Theon Sunday as a crucial ally of Silvio Berlusconi demanded that the government cut taxes, despite the serious implications that this would have on Italy's public finances. Umberto Bossi, the Northern League leader and arbiter of the prime minister's fate, brushed aside concerns that Italy could go the way of Greece when he told cheering supporters in Pontida that the tax burden in Italy had gone "beyond all limits". Bossi, Berlusconi's partner in Italy's rightwing coalition government, has been under huge pressure from his party's rank and file since local elections last month showed a sharp fall in the league's support. Tax cuts would offer both men the promise of regaining their lost popularity, but could widen the budget deficit of a country that has the eurozone's biggest public debt. On Friday, the rating agency Moody's warned it could downgrade Italy's credit ratings because of concerns that the crisis in Greece could increase eurozone interest rates and derail Italy's already precarious economic recovery. The finance minister, Giulio Tremonti, has been urging prudence on his cabinet colleagues and was reported by La Repubblica to be planning a mini-budget that would include deficit reduction measures totalling €40m (£35m). But Bossi told his supporters: "Tremonti says that we risk ending up like Greece. But, whatever, something has to be done to bring down taxes." While the latest flare-up of the crisis in Europe seems like a summer repeat from 2010, one element is conspicuously absent: doomsday forecasts for the euro. Last spring, as Greece first teetered on the brink, there were rising expectations that the euro would by now have plunged against the U.S. dollar, with some forecasters looking for declines approaching 20%. Talk that the crisis would lead to a breakup of the euro zone added to the gloom. From May to June 2010, analysts on average cut their midyear 2011 euro forecasts to $1.1950 from $1.2920, according to Consensus Economics. threat of a new crisis on the eurozone's southern flank loomed

Saturday 6/18/2011

GERMANY - Chancellor Angela Merkel of Germany has sued for peace with the European Central Bank (ECB), following weeks of feuding over how to rescue Greece from the devastating debt crisis threatening the future of the euro single currency. Merkel announced on Friday that the decisions on a new three-year bailout package for Greece, tipped to run to €120bn (£106bn), would need to be agreed with the ECB. At a Berlin summit with the French president, Nicolas Sarkozy, Merkel softened her terms for the Greek bailout, urged a quick decision, stressed that any participation by private creditors in the rescue should be voluntary, and insisted that a new package with Greece would be agreed together with the ECB. Her climbdown was welcomed by the financial markets, as the prospect of Greece suffering a catastrophic disorderly default receded. The euro rallied strongly, gaining more than one cent against the dollar. Europe's major stock markets also closed higher as traders took a more positive view of the Greek situation. The German media, though, promptly predicted that Merkel's olive branch could cost her politically at home. "For the German government, this is a remarkable shift," said the liberal Sueddeutsche Zeitung. "The chancellor has backed off from a central German demand," said the conservative Frankfurter Allgemeine Zeitung. In a research note, JP Morgan said that Berlin seemed to be dropping its insistence on a bond swap by Greece's private creditors, the central factor that the ECB feared would cause the country to be declared in sovereign default. The Berlin summit came at the end of a week of intense political and market turbulence, with riots on the streets of Athens, a Greek government on the brink of collapse, and bad-tempered disarray among EU leaders. And despite the apparent progress, it remains to be seen how the second Greek bailout in a year will be structured .

The International Monetary Fund for the first time on Friday publicly called on the private sector to help finance Greece and other European peripheral countries, warning that failure to help fund the ailing economies could force sovereign-debt defaults and risk derailing the global recovery. After weeks of brinksmanship over Greece, Germany gave ground Friday, improving the chances that the struggling country will avoid a messy debt default this year that could threaten the stability of the euro currency area. German Chancellor Angela Merkel dropped her government's insistence on forcing a rescheduling of Greek government bonds, ending a six-week standoff that threatened to halt any more loan payouts to Greece. Instead, she said was open to a voluntary rollover of the country's debt. The move came as the Greek prime minister reorganized his government, naming a new finance minister to help overcome public resistance and push an austerity package into law. Greece's financial future appears to be in good hands for the next month as Germany and France have agreed on a plan to handle Greek debt. WSJ Brussels bureau chief Stephen Fidler discusses with the News Hub panel. AP Photo/Ferdinand Ostrop . The focus of the Greek discussions now shifts to Luxembourg on Sunday and Monday, where European finance ministers are due to hold talks. A new aid package for Greece would stave off the threat of a Greek debt default in the short term. But it wouldn't address the bigger challenge facing Europe: the likelihood that Greece won't be able to repay all of its debt, and the difficulty of cutting Greece's debt burden without sparking capital flight from other struggling countries around the euro. Personally, I have no doubt that the European oligarchy will do everithing possible to rescue the ill conceived "euro" ...a burden for all the europeans.

German Chancellor Angela Merkel and French President Nicholas Sarkozy will meet in Berlin Friday - Event Risk - The Greek cabinet was reshuffled on Friday and will face a vote of confidence by Tuesday night. The political moves could be another potential flashpoint in a country already beset by fierce anti-austerity strikes. But some analysts said the euro was holding up well despite the uncertainty as the market held out hopes a solution could be reached and a new three-year bailout plan would be decided in July. "It's difficult keeping up with the event risks but policymakers are whittling down a timetable," said Tom Levinson, FX strategist at ING, adding euro/dollar at $1.4100 could turn out to be good value if progress is made. "This Sunday they should agree on another aid tranche for Greece and in July they should be agreeing the main aid package. Unless something major goes wrong with either the confidence vote or Germany does not soften its terms I think the euro will do better." Investor risk appetite was also hampered on Friday by weak U.S. regional manufacturing data that cemented concerns about a soft patch in the U.S. economy, causing prices in Asia to slump. Economic and Monetary Affairs Commissioner Olli Rehn said euro zone finance ministers will decide at a meeting on Sunday to disburse the next tranche of emergency loans to Greece in early July and decide on the new three-year bailout on July 11. Friday's and Sunday's meetings will be watched closely by the market for reassurance the Greek debt crisis can be resolved. "As an investor I would be quite nervous," said Ankita Dudani, G10 currency strategist at RBS. "There is a lot of uncertainty out there over what Germany wants and it is quite hard to see them coming up with something that works for everyone." Discord between the euro zone's paymaster Germany and the European Central Bank, backed by France, has spooked investors across asset classes, with the European stock index on track for its longest run of weekly declines since January 2008. Germany is insisting banks, pension funds and insurance firms that hold Greek debt swap their bonds for new ones with longer maturities.But fearful this solution could create a "credit event" and prompt rating agencies to label Greece in default, the ECB, European Commission and France all favour a softer option under which holders of Greek bonds would be asked to buy new Greek debt as their holdings mature.

"French for a change"

«Faire preuve d'esprit de responsabilité et de sens du compromis.» Nicolas Sarkozy a lancé jeudi un appel solennel aux Européens pour sauver la Grèce. Attendu ce matin à Berlin, le président français sait qu'il devra déployer des trésors d'imagination et de persuasion pour faire bouger Angela Merkel. Alors qu'Athènes, plongé dans une crise politico-financière, est au bord de la faillite, la chancelière est saisie d'un nouvel excès d'attentisme. Confrontée à une fronde au sein de sa majorité, Merkel irrite ses partenaires européens en faisant monter la pression: elle s'obstine à conditionner toute nouvelle aide financière grecque à une participation des créanciers privés afin de leur faire partager le fardeau des contribuables allemands. La position de Berlin s'est toutefois un peu assouplie ces dernières heures. Le gouvernement allemand, qui se heurte à une fin de non-recevoir de la Banque centrale européenne (BCE), réclamerait désormais un report au mois de septembre de la décision concernant une rallonge à la Grèce, initialement attendue au Conseil européen de la semaine prochaine. Jouer la montre lorsqu'il y a urgence, pour tenter d'infléchir le débat: Berlin avait déjà usé de cette tactique dans le premier acte de la crise grecque, en mai 2010, en rechignant à mettre la main à la poche pour Athènes. (source Le Figaro)

PARIS—France's Finance Minister Christine Lagarde is preparing a global tour including stops in China, Brazil and India to rally support for her bid to run the International Monetary Fund, and is starting to lay out her agenda—including making the fund a more legitimate representative of emerging countries. In an interview at her Paris office, Ms. Lagarde rebuffed some of the concerns that have emerged about her candidacy, which she officially unveiled on Wednesday but has been preparing for several weeks. Among them: Whether a European should lead an institution that has been trying to better represent emerging nations, even while a top global economic priority is containing Europe's own debt crisis. At a summit of Group of Eight leaders in Deauville, France, Mr. Sarkozy praised Ms. Lagarde on Thursday and appeared to underscore broad support for her from other countries. "From what I have heard, everyone thinks Christine Lagarde is a woman with many qualities," Mr. Sarkozy said, adding that leaders discussed the succession issue on the sidelines there. The U.S. has been careful not to show its hand, but Secretary of State Hillary Clinton said Thursday that "unofficially," the country supports women in top jobs to head big organizations.

Last week saw real progress in reaching a solution to the Greek, Portuguese and Irish debt crises. It is now recognized that these countries can never, ever, repay their debts, certainly not on time, and more than likely not in full. A default by any other name is a default. It might doff its name, as Juliet thought Romeo might do, and choose "repositioning," or "soft restructuring," or "voluntarism," but it remains a default. If the renaming permits banks to continue the fiction that Greek paper is worth what is inscribed in their ledgers, so be it: sooner or later reality will catch up with them just as it has with the profligate governments now at the mercy of their euro-zone benefactors. No need to rehearse the arithmetic that has appeared in this and other columns. It is enough to point out that the bailouts assumed that the recipient governments would be able to return to the financial markets after a period of reliance for cash on the European Central Bank, the International Monetary Fund, and their euro-zone partners. In short, the eurocracy devised a plan for coping with a liquidity crisis when these countries were facing a solvency crisis. Diagnose the disease incorrectly, and the prescribed medicine will make the disease worse by prolonging the period before which a proper diagnosis is developed.

BUCHAREST- ROMANIA - The National Federation of Romanian Agricultural Producers (FNPAR) warned that the unfavorable weather conditions and lack of agricultural strategies will force up food prices in the upcoming period. Data show the rye production will decrease by 22.9% this year compared to 2010, the rape production will drop 22% and the oleaginous plant production by 7.6%, FNPAR leader Vorel Matei said in a press release. He pointed out that the country's irrigation system is not functional. The federation called on the ministry to draw up viable agricultural strategies to help the agriculture sector and prevent food prices from rising. Agriculture Minister Valeriu Tabara said in April there is no reason why food prices should go up significantly this year. Tabara said prices will remain more or less constant, since producers are able to cover their costs and turn a profit. The shelf prices of food, he said, might go down if Romania can build an integrated farming system.

The European Bank for Reconstruction and Development Friday revised upward its forecast for Romanian economic growth to 1.8% in 2011, from 1.1% previously, saying it expects harsh austerity measures implemented under a multilateral financial program will pay off. "In Romania, the government has managed to complete successfully the IMF program by implementing harsh austerity measures that will keep the fiscal accounts under control," EBRD said in its Regional Economic Prospects report. The bank said the southeast Europe continues to lag behind other regions in terms of the pace of recovery from the crisis, with the exception of Turkey, where growth is now proceeding at a rapid pace. "The one bright spot is the external sector, where exports in most countries are growing rapidly reflecting both a base effect from the deep slump in 2009 and renewed global demand for key exports from the region," the report noted. However, except in Turkey and Romania, domestic demand remains sluggish as financial systems continue to unwind imbalances after the pre-crisis boom and consumer and investor confidence stays low, EBRD said. For 2011, EBRD expects the economy will pick up to 2.2% in the region, up from a growth of 1.9% previously predicted.

BRUSSELS - BERLIN: Eurozone governments are considering a plan to prevent a Greek default under which private investors would be asked to maintain their exposure to its debt and Athens would receive a new package of EU/IMF aid, eurozone sources said. Sources spoke of the new strategy on Thursday after ECB raised the stakes in its bid to prevent a restructuring of Greek debt by telling governments it would refuse to accept the bonds as collateral in the event of such a move. The threat, made by ECB executive board member Juergen Stark at a conference in Athens on Wednesday came after European finance ministers raised the possibility of a "soft restructuring" via debt maturity extensions earlier this week. One source with insight into European discussions on Greek debt said any "soft" or "hard" restructuring that might trigger a "credit event" - or the payout of default insurance contracts - was now off the table. Instead of a maturity extension, which might decrease the value of bonds and trigger such an event, banks would be encouraged to maintain their holdings of Greek debt and buy new bonds to replace issues as they matured, the source said. This would be done in combination with a new package of Greek reforms and austerity, as well as more EU/IMF money to secure Greece's funding needs through 2014. "We hope to have an agreement by the end of June," the source said.

IMF - press release

Strauss-Kahn Resigns - In a letter to the board, Mr. Strauss-Kahn said: "I deny with the greatest possible firmness all of the allegations that have been made against me." The letter said Mr. Strauss-Kahn, being held in a New York jail on sexual-assault charges, would resign with immediate effect. "I want to protect this institution which I have served with honor and devotion, and especially—especially—I want to devote all my strength, all my time, and all my energy to proving my innocence," the letter said. The IMF, which released the letter just after midnight Thursday, said it "will communicate in the near future on the Executive Board's process of selecting a new Managing Director." It added that John Lipsky remains as the acting head. The resignation brings a quick end to the paralysis that has gripped the IMF since Mr. Strauss-Kahn was arrested several days ago. The IMF is in the midst of negotiations about the next steps to take in resolving Greece's financial problems and his absence from the talks has been seen as a major problem. His resignation will put in high gear the global search for a replacement. By tradition, a European is selected to head the IMF and French Finance Minister Christine Lagarde is considered the front runner.

Romania went up four places to 50th in the annual IMD World Competitiveness report, with a total score of 57.497 out of 100 points possible.

Romania Up 4 Notches In IMD 2011 World Competitiveness ReportHong Kong and the USA were tied for number, as both received a score of 100, followed by Singapore, with 98.6 points.In Central and Eastern Europe, Estonia is ranked best, on the 33rd spot, followed by Poland (34th), Turkey (39th) and Lithuania (45th).The IMD's report ranks 59 states in terms of global competitiveness.

Buxelles on Greece - While Juncker's and Rehn's statements marked a significant shift in official comment on Greece's predicament, there was apparent disagreement among other senior officials about whether such a move was the right thing to do, although that may have reflected the confusing array of phrases used. "Restructuring, rescheduling -- off the table," French Economy Minister Christine Lagarde said late on Monday, after Juncker had hinted at a "reprofiling" of Greek debt, a way of extending the maturities on its loans without going through a more fundamental restructuring process. "A restructuring or a rescheduling, which would constitute a default situation, what we would call a credit event, are off the table for me," she said. European Central Bank governing council member Ewald Nowotny told Austrian radio that a "soft restructuring" was not on the cards, insisting that Greece needed to shore up its finances. While all EU officials have rejected the idea of a full-on default, they have now introduced at least three terms to refer to the possibility of some alteration in the repayment schedule of Greek debt: restructuring, rescheduling and reprofiling. From the financial markets' point of view, there may be little difference among them. The manager of a debt fund in the United States joked that the only time he had heard the word "reprofiling" used was in reference to a nose job. But sovereign debt analysts draw a distinction between restructuring, which involves enforced losses, and "reprofiling," when bondholders are asked to exchange short-term debt for longer-dated bonds with a similar coupon, thereby altering the profile of the yield curve and effectively giving the debtor more time to repay the loan.

European governments are wrestling with the prospect of a fresh bailout for Greece a year after they committed €110bn (£125bn) to Athens, under pressure from Washington and Beijing to calm the markets and stabilise the euro. The meeting of the 17 finance ministers of the eurozone was overshadowed by the absence of Dominique Strauss-Kahn, head of the International Monetary Fund and French presidential hopeful, who is facing sexual assault charges in New York. Strauss-Kahn has been a key player in the Greek drama and had been due to attend the first-night dinner in Brussels. The ministers – along with the 10 EU finance ministers from outside the single currency, including chancellor George Osborne – agreed on a €78bn bailout for Portugal, the third rescue of a eurozone country in a year. They also signed off on the permanent eurozone bailout fund, the European stability mechanism, which is to shore up the currency from 2013. They were expected to agree that Mario Draghi of Italy be appointed the next head of the European Central Bank in Frankfurt. With governments reeling from French socialist Strauss-Kahn's arrest on charges of attempted rape, the meeting in Brussels was also the first chance for ministers to discuss who would be the next head of the IMF in Washington; the post is traditionally held by a European. The German chancellor, Angela Merkel, was the first to say that Europe should retain its prerogative over the post, amid calls that it was time the IMF job went to someone from the emerging economies. "We know that in the mid-term, developing countries have a right to the post of IMF chief and the post of World Bank chief," she said. "I think that in the current situation, when we have a lot of discussions about the euro, that Europe has good candidates to offer."

Greece's Prime Minister has hit out at fellow European nations for demanding "islands or monuments" as security for bailout loans ahead of a gathering of European finance ministers in Brussels on Monday to discuss the country's ailing finances. Despite the conviction in financial markets that Greece's debts are unsustainable and will ultimately have to be restructured, eurozone ministers appear determined to top up last year's €110bn (£96bn) rescue package while forcing the beleaguered country into an ever tighter fiscal squeeze. Prime minister George Papandreou gave a hint on Saturday of his frustration over the terms being discussed by creditor nations, which include Germany and France, by suggesting that they might demand a mortgage over Greece's historic antiquities – or even a lien over some of the country's Aegean islands. "I want to add one thing on which we are very sensitive: to ask us for an island or a monument as a guarantee is nearly an insult," Papandreou told Italy's Corriere della Sera newspaper. "The people expect our word and our actions are a sufficient guarantee." Athens has announced a list of state assets, from airports to motorways, that will be sold off to raise €50bn over four years, but there are concerns that the process has stalled. The country will come under pressure to step up austerity measures in exchange for a fresh bailout at Monday's meeting.

Papandreou States: “There is No Going Back on the Euro for EU” - The Greek debt is manageable without restructuring, Prime Minister George Papandreou stressed in Oslo on Friday. Addressing the Progressive Governance Conference themed “A Post-Crisis Agenda for the Centre -Left: Securing Shared Prosperity”, organised by the think tank Policy Network, Papandreou added that: “We have decided to remain and to safeguard the Euro”.
Papandreou outlined a series of measures being implemented by the Greek government, such as the opening of so-called closed-shop professions, and changes to taxation and the social security system. As a result, he is expecting a 5 percent decrease of the deficit annually and an increase in exports. He further pointed out the positive signs in the tourism sector, while regarding the manageability of the debt he cited a relevant appraisal by the International Monetary Fund (IMF). “The Greek drama has become a European drama,” the Premier said, adding that in the midst of the crisis the European identity, European solidarity and crisis management ability were being put to the test.

José Manuel Barroso, the president of the European commission which initiates and polices EU law, told the centre-right government he had "important doubts" about whether it was complying with European and international law. He warned the Danes against acting unilaterally and threatened to take Copenhagen to the European court of justice. "We will take all necessary steps to ensure the full respect of the relevant law," he said in a letter to the Danish prime minister, Lars Lokke Rasmussen. Denmark stunned its EU partners on Wednesday by announcing, without consultation, that it was reintroducing customs controls and border checks on the frontiers with Germany and Sweden as part of a campaign said to be directed at combating transnational crime and thwarting mafias from eastern Europe. Brussels suspects Denmark could be in breach of single market rules and the Schengen agreement, which has abolished passport controls in 26 countries, including 22 of 27 EU states. The decision was a concession to the far-right populist Danish People's party, which is not formally in government but whose votes were needed for the coalition to win support for long-term budget, welfare and retirement policies. The commissioner for EU home affairs, Cecilia Malmstrom, a Swedish liberal, reinforced the message. "The commission's preliminary assessment raises real concerns that, if implemented as announced, the measures foreseen could be in breach of the obligations assumed by Denmark under EU and international law. "The commission stands ready to continue dialogue with Denmark," she said. "But it will, if needed, use the tools at its disposal to guarantee the respect of EU law.''

BUCHAREST - ROMANIA - Public-Private Partnerships (PPP) does not mean that the Government comes with "the plot" and then sits around waiting for investors to bring the money, do the project and then, share the benefits with the state, although quite a few government officials believe this is how things are. "It is an error of perception. In very few real-life situations the state makes the plot available and then sits around waiting. If this is the approach, it's a mistaken one. PPP entails government funding, government guarantees and indirect funding. PPP means more than putting an idea into practice, it means sharing risks. In order for the investor to take on the full risk, one would need to have an extremely tempting project, but such projects are not very often to come by," says Florian Niţu, managing partner of Popovici Niţu & Asociaţii law firm, who specializes in public-private partnerships. The Government has recently approved a list of 17 major projects (highways, dams, bridges) that it wants to build through public-private partnerships, following the modification of the PPP law through an emergency ordinance last month. How is the Government planning to attract investors into these projects worth tens of billions of euros? Marin Anton, secretary of state in the Environment Ministry, explained the Government's philosophy yesterday at the seminar titled "The week of responsibility - Companies' social responsibility": "The Government has done its job. Now the private sector is expected to come with projects to the Government. You have to use the legal framework that the country and the Government has made available for you. We want the state to be involved as little as possible. The legislative and the conceptual parts are ready. It is companies' duty to develop their business because this is what they make money from." (Z.F)

OAO Sberbank, Russia’s largest lender, wants to buy the international division of Austria’s Volksbanken AG Group without its Romanian unit to avoid consolidating its European Union business in the eastern European country, Mediafax reported, citing unidentified people familiar with the matter. Sberbank has asked Volskbank to exclude the Romanian unit, its biggest in eastern Europe, after visiting the Bucharest- based lender and meeting with the National Bank of Romania three weeks ago, the news service reported today, citing the unnamed bank industry people. Romania’s central bank would be the main supervisor of the Russian bank’s operations in the EU after the potential deal, according to Mediafax.

The new accounting law, modified through a government emergency ordinance, for the first time makes a clear distinction between organising and keeping the books, versus doing more advanced reporting (an accountant's job) and signing for it. The Romanian accounting system takes one more step towards deregulation, which brings it closer to the Anglo-Saxon school, says Marin Toma, chairman of the Body of Expert and Licensed Accountants of Romania (CECCAR), who has been running one of the most important and stable bodies in Romania for the last 18 years. Companies with turnover or overall assets worth under 35,000 euros, which will hire based on a contract or on a service agreement graduates of economic faculties to keep the books, risk a lot, because these graduates will be responsible not only for keeping the books, but also for putting together the accounting records and signing for them. "As an entrepreneur, you have to be really adventurous to accept something like that. I would separate the two processes (organising and keeping the books, and doing accounting and signing for it) because the risk is quite significant. At big companies, only those who have the right to sign can be held accountable. For instance, for a fictitious invoice introduced in the cost category, both the entrepreneur and the graduate of an economics faculty are held to account, it is considered a crime," Toma says. A novelty that the accounting law brings is that these graduates of economics faculties will be able to organize, keep the books, as well as do accounting and sign financial statements