Some unexpected positive news for euro zone and some expected negative news, as well, today.
The OECD has broken ranks with the IMF and the European Commission and predicted that the euro zone economy will avoid recession and grow a fraction this year, reports the FT.
But the OECD is in lock step with the other two institutions in calling for a beefed up European Stability Mechanism - firewall, in common language - to help bail-out bigger countries like Spain and Italy should they be overtaken by the debt crisis. 1 trillion euros seems to be the agreed upon figure.
Slowly but surely German Chancellor Angela Merkel is bringing Germany, and by extension the rest of the euro zone, towards just such an enhanced firewall. Yesterday, she endorsed bringing all existing emergency funds, including the ESM, together to create a firewall with around 700 billion euros at its disposal. Throughout the autumn and the early part of this year the German Chancellor had resisted just such a move.
That's the positive news. The expected negative news is confirmation that Spain is in recession. The economy contracted in the first quarter of this year following a serious contraction at the end of last year. No figure from the Spanish central bank on just how much the economy contracted in quarter 1.
Needless to say, Spain's borrowing costs went up, Spanish bond yields rose on the news. However, Italy, the other country that has pessimists concerned, saw its bond yields come down to a four month low.