Europhiles remind me of religious...freaks

BUCHAREST - ROMANIA - Do we want a new place in Europe? There's a whole world of independant countries out there, some of them even have functioning economies. The EU have completely lost their way, we should have nothing more to do with it until sanity returns. Europhiles remind me of religious people. In fact I think being a Europhile is a kind of religion. If you give some of the overwhelming scientific evidence of how old the world really is to a religious person who believes the world is only 4000 years old, they will still believe the world is 4000 years old no matter what you tell them. Tell a Europhile who is frightened that we could not survive out of the EU, that the Swiss or Norwegians are better off for being out of the EU, they will still be as worried & convinced we couldn't survive out of the EU as before you spoke to them.
Yet they wouldn't be able to provide any evidence why they believe this. Without even understanding their own reasons why. Yet we don't even have enough money to fund our own police, hospitals & schools properly & pensioners who've paid taxes & national insurance for 45 years barely exist on their pension.

IN THE WEEK AHEAD

IN THE WEEK AHEAD: Investors will have only a few U.S. economic reports to distract them from the events in Europe. Factory orders and an update from the service sector will be followed by monthly updates on consumer credit and sentiment. Investors will focus on the European summit in Brussels at the end of the week. Yes, we are still talking about Europe. Fiscal union and tighter controls will be the main topics, as the wealthier nations (read: Germany) try to extract a pound of flesh in exchange for a full-fledged bailout of weaker nations. Economists have been saying that to solve the European crisis, Germany would have to come down from its moral high horse and admit it has far too much to lose if the EU were to implode. Last week, Merkel's comments, along with the central bank action, were seen as positive developments towards that end. To wit, stocks were up 7 percent, the strongest weekly performance since 2009. German government bonds, which until recently had been a haven from turmoil in the rest of the euro zone, are losing their allure as the sovereign-debt crisis roils Europe. For most of the two years since Greece's budget woes set off a spiral of selling in the bond markets of some euro-zone countries, German bonds, known as bounds, have benefited from a flight to safety along with Treasury bonds and U.K. gilts. But that relationship started to crack a few weeks ago when Germany had its worst 10-year bond auction in history, which sparked one of the biggest sell offs in some time. Despite the brouhaha about the U.S. jobs report (more on that below), the stock market-moving news last week was all about Europe and the coordinated central bank action to attack one of the symptoms of the European contagion --liquidity for European banks. Sure, the action could be called a "band-aid," but it could also be seen as the necessary preparation for the major procedure that is required to treat the ailing patient.

European leaders will meet on December 9 for crunch talks

Reports in Italy suggested that the IMF is drawing up plans for a €600 billion (£517 billion) assistance package for the country....IMF denies the news item though...NOT ENOUGH MONEY IN THE BAG !... Spain may be offered access to IMF credit, rather than a rescue package, to avoid being “picked off” by the markets in the coming weeks. An IMF rescue package involves a country being offered hundreds of billions of euros in return for agreeing to launch a major austerity programme to cut spending. A credit line is a more flexible arrangement which gives countries short term access to international finance. The reports of an IMF rescue package being prepared come as European finance ministers meet tomorrow to discuss draft plans for a bail-out scheme. Under the scheme set to be discussed, the euro area’s European Financial Stability Facility (EFSF), would have to “insure” bonds of troubled countries by covering the first 30 per cent of any unpaid debts. To offer this guarantee, the European bail-out fund would have to be able to raise €1.4 trillion – a threefold increase compared to the current size of the scheme. Last night, it was not clear if or how this money could be raised, although the EFSF may itself sell bonds to international investors....The numbers reported for potential IMF support to Italy should be put in context. The IMF's total credit outstanding to all countries at end-October was SDR 85 billion (about € 100 billion)...As for the notion that in the current circumstances any rational investor would buy EFSF bonds, well, it just beggars belief. Who exactly would guarantee those bonds? France, Germany, with debt/GDP ratios of over 80% already? Or perhaps the idea is that countries such as Italy would guarantee themselves? Who would repay the bonds? And in what currency?... WSJ -FOREX - Companies that provide the plumbing for the $4 trillion-a-day foreign-exchange market are testing systems that could handle trading of previously shelved European currencies.ICAP PLC, which operates the biggest system for enabling currency trades between banks, said Sunday that it is prepping electronic-trading systems for a possible exit by Greece from the euro zone and a return of the drachma, the country's previous currency. CLS Bank International, whose platform enables banks to settle their currency trades, is running "stress tests" to prepare for a dissolution of the euro, people familiar with the matter said.

Markets fall as Germany fails to sell 35pc of the bonds it offers at auction

"The scale of the deterioration is surprising, but it seems that manufacturing is the sector probably most affected by the spillover from the financial tensions of the sovereign debt crisis, because it is highly cyclical," said Clemente de Lucia, economist at BNP Paribas.The 17 nations using the euro suffered the deepest fall in new industrial orders since December 2008, well below analysts' forecasts of a 2.5pc fall. The core nations of Germany, France, Italy and Spain all registered sharp contractions, the EU's statistics office said. The 6.4pc drop in orders of capital goods, which indicates investment in new machinery, shows factory managers are pulling back on expansion plans and hoarding cash as the debt crisis shatters business confidence. Falling export demand from Asia, fewer new orders, unemployment at 10pc and weak consumer confidence are combining to create a very difficult business environment. "This clearly indicates that we are now entering into a recession," said Peter Vanden Houte, economist at ING. "It is now very clear that this debt crisis has also affected the real economy, and the real economy is now going down." He said banks in peripheral eurozone countries are facing deposit withdrawals that could create a credit crunch, further slashing industrial orders. He said output in the fourth quarter will be "quite negative", as could the first quarter of 2012.

Germany - Europe's saviour – or biggest problem?

It could all be over by the New Year... Germany's finance minister Wolfgang Schaeuble says next month's EU summit will calm jittery markets and offer a rapid solution to the eurozone crisis. In particular he believes that changes to European treaties to institutionalize budgetary discipline will be forthcoming. It's going to be quicker than 12 months. I think decisions will be made on December 9. There's no alternative. We must change the structures. It's not the arrogance of the Germans, that's just the way it is. The rift between France and Germany over the issue of the ECB's role in solving the debt crisis is widening. Although Angela Merkel disagrees, French Prime Minister Francois Fillon said today that it should start buying up more eurozone bonds: We still face a major difficulty, which is to convince Germany that we must give the eurozone a defense tool for our currency through a certain evolution of the central bank's role. Staying in France, the head of the agency that manages government debt, Philippe Mills, acknowledged that the country isn't in the best position compared with other eurozone countries that it shares a AAA rating with: I recognize that based on the criteria of public finances that France isn't in the best position compared to the other AAA countries in the eurozone, even if the responsiveness of the government has been welcomed by the (ratings) agencies and investors....AND... MY SUBJECTIVE OPINION ON "UBER ALLES" NOW : Post-war German politics has always been founded on consensus so hardly surprising you get successive generations of German politicians who are exceptional only in their dullness and mediocrity: Kohl, the last 'great' chancellor was as dull as ditchwater; Schröder was laughed off as a 'used car salesman'. Only Willy Brandt - a bit of a showboater - and Helmut Schmidt rose above the rest in terms of vision and intellect, but they didn't last long. Germans like their politicians dull and boring, unadventurous and unambitious. The current crop of German politicians is even more miserable: Westerwelle, Rösler, Steinmeier, Ude, who of them could do a better job than Merkel? The one guy who might have made broken the pattern - Guttenberg - has disappeared off to the US after the plagiarism scandal. For a Europe crying out for leadership Germany is indeed a problem.

The newly appointed Italian Prime Minister Mario Monti has named a government entirely composed of unelected figures, just days after a technocratic government was installed in Greece, where the presence of far-right figures linked to the military junta are raising hackles. Monti, an ex-EU-commissioner, was appointed officially on Wednesday by the president of the republic. The new Prime minister has in turn also appointed himself finance minister and, in a move likely to amplify criticisms that a regime of bankers has been imposed on Europe’s southern flank, Corrado Passero, the CEO of Intesa Sanpaolo, the country’s largest bank, has been awarded the industry and infrastructure job.All ministerial posts will be held by technocrats, soldiers and diplomats. Along these lines, the Italian ambassador in Washington, Giulio Terzi di Sant’Agata, has been made foreign minister while an admiral in the navy, Giampaolo Di Paola is now defence minister, eliminating civilian command of the armed forces. "The process of forming a government has taken a radically unorthodox and rushed route after Silvio Berlusconi - under pressure from markets and other EU leaders, resigned as the country’s economic position grew ever more precarious and threatened to pull the entire eurozone down." writes the EUobserver. Meanwhile in Greece - Far-right MPs with links to the Greek Junta appointed ministers. The imposition of the technocrats in Rome comes just days after former vice-president of the European Central Bank, Lucas Papademos, was placed in the top office in Greece, where he too has appointed an administration of technocrats, complimented by members of the far right - the first time Athens has seen such figures in government since the fall of the military junta in 1974.

DEMOCRACY IN ACTION ??? - that is indecizion, political deals and most of all the taxpayer is humiliated and left out ! Shame on the GREEK government !!!...Papandreou turns his attention to the planned referendum, which we believe has now been consigned to history (or perhaps ignominy): Again, he blames his European partners....I believe deeply in democracy, the values inherent in democracy, and when I announced the referendum ... our partners wanted everything to go like clock-work, to work robot like .... if we can't respond to our commitment the issue of the euro will be on the cards. The decision of the referendum would be a guarantee of us staying in the eurozone. What is of priority is not the referendum but whether as a country we are willing to enforce the commitments [outlined] in the October 26 agreement. I told our partners that if we had political consensus, if we could vote through the rescue package [with the main opposition party] there would be no need for other solutions. Papandreou is also saying that Greece has stared catastrophe in the face. We got a small taste, fortunately a small one but a taste nonetheless, of what saving the country means and what not saving the country would have meant. The speech is being delivered in complete silence - no applause or other supportive noises. Papandreou calls the deal agreed in Brussels last week a 'landmark' moment for Greece. Papandreou goes on to criticise some of his fellow European leaders for the way they have treated Greece: "It is clear that we have lived through scenes as a country that we didn't deserve and harmed us." he says slamming the way Merkel and Sarkozy publicly humiliated him during emergency talks in Cannes last night "telling us how to hold our referendum, defining the rules ..." Greece has a German "governor" - ande they diserve it !!!

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.

Greek Prime Minister George Papandreou has won unanimous support from cabinet for his controversial plan to hold a referendum on the EU bailout deal. Mr Papandreou told a late-night cabinet meeting that the referendum will be "a clear mandate and a clear message in and outside Greece on our European course and participation in the euro." "No one will be able to doubt Greece's course within the euro," he said, adding that market turmoil triggered by his announcement of the referendum late on Monday would be short-lived. After the meeting, a Greek government spokesman said cabinet had unanimously to the referendum and that it would take place "as soon as possible". "The cabinet expressed its support," said government spokesman Elias Mossialos. "The referendum will take place as soon as possible, right after the basics of the bailout deal are formulated." The euro and global stocks were pummelled on financial markets on Tuesday after Mr Papandreou's move threw into question the survival of crucial efforts to contain the euro zone's sovereign debt crisis. Asian stocks extended the wave of selling on Wednesday. Meanwhile, The French president Nicolas Sarkozy and German chancellor Angela Merkel will hold emergency talks on today in a desperate attempt to hold the eurozone together and formulate a response to the Greek prime minister's plan for a referendum on the austerity measures imposed by his European partners. George Papandreou's socialist government is on the brink of collapse after his referendum plan sparked an angry reaction within his own party and plunged Europe back into turmoil, just days after a complex rescue deal had been agreed – requiring Greece to embark on tough cost-cutting measures.

The ECB has already done quite a bit of bond buying, which it has disingenuously dressed up as a way of helping the "monetary transmission system". The sophistry of this explanation is ridiculous. No, what the ECB has been doing is trying to drive bond yields in the distressed single currency nations down to more tolerable levels.Even so, the numbers have been very low against what the Federal Reserve has been doing in the US, and the Bank of England in the UK. As long as Germans believe that bond buying by the central bank is essentially monetisation of public debt – the sort of stuff that led to the Weimar hyperinflation of legend – it will be blocked from meaningful action. Mr Draghi's challenge is therefore to persuade Berlin that bond purchases are for a different purpose – demand management. This is essentially the justification that underpins QE in Britain and the US. In both cases, the intention is eventually to sell the accumulated bond holdings back to markets, or to run down the positions by allowing the bonds to mature. To better support this justification, ECB bond purchases would have to be much more widely spread than at present. It would have to include German bunds in proportion to the size of the German economy alongside Italian, Spanish and Portugese debt. But as I say, Mr Draghi faces an uphill struggle. Germans would prefer to suffer, or even see the euro collapse completely, than tolerate such an unconventional approach

BEIJING - Chinese and European officials sought to play down expectations about when and how China may deploy its vast financial resources to help bail out indebted countries in Europe. A Chinese Vice Finance Minister said China must first see the details of a new European bailout fund before making any commitments. "We of course must wait until its structure is extremely clear," Zhu Guangyao told a press briefing. "And moreover, this investment must be decided on after serious, technical discussions."

Klaus Regling, the chief executive of the European Financial Stability Facility, flew into Beijing on Friday on the first stop of his trip. Klaus Regling is the
German Governor of the new Europe" de facto !

THE RIBBENTROP - MOLOTOV PACT - IMPLEMENTED - the second pillar.

THE RIBBENTROP-MOLOTOV PACT - IMPLEMENTED - the second pillar. Germany takes over the administration of Europe. In Berlin, the new epicentre of political as well as economic Europe, the German chancellor, Angela Merkel, was putting the finishing touches to her government statement to the Bundestag on the broad shape of the new "bazooka" – the enhanced bailout fund, or EFSF, that would save Europe from any reprise of the sovereign debt crisis that has overtaxed the powers of EU leaders to assert the primacy of politics over the naked short-sellers of financial markets. The letter – which Berlusconi hopes will give him a respite from humiliating criticisms of his country's €1.9tn debt and stagnant economy – was in Rome, being touched up by his advisers, but it was one of three key elements to a day destined to determine Europe's future. Down the road in Brussels from the marble-clad Justus Lipsius building, the current home of the council of ministers, EU officials – marshalled fittingly enough by an Italian treasury official, Vittorio Grilli – began a new session of their tortuous, often aggressive talks with leading bankers over how to reduce Greece's debt burden and allow a second bailout package to go ahead. Later the negotiations over the "haircuts" for holders of Greek debt moved from the Lex building to Justus Lipsius so they could be closer to Europe's political leaders. The overnight news from Rome was that Berlusconi had cut a deal on pensions reform with the Northern League, but that did not pacify the Italian press corps, the biggest national contingent in Brussels and the best-paid. At the midday news conference in the Berlaymont, the European commission's headquarters, that letter was the sole topic. "Can't we interest you in anything else?" Olivier Bailly, the spokesman, asked plaintively. He could not.

As Donald Tusk, the Polish premier whose country holds the rotating presidency, set out the achievements so far, a leak of the draft eurozone summit communique began doing the rounds. It again contained no figures, preferring instead to talk of boosting the bailout fund's firepower "severalfold" and strengthening the role of the European commission as Greece's debt and budget inspector. No word of those "haircuts" for the banks. Merkel and her team had spent all day lowering expectations of breakthroughs, big bangs, full-range bazookas; as dinner for the eurozone 17 loomed it looked pretty clear they were right.

Germany is thought to be pushing hard for banks to take a 60% write-down on their holdings of Greek government bonds, but France had been insisting the cut shouldn't be much higher than 40%, EU officials have said in recent days. WSJ's Brian Blackstone reports that while European leaders are scrambling to strike a deal to rescue ailing economies, a new business survey paints a pessimistic picture of economic strength. The banks are signaling that a 60% cut wouldn't be deemed voluntary and could trigger a raft of claims for insurance contracts, known as credit-default swaps, to cover bond losses, according to senior euro-zone and International Monetary Fund officials. Late Monday, Charles Dallara, the head of the IIF, warned of "severe contagion" if the euro zone imposes a non-voluntary deal. He said there are "limits" to what can be called a voluntary deal. While euro-zone national governments—and the commission—are saying officially that they want a voluntary deal, one euro-zone official said it is clear that some in Germany would rather impose a "brutal" restructuring and that Greece's private creditors are aware that if they don't compromise, a large Greek haircut will be unilaterally imposed. "The bankers know that if they don't play ball the risk of a hard restructuring is still there," the person said. Failure to pin down specifics on the future of the EFSF at the EU summit could keep pressure on the fund's borrowing costs, which have climbed over the last few weeks amid the uncertainty.

Europe is facing "clear and present danger". Europe: not the eurozone, not the subcontinent south of the channel, but the society that after triggering two world wars has finally learned to peacefully build on a wonderfully diverse cultural heritage. That Europe is now in danger of being sucked into a black hole of mistrust, in the course of a long-lasting series of economic and political failures. As Europe grapples with financial instability and its leaders hold a series of summits to try to agree a rescue plan, free-floating financial capital keeps shunning entrepreneurial investment, maintaining that instability. In the present world, only a green growth strategy – currently spearheaded by the Organisation for Economic Co-operation and Developement – offers the opportunity to turn sufficient amounts of financial capital into entrepreneurial investment. Transforming the cities, businesses and homes of Europe so as to increase welfare while reducing damages to the environment is widely seen as a desirable goal, and it can trigger the investments needed to overcome the present crisis.

Can somebody tell me what's great about this plan, and why the market and euro rallied?

RECAP-Bloomberg: "Merkel's office: “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” The search for an end to the crisis “surely extends well into next year.”" UK Telegraph: "Diplomats say Mr Geithner’s plan to use the ECB as a guarantor of eurozone sovereign bonds was dismissed out of hand, while the EU failed to offer clear assurances that bank recapitalisation would be carried out with sufficient speed and scale to halt an incipent run on the system." "German foreign minister Westerwelle politely told the US to mind its own business. “I cannot understand some of the comments of our American friends. You can’t solve a debt crisis with more debt,”" "RBS said any attempt to solve the eurozone crisis without the ECB playing a key role in shoring up the system is doomed to failure." "Trichet, ...said late last week that the bank has done “all it could” ... has now exhausted its role of “lender of last resort”." "Ackermann, head of Deutsche Bank, said plans to leverage the EFSF may be illegal. “We cannot allow a rescue fund of this magnitude. The (constitutional) court would’t permit, and nor would the people,” he said." Germany wants private investors to increase haircut to 50%. Financial Times: Investors say no. 21% was agreed, and they're sticking with that. (Search for: "Investor threat to second Greek bail-out") If banks take bigger haircut, they will incur bigger losses and will be downgraded again. If EU forces this, then it's involuntary and triggers CDS payouts on default. If EFSF is leveraged, then it will be downgraded from AAA, which means it can't borrow anymore.EU wants to re capitalize banks. DB said no. Germany and France have higher Debt to GDP ratios than Spain, and Spain is one of the PIIGS. Is this the poor helping the poor? When do their AAA ratings get downgraded? Spain was downgraded last Friday. If Germany or France get downgraded, how will the EFSF be able to sell bonds to raise the 440b euros?There are obstacles to almost every part of the plan. Can somebody tell me what's great about this plan, and why the market and euro rallied?

New Challenge Could Be Launched at Highest Court

GERMANY - A new panel of lawmakers set up by the German parliament to reach quick decisions on the release of rescue funds from the European Financial Stability Facility (EFSF) may be in breach of the German constitution, a study by the parliament's research unit has shown. The panel is intended to ensure that parliament has a say in the release of funds from the EFSF, following a Constitutional Court ruling last month which said the parliament must be involved in measures to bail out other euro-zone member states. The nine-member body, to be selected from the parliament's budget committee, is to approve bailout decisions with the necessary speed and confidentiality to avoid fanning financial market turmoil. New Challenge Could Be Launched at Highest Court - But the study, undertaken by legal experts and commissioned by a member of parliament from the opposition center-left Social Democrats, Swen Schulz, has cast doubt on whether the panel will preserve an adequate degree of parliamentary sovereignty on budget decisions amounting to billions of euros. "Delegating this authority to a special body shifts responsibility onto a small number of people and obstructs the involvement of all members of parliament in the parliamentary process," the study says. Schulz is now considering taking the matter to the Constitutional Court, which is Germany's highest judicial authority. "A nine-member panel can't replace the Bundestag in such an important question," he says. Last month, the court rejected lawsuits filed by eurosceptics aimed at blocking the participation of Europe's biggest economy in bailout packages for Greece and other euro-zone countries. But it said the government must seek the approval of parliament's budget committee before granting aid.

Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit. German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a briefing in Berlin today. The search for an end to the crisis “surely extends well into next year.” Group of 20 finance ministers and central bankers concluded weekend talks in Paris endorsing parts of an emerging plan to avoid a Greek default, bolster banks and curb contagion. They set the Oct. 23 summit of European leaders in Brussels as the deadline for it to be delivered. On the summit agenda is how any recapitalization of Europe’s banks “might be carried out in a coordinated way” and how to make the European Financial Stability Facility, the EU’s rescue fund for indebted states, as effective as possible, Seibert said. The leaders will also discuss ways to tighten economic and financial policy, he said. The euro retreated from a one-month high against the dollar after Seibert’s comments, following last week’s biggest gain in more than two years on speculation that European policy makers are stepping up efforts to stop the crisis. German 10-year bonds rallied and the Stoxx Europe 600 Index pared an advance of as much as 1.5 percent and was up 0.3 percent at 12:47 p.m. in Frankfurt.

Geting closer to the Ribbentrop - Molotov Pact implemetation ..!!!

PARIS—France and Germany were moving closer on a comprehensive package to stabilize the euro zone that would bolster the firepower of the bloc's rescue fund and strengthen the region's banks, the countries' finance ministers said Friday, though officials cautioned they were still working on many of the details. French and German finance ministers Friday said they have made progress on delivering a comprehensive package to stabilize the euro zone. Meanwhile the cost of the collateral Greece is expected to provide its creditors has zoomed up. Charles Forelle reports live from Paris. Finance ministers and central-bank chiefs from the Group of 20 leading nations were meeting here Friday and Saturday, with the threat the euro zone's crisis poses to the rest of the world economy and financial system dominating discussions. France's President Nicolas Sarkozy gestures at Germany's Finance Minister Wolfgang Sch??uble after a meeting at the Elys??e Palace in Paris. Meeting ahead of that gathering, French Finance Minister François Baroin and his German counterpart Wolfgang Schäuble said the two governments have developed specific agreements to present to other European countries at a summit in Brussels on Oct. 23. The package—first promised by German Chancellor Angela Merkel and French President Nicolas Sarkozy last Sunday—includes maximizing the force of the euro zone's bailout fund and finding a solution for Greece's debts. "We also made progress on the shared plan to recapitalize banks," Mr. Baroin told reporters after a meeting with Messrs. Schäuble and Sarkozy. As Portugal announces further austerity cuts and Spain experiences another ratings cut, G-20 finance ministers talk to the IMF about a possible role in the euro-zone crisis. France and Germany hold the key to resolving the biggest question hanging over global financial markets: how to boost the European Financial Stability Facility's firepower without requiring nations to contribute further funding or guarantees. According to a European Union official familiar with the situation, Germany and France are weighing two models but leaning towards using the fund to insure bonds from euro-zone countries.

The European debt crisis involves a type of investment long considered to be one of the soundest available -- government bonds issued by European countries. It is a situation which has taken politicians by surprise as well, as can be seen by existing regulations regarding the assessment of risk posed by sovereign bond investments. When determining how much equity capital banks need as a buffer, the risk of financial loss associated with government bonds is considered to be zero. In the middle of the year, many banks were already forced to write off 21 percent of their Greek bonds due to the impending debt reduction, known as a "haircut." That, though, likely won't be enough. Greek bonds may soon lose half their value -- if not more. German financial institutions would likely be able to absorb such losses. The country's 13 largest banks have reduced their Greece-related risks to €5.6 billion. But what if other European countries are affected by the turmoil? Currently, Italian and Portuguese government bonds are only being traded at a steep discount. If Greece were to default on its loans, the market value of these bonds would plummet even further. US investment bank JP Morgan suggests a scenario in which Greek bonds have to be written down by 60 percent, Portuguese and Irish bonds by 40 percent and Italian and Spanish bonds by 20 percent on bank balance sheets. Due to these write downs alone, JP Morgan says that European banks require an extra €54 billion. Analysts at Morgan Stanley even recommend up to €150 billion more in capital.

To recap: In July, European leaders crafted the fund (technically, the European Financial Stability Facility or EFSF) as a $588 billion rescue fund to prop up Greece and other nations that are bankrupt in reality — if not in public. Of course, it isn’t just the governments which will need rescuing. It is also all the other institutions that made loans to Greece & Co. When (not if) the default happens, a lot of already shaky banks will have much more debt than they do assets. Investors and depositors will then act on the fact that those institutions are not a good place to keep their money. The banks that loaned to the banks that loaned to Greece will also have more debt and people will worry about those banks. This will worry the banks that loaned to the banks that loaned to the banks to fund the mess that Greece built. The EFSF is supposed to be that something. The theory is that it will do this by providing money to a lot of those governments and institutions

BRATISLAVA, Slovakia—Slovakia's parliament has endorsed the amended rescue fund, in a repeat vote, allowing the European Financial Stability Facility to become operational. Slovakia was the last country in the 17-member euro zone to vote on the €440 billion ($606.8 billion) EFSF and the only country to repeat the endorsement vote, having rejected initially late Tuesday. The 114-lawmaker majority in the 150-seat parliament voted to approve the fund. The approval became possible after an earlier vote, demanded by the opposition Smer-Social Democracy party, which approved the holding of an early general election in March 10, 2012. The snap election will come less than two years after regular general polls held in June 2010. The local political turmoil was brought about by the outgoing right-of-center government of Prime Minister Iveta Radicova losing a confidence vote by parliament late Tuesday. 119 lawmakers in the 150-seat parliament voted to hold the general election ahead of schedule. The vote opens the door for the EFSF approval in the repeat vote. Slovak ratification will bring into force a new agreement among the 17 euro-zone countries that dictates how the bailout fund operates. As a result, the EFSF will be able to deploy as much as €440 billion, up from about €250 billion now. It will also be able to buy government bonds in the secondary market and help countries recapitalize their banks, among other things. Democracy in action : vote until it passes and ask for a bribe before passing "it" !!! Is this the E.U. "democracy"???...I SAY , YES, E.U. IS TODAY'S SOVIET BLOCK !!!!