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 !!!

Not Germany, Austria, or Switzerland is Italy

This is not Germany, Austria, or Switzerland is Italy - It is Italy – a nation not known for its work ethic or admiration of rules and regulations, and one which, last week, seemed to be teetering on the brink of financial and political meltdown. "The rest of Italy definitely envies us," said Mr Durnwalder, who is president of the semi-autonomous South Tyrol region. The area, with its bilingual German and Italian population, sits on the geographic, political and cultural fault line of the eurozone. It has almost no unemployment, its inhabitants are among the richest in the country, and in stark contrast to city halls elsewhere in Italy, the local administration has no debt. "The rest of Italy envies the results," he adds with a chuckle. "But not the work." Italy, the euro zone's third largest economy, is again at the centre of the debt crisis, as fears grow that its borrowing costs could hit levels that overwhelm the capacity of the bloc to provide support amid chronic political instability in Rome. The situation was described as "confused and dramatic" last week by Mario Draghi, the new head of the European Central Bank - who himself is an Italian. Italy has the second highest public debt in the eurozone after Greece – the equivalent of 120 per cent of GDP – and is suffering from chronically stagnant growth. The three main credit agencies have all downgraded Italy recently, meaning that its economy is judged to be less secure than those of Slovakia and Estonia – the two poorest eurozone countries. South Tyrol, by contrast, an area of 3,000 square miles and 500,000 inhabitants that retains strong control over its own finances, retains Triple A Star credit rating. Average GDP per head in the area around Bolzano was €34,600 - more than double that of Sicily, which has a similar degree of autonomy - and South Tyrol's unemployment is barely two per cent. In Sicily it is around 25 per cent, and the regional economy is blighted by corruption, low productivity and poor administration. The rest of Italy, says Mr Durnwalder, must now likewise learn to live within their means, as they do in the Alpine valleys he calls home.

NOTES about EFSF - I've read before that the EFSF is permitted to issue bonds denominated in currencies other than the euro, but the governments of the euro zone states have promised to provide guarantees denominated in euros, and I doubt that all 17 national parliaments have passed laws authorizing their governments to provide guarantees denominated in any other currency and laying down conditions for them to do that, especially regarding the applicable exchange rate“We have so far only issued euro bonds but we are authorised to use any currency we want if it seems efficient,” Klaus Regling, chief executive of the European Financial Stability Facility (EFSF), said. "It also depends on the Chinese authorities, whether they would approve that. I think it is probably more difficult. But I could imagine that over the years it might happen," he added. China has the largest foreign exchange reserves in the world, valued at $3.2 trillion (£2 trillion) . Mr Regling also said that investors may be protected against a fifth of any initial losses. “The EFSF will take a certain tranche that will be a junior tranche, which means if something goes wrong, the first loss will be carried by the EFSF. It could be around 20pc,” Mr Regling said in a speech at Tsinghua University.

"To fulfill its mission, EFSF issues bonds or other debt instruments on the capital markets. EFSF is backed by guarantee commitments from the euro area Member States for a total of €780 billion and has a lending capacity of €440 billion."

Therefore if I was the responsible person in the Chinese government, or indeed any other investor who might be interested, I would be looking ahead to how the yuan-euro exchange rate might change during the lifetime of the bonds denominated in Yuan. To the extent that I anticipated that the yuan would strengthen against the euro, I would also anticipate an effective weakening of the euro denominated guarantees of yuan denominated bonds. To take a simple illustration, if I anticipated that the value of the yuan would double against that of the euro then I would calculate that if the EFSF only issued bonds denominated in yuan then the effective value of the €780 billion total guarantees would be halved, meaning that its effective borrowing and lending capacity would be halved from €440 billion to €220 billion. And if the EFSF is expected to provide guarantees to assist a second SPV or SPIV to borrow much larger sums, anything which erodes the effective value of the guarantees provided to the EFSF by the eurozone state governments must also erode its capacity to provide guarantees to that larger SPIV.

Greece has a "governor" - Horst Reichenbach

BRUSSELS (Dow Jones)--Some Greek banks may have to be nationalized after the application of the agreed 50% write down in nominal value of Greek bonds held by the private sector, as part of new euro-zone package for the country, Greek prime minister George Papandreou said Thursday. Speaking to reporters after the conclusion of a marathon euro area leaders΄ summit, Papandreou said Greek banks would be re capitalized with official funds that would come out of the country΄s fresh EUR130B bailout package. "If the private sector can overcapitalize the banks they can do that but if they can΄t it means the official sector will need to. That will mean a temporary passage of ownership to the state. After restructuring they will be sold back to the private sector," Papandreou said. He also said the details of the new package would be worked out over the next few weeks. "We want to be done with this," he added. Asked if he was contemplating calling an early election or seeking the formation of a government of national unity, Papandreou said that Greeks want changes, not elections. "We will continue to seek the maximum level of consensus possible," he added.

Merkel's spokesman Steffan Seibert told journalists that further changes to Europe's bailout fund would require the agreement of the Bundestag, the German parliament. The eurozone's efforts to solve its escalating debt crisis plunged into disarray Thursday, when Germany and France called a second emergency summit after it became clear that they would not be able to bridge their difference in time for a first crisis meeting Sunday. Merkel's address to parliament scheduled for Friday was cancelled, and Seibert said it would take place next week. Sunday's summit was supposed to deliver a comprehensive plan to finally get a grip on the currency union's debt troubles by detailing new financing for debt-ridden Greece, a plan to make Europe's banks fit to sustain worsening market turbulence and a scheme to make the eurozone bailout fund more powerful. The announcement came from the offices of French President Nicolas Sarkozy and German Chancellor Angela Merkel after it became clear that the currecy union's two biggest countries could not agree on the main points of the plan. Both governments said that all elements of the eurozone's crisis strategy would be discussed on Sunday "so it can be definitively adopted by the Heads of State and Government at a second meeting Wednesday at the latest." It also said that the two leaders would meet Saturday afternoon ahead of the summit in Brussels in the hope of making progress.

The European Union's executive may ask for powers to censor credit ratings for countries in crisis, its financial reform chief said on Thursday, describing a ban as one way of stopping fallout from "ill-thought-out" ratings. The proposal, which officials cautioned may be impossible to police, would be the most stringent curb yet on rating agencies and highlights frustration in France, which was this week warned by Moody's that its top rating was under threat, and Germany. "These rating agencies should probably be considered one of the causes of this crisis," said Michel Barnier, the former French foreign minister who is now the EU commissioner in charge of regulating finance.

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.

Standard & Poor's Ratings Services has downgraded Spain a notch, citing increasingly unpredictable financing conditions that could squeeze a private sector already pressured by struggling economic growth. The move comes as politicians in Slovakia finally voted to expand Europe's bail-out fund, ending a nail-biting stand-off that threatened the Greek rescue mission and rattled global markets. S&P expects theowing challenges for Spain's private sector as it seeks fresh external financing to roll over high levels of external debt. S&P now rates Spain at AA-, three steps below the top AAA rating. Its outlook is negative. Slovakia became the last of the 17 members to ratify new powers for the €440bn (£385bn) European Financial Stability Facility (EFSF) in a move that will deliver eurozone leaders as much as €3 trillion firepower against the escalating debt crisis. The news came as the Financial Times reported that emerging market countries are working on ways to contribute money rapidly to expand the effective firepower of the International Monetary Fund, with the aim of increasing its role in fighting the eurozone sovereign debt crisis. An announcement is due at the G20 in early November, it is claimed.

Europe's embattled leaders gave themselves a two-week deadline to resolve the single currency debt crisis on Monday by delaying a crucial summit. The European Council president, Herman van Rompuy, announced the delay after it became clear that EU leaders were struggling to agree on proposals to expand Europe's bailout fund, and on possible changes to Greece's second bailout. With international lenders also reportedly making slow progress assessing Greece's finances, the summit has been pushed back from next Monday to Sunday, 23 October. But with Slovakia's coalition government failing to reach agreement on the existing deal to give the eurozone rescue fund stronger powers, the eurozone still appeared disunited. The postponement came as George Osborne told MPs that Europe needed to take decisive action immediately as the eurozone was now the "epicentre" of this summer's turmoil on global stock markets. "We need a comprehensive solution which ringfences vulnerable eurozone countries, recapitalises Europe's banks and resolves the uncertainty about Greece," Osborne told the House of Commons. The chancellor added his voice to those calling for the European financial stability facility (EFSF) to be expanded further. "If you're trying to protect larger countries, then €440bn is sadly not enough." Osborne also revealed that prime minister David Cameron had discussed the crisis with Barack Obama on Monday afternoon, a sign that Europe's woes continue to dominate the international agenda. World stock markets rallied again as traders welcomed the bank recapitalisation plan agreed over the weekend by the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy.

Analysts at Credit Suisse expect Goldman to have lost $392m in the three months to the end of September, while analysts at Barclays predict losses in the region of $180m. The trading revenues at Wall Street banks have been damaged over the summer by the sharp decline in global stock markets, the volatility across many asset classes and shaken confidence among chief executives to do deals.‬ The third quarter saw the FTSE 100 drop 13.7pc, the Dow Jones Industrial Average fall 12.1pc and the S&P 500 sink 14.3pc. Analysts at Credit Suisse expect that to have reduced revenues at Goldman's Fixed Income, Currency and Commodities division – a key driver of profits for the bank over the last decade. Revenues are expected to drop to $1.8bn, a 37pc fall on last year. "We expect overall fixed-income sales and trading activity to be very weak during the quarter," said Howard Chen, an analyst at Credit Suisse.‬ Goldman's investment banking division, which has been hit by macro-fears about the European debt crisis and an economic slowdown in the United States, will see revenues nose-dive 29pc to $825m, compared with the same quarter last year, according to Credit Suisse. The prospect of Goldman's first loss since 2008 underlines the pressure facing what is historically one of the industry's top performers. The bank has already announced a $1.2bn cost-cutting programme to be cut from its operations by mid-2012. But the new plan will increase cuts by as much as $250m. This could equal up to 5pc of the firm's expenses based on its 2010 spending. Wall Street recruiters say that Goldman, alongside other banks, may choose to make deeper cuts to jobs to be able to pay its best staff bigger bonuses.‬ When finance ministers from the G20 major economies meet next weekend, they could be excused for having a sickening feeling of deja vu. This time it's Paris, not London, but, just as in May 2009 when Gordon Brown brought the power-brokers of the world economy together in Docklands, they are trying to prevent a financial crisis spiralling out of control and dragging the global economy into recession. This time, though, there is far less political agreement or goodwill. Instead of the US, where the collapse of Lehman Brothers sent consumers and investors into panic mode, this time the focus is firmly on the eurozone, and time is running out. Greece is on the brink of going bust if it doesn't receive a fresh injection of cash, and bond vigilantes are focusing their fire on the much bigger Italian and Spanish economies, which had their debt downgraded by Moody's on Friday. Meanwhile, many economists think the eurozone as a whole may already have sunk into recession.

For Britain's banks, the perception that European banks are weak and too exposed to sovereign debt is a bigger problem than a Moody's downgrade, says the BBC's business editor, Robert Peston. He writes: The UK banks' downgrade is an inevitable consequence of government policy to reduce the likelihood that they would be bailed out in a crisis - of which the most conspicuous manifestation has been the Vickers' commission recommendations to put retail banks behind a ring fence and make creditors to banks explicitly liable to losses. The important point, for today however, is that these downgrades have been anticipated and discounted by the market for some time, so their real economic impact on the affected banks should be negligible. Mr Peston also gives an interesting run-through of how much capital European banks, including RBS, Lloyds and Barclays, would have to raise under a new set of stress tests, based on figures from French bank Natixis. If RBS was obliged to raise fresh capital, the government would be caught between a rock and a hard place, he writes. The bank has the right to sell new shares to the government at 50p (vs. a 23.5p share price now) under the terms of its previous bailout. This would obviously incur a loss for taxpayers. But the alternative would be the Government fully nationalising RBS... Lloyds has also responded to the Moody's ratings cut on the debt of 12 UK banks this morning. They are also playing down the move.

"The Eurozone will survive" says Fitch..."The issue was never in doubt" . Never in the history of propaganda have so many words been wasted to so little effect.

Why not just abandon the mistake and revert to national currencies. If managed properly it should not be disastrous, but just a money changing exercise, which puts right the daft notion of a common currency in the current situation. They changed to the euro quite simply so change back quite simply and let the drachma etc. float. Debts will still remain but national economies will adjust. The E.U. dinosaur will not like it, but when you make a mistake instead of trying to fudge a solution it is better in the long run to face reality.
The next step is to revert the E.U. to the common market and the ECU and forget federalization and the human rights act, both of which hinder progress and national ambitions. I believe the above would receive the whole-hearted support of the European nations.

The FTSE 100 closed down 2.35pc, the Dax in Frankfurt fell 4.04pc, and the CAC in Paris was down 3.6pc following the news that Mr Stark, the top German official at the ECB, was leaving due to "personal reasons". Sources said his departure reflected a deep rift at the heart of the ECB, with Mr Stark opposed to the bank's policy of buying eurozone bonds to support highly indebted countries like Italy and Spain. Mr Stark was considered to be a hawk at the bank, favoring looser monetary policy including higher interest rates. The news came amid clear divisions in the G7 ahead of the two-day meeting, which began on Friday. Before arriving in Marseilles, Chancellor George Osborne was adamant that he would not waver from his austerity plan. "Britain will stick to the deficit plan we've set out," he said. However, Christine Lagarde, the head of the International Monetary Fund, said that policymakers in advanced economies should use all available tools to boost growth as the world economy entered a "dangerous new phase". Speaking alongside the Chancellor at Chatham House, she said that while Britain's £110bn deficit reduction plan was "appropriate", policymakers should be "nimble." An EU official in Marseilles admitted that Mr Stark's resignation was unhelpful: "People weren't expecting this and the timing is bad," he said. Joshua Raymond, chief market strategist at City Index, took a similar line: "[Stark's departure] escalates investor fears that Europe's leaders and central bankers are far from united in ideology at a time when the markets need to see credible and definitive action to prevent the sovereign debt crisis from sending European economies back into recession." Just hours after his resignation, Mr Stark called for drastic reforms to strengthen economic governance of the euro zone. He said that a "quantum leap" is necessary "at the European level" to reinforce its institutions. He added that "a large reform of decision-making mechanisms and sanctions" is necessary in order to secure in the future effective coordination of economic and fiscal policies of the euro zone countries. "We find ourselves in a situation where risks to public budgets undermine financial stability," wrote Stark.

German High Court - ruling against Germany and the German People

(Reuters) - Germany's highest court said on Wednesday that parliament must have a bigger say in euro zone rescue packages, in a landmark ruling that may make it more difficult for Europe to respond swiftly in delivering aid to crisis-hit member states. The German Constitutional Court rejected a series of lawsuits filed by euroskeptics aimed at blocking the participation of Europe's biggest economy in bailout packages for Greece and other euro zone countries, as had been expected. But it said the government must seek the approval of parliament's budget committee before granting aid and spelled out that the ruling should not be misinterpreted as a "blank cheque" for future rescue packages. "The constitutional complaint has been rejected," said the president of the court, Andreas Vosskuhle, in a ruling closely watched by policymakers and investors because of its impact on the decision-making process in the 17-nation currency bloc. "This was a very tight decision. But it should not be mistakenly interpreted as a constitutional blank cheque authorizing further rescue measures," the red-robed judge told the plaintiffs, government officials and members of parliament in the courtroom in Karlsruhe. Greece, Portugal and Ireland have already received aid from Europe and the International Monetary Fund while Italy -- the third largest economy in the euro zone -- looks increasingly vulnerable as it struggles to implement a savings program. The prospect of having urgent rescue decisions bogged down in legislation in Germany -- and potentially other euro zone parliaments, if more states follow suit -- will not please policymakers trying to streamline that process. Chancellor Angela Merkel already faces a revolt in the Bundestag (lower house of parliament) over European leaders' decision in July to grant new powers and extra funds to the current bailout fund -- the European Financial Stability Facility (EFSF) -- which goes to a vote on September 29. Parliament also has to ratify by the end of the year the fund which will replace the EFSF from mid-2013 -- the European Stability Mechanism (ESM) -- and the court ruling is likely to influence how it allocates rescue funds in future too.

Fears of "currency wars"

Fears of "currency wars" characterized by competitive devaluations and protectionism continue to dominate headlines in the run–up to the G20 summit in November. In our lead article this week, we examine Brazil's latest policy response to the appreciation of its currency. By raising the tax on capital inflows again, however, the government is unlikely to slow the Real's rise for long. China, too, remains central to the global debate over exchange rates. We focus on the record rise in the country's foreign reserves, a development certain to fuel further calls for revaluation, even though abrupt change is neither likely nor desirable.Elsewhere, French strikers are on the warpath over proposed pension reforms. With more austerity on the way, tensions between the government and the public could drag on. Nor is France, of course, the only country grappling with the consequences of belt–tightening. From Risk Briefing we feature a webcast with our UK analyst, Neil Prothero, who expects the cuts announced in the British government's spending review to hit economic growth.Industry Briefing looks at the rise of micro finance in Europe, which suggests that micro loans are not just relevant to borrowers in poor countries. Finally, Executive Briefing examines a refreshingly counter–intuitive social networking strategy, the idea of which is to connect with fewer, not more, people as a means of deepening relationships with customers.How do these issues affect your business? Please let me know at: arbitraj@aol.com