headline CPI coming in at +3.0 percent after a 0.6 percent monthly acceleration. The annual headline figure was about 0.1 percent slower than had been estimated. The ONS says the biggest downdraughts inside the figures came from air fares, alcohol, clothing and sea transport (sea transport?).

So-called "real world" inflation, as measured by the RPI, comes in at +0.7 percent for April, taking the annual advance to +3.5 percent, bang in-line with economists' forecasts.

Sterling, which had been better bid in anticipation of a firmer figure, falls a few pips to $1.5814 against the US dollar.

0920 BST: OECD Tapebomb

Some selected economic growth figures from the .. ahem .. .comprehensive OECD release

US: +2.4% (2012) +2.6% (2013)

China: +8.2% (2012) +9.3% (2013)

Eurozone: -0.1% (2012) +0.9% (2013)

Germany: +3.1% (2012) +1.2% (2013)

France: +0.6% (2012) +1.2% (2013)

UK: +0.5% (2012) +1.9 (2013)

Greece: -5.3% (2012) -1.4% (2013)

Spain: -1.6% (2012) -0.8% (2013)

Italy: -1.7% (2012) -0.4% (2013)

0910 BST: Euro area to slip back into recession

In its semi-annual assessment of the global economy, the Organisation for Economic Co-operation and Development (OECD) says Eurozone GDP will contract by -0.1 percent this year before rebounding to +0.9 percent in 2013. The figures come alongside the Paris-based OECD's view that global economic expansion will slow to +3.4 percent this year from a +3.6 percent advance in 2011.

0900 BST: Spain's rising bill

The Institute of International Finance says Spain's banks could need another €76bn in capital to cover loan losses that could climb to €260bn as the economy deteriorates. The banking lobbyist said the Spanish sector was on track to raise around €184bn but that it still had a significant shortfall in capital buffers should the broader economy continue to slow.

0835 BST: Risk on

The Euro pops past 1.2805 against the dollar as the tone improves across all asset classes. Peripheral bond yields in Spain and Italy are improving and broader equity indices are showing solid gains in the opening half hour of trading, led by a nice 1.1 percent lift for the FTSE 100.

0830 BST: Sticky prices

We'll get UK inflation figures at 0930 BST and they're likely to make interesting reading given comments this morning from the Bank of England's departing economist (and frequent thorn in the side of Governor Mervyn King). Speaking with CNBC Europe television, the soon-to-be President of the Peterson Institute said UK inflation was "stickier" than he had first anticipated and that the current situation in Europe was indeed hampering UK growth potential.

He departs the government's message on austerity, however, by suggesting another round of stimulus would kick-start an exit from the current double-dip recession. The comments have given the Pound a slight boost this morning as it trades at 1.5833 against the US dollar.

0810 BST: Peripheral bonds

With 10-year Bunds adding around 4 basis points this morning in what's often called a "risk on" trade, we're also seeing corresponding falls in government bonds markets across the indedbted edge of Europe, which will make Spain's task of rasing €2.5bn in treasury bills this morning a tiny bit easier.

Spain's benchmark 10-year bonds are trading at 6.22 percent, a four basis point improvement. Italy's 10-years posted similar declines to trade at 5.84 percent while France's 10-year bonds were marked at 2.82 percent.

0805 BST: First ticks green

Stocks kick-off the session in positive territory with a 0.5 percent gain for the FTSE Eurofirst 300 and solid gains for Spain's IBEX and Italy's FTSE MIB.

London's FTSE 100 is showing modest early gains of 0.4 percent, but with the better performance of banks in Europe, the infrastructure investment news from China and a solid start for FTSE heavy-weight Vodafone, I suspect the gains will improve over the course of the morning. Germany's DAX has an early read of +0.8 percent.

0755 BST: Good Morning!

A solid overnight session in Asia - where the broadest measure of performance looks set for its best two-day gain in more than a month - has set European markets up for a better open Tuesday, although it's difficult to say what's driving the optimism other than value. Beaten down shares were snapped-up all over the region last night as the MSCI Asia-Pacific Index rose around 1.3 percent at one stage during the session before retreating to a 0.2 percent gain by 0740.

State media reports from China indicate officials are preparing to accelerate infrastructure investments in the worlds' second-largest economy in an effort to stabilize growth and, perhaps more importantly, employment.

In Europe, bund yields rose marginally at the start of trading off the back of the better tone from Asian equity markets, with 10-year bunds rising 2 basis points to 1.46 percent. The single currency was little changed at 1.2783 against the US dollar