Europe's top banker calls for calm

Europe's top banker calls for calm: "

• Jean-Claude Trichet says euro critics will be proved wrong
• Expert says euro is limping towards its end
• Fears of contagion from Irish bailout are growing

Europe's top central banker tried to calm the financial markets after another turbulent day when the borrowing costs of several major economies remained at unsustainably high levels.

Amid signs that the contagion from Ireland's debt crisis was spreading to some of the biggest economies in the 16 nation eurozone, the premium demanded by investors to hold Spanish, Italian and Belgian government bonds compared with German bonds touched record levels.

French, Portuguese and Irish bonds were also caught up in the rout. However, Europe's political leadership remains adamant that the currency can survive and Jean-Claude Trichet, the European Central Bank president, waded into the argument by calling for more, not less, harmonisation within the eurozone as the way out of trouble.

Speaking at a hearing of the economic and monetary affairs committee of the European parliament in Brussels, he said: 'We have got a monetary federation. We need quasi-budget federation as well. Yes, we could achieve that if there is strong monitoring and supervision of what there is. Because what exists doesn't correspond with the actual situation that we are facing. It is a situation where we need quasi-federation of the budget.'

Analysts saw the remarks as significant and were described by Elisabeth Afseth, fixed income researcher at Evolution Securities, as 'quite astonishing'.

The euro briefly fell below $1.30 for the first time since mid-September after Sunday's €85bn (£71bn) bailout for Ireland failed to contain concerns that other EU countries would need international assistance.

There were also tensions in the money markets where the closely followed rate at which banks lend to each other in dollars – three-month dollar Libor - was fixed at its highest level since late August at 0.3% amid heightened anxiety about the health of major banks in the eurozone. Shares in British, French and Spanish banks were lower while the Portuguese central bank warned the country's banks could face 'intolerable risk' if the country's austerity measures failed.

The borrowing costs of companies were also rising as investors raced to havens such as US and German government bonds and commodities such as gold.

Trichet, who will oversee a crucial ECB meeting on Thursday, insisted to MEPs that eurozone detractors would be proved wrong. 'I would say, by the way, that pundits are tending to underestimate the determination of governments and the determination of the college that makes up the eurogroup, and indeed the 27-member state council.'

But detractors remained out in force. Citigroup's chief economist Willem Buiter, a former member of the Bank of England's monetary policy committee, said: 'There is no such thing as an absolutely safe sovereign.'

He described Ireland as 'insolvent', Portugal as 'quietly insolvent', Greece as 'de facto insolvent' and Spain in need of large-scale restructuring of the debt of its banks. Buiter said the eurozone's problems were an 'opening act' and Japan and the US could soon be caught up in the Irish fallout. Stephen Lewis, of Monument Securities, reckoned the eurozone in its current guise was reaching its end but 'it will limp along for a while to come'.

A crucial test takes place on Thursday when Spain is due to issue three-year bonds. Afseth said: 'If Spain is unable to sell the bonds or only at a high interest rate then that will highlight the problems and the lack of confidence [in the market]'.

Spain has around €9bn left to raise on the markets this year and €150bn next year while Italy, which has also been caught up in the Irish contagion, has €340bn of funding needs in 2011.

Ten-year borrowing costs for Spain rose to 5.59% while the difference with German Bunds was 3.12 percentage points – the largest gap since the euro was launched.

Italy described its public finances as 'sound' even as it became engulfed in fears that it might face difficulties raising funds on the market."

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Students ignore chill in mass rally

Students ignore chill in mass rally: "

• Marches in cities across UK pass off mostly peacefully
• Significant clashes with police only in London

The third and most peaceful mass protests against the government's higher education plans took place today as thousands of students took to the streets despite the freezing weather.

Large demonstrations took place in Brighton, Birmingham, Bristol, Manchester, Newcastle, Oxford and London, and there were only minor outbreaks of disorder with about two dozen arrests across the country.

Students got on to rooftops, stormed their way into council buildings, and stopped traffic in dozens of town centres, many saying they hoped the display of feeling would reverberate in Westminster.

The only significant clashes with police took place in London, where the Met tried to forcefully clear streets around Trafalgar Square at nightfall. Windows were smashed and missiles thrown at police, who charged at protesters with batons.

Earlier there had been chaotic scenes in the capital when 4,000 students marching toward parliament tried to evade what they believed were attempts by police to 'kettle' them in the bleak weather.

The demonstrators responded by dispersing across the city, in separate marches leading police in cat and mouse chases. One 'feeder' march headed into the City, while others meandered past bemused onlookers at Oxford Circus and Hyde Park Corner, and near Buckingham Palace, stopping traffic on route.

'This is truly one of the most bizarre demonstrations I have been on,' said Michael Chessum, 21, as he jogged up Regent Street with a group of riot police in tow. 'It has been a shambolic policing operation because we had agreed with them beforehand that we would march along Whitehall - but the spirit and determination of the students to march and get their point across has been pretty impressive.'

The Met denied it had intended to kettle protesters, despite evidence of metal barriers and rows of officers waiting along Whitehall. It blamed the confusion on protesters, who, the force said, had departed on their march at an earlier time than agreed. 'We made sure we had a flexible plan and sufficient resources to enable people to come back to Trafalgar Square where the protest was due to be held,' said Chief Inspector Jane Connors. 'That is what we did, moving around London, encouraging people to come back and meet together. We wanted to minimise disruption.'

The mood was more harmonious elsewhere in the country, although in Brighton about 600 protesters marched through the city and then tried to force their way into Hove town hall. About 100 people managed to scale the roof of a car park and threw missiles, according to police, but there were no arrests. Students also scaled a roof in Liverpool, where there were two arrests.

In Newcastle, students occupying a university building marched through the city centre in a peaceful event. Northumbria police said in a statement they had 'nothing but praise' for the campaigners. 'There were no arrests and no reports of any trouble of any kind,' the force said.

Ten people were arrested in Bristol when about 1,000 protesters lit flares and marched through the city centre. The M32 was closed when it seemed that the march might go towards the motorway.

In Birmingham, about 40 protesters stormed into a council hall building, prompting a standoff with security and police. There were similar scenes in Leeds, where about 40 students occupied a university building, and in Oxford, where students stormed the county council offices.

Video footage showed protesters entering the Oxford building and walking through corridors before being ejected by police. The Conservative leader of the local authority, Keith Mitchell, said via a tweet: 'County Hall invaded by an ugly, badly-dressed student rabble. God help us if this is our future.'

Greater Manchester police said there were five arrests in the city, but that only a 'loose cordon' of officers was placed around hundreds of demonstrators who had gathered in the city centre.

About 400 students also walked peacefully through Cambridge, and, in Edinburgh, 300 protesters marched along the Royal Mile in the city and gathered at a rally outside the Scottish parliament. There was also an impromptu sit-in at Queens University, Belfast, and at the Trent building on Nottingham University's campus.

The scale and reach of this month's student protests have shocked the authorities, who fear that mobilisation against government's austerity cuts could spread. Riot police were called to Lewisham town hall on Monday night when 100 protesters in the London borough tried to force their way into a meeting where councillors were voting to cut the budget by £60m. Police said arrests were made and several officers received minor injuries. The same protest groups are expected to focus on a council meeting in Camden, north London, tomorrow.

Many of the protests were organised by students who were occupying up to 32 university buildings across Britain. They have taken place largely independently of the National Union of Students. Threatened with a no-confidence vote, the NUS president, Aaron Porter, recently apologised for the union's 'spineless' caution toward student activism and promised more support.

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