On the german news-front:

- Just breaking: the SPD has apparently decided its Chancellor Candidate for 2013. Peer Steinbrück, ex-finance minister in Merkel's first coalition, will be Merkel's challenger. The best choice. He recently called for the splitting up of german universal banks (deutsche- and commerzbank), picking up the suggestion from the Vickers report.

But my favourite Steinbrück piece in english remains: Germany's outspoken finance minister on the hopeless search for 'the Great Rescue Plan.' (from 2008, english, newsweek) featuring the "crass keynesianism" quote, aimed at Gordon Browne.

- On Banking Union: Weidmann of the Bundesbank is also against taking on historic liabilities, as were the three "northern" finance ministers early in the weekreports SZ (not going to happen)

- also on banking reform, a sharp attack on german "backsliding" by the euro-friendly economist blogger charlemagne The other moral hazard: If the euro zone is to survive, Germany too must keep its promises to reform

- the daily dose of CSU-politicians-throwing-their-weight-around comes from Bavaria's Finance Minister Söder. who wants a german veto at the ECB. "The one who is liable and pays, decides" (SZ, german)

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

Businesses will need to secure as much as £28.5 trillion to refinance old borrowings and fund new spending, raising major questions over the ability of the world economy to avoid a recession, according to a report from Standard & Poor's....British companies will have to find between £220bn and £268bn of new financing to fund their growth plans on top of refinancing hundreds of billions of pounds more of existing debt, according to the ratings agency. The scale of the refinancing required, as well as the amount of new debt companies must sell, could create what S&P described as a "perfect storm for credit markets". The report continued: "Governments and banking regulators are now not as well placed to counter another perfect storm scenario given that they have already expended so much of their fiscal and monetary arsenal to mitigate the problems arising in recent years." The consequences of this are already being felt in the rising cost of borrowing faced by everyone from the largest banks to home buyers when taking on new debt or refinancing existing loans.....Wow! Corporations can use more of their profits to fund growth, saving money long term by not having to use millions to fund debt interest payments. Shareholders need to kick their board’s arses into shape as the biggest ponzi scam needs to regain some real credibility as global fascists treacherous governments have been exposed for using tax payers money to prop up the ponzi stock market scam and the people are pissed. Markets and their political class puppets need to have their strings severed, as their manipulating “togetherness” is a massive toxic tumor which is preventing the free market from doing what it is supposed to do and the cancer is killing the patient. The patient is now suffering from CDIC [chronic disposable income constipation]. I'm thinking something has got to give. Oh yes, I know, the fascist socialist, tax raping governments, FibLabCons, need to get their offing thieving hands out of peoples income pots. If they don't Shareholders will be suffering from IDS [Irritable Dividend Syndrome] for a long time to come.

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

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

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

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

End of the Wirtschaftswunder? - Carsten Brzeski of ING said that the German data was a "growth normalisation" rather than a "disappointment" on its own, as Germany should still grow by at least 3% this year. He warned, though, that the German economic recovery is clearly slowing. "Looking ahead, the million-dollar question is whether a solid second quarter is the beginning of the end of the German Wirtschaftswunder [economic miracle] and whether recent market turmoil could push the economy back into recession," said Brzeski. "While German politicians are currently racking their brains on the pros and cons of common eurobonds, the luxury of having an economy running at 'wonder' speed is fading away." Gary Jenkins, head of fixed income research at Evolution Securities, said the German data will "only add to the concern of the market that we are running into headwinds that are going to make a difficult situation even worse". French and German officials have already indicated that Merkel and Sarkozy will not discuss the idea of issuing eurobonds – debt backed by the whole eurozone rather than individual countries. Jenkins believes that eurobonds appear to be the "least worst option at this stage". He said: "A temporary fiscal union may be the endgame, where you have common bond issuance for five years that replaces all individual sovereign bond issuance, after which time that is phased back in over, say another five years. Thus you retain a modicum of moral hazard." Stock markets across Europe fell in early trading, with the FTSE 100 dropping 73 points to 5277. The euro lost ground against the dollar, as traders reacted to the news that Germany had reached near-stagnation. "Following on the back of weak GDP data announced by France this will further undermine any efforts to resolve the eurozone debt crisis," said Max Johnson, a broker at forex specialist, Currency Solutions. But he added: "Looking around the global economy, at least there will be few, if any, cases of schadenfreude."

As Italy's borrowing costs soared and its stock markets plummeted, last week the ECB's president, Jean-Claude Trichet, and his designated successor, the Italian central bank governor Mario Draghi, wrote to Berlusconi listing the demands he would have to meet if the bank were to intervene and buy Italy's embattled bonds. According to one report, the ECB's demands were set out in humiliating detail. Last Friday, Berlusconi promised a broad range of structural reforms and announced he was bringing forward to 2013 the target date for the elimination of Italy's budget deficit. A new package of measures is due to be endorsed at a cabinet meeting that could be held as early as Friday. Berlusconi's right-wing government has said the package will be enacted by decree, but it would then need to be approved in parliament. Bossi, the leader of the Northern League, called the ECB's letter "an attempt to overthrow the government". In a reference to Draghi that suggested the central banker harboured political ambitions, Bossi said: "I fear that this letter was done in Rome. He's gone from here into Europe, but he's always in Rome." Draghi has been touted as the possible leader of a non-party, or cross-party, cabinet to lead the country were Berlusconi to fall. Bossi also made it clear he was not happy with suggestions that the ECB wanted pension cuts. Berlusconi has refused repeated calls from the opposition and the trade unions for the letter to be made public. But his finance minister, Giulio Tremonti, supplied more detail on the government's plans to a parliamentary committee.

Renewed worries about the Eurozone's finances and the state of its banks - particularly the French ones - have sent shares sharply lower again, all but wiping out Tuesday's Bernanke bounce on Wall Street. The US market, which invoked a rule to help prevent turbulence at the open, is down more than 242 points, having started down 75 points and fallen by more than 300 points at its worst so far. Last night the US market mounted a more than 400 rise after US Federal Reserve chairman Ben Bernanke vowed to keep interest rates low until 2013, but it seems investors are now nervous about what that means for the state of the US economy, and how bad it could get. But attention also moved back to Europe, with news that President Sarkozy was locked in emergency talks with his ministers seeking ways to cut the country's deficit. That prompted rumours that the country was likely to be next to lose its Triple A rating, and also talk that one of its banks could be in trouble in the current financial turmoil, leading to hefty double digit share price falls at the likes of Societe Generale and BNP Paribas. In a note on the rating this week Citigroup said: We expect that France, with its high public debt and deficit, and popular resistance to cutbacks in its even by euro area standards extremely large welfare state is now likely to be the G7 country at the highest risk of losing its AAA rating. The markets appear to share this sentiment with French 10-year spreads over German Bunds reaching 16-years highs on Friday.

08/08/2011 - -7.44am: Japan's stock market has now closed after a pretty nervy session, but one where we didn't see a full-blown panic. The Nikkei ended 2.18% lower at 9,097.56, down 202.32 points, having been as low as 9,057.29 at one stage.

"The three main concerns are S&P's downgrade of the U.S. debt rating, the ongoing European debt problems and inflation worries in China," Masanaga Kono, chief strategist at Amundi Japan, told Reuters. Most Asian markets are still trading, and they are all suffering losses. China's Shanghai Composite is down by over 4%. We'll do a full round-up of the Asian markets once they've closed - they've already helped to set the mood in Europe....

Almost £50bn was wiped off the value of britain's 100 biggest companies on a day of global stock market mayhem triggered by a deepening of the eurozone crisis and fears for the US economy. After a day of massive stock market falls in Europe and the US of a kind not seen since the depths of the last economic downturn, traders said the atmospherewas reminiscent of the banking crisis of October 2008. Wall Street endured one of its worst days since the height of that crisis, with the Dow Jones Industrial Index closing more than 500 points or 4.3% lower at 11,383 in heavy volume, as it resumed a two-week streak interrupted only briefly on Wednesday. It was the biggest single-day loss since 2008. "For many traders this week has felt like the start of the banking crisis in 2008, which would go some way to explaining the panic selling we have seen today," said Will Hedden, sales trader at IG Index. The fall on Wall Street is expected to cause further falls in the FTSE 100 index of leading shares today, after the index fell to its lowest close, 5393.14, since September 2010 yesterday. The futures market was predicting a further 100 point fall. Rumours were swirling around the City that hedge funds were being forced to sell assets such as gold in order to cover deepening losses on other investments. This led to a surprise 1% drop in gold, which in recent weeks had hit record highs of more than £1,000 an ounce as a safe haven bet in the eurozone and US debt crisis. Brent crude fell 5% to $107 a barrel amid signs of slowdown in the west's economies. Anxiety over the debt crisis in the eurozone, and increasingly in Italy, set the tone for nervous trading during the London morning, but the pace of the decline accelerated as Wall Street opened sharply lower. By early afternoon in New York the Dow Jones had declined by 400 points, resuming the two-week losing streak only briefly interrupted on Wednesday. Despite this week's 11th-hour agreement to raise the US debt ceiling, Wall Street is increasingly anxious over the health of the world's biggest economy. A major test comes today with the release of US employment data giving the latest health check of an economy which barely grew in the first half of the year.

Eurozone - Remedy won't be available soon - Faced with the prospect of the Eurozone crisis spreading to Spain, Italy and Cyprus, "Eurozone governments are accelerating efforts to bolster their €440bn rescue fund", reports the Financial Times. On July 21, "they agreed to equip the EFSF with the ability to repurchase the bonds of stricken governments on open markets, provide them with short-term lines of credit and cash to help recapitalise ailing banks." With Spanish and Italian risk premiums on the rise, "the ability to repurchase Spanish or Italian bonds at distressed prices would be one way to help stabilise the markets". "Yet European diplomats and officials acknowledged that it would be weeks – and possibly months – before the EFSF’s new powers could be put to use", notes the FT, reporting that officials of the Eurozone are accelerating their work to produce a draft document. The final text would then have to "be signed by the 17 Eurozone governments, and then undergo a ratification process that includes parliamentary approval in most of those countries."

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