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.

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.

E. Coli Outbreak Linked to Aggressive New Strain - As the E. coli outbreak continues to ravage Germany and other parts of Europe, the World Health Organization said Thursday that the aggressive intestinal bacteria is a new strain never seen before. Meanwhile fears of the illness prompted Russia to ban imports of vegetables from the EU. Researchers are still desperately searching for the origin of the E. coli bacteria that has left 18 dead and infected hundreds of others in Germany and Europe. The number of cases within Germany continues to rise, with up to 2,000 reported cases of infection, several hundred more than at the beginning of the week. Following the death of another victim in Hamburg overnight, the World Health Organization announced that preliminary genetic sequencing had revealed the deadly strain is likely a mutant form of two separate E. coli bacteria that is new to scientists. The "unique strain has never been isolated from patients before" and has "various characteristics that make it more virulent and toxin-producing," WHO food safety expert Hilde Kruse told news agency AP.
The mutant bacteria was identified through cooperation between scientists at the University Medical Center Hamburg-Eppendorf (UKE) and the Beijing Genomic Institute. "This strain is only a very distant relative of conventional EHEC bacteria," said UKE bacteriologist Holger Rohde. The newly discovered enterohemorrhagic strain of the bacterium Escherichia coli (EHEC) causes watery or bloody diarrhea. In severe cases, EHEC also attacks the blood, kidneys and brain, causing a life-threatening complication known as hemolytic-uremic syndrome (HUS). Thousands of people in nine European countries have been infected by the bacteria, with nearly 500 developing the HUS complication.

Google US accounts hacked

Google has warned that computer hackers in China had broken into the Gmail accounts of several hundred people, including senior government officials in the US and political activists. The internet giant said all victims had been notified and their accounts had been secured. The attacks, announced on Google's blog, are not believed to be tied to a more sophisticated assault originating from China in late 2009 and early last year. That intrusion targeted Google's own security systems and triggered a high-profile battle with China's Communist government over online censorship. The tensions escalated amid reports that the Chinese government had at least an indirect hand in the hacking attacks, a possibility that Google did not rule out. In the latest incident, Google believes Chinese hackers tricked people into sharing their passwords in so-called "phishing" scams

In Athens, the spirit takes hold just before the sun has set.

In Athens, the spirit takes hold just before the sun has set. - It is then that Greeks, young and old, married and single, employed and unemployed flood the square in a wave of protest against the austerity and recession that has brought their country to the brink of despondency and despair. "Openly we say that we have been inspired by the demonstrators in Spain," said Simos Adamopoulos, an organiser who has spent three nights sleeping in a tent in the square. "Our motto is 'the battle that is never waged is never won.' We will stay here, and in squares up and down the country for as long as it takes." While even protestors admit their endgame remains unclear, their motivation beyond the realms of party or political creed has surprised even the most cynical. As in Spain the demonstrators – estimated in Athens alone to have exceeded 50,000 on Sunday – have been lured into action by Facebook. Motivated by a peaceful desire to vent their spleen, they have turned up at rallies with pots and pans rather the more lethal Molotov cocktail preferred by violence-prone youngsters. "But," says Adamopoulos, "we're also really disgusted with the system, with the political establishment, with all those crooks and thieves. As we've got poorer they've got richer and that you could say is also spurring us." Greece is in a terminal debt trap. Further government austerity will just kill the economy, decrease the GDP further and hence increase the debt/gdp ratio . More bailouts that will never be repaid, will temporarily prop up the Greek economy but will also increase debt and will also make the situation worse. So the question is; "why won't the central banks simply allow a haircut?" The only reasonable answer is that they know a haircut would tip other Euro countries and banks into insolvency and set off a domino effect . Hopefully all persons reading this have hedged their positions against such a cascading sequence of defaults. If not, act soon, or forever live with the consequences. For the common person who expects decent employment opportunities, a government pension, and free health care, there is simply nowhere to hide.

IMF to judge Greece as protests swell

ATHENS (Reuters) - European Union and IMF officials are expected to deliver their verdict this week on Greece's faltering drive to bring its budget deficit under control, but ordinary Greeks have warned that their patience is running thin. Greece last year won a 110 billion euro (95.4 billion pound) rescue package from the EU and International Monetary Fund, but since then has struggled to meet its deficit reduction targets, heightening the risk of a default on its 327 billion euro debt -- equivalent to 150 percent of economic output. European Central Bank board member Lorenzo Bini Smaghi issued a dire warning against default and told the Financial Times it was a "fairytale" to think that Greece's debts could be restructured in an orderly way. "If you look at financial markets, every time there is mention of a word like 'restructuring' or 'soft restructuring' they go crazy - which proves that this could not happen in an orderly way, in this environment at least," he said. He added: "If Greece defaulted, the Greek banking system would collapse. It would then need a huge recapitalisation -- but where would the money come from?" The Italian said Greece could instead reduce its debt by selling assets and changing its tax and expenditure systems. "If you look at the balance sheet of Greece, it is not insolvent." But Socialist Prime Minister George Papandreou has failed to win backing from the opposition to adopt fresh austerity steps, more economic reforms and faster sales of state assets, as demanded by the EU and IMF.

Goldman Sachs Asset Management warning

Jim O'Neill, chairman of Goldman Sachs Asset Management, warned that the Irish rescue package did not solve the problems at the heart of the single currency.
"Unless there's an underlying solution to not just the debt challenge, but also to … how European monetary union sits together involving all these domestic political partners, how can we forget about the problems lurking with Portugal and Spain," O'Neill said in a TV interview.
Other market experts were also concerned about the eurozone. Graham Turner of GFC Economics said the solution for weak members might be for Germany to walk away from the single currency.
He suggested that Austria, Finland, the Netherlands and Germany could form a new deutschemark bloc which would allow the other 12 members of the eurozone to devalue and reflate their way out of the crisis. "It has to be a better option than the present straitjacket of a single currency," said Turner.
Stock markets tumbled as anxiety about contagion from Ireland was exacerbated by news, just as European trading began, that North Korea had shelled the South Korean island of Yeonpyeong, near their disputed western border.Wall Street Journal,The Washington Times,Athens News,The New York Times,USA Today