IMF warns it could hold back bail-out cash without assurances that Greece will fulfil its commitments, but Papandreou is 'unable to give that', while EC President urges Greece to back eurozone package.

Eurozone chairman Jean-Claude Juncker is at the Cannes meeting, and he is not happy with Greece's decision to stop the bail-out process to give the public have a chance to vote. He said: "We took a decision last week as 17 (member states), we can't allow anyone to disassociate himself from that decision." But a pragmatic French official, also at the summit, said there was little chance of stopping them. The best they could hope for was to get the vote out of the way quickly. It is too late to persuade them to go back on the decision to hold a referendum. The idea is that they hold the referendum as quickly as possible and make it about being in the euro.Ben Bernanke said it was "a bit frustrating" to have to watch the Euro debacle from the sidelines and listed it in the run of "bad luck" that had held back US recovery alongside the nuclear accident in Japan and high oil prices. But he didn't give much insight into the Fed committee's thinking on the impact of European woes on the US or on what, if anything, the US can do to help the situation. Sadly he may have been silent because really there isn't much the US can do at all.The US markets seem to be having an unusually normal day. They started mildly up and have stayed there. There's almost a sense of "normalcy" as Americans like to say. No doubt there'll be a huge sell off or rally soon. For the record, the Dow Jones index is up 183 points, or 1.5%, with around half an hour to go.

Meanwhile, back in Europe, tensions are running high... A European Union official has given an interview to a small group of reporters in Cannes, appearing "angry and frustrated", according to the Wall Street Journal. The anonymous official said: I have no words to describe how I feel about Greece. Uncertainty is exactly what we don't need right now. If Greece were going to war tomorrow, they would establish national unity. Well, we are at war. The crisis is that bad. And it's time that Greece put party politics aside and demonstrate national unity. Greece as a country has to make it clear that they want to make the kind of effort that is necessary. If not, they have to bear the consequences. Papandreou, whether consciously or not, has called Europe's bluff. With a potential NO from the Greek people he could bring the European house of cards down. He is in a unique position, in my view, to renegotiate a bailout package with much more favourable terms for his people. And this is something that could benefit many other countries (Italy, Portugal etc). Truly, there can't be no growth in an economy - especially that of Greece - when what is imposed by the troika is no less than a reduction of people's real income by 1/3. Imagine what would happen to us here if the same conditions were imposed. I for one would not be able to pay my mortgage. And, what's more, the Left in Greece could play a vital role if in the end Pap's government falls (they would have to form an interim "national unity" government put together by their president). The New Democracy party (conservatives) are truly responsible for this mess in Greece and its current leader is really a laughable fellow. Let's just hope that it's the people who are favoured this time round and NOT the international markets and/or the banks.

In an embarrassing development for John Boehner, the Republican Congress speaker, the Congressional Budget Office (CBO) ruled on Tuesday night that his bill would have only cut spending by $850bn (£517bn)over the next decade, not the $1.2tn he had aimed for. Republicans are now racing to rewrite the legislation, and have pushed back a congressional vote on the plan from Wednesday to Thursday at the earliest. Although Boehner was already struggling to find support for his package, the delay increases the risk that Washington will fail to agree a deal to raise the debt ceiling before 2 August, when the federal government is expected to run out of money. The dollar dropped against other currencies on Wednesday morning as investors faced the possibility that America could default. Several economists believe the country will lose its AAA credit rating within months, which would push up its borrowing costs, even if the $14.3tn debt ceiling is increased in time. The White House said on Tuesday it was working with Congress to devise a "Plan B" that might attract enough support. The two sides have been deeply divided for weeks, with Republicans demanding deep spending cuts and Democrats anxious to include tax rises as a major part of the deal.

Five cajas failed Europe-wide stress tests on banks last year. The Bank of Spain has forced them into a round of mergers, reducing their number from 45 to 17 last year. High levels of bad property loans at the cajas are seen as a major risk for Spain as it slashes its budget deficit to stave off fears it will need an Irish or Greek-style rescue from the European Union and International Monetary Fund. Estimates of the cost of recapitalising the savings banks range from €17bn (£14.4bn) to €120bn, with consensus falling in the €25bn to €50bn range, according to Reuters. Economists say Spain could afford that level of rescue without seeking outside aid.The banking sector has so far set aside €88bn to cover losses on total loans of €439bn to real estate and construction. Spain's borrowing costs have soared amid worries that the sovereign debt crisis that forced Greece and Ireland to seek bailouts will spread to Portugal and then Spain. A budget deficit of 9.3% of GDP in 2010 and stagnant growth have added to the worries, though the government is hitting deficit reduction targets and pledges pension and labour reform shortly. Analysts welcomed the promise of caja recapitalisation. "This underpins hopes that Spain is now on the right track," Commerzbank strategist David Schnautz told Reuters.

No bailouts - Barklays

Barclays boss Bob Diamond has said that taxpayers should not bail out banks, and that those banks that get into trouble should be allowed to fail. "It is not OK for taxpayers to bail out banks," Mr Diamond told a Treasury Committee hearing. On bonuses, he said that Barclays "paid for performance, not for failure". The government has called on banks to pay smaller bonuses, with Deputy Prime Minister Nick Clegg urging them to be "sensitive to the public mood". Mr Diamond said that Barclays had yet to decide on bonus payments to its staff for this year. He added that the "majority" of the amount paid in bonuses went to investment bankers, rather than staff in the retail banking arm. "We are sensitive, we are listening [to calls for restraint], and there is no lack of effort in recognising the importance of this issue and being responsible [over bonuses]," he said. He said that Barclays had "no intention of paying more in bonuses than is necessary". However, he said the bank had to balance these responsibilities with "the environment we operate in", referring to the fact that if Barclays were to unilaterally reduce bonuses, top staff could leave to join competitors. He said he had waived his bonus for the past two years but would wait until he was offered one this year before deciding whether to accept it.