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.

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.

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.

LONDON -- Scientists on Thursday blamed Europe's worst recorded food-poisoning outbreak on a "super-toxic" strain of E. coli bacteria that may be brand new. But while suspicion has fallen on raw tomatoes, cucumbers and lettuce as the source of the germ, researchers have been unable to pinpoint the food responsible for the frightening illness, which has killed at least 18 people, sickened more than 1,600 and spread to least 10 European countries. An alarmingly large number of victims - about 500 - have developed kidney complications that can be deadly. Chinese and German scientists analyzed the DNA of the E. coli bacteria and determined that the outbreak was caused by "an entirely new, super-toxic" strain that contains several antibiotic-resistant genes, according to a statement from the Shenzhen, China-based laboratory BGI. It said the strain appeared to be a combination of two types of E. coli

America risks losing its triple-A credit rating unless swift and significant progress is made over its debt ceiling, Moody's has warned, piling fresh pressure on the US a few hours before crucial employment data is released. The ratings agency is concerned by the lack of progress made by the US Treasury and Congress over whether to allow the US national debt to increase. It said that the risk of the US defaulting on its loans was "very small but rising", suggesting that the country might not deserve its AAA rating. "Although Moody's fully expected political wrangling prior to an increase in the statutory debt limit, the degree of entrenchment into conflicting positions has exceeded expectations," the agency said. "The heightened polarisation over the debt limit has increased the odds of a short-lived default. If this situation remains unchanged in coming weeks, Moody's will place the rating under review." Under US law, the country's national debt may not exceed $14.3 trillion (£8.75tn). That figure was reached last month, forcing America to dip into two government pension schemes to service its debts. That, though, will only tide the US over until the start of August.