....The entire problem is laid bare for all to see.

"Angela Merkel will have to relent and agree to the European Central Bank being unleashed. She will be forced to allow quantitative easing and for the ECB to be the lender of last resort. She will be forced out of office as Germany’s cherished inflation rises. "... She'll have to find some way to get the Bundestag and Constitutional Court to look the other way while she does it. Wait, I've got it, she could send them on vacation to Greece. It is little known, but Western finance is actually a CIA funded black ops. (undercover) unit. Traditionally, it has been used to deal with emerging economies that may pose a threat to Western dominance. Once the emerging economy is spotted, the CIA sends in their Western finance black ops team. Initially, they lend money at low interest rates to invest and “help” the emerging economy, once confidence is gained they lend more and more. At the critical point, they suddenly jack up interest rates as the loans roll over and leave the economy in chaos, with a financial crisis that will set them back decades. The Western finance black ops. unit have already been used on:
Latin America – financial crisis, early 1980s
Asia – financial crisis 1997
Russia financial crisis 1998
I can only assume the US became concerned with the emerging Euro-zone threatening the US position. The CIA then sent in their Western finance black ops. team to create chaos. As usual with the CIA, their operations are frequently hampered by unforeseen consequences (blowback). The CIA forgot about the inter-connected nature of the Western banking system and these days a collapsing bank in the Euro-zone can cause a cascade effect that will bring down banks in the US. The FED have had to step in and help bailout the Euro-zone because of this. Needless to say the FED aren’t very happy with the CIA. This is the only explanation I have been able to come up with to explain the totally destructive nature of Western finance. IN CONCLUZION : Given the ever declining share of world GDP generated in Europe, it will increasingly become irrelevant. Crisis, or no crisis, it will become a footnote in economic history, governed by a bureaucracy with delusions of grandeur.

Europe's political leaders have spent most of the euro crisis denying there's a euro crisis. A "specific Greek problem", that they'd give you. Irish and Portuguese aberrations. As for the Spanish, that really was hard manchego. Wherever disaster struck over the past two years it was always the member's fault, never the club's. The denialism ended this summer, as the financial bushfire moved to Italy and even began to menace Belgium and France. Sequestered in their conference rooms in northern Europe, policy-makers found it easy to wave away catastrophe in the distant, poorer periphery – but far harder when the second and third-largest economies in the entire bloc were under threat. If the rhetoric and the not-so-faint snobbery have vanished, to be replaced by panic about "a last wake up call" and "a crucial crossroads", the actual policy-making is as clueless as ever. At the last major summit, the one where David Cameron pressed the eject button, little was agreed apart from a restatement of Maastricht rules on budget deficits. Markets got excited about the promise of a $200bn loan to the IMF; until it transpired that the figure had been plucked out of thin air and no one knew where it would come from. Rather less predictable is at what cost to the rest of us. In that respect, what's really scary is just how tribal many people become in the face of bad news. The right wing press here has already gone into xenophobic overdrive, and both here and abroad sound judgement - or what passed for it - seems to have leapt out of the window before it's even had chance to see the new year in. At a time when the World's problems have never needed more co-operation to resolve, everywhere you look nation states are acting increasingly like the kind of blinkered, selfish, short term egotists who stitched us all up so badly in the first place. My best hope for 2012? That when it falls, out of the wreckage of this sham of a global financial system we find the sense to build an economic model that doesn't belong in an asylum. That this will eventually happen I am confident about; when, and quite what pain we'll have to go through to get there, far less so. But one thing is for sure - 2012 won't be dull... I wish good to all of us!!!

The panic engulfing Europe’s banks is alarming. Their access to wholesale funding markets has dried up, and the interbank market is increasingly stressed, as banks refuse to lend to each other. Firms are pulling deposits from peripheral countries’ banks. This backdoor run is forcing banks to sell assets and squeeze lending; the credit crunch could be deeper than the one Europe suffered after Lehman Brothers collapsed. Add the ever greater fiscal austerity being imposed across Europe and a collapse in business and consumer confidence, and there is little doubt that the euro zone will see a deep recession in 2012—with a fall in output of perhaps as much as 2%. That will lead to a vicious feedback loop in which recession widens budget deficits, swells government debts and feeds popular opposition to austerity and reform. Fear of the consequences will then drive investors even faster towards the exits. Past financial crises show that this downward spiral can be arrested only by bold policies to regain market confidence. But Europe’s policymakers seem unable or unwilling to be bold enough. The much-ballyhooed leveraging of the euro-zone rescue fund agreed on in October is going nowhere. Euro-zone leaders have become adept at talking up grand long-term plans to safeguard their currency—more intrusive fiscal supervision, new treaties to advance political integration. But they offer almost no ideas for containing today’s conflagration.

Eurozone finance ministers are scheduled to discuss significant increases to the bailout packages for indebted countries in Brussels on Tuesday. But policymakers remain divided over the best way to finance the bailout schemes, including the EU's main rescue fund, the European financial stability facility (EFSF). After crisis talks in October, Angela Merkel and Nicolas Sarkozy said they hoped to expand the €440bn (£377bn) EFSF to around €1 trillion: large enough to cope with the prospect of possible bailouts for Spain and Italy. But recent attempts to construct a bigger fund have failed, leaving ministers scrambling to find alternatives. Some leaders want the European Central Bank to take an active role, but new central bank boss Mario Draghi has ruled out buying large amounts of Italian and Spanish government debt to stabilize their borrowing costs. Rumors circulated over the weekend that Spain was preparing to make a bid for EFSF funds after Madrid saw the cost of its borrowing reach 6.7%. Sources close to the incoming government of Mariano Rajoy denied that he had made a request for bailout funds from Brussels, although they refused to say whether he was considering making such a request. Analysts say the situation is complicated by calls in Ireland and Portugal for a Greek-style debt write-off. Dublin and Lisbon are expected to take their case to the finance ministers' meeting on Tuesday, arguing that they should also enjoy the 50% reduction on their debts that was negotiated for Athens.

How to win the war you "lost" - Germany is taking on an increasingly dominant role in Europe

Revelations that draft proposals for the Irish December budget had been circulated in a German parliamentary committee were met with horror in Ireland. It has since emerged that they were sent to every finance minister in the EU. Members of Irish opposition parties have been in uproar at the fact that parliamentarians in Berlin were privy to vital information, such as a proposed 2% hike in VAT. Although the government insisted that the plans seen in Berlin were not final, the Irish minister for finance, Michael Noonan, confirmed on Friday that he would indeed be proposing to the government that they increase the top rate of VAT by 2% to 23%. It is one of a number of measures the government says it will have to take to raise €1bn (£856m) in additional taxation as part of total spending cuts and tax increases of €3.8bn. The broad outline of the annual budget is usually known in advance, but the exact details are not revealed by the finance minister until budget day. The Irish people have, however, already been told that they face a string of harsh austerity budgets over the coming years. So, it will come as little surprise that more pain is to come. The fact that the budget plans were found in the Bundestag is most likely due to the fact that its finance committee has to be included in any decision-making on the bailouts, according to a recent ruling by the country's constitutional court. In other countries such a paper would never have left the finance ministry, but in Berlin all the 41 committee members were privy to the information. The reality is that Ireland ceded control over its own finances when it was forced to tap the bailout funds late last year. When the troika of the IMF, ECB and EU rode into town on those dark and dismal days last November there was much talk of the loss of sovereignty. For many something wrested from the British less than a century ago had been squandered due to the chronic mishandling of a banking crisis that was in turn caused by the reckless investment in property development. The worry for peripheral countries like Ireland should be not so much that Berlin is in charge, but the vision that Germany has for the rest of Europe.

Fitch: Italy is already in recession

Italy's new prime minister, Mario Monti, said the euro zone's third-largest economy faces an emergency, and he promised sweeping but fair reforms to dig the country out of a major financial crisis. Monti's government of technocrats must pursue fiscal and structural economic reforms but the downturn in Italy and Europe will complicate his job, Fitch said"Italy is likely already in recession and the downturn in activity across the euro zone has rendered the task of the new government much more difficult," Fthe ratings agency said in a statement. Fitch, which downgraded Italy to A+ from AA- with a negative outlook last month, warned it would cut the country's ratings to the low investment grade category if it were unable to borrow at sustainable rates on the markets. "Sustaining political and public support for structural reforms and austerity will be challenging in the face of rising unemployment. Convincing investors that the reforms will be effectively implemented and will boost economic growth over the medium term will be equally if not more challenging," it added. Italy's borrowing costs hovered close to euro-era highs on Thursday, with yields on 10-year bonds touching 7.1pc early in the day - past the levels that forced its smaller neighbours Greece and Portugal to seek a bail-out. The country has to refinance €312bn (£267bn) of debt next year. Fitch said Italian bond yields had risen to a level which, if protracted, would place public debt on an unsustainable path.

Italy - trouble in paradise

Italian bonds rise past 'unsustainable' 7% barrier and the country enters bail-out territory, with the ECB reportedly buying country's debt and Germany under pressure to act to save monetary union. The spread between French and benchmark German bonds hits new record high of 148 basis points. When, like Italy, you have a €1.9 trillion debt pile should it really matter if the market charges you 6.7pc or 7.4pc to service it? The Telegraph's Louise Armitstead believes it may not matter to the country but it does matter to the EU. Once yields go above 7pc they rarely come down again because a self-fulfilling spiral takes hold. Once above the 7pc mark, Greece lasted just 13 days before requesting a bail-out. Ireland lasted 15 days. Portugual held out longer but succombed after 49 days. The reason that the Italian public have a right to be angry over how their country has been run: In the past, Italy used to devalue its currency to regain its competitive position, in the Euro, it cannot do that. To increase competitiveness within the Euro involves painful reform, like the wage cuts seen in Ireland. Can you see the Italians going for that solution? They have been mislead by their politicians for years, promising them the Dolce Vita. And just like the Greeks they are slowly waking up to the realisation that this promised life of pleasure was a dream that is fast disappearing as dawn breaks ... or until "the german governor" is appointed , just like in Greece's case !

Merkel's spokesman Steffan Seibert told journalists that further changes to Europe's bailout fund would require the agreement of the Bundestag, the German parliament. The eurozone's efforts to solve its escalating debt crisis plunged into disarray Thursday, when Germany and France called a second emergency summit after it became clear that they would not be able to bridge their difference in time for a first crisis meeting Sunday. Merkel's address to parliament scheduled for Friday was cancelled, and Seibert said it would take place next week. Sunday's summit was supposed to deliver a comprehensive plan to finally get a grip on the currency union's debt troubles by detailing new financing for debt-ridden Greece, a plan to make Europe's banks fit to sustain worsening market turbulence and a scheme to make the eurozone bailout fund more powerful. The announcement came from the offices of French President Nicolas Sarkozy and German Chancellor Angela Merkel after it became clear that the currecy union's two biggest countries could not agree on the main points of the plan. Both governments said that all elements of the eurozone's crisis strategy would be discussed on Sunday "so it can be definitively adopted by the Heads of State and Government at a second meeting Wednesday at the latest." It also said that the two leaders would meet Saturday afternoon ahead of the summit in Brussels in the hope of making progress.

The European Union's executive may ask for powers to censor credit ratings for countries in crisis, its financial reform chief said on Thursday, describing a ban as one way of stopping fallout from "ill-thought-out" ratings. The proposal, which officials cautioned may be impossible to police, would be the most stringent curb yet on rating agencies and highlights frustration in France, which was this week warned by Moody's that its top rating was under threat, and Germany. "These rating agencies should probably be considered one of the causes of this crisis," said Michel Barnier, the former French foreign minister who is now the EU commissioner in charge of regulating finance.

BRATISLAVA, Slovakia—Slovakia's parliament has endorsed the amended rescue fund, in a repeat vote, allowing the European Financial Stability Facility to become operational. Slovakia was the last country in the 17-member euro zone to vote on the €440 billion ($606.8 billion) EFSF and the only country to repeat the endorsement vote, having rejected initially late Tuesday. The 114-lawmaker majority in the 150-seat parliament voted to approve the fund. The approval became possible after an earlier vote, demanded by the opposition Smer-Social Democracy party, which approved the holding of an early general election in March 10, 2012. The snap election will come less than two years after regular general polls held in June 2010. The local political turmoil was brought about by the outgoing right-of-center government of Prime Minister Iveta Radicova losing a confidence vote by parliament late Tuesday. 119 lawmakers in the 150-seat parliament voted to hold the general election ahead of schedule. The vote opens the door for the EFSF approval in the repeat vote. Slovak ratification will bring into force a new agreement among the 17 euro-zone countries that dictates how the bailout fund operates. As a result, the EFSF will be able to deploy as much as €440 billion, up from about €250 billion now. It will also be able to buy government bonds in the secondary market and help countries recapitalize their banks, among other things. Democracy in action : vote until it passes and ask for a bribe before passing "it" !!! Is this the E.U. "democracy"???...I SAY , YES, E.U. IS TODAY'S SOVIET BLOCK !!!!

And they shall vote until it passes..." how about that?!

Slovakia's parliamentarians failed to ratify the expansion of the €440bn (£385bn) European Financial Stability Facility (EFSF). Opposition politicians in Slovakia, which is the only member of the eurozone not to have ratified the changes, have said they will approve the EFSF - but not without the removal of prime minister Iveta Radicova and her government. Richard Sulik, the rebel leader of the coalition's minority member, the Freedom and Solidarity Party, abstained from the vote. He told the parliament: "I'd rather be a pariah in Brussels than have to feel ashamed before my children, who would be deeper in debt should I back raising the volume of funding in the EFSF bail-out mechanism." Separately, the troika auditors - officials from the European Union, the European Central Bank and the International Monetary Fund (IMF) - reported that Greece's fiscal targets for 2011 were "no longer within reach". After weeks of scrutiny, the officials said that the Greek "recession will be deeper than anticipated"; that there was "no evidence of improvement in investor sentiment"; and that the structural reforms, though taking place, were "uneven".

It is not for the first time Slovakia has been against major eurozone policies since it adopted the currency in 2009. Last year, it rejected providing its 800 million euro share of the 110 billion EU bailout plan for Greece. That rescue went ahead without Slovakia, but another exemption for the country would cast doubt over the eurozone's credibility and ability to function as a bloc.

Nonetheless, many analysts are surprised at the power the small country wields. As Greg Anderson of Citigroup put it: "it seems somewhat unfathomable that a country that has not been a member of EMU for even three years could be the one leading to its unravelling."Slovakia prepares for a fresh vote on the eurozone bail-out fund and international lenders buy time for a broader response to the debt crisis with hints that Greece is likely to get a key loan next month."

The EU commission says 22.8 million people were unemployed in the EU in August, down by 62,000 from July and by 300,000 from August last year. In less welcome news, eurozone inflation jumped from 2.5% to 3% in September, galloping away from the European Central Bank's 2% target.
News :

Greece will not meet deficit targets this year or in 2012
Greek civil servants block troika from entering finance ministry
Greek finance minister tries to quash talk of ‘disorderly default’

EU economy commissioner Olli Rehn said on Monday (3 October) that European finance chiefs are considering different options on how to leverage the eurozone’s multi-billion-euro rescue fund to give it further firepower. "We are reviewing options on optimising the use of the [European Financial Stability Fund] in order to get more out of it and make it more effective as a financial firewall to contain contagion. Leveraging is one of the options," he said speaking to reporters in Luxembourg. Finance ministers are meeting in Luxembourg to assess the heavily indebted Greek government’s latest announced efforts to deliver on its promises of austerity and structural adjustment made to international lenders. There are growing fears that were Spain and Italy to be cut off from market funding, the existing €440 billion rescue fund would be insufficient to bail out such large economies and even an expansion of the war-chest to €780 billion agreed by eurozone leaders in July may not be enough.

French president Nicolas Sarkozy is to hold urgent talks in Germany with chancellor Angela Merkel on speeding up the rescue plan for the euro. Sarkozy said on Friday the talks would take place within days as uncertainty about the eurozone's stability and worries about deepening recession returned to European markets. Declaring after talks with Greek premier George Papandreou that "a failure of Greece would be a failure for all of Europe", the French president praised Athens for its determination to meet its commitments and said: "There can be no question of dropping Greece." His comments came as European leaders turned up the heat on Slovakia to approve the enhanced eurozone rescue fund amid growing fears it could yet scupper the scheme. Only a day after huge relief at Germany's decision to endorse the expanded bailout fund, anxiety stalked markets and the corridors of power as eurozone inflation rose to a three-year high of 3%, shares in French banks plunged as much as 10% and Denmark's central bank offered 400bn krone (£46bn) in emergency liquidity for the country's banks. There was renewed talk of a Greek debt default and larger "haircuts" for private bondholders as Papandreou sought backing for a further €8bn (£6.8bn) lifeline to save his country's treasury from bankruptcy. Sarkozy said: "There is a moral and economic obligation of solidarity with Greece." Papandreou in turn told reporters that his nation was making all the required sacrifices and reforms. "I wish to make it perfectly clear that Greece, I myself, our government, the Greek people, are determined to make the necessary changes." Yet conflict sprang up anew over plans to set up an even bigger rescue fund for the eurozone, with leading European bankers demanding an outline agreement on a new scheme by the time G20 finance ministers meet in mid-October.

Ireland's central bank reportedly is printing Ireland's old currency in case the country leaves the eurozone. At least that's the rumor circulating in Dublin, notes Alan McQuaid, chief economist at Bloxham stockbrokers in that city. McQuaid, writing a guest commentary for The Guardian, says he's not sure if the rumor is true. But he does hope Ireland has contingency plans in case the euro disintegrates. Then again, given the record of European leaders, a lack of backup plan wouldn’t be surprising. As Greece struggles to remain solvent, the European monetary union is scrambling to stop the debt crisis from spreading. If the crisis does spread, Ireland might be next in line. Some pundits say Ireland should drop the euro. Being master of your own destiny does have appeal, McQuaid admits. If it returned to the punt, Ireland could boost exports by devaluing the currency and reduce its debt burden.

BERLIN — In the debate about the possible bankruptcy of the Greek state, one largely dormant argument has resurfaced with increasing frequency: the widespread damage inflicted by the Nazi regime during World War II means that Germany still owes Greece major wartime reparations. While the claims for payment of damages are based on very real facts, one could argue that over the course of 60 years or so, those claims have been satisfied under international law. What is at stake? Without having been provoked, the Wehrmacht — the Third Reich's armed forces — took over both Greece and Yugoslavia on April 6, 1941. In both countries, German soldiers set up a brutal occupation regime. As was usually the case in European nations invaded by the Germans, the high cost of the occupation was borne by the occupied country — and the Greek economy was plundered through forced exports. This resulted in galloping inflation and a radically lower standard of living for Greeks. Additionally, the Third Reich forced the Greek National Bank to lend Hitler's Germany 476 million reichsmarks interest-free. After Germany's surrender, the Allied powers organized the Paris Conference on Reparations in the fall of 1945. Greece laid claim to $10 billion, or half the total amount of $20 billion the Soviets suggested that Germany pay. The suffering caused to Greece by the Nazis is undeniable. Yet at the same time, human suffering cannot really be measured. Independent historians unanimously agree that the total economically measurable damages suffered by Greece as a result of the German occupation, in both absolute numbers as well as proportionate to the population, put Greece in fourth place after Poland, the Soviet Union and Yugoslavia. (Is the Greek bailout falling apart?) At the Paris Conference on Reparations, Greece was finally accorded 4.5% in material German reparation and 2.7% in other forms of reparations. Practically, this meant that Greece received mainly material goods — like machines made in West Germany — worth approximately $25 million, which in today's money amounts to as much as $2.7 billion. However, the stipulations made at the Paris conference were all but irrelevant given that the U.S. opposed heavy economic penalties. U.S. leaders recalled what happened after World War I, when Germany's first democracy, the Weimar Republic, was massively weakened economically by having to pay off reparations. Indeed, one of the consequences of this policy was the rise of Hitler.

All Four Allies Agreed - That is why under the terms of the 1953 London Debt Agreement, reparation payments were put off until a peace treaty was signed. That finally happened in 1990, which didn't require Germany to pay further reparations to other countries like Greece. Greece accepted the treaty, though clearly it had little choice. After decades of partnership with Germany (Greece has been a member of NATO since 1952 and associated with European organizations since 1961), it would have been politically difficult to demand huge reparations — although the issue of compensation was periodically raised by Greek politicians, mostly to score points in domestic politics. (source : Time )

Germany isn't opposed in theory to leveraging the EFSF, but sees a number of practical problems with the idea and is refusing to be forced to make quick decisions, according to people familiar with the government's position. Germany's parliament is due to vote on Sept. 29 on legislation to increase the rescue fund's lending capacity to €440 billion and give it new powers, including the right to buy bonds in secondary markets and provide funds for governments to recapitalize banks. Mrs. Merkel is trying to prevent a rebellion within her coalition on the issue. Raising the specter of a more-radical revamp of the EFSF would make it even harder to keep her lawmakers in line. Growing hostility of German lawmakers and voters to more-generous bailout aid for euro members means that additional measures will be hard to ratify even after the Sept. 29 vote. The German finance minister, Wolfgang Schäuble, told reporters that the bailout fund can only work within the legal framework of the European Union's treaty, and more specifically, within the agreement governing the bailout fund. Neither of those allows the facility to be leveraged, he said. A number of ECB officials have rejected the leverage idea. But on Sunday, executive board member Lorenzo Bini Smaghi of Italy became the first ECB official to publicly throw his weight behind the idea of leveraging the bailout fund to stem the crisis

£1.7 trillion 'firewall' fund readied to save euro - I think this is a lot of "Hot Air" !

"We are in a precarious situation," International Monetary and Financial committee chair Tharman Shanmugaratnam. "We face a confluence of sovereign debt and banking risk with the epicentre of that being in the euro area, but it is underpinned and complicated by the fact that we also face a weakening global economy." Greece is at the forefront of the crisis that has struck a number of countries on the 17-nation euro zone's periphery. Debt-laden Italy, the third-biggest euro zone economy, has also been struggling to retain investor confidence. Mr Shanmugaratnam said IMF leaders "will do what it takes" to prevent an escalation of the financial crisis and to avoid the possibility of a prolonged period of stagnation in larger economies, which would in turn affect overall growth of the global economy. IMF head Christine Lagarde confirmed the fund's consensus on the causes of the crisis, and the steps that need to be taken to solve it. "There was no denial, there was no finger-pointing," said Ms Lagarde. Although the meetings of top finance officials were dominated by worry about a possible debt default by Greece, which might cause a domino effect in other highly indebted euro zone countries, Ms Lagarde said steps were already being taken. "If you look at financial regulation, if you look at crisis management, if you look at improved governance, for instance, in the euro zone, if you look at strengthening the capital of the banks, a lot has already happened," she added.

Recap of the day - sept. 23. 2011

Just a recap of the day

1. The G20 settled markets with a comminiques overnight on Thursday, pledging to "take all actions to preserve the stability of banking systems and financial markets as required".

2. In London the FTSE 100 opened up 1.2pc with banks rising strongly, but the bounce was shortlived. By 10.45am the index had tumbled through the psychologically important 5,000 level after reports that Greece saw orderly default as possible. The mood was darkened after an EU spokesman said there were not plan to further recapitalise eurozone bank - other than what has been done. This seems to contradict the thrust of the G20 statement.

3. By lunchtime the market was turning around after rumours of further ECB measures to support the eurozone economy. Sentiment was further boosted by comments from Osborne at the IMF annual meeting in Washington. He said Europe had until the G20 meeting in Cannes in November to solve the political crisis in the eurozone. This six-week deadline seemed to give investors hope that leaders understood the urgency of the eurozone's situation.

4. London's leading shares close up 0.5p on the day, but down 5.6pc on the week. Markets in Germany, France, Italy and Spain also rose, closign up 0.6pc, 1pc, 2.1pc and 1.36pc respectively. However, after European markets closed the Dow Jones and the S&P 500 seemed to be trading sideways as nerves returned.

The Greek Finance Minister Evangelos Venizelos. The Greek Finance Minister Evangelos Venizelos presented to the parliament three scenarios to solve the budget crisis, including a default ordered at a discount of 50% for holders of sovereign debt, the Greek press reported Friday. A spokesman for the Greek government has denied reports the newspaper Ta Nea and Ethnos, which state that the other two scenarios are disordered or defective, or the implementation of the second rescue plan 109 billion euros agreed on 21 July. Citing witness a speech given by Evangelos Venizelos, Ta Nea reported that the Greek Finance Minister would also have considered "very dangerous" for Athens to claim a discount of 50%. "This would require a large coordinated effort," would have said. A spokesman for the Ministry of Finance said not to be able to comment on articles, but a spokesman for the Greek government, Angelos Tolk, has denied.

The cat is out of the bag. Eurozone leaders, in various states of denial about the need for their banks to raise more capital, now have to face some hard facts, courtesy of the International Monetary Fund. The sovereign debt risk to European banks has risen since the start of 2010 by about €200bn, with a total spillover effect of €300bn, estimates the Fund. These are staggering figures. They are not, it should be said (and as the IMF emphasises), the size of the black hole in the collective balance sheets of European banks, since there's a very significant difference between a risk and an estimated loss. All the same, €200bn, or €300bn, has to be prepared for. The IMF's analysis explains why the funding climate for many European banks has become icy. When huge losses are guaranteed, but their precise size and location is unknown, the rational response is to play safe by reining in lines of credit. And when everybody wants to retreat, the flow of money slows, thereby exaggerating the crisis by choking lending to economies. There really is only one remedy – get capital into the banks, raise the buffers and generate confidence that losses, however large they turn out to be, can be absorbed. Now that the IMF itself is recommending recapitalisation of the European banking system, there is a greater chance it might happen. That's the good news. The bad news is that there is no guarantee that the eurozone leaders will act in time to prevent an avoidable crisis turning into a catastrophe. Many flew into a funk when the IMF's new managing director, Christine Lagarde, emphasised the need for recapitalisations a few weeks ago. Some screeching U-turns are required.

The International Monetary Fund has warned in its latest Global Economic Outlook that Europe and the US could slip back into recession next year unless they quickly tackle economic problems that could infect the rest of the world.The apparent 'boom' in living standards, property prices, pensions, benefits and consumer goods wasn't real, it was created on the back of massive personal and government borrowing. I would have thought that much at least was obvious to anyone.
The problem is not really lack of short-term growth, it's the expectation that we should have constantly have growth and that we should be 'better off'' in every way year after year. We can't return to the false boom and so we will have a period of contraction and shrinking of living standards back to just what they should have been without the debt-filled illusion of quick growth. Those shrunken living standards in the developed economy still look pretty good compared to the average African, non-oil Arab or South American state.And so living standards will have to fall, state expenditure will have to be reduced, debt payed down and we will all have to return to the real world
It isn't complicated, after all what is general 'poverty' in the Western world? Leaving aside the very real cases of the homeless and destitute. No new personal computer, no new mobile and no Sky subscription. No free gastric band operations, waiting a bit longer for a new hip or knee. No new car or telly or foreign holidays. Working longer because you're living longer and staying healthier and not expecting 50% of your best salary when you retire. Sometimes you don't need a complicated solution because the problem is simple. We were conned by politicians that all this was affordable and sustainable.. and it wasn't.