The polls in Ireland will close at 10pm, and we should get the result tomorrow afternoon. But I'm going to stop the blog now. We'll be back early tomorrow. Until then, goodnight all and thank you.
The report that the International Monetary Fund is preparing to help Spain (see 5.48pm) has been dismissed as 'complete nonsense' by the country's economy minister tonight.
Luis de Guindos also warned that the future of the eurozone would be at stake over the next few weeks. As he put it:
The battle of the euro is being fought right now in Spain and Italy...The future of the euro is at stake in the next few weeks in Spain and Italy.
Don't forget Greece!
So, our small sample of views from Henry McDonald's class this evening (see 6.45pm onwards for the full package) is complete. Despite the small sample, the class provided a valuable range of views - a Yes supporter, one (or potentially two) No votes, as well as those who didn't take part in the referendum.
Our final view from the Irish Writers Centre on the Irish fiscal treaty referendum comes from Sarah Jane Brennan.
She's a researcher, activist, and blogger, who recently graduated from an MA in International Relations at Warwick University. Here are Sarah Jane's thoughts on the referendum, in which she cast a No vote.
I unreservedly and unapologetically voted No today. At a time of such deep uncertainty throughout the Eurozone, today's referendum should have been deferred until the contents of the treaty were finalised. At present, the German parliament have deferred their ratification process until the end of June; the new French president, Hollande, categorically stated he was unwilling to ratify the treaty in its current form and called for growth measures to be integrated; and myriad other European leaders have expressed profound reservations about its blinkered and reductive economic logic.
Frankly, it's undemocratic for our government to expect the Irish electorate to vote on a piece of legislation, which will most likely be amended.
A No vote gives Hollande more leverage to renegotiate the treaty's terms and broker a better outcome for peripheral EU states like Ireland. It also sends a crucial signal to Eurocrats across the continent that the Irish people are unwilling to accept the stultifying and unyielding austerity they are currently subject to.
Niamh Ní Shúilleabháin, aged 27, hasn't made it to the polling booth yet today to cast her vote on the Irish referendum. This is why:
I still have yet to vote and it's almost seven o'clock.Polling booths close in three hours. Tick tock.
Arguments made by both yes camp and no camp have underwhelmed me with both sides painting a picture of an an impending apocalypse. However both camps have failed to show voting yes or no will actually bring an end to the never-ending austerity.We may have been the only eurozone electorate to be given the vote but I feel that the Government will drive on on regardless of our views in an effort to toe the line. And it's for that reason if I do vote,it will be no.
Maryline, a French woman who lives in Ireland, provides our fourth view from Dublin this evening (see 6.45pm onwards for the full collection of contributions from the Irish Writers Centre):
I'm French, living in Ireland since 2008 and trying to be aware about the European and Irish politics.
In the last referendum in 2005, France was asked to vote for or against the European Constitution: 54.68% said no but it did not prevent the Senate from approving it no more than 3 years later.
In 2008, Irish said No to this same Constitution and one year after, as though by magic, the Constitution was approved after a second Referendum.
Does it sound like Democracy or do we hide it behind a pseudo Vox Populi? What about the economic threat both Fianna Fáil and Fine Gael pretend to propagate if the No camp win? Fear, this is in my opinion the only message politics want to pass. With fear the People will be controlled better. More sheep in Ireland.
Unfortunately I was not able to vote today but if I could, I would have voted No, without hesitation. A No of rejection and protestation. People don't have to be the whipping boy of corrupted politics that left our Europe and countries in a chaos of no return.
Our third view on the Irish referendum comes from Lisa Rose Jones. She, like Laurence O'Bryan (see 7.01pm) chose not to take part in the vote today.
Here are her reasons:
I didn't vote today. I'm Welsh living and working in Dublin. In my home country I vote Plaid Cymru.
Wales has the Welsh Assembly in Cardiff and in recent years we have clawed back some power from England - we are now responsible for some of our legislation (it's only taken us 600 years!)
If I had voted today it would have been a big NO.
To let a Big Brother rule you - to have it set in stone in a written constitution means it is harder to undo.
Ireland is an independent country. I have always thought the EU to be an inter-dependent set-up - let us hope it does not turn into a dictatorship.
Our second "citizens' view" from Ireland tonight is written by Niamh Ní Mhaoileoin, 23, from Dublin, who blogs at leighanoisgocuramach.wordpress.com
Niamh voted yes in today's referendum. Here's why:
I'm euro-skeptic at the best of times, but now, in the worst of times, I don't think I have the option. I voted no to Lisbon the first time, trying to slow the process of Europe. I was brow-beaten into a 'yes' the second time. This time I voted yes with full certainty. We're in need. It's a painful reality, but come Monday I don't want to be looking under the couch cushions for punt coins.
So I'm quite anxious about tomorrow's results and frustrated by the low turnout, as well as by the government's failure to properly inform people. It's left them vulnerable to the outrageously sensationalist attacks of the no campaign.
Many of us are disgusted by the cowboys on the other side of the fence; the rabble-rousing, summoning Ireland's children to her flag and horribly misrepresenting European leaders. When one side is portraying the blood being squeezed out of Ireland's veins, "stability and growth" seem like paltry responses, but those are the realities. Giving the finger to Europe, bankers and anyone else in the crossfire is tempting, but dangerously irresponsible.
The first contribution from Dublin's Irish Writers Centre comes from Laurence O'Bryan, a Dubliner and crime author, published in the UK by Harper Collins.
I decided not to vote today. There are reasonable arguments for both supporting the EU treaty and for voting against it. My reason for deliberately not voting is that I believe that if the vote is no, against the Irish government's wishes, that we will be asked to vote again, despite their protestations to the contrary.
Twice before the people of Ireland were asked to vote about European treaties. Each time when the vote came in against the wishes of the Irish coalition of the time a second vote was held which overturned the original vote by the people. We operate an interesting form of democracy in Ireland, where votes are repeated until the "right" decision is made.
The Irish government, only elected in 2011, appears to be following the policies of the previous government and not implementing the real changes they themselves suggested in the run up to that election. The whole charade of a vote in Ireland reminds me of the Act of Union in 1800, which abolished the Irish parliament and saw Irish MPs sitting in Westminster.
The handover of power to Germany during the present turmoil is disturbing. I just hope we can, as a state, keep our options open if the Euro descends into chaos.
Heads-up: in a few minutes, we'll be publishing more views from Dublin citizens on today's referendum.
They'll be explaining why they voted the way they did, or why they didn't vote at all, and giving an insight into the situation in Ireland today.
The group, ranging from young people in their 20s to retirees, represent a good cross-section of the population. They are available to help us, because they all attend a class in creative non-fiction at the Irish Writers Centre, taught by our own Henry McDonald.
If the No campain do pull off an unlikely victory in today's referendum, this poster could be one reason.
Portraying the EU as the money-grasping Mr Burns from The Simpsons, the poster has captured the imagination of many who are unhappy about the way Ireland has been treated since the financial crisis began.
Here's a cheery picture from Ireland today - triplets voting in the referendum; the first time they have taken part in an ballot.
Siobhan, Michael and Emma Crawley cast their votes at Sean O'Mahonys GAA Club in Dundalk, Co Louth
To help explain the feeling in Ireland today, we've collected the contrasting views of two people on Dublin's Botanic Road.
Arthur McGuinness, who owns one of the oldest and most famous barbers shops, voted in favour of Ireland approving the Fiscal Compact Treaty today. But his neighbour Ed O'Loughlin, author of Booker long-listed novel "Not Unkind, Not Untrue" and "Toploader", voted no.
Arthur McGuinness: why I voted Yes
I did so out of fear, fear that we will be cut adrift from Europe if we said No to this treaty. We are relying on Europe to fund us, to help keep this country and its services continue. I can't see the Europeans dipping their hands in their pockets for us if we say No.
Ed O'Loughlin: Why I voted No
I voted yes to all the previous European treaties because I believe very strongly in European solidarity and cooperation - are our memories so short that we forget what the alternative is? This time I have voted "no" for exactly the same reason. This crazy treaty, as it stands, outlaws Keynesian economics, which makes no rational sense. If it comes into effect without major modifications it will copper-fasten international and domestic inequalities that will rip apart all of Europe - and not just the Euro zone or the EU. This would get very ugly indeed.
As far as Ireland itself goes, it makes no sense strategically or tactically for us to ratify this treaty now. If any genuine solution to the Euro crisis is to be found it will come in the form of - to put it simply - a big pot of money for the indebted countries. If we pass this treaty now we will effectively be throwing our hand in before the bidding even starts for a share of that money. Unfortunately, our elected leaders and senior civil servants are not fit to play poker with the European elites, and are happy to do as they are told by them, in the fond hope that they will be rewarded somehow.
A report that the International Monetary Fund is preparing 'contingency plans' for Spain have caused some excitement in the financial markets, erasing almost all the losses on the Dow Jones index.
The story is running on Dow Jones, with an unnamed source suggesting that the IMF is getting ready to step in if Spain fails to find a way of recapitalising Bankia (which needs €19bn in fresh funding). A full-scale bailout isn't being planned (Spain's borrowing needs being huge), but smaller short-term loans could be considered.
Here's the key quote:
"A better picture will emerge after the IMF review of the Spanish economy starting June 4," one of the people said. "But thoughts are already being discussed (within the European department)"."Some say a Spanish bailout is inconceivable, but it's equally inconceivable that preparations are not being made for such an eventuality," the person added.
Full story here on the Wall Street Journal.
I mentioned at 3.29pm that Spain's deputy prime minister will be meeting with the IMF's Christine Lagarde later today.
All the indications are pointing to an historic low turn out in Ireland's referendum on the fiscal treaty, and that could make the vote closer than initially thought.
Our Ireland correspondent Henry McDonald reports:
Barring a late and very dramatic surge in voting between now and 10pm the turnout could be well below 50%.
This may give some heart to the No camp as their supporters are traditionally more inclined to get out and vote – as they have done so on previous referendum days when it comes to EU treaties and reform programmes.
Advance polling has suggested a 60%-40% victory to the Yes count, a very healthy margin. And most bookmakers had made a Yes victory a very, very strong favourite (priced at 20-1 on at one firm).
It's been another day of record low bond yields in safe haven government debt, with UK gilts, German bunds and US treasuries hitting new records.
UK 10-year bond yield: 1.577%
German 10-year bond yield: 1.204%
US 10-year bond yield: 1.536%
More dramatically, the yield on German 2-year bonds actually turned negative a few minute ago. [which means investors were prepared to pay more than the face value of the bond, insuring a loss if they held it to maturity, even discounting inflation].
Brenda Kelly of CMC Markets said these low yields suggested that the financial crisis is "finally coming to a head".
Unless the Irish collectively dash to the polling booths this evening, the turnout is going to be pretty low.
According to the Irish Times, returning officers across the country were reporting turnout of between 15% and 20% at 2.30pm this afternoon.
More from Henry McDonald in Dublin, as the referendum continues:
Despite all the doom and gloom swirling around the economy and which has dominated the discourse over today's referendum vote the Irish are going through a baby boom.
According to Ireland's Central Statistics Office today Irish women continue to have the highest fertility rate of all 27 EU member states. The average number of children per woman is 2.10.
In 2009 - the year the Celtic Tiger economy crashed - there were 75,554 children born in Ireland, the highest number in 118 years. And it was the fourth consecutive year that there was an increase in births in the Republic.
But the gloom just keeps hanging over the economy on referendum day. Although first the Irish taxpayer and later those from Stuttgart, Munich and other powerhouses in the German economy funded a bank bailout the Irish banks continue to balk at lending money.
Loans dropped by €632 million in April 2012 as the level of lending to Irish households continues to decline, the Irish Central Bank revealed today.
The Central Bank's latest data found that last month's lending was down 4 per cent on a year-to-year basis, with loans for buying property down by 2.4 per cent and loans for consumption and other purposes down 8.4 per cent.
The word from Ireland is that the turnout for today's referendum is pretty light, with reports of turnout below 20% (so far) in many areas.
In #Offaly turnout ranging from 11 to 15%; #Westmeath figure is about 13.5% with #Laois averaging at about 14% #EUFT #EUref
— Jack Quann (@jqbilbao) May 31, 2012
Our correspondent Henry McDonald points out that turnout for the last Nice treaty vote was 59%, so it will take a huge late surge in voting to get close to that figure.
Incidentally, this is the 33rd time Irish people have voted to amend the country's 1937 Constitution although many of these previous referenda were unconnected to EU membership.
The count will take place at Dublin Castle tomorrow, and Henry says it will be interesting to see if Sinn Fein's presidential candidate and Northern Ireland Deputy First Minister Martin McGuinness turns up, because:
...with the news that the Queen will spend two days in Northern Ireland at the end of June as part of the Diamond Jubilee celebrations McGuinness will undoubtedly be fielding further questions on whether he will meet Her Majesty during her visit.
The Sinn Fein MP and chief republican negotiator during the peace process has hinted he may be prepared to meet the Queen following her successful tour of the Republic of Ireland last
nextyear. McGuinness might be in a cheerful mood if Ireland votes No as his party will be seen as the main beneficiaries of that outcome.
Speaking of Angela Merkel, the German chancellor spoke about the eurozone crisis today during a summit of Baltic Sea leaders.
Merkel told reporters that she agreed that changes need to be made across Europe and the eurozone, as Olli Rehn and José Manuel Barroso argued yesterday in their report on the EU economy.
Merkel said:
I have always said we need more Europe and that will as a consequence mean that more competences are given to the European Commission...Therefore, I expressly welcome that the Commission set out recommendations for the various countries yesterday.
Merkel, the main roadblock to the introduction of eurobonds, argued that there should be 'no taboos' when the EU considers treaty changes to deliver closer fiscal union, arguing:
There are also steps to integration that will require changes to the treaty. We have not got that far yet, but there should be no taboos.
Christine Lagarde is to hold talks with Spain's deputy finance minister in Washington this afternoon, but the country has NOT sought official funding.
That's the word from an International Monetary Fund spokesman in America in the last couple of minutes, who insisted that the IMF was not drawing up any plans to help Spain.
The spokesman added that the IMF will begin an annual review of the Spanish economy on June 4.
The US stock market is not impressed by the ongoing euro woes, today's downward revision to American GDP, and the worrying jobs news.
While the futures contracts were pointing to a positive opening, the major US markets all lost ground in early trading. The Dow was off 0.41% in the first half hour of trading.
European shares are also in the red, with the German DAX and French CAC both down around 0.8% right now.
Heads-up: our web news editor Jonathan Haynes just opened a caption competition, for a photo of German chancellor Angela Merkel giving an amusing one-fingered gesture to a retreating penguin (and the prime minister of Poland), while wearing a yellow rubber glove. Enjoy yourselves (and come back afterwards).
You might remember the row that blew up after the IMF's Christine Lagarde told The Guardian that the Greek people need to stop avoiding paying taxes.
Well, Nick Malkoutzis, the deputy editor of Greece's daily English language newspaper Kathimerini, has written this article on the issue, partly based on the views of his readers.
Malkoutzis makes a series of important points, including:
• yes, Greece has a large shadow economy, but so do many other countries both in Europe and the developing world. The country isn't uniquely sinful.
• Greeks may rely on the inefficiency of state bureaucracy to evade taxes, but in other countries large companies and rich individuals use legal tax loopholes to avoid paying tax on their earnings.
Malkoutzis also suggests that officials and critics may not want to confront the scale of public suffering in Greece (on this point, Lagarde said she had more sympathy for children in Africa than in Athens). He concludes:
But, then again, stories of workers losing their jobs every day, thousands having no benefits or healthcare, sick people not being able to buy their medicines and some being pushed so far they take their own lives are not what you want to hear before bedtime. These are the kind of stories that might just keep you awake at night.
Sticking with the US briefly -- it's not looking good for Friday's hotly watched "nonfarm payroll" figures.
The number of US workers filing for unemployment benefits jumped last week, a sign that the recovery in the job market continues to slow. Initial jobless claims rose by 10,000 to seasonally adjusted 383,000 in the week ended May 26, the Labour Department said Thursday.
But US stock markets so far seem to be taking the news in their stride. The Dow Futures - an indication of the direction markets are likely to take - are up slightly ahead of the opening bell.
Here's our Wall Street correspondent, Dominic Rushe, on the latest US GDP data (see 1.41pm)
With all the talk about European austerity v US spending it's interesting to see what impact the cuts the US is making are having an impact on its GDP.
The Commerce Department says government spending contributed to the slow down in economic growth. Federal government spending was down 5.9% in the first quarter after a decrease of 6.9% in the fourth. State and local spending was also cut, down 2.5%.
Dom's also now written a full story on the news that US GDP grew by 1.9% (annualised) in Q1 2012, not 2.2% as first estimated, here.
US economic growth for the first three months of 2012 has been revised downwards. America now grew by 1.9% in the quarter on an annualised basis (or around 0.475% on the quarter-on-quarter basis used in Europe).
The downgrade was expected by economists, and is another indication that the global economy didn't enjoy a great start to 2012 (the eurozone stagnated, while the UK shrank by 0.3%).
The data also showed an unexpected drop in US corporate profitability, which fell by 4.1% in the quarter. That's the biggest drop since the last three months of 2008, when panic after the collapse of Lehman Brothers sent corporate profits falling by more than a quarter.
Economics professor Nouriel Roubini fears this is the start of a trend, as economic problems eat into the corporate bottom line:
Start of the profit squeeze? @MarkitEconomics: US Q1 corporate profits decline largest since Q4 2008 (-26.5 PCT) according to @Reuters #US
— Nouriel Roubini (@Nouriel) May 31, 2012
Spain is having a relatively calm day, with bond yields falling back from danger levels. The Spanish 10-year bond yield has dropped back to 6.47%, reversing yesterday's alarming rise as concern over its banks escalated.
Good. But there is also worrying news from the Bank of Spain about the amount of capital leaving the country.
Giles Tremlett reports from Madrid:
People and companies have been taking their money out of Spain at an unprecedented rate. Some €66.2bn left the country in March, according to figures published today by the Bank of Spain.
That is the largest monthly amount since the statistical series started in 1990, according to El País, and raised the spectre of capital flight as people worry about the country staying with the euro.
It was more than twice the previous month and means some €193bn have left Spain over the past nine months.
Spanish banks lost two percent of their deposits in the same month. That is by no means a run, but it is also one of the largest figures for the past 15 years.
El Pais has a great graph showing monthly capital levels here (I've taken a small screengrab above as a teaser).
Although the main referendum is taking place in Ireland today, voting has already taken place in some islands off the coast of Ireland.
Voters on five islands in the Donegal area voted on Monday. On Arranmore, just 43 voters out of an electorate of 173 cast their vote.
A record low turnout, according to presiding officer Nora Gallagher who told journalists:
It's the lowest turnout ever.
On another island, Inishfree, the only man to actually live there cast his vote. Although Barry Edgar Pilcher was able to exercise his democratic right (the ballot box was actually placed on his livingroom table) a 63-year German named Hans Schleweck who resides on the mainland was disappointed to discover he could not join in the referendum.
According to The Irish Times, Mr Pilcher then treated the returning officer, a Garda officer, and the disappointed Mr Schleweck to a tune or two on his saxophone.
Turnout may have been low in Ireland in the first few hours of the referendum (see 11.38am), but the main party leaders voted early.
The Taoiseach, Enda Kenny, cast his ballot at St Patrick's National School in Castlebar, County Mayo, while deputy prime minister Eamon Gilmore voted in Shankill, south Dublin this morning.
For the No side, Sinn Féin president Gerry Adams cast his ballot in the constituency of Louth.
And here's a photo of a Catholic nun casting her vote at the Drumcondra polling station in Dublin.
Irish army bomb disposal officers have made safe a suspicious object outside the constituency office of Sinn Féin Dublin TD Mary Lou McDonald.
The suspect object was found at her office on Dublin's North Strand this morning. The military technical officers have taken the object away to determine if it was a viable explosive device.
2PM UPDATE: Sinn Féin later said the suspect device left at Mrs McDonald's office was a hoax pipebomb.
Fitch, the rating agency, warns that "the risk of a Greek exit [from the eurozone] is material and rising".
It does not expect the euro to break up completely, though.
The warning comes in a new report, in which Fitch outlines how it would respond to a hypothetical exit from the eurozone. It explained that it would rule that the exiting country had defaulted, and would also slash ratings on companies who are based within the country, to junk status or worse....
Ratings of entities from the exiting country would reflect the severe adverse effects from recession, inflation, lack of credit, bank deposit restrictions and capital controls, and potential social and political instability. Combined with the application of rating criteria on distressed debt exchanges (DDEs) to a redenomination scenario, many ratings are likely to go to low speculative-grade or default.
Here's some more info on turnout in the Irish referendum (see also 11.17am). RTE is reporting that by 10am turnout across Dublin polling stations was around only 4.6% of the electorate.
The Yes camp will be hoping for a lunchtime and later tea time surge, Henry McDonald reckons.
On that topic...opposition party Fianna Fail has issued a statement in the last few minutes urging people to exercise their democratic franchise. Fianna Fail stands alone on the opposition benches in the Irish parliament as the party calling for a Yes vote alongside the ruling.
Irish public broadcaster RTE has tweeted that by 9.30am there was only a 3.8% turn out of voters in Dublin South while the turn out in neighbouring Dun Laoghaire was a mere 3%.
Henry McDonald explains:
It's very early days of course but it is worth nothing these two constituencies south of the river Liffey have produced some of the largest pro European votes in all the referenda on the EU preceding today's one.
Polls opened at 7am, allowing people to vote before work. They'll also be open until 10pm tonight.
An update from Brussels – Mario Monti is telling the Germans that they need to think again on the euro.
Ian Traynor reports:
Also addressing a Brussels audience this morning, the Italian prime minister positioned himself halfway between Chancellor Angela Merkel (Frau Austerity) and President François Hollande (Monsieur Growth).
He supported the Germans in resisting French calls for the European Central Bank to expand its mandate to promote growth in the eurozone, but backed the French campaign pressing Berlin for greater growth-oriented flexibility. The popular backlash in Greece and elsewhere against austerity meant that the German government had to "reflect quickly and deeply" over how to respond.
The comments come after the other Mario, Sig. Draghi, added his weight to calls for closer banking union across Europe.
As flagged up earlier (see 8.57am), public anger over Ireland's debt ridden and generally loathed banks is one factor in today's referendum.
The news in the last 24 hours that the Irish banking sector needs another €4bn cash injection could influence voters, one way or the other. (details here)
From Dublin, Henry McDonald reports:
Where the money will come from is anybody's guess. Some suspect the billions could come from a second international bail out, others fear the state may have to raise the cash elsewhere to keep the Irish banking system functioning.
Either way the prospect of Irish High Street banks getting more largesse from the taxpayer, whether they be Irish, German or whoever, will enrage most people in the state. The question is: willl this focus minds further on the necessity to stay in the eurozone because of the need for a potential second loan from Ireland's EU partners and thus boost the Yes camp or will it only compound the growing resentment against the entire financial system and provide more late ammunition for the No side?
A new opinion poll was published in Greece today, putting New Democracy ahead of Syriza in the run-up to the June 17 parliamentary election.
Conducted by DATA RC between 28 and 30 May, it showed that 24.5% of people would vote for New Democracy, versus 22.1% for Syriza. The percentages rise to 28.4% and 25.6% when 'don't knows' and those who will decline to vote are excluded.
Previous polling has put Syriza (which has pledged to renegotiate Greece's austerity programme) in the lead, or neck-and-neck with New Democracy.
Mario Draghi has made an important intervention on the eurozone crisis this morning, telling the European Parliament that national governments must show proper leadership now to stem the crisis.
The head of the European Central Bank told the Parliament's economic affairs committee that there was no time to waste in fixing Spain and moving more radically towards a proper eurozone fiscal union.
As Ian Traynor explains from Brussels, after yesterday's rather impotent calls from the European Commission, Draghi is a formidable voice:
Draghi added his views to the growing clamour for a eurozone banking union, with common guarantees for depositors.
Europe's political leaders need to show "vision", he said, and can't expect the ECB to act as a surrogate eurozone government. A eurozone banking union would need to be supervised centrally, include eurozone guarantees for depositors and a resolution fund, he said.
The requirement was "further centralization of banking supervision." Draghi bluntly showered scorn on the "worst possible" attempts of national authorities to deal with imploding banks, notably in Spain and Belgium.
"What Dexia shows and Bankia shows as well is that whenever we are confronted with the dramatic need to recapitalize, if you look back, the reaction of the national supervisors... is to underestimate the problem, then come out with a first assessment, a second, a third, fourth...That is the worst possible way of doing things, because everybody ends up doing the right thing but at the highest possible cost and price."
As Ian puts it, Draghi appears to be "cautiously enlisting in the cause of a eurozone banking union", which would open up a new front in the euro wars. He explains:
Top people in Brussels predict a looming and bruising battle between Frankfurt and Berlin which will centre around the uses and abuses of the European Stability Mechanism, the eurozone €500bn permanent bailout fund which is to be up and running in July.
One of the biggest and most protracted conflicts over Greece in the past couple of years was between Angela Merkel and Jean-Claude Trichet, Draghi's French predecessor, revolving around the terms of the second Greek bailout, specifically on German demands that it include haircuts for Greece's private creditors. Merkel won, but now concedes she was wrong and that this chastening experience won't be repeated.
Trichet consistently argued that Berlin's "moral hazard" argument on private lenders taking a hit and sharing the losses was misplaced and would prove disastrous, setting a precedent and deterring investors across the eurozone. He lost on Greece, but may feel vindicated by events.
Draghi's remarks this morning presumably mean that the ESM firewall would need to be deployed for a banking union, perhaps for the direct recapitalisation of Spanish banks. This is not possible under the treaty setting up the ESM. The money can only go to governments which can then funnel it to the banks. For that to happen, though, a government has to request a bailout with all that that implies - humiliation, very tight strings attached.
That has been the German precondition so far. The outcome of this gathering dispute will show whether Berlin is undertaking a serious shift in its approach to the euro crisis.
New Greek retail sales have just been released, and they're dire.
Retail sales in March were 16.2% lower than a year ago on a volume basis, accelerating the decline in consumer spending (February's data showed a 12.9% tumble).
The bad data is hardly a surprise - and simply reinforces the point that the Greek economy, now in its 5th year of recession, is spiralling downwards.
This graph by Reuters' Scott Barber shows how Greek retail sales and consumer confidence began to slide as soon as the financial crisis began, and have worsened again in recent months.
Just in - inflation across the eurozone has fallen to an annual rate to 2.4% in May, from 2.6% in April. Economists had expected a smaller fall, to 2.5%.
This easing in the rising cost of living may give the European Central Bank more leeway on monetary policy, perhaps to lower interest rates again soon (the ECB's governing council meets next week)
Update: Here's Howard Archer of IHS Global Insight on the fall in eurozone inflation:
May's drop in consumer price inflation eases the squeeze on consumers' purchasing power, thereby providing much needed support to growth.
It also facilitates an interest rate cut by the ECB sooner rather than later, and there is an ever more compelling case for this given the current deteriorating economic growth environment in the Eurozone and the heightened uncertainty stemming from the situations in both Greece and Spain.
Polling is well underway in Ireland now on the EU fiscal treaty referendum, as the Republic's 3.3 million voters play their part today in shaping the EU's future.
Henry McDonald reports from Dublin:
Opinion polls thus far have suggested that the Irish electorate will endorse the treaty designed to impose budgetary discipline on all EU states. But a lot could depend on turn-out! Traditionally anti-European voters are more inclined to get out and vote.
And in 2001 and 2008 these voters willingness to turn out at polling booths across the country's 43 constituencies proved critical in defeating first the Nice and then later the Lisbon Treaties on EU reform.
Compared to last week's blistering sunshine much of Ireland today is wet, grey and overcast which may put off some voters from turning out and possibly boost the No camp's fortunes although all the polls have indicated the Republic will pass the treaty. Counting won't begin until 9am on Friday morning across 26 count centres in the state.
The result which all of Europe and beyond will be watching should be known around tea time on Friday.
Germany's unemployment rate has dropped again -- dipping to 6.7% in May, from 6.8% the previous month.
But on a sesasonally adjusted basis, the number of people out of work was unchanged at 2.872m, while economists had expected a drop of around 5,000. That suggests that the German employment market may be slowing down, after a decent run in recent months.
Carsten Brzeski of ING warned that "signs are increasing that the German labour market is slowly cracking up".
At 6.7%, the German unemployment rate is comfortably below the eurozone average of 10.9% (a 15-year high).
In the bond markets, the yields* on French and Austrian 10-year bonds have both fallen to their lowest level since the euro was created.
In the latest sign that investors are stashing their funds in safe European debt, the price of debt issued by France and Austra rallied this morning. This pushed the yield on France's 10-year bond down to just 2.379%, and the Austrian equivalent to 2.13%.
In the European stock markets, shares have gained a little this morning. The FTSE 100 is up 45 points (+0.86%), and the Spanish IBEX has gained 1.2%.
* - yields measure the rate of return on a bond, falling when the price rises and vice versa. So if a trader is prepared to pay more to hold a certain bond, s/he accepts a lower return.
There have been signs of a certain degree of anti-German sentiment in Ireland in the run-up to today's referendum:
This photo was taken outside Leinster House, where the Irish Parliament is based, on Wednesday.
It's now 18 months since Ireland signed up for its highly unpopular €85bn bailout plan, which forces hefty cuts to government spending and a raft of tax rises. The most unpopular issue, though, is that Ireland took the debts of its failing banks on to the public books. That decision helped prevent the contagion hitting other financial institutions across Europe, but in return Ireland is left paying off €31bn of promissory notes at high interest rates.
We've just launched this Q&A explaining how the Irish referendum works.
Polling data in the run-up to today's vote suggested that the Yes camp will win. But there are no guarantees.
As the BBC explains:
The nightmare scenario for the government is that people wake up on Thursday morning and decide to give ministers a bloody nose by voting 'no' in the referendum.
After four years of austerity measures, some anti-treaty campaigners are predicting the "revenge of the people".
Four opinion polls released over the weekend indicated that around 60% of voters would back the treaty. But a significant number of people have been classed as 'don't knows' in the run-up to today's vote.
The BBC also says that some 'yes' campaigners reckon the gap could be as close as 53-47. A sign of nerves, or an attempt to encourage Yes voters to the polls?
Last night, Irish prime minister Enda Kenny urged the Irish people to vote Yes in today's referendum on the fiscal compact. He claimed that the country's borrowing costs would leap to dangerous levels if it did not have the protection of the European Stability Mechanism.
Taoiseach Kenny said:
Countries that ratify this have access to the ESM, countries that don't won't and the difference between 3% and 7%, or even 8% or 9%, is enormous in the context of availability of funding, were that ever to be necessary.
Ireland's 10-year bond are trading at a yield of 7.4% this morning. That's a higher rate than a country can reasonably borrow at, but not so high that investors have given up on the country (whose borrowing needs are covered until the end of 2013 by its current bailout)
The No campaign, though, takes a very different view. It argues that rejecting the Treaty will give Ireland the authority to go back to the rest of Europe and demand a better bailout plan.
Sinn Féin president Gerry Adams argued that voting No was the "patriotic thing to do":
I ask Irish citizens not to be bullied, not to give their democratic rights away, not to give up their say over Irish economic policy and not to write austerity into the Constitution.
Irish voters face an unenviable choice today. The EU fiscal compact will force member states to hit tough budget targets, which could mean more further pain for a country that is already deep into its austerity programme.
But the fiscal compact will also guarantee access to the European Stability Mechanism, Europe's new bailout fund – a financial lifeline to countries who cannot borrow in the debt markets.
Our leader article argues today that the pact is "an unroadworthy vehicle going the wrong way":
It's lethal not only for its occupants but other road users, it's got an oil leak and probably no brakes. Would you hitch a ride in one, if it lurched to a halt in front of you?
But with no guarantee that Ireland can return to the financial markets as soon as planned, refusing a lift could be a gamble. Ultimately, it's a choice between fear and anger:
Fear might well win the day in Ireland: no one knows whether a Greek exit would be a blip on the screens or another Lehman Brothers. But if the firewalls are not as thick as they are cracked up to be, would Ireland be the next point of contagion? The Germans need to get a signal, but would your economy be the one wanting to send it ? It's hardly a great choice.
Here's a quick agenda of some of the main events happening today:
• Irish referendum: all day, polls close at 10pm
• German unemployment data: 8.55am
• Eurozone inflation for May: 10am
• US Q1 GDP, second revision: 1.30pm
• Brussels Economic Forum: all day (including Olli Rehn and Mario Monti).
India, Switzerland, the Philippines and Denmark are all releasing (or have already released) GDP data, so we'll keep an eye on the reaction to that data, for a more global economic perspective.
Good morning, and welcome to our rolling coverage of the eurozone financial crisis.
Ireland is the centre of attention today, as it holds its referendum on whether to ratify the fiscal compact. Polls have just opened across the country, and our Dublin correspondent Henry McDonald will be following all the action throughout the day. The results itself will be released on Friday.
Elsewhere, Spain is still a major concern. The crisis over its banking sector continues, there is still no clear plan for recapitalising Bankia, and its bond yields are still dangerousy high.
We'll also be tracking the reaction to yesterday's EU report cards on the European economy, which included a call for closer banking union, and warnings that France and Spain need to do more to bring their deficits down (although Spain may be given more time).
There's also a lot of economic data being released today, including German unemployment, eurozone inflation, French and German retail figures, and another estimate of US GDP. Busy busy