France is the talk of the markets again as President Hollande pleads for the ECB to inject liquidity and Credit Agricole says it was ''misled'' by BES, and is taking a 708 million euro hit as a result - though underlying profits drive its share price sharply higher. David Pollard reports
Credit Agricole says Banco Espirito Santo is inflicting a hit of over 700 million euros on its results. A reminder, if needed, that all is not yet rosy in the euro zone garden. President Hollande, too, is searching for the green-fingered touch. In a newspaper interview, he appeals to the ECB and Germany to do more to boost growth - and to tackle a ''real deflationary risk''. His words coincide with a warning from ratings agency Moody's - saying France has failed to spell out the detail of its spending cuts. It's already had a two-year reprieve to bring its deficit under three percent of GDP. Now, Hollande says, the ECB must inject liquidity into the euro zone. Inflation fell to its lowest level in five years in July. But no action is expected from the ECB at this week's policy meeting. Nor would it be able to focus exclusively on France, says Chris Beauchamp of IG. SOUNDBITE (English) CHRIS BEAUCHAMP, MARKET ANALYST, IG: ''I think if you're looking for the ECB to rescue France, it may be a bit of, too ambitious a goal, really. You're looking for the ECB to shore up the situation. That's the point of all these central bank exercises. They're not there to rescue the situation. They're there to provide a breathing space. And a breathing space is desperately what the euro zone needs at the moment. It just hasn't got any respite from this dangerous cycle of low inflation and low growth.'' Credit Agricole's Q2 net income fell by over 97 percent, if costs related to the troubled Banco Espirito Santo are included. They clouded a strong set of underlying numbers. Adjusted net income rose to just over a billion euros - triggering a near five percent rise in its shares in early trading. Chief exec Jean-Paul Chifflet says the bank ''can only regret'' being misled by the Espirito Santo family - and would consider joining any legal action against it. Europe's banking issues may yet have a way to go, according to NAB's Tom Vosa. SOUNDBITE (English) TOM VOSA, HEAD OF MARKET ECONOMICS, NATIONAL AUSTRALIA BANK: "It may well pop up elsewhere. I mean I think the starting point for all of this is as the asset quality review done by the ECB continues on, we are finding stuff across European banks. It's also fair to say, of course, that we still are not at the end of the BES saga. I still worry about the bad bank and what exactly is going to happen there. But we are at least making progress in Europe." It's faltering progress. Latest PMI data shows euro zone growth accelerating in June - but at a slower pace than expected. And France still lagging behind as service sector output was offset by a downturn at manufacturers.