The China Securities Regulatory Commission granted the first batch of licenses under a newly launched trial program that allows yuan funds raised offshore to be invested in China's capital markets, according to some of the funds and people familiar with the situation. The Hong Kong subsidiaries of asset managers Harvest Fund Management Co., E Fund Management, HuaAn Fund Management Co. and HFT Investment Management received the Renminbi Qualified Foreign Institutional Investor licenses today, according to the funds. Renminbi is another name for the Chinese currency.

There is little doubt that European banks need shoring up right now. That fact was made clear Wednesday, when 523 banks tapped the European Central Bank for a record 489 billion euros (nearly $640 billion) in loans. Compared with their American peers, they have been much more dependent on borrowing in recent years to finance their lending binges. On average, European banks’ loan books exceed their deposits by 1.2 times. In the United States the average loan-to-deposit ratio is 0.70. The upshot is that it will probably take much longer for Europe’s banks to unwind their bad loans and debt than it has for American banks. The European Banking Authority, after a third round of stress tests in October, has ordered Europe’s fragile banks to raise more than 114 billion euros in fresh cash in the next six months. By June 2012, the region’s financial institutions will need to increase their so-called core Tier 1 capital ratio — the strictest measure of a bank’s ability to resist financial shocks — to 9 percent of assets. That ratio, higher than the 5 percent preliminary target that the Federal Reserve set for American banks this week, reflects the acute capital strains that European banks are facing. To meet the new European standard, analysts predict that the region’s banks could end up selling assets, shrinking loan books and shutting down foreign subsidiaries in a de- leveraging process that may exceed 3 trillion euros in the coming years. And unless they are able to find better methods to restore their balance sheets — including direct support from their equally stressed national governments — many banks could well end up failing, analysts warn.

Wow, the ECB seem to be able to see into THE PAST.

The ECB said the "risks to euro area financial stability increased considerably in the second half of 2011". It said "positive market responses" to European summit agreements had been "short-lived – indeed, a bumpy ratification process appears to have contributed to additional market uncertainties."" Wow, the ECB seem to be able to see into THE PAST. I'm in awe of their genius. I mean, absolutely NOTHING like this was remotely on the radar of a at least a few billion people. Speaking for myself I thought Europe was working fine and had things thought through until that bombshell. I was so impressed I stopped reading on the assumption that brainpower like that would naturally fill the rest of such a report with totally rational steps to a brighter future. A little bird tells me though that that isn't actually the case and that the ECB see the solution as implementing more of the same policies which THEY THEMSELVES report have already failed - and this despite their unique hindsight genius??? I notice also that the E in ECB stands for Europe, much like the E in 'Euro' stands for Euroland. But then someone else pointed out to me that the E in 'Euro' is not the same as the E in EU, although it is the same as the E in ECB, but only on a waning moon when the morning of the next solstice coincides with the witching hour according to CET, although the E in that is not the same as the E in EU nor is it the same as the E in 'Euro' nor is it the same as the E in ECB nor the E in, well, 'Europe' for that matter. I'm confused frankly. I may well be thick but might this mean that Europe is actually being run by complete "arseholes"?

It is not difficult to conjure up doomsday scenarios. Here are just three: First, the global financial system is exposed as a giant pyramid selling scheme – piles of dodgy loans leveraged up against inadequate capital base. The house of cards collapses and the global economy implodes. Secondly the global economy is panning out the way Marx said it would, in a race to the bottom as the owners of capital look for ever-cheaper sources of labour to prevent profits falling, leading eventually to class war. And thirdly, the stresses and strains in the global economy are symptoms of a planet operating well beyond its carrying capacity. Environmental Armageddon awaits. Were any of these dystopian visions of the future to come to pass, they would make the 1930s seem pretty benign by comparison. All that said, there are big differences between the world of 2011 and that of 1931. For one thing, in the west we are all a lot richer than we were 80 years ago and have more fat to live off. Emerging economies, such as China, Brazil and India, have been growing fast and while all three have wobbled recently, they are still expanding at a fair old lick. Prices are rising not falling, unemployment is nowhere near as high as it was during the Great Depression and for those unfortunate enough to be out of work, welfare states are bigger and more generous.

... in the end the Euro breaks up.

I think we will find that this €200billion back door funding through the IMF will not happen - the IMF have said that money given cannot be prioritised to a specific area. Mario Draghi has also pointed out that it would contravene EU treaty law (not that means much these days) but this fund was part of the deal that Merkozy tried to foist on the UK and the other non-euro countries along with the FTT. The UK or rather Cameron did not agree to be part of it, therefore I don't think he will. Also both Cameron and Osborne have pointed out previously that the IMF cannot be used to support a currency. Can you imagine the fall out if every penny of the government's limited spending cuts and savings were suddenly being seen to being sent to bailout the Euro. There would quite rightly be a run on the pound, our interest rates would have to go up, more QE, more inflation. However, when is a veto not a veto? When it is exercised by the UK. Honestly, listening to the ghastly Ollie Rhen, Van Rumpoy and Barroso makes you realise that Cameron did absolutely the right thing. Can you imagine having to be in the same room as all that eurotrash for endless hours. Think of the smell. What happened to us in the UK when we tried several times to defend a Sterling exchange rate by selling reserves? It got us absolutely no-where because trying to defend the exchange rate is just a big bluff if everyone knows the exchange rate is basically wrong. And even if the ECB claims they are not going to defend one particular exchange rate, they are still going to put the reserves behind a Euro currency *structure* that is as wrong as $2.80 was for Sterling way back when. The Euro is defective and the market is on to it. Deploying national reserves will just lead to a series of "step" adjustments, consisting of nations exiting the Euro, but in the process, reserves will be spent and they should not be spent. In fact, the traders take the long view, which is that - in the end the Euro breaks up.

Oh dear, yet more huffing and puffing from Frau Merkel and her toy pig Psycho-Sarko... They talk and try oh so hard to sound as if they know what is going on but fail to face reality each and every time. To say no more "haircuts" is a bit "rich", given how they mugged bond holders only a few weeks ago - can these two be trusted ever again?? ... They miss the point, in my humble opinion - they must have full fiscal union to make the You - Owe work... however, a small problem is that the people (oh no not them again!!!) do not wish to have full fiscal union depriving them of sovereignty...
Alternatively they can accept the grim reality, that Delors little idea born with flaws can never get better and is occupying a vital bed in Intensive Care...Here are the main points of the new treaty include:

1 - Automatic sanctions for breaching deficit ceilings of 3pc of GDP and a requirement for balanced budgets.
2 - Speeding up implementation of the permanent bailout funds, the European Stability Mechanism, to 2012, with the introduction of qualified majority - 85pc - for decisions, instead of unanimity.
3 - No more haircuts for bondholders.
4 - A monthly meeting of euro zone leaders until crisis ends, focusing on growth in Europe.
5 - ECB's role to remain unchanged - will not be lender of last resort - and there will be no eurobonds.

As the two spoke yields on 10-year Italian bonds, which last week were trading at "unsustainable" level above 7pc, slipped below 6pc.

Confidence that European leaders will come up with a credible plan to end the debt crisis at a crucial summit this week also buoyed stock markets. PRESS REACTION : -- Bruno Waterfield, the Telegraph's Brussels Correspondent, tweeted, citing a diplomat: "Looks like Sarko caved on most points, EU 27, automatic sanctions, ECB." -- While Simon Nixon, European editor of the Wall Street Journal's Heard on the Street column, suggested that France was a big winner. -- "Amid all the bluster from Merkozy presser, big winner seems to be Sarkozy (and de Gaulle), losers are Germany and UK."

Sarkozy calls for a 'new economic age' where debt and public spending are reduced, claiming that 'those that lend to us no longer want to lend to us' despite today's successful bond auction. However, Moody's has downgraded its outlook on the Czech banking system to negative from stable on prospects of a "broader slowdown" in the EU. The change in outlook primarily reflects the rating agency's view that the banks' operating environment will weaken, amidst a broader EU economic slowdown. This will create renewed pressures on asset quality and impair the banks' profitability and capitalization. Sarkozy gave his version of how the eurozone should work today, calling for France to clear its debts, trim public spending and begin a "new economic age". He will meet with Angela Merkel on Monday, but before that she's set to give her own version of the speech to the Bundestag tomorrow. Stay tuned to the live blog tomorrow for coverage of that. Essentially, the pair will hash-out a joint plan to take to the EU summit on December 8 and 9 - the idea being to give the EU a new treaty to restore tough budgetary discipline on the debt-ravaged eurozone. This afternoon we heard that the IMF was "likely" to slash its global economic growth forecast in the New Year, now the United Nations has sharply cut its own economic projections, claiming that the world is at risk of entering a new recession.....The UN's report on the World Economic Situation and Prospects 2012, released today, forecasts 2.6pc growth next year in its main, relatively optimistic scenario - and just 0.5pc in its pessimistic scenario. That's significantly below its May forecast of 3.6pc. The report says: "The world economy is teetering on the brink of another major downturn" and "the risks for a double-dip recession have heightened".

The Euro should be put out of its misery-The EU deceived us that the Euro would work

The EU deceived us that the Euro would work when plainly it would not, and now millions are going to suffer due to their vanity, stupidity, and enlarged egos. We need to know not only who they are, but who were their supporters - further more all those that are on retainers, (sorry Pensions) need to come clean and repent.The EU politicians created this monster by saying join us and we will advance you money to develop your country to a level beyond your wildest dreams. And at a speed that you would never be able to attain through organic growth. So the scheme is built on a huge gamble that economists would always tell you was bound to fail one day. It was totally dependent on perpetual and rapid economic growth. That was and is the only key to repaying those debts. As soon as the growth slowed, the game was up. I like to keep it simple. A private individual can have a good life on a credit card, providing the income keeps going up to pay the interest. But the day of reckoning comes when the income slows or stops. Europe kept on spending and kept on asking for an increased limit and the banks and politicians kept giving it. Then the inevitable happened. And now there is no one left to lend the money for Europe's next months credit card bill. EU leaders simply won't admit that their pet project was unsustainable from the start and now they will stop at nothing to prevent the first domino falling. The Euro should be put out of its misery in the most orderly manner possible, before it collapses completely. There will be pain for all, but the longer they drag this out the worse it will be.

How incompetent can a E.U. Commissioner be ?...there he goes : Olli Rehn, the European Commissioner for Economic and Monetary Affairs, is calling for quick decisions for the solution of the financial crisis affecting the eurozone. Speaking in Helsinki on Thursday, Rehn said that slow movement will not work. “Ahead of us we have either the slow disintegration of the entire eurozone, or the strengthening of the economic and monetary union.” According to Rehn, plans to increase the lending capacity of the European Financial Stability Facility (EFSF) is in its final stages, and decisions could be forthcoming already next week at a meeting of the economic ministers of the eurozone. - The EU treaties that created the euro and set its membership rules contain no provision for members to leave, meaning any break-up would be disorderly and potentially chaotic. If eurozone governments defaulted on their debts, the European banks that hold many of their bonds would risk collapse. Some analysts say the shock waves of such an event would risk the collapse of the entire financial system, leaving banks unable to return money to retail depositors and destroying companies dependent on bank credit. The Financial Services Authority this week issued a public warning to British banks to bolster their contingency plans for the break-up of the single currency. Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment. Analysts at UBS, an investment bank earlier this year warned that the most extreme consequences of a break-up include risks to basic property rights and the threat of civil disorder. “When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences.”

Ollie Rehn - incompetent, corrupt is part of the problem facing Europe today

Olli Rehn, EU economic and monetary affairs commissioner, warned Germany that it alone could not determine the eurozone's fate, Italy only managed to secure cover for a two-year bond worth €2bn by paying 7.8%. A six-month loan for €8bn cost it 6.5% compared with 3.54% only a month ago. Rehn admitted in Rome that contagion had now spread to the core of the zone. He was speaking after talks with Mario Monti, Italy's new technocratic prime minister, who has yet to convince markets he can deliver on his promises of structural reforms and savage cuts in national debt. Meeting in Berlin, the finance ministers of Germany, Finland and the Netherlands even hinted at the prospect of an enhanced role for the European Central Bank (ECB) if all other steps to save the euro collapsed. But they again ruled it out as an immediate solution. Meeting in Berlin, the finance ministers of Germany, Finland and the Netherlands even hinted at the prospect of an enhanced role for the European Central Bank (ECB) if all other steps to save the euro collapsed. But they again ruled it out as an immediate solution.

Euro zone member states are discussing dropping private sector involvement from the permanent bailout mechanism that is due to come into force in 2013, four EU officials said on Friday. The discussions are taking place as part of wider negotiations over changing the EU treaty to introduce stricter fiscal rules as Germany wants. Germany insisted that private sector investors -- banks and insurance companies -- bear a portion of the losses in the bailout of Greece. Euro zone states originally agreed to include clauses in the permanent bailout fund, the European Stability Mechanism (ESM), that would enforce private sector involvement. But the majority of the euro zone's 17 countries now want those clauses removed from the ESM and there is movement toward that happening, the sources said. "France, Italy, Spain and all the peripherals" are in favor of removing the clauses, one EU official told Reuters. "Against it are Germany, Finland and the Netherlands." Others said that while German insistence on retaining the clauses was fading, they would only be removed as part of a broader negotiation over changes to the EU treaty. Berlin wants full backing for changes to the treaty before it moves on other areas where member states want it to soften its stance, the officials said.

Contingency planing - throughout Europe and beyond

The remaining international confidence in the euro evaporated and made even German bonds to lose their "risk free" status. The crisis is no longer confined to the "sinners of the south". Suddenly, no-one wants to hold euro denominated assets of any variety, and that includes what had previously been thought the eurozone safe haven of German bonds. "Investors have gone on strike". The American Investors are getting their money out as fast as they decently can and British banks have stopped lending to all but their safest euro zone counterparts. Even those have been denied access to dollar funding. The UK hardly has anything to boast of... it's got its own legion of problems, many of them not so dissimilar to those of the euro zone periphery. The defining moment was the fiasco over Wednesday's bond auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK. If you are tempted to think this is another vote of confidence by international investors in the UK, don't. It's actually got virtually nothing to do with us. Nor in truth does it have much to do with the idea that Germany will eventually get saddled with liability for periphery nation debts, thereby undermining its own creditworthiness. No, what this is about is the markets starting to bet on what was previously a minority view - a complete collapse, or break-up, of the euro. Up until the past few days, it has remained just about possible to go along with the idea that ultimately Germany would bow to pressure and do whatever might be required to save the single currency. The prevailing view was that the German Chancellor didn't really mean what she was saying, or was only saying it to placate German voters. When she finally came to peer over the precipice, she would retreat from her hard line position and compromise. Self interest alone would force Germany to act. There comes a point in "every crisis" when the consensus suddenly shatters. That's what has just occurred, and with good reason. In recent days, it has become plain as lite that the "lady's not for turning".

U.S. CONGRESS - The special deficit-reduction super committee appears likely to admit failure on Monday, unable or unwilling to compromise on a mix of spending cuts and tax increases required to meet its assignment of saving taxpayers at least $1.2 trillion over the coming decade. The panel is sputtering to a close after two months of talks in which the members were never able to get close to bridging a fundamental divide over how much to raise taxes to address a budget deficit that forced the government to borrow 36 cents of every dollar it spent last year. Members of the bipartisan panel, formed during the summer crisis over raising the government's borrowing limit, spent their time on Sunday in testy performances on television talk shows, blaming each other for the impasse. Republicans said Democrats' demands on taxes were simply too great and weren't accompanied by large enough proposals to curb the explosive growth of so-called entitlement programs like Medicare and Medicaid. "If you look at the Democrats' position it was 'We have to raise taxes. We have to pass this jobs bill, which is another almost half-trillion dollars. And we're not excited about entitlement reform,' " countered Republican Jon Kyl of Arizona on NBC's "Meet the Press." Under the committee's rules, any plan would have to be unveiled Monday, but it appeared that Murray and co-chair Rep. Jeb Hensarling of Texas would instead issue a statement declaring the panel's work at a close, aides said. Failure by the panel would trigger about $1 trillion over nine years in automatic across-the-board spending cuts to a wide range of domestic programs and the Pentagon budget, starting in 2013, according to the Congressional Budget Office. This action, called a "sequester," would also generate $169 billion in savings from lower interest costs on the national debt.

The eurozone faces calamity unless Germany gives up it's expantionist behavior...

Ferdinand Foch allied commander said after the Treaty of Versailles : "This is not a peace. It is an armistice for twenty years" Well it would prove prophetic; World War II started twenty years and sixty five days later. It must be about 20 years since German reunification and they are at it again !!! ... The all-important spread between the 10-year French government bond and its German equivalent touched yet another euro-era high last week. Spain, also, despite its relative fiscal strength, just paid a crippling 6.9pc on 10-year money. Yields on paper issued by the EFSF, the bail-out fund meant to reassure eurozone creditors, are now spiraling out of control. Investors beyond Europe, deeply disturbed at the region’s economic incoherence, are even questioning German bonds. How much louder do the alarm bells need to ring before time is called on this absurd monetary experiment? There may be “no such thing as an orderly break-up”. But there is a very big difference indeed between embarking on a tough transition to a smaller eurozone with a coherent plan agreed by respective governments on the one hand, and a hugely-damaging systemic meltdown on the other, to be followed by years of pan-European loathing and mutual recrimination. Maybe Merkel will attempt to “muddle-through” - printing a bit here, a bit there, trying to keep it all under wraps. If so, she will learn that the status quo really isn’t an option. The euro in its current form is incendiary and explosive, a macro-economic weapon of mass destruction. It simply must be defused.

Germany, backed by France - (Vichy ?!...nobody learns anything from their own history)...Speaking after talks with David Cameron in Berlin, Mrs Merkel also pointedly rejected the Prime Minister’s call for the European Central Bank to play the main role in bailing out troubled eurozone countries. The disagreements undermined the claims of the two leaders to be working closely on responses to the European debt crisis. Germany, backed by France, wants the European Union to impose a new tax on every financial transaction banks make, with the revenues used to help debt-ridden countries. Britain has suggested that such a tax would have have to be applied by every country in the world to be workable. A European tax would simply drive banks to other countries, ministers believe. Mr Cameron said: “The danger is driving transactions to a jurisdiction where it wouldn't be applied. Mrs Merkel made clear she had not changed her position either. “We are at one in saying a global financial tax would be introduced immediately,” she said. “But on a European one, we did not make any progress on that one. We have to both work on where we both feel change is needed.” The Prime Minister is among international leaders has been pushing hard for Germany to agree to the ECB acting as a bank of last resort for failing eurozone states.

Growth - statistics ...

German gross domestic product (GDP) expanded by 0.5pc between July and September compared with the preceding three months, driven by strong domestic demand. Growth in Europe's biggest economy in the second quarter had stood at 0.3pc, revised upwards from an original estimate of 0.1pc. "Positive impulses came primarily from domestic demand, with rising consumer spending in particular contributing to growth," the federal statistics office Destatis said in a statement. "In addition, investment in equipment also increased, while construction investment declined somewhat after a strong start to the year." Foreign trade was also robust, with both exports and imports growing by around the same amount. Economists also expect fourth-quarter growth in France to be flat at best as the euro zone debt crisis discourages investment and employment. The French government has slashed its growth forecasts twice in the past four months and pledged budget cuts to prevent the deficit from ballooning. Xavier Bertrand, the French Labour minister, said: "Positive growth means tax revenue, but there isn't enough growth so we have to manage our budget like you do at home, or like a company chief. If there's not enough money coming in then there must be less money coming out." Romania 3Q GDP + 1.9% On Quarter, +4.5% On Year. Romanian economy expanded by 1.9% in the third quarter, after a modest recovery of 0.2% three months earlier, a flash estimate of the country’s statistics institute showed Tuesday.

The G20 is planning to increase the crisis-fighting firepower of the International Monetary Fund after the start of its summit was dominated by the first open admission from EU leaders that it might be necessary for Greece to leave the eurozone if the single currency is to survive. George Osborne said there was a "real sense of urgency" on a day that saw an emergency interest rate cut from the European Central Bank, backtracking from Greece over a referendum on its bailout conditions, and a recognition that the IMF may need extra resources to cope with a deteriorating global economy. Amid distinct echoes of the financial market meltdown in the autumn of 2008, European leaders put massive pressure on the embattled government of Greek prime minister George Papandreou, forcing the abandonment of plans to hold a referendum and triggering a political showdown in Athens. Downing Street sources said "strong political pressure to sort itself out" had been put on Greece, while Barack Obama said it was time to "flesh out" Europe's bailout plan. Share prices rose towards the end of the day as it became clear that Papandreou had been forced to shelve his referendum plans and was seeking to put together a government of national unity that would agree to Europe's bailout conditions. How could Greece leave the eurozone? There are two scenarios for Greece to leave the euro. The first would be if Greece was unable, or refused, to abide by its EU-IMF austerity programme. The refusal would lead to EU-IMF payments being withheld and Greece defaulting, a catastrophic event for both the Greeks and the EU. The second scenario involves a Greek referendum on the EU-IMF austerity programme, the economic pain and the loss of sovereignty entailed with it. As the EU has made clear, via Angela Merkal and Nicolas Sarkozy, a No vote or even the referendum itself would be taken as a decision to exit the euro. Can Greece leave the euro? Does it mean leaving the EU? The EU lawyers are not sure. "It's a legal minefield in uncharted waters," said one EU legal advisor. The confusion might be a deliberate ploy. A European Central Bank document examining the possibility two years ago decided that "some lack of legal certainty is desirable" to stop countries walking away too easily. "The hitherto silence may therefore be preferable to clarity," it said. George Papandreou, the Greek prime minister, seems to think it is all or nothing. "If we leave the euro we will have to leave Europe," he told MPs.

TWO NAMES : Horst Reichenbach = GREECE'S APPOINTED GOVERNOR and Klaus Regling = CEO - ESFS !!!! THE GREEKS ARE WRIGHT !!! ...At a press conference Mr Sarkozy said: "Our Greek friends must decide whether they want to continue the journey with us. "We cannot commit European taxpayers' money unless the rules unanimously adopted in Brussels are respected to the letter." He was flanked by Mrs Merkel, who added: "The referendum will revolve around nothing less than the question: does Greece want to stay in the euro, yes or no?" David Cameron said that the world was facing a "financial storm" as Greece may now be forced out of the single currency. Simon Johnson, the former chief economist at the IMF said Europe was "looking straight into the face of a great depression". The National Institute of Economic and Social Research said that Britain had a 70 per cent chance of falling back into recession under the "increasingly more likely" scenario that the euro crisis will not be resolved imminently. The Prime Minister will travel today to the G20 summit but is expected to be little more than a bystander as key meetings take place between European and American leaders. The British government has refused to contribute money to help the euro but European leaders are expected to lobby the Chinese, Russians and Brazilians for loans. An EU diplomat claimed last night that European leaders thought they had been misled by the Greek prime minister – as he had used the threat of a referendum during a eurozone summit last week in order to win concessions. "Everyone thought the threat had been dropped. Only one way to describe this: 'absolute bloody fury'," said the diplomat. "If it wasn't a case of mutually assured destruction this would be the moment that it is game over for Greece." With Greek national opinion currently against perceived European interference in its affairs, the country could be forced out of the single currency in a disorderly and chaotic manner. The removal of EU support comes as Greek politicians begin discussions on whether to vote in favour of a no–confidence motion in Mr Papandreou, which could trigger the government's collapse. European leaders are hoping that, by increasing dramatically the pressure on Greece, politicians may demand that the referendum is scrapped. An IMF source said: "The [IMF] board would not want to give money to Greece and then wonder what will happen. The board will want comfort that Greece will fulfil its commitments and right now Papandreou is unable to give that." There are mounting fears that the Greek crisis will fatally undermine Italy's economy in the coming days.

Germany goes to the G20 summit in Cannes with financial regulation at the top of its official agenda. But behind that widely publicised aim, Chancellor Angela Merkel desperately needs to come away with a watertight solution to the Greek debt crisis.With the US and Britain showing no sign of budging in their opposition to an FTT, however, Merkel could well come away without a deal, but she will not be happy – and will not drop her own plan. She has said: "I don't think this is acceptable. We must ensure that financial-market actors share in the costs of fighting the crisis. I will push for this until it happens, at least in Europe, even better worldwide." Germany also wants the IMF to have greater resources to support the latest eurozone rescue deal, although there are doubts that the summit will produce definitive numbers. But getting some movement on Greece's rescue is vital to Merkel. She came away from a eurozone summit last week assuming she had a deal on a Greek bailout and she will want answers from Papandreou in Cannes. Before the talks the German chancellor stressed that Germany wanted to get the ball rolling on last week's agreed rescue package. "We want to put this plan into practice, but for this we need clarity." On the domestic political front, the latest opinion polls raise the pressure on Merkel over Greece. A poll in news magazine Stern asked Germans for their view of her handling of the eurozone crisis, with 46% saying she had not reacted well, while 42% approved of her actions. Given that tensions and undercurrents of prejudice between Germany and Greece go back decades, those perceptions will be hard to shift whatever Merkel comes away with this week. Even before Papandreou's shock referendum call, on overwhelming majority of Germans surveyed - 87% - said the eurozone crisis was not solved with last week's Brussels deal.

IMF warns it could hold back bail-out cash without assurances that Greece will fulfil its commitments, but Papandreou is 'unable to give that', while EC President urges Greece to back eurozone package.

Eurozone chairman Jean-Claude Juncker is at the Cannes meeting, and he is not happy with Greece's decision to stop the bail-out process to give the public have a chance to vote. He said: "We took a decision last week as 17 (member states), we can't allow anyone to disassociate himself from that decision." But a pragmatic French official, also at the summit, said there was little chance of stopping them. The best they could hope for was to get the vote out of the way quickly. It is too late to persuade them to go back on the decision to hold a referendum. The idea is that they hold the referendum as quickly as possible and make it about being in the euro.Ben Bernanke said it was "a bit frustrating" to have to watch the Euro debacle from the sidelines and listed it in the run of "bad luck" that had held back US recovery alongside the nuclear accident in Japan and high oil prices. But he didn't give much insight into the Fed committee's thinking on the impact of European woes on the US or on what, if anything, the US can do to help the situation. Sadly he may have been silent because really there isn't much the US can do at all.The US markets seem to be having an unusually normal day. They started mildly up and have stayed there. There's almost a sense of "normalcy" as Americans like to say. No doubt there'll be a huge sell off or rally soon. For the record, the Dow Jones index is up 183 points, or 1.5%, with around half an hour to go.

Meanwhile, back in Europe, tensions are running high... A European Union official has given an interview to a small group of reporters in Cannes, appearing "angry and frustrated", according to the Wall Street Journal. The anonymous official said: I have no words to describe how I feel about Greece. Uncertainty is exactly what we don't need right now. If Greece were going to war tomorrow, they would establish national unity. Well, we are at war. The crisis is that bad. And it's time that Greece put party politics aside and demonstrate national unity. Greece as a country has to make it clear that they want to make the kind of effort that is necessary. If not, they have to bear the consequences. Papandreou, whether consciously or not, has called Europe's bluff. With a potential NO from the Greek people he could bring the European house of cards down. He is in a unique position, in my view, to renegotiate a bailout package with much more favourable terms for his people. And this is something that could benefit many other countries (Italy, Portugal etc). Truly, there can't be no growth in an economy - especially that of Greece - when what is imposed by the troika is no less than a reduction of people's real income by 1/3. Imagine what would happen to us here if the same conditions were imposed. I for one would not be able to pay my mortgage. And, what's more, the Left in Greece could play a vital role if in the end Pap's government falls (they would have to form an interim "national unity" government put together by their president). The New Democracy party (conservatives) are truly responsible for this mess in Greece and its current leader is really a laughable fellow. Let's just hope that it's the people who are favoured this time round and NOT the international markets and/or the banks.

Responding to the riots that followed last week's proposal as well as dissent from within his own Socialist party, Prime Minister George Papandreou said: "The command of the Greek people will bind us. Do they want to adopt the new deal, or reject it? If the Greek people do not want it, it will not be adopted." Staging a referendum threatens to throw the euro zone further into crisis as the majority of Greeks object to the bail-out, according to a survey published last week. If Greece were to reject the plan, which requires deep spending cuts, it would risk a full-scale default and possible ejection from the euro. The country could even run out of money to pay civil servants or state pensions if the troika decided to pull the plug. European leaders and the IMF have struck a deal that would see banks take a 50pc write down on Greek loans, cutting the country's debt by up to €100bn, alongside a €130bn international rescue effort on top of the existing €110bn package. No dates have been set for the referendum, which would include a confidence vote in the government. Yields on 10-year bonds jumped to 6.18pc on Monday, while spreads over German Bonds reached 410 basis points, nearing the critical level where LCH Clearnet raises margin requirements. This, in turn, triggers further selling. However, The Greek Constitution permits referenda EXCEPT for questions involving potential revenue measures including taxation. On that basis any referendum in Greece on the aid package and accompanying revenue measures is unconstitutional.

Mario Draghi has little latitude for monetary stimulus. Germany has imposed a de facto veto on large-scale purchases of Italian and Spanish bonds, viewed by orthodox monetarists as a slippery slope towards debt monetization. Intesa Sanpaolo Giovanni Bazoli said the spreads are un stainable "not just in the medium run, but in the short run as well". He warned of a credit crunch in Italy as banks struggle to meet higher capital ratios set by EU leaders. The renewed jitters came as the OECD club of rich states slashed its euro zone growth forecast for next year from 2pc to just 0.3pc, implying an outright recession over the winter. The body called on the ECB to cut interest rates and deploy its full lending power to head off debt contagion to Italy and Spain. The OECD said the world risks a fresh crisis of equal magnitude to the Great Recession if authorities fail to act in time, with GDP contractions of up to 5pc in some big economies by early 2013. The ECB's new president The Bundestag voted last week to upgrade the EU's bail-out fund (EFSF) to around €1.2 trillion but only on condition that the ECB steps back from its support role. This pits Germany against much of the world. The US Treasury, the International Monetary Fund, and most leading economists fear the fund will fail without a central bank prop.