Spain's banking crisis wiped out billions of euros of family savings on Tuesday as small investors who bought shares in the nationalized giant Bankia were finally able to trade them – but at only a fifth of their original price. The wipeout on Madrid's stock exchange means that Bankia, which was created by the fusion of seven savings banks, has now lost 99% of its stock exchange value since it was listed 22 months ago.  Preference share owners had been given the tradable shares, which came with a hefty haircut, as part of a cash injection worth billions of euros into the bank that wreaked most damage on Spain's financial system after suffering huge losses on toxic loans to real estate developers.  Bankia's 11bn new shares, part of a €15.5bn (£13.3bn) recapitalization, tumbled as soon as they started trading on Tuesday morning. By the end of the day they were worth half their €1 book value. Trading in the new shares was meant to have marked a new start for the country's fourth-largest bank by market capitalization. Last year it needed a €24bn bailout as part of a wider European rescue of Spain's financial system.

"They're cheating us again, like they did before," Maricarmen Olivares, whose parents lost €600,000 in life savings made from selling her father's car workshop, told Reuters. "Everything is a swindle, the share listing, the compensation package, the value of the stock now."

Spain took €42bn of the €100bn offered to help it clean up banks that were drowning in a sea of bad real estate loans left behind by the country's burst housing bubble. Bankia was the biggest of four nationalized banks that needed funds, along with NCG Banco, Catalunya Banc and Banco de Valencia.

Questions are already being raised about whether banks will have to find yet more capital, amid worries that they have not owned up to all their bad property loans and as the country's economy continues to deteriorate. Reports suggest they may need €10bn more, though Spain can now easily raise any additional funds the state may have to provide on the markets.  Bankia may raise several billion euros from the sale of stakes in the British Airways owner International Airlines Group, electricity company Iberdrola and insurer Mapfre. It agreed last week to sell City National Bank of Florida to the Chilean bank BCI for $883m. NCG Banco said on Tuesday it would sell its 80-branch EVO network as part of the restructuring plan negotiated with the EU after the injection of €10bn of public money into the lender.

UK EUROPEAN MEMBERSHIP - We don't want to be part of a United Europe governed by a socialist unelected junta from Brussels. Put the business case to one side, this is about democracy, liberty and self governance.  I would rather be a little bit poorer now but in charge of my own destiny, than ruled by a socialist political elite which will in time become even more corrupt than now and make me much poorer in the long run. If the rest of Europe want to unite under a Brussels government then let them, but we don't want it. I suspect if other countries were ever given a vote, they would not want it either.  But surprise, surprise, the unelected elites don't like elections because they get the wrong answer to their ever closer union. The business leaders quoted should know better than to neglect democracy for the sake of profits....
Whilst the economic benefits of membership may, or may not be, overwhelming, (and Lord Lawson, Denis Healey and others have already questioned whether the economic benefits are as great as made out), that is not the issue.  The issue is that there are a number of fundamental problems with the eurozone and the EU itself which are precipitating the continent into potential conflict.  Firstly, as is apparent from Greece, Cyprus, Spain, Italy and Portugal, not a single person in those countries has a vote to change let alone influence policy being directed by Brussels. This democratic deficit in a time when the Euro-"elite" are pushing a solitary austerity agenda, without regard to the consequences of those policies not just on families and communities but half the continent, is fanning the flames of extreme nationalism in those countries. Until such time as the people of Europe get a vote to get rid of the idiots in charge in Brussels, we should have nothing to do with it.  Secondly, even if the policy of "internal devaluation" is successful, that will mean a worker in those countries will have to work harder and longer for a Euro than a worker, say, in Germany. So the exodus of the youth from those countries will accelerate and some will go within the Union to areas where there is work. This will drive down wages in the destination countries and will ignite talk of "jonny foreigner taking our jobs" that we've heard incessantly here. How well that will play in Germany is anyone's guess.  Thirdly, the accounts of the EU haven't been signed off by their auditors for, I believe, something like 10 years due to fraud and misappropriation of funds.  Finally, and most importantly, if the eurozone members are successful in driving through a Federal State (without obtaining specific consent for this from the individual national electorates), what impact is that going to have upon the operation of the EU? Currently, we have 27 nations, some with greater weight than others. With a Federal State of 17 nations, that bloc will outvote and outweigh all the other members. Policy (as the SNP seems to argue) will be set to the agenda of the bigger constituent. Ergo, the UK and all the other non-eurozone members will be outvoted on every measure, and what guarantees are there going to be to protect those countries from such policy focus? Given the EU's declaration of economic war against the City of London with the FTT (stealing money that would otherwise go to the UK Exchequer from the City), capping bonuses (bureaucracy gone mad and aimed directly at the City), with seemingly precious little the UK can do about it, it does not augur well for future protection.   I remain unconvinced about the economic benefits of membership. The EU will want access to our market. But is the EU necessarily the dynamic growth zone for the future? It doesn't look like it.   However, the risk of extreme nationalism arising from the current policies and the utter devastation being wrought across half a continent to "save" the Euro is not a price worth paying to secure economic benefits. We should be leading Europe away from the precipice towards which its bureaucrats appear determined to push it. Clearly this isn't happening at present, so its time to leave. Not, as some would suggest, to a Norwegian or Swiss style semi-detached model, but complete detachment.  And the sooner the better.

ROME—Italy's new government took its first concrete steps Friday, announcing some €3 billion ($3.86 billion) in economic measures aimed at offering relief to households and workers amid the country's longest postwar recession. Prime Minister Enrico Letta, who was sworn in last month as head of a coalition cabinet, said an unpopular tax on primary residences would be suspended and an extra €1 billion would be pumped into a wage-supplement program.  The measures were the bare minimum of what the new government has pledged. Notably, none of the announced benefits address what politicians have identified as the national priority: youth unemployment. Still, they signal a breakthrough of sorts given the stark political differences among the politicians that make up the patchwork majority behind Italy's first bipartisan government in more than 60 years.  Mr. Letta and his deputy, Angelino Alfano representing the mainstream left and right parties respectively—were upbeat about the day's cabinet meeting, where ministers managed to avoid the squabbles that have characterized recent meetings.  "We scored a goal on our first try," said Mr. Alfano, whose conservative People of Freedom party had demanded that the new property tax—introduced by former Prime Minister Mario Monti be scrapped. Mr. Letta, however, emphasized that only the summer installment of the tax on primary residences is being suspended. That is because the government intends this summer to overhaul the way Italy's tax code impacts real estate overall. Rome draws €44 billion in revenue from taxes, tariffs and other levies related to private property. About half of that is linked to ownership and the rest to service charges. The planned reform will "help households and the construction sector," the prime minister said, adding that businesses would be offered tax credits and breaks on properties they owned as part of production processes.  The decision to lower a tax on property is popular, because of Italy's high home-ownership rates. But it also reduces the government's room to maneuver on another important issue: lowering income and business taxes. Italian income taxes are unusually high even by European standards and hobble competitiveness and output, said Timo del Carpio, an economist at RBC Capital Markets in London.  The property tax was an efficient tool to spread out Italy's painful fiscal adjustment amid the euro-zone debt crisis, said Mr. Carpio. The decision to undo it shows that Mr. Letta's "fragile coalition is already proving to be an obstacle" toward that goal, he said.  While Mr. Alfano's party demanded the property tax cut, supporters of Mr. Letta's center-left Democratic Party wanted more money for a welfare program that has come under strain amid the economic downturn. The measure announced on Friday will provide new money for furlough schemes, helping companies keep their workforces intact. However, because those on furlough aren't part of the hoards of jobless people in Italy, the new measures do little to help tackle the country's 11.5% unemployment.  Mr. Letta is also working on a plan to offer tax breaks for new hiring but no final decisions have been taken, in part because the program is likely to prove far more costly than the measures announced Friday.   In an important shift from the past two years of Italy's economic policy, the latest measures will be "100% funded by public spending cuts and not by shifting the tax burden somewhere else," Mr. Alfano said. He didn't give details.  As things stand, Rome has little margin in making its future moves. Mr. Letta reiterated his intention to keep this year's budget deficit below 3.0% of gross domestic product, in accordance with European Union rules. That should allow Italy to be released from European strictures on countries with excessive deficits—an outcome cabinet officials expect will provide further fiscal relief by lowering sovereign borrowing costs.   "These are just our first steps," Mr. Letta said.

The IMF suggests that as soon as central banks signal that they are readying themselves to halt QE, bond prices are likely to fall sharply, as investors "run for the door". Interest rates, which move in the opposite direction to bond prices, would jump and central banks might be forced to push up rates even further to prove they have not lost control of inflation.

"The potential sharp rise in long-term interest rates could prove difficult to control and might undermine the recovery (including through effects on financial stability and investment). It could also induce large fluctuations in capital flows and exchange rates," the IMF warned.

The research analyses the potential losses to central banks under three possible scenarios, from a relatively benign one percentage point rise in interest rates, to a much more dramatic six percentage point increase in short-term borrowing costs.

Under the most extreme scenario the losses to the exchequer would be £80bn, so even if the Bank is right about the £60bn gains for the Treasury from QE, that could still blow a £20bn hole in the public finances.

Economists stressed that any direct costs of QE should be weighed against the wider benefits to the economy. Erik Britton, of City consultancy Fathom, said, "the losses could be large - that much is true, and they would be borne by the taxpayer; but that would only be in a scenario where we were back in growth, and the benefits to the Treasury of that would outweigh those costs."

The IMF's researchers stressed that the prospect of losses on central banks' balance sheets should not prevent them from unwinding their unconventional policies, but warned that, "the path ahead will be challenging, with many unknowns."

Risky national votes - let's get out of this nightmare called EU !!!

David Cameron's clamor to open the EU treaties to get a new deal for Britain in Europe could trigger a whole stream of risky national votes, senior EU officials have said amid exasperation with the prime minister's abrupt concession to Tory backbenchers on the referendum bill.

European leaders declined to say anything publicly about the Conservative plans for a draft bill on an in-out EU referendum. It is being interpreted in Brussels as internal Tory party politicking, but privately there is acute and increasing frustration with Cameron's tactics.

They complained that while in Washington Cameron launched another round of Brussels-bashing when he was supposed to be promoting the merits of a potential game changing trade pact between the EU and the US.

"It's the frustration, even on things like this when it would be better to talk up the EU. You would actually have thought this was just a US-UK trade pact," said one official. "It's the kind of stuff where you just feel you're banging your head off the wall."

Another senior official said: "It's pure political posturing. Pure ideology. British pragmatism has gone away."

Officials also pointed to the irony of George Osborne being in Brussels on Tuesday to push strongly for an EU deal to curb tax evasion even while the talk in his party ranks was about quitting the EU.

The European Union - in the longest recession ever

The eurozone has slumped into its longest recession ever, after economic activity across the region fell for the sixth quarter in a row.  Economic output across the single currency area fell by 0.2% in the first three months of 2013, statistics body Eurostat reported on Wednesday. France, Spain, Italy and the Netherlands all saw their economies shrink as the economic crisis in the eurozone continued to hit its largest economies. Eurostat's figures showed that the eurozone economy has contracted by 1% over the last year, putting further pressure on leaders as unemployment climbs to new record highs. The 0.2% contraction in the first quarter was an improvement on the 0.6% drop recorded between October and December, but analysts warned that the eurozone's economic outlook is darkening.  "What seems incontrovertible, on this evidence, is that the member-states of the euro zone are on the wrong track," commented Stephen Lewis, chief economist at Monument Securities. "The costs of the zone's one-size-fits-all strategy are becoming brutally apparent."

France was dragged back into recession by a 0.2% drop in GDP, announced on the first anniversary of François Hollande being sworn in as president. Pierre Moscovici, French finance minister, denied Paris's forecast of 0.1% growth this year was too optimistic. "I'm sticking to the figures," Moscovici told reporters, adding that the EU must prioritise growth over tackling budget deficits.

There was also disappointment that Germany eked out growth of just 0.1%, worse than economists had expected. The Dutch economy shrank by 0.1%. "The bottom line is that both the German and French economies, which together account for half of the eurozone's output, are in the doldrums," said Nick Spiro of Spiro Sovereign Strategy. "Add in the persistent recession in the Netherlands, which accounts for a further 6.5% of eurozone GDP, and the core and semi-core of the eurozone are in significantly worse shape than a year ago."

Italy's new prime minister, Enrico Letta, was given an early reminder of the challenge he faces with the news that Italian GDP fell by 0.5%. Italy's economy has been shrinking for the last seven quarters, its longest recession since at least 1970.

Beyond the eurozone, the Czech Republic suffered a 0.8% decline in GDP during the quarter. The data came a day after the Washington-based Pew Research Centre reported that public support for the European Union had fallen over the last year, from 60% to 45%. Pew warned that the ongoing financial crisis means the European project was "in disrepute" in some countries, with many Europeans losing faith in closer integration. "These results spell trouble ahead for the EU," said Lewis."They are likely to be taken seriously in Washington."

Eurostat's figures also showed that the European Union shrank by 0.1% during the last quarter, despite the UK growing by 0.3%.

Figures released last week showed that Spain's economy contracted by 0.5%.

French president François Hollande's governing Socialist party has delivered a blistering assault on Germany's chancellor, Angela Merkel, accusing her of causing the single currency crisis that has been tearing Europe apart for more than three years, of acting selfishly and intransigently in her own political and German national interest, and demanding a "showdown" with the "chancellor of austerity". The French socialists' criticisms, in a draft paper on party policy on Europe ahead of a conference in June, came as Spain dramatically shifted its commitment to austerity. Spain set a far higher budget deficit target for this year while admitting that the country's chronic unemployment would stay above 25% for the next four years.

Spain's move to ease its deficit burden was praised by the European commission in Brussels in what is a clear sign that it, too, has radically changed its previously hawkish insistence on harsh austerity. It said in a statement: "Regarding the fiscal targets, the postponement of the correction of the excessive deficit (to below 3% of GDP) to 2016 is consistent with the current technical analysis by the commission services of what would be a balanced – but still ambitious – fiscal consolidation path, given the difficult economic environment." The Spanish finance minister, Luis de Guindos, insisted that, despite continued recession and 27% unemployment, Spain was turning the corner and that last year's intense austerity measures - which helped tip a further 600,000 Spaniards into unemployment – had been worth the effort. "The results have not been good but they could have been much worse," he said. However, the government said it would still have to raise taxes to meet the new deficit targets. The budget minister, Cristóbal Montoro, pledged no rises in VAT, income tax or fuel taxes, but said other special taxes would rise. He refused to say which ones they were. Company taxes will also rise and a small tax on banks, based on their deposits, is to be introduced.

The prime minister, Mariano Rajoy, continued his tradition of avoiding the press and public when major announcements on the economy are made, and left ministers to present the changes.

Apparently, there's now an idea for the smaller countries in SE Europe to come together to confront Germany as a group?

One old family friend was taken off to Mauthausen and his widow received nothing until the early 1970s, and even then it was a pittance - a few hundred deutschmarks.

It's a scandal that because the eastern half of Europe fell under communism, this meant Germany ended up paying nothing until the détente of the 1970s, by which time many claimants were dead.

And as I said, even in the 70s, the amounts paid out were pittances.

This issue affects so many countries. If proper compensation were to be paid now, the amount would be enormous.

 

I think the Eurozone has to admit this now looks more like a fire sale rather than a rescue....Face the facts Cyprus, Portugal, Spain, Slovenia, Greece, Italy are bankrupt and in the process the Eurozone has in effect done the same to France by spreading the unfunded debt across the rest of the eurozone. To pay for this they have forced the countries into an ever increasing depression of cuts, job losses, and poverty for the citizens of these countries.  This will flow back through the rest of the Eurozone as people just stop spending and companies find they have no one to sell to. 

The Germans are in effect now confiscating or asset stripping those countries of there last assets - individuals savings, gold etc.
The disaster that predicted by many is now happening - meanwhile the eurocrats keep saying everything is okay - I think everyone needs to remind them of TITANIC - there are not enough lifeboats left!

The  10 countries identified as imbalanced by the EC  are Belgium, Bulgaria, Denmark, Italy, Malta, the Netherlands, Finland, Sweden and the UK.

The full report is here - here's the top-line reasons for each:

Belgium:

Macroeconomic developments in the areas of external competitiveness of goods, and indebtedness, especially concerning the implications of the
high level of public debt for the real economy, continue to deserve attention.

More specifically, Belgium has experienced a long-term decline in its export market shares due to persistent losses in both cost and non-cost competitiveness.

While Belgian goods exports are gradually being reoriented towards more dynamic regions, the specialization in cost-sensitive intermediate products is intensifying...

Bulgaria

The impact of deleveraging in the corporate sector as well as the
continuous adjustment of external positions, competitiveness and labour markets deserve continued attention.

More specifically, Bulgaria rapidly built up imbalances during the boom phase that coincided with its accession to the European Union. In a context of catching up, high foreign capital inflows contributed to the overheating of the domestic economy and a booming housing sector.

Denmark

The continuing adjustment in the housing market and the high
level of indebtedness in the household and private sector as well as drivers of external competitiveness, deserve continued attention.

More specifically, there has been a weak export performance linked to a rise in unit labour costs due to high wage growth and, in particular, weak productivity growth.

Italy

Export performance and the underlying loss of competitiveness as
well as high public indebtedness in an environment of subdued growth deserve continued attention in a broad reform agenda in order to reduce the risk of adverse effects on the functioning of the Italian economy and of the Economic and Monetary Union, notably given the size of the Italian economy.

More specifically, in a context of elevated risk aversion in financial markets, Italy's high public debt weighs on the country's growth prospects through several channels, in particular the high tax burden needed to service the debt, funding pressures for Italian banks and thus for the private sector, increased macroeconomic uncertainty and a severely limited margin for countercyclical fiscal policies and growth-enhancing public expenditure.

Hungary

On-going adjustment of the highly negative net
international investment position, largely driven by private sector deleveraging in a context of high public debt and a weak business environment continue to deserve very close attention so as to reduce the important risks of adverse effects on the functioning of the economy.

Malta

The long-term sustainability of the public finances warrants attention
while the very large financial sector, and in particular, the strong link between the domestically-oriented banks and the property market poses challenges for financial stability and deserves continued monitoring.

More specifically, the long-term sustainability of public finances is at risk due to the high projected cost of ageing and other sizeable contingent liabilities.

The Netherlands

Macroeconomic developments regarding private sector debt and deleveraging pressures, also coupled with remaining inefficiencies in the
housing market deserve attention.

Although the large current account surplus does not raise risks similar to large deficits, the Commission will also continue monitoring the developments of the current account in the Netherlands.

More specifically, rigidities and distortive incentives have built up over decades to shape house financing and sectorial savings patterns.

Finland

The substantial deterioration in the current account position and the weak
export performance, driven by industrial restructuring, as well as cost and non-cost competitiveness factors, deserve continued attention.

More specifically, the loss in competitiveness weakens the country's economic position and risks compromising future prosperity and living standards, especially as population ageing already poses a challenge in this regard.

Finland has rapidly lost world market shares and the current account balance has been on a downward trend, and even turned into a deficit in 2011, which is forecast to widen.

Sweden

Macroeconomic developments regarding private sector debt and
deleveraging, coupled with remaining inefficiencies in the housing market deserve continued attention.

Although the large current account surplus does not raise risks similar to large deficits in other countries, the Commission will continue to monitor developments of the current account in Sweden.

The UK

Macroeconomic developments in the areas of household debt, linked to the high levels of mortgage debt and the characteristics of the housing market, as well as unfavourable developments in external competitiveness, especially as regards goods exports and weak productivity growth, continue to deserve attention.

More specifically, the UK faces tensions between the needs for deleveraging, maintaining financial stability and avoiding compromising investment and growth

Waiting for poverty to strike is no game. It makes ordinary men and women helpless, desperate and scared. "If you look at it mathematically, there is no way out: we will just never be able to repay our bills to the EU and IMF," said Haris Christou, one young Cypriot speaking for his compatriots. "Am I afraid? Of course I am afraid. Everybody knows everything in Cyprus is going to get bad, really bad. And nobody knows where exactly we are headed."

On Wednesday night men and women, some young, some old, gave voice to that fear. They gathered outside the offices of the European commission, and then lined the road that leads up to Cyprus's colonial-era presidential palace, to protest against a rescue programme that, wittingly or not, will destroy their country's banking sector and bring its economy to its knees.

"Out with the troika", "Fuck the troika", "Go home Troika", said the placards. "No to the policies of austerity." "No to privatisations." "No to the memorandum of catastrophe."

But more than words, or any amount of hoarse chanting, it is uncertainty that now speaks loudest in Cyprus. The uncertainty that has come with the knowledge that the island's economic output will shrink dramatically as a result of the austerity now being demanded in return for €10bn in aid. The uncertainty unleashed by policies that will see many Cypriots wake up with much less than they once had in the bank. And the insecurity of suddenly being the subject of capital controls that possibly could change Cypriots' lives for years....I, too, would be inclined to withdraw all my funds from any Cyprus bank and I suspect there will be a run on them. There are 'policies in place' to restrict such a run but I don't see how they can prevent people taking out what is their own money. That is the worry. The Russians called it theft and so would any Cypriot who cannot access savings. The safest place to deposit money is still the UK and I'm surprised that London has not offered to make itself a safe haven for Italians, Portuguese and the Spanish to place their life savings. That's what I'd do if I were a Mediterranean saver. The GBP and USD have their moments but nobody will lose a penny by keeping their money in those currencies which are trusted around the world. I don't know how any Cypriot would be able to do a SWIFT transaction to get cash out of harm's way but surely it can be done.

Who is in charge ? ...merkel or cameron ???

In G4S Cyprus trusts.... And finally, British company G4S (who failed to win many gold medals at the last Olympics) is helping with the operation to get Cyprus's banking system back on its feet.

The company - whose vans have been photographic restocking cash machines across the island since the banks were locked - says it is making a great effort.

From the Daily Telegraph tonight: John Arghyrou, managing director of the Cyprus business for G4S, said its 750 employees have been working through the night, going out to replenish cash machines with police. Licensing rules prevented the firm from bringing in extra staff to handle the unprecedented workload.

"Demand is greater than we can provide... We haven't closed since the crisis started," he told Reuters. "I've never seen anything like it in terms of what is going on from a security perspective. I would say the workload has quadrupled because the whole system has changed."

We may know by tomorrow night if they've all succeeded.

European leaders reached an agreement with Cyprus early on Monday morning that closes down the island's second-biggest bank and inflicts huge losses on wealthy savers.

Russians would lose billions of euros under draconian terms that are aimed at preventing the Mediterranean tax haven becoming the first country forced out of the single currency. "Herman Van Rompuy has brokered an agreement between the troika and Cyprus," said an EU source, referring to the president of the European council and Cyprus's trio of creditors: the European commission, the European Central Bank and the International Monetary Fund. A meeting of eurozone finance ministers that started six hours late reached an agreement in the early hours of Monday morning to finalise the fine print of the deal. Savers with deposits of less than €100,000 (£85,000) would be spared but it was thought there would be heavy losses inflicted on the deposits of the wealthy.

Laiki, or Cyprus Popular Bank, is to be closed, with its good assets transferred to Bank of Cyprus, the country's biggest bank, where savers would suffer big losses in return for equity shares. Those with more than €100,000 in Laiki would also be hit hard.

Negotiations got under way amid a hardening of the stance by the IMF and Germany, which insisted that depositors must take the hit for bailing out the eurozone's latest crisis economy.

There were signs of panic in Cyprus as a €100 limit was imposed on ATM withdrawals, with more stringent capital controls to follow if the deal is finalised....This does not require ratification by the Cypriot parliament. So the will of the EU is imposed by force and thousands of depositors in Cypriot banks will have their money stolen all in the cause of the mighty Euro.

French authorities search Christine Lagarde's flatAway from Cyprus and indeed the UK Budget, it seems French authorities have searched the Paris flat of IMF boss Christine Lagarde.

The move is part of an investigation into her handling of a 2008 compensation payment of €285m to businessman Bernard Tapie. There are claims that Lagarde, then finance minister, acted illegally in approving the payment. She denies any wrongdoing.

 

CYPRUS GOVERNMENT SPOKESMAN DENIES REPORTS OF DEAL TO SELL CYPRUS POPULAR BANK  TO RUSSIAN INVESTORS...Confusion over reported Cyprus bank sale...there are reports that Cyprus Popular Bank has been sold to Russian investors, something which has gave a lift to markets and the euro.  However, in this atmosphere of speculation and rumour, it may not be correct.

Merkel regrets Cyprus vote decision and awaits new proposals...Angela Merkel regrets the outcome of last night's vote in the Cypriot parliament, according to snaps on Reuters.

But the German chancellor accepts the decision and now awaits a proposal from the Cypriot government to the Troika. She will look at all the proposals the government makes.

Hammering home the point made by the ECB earlier, she said Cyprus does not have a sustainable banking sector.  Savers in Cyprus with more than €100,000 in the bank should be ready to contribute to any bailout (it was the plan to hit savers with more than €20,000 that scuppered the vote).

The Statement by the Eurogroup President

Statement by the Eurogroup President on Cyprus - The Eurogroup held a teleconference this evening to take stock of the situation in Cyprus. I recall that the political agreement reached on 16 March on the cornerstones of the adjustment programme and the financing envelope for Cyprus reflects the consensus reached by the Cypriot government with the Eurogroup. The implementation of the reform measures included in the draft programme is the best guarantee for a more prosperous future for Cyprus and its citizens, through a viable financial sector, sound public finances and sustainable economic growth. I reiterate that the stability levy on deposits is a one-off measure. This measure will - together with the international financial support - be used to restore the viability of the Cypriot banking system and hence, safeguard financial stability in Cyprus. In the absence of this measure, Cyprus would have faced scenarios that would have left deposit holders significantly worse off.

The Eurogroup continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below €100,000. The Cypriot authorities will introduce more progressivity in the one-off levy compared to what was agreed on 16 March, provided that it continues yielding the targeted reduction of the financing envelope and, hence, not impact the overall amount of financial assistance up to €10bn.

The Eurogroup takes note of the authorities' decision to declare a temporary bank holiday in Cyprus on 19-20 March 2013 to safeguard the stability of the financial sector, and urges a swift decision by the Cypriot authorities and parliament to rapidly implement the agreed measures.

The euro area Member States stand ready to assist Cyprus in its reform efforts on the basis of the agreed adjustment programme.

Cypriots reacted with shock that turned to panic on Saturday after a 10% one-off levy on savings was forced on them as part of an extraordinary 10bn euro (£8.7bn) bailout agreed in Brussels.

People rushed to banks and queued at cash machines that refused to release cash as resentment quickly set in. The savers, half of whom are thought to be non-resident Russians, will raise almost €6bn thanks to a deal reached by European partners and the International Monetary Fund (IMF). It is the first time a bailout has included such a measure and Cyprus is the fifth country after Greece, the Republic of Ireland, Portugal and Spain to turn to the eurozone for financial help during the region's debt crisis. The move in the eurozone's third smallest economy could have repercussions for financially overstretched bigger economies such as Spain and Italy.

People with less than 100,000 euros in their accounts will have to pay a one-time tax of 6.75%, Eurozone officials said, while those with greater sums will lose 9.9%. Without a rescue, president Nicos Anastasiades said Cyprus would default and threaten to unravel investor confidence in the eurozone. The Cypriot leader, who was elected last month on a promise to tackle the country's debt crisis, will make a statement to the nation on Sunday.

The prospect of savings being so savagely docked sparked terror among the island's resident British community. At the Anglican Church's weekly Saturday thrift shop gathering in Nicosia, Cyprus's war-divided capital, ex-pats expressed alarm with many saying that they had also rushed to ATMs to withdraw money from their accounts. "There's a run on banks. A lot of us are really panicking. The big fear is that there soon won't be cash in ATMs," said Arlene Skillett, a resident in Nicosia. "People are worried that they're automatically going to lose ten present [of their savings] in deposit accounts. Anastasiades won elections saying he wouldn't allow this to happen."

Athens negotiates over Greek property taxWith recession worsening, higher taxes are another key issue The highly controversial property tax, introduced in 2011 and slapped on households through electricity bills, has elicited particular opprobrium, so much so that the conservative-dominated coalition promised to slash the EU-IMF mandated measure after assuming power in June 2012.  Hit by successive rounds of pay and pension cuts and a barrage of other duties, more and more Greeks, who have seen their disposable income drop by as much as 50% in the last two years, say even if they wanted to, they can no longer afford to pay the tax.  Growing numbers, who have inherited properties, say they are caught between a rock and a hard place: unable to sell properties in a depressed market but also unable to pay the duties now slapped on them.  The emergency measure raises approximately €3bn a year - vital to revenues. Under immense popular pressure, prime minister Antonis Samaras' fragile coalition has attempted to persuade troika technocrats that it can raise the money if the tax is merged with other property duties.  Mission chiefs and the German Governor of Greece - Horst Reichenbach from the EC, ECB and IMF, however, have not been convinced, citing the innate weaknesses of Greece's infamously leaky tax collection system.  Insiders worry that if the government is seen to lose yet another battle in the tug and pull of negotiations, it could suffer a potentially fatal PR communications defeat. The fiercely anti-bailout political opposition has stepped up criticism of the government saying it is already reneging on its promises.

Jean Claude Juncker, prime minister of Luxembourg, who chaired a group of Euro-zone finance ministers at the height of the financial crisis, claimed that elections in Italy and Greece brought "national resentments to the surface, which we'd believed had gone away".

He said that he had been appalled by protesters' banners in Greece which showed Angela Merkel, the German chancellor, in Nazi uniform.

Mr Juncker said in an interview with the magazine Der Spiegel: "Anyone who believes that the eternal question of war and peace in Europe is no longer there risks being deeply mistaken.

"The demons have not gone away – they're only sleeping, as the wars in Bosnia and Kosovo showed. I am struck by how much conditions in Europe in 2013 are similar those of 100 years ago."

The way in which some political figures in Germany had been criticised in Greece has left "deep wounds" Mr Juncker said. He said the Italian election was also "excessively hostile to Germany and therefore anti-European". Mr Juncker, who chaired the Euro Group from 2005 until he stepped down in January this year, said that he saw parallels with 1913. "In 1913 many believed that there would be no more war in Europe. The great powers of the continent were so closely inter-twined economically that the view was widespread that they could no longer have military confrontations," he said.

Mr Juncker also claimed that the only way for Europe to continue to wield global influence in future was through being united. The governments of Germany, France and Britain all knew that the only way their voice could be heard internationally was "through the megaphone of the EU," he said.

Source : BBC ...

The European Central Bank (ECB) has kept eurozone interest rates unchanged at 0.75% for the eighth month in a row.

Rates have remained at the same level since the ECB cut rates from 1% in July last year.

The ECB's president, Mario Draghi, said they had discussed a rate cut, but the consensus was to leave them as they were.

Many analysts do not expect the ECB to alter rates from their current record low until next year at the earliest.

The decision matched that of the Bank of England, which on Thursday also decided to keep its interest rate unchanged at 0.5%.

Latest figures for inflation for the 17-nation eurozone showed a fall from 2.2% to 2% in January.

The European Commission has estimated inflation in the eurozone will fall to 1.8% this year. Its target for inflation is "close to, but below 2%". Widespread austerity and weakening economies have left consumers with little free cash to spend, depressing retailers' ability to increase prices. Some analysts thought that the drop could leave the European Central Bank (ECB) room to cut interest rates at the March meeting. Mr Draghi said: "We have discussed the possibility of doing it [cutting rates]. So there was discussion.

"The prevailing consensus was to leave the rates unchanged."

Risks. At a news conference on Thursday afternoon, the president of the ECB, Mario Draghi, said that the eurozone's economy would start to stabilise this year and would pick up in the second half, although downside risks remained.

He said growth could return in 2014, although the forecast range was wide, between 0% and 2% growth.

The range for inflation next year was also wide, with expectations of price rises of between 0.6% and 2%.

Mr Draghi said the need to cut costs would hold back recovery: "Necessary balance sheet adjustments in the public and private sectors will continue to weigh on economic activity.

Later in 2013, economic activity should gradually recover, supported by a strengthening of global demand and our accommodative monetary policy stance."

Bond yields, the implied price governments pay for borrowing, narrowed slightly, with German prices rising and Italian, Spanish and French falling, suggesting markets saw the current policy as helpful to the eurozone as a whole.

Mr Draghi said he did not think Italy's recent inconclusive elections - which rocked markets - were unduly unsettling, as markets "understand that we live in democracies" and that the initial negative reaction was overdone.

He said Italy had already carried out cuts to reduce the deficit and that would "continue on automatic pilot".

He added that a year ago, the turmoil resulting from the ballot would have been worse.

The taboos are falling one by one.

“We must leave the austerity cage,” he told leaders of his Democrat Party (Pd), responding to Italy’s electoral earthquake by tearing up his pre-election programme. “A change of course is absolutely necessary given that five years of austerity and attacks on workers have pushed up public debt levels across Europe,” he said.

“The vicious circle between belt-tightening and recession is putting representative government at risk and making it impossible to govern. The immediate emergency is the real economy and joblessness,” he said. The pledge puts Mr Bersani on a collision course with the ECB, which is constrained from helping to shore up the Italian bond market unless Rome complies with Europe’s austerity agenda. “Italian voters may have effectively voted away the ECB safety net,” said Christian Schulz from Berenberg Bank. The central bank cannot activate its bond purchase programme (OMT) unless Italy requests a rescue from the EMU bail-out fund, and that in turn requires a vote in Germany’s Bundestag.

“The ECB cannot – and will not want to – do anything to help Italy after the inconclusive election result, even if borrowing costs spiral out of control,” he said.

Mr Bersani’s Democrats (Pd) and its allies control the lower house but failed to win the senate. He is hoping for tacit support on a law-by-law basis from the Five Star Movement of comedian Beppe Grillo. Mr Grillo has responded with a volley of anathemas, calling Mr Bersani a relic from a defunct political order that must be swept away by civic revolution. Yet many of his 163 senators and deputies say the movement should seek common ground with the Pd.

Mr Bersani said Italy should mobilize its EU voting weight to push for an EU-wide change of course. He has natural allies in Paris.

French finance minister Pierre Moscovici warned EMU colleagues on Monday that current policies “risk a loss of social and political confidence across Europe. We must not pile austerity on top of recession”. Mr Moscovici said France would need an extra year to meet its deficit target of 3pc of GDP and called for action to tackle the root of the crisis with an EMU-wide growth strategy.

French officials are deeply alarmed by the relentless upward rise in France’s unemployment rate to 10.6pc, or 26.9pc for youth. President Francois Hollande’s popularity ratings have crashed from 55pc to 30pc since his election in May, the fastest decline ever recorded for a French leader.

Italy, France, and Spain toyed with a Latin bloc alliance last year to confront Germany over EMU’s contractionary policy mix, but the initiative faded.

Mr Hollande pulled back from a showdown with Berlin and ultimately pushed through further fiscal cuts and reforms, while Italy’s Mario Monti was never willing to jeopardise the European Project that he served for ten years as a commissioner.

Critics says Mr Monti, whose Civic Choice list won just 10pc of the vote, went native in Brussels long ago and has been slow to understand the deeper political crisis unfolding in Italy.

The outgoing premier gave them fresh ammunition today, saying that it would be better to hold fresh elections than to see an anti-EU government to take power.

It is unclear whether a second vote would achieve what he intends. The latest snap polls show that Mr Grillo’s support is still rising, jumping from 25pc to 28pc.

Ominously, nostalgia for Fascist leader Benito Mussolini has started to emerge as the post-War order crumbles. Two key figures have praised elements of Fascist rule over the last two days.

A leader of the Five Star Movement professed “fascination” with the Fascist sense of the Italian state and the family, while the deputy state secretary of the economy said Mussolini “governed well until 1935.” (source telegraph)

EUROPE - The twin policy regimes in East and West stoked the credit bubble, and this in turn disguised what has happening to trade flows. These flows were disguised yet further after 2008 by QE and fiscal buffers, but the hard reality beneath may soon be exposed as these are props are knocked away.

"In a world of deficient demand and excess savings, every country will try to acquire a greater share of global demand by exporting savings," he writes. The "winners" in this will be the deficit states. The "losers" will be the surplus states who cannot retaliate. The lesson of the 1930s is that the creditors are powerless. Prof Pettis argues that China and Germany risk a nasty surprise. America's shale revolution and manufacturing revival may be enough to head off a US-China clash just in time. But Europe has no recovery strategy beyond demand compression. It is a formula for youth job wastage, a demented policy when youth a scarce resource. The region is doomed to decline until the boil of monetary union is lanced. Some will take the Mishkin paper as an admission that QE was a misguided venture. That would be a false conclusion. The West faced a 1931 moment in late 2008. The first round of QE forestalled financial collapse. The second and third rounds of QE have had a diminishing potency, while the risks have risen. It is a shifting calculus. The four years of QE have given us a contained depression and prevented the global strategic order from unravelling. That is not a bad outcome, but the time gained has largely been wasted because few wish to face the awful truth that globalisation itself -- in its current deformed structure -- is the root cause of the whole disaster. ...It will be harder from now on if central banks conclude that their arsenal is spent. We can only pray that their help will not be needed.