A US appeals court panel has said that federal officials must reconsider their decision not to regulate the size of airline seats as a safety issue. In a ruling on Friday, one of the judges called it “the case of the incredible shrinking airline seat”.  The Flyers Rights passenger group challenged the Federal Aviation Administration in court after the agency rejected its request to write rules governing seat size and the distance between rows of seats.  New York senator calls for FAA action over 'shrinkage' of airplane seats A three-judge panel for the federal appeals court in Washington said the FAA had relied on outdated or irrelevant tests and studies before deciding that seat spacing was a matter of comfort, not safety.  The judges sent the issue back to the FAA and said the agency must come up with a better-reasoned response to the group’s safety concerns.  “We applaud the court’s decision, and the path to larger seats has suddenly become a bit wider,” said Kendall Creighton, a spokeswoman for Flyers Rights.  The passenger group says small seats bunched too close together slow down emergency evacuations and raise the danger of travellers developing vein clots.  FAA spokesman Ian Gregor said the agency was considering the ruling and its next steps. He said the FAA considers the spacing between seat rows when testing to make sure airliners can be evacuated safely.

MEXICO CITY (AP) -- The U.S. Embassy in Mexico issued a security message Friday warning U.S. citizens to avoid the Pacific resort of Acapulco because of violence and protests.

In yet another blow to a coastal city once favored by U.S. movie stars and jet-setters in the 1950s and `60s, the embassy said its personnel "have been instructed to defer non-essential travel to Acapulco, by air or land," and added that it "cautions U.S. citizens to follow the same guidelines."

The alert noted that "protests and violent incidents continue in Guerrero state in response to the disappearance of 43 students there."  Demonstrators have blocked highways to Acapulco, hijacked buses and blockaded the city's airport to demand the government find the students who disappeared Sept. 26 in the nearby city of Iguala. Prosecutors say local police working for a drug gang probably turned the students over to gang members, who may have killed them and burned their bodies.

In early November, demonstrators blocked Acapulco's airport for hours carrying clubs, machetes and gasoline bombs, causing hotel reservations on a subsequent three-day holiday weekend to fall about 35 percent, said Javier Saldivar, head of Acapulco's business chamber. Hotel occupancy that should have neared 95 percent was only about 60 percent.  "We suffered a serious loss," Saldivar said.  While U.S. tourists account for about 55 percent of foreign visitors to Mexico, relatively few of them go to Acapulco any more. For example, while Mexico's most popular cruise ship port, Cozumel, handled 894 cruise ship arrivals in 2013, Acapulco had only 9.  Drug gang violence has also played a role. In recent years there have even been some shootouts on Acapulco's famed coastal boulevard, but those incidents have calmed somewhat in the last two years.  Acapulco was once a well-regarded destination. It was during a vacation there in the 1960s that novelist Gabriel Garcia Marquez came up with the idea for "100 Years of Solitude." It was there that Bill Clinton took a young woman named Hillary for a honeymoon in 1975.  But in the 1970s and `80s, the resort's infrastructure crumbled, and poor, crowded settlements sprung up inland from the bay, sparking rising problems of unemployment, crime and pollution.

America’s biggest banks will have to hold an extra $68bn of cash on their balance sheets under stringent new rules designed to prevent a repeat of the 2008 financial crisis.  US regulators have also signaled they would like to tighten banking rules even further, as they introduced the new rule requiring lenders including JP Morgan and Goldman Sachs to shore up their capital reserves.  Under the new legislation, approved last night by the US Federal Reserve, the Federal Deposit Insurance Corporation and Comptroller of Currency, the eight largest US banks will have to hold at least 5pc of their total assets in cash, instead of the 3pc previously required.   The rule, which will come into force in 2018, is the latest in a sweeping set of reforms designed to ensure banks have enough money to cover their losses in the event of a major financial disaster.   The change is expected to weigh on the profits of those banks affected as they will not be able to put quite as much of their cash to work. However, the Fed signaled yesterday that it may yet go further. Dan Tarullo, the Fed’s regulation tsar, said the central bank may “increase the risk-based capital surcharge for US systemically important firms to a higher level than the minimum agreed to internationally”.   Such a change is particularly serious for investment banks such as Goldman Sachs and Morgan Stanley, who do not have retail banking operations that accept cash deposits from customers.  However, all of the affected banks, including Citigroup, Bank of New York Mellon, Wells Fargo and State Street, will have to take the new capital requirements into consideration as they weigh up whether to pay dividends.

China - British deal = "adios" Euro !!!

China and Britain have reached a three-year deal to swap their currencies when needed, the first such agreement between Beijing and a major developed economy and a move that could help boost the Chinese Yuan outside Asia.... In a statement released late Saturday, the Bank of England said Governor Mervyn King and his counterpart at the People's Bank of China, Zhou Xiaochuan, signed an agreement to set up a three-year swap line with a maximum value of 200 billion Yuan ($32.6 billion). It means that Bank of England could draw on the line with the PBOC when there is a sudden shortage of Yuan funds in the U.K. market—and make the Yuan, also known as renminbi, available to banks under its jurisdiction.  China's central bank has increasingly used such bilateral currency-swap deals in its effort to promote the Yuan in global trade and finance. So far, the PBOC has signed nearly two trillion Yuan worth of currency-swap deals with some 20 countries and regions, including Hong Kong, Thailand, Singapore, New Zealand, Argentina and Malaysia. Most of the pacts so far have been with emerging economies in the Asian-Pacific region and don't include major economies such as the U.S., Japan and those in the euro zone. These currency lines, though rarely tapped, could enhance foreign investors' confidence in trading of the Yuan. An expansion of Yuan trading into London could help China advance its goal of turning the Yuan into an international currency, a key part of its broader push to open up its financial system. Currently, Beijing maintains a tight leash on cross-border fund flows, making it difficult for the Yuan to accumulate overseas. Chinese officials in recent months have increased their rhetoric toward making the Yuan a freer currency, hinting that a plan on Yuan convertibility would be proposed later this year and include steps aimed at allowing freer flows of its currency and ways to let Chinese individuals make overseas investments. Some scholars within China expect the Yuan to become basically convertible as early as 2015, though Chinese officials have never given a timeline for how soon that would occur. The timing would depend on progress in China's efforts to overhaul its creaky financial system and open its capital account—efforts that could be slowed if China's economy sputters or its financial system hits turbulence.  U.K. and European bankers as well as the politicians are counting on the Yuan to help cement London's role as the center for global foreign-exchange trading. This comes as cities such as Singapore, Tokyo, Taipei, Luxembourg and Kuala Lumpur are all exploring the possibility of becoming offshore Yuan trading hubs—a status only the Chinese.

The German (Fourth Reich's ) Governor of Greece - Horst Reichenbach made no comments !!!!!

No final decision on next tranche of Greek bailout expected today, despite "broadly positive" Troika report ( Governor's Horst Reichenbach report in fact).

The German finance ministry has declared that there is no chance of a deal today on Greece's bailout programme, despite Athens approving its 2013 budget last night.

Ministry spokeswoman Marianne Kothe told reporters in Berlin that it wasn't realistic to expect a decision at tonight's Eurogroup meeting (of euro finance ministers), particularly as German MPs must have their say first.

Kothe said: Everyone is working under a lot of pressure to resolve questions which are still open...I think it's rather unrealistic to expect a final decision today as in Germany the Bundestag has to agree to it in advance.

There are also reports this morning that Jean-Claude Juncker, chair of the eurogroup, has also ruled out a decision this evening.

The precise whereabouts of the Troika report on Greece is another issue ... Germany's Kothe said today that she didn't think the final version was complete yet...in fact The German (Fourth Reich's ) Governor of Greece - Horst Reichenbach made no comments !!!!!

STEP BY STEP ..." goose" step that is ...!!!

The German military will in future be able to use its weapons on German streets in an extreme situation, the Federal Constitutional Court says. The ruling says the armed forces can be deployed only if Germany faces an assault of "catastrophic proportions", but not to control demonstrations. The decision to deploy forces must be approved by the federal government. Severe restrictions on military deployments were set down in the German constitution after Nazi-era abuses. The court says the military still cannot shoot down a hijacked passenger plane - fighter jets would have to intercept the plane and fire warning shots to force it to land. After World War II the new constitution ruled that soldiers could not be deployed with guns at the ready on German soil, the BBC's Stephen Evans reports from Berlin. The court has now changed that, saying troops could be used to tackle an assault that threatens scores of casualties. The judges had in mind a terrorist incident involving armed attackers in public places. German troops have been deployed abroad since the war, but it has been a gradual process. German warplanes have been used in the Balkans and troops are on the ground in Afghanistan, protecting construction workers, but able to return fire if attacked.

Romania has been rocked by political turmoil after parliament suspended President Traian Basescu from office, paving the way for a referendum on his future later this month. The procedure comes despite European Union and U.S. concerns over the status of democracy in the former communist nation.  Basescu was suspended from his job Saturday after 256 legislators voted in favor of a procedure that could lead to him being permanently removed from office. Only 114 lawmakers were against the action. Senate Speaker Crin Antonescu was appointed interim president.  Reacting to the vote, Basescu said he will now prepare for the July 29 referendum when Romanians will get a final say on his fate.  Basescu survived a similar vote in 2007. Analysts say he faces a tougher challenge this time, in part because of his declining popularity in a period of economic crisis in this nation of 19 million people.  Additionally, a recently adopted law requires only a simple majority of votes to push him out. Before, the requirements were more demanding. Romania's ruling center-left coalition says Basescu should leave office because he overstepped his authority and interfered in the government's work since his re-election in 2009.  In one of the latest stand-offs, a public quarrel emerged between the president and Prime Minister Victor Ponta over who should represent the country at a European Union summit. The Basescu has also been accused of alleged harsh remarks towards gypsies, also known as Roma, and disabled people, though the president has denied wrongdoing.  He told parliament before the suspension vote, the real reasons why the prime minister wants him to go is to increase his own power. Unlike in some European nations, Romania's president is chosen by popular vote and is in charge of foreign policy, the powerful intelligence services and the country’s defense policies.  The latest moves have prompted the U.S. and the EU to express worries over Romania's democratic credentials. The U.S. State Department said in a statement that it was concerned that developments in the country “threaten democratic checks and balances."  The EU's executive body, the European Commission, has also urged the government not to reduce the effectiveness of democratic principles and institutions, as the explained by commission spokesman Olivier Bailly.  "The rule of law, the democratic checks and balances and the independence of the judiciary are cornerstones of European democracy and indispensable for mutual trust within the European Union. Government policy and political action must respect these principles and values."
Bailly added that the latest developments threaten progress that was made in these areas since Romania joined the EU in 2007.  In addition to Basescu, Prime Minister Ponta has also come under opposition pressure to resign after an academic panel concluded that he copied a significant part of his doctoral thesis from other authors without proper attribution. Ponta, who calls the charges politically motivated, says they have been orchestrated by an adviser to Basescu.

IMF - John Lipsky, the acting managing director of the International Monetary Fund, has taken a tougher approach than his predecessor, Dominique Strauss-Kahn. Photograph: Aleofficials and diplomats in Brussels confirmed that the IMF threat to pull the plug on its funding – in stark contrast to the more emollient line of Strauss-Kahn – had been defused because of a German climbdown. As political turmoil continued in Greece on Thursday, with the prime minister, George Papandreou, scrambling to form a new government, the stage was being set for a political struggle between Europe's powerbrokers over the fine print of the proposed new €100bn-plus rescue of Greece. Berlin is deeply at odds with France and with the key EU institutions – the European Central Bank (ECB), the European commission, the presidency of the EU and the head of the eurozone, Jean-Claude Juncker, prime minister of Luxembourg – over the terms of a new deal. Germany was forced to agree to bail out Greece for the second time in a year under strong pressure from the International Monetary Fund following the resignation last month of its head, Dominique Strauss-Kahn, the Guardian has learned. Under its acting chief, the American John Lipsky, the IMF has taken a more hardline stance and it warned the Germans in recent weeks that it would withhold urgently needed funds and trigger a Greek sovereign default unless Berlin stopped delaying and pledged firmly that it would come to Greece's rescue.

AsiaNewsAgencies - China: Xintang: police and army occupy city to stop protests. Climate akin to martial law, with police patrolling every street, road blocks, orders for shops and restaurants to close early, people advised not to go out at night. Tens of thousands of migrants are ready to protest on the streets for justice and recognition, tired of constant harassment.Beijing (AsiaNews / Agencies) - The police are now patrolling the streets and putting roadblocks on main thoroughfares of Xintang in the city of Zhengcheng, to end to urban guerrilla warfare that first broke out June 10. But it is a deceptive calm, with tens of thousands of immigrants ready to explode with further protests and violence. Beijing (AsiaNews / Agencies) - The police are now patrolling the streets and putting roadblocks on main thoroughfares of Xintang in the city of Zhengcheng, to end to urban guerrilla warfare that first broke out June 10. But it is a deceptive calm, with tens of thousands of immigrants ready to explode with further protests and violence. summoned the managers of 1,200 companies in the area telling them to "pay close attention to their employees." In an atmosphere akin to martial law, shops and restaurants have been ordered to close early. Residents have been "advised" not to go out at night and not to post pictures of the clashes on line.
http://www.eucouncilfiles.eu/

George Papandreou should resign

George Papandreou pledges to form a new government - After a day which saw world stocks tumble, on which tens of thousands marched on parliament to oppose the swingeing austerity measures designed to stave off bankruptcy, George Papandreou effectively conceded that he had not been able to muster enough support in parliament for the cuts required by international creditors to enable Greece to balance its books. Papandreou has told his conservative opposite number, Antonis Samaras, that he would stand aside and make way for a new leader if the opposition joined his party in a national unity government committed to sweeping reform to pull Greece's economy out of its tailspin. It remained unclear whether the opposition New Democracy party would agree to the move. Party insiders indicated that it would only do so if the government renegotiated the terms of last year's €110bn (£96bn) international bailout package, designed to save Greece from default. "The most important member of a ship's crew is the captain, and the captain has to go," conservative deputy Theodoros Karaoglou said, according to Associated Press. "If we joined forces, we could go to our [creditors] together to negotiate and the results of course would be better." Greece's economy is drowning in more than €300bn of debt – around one and a half times more than the country's entire annual output. Unemployment has rocketed to 16.2%, and the economy is predicted to contract by as much as 3% this year, making it Europe's worst performing economy – and one of the worst in the world.

With Europe's debt crisis intensifying by the day, fear appears to be the single biggest factor motivating those in charge of policy on the common currency. But as finance ministers from the 17 euro countries debated how to bail out Greece for a second time in a year, before an EU summit on 25 June, the signs are not promising. In Athens, a day after Standard and Poor's gave Greece the lowest rating of any country it covers – lower even than Pakistan and Ecuador – the omens appeared to be particularly poor. Differences over involvement of private investors in the rescue package – which is seen as the key to getting Europe's paymaster, Germany, to agree to it at all – this week pushed the cost of insuring Greek government debt against default up to 1,600 basis points, a record high even by the standards set so far. More than ever, Papandreou appears stuck between a rock and a hard place. Faced with a €340bn (£300bn) debt projected to hit 160% of GDP by 2012, Greece is teetering on the brink of bankruptcy. In a country plagued by a shadow economy that accounts for almost 30% of GDP, the medicine prescribed by the EU, IMF and ECB in exchange for €110bn of emergency loans last May, has resulted in a deeper than expected recession with further cost-cutting measures now seen as crucial if Greece is not only to rein in its debt but make it sustainable.

- Romania’s major grain traders such as Cargill, Alfred C. Toepfer, Glencore and Nidera exported grain worth EUR1.3 billion from June 2010 through 2011, according to Victor Beznea, president of the Romanian Association of Farm Product Traders (ARCPA).

- The record-high EUR1.5 billion raised by the Finance Ministry last week from the foreign markets brings to over EUR4.5 billion the foreign currency debt accumulated by Romania since the beginning of the year.

According to the source, the U.S. carmaker will produce over 70 B-Max prototypes in Romania this summer. The car parts needed to assemble the B-Max models were produced at Ford's car plants in Germany. The B-Max minivans will be tested soon in Belgium, at Ford Lommel Proving Ground and in other countries. After tests are finished, the cars will be dismantled. Ford Romania will start the production of the new car model next year. B-Max will be produced exclusively in Romania. At the end of March, Ford finished installing the production lines for B-Max and a new family of engines at the Craiova car plant. Ford produced about 3,000 Transit Connect light commercial vehicles in Romania. The U.S. carmaker has invested EUR450 million so far in operations carried out in Craiova.

European Union - EU solidarity ?!...

French banks lead exodus of EU lenders from hardest-hit European economiesEuropean banks increase pressure on Greece and other struggling economies by refusing support for business dealsThe crisis enveloping Greece, Ireland and Portugal appeared to deepen after figures showed EU banks were refusing to support business deals in the EU's hardest-hit economies. Figures from the Bank of International Settlements (BIS) show French, German and UK banks have embarked on a mass exodus from Greece, Portugal, Spain and Ireland, in what analysts see as an effort to bolster their balance sheets and conform to new rules designed to protect financial institutions from going bust. The move is expected to add to tensions in Brussels over how to prevent Greece defaulting on its loans because vital business contracts will cost more to insure. French banks cut their exposure to Greece from $92bn (£57bn) to $65bn in the last three months of 2010. They also reduced their involvement in Ireland, Portugal and Spain, slicing their total exposure to the four hardest-hit economies by $112bn. Richard Batty of Standard Life Investments said the reduction in credit derivatives issued by French banks was due to "the reduced risk appetite of the major banks, and in parallel, a shift to bolstering capital positions to reflect the requirements of the Basle III rules". He said stress tests planned by Brussels for the summer could lead to a further exodus as banks sought to insure only the safest risks.

German and French banks held over two-thirds of the Greek government bonds at the end of last year, accounting for 70% of the $54.2bn owned by banks from 24 countries that report to the BIS.

Romania's Government will seek a confidence vote in Parliament to adopt the act on the country's administrative reorganization, Democratic Liberal Party general secretary Ioan Oltean announced in a press conference on Friday. The government's proposal is to reorganize the country into eight counties, from the current 41. According to Oltean, this new system would improve European Union fund absorption and increase the efficiency with which these funds are used. He pointed out that the EU has not explicitly asked Romania to implement a new territorial organization. The new counties would have their capitals at Cluj-Napoca, Brasov, Timisoara, Craiova, Constanta, Iasi, Ploiesti and Bucharest. The ministries' decentralized services would have eight local offices, instead of 41, bringing the authorities closer to the citizen, according to Oltean. He added that many matters handled by these services and by the county councils would be transferred to commune, town and city halls. Oltean added that the ruling coalition wants the 2012 local elections to use the eight-county administrative organization. Asked why the government has not held a public referendum or a survey on the issue, Oltean replied that they would block or delay reform.

BUCHAREST - Romania sold EUR1.5 billion in five-year bonds at an annual yield of 5.29%, in the first issue of the country's EUR7 billion medium term notes (MTNs) program, with orders books closing at EUR3 billion, a Finance Ministry official said Thursday. Meanwhile - Greece's crisis-hit economy expanded by a sickly 0.2% in the first three months of this year – even worse than first thought – as its fiscal austerity measures strangled demand, official figures have revealed. The bailed-out economy is now shrinking at an annual rate of 5.5%, instead of an initial estimate of 4.8%, the Greek statistical agency said on Thursday. Bond yields jumped after the announcement, with the government now facing paying 25.08% over two years if it tried to borrow from the financial markets. The cost of insuring Greek debt against default also hit new record highs. Athens is widely expected to receive a fresh bailout from its eurozone partners in the coming weeks, but Germany is locked in a standoff with the European Central Bank about the terms of any new assistance package, and whether Greece's private sector creditors will have to bear part of the cost. The ECB is concerned that forcing bondholders to take a loss could spark a catastrophic loss of confidence in Europe's banks, many of which are sitting on millions of euros-worth of Greek debt.

A further indication of Germany’s competitiveness is the constant high GDP share of the manufacturing industry over the past years. While other countries had to relocate production to other countries, Germany was able to keep a large part of the production at home. The German automotive industry is as a good example; the number of cars produced has remained relatively stable at around 5 million cars per year since 1999. However, the value of each car has increased significantly. Germany remains a market leader in many sub segments of the mechanical engineering and equipment manufacturing industry. The good overall economic situation was clearly reflected in the earnings of a lot of German companies. Car manufacturers have reported record sales, in particular driven by exports into booming emerging markets. In China the purchase of Audi cars has now surpassed that of Germany. Industrial and chemical companies were also able to increase sales and profits significantly. The stock price of German companies followed this positive earnings development. The ongoing uncertainty about a solution for the European sovereign debt crisis, stronger increased raw material prices as well as a possible headwind by a stronger euro are currently weighing on the stock market and could result in an higher volatility, especially during the summer months. Several economic indicators, like the IFO business climate index, could also get weaker and thus signal a slight slowdown of the economy in the second half of 2011. Therefore we have a conservative outlook for the DAX at the end of the year of 7600 to 7800 points. The mid-term outlook remains nevertheless positive and ideally new all-time highs for the DAX could already be within reach this year.

HAMBURG, Germany — First they pointed a finger at Spanish cucumbers. Then they cast suspicion on sprouts from Germany. Now German officials appear dumbfounded as to the source of the deadliest E. coli outbreak in modern history, and one U.S. expert called the investigation a "disaster." Backtracking for the second time in a week, officials Monday said preliminary tests have found no evidence that vegetable sprouts from an organic farm in northern Germany were to blame. The surprise U-turn came only a day after the same state agency, Lower Saxony's agriculture ministry, held a news conference to announce that the sprouts appeared to be the culprit in the outbreak that has killed 22 people and sickened more than 2,330 others across Europe, most of them in Germany, over the past month. Andreas Hensel, head of Germany's Federal Institute for Risk Assessment, warned, "We have to be clear on this: Maybe we won't be able anymore to identify the source." At an EU health ministers meeting Monday in Luxembourg, Germany defended itself against accusations it had acted prematurely in pointing to Spanish cucumbers. "The virus is so aggressive that we had to check every track," said Health State Secretary Annette Widmann-Mauz. The EU will hold an emergency meeting of farm ministers Tuesday to address the crisis, including a ban imposed by Russia on all EU vegetables.

Greek Accord - Factory-gate prices in the euro region rose 6.7 percent from a year earlier after increasing a revised 6.8 percent in March, the EU’s statistics office in Luxembourg said. That’s the first decline since August. Economists had projected a reading of 6.6 percent last month, according to the median of 21 estimates in another Bloomberg survey. The yield on Greek two-year debt tumbled 25 basis points to 22.59 percent. It earlier dropped as much as 78 basis points to 22.07 percent, the lowest since April 21. Ten-year yields fell eight basis points to 15.86 percent. The EU and IMF accord to pay the next installment to Greece under last year’s 110 billion-euro bailout paves the way for an upgraded aid package that includes a “voluntary” role for investors. Greek Prime Minister George Papandreou will aim to quell growing dissent this week within his Socialist party -- known as Pasok -- over the deeper austerity measures as voters’ patience wears thin and public protests mount. ‘Buying Time’ - “It’s a question of buying a little bit more time for letting Greece prove that they can, or cannot, put the reforms in place, but also to reduce the risk of contagion maybe to some of the other economies,” Laurent Fransolet, head of European fixed-income strategy at Barclays Capital in London said in an interview on Bloomberg Television’s “The Pulse” with Maryam Nemazee. Greece remains shut out of the financial markets a year after it became the first euro-region nation to request external assistance. Ireland and Portugal have since requested aid. The euro fell to a more than four-year low of $1.1877 on June 7, 2010, amid market fears of sovereign default. While the shared European currency has recovered, touching a 17-month high of $1.4940 on May 4, bonds from Greece, Ireland and Portugal extended their fall, pushing yields to new euro-era records last month as the market sought assurance that default will be avoided. Portuguese Election - Portugal’s Social Democrat leader Pedro Passos Coelho said he will seek to form a governing coalition with the third-placed People’s Party to enact austerity measures mandated by the nation’s 78 billion-euro bailout. “Early results that the socialist party had lost power and that center-right parties would be able to form a new majority government, avoiding a potentially damaging political stalemate, should be seen as a positive development for Portuguese credit,” Huw Worthington, a fixed-income strategist at Barclays Plc in London, wrote in an e-mailed note today. Portuguese 10-year yields fell four basis points to 9.77 percent, while the two-year note yield declined 14 basis points to 10.79 percent.

S&P warned that the re-profiling of loans would almost certainly be considered a default and lead to a further downgrading of Greece's debt. "Such a lengthening of maturities would constitute a default under our criteria because the sovereign debtor will pay less than under the original terms of the obligation," it said. A further downgrade would increase Greece's already sky-high borrowing costs. The yields on 10-year bonds are already in excess of 16%. S&P said that testing the effect of a voluntary exchange would be a tougher challenge but any hint of the word voluntary being used to disguise an imposed cut in loan valuations would also trigger a default notice from the ratings agency and a subsequent downgrade. Jim Reid, a credit strategist at Deutsche Bank, warned that a technical downgrade was unlikely to stop the EU going ahead with a restructuring of Greece's loan book. He said that EU banks could maintain the nominal value of the loans on their balance sheets despite the view of S&P and other ratings agencies that the loans were worth less after the restructuring. He said the banks and the EU would disguise the real effect of the restructuring. Without a material cut in loan values, hedging instruments, known as credit default swaps (CDS), can remain untouched. CDSs act as a form of insurance against a bond default by a company or country.

Speaking in Aachen in Germany, Trichet urged closer European integration as the means of imposing discipline on countries which failed to keep their public finances in order, monitor economic reform and provide a common approach to dealing with Europe's financial sector.
The ECB president said his plan would fall short of giving a pan-European finance ministry tax-raising powers, but suggested that the idea was a logical next step.
"In this union of tomorrow, or of the day after tomorrow, would it be too bold, in the economic field, with a single market and a single central bank, to envisage a ministry of finance of the union?" he said as he accepted the Charlemagne prize for contributions to European unity.
Trichet's intervention came on the eve of Friday's announcement of the terms Greece will have to accept for a second bailout from the EU and IMF.
Trichet acknowledged that a central ministry would be a radical step for the European Union and require a revision of its underlying treaty. While supporters of closer integration believe there is currently little political appetite in member states for a fresh transfer of powers to the centre, they argue that the only alternative to closer fiscal union will be the break-up of the single currency.