With Brexit entering a critical phase, the arrival of French President Emmanuel Macron in Britain tomorrow should give Theresa May a golden opportunity to begin work on building the new set of alliances Britain will need for life beyond the EU. Immigration issues are certain to dominate the agenda, as Mr Macron seeks to resolve the disruption caused by the hundreds of illegal migrants who have once again gathered in the Pas-de-Calais.   The French president has caused a degree of consternation in some circles with his suggestion that Britain should do more to resolve the seemingly perennial Calais issue by agreeing to take more migrants, as well as contributing more to the costs of cross-border security enshrined in the Le Touquet accords.  Such demands might appear presumptuous to committed Brexiteers, who take umbrage at the prospect of any foreign power telling the British government how...

For most of its short life, the European Central Bank fretted about inflation being too high. Now it has the opposite concern.  The fear of deflation explains the package of measures announced by Mario Draghi on Thursday. Three months ago, the ECB president disappointed the markets by coming up with less stimulus than he had led them to expect. This time there were no half measures.

The ECB sets three interest rates and it cut all of them. The central bank has been buying bonds in return for cash at a rate of €60bn (£47bn) a month, but will now up the purchases to €80bn a month for at least a year, and probably longer. It launched a scheme on Thursday under which commercial banks would be paid for borrowing money provided they re-cycle the funds to the private sector in the form of loans to households and companies.  And still it wasn’t enough to slake the insatiable thirst of the financial markets for more and more stimulus. The euro initially fell on the foreign exchanges but then rose when Draghi said the ECB did not anticipate the need for any further cuts in interest rates.

"We have a clear aim with the Energy Union. It is to strengthen the security of energy supply and increase energy efficiency at an affordable cost", said András Gyürk MEP, the EPP Group Shadow Rapporteur, after the adoption of the European Parliament initiative Report on the Energy Union. "It is up to economic actors to decide which projects make economic sense and what could be the potential of extraction projects in the area of energy. The European Parliament must do its best to provide a sound regulatory environment that includes strict standards with regards to climate, health and environment", Gyürk said. An important brick in the construction of the Energy Union is the plan to achieve a goal of 10 percent cross-border interconnectivity in the internal EU electricity grid.  "Increased interconnectivity is a crucial step towards achieving a true internal electricity market in EU. It must be achieved by more infrastructure as well as better access to the existing infrastructure", said Bendt Bendtsen MEP, the EPP Group Shadow Rapporteur, after the adoption of the initiative Report 'Making Europe's electricity grid fit for 2020'. "It will enable the EU to make better use of the electricity produced in Europe and thus lower dependence on imports, resulting in better energy security and lower electricity prices, to the benefit of European businesses and citizens", Bendtsen concluded.

Angela Merkel has declared that she and François Hollande will discuss how to strengthen the eurozone, when they meet on Saturday....Merkel also said that she and Hollande has a 'trusting' relationship, and would look for solutions that were "good for all of Europe." ....Meanwhile ...

Finland's prime minister, Jyrki Katainen, has questioned whether the European Central Bank's new bond-buying scheme will really help. Nearly two weeks after the ECB announced its Outright Monetary Transactions programme, to much fanfare, Katainen downplayed its significance, telling reporters that It has led to a positive situation, but I'm not fully sure if it will help in the long run....The prospect of OMT has helped ease borrowing costs for peripheral countries. However it can't kick in until a request for help is made... Katainen also argued that countries who are suffering from high yields must "sacrifice faster short-term growth" in favor of fixing their economies, bolstering competitiveness, and restoring confidence.GREECE CONFIRMS PLANS TO SELL OFF BUILDINGS OVERSEAS....We have confirmation from Greece that the Greek government is planning to sell off some of its prime overseas properties. As flagged up at 8.55am, this could include the Greek consul's home in West London.  The foreign ministry's spokesman Gregory Delavekouras has just confirmed that Greece will seek to sell a host of properties abroad but potential buyers should not hold their breath: the foreign ministry's finance office has to draw up a list of the assets first and investigate market conditions.  The good news is that the foreign ministry actually knows what the properties are - unlike the Greek state which has little idea of what it owns in a country that has long lacked a land registry.  "There is a decision to make use of properties that for various reasons are not being used," he told me. "But no decision has been made about specifics and I can't tell you which buildings would be available."  Since the outbreak of debt-burdened Greece's great economic crisis, diplomatic staff have been scaled back - the general consulate in London, home of a thriving Greek community, was one such victim -- as the government has tried to reign in expenditure.

Smoke and mirrors...

Lord Rothschild has taken a near-£130m bet against the euro as fears continue to grow that the single currency will break up. --- If Lord Rothschild doesn't know what is going on, well, then nobody does..... As a wise man once said "watch where the wise money goes".The member of the banking dynasty has taken the position through RIT Capital Partners, the £1.9bn investment trust of which he is executive chairman. The fact that the former investment banker, a senior member of the Rothschild family, has taken such a view will be seen as a further negative for the currency. The latest omen follows news in The Daily Telegraph late last week that the government of Finland is already preparing for the euro’s break-up. RIT, which Lord Rothschild has led since 1988, had a -7pc net short position in terms of principal currency exposures on the euro at the end of July, up from -3pc at the end of January. Given a net asset value of £1.836bn at the end of July, the position is worth £128m. Sources close to RIT suggested that the position was not a dogmatic negative view on the euro as a currency, but rather a realistic approach on a currency that remains relatively weak....Meanwhile, Germany and France, the eurozone’s two biggest economies, did better than expected, even if their second quarter performances were far from being success stories. Germany’s GDP grew by 0.3%, beating its own forecasts, and France flat-lined at 0% growth, but avoided slipping into a much feared recession…..On news of Germany and France’s numbers, stock markets bounced up and share prices rose across the continent. Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 all finished with slight gains on Tuesday.  According to Jeremy Batstone-Carr, director of client research for Charles Stanley, a financial advising firm, the figures as a whole should be a cause for worry. “According to further looking projections, data for Germany suggests the next six months will be just as bad if not worse,” he said.  The data also showed a clear divergence between the region’s northern core countries and weakness in the southern periphery countries, which threatens to exacerbate existing problems. Hard-hit over the past three months were Italy (-0.7%), Finland (-1.0%) and Portugal (-1.2%).  On another gloomy note, Britain’s economy shrank by 0.7 percent, according to Eurostat. That compared to .03% negative growth for the first quarter of the year, which meant that Britain has been in recession for the last nine months. Recession is defined by economists as two consecutive quarters of contraction.  During the same three-month period, GDP increased by 0.4% in the United States and 0.3% in Japan - Europe’s main economic partners.

Two main problems : 
1. Germany screwed the Euro so it is stuck undervalued and exports to slave consumer PIGS. Plus Germany borrows at 2% and lends to the PIGS at 5% so they can buy more German goods. 15% Greek GDP on arms from Germany and France. 

2. Eurovampire Barrosso ups his budget by 7% from EU states, to 100+Bn, while demanding austerity and PIGS cut State spending by 7%! Brutal hypocrisy by unelected beaurocrat dictators. Democracy is gone.

While Germany bleeds Europe dry via the Euro and conquers southern Europe more effectively than in WW2. Barroso sucks out the remaining blood through Eurocrats who do nothing but inflict painful laws, taxes and unemployment on Europe.  Only when the main debtor countries become competitive by a 30% devaluation and start to grow their GDP will the Europe crisis begin to ease. Or Germany revalues and makes its goods more expensive. Or there is a Euro A (north) and a Euro B (south). Then both areas will become competitive and grow.

Until a revauation within Europe the crisis will get deeper, with more unemployment, and more civil unrest.

European finance ministers urged a prompt decision on ramping up the International Monetary Fund's crisis-fighting resources, a day after they agreed to commit more funds to their own so-called firewall. After two days of talks on efforts to enhance their response to the sovereign-debt crisis, finance ministers from the 27 member nations of the European Union and central bank governors said that despite signs of stability and easing tensions in the financial markets there shouldn't be complacency. Danish economy minister Margrethe Vestager, who hosted the talks, said on Saturday that it is crucial that a global agreement is reached on boosting IMF's resources. "It's important to ensure the IMF has sufficient resources to play its systemic role in the global economy," Ms. Vestager told a news conference at the end of the talks. "Yesterday's decision…is very important in this respect. What we are hoping for is an agreement in Washington." On Friday, euro-zone finance ministers agreed to expand the currency bloc's capacity for crisis lending to €700 billion ($934 billion) by combining new funds into a permanent rescue mechanism with existing bailout loans. But funds available for new loans will be capped at €500 billion after July 2013, when a temporary bailout mechanism will expire. The combined lending ceiling of €700 billion includes €200 billion in existing loans to Greece, Portugal and Ireland. Source : WSJ

arbitraj@aol.com

The total value of private deposits in Greek banks down to €170.1bn, the lowest in over five years and 30% below their peak of December 2009. The steady decline in deposite is partly due to worried citizens removing their savings in case the Greek banking sector should collapse, or even leaving the country altogether. But it also reflects that fact that people have been using their savings to keep afloat, following rising unemployment and wage cuts. In Brussels, EU officials have denied claims that Spain may have to seek financial help. European Commission spokesman Amadeu Altafaj has just told a press conference that media reports that Spain may seek bailout aid are "completely without foundation". Altafaj added that the private sector should be able meet most of the cost of overcapitalizing Spain's banks. As we flagged up, analysts fear that the Spanish government will be unable to pick up the bill.

Paper makers must be making a fortune at these rates....

Results from Spain's bond auctions are in. The government managed to get the sales away at lower yields than last time (better value-for-money for the taxpayer). The average yield on April 2016 was 3.748% down significantly from 4.971% last time in July 2011. Overall it raised €10bn form the auction of three bonds.

I predicted that both bond auctions will go better than anticipated - not because of any improvement in economic fundamentals in Spain or Italy, but because the ECB will not and cannot permit either auction to fail.

Italy got its bonds away at half the interest rate it was paying last year. The yield on Italian 12-month bills fell to 2.735%, from the near-6% yield Italy paid to sell one-year paper at a mid-December auction. It's the lowest since June 2011. Italy sold €8.5 billion euros of 12-month BOT bills and €3.5bn of bills maturing at the end of May. The 12-month sale was covered 1.5 times, versus a bid-to-cover ratio of 1.9 at the slightly smaller sale in mid-December. The 10-year yield spread between Italian and German bonds fell below 500 basis points for the first time this year.

The truth about Germany

Germany’s public debt is much higher than officially shown, Handelsblatt reported, citing calculations by Bernd Raffelhueschen, an economics professor at Freiburg University. Apart from 2 trillion euros ($2.7 trillion) of public debt, there are liabilities of another 5 trillion euros because of shortfalls in the social security and pension funds, according to Raffelhueschen, the newspaper said.

Christine Lagarde, the IMF's managing-director, said the outlook had darkened suddenly over the summer. "There has been a clear crisis of confidence that has seriously aggravated the situation. Measures need to be taken to ensure that this vicious circle is broken," she said. "The spectrum of policies available is narrower because a lot of ammunition was used in 2009. But if governments, institutions and central banks work together, we'll avoid recession," she told Der Spiegel. The comments come at the start of a dramatic week for the eurozone as Italy prepares to roll over record sums of debt and Germany's constitutional court issues its long-awaited verdict on the legality of the EU's bail-out machinery. Markets are already tense after the EU-IMF 'Troika' withdrew abruptly from Athens on Friday, accusing the Greek government of failing to comply with rescue terms. Mrs Lagarde said the US has scope to "abandon short-term austerity and introduce some measures to drive growth" provided the country lays out a credible debt strategy over the medium term. She said Europe needs to take its foot off the fiscal brake and shift to "growth-intensive measures" until the danger has passed, insisting that Germany has leeway to "stimulate demand".

The Greek economy is shrinking at an alarming rate, with Mr Venizelos last week admitting it will likely contract by more than 4.5pc this year, worse than an earlier 3.5pc forecast. Greece's debt, meanwhile, has ballooned to over €350bn. The public deficit is also running dangerously high, coming in at €14.7bn in the first half of 2011, compared to a target of €16.7bn for the entire year. In July it climbed further to €15.5bn, deputy finance minister Filippos Sachinidis told parliament on Wednesday. He added that part of state revenue included in this year's calculations will not be collected until early 2012. To make up the shortfall, on Thursday the authorities raised sales tax for food at restaurants and hotels by ten points to 23pc.The Greek finance ministry went on the defensive after a new budget watchdog released an internal report warning that debt was "out of control". Evangelos Venizelos, the Finance Minister who earlier this week had to explain to auditors from the EU, ECB and IMF why the debt-laden country had missed targets, put the report down to inexperience. He said in a statement: "All responsible international organisations know in which way macroeconomic and fiscal reports are compiled, checked and published. It is clear that the budget office still lacks this knowledge, experience and responsibility." The report warned that the dynamic of Greece's enormous debt is "out of control" and said slippage on meeting deficit targets, exacerbated by a deep recession, threatened to cancel out the benefits of a new EU bailout. Eurozone leaders approved a new €109bn bailout for Greece in July to save the country from bankruptcy, with the private sector providing another €50bn.

I do not think Euro is doomed to fail, I think it is doomed to a reform. Time to cut the losses and accept that Euro currency never was a good prospect. It would have been viable if the unity was only members made up of the poor European eastern and Mediterranean countries for them the only way was up.
For the European big two the only way is down. At least the British Government got it right on the No Euro currency vote. Now they need to reverse the hand over of power vote to Brussels. Shake of the fleas or go into the water backwards.There are still some valid alternatives for its members to correct its proven deficiencies, which are less costly, both financially and politically, than to let the Euro fail. Its failure means necessarely default from indebted countries that must resurrect their old currencies and devalue it. As Euro is now, it has proven big business mainly for the Germans but it is not sustainable. Of course, if you are against Euro because you would like Europe to be just a trading union, with no political union consequences, then you must be wishing the failure of the Euro which is a force driving to strengthen politically and fiscally the union of the European Monetary Union members. I think Euro can still be saved and we have read too many false doomed announces already to believe this last one is the good one.
If Euro is not reformed and, finally, it fails, it will not be missed in Spain, Italy, Germany, Greece..., in fact all of us would probably better -off!

The European Central Bank has moved to halt Europe's runaway debt crisis by pledging to buy government bonds from Italy and Spain. The move to prop up Europe's struggling nations came after a day of frantic discussions between the finance ministers of the world's leading economies. Markets open for the first time since Standard & Poor's decision to cut the US's credit rating from AAA late on Friday. In a statement, the ECB said it welcomed announcements by Spain and Italy of "new measures and reforms" aimed at the financial problems and urged both governments to roll them out swiftly. The agreement of the bank's policy-making governing council is a watershed moment for the ECB. The central bank has so far insisted that the main responsibility for acting lies with national governments. But last week a more modest bond buying effort failed to halt the European slide. The ECB said it had taken note of a statement by France and Germany released on Sunday stressing their commitment to European financial reforms. Silvio Berlusconi's government cobbled together an emergency austerity package for Italy late on Friday to placate the bond markets. Italy's borrowing costs shot up last week amid fears that its debts have become unsustainable. The Tokyo Stock Exchange opened down 1.4% after the announcement, the first test of the move ahead of the opening of European and US markets. US markets also looked set to open down with futures traders betting the markets would open below Friday's closing prices.

Ratings agency Moody's has cut Greece's debt rating by three notches to Ca on Monday, leaving it just one notch above what is considered default, and said the chance of a default is now "virtually 100%". The ratings agency warned that last week's bailout package agreed by eurozone leaders will make it easier for Greece to reduce its debt, but the country still faced medium-term solvency challenges and there were significant risks in implementing the required reforms. "The announced EU programme implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100%," the agency said. "[Greece's] stock of debt will still be well in excess of 100% of GDP for many years and it will still face very significant implementation risks to fiscal and economic reform," it added. The ratings agency is wary that the eurozone bailout package sets a negative precedent for investors. "The support package sets a precedent for future restructurings should the finances of another euro area sovereign become as problematic as those of Greece," Moody's said. According to the ratings agency, obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

The outlook is developing.

Standard & Poor's and Fitch have already downgraded Greece to CCC, one notch above Moody's.

European debt crisis --Barclays Capital caught the mood best – the result was "more than expected but not enough to make us sleep soundly". First, the definite good news. The yield on Greek two-year debt has plunged from 40% to 28%. Clearly, even the lower rate shows Greece is miles away from being able to fund itself in the market. But the danger of an imminent chaotic default has been removed by the eurozone's softer stance on lending. The country will get €109bn (£96bn) of loans at 3.5%, ranging from 15 years to 30 years in length. The banks will volunteer (ie have their arms twisted) to join the relief effort, but not by so much as to trigger worries about holes being ripped in their balance sheets. The precise sums are hard to determine given the complexity of the volunteering menu but the hit to the private sector could be €50bn for 2011-14, calculate analysts; banks will count that as a good result for themselves. But will the assistance be enough to shift Greece back on the road to financial solvency? And is the eurozone now equipped to cope with an outbreak of worry about Spanish and Italian debt? It is hard to answer "yes" to either question. The debt-relief programme simply doesn't look big enough to be a permanent solution. The country's debt-to-GDP ratio, previously set to hit 160%, could still emerge as high as 130% and its economy still looks too uncompetitive and too weak to allow higher tax rates to take a meaningful bite out of the debt pile Well, four years after the beginning of the 2007-8 financial collapse, this time it is different. After a recession, one normally expects a recovery in the major industrial economies. This time, recovery has had to be postponed – except, for a time, in Germany. Which is a disappointment, evidently, to our chancellor, George Osborne, who last week conducted a dramatic U-turn with regard to his party's view of the eurozone. Our very Conservative chancellor is now in favour of greater European integration, and has declared that "the remorseless logic" of monetary union is greater fiscal union. The "remorseless logic" is hardly news to those of us who, while being pro-European, were always concerned about the deficiencies of a monetary union without a full fiscal counterpart. But what is new is the chancellor's enthusiasm for it. The motive for this change in Treasury – as opposed to Foreign Office – policy towards the eurozone is not at all hard to find. Osborne was quite candid: if the eurozone crisis spirals out of control – 40% of our exports go to the eurozone – it will exacerbate what Osborne acknowledges is Britain's "tough" economic situation.

Although Fitch welcomed the agreement that was unveiled in Brussels, it has also decided to assign Greece a "restricted default" rating. The decision is based on the fact that private sector investors will contribute up to €50bn by rolling debt over or writing some off altogether. "Fitch considers the nature of private sector involvement in a new financial programme of support for Greece to constitute a restricted default event," said David Riley, head of sovereign ratings at Fitch. "However, the reduction in interest rates and extension of maturities potentially offers Greece a window of opportunity to regain solvency, despite the formidable challenges that it faces." Under the agreement announced last night, investors holding Greek debt can swap it for new securities maturing in 30 years, with higher interest rates on offer if they take a haircut on the size of the loan. More encouragingly for Athens, Fitch said it expects to assign a "low speculative grade" rating to Greece's future bonds. That suggests they would still be treated as "junk", but several notches above default. Fitch also undermined Europe's efforts to build a firewall to stop the crisis spreading, predicting that Ireland or Portugal had just 18 months to avoid the same fate. "If the Irish and Portuguese economies and public finances are not firmly on a sustainable path going into 2013, when both will need to regain access to medium-term market funding, the potential precedent set by PSI [public sector involvement] in the Greek package will be incorporated into Fitch's assessment of the risks to bondholders and reflected in its sovereign rating opinions and actions," said the agency.