British Chancellor George Osborne delivered his Autumn Budget Statement before the parliament on Wednesday. He emphasized that the Eurozone debt crisis had been weighing on the UK economy and informed that the Office of Budget Responsibility slashed its GDP forecast to -0.1% in 2012 from +0.8%. The predictions for 2012 and 2013 are 1.2% and 2.0%, respectively.

"It's taking time, but the British economy is healing. It's a hard road, but we're getting there. Britain is on the right track—and turning back now would be a disaster. We have much more to do,” Osborne told British lawmakers.

That is why the austerity measures implemented in 2010 will continue for three more years than initially expected, i.e. until 2018, as George Osborne does not see an alternative to this course of action. The Chancellor also announced some tax increases and a corporate tax reduction. He stated that that the UK budget deficit would be 6.9% of GDP this year.

According to James Knightley from ING: “The key question for markets though is whether the weaker growth and fiscal outlook will heighten concerns regarding debt sustainability at the ratings agencies. If it does then a downgrade could be on the cards, threatening to undermine sterling and potentially putting upward pressure on government borrowing costs.

Spain sells €4.2 billion of bonds, below maximum target

Spanish Treasury held a debt sale on Wednesday during which it managed to auction 4.2 billion euros worth of government bonds, out of a targeted Eur 3.5-4.5 billion euros. 3-, 7- and 10-year bonds were sold at lower interest rates than seen at the previous auction.

1.1 billion euros of 10-year bonds were sold at an average interest rate of 5.25%, which is the lowest level seen since September 2011. Also 1 billion worth of 7-year bonds was auctioned. These yielded 4.66%, slightly higher than 4.54% seen at the previous sale. The rest of the amount was placed in 3-year bonds, which yielded 3.39%, compared with the previous 3.61%.

The Spanish Treasury will carry out two more debt auctions this year, one on December 11 and the other on December 13.