Internationally renowned Russian opera singer Anna Netrebko has donated 1m roubles (£12,000; $19,000) to a theatre in rebel-held eastern Ukraine and posed with a rebel flag. Netrebko said her gift to the Donetsk opera and ballet theatre was "a step to support art where it is needed now".   Russian Channel 5 TV showed her giving the cheque to Oleg Tsarev, a leader of the armed separatists in Donetsk.   Russian government support for the rebels has been denounced by the West.  The famous soprano made her donation in St Petersburg, where she is a star of the Mariinsky Theatre. She said performers in Donetsk were struggling on with their art despite the freezing cold.  Other top names in Russian culture have also voiced support for President Vladimir Putin's stance on Ukraine, notably the government's annexation of Crimea and support for the pro-Russian separatists in Donetsk and Luhansk.  The Russian celebrities backing the Kremlin over Ukraine include variety singer Iosif Kobzon, film director Nikita Mikhalkov, conductor Valery Gergiev and viola virtuoso Yuri Bashmet. ...  The European Union has amended sanctions against Russia’s biggest lenders like Sberbank and VTB on long-term financing, and eased some sanctions on the oil industry. The EU says Russia’s biggest lenders - Sberbank, VTB, Gazprombank, Vnesheconombank and Rosselkhozbank - will now be allowed access to long –term financing should the solvency of their European subsidiaries be at risk.   The announcement released Friday refers to “loans that have a specific and documented objective to provide emergency funding to meet solvency and liquidity criteria for legal persons established in the Union, whose proprietary rights are owned for more than 50 percent by any entity referred to in Annex III [Russian banks – Ed.].” The EU has also specified the terms and conditions on which it can lift the ban on providing equipment for oil exploration.   Its supply is still banned to Russia itself, or the exclusive economic zone and offshore territories. However, EU said it may “grant an authorization where the sale, supply, transfer or export of the items is necessary for the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment.”  This basically clarifies the position of the latest set of EU sanctions. The notion of “Arctic oil exploration” means the embargo is applied to oil exploration on the offshore Arctic. “Deep water exploration” means any operation extracting oil carried out deeper than 150 meters below the surface.  The sanctions target the finance, energy and defense sectors. In July 2014 the EU issued a “sectoral list” which includes Sberbank, VTB, Gazprombank, Russian Agricultural Bank (Rosselkhozbank) and Vnesheconombank. The lenders were cut off from long-term (over 30 days) international financing.  The EU has banned three Russian energy companies Rosneft, Gazpromneft and Transneft from raising long-term debt on European capital markets. It has also halted services Russia needs to explore oil and gas in the Arctic, deep sea and shale extraction projects.

Cold war, this is the new mantra, it is on every lips. It is trendy. Gents you must be scared, they (the West) have run out of idea on how to demonize Russia as it is not working so well anymore, so let's go back to Cold war fears and wake up some old demons.  And with the Republicans back in power in the US, it might as well end up in a hot war....Western countries are at the gates of a new cold war with Russia, sparked by the Ukraine crisis and a continuing failure to grasp the depth and seriousness of Vladimir Putin’s grievances with the US and EU, the Finnish president, Sauli Niinistö, has warned.  Speaking to the Guardian at his official residence before Thursday’s conference in Helsinki attended by the UK prime minister, David Cameron, and Nordic and Baltic state leaders, Niinistö said Finland had a long tradition of trying to maintain friendly relations with Russia. But it would not be pushed around. ... “The Finnish way of dealing with Russia, whatever the situation, is that we will be very decisive to show what we don’t like, where the red line is. And that is what we are prepared to do,” Niinistö said, referring to recent violations of Finnish airspace by Russian military aircraft.  “We put the Hornets [US-made Finnish air force F-18 fighter aircraft] up there and the Hornets were flying alongside the Russian planes … The Russians turned back. If they had not, what would we have done? I would not speculate.”... "Finland, formerly a grand duchy of the Russian empire, declared its independence in 1917 after the Russian revolution. It survived two separate conflicts with the Soviet Union during the second world war. During the cold war Finland followed a policy of “active neutrality” to keep Moscow at bay. The two countries share an 830-mile (1,300km) land border."  No mention of effectively being allied with Nazi Germany.  Although we all know that the Nazis are being rehabilitated as they become re-useful to Europe and its latest Drang nach Osten....Putin is what he is, and Russia is what it is. Unfortunately the EU is what it is as well, and the EU largely caused this by meddling in the Ukraine, forcing it to make a choice when it is a country divided by a national and ethnic faultline. The part in contention was actually part of Russia until about 60 years ago and the population there naturally feel an affinity with Russia because they speak and are ethnically, Russian.  Whether the EU wants a Cold War is a moot point given the economic ties and the danger of further conflict, but lest we forget, this is an organisation comprised of countries that regard defence spending as an overhead and their armed forces as a ceremonial guard for foriegn dignitaries, and flag wavers for third world disaster relief. If there was a new Cold War we would be relying on the hated Americans for military muscle, and where was the EU when Bush wanted to put early warning radar in Poland

Clearly, the IMF and the World Bank have begun to realize that the system is broken. Unfortunately, no-one seems to have a clue what to do - apart from yet more QE and praying that the Banks will start lending. Have they not realized that the real problem lies in the way money is created in the system? As Positive Money have been arguing very coherently for some years, 97% of the money in the economy is currently created out of thin air when Commercial Banks make loans in the form of interest bearing debts. Even the Bank of England has now come clean on this mind boggling fact. Yes, Mr Cameron, there is a magic money tree. There's one in every Bank in the world. That's how our current money system works.

The interest payments generated by this insane debt-based money system are absolutely crippling the entire world economy. 3% of all GDP is currently being used to pay the interest payments on government debt, and in the 28 EU countries, those unjustifiable interest payments have cost taxpayers a total of over €6.2 trillion since 1996 - 54.8% of all government debt. And that is despite the fact that the banks who lend their "money" to governments don't even have the money they lend. What's even more stupid is that since the Basel regulations say that lending to AAA to AA- rating sovereigns has a risk weighting of zero - they don't even need any capital to make the loans. The result is that commercial banks can have thousands of times more assets than capital.

And 3% of GDP is just what tax payers end up paying to the banking system to cover government debt. Add in the interest payments on all the household and business debt and you can see that the entire system is currently set up to transfer the maximum amount of wealth from the people and businesses that do the work, to the people who control the money creation process - namely, commercial banks.

The overall consquence of this insanity is that there is currently about twice as much debt in the world economy as there is money. In other words, there is simply no way to pay of the debt. Osborne's austerity and more bank generated debt can only make things even worse. The system has to change. One simple option is for Central Banks to impose a modest financial transaction tax on all electronic transactions denominated in their currency - wherever they occur in the world. The revenue generated should be reinjected into the real economy as debt free money, either by simply giving the money to governments debt free, or by making direct payments to citizens in the form of an unconditional basic income.

Within a few years, this mechanism would allow the current mountain of debt to be converted progressively into debt free money that can circulate freely within the economy. Taxing financial transactions would also be a very intelligent alternative to the current totally obsolete tax system. With global financial transactions in 2013 running at at least $10 quadrillion a year, even a tax rate of less than 0.1% would easily allow taxes like VAT, Income Tax, or Corporation tax to be scrapped, providing a massive boost to the real economy. There is really no excuse for the IMF and the World Bank to do nothing.

Capitalism barely exists nowadays. Capitalism means privatised profits, and privatised losses. Not, privatised profits, and socialised losses. Eg - Where businesses take the profit during the good years, and then get bailed out by the tax payer during the bad times. Businesses are nothing more than people. The people aren';t to blame for this mess. Its the governenment meddling - low interest rates, bailing out banks, excessive debt fuelled state spending etc that have led to the mess we are in....World leadership through this crisis has been an utter failure. Especially from Germany which everyone fell supine before and begged for their help. They responded not with solidarity buy with the punishing diktat of austerity based not on economic analysis but on religious (Calvinist) ideology. (If you think that statement is off, go and read the speeches given by the German finance minister which are full of moralizing and void of economic analysis) Punish the offenders such as Spain obviously so irresponsible they actually had a surplus when the crisis hit. The West is in the powerful grip of Neoliberal ideology which is the reason for the extreme inequity and widespread economic suffering of tens of millions of people. That is what must change....The leaders of the Eurozone are mired in a political swamp of their own making and there appears to be no end in sight. Even those opposed to further EU expansion agree that to make the Eurozone work you need a fiscal union but politically that seems as far away as ever. The other option is to break up the Eurozone with individual country's choosing to leave, and at present this seems the more likely course of action of the two. In Italy the five star movement have now decided to campaign to leave the Euro, FN in France is anti-euro and in Germany the AFD is a growing political force.

A sharp rise in lending to the world’s poorest countries will leave them with crippling debt payments over the next decade, a few years after many had loans written off, a report has warned.

The Jubilee Debt Campaign said as many as two-thirds of the 43 developing countries it analysed could suffer large increases in the share of government income spent on debt payments over the next decade. Coinciding with the World Bank’s annual meeting in Washington, the anti-poverty campaigners accuse the international lender and other public bodies of “leading the lending boom” to poor countries without checking how repaying debts will divert resources from cutting poverty. The report highlights that for 43 poor countries, half of lending is from multilateral institutions such as the International Monetary Fund, World Bank and African Development Bank. Total lending to the group of poor countries has increased by 60% from $11.4bn (£7.1bn) a year in 2009 to $18.5bn in 2013.

“There is a real risk that today’s lending boom is sowing the seeds of a new debt crisis in the developing world, threatening to reverse recent gains in the fight against poverty and inequality,” said Sarah-Jayne Clifton, director of the Jubilee Debt Campaign.

“The shocking thing is that public bodies like the World Bank are leading the lending boom, not just reckless private lenders hunting for returns.”  The campaigners are calling for measures to make lending more responsible and for aid-giving to be shifted away from bodies like the World Bank that give loans towards sources that give it in the form of grants. The analysis uses IMF and World Bank data on developing country debts and projects the cost of payments under the following three scenarios: predictions of continuous high economic growth are realised; estimates of one economic shock over the next decade prove correct; and economic growth is lower than the standard prediction.

Worries about the eurozone came to the fore this week after a poor set of industrial production figures from Germany was swiftly followed by news of a 5.8% fall in its exports, compared with expectations of a 4% decline. The fall was the biggest since January 2009, and showed the effects of the sanctions on Russia over Ukraine, as well as the wider slowdown in the eurozone.

Germany’s economy shrank by 0.2% in the second quarter, so a second consecutive contraction in GDP in the third quarter would tip it into a technical recession. There were reports that the government would next week lower its estimates for GDP growth to 1.2% for both 2014 and 2015, from 1.8% for this year and 2% for next year.

Mario Draghi, the president of the European Central Bank, added to the gloom on Thursday by saying in Washington that the eurozone recovery was running out of steam.

Analysts are nervous that Draghi’s plans to stimulate the flagging eurozone economy with a bond-buying programme have still not been fully implemented and may not be sufficient anyway. Other central banks, notably the US Federal Reserve, have been gradually turning off the money that has been supporting the global markets for the past six years since the global crash which followed the collapse of Lehman Brothers. The prospect of this support ending, and of interest rates rising, had already started to unsettle markets. There was a brief respite from the week’s slide when the minutes of the latest Federal Reserve meeting suggested it was in no rush to raise rates, but this proved short-lived... It becomes clearer by the day that the Eurozone is heading back into crisis - several of the Mediterranean members have never really recovered from the recession of 2009 - unemployment in Greece is 29% whilst youth unemployment in Spain is over 50%. These are depression levels.
Whilst ever Germany insists on continuing with its austerity programme for the EZ, it will languish in low growth/no growth. Now that even Germany is feeling the effect of lack of demand for its exports to the other EZ countries, perhaps some change will occur in policy. If not, then a second crisis for the EZ will spell the political end of the project, with unpredictable results for the European Union overall.

Greece’s finance minister, Gikas Hardouvelis, argued in talks with the IMF boss, Christine Lagarde, that Athens can do without further loans from the Washington-based lender of last resort. Emergency bailout funds have propped up the Greek economy since it came close to crashing on a mountain of deficit and debt in 2010.

“Not only do we not need a new memorandum [loan agreement],” said prime minister Antonis Samaras, addressing parliament hours before his government survived a crucial vote of confidence early on Saturday. “We don’t need the rest of the money that from the start of next year we were on course to get from the current memorandum. We can leave it one and a half years earlier … that is our goal.”

Funding from the IMF had been due to expire in March 2016, while funds from the eurozone end this year. At €240bn (£188bn), the lifeline was the largest rescue programme in global financial history and was aimed at preventing the debt crisis that affected Athens from spreading to the rest of the eurozone.

Samaras denies that Greece wants an acrimonious break from the IMF. The organisation, perhaps more than the EU, has insisted on tough reforms and austerity measures in return for the rescue funds. These have exacerbated a six-year recession, the worst on record, left a quarter of the workforce unemployed, and seen support for Samaras’s fragile coalition plummet.

Hardouvelis, who met Lagarde with his predecessor, the governor of the Bank of Greece, Yannis Stournaras, is thought to have presented a plan detailing the country’s ability to cover its financing needs from bond markets. But the IMF chief has already signalled that she does not share such confidence. Although the IMF is also keen to disengage from the programme – and is under pressure from member states to focus on countries in the developing world – Greece is faced with a financing gap of about €15bn next year.

Growing fears about the US economy sparked a global stock market sell-off, with shares in London, Europe and the US falling sharply following poor data from America.... As the dollar falls so the value of companies rise as they are valued in widgets, so as the dollars rises so the value of companies fall, also if you have a large deficit that can not be paid for with tax then you create perpetual bonds at zero percent interest to the value of the difference, now both the UK and US are doing this, they call it QE, but no where can I find this in this paper or its comments, is every commenter here a troll typing a from a script? I live in a world of either robots or crazy people...The QE addicted stock markets are suffering cold turkey. They expect their next fix soon. The Fed dealer will comply to keep his customers happy. Sadly they still don't realise the QE fix makes the addict sicker.  I'm looking forward to the November Gold Referendum in Switzerland when the people will vote for ensuring the Swiss franc is actually backed up by something more than a promise of more funny money.  A further nail in the coffin for this absurd charade... QE means that the Fed has lots of US bonds. This kept interest rates low. Why doesn't the Fed start selling these bonds as there is now a demand for a safe haven in US dollars? The will prevent interest rates on the bonds falling lower and get the Fed out of the real economy.
OK what is wrong with this idea?   High rates increase the debt repayments for all debtors, the largest of which is the USGovt. An entity which has, as it happens, dramatically increased the proportion of its debt that is short-term, a move designed to lower interest costs. This also exposes the US to huge rate-risk as they must roll this short-term debt frequently. They cannot risk higher rates, possibly ever.  What they would ideally like is high inflation combined with low rates, to inflate away the value of all those trillions in debt while keeping interest payments down...  My sense is that the belief that Central Bank policy can insulate investors from any and all risk is now wearing thin. Finally. After a very long wait for those of us who always knew it would. If true, this has profound implications that will quickly become apparent.  As long as traders believed that the CBs would always be willing and able to save the day in case of any market pullbacks, why not leverage up and go all-in? It's been nearly impossible to lose money in the stock/bond/property markets over the past 5 years. Many/most traders know that the CB's have been blowing a massive asset bubble over the past few years but they also believe that they're smarter than everyone else and will be able to sell before the crowd when the bubble starts to pop - so why not, as former Citigroup CEO Chuck Prince memorably put it, 'Dance as long as the music is playing'?

José Viñals, the IMF’s financial counsellor, said: “Policymakers are facing a new global imbalance: not enough economic risk-taking in support of growth, but increasing excesses in financial risk-taking posing stability challenges.”

This is not what the central banks intended when they cut the cost of borrowing and cranked up the electronic-money printing presses in the process known as quantitative easing. They expected cheap and plentiful money to rouse the animal spirits of entrepreneurs, encouraging them to invest. Instead, they have provided the casino chips for speculators.

The IMF has identified three main problems:

First, while the traditional banks have been strengthened since the crisis by the injection of new capital, they are not really fit for purpose. The IMF conducted a survey of 300 banks in advanced economies and found that institutions accounting for almost 40% of total assets were not strong enough to supply adequate credit in support of the recovery.

Second, risk is shifting from traditional banks to what is known as the shadow banking system – institutions such as hedge funds, investment banks and money market funds that do not take deposits directly from the public, but have grown in size and importance over the past decade. The fund thinks the next crisis could well stem from the shadow banks.

Third, by guiding financial markets to expect only limited and slow increases in interest rates, the fund fears it has made investors complacent. Prices of a range of financial assets have risen; there has been little distinction between investments that are safe and those that are risky; and markets have been eerily free from volatility. Asked where the next sub-prime crisis was going to come from, Viñals said he did not have a crystal ball. Clearly, though, the IMF fears there is something nasty lurking out there.

Today is the anniversary of German reunification in 1990. Merkel's speech, on Austrian TV, contains the following (my translate). "I know I repeat and repeat this issue and many thing it is insignificant, but I will keep repeating it because only by doing what we do are we showing how to resolve our European problems. If we do not continue with our method we, here in Europe, will soon not be taken very seriously. We Europeans must stick to the principles and treaties we have founded and put in place for ourselves, including the Growth and Stability Pact."

I think those remarks, the frankest I've heard from Angie, are directed at France, the other throne in the dual monarchy, and to some growing extent Italy. Interesting times ahead, especially as the ECB is empty and we are going to discover quite a few banks are void too, and not just in the GIPIS group.

LATE EDIT - I found this too!

French 2015 budget statement -“No further effort will be demanded of the French, because the government – while taking the fiscal responsibility needed to put the country on the right track – rejects austerity.” This was yesterday...."European companies continued to struggle this September, as continued weakness in France took a turn for the worse.

Key gauges of private sector strength slipped, failing to meet the expectations of analysts. The composite purchasing managers’ index (PMI) reading for the euro area as a whole dropped to 52, from 52.5 in August.  While above 50, and thus implying private sector growth across the currency bloc on average, the data suggest that the pace of growth fell.  A consensus poll of economy watchers suggested that the headline reading would only deteriorate to 52.3 in September. 

"The PMI suggests the eurozone economy remained stuck in a rut in the third quarter", said Chris Williamson, of Markit, who compiled the report. "

B.S. de jour from the western press .....

Leaders from the 28 Nato countries are expected to approve the plan at the alliance's summit in Wales when the Ukraine crisis tops the agenda on Friday. The Nato secretary-general, Anders Fogh Rasmussen, said the force, drawn on rotational basis from Nato allies, could be in action at "very, very short notice".

Rasmussen described it as a mixture of regular troops and special forces that could "travel light but strike hard". It would be supported by air and naval forces as needed. He declined to say how many troops would be engaged but Nato officials said it would number around 4,000 and would be expected to deploy to any alliance member country within 48 hours.. "It is so that we are ready should something nasty happen," a senior Nato official said. Russia is likely to view the creation of the high-readiness force as an aggressive move. Nato has struggled to find a response to Russia since the Ukraine crisis began in February, beyond increased military exercises in the Baltic states. One of the biggest criticisms of Nato's response to Russian actions has been its lack of speed and flexibility. The spearhead force does not help with the immediate crisis in Ukraine, which is facing Russian incursions in the east and south of the country. But the force might have a deterrent effect if Russia was considering destabilising the Baltic states. Since the annexation of the Crimean peninsula by Russia in March, Poland and other east European and Baltic state members of Nato have demanded the alliance take a more active and high-profile role in their defence. Other allies, however, have been wary of doing anything that might endanger a 1997 agreement with Moscow under which Nato pledged not to base substantial numbers of soldiers in eastern Europe on a permanent basis. Officials said that troops would be constantly rotated, in order not to violate the 1997 agreement. However, the constant rotation will in effect mean Nato will have a permanent presence in the Baltic states. Airfields and seaports in the region could also be upgraded to permit their use by the force, Rasmussen said. Officials said the creation of the force, formally named the high-readiness joint task force, had been triggered by the Ukrainian crisis and military planners have been working on it since. "Elements of the force should be in place by Christmas," an official said.

As much as I admire Germany and its impressive manufacturing industry, the almost total reliance on exports as a way to achieve growth means that Germany cannot be the engine of growth that the Eurozone needs it to be.  The economic policies of China and Germany were just as much responsible for the financial crash as those of the debtor nations who have to exist for the policies of those two countries to work. German and Chinese surpluses were never returned and spent in their domestic markets but were recycled in the debtor states so that they could continue to buy German and Chinese goods to support the export growth that these two countries are so reliant on, of course this Ponzi scheme could not continue indefinitely hence the crash. Much of Europe is still in denial about some of the causes of the financial crash so it is hardly surprising that they cannot find a cure if they misdiagnose the illness. Anglo-saxon style casino banking was a convenient scapegoat which allowed others just as culpable to get away scot free. It explains the constant attacks on the city of London while ignoring their own zombie banks which are loaded up with sovereign debt which may turn out to be worthless. How many stress tests have they conducted on banks which have turned out to be nothing but meaningless shams that convinced no one.

It is worth remembering that at the introduction of the Euro the most vocal critics were British and what they predicted then subsequently happened. There is a lot to admire about Germany but do not have all the answers...

Germany's de facto leadership of the EU has been terrible. Most especially on the economic front. Certainly Germany itself benefitted from the hard currency policy it imposed on the other eurozone countries, as the industries of those countries folded one by one and their markets were taken over by German ones. But it was a disaster for the rest of us, and ultimately even Germany will be hurt as we become more and more unable to buy its goods. The only way soft-currency countries could have continued to compete with hard-currency ones like Germany was if the latter had allowed some domestic wage inflation. But they didn't, instead asking troubled countries to impose wage deflation - which they well knew was impossible, because wages are determined by contract and cannot be lowered easily any more than pensions.

For soft-currency countries, and even medium-hard currency ones like France, the euro has been a trap. You can't leave it without creating devaluation fears which will drive interest rates into the stratosphere, and if you stay in it your industry erodes year by year until you become a third-world vassal of Germany. The teutonic refusal to restore the competitivity of its southern neighbors by increasing its own wages has been selfish and destructive.

The new German assertiveness in foreign policy matters hasn't been much better. Merkel's dominant and belligerent stance during the Crimea crisis did more harm than good and is one reason why Russia and the EU are hardly talking any more, let alone working together to defuse the Ukrainian crisis. In any case if Germany wants to continue to call the foreign policy shots for all of Europe, it might start by doing its share of defense spending instead of relying on the French/British security umbrella.

Power comes with responsibility and Germany under Merkel hasn't shown much of it.

We are 5-6 years into our jobless recovery. And even this tepid recovery shows signs of stalling.
Today's GDP numbers ARE a positive sign, but unfortunately are just not very relevant to the typical American these days.

The combination of Outsourcing, Automation, and Illegal Immigration have decimated the working class and working poor, with no end in sight. Wages can't rise with these headwinds... and if they did then the Fed would immediately raise interest rates to ward off the "wage price spiral" crushing wages again. They think it's ok for Stocks to jump out of control... but wage raises for the plebes is unacceptable. For example - One was laid off in 2010 shortly after the start of the recession. He highly skilled in my field, yet have been bouncing around from job to job all making starting salary numbers, despite being 40 years old. Paying my mortgage is a struggle. Paying his health insurance is worse ($375/month from Freelancer’s Union). He is forced to buy cheap bare minimum car insurance ($18/month from Insurance Panda). His daughter is forced to attend a public school that is in increasingly worse condition thanks to illegal children and welfare leeches moving in. Yet here I am, unable to afford a quality education for her....

Federal Reserve monetary policy moves (although necessary) have mainly benefitted Big Business (especially Finance) and speculators, to the detriment of savers. Zero Interest Rate policy and Fed Purchases in the Open Market simply don't help the Average American much. Thus we see a booming Stock Market (which is clearly an echo bubble based on Fed policy and not on macroeconomic data) and we saw a mini echo RE bubble (especially the "luxury rental" segment)

People ask why the Stock Market isn't jumping with today's news. The answer is obvious. It likes the increase in GDP, but it doesn't like the idea that the Fed may need to stop goosing the market. The Fed is trapped with no exit strategy.

There is no Fiscal Policy these days due to Republican intransigence.

We need a drop in REAL unemployment and increased WAGES, and should focus on those.

On 16 July 2014, the Supreme Court provided clarity on the nature of a principal’s entitlement to recovery of a secret commission or bribe received by an agent.  The court ruled that when an agent acquires a benefit as a result of his fiduciary position, including a secret commission or bribe, he is to be treated as having acquired the benefit on behalf of his principal and so holds it on trust for the principal.  The ruling is significant in the context of insolvency, as the effect of the decision is to give a principal a preferential claim over the assets of his agent, as against an unsecured creditor.  It also permits the principal to trace the bribe into the hands of others (where they are not bona fide purchasers), which can be crucial where the agent has dissipated his assets.  This ruling confirms a principle which has, to date, been treated inconsistently by the courts since the nineteenth century.

Facts of the case : In December 2004, FHR European Ventures LLP (FHR) purchased the issued share capital of the Monte Carlo Grand Hotel SAM from Monte Carlo Grand Hotel Ltd (the Seller).  Cedar Capital Partners LLC (Cedar) were consultants who acted as FHR’s agent in negotiating the purchase of the hotel.  However, Cedar had also entered into an “Exclusive Brokerage Agreement” (Agreement) with the Seller, under which Cedar received a €10m fee on conclusion of the sale and purchase of the hotel in or around January 2005.

In November 2009, the claimants brought proceedings to recover the €10m fee from Cedar on the basis that they had failed to disclose the Agreement to the claimants and breached their fiduciary duties.  The claim was successful at first instance, but the judge refused to give the claimants a proprietary remedy in respect of the monies (which would otherwise have put the claimants in a favorable position over unsecured creditors in the event of insolvency).  Instead, FHR was held to have a personal claim against the agent.

The Court of Appeal granted the claimants’ appeal on this point and made a declaration that Cedar received the €10m fee on constructive trust for the claimants and so was entitled to a proprietary remedy.  This decision has now been upheld by the Supreme Court.

The argument focused on the limits of the application of a rule of equity that an agent who acquires a benefit as a result of his fiduciary position or pursuant to an opportunity resulting from his fiduciary position, is to be treated as holding that benefit on behalf of, and so on trust for, the principal. If the rule applied in the context of a bribe or secret commission, it would give the principal a proprietary claim to the bribe as well as a personal claim against the agent; if not, the principal would have only a personal claim against the agent. Cedar argued that the claimants should not be entitled to a proprietary remedy in such a case, on the basis that a bribe or secret commission was always intended to be made to the agent, not his principal; it was never the principal’s property.  Accordingly, it would be wrong to assume a constructive trust and there should be an exception to the equitable rule to that extent.  FHR argued that the equitable rule should apply, on the basis that equity does not permit an agent to rely on their own wrong to justify retaining a benefit received as a result.    Lord Neuberger, who delivered the judgment, reviewed the conflicting authorities and concluded that it was not possible to decide the case on the basis of clear legal authority and so it was necessary to consider the matter from the perspective of principle and practicality.  He considered Cedar’s argument to be the more complicated to justify and also unattractive, given that in a situation where the agent receives a bribe or secret commission from a third party, there would be a strong possibility that that payment would disadvantage the principal.  Looking at the facts of the case, Lord Neuberger considered that had the Sellers not paid the €10m to Cedar, it may have accepted a reduced price to reflect the fact it did not have to pay the large fee to the consultant.  Furthermore, given the heightened awareness and concern about bribery, the Supreme Court said that it expected “the law to be particularly stringent in relation to a claim against an agent who has received a bribe or secret commission” (at paragraph 42).

FHR’s arguments had the merit of simplicity and were consistent with the fundamental principles of the law of agency.  They were also consistent with the position in other common law jurisdictions, namely Australia, New Zealand, Singapore, Canada and the US.  It also seemed curious that if Cedar’s arguments were preferred, this could have the effect that a principal whose agent wrongly accepted a bribe would be worse off (in terms of recovery) than where the principal had obtained a benefit “in far less opprobrious circumstances” (at paragraph 41).

Accordingly, the Supreme Court favored the claimant’s argument, concluding that “there is no plainly right answer, and, accordingly, in the absence of any other good reason, it would seem right to opt for the simple answer” (at paragraph 35).  This decision provides a welcome clarification of the position of the status of bribes and secret commissions paid to agents.  It provides a departure from the jurisprudential differentiation between different types of benefits that an agent may receive in breach of his duties that had occupied the minds of lawyers and their textbooks for many years.  The judgment is likely to have a significant impact on cases where the agent in question has dissipated his assets or has become insolvent, such that the principal may not otherwise have been able to (1) recover the full amount of the bribe or secret commission from the remaining assets when other creditors are taken into account and/or (2) trace the funds into the hands of non-bona fide purchasers.  Of course, where a principal seeks to recover what is, in effect, a bribe paid to the agent, this may create other issues for the principal to grapple with, not least the money laundering provisions in the proceeds of crime legislation.  If not carefully considered and complied with, the principal may find himself committing a criminal offence by recovering “criminal property”.

Case reference: FHR European Ventures LLP and Others (Respondents) v Cedar Capital Partners LLC (Appellant) [2014] UKSC 45 

The US economy has shrunken at its fastest rate since the depths of the recession five years ago as it emerged that the harsh winter took a far bigger toll on activity than previously estimated.

Official data released in Washington showed that output as measured by gross domestic product fell at an annual rate of 2.9% in the first three months of 2014. Originally, the Department of Commerce had said output rose by 0.1% at an annual rate in the quarter ending March before adjusting this to a 1% decline. The gap between the second and the third estimates was the largest on record. Wall Street was taken unawares by the size of the downward revision to growth in the world's biggest economy, with the consensus believing that growth would be down by 1.7% at an annual rate. But it expressed confidence that the US would quickly bounce back from a weather-affected start to 2014 by posting strong growth in the second quarter. Nancy Curtin, the chief investment officer of Close Brothers Asset Management said: "The US economy didn't just grind to a halt in the first quarter – it hit reverse as the polar vortex took its toll. But we can't judge current growth by looking in the rear-view mirror, and we are unlikely to see investors react strongly to what is now quite a long way behind us.

"More recent data have pointed to the economy picking up speed. Manufacturing is at a four year high, while the housing market is looking positive once more. It's clear that growth has gone up through the gears in Q2, and we'll see this reflected in the next GDP reading." Officials at the commerce department said the downward revision to growth had been the result of lower consumer spending on health care and a weaker than previously estimated contribution from exports.

In the battle over who should become the next president of the European Commission, David Cameron is depicted as the loser - "isolated", "incompetent", a serial mis-reader of Brussels politics.

Yet David Cameron is not alone in finding himself in a corner, defending a position he cannot retreat from.

Several leaders who doubted whether Jean-Claude Juncker was the best candidate for the job are now uncomfortably lining up behind him.

But Angela Merkel's position is almost as uncomfortable as that of David Cameron. Frau Europe's authority has been damaged.

It was not just that she was forced to back down when she suggested other names apart from that of Mr Juncker should be considered for the top job.

She flinched as some outraged German columnists pointed out that during the campaign she had told voters the election would determine the next Commission president.

Although much of the German political establishment has seen a strengthening of the European Parliament as one answer to the EU's democratic deficit, Chancellor Merkel is said to be uncomfortable at a shift in power towards the European Parliament which could weaken the ability of heads of government to define the agenda.

There is already a fall-out from the battle over the Commission presidency.

The centre-left in Europe, led by Italian Prime Minister Matteo Renzi and President Francois Hollande of France, have seized an opportunity to push their case for a change of course in Europe. Yes, they have agreed to back Mr Juncker but in exchange for a commitment to support their growth agenda.

The centre-left wants a more flexible interpretation of the EU's budget and deficit rules.

Chancellor Angela Merkel of Germany and her centre-left coalition partner have cut a deal which strengthens the chances of Jean-Claude Juncker becoming the next chief of the EU executive, presaging a defeat for David Cameron who has vowed to fight Juncker's appointment to the bitter end.

Sigmar Gabriel, the German vice-chancellor and leader of the Social Democrats (SPD), joined Merkel in backing Juncker for the job of European commission president while dropping demands that Martin Schulz, the outgoing German president of the European parliament, be made the German commissioner in Juncker's team.

The deal in Berlin came as the EU's centre-left government leaders prepared to meet in Paris on Saturday to coordinate positions ahead of what promises to be a turbulent EU summit next week focused on Juncker, the former Luxembourg prime minister.

Following last month's European elections, leaders are to meet for a summit on Thursday and Friday to debate who should be the next commission chief.

Cameron has waged a loud and aggressive campaign in what looks like a doomed attempt to sway minds against Juncker. Officials in Brussels say the Cameron campaign has been driven by Conservative party politics, with fateful implications for Britain's future in Europe.

The deal in Berlin suggests that domestic party politics in Germany have played an even bigger role in resolving the controversy over Juncker and the EU's future leadership team.

Schulz led the European social democrats in the recent election as contender for the commission job while Juncker, with Merkel's backing, led the campaign for the Christian democrats who won, making the Luxembourger the frontrunner. Cameron had no say in either candidacy since the Conservatives are aligned with neither grouping after the prime minister parted company with Europe's Christian democrats in 2009.

"The SPD will accept a commissioner from [Merkel's] CDU," Gabriel told Der Spiegel, "provided Schulz is elected president of the European parliament".

That represented a climbdown. The SPD had previously threatened to block Juncker in the necessary vote in the European parliament unless Schulz was named by Merkel as the new German commissioner.

Schulz told the Guardian last week that Juncker had offered him the post of vice-president of the commission and also warned that it would be "easier" for the SPD to support Juncker in a vote if he was assured of the job.

It is not clear how the Berlin deal will go down in the rest of Europe and whether Merkel, the most powerful leader in the EU, will get her way. But it suggests she will push to have Juncker nominated next week. If she does, Cameron will insist on a vote at the summit, will vote against, will force other leaders to show their true colours on Juncker, and will probably lose in the qualified majority vote.  Until now, these decisions have always only been taken by consensus by national EU leaders....Well...Merkel is by far not as powerful as many people are led to believe. Juncker wasn't her favorite candidate in the first place but letting him down and thus defying the Spitzenkandidat process she had agreed to earlier would have undermined her credibility and ended her career. That's why the social democrats pushed so hard.
Then there's the concessions she did have to make: Schulz becoming president of the European Parliament even though his group is not the largest. Helle Thorning-Schmidt, a Denish social democrat, becoming president of the Council of Ministers. And most importanly: Loosening the ties on austerity within the eurozone, thus making Juncker acceptable to Renzi.
So Merkel didn't come out as a winner, but Cameron wasn't even allowed to take part in the game.

The head of the International Monetary Fund has warned that a persistent violation of ethics among bankers and rising inequality pose a major threat to growth and financial stability.

Christine Lagarde told an audience in London that six years on from the deep financial crisis that engulfed the global economy, banks were resisting reform and still too focused on excessive risk taking to secure their bonuses at the expense of public trust.

She said: "The behaviour of the financial sector has not changed fundamentally in a number of dimensions since the crisis. While some changes in behaviour are taking place, these are not deep or broad enough. The industry still prizes short-term profit over long-term prudence, today's bonus over tomorrow's relationship.

"Some prominent firms have even been mired in scandals that violate the most basic ethical norms - Libor and foreign exchange rigging, money laundering, illegal foreclosure."

Lagarde warned the too-big-to-fail problem among some of the world's largest financial institutions was still unresolved and remained a major source of systematic risk, with implicit subsidies of $70bn (£42bn) in the US, and up to $300bn in the eurozone.

In a speech littered with quotations from Winston Churchill to Pope Francis and Oscar Wilde, Lagarde said international progress to reform the financial system was too slow. "The bad news is that progress is too slow, and the finish line is still too far off. Some of this arises form the sheer complexity of the task at hand. Yet, we must acknowledge that it also stems from fierce industry pushback, and from the fatigue that is bound to set in at this point in a long race." Lagarde told the inclusive capitalism conference that rising inequality was also a barrier to growth, and could undermine democracy and human rights. The issue has risen up the agenda in recent months with the publication of the French economist Thomas Piketty's book, Capital in the Twenty-First Century.

"One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy," Lagarde said.  Borrowing from Oxfam research, she noted that the world's richest 85 people, who could fit into a single London double-decker bus, control the same wealth as the poorest half of the global population of 3.5 billion people.

Options to address inequality include more progressive tax systems and greater use of property taxes, she said.

"We must recognise that reducing inequality is not easy. Redistributive policies always produce winners and losers. Yet if we want capitalism to do its job – enabling as many people as possible to participate and benefit from the economy – then it needs to be more inclusive. That means addressing extreme income disparity."

Lagarde compared the rising awareness of social responsibility tied into the financial system with the world's expanding environmental consciousness. "Just as we have a long way to go to reduce our carbon footprint, we have an even longer way to go to reduce our 'financial footprint'. Yet we must take those steps."

European Central Bank Executive Board member Yves Mersch has said it would be close to suicide not to agree on a mechanism to close down non-viable banks. Reuters reports: The resolution mechanism - still not finalized - is the second pillar of the banking union, which complements the unified banking supervision under the auspices of the ECB, together marking the most ambitious step towards closer European integration since the launch of the euro. Mersch said he was confident an agreement on the Single Resolution Mechanism (SRM) could be reached, though “whether the outcome will then be satisfactory from every point of view, that’s again a new discussion”.

“I do not know of anyone who would have a plan B for a suicide. And not having an SRM would be very close to suicide,” Mersch said, when asked whether there was a plan B in case no agreement was reached before European elections in May. After two days spent trying to finalize the plan to tackle non-viable banks. European ministers said they disbanded on Tuesday with broad agreement, but officials said key questions remained open.

Well....lot's of hot aair - in fact The EU is a "bad joke" ...

According to Portuguese MEP Paulo Rangel: “The new process under which the European Commission President is elected by the European Parliament will fortify the Commission's democratic legitimacy and political role and will make the upcoming elections more substantial, by linking European voters to the election of the Commission President.”

The Report on the implementation of the Lisbon Treaty with respect to the European Parliament (EP) stresses the need to reinforce the Commission's democratic legitimacy, independence and political role.

Paulo Rangel’s Report urges the European Council to take the results of the elections into account and honour the citizens' choice when nominating the proposed candidate for the position of President of the European Commission. The Report also foresees that the candidate will need to present the next term’s policy guidelines for discussion to the European Parliament before getting the job.

The text also suggests that Commissioners should, as much as possible, be selected amongst the elected Members of the EP and that the new President-elect of the Commission should be more autonomous when selecting the College of Commissioners.

European Commission to function more efficiently...Rangel’s Report takes a further view with additional measures for the more effective functioning of the Commission - without prejudice to the right to appoint one Commissioner per Member State - by suggesting the appointment of Commissioners without portfolio or the establishment of a system of Vice-Presidents with responsibilities over major thematic clusters and with competences to coordinate the work of the Commission in the corresponding areas.

The Report also urges the next Convention to consider how the Commission is formed in order to reinforce its democratic legitimacy and calls on the next Commission President to consider how its composition, construction and political priorities will strengthen policy which is close to the citizens. In addition, it suggests that the next Convention should envisage a reduction of the number of votes required to apply a motion of censure against the Commission.

This important Report was approved by the EP in plenary with 298 votes in favour, 102 votes against and 25 abstentions.