Italy woke up on Sunday to discover that politics was once again a world of bitter, personal attacks, sleight of hand, stunning egotism and shocking obsequiousness, meaning just one thing: Silvio Berlusconi was back. Overnight, the calm, grey world of Italy's technocrat prime minister, Mario Monti, vanished after the former EU commissioner said on Saturday he was resigning because Berlusconi, the 76-year-old media mogul and three-time prime minister, had withdrawn his parliamentary support. Hours earlier, Berlusconi had stood outside the gates of AC Milan, the football club he owns, declaring that after much soul-searching he would stand in elections, now likely in February. He boasted that after searching far and wide, he had failed to find a successor as brilliant as himself. Monti's austerity polices, tax hikes and spending cuts had dragged Italy to "the edge of an abyss", Berlusconi said last week, before his MPs were ordered via text to walk out of key votes and his party secretary, Angelino Alfano, told parliament: "We consider the experience of this government closed." Alfano then accused the centre-left Democratic party – currently riding high in the polls – of communist tendencies, jolting Italians back to Berlusconi's heyday of claiming commies boiled babies alive. Gian Antonio Stella, a leading commentator with Corriere della Sera, lamented: "I thought we had got beyond all that; it is so unpleasant to return to the 'You are either for me or against me' version of politics.

"Italians are sick of the Guelph and Ghibelline mentality, which cuts off the oxygen from political debate."

But for Berlusconi that vitriol is his lifeblood and he now has two months to turn up the heat on his TV channels and persuade Italians to take his side once again, following his resignation in November 2011 in the midst of sex scandals and an economic crisis that threatened to send Italy into meltdown.

Monti's plan to resign at the end of the year after he passes the 2013 budget, bringing elections forward a month from March, deftly denies Berlusconi the pleasure of shooting down the government's remaining bills as they struggle to get through parliament.

"The big question now is whether Monti himself wants to run as the head of a centrist group in the election," said Roberto D'Alimonte, a professor of politics at LUISS university in Rome.
Italy faces a return to political chaos - IN FACT , ITALY WANTS OUT FROM UNDER THE GERMAN BOOT - after Prime Minister Mario Monti announced at the weekend that he will resign, prompting his notorious predecessor Silvio Berlusconi to say he would attempt a comeback. The renewed uncertainty sent European shares into a slump as trading for the week began on Monday morning. Investors aren't the only ones worried, either. German Foreign Minister Guido Westerwelle told SPIEGEL ONLINE on Monday that the situation in Italy threatened to spark renewed financial problems in the euro zone. "Italy can't stall at two-thirds of the reform process," he said. "That wouldn't cause turbulence for just Italy, but also for Europe." Westerwelle's concerns were echoed by Klaus Regling, the head of the permanent euro-zone bailout fund, the European Stability Mechanism (ESM), who told German daily Süddeutsche Zeitung on Monday that he feared the heavily indebted country could abandon necessary reforms. "In the last year Italy has pushed through important reforms," he told the paper. "So far, the markets have honored that, although they have reacted with concern to the developments of recent weeks." The reform process must continue for the sake of both Italy and the entire currency union, Regling said. BERLUSCONI SHOUL GET iTALY OUT OF THE FOURTH REICH !!!!

The EU's general court has blocked an attempt to force the European Central Bank to release files showing how Greece used derivatives to hide its debt in the run-up to the financial crisis. The case was brought by Bloomberg News under the EU's freedom of information rules in August 2010 but was thrown out on Thursday by the court in Luxembourg.

"Disclosure of those documents would have undermined the protection of the public interest so far as concerns the economic policy of the EU and Greece," the EU's general court said.  Goldman Sachs and other investment banks have been criticised by European leaders over claims that they helped Greece disguise the true scale of its debts over several years. German chancellor Angela Merkel said in February 2010: "It's a scandal if it turned out that the same banks that brought us to the brink of the abyss helped to fake the statistics."  The ECB is headed by a former Goldman banker, Mario Draghi.  The ruling means European taxpayers who are footing the bill for the €240bn Greek bailout will not find out whether EU officials knew of irregularities in Greece's national accounts before they became public in 2009.  Georg Erber, a specialist in financial market regulation at the German Institute for Economic Research, told Bloomberg: "The courts are bending the rules to legalise the policies of the European institutions and help stabilise the region. It reveals implicitly that the EU was well informed about what was going on and didn't take steps to avert the crisis."

The feeble EU will....

European banks have asked the European Commission to postpone the introduction of tougher global bank capital rules by a year to 2014 after U.S. regulators told lenders they did not expect the new regulations to take effect in 2013......The feeble EU will almost certainly cave in. Europe is SO bust that it needs the bankers, more than the bankers need the EU. This would show that the EU is no more than a grubby little exercise (or project) to allow politicians to borrow "however much it takes" to get as many European people "hooked for good" on Europe's spend, spend, spend socialist politicians as possible. And, later on, if US banks decided to play by less strict rules, then don't let them trade in Europe? The new Basel rules are not that strict anyway. They are only designed to try and make it a bit more difficult for banks to go bust when the next crash happens. It tries to raise the cover provided for banks debts turning bad from 2% to 7%. Meaning if more than 2% of the loan book goes bad now - the bank goes bust. The authorities have plucked a 7% figure out of the air as being sufficient cover for all future banking crises.

MADRID—Spain's central bank said Tuesday the Spanish economy contracted at a faster pace in the third quarter and the country may miss its budget-deficit target because of tax-revenue shortfalls.

The euro zone's fourth-largest economy contracted by 1.7% from the same period last year, compared with a 1.3% contraction in the second quarter, the central bank said.

In the first estimate of Spain's economic performance during the July-to-September quarter, the Bank of Spain said that on a quarterly basis gross domestic product likely contracted 0.4%, the same as in the second quarter. The central bank's estimates are often very close to or in line with final government estimates issued later. The government's first third-quarter GDP estimate is due Oct. 30.

The central bank also said that "it can't be ruled out" that Spain's government would miss its budget deficit target for this year, currently at 6.3% of GDP after a series of revisions, largely because of tax-revenue shortfalls. Last year, Spain's deficit stood at 9.4% of GDP, more than three percentage points above the target.

"The efforts to lower spending at the public sector have had a net contracting effect (on the economy) in the central months of the year," the Bank of Spain said. "We see drops in consumption and investment by all levels of government above those seen in previous quarters."

It looks very likely there will be mass demonstrations in Athens to mark Angela Merkel's visit next Tuesday. Our correspondent Helena Smith has spoken with the radical left-wing main opposition Syriza party, and they are confident that the German chancellor will be met with vocal protests.“She should expect demonstrations. Greek society will welcome her with mass protests,” Panos Skourletis, the party’s spokesman told me, emphasizing that Syriza’s leader Alexis Tsipras would not be meeting the German chancellor. “Firstly, we have no intention of meeting her,” said Skourletis. “Secondly, we will propose that trade unionists aligned to Syriza meet with other trade unions in emergency session to decide on holding a general strike on the day of the visit. Demonstrations will obviously coincide with the strike.” Protestors would be united by an over-riding demand: to abolish the brutal austerity that was pushing societies across Europe, and especially Greece, to the brink, he said.The Independent Greeks party, also vehemently anti-bailout, has said it will make war reparations a major part of its own protest when it stages a “symbolic blockage” outside the German embassy in Athens on Tuesday.

Libor rate-setting is “no longer viable”.

Martin Wheatley, the incoming head of Britain's new market regulator, is expected to recommend this week that the lobby body lose its supervisory role in the setting of the rate. "If Mr Wheatley's recommendations include a change of responsibility for Libor, the BBA will support that," the BBA said on Tuesday: The review was announced following revelations three months ago that big banks were had been attempting to rig Libor for years. The scandal led to a £290m fine for Barclays, ongoing investigations into manipulation at other banks, criticism of the rate and calls for a new benchmark that is more transparent and relevant to the credit worthiness of banks. Sir Mervyn King, Governor of the Bank of England, believes Libor has stopped working and should be replaced, while Mr Wheatley, who is the chief executive-designate of the Financial Conduct Authority, has said Libor rate-setting is “no longer viable”.

The BBA, a lobby group for banks, has been heavily criticised for its oversight of Libor, which is used to price loans and transaction for businesses and individuals worth more than $350 trillion globally. Libor is based on what a panel of banks expect to be charged rather than measuring actual lending rates. It is not directly supervised by regulators in Britain but has been overseen by the BBA since 1986. The Wheatley's review, due out on Friday, is expected to propose anchoring Libor interest rates to real transactions, rather than rates which panel banks believe they could borrow from their peers. (source telegraph.uk)

When will the Eurozone countries begin to face reality and dump their currency. Germany, won't keep picking up the bills while those with problems won't take the medicine needed to survive. Its far to much debt for the ECB to take, and something has to give. I just think it's time we cut loose from the mad house altogether.... Both the German and Greek developments are interesting, but I think that the real debate is going to be over how Draghi's "sterilization" is going to work. He is going to create unlimited amounts of new cash to buy peripheral Bonds and if all that cash gets into the economy, it could be inflationary, so the claim is that he is going to find ways to suck it back in. But that means the ECB selling assets, and there Draghi doesn't have any good choices. If he tried selling PIIGS Bonds that the ECB owns, it would just cancel out the effects of OMT. If he sells core country Bonds, he dilutes the quality of the ECB balance sheet even more, and he pushes the price of the core country Bonds down, and yields up, and so harms the core country taxpayers. The third way that has been proposed won't even work. That proposal was to persuade commercial Banks to convert their cash deposits at the ECB into one-week term deposits that technically aren't cash. But a one-week term deposit is similar enough to cash that Banks will behave as if it's cash. So at the end of the day the commercial Banks will get the new OMT cash and retain their existing cash as one-week deposits, which could lead to the Banks creating a credit bubble....Pro austerity or pro tax-and-spend? That is the question to which the electorate do not have a clue as to the answer. They are waiting for their political guides to provide it: on the left the Labour Party and the Trade Unions and on the right the Conservative led coalition and business; none of them capable of delivering - except by invective - the magic bullet to cure the problem. Instead the electorate are reduced to booing the Tory Ministers at the Games for attempting to solve the problem (the structural deficit) that they did not cause, and cheering the representative of the left who did. Politics is a deep and murky world,isn't it?

The "details" of a soap bubble ...

European Central Bank president Mario Draghi is expected to announce the details of a bond-buying programme to help keep down borrowing costs of crisis-hit countries later on Thursday. Leaks suggest it will involve unlimited purchases of government debt that will be "sterilised" to assuage concerns about printing money. The bond-buying scheme is rumoured to be called the "outright monetary transactions", with a shorthand title of OMT.

 

Maturity

The life of a bond, at the end of which it will be repaid in full. A bond's maturity can be as short as a year to as long as 100 years.

Seniority

This refers to how likely you are to be repaid if a bond issuer goes bankrupt. Bondholders with seniority over others will be paid back before other bondholders. There was some concern that the ECB would demand seniority over other bondholders when it undertook the bond-buying scheme, but leaks now suggest otherwise.

Unanimity

Was the ECB governing council united in backing Thursday's decision, or was there opposition? Bundesbank head Jens Weidmann has spoken out against a bond-buying programme before – is he now onside? Was the ECB split over interest rate levels, or were the decisions unanimous? Draghi's answer to these questions (which will surely come up) could be crucial.

Pari passu

A Latin phrase meaning "equal footing". In the bond markets, this means bondholders will be treated the same if a bond issuer goes bankrupt. Any purchases the ECB makes as part of its bond-buying programme are expected to be pari passu with other bondholders.

Collateral requirements

The ECB asks banks for collateral in return for taking out cheap loans. If they relax collateral requirements, they can accept a wider range of assets as collateral from banks. They have already relaxed these requirements, and can now accept everything from bundles of car loans to mortgage-backed securities.

Conditionality

This is the way the ECB would keep the Germans happy, by imposing conditions on receiving assistance from the ECB; so, if the ECB helps keep a country's borrowing costs low by buying up its bonds, that country may have to agree to some strict austerity. Without conditionality it would be easier for the ECB to unilaterally intervene.

Convertibility risk

This refers to the risk that you will buy bonds denominated in euros but could ultimately be paid back in lire or drachma (or deutschmarks) if the country taking out the debt leaves the eurozone before the end of the bond's life.

Unlimited intervention

Exactly what it says on the tin. Expectations are that the ECB will not put a limit on its bond buying. This is seen to be an improvement on the previous bond-buying programme, which was limited in size and therefore lacked credibility in the markets. If other traders do not believe the ECB has the firepower (or inclination) to buy enough bonds to bring down yields, they may continue to bet on them rising.

Sterilisation

This makes sure the money supply does not increase as a result of the bond-buying programme. When the ECB buys bonds, it is injecting liquidity into the financial system, effectively creating new money. To counteract that, the ECB has in the past followed bond purchases by subsequently draining an equal amount of liquidity from the system. It does this at the weekly deposit tender by increasing the rates it will pay commercial banks to deposit money with the ECB. The idea is that this will encourage banks to deposit more money with the ECB, thereby taking it out of the system.

Yield cap

Rumour had it that the ECB would set a yield cap on certain countries' government bonds. This would mean if the yield looked like it would break through that level, the ECB would start buying bonds to push prices higher and bring yields back down.

"EU assembly" ( in fact a bunch of retards )

Members of the "EU assembly" ( in fact a bunch of retards ) have been chastised for revealing details of a confidential briefing with ECB president, Mario Draghi. Mr Draghi was taking part in a hearing organised by the EU assembly's economic and monetary affairs committee on the future of the euro and plans to build a so-called banking union. Jean-Paul Gauzes, a French member of the panel, commented that Mr Draghi had told the committee that he was comfortable with the central bank buying bonds with maturities up to about three years. Members had their knuckles rapped over leaking their briefing, with the committee chairman Sharon Bowles saying the leaks were “a complete breach of confidence". "I think it has brought this house into disrepute,” she added.

Bloomberg reported: While it had originally been intended that Draghi’s hearing with lawmakers would be public, that plan was changed because of the convention that senior ECB officials don't comment publicly on policy in the week before an ECB Governing Council meeting, according to a parliament spokesman.

Moodys have downgraded 28 Spanish banks recently to just above junk status, also downgrading several Italian banks because of the contagion effect.The whole of Europe is utterly screwed by a debt mountain that cant ever possibly be paid off....Unless the ECB can magic up another 500 billion in a vain attempt to stop Spain and Italy going down the tube. ... We have politicians across the EU without a backbone between them, clenching their buttocks as hard as possible to not be the first to publicly shit themselves in panic. Yet the EU keeps a triple A credit rating. That sounds like a ponzi scheme to me...

Enormous growth with cheap money, that's United Europe

That is what we experienced in the last decades of the EU. Regard Spain, it changed, grew and modernised, in rural regions partially medieval,her life with an unmatched velocity never experienced before in history. - And ended in the financial crisis. That was mainly the fault of the socialists, with the coward Zapatero, now fleeing before the voters, and by socialists inbred attitude to waste the money, that others earned. And this horror experience shall now be revived in France with a President to elect who already declared that he would disregard the rules for austerity- and preferably waste German money.
By the way:I just returned from the "total emergency“ in Spain’s most suffering region Catalonia, nearly bankrupt. The restaurants were filled with Spanish families. Enjoying excellent food with pescados, mariscos and bogavantes (lobster) together with cava and one of the favourite cars seems to be the Porsche Cayenne... With the speed at which the level of quoted debt is increasing and far greater than any rate of inflation surely there must be questions on how big the black hole in the finances actually is. If you told me it was a 100 billion today then all of a sudden it lurched to 300 billion any sane person would say "WTF". ... SO SOMEBODY HAS BEEN LYING OR HIDING THE TRUE SCALE OF THE PROBLEM! At that point you can't fix it the size of the problem is not yet determined so honestly now "how big is the problem"??? You will not get a straight answer on this because they would be called out on it tomorrow when it has doubled yet again!....Germany’s ECB board member, said today: “The risk premia of sovereign bonds now reflect not just the insolvency risk of some countries but an exchange rate risk, which should not theoretically exist in a currency union. The markets are pricing in a break-up of the eurozone. Such systemic doubts are not acceptable".
Ahhh, "theoretically"... Well, theories are often very, very wrong indeed. Or were Greece, Ireland, Portugal, now Spain and next Italy all supposed to be declared insolvent as part of the euro "master plan", eh? ...Want some more data for your "theory"?....there, you see..."The Catastrophic State of Italy's Labor Market - September 4, 2012 - Spiegel. Italy's economy remains in freefall. The country is shedding jobs, production rates are abysmal and the infrastructure is appalling. Banca d'Italia, now forecasts a 2 percent drop in GDP this year"

What the incompetent idiot stated :Rehn added that the euro was "irreversible"....hahaha!

Spanish banks borrowed a record €402bn (£316bn) from the European Central Bank in July, leaving them as far as ever from returning to capital markets, and heaping further pressure on Madrid as it tries to avert a full sovereign bailout. The banks borrowed 10% more than the €365bn they tapped in June, Tuesday's data from the Bank of Spain showed. Spiralling debt costs and balance sheets ravaged by a domestic property bubble that collapsed in 2008 have shut most domestic banks out of the bond markets. The banks' use of the ECB facility has increased sharply this year, rising from €161bn in January, and the sector was propped up in July with the promise of a European rescue package – which it has yet to tap – worth up to €100bn. The pattern is similar if less acute in Italy – like Spain at the sharp end of the eurozone debt crisis – where banks held €283bn in ECB funds in July compared with €281bn in June, Bank of Italy data showed last week. In Spain, only heavyweights with big operations abroad such as Santander and BBVA continue to have few problems raising funding from the market. One likely factor in the July increase was the higher charges that some clearing houses were levying on the use of Spanish bonds – which many domestic banks have invested heavily in – as collateral for raising funds, one analyst said. The eurozone has avoided entering a technical recession, defined as two consecutive quarters of negative growth, because growth was flat over the first three months of 2012. Howard Archer of IHS Global Insight predicted that GDP will fall again during the current quarter. Archer said the eurozone was "struggling against tight fiscal policy in many countries, high and rising unemployment, muted global economic activity and ongoing serious sovereign debt tensions that weigh down on confidence and limit investment. Stock markets, however, were cheered by the news as the contraction was smaller than expected and share prices rose across Europe. The FTSE 100 finished 32 points higher at 5864, while the DAX closed 0.8% higher. The European commission vice-president, Olli Rehn, told CNBC that the EU and the European Central Bank would take action "once certain conditions are met". Rehn added that the euro was "irreversible".

The eurozone is grappling with sky-high debt levels

Slower economic growth is making it harder for governments and central banks to control the debt crisis in Europe. Shrinking economies make it more difficult to get the public finances into shape. Lower output dents tax revenues while forcing up the cost of social benefits. “The big picture is that the economic growth required to bring the region’s debt crisis to an end is still nowhere in sight,” said Jonathan Loynes, chief European economist at Capital Economics. For those countries at the front-line of Europe’s debt crisis, the figures make for grim reading. Unsurprisingly, Greece is faring the worst -- its economy is 6.2 percent smaller than a year ago and back at the level it was in 2005. Portugal, which has also been bailed out and enacting the tough austerity medicine, suffered a big 1.2 percent drop in output in the second quarter, compared with the previous quarter’s modest 0.1 percent drop. Italy and Spain, the eurozone’s third and fourth largest economies, shrank by 0.7 percent and 0.4 percent respectively in the second quarter. Both countries are struggling to convince markets they have a strategy to get a grip on their debts. Spain has even acceded to a bailout of its banks. Alexander Schumann, chief economist at The Association of German Chambers of Industry and Commerce, urged Europe’s indebted countries to carry on with their reforms and that it won’t be long before they start reaping the rewards. “We need to be patient but there are positive signs that in 18 or 24 months we might see light at the end of the tunnel in Portugal, Spain, Italy and Greece, “he said. “We can get there if politicians don’t block the tunnel with ideas that add new uncertainty.”...The eurozone is grappling with sky-high debt levels and record unemployment of 11.2 percent. Compared with the year before, the eurozone’s economy is 0.4 percent smaller. Without Germany continuing to post solid levels of growth, the eurozone would officially be in recession. Europe’s largest economy grew by a quarterly rate of 0.3 percent in the second quarter. Though down on the 0.5 percent recorded in the first quarter, the advance was a little more than expected -- most economists thought Germany would only grow by 0.2 percent.

I bet even the IMF has no idea how much the game is going to change.

President Mario Draghi admitted his eurozone rescue plan was a work in progress. ... First there was light at the end of the tunnel - now there is just work in progress meaning that they are thinking of trying to locate where they are in the tunnel but they haven't got a clue what to do. Euro is just a shamble the biggest political failure of all times, the biggest wealth destroyer the humanity has ever known. Congratulations to the europhiles for making the world a poorer place. You're in a big hole and you're still digging.... There is a need for the europhiles for an apology for all the misery they piled onto the people and start urgent negotiations on how to get rid of the euro. We will forget all your sins. It is up to you to put your hands up and say sorry. wELL :The elephant in the room is losing it's grip on the ceiling light flex? Stand by for the mass stampede through doors and windows and walls. The IMF is as informed as manuel as to the whole picture, the truth is nobody can know the extent of the desolation bankers and financial whizzkids have visited upon us and anyone who can be convinced otherwise has little appreciation of the shortcomings of human nature. It's likely that from top to bottom they were all behaving with the mindset of the shoplifters during the riots, driven mad in their bonus rush, many also under the influence of cocaine?
Over four years some of the known truth has been drip fed out, it's rumsfeldt's unknown unknowns (as it were) that will lock in the longest depression yet, as we especially seem stuck with the present establishment using the austerity argument totally dishonestly for dogmatic gains and repression.... I SAY : The economic shock from the eurozone crisis has not yet hit said the IMF- AND That's because it ISN'T a "eurozone crisis", it's a crisis of western consumer 'growth' capitalism, mainly caused by a bubble stoked by profligate bank lending activities, reckless and stupid corporate borrowing and a disastrous corporate 'globalisation' process which saw the biggest transfer of wealth across the globe in human history - oh, and diminishing conventional oil reserves.

Top bankers messed up, top business leaders gave away the wealth of the west for short term profit and dumb politicians didn't understand what was going on. Those that did, were easily 'persuaded'.  They're all sliding down the mountain side, using ice picks for brakes but kicking the Eurozone ahead of themselves, so that they have someone to blame....it called for a "policy game changer"

I bet even the IMF has no idea how much the game is going to change.

An interesting point -- Spanish 10 year debt is yielding 7.5pc, half of what it ought to yield but enough to spook markets not yet ready to face the inevitable deflation of what has long been a bond super-bubble. This bubble is particularly evident in France. The debt levels which the country has are as unsustainable as Britain’s, yet its policies are more irresponsible and its remedies more restricted. Although it is considered a core country in the eurozone, France’s economic profile now bears more resemblance to Greece’s the Germany’s. Public debt in France is at 86.1pc of GDP (146pc if ECB liabilities and bank guarantees are included). The projected budget deficit this year is 4.5pc, with France having exempted itself from the EU’s instruction to bring deficits down to 3pct by the end of the year. These numbers are not unusual in the context of eurozone economies in general. What distinguishes France is the lack of political will to address them and, as a consequence, a projected debt to GDP ratio which would place it firmly amongst the PIIGS grouping. A 2010 paper by the Bank of International Settlements – cited by economist John Mauldin in his brilliant recent dispatch on ‘hidden lions’ – sought to model the likely effects of three separate policy paths by European governments. These range in severity from governments essentially carrying on as they are, to the most extreme austerity the authors believe to be politically possible, a gradual downwards movement in government spending while age related entitlements are frozen.

The proposed creation of a single euro-zone bank supervisor is shaping up to be a test of the willingness of countries to give up national powers for the sake of the euro. Though still in its infancy, the effort—which envisions a key role for the European Central Bank in supervising the bloc's largest and most internationally active banks—faces hurdles as officials try to streamline a patchwork of regulators and supervisors numbering in the dozens. German central bank officials are reluctant to add another responsibility to the ECB that might weaken its anti-inflation vigilance. French bank executives worry that a Europe-wide supervisor wouldn't take into account the unique ownership structure of some banks. Behind a painted fence, the new European Central Bank building rises in Frankfurt. A banking supervision plan sees a key role for the ECB. "It will be a test case, so they'd better pass the test, otherwise it would put euro area in danger," says Daniel Gros, head of the Center for European Policy Studies, a think tank in Brussels. German Chancellor Angela Merkel has made the creation of a new euro-zone banking supervisor under the aegis of the ECB a precondition for agreeing to let Europe's bailout fund re capitalize banks directly, rather than indirectly via loans to national governments. Such a European financial backstop for banks would alleviate pressure on countries with banking crises, such as Spain and Ireland, and would correct one of the omissions in the design of the euro that economists say has made the currency union unstable. Creating a single supervisor would require countries to give up some of their sovereignty over how their banks are regulated.

German politicians have reached an agreement that will allow parliament to approve the setting up of a permanent eurozone bailout fund and the fiscal pact which eurozone leaders agreed to last year.  Angela Merkel's government and the opposition Social Democrats said they had agreed on the measures, which will give the Chancellor the two-thirds majority in parliament she needs when it goes to a vote next week.  There's a bit BUT though - Volker Kauder, the parliamentary leader of Mrs Merkel's party said again there would ne debt mutualisation in Europe, aka no eurobonds ... The head of the International Monetary Fund has piled pressure on Germany by recommending a series of crisis-fighting measures that chancellor Angela Merkel has resisted.  IMF managing director Christine Lagarde warned that the euro is under "acute stress" and urged eurozone leaders to channel aid directly to struggling banks rather than via governments. She also called on the European Central Bank to cut interest rates.  The comments came as Italy's prime minister Mario Monti, warned of the apocalyptic consequences if next week's summit of EU leaders were to fail.  The stark message from Lagarde, delivered to eurozone finance ministers who met in Luxembourg, will increase pressure to come up with a unified approach to tackle problems including Spain's struggling banks. She urged the 17 eurozone countries to consider jointly issuing debt, helping troubled banks directly, and suggested relaxing the strict austerity conditions imposed on countries that have received bailouts.....

Luxembourg's Jean-Claude Juncker has said he'll step down as chairman of the forum of the eurozone finance ministers this year, citing the heavy workload and his health.  Schaeuble has said he wants the job but Hollande is thought to be anxious about appointing a champion of austerity to such a key role.   If Germany gets the Eurogroup job, France gets to appoint their man as head of the bailout fund the European Stability Mechanism and vice versa.  Hollande is expected to put his petitions to Angela Merkel, Italy's Mario Monti and Spain's Mariano Rajoy at their talks in Rome on Friday.

The European Exchange Rate Mechanism (ERM) vs. The Euro

I'm getting a great deal of "de ja vue" with what's happening these days, The ERM....I remember everybody desperately trying to keep it going long after the game was up, then finally when the bang came, it came big time. I think the same will happen to the Euro.  One mighty loud bang about to come, and when it does come, it will happen very very quickly......After all, was the ERM not the farther of the Euro?.....The European Exchange Rate Mechanism (ERM) is based on the concept of fixed currency exchange rate margins, but with exchange rates variable within those margins. This is also known as a semi-pegged system. Before the introduction of the euro, exchange rates were based on the European Currency Unit (ECU), the European unit of account, whose value was determined as a weighted average of the participating currencies....A grid (known as the Parity Grid) of bilateral rates was calculated on the basis of these central rates expressed in ECUs, and currency fluctuations had to be contained within a margin of 2.25% on either side of the bilateral rates (with the exception of the Italian lira, which was allowed a margin of 6%). Determined intervention and loan arrangements protected the participating currencies from greater exchange rates fluctuations.

The European Exchange Rate Mechanism (ERM) was a system introduced by the European Community in March 1979, as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for Economic and Monetary Union and the introduction of a single currency, the euro, which took place on 1 January 1999. After the adoption of the euro, policy changed to linking currencies of countries outside the Eurozone to the euro (having the common currency as a central point). The goal was to improve stability of those currencies, as well as to gain an evaluation mechanism for potential Eurozone members. This mechanism is known as ERM2.

As the Eurocrats toy with “Grexit”, Spain is trying to plug holes in regional budgets

If the World goes into a nose dive there will still be top dog countries or safer heavens. The time to worry is when people start to starve then civil war breaks out. AS long as they can keep bellies full then civil unrest will be held at bay.

Back in the 1970s, the eurozone economies, then among the most dynamic on earth, generated 20pc of global growth. Over the past decade, this growth share has fallen to 5pc. Yet the single currency area still accounts for more than a fifth of the global economy. More fundamentally, the region’s banking sector is so distressed, and many of its governments so close to insolvency, that “eurogeddon” could spark a worldwide shockwave every bit as damaging as Lehman. And this time, of course, there is far less scope for fiscal and monetary bail-outs – not only in Europe, but in the US and elsewhere, too. Of course, the UK, already in recession and reliant on the eurozone to buy more than half its exports, is among the most seriously exposed. In May, Britain’s manufacturing PMI index nosedive to 45.9, the weakest reading since May 2009, down from 50.2 the month before. This marked the second biggest one-month drop in 20 years. Global markets are clearly skittish. The only thing that has stopped asset prices falling further, perhaps, is the belief that escalating market turmoil could push central banks into action – not just the ECB, but the Bank of England and Federal Reserve, too. That’s why gold prices are firming up once again. It’s also why the dollar index, typically inversely correlated with investor risk appetite, has lately shown signs of reversal.... - Well, the week past, brought worrying signs, though, that while the eurozone’s woes are not easing, ongoing concerns about monetary union are now having an impact on alternative growth centers, too, imposing real damage on commercial activity in other parts of the globe.....There is no talk of firewalls, or of simply letting Spain go, or of the European banking system being re-capitalised to compensate for the losses that it would suffer. Nope. This is it. The cancer has now spread to the vital organs of the EU. Spain is not a peripheral Mediterranean country. It is not an insignificant player in the political project. It is not a marginal going-along-for-the-ride-and-the-free-money passenger on the euro train. Not only is its economy so large as to be indispensable, but its ties with Italy mean that the Italian economy (which is the third largest in the EU) would be fatally compromised by its fall. “Itexit” is almost unpronounceable, so perhaps it’s fortunate that it will never be required: after Spexit, there would be nothing left to exit from.

European Central Bank (ECB) president Mario Draghi says that eurozone leaders must decide what they want the bloc to look like in the future, because the current set-up is "unsustainable". He said that the ECB could not "fill the vacuum" left by governments on creating growth or structural reforms. EU economics commissioner Olli Rehn said more austerity was needed if the eurozone was to avoid disintegration. New figures showed eurozone inflation slowed more than expected this month. Inflation in the 17 countries that use the euro eased to 2.4% in May from 2.6% in April. The figure is still above the ECB's target to keep inflation below 2%, but the lower-than-expected number could fuel calls for an interest rate cut next week.

Worries over the eurozone debt crisis - and in particular Spain's banking sector - have been hitting markets all week. However, the markets were enjoying a respite on Thursday. The euro - which had fallen to near two-year lows against the dollar at $1.2358 - recovered slightly to $1.2410. European stock markets were mostly positive, with London's FTSE 100 share index up 0.8%, and the Frankfurt and Paris indexes registering similar gains. The pressure on bond yields also eased slightly, with Spain's 10-year bond yield - the rate of return demanded by investors - falling back to 6.61%, having reached 6.79% on Wednesday. In other figures released on Thursday, Germany's unemployment rate fell below 7% as Europe's biggest economy continued to perform strongly. The jobless rate dropped to 6.7% in May, from 7% in April, as the number of people unemployed fell by 108,000 to 2.86 million. However, there was more bad news from Greece as figures showed that Greek retail sales volumes fell by 16.2% in March compared with a year earlier. This followed February's decline of 12.9%.

Angela Merkel says Europe should be ready to consider all options to stop the debt crisis - but wouldn't comment on a banking union in the eurozone. She said member states should be ready to hand over more powers to the EC: There are integration steps which will require treaty changes. We are not at that stage today but nevertheless there are no taboos. I have always said we need more Europe and that means eventually giving more competences to the European Commission. We have to think about how we move forward over the next five to ten-year horizon. And if we are constantly coming up with new taboos, it won't work. An odd move here from Bankia. In an attempt to hang on to deposits it's offering a free Spiderman towel to young savers if they can put away €300 by the end of the month. There were reports of a bank run earlier in the month after the state takeover of the lender was announced.
WELL....The simple truth is that European Nations face solvency issues thanks to structural deficits, which means the ECB is broke. The EFSF has never been adequately funded, nor can the IMF come up with enough money to bail out every bank in Europe, therefore, eventually, the currency will be abandoned. The Euro exists currently only because of US Currency backstops. By the same token, here in the US, sooner or later bond clamping will fail, and cuts will be occurring here as well. The only thing that remains up in the air is the timing, not the eventuality....BBC is reporting that the head of the European Central Bank, Mario Draghi, declared the Eurozone is "... unsustainable..." and that the ECB cannot ..."fill the vacuum..." left by the failure of Eurozone to take necessary action on austerity and structural reforms.

So, as a good socialist I transfer the debt to the average Joe

The vast majority of the EU states are socialist, so I believe, the main aim of socialism is to transfer wealth from those that have to those that have not to make it a fairer society.--- So as a good socialist I transfer the debt to the average Joe tax payer to protect the wealth of shareholders, bondholders and depositors. So Joe tax payer gets poorer and the rich get richer.---So I am a capitalist, I believe in a free market....Joe tax payer is protected for small amounts by the government i.e. all taxpayers. Its just insurance really Joe taxpayer has already paid for with his taxes. The bank goes bust free market forces. The shareholders, bondholders and wealthy depositors get stuffed. Wealth redistribution at a stroke with out the need for expensive tax collection and redistribution....I am sure all the educated people will tell me were I am going wrong....The wealthy by winning the competition have power to circumvent the market forces. So no pure market exists or is possible, and if ever it happened it would destroy itself in monopoly. It is even doing a good job of this at the moment without this 'purity'....Question - rhetoric : With so much continuing financial doom and gloom around Europe, the Euro and Spanish banks why have European stock markets followed far East markets and risen by more than 1% on opening this morning?. Is there something happening out there in the 'markets' that only a select few are aware of?... The ECB has  let the broader M3 money supply contract for the whole eurozone late last year, badly breaching its own 4.5pc growth target. This was not purist hard-money discipline. Let us not dress it up with the bunting of ideology, or false authority. It was incompetence, on a par with the errors of 1931.

Spain’s Bankia fiasco has merely brought matters to head, though the details are shocking enough. A €4bn bail-out in mid-May. A €23bn bail-out two weeks later. You couldn’t make it up.