11.30 The European Central Bank seems to be setting itself up in diametric opposition to Germany - an uncomfortable position for the rest of the world and especially struggling eurozone nations.
The eurozone economy faces serious risks and politicians must act fast, he said, adding that the ECB stands ready to provide further liquidity to solvent banks, the central bank's president Mario Draghi said.
Speaking at the annual ECB Watchers conference in Frankfurt, he said:
There are serious downside risks here. This risk has to do mostly with the heightened uncertainty.
The ECB has the crucial role of providing liquidity to sound bank counterparties in return for adequate collateral. This is what we have done throughout the crisis, faithful to our mandate of maintaining price stability over the medium term - and this is what we will continue to do.
We have reached a contingency where political choices have become predominant over monetary instruments that we can use in the near future.
11.20 Nothing in Greece is safe - even the ultimate defensive company, Coca-Cola. Moody's have downgraded the credit rating of Coca-Cola Hellenic Bottling Company's bonds.
Moody's said:
Today's rating action is prompted by the weakened credit profile of Coca-Cola Hellenic and our expectations that the current macroeconomic and consumer outlook across Europe will remain depressed in the coming quarter.
11.00 Angela Merkel has been speaking at a conference for entrepreneurs in Berlin, and has stuck to the hardline that Germany won't be taking on the rest of Europe's debts and propping them up.
Issuing common euro-area bonds is the "path to mediocrity," she told the conference.
Germany won?t be persuaded of all those quick solutions.
The country will reject any such "quick" crisis solutions at the G20 summit she said. So don't expect any massive action from Mexico in that case...
10.40 But while the markets might be enjoying the help for banks from the Bank of England, the Institute of Directors has poured cold water on the whole endeavour:
Graeme Leach, chief economist at the IoD said:
The extended liquidity and funding for lending schemes are welcome, but limited.
The liquidity scheme will need to be massively expanded if break-up and contagion spread across the eurozone. The funding for lending scheme helps the supply of money and the demand for it, by lowering the cost of borrowing.
But the core problem remains. Companies alarmed by the euro crisis will not be eager to borrow regardless of the cost.
10.15 UK bank shares are having a very strong morning after the announcement of more short-term liquidity from the Bank of England.
Royal Bank of Scotland shares are up 7pc to 245.4p, while Barclays jumped 5.2pc to 202.8p and Lloyds is up 4.8pc to 31.12p.
10.00 The latest UK trade figures are out and show a drop in exports to non-EU countries.
The Office for National Statistics said the trade deficit widened to ?10.103bn - the second-largest gap since records began in January 1998. That compared to a deficit of ?8.734bn in March and economists' forecasts for a gap of ?8.5bn.
The goods trade deficit with non-EU countries widened to ?5.202bn in April from ?4.179bn in March and against forecasts for a gap of ?4.18bn.
Exports to non-EU countries fell 10.3pc on the month, driven by lower sales of chemicals and cars.
09.55 Moody's is having a busy week - after downgrading Spain and threatening it with junk status on Wednesday night, today the ratings agency has cut the ratings of 11 European banks and said more downgrades would follow if Greece leaves the eurozone.
Moody's today downgraded five Dutch banking groups, three French banks and one each from Belgium and Luxembourg.
09.45 Bond markets are looking a lot calmer this morning - the yields on Spanish and Italian bonds have retreated from their highs of yesterday, although both are still trading above 6pc.
The yield on Spanish 10-year government bonds is down by 10 basis points to 6.002pc, while the yield on Italian bonds is down 11 basis points to 6.74pc.
09.10 In case you missed the debate on the ?140bn emergency lending scheme for banks on Radio 4 this morning, this is what Mark Hoban, the Financial Secretary to the Treasury, said the message for businesses is: "Finance is available at a price they can afford."
Up against the Shadow Chancellor Ed Balls, he said that businesses felt restrained by the cost of lending, with banks refusing to lend to them.
Mr Hoban said that if there was 5pc take up of the scheme, then loans would total ?80bn. The plan follows Project Merlin under which bank pledge to lend more and the National Loan Guarantee scheme to boost lending to small businesses.
When asked what happens if this "funding for lending" plan fails, he replied: "We've got to make it work."
Ed Balls, the Shadow Chancellor (below), was again banging his "I told you austerity would cause a recession" drum on the programme, but refused to quantify how much of a boost his suggestion to cut VAT would have contributed to growth.
08.55 And you thought you were busy? Greek left-wing leader Alexis Tsipras is going to become a father for the second time any day now - and possibly also win the Greek election and take the country out of the euro...
08.10 The Bank of England has announced it will hold the first emergency liquidity providing operation (part of the ?140bn package announced last night) for banks on June 20.
The Bank said it will hold at least one so-called Extended Collateral Term Repo Facility each month until further notice, and would offer at least ?5bn at each operation.
The six-month funds will be offered at a minimum of the Bank interest rate (0.5pc at present) plus 25 basis points.
08.05 The FTSE 100 has opened higher after the announcement of more liquidity for banks:
07.50 Well, the central bankers may be getting ready to try and stave off a financial markets crash if Greece does end up exiting the euro following this weekend's election, but Germany is still insisting it won't be held over a barrel.
Jens Weidmann, the head of German central bank the Bundesbank and and ECB committee member, told the Greek newspaper Kathimerini:
In any case, we must not allow any country to blackmail us with the consequences of contagion.
He said Greece had to stick to the terms of the ?130bn bailout programme agreed in March and he ruled out any extension of the programme's timetable to allow Greece more time to reach its targets.
07.40 Sir John Vickers, chairman of the Independent Commission on Banking whose recommendations the Government's banking reforms are based on, has been speaking on the radio this morning.
Despite saying yesterday that some important issues including the amount of leverage banks can use had been watered down, Sir John told BBC Radio 4 this morning he would give the Government's implementation of the ICB's recommendations "two point seven cheers".
He said the Government still had time to change its mind and increase the size of the capital cushion to that recommended by the ICB.
He said he did not know why the government had decided to water down the ICB's proposal. The commission wanted big banks to lend a maximum of around 25pc of their capital, but the government proposes raising this to 33pc.
He said this was just a White Paper and so the ICB's proposed limit could still be introduced.
Sir John also said there was "no contradiction" between regulators plans to limit banks' ability to lend and last night's ?140bn plan by the government and the BoE to keep banks lending in the face of the eurozone crisis.
We have to distinguish between the crisis we are in now and where we want to be in the future. The difficulties we are in now underline how important it is that we have a platform for the future.
07.35 The eyes of the world's political leaders and financial markets are all on Greece, but the leader of the country's left-wing coalition party Syriza Alexis Tsipras is not backing down on his rhetoric about ripping up the bail-out agreement if he wins Sunday's election.
Alex Spillius reports from Athens:
Forecasting victory for his Syriza party in Sunday?s election, Mr Tsipras said he would keep Greece in the euro but also boost growth after five years of recession, calling for a "renegotiation" of harsh credit conditions attached to his country?s ?130bn bailout.
He said his main rival, New Democracy leader Antonis Samaras, "has guaranteed Merkel's Europe of the past?.
His Syriza coalition is running neck-and-neck with the New Democracy conservatives in an election being watched around the world as it could precipitate Greece's exit from the eurozone and potentially unravel the single currency. Neither party is forecast to win a majority and will probably be required to cobble together a coalition.
07.30 Overnight in Asia, markets have risen following a strong finish on Wall Street.
Sentiment was helped by hopes of another round of quantitative easing in the US and other major nations. should the results of the Greek election throw the financial markets into panic.
G20 officials told Reuters last night that central banks were getting ready to step in to stabilise markets if needed:
The central banks are preparing for coordinated action to provide liquidity.
European shares are also forecast to open higher.
07.25 There was a slight interruption to last night's formal proceedings when Mr Osborne was confronted by a man holding a GCSE maths book as he prepared to make his annual speech. Donna Bowater reports:
The intruder, who was initially thought to be a protester, was a crew member filming for a new BBC Three comedy show, which "pokes fun at the establishment".
Wearing a black suit and bow tie, Heydon Prowse tried to present Mr Osborne with a spiral-bound book labelled "GCSE Maths Exercise Book".
Mr Prowse is filming for the show with collaborator Jolyon Rubinstein.
BBC spokeswoman Kate Toft said: "It's making a political point in a cheeky way. It's a BBC Three show, which will come out later in the year and it's a sort of topical satirical entertainment show, which pokes fun at the establishment."
But did Mr Osborne take the textbook home and read it? That's the big question...
07.15 If you want to catch up with all of last night's events, we have a veritable smorgasbord of articles that will bring you up to speed:
? Sir Mervyn King says European banks need 'major recapitalisation'
? Jeremy Warner's view that the UK economy is so depressed there could be little demand for credit
? George Osborne's speech in full
? Mervyn King's full speech in full
? Reaction to last night speeches
07.10 Meanwhile at home, Chancellor George Osborne and Sir Mervyn King, the governor of the Bank of England, donned their best suits and bow ties and unveiled a ?140bn scheme to kick-start Britain's stagnant economy at the Chancellor's annual Mansion House speech.
Here's Robert Winnett with more details:
It comes after sharp rises in the costs of mortgages and other loans in recent months as banks struggle to raise money in the midst of the single currency crisis.
Sir Mervyn King, the Bank of England Governor, said that the ?industrialised world have thrown everything bar the kitchen sink? at the global economic meltdown but that even ?bolder action? was now required.
In the annual Mansion House speech in the City, the Chancellor said he was no longer prepared to ?stand on the sidelines? and that the radical new ?bank funding scheme? will be launched within weeks.
07.00 Spain's borrowing costs moved from "dangerous" to "unsustainable" yesterday when the yields on 10-year Spanish government bonds reached 7pc, as more economists called for the ECB to step in or face "game over".
Ambrose Evans-Pritchard reports:
"The ECB needs to intervene very quickly or it is game over," said Nicholas Spiro from Spiro Sovereign Strategy. "There is a whiff of capitulation in the air."
The dramatic escalation comes just days after the eurozone agreed a ?100bn rescue package for the Spanish state to recapitalise its crippled banks. "It is very worrying. Markets are behaving as if the eurozone is heading for break-up," said Jens Sondergaard from the Japanese bank Nomura.
France's industry minister Arnaud Montebourg said the markets were flying out of control because the ECB was failing to take charge. "We need an ECB that does its job," he said.
06.45 Good morning and welcome back to our live coverage of the European debt crisis.
Debt crisis live: archive
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