Eurozone crisis live: Spanish bond yields rise again, as Merkel 'bleeds' for Greece - as it happened

German Chancellor Angela Merkel speaks to the media on September 17, 2012 in Berlin, Germany.
German chancellor Angela Merkel told reporters that she feels Greece's pain, but that the country must push on with its reforms. Photograph: Sean Gallup/Getty Images

That's where we end today's liveblog. Back tomorrow. Until then, thanks for reading and commenting, and have a good eveninh.

A view shows containers at the Lisbon harbour during a strike by Portuguese harbour workers, in Lisbon September 17, 2012. Strikes over salaries and labour reforms brought most of the country's ports to a halt and reduced operations at refineries on Monday.
Lisbon Harbour. Photograph: Jose Manuel Ribeiro/Reuters

Strike action in Portugal has disrupted work at most of the country's ports, and also hit operations at some oil refineries.

Workers at Portuguese oil company Galp began a three-day strike on Monday that has slowed some of its crude refining operations, although supplies of refined fuel is not hit.

Meanwhile, sea traffic controllers and staff at ports across the country began a 48-hour strike. That has made it hard for ships to dock.

The protests are in opposition to the Portuguese austerity programme, as Reuters explains:

The government has made it easier for companies to fire and hire workers and harder for unions to negotiate pay increases while it hiked taxes for workers to meet tough fiscal goals under the terms of a €78bn EU/IMF bailout.

A worker gestures at one of the entrances of the Lisbon harbour during a strike by Portuguese harbour workers, in Lisbon September 17, 2012.
A worker gestures at one of the entrances of the Lisbon harbour during a strike by Portuguese harbour workers, in Lisbon September 17, 2012. Photograph: Jose Manuel Ribeiro/Reuters

Credit default swaps show Spanish and Italian fears

The cost of insuring Spanish and Italian government debt against default has jumped today - another indication of rising worries over the eurozone periphery today.

The cost of a Spanish credit default swap contract surged by 33 basis point to 375 (which means it now costs €375,000 per annum to insure €10m of Spanish debt against default).

The Italian equivalent picked up by 23 points to 330bp.

Significant moves, but still below the levels where default is a realistic prospect.

Another small development from Greece: government ministers and Troika officials will hold talks every day, until the debt inspectors leave the country (that's via Greek journalist Efthimia Efthimiou):

Efthimia Efthimiou (@EfiEfthimiou)

#Greece Senior FinMin official: There will be discussions with the Troika members on daily basis until Troika leaves

September 17, 2012

Could be a war of attrition...

Speaking of Greece, reader James Wilkins suggests Spanish PM Mariano Rajoy is keen to avoid emulating former Greek leader George Papandreou:

Is it naive to suggest that if Rajoy does not want to go down in history as a Spanish Papandreo by capitulating to the combined forces of the Troika, he could resign.

No-one forces politicians to stay in their jobs for ever, and do things against their will. If Greek politicians had not been glued to their seats at the beginning of the crisis ordinary Greeks would be suffering less now... and Angela Merkel’s heart could heal.

Judges and doctors start strike action in Greece

Greece entire criminal justice system has been brought to a grinding halt today.

Our Greek correspondent Helena Smith reports that judges and prosecutors walked off the job over projected wage cuts foreseen in the austerity package international lenders are demanding in return for rescue funds.

This was the scene at the Greek supreme court in Athens today, as judicial officials began what could be lengthy protests:

Judicial officials take part in a protest at the country's Supreme Court building in Athens, Monday, Sept. 17, 2012.
Judicial officials take part in a protest at the country's Supreme Court building in Athens, Monday, Sept. 17, 2012. Photograph: Thanassis Stavrakis/AP

Helena writes:

Racheting up the pressure on the government, criminal and civil judges, prosecutors and court officials, have taken the unprecedented step of going on strike in a move that promises to throw one of the central pillars of society into mass disarray.

The two-week protest, the longest in living memory, will put the kabosh on thousands of cases being heard not least those involving contested tax payments (court officials estimate a backlog of approximately 165,000 in that area alone.)

With the exception of judges at the council of state, Greece’s highest legal body (and an hour of emergency cases being heard between 9 to 10 AM every day), court officials have vowed to participate in the action nationwide.

At a protest gathering held in a chamber at the Supreme Court earlier today, judges vented over the planned wage cuts saying the strike would last until the controversial austerity package is brought before Athens' 300-seat parliament for ratification at the end of the month.

"We state that we are resolute in our decision to protect our rights as guaranteed in the constitution," Vassiliki Thanou, head of the Association of Judges and Public Prosecutors, told the assembled crowd.

"Time for the government has run out," she added.

The walk-out is by far the most serious confrontation with the government since the elevation of the conservative-led, three-party coalition to power in June – and, says unionists, underlines the scale of public anger over cuts that are widely seen to be unfair.

The court officials are not alone. More than 22,000 doctors at state-run hospitals also went on strike today in what was described as “indefinite” protest action over unpaid overtime pay. State clinics across Greece will only treat emergency cases. With reserves in public coffers running perilously low (as a result of delays in the disbursement of the latest €31.5 bn rescue loan originally due in July) the government has put off paying suppliers' bills and salaries in addition to overtime pay. Earlier this month, private doctors similarly began refusing to treat state-insured patients without full payment, while protesting pharmacists also began refusing to hand over medicines at prescription prices.

The Greek academy was also brought to a halt as university professors kicked off a strike until the end of the month to protest the planned wage cuts. Professors, who own on average around €2,000 a month, would see their salaries slashed by around 20 % under the EU-IMF-dictated austerity package.

And here are some more photos from today's protests:

Doctors walk underneath a banner with anti-austerity measures, at the entrance of 'Laiko' Hospital, Athens, Greece, 17 September 2012.
Doctors walk underneath a banner with anti-austerity measures, at the entrance of 'Laiko' Hospital, Athens, today. Photograph: Fotis Plegas/EPA
An empty courtroom is seen in Athens, Greece, 17 September 2012.
An empty courtroom is seen in Athens, Greece, 17 September 2012. Photograph: Alexandros Beltes/EPA

Alberto Gallo, head of European Macro Credit Research at RBS, has put out an interesting research note today about the limitations of the European Central Bank's bond-buying plan.

Gallo argues that the ECB has done a good job of reducing the risk of the eurozone blowing apart quickly, it hasn't addressed the risk of a slower disintegration of the financial markets. A new plan to stimulate growth and kick-start bank lending is also needed:

He writes:

Surface-level operations to correct sovereign yields may reduce periphery-core funding differentials and capita flight, but cannot normalise them.

The fundamental cause of these imbalances is the lack of a fiscal union along with the monetary union. This is a 10-year project, but there are steps that policymakers can implement now, in our view: introducing a deposit guarantee scheme and allowing the ESM to buy bank loans in a TALF-like program to free up bank capital.

Worryingly for Madrid, Gallo's advise to investors is to go "long credit" (because of the impact of quantitative easing) but "short Spain", adding:

Liquidity alone will not fix solvency and capital flight issues in the periphery, which are deteriorating in Spain.

Stock markets in Europe are closed, and the main indices have all fallen.

Here's a closing summary:

FTSE 100: down 22 points at 5893, - 0.37%

German DAX: down 10 points at 7401, - 0.14%

French CAC: down 26 points 3555, - 0.73%

Spanish IBEX: down 6 points at 8148, -0.08%

Italian FTSE MIB: down 154 points at 16470, - 0.93%

With Spanish bond yields still sharply higher today, there is concern in the City that the eurocrisis is poised to flare up again.

Michael Hewson of CMC Markets comments:

A sense of realism has returned once more as investors realise that the same old problems remain as intractable as ever.

Industrial unrest in Spain against further austerity, as well as concerns about regional fragmentation, has made investors realise that for all the promises of action by politicians and central banks, ultimately the fate of Europe will be decided by the people, and not by political will.

Which, in a democracy, isn't a bad thing. We may find, though, that pressure from the financial markets forces Spain's hand.

Steve Collins, global head of dealing at London & Capital Asset Management, reckons this has not been the most scintillating day in the financial crisis:

Steve Collins (@TradeDesk_Steve)

This has to be the most boring day in months ...........

September 17, 2012

Eyebrows have been raised in Athens over Angela Merkel's statement today that her "heart bleeds" for Greece (see 11.09).

Helena Smith, our correspondent, point out that this isn't the first time that the German chancellor has publicy "wept" for Greece:

Merkel, who insists on reading a digest of the Greek news everyday so she can be kept abreast of the crisis "from the Greek perspective," recently told German TV that her "heart bleeds for pensioners" who are not at fault and now have to pay for the sins of the profligacy wrought by past Greek governments.

The reaction in Greece, where the government is now under immense international pressure to come up with more cuts that will inevitably worsen the recession engulfing the country and with it unemployment, has been noticeably mute. Most Greeks are not sure what to think.

After round upon round of tax increase, pay and pension cuts (enacted in the main at the request of EU paymaster Germany), the vast majority are in survival mode - unable to show much euphoria even over Berlin's latest volte face and assurances that the country's future remains in the eurozone.

And here are a couple more photos from Merkel's press conference (see 12.19pm for a summary)

German Chancellor Angela Merkel addresses the media during a press conference at Bundespressekonferenz on September 17, 2012 in Berlin, Germany. Merkel spoke about national and international policy.
Photograph: Thomas Koehler/Photothek via Getty Images
German Chancellor Angela Merkel speaks to the media on September 17, 2012 in Berlin, Germany.
Photograph: Sean Gallup/Getty Images

France's finance minister, Pierre Muscovici, told reporters in London today that he believes the eurozone is "more secure than it was six months ago".

Back in mid-March, Greece had just hammered together the details of the bond-swap deal in which private investors wrote of tens of billions of euros. Since then we've had two Greek elections, the summit at the end of June when leaders agreed on banking union, the ECB's new OMT programme. The latter two initiatives are both building blocks in a more stable currency union - but there's so much more to do....

Muscovici also argued Spain must decide for itself whether to seek aid for itself, saying:

This is a matter of sovereignty and we do not decide for the Spanish government.

Today's rise in Spanish borrowing costs (see 15.04) shows, though, that Spain cannot put off a decision forever.

Here's some exasperated reaction from Twitter:

Luke Baker (@LukeReuters)

Guess what? Spanish 10-year yields just went back above 6.0 percent.... #EU leaders, never miss an opportunity to miss an opportunity?

September 17, 2012
Joseph Cotterill (@jsphctrl)

Oh c'mon with the Spain tough negotiators stuff. From the geniuses who brought you the Bankia recap.

September 17, 2012
Paweł Morski (@Pawelmorski)

Oh great. Boring theatrics as we pretend Spain won't end up in ESM. Acting it out like Rajoy's buying a fucking carpet in an Istanbul bazaar

September 17, 2012

Want to understand the German national psyche? Then check out this piece on the schwäbische Hausfrau – southern Germany's thrifty Swabian housewife.

As my colleague Julia Kollewe explains, the philosophy in Gerlingen, near Stuttgart, is to live thriftily, save hard, and, err, wear your fur coat inside out.

Here's a flavour:

This outlook is informed by a national psyche profoundly shaped by the experience of the Weimar republic's debt mountain and hyperinflation in the 1920s, when people pushed carts overflowing with banknotes through the streets.

You won't find any luxury boutiques in Gerlingen. Nonetheless, its 20,000 inhabitants have more purchasing power – an estimated €500m (£400m) a year – than any other town in Baden-Württemberg. Even the nearby state capital, Stuttgart, doesn't have many luxury shops. Compare that with Munich's Theatinerstrasse, which is lined with international brands such as Dolce & Gabbana, Armani and Swarovski.

"Bavarians live the baroque life," says Angela Schmid, head of the German housewife association's Württemberg branch. "Swabians do buy luxury clothes and other goods, but they don't like to show off. You might see a Swabian housewife enter a luxury boutique who is dressed like her cleaner. You won't see amazing hats in the street either or jewellery – people only show them to each other in private."

Swabians even have an expression for this – hälinge reich, which means "secretly rich".

More on Angela Merkel's postergirls of austerity here.

SPANISH BOND YIELDS BACK THROUGH 6%

The yield on Spain's 10-year bonds just rose through the 6% level, for the first time since Mario Draghi announced his new OMT bond-buying programme.

They opened at 5.8% this morning, so it's a significant rise. It puts more pressure on Mariano Rajoy to bite the bullet and apply for formal financial help, with conditions.

If he doesn't, the European Central Bank is not going to start mopping up unlimited quantities of shorter-term Spanish debt.

UPDATE: This graph hows how Spanish bond yields remained worryingly high this summer, before dropping sharply on 6 September, the day that Draghi launched OMT.

Spanish 10-year bond yields
Photograph: Reuters

Just in: France has sold over €5bn of short-term debt at negative interest rates, as investors continued to accept a guaranteed loss in return for safe-haven bonds.

The French treasury auctioned €3.78n of 13-week bills, with buyers paying an average yield of -0.012%, and a further €1.29bn of 22-week bills at an average yield of -0.004%.

Such negative yields reflect the rush of money into secure assets (France can be relied on to repay these debts when the bills mature).

France also sold €1.69bn of 52-week bills, with investors demanding a whole 0.029% yield in return for handing their cash over for a year.

Look who's back. Silvio Berlusconi has launched himself into the political spotlight again with an attack on Italy's current prime minister, Mario Monti.

Berlusconi told Italian daily newspaper il Giornale (proprietor: the Berlusconi family) that his party would abolish an unpopular property tax that is central to Monti's attempts to rebalance Italy's finances.

The former (and future?) prime minister declared that the property levy was an affront to Italian dignity:

The home is a pillar on which every family has the right to base its security for the future.

It wasn't immediately clear where Bersluconi would find the €20bn which the tax is meant to raise.

With Monti reluctant to extend his tenure as unelected leader beyond next spring's elections, Berlusconi appears to have a real chance of leading Italy again.

That's not causing many parties in the financial sector.

Nick Spiro of Spiro Sovereign Strategy says Monti has played a pivotal role in restoring confidence in Italy since being rushed to power last November:

The contrast between the technocratic Mr Monti and the scandal-plagued Mr Berlusconi has accentuated the political determinant of Italian sovereign risk

The spectre of another unstable and ineffective coalition government after next April's parliamentary election hangs menacingly over Italian sovereign debt. Mr Berlusconi's continued presence in Italian politics is a major concern for the markets - even if, as we have stressed before, most of Italy's problems remain as acute under Mr Monti as they did under his predecessor.

Berlusconi himself is on a week-long cruise.....

Former Italian premier Silvio Berlusconi (bottom left) disembarks from the MSC Divina for a stopover in Bari, southern Italy 16th September 2012. Berlusconi, who has recently hinted at a return to frontline politics, is on a week long cruise to the Mediterranean.
Former Italian premier Silvio Berlusconi (bottom left) disembarks from the MSC Divina for a stopover in Bari, southern Italy 16th September 2012. Photograph: Luca Turi/EPA

This video, uploaded to Youtube yesterday, shows scenes from Saturday's demonstrations in Portugal.

US manufacturing gloom

Some disappointing US economic news was just released, showing that the global slowdown has now hit America's manufacturing sector.

The Empire State survey came in at a rather weak -10.4, down from -5.85 in August. That's the lowest reading since April 2009, driven down by a slump in new orders.

This graph, by Scott Barber of Reuters, shows how the Empire manufacturing survey has deteriorated this year, in step with US GDP. Not a good sign at all.

Empire State data
Photograph: Reuters

Spanish bond yields rise

Spanish bonds have fallen in value this morning, as uncertainty over whether Madrid will seek financial help hits confidence in its debt.

This has pushed the yield (effectively the interest rate) on Spain's 10-year bond rose to 5.97%, up from 5.83% last Friday night. Not the in the "danger zone" yet, but a sign that investors are getting jittery about Madrid's plans.

MERKEL'S PRESS CONFERENCE SUMMARY

Angela Merkel's annual press conference is over. Here are the main issues raised:

The future of Europe: the German chancellor said that eurozone leaders must agree on closer political coordination across the region. She also argued that weaker euro members must continue to reform, to help rebalance the euro economy.

There are further steps we must take. As this crisis must be solved largely politically we need to do what we didn't do sufficiently when the euro was introduced, namely have more co-ordination and more accountability.

The Greek situation: Merkel said she wants Greece to remain in the euro. She didn't weaken her resolve on Greece reforms, saying they must be "carried through" even though some are difficult. She also, according to Bloomberg, said her "heart bleeds" at some of the suffering in Greece.

The European Central Bank: Merkel offered words of support to Bundesbank chief Jens Weidmann, saying his opposition to the ECB's bond-buying programme was fuelled by concern that Europe solves the crisis in a sustainable way.

Italy. Merkel said she had discussed the crisis in general terms with Italian PM Mario Monti over the weekend, but had not specifically discussed an aid package for Italy. She added:

Italy is courageously carrying on with its reform program and has made good progress.

On Saturday, protesters gathered in front of the Greek Parliament during a rally organised by the Indignant Greeks movement. Photograph: Simela Pantzartzi/EPA
On Saturday, protesters gathered in front of the Greek Parliament during a rally organised by the Indignant Greeks movement. Photograph: Simela Pantzartzi/EPA

Over in Greece our correspondent Helena Smith says Antonis Samaras the coalition government’s conservative prime minister has begun a crucial meeting with his finance and labour ministers.

The meeting comes as Athens enters the last stretch of the race to seal a controversial package of spending cuts demanded by lenders in return for further aid.

Helena writes:

In what is being billed as a crucial ten-day ten-day period for crisis-hit Greece, the government will attempt to finally close the contentious issue of cuts it must agree to in exchange for €31.5bn in rescue loans.

The Greek prime minister Antonis Samaras wants to seal the €12.5bn package, whose measures have provoked the wrath of unions and anti-bailout parties, in the coming days so he can present the savings in detail next week to visiting inspectors from the EU, ECB and IMF, the “troika” keeping the country afloat.

On a date that has yet to be decided later this week, Samaras will meet his coalition partners, socialist Pasok leader Evangelos Venizelos and Democratic Left leader Fotis Kouvelis for talks that are expected, at last, to put an end to the long-running saga over the measures.

The Greek media this morning, starting with the state-run news channel NET, are reporting that topping the list of cuts now on the table are the rise in pension age from 65 to 67 – a measure that is expected to save the state close to €1bn a year. Slashing benefits and health sector costs are also at the heart of the ongoing negotiations along with the steady reduction of wages for special forces including military personnel, the police and fire brigade. The package, tantamount to 5% of GDP, is part of efforts to bring down Greece’s debt load from the current 166% of GDP to 120 % of GDP by 2020.

Some more interesting lines from Angela Merkel's press conference: she has rejected the idea that the Irish rescue package should be relaxed, arguing that Ireland remains"on a good course".

That will disappoint Dublin, which has long been pleading for a reduction in the interest rate it is being forced to pay on the "promissory notes" issued to rescue its banking sector.

Merkel also said she believes it's "unlikely" that Europe will have a new banking supervisor in place by the start of next year. She said the EU must not "disappoint" by moving too fast.

Hmmm. It emerged over the weekend that plans to get the body up and running by 1 January had all but collapsed, after finance ministers squabbled over the plan.

MERKEL ON GREECE

Angela Merkel
Angela Merkel Photograph: Reuters

Just in: Angela Merkel says "her heart bleeds" to see the hardship being suffered by the Greek people in the crisis.

(That's via Bloomberg, whose command of German shames mine.)

Chancellor Merkel says she has made it very clear to Prime Minister Antonis Samaras that she wants Greece to remain within the eurozone. She also says that it is important that "wealthier" members of Greek society do more to help the country move forwards (a reference to tax-avoidance?).

Merkel's annual press conference is continuing, with the chancellor also defending Germany's tax-evasion deal with Switzerland, and calling for a political solution to the crisis in Iran.

In sombre mood, Angela Merkel tells today's press conference that the financial markets are "worried" about whether Europe's debts will be repaid.

A reporter asks a question about rebalancing Europe's economy. Merkel replies that she welcomes the focus on imbalances within the eurozone. She adds that she is trying to boost domestic demand, but also argues that other members of the region must make structural reforms to fuel growth.

UPDATE: There are also occasional bursts of laughter – one seemingly caused by the press photographers taking too many pictures, distracting Merkel from the questioning.

CharlieKilo (@TonyHill_7)

@graemewearden Obv it was because the many photographers release the shutter so it was difficult to hear anything else - Merkel laughed.

September 17, 2012

Merkel defends Bundesbank chief

Angela Merkel has defended Bundesbank chief Jens Weidmann, who argued in vain against the European Central Bank's new programme to buy the debt of struggling euro countries who accept fiscal "conditions".

Merkel told journalists at this morning's press conference that Weidmann was concerned about making sure there is a "sustainable solution to the crisis", and adds that there is nothing wrong with the Bundesbank chief expressing his opinions.

Update: Here's the key quote from Merkel, via Reuters:

I know him [Weidmann] and I know he is very concerned that the crisis is resolved in a truly sustainable way and that the euro is a stable currency.

This follows the public rebuke issued against Weidmann by Merkel's finance minister, Wolfgang Schauble this weekend (see here).

Merkel is taking a middle path, though, insisting that the ECB is independent while adding that it should not venture "into the realms of fiscal policy".

Angela Merkel's annual press conference begins

Angela Merkel
Angela Merkel Photograph: Reuters TV

Angela Merkel has called for European leaders to achieve "closer political co-ordination by the end of 2012", at the start of her annual press conference in Berlin.

The German chancellor is being quizzed about the euro crisis by journalists. She tells them that democratic legitimacy is a key issue, and that leaders need to look at ways to maintain it.

More to follow

Heads-up: Angela Merkel will be hosting her "annual press conference" shortly. The German chancellor is likely to be questioned about her views on the eurozone crisis, including possible future bailouts and calls for closer EU integration and bailouts.

That's a good moment to flag up that the Guardian launched a new series on Germany today. It's called Germany: the accidental empire.

Today, author and philosopher Bernhard Schlink writes about the burden of being German.

Kate Connolly, Ian Traynor and Siobhán Dowling cover the "guilt and resentment" Germany's savers feel over pressure to do more to end the euro crisis.

And Siobhán also explains how Leipzig was saved from economic decline.

Bloomberg reports that Mario Monti will be hosting three other eurozone leaders in Rome on Friday – Greece's Antonis Samaras, Spain's Mariano Rajoy, and Ireland's Enda Kenny.

So, two leaders who are trying to resist signing up for a bailout, and two who are coping with the consequences of one.

Just one obvious omission from the guest list: Pedro Passos Coelho, the Portuguese prime minister.

Matina Stevis (@MatinaStevis)

Portuguese feeling left out? RT @lindayueh#Greece PM Samaras, #Spain PM Rajoy, #Ireland PM Kenny to meet #Italy PM Monti in Rome on Sept 21

September 17, 2012

Market update

Spain and Italy's stock markets have fallen this morning, with other European indices also dropping back a little from Friday's highs.

Spanish IBEX: down 47 points at 8106, -0.6%

Italian FTSE MIB: down 93 points at 16530, - 0.5%

FTSE 100: down 6 points at 5909, -0.1%

German DAX: down 4 points at 7407, -0.06%

French CAC: down 8 points at 3573, - 0.23%

Mike van Dulken, head of research at Accendo Markets, says many questions remain despite recent developments in the eurocrisis, and beyond.

When will Spain ask for help, allowing Draghi to act? Will Greece be given more time? How many banks will the ECB have to supervise?

Thereafter, it’s still hoped that China still announce more stimulus especially after Investment back Citigroup cuts its GDP forecast to 7.6% from 8.0%.

There's plenty of coverage of the Spanish situation in the newspapers, and on the newswires today.

The Wall Street Journal predicts "an autumn of angry street protests by a recession-weary public" in Spain:

Spaniards are already reeling from a July round of cuts that eliminated Christmas bonus pay for public employees, lowered unemployment benefits and raised sales taxes, bringing new pain to wage earners hit by public-sector pay reductions two years ago.

"We cannot and will not accept more cuts," said Angel Arriero, a 39-year-old information engineer at a government ministry, marching in Madrid's late-summer heat Saturday with his wife and young daughter. He said his pay had dwindled by more 10% since Spain's economy was plunged into crisis four years ago.

"It's all too much for me to handle," he said, holding a sign that read "No más!" (No more!).

Reuters reports that Spain moved closer to a bailout on Friday when economy minister Luis de Guindos pledged to draw up a new set of fiscal reforms:

This is a blueprint for a fiscal and structural programme, this is a blueprint for a way forward," said one senior EU diplomat on condition of anonymity.

"Yes, we're moving towards a bailout but now a decision has to be taken by Rajoy. And right now, it's hard to know his intentions," the diplomat added.

In the Daily Telegraph,  Ambrose Evans-Pritchard says that Spain is "digging its heels in":

Spain’s attempt to resist a rescue until forced by markets leaves the eurozone in an impasse. The ECB cannot purchase Spanish bonds until Spain formally requests help from the bailout fund and signs a 'memorandum' ceding fiscal sovereignty.

Last weekend's protests in Madrid are a clear sign of the public anger against Mariano Rajoy's plans to cut public spending and civil service wages and raise taxes.

Some of the demonstrators demanded a referendum on Rajoy's €65bn austerity package, and there was palpable anger against the prime minister personally – 10 months after he won a landslide general election victory.

Here are some photos from the scenes:

A group of demonstrators hold a mock coffin with an effigy of Spanish prime minister Mariano Rajoy during a protest against Spanish government austerity measures, on 15 September 2012.  Photograph: SERGIO BARRENECHEA/EPA
A group of demonstrators hold a mock coffin with an effigy of Spanish prime minister Mariano Rajoy during a protest against Spanish government austerity measures, on 15 September 2012. Photograph: SERGIO BARRENECHEA/EPA
A fireman gestures towards a man dressed as Spanish prime minister Mariano Rajoy, centre, during protests in Columbus Square in Madrid on Saturday September 15, 2012.  Photograph: Andres Kudacki/AP
A fireman gestures towards a man dressed as Spanish prime minister Mariano Rajoy, centre, during protests in Madrid's Columbus Square. Photograph: Andres Kudacki/AP
People take part in a demonstration against government austerity measures aimed at slashing the public deficit and avoiding the need for a financial bailout on September 15 in Madrid.
Photograph: Ervin Sarkisov/CORBIS/Corbis

The BBC has a good write-up of the demonstrations, here.

The agenda

It's a quiet start to the week, although there is some new economic data that will show how the eurozone economy is performing
Eurozone July trade balance: 9am BST/10am CEST
Eurozone July current account: 9am BST/10am CEST
Dutch debt action: 10am BST/11am CEST
French debt auction: 2pm BST/3pm CEST
French finance minister Pierre Moscovici gives speech and press conference in London: afternoon

Spanish Prime Minister Mariano Rajoy answers a question during a parliamentary session at the Spanish parliament in Madrid September 12, 2012.
How long can Spanish prime minister Mariano Rajoy avoid asking for financial assistance? Photograph: Andrea Comas

Good morning, and welcome to our rolling coverage of Europe's financial crisis.

Spain is top of the agenda this morning. Last weekend's meeting of euro finance ministers was dominated by the question of whether, and when, Madrid will cave into pressure and seek financial help.

With the European Central Bank promising to buy unlimited quantities of bonds if a country applies for aid, the pieces are now in place. Spanish prime minister Mariano Rajoy, though, is resistant.

Almost everyone expects the Spanish bailout. But with the country's borrowing costs back in safe territory, Rajoy isn't being pushed. How long can he hang on for?

Jan Kees de Jager, the Dutch finance minister, put the ball firmly in Spain's court yesterday, telling CNBC that:

It’s up to Spain whether or not to ask for a further program...There is still a lot to gain for Spain in Europe without asking for a full programme.

Meanwhile, the Spanish public continues to register its anger over the direction the country is taking. Tens of thousands of people took to the streets over the weekend, with similar demonstrations also taking place in Portugal (more on this shortly).

Greece, of course, is the other big issue. Will Athens be granted more time to hit its targets, and has it done enough to win its next aid tranche?

Finance minister Yannis Stournaras told us last night that he is now more upbeat, having met his fellow finance ministers in Cyprus on Friday and Saturday:

I am more optimistic ... we have turned the corner. There is more trust between us and our partners but we still have a long way to go.

In the financial markets, though, the optimism created by the Federal Reserve's third round of quantitative easing (QE3) is ebbing away, with the FTSE 100 dropping by 26 points in early trading.

As usual, we'll be tracking all the latest development in the eurozone and beyond.