German Chancellor Angela Merkel and French President Nicholas Sarkozy will meet in Berlin Friday - Event Risk - The Greek cabinet was reshuffled on Friday and will face a vote of confidence by Tuesday night. The political moves could be another potential flashpoint in a country already beset by fierce anti-austerity strikes. But some analysts said the euro was holding up well despite the uncertainty as the market held out hopes a solution could be reached and a new three-year bailout plan would be decided in July. "It's difficult keeping up with the event risks but policymakers are whittling down a timetable," said Tom Levinson, FX strategist at ING, adding euro/dollar at $1.4100 could turn out to be good value if progress is made. "This Sunday they should agree on another aid tranche for Greece and in July they should be agreeing the main aid package. Unless something major goes wrong with either the confidence vote or Germany does not soften its terms I think the euro will do better." Investor risk appetite was also hampered on Friday by weak U.S. regional manufacturing data that cemented concerns about a soft patch in the U.S. economy, causing prices in Asia to slump. Economic and Monetary Affairs Commissioner Olli Rehn said euro zone finance ministers will decide at a meeting on Sunday to disburse the next tranche of emergency loans to Greece in early July and decide on the new three-year bailout on July 11. Friday's and Sunday's meetings will be watched closely by the market for reassurance the Greek debt crisis can be resolved. "As an investor I would be quite nervous," said Ankita Dudani, G10 currency strategist at RBS. "There is a lot of uncertainty out there over what Germany wants and it is quite hard to see them coming up with something that works for everyone." Discord between the euro zone's paymaster Germany and the European Central Bank, backed by France, has spooked investors across asset classes, with the European stock index on track for its longest run of weekly declines since January 2008. Germany is insisting banks, pension funds and insurance firms that hold Greek debt swap their bonds for new ones with longer maturities.But fearful this solution could create a "credit event" and prompt rating agencies to label Greece in default, the ECB, European Commission and France all favour a softer option under which holders of Greek bonds would be asked to buy new Greek debt as their holdings mature.

"French for a change"

«Faire preuve d'esprit de responsabilité et de sens du compromis.» Nicolas Sarkozy a lancé jeudi un appel solennel aux Européens pour sauver la Grèce. Attendu ce matin à Berlin, le président français sait qu'il devra déployer des trésors d'imagination et de persuasion pour faire bouger Angela Merkel. Alors qu'Athènes, plongé dans une crise politico-financière, est au bord de la faillite, la chancelière est saisie d'un nouvel excès d'attentisme. Confrontée à une fronde au sein de sa majorité, Merkel irrite ses partenaires européens en faisant monter la pression: elle s'obstine à conditionner toute nouvelle aide financière grecque à une participation des créanciers privés afin de leur faire partager le fardeau des contribuables allemands. La position de Berlin s'est toutefois un peu assouplie ces dernières heures. Le gouvernement allemand, qui se heurte à une fin de non-recevoir de la Banque centrale européenne (BCE), réclamerait désormais un report au mois de septembre de la décision concernant une rallonge à la Grèce, initialement attendue au Conseil européen de la semaine prochaine. Jouer la montre lorsqu'il y a urgence, pour tenter d'infléchir le débat: Berlin avait déjà usé de cette tactique dans le premier acte de la crise grecque, en mai 2010, en rechignant à mettre la main à la poche pour Athènes. (source Le Figaro)

EURO UPSIDE CAPPED - Some analysts were sceptical about the sustainability of the euro's rise as they believe a Greek debt restructuring is inevitable, and that more aid loans would only throw new debt onto old debt without solving Athen's fiscal problems. "I would fade this rally in the euro for now. Investors will be looking for a more lasting resolution to the Greek debt problems and our economists haven't ruled out the possibility of a voluntary restructuring involving private bondholders," said Valentin Marinov, currency strategist at Citi. Renewed concerns about Greece's debts have pushed the euro around 2.5 percent lower versus the dollar so far this month, cutting overstretched long euro positions. While euro positioning remains long, it is more balanced than a month ago, and UBS currency analyst Geoffrey Yu said recent, choppy trade illustrated the deep division between euro bulls and bears while euro valuation remains relatively high. "Real money is still not convinced that Greece will be able to last the next few months, so there's a struggle between people who want to buy the euro on dips and people who are trying to grab any opportunity to get out of the euro," he said. But given the market's obsession with monetary policy and rate differentials between currencies, Yu said the euro may initially rise to $1.45 if the European Central Bank next month signals that it is preparing to raise interest rates again. Data on Tuesday showed inflation rose more slowly than expected in May but remained well above the European Central Bank's 2 percent target. [ID:nBRLVGE7ET] . An ECB rate rise would widen the euro's rate advantage against the dollar, particularly given that the Federal Reserve is widely expected to keep its lending rate near zero for months to come. Signs of weakness in the U.S. economy have raised speculation that U.S. rates will stay low.

BUCHAREST - Romania will start on June 6 the road-show presentations for a first international issue of its planned EUR7 billion medium term notes (MTNs) program, market sources told MEDIAFAX Friday. The Finance Ministry last year selected Austria's Erste Group Bank AG (EBS.RO) and French Societe Generale to handle the financing program. The ministry said it plans to launch the first bond issue before July, followed by another issue in the second half of the year. In 2010, Romania announced a three-year MTNs program worth up to EUR7 billion. However, the country didn't attract any funds via the program so far. Early May, the ministry sold debt worth EUR939 million in three-year foreign currency bonds on the local market, at an average interest of 4.89% a year. The latest international debt sale took place in March 2010, when the ministry attracted EUR1 billion in a five-year Eurobond, at an annual yield of 5.17%.

BUCHAREST - Greek banks, which control 17% of Romanian banking assets, have not withdrawn financing lines from local subsidiaries ahead of time so far, central bank officials said. Banks controlled by Greek investors have sufficient liquidity and are not under pressure to borrow heavily from the market, says Nicolae Cinteza, head of the Supervisory Department of the BNR, the Romanian central bank. The Greek hold 17% of Romanian banking assets and have a similar share of the deposit segment, with funds attracted from local customers amounting to around EUR6 billion. "I speak with officials in Greece at least on a weekly basis, we are in permanent contact with them. There have not been early repayments of resources attracted from Greece so far, only of loans that reached maturity," Cinteza told ZF.

A combination of more austerity, haircuts for creditors and further soft loans from rich countries will probably be what eventually solves the euro zone crisis. But the region would get there faster if everybody admitted their own guilt. Simply making everyone share the blame doesn't solve the huge problem of Moral Hazard. The show just goes on.
As far as I can see, the idea of a split-Euro had been dismissed as too confusing. But it would answer the following point - all would share the consequences, pain would be less and nobody will be responsible fo nothing - how convenient for the Brussels pimps and prostitutes populating the European Parliament . Italy, Greece's etc could work their way out with a weakened currency. The Northern banks would hold a weaker denomination, but money would initially flow in the northern direction (gov't officials leading the race, no doubt), so the northern banks would arguably gain and be happier to support a leaner south. The south could, over a number of years, begin to act honestly (i.e. collect taxes) and a balance would be achieved.
A southern Euro would not be drastically different, and in theory could eventually catch up.

Last week saw real progress in reaching a solution to the Greek, Portuguese and Irish debt crises. It is now recognized that these countries can never, ever, repay their debts, certainly not on time, and more than likely not in full. A default by any other name is a default. It might doff its name, as Juliet thought Romeo might do, and choose "repositioning," or "soft restructuring," or "voluntarism," but it remains a default. If the renaming permits banks to continue the fiction that Greek paper is worth what is inscribed in their ledgers, so be it: sooner or later reality will catch up with them just as it has with the profligate governments now at the mercy of their euro-zone benefactors. No need to rehearse the arithmetic that has appeared in this and other columns. It is enough to point out that the bailouts assumed that the recipient governments would be able to return to the financial markets after a period of reliance for cash on the European Central Bank, the International Monetary Fund, and their euro-zone partners. In short, the eurocracy devised a plan for coping with a liquidity crisis when these countries were facing a solvency crisis. Diagnose the disease incorrectly, and the prescribed medicine will make the disease worse by prolonging the period before which a proper diagnosis is developed.

BUCHAREST- ROMANIA - The National Federation of Romanian Agricultural Producers (FNPAR) warned that the unfavorable weather conditions and lack of agricultural strategies will force up food prices in the upcoming period. Data show the rye production will decrease by 22.9% this year compared to 2010, the rape production will drop 22% and the oleaginous plant production by 7.6%, FNPAR leader Vorel Matei said in a press release. He pointed out that the country's irrigation system is not functional. The federation called on the ministry to draw up viable agricultural strategies to help the agriculture sector and prevent food prices from rising. Agriculture Minister Valeriu Tabara said in April there is no reason why food prices should go up significantly this year. Tabara said prices will remain more or less constant, since producers are able to cover their costs and turn a profit. The shelf prices of food, he said, might go down if Romania can build an integrated farming system.

The European Bank for Reconstruction and Development Friday revised upward its forecast for Romanian economic growth to 1.8% in 2011, from 1.1% previously, saying it expects harsh austerity measures implemented under a multilateral financial program will pay off. "In Romania, the government has managed to complete successfully the IMF program by implementing harsh austerity measures that will keep the fiscal accounts under control," EBRD said in its Regional Economic Prospects report. The bank said the southeast Europe continues to lag behind other regions in terms of the pace of recovery from the crisis, with the exception of Turkey, where growth is now proceeding at a rapid pace. "The one bright spot is the external sector, where exports in most countries are growing rapidly reflecting both a base effect from the deep slump in 2009 and renewed global demand for key exports from the region," the report noted. However, except in Turkey and Romania, domestic demand remains sluggish as financial systems continue to unwind imbalances after the pre-crisis boom and consumer and investor confidence stays low, EBRD said. For 2011, EBRD expects the economy will pick up to 2.2% in the region, up from a growth of 1.9% previously predicted.

BRUSSELS - BERLIN: Eurozone governments are considering a plan to prevent a Greek default under which private investors would be asked to maintain their exposure to its debt and Athens would receive a new package of EU/IMF aid, eurozone sources said. Sources spoke of the new strategy on Thursday after ECB raised the stakes in its bid to prevent a restructuring of Greek debt by telling governments it would refuse to accept the bonds as collateral in the event of such a move. The threat, made by ECB executive board member Juergen Stark at a conference in Athens on Wednesday came after European finance ministers raised the possibility of a "soft restructuring" via debt maturity extensions earlier this week. One source with insight into European discussions on Greek debt said any "soft" or "hard" restructuring that might trigger a "credit event" - or the payout of default insurance contracts - was now off the table. Instead of a maturity extension, which might decrease the value of bonds and trigger such an event, banks would be encouraged to maintain their holdings of Greek debt and buy new bonds to replace issues as they matured, the source said. This would be done in combination with a new package of Greek reforms and austerity, as well as more EU/IMF money to secure Greece's funding needs through 2014. "We hope to have an agreement by the end of June," the source said.

IMF - press release

Strauss-Kahn Resigns - In a letter to the board, Mr. Strauss-Kahn said: "I deny with the greatest possible firmness all of the allegations that have been made against me." The letter said Mr. Strauss-Kahn, being held in a New York jail on sexual-assault charges, would resign with immediate effect. "I want to protect this institution which I have served with honor and devotion, and especially—especially—I want to devote all my strength, all my time, and all my energy to proving my innocence," the letter said. The IMF, which released the letter just after midnight Thursday, said it "will communicate in the near future on the Executive Board's process of selecting a new Managing Director." It added that John Lipsky remains as the acting head. The resignation brings a quick end to the paralysis that has gripped the IMF since Mr. Strauss-Kahn was arrested several days ago. The IMF is in the midst of negotiations about the next steps to take in resolving Greece's financial problems and his absence from the talks has been seen as a major problem. His resignation will put in high gear the global search for a replacement. By tradition, a European is selected to head the IMF and French Finance Minister Christine Lagarde is considered the front runner.

Romania went up four places to 50th in the annual IMD World Competitiveness report, with a total score of 57.497 out of 100 points possible.

Romania Up 4 Notches In IMD 2011 World Competitiveness ReportHong Kong and the USA were tied for number, as both received a score of 100, followed by Singapore, with 98.6 points.In Central and Eastern Europe, Estonia is ranked best, on the 33rd spot, followed by Poland (34th), Turkey (39th) and Lithuania (45th).The IMD's report ranks 59 states in terms of global competitiveness.

Buxelles on Greece - While Juncker's and Rehn's statements marked a significant shift in official comment on Greece's predicament, there was apparent disagreement among other senior officials about whether such a move was the right thing to do, although that may have reflected the confusing array of phrases used. "Restructuring, rescheduling -- off the table," French Economy Minister Christine Lagarde said late on Monday, after Juncker had hinted at a "reprofiling" of Greek debt, a way of extending the maturities on its loans without going through a more fundamental restructuring process. "A restructuring or a rescheduling, which would constitute a default situation, what we would call a credit event, are off the table for me," she said. European Central Bank governing council member Ewald Nowotny told Austrian radio that a "soft restructuring" was not on the cards, insisting that Greece needed to shore up its finances. While all EU officials have rejected the idea of a full-on default, they have now introduced at least three terms to refer to the possibility of some alteration in the repayment schedule of Greek debt: restructuring, rescheduling and reprofiling. From the financial markets' point of view, there may be little difference among them. The manager of a debt fund in the United States joked that the only time he had heard the word "reprofiling" used was in reference to a nose job. But sovereign debt analysts draw a distinction between restructuring, which involves enforced losses, and "reprofiling," when bondholders are asked to exchange short-term debt for longer-dated bonds with a similar coupon, thereby altering the profile of the yield curve and effectively giving the debtor more time to repay the loan.

European governments are wrestling with the prospect of a fresh bailout for Greece a year after they committed €110bn (£125bn) to Athens, under pressure from Washington and Beijing to calm the markets and stabilise the euro. The meeting of the 17 finance ministers of the eurozone was overshadowed by the absence of Dominique Strauss-Kahn, head of the International Monetary Fund and French presidential hopeful, who is facing sexual assault charges in New York. Strauss-Kahn has been a key player in the Greek drama and had been due to attend the first-night dinner in Brussels. The ministers – along with the 10 EU finance ministers from outside the single currency, including chancellor George Osborne – agreed on a €78bn bailout for Portugal, the third rescue of a eurozone country in a year. They also signed off on the permanent eurozone bailout fund, the European stability mechanism, which is to shore up the currency from 2013. They were expected to agree that Mario Draghi of Italy be appointed the next head of the European Central Bank in Frankfurt. With governments reeling from French socialist Strauss-Kahn's arrest on charges of attempted rape, the meeting in Brussels was also the first chance for ministers to discuss who would be the next head of the IMF in Washington; the post is traditionally held by a European. The German chancellor, Angela Merkel, was the first to say that Europe should retain its prerogative over the post, amid calls that it was time the IMF job went to someone from the emerging economies. "We know that in the mid-term, developing countries have a right to the post of IMF chief and the post of World Bank chief," she said. "I think that in the current situation, when we have a lot of discussions about the euro, that Europe has good candidates to offer."

Greece's Prime Minister has hit out at fellow European nations for demanding "islands or monuments" as security for bailout loans ahead of a gathering of European finance ministers in Brussels on Monday to discuss the country's ailing finances. Despite the conviction in financial markets that Greece's debts are unsustainable and will ultimately have to be restructured, eurozone ministers appear determined to top up last year's €110bn (£96bn) rescue package while forcing the beleaguered country into an ever tighter fiscal squeeze. Prime minister George Papandreou gave a hint on Saturday of his frustration over the terms being discussed by creditor nations, which include Germany and France, by suggesting that they might demand a mortgage over Greece's historic antiquities – or even a lien over some of the country's Aegean islands. "I want to add one thing on which we are very sensitive: to ask us for an island or a monument as a guarantee is nearly an insult," Papandreou told Italy's Corriere della Sera newspaper. "The people expect our word and our actions are a sufficient guarantee." Athens has announced a list of state assets, from airports to motorways, that will be sold off to raise €50bn over four years, but there are concerns that the process has stalled. The country will come under pressure to step up austerity measures in exchange for a fresh bailout at Monday's meeting.

Papandreou States: “There is No Going Back on the Euro for EU” - The Greek debt is manageable without restructuring, Prime Minister George Papandreou stressed in Oslo on Friday. Addressing the Progressive Governance Conference themed “A Post-Crisis Agenda for the Centre -Left: Securing Shared Prosperity”, organised by the think tank Policy Network, Papandreou added that: “We have decided to remain and to safeguard the Euro”.
Papandreou outlined a series of measures being implemented by the Greek government, such as the opening of so-called closed-shop professions, and changes to taxation and the social security system. As a result, he is expecting a 5 percent decrease of the deficit annually and an increase in exports. He further pointed out the positive signs in the tourism sector, while regarding the manageability of the debt he cited a relevant appraisal by the International Monetary Fund (IMF). “The Greek drama has become a European drama,” the Premier said, adding that in the midst of the crisis the European identity, European solidarity and crisis management ability were being put to the test.

The new accounting law, modified through a government emergency ordinance, for the first time makes a clear distinction between organising and keeping the books, versus doing more advanced reporting (an accountant's job) and signing for it. The Romanian accounting system takes one more step towards deregulation, which brings it closer to the Anglo-Saxon school, says Marin Toma, chairman of the Body of Expert and Licensed Accountants of Romania (CECCAR), who has been running one of the most important and stable bodies in Romania for the last 18 years. Companies with turnover or overall assets worth under 35,000 euros, which will hire based on a contract or on a service agreement graduates of economic faculties to keep the books, risk a lot, because these graduates will be responsible not only for keeping the books, but also for putting together the accounting records and signing for them. "As an entrepreneur, you have to be really adventurous to accept something like that. I would separate the two processes (organising and keeping the books, and doing accounting and signing for it) because the risk is quite significant. At big companies, only those who have the right to sign can be held accountable. For instance, for a fictitious invoice introduced in the cost category, both the entrepreneur and the graduate of an economics faculty are held to account, it is considered a crime," Toma says. A novelty that the accounting law brings is that these graduates of economics faculties will be able to organize, keep the books, as well as do accounting and sign financial statements

The eurozone's first ever bailout of a debt-laden member country is failing and will need to be renegotiated exactly a year after the €110bn (£96bn) rescue package was agreed for Greece. Following secret talks in Luxembourg on Friday between Athens and some of the key EU players, it emerged that Greece will not be able to meet the terms of last year's rescue and is hoping to ask the eurozone for more funds. As Britain made clear it did not want to offer any more support for Greece as part of an EU package or a bilateral loan, investors remain unconvinced of the ability of Athens to sustain its €340bn debt load. Signalling that his government will struggle to finance itself on the bond markets by next year – which was part of the deal struck with the eurozone and the IMF – the Greek finance minister, George Papaconstantinou, said: "We will either go out to markets or use the recent decision by the EU that allows the European fund to buy Greek bonds. The markets continue to disbelieve in our country." His trip to Luxembourg had been kept so quiet in Athens that only the prime minister, George Papandreou, knew about the discussions, which were led by Jean-Claude Juncker, the Luxembourg prime minister and president of the group uniting the 17 countries using the single currency. Juncker confirmed that the Greek bailout would need to be renegotiated amid alarmist reports that the country was contemplating reintroducing the drachma. After the talks – attended by the finance ministers of Germany, France, Italy and Spain as well as Olli Rehn, European monetary affairs commissioner – Juncker said the Greek package needed a "readjustment". Haggling over a new Greek deal is set to dominate the weeks ahead.

The NBR is no longer thinking favourably about leu's strengthening further, after the exchange rate has slid by around 4% since the start of the year. The rising leu is attracting portfolio investors, going into speculative bubbles, and foreign currency lending, says NBR governor Mugur Isărescu. "Allowing the domestic currency to go up to dampen imported inflation can attract rising portfolio investments. More portfolio investments can lead to rising asset prices. Putting up with leu appreciation to help inflation may not be possible in terms of risks generated at the level of private sector balance sheets," Isărescu told the students of "Transilvania" University of Braşov at the end of last week. The NBR is facing a dilemma again, in the context where inflation seems to be climbing steadily, going beyond the 8% threshold this spring, almost double the level of a year ago. After the VAT hike shock of last summer, pressures related to soaring fuel and foodstuff prices internationally have started being felt since autumn. In parallel, the economy is struggling to exit an over two-year recession, and loan demand, though weak, is foreign currency focused. (Z.F.)

Eurozone finance ministers are battling this weekend to contain a mounting sense of crisis about the future of the single currency as details emerge of secret talks on restructuring Greece's debts. Analysts expect a sharp sell-off of the euro when markets open tomorrow morning, as investors digest the fallout from reports – swiftly scotched – that Greece was considering leaving the eurozone. "Perhaps we have crossed a rubicon," said Jonathan Loynes, European economist at Capital Economics. "The knee-jerk response will probably be to push the euro lower. I believe the euro should be at parity with the dollar, not at $1.44 – I don't know what it's doing at anything like these levels." Euro policymakers at first denied that a meeting was taking place, but were later forced to admit that the German, French and Italian finance ministers had been holed up in a chateau in Luxembourg with their Greek counterpart George Papaconstantinou, discussing options for dealing with Greece's unsustainable debt burden. Rumours swept through financial markets late on Friday that Greece was threatening to leave the eurozone and reintroduce the drachma, but that was furiously denied by Athens yesterday.