• Tight security as G8 leaders arrive at Camp David
• Protests planned in Thurmont and Frederick, Maryland
• Demonstrations against Nato in Chicago
• Follow me on Twitter @AdamGabbatt
• All times CT

4.14pm CT: Here's the AP report of the nurses' protest here in Chicago earlier today. It confirms one arrest.

Thousands of nurses and other protesters gathered Friday at a downtown Chicago plaza for a noisy but largely peaceful demonstration demanding a "Robin Hood" tax on banks' financial transactions, before a smaller but more raucous crowd broke away and began marching through city streets.

The marchers chanted slogans and taunted police, who followed on bicycles and on foot. Police horses blocked some intersections as the breakaway groups wound through the city.

Members of National Nurses United, the nation's largest nurses union, were joined by members of the Occupy movement, unions and veterans. City officials have said the event could draw more than 5,000 because of a performance by former Rage Against the Machine guitarist Tom Morello, an activist who has played at many Occupy events. Early crowds did not appear to be that large.

The nurses and their supporters dressed in red shirts and wore green felt Robin Hood caps with red feathers. There were few problems at the rally, though police arrested at least one demonstrator as the gathering broke up.

About a dozen police officers, some wearing riot gear, surrounded the protester, who was dressed entirely in black. Police handcuffed him and walked him away from the rally.

"Chase, chase, you're a disgrace" #nato twitter.com/AdamGabbatt/st…

— Adam Gabbatt (@AdamGabbatt) May 18, 2012

3.31pm CT: As Ryan Deveraux has been reporting for us today, Camp David, the Maryland location of the G8 summit, is heavily guarded and protesters are being kept well away. The Associated Press has filed a profile of the isolated retreat, which has been a hotbed of international diplomacy down the years.

British Prime Minister Winston Churchill huddled there with President Franklin Delano Roosevelt in 1943 to pore over plans for the invasion of Normandy.

The peace treaty between Egypt and Israel was forged at Camp David under the guidance of President Jimmy Carter. And it was there, too, that President Bill Clinton unsuccessfully tried to broker a deal between Israeli Prime Minister Ehud Barak and Palestinian Authority Chairman Yasser Arafat.

President Barack Obama, an infrequent visitor, is putting the presidential hideaway on full display for this weekend's summit of the Group of Eight industrial nations, the largest gathering of foreign leaders ever to assemble there. Arriving Friday, the leaders will stroll the camp's leafy paths and bed down in the 11 residential cabins. Four African leaders will join them for lunch Saturday.

More than 50 heads of state have visited Camp David over the past seven decades. But this weekend's G-8 meeting represents the first time more than two foreign leaders have gathered there.

3.21pm CT: After the nurses' union demonstration at Daley Place ended with a singalong led by Tom Morello, protesters set off south through the city on an impromptu march. Some chanting "This is what democracy looks like", others "Fuck the police", protesters were allowed the freedom of Clark St as they marched.

Hundreds joined the march, which eventually veered east towards Lake Michigan, but police on bicycles had lined up a blockade. That seemed to cow the demonstration somewhat, with protesters now slowly heading north back towards the city centre in baking heat. There are still some 300 people, but there's much less chanting.

There have been one or two arrests.

Cpd tackle and arrest one demonstrator, standing on him. Riot gear om the scene yfrog.com/odp5orzj

— aaroncynic (@aaroncynic) May 18, 2012

2.37pm CT: Here in Maryland, anti-G8 demonstrators held a people's summit at a local library in Fredreck, a short drive down the highway from Thurmon, where I was earlier, writes Ryan Devereaux.

Free food was served as speakers addressed issues ranging from military spending and US international influence to the deployment of unmanned drones at home and abroad.

The summit gave way to a short march. About 80 protesters took to the streets of the sleepy town as wide-eyed residents looked on and held up their smartphones.

Demonstrators chanted "fuck cops, we don't need 'em, all we want is total freedom". As far as the march went on, protesters got what they wanted. There were no attempts by police to interfere with the procession, though nine mounted police officers were stationed in front of police headquarters and later seen trotting through city streets.

The march was not confined to police issues, however. "Everyone here is 100% against the G8," said Dylan Petrohilos. The reasons were both international and local, he explained.

"The G8 is in the area, it's in our community and we don't like that," Petrohilos said, explaining that many residents of Frederick felt the summit was forced upon the community without consultation. In March the Obama administration abruptly announced the G8 would be held at Camp David, rather than Chicago.

Indeed many residents seemed supportive of Friday's demonstration. "It's a free country," Richard Bailey said, as the march passed by his rock store, Earthly Elements. "We all have the right to our opinion."

As a small business owner, Bailey said there were parts of the Occupy movement he could relate to, particularly critiques of income inequality and corporate power. "I see both sides of things," Bailey said. "If you don't call attention to something, you don't know there's a problem and that's what they're doing."

About 80 people marching through the street chanting, "Fuck cops, we don't need 'em, all we want is total freedom." #G8 twitter.com/RDevro/status/…

— Ryan Devereaux (@RDevro) May 18, 2012

2.18pm CT: I've been spending some more time here with the nurses' protest in Daley Place in Chicago. While the crowd is impressive, it may not be good news for protesters as a whole.

Those hoping for the turnout at Sunday's main anti-war to be swelled by hundreds of NNU members may find themselves disappointed. Speaking to crowd members here, I'm yet to find one nurse who will be matching on Sunday – in fact it seems many will no longer be in Illinois, let alone Chicago.

Linda Carter, from Augusta, Georgia, was among the protesters who were here solely for the NNU demonstration. "I'm focussed in the healthcare issues," she said. "Besides, we're flying back home."

Still, she was pleased with numbers at the event. "It's wonderful. I just hope that the politicians really listen to what we're saying – that working, low income Americans can't afford healthcare."

Kim Conway, from California, had been planning to be at this protest for "almost a year". She said: "Nurses take care of everyone else. It's time for the banks to step up and pay their share."

Later, a group of anti-Nato protesters set off on a march from Daley Place:

March now taking place from Daley Place following #NNU demo. Can't see any nurses #nato twitter.com/AdamGabbatt/st…

— Adam Gabbatt (@AdamGabbatt) May 18, 2012

1.50pm CT: Barack Obama's meeting with French president Francois Hollande at the White House has ended, and Ewen MacAskill reports on hints of a compromise over the tricky issue of Afghanistan. Hollande gave an election pledge that he would have all French troops out of Afghanistan within a year, but there seems to be some wriggle room.

At the White House, Hollande insisted he was standing by his pledge to have all French combat troops out by the end of this year, but left the door open for a compromise. He said he was committed to providing assistance on Afghanistan security, but in a different way, and that this would be discussed at the Nato summit, being held in Chicago on Sunday and Monday.

The White House is sympathetic to Hollande, knowing it would be political suicide for him to renege on his pledge less than a week after being sworn in as president. But Tom Donilon, the White House national security adviser, in a briefing on Thursday, suggested one area for a compromise could be the French taking on a different role, shifting from combat to training.

You can read Ewen's full report here.

12.06pm CT: Back here in Chicago, there are around 2,000 nurses packed into Daley Place, their green-clad heads bobbing in unison to an eclectic mix of feel-good pop songs.

The group marched south from their meeting point to the place, where a stage and, of course, a medical tent have been erected.

Tom Morello is the big draw here, and as 12 approaches – the scheduled time for the beginning of the rally – the nurses are being joined by an influx of younger demonstrators.

All members of the National nurses united union are clad in rakish green Robin Hood-style hats, by the way, a reference to the Robin Hood tax campaign's call for a tax on financial trading which would raise billions.

National Nurses United rally at Daley Plaza. Note "Robin Hood" headgear #nato twitter.com/AdamGabbatt/st…

— Adam Gabbatt (@AdamGabbatt) May 18, 2012

11.15am CT: The French delegation has arrived at Dulles airport in Virginia for the G8 summit.

At the bottom of the stairs is France's President Francois Hollande, followed by Hollande's partner Valerie Trierweiler, and France's Foreign Minister Laurent Fabius.

Our Washington correspondent, Ewen MacAskill, reports that Hollande is at the White House for his first meeting with Barack Obama since his election. Hollande campaigned on a pro-growth strategy, one which chimes with Obama's desire for European stimulus strategy.

Hollande offers the US a useful ally in Europe, one in favour of a pro-growth, stimulus approach to the eurozone crisis. They are also discussing a compromise on Hollande's election pledge to withdraw French troops from Afghanistan at the end of the year. The US is pushing for these troops to be switched to a training role. At the end of their meeting, the two are to make brief statements to the press but are not scheduled to take questions. Hollande then heads for lunch with secretary of state Hillary Clinton and then on to a meeting at the British residency with David Cameron.

10.50am CT: In the tiny Maryland community of Thurmont, a small number of protesters have gathered to protest the G8 summit at Camp David, a few miles down the road, Ryan Deveraux writes.

Early this morning, Richard Ochs and Donna Plamondon set up a staging area near a local grocery store where they laid out signs and banners condemning war, foreign military occupations and genetic food modification.

"I'm here for social justice in general," Plamondon said. "We gotta get the money out of politics...put some of that money back in schools."

The demonstrators, mostly middle aged, represent Occupy camps from around the country, including Baltimore, Tuscon and Washington DC. Their numbers are small, presently about a dozen, but more are expected to turn out as the day progresses.

Demonstrations will be held until sundown today and tomorrow, and are expected to include large drone replications as well as the participation of Ethiopian expatriates and an anti-nuclear Buddhist monk.

Police plan to keep protesters at least four miles from the presidential retreat, where leaders from the world's wealthiest nations are meeting with Barack Obama. A no fly zone is in effect over the area and local law enforcement agencies are not taking any chances.

10.15am CT: The National Lawyers Guild has rejected claims that Molotov cocktails were recovered during the pre-emptive raid by Chicago police on an apartment where Nato protesters were staying in Bridgeport.

ABC7 reported on Thursday night that a "police source" said Molotov cocktails were seized during the raid, during which nine people were arrested. The NLG said this report was wrong.

The National Lawyers Guild refutes claims by the Chicago Police Department that Molotov cocktails were recovered in last night's house raid in Bridgeport.

Police confiscated home brewing equipment – not Molotov cocktails – and are falsely claiming that Occupy activists were involved in criminal activity.

I spoke to the main tenant of the raided apartment at the "no Nato" convergence center in the north of the city late last night.

William Vassilakis, who moved into the apartment on 1 May, said that all nine people arrested had been staying with him.

"We were putting them up," he said, adding that the nine, whose ages ranged from 17 to people in their 60s, had travelled to Chicago for the Nato summit. Vassilakis, 25, said he had returned to his apartment on Wednesday night after a Nato protest meeting to find police cars outside. He did not enter.

I spent the night elsewhere and spent the whole day [Thursday] in terror. I thought I could host people, and this is what happened.

When Vassilakis did return, he found that police had seized home brewing equipment and a laptop. He told the Guardian that four of the people arrested had been in a video posted to YouTube last week which purported to show police "intimidating" protesters. In the video, recorded by protesters as police conducted a traffic stop on their vehicle, police are overheard asking protesters if they are heading to Occupy Chicago and whether they "have something planned for next week".

After a back and forth exchange over the 1968 riots in the city an officer is heard to tell the demonstrators: "Wait for the protest day. Save it up for then," adding: "We'll come looking for you. Each and every one of you.

9.55am CT: So what can we expect from the G8 summit at Camp David, Maryland? David Cameron, writing for the PoliticsHome website, has listed four things he wants to accomplish at Camp David, which he describes as a "perfect venue for the kind of free-flowing and personal interaction that leaders need".

"We have a lot to talk about," Cameron says. In a nutshell, his discussion points are the world economy – "getting global trade moving again"; supporting "the march of democracy and freedom" in the Middle East; encouraging non-G8 countries to "to step up and contribute to the future of Afghanistan"; and encouraging nations to renew their commitments to aid contributions.

But how can the G8 converse and move forward on these issues when Vladimir Putin will not be present, asks Dr Evgueni Novikov in an opinion piece on Fox News, arguing that Obama's attempts to "reset" America's relationship with Russia has been "both naïve and counter-productive".

Novikov, a former communist party official in the Soviet Union, wants Obama to get "tough".

Russians have most respected the US when it leaders demonstrated strength and clarity of purpose. To be respected, leaders must be tough. And it's doubtful that Obama's "hot mic" comments to then-President Dmitry Medvedev that he'll have "more flexibility" on US missile defense after the elections inspires much fear or respect in Moscow.

Cameron was explaining his stance on morning television in the UK on Friday. Not sure what the girl group The Saturdays thought about it, though.

9.35am CT: "Interesting poll in the Chicago Tribune where the headline and first paragraph says exactly the opposite to the numbers," writes my colleague – and Windy City resident – Gary Younge. 'The headline reads 'Global policy hit at home.'

The intro reads: "Chicago-area voters strongly support two of the Obama administration's major foreign policy priorities", but then the Sun Times's own poll – on which the article is based – says the exact opposite. The figures suggest Obama's policy in Afghanistan is seen as something of a dud. The president plans to keep troops in Afghanistan until 2014. Only 33% support that. 42% want the troops removed immediately. And 20% want them to stay longer. How is a policy a hit when 62% of people don't support it?

9.20am CT: Protesters staged a night march in Chicago on Thursday after "pre-emptive" raids on an apartment in the city led to the arrest of nine anti-war demonstrators.

Scores of protesters, many of whom had recently arrived at the "no Nato" convergence center in the north of the city, marched through the streets, some reportedly chanting "fuck the police".

The impromptu action came after nine people were arrested when police raided an apartment in Bridgeport, according to the National Lawyers Guild (NLG).

Kris Hermes, from the NLG, told the Guardian that the organisation had spoken with "a number of witnesses" to the raid, who were "pretty terrified" and did not wish to be named.

The NLG said police had initially entered the building without a search warrant, before producing one which was missing a judge's signature.

Chicago police had initially refused to say where the arrested protesters were being held, Hermes said, but lawyers from the NLG had since been able to visit the detainees in Chicago's organised crime detention centre.

"They were stressed out and confused about why they were being detained," Hermes said, adding that the nine had their wrists and ankles shackled when the NLG lawyers saw them.

Four of the protesters have since been released, but five remain in custody and are expected to appear in bond court at 12pm today. We'll have an update when we know more.

9am CT: Good morning. Today is the first day of the G8 summit at Camp David, where Barack Obama will host the leaders of the world's wealthiest countries.

Russia's president Vladimir Putin will not be present, but the remaining seven leaders, including France's newly elected president Francois Hollande, Germany's Angela Merkel and David Cameron from the UK, will still form the largest single gathering of world leaders ever received at Camp David.

The agenda will focus on the continuing showdown with Iran and its refusal to abandon its program to produce nuclear weapons, CBS news reports, with a focus also on the standoff with North Korea. G8 leaders are set to focus on economic issues first thing Saturday morning.

Perhaps with that in mind, Barack Obama is due to make a major speech in Washington ahead of the rendezvous, announcing at least $3bn in private sector funding to tackle hunger in developing countries, mainly in Africa.

My colleague Ewen Macaskill reports:

Aid agencies are likely to react with mixed feelings to the pledge to find funding from the private sector, with charitable groups sceptical funding from the business world can replace the kind of funding governments traditionally provide to the world's poorest countries.

But given the present austerity measures in Europe and in the US these appear to be drying up and instead Obama is putting the focus on the private sector.

Anti-war protesters will gather in Thurmont, six miles east from Camp David, and Frederick, further south, to register their disapproval with the summit. The Guardian's Ryan Devereaux will be reporting from the scene.

I'm here in Chicago, which was to have hosted the G8 before it was moved in March, but which will still welcome 51 world leaders and thousands of dignitaries and journalists at the Nato summit from Sunday. Protests are also planned here, with the National Nurses United slated to hold a rally in the city's downtown area.

Follow here for live reporting on all the latest summit developments and protests, with links out to the best-of-the-rest coverage online.

It is hard to see how promoting the importance of parenting squares with freezing child benefit, or cutting maternity leave, or failing to fund adequate childcare provision

David Cameron has made being a parent part of his political identity. Tory traditionalists fear it means the nanny state has become more than just a metaphor for interference. They should look around them. New parents are all too pleased to be able to turn to the state for expert advice and, as one piece of recent research confirmed, thousands already do. Parenting matters to children's futures and to their parents' wellbeing, and the coalition has been more constructive than its critics feared two years ago. Sure Start centres, for example, will provide some of the parenting classes Mr Cameron announced on Friday, despite the Conservatives' attacks on them in opposition. There's continued funding for research and lobbying bodies like the Family and Parenting Institute. And the prime minister keeps returning to the subject, even amid economic crisis.

Mr Cameron's idea of parenting as nation-building may not be as widely acceptable as the more practical help of someone to call when your own tears of frustration are louder than the relentless wailing of your new born baby, or a source of sane advice when your screaming toddler has taken to throwing himself face down in the supermarket aisles. Expert advice, and having a way of meeting other parents facing the same challenges, are inestimable benefits whether they come from the extended family, an antenatal class, or the state.

But they are not enough on their own. And the coalition is pursuing policies that risk jeopardising all the good that comes from normalising the business of being a parent. It is hard to see how promoting the importance of parenting squares with freezing child benefit, or cutting maternity leave, or failing to fund adequate childcare provision. Bad parenting might be due to ignorance, but it can also be triggered by stress or depression or problem drinking. The evidence of the role of parenting, and parenting classes, in coping with teenage misbehaviour is far less clearcut than Mr Cameron seemed to suggest when he spoke last August of poor parenting contributing to the riots. There is an ambiguity in the way he says that loving families are more important than a large income which suggests that he thinks this is yet another way of shrinking the state, by dumping more responsibilities on the family.

In this formulation it is not social crisis that contributes to failed families, but failed families that cause social breakdown. Yet everyone involved in teaching parenting talks of the importance of treating it as part of a bigger picture, which also involves financial and physical security, better education and the chance of a job. Helping people to be good parents is going to take more than a voucher from Boots.

Social network giant ends day at $38.23, up just 0.61% from its starting price after share sale got off to a messy start

Facebook's first day as a public company ended with the company narrowly avoiding the embarrassment of its stock dipping below the $38 starting price, in one of the most frenzied share sales in history.

Shares in the social network giant ended the day at $38.23, up 0.61%, having soared 11% earlier in the day. A record 566m shares traded hands as the company joined the Nasdaq stock market where it is now valued at $104bn, more than the combined worth of Goldman Sachs and Nike.

Mark Zuckerberg, the company's 28-year-old founder and Facebook's largest shareholder, saw the value of his holding reach $20.4bn by the time the market closed.

The sale got off to a messy and inauspicious start. Early trading was delayed until 11.30am as the exchange systems seemed unable to cope with the scale of the initial public offering (IPO) and failed to send electronic reports back to traders and firms to confirm that shares had been bought or sold. After the market closed, CNBC reported that the Securities and Exchange Commission was looking at the Nasdaq trading problems.

When trading eventually did start, more than 82m shares were traded in the first 30 seconds. The share price soared 11% before quickly collapsing to close to the $38 offer price.

Dealers speculated that Facebook's army of bankers had stepped in to stop the shares falling below $38, a move that would have landed the social network with a public relations disaster on its first day as a public company.

Sam Hamadeh, founder of the analyst PrivCo, watched the day unfold at the Nasdaq exchange. "It was stunning," he said. "I have not seen anything like it in 20 years of watching this market."

He calculates that the banks who underwrote the share sale stepped in and bought $300m worth of shares to stop Facebook dipping below $38, a move that would have marked Facebook as a "busted IPO".

"It doesn't matter so much to Facebook, they raised their money but
it's not a great start," said Hamadeh, who said he believed Facebook was worth $24-$25 a share. "And that's being generous."

Before the shares started trading the estimated price reached $45, triggering a wave of sell offs that Nasdaq could not handle, said Hamadeh. Nasdaq did not return calls for comment. He predicts that the shares will fall further next week. "The banks can't support this thing forever," he said.

For now the share price is not Zuckerberg's primary concern. "Of course the money means something to him," said David Kirkpatrick, author of the Facebook Effect. "But he's not doing it just for the money and he assumes that rather than focus on the money, he should focus on making sure Facebook does well. He is highly analytical in everything he does, extremely disciplined. He is not going to be watching that stock price every day, I can tell you that."

Facebook's stock market debut had begun with Zuckerberg - wearing his trademark navy blue hooded top - remotely ringing the opening bell for the New York-based stock exchange from outside his California headquarters as staff cheered him on. Forbes calculated that as he did so, he was the world's 23rd richest man – two places above Google founders Larry Page and Sergey Brin.

However, the riches generated by Facebook went wider. At $38 a share Facebook created 88 people with fortunes of over $30m, according to Wealth-X, an analyst that monitors high net worth individuals. If the price reaches $43, there will be 265 Facebook millionaires worth more than $30m.

The sale reaped enormous rewards for Facebook's co-founders and early backers. Co-founder Dustin Moscovitz is now worth over $5bn. Elevation Partners, an investment firm that counts U2 singer Bono among its partners, holds shares worth over $1.6bn.

Facebook's IPO is the most hotly anticipated share sale since Google's in 2004. Google's stock started trading at $85 and ended the day at $100.34. Google's shares now sell for over $620.

As with the Google IPO, there has been a lot of scepticism about Facebook's ability to turn its phenomenal number of users into a business able to support a $100bn-plus valuation. Facebook's revenues were $3.7bn last year. Goldman Sachs, the investment bank, had revenues of close to $29bn and is valued at half Facebook's current value.

The social network now has over 900 million people on its service and will soon top a billion. For its fans, Facebook is the defining company of the 21st century. "His impact on the world will be as least as big as Bill Gates and probably already has been," said David Kirkpatrick, author of The Facebook Effect.

Kirkpatrick has spent many hours with Zuckerberg writing the only authorised history of the company. He said Zuckerberg had a "laser focus" on business and planned to spend Friday working rather than watching the share price.

"He really doesn't believe in paying attention to that stuff. He's much more focussed on product development, on penetration of the service around the world," said Kirkpatrick.

"In some ways he is a typical American suburban guy.

The sale comes amid what some are calling a new bubble in tech companies. Facebook's IPO follows a mixed set of share sales from other social media firms including Groupon, the online coupon company, and Zynga, the games firm behind Words With Friends and Draw Something.

Facebook itself has driven up the bubble, according to some, by spending $1bn on Instagram, a profitless photo-sharing application.

Earlier this week Pinterest, a social site that lets people "pin" pictures and content to create collections of interest, raised $100m at a price that valued the company at $1bn.

"There is a frenzy going on. I think this is a bubble," said Alan Patrick, co-founder of technology consultancy Broadsight. "Short term I can see that Facebook can be valued at $100bn on sentiment. People believe that it is going to make a lot of money. But sentiment doesn't last."

He said Facebook had yet to prove that it could make money on mobile devices, the fastest growing way in which people access Facebook.

However, the share sale comes in a week when General Motors announced it was dropping its own Facebook ads and said they were not working. GM is one of the world's largest advertisers and spent $1.83bn on US ads last year, according to Kantar Media, an ad-tracking firm.

Nigel Morris, chief executive of ad giant Aegis Media Americas, said: "We handle a number of clients who are advertising very successfully on Facebook. For others we are evaluating the right approach. The issue for Facebook is not whether revenues will grow, it's whether they will grow fast enough to justify this valuation."

Whatever the future for Facebook, its founders and early investors were certainly celebrating. Co-founder Eduardo Saverin, who is now worth over $2.7bn, congratulated Zuckerberg on his Facebook page: "Congrats to everyone involved in the project from day one till today, and I especially wanted to congratulate Mark Zukerberg (sic) on keeping tremendous stead-fast (sic) focus, however hard that was, on making the world a more open and connected place."

You can't really be an auteur until you've got your type – and that's just as true for the women directors

Tim Burton's Dark Shadows may have received a kicking from critics, but one person has emerged from the dust-up unscathed: Eva Green, the French actress who plays the evil witch Angelique Bouchard. With her red-lacquered lips, her crazy-beautiful eyes and possessed-marionette limbs, Green's lolling vamp represents the perfection of a type Burton has long been trying to get right – from Michelle Pfeiffer's Catwoman in Batman Returns, to Lisa Marie Smith's bosomy Martian in Mars Attacks!, to Anne Hathaway's White Queen in Alice in Wonderland.

Critics may be tired of the rest of Burton's directorial signatures – the ornate production designs, the seventies kitsch, the collaboration with Johnny Depp – but he's finally perfected his vamps: peroxide-blonde, big-chested, cinch-waisted, eyes like Bambi's.

All film directors have their types. Everyone knows Steven Spielberg for his suburban settings, alien visitations, and Godlike shafts of light, but equally consistent is his taste for hot moms in long T-shirts, cut-off jeans and morning-sexy hair: Teri Garr and Mellinda Dillon in Close Encounters of the Third Kind, JoBeth Williams in Poltergeist, and Dee Wallace in ET (dressed as Catwoman for Halloween, she even sends ET into a swoon).

Scorsese scholars find rich pickings in the director's Catholism, his taste for violence, his bruisers, misfits and loners, but less so the women in orbit around them, whether sexily-damaged like Rosanna Arquette in After Hours and Illeana Douglas in Cape Fear, or spitfires like Lorraine Bracco in Goodfellas and Sharon Stone in Casino, giving as good as they get.

To which we could add Tarantino's foot fetish ("He gave her a foot massage!"), Fellini's breast-love, the lifelong connoisseurship Michaelangelo Antonioni brought to women's legs, David Lynch's thing for misapplied lipstick, Darren Aronofsky's taste for brainy brunettes and David Fincher's love of skinny Goth girls viewed from the rear. As New York film critic David Edelstein concluded recently: "Fincher is an undies-and-butt man." You could be forgiven for concluding that the most enduring definition of an auteur is a film-maker who populates his movies with women he wants to boff.

The big guns of auteur theory are strangely silent on the matter. In his seminal essay Notes on Auteur Theory in 1962, the influential American critic Andrew Sarris determined that auteur status was conferred by meeting the following benchmarks: technical competence, personal style and something called "interior meaning", which he variously defined as a director's "vision of the world", his "attitude to life", and "élan of the soul." He said nothing about sexual pecadilloes.

Even though the two film directors hoisted highest by the French and touted as auteurist poster boys – Howards Hawks and Alfred Hitchcock – are famous for their taste in women, bequeathing us, respectively, the Hawksian woman and the Hitchcock blonde.

In his groundbreaking 1953 Cahiers du cinema essay, The Genius of Howard Hawks, Jacques Rivette identified Hawks as "a bundle of dark forces and strange fascinations" – his "obsession with continuity", his "obsession with primitivism" and "bouts of ordered madness which give birth to an infinite chain of consequences" – but passed over his equally fervid obsession with insolent, self-possessed foxes, lounging against doorways in tailored suits like Lauren Bacall in To Have and Have Not ("You know how to whistle, don't you, Steve? You just put your lips together and … blow.")

Likewise, in their landmark study, Hitchcock: The First 44 Films, Eric Rohmer and Claude Chabrol identified the "Hitchcock touch" through all the Catholic motifs in his work – original sin, guilt, martyrdom, crucifixion and so on. But he had little to say about his lifelong worship at the altar of cool blondes with perfect manners, and a nice line in double-entendres, as epitomized by Grace Kelly in To Catch a Thief ("Do you want breast or leg?"), though Truffuat touched on the subject in his book of interviews with the director.

It's a puzzle. French men are not known for their immunity to the charms of women. On the other hand, there's always been a strong hint of chauvinism to auteur theorists. The carving up of the movies, a collaborative medium, into a series of solo acts, each bearing the unmistakeable imprint of an all-controlling "master", most often male, is basically the great man theory of history transplanted into movie theatres – the swinging dick of film theories. Which is maybe why auterism, as conceived by the French in the 1960s and imported into America in the 1970s, has largely been the hobby-horse of young men in their twenties. Control is a young man's sport.

"There are no good and bad movies, only good and bad directors," said François Truffaut, at 21, believing that a real man's signature comes through regardless, like musk or sweat. Jacques Rivette, at age 25, found Hawks world to be "exclusively male" and dissed Marilyn Monroe as "that monster of femininity".

So what about the women? The recent complaints from the Croissette about the lack of women directors at Cannes – a "great pity", according to jury member Andrea Arnold – should not obscure the significant advances women have made in turning the cameras on men. Kathryn Bigelow's onscreen testosterone experiments have taken her from the young bucks of Point Break – "young, dumb, and full of come" – to the more pathological daredevilry of Jeremy Renner in The Hurt Locker. Sofia Coppola has showcased her rapport with father figures (guess who) in Lost In Translation, and sleek young blades like Stephen Dorff in Somewhere.

But the Female Gaze Award for Male Objectification surely has to go to Jane Campion, who got full-frontal nude scenes from Mark Ruffalo in In The Cut and Havey Keitel in The Piano. "He feigns the active while [re]presenting the passive posture," writes Missouri professor Jaime Bihlmeyer of Keitel's nudity in his 2003 academic paper The Female Gaze, the Speculum and the Chora within the H(y)st(e)rical Film. Citing Jacques Lacan and Julia Kristeva's work on phallocentrism, Bihlmeyer concludes that by stripping for the camera, Keitel "appropriates a state of ambiguity" and becomes "unstuck from the linearity of the Law of the Father in this display of Other than subjectivity".

Or, as Ruffalo tells Meg Ryan in In The Cut, "some women have no sense of the cock". Perhaps there's our definition: you haven't really qualified as an auteur until an American film scholar has used French psychoanalytic theory to render your ouevre as impregnable as Jean Baudrillard's left nut.

Before trading, Facebook's bankers were ready to count their profits in billions. By close, they'd had to bale out their own IPO

The day of Facebook's first day of trading as a public company brought with it a strange perspective: the highest manifestation of a social media bubble and its ugly aftermath, all in the span of a few hours. Who would have thought that Facebook's much-hyped IPO – in its bold $16bn size, the apotheosis of uncontrolled, frothy, capitalist ambition – may have been just the thing needed to bring Silicon Valley high spirits back down to earth and send ambitious techies snuggling back into their hoodies?

The day opened with crowds awaiting Facebook's debut in New York's Times Square, waving at cameras. Gleeful Facebook employees, with sugar-plum dreams of newly-minted fortunes, crowded with smiles behind CEO Mark Zuckerberg at the company's Menlo Park headquarters. The Wall Street Journal created a Zuckerberg Wealth-O-Meter ($20bn at the latest count) and the New York Times revealed the subtle-wealth secrets of 1,000 new millionaires created by the IPO.

Just to play a concise version of the parlor game that went around the stock markets, Facebook's market value at $104bn – with $3.7bn of profits – would have made Facebook worth more than: internet megastore Amazon.com; global beverage behemoth PepsiCo; petro-giant Total; BHP Billiton; and McDonald's. It was not far off the valuation of JP Morgan Chase, an international bank with $1tn in assets. Over the previous weeks, one brief glimpse of Mark Zuckerberg in a hoodie, heading to an investor meeting, launched the kind of press coverage we've hardly seen since the Beatles. JP Morgan itself, one of the company's banks, flew the Facebook company flag next to the stars and stripes of the United States, and papered its headquarters with Facebook signs.

One was tempted to caption many of the pictures, media packages and general euphoria with a single sentence: "On the sixth day, He created Facebook." It was a vision of capitalist paradise, all the richer because Zuckerberg openly disdained the money-waving bankers and investors of Wall Street. What could possibly go wrong?

The popping of this culturally focused Facebook bubble – if not the financial one – was decisive. A few hours later, the scene was decidedly more morose.

The IPO was delayed three times on the Nasdaq exchange because of technical difficulties. Facebook's stock price began a determined move downward – until its 33 banks rushed to buy up shares to avoid embarrassing the company. Zynga, the publicly traded company that makes Farmville and contributes 12% of Facebook revenues, took the aftershocks from Facebook's struggle strongly: its stock fell so fast that its trading was halted. Financial television pundits turned tail and suddenly cautioned against putting faith in an irrational frenzy about Facebook.

The bubble giveth, and the bubble taketh away. What brought Facebook's prospects down – at least, on its first day of trading – was the simple fact that the relationship between a company's stock price and its true value has always been an uneasy one. It is more so for this strange breed of social media leaders – Facebook, LinkedIn, Groupon, Zynga – which appear in front of millions of people but have relatively little in revenue to show for it.

Facebook, as the leading social media company of our time, tested the limits of whether investors are willing to pay anything to participate in the popularity of social media – the way they filed like lemmings to invest in hapless dotcoms like Pets.com in the late 1990s. With Facebook as their avatar, other social media companies have sought high valuations: Instagram recently sold for $1bn, and the most recent estimate on the scrapbooking site Pinterest was $1.5bn.

What happened was a decisive statement. Wall Street is trying to capitalize on the financial hype by sending out companies like Facebook, LinkedIn, Zynga and Groupon public before they are mature enough to sustain the pressure of being publicly-owned companies. But what Wall Street wants and what Wall Street gets, these days, are two very different things.

Regular investors – just normal Americans – bought 20% of the Facebook IPO. They are usually known derisively as the "dumb money". They have wised up a bit, perhaps, in the decade since the dotcom bubble. Most of the hype, and the expectation of vast riches, came from Wall Street bankers and professional investors – another sign, perhaps, that the finance industry is trapped in its own bubble, out of touch with American sentiment.

For Facebook, the first day of trading was mildly embarrassing – no big "pop". It closed on the day moving down: the stock closed at $38, the exact prior price set by the underwriters. As a metaphor, this was irresistible: after all the excitement, talk, euphoria and disappointment, Facebook ended the day right where it started.

Snow, hail, drought, frost, flood ... the weather is playing havoc not only with national morale, but our fragile wildlife. The ordinary vicissitudes of a British spring – or something more sinister?

Snow in Teesdale, hail in Birmingham, floods in Essex, and what felt like a touch of frost on the first morning of the first test at Lords (admittedly, rarely a balmy occasion). With a miserable May following the wettest April for a century, it must be tempting to peer up at the gloom and wonder, whatever happened to global warming? Louise Mensch did just that this week and the Tory MP soon attracted criticism after tweeting: "Wow. We really do need more windfarms on land to combat all this dreadful global warming. #rain".

There's a jolly Armstrong and Miller sketch in which Ben Miller's remark about global warming, while gazing out at the rain, precipitates a government warning that people will be jailed if they don't learn the difference between climate, a long-term trend over many years, and weather, which is what is going on outside the window right now.

Suitably re-educated, Miller gazes at the downpour and notes: "Look at this weather, eh? Still, I'm sure it will all even out statistically to illustrate a long-term warming trend."

Weather. There's a lot of it about. And it is tempting to look for deeper meaning in the very ordinary vicissitudes of spring. We may be settling into a typically rubbish British summer but the weather is about the media (where "blasts" are always "Arctic") and the Met Office (where a hurricane was infamously not on its way the night before "the Great Storm" of 1987) engaging in a ceaseless tango, the former desperate to wheedle an apocalyptic or optimistic pronouncement from the latter. Occasionally, the Met Office gets scorched, such as when they made their infamous long-term forecast of 2009 which was spun by the press into a guarantee of a "barbecue summer". (It was rained off.) Mostly, however, the forecasters stick closely to an understated script.

"After one of the warmest Marches and the wettest Aprils, now we're back to normal," says Charlie Powell, forecaster at the Met Office. "It's just British spring-time weather. It's just all normal variability and that's what we've seen to textbook standards in the last couple of months."

Hang on! What textbook features the driest March for 59 years followed by the wettest April in 101 years? At least Dr Barnaby Smith of the Centre for Ecology & Hydrology calls this spring "remarkable" for its shift from nearly two years of dry weather. "What happened in April was definitely not normal," says Smith.

The Intergovernmental Panel on Climate Change has warned that extreme weather events will become more frequent with global warming, but abnormal British weather is no such thing. For all our fickle skies, Britain (hottest day ever: 38.5C, Faversham, Kent, 2003; coldest -15.9C, Fyvie Castle, Aberdeenshire, 1995) doesn't do extremes. The IPCC is predicting an increase in the frequency and magnitude of warm temperature extremes – and, possibly, patterns of precipitation – but climate scientists admit they have no idea whether events such as floods and even cyclones and hurricanes will become more or less frequent. And a chilly spell isn't the start of an ice age. (For the whatever-happened-to-global-warming brigade, April was the fifth warmest on record worldwide; for precipitation pessimists, Britain has basked in 22 out of 24 months of below average rainfall.)

"When you talk about climate change or global warming you don't link it to a small area or a small space of time," chides Powell when I ask if our weird spring is linked to climate change. Snow in May, as the Met Office points out, is nothing special. The last time we saw it was way back in 2011, and again in 2010. On 2 May 1979, snow was reported at 342 weather stations across Britain. As the naturalist Richard Mabey writes in A Brush With Nature, "Our climatic folk memory is notoriously short and erratic, and full of gloomy mythology whose only silver lining is a vague belief in ancient Golden Summers. It is as if, living in a part of the world where the weather will always be capricious, we daren't allow ourselves the luxury of remembering particular weather instances for fear of developing foolhardy expectations."

Mabey challenges his readers to remember the summer of 1983 (the hottest July for 300 years) and the great summer of 1975 (no, not 1976, which everyone remembers because it led to drought) which started on 6 June after snowfalls on the 2nd. Mabey recalls rather more precisely than most of us because he kept a weather diary for 20 years (although he's given it up now because it got too repetitive).

Most people who might be devastated by our weird weather are surprisingly phlegmatic. Visit England must worry that their expensive ad campaign – featuring Stephen Fry, Rupert Grint and Julie Walters – will be washed out by the weather. "You don't go to the Peak District to sunbathe," says Sarah Long of Visit England. Forced by the financial squeeze into staycations back in 2009, we keep masochistically coming back for more, apparently. "We're fairly resilient," says Long. "Although it's great when the sun comes out, England is an all-weather destination."

Farmers, too, known to grumble about the weather now and again, are still thankful for the downpours after two dry winters. Drought status has been lifted in 19 areas of south-west England, the Midlands and parts of Yorkshire, although groundwater levels in much of the south and east, where hosepipe bans remain, are still low. "It's possibly surprised some people that groundwater levels have recharged as much as they have," says Smith at the Centre for Hydrology & Ecology. But there still needs to be at least a summer of average rainfall before aquifers in the south and east return to a healthier level. "The rainfall has bought us some time but we're not back to normal," says Smith. "Whatever normal is."

Worried about the drought in March, farmers now face a new challenge, according to Luke Ryder, dairy adviser for the National Farmers Union – getting out on to their waterlogged land. It is too wet for many farmers to put their cattle out, or get the first crop of silage in.

"In no way are farmers complaining," says Ryder. "We were praying to the rain gods."

The hidden cost of this miserable May, however, may be on our wildlife. "It's bloody awful," says Matthew Oates of the National Trust. "It's disastrous." The weather is hammering bird life and anything that lives in a burrow. Four thousand puffins – birds who live in burrows – have been washed out of their nests on the Farne Islands. Coots, moorhens and great-crested grebes, which make nests close to the water, have been swamped by rising waterlines, according to Dave Leech of the British Trust for Ornithology (BTO). Birds that nest on the ground or live close to wetland habitat, such as meadow pipits and reed buntings, have also fallen victim to the rains.

Secret World, the animal rescue centre in Somerset, reports a 50% increase in admissions of baby badgers, foxes and rabbits this spring, flooded out of homes. The centre has also seen an increase in admissions of adult barn owls, tawny owls and buzzards, which have become too bedraggled to fly in the wet, or seen their hunting grounds completely submerged. There haven't been many baby birds because, says founder Pauline Kidner, all the nests were abandoned or failed in the April monsoon.

As Oates points out, garden birds at least are able to have a second attempt at nest-building and could still successfully rear young. And while blocking weather systems delayed the arrival of long-distance migrants such as swifts and reed warblers by as much as two weeks, these birds should still be able to make up time and breed successfully.

May, says Leech, head of the nest records scheme at the BTO, is "a pivotal month". Unless it gets warmer and sunnier, there won't be much bird food about. "We've moved from habitat drought stress to habitat saturation, but the cold weather is really having a huge impact on the food chain," adds Oates. "It's been a disastrous time for winged insects – hoverflies, bees, moths and butterflies."

This weekend marks the start of Save Our Butterflies Week – and they need it: two of the most endangered butterflies in Britain, the Duke of Burgundy and the Pearl-Bordered Fritillary, only fly in early spring; after enjoying a revival in the glories of April 2011, it's back to square one this year. "Square one being the lowest point ever in their recorded history," says Richard Fox of Butterfly Conservation. In the rain and cold, adult butterflies cannot find mates or lay eggs to create caterpillars. And the role of most caterpillars? Bird food. "Insects are generally very heavily reliant on temperature and climate," says Fox. The lack of winged insects will have "knock-on effects for predators further up the food chain and for plants as well, which rely on pollinators such as bees."

Nevertheless, even fragile-looking winged creatures are surprisingly robust. Many butterflies will sit out a week of rain under a leaf.

Mabey was wondering about this year's swifts – a notable absence screaming around our villages and towns – but when he visited Lakenheath Fen in Suffolk this week he found thousands of this dynamic summer migrant whizzing low over the reeds. "Needs must is the rule in bad weather, not surrender," says Mabey. As Fox points out, the whole ecosystem is not going to fall apart. "Wildlife is used to weather," he says, "but the real concern is over the rarer species that have already been much reduced by human activity and can ill-afford too many bad seasons."

Butterflies are useful bellwethers; because they are so well studied, and so sensitive to the changing climate, they provide strong clues as to how other insects are adapting to weird weather. Over recent, warmer decades, many winged creatures have moved north through Europe.

But a fascinating study published in Nature Climate Change this year showed that birds and butterflies are not keeping pace with their natural climatic zone. Birds and butterflies are sensitive to small changes in average temperatures and so reside in a "climate space" where they can find food, breed and thrive. But with shifting climatic patterns, butterflies are lagging an average of 135km behind their natural climatic zone; birds are 212km behind.

Our flora and fauna may heave a collective sigh of relief if the Met Office is correct and we really are heading for a "distinctly average" 30 days. The south and east are likely to get a bit more rainfall than average, the north a bit less and the Met is really sticking its neck out to predict temperatures "around or a little bit below average" for June.

We are only human, however, and the weather gods love to mock us. Just after the Met forecast a drier than average April/May/June, the deluge began. Apart from a hosepipe ban, there is no better rain dance than the prediction of a barbecue summer. And so "distinctly average" can only be a good thing, can't it?

Professional critics are no more reliable than Amazon ratings, a study shows. So do we really need them?

Is the professional book reviewer an anachronism? In a recent Harvard Business School study of nonfiction reviews, assessments in mainstream media outlets like this one and amateur ratings on Amazon largely converged. Assuming we can trust the questionable verdict of mere consensus, surely we could chuck the Review section and decide what to read purely by consulting peers online?

Full disclosure: I am a professional book reviewer. Moreover, who knows whether pros and amateurs would converge in evaluations of fiction, which are notoriously subjective, and more my bailiwick.

Nevertheless, traditional reviewers still serve a function. Few Amazon punters will explore a book with the depth of an 800-word review. Supportive quotes are a virtual obligation of the form in print, since especially appraisals of style require substantiation, yet most Amazon reviewers applaud or deplore an author's prose without providing examples, and you just have to take their word for it. Granted, critics are often scorned as clubby in-fighters either championing their friends or settling old scores. On the Guardian website this week, a former reviewer for an unnamed London newspaper explained that he'd probably lost the job because he disparaged Joseph O'Neill's "odious" Netherland (certainly one of the most overrated publishing successes of all time), adding, "most book reviewers are pretentious tits".

Yet many Amazon reviewers are just as snotty, pompous and snide as the worst of the "tits" in the Times Literary Supplement. A few small-minded pros may indeed be brown-nosing or out for revenge, but most critics with a shred of integrity refuse to review authors they know. Besides, Amazon suffers from corruption as well: friends-and-family boosters can inflate a listing with flattery; rivals and personal adversaries can pump it with poison. Some review sections may be suspected of assigning books whose publishers advertise in the paper, but Amazon's emailed "recommendations" are paid for by publishers, no doubt.

As for accuracy of assessment, Amazon reviews tend to gather populist momentum, coalescing into a group-think that discourages dissenters. Able to check online for what's already out there before filing, insecure professional critics are likewise prone to go safely with the popular tide. But the best reviewers will stick their necks out, sometimes defending a misunderstood book against a deluge of denunciation, or objecting that a fashionably crowned "masterpiece" isn't all it's cracked up to be.

Certainly critics are not all created equal. American papers now pay so appallingly that some reviewers no longer feel it behoves them to actually read the book, a little oversight that they expose by making gross errors in plot summary or by wildly mischaracterising a book's whole premise. Some critics are so at odds with your tastes that you go out of your way to read what they hate.

Still, when executed responsibly, reviewing requires many hours of reading that modest fees don't begin to compensate. We're not all grinding an axe or scratching a back. We try to put an author's work in context, to advance a more constructive argument than "I didn't like it", and to make a few halfway amusing observations along the way. We delight in bringing a fine book to your attention, while sparing you a trawl through dozens of conflicting comments by folks who can't spell. When we pan a work, hoping to save you time and money, we risk making an enemy of the author for life, while Amazon trolls can forever hide behind "woof25".

Anyway, why not read the Review section and go online? Then, if both the pros and the proles turn out to be wrong, these days you've got multiple forums in which to say so. I might defend the reviewing trade, but a handful of haughty hired hands no longer having the last word on books is not a bad thing. According to that Harvard study, professional critics are swayed by awards and hype (witness the mysterious chorus of acclaim for Netherland), while regular readers are less prone to being bamboozled and more open to new writers. So between the two sources, we should all find the ultimate Holy Grail: a decent book.

• Follow Comment is free on Twitter @commentisfree

American Legislative Exchange Council under mounting fire after championing causes like Florida's stand-your-ground law

The storm surrounding the American Legislative Exchange Council, Alec, has gathered pace with the fresh defection of 11 Democratic state legislators who have cut off ties with the lobbying network.

The defections bring the number of Democratic representatives in state assemblies across the country who have dumped Alec to 39.

The network, which brings together big corporations with local politicians to forward right-wing and anti-union legislation, has come under sustained pressure from campaigns such as the Progressive Change Campaign Committee.

Of the 11 new defectors, eight are Democratic representatives in Pennsylvannia, two in Illinois and one in Iowa.

PCCC's state organising director James Ploeser said the new blow to Alec showed how pressure on the lobbying group was working. "This shows progressives won't tolerate Democrats lending bipartisan cover to Alec and its extreme rightwing, union-busting, voter-suppression agenda," he said.

In recent years Alec has become under mounting fire from progressive groups for what they see as its pernicious influence on the democratic process in the US. The network exists to forward what it calls "model" laws by drafting legislation that it then encourages to spread from state to state across the nation.

Among the highly contentious causes it has championed have been voter-ID laws that make it more difficult for older and black people to register to vote and stand-your-ground laws that give gun owners greater powers that have been condemned by critics as "shoot-first" laws.

The shooting of the unarmed black teenager Trayvon Martin in Florida, the first state to adopt with Alec's help a stand-your-ground law, led to a powerful backlash against the lobbying network. Battered by the criticism, Alec's chairman David Frizzell last month announced that he was closing some of the network's most controversial legislative areas, or "taskforces".

Despite the strategic retreat, Alec has proven to be vulnerable to the growing opposition to its work. Several large companies, including Coca-Cola, Kraft, Proctor & Gamble, McDonald's, Pepsi and Wendy's as well as the Bill and Melinda Gates Foundation all bailed out of the network.

Now pressure is being put on other firms such as AT&T and Johnson & Johnson to follow suit and cancel their membership, with some 88,000 people signing a PCCC petition to that effect.

But the defections amount to a relatively small part of the network's total membership which still includes more than 2,000 republican politicians from all 50 states and about 300 corporations and private-sector bodies.

Europe needs to go in for a proper restructuring of its banking sector along the lines of that executed by Gordon Brown and Alistair Darling in 2008-09

History suggests that the last place one would look for the resolution of a crisis is a summit of world leaders. Yet every so often summits can pave the way to a sea change in policy. The G20 meeting in London presided over by Gordon Brown in the spring of 2009 agreed an impressive-sounding trillion dollar boost to the world economy, but more importantly sealed a deal between the leading powers that they would each spend more until the spectre of recession was warded off. Similarly, the first G20 summit that David Cameron attended as prime minister in 2010 marked the point at which Europe and America parted ways on economic policy.

Two summits, two opposing results, yet each hugely significant. Let us hope that the G8 meeting kicking into gear in Washington this weekend is of a similar rank of importance. Certainly, the situation Mr Obama and his colleagues confront is potentially even more grave than the one they faced in those early months after Lehman Brothers collapsed. However amazing it is to imagine, it is not hyperbolic to say that the euro stands on the verge of a death spiral – and that there are precious few opportunities left to pull it back from the brink. It is not simply the very real prospect of Greece leaving the single currency; it is also the palpably distressed condition of Spanish banks (as suggested by this week's credit-rating downgrade for 16 of them, and the collapses in their share prices), and of so many others across Europe; plus the long-standing issue that Spain and Italy and a number of other countries are now finding it increasingly difficult to get the loans they need from financial markets.

On its own, the ejection from the euro of a country worth only around 2% of the club's GDP would still be shocking and chaotic. But put it together with the fragility of confidence – financial, business, political and public – across the continent and you have a recipe for chaos on a scale that would make the 2008 bonfire of the banks look like a relatively pleasant memory. Against this backdrop, the tasks that face the G8 are large, but they can be broken down into three: financial, economic and political. Each can be easily clarified, but they will require huge expense of capital, both financial and political, to carry out.

The financial part of resolving the euro crisis has to begin by acknowledging that the continent's crisis revolves around its banks. Spain went into the financial crisis with very modest public debt, which increased sharply as the government had to deal with a housing and banking bust. Even now, a large part of the reason why Madrid remains a candidate for a financial rescue line from the rest of Europe is because if its banking sector suffered a big collapse, the government would have to step in. In other words, the banking sector debt is de facto a contingent debt on the government's balance sheet. This is madness, but it is also highly dangerous. To sort this out, Europe needs to go in for a proper restructuring of its banking sector along the lines of that executed by Gordon Brown and Alistair Darling in 2008-09. Since crisis-stricken southern Europe does not have the resources to do this, it will have to be done on an international basis with funds contributed by other countries.

The economic part of rescuing the euro begins by halting the counter-productive austerity programmes, and agreeing a collective fiscal-stimulus package to be led by Germany. Ms Merkel can borrow at record-low interest rates from the financial market: this is money that should be used to revive the euro area. Finally, Europe's political classes need to realise that a continent that now revolves around a failing euro project, and one that demands its member nations engage in destructive austerity, is doomed to political as well as economic failure. The euro project needs to be reimagined as something altogether more positive.

• German chancellor 'proposes euro referendum'
• Greek politicians furious...Berlin denies it
• Almost £80bn wiped off FTSE 100 this week
• EC: We want to keep Greece in eurozone, not out
• Trade commissioner: contingency plans are in place

9.45pm: And with that, we're done for the day, What a dramatic week, in which the prospect of Greece leaving the eurozone grew, and stock markets fell steadily in the face of a flood of bad news.

Thanks, as ever, for reading and commenting. Have a great weekend.

9.38pm: Greek leftist leader Alexis Tsipras has given an interview to the Guardian in which he describes the election campaign as "a war between people and capitalism".

It begins:

"I don't believe in heroes or saviours," says Alexis Tsipras, "but I do believe in fighting for rights … no one has the right to reduce a proud people to such a state of wretchedness and indignity."

The man who holds the fate of the euro in his hands – as the leader of the Greek party willing to tear up the country's €130bn (£100bn) bailout agreement – says Greece is on the front line of a war that is engulfing Europe.

The whole piece, by Helena, is here.

9.16pm: Helena Smith, our Athens correspondent, had the pleasure of meeting London Mayor Boris Johnson yesterday (he was in Athens to play his part in the Olympic Torch exchange).

Helena reports that while Boris comes from the opposite end of the political spectrum, he seems to agree with Greek far left leader Alexis Tsipras that Greece is in a much stronger position than might at first seem. She writes:

"I don't think for a moment Greece is going to be thrown out of the EU," Boris told me. "To do so would be to throw out the baby with the water ... and I don't think for a moment Tsipras will do anything that would lead the country [to exiting the euro zone]," said the former journalist, who it would seem is a keen follower of Greek affairs.

The prospect of Greece returning to the drachma was, Johnson agreed, as remote as the UK joining EMU. But for safety's sake he had some of the old currency in his pocket - and what would have been back in 2001, when Athens signed up to the euro, a reasonable amount.

"I was told to come back in a month," he joked, after trying to pay his dinner bill with it.

Only Boris....

9.09pm: World leaders have been discussing the Greek crisis in America, where they are gathering for the G8 summit.

François Hollande, the new French president, said it was essential that Greece remains in the eurozone, adding that he had told Barack Obama that economic growth must be a priority for Europe.

David Cameron has also been speaking, and repeating his line that the eurozone must take "decisive action" on Greece, and that Greeks must "make their minds up" about the country's future plan (as, indeed, they should do on June 17).

9.07pm: On Wall Street, the ongoing eurozone crisis helped to send shares lower again, with the Dow Jones index finishing 73 points lower at 12369, a fall of 0.6%.

That means the Dow has fallen 3.5% in the last week, and has fallen in 12 days of the last 13. Facebook's less than stellar IPO didn't help.

8.40pm: Our Greece correspondent Helena Smith has just worked the phones and says there is a view in Athens that Angela Merkel's suggestion may have been "lost in translation."

A high-level source told Helena:

My explanation after calling the prime minister's office is that Mrs Merkel may have said the election was like a referendum and the president may have misunderstood.

Because the details of the conversation were released by the president's office it is very difficult to verify but there is a feeling it was lost in translation.

So maybe it's not a farce, maybe it's a romcom.

From Greece, Theodora Oikonomides kindly reminds me that President Karolos Papoulias is a fluent German speaker.

Update: However, Helena's been told that the conversation was conducted in Greek.

It seems that the full picture will only become clear if/when the transcript of the call is released...

8.19pm: Whatever the truth of the situation, Germany and Greece risk an embarrassing diplomatic spat over the claim that Angela Merkel proposed a euro membership referendum.

Many Greek citizens are already weary of the meddling in their elections from outside, so Merkel's apparent interjection is not going to help. For the rest of us, it reinforces the feeling that Europe still hasn't got a grip on the crisis.

So, Greece is denying a denial by Merkel that she suggested Greece hold a referendum, which it is doing anyway

— Chris Adams (@ChrisAdamsMKTS) May 18, 2012

Our European editor, Ian Traynor, also dispairs:

#euro greece and germany #headlesschickens

— Ian Traynor (@traynorbrussels) May 18, 2012

One can only imagine what Barack Obama will make of it at the G8 summit. Makes Washington look like a model of democratic efficiency (until the debt ceiling talks come round again, anyway).

7.58pm: This is turning into something of a farce.

According to reports from Athens, the Greek government is now rejecting Berlin's denial, insisting that Merkel did suggest running a referendum alongside the June 17 vote.....

7.21pm BST: The German government has now denied that Angela Merkel suggested that Greece should hold a referendum.

Reuters is quoting a German government spokesman that:

This is false and we completely dismiss this.

But as reported at 6.26pm, the statement from the Greek prime minister is pretty clear. It says that: "She [Merkel] also conveyed to the President of the Republic thoughts about the holding of a referendum parallel to the elections on the question of whether the Greek citizens wish to remain in the eurozone."

So what exactly were Merkel's thoughts on the idea of a euro referendum, which wasn't being discussed until this evening....

7.10pm BST: There's been a rapid backlash in Greece to the news that Angela Merkel had proposed that Greece should hold a referendum on its euro membership.

Alexis Tsipras, head of the Syriza coalition, reacted quickly, saying Merkel had grown used to treating Greece "like a protectorate". He blamed the leaders of the mainstream political parties for encouraging this attiture.

Tsipras (rising a wave of popularity by arguing that Greece's austerity package must stop), added that the June 17 elections will allow the Greek people to end their "austerity, subordination and indignity" in favour of "progressive developments across Europe".

You can see Tsipras's full statement here, on RadioBubble.

Antonis Samaras, the head of the conservative New Democracy party, also rejected the suggestion of a referendum, but for different reasons. Samaras said:

The Greek people don't need a referendum to prove they're pro-euro.

And Pasok MP Eva Kaili has also rejected Merkel's suggestion, telling Business Insider that the referendum:

won't and can't happen. It is ironic and it is blackmail.

Efthimia Efthimiou, financial journalist at Capital.gr, suggests that Merkel would have been aware that Greece's current coalition government lacked the authority to call a referendum, but wanted to ensure that the June 17 election was seen as a vote on Greece's future in the eurozone.

6.45pm BST: Angela Merkel's jaw-dropping suggestion that Greece should hold a referendum on its membership of the eurozone (as the Athens government stated at 6.26pm) comes exactly 190 days after former prime minister George Papandreou resigned, after enraging European leaders including the German chancellor by suggesting the Greek people should vote on the terms of their second bailout.

6.26pm BST: The Greek government has released a statement, confirming that Angela Merkel suggested to president Karolos Papoulias that Greece should hold a referendum on its membership of the eurozone.

The idea was then rejected by interim prime minister Panagiotis Pikramenos, as his caretaker administration simply does not have the authority to call a referendum.

It's here, in Greek. Here's a translation of the key section in English, via Diane Shugart, who does a brilliant job of reporting Greek events on Twitter.

Mrs Merkel reiterated the EU's support for Greece's efforts to overcome the crisis. She also mentioned that the EU intended to examine bolstering of policies aimed at growth and combatting unemployment in the European area. The issue of growth is, in any case, the basic issue that will occupy the extraordinary EU summit on May 23 in Brussels.

She also conveyed to the President of the Republic thoughts about the holding of a referendum parallel to the elections on the question of whether the Greek citizens wish to remain in the eurozone. It is evident nonetheless that the issue is beyond the scope of the caretaker government.

6.15pm BST: Some remarkable late breaking news in Greece – national TV are reporting that Angela Merkel, the German chancellor, told Greek president Karolos Papoulias today that Greece should hold a referendum on its membership of the eurozone, alongside the election of June 17.

We knew that Merkel and Papoulias had spoken by phone earlier today (see 10.55am), but this is an unexpected development....

More to follow!

6.10pm BST: An update on the situation at Santander UK following the one-notch Moody's downgrade last night, from my colleague Jill Treanor:

Steve Pateman, head of Santander UK's high street banking operations, says that today, since the blanket news coverage of its one-notch credit downgrade, there has been " a modest increase in outflows in our retail business of around £200m, but this is less than 0.2 % of our retail deposits, and is no cause for concern".

He points out that the bank is getting in £500m weekly into its ISAs and has a £35bn liquidity buffer. He also points out: "We have no exposure to Greece. We are fundamentally a very simple bank that lends to UK businesses and
households," said Pateman.

"People have lost sight of the fact that this a one notch downgrade", he added, and keeps the bank in the same rating status as other UK banks.

The UK money is ringfenced from the Spanish parent. One way for it to flow back is through a dividend is one way - the last one was paid in the first half of 2011 - and is only done so if the board of the UK business wants to pay a dividend and if the Financial Services Authority approves.

5.40pm BST: European Parliament president Martin Schulz has visited Greece today. In a speech given in Athens, the German social democrat spoke plainly about the pain suffered by ordinary Greeks, before insisting that austerity could not be avoided.

Here's the details of Schulz's speech:

I understand your despair. I understand your resignation .I understand your anger.

European solidarity demands that we stand by each other. The citizens of Greece are not to blame for the current situation, and yet are having to bear the main burden of it.....

but, the first hard truth is this: austerity measures and structural reforms can not be circumvented. No EU country will release the next instalment of the EUR €130bn rescue package unless the next Greek government adheres to the commitments that have already been made.

If Greece wants the Troika to keep its promise to pay the next instalment, which Greece needs by the end of June at the latest, Greece must also keep its promises

Trust is founded in the reliability of both partners. If the next Greek government does not keep the promises that have already been made and adhere to the agreements that have already been reached, many people in neighbouring countries will have the impression that Greece does not keep its word.

If you give up now, the next instalment of the bailout will not be paid. What that means is that the Greek State will have no more money in future to pay salaries, to pay pensions, to pay unemployment benefit, to keep the schools and hospitals going.

People who say that all you have to do is not pay anything back are failing to mention that Greece would then receive no more credit, either from banks or from countries. Those who say we don't accept the memorandum, but we will stay in the euro zone, nourish a fake hope.

The people who say that Greece need not abide by the agreements are failing to say that that can lead to only one thing, Greece's departure from the eurozone.

So, it's the same argument as European officials have been making for weeks, but with a more 'human' tone at the start to try and sweeten the austerity pill.

And despite Brussels officials insisting that they remain impartial and will accept the result of June's election, Schulz's comments must be read as a call to back parties who accept the current financial programme deal, and not to vote for the Syriza coalition. Political impartiality is being stretched...

And, as regular reader James Wilkins points out:

If Martin Schulz manages to scare Greek voters into voting for New Democraty or Pasok so that they can form the next government I doubt it will last long because additional austerity measures are planned in addition to the ones already in place.

I am fairly sure that NO government will be able to carry them out.

Agreeing the details of those new cutbacks/tax rises will be an early challenge for the next government.

5.15pm BST: Fitch has just followed up on last night's Greek downgrade, by cutting its ratings on the country's banks to CCC as well. They, like Greece itself until yesterday, has been rated at B-.

Inevitable, really, given last night's move (it's unusual for a bank to have a higher credit rating than its sovereign).

Here's the rationale:

In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF programme of fiscal austerity and structural reform, an exit of Greece from EMU would be probable and/or this could be followed by a withdrawal of international support to Greek banks.

A Greek exit would likely result in widespread default on private sector as well as sovereign euro-denominated obligations.

4.43pm BST: European stock markets have closed, and it's another day of losses as the eurozone crisis rumbles on.

In London, the FTSE 100 shed 70 points, led by the banks and the miners. The crisis has wiped £79.76bn off the blue-chip index in the last week.

Somewhat ironically, the only one of the Big Five European indices to rise today was Spain, which shrugged off Moody's decision to downgrade its banks last night.

Here's the closing scores in Europe:

FTSE 100: down 70 points, or 1.33%, at 5267
German DAX: down 37 points, or 0.6%, at 6271
French CAC: down 3.99 points, or 0.13% at 3008.
FTSE MIB: down 40 points, or 0.3%, at 13048
Spain's IBEX: up 28 points, or 0.4%, at 6566.

In London, Chris Beauchamp of IG Index dragged his eyes away from the Facebook IPO to comment:

Bulls will doubtless be glad to put this week behind them, having had to endure a wave of selling that has its origins in Europe. A modest attempt to recover during the afternoon was sparked by news that the Spanish government was hiring advisers to assist with bank rescue plans, and this helped Spanish and Italian markets to push into positive territory. However, the effect of this soon faded and the selling began anew as US markets opened.

The story remains identical to that seen throughout the week, namely a Greek exit from the euro and the possible repercussions.

4.17pm BST: Britain would suffer a deep slump, perhaps as severe as the recession that began in 2008, if Greece left the euro - the chair of the Office for Budget Responsibility, Robert Chote, has said.

In an interview with my colleague Andrew Sparrow, Chote was clear that a Grexit would be a severe blow to the UK economy, destroying economic activity that would be extremely hard to rebuild.

Chote, who approves the forecasts on which Britain's budget's are based, said:

The concern is that you end up with an outcome in the eurozone that creates the same sort of structural difficulties in the financial system and in the economy that we saw in the past recession, and that that has consquences both for hitting economic activity in the economy, but also its underlying potential.

And it's the latter which has particular difficulties for the fiscal position, because it means not just that the economy weakens and then strengthens again – ie, it goes into a hole and comes out – but that you go down and you never quite get back up to where you started.

Although Chote's speaking about the UK, the implications for other economies would also be severe. More here.

3.57pm BST: Interesting development at the Bank of England this afternoon – monetary policy committee member Adam Posen will not take a second term on the MPC, and is rejoining Washington's Peterson Institute as director.

Posen has been the most ardent supporter of quantitative easing, until a month ago when he surprisingly stopped voting for more electronic money to be created. With Posen not taking a second term, this means a vacancy on the MPC -- and perhaps less chance of the Bank launching QE3....

3.53pm BST: Stephen Harper, prime minister of Canada, is planning to use this weekend's G8 summit to bang some European heads together.

Having watched the eurozone crisis rumble on for the past few years, Harper now appears determined to take a tough line during the talks in Maryland.

Andrew MacDougall, Harper's director of communications, told reporters in Ottowa that:

The prime minister is of the opinion that this (the eurozone financial crisis) is the problem that needs to be talked about now, and I think it's good timing that we have this opportunity with some of the principals around a table.

It seems like we've been discussing this issue for many a summit....

Tough action needs to be taken...We need to get on top of this.

In the 1990s Canada, of course, pulled off an 'expansionary fiscal contraction' that conservatives often point to today. It cut public spending sharply, and still saw decent economic growth. Critics, though, argue that it's wrong to expct Europe to manage the same trick - as the world economy is in much worse shape today, and there's less margin for any new monetary easing (as policy is so loose already)...

3.32pm BST: On Wall Street, the Dow Jones industrial average has failed to claw much of yesterday's losses, despite the excitement of the Facebook IPO.

The Dow is up just 17 points at 12459, a gain of 0.13%. In London, the eurocrisis continues to weigh on shares with tthe FTSE 100 down 63 points at 5275.

2.58pm BST: Missed this yesterday. Boris Johnson, Mayor of London, has reportedly given his backing to Greece while visiting Athens for yesterday's Olympic flame ceremony, as only Boris can.

Athens News reports that Johnson told them that Greece should take solace from the fact that there's no mechanism to eject a country from the eurozone, and that Germany must accept the price of saving the euro.

Or, as he put it:

If the Germans want to sell washing machines to Greece then they have to pay for the single currency.

You could argue that the underlying trade imbalances in the eurozone would be eased if the Greeks sold washing machines to the Germans. But, I guess Boris is more of a classics man than an economist.

please @AthensNewsEUtell us that @mayoroflondon Boris Johnson made the German washing machine quip... in fluent ancient Greek...

— Faisal Islam (@faisalislam) May 18, 2012

2.32pm BST: Just spoke to José Manuel Barroso's spokesman, Simon O'Connor, who insists that Europe has not drawn up a emergency contingency plan for Greece today (despite various reports on this line today).

The commission is not working on the basis of a Greek exit scenario.

We are working to keep Greece in the euro.

The commission doesn't want to be drawn officially on the comments made this morning by trade commissioner Karel De Gucht (see 10.15am), that the ECB and EC have 'contingency plans' to avoid a 'domino effect' from a Greek default. De Gucht's comments are getting plenty of attention today, though.

It sounds as if Olli Rehn, the European Commission's top economics official, has given Channel 4 News a similar line, in an interview being broadcast tonight.

Update:
As I blogged earlier, we'd long assumed that Europe was making some contingency plans for a Grexit (Mervyn King, Bank of England governor, has been clear that the UK authorities have been planning for such scenarios for a while). So, while there may not a full-blown contingency plan signed off and in place in Brussels, it would be more worrying (deeply irresponsible, really) if Rehn, Barroso, et al hadn't put some work into the issue -- given the proximity of the June 17 election in Greece.

1.45pm BST: The Irish economy continues to take a hit from its own debt laden, crisis stricken banking sector.

Bank of Ireland - one of the banks rescued in the international bail out - has announced today it is axing 1,000 jobs - 250 more posts than they had projected earlier this year.

From Dublin, Henry McDonald reports:

Chief executive Richie Boucher said that as the bank restructures "the overall number of people which we need to employ will regrettably reduce".

However, the Irish Banking Officials Association - the trade union for bank workers in the Republic - welcomed the fact that all the job losses will voluntary redundancies.

While jobs continue to be lost in the banking sector there have been further glimmers of hope in the export-drive hi-tech sector in Ireland, with computer giant IBM revealed today that it hopes to create up to 300 new jobs at its Irish headquarters in west Dublin.

Speaking of Ireland, Henry flags up latest polling shows that the Labour party, the junior coalition partner, has fallen behind Sinn Fein in the latest opinion poll on the state of Ireland's parties in today's Irish Independent. Sinn Fein has 17 per cent support while Irish Labour are down to 15 per cent. The poll comes 24 hours after an opinion survey on Irish attitudes towards the EU fiscal treaty. Significantly up to 35% of the Irish electorate remains undecided on how to vote at the end of this month.

The results of the referendum will be known in a fortnight; a no vote could add to further de-stabilisation of the eurozone.

1.24pm BST: Anticapitalist campaigners have been demonstrating in Frankfurt today, as part of a protest called 'Blockupy'.

According to local reports, police have begun removing people from outside a skyscraper that houses Goldman Sachs' German operation. Some roads have been closed, and Reuters says 40 people have been detained.

The police presence appears quite high, given the small number of peaceful protesters, as these photos from The Wall Street Journal's Laura Stevens show (there are more pics on her Twitter feed.:

#Blockupy #Frankfurt twitter.com/LauraStevensWS…

— Laura Stevens (@LauraStevensWSJ) May 18, 2012

#Blockupy #Frankfurt twitter.com/LauraStevensWS…

— Laura Stevens (@LauraStevensWSJ) May 18, 2012

Demonstrators have been protesting against Europe's austerity programmes, and against the way the financial system operates. German banks have said their operations have not been affected by Blockupy.

1.13pm BST: Here's some market commentary from David Jones of IG Index, confirming the grim mood in the City today:

With around 250 points gone on the FTSE 100 since last week, the 2012 uptrend that held for so long finally appears to have broken. The ugly prospect of bank runs appears to be spreading over Europe, rumours having hit Spanish banks yesterday to complement those heard about Greece earlier in the week.

As with so many things, it doesn't matter if it's actually true, since markets have worried about this for so long that the merest hint of capital flight raises investors' hackles. Bond yields are on the march, and shares in London are
taking heavy losses once again.

12.47pm BST: Here's more details of the European Commission's official denial that it's working on contingency plans for a Greek exit (via Market News)

The European Commission is not working on any contingency plans should Greece leave the Eurozone, a spokesperson for the Commission said on Friday.

"We completely deny that we are working on any such emergency plans" the spokesperson told MNI.

"We are concentrating all our efforts on supporting Greece and keeping it in the Eurozone. That is the scenario we are working on," the spokesperson said.

Have been trying to speak to the Commission on this myself....

As reported at 10.15am EU trade commissioner Karel De Gucht appeared to tell Belgian newspaper De Standaard that contingency plans were well underway. Unfortunately, the online version of this article only includes part of the interview, so it's tricky to know exactly what was said....

Open Europe, the think tank, says De Gucht has previous form on letting 'the cat out of the bag' on such issues....

12.27pm BST: In a volatile session, European stock markets have clawed their way back, amid ongoing chatter in the markets that a short-selling ban might be reintroduced. The FTSE 100 is still in the red (down 30 points at 5309), but other markets are a little higher.

Short-selling bans are usually brought in during times of crisis. They do tend to provide some short-term support for share prices, but don't fix underlying problems....

12.04pm BST: The European Commission has now denied that is has been working on an exit plan for Greece, after trade commissioner Karel De Gucht told a Dutch newspaper that contingency plans had been drawn up (see 10.15am).

European Commission spokesman Olivier Bailly has said that the EC "denies firmly" that any such exit scenario is being worked on, and that the Commission still wants Greece in the eurozone. There is no secret Grexit plan, Bailly insisted.

#Barroso and #Rehn have been saying for 2 years that #EC wants #Greece to stay in #€. This remains TRUE! NO PLAN from #EC for #GREXIT.

— olivier bailly (@ECspokesOlivier) May 18, 2012

11.07am BST: While European stock markets have suffered again, there has been another surge of money into AAA-rated government bonds.

With investors desperate to find a safe home for their money, German bonds hit their highest levels ever. This pushed the yield (the measure of interest rate) on 10-year bunds down to a new alltime low of just 1.396% in early trading (Tradeweb date, via the Reuters terminal). UK 10-year gilts also strengthened, pushing down the yield to 1.81%.

Such record low yields suggest both countries will be able to borrow at very low rates at the present time. Economists, though, see record low yields as a sign of stagnation. Dr Gerard Lyons of Standard Chartered pointed out that a similar pattern was seen in Japan during its financial crisis 20 years ago.

During the lost decade in Japan a key sign of market throwing in the towel on the economy was when yields fell sharply - as now in Europe.

— Gerard Lyons(@DrGerardLyons) May 18, 2012

Lyons was on sharp form on the BBC this morning too, describing the tension between Greece and the rest of Europe as a poker game, in which "instead of both sides playing Aces at the last minute they will produce Jokers".

10.55am: German chancellor Angela Merkel made a telephone call to the Greek president Karolos Papoulias this morning, to discuss the crisis.

A German government spokesman has just confirmed the call, explaining that Merkel "expressed the German government's wish for a functioning government in Greece". According to Greek TV, Papoulias will now brief caretaker PM Pikramenos on the discussion, so more details might come out later...

Seperately, a spokeswoman for the finance ministry has been quizzed about this morning's report (see 10.15am) that the ECB has been working on contingency plans in case Greece leaves the eurozone. No details emerged, but she did say that:

Our citizens expect us to be prepared for every eventuality.

10.15am: EU trade commissioner Karel De Gucht has confirmed that the European Commission and the European Central Bank are working on an emergency scenario in case Greece should leave the euro zone.

While we'd rather assumed that contingency work was underway, I'm not aware of an official stating it before (shout out if you know better).

De Gucht made the comments in an interview with Belgian newspaper De Standaard, arguing that a 'domino effect' from a Greek exit could be contained:

Both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn't make it.

De Gucht declined to give details, and added that he still expects Greece to remain in the euro (quotes via Reuters' Brussels office).

9.49am: In the financial markets, the FTSE 100 remains sharply lower, down 53 points at 5285, at its lowest point since 30 November.

This moves the UK blue-chip index deeper into 'corrrection' territory, from its recent high of 5965 in mid-March.

The German DAX and French CAC markets are also still in the red, both down around 0.6%.

But surprisingly, the Spanish stock market is actually up. Led by Bankia, whose shares have surged by 28% this morning. Quite a turnaround, following yesterday's rumours of a bank run. Other financial stocks are also now up, despite Moody's volley of downgrades last night.

That follows a report that Goldman Sachs has been hired to value Bankia – which could prelude a break-up.

UPDATE: A couple of City types have also mentioned a rumour that Spain might impose a ban on short selling (selling stocks which you don't actually own). Nothing official though.

9.35am: The crisis in the Spanish banking sector comes nearly four years after Santander was playing a 'white knight' role during the UK's own banking crisis.

Our banking expert Jill Treanor comments:

Interesting times for Santander UK. This was the bank that the Labour government turned to during the 2008 crisis to take on Bradford & Bingley savers. It also bought Alliance and Leicester just before the crash.

Now, unrelated to last nigh's downgrade, its attempts at a stock market flotation - earmarked for two years ago - are now pushed back until at least next year. Even so, it still has a strong rating and has not been downgraded as much as the overall group.

9.13am: The proportion of bad debts sitting on the books of Spanish banks has risen to its highest level since August 1994.

Bank of Spain data showed that the bad loans rate across the Spanish banking sector rose to 8.37% in March. The number of loans falling into arrears increased by €1.6bn to €148bn.

That underlines the thinking behind Moodys' downgrades last night – Spain's banking sector is stuffed full of loans that turned sour once the property market crashed.

Those bad debts could grow significantly if the Spanish economy deteriorates, making it even harder for the Madrid government to recapitalise its banks and put them on a sound footing. As Nicholas Spiro of Spiro Sovereign Strategy points out:

Spanish bank restructuring is a moving target: the deeper the downturn, the bigger the scope for a further deterioration in asset quality.

8.55am: France's new prime minister had stern words for European leaders this morning for their failure to help Greece through the financial crisis.

Jean-Marc Ayrault, a former German teacher, added his voice to the chorus calling for a new growth agenda. Ayrault urged Brussels to put spare structural funds to work to help the Greek economy return to growth:

We waited too long before helping Greece. This has been going on for two years now and only gets worse....

Tough talk, but not exactly unfair.

8.36am: German finance minister Wolfgang Schäuble said on Friday that the market turmoil surrounding the euro zone crisis could last another two years.

Speaking on France's Europe 1 radio after Asian markets had tumbled, Schäuble said:

Regarding the crisis of confidence in the euro ... in 12 to 24 months we will see a calming of the financial markets

And that, it seems, is Schäuble being optimistic. He also appeared to warn Greek voters not to trust parties who promise to renegotiate Greece's financial progamme.

It's up to Greek politicians to explain the reality to their people and not make false promises.
We want Greece to stay in the euro but meet its commitments and that's a decision that's up to the Greeks.

8.27am: Santander UK, which was downgraded one notch by Moody's last, is stressing this morning that the downgrade won't affect its business.

A spokesman said:

The change to Moody's credit rating of Santander UK plc has no impact on our businesses in the UK or our plans for future growth. Santander UK plc is an autonomous subsidiary of the Santander Group, with more than 90% of its total assets held in the UK and a Eurozone sovereign exposure of less than 1% of assets.

Santander UK is a key player in the British financial sector, having acquired Alliance & Leicester, Abbey National and Bradford and
Bingley. It now has a higher credit rating than its parent company, following Banco Santander's three-notch drubbing.

8.10am: European stock markets have fallen at the start of trading, with Spain's IBEX showing the steepest losses.

The IBEX shed 128 points, or 2%, at the start of trading, hitting a new nine-year low of 6409 points. That follows Moody's downgrading much of the Spanish banking sector last night (see 7.49am)

In London, the FTSE 100 is down 50 points at 5289, a new low for the year. Just four shares have risen, while mining companies and banks are leading the fallers. Rio Tinto, Xstrata, Lloyds Banking Group and Barclays are all down at least 2.5%.

It's a similar tale across Europe, with the Italian FTSE MIB down 1.5% and the French and German markets dropping around 1%.

There's a really downbeat mood in the City this morning. As Clive Duckitt, director at Fyshe Horton Finney, commented:

There seems little respite from the gloomy news that has engulfed equity markets in recent weeks.

7.56am: Risk aversion has driven the US dollar up this morning, as traders look to put their money somewhere safe.

This has pushed the euro down to a new four-month low of $1.2649 against the US dollar.

It has also pushed the oil price to its lowest level of the year, with a barrel of Brent crude dropping $1 to $106.40. That might actually bring some relief to the global economy, as high fuel and energy prices have been blamed for pushing up inflation.

7.49am: Moody's decision to downgrade much of Spain's banking sector last night has put country's financial problems under even more scrutiny.

Some downgrades had been anticipated, but the scale of the move is still quite dramatic – with 16 banks downgraded in total and some, including the giant Santander, by three notches.

Moody's blamed the weak Spanish economy (currently in recession), and the Madrid government's reduced ability to support troubled lenders, given its own problems.

Amidst the ongoing euro area debt crisis, the Spanish government's rising budget deficit and the renewed recession, sovereign creditworthiness has declined.

Spain's banking sector was also reeling from reports, officially denied, that worried customers were pulling deposits out of Bankia.

As analysts at Investec comment, "It's not going to go down in history as a great day for Spanish banks."

7.38am: Asian markets were hit hard overnight by fears over the health of the Spanish banking sector, and the looming threat of a eurozone break-up.

In Tokyo, the Nikkei fell by 2.99% at 8611.31, its lowest level since January. The index has now fallen for seven weeks in a row -- its worst performance since 2001. Hong Kong's Hang Seng index is down -2.69%.

Ben Kwong, Hong Kong-based chief operating officer at KGI Asia, called it straight:

It's really bad....

Fears of a Greek exit from the euro zone and the negative consequences from that are prevailing.

Australian stocks were also hit overnight, particulaly banks and miners (with National Australia Bank falling 4.23%, and Rio Tinto down 5%). Warnings that China's economic growth might be lower than expected this year also hit sentiment.

Chris Weston, institutional trader at IG, was also in bleak mood, predicting a "dark and tiresome open" in European markets.

The world is bereft of good news

7.35am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis.

Not that there's much 'good' about this morning. The escalating crisis having sparked heavy losses in Asian stock markets overnight, and another sell-off expected in Europe today.

There are two factors behind the sell-off: Fitch downgrading Greece yesterday evening on concerns that it might soon leave the eurozone and default, and Moody's decision to downgrade 16 Spanish banks.

Those two developments capture the essence of the crisis today – Greece pushed to the brink of euro exit by austerity, a long recession and an huge debt mountain, and Spain battling to avoid the same fate. We'll be watching both countries today.

World leaders are gathering in the US for the G8 summit, facing the growing threat of a global downturn. Barack Obama is expected to demand that Europe bows to pressure at home and abroad with new policies to boost growth.