Rehn - the definition of incompetence ....

Europe's commissioner for economic and monetary affairs said that Britain was "stronger", "healthier" and more influential as a member of the EU.

Mr Rehn urged Britain to "focus on reform rather than repatriation.

"If I were a British citizen, I would want my country to be playing as a midfield playmaker rather than watching from the sidelines," Mr Rehn said in a speech in London on Thursday.

"No one ever scored goals sitting on the bench." "Whatever choices Britain ultimately makes about its future in Europe, I trust this great European country will support the rebuilding of our economic and monetary union, in line with Chancellor George Osborne's political maxim that “the remorseless logic” of monetary union leads to greater economic union," he added.

"We have before us many more far-reaching choices, in the eurozone and in the wider European Union. In that context, I believe it is firmly in Britain's interest to use its energy for reforming Europe rather than seeking to undo our Community, which would leave us all weaker."  Earlier this week, Mr Rehn backed George Osborne's austerity drive. "I don’t believe that fiscal consolidation plans should be reversed, as growth is now set to start to pick up,” Mr Rehn told The Times.

“It [fiscal consolidation] is still decisive in affording favourable financing conditions into the UK and therefore it should be maintained.” Leading central bank experts have warned that it would be "suicidal" for Britain to leave the EU because it would "lose the protection it currently enjoys as the eurozone’s major financial centre.”

Athanasios Orphanides told the Daily Telegraph that European regulators would have the means to shut down key parts of the City if Britain left the EU because it would lose its legal protection as one of the 27-nation bloc's members.

Italy woke up on Sunday to discover that politics was once again a world of bitter, personal attacks, sleight of hand, stunning egotism and shocking obsequiousness, meaning just one thing: Silvio Berlusconi was back. Overnight, the calm, grey world of Italy's technocrat prime minister, Mario Monti, vanished after the former EU commissioner said on Saturday he was resigning because Berlusconi, the 76-year-old media mogul and three-time prime minister, had withdrawn his parliamentary support. Hours earlier, Berlusconi had stood outside the gates of AC Milan, the football club he owns, declaring that after much soul-searching he would stand in elections, now likely in February. He boasted that after searching far and wide, he had failed to find a successor as brilliant as himself. Monti's austerity polices, tax hikes and spending cuts had dragged Italy to "the edge of an abyss", Berlusconi said last week, before his MPs were ordered via text to walk out of key votes and his party secretary, Angelino Alfano, told parliament: "We consider the experience of this government closed." Alfano then accused the centre-left Democratic party – currently riding high in the polls – of communist tendencies, jolting Italians back to Berlusconi's heyday of claiming commies boiled babies alive. Gian Antonio Stella, a leading commentator with Corriere della Sera, lamented: "I thought we had got beyond all that; it is so unpleasant to return to the 'You are either for me or against me' version of politics.

"Italians are sick of the Guelph and Ghibelline mentality, which cuts off the oxygen from political debate."

But for Berlusconi that vitriol is his lifeblood and he now has two months to turn up the heat on his TV channels and persuade Italians to take his side once again, following his resignation in November 2011 in the midst of sex scandals and an economic crisis that threatened to send Italy into meltdown.

Monti's plan to resign at the end of the year after he passes the 2013 budget, bringing elections forward a month from March, deftly denies Berlusconi the pleasure of shooting down the government's remaining bills as they struggle to get through parliament.

"The big question now is whether Monti himself wants to run as the head of a centrist group in the election," said Roberto D'Alimonte, a professor of politics at LUISS university in Rome.
Italy faces a return to political chaos - IN FACT , ITALY WANTS OUT FROM UNDER THE GERMAN BOOT - after Prime Minister Mario Monti announced at the weekend that he will resign, prompting his notorious predecessor Silvio Berlusconi to say he would attempt a comeback. The renewed uncertainty sent European shares into a slump as trading for the week began on Monday morning. Investors aren't the only ones worried, either. German Foreign Minister Guido Westerwelle told SPIEGEL ONLINE on Monday that the situation in Italy threatened to spark renewed financial problems in the euro zone. "Italy can't stall at two-thirds of the reform process," he said. "That wouldn't cause turbulence for just Italy, but also for Europe." Westerwelle's concerns were echoed by Klaus Regling, the head of the permanent euro-zone bailout fund, the European Stability Mechanism (ESM), who told German daily Süddeutsche Zeitung on Monday that he feared the heavily indebted country could abandon necessary reforms. "In the last year Italy has pushed through important reforms," he told the paper. "So far, the markets have honored that, although they have reacted with concern to the developments of recent weeks." The reform process must continue for the sake of both Italy and the entire currency union, Regling said. BERLUSCONI SHOUL GET iTALY OUT OF THE FOURTH REICH !!!!

Big credit bubble?! Big surprise!!

So the markets are overvalued? Big credit bubble?! Big surprise!! I've had the feeling the markets have been overvalued for years (about 12 years to be precise), and the same applies to almost all major currencies as well (most obviously, and most ludicrously, the Euro). There WILL be a crash. What really concerns me is how the aftermath of a crash will be dealt with. My guess is governments and banks will go looking for new income streams to replace the old, dead ones and we will all be conned even more than we are already. And on and on it will go until something big stops it (like an asteroid impact!)....Well : Anyone with a grain of financial acumen knows exactly why markets have risen - it is due almost entirely to the money printing and pathetic Interest rates arranged by almost ALL the westernised economies. Savers and Investors previously had countries like Australia, with rates giving a return on term deposits of 5-6%, risk free.....these rates have now gone due to pressure from the Oz Govt among others, on the RBA to lower rates for the benefit of borrowers and mortgagees in order that they might get re-elected next year....Now that these bolt holes are unavailable, people have no alternative but to put money back into low-risk, high dividend yielding shares. Bank shares in Australia, for example, bring a net return of around 7% and retirees etc have seen their standard of living continually falling in the Western world ever since the GFC began. Many are now at the stage where, even though they still don't trust the stock market and the smarter ones can still see the risks in the Eurozone , they have to act or see their nest eggs whittled away by ever-rising prices on utilities etc. The worry is that, as the BIS implies, this is NOT a sound rally and if another credit bubble recurs, investors risk another large slice of their pension funds etc being lost in the resultant crash... The elites' plan of denuding the middle class of their wealth is ALL going to plan....“Some asset prices appeared highly valued in a historical context relative to indicators of their riskiness,” said the bank in its quarterly report. Yields on mortgage bonds have fallen to the lowest level ever recorded. Spreads on corporate debt have narrowed to the wafer thin margins of 2007, even though default rates are currently three times higher than they were then for junk bonds and twice as high for investment-grade companies. The venerable Swiss-based institution – almost alone in warning of a global debt crisis in the build-up to the Great Recession – said it is rare for markets to gather steam at a time when the major forecasters are turning gloomy. The International Monetary Fund and the OECD have downgraded their outlooks for 2012 and 2013, with sharp cuts for much of Europe as well as for Brazil, China, and India. “Unusually, equity and fixed income gains coincided with a weakening of the global economic outlook. In the past, falling growth forecasts have usually been associated with rising expected default rates and higher bond yields,” it said....Money printing and flooding the banks with cheap cash is keeping the stock market and property bubbles inflated, keeping interest rates suppressed and removing any incentive for people to save for their own future. Supporting zombie companies is technically keeping bad debts of the Bank's books but is stifling real growth in the economy. Remember how politicians sold your and your children's future down the river for just one more election win, well they're still doing it.

In the otherwise ugly EU quarter in Brussels, something of a building boom is going on. There's the €300m (£241m)-plus being spent to convert an art deco pile into a palace fit for a European president. In a nearby park another €100m makeover is creating the European parliament's version of the continent's postwar history. That's after the parliament splashed out another €20m just down the street to create a multimedia tribute to itself last year, the Parliamentarium visitors' centre.

Austerity Europe? Not at the European Union's Brussels HQ. While budgets, public spending, and civil service staffing levels are being slashed from Portugal to Poland, Greece to Great Britain, to be one of the 56,000 EU eurocrats is to escape most of the pain felt in almost every country in the union.

Officially, they work a 37½-hour week and take Friday afternoons off, though many complain those conditions are theoretical and they in fact work inordinately long hours. Their children are educated for free at high-quality private schools – a big new one has just opened near the Belgian monarchy's summer residence in a leafier part of Brussels. They retire at 63 on generous pensions and dozens a year are granted early retirement on full pensions. According to UK government calculations, 214 of the most senior eurocrats get paid more than David Cameron's £178,000 a year. Staff not living in their native country – almost all – receive a 16% top-up on their salary for being expatriates.

Despite their insulation inside the Brussels bubble from the economic storm battering Europe, the eurocrats are revolting. There was a small strike a couple of weeks ago and several hundred staff staged a lunchtime protest outside the European commission on Wednesday complaining about the impact of proposed cuts on people "who provide the necessary human resources for achieving the union's tasks".

It comes as EU leaders gather for an almighty battle that could tear Brussels apart – the ritual showdown over the EU's €1tn budget.

The European Commission has cut sharply its growth forecast for the eurozone, warning that the "difficult process of rebalancing will last for some time".

It now projects the bloc will narrowly avoid recession next year, growing by 0.1%, compared with its previous estimate of 1% growth, and thinks the EU economy will shrink this year.

Unemployment would also continue to rise next year, the Commission said. The revision helped push global stock markets lower.

The Paris and Frankfurt exchanges closed down 2%, while London's FTSE 100 ended the day 1.6% lower. New York's Dow Jones lost 313 points, or 2.4%, at 12,933, its lowest level since early August.

The euro also weakened against the dollar following the revision, falling by half a cent to $1.278. Against the pound, it fell by a fifth of a pence to 79.93p.

Figures released earlier on Wednesday showing the biggest monthly fall in German manufacturing output since April, also weighed on markets.

As did concerns about the upcoming so-called fiscal cliff in the US, now that the US election has been won by Barack Obama.

"Having been fixated on the US election and the preferred market outcome of an Obama victory, the initial morning feel good bounce [has fizzled out], as markets quickly moved on to the next potential banana skin," said Michael Hewson at CMC Markets.

"In this case there are several, starting with today's Greek parliamentary vote on austerity, not to mention concerns about how the newly elected president will deal with the US fiscal cliff concerns."

Under current plans, $600bn (£375bn) of tax rises and spending cuts will kick in in January, with many analysts saying this will push the US economy back into recession.

Opinion ....2...

Disaster was visited on the global economy 40 years ago with the Nixon 'shock' - the disengagement between the dollar and gold and other currencies with gold via their linkage with the dollar. That is the demise of the Bretton Woods agreement.
With the end of that arrangement countries were now free to create as much money as they liked and run as big a trade deficit as they liked. Under Bretton Woods, any trade defict had to be quickly reversed by cutting demand to maintain parity with the dollar and therefore gold
In 1963 Reginald Maudling tried to stimulate the UK economy only for UK business to fail to meet demand and so sucked in imports. That stimulus had to be quickly reversed. The same 10 years later with Anthony Barbour. The failure of Brits to create wealth goes back way before Margaret Thatcher. And way before GCSEs - but that's another matter.
Of course, Germany was the exception as the Bundesbank was not about to engage in this game of Monopoly.
Like all frauds, it starts small and the fraudster, having got away with it, then becomes more ambitious.
By 2007 the global economy had split into two camps - those who could create wealth, Germany (being smart and well-organised) and China (using slave labour) being the two prme examples, and those who could only consume wealth, the UK and US being the best examples. The US having exported a large chunk of its wealth creating capacity to the likes of China for the benefit of the few
The circle being squared with debt.
The Anglo-saxons convinced themseleves that crazy maths could be used to make even the worst debt perform.
In an attempt to maintain this farce from 2008 onwards the fraudsters now went one better by a quasi-monetisation of debt, quantative easing. Rather than solve the basic problem of not creating wealth they reach for their trusty tools of deceit and fraud.
Having got over the last few years with quasi-monestisation the UK, like all confident fraudsters, now becomes more confident and goes for full monetisation as Osborne claws back interest payments on bonds owned bythe BoE. One of the attributes of fraudsters is being adept at the use of convoluted logic to defy logic.
Eventually they will also write off the capital value of these bonds.
That gives a short breathing space but just as qe has solved nothing neither will that. The 'grand plan' seems to hope something will turn up.
But still there is this huge global trade imbalance that is being addressed by the default of everything just winding down as the there are fewer and fewer buyers for the sellers.

The European Union's Autumn economic forecasts said gross domestic product (GDP) across the 17-nation currency area would shrink 0.4pc in 2012 and that it would take until 2014 to recover, with expected growth then of 1.4pc.

"Europe is going through a difficult process of macro-economic rebalancing, which will still last for some time," EU Economic Affairs Commissioner Olli Rehn said in a statement, pointing to a gradual pick-up "from early next year."

The Commission expected the United States to far outstrip Europe, with steadily-increasing growth above the two-percent mark going forward.

However, Rehn said there is still a risk that record and mounting unemployment - put at nearly 12pc next year across the debt and austerity ravaged eurozone - could undo progress on financial markets where the pressures on government borrowing rates have eased in the past few months.

With inflation at next year forecast to "fall below two percent," the core target underpinning eurozone-wide economic planning, Rehn said that decisions taken at some two dozen crisis summits had "laid the foundations for strengthening confidence."
A German government spokesman told reporters that parts of the troika report on Greece would be ready by Monday, although they added that Germany’s lower house of parliament would need to approve the tranche before any cash could be disbursed.

France - unveiled €20bn worth of tax breaks over three years, which will allow companies to cut labour costs, in a bid to restore the competitiveness of the country's declining industry. The cuts come after a report, commissioned by the Socialist government reported and carried out by French industrialist Louis Gallois, yesterday called on Francois Hollande to undertake "shock therapy" to stop the national rot, with drastic cuts in business payroll taxes to claw back loss ground against Germany and other EMU states. French Prime Minister Jean-Marc Ayrault said the reduction would take the form of tax credits, instead of a cut to employer wage taxes as recommended in Gallois' report . The cuts will be split as follows:

• €10bn in spending cuts

• €10bn increase in value added tax (VAT) and green taxes.

The standard VAT rate will rise from 19.6pc to 20 pc. There will also be a three-percentage point increase in tax on restaurants. "France must recover its ranking - its ranking of a grand industrial power," Ayrault said. The measures announced by the state "should allow France to avoid the decline that stalks us," he said.

 Two-days of general strikes began in Greece , with state hospital doctors, taxi drivers, transport workers and journalists walking off the job, as they protest against the government's austerity budget. The budget was delivered to parliament late last night and is due to be voted on tomorrow. The budget includes a package of €13.5bn (£10.8bn) in cost cuts and tax hikes along with measures making it easier for firms to hire and fire workers. Approval of the reforms and the passage of the 2013 budget are crucial to unlocking €31.5 bn in aid from an International Monetary Fund and European Union bailout that has been on hold since the summer.

The permanent loss of national sovereignty over government budgets to Brussels is being demanded by Germany at a time when eurozone taxpayers - and primarily German taxpayers - look likely to be called on to foot the bill for solving the eurozone crisis. A new "banking union" currently being fleshed out will make the eurozone as a whole collectively responsible for any losses associated with future bank bailouts, irrespective of which country the troubled bank happens to be located in. There is however still uncertainty as to whether this sharing of risks will also apply to the rescue of Spain's banks that is currently being prepared, or whether the Spanish government will instead be required to guarantee the bailout.Meanwhile, expectations are growing that Greece will be given a further write-off or "haircut" of its debts, including possible relief on its debt repayments to the eurozone's bailout funds or the European Central Bank. Mr Schaeuble ruled out any direct debt forgiveness on Sunday. "You don't give a debtor who doesn't service your debt claims new money," he told Deutschlandfunkradio. "We would be prevented by law from doing any more." He did however leave the door open to an arrangement under which new bailout loans could be used by Greece to buy back its private sector debts at what are currently cheap market prices. Greece has also been asking for two more years to meet the spending cuts demanded by international creditors. On Wednesday, the Greek Finance Minister Yannis Stournaras had claimed that a deadline extension had been agreed. But both Mr Draghi and Mr Schaeuble have denied this was the case, pointing out that the negotiations over the release of Greece's next tranche of bailout money were not yet complete.

The Greek government will put labour market reforms proposed by foreign lenders to a vote in parliament next week, as a series of crunch meetings takes place next week.

The parliament will vote, despite a refusal to back the proposals by a junior coalition partner's refusal to back them, the finance minister said on Saturday. The 2102 budget law, which will bring a range of new austerity measure into the statute books, has been demanded by foreign creditors, will be presented on Wednesday.

A separate bill with new labour market reforms will be put to the vote later in the week, Yannis Stournaras, Greece’s finance minister said.

Greece is expected to run out of money in the middle of November and the government needs to get through a series of austerity measures to unlock the next tranche of aid.  The Democratic Left Party, which has refused to back the reforms, has 16 deputies in the parliament, with the government having a 176 majority. This means the law is expected to pass, but it shows fracture lines building within the ruling coalition.

On Wednesday eurozone finance ministers will hold a conference call on Greece, two days after Monday's Euro Working Group where senior eurozone officials examine the heavily indebted country's progress in meeting the required cost savings required by the Eurogroup.

....“impossible for Germany to pay everybody’s bills,”

While Germany and the other euro members will “stick to the monetary union,” every euro state has to fight the problems it faces as it’s “impossible for Germany to pay everybody’s bills,” Schaeuble said. Germany “would be destroyed” if it overstretched its resources, he said. ....Turning to Spain, the German minister said financial markets have yet to appreciate efforts made by the country’s government, led by Prime Minister Mariano Rajoy, to return to sustainable public finances. Standard & Poor’s cut Spain’s sovereign-debt rating by two levels to BBB- on Oct. 10, citing the backtracking of euro-region peers on a pledge to sever the link between the sovereign and its banks. “Since Spain is under the pressure of markets, Spain had to take decisions on reducing its deficit, to increase its competitiveness, but Spain is delivering since the Rajoy government is in place,” Schaeuble said. “They’re doing very well but it takes time until markets believe them.”

Swedish Finance Minister Anders Borg said yesterday it’s“most probable” that Greece will quit the common currency and such an outcome shouldn't be ruled out over the next six months. Schaeuble told the Singapore-German Chamber of Industry and Commerce that a Greek exit would create “huge” problems and wouldn't happen. .... “If you look at how much interlinked we are in the European Union and in the currency union, to leave it would create huge, incredible difficulties for everyone,” Schaeuble said. “Therefore the better way is to solve it, but of course it has to be solved.” Euro-area finance ministers on Oct. 8 backed Greece’s plan to trim its budget and reshape the economy, while demanding that the government in Athens commit to a list of 89 policy steps before the summit. They didn't commit on whether the next 31 billion-euro aid installment will be paid out in one go or released in smaller chunks. “Everyone is trusting that Samaras and his government is really decided to do what is needed,” Schaeuble said.

....What an incompetent! - Ollie Rehn's opinion in WSJ...

"A casual reader of much recent commentary could be forgiven for believing that European governments are blindly enacting harsh policies of austerity, under the watchful eye of a European Commission obsessed with enforcing arbitrarily chosen nominal deficit targets. It is time to debunk this damaging myth.

In fact, the European Union's Stability and Growth Pact can adapt a country's agreed fiscal adjustment path if the economic situation calls for it.   Alongside the nominal targets for deficit reduction, each new recommendation issued to a member state specifies the structural fiscal effort to be achieved each year until the excessive deficit is corrected. While the nominal targets may continue to dominate the headlines, the Commission focuses its assessments of member states' actions first and foremost on their compliance with the agreed structural effort.

This is consistent with another little-known, yet key element of the pact: the medium-term objective of a balanced budget in structural terms. The appropriate pace of progress towards this medium-term objective is agreed by taking into account the specific economic circumstances of each EU member state. Accordingly, a member state may receive extra time to correct its excessive deficit. This has occurred twice this year already: in July for Spain, and in October for Portugal. Both now have until 2014 to bring their government deficits back below 3% of GDP. ".... excerpt of OR's article in the WSJ

He He!! ....hahaha !!!

I'm waiting to see what Merkel has to say when Germany slides into recession (probably early next year) Germans start to lose their jobs and exports dry up because their world wide customers are running out of cash. I just wonder how good she will think the Euro is then. I know Germany went through it's own tough period with reunification but it's one thing to do it for your own people but quite another when it's for a bunch of ungrateful's.

It seems incredible that this bunch of unelected bureaucrats have got this far.....Greece must leave the euro and it will increase the chances for the rest. The departure should be orderly, so as to give the Greeks chance to resurrect themselves....The politicians are only interested in saving their own false dream which has become our worst nightmare. They are not focussing on where the ship is going and it is getting too close to the island. Think about economic recovery and jobs and stop playing around with the lives of the Greeks. The Euro will probably recover a lot if some positive and common sense actions are taken.

They made a fortune selling machine tools to developing countires and now there is a surplus of production.... and falling world demand......so prespects of selling more look grim....and due to the austerity they have imposed on all Europe the middle classes are now just trying to survive....so little or no money for treats like expensive German cars ......but more importantly its a change in mind set, and image is no longer important or so important  seems like they have been digging their own grave (and the rest of Europe) .....just a surprise that it took so long to arrive at their door....and I think that in the case of Germany it could be dramatic turndown  seem to remember that Spain was Audis biggest European Market....and so here we are in the umpteenth round of the European Can Kicking Contest and are we any further along for all the meetings replays and extra time towards a resolution?
The ECB wanted it settled by penalty shoot out but the Spanish refuse to play; the French team threatens to go on strike again, Greece demands a longer run up, the Italians fell over spectacularly on the run up screaming "Penalty!" England formed a wall inside the 6 yard box and Ireland refused to kick it and opted instead to beat it with sticks.....and Germany elected to play like Kuntz.
He He!!

The reporting in germany on the government response to developments at the IMF conference:

-Merkel refused to comment on the suggestion of a two year extension, saying she'd await the troika report.
-Schäuble ruled out OSI, sounded extremely unconvinced about a two year extention for Greece, and basically said things were going better than the media presented it.
-Brüderle (FDP Floor-Leader) said that he didn't see a majority in the Bundestag for a 3rd Greek Bailout. Which is polite language for "we're not voting for it". The CSU would be against, but has made no public comment. Plenty in the CDU would be against too, but the majority will hold to Merkel's line. The SPD are for it, as I think are the Greens.

So it looks like another one of those wrapped-together-with-sticky-tape temporary coalitions, to get it through the Bundestag. And probably bundled together with other applications from Spain, Slowenia, Cyprus.

European Central Bank policymaker Jörg Asmussen has argued against Greece leaving the eurozone, at the IMF/World Bank shindig in Tokyo.   Asmussen argued that Athens was making good progress.  The Greek authorities have to demonstrate that they can continue to stick to their commitments... This is the best way out of its crisis: for Greece to reform within the euro area....CNN is also focusing on the growing divisions between the IMF and the eurozone over austerity....Its correspondent, Andrew Stevens, writes from Tokyo:The EU will produce its own conclusions about the impact of austerity measures next month. Whether that brings us any closer to a consensus is hard to judge.....Remember the old joke about economists: if you laid all the economists in the world end-to-end you still wouldn't reach a conclusion.  But this is no joking matter. Millions of Europeans have fallen into poverty or at least economic hardship as a result of the current austerity programs.

Super writting by Helena Smith - The Guardian

Up close Angela Merkel is very static. She stands immoveable, her eyes flashing this way and that. In Athens, as she stood behind a lectern following talks with the Greek prime minister, Antonis Samaras, the German chancellor was so restrained she hardly moved at all. The Greek capital resembled Fort Knox – with riot police guarding her every move, helicopters roaring overhead and sharp shooters installed on the rooftops of buildings great and small – but Europe's most powerful woman was having none of it. The angry chants and hoarse slogans of the thousands of protesters who had also come out to greet her, eliciting one of the biggest security operations ever put on by near-bankrupt Greece, belonged to another world. As did the copious amounts of acrid teargas that wafted through the Athens air.

In the hushed marble interior of the mansion that is the prime minister's office, Merkel had a message and on this, her first visit to Greece since the eruption of Europe's debt drama, it was a message she was determined to convey.

"I have not come as a task-master," she said, her eyes elevated towards the room's ornate sunlit ceiling as if focusing on some indefinable spot. "And nor have I come as a teacher to give grades," she added, now focusing intently on the marble floor. "I have come as a friend to listen and be informed." Three years into the crisis that began in Athens, Merkel also wanted to say that she understood "a lot" was being demanded of Greece. She was not the austerity warmonger that critics had painted her to be. "I come in full and firm awareness of what the people of Greece are going through," she insisted. But, she continued, Europe's weakest link was badly in need of change – and, if reforms were not made now, they would come back "in a much more dramatic way".

"I come from East Germany and I know how long it takes to build reform," she said, almost by way of reassurance. "The road for the people of Greece is very tough, very difficult, but they have put a good bit of the path behind them. I want to say you are making progress!"... But even as the leader attempted not to sound like the matriarch in charge of the family till, there is no denying that that is exactly what she is.

"Saying that she is not here to preach is bullshit," said one of the small retinue of Berlin-based journalists who follow her every move. "She is here to tell them exactly what to do."  For the vast majority of Greeks, no person is more identified than Merkel with the punitive measures that have ensnared the country in unprecedented recession and record levels of poverty and unemployment.

As up to 300,000 took to the streets in a massive display of fury over the savage cuts and tax increases that have brought growing numbers to the brink of penury, it was the woman who is widely seen as the "architect of austerity" that was firmly in their sights.   "If I met her I would say if you had read Greek history you would have been more aware," said Takis Stavropoulos, a bearded leftist who had converged with thousands of other protesters on Syntagma square. "If she had done that she would have known we would resist."   No government has been in as difficult a place as the ruling coalition that Samaras has lead since June. Although Merkel's surprise visit was seen as a major coup, with officials hailing it as further proof of Berlin's new-found willingness to keep Greece in the 17-member eurozone, there was also an acceptance that the chancellor's six-hour presence in Athens, while rich in symbolism, did not yield much in the way of substance.   Merkel's Calvinist approach to dealing with Europe's crisis-hit southern periphery may have softened, as the leader looks to re-election next year, but as tiny Greece stares into the abyss with enough funds to survive only until the end of next month, the message was clear: apply more draconian measures and the rescue funds will keep pouring in. Echoing the complaint of German commentators, Greek analysts agreed that the visit was long-overdue.

"It is hard not to see that this visit had a more important message for Germany ahead of [next September's] general elections than it did for Greece," opined the prominent commentator Yiannis Pretenderis.  The sad reality remained. After the biggest debt write-down in the history of world finance and two EU-IMF-sponsored bailouts worth a mammoth €240bn, Greece was still far from being saved and, even worse, was slipping inexorably into social meltdown with its political arena becoming ever more radicalised.

The draconian €13.5bn package of spending cuts that is the price of further aid could, many fear, push Greece further to the edge.  Back at the heart of the government, untouched by the discord of everyday life, the awkwardness of Greece's disharmonious relationship with its big brother Germany was on full display in the awkwardness of the body language of its prime minister.   As Merkel, the pastor's daughter, spoke, Samaras, whose background is privileged elite, Harvard and moneyed, looked on and winced.

"Greeks are a proud people," he said. "And our enemy is recession. But we are not asking for favours. In my discussion with the German chancellor I pointed out, however, that the Greek people are bleeding."  As he spoke, Merkel remained absolutely static before pursing her lips and looking away.  Police fired teargas and stun grenades to hold back crowds chanting anti-austerity slogans and waving Nazi flags while Merkel's host, Prime Minister Antonis Samaras, welcomed her as a "friend" of Greece.  On her first visit to Greece since the euro zone crisis erupted three years ago, Merkel struck a conciliatory tone.  She reaffirmed Berlin's commitment to keep the debt-crippled Greek state inside Europe's single currency but offered Samaras no concrete relief ahead of a new report on Greece's reform progress due by next month.  "I have come here today in full knowledge that the period Greece is living through right now is an extremely difficult one for the Greeks and many people are suffering," Merkel said at a news conference with Samaras just a few hundred yards from the mayhem on Syntagma Square, outside parliament.

"Precisely for that reason I want to say that much of the path is already behind us," she added. (source guardian.uk)

Athens-based journalist Damian Mac Con Uladh reports that the Greek government has even banned some TV crews from covering parts of Angela Merkel's trip today:

Ms Merkel is due to land in Greece this morning for talks with her counterpart Antonis Samaras and president Carolos Papoulias. But she is likely to face angry protests in a country where many feel their already-struggling economy has been dealt further harm by austerity measures demanded in return for a bail-out. Greece is in its fifth year of recession and unemployment has soared to 25pc. The country is currently in negotiations with the troika (representatives from the IMF, European Commission and ECB) over whether it has made enough progress implementing cuts and tax hikes to release its next €11.5bn tranche of bail-out cash, without which it faces bankruptcy by November. Alexis Tsipras, who leads the opposition Syriza party in Greece, said: "She does not come to support Greece, which her policies have brought to the brink. She comes to save the corrupt, disgraced and servile political system. We will give her the welcome she deserves." Around 7,000 police will be on patrol on the streets of Athens, backed up by rooftop snipers, water cannon and a helicopter, while 300 members of the coastguard have also been drafted-in to bolster the security operation. As well as the large police presence, all large gatherings and rallies have been banned in large parts of Athens (shown in the map below) from 9am to 10pm to "preserve the peace".I see austerity does not apply to the German Chancellors security - evidently. Germany have squeezed every little last ounce of competitiveness from Greece, and are now spitting in their faces. Mercedes should be 20% more expensive than they are, minimum. The reason the Germans sell so many is because they are using Greece and the other southern sovereign nations to keep their exchange rate artificially low. It is a huge scam on the Greeks. Meanwhile, Greece have to buy all in Euros. They should revolt and hang their leaders.

Germany's Weimar Republic ....

SAMARAS WARNS THAT GREECE FACES DISASTER...Greece's prime minister has warned that the economic crisis in Greece is now so severe that society risks collapse, and urged its international lenders to agree its desperately-needed aid trance soon. In an interview with German business newspaper Handelsblatt, Samaras said: Greek democracy is facing perhaps its greatest challenge. He cited the rise of the fascist Golden Dawn party (which won parliamentary seats in the last election) as proof that Greece is staring into the abyss.

There is a real risk of the social order collapsing, he said, thanks to "the rise of a right-wing extremist, one might say fascist, neo-Nazi party."

Samras argued that Greece faced the same fate as Germany's Weimar Republic (whose collapse amid economic chaos heralded the rise of the Nazia in the 1930s). And Samaras pointedly insisted that Greece could not make further cuts, saying the existing plans "already to to the bone". Poverty is growing, and unemployment at record highs [youth unemployment has reached 55.4%] he added: More and more people have to go to soup kitchens of church and charities to get a hot meal. Highlights from the interview are here on Handelsblatt's website (in German). Google translation into English here.

Reuters also has separate details of the interview. It reports that Samaras warned that Greece cannot manage beyond November without its injection of international aid (worth around €31bn) . "The key is liquidity. That is why the next credit tranche is so important for us," Samaras told the business daily Handelsblatt. Asked how long Greece could manage without it, he said: "Until the end of November. Then the cash box is empty." Samaras also suggested that the ECB could lend a hand by accepting lower interest rates on the Greek debt is already owns, or allowing those bonds to 'rollover' rather than be repaid. He also suggested that a Spanish-style banking rescue could help: I could also imagine the recapitalisation of Greek banks as is being considered for Spain, which would be not accounted for on its state debts but carried out directly via the ESM. That would be a significant relief.....On the Samaras interview. Yes, the echoes with Weimar (rise of the NSDAP through austerity, rise of Golden Dawn through austerity) are valid. But, what isn't valid is the economic background. Weimar saw american lax credit suddenly withdrawn, Greece has the biggest economic assistance program in history.

There is no German help that can solve the basic problem in Spain. Money, or access to it, is not the problem for the Spanish sovereign. It has had quitre literally hundreds of billions of euros thrown at it since it joined the EU a quarter of a century ago and it has still failed to develop a sustainable and functional economic model.   Fully a third of people in Madrid are employed by the state, many in utterly futile positions which are duplicated at regional and local model. Spain would be better off if it offered redundancy to all such public sector workers, with a view to cutting down numbers by say a third. Those who take up the offer should in addition to their redundancy pay be assured of loan and equity funding for business start ups to generate wealth that the country badly needs. And I'm not talking about property development projects on the coast which seems to be the default Spanish notion of entrepreneurialism.  All this schlepping up and down from one European capital to another by leaders and finance ministers is utterly futile. The fundamental problem will not be solved by finding some ingenious way of getting "free money" funneled from North to South. The basic problem is that, given developments in the East, not enough wealth is being generated to sustain our current economic and social model in both South and North. Countries such as Greece and Spain are being picked off in the same way that we see the least fleet of foot in the herd being picked off by the predator on those BBC wildlife programmes.   But if the basic problem is not tackled, what is happening in those countries will surely happen in countries such as France and the UK, which because of their proud histories implicitly believe that they are somehow immune, in a few years time. Let's stop sloganeering about bankers and tax evaders - for whom incidentally I have not an ounce of sympathy - and stop putting our faith in the chimera of revolution. Let us rather face up to the simple fact that if we want to maintain our existing social model we must start to generate wealth or within a generation we ALL will be eking out our livings on the verge of grinding poverty.

The ECB is prohibited from directly purchasing bonds from governments

The ECB is prohibited from directly purchasing bonds from governments, and yet purchases on the bond markets are among the instruments at its disposal. It is permitted to make such purchases, but only for reasons of monetary policy, such preventing deflation, for example.

Bond purchases are a treatment with side effects. Falling interest rates on sovereign bonds reduce the cost of government borrowing. The question is whether these side effects are the real motivation behind the ECB decisions, while the arguments surrounding monetary policy are merely a pretext. In that case, the purchases would be little more than government financing in disguise.

Germany's Federal Constitutional Court could very well be of the same opinion. In its recent ruling on the European Stability Mechanism (ESM), the court did not fail to express its skepticism of the bond purchases. The court will address the legality of the bond purchases in upcoming proceedings.

Even then, however, the German court will likely refer the case onwards to the European Court of Justice, which will then be forced to decide whether the central bank is still acting within the bounds of its mandate. Both the ECB and the Bundesbank are already preparing for the legal battle and are reviewing the legal underpinnings of their respective positions.

"The ECB's argument that the bond purchases have to do with monetary policy is a pretext," says Jürgen Stark, the central bank's chief economist until the end of last year. "If the transmission mechanism of monetary policy is indeed disturbed, the ECB must intervene, irrespective of whether or not a country has subjected itself to a bailout program."

For Stark, who resigned in protest over the ECB's first bond-purchasing program, a red line has been crossed once again. "We are talking about the financing of governments here," he says. That, he points out, is in violation of European Union treaties. "The ECB is operating outside its mandate," he concludes....Academics share his assessment. "Common sense tells us that the ECB, with its purchasing program, is doing something completely different from expressing its concern over price stability," says Clemens Fuest, a professor of economics at the University of Oxford. According to Fuest, the ECB, following the example of the International Monetary Fund, is upgrading itself to a European bailout institution, which provides assistance based on certain conditions. It loses its independence as a result, says Fuest, because it can hardly refuse to provide assistance if its conditions are met. "The ECB has overstretched its mandate," Fuest believes.

Even supporters of the bond-purchasing program are critical of Draghi's approach. "The ECB should have continued to cite market failure as justification for its purchases," says Peter Bofinger, a monetary expert at the University of Würzburg in southern Germany and a member of the German Council of Economic Experts which advises the government on economic issues. "Then it could have intervened whenever it felt it was appropriate."

....resistance, resistance",

Thousands of demonstrators took to the streets of Paris on Sunday to protest against the spread of economic "austerity" in France and Europe.  Chanting "resistance, resistance", the crowds had been rallied by around 60 organisations, including the leftwing Front de Gauche and the French Communist party, which oppose the European budget treaty.  "Today is the day the French people launch a movement against the politics of austerity," said the Front de Gauche president, Jean-Luc Mélenchon. A few hours before the protest started Jérome Cahuzac, a junior budget minister, described the demonstration as a "fundamental" error. "I think they are committing a fundamental error in thinking that the policies we are following are weakening France, when in fact these policies are strengthening it," he told Europe 1.  The French prime minister, Jean-Marc Ayrault, defended the European budget treaty and accused the protesters of taking a risk with history. "To take the risk of aggravating the crisis, which is not only an economic crisis but also a euro crisis … The ambiguity of saying 'non' is also something that could lead to the end of the euro."

He added that he and the president, François Hollande, "would never be responsible … for the disappearance of the euro. The support of the majority in these circumstances is essential. We can't swerve away, the future of the euro as well as growth and prosperity are in doubt," Ayrault added.

For Annick Coupé of the Solidaires union, the demonstration on Sunday was aimed at creating a "show of force for the weeks to come" in which the government will consider pension, social security and employment reforms. "Just because we helped defeat Nicolas Sarkozy [the former right of centre president] doesn't mean we're now going to shut up," she said.