Mario Monti, the Italian prime minister, told a joint press conference with Angela Merkel, the German chancellor, that Italy's deficit would rise to 2pc of GDP rather than the 1.3pc predicted, while the German finance ministry revised its forecast from 1pc to 0.5pc "thanks to the favourable overall economic development".
Referring to their clash at the Brussels summit, Mrs Merkel said she and Mr Monti were "willing to overcome our difficulties" and work together to end the three-year-old debt crisis. She said that "every day counts" in finding a resolution.
Francois Hollande, the French president, announced €7.2bn (£5.8bn) of tax rises in a bid to relieve France's "crushing" national debt. The government expects the French economy to grow by just 0.3pc this year, compared with previous estimates of 0.7pc. Despite the gloom, markets have risen in recent days in anticipation of an ECB rate cut.
Yesterday, the rally tailed-off as traders feared Mario Draghi, president of the ECB, would again resist the pressure to act. Germany's Dax was off 0.2pc, the French CAC slid 0.1pc and the FTSE 100 was almost flat.
Jim Reid, of Deutsche Bank, said: "The ECB is widely expected to ease its key rate by 25 basis points tomorrow but we can't help thinking that additional market-friendly action is required from Draghi to sustain this rally. The market is hoping that politicians have done enough to encourage the ECB to lend a hand. We suspect that they won't add additional support for now, which may lead to some disappointment."
The Telegraph
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