SO MUCH FOR THE ECB plans...

MADRID--Mariano Rajoy, the Spanish prime minister, has said he is more determined than ever to avoid having to ask for a bailout – despite the insistence last week by ECB president, Mario Draghi, that it would be a condition of the central bank helping to keep down a country's borrowing costs.

"If there is one overriding priority for creating employment it's reducing the public deficit. That is far more important than what people like to call a bailout," Rajoy said in a televised interview on Monday night. Draghi announced last week that the bank would buy unlimited quantities of sovereign debt to ensure eurozone governments retained access to funding, but he made it clear that there would be strings attached. However, Rajoy said he was not prepared to accept such conditions. "I couldn't accept anyone else telling us what our policies should be or where we have to make cuts," he said. How this apparent intransigence is received in Brussels and Berlin remains to be seen, but Rajoy received some support for his stance on Tuesday during a visit to Madrid by the Finnish prime minister, Jyrki Katainen, who said a bailout could be avoided as long as the measures taken in Madrid were seen as credible. Rajoy is at pains to show that he is in charge, that he is not the victim of circumstance and that he is making decisions of his own free will and not because they have been imposed on him. He appears to have decided that, if he has to make spending cuts and other unpopular decisions, then he will do it without ceding sovereignty the way the Greeks have been forced to do.

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.

Green light for the "QARTO REICH"...

The eurozone's permanent bail-out fund HAS BEEN ratified - with conditions.......Germany's constitutional court has given the green light for Germany's president to sign the €700bn European Stability Mechanism into German law.

That takes away the danger of the bailout fund being blocked.

But there are also some key conditions:

1) The court has rules that German liability to the ESM must not exceed €190bn without asking the Bundestag for approval.

2) Both houses of the German Parliament must be kept informed about how the funds within the ESM are deployed.

No-one really has the courage to kill the Euro, nor do they have the where with all to rescue it. How do people think the markets will react to yet another plan about what we'd like to do if we had the balls/mandate.

Another important element in today's court ruling: the judges are going to consider the bond-buying programme announced last week by the European Central Bank.

German MP Peter Gauweiler asked the court to consider whether the Outright Monetary Transactions (OMT) plan was also a violation of German sovereignty, as it allows the ECB to buy unlimited quantities of eurozone sovereign debt. Gauweiler's complaint failed to postpone today's decision, but it suggests there could be further action from Karlsruhe in the months ahead, as the judges examine whether OMT transfers German sovereignty to the ECB.

"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...

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.

Debt crisis...

Debt crisis: Germany caves in over bond buying, bank aid after Italy and Spain threaten to block 'everything'. The agreements at a European Union summit in Brussels suggested Germany had yielded on its insistence on forcing tough reforms in exchange for rescue money. That was a victory for Italy and Spain, who have argued they have done a lot to clean up their economies yet are facing rising borrowing costs. European Council chairman Herman Van Rompuy said the aim was to create a supervisory mechanism involving the European Central Bank by the end of this year, and to break the "vicious circle" between banks and sovereign governments. Jose Manuel Barrose, the European Commission president, said the deal was "ambitious".My excuses but I forgot to take my 'suspension of disbelief' pill this morning. So this 'deal' comes into effect at the end of the year and after the Bundestag presumably vetoes Germany allowing any more money? And because the money is not available from a non-existent-fund that hasn't been set up yet and won't happen anyway the markets have reacted favorably? Until when will this non-solution solve the problem of Spanish and Italian debt yields, to say nothng of Greece, Portugal, Ireland, Cyprus and possibly France? I shall go and celebrate immediately !!!

...fulcrum of Merkels German Dream - to rule Europe without a shot being fired

The reason that the Euro will NOT be put to the sword is that it is the (well they can't can they because they are not allowed guns anymore). Merkel is a typical Prussian - NEVER WRONG - and that will soon lead to the impoverishment of most of the less powerful in Europe, which in turn will lead to massive civil unrest. And who will "take charge", or "come to the rescue"?...Why the very person who caused it - Angela Merkel.

Ring any bells Greek people?".... Meanwhile, The Greek coalition seeks two extra years to NOT meet bailout deficit targets!""The general target is for there to be no further reductions in wages or pensions and no more taxes"  A good target for a country with budget in red for years and still in red and it seems has no intention getting out of red and asking basically EU taxpayers to cover its unbalanced budget for next two years or more probably forever . "They ask extra two years' grace to meet the tough deficit targets laid down in the bailout deal, and was hoping to reverse cuts in the minimum wage and cancel planned civil service layoffs."....So,minimum wages upwards, regardless of the fact that even now with all the "cuts" their minimum wage is higher than in Spain. Promised excess state administration lay-offs to be cancelled,actually they have not even started with the cuts, and is still only a promise to IMF, EU of 150,000 out of 1 milion public sector workers. ... And, aaa, taxes, not to be forgotten, Please, no more taxes!!!....Is it only me, or it just doesnt really makes sense? I mean how do they plan to run their country like this? Who do they think should foot the difference between their overspending and taxes they (dont) collect??? To whom they think they can go and make this "case" with straight face??? To EU taxpayers??? I somehow dont think their "argument" will work.

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.

CHINA AND JAPAN - The two nations said they will consult “very closely” on the issue after Christine Lagarde, head of the IMF, asked members to commit as much as $500bn extra to the Washington-based global lender for possible bailouts. Jun Azumi, the Japanese finance minister, said the pair would look at further funding to strengthen the IMF's financial base, following talks with his Chinese counterpart Xie Xuren in Toyko. “Rather than make decisions independently, we’ve agreed to consult each other very closely,” he said. “Although a critical moment of the European issue has gone, we can never be optimistic.” The IMF wants to ramp up its ability to attack Europe's debt crisis. The issue of increasing its firepower is expected to be top of the agenda at a meeting of finance ministers from the Group of 20 nations on April 20. “It’s important for Japan to check China’s intention on this, while China probably wants to increase its political influence if it puts up money,” Tomoko Fujii, a senior foreign exchange strategist at Bank of America Merrill Lynch, told Bloomberg. China would press on just fine. It would take a big hit for a while but would manage to navigate the obstacle just fine. It would just have to reorient its growth strategy away from exporting to a domestic focus, which is something it has been doing, though way too slowly. A collapse of its huge export market would mean it has to alter its model immediately, which it would do. One great advantage they have is that as a dictatorship they can make big decisions instantly and do whatever it takes to make it happen. And you can bet the people would pull together and absorb whatever shock the change meant for them on a personal level; because deep down they know they are on the right path to economic hegemony and they trust their government to keep doing the right thing as they clearly have done so far. And if India was a dictatorship rather than a democracy then it would also be much further ahead than it is now. Democracies are obviously great, but are not the best form for building up a country economically and doing it quickly, as every man and their dog wants things their way rather than for the good of the country in the long term. Westerners trot out all the negatives and pronounce the collapse of China all the time. Although the points raised are valid they don't materially alter the trajectory of China. Ageing demographic, loss of export market, trade war, environmental destruction, etc, all valid points, but all not a big enough issue to stop 1.4 billion people retaking the economic crown they held for most centuries preceding the industrial revolution, when population size suddenly became less relevant.

Tensions within the zone are mounting as we enter this week

Tensions within the zone are mounting as we enter a week in which Italy, Belgium, Spain and France plan to tap the markets for some €17 billion ($22 billion) in new loans and, says Goldman Sachs, the European economy slides into recession. Bankrupt Greece; junk-rated Portugal pleading with Angola for inbound investment; jobless Spain, facing some interest rates that have doubled in the past month; and recovering Ireland have already fallen to the bond vigilantes. Growth-free Italy is fighting a rearguard action, facing unsustainable interest rates despite the stellar reputation of its newly appointed technocrat prime minister, Mario Monti; Belgian debt, now equal to its GDP, has been downgraded, in part because of the inability of this seat of the EU to form a new government. France, consumer confidence dropping, is likely next. Some German IOUs were unsold, and prices of bunds are slipping. No euro-zone country and no euro-zone company can any longer escape the consequences of the structural flaw in the euro-zone architecture. German Chancellor Angela Merkel opposes measures that might stem the tide that is about to engulf the euro. Nor can countries outside the euro zone. Great Britain, with high deficits, mounting debt, and a deficit-reduction plan that just might not work, retains its triple-A rating because it has its own currency and the rating companies increasingly consider governance when deciding whether to downgrade.
Britain is considered governable, but that might change after Wednesday's strike of public service workers shuts down the country. The failure of the super committee to find some trivial deficit reductions means America might also slip into the ungovernable category. And the Federal Reserve Board is imposing new stress tests to determine whether leading banks can withstand a wave of sovereign- debt and bank defaults in Europe. One thing is certain: The euro cannot survive without a major change in the governance structure of the euro zone. The first prescription for what ails the zone was "austerity", but that has produced recessions and government oustings. Then came the European Financial Stability Facility, but it turns out to be too puny to halt the bond vigilantes' rampage through the euro zone, and anyhow rests in part on France's waning ability to join Germany as a guarantor by retaining its triple-A credit rating. The European Central Bank, operating within the legal limits imposed on it by thetreaties that govern the European Union, is providing some liquidity to the banks and a bit of relief on the interest-rate front for sovereign borrowers, but it cannot do much to prevent the insolvent from being forced to default. Ms. Merkel, Germany's latest Iron Chancellor, has set her face against any of the measures that might stem the tide that is about to engulf the euro. She is against allowing the ECB to become the lender of last resort, aka printer of money. She refuses to share her balance sheet with stressed countries by allowing the issuance of euro-bonds, until they reform, even though such reforms cannot be implemented in time to head off sovereign defaults that would take down many under-capitalized European banks, now desperately juggling their books to inflate their capital ratios.

An eerie calm seems to have settled across global markets in the lead up to today's decision on a Greek bond swap .

The ECB left interest rates unchanged at 1% as it published new forecasts underlining the impact of the sovereign debt crisis on activity in the 17 countries that use the single currency. While the bank's president, Mario Draghi, said a deal was "very close", his economic staff said they now expected eurozone growth this year of between -0.5% and 0.3% (down from a previous forecast of between -0.4% and 1%). In 2013, they forecast growth of between 0% and 2.2% (down from between 0.3% and 2.3%) On inflation, the ECB expects the consumer price index to be between 2.1% and 2.7% (from 1.5% to 2.5%). Analysts said that the pick-up in inflation ruled out any further cuts in the cost of borrowing for the time being. Matters will come to a head soon. The IMF must decide by September whether Portugal needs more money and debt relief. If Portugal now spirals into a Grecian vortex, large haircuts loom. This time EU leaders will have to accept that their own taxpayers will suffer losses - avoided until now - or violate their pledge. Bondholders are not waiting to learn whether Europe will keep its word this time. There has been no rally in Portuguese debt since the ECB flooded banks with €1 trillion. Ten-year yields are stuck at 13.2pc. Return to market access is a distant dream. The risk for Europe is that investors will charge a "political risk" premium to invest in any EMU country subject to EU legal whim. The greater risk is that Euroland's crisis rumbles on as fiscal contraction in Italy and Spain plays havoc with debt dynamics, and reforms come much to late to close the North-South trade gap. Europe's handling of Greece has guaranteed that global funds will rush for Club Med exits at the first sign of trouble. The next spasm of the debt crisis will that much dangerous if it ever comes. As the saying goes: Hell hath no fury like an abused bondholder. More than 75% of private-sector creditors have pledged to take part in Greece's €200 billion ($262.98 billion) debt swap, an official said.

Used car salesmen....

In a show of unity at a meeting in Paris, Mr Cameron and Mr Sarkozy highlighted their common military goals by suggesting they could intervene in Syria if the country’s rebels “unite and organise” in a revolution. Mr Sarkozy said he now understood where Britain’s “red lines” lie when it comes to being part of Europe. He even said he “admired” Britain’s staunch defence of the City....Both men also expressed concern over Syria’s “butchery” of its own people and said they would work harder to make links with rebels in the nation. They did not rule out joint military action in Syria but said the current circumstances were not right. “The main obstacles are not to do with such and such country’s attitude at the UN,” Mr Sarkozy said. “The fact is we cannot bring about a revolution without the Syrian people. We cannot bring this about if the Syrian opposition does not unite and organise to help us help them.”...Used car salesmen have now been elevated to honest, chivalrous, patriotic and English gentlemen.I would not trust these two sharpies to sell me a scooter....So, Sarkozy now believes that stand up comedy is the way forward in winning the French Presidential election !?

34 Italian financial firms downgraded by Standard & Poor’s -- UniCredit SpA (UCG), Intesa Sanpaolo SpA and Banca Monte dei Paschi di Siena SpA (BMPS) were among 34 Italian financial firms downgraded by Standard & Poor’s, after the credit-ratings company reduced the nation’s grade last month. UniCredit, Italy’s biggest bank, and No. 2 Intesa had their long-term ratings lowered to BBB+ from A, S&P said yesterday in a statement. Monte dei Paschi, the No. 3 bank, was reduced to BBB from BBB+. All three have a negative outlook, S&P said. .....Italy’s credit rating was cut two levels to BBB+ from A on Jan. 13 as S&P said European leaders’ struggle to contain the region’s debt crisis would complicate the country’s efforts to finance borrowings. S&P yesterday revised its banking industry country risk assessment, known as Bicra, for Italy to group 4 from group 3, citing mounting risks. ...“Italy’s vulnerability to external financing risks has increased, given its high external public debt, resulting in Italian banks’ significantly diminished ability to roll over their wholesale debt,” S&P said in a separate statement on the country’s financial industry. “We anticipate persistently weak profitability for Italian banks in the next few years.” European nations are grappling with a debt crisis now in its third year as they seek to restore budget order and shore up the region’s financial industry. Spreads on some Italian banks are trading as if they were rated at the cusp of investment grade....go figure!?!?!?!...that means that either investors lost their marbels, or all the financial intitutions lost their credibility entireley !!!

On Sunday in a measured but pointed open letter to the government, the Association of Support and Cooperation of the State Armed Forces, the professional association of full-time staff, warned that the Greek Armed Forces are monitoring the government’s moves “with increased concern” and that their confidence in the “intentions of the state” have been “shaken”.

The World Bank has slashed its global growth forecast and told developing nations to prepare for the worst, warning that Europe’s debt crisis could trigger an even deeper slump than the post-Lehman collapse three years ago. "While contained for the moment, the risk of a much broader freezing up of capital markets and a global crisis similar in magnitude to the Lehman crisis remains. The willingness of markets to finance the deficits and maturing debt of high-income countries cannot be assured. Should more countries find themselves denied such financing, a much wider financial crisis that could engulf private banks and other financial institutions on both sides of the Atlantic cannot be ruled out. The world could be thrown into recession as large or even larger than that of 2008-09." The consequences would be dire for 30-odd countries with external finance needs above 10pc of GDP. The bank advised these states to "prefinance" their needs while the credit markets are still open, reducing the risk of a sudden crunch. Commodity exporters should brace for a fall in oil and metal prices of almost a quarter. Emerging markets have already seen a rise in average bond spreads of 117 basis points since last July. Global trade volumes contracted at an 8pc annual rate in the three months to October. Capital flows to developing countries fell to $170bn in the second half of 2011 from $309bn a year earlier. In a veiled attack on Europe’s austerity policies the bank said "it is not yet clear whether there is an end in sight to the vicious circle whereby budget cuts to restore debt sustainability reduce growth and revenues to the detriment of debt sustainability". The bank’s "downside scenario" involves a credit freeze in two "larger Euro Area economies". Such an event would cause a further contraction of Euroland’s GDP by 6pc over the next two years. The bank stopped short of modelling what would happen if the eurozone breaks up altogether.

Questions, questions, questions....

Does the ECB actually have any worthwhile amount of money? Or is it effectively just a thinly-capitalized dealer like all the rest of the banks? Is this correct: Its capital is five billion euros which is held by the national central banks of the member states as shareholders. The initial capital allocation key was determined in 1998 on the basis of the states' population and GDP, but the key is adjustable. Shares in the ECB are not transferable and cannot be used as collateral. 5 billion won't get it very far as a 'rescuer'! Where is this new 'cheap' loan on offer to Spain coming from? And where is the other 700 billion euros it has already lent coming from, if the whole EU or world house-of-cards collapses? And how do the shareholder countries actually cough up their share when they are all in debt way over their heads? It looks as if the ECB is as heavily complicit and drowning in the game of pass-the-debt-parcel (aka 'cycle of debt') as anyone! If so, then, for all his regulation dark blue EU technocrat suits, in reality Draghi is just yet another 'emperor with no clothes'!

The CFO of the "United Europe"...

Reuters : ..."the new EU fiscal agreement states that primary budget deficits must not exceed 0.5pc of GDP over the economic cycle, while countries can be taken to the European Court of Justice if they fail to meet targets...." US stocks have opened higher as investors shrugged off a Fitch downgrade of major banks and focused on the market debut of social games giant Zynga. The Dow Jones Industrial Average rose 93.02 points (0.78pc) to 11,961.83 in early trade. The broader S&P 500 climbed 11.66 points (0.96pc) to 1,227.41, while the tech-heavy Nasdaq Composite jumped 29.48 points (1.16pc) to 2,570.49. Ratings agency S&P has revealed that five exporters are vulnerable to recession or may suffer a larger drop in GDP next year. The five are: Germany, the Netherlands, Belgium, Austria and Finland. Meanwhile, a US Treasury official has reiterated that the EU debt crisis is a serious risk to America's outlook. The official adds that the US has no intention of seeking additional funding for IMF.

Regling (in fact the designated CFO of the "United Europe") is full of opinions today since he has added that Italy's and Spain's borrowing needs are manageable and he doesn't believe they will lose market access. Regling also finds it surprising to constantly hear that only the ECB has the resources to tackle the debt crisis. Klaus Regling, chief executive of the European Financial Stability Facility, has said Greece may need €100bn for its second programme. He has also said that bank recapitalisation in the EU may total €50bn and that €600bn of uncommited funds is already available to fight the debt crisis. Will it be enough?

Fitch cut the “issuer default ratings” at the banks to “reflect challenges faced by the sector as a whole”. The ratings agency said: “These challenges result from both economic developments as well as a myriad of regulatory changes”. Credit ratings of the world’s biggest lenders have come under pressure as weak economic growth and concerns about whether European politicians have done enough to end the Eurozone debt crisis. Long-term issuer default ratings for Bank of America, Citigroup and Goldman Sachs were cut to A from A+. Barclays, Deutsche Bank and Credit Suisse were downgraded to A from AA- while BNP Paribas fell to A+ from AA-. Meanwhile, Germany’s attempt to save the Eurozone was hanging in the balance as Hungary and the Czech Republic claimed it would be damaging and protesters in Warsaw demanded Poland stands firm against Angela Merkel. Hungarian prime minister Viktor Orban said that central Europe had the potential to become the most competitive region in Europe. “The only kind of co-operation we can have with the eurozone is one which does not damage Hungary’s competitiveness,” he said. Poles marched under banners that read: “We want sovereignty, not the euro.” They were protesting against the Brussels deal that could see EU countries, including those outside the eurozone, face penalties for breaking tough centralized spending laws. Britain used its veto in Brussels, sparking an intense backlash. Ireland and Sweden are also nervous about the fiscal pact, but Germany and France still expect the other 26 members, minus the UK, to approve it. Mario Draghi, the head of the European Central Bank (ECB), doused the other big hope, for radical ECB support, warning that the bond-buying program was “neither eternal nor infinite”. He said there was little he could do to restore growth.

Christine Lagarde, the head of the International Monetary Fund (IMF), said the debt crisis is not yet over: “No country or region is immune. All must take action to boost growth. Work must start in the eurozone countries and must continue relentlessly. The risks of inaction include protectionism, isolation and other elements reminiscent of the 1930s depression.”

The Times :"Britain looks likely to be joined by Sweden outside the new bloc, doubling the strength of the outer core against an inner 25".

Political and legal challenges mounted against the much-trumpeted deal struck in Brussels to save the euro, especially from Europe's center-left. François Hollande, the Socialist Party candidate who is currently the clear leader in opinion polls for the French presidential elections next year, on Monday said that he would seek to renegotiate the deal, which euro-zone leaders announced Friday morning after an all-night negotiating session.The euro-zone leaders agreed Friday to advance €200 billion ($268 billion) to the International Monetary Fund to help fund its backstop mechanisms, but put off until March a decision on raising the €500 billion cap on the resources of the European Stability Mechanism. In a note on Monday, analysts from Royal Bank of Scotland said that even in the best-case scenario, the €700 billion in combined funds that were agreed to last year would be able to fund Italian borrowing requirements for only two years, if it lost access to the bond markets the way Greece, Ireland and Portugal have. In Germany, both parliamentarians and the independently minded Bundesbank grumbled, but issued no explicit threats to bring the deal down. Bundesbank board member Andreas Dombret did, however, say the German parliament should have the right to approve or reject Germany's share of the IMF loan, which he put at around €45 billion. Traditionally, the Bundesbank has been uneasy about giving the parliament any more influence over its actions than the German constitution allows. However, Mr. Dombret expressed concern that the transfer could conflict with previous government pledges to the Bundestag that Germany's financial risk from the bailout programs would be limited. The lower house of parliament, or Bundestag, will have to deal with the decision to provide more funds to the IMF, a spokesman for German Chancellor Angela Merkel said. He didn't specify whether the Bundestag will only be informed of the measure, or will have to vote on it. Germany's eastern neighbors, Poland and the Czech Republic, also fretted on Monday that the latest deal could get very expensive for them.