The taboos are falling one by one.

“We must leave the austerity cage,” he told leaders of his Democrat Party (Pd), responding to Italy’s electoral earthquake by tearing up his pre-election programme. “A change of course is absolutely necessary given that five years of austerity and attacks on workers have pushed up public debt levels across Europe,” he said.

“The vicious circle between belt-tightening and recession is putting representative government at risk and making it impossible to govern. The immediate emergency is the real economy and joblessness,” he said. The pledge puts Mr Bersani on a collision course with the ECB, which is constrained from helping to shore up the Italian bond market unless Rome complies with Europe’s austerity agenda. “Italian voters may have effectively voted away the ECB safety net,” said Christian Schulz from Berenberg Bank. The central bank cannot activate its bond purchase programme (OMT) unless Italy requests a rescue from the EMU bail-out fund, and that in turn requires a vote in Germany’s Bundestag.

“The ECB cannot – and will not want to – do anything to help Italy after the inconclusive election result, even if borrowing costs spiral out of control,” he said.

Mr Bersani’s Democrats (Pd) and its allies control the lower house but failed to win the senate. He is hoping for tacit support on a law-by-law basis from the Five Star Movement of comedian Beppe Grillo. Mr Grillo has responded with a volley of anathemas, calling Mr Bersani a relic from a defunct political order that must be swept away by civic revolution. Yet many of his 163 senators and deputies say the movement should seek common ground with the Pd.

Mr Bersani said Italy should mobilize its EU voting weight to push for an EU-wide change of course. He has natural allies in Paris.

French finance minister Pierre Moscovici warned EMU colleagues on Monday that current policies “risk a loss of social and political confidence across Europe. We must not pile austerity on top of recession”. Mr Moscovici said France would need an extra year to meet its deficit target of 3pc of GDP and called for action to tackle the root of the crisis with an EMU-wide growth strategy.

French officials are deeply alarmed by the relentless upward rise in France’s unemployment rate to 10.6pc, or 26.9pc for youth. President Francois Hollande’s popularity ratings have crashed from 55pc to 30pc since his election in May, the fastest decline ever recorded for a French leader.

Italy, France, and Spain toyed with a Latin bloc alliance last year to confront Germany over EMU’s contractionary policy mix, but the initiative faded.

Mr Hollande pulled back from a showdown with Berlin and ultimately pushed through further fiscal cuts and reforms, while Italy’s Mario Monti was never willing to jeopardise the European Project that he served for ten years as a commissioner.

Critics says Mr Monti, whose Civic Choice list won just 10pc of the vote, went native in Brussels long ago and has been slow to understand the deeper political crisis unfolding in Italy.

The outgoing premier gave them fresh ammunition today, saying that it would be better to hold fresh elections than to see an anti-EU government to take power.

It is unclear whether a second vote would achieve what he intends. The latest snap polls show that Mr Grillo’s support is still rising, jumping from 25pc to 28pc.

Ominously, nostalgia for Fascist leader Benito Mussolini has started to emerge as the post-War order crumbles. Two key figures have praised elements of Fascist rule over the last two days.

A leader of the Five Star Movement professed “fascination” with the Fascist sense of the Italian state and the family, while the deputy state secretary of the economy said Mussolini “governed well until 1935.” (source telegraph)

 

Mitiska Ventures, a Brussels-based real estate investment management company set up as a subsidiary of Mitiska, is pleased to announce an interim closing of its First Retail International (FRI) club deal at €41 million. Mitiska, which has 30 years of experience and a track record in retail and retail real estate across Europe, has committed €10 million to FRI as the sponsor of the club deal, alongside Belgian, Dutch, Luxembourg and Swiss private and institutional investors... FRI is a specialist retail property company which invests exclusively in retail warehouse properties across Europe. Within this retail warehouse niche, FRI targets both ‘opportunistic’ and ‘value-added’ type investments from a ‘(re)develop-and-hold’ perspective. By applying a conservative leverage strategy (max. 50% Loan-to-Value) with full distribution of profits and proceeds, FRI’s objective is to provide its investors with a regular cash return of 3 – 6% p.a., together with long-term capital appreciation resulting in a total IRR of 10 – 15% to investors.  FRI invest on a ± 50:50 basis in both Western and Central & Eastern Europe. As the retail warehouse market is mainly locally driven, investments outside of Belgium will in principle be undertaken in partnership with experienced local country partners. FRI benefits from an exclusive country partnership which has been entered into with Alpha Property Development (InterCora Group) for Romania, and discussions are underway relating to several other countries. FRI is managed by Mitiska Ventures, a specialist team which has combined experience of more than 85 years in the European retail warehouse sector and which has worked together closely at Mitiska over the past six years. In that time, the team has built up an attractive project pipeline representing a total investment volume of around €100 million. These pipeline projects have been contributed to FRI by Mitiska as a seed portfolio and represent a 9 - 10% yield on investment. Alongside these pipeline projects, Mitiska Ventures is working on a robust pipeline of new leads which will further grow and diversify FRI’s portfolio.

Russia's largest oil producer, state-controlled OAO Rosneft, ROSN.RS -0.31%said Monday it has raised $16.8 billion in bank loans and plans to sign a trade-finance package with two international oil traders to finance the buyout of TNK-BP BP.LN -0.01%. Rosneft is acquiring TNK-BP, Russia's number three oil producer, from BP PLC and the AAR consortium of Soviet-born billionaires in deals worth $55 billion in cash and shares that will create the world's largest listed crude producer. Under the deal, agreed to in October, the AAR tycoons will get more than $28 billion when the deal closes in the first half of 2013. BP will hold a 19.8% stake in Rosneft as part of its deal to sell out of TNK-BP.

To finance the purchase of BP's 50% stake in TNK-BP, Rosneft said it obtained a five-year loan of $4.1 billion and a two-year $12.7 billion loan from a group of international banks. Under the agreement, Rosneft said it plans to sign contracts to supply up to 67 million metric tons of crude oil in total for a period of five years, subject to a prepayment. Rosneft would use future oil exports as collateral for the trade financing from the traders. The supplies are expected to commence in 2013, the company said, but didn't provide any financial details of the deal.

Bundesbank sounds the alarm

Germany's central bank has warned that economic growth in Europe's largest economy is weakening, due to the eurozone crisis and problems across the world economy.

In a new monthly report, the Bundesbank said that German firms are more worried about Germany's future prospects. It points to the slowdown in China, Japan's now-shrinking economy, and fears over the US fiscal cliff.

The full report is online here (pdf, in German), and Reuters provides a translation of the key points:

The economy currently presents a mixed picture, which is likely to cool further towards year-end...

By now it has become unmistakable that the disturbing external factors are affecting the willingness to invest and job planning so strongly that the whole economy could be affected.

Last week's economic data showed that German GDP rose by 0.2% in the third quarter of 2012 – the question is whether it shrinks in the last three months...

History explains all....

History explains all....The EU is experiencing its 'Stalingrad' moment....Sheer hubris makes it impossible for the EU to make the right decisions. Draghi's wears his vanity as if it alone is enough to save the EU. His vision is correct in his eyes, and to him that is all that matters, and that imprisons him in a course of action that is clearly failing. He is the only one who can't see it, though his generals nod their approval to maintain their salaries and privileges. Even Greece has deferred the worst effects of their austerity measures, which means that there will be no avoiding mounting civil disorder. If Golden Dawn show some political maturity (which they haven't so far) they'll walk in to power. Samaras is trying to defuse the Golden Dawn threat with some cynical changes to citizenship law but that's only upsetting his coalition partners. His government is doomed to collapse. European governments should focus on spending cuts, not tax rises to get their deficits down, according to the head of the European Central Bank. Mario Draghi said that the ECB's action (via its €1 trillion LTRO bazooka and announcement of the OMT programme) had helped to calm markets, but that it was up to governments to regain credibility.The growing tension between Germany and Greece was on show today as public sector workers stormed a building where officials from the two countries were meeting in the Greek city of Thessaloniki. Police had to form a shield around German Consul Wolfgang Hoelscher-Obermaier as he tried to enter the building. They also pelted him with water bottles and coffee in a protest against austerity measures. The workers chanted: "It's now or never!" and held up mock gravestones and banners proclaiming "Fight until the end!" ...Workers said that they were furious at comments by German envoy Hans-Joachim Fuchtel, who reportedly told journalists on Wednesday that it takes 3,000 Greek public sector workers to do the work of 1,000 of their German counterparts. Mr Fuchtel is Angela Merkel’s special envoy to Greece. Michael Meister, a member of Chancellor Angela Merkel's Christian Democratic Union party, told reporters that he could "live with" giving Greece more time to bring down its debt levels, adding that the EU had "many tools" to enable this to happen. However, he said that a writedown of Greek debt would be unacceptable to Berlin, and that MPs would not rush through a vote on the country's next aid tranche.

Super writting by Helena Smith - The Guardian

Up close Angela Merkel is very static. She stands immoveable, her eyes flashing this way and that. In Athens, as she stood behind a lectern following talks with the Greek prime minister, Antonis Samaras, the German chancellor was so restrained she hardly moved at all. The Greek capital resembled Fort Knox – with riot police guarding her every move, helicopters roaring overhead and sharp shooters installed on the rooftops of buildings great and small – but Europe's most powerful woman was having none of it. The angry chants and hoarse slogans of the thousands of protesters who had also come out to greet her, eliciting one of the biggest security operations ever put on by near-bankrupt Greece, belonged to another world. As did the copious amounts of acrid teargas that wafted through the Athens air.

In the hushed marble interior of the mansion that is the prime minister's office, Merkel had a message and on this, her first visit to Greece since the eruption of Europe's debt drama, it was a message she was determined to convey.

"I have not come as a task-master," she said, her eyes elevated towards the room's ornate sunlit ceiling as if focusing on some indefinable spot. "And nor have I come as a teacher to give grades," she added, now focusing intently on the marble floor. "I have come as a friend to listen and be informed." Three years into the crisis that began in Athens, Merkel also wanted to say that she understood "a lot" was being demanded of Greece. She was not the austerity warmonger that critics had painted her to be. "I come in full and firm awareness of what the people of Greece are going through," she insisted. But, she continued, Europe's weakest link was badly in need of change – and, if reforms were not made now, they would come back "in a much more dramatic way".

"I come from East Germany and I know how long it takes to build reform," she said, almost by way of reassurance. "The road for the people of Greece is very tough, very difficult, but they have put a good bit of the path behind them. I want to say you are making progress!"... But even as the leader attempted not to sound like the matriarch in charge of the family till, there is no denying that that is exactly what she is.

"Saying that she is not here to preach is bullshit," said one of the small retinue of Berlin-based journalists who follow her every move. "She is here to tell them exactly what to do."  For the vast majority of Greeks, no person is more identified than Merkel with the punitive measures that have ensnared the country in unprecedented recession and record levels of poverty and unemployment.

As up to 300,000 took to the streets in a massive display of fury over the savage cuts and tax increases that have brought growing numbers to the brink of penury, it was the woman who is widely seen as the "architect of austerity" that was firmly in their sights.   "If I met her I would say if you had read Greek history you would have been more aware," said Takis Stavropoulos, a bearded leftist who had converged with thousands of other protesters on Syntagma square. "If she had done that she would have known we would resist."   No government has been in as difficult a place as the ruling coalition that Samaras has lead since June. Although Merkel's surprise visit was seen as a major coup, with officials hailing it as further proof of Berlin's new-found willingness to keep Greece in the 17-member eurozone, there was also an acceptance that the chancellor's six-hour presence in Athens, while rich in symbolism, did not yield much in the way of substance.   Merkel's Calvinist approach to dealing with Europe's crisis-hit southern periphery may have softened, as the leader looks to re-election next year, but as tiny Greece stares into the abyss with enough funds to survive only until the end of next month, the message was clear: apply more draconian measures and the rescue funds will keep pouring in. Echoing the complaint of German commentators, Greek analysts agreed that the visit was long-overdue.

"It is hard not to see that this visit had a more important message for Germany ahead of [next September's] general elections than it did for Greece," opined the prominent commentator Yiannis Pretenderis.  The sad reality remained. After the biggest debt write-down in the history of world finance and two EU-IMF-sponsored bailouts worth a mammoth €240bn, Greece was still far from being saved and, even worse, was slipping inexorably into social meltdown with its political arena becoming ever more radicalised.

The draconian €13.5bn package of spending cuts that is the price of further aid could, many fear, push Greece further to the edge.  Back at the heart of the government, untouched by the discord of everyday life, the awkwardness of Greece's disharmonious relationship with its big brother Germany was on full display in the awkwardness of the body language of its prime minister.   As Merkel, the pastor's daughter, spoke, Samaras, whose background is privileged elite, Harvard and moneyed, looked on and winced.

"Greeks are a proud people," he said. "And our enemy is recession. But we are not asking for favours. In my discussion with the German chancellor I pointed out, however, that the Greek people are bleeding."  As he spoke, Merkel remained absolutely static before pursing her lips and looking away.  Police fired teargas and stun grenades to hold back crowds chanting anti-austerity slogans and waving Nazi flags while Merkel's host, Prime Minister Antonis Samaras, welcomed her as a "friend" of Greece.  On her first visit to Greece since the euro zone crisis erupted three years ago, Merkel struck a conciliatory tone.  She reaffirmed Berlin's commitment to keep the debt-crippled Greek state inside Europe's single currency but offered Samaras no concrete relief ahead of a new report on Greece's reform progress due by next month.  "I have come here today in full knowledge that the period Greece is living through right now is an extremely difficult one for the Greeks and many people are suffering," Merkel said at a news conference with Samaras just a few hundred yards from the mayhem on Syntagma Square, outside parliament.

"Precisely for that reason I want to say that much of the path is already behind us," she added. (source guardian.uk)

NICOSIA, Cyprus—Euro-zone finance ministers indicated Friday they are open to giving Athens more time to meet budget targets and that they aim to decide by the end of October on whether to give Greece its next installment of a bailout money….In their first gathering after a long summer hiatus, finance ministers from the 17-member currency bloc spent the morning discussing the economic and financial crises of Greece, Spain, Portugal and Cyprus. They were joined later by the 10 ministers from the rest of the European Union to debate proposals, released this week, for a system of common banking supervision.  European Central Bank President Mario Draghi, center, with IMF chief Christine Lagarde, left, Eurogroup President Jean-Claude Juncker and German Finance Minister Wolfgang Schäuble talk at the start of a two-day informal meeting in Cyprus….The meeting comes days after the European Central Bank announced a revamped plan for purchases of government bonds in the open market in coordination with the euro zone's rescue funds, and follows a German constitutional court ruling clearing the way for the launch of the European Stability Mechanism, the permanent bailout fund.  Friday's gathering turned attention back to the governments of bailed-out countries and what they will do to implement tough reforms to qualify for support from the currency bloc.   Ministers sought to keep pressure on the Athens government, which hopes to win approval soon for the next disbursement in its €173 billion ($224.7 billion) second bailout package…. The Greeks "need to show very strongly decisive action" on structural reforms and spending cuts, said Luxembourg's Jean-Claude Juncker, head of the Eurogroup of finance ministers. Athens must agree to a "set of credible measures to close the fiscal gap between 2013 and 2014," he said.

I have yet to meet any French or Germans who want to keep the Euro.

Germany led the way with regard to the Euro, due mainly to the enormous financial benefits it would reap. There is no problem with that if we accept that nation states should act in their own best interest...."Bundestag president Norbert Lammert said parliament’s integrity cannot be subordinated to the ups and downs of the markets. Free Democrat (FDP) leaders said Italy’s unelected prime minister is playing with political fire by trying to circumvent democratic legitimacy.

The dispute comes as relations between Germany and Italy touch the lowest ebb since the Second World War, with Il Giornale publishing a front-page picture of Chancellor Angela Merkel under the headline “Fourth Reich”. "..This is funny... the Germans complaining about Mr Monti not being elected... He was elected... by Merkel and Sarkozy!!! and their puppy Barroso...Wait for Berlusconi to come back with a proper election in Italy and see where you are with your Euro! However, Germany now insists that there must be financial union to support this currency; but on Germany's terms, and with no risk to their financial systems. It is not good enough to state that they are paying for the bailouts - the idea of the EU is that all are equal and it is their DUTY to give this support. If they believe differently then they can hardly be called "good europeans".The euro, as predicted from the very beginning, has proved to be in nobody's long-term interests; it gave a short term limited boost to to weaker economies but has ended up being the agent of destruction for their economies. It was only ever the zealot's attempt to create the EUSSR as a single country. Well, hell mend them. Let it go and stop pouring good money after bad keeping it up. I've yet to meet any French or Germans who want to keep the Euro.

I say....

I've been scriblling about the super amounts of money that European taxpayers have been paying out every year in interest payments to the banking sector - €5.6 trillion since 1995. This has to be one of the longest running extortion rackets in history. Remember that the banks lend money to governments that they don't actually have - they use the magic conjuring trick of fractional reserve banking to create the "money" out of thin air. They then charge taxpayers interest despite the fact that lending to governments must surely be one of the safest bets around....The figures for long-term interest rates in the European Union can all be found on the ECB's website. If you click here, you can see the figures for the last year or so. But I've just discovered that you can easily generate graphs showing the interest rates for all EU countries since as long ago as 1993. First, here is the official ECB graph showing interest rate variations for the 17 Eurozone countries.
Intringuingly, there was a moment back in 2007-2008 when all the countries were paying the same rate of roughly 4% - it was a good time to be in the Eurozone. But since then, the rates have gone all over the place with Greece, Portutal and Ireland being forced to pay extortionate rates - so high that they might as well pay using a credit card. Some countries, such as Germany have done very well since their rates are now down below 2%. This gives them a fantastic competitive advantage. Could that explain why they are so keen on maintaining the status quo?

A financial transaction tax would have a positive impact on growth and jobs -- My latest opinion ON GREECE

The introduction of a financial transaction tax in Europe could benefit the European economy and raise the level of growth, according to a study written by two prominent economists, Professors Stephany Griffith-Jones and Avinash Persaud....The study was presented today in Brussels during a press conference chaired by S&D Euro MP Anni Podimata who will draft the European Parliament's report on the Commission's proposal. Mrs Podimata welcomed the study and said: "This study confirms what we have been saying all along. The financial markets have to make a fair contribution to the crisis they provoked. "An FTT will reduce the fragmentation of the internal market. Put together with other tools, it will act as a disincentive to high frequency trading and other practices which increase risk without ensuring liquidity. "This would contribute to a better financing of the real economy, encourage investment and job creation in the EU. "The S&D Group is against putting the entire burden on ordinary taxpayers, and calls for measures to boost growth. In this sense, an FTT is an integral part of this approach". Professor Stephany Griffith-Jones confirmed the benefits of an FTT. Among them, she said: "The Commission has calculated that it would only have a -0.2% effect on growth. It takes into account the fact that a very small part of investment by credit companies would actually be taxed and that high frequency trading would be decreased. "But, in our study, we argue that an FTT would also contribute to reduce the risk of a future crisis. When this is taken into account, you obtain a positive effect on growth of about a quarter of a percent". Professor Stephany Griffith-Jones rejected the argument that the tax would not be feasible because of fraud: "In the past, the same was said about income tax, which is indeed avoided but which still raises a lot of money", she said.

My latest opinion ON GREECE AND THE E.U.---The only way to save Greece is to expel it from the E.U and the Euro. The only way to save Europe ,is to dissolve the E.U and abandon the Euro. The E.U has been responsible for imposing the iniquitous Climate Change furphy on the ecomomies of Europe. This bizarre and truly vicious religon has smashed the global economy. ... It has acted as a wrecking ball on the financial infrastructure of all those regions witless enough to adopt it. It has driven up energy costs ,leading to the closure of businesses everywhere ,rising unemployment and excessive hardship and death by hypothermia for the elderly and the needy. It has distorted the functioning of economies everywhere by rewarding failed inefficient, primitive energy suppliers and distributors,whilst penalising those who provide cheap and reliable energy. It has rewarded rentseekers and carpet baggers ,at the expense of those who actually do an honest day's work....Ditch the insane climate change policies of the E.U and save the global economy.

The other Europe ...today's developments - At this hour ( 1:30 pmlocal time), there are people gathering in the center of Bucharest once more.

ROMANIA: More than 30 people were injured Sunday during a protest that turned violent in Romania’s capital, with demonstrators throwing stones and riot police using tear gas, medical sources said. Around a thousand Romanians had gathered in central Bucharest to voice anger at falling living standards and call on President Traian Basescu to step down. At this hour ( 1:30 PM. local time), there are people gathering in the center of Bucharest once more.

CZECH REPUBLIC: The Czech government’s restitution bill that compensates churches for property and assets confiscated during communist rule has raised political tensions and fiscal costs, and as such is credit negative, Moody’s Investors Service said Monday. The bill commits the state to transferring CZK170 billion, or 4.3% of gross domestic product, to the churches, Moody’s noted. Furthermore, if tensions result in the exit of Public Affairs (VV) from the ruling coalition, early elections would have to be called to form a new government, the credit rating firm pointed out.
SLOVAKIA: Standard & Poor’s Ratings Services lowered its long-term sovereign credit rating on the Slovak Republic to ‘A’ from ‘A+’, and affirmed the short-term ‘A-1′ rating
BULGARIA: Miners at Bulgaria’s largest coal producer, state-owned Maritza East Mines, went on strike Sunday after failing to obtain demanded wage increases, miners’ union leader Valentin Valchev said.

The West's economic malady is basically caused by an American decision about 15 years ago, as the nation's industrial policy in a post industrial world. The policy is imposed on the rest of the world through a new form of American "banking", which eventually led to the 2008 debacle. Since then, only two major economies (Germany and China), BOTH of which resisted the continued predatory practices by American banksters, and both economies recovered. Other Western nations were not as vigilant, and have no hope of recovering. Today, American banking is synonymous with "trading". Trading what? Mostly derivatives. I believe it was reported that B of A made 90% of its profits in 2010 on trading; the number of SBA loans made also dropped by about 90% from previous levels. American banks don't bank (lend) anymore, they trade. One can not create or maintain stability by pushing a national policy of rounding up all the major banks and financial institutions of the nation, and have them GAMBLE (derivatives trading is purely redistributive, and produce nothing) as a principal occupation, at a scale 50 times the GDP of the entire nation. Worse yet, this irresponsibility is further forced upon the world, on all other nations that wish to trade with America, in the name of free trade. Trying to achieve stability for the world that way, is like walking south from Paris, in order to reach London.

Sarkozy, who is hoping to win re-election in May, needs an external enemy to display his leadership qualities, according to Roger-Petit. “Germanophobia is forbidden, but visibly, Anglophobia, if we can use this term, is now the trend,” the journalist wrote on Friday. Chatham House’s Gomis agreed that Sarkozy and Cameron’s public disagreement over the EU has helped their respective images at home. “Adopting this position, as the leader who saves the euro despite British opposition, is very interesting for Sarkozy ahead of elections,” Gomis said. It really disapponts me that countries such as Holland , Denmark, Poland and others in the North part of the EU do not seem to be worried about losing their independence and ability to decide their own futures. Ireland must also be worried as it means their much vaunted way of attracting business to their country by way of low Corporation tax will shortly end... in the meantime, absolutely nothing has been done to solve the Eurozone crisis.

Draft of new euro measures a 'confidence trick'

The EU summit in Brussels agreed to provide up to €200 billion more to the International Monetary Fund, which could use some of that money to support debt-laden countries. The 17 eurozone countries will provide €150 billion of that, with the remaining €50 billion due to come from EU members who do not use the single currency. Several non-euro nations including Denmark and Sweden have said they are prepared to provide loans from their central banks. EU officials said it remained possible that Romanian Central Bank could be asked to contribute to the €50 billion. Final decisions on the IMF package are due in 10 days. Leaders are hoping that economies outside Europe will contribute. Even The Central Bank of England may be asked to contribute. Christine Lagarde, the head of the IMF, welcomed the deal as the beginning of an answer to the eurozone crisis. “I appreciate this demonstration of leadership from Europe, and I am hopeful that others will also do their part,” she said.

Joseph Daul at the EPP Congress in Marseilles speaking at the EPP Congress in Marseilles

Joseph Daul at the EPP Congress in Marseilles, speaking at the EPP Congress in Marseilles. "We will not allow ourselves to be hindered in our effort to rebuild the 'House of Europe' by those who refuse to move forward. But we cannot build a solid, safe house if those living in it don't feel comfortable" - Speaking at the EPP Congress in Marseilles on the eve of the European Council, the Chairman of the EPP Group (center-right) of the European Parliament called for Europe to choose "the right path". "The right path is that of governance of the Euro through freely-shared sovereignty on budgetary, tax and social aspects. The right path is that of a common effort from the 27 Member States, and an even bigger effort from the 17+ Euro zone countries, to better manage their public finances and to help entrepreneurs create new wealth and jobs." Joseph Daul said that the EPP has the heavy responsibility of getting Europe out of the crisis: "But the EPP has always proved in the past that it is up to meeting challenges, be it the creation of the European Community, European reunification, the Single Market or implementing moral standards for the financial markets." Finally, the Chairman of the biggest parliamentary Group in Europe called for "great caution on how we plan our exit from this crisis." "We will either succeed or divide, depending on whether our plans are inclusive - equally respecting small and bigger Member States - or dictated. Depending on whether we prioritize relative strength or whether we prioritize cohesion, we will either emerge from this crisis or we will stay mired in it." On any eventual change to the European Treaties, Joseph Daul said that if the Council is in favor, the European Parliament and the European Commission, guarantors of the general European interest, will actively play their role in the negotiations.

It could be worse than we can imagine. So there's no room for complacency.

Europe's hopes of "ring fencing" the embattled single currency through a €1 trillion-plus leveraged bailout fund are sinking due to spiraling bond yields, investor flight from euro zone debt, and failure to entice cash-rich governments in the far east to commit to the plan. Klaus Regling, the head of the European Financial Stability Facility (EFSF), is expected to tell euro zone finance ministers meeting in Brussels on Tuesday evening that the scheme to quintuple the firepower of the fund by underwriting initial losses on euro zone bond-buying by China and sovereign wealth funds in the far and Middle East has failed to attract enough interest. The blow to euro zone efforts to save the currency came amid increasingly apocalyptic predictions of a euro collapse........ The Organisation for Economic Co-operation and Development in Paris forecast a "deep depression" across Europe and a tidal wave of bankruptcies if any of the 17 countries was forced to quit the euro. The Polish foreign minister, Radoslaw Sikorski, urged Germany to save the EU from "a crisis of apocalyptic proportions". Stock markets rebound sharply after days of heavy losses as investors ignore IMF denial of aid for Italy and an OECD warning of euro zone recession and risk that US could follow suit...for investors read central banks....The stock market is rigged. Same with the bonds, it is only a matter of time when we get a eurobond. Currencies are rigged by the G 20 who are running an un-official world exchange rate mechanism. Why do journalists keep talking as though there is a free market ?... We will see the FTSE now heading for 6500 and the Dow to 12500, then we will head down back to 5000 and 11000. The dealers in the stock market and bond market brokers are making an absolute fortune, you can read the central banks like an open book.....Meanwhile - Christine Lagarde, the head of the International Monetary Fund, throws her weight behind the unnamed denials - she says neither Italy nor Spain has made a funding request to the IMF. She was speaking from Lima, Peru today as part of a tour of South America. The story that the IMF was drawing up a £517m rescue package for Italy and Spain, sparked by Italian newspaper reports over the weekend, was denied by an unnamed IMF spokesman earlier today. However Ms Lagarde's denial that there has been a request for funding still leaves open the possibility that the fund is thrashing out possible ways to help the eurozone without waiting to be asked... Sir Mervyn King - he's been asked again to defend the rate of inflation being so far above the bank's target of 2 %. The overshoot in inflation is not because we've had a very buoyant economy growing fast - it's not that we overestimated the amount of capacity around. It's not domestically generated inlfation, it's caused by external factors. The nature of the crisis, changes to the banking system - this has made life extremely hard. What we failed to understand was how long it would take for conditions in the banking markets to get back to normal. We thought that by now funding conditions would be better but in fact they are worse. That's one of the things that has made assessing the economy very difficult. Sir Mervyn King has been speaking to the Treasury Select Committee about the latest Inflation Report. He warned the dangers from Europe are so unpredictable that no accurate predictions can really be made.

Data designed to anticipate turning points in economic activity suggested that signs of a faltering recovery were increasing across the board, the OECD warned. The OECD's monthly composite leading indicators (CLIs) index fell to 100.4 within the OECD area, from 100.9 in August, where 100 represents the long-term trend of economic activity. Among G7 countries the index fell to 100.6 from 101.1. "Compared to last month's assessment, the CLIs point more strongly to slowdowns in all major economies," the OECD said. Italy had the lowest reading among the G7 at 97.5, compared with 98.5 in August. Germany suffered the biggest drop over the month to 99.1 from 100.4 Merkel has warned that Europe faces perhaps its toughest time since the second world war. In a speech to her Christian Democratic Union party, the German chancellor said that closer political union was needed to save Europe. "If the euro fails then Europe will fail," she cautioned.

The break-up of the euro would mean a short, sharp economic shock and probably a recession, but would be followed by a quicker return to strong economic growth, according to the Centre for Economics and Business Research. As European governments struggle to keep the euro zone together, Greek political leaders last night sealed a pact to form a national unity government after George Papandreou, the prime minister, announced his imminent resignation under pressure from a European ultimatum. David Cameron will today tell MPs that the failure of eurozone leaders to resolve the debt crisis is harming the economy, and will warn that the break-up of the single currency would be even more damaging. However, CEBR economists suggest that the demise of the euro would “not be anything like the disaster that has been argued”. Freed from the constraints of the single currency, strong countries such as Germany would see their currencies gain in price in relation to the pound, boosting British exports. The economists predict that break-up would free many eurozone members from the deficit-cutting austerity policies that threaten to subdue their growth for years. “If it breaks up the immediate pain is much more intense, but then there is a more stable basis and we would expect that within about 30 months growth will actually be faster than if the euro zone survives in its current form,” CEBR said.

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.

Resque - Europe's leaders are claiming a victory in the eurozone crisis after agreeing new deals that halve Greek debt and increase the firepower of the main bailout fund to around €1trn. Athens will be handed a new €100bn bailout early in the new year. The accord was reached in the early hours of Thursday after hours of fractious debate. At one stage talks broke down with holders of Greek debt but they ended up accepting a loss or "haircut" of 50% in converting their existing bonds into new loans. Investors are likely to welcome the breakthrough. Sharp gains are predicted for European markets on opening, with the FTSE 100 being called up 75 points and similar rises expected on the German and French stock markets. Angela Merkel, the German chancellor, helped broker the deal in talks with the bankers that also included the French president, Nicolas Sarkozy, and the IMF managing director, Christine Lagarde. Merkel said the swap would take place in January. Sarkozy said private sector investors would refinance Greek's remaining debt at preferential rates while governments would find €30bn to go alongside €100bn from the private sectors. The French president and German chancellor both insisted that the €440bn bailout fund, the European Financial Stability Facility (EFSF), could find its firepower increased by four to five times. Since the fund has about €250bn left this could amount to €1trn – or US$1.4trn in Sarkozy's words. "We have reached an agreement which I believe lets us give a credible and ambitious and overall response to the Greek crisis," Sarkozy told reporters as the meeting broke on Thursday morning. "Because of the complexity of the issues at stake it took us a full night. But the results will be a source of huge relief worldwide."