Talk of 'nuclear default' sums up Left's anger at EU dictates

"We have an atomic bomb that we can use in the face of the Germans and the French: this atomic bomb is simply that we won't pay," said Pedro Nuno Santos, vice-president of the Socialist Party in the parliament.

"Debt is our only weapon and we must use it to impose better conditions, because recession itself is what is stopping us complying with the (EU-IMF Troika) accord. We should make the legs of the German bankers tremble," he said.

The comments came as Portugal slides deeper into recession, with the economy expected to contract by 3pc next year. Protesters marched through Lisbon on Thursday denouncing plans by the new conservative government to raise the working week to 42 hours. Wages are being cut 16pc for higher paid, and 8pc for lower paid public workers.

The parliament passed a fresh austerity budget earlier this month under the terms of its €78bn loan package from the EU and the International Monetary Fund.

Mr Nuno Santos said Europe's southern states should join forces to resist the austerity dictates and contractionary policies being imposed by the core powers. "It is incomprehensible that the peripheral countries don't do what the French president and the German Chancellor do. They should unite," he said.

Left-leaning parties in Europe are becoming increasingly defiant, accusing the Right of exploiting its grip on the European machinery to force through polices that are in effect dismantling parts of the welfare state or undermine trade union power. Germany's Angela Merkel, France's Nicolas Sarkozy, and Holland's Mark Rutte are all conservatives, and will soon be joined by Spain's Mariano Rajoy.

Francois Hollande, France's Socialist leader and front-runner in the presidential elections, has vowed to renegotiate last week's EU summit deal if elected next May, saying it violates the fiscal sovereignty of the French parliament, imposes perpetual austerity, and fails to offer struggling states any way out of economic crisis. "There must be growth," he said

Oskar Lafontaine, a leader of Germany's Linke (Left) party, said the euro was hurtling towards destruction on current policies. He blamed Germany's system of screwing down wages to undercut other EMU countries – or "wage dumping" – for causing the imbalances behind the eurozone crisis. "A shared currency cannot work without coordination of wage policy. Once wages have diverged as far as they have in recent years, devaluation and revaluation is the only way out."

He accused Merkel and Sarkozy of driving Greece into a downward spiral and now trying to inflict the same "demented" policies on the whole of Europe.

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Wall Street falls as a debt default day edges closer

The relatively relaxed attitude Wall Street has taken so far in the talks that began two months ago is now replaced with anxiety growing with the approach of the deadline August 2 Photo: AP

With no sign of progress in the round of talks parallel debt to the Capitol, investors moved quickly to reduce their exposure to shares in what is shaping up to a heavy it four trading days. The & S P 500 fell 10.66-0. 81pc - 1,305.48, while the Dow Jones Industrial Average fell 92,34-0. 74pc - to 12,387.39.

Despite a sweep of the largest companies in America, including Coca-Cola, Apple and Goldman Sachs, reports of results this week Wall Street is now riveted on the negotiations aims to raise the ceiling of the debt of $ 14.3 billion (8.9 billion to £) America.

Markets "continue to have saw long Exchange as new macro continue to confuse and concern investors", said Mary Ann Bartels, a strategist at Bank of America, Merrill Lynch. "Investors are naturally maintain a low profile."

The relatively relaxed attitude that Wall Street has taken so far in the talks that began two months ago is now replaced by concern at the approach of the date limit growing August 2. U.S. Secretary of the Treasury Tim Geithner has warned that if the ceiling of the debt - or requirement of the country the legal loan - was not raised in two weeks and then the Government has more will be able to pay all his bills.

With some politicians in Congress by minimizing the importance of a temporary default on its debts, Monday rating agency Fitch said that risks of losing America's precious AAA credit rating for the first time in its history. "Agreement on a credible fiscal consolidation strategy will secure the status of"AAA"U.S.," said Fitch. "Not inevitably undermine the sovereign credit profile." The warning echoed those made by Standard & Poor and Moody last week.

On Wall Street, it was the banks, the first victims of the losses. Shares of Bank of America, the countries largest lender collapsed 2. 8pc, while the shares of Citigroup fell to 1. FP7. The new, Friday evening, that eight banks were not new trials of stress by financial regulators of the already shaken nerves frayed continent.

The President Barack Obama and the Republicans and Democrats in Congress are in the paradoxical situation to try to reach a long-term agreement on the reduction of the deficit as a condition for the lifting of its debt ceiling.

After winning control of House of representatives during the elections last November, Republicans insist spending reduction must bear the burden.

The White House and the Democrats are adamant that the closure of tax for companies and the richest in America must be part of the agreement.

While the S & P and the Dow Jones was cast, prize of the American Government bonds rose Monday as investors relies still on them as a refuge for the debt crisis deepening of Europe.

The yield, which moves in the opposite direction to bond prices, dropped to 2 89pc, near its lowest level this year.

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World markets fall on fears U.S. blockade of debt default

The collapse of negotiations between John Boehner and President Obama leaves the possibility of the first major default value by the United States. Photo: GETTY

Brinkmanship political Washington on the ceiling of the country's debt of $ 14.3 billion ($ 8.8 billion of £) pushed gold in a record of $1.616 an ounce and the Swiss franc higher against the dollar.

In New York, the Dow Jones opened 104 points - or 0 8pc - at 12,572.36, with the broader S & P 500 and the Nasdaq also sliding. FTSE 100 index in London, leading shares fell from 0 3pc in 5918.24, in Germany of DAX dragged 0 1pc and the France CAC 0 4pc.

A US Congress strongly divided pursued plans budget rival Monday that appears unlikely to win broad support, pushing the United States more about a failure to downgrade and debt ratings would send new shock waves world markets.

In Nikkei 225 of the Tokyo Asia 0. 8pc lost, Hang Seng Hong Kong slipped 0. FP7, Nestle in Seoul fell 1pc and fell ASX Australian 1. FP6. Shanghai Composite China slipped by 2 96pc and the Shenzhen Composite declined 3 75pc, with the railway accident of last Saturday, also have an impact.

"The only thing you can be sure in the next hours and days is the volatility as continuing political posturing in the United States, said Ben Potter, strategist, IG markets market, in a report."

Weeks of talks between Democrats and Republicans to raise the ceiling of the debt of $ 14.3 billion ($ 8.8 billion of £) of the country and prevent by default do not relate to this product, and the negotiations between President Obama and John Boehner, the top Republican in Congress, disintegrated Friday.

The President now faces a rush to get an agreement agreed and voted by the Congress prior to the date limit of 2 August, when the United States will never know her first by default. A plunge in markets in the world shows that there are concerns that this would not be possible, or anxiety as possible these increases or spending cuts.

Futures contracts indicated that Wall Street will also be slide, the Dow Jones, the broader S & P 500 and NASDAQ technology rich of forecasting open downwards on 1pc.

The US is facing increasing pressure to reach a resolution, as the impact of U.S. default would be felt around the world. Business Secretary Vince Cable said the BBC Andrew Marr Sunday that it could have repercussions for the United Kingdom.

"The irony of the situation at the moment, with opening tomorrow morning, markets, is that the greatest threat to the global financial system has been a few nutters right in the US Congress rather than the euro area," he said.

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Moody lifts default coverage on assorted obligations of a loan guarantee

Supposedly closed were among the complex credit products which have been partly blamed for the creation of the financial crisis which brought down Lehman Brothers. Photo: GETTY

In a briefing yesterday, the rating agency said that it would be the probability of failure to 30pc coverage termination that it placed on assorted obligations of a loan guarantee, what pool ready for business as a whole.

Supposedly closed were among the credit products such as unsecured debt instruments which have been partly blamed for the creation of the financial crisis which brought down Lehman Brothers, and that led to the rescue of taxpayer many banks more complex.

30Pc stress was applied by Moody to any exceptional closed following the collapse of Lehman Brothers, but the rating agency said that the improvement of the conditions of market over the past three years meant that it was more necessary.

"With credit conditions relatively more stable now and for corporate credits, two Moody low default rates will remove the temporary stress and Institute methodology adjustments, reflecting a review of historical default rates which includes the experience of the recent credit crisis,", the rating agency said in a statement.

Investors in CLOs varies between banks and other large financial institutions, and hedge funds and sovereign wealth funds in the Middle East.

Wealth by the Libyan Government funds has been among investors in the Middle East rumors have a large exposure to the product, with documents who fled last month showing that the Fund lost millions of dollars by investing in complex structured products.

By removing its criteria of stress of CLOs, Moody is expected to upgrade ratings of a large number of outstanding bonds, well he says, that it will apply a default expectation of higher debt in the future.

In particular, Moody said it has revised its methodology of dimensions to use more accurate data on corporate default rates in Europe and the United States.

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