European Shares to Open Flat, EU Summit Starts

European shares were called to open flat on Thursday, with investors taking a cautious stance ahead of a summit of EU leaders in Brussels.

EU building flags brussels
EyesWideOpen | Getty Images
EU building flags brussels

There are increasing concerns that divisions will lead to little in the way of progress in bringing a resolution to the ongoing debt crisis.

The FTSE was called to open higher by 6 points at 5533, the DAX was seen opening lower by 4 points at 6230 and the CAC 40 was expected to open 7 points higher at 3070.

European leaders go into the summit openly divided, with German chancellor Angela Merkel likely to find herself opposed to her French and Italian counterparts over the issue of solving the currency bloc’s fundamental problems.

Merkel is expected to call for budget controls to be put in place ahead of any deal on debt sharing favored by France, while Italy and Spain are expected to demand financial assistance to bring their borrowing costs down.

Investors fear one or both countries may need a bailout similar to Greece by the fall.

Italy's borrowing costs could be driven further above 6 percent at a bond auction on Thursday after Merkel brushed aside the country's plea for emergency action to steady debt markets on Wednesday.

Italy is offering up to 5.5 billion euros ($6.8 billion) in five- and 10-year bonds just hours ahead of the summit where prime minister Mario Monti will keep pushing for joint moves to contain government funding costs.

Italy is battling with rising interest payments on its 1.95 trillion euro debt.

Monti said (where,when?) he would also back a financial transaction tax if it came with stronger cooperation on financial policy, including on dealing with sovereign debt.

Meanwhile, the European Union and European Central Bank (ECB) will start work on their mission to Spain in Madrid next Wednesday, with support from the international Monetary Fund, ECB executive-board member Joerg Asmussen said.

The mission aims to present a memorandum of understanding regarding a European bailout of Spain's banks to euro-zone finance ministers on July 9, Asmussen told Reuters.

In company news, Barclays has been forced to pay regulators in the U.S and UK $453 million after it was fined for manipulating the LIBOR and EURIBOR interbank interest rates.

UK regulator the Financial Services Authority (FSA) said other major banks were under investigation, suggesting the manipulation of the interest rates went far beyond the actions of just one.

However, Barclays chief executive Bod Diamond faced calls to resign from UK politicians and late on Wednesday the UK parliament’s treasury select committee said it would be calling him before it to explain his bank’s actions.

Diamond announced that he would not be taking his annual bonus package this year.

National Bank of Greece chief executive Apostolos Tamvakakis plans to announce his resignation tomorrow, a source told Reuters on Wednesday.

Deputy chief executive Alexandros Tourkolias will replace him, the report said.

Earlier Wednesday, a bank official said chairman Vassilis Rapanos resigned, citing health issues.