Explosive job growth in the oil and gas sector propped up the U.S. economy for several years in the wake of the recession, as the fracking revolution put American energy workers back to work.

But 2015 was the year that job gains in the energy sector came to a screeching halt as rock-bottom oil prices triggered layoffs of more than 258,000 workers globally, according to a comprehensive analysis by industry consultant Graves & Co. And the energy business is poised to endure a fresh round of job cuts and bankruptcies in early 2016, analysts say.  The number of active oil and gas rigs in the U.S. fell 61% to 698 as of Dec. 31, compared to a year earlier, according to Baker Hughes Rig Counts....Oil companies in Texas have endured revenue losses of up to 70% over the last year, he says.  Dan Heckman, national investment consultant for U.S. Bank Wealth Management, said he expects to see a fresh round of layoffs, production cuts and bankruptcies in the oil and gas business in early 2016.  The current U.S. unemployment rate for the oil, gas and mining sector is 8.5%, but could top 10% by February, about double the overall jobless rate, Heckman projected.   Oil production leader Saudi Arabia has refused to slash output to bolster prices, and U.S. producers have kept wells flowing to pay off investments ordered in the 2000s when new fracking technology triggered a spike in American energy production.  "Many of these companies are in negative cash flow, and that’s not a sustainable dynamic," Heckman said.  It’s a game of chicken, with energy analysts closely watching to see where production cuts take place in an effort to boost prices.  Projections for a prolonged period of low oil prices provide little hope for a quick rebound. Most analysts believe oil prices will stabilize in 2016, but probably won’t rise much until the second half of the year, barring unexpected geopolitical instability.  It’s a sharp reversal of fortunes for an industry that was celebrated for the economic windfall it provided for oil-rich states such as Texas, North Dakota and Pennsylvania as other areas of the economy remained soft.  The number of jobs at oil and natural gas companies rose 40% from the start of 2007 through the end of 2012, even as total U.S. private-sector employment rose only 1%, according to the U.S. Energy Information Administration.

The global economy had another difficult year in 2013. The advanced economies' below-trend growth continued, with output rising at an average annual rate of about 1%, while many emerging markets experienced a slowdown to below-trend 4.8% growth.

After a year of subpar 2.9% global growth, what does 2014 hold in store for the world economy?

The good news is that economic performance will pick up modestly in both advanced economies and emerging markets.

The advanced economies, benefiting from a half-decade of painful private-sector deleveraging (households, banks, and non-financial firms), a smaller fiscal drag (with the exception of Japan), and maintenance of accommodative monetary policies, will grow at an annual pace closer to 1.9%.

Moreover, so-called tail risks (low-probability, high-impact shocks) will be less salient in 2014.

The threat, for example, of a eurozone implosion, another government shutdown or debt-ceiling fight in the US, a hard landing in China, or a war between Israel and Iran over nuclear proliferation, will be far more subdued.

Still, most advanced economies (the US, the eurozone, Japan, the UK, Australia, and Canada) will barely reach potential growth, or will remain below it.

Households, banks and some non-financial firms in most advanced economies remain saddled with high debt ratios, implying continued deleveraging.

High budget deficits and public debt burdens will force governments to continue painful fiscal adjustment. And an abundance of policy and regulatory uncertainties will keep private investment spending in check.

The outlook for 2014 is dampened by longer-term constraints as well. Indeed, there is a looming risk of secular stagnation in many advanced economies, owing to the adverse effect on productivity growth of years of underinvestment in human and physical capital.

And the structural reforms that these economies need to boost their potential growth will be implemented too slowly.

While the eurozone's tail risks are lower, its fundamental problems remain unresolved: low potential growth; high unemployment; high and rising levels of public debt; loss of competitiveness and slow reduction of unit labour costs (which a strong euro does not help); and extremely tight credit rationing, owing to banks' ongoing deleveraging.

Meanwhile, progress toward a banking union will be slow, while no steps will be taken toward establishing a fiscal union, even as austerity fatigue and political risks in the eurozone's periphery grow.

In Japan, prime minister Shinzo Abe's government has made significant headway in overcoming almost two decades of deflation, thanks to monetary easing and fiscal expansion.

The main uncertainties stem from the coming increase in the consumption tax and slow implementation of the third "arrow" of Abenomics, namely structural reforms and trade liberalisation.

In the US, economic performance in 2014 will benefit from the shale energy revolution, improvement in the labour and housing markets and the "reshoring" of manufacturing.

The downside risks result from: political gridlock in Congress (particularly given the upcoming midterm election in November), which will continue to limit progress on long-term fiscal consolidation; a lack of clarity about the Federal Reserve's planned exit from quantitative easing (QE) and zero policy rates; and regulatory uncertainties.

Emerging markets' difficult year in 2013 reflected several factors, including China's economic slowdown, the end of the commodity super cycle, and a fall in potential growth, owing to delays in launching structural reforms.

Moreover, several major emerging economies were hit hard in the spring and summer, after the Fed's signal of a forthcoming exit from QE triggered a capital flow reversal, exposing vulnerabilities stemming from loose monetary, fiscal, and credit policies in the boom years of cheap money and abundant inflows.

Emerging economies will grow faster in 2014 – closer to 5% year on year – for several reasons. Brisker recovery in advanced economies will boost imports from emerging markets.

The Fed's exit from QE will be slow, keeping interest rates low. Policy reforms in China will attenuate the risk of a hard landing.

And, with many emerging markets still urbanising and industrialising, their rising middle classes will consume more goods and services.

Still, some emerging markets – namely, India, Indonesia, Brazil, Turkey, South Africa, Hungary, Ukraine, Argentina, and Venezuela – will remain fragile in 2014, owing to large external and fiscal deficits, slowing growth, below target inflation and election-related political tensions.

Some of these countries – for example, Indonesia – have recently undertaken more policy adjustment and will be subject to lower risks, though their growth and asset markets remain vulnerable to policy and political uncertainties and potential external shocks.

The better-performing emerging markets are those with fewer macroeconomic, policy and financial weaknesses: South Korea, the Philippines, Malaysia and other Asian industrial exporters; Poland and the Czech Republic in Europe; Chile, Colombia, Peru and Mexico in Latin America; Kenya, Rwanda and a few other economies in sub-Saharan Africa; and the Gulf oil-exporting countries.

Finally, China will maintain an annual growth rate above 7% in 2014. But, despite the reforms set out by the Communist party's central committee, the shift in China's growth model from fixed investment toward private consumption will occur too slowly.

Many vested interests, including local governments and state-owned enterprises, are resisting change; a huge volume of private and public debt will go sour; and the country's leadership is divided on how quickly reforms should be implemented.

So, while China will avoid a hard landing in 2014, its medium-term prospects remain worrisome.

In sum, the global economy will grow faster in 2014, while tail risks will be lower.

But, with the possible exception of the US, growth will remain anaemic in most advanced economies, and emerging-market fragility – including China's uncertain efforts at economic rebalancing – could become a drag on global growth in subsequent years.

The head of Slovenia's central bank, Bostjan Jazbec, has said it will consider asking for outside help if the country's funding costs stay high. He also said Slovenia's GDP would shrink by 2.6% this year, more than April's 1.9% forecast.

Slovenia's banks are largely state-owned and saddled with bad loans worth 22.5% of its GDP.

Mr Jazbec's comments are likely to fuel speculation over whether Slovenia will be bailed out by the EU.

Still hope

Mr. Jazbec said he would consider asking for aid if yields on Slovenia's bonds remained high.

During a news conference, he said the country was doing everything it could to bring its funding costs down.

"If that is not successful, then there is a possibility to ask for help within various programmes," he added.

Meanwhile, Slovenia's Prime Minister, Alenka Bratusek, has admitted to parliament the amount needed to rescue the banks is "completely unknown".

But Ms Bratusek told STA, the state-owned news agency: "We are very intensely preparing measures that are needed, so as to avoid asking for help."

The results of the bank's stress-tests, out at the end of November, will indicate whether or not a bailout is needed.

Eurozone members can ask for help from the European Stability Mechanism, set up in 2012.

Italian GDP revised down - The Italian recession is deeper than thought. New data released this morning shows that the economy shrank by 0.3% in the second quarter of 2013, worse than the 0.2% first estimated. That means that Italian GDP is 2.1% less than a year ago, not the 2% as initially thought.

As if prime minister Enrico Letta didn't have enough to worry about with Silvio Berlusconi's fate still in the balance.

 ISTAT, Italy's statistics body, reported that household spending continued to shrink in the face of Italy's economic woes, falling by 0.4% during the April-June quarter.

Capital spending and imports also dropped, by 0.3% quarter-on-quarter in both cases.

The year-on-year data underlined how Italy's economy has suffered over the last 12 months. Consumption is down by 2.4%, capital expenditure is 5.9% lower, while imports are down 4.6%. Exports are 0.2% higher than a year ago.

Here are the details:

Over in the bond markets, Italian government borrowing costs have risen above Spain's for the first time in 18 months. It means Italy is being priced as a (slightly) bigger risk than Spain, in a sign that the Berlusconi Conundrum is dragging Italy towards a new crisis. Italian 10-year bond yields are trading at 4.485% this morning compared to 4.481% for Spain. That's must be a minor relief for Madrid, whose borrowing costs have been pushed up by allegations of government corruption and fears over bad bank debts.

...the German model is really a "beggar thy neighbor"

Schröder's economic "reforms" entailed gutting social security and unemployment benefits and eliminating the minimum wage in order to force young/unemployed Germans to go to work for one euro an hour (literally). Has this worked? Only sort of. True, the dramatic reduction of labor costs has been one of the keys to Germany's phenomenal export-oriented growth over the last decade. Combined with the artificial deprecation brought about by the adoption of the Euro, it's helped Germany maintain an extremely favorable balance of trade vis à vis other members of the Eurozone. What this means is that Germany's "success" has been built by selling more to their neighbors than their neighbors sell to them. (Internal demand on the other hand has flat lined; the German "model" is entirely predicated on exports.) Here's the thing though: it's impossible for all Eurozone members to maintain a trade surplus towards each-other; for one country to maintain such a surplus, another must have a deficit. Calls for the Mediterranean states to emulate the German model are thus deeply paradoxical; were the PIGS to run such a surplus, who would eat the deficit?

In other words, the German model is really a "beggar thy neighbor" policy, one which literally requires the impoverishment of the Mediterranean states. For ten years this kind of worked: Germany sold more to Spain et al than it purchased, then recycled those profits back to the periphery in the form of lines of credit, allowing those countries to purchase even more goods yielding greater profits, etc, etc. (Rinse and repeat.) Eventually the imbalance grew too deep for anyone to ignore and hey presto we had the start of the Eurozone crisis.

So, with shades of Plato's pharmakon, what the author is here calling for is to treat Europe with more of the poison that caused it's illness in the first place. What he identifies as Germany's "successful example" is actually the source of the crisis, not its resolution. A real solution would require the Germans to adopt a new policy based on internal demand, increasing domestic purchasing power by (for example) establishing a minimum wage and strengthening the working classes... Yes, the German mercantilist strategy cannot be maintained indefinitely and they do need to switch from an export driven economic strategy to one more balanced by domestic demand. And yes, the internal disparities and inconsistencies within the Eurozone make escape much more difficult (if not impossible) for the Southern periphery, including possibly France also.

But there are two further problems which are really at the genesis of the Eurozone's economic difficulties - one of which is shared with the UK. First, most of Europe (including the UK) has been running consistent deficits (trade and budget), and while one can argue about when and how and how fast these deficits are reversed, ultimately they will need to be for sustainability. It was not the economic disparities of the Eurozone per se which created their current difficulties, but the lack of flexibility to respond to the credit crisis. The other major problem is the sclerotic nature of a lot of Eurozone economies (eg France, Spain), with myriad obstacles and costs put in the way of enterprise and real job creation, and the disincentives to employment and inward investment.

 

The Shibor overnight lending rate in Shanghai spiked violently to 29pc, with wild moves in seven-day and one-month money. The central bank refused to intervene to calm markets, apparently determined to purge excess from the credit system.

China Securities Journal, a voice of the regulators, said: “We cannot use a fast money supply growth as in the past, or even faster, to promote economic growth.”

“I am extremely concerned about China,” said Lars Christensen from Danske Bank. “They are overdoing it and are on the verge of making the same mistake as the Fed and the European Central Bank before the Lehman crisis in 2008, when they failed to see how much the economy was slowing.” Mr Christensen said the world now risks a “perfect storm” as the Fed prepares to taper its bond purchases (QE) at the same time as tightening the spigot of worldwide dollar liquidity.

The twin effects are cascading through emerging markets, pummelling commodity exporters such as Brazil, South Africa and Russia that sell to China, but also tripping up Turkey, Ukraine, Hungary and others that rely on external funding. “Everything is being hit indiscriminately,” said Neil Shearing from Capital Economics.  The Turkish lira and the Indian rupee both fell to record lows as investors pencilled in Fed tapering for September. “The party is over,” said Ceros Securities in Istanbul.

Fed chairman Ben Bernanke has brought forward his QE exit by lifting the unemployment target from 6.5pc to 7pc. He dismissed the looming threat of deflation as a “transitory” effect.

Brazil’s real weakened to a four-year low of 2.26 against the dollar, down 15pc since April, while the cost of credit default swaps gauging risk in Indonesia and Vietnam jumped more than 40 points. The Kremlin said Russian companies may have to delay bond issues, but denied immediate credit stress.

The latest country moving onto the radar screen is Poland, where construction crashed 28pc in May, “Poland is suddenly stalling, something we haven’t seen in almost two decades. The central bank has been way too hawkish,” said Bartosz Pawlowski from BNP Paribas.

Benoit Anne from Societe Generale said the “second leg” of the emerging market sell-off is just starting, warning that there is a “long way” to go before investors wake up to the full impact of Fed tightening. Latin America’s debt crisis of the early Eighties and East Asia’s crisis in the Nineties were both triggered by turns in the US credit cycle, though emerging markets have ample foreign reserves to defend themselves this time.

Mr Shearing said the BRICS quintet will be much weaker than assumed over the next two years for their own structural reasons, but there is now the risk of a “mutually reinforcing” effect as dollar stimulus drains away. The latest ructions in China came after premier Li Keqiang omitted mention of the liquidity strains in a speech this week, instead dwelling on rampant excess in the shadow banking system and overcapacity in obsolete areas of the economy. Though Deutsche Bank said the unwinding of hot money inflows disguised by over-invoicing may also be to blame.

Mr Li’s comments were a signal that the new leadership intends to prick the credit bubble, even though the hard line has already led to industrial recession. China’s HSBC manufacturing index fell sharply in June, dropping further below the “boom-bust line” to 48.3. Zhiwei Zhang from Nomura said Beijing aims to crack down on a plethora of trusts, wealth products and offshore vehicles intended to evade loan curbs. These have accounted for half China’s credit growth over the past year. It is willing to “tolerate short-term pain” to wean China off over-investment, and is less worried about social instability now that its workforce has begun to contract and the rate of migrants from rural areas is slowing.

The strategy is to tighten before the Fed winds down QE in order to “avoid two negative shocks occurring simultaneously”, but this may be hard to manage given the scale of the boom. “We expect a painful deleveraging process in the next few months. Some defaults will likely occur in manufacturing industry and in non-bank financial institutions,” he said. Fitch Ratings said total credit has jumped from $9 trillion to $23 trillion over the past five years, surging from 125pc to 200pc of GDP. This is a bigger rise than in any of the major bubbles worldwide over the past half century.

China has the firepower to cope with any crisis and will not let the state banking system collapse. Keeping growth on track now that credit has reached saturation point is a tougher challenge. Source telegraph.uk

The number of jobless people in France rose by nearly 40,000 (1.2%) in April, to hit an all-time high. The increase took the number of registered jobseekers in mainland France to 3,264,400, the worst since records began in 1996, marking two uninterrupted years of monthly rises, official figures revealed.

Looking at the last five years, it was the 53rd month out of 61 showing a rise, highlighting France's chronic job crisis as the economy fell back into recession in the first quarter and jobless figures were driven up by industrial layoffs.

The new record is a blow to President François Hollande, who is sticking to a pledge to reverse the unemployment trend by the end of the year, despite multiple forecasts to the contrary.

The UK labor market has done much better than expected since the start of the recession. Although we are suffering the worst recovery for over a century – national income has shrunk by almost 3% since 2008 – jobs have held up. Professor John Van Reenen explains that the main reason for this paradox is that real wages have collapsed, allowing firms to enjoy cheaper labor despite low demand for their goods and services. More jobs than ever before?  The headline claim that ‘there are more people in work today than before the economic crisis started’ is true but it is also profoundly misleading. Employment has risen a little – from 29.5 million in 2007 to 29.7 million up to the release of the jobs figures – but the adult population has also risen. This means that the proportion of people over 16 who are in work, the employment rate, has actually fallen from 73.1% at the end of 2007 to 71.4% in 2013. What’s more, there is evidence of underemployment as there has been a big rise in the proportion of part-timers, temporary workers and ‘zero-hours’ contracts. Even more striking is the boom in the number of people who would like to work more hours at their current wage rates, but cannot get the extra work. Although the unemployment rate rose from 5.2% at the end of 2007 to 7.8%, estimates of the underemployment rate rose from 6.8% to 10.5%.

EU Parliament adopts "most comprehensive and most far-reaching banking regulation in European history" with overwhelming majority

"Today's decision makes European banks more resilient, so that no more taxpayers' money has to be used to prop them up", explained Othmar Karas MEP, Vice-President of the European Parliament. The new set of rules for banks, which was adopted with an overwhelming majority, comprises more than a thousand pages and is the basis for the planned banking union. "The new single rule book for all 8200 banks in the EU is the foundation on which the house of the Banking Union is to be built. The single supervisory mechanism will be the roof. As walls to the house, we must now feed in the Resolution framework for banks and the deposit guarantee schemes. The new set of rules is the most comprehensive and most far-reaching banking regulation in the history of the EU", he said. Karas was Parliament's negotiator for the law known as the CRD (Capital Requirements Directive) or Basel III....Part of the new rules is that for the first time, there will be a cap on bankers' bonuses. Bonuses may not be higher than the salary. Only in exceptional cases, the shareholders of a bank may decide that bonuses may amount to a maximum of twice as much as the fixed salary. "The rules concerning bankers' bonuses do not regulate the amounts of the salaries. As legislators, we do not regulate salary levels. But we install fairness and transparency and we contribute to a change in culture", said Karas. The most important part of the new rules is tightened capital requirements for banks. From 1 January 2014 onwards, European banks have to put aside more and better capital to be prepared for possible crises. Unprecedented is the new rule that banks have to publish, country by country, what their profit is, how much tax they pay and how much they receive in subsidies. This increases transparency.

"The new capital requirements are key to an efficient banking supervision and therefore a crucial condition for the banking union", said Marianne Thyssen, EPP Group MEP responsible for the negotiations on the new single European banking supervision. "Today's large majority for the new banking regulation is a major success for Othmar Karas and an important step on the road to a safer banking sector. Both the new capital requirements and the reinforced European banking supervision will help to avoid crises. Prevention is better than cure", said Thyssen.  For the first time, criteria for the liquidity of bank capital are being introduced. Banks have to be able to fulfill their liabilities in stress situations for a period of at least 30 days. Particularly important to Othmar Karas has been making loans to Small and Medium-Sized Enterprises (SMEs) easier: "Banks must focus on their core business, which is financing the real economy." The new law reduces the capital requirements for loans to SMEs and business start-ups. Granting loans become easier this way. In addition, continental European banks are being strengthened in their competition with Anglo-American competitors by recognizing the characteristics of European banks as decentralized structures and loss-sharing agreements. "Our aim is to make European banks as firm as a rock on the global financial markets", concluded Karas.

"Citigroup said it now expects Spain's economy to contract by 2.2pc this year and another 2pc in 2014, pushing unemployment to 28pc.The effects of the slump will overpower any gains from fiscal austerity. The bank said public debt will surge from 88pc to 110pc of GDP in just two years." "Premier Mariano Rajoy has so far resisted a full rescue from the EU bail-out fund (ESM), fearing a political backlash and loss of sovereignty. Yet the ECB cannot purchase Spanish debt until Madrid pulls the trigger and signs a "memorandum"." "Julian Callow from Barclays said the ECB’s Mario Draghi is “itching” to buy Club Med bonds, seeing this as a way of targeting monetary stimulus on the countries in trouble - without an causing inflationary spillover in Germany - but he is paralyses until Madrid relents." Ah, when it all collapses the EU socializes private debt and gets to appoint another country's leader. Now I see what the strategy is. Meanwhile, Ireland has now a debt to GDP ratio of 120% and rising are now predictably making noises such as, forgive us our debt or else the best boy in the class is going native! Put "precautionary" loans in place as we will not be able to exit the bailout without a second bailout i.e. "precautionary loans" or if you prefer a "bailout extension" call it what you like, just make sure the money is there for us! The government are back in talks to extend their sweet heart deal Croke Park deal with the 23 public sector unions that represent government workers, so no surprises. They will be requiring additional funding to finance the Labor trade union government nexus. Labor are in coalition. As for Spain they will get their bailout from the ESM with a vicious MOU attached. They will underestimate (deliberately) how much they require, the further austerity will cause even greater unemployment and they will be on the road to Greece and the EU will be on the road to either break up or an admission that democracy has been overthrown and that you cannot rule a democratic EU. The whole project has been derailed because it was never possible to unite countries of such diverse cultures and work ethics. France wants to be socialist, therefore it needs Germany which is capitalist to pay up! Greece does not collect taxes so it wants them collected elsewhere and passed on to them otherwise they might have to pull out and it might be a systemic risk, Cyprus needs a bailout they too could be "systemic" and what about all that Russian money? Sure Russia might give a dig out? It is a tower of Babel ... I wonder whether most people in more stable Northern European countries realize just what exposure they are going to have to these bailouts via the ESM (for that is what the EU are now touting as the Spanish rescue vehicle)The ESM can make a capital call any time it likes on it's EZ members at 7 days notice and it's officers are immune from prosecution in any EU jurisdiction.. and it's records inviolable. So all those EZ member states that thought they were relatively safe are going to end up providing whatever funds a bunch of people with no accountability whatsoever demand of them. Budgetary independence and fiscal prudence gone in a flash and they never even noticed....Well, the next round of protests/riots ought to be interesting. Maybe Draghi, LaGarde, Merkel, Barroso, Van Rumpy and Rajoy could sit down with the hungry masses to explain how the worst is behind them.

Gross domestic product (GDP) in the world's second-largest economy expanded 7.8pc last year in the face of weakness at home and in key overseas markets, the National Bureau of Statistics (NBS) announced on Friday.  But it grew 7.9pc in the final three months of 2012 as industrial production and retail sales growth strengthened at the end of the year, snapping seven straight quarters of slowing growth in a positive sign for the spluttering world economy.

The official statistics come as optimism grows among analysts that China will pick up steam in 2013 after two years of relative weakness, although they - and the government - caution that the improvement will not be dramatic. "The international economic environment remains complicated this year and... there are still unbalanced conflicts in the Chinese economy," NBS spokesman Ma Jiantang told reporters.  Still, Ma added: "We expect China's economy to continue to grow in a stable manner in 2013."  The problem is that the economic and social arrangements that have emerged in China on the back of a decade or so of double-digit growth don't work, ie are unsustainable when the growth rate subsides. This is what worries the hell out of the Chinese leadership. The risk is that Chinese society becomes unstable. It's really no different to us over here having got used to trend economic growth of, say, 2.0% - 3.0% pa trying to sustain our own massively indebted complex societies on annual growth rates of 1.0% - 1.5%. In essence, we're going bust....The fundamental issue in all of this is that politicians won't tell their societies that they/we are indeed going bust. By the same token, many/most folk don't fully appreciate that a society that has emerged on the back of 60 years of a trend of, say, 2.5% pa growth (as is the case in the UK) cannot survive in recognisable form for more than about 5 years, 10 years at the very most, without that society fracturing. China certainly has its problems; we certainly have ours. Our mutual predicament is that "infinite" economic growth predicated on "infinite" supplies of cheap energy, primarily cheap oil, is by definition unsustainable. .....We have entered interesting times.

BRUSSELS - Greece is to get €49.1 billion worth of bailout funds after eurozone finance ministers in Brussels agreed the latest tranche of emergency funding on Thursday (13 December). Athens will receive €34.3 billion "in the following days", with the remaining funds, some of which will fund overcapitalization and resolution costs of Greek banks, to be paid out in the first three months of 2013. The money will be paid out by the European Financial Stability Facility (EFSF). The decision, which was taken after a meeting lasting under two hours, follows months of marathon talks between Greece and its creditors. It also comes at the end of a successful week for Athens after a debt buy-back which saw the government buy €31.9 billion of bonds at just over a third of their face value. Speaking with reporters following the meeting, Economic commissioner Olli Rehn said that the deal marked the end of an "odyssey" for Greece. He commented that the debt-laden country had confounded the "Cassandras" who had been "convinced that the game was up for Greece in the euro area."

BRUSSELS - The 2013 EU budget has been agreed after MEPs signed off on a deal worth €132.8 billion in Strasbourg on Wednesday (12 December). The agreement breaks months of deadlock between MEPs, the commission and national governments.  It increases EU spending next year by just €3.8 billion, over €5 billion less than the sums demanded by MEPs and the EU executive. It also includes a controversial deal providing just €6.1 billion of emergency funding to the European Commission to cover outstanding bills from 2012.  In October, the commission tabled an emergency budget worth €9 billion, with the EU's student exchange Erasmus programme and the European Social Fund among items facing a cash-flow crisis.  However, with member states refusing to stump up the extra cash in full, the EU executive will now roll over 2012 payments worth roughly €2.5 billion into 2013. Speaking in Strasbourg, Alain Lamassoure, the centre-right chair of the assembly's budget committee, complained that by rolling over payments the deal "respects the treaty but betrays its spirit."  Green budgetary spokesperson Helga Trupel said the agreement would "lead to a budget hole of at least €9 billion at the end of next year."  For his part, Italian conservative Giovanni La Via, who drafted the parliament's position on the budget, said that the funds would "guarantee investment in growth and job-creation."  Following the vote, the EU's budget commissioner warned that a repeat cash-shortfall would probably occur in 2013.
"The approved budget will in all likelihood not be sufficient to pay the incoming bills ... the pressure on the 2013 EU budget will be tremendous. There is a serious risk that we will run out of funds early in the course of next year," warned Janusz Lewandowski.
He added that "by systematically cutting the commission's estimates, the Council transforms the EU annual budget in a budget for nine to 10 months; last year we ran out of cash to pay all the claims in November, this year was in October and next year I expect this to happen even earlier."  The budget includes a 6.4 percent increase for EU research and development funding, alongside a 6.3 percent rise for the trans-European transport network.  The foreign aid budget also rises by 1.9 percent to cover extra funds to support Palestine. The EU's three main institutions will see a real terms cut.

THE WALL IS BEING REBUILT...

THE WALL IS BEING REBUILT...we, the Romanians, as well as England seriously have to get out NOW...the fact that they are even THINKING about asking why someone would want to move is sickening!!!!

It would be far better to leave the EU than to keep saying 'no' to everything. Of course, we could just say 'yes' instead but that would be anti-democratic, as the British people, via Parliament, have decided not to.
This is the crux of the matter; the EU is an inherently anti-democratic machine and has nothing whatsoever to do with trade. It is time that this 'red herring' was netted and gutted. Then again, the Common Fisheries Policy doesn't allow us the freedom to catch this type of fish as and when we want to in our own waters.

A google translation of news from today from germany:

"Handelsblatt": European Commission wants to prevent legal tax avoidance
For "anti-abuse clause" in national tax laws...The European Commission wants to press action against it that companies and wealthy citizens escape by moving within the EU taxation. The EU member states would have to an "anti-abuse clause" in their national tax laws add to remedy the situation, told the newspaper "Handelsblatt" (Wednesday edition) of Commission circles. The clause is intended to enable the tax authorities to check migration willing companies or individuals. Affected businesses and citizens would have to show that there is in addition to the tax or otherwise, for their move to another country. The complaint about the lack of tax compliance by companies and wealthy citizens by moving to another country is widespread.

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)

TRUTH IS : Private sector activity shrank for the tenth time in 11 months

Who on earth is investing to raise these stock markets so high? If I were Warren Buffet I would say this is a typical bubble Companies are not making real profits Banks aren't either so who is doing the investing????...Bond yields are down, oil prices high, USA crops are devastated by drought, housing in USA is still very much wasted. So are "the powers that be" simply doing what analysts do talking up the benefits of share ownership until even "my mate Joe Blw" decides that investing in stocks beats keeping his money under the mattresse ? I have had it with markets banks and politicians lies and deceits. I am closing all my banking accounts and simply paying in earwigs from now on.We are living in the Alice of Wonderland World. The more bad economic data we gets, the more the worlds stock markets rise..... Hopes that Europe’s leaders will act decisively drowned out weak data showing the eurozone endured another torrid month in July. Private sector activity shrank for the tenth time in 11 months and pointed to a 0.6pc rate of quarterly contraction, according to the purchasing managers index. Offsetting that was the strong US jobs data. July saw 163,000 people find work in the world’s largest economy, beating forecasts of 100,000. The sense of relief was sharpened because almost all the recent US data have pointed to a deterioration since the first quarter of the year. “It will alleviate fears that the US might be tipping back into recession,” said Nigel Gault, an economist at IHS Global Insight. The utterly repellent EU freak show stumbles from crisis to crisis, a crisis which conveniently gives the bureaucrats an excuse to force member countries into a fiscal union with budget control being handed over to Brussels, effectively crushing the last breath of democracy of the nation state in favor of an EU super state, but the light of freedom, sovereignty, cultural identity and the ability to decide one owns destiny will not be extinguished whilst the euro sceptics still have a voice. The common market worked well, that is where Europe should be heading not more Europe.....However : While U.S. employers hired an additional 163,000 "human resources" they also sacked an additional 195,000 "human resources" last month, including a decrease of 228k full-time jobs which was only partially offset by a 31k rise in part-time jobs (defined as 1 to 34 hrs/wk). Furthermore, a new group of 199,000 Americans joined the "Working-Age" pool last month and will need jobs as well. Not only is the U.S. economy in such a severe situation as reported, it is, in fact, in a worse one. Currently some 87 million Americans, or about 36% of the working-age population of the U.S., are no longer even looking for work and are considered "out of the labor force." If it were not for workers who dropped out of the labor force, the real UE rate would be far north of 11%. All of this MSM "rah-rah" reporting and "growth and recovery" hopium smoking needs a reality check.

Germany, the Netherlands and Luxembourg had the outlooks for their AAA credit ratings lowered to negative by Moody’s Investors Service in past week, citing “rising uncertainty” about Europe’s debt crisis, the risk of Greece leaving the eurozone, and the growing likelihood of massive bailout bills in Spain and Italy. On the whole, they seem like pretty sound reasons to me.

The IMF has, as I predicted, written off Greece. The Greek elite is, in turn, not even trying to hide how little effort they’re exerting to put their own public sector feathered-nest in order. The managements of Greek state-run enterprises seem to be so forgetful, they forgot to implement government decisions concerning wages cuts for thousands of employees at state-run enterprises (DEKO) and other state bodies and organizations. And the Coalition itself omitted to pass the legislation forcing them to do it.

The Troika arrived in Athens this week, to be vociferous in pointing out the non-compliance. (I doubt if they’ll bother to mention that all the forgotten public sector cuts have been dumped onto the already flatlining private sector). It is just possible that the Troikanauts will say “That’s it, no more money”, but unlikely: with Spain and Italy in bond-yield intensive care, this would be bad timing.

Spain’s two-year bond yield saw its biggest one-day move since the eurozone debt crisis broke out in early 2010, closing at 6.53 per cent. “Spain is close to losing access to markets entirely,” said John Stopford, a senior fund manager at Investec Asset Management. “It’s not sustainable to borrow at these levels for very long.” He’s not wrong: Spain is entering the Greek Twilight Zone --- An association representing German banks has called for an extra year to implement tougher rules that would force them to hold more cash as a buffer against possible financial crises. The BVR group of private and public banks called for a delay until January 1, 2014 for the entry into force of the so-called Basel III regulations due to the "enormous technical restructuring and implementation work" needed. The planned implementation at the beginning of 2013 was "no longer realistic" said the group.

UPSSSSS....!!!!

Finland and Holland move to block bond-buying plans, casting the first doubts on last week's summit deal, as figures show a slide in Spain, Greece and Italy's manufacturing activity and a rise in unemployment across the eurozone....A little more detail on this German court hearing. Germany's parliament last week approved the ESM, but President Joachim Gauck said he will not sign it into law until the powerful constitutional court has given its go-ahead. Several critics have already filed complaints against the ESM with the court, who will hear these complaints on Tuesday 10 July - one day after the fund is supposed to take effect. Over in Greece, ministers are deep in talks over how to ease the punishing terms of its bailout before a review by the country's lenders. Antonis Samaras, the country's prime minister, wants more time to meet targets and to dilute austerity measures. Reuters reports that ministers from the conservative-led coalition were huddled in talks on Monday to work out the plan before "troika" inspectors from the EU, ECB and IMF begin their review of Greece's faltering progress in fiscal adjustment and reforms.

Angela Merkel, the German chancellor, was asked about this today. She said we must accept decisions of other states and there is no need to make decisions now... Confusion still reigns, it would appear, over whether direct overcapitalization of banks by the eurozone's permanent rescue fund would require a treaty change. Yesterday, the European Commission said no legislative changes were needed in the treaty governing the European Stability Mechanism. But the Dutch government said today it was uncertain if a direct overcapitalization of banks by the euro zone's permanent rescue fund would require a treaty change. For now, however, it was assuming that no treaty change would be needed and, when appropriate, the cabinet would propose that parliament approve the addition to the ESM's mandate.

France's finance minister has said that the country's revised budget, due to go before the cabinet on Wednesday, will rein the government's deficit to a targeted 4.5pc of GDP. ...

Reuters reports that Pierre Moscovici said that without budget amendments the deficit would hit 5.0pc of GDP this year - implying the government needed some €10bn in new deficit cutting measures. 

The need to redenominate contracts from euro into new currencies.

“...Europe a nest of squabbling nations. Even the continent’s democratic achievements seem under threat, as dire economic conditions create a favorable environment for political extremism. Who could have seen such a thing coming? Well, the answer is that lots of economists could and should have seen it coming, and some did...” Well if they did, their silence was f**king deafening---I, and many others didn’t need to take in the econo-babble of so-called experts – common sense told you it wouldn’t work – if you were lacking that, then the example of the Soviet Union rubbed your nose in the dog shit that is collectivism. Over countless centuries, the people of Europe divided themselves naturally into what became nation states. There was some squabbling and not a little bloodshed along the way – most of this was caused by politicians (in those days they called themselves Kings and Priests)  ... Left to their own devices, these nations created their own languages, culture, sexual deviations, food preferences and currencies – they traded with each other, and by and large, the market was self-regulating..And then, some twats invented the European f**king Union...

The rest, as they say, is bollocks – sorry I mean historyThe most realistic scenario for euro break-up.... is that Greece, or one or more of the weaker peripheral countries, will leave the eurozone, introduce a new currency which then falls sharply, and default on a large part of their government debt. Preparations for exit must be made in secret and acted on straightaway. Just before departure, some form of capital controls will be essential, including temporary closure of banks and ATMs. With no time to print new notes, euro notes and coins should continue to be used for small transactions. The new currency should be introduced at a one-for-one rate with the euro. But it will soon depreciate by something like 30-50% giving a boost to Greece's international competitiveness. The government should redenominate its debt in the new national currency and make clear its intention to renegotiate the terms of this debt. They must announce robust measures to keep inflation in check but, with them, markets may well lend to the exiting country again the medium term. Importantly, the exiting country has an opportunity to break free from a crippling debt strait jacket....A break-up of the eurozone implies a need to redenominate contracts from euro into new currencies. This is relevant for bonds, loans, deposits and other financial instruments. This process is complicated by various legal constraints. Different financial instruments are governed by different laws, and many euro denominated instruments are governed by foreign laws, especially English laws. Eurozone governments cannot change laws of foreign countries and they cannot easily redenominate foreign law assets. Since there are tens of trillions of euro-denominated contracts in existence under foreign law this is a very large potential problem. This plan stresses the importance of facilitating an orderly currency redenomination process in all break-up scenarios. This includes the need for an ECU-2 currency basket to settle euro claims in a full-blown break-up, where the euro ceases to exist. The ECU-2 would constitute a bridge between the euro (which no longer exists in a full blown break-up) and the new national currencies. The ECU-2 concept would thereby help avoid arbitrary currency conversions and prolonged legal battles about redenomination. In the absence of an efficient process for redenomination, a full-blown break-up of the eurozone is likely to be devastatingly disruptive and could see a complete freeze of the global financial system.
ATHENS NOW --- Greece's finance minister, Vassilis Rapanos, resigned on Monday after being ill in hospital for several days. The prime minister's office said that Mr Rapanos had sent a letter of resignation to the prime minister, Antonis Samaras, who had accepted it. The country's new coalition government, comprising Democratic Left, Pasok and New Democracy, was formed last week following months of political turmoil and two inconclusive elections.----- Now we know the truth, Samaras couldn't or didn't want to see what he was getting himself into and Rapanos fainted the moment he did. Great stalwart team to implement what their Greek countrymen and women elected them for; putting an end to Teutonic austerity while remaining in the EMU. Both gents must know this combination is not on Frau Merkel's menu. I'd give them a month, about the time it will take Greeks to realize their election manifesto was a fraud !!!!!
The developments so far today:

- Spain saw its short-term debt costs almost triple in an auction this morning as its request for a €100bn rescue package for the country's banks failed to stem market fears.

- A report compiled by Barroso, Van Rompuy, Draghi and Juncker ahead of this week's eurozone summit presents a plan for rescuing the eurozone including creating a closer fiscal and banking union that would turn Brussels into a finance ministry for all eurozone members. Under the plan, the European Union could be handed powers to change countries' budgets if they breach debt and deficit rules.

- Finance chiefs of the eurozone's four biggest economies - France, Germany, Italy and Spain - will hold last-minute talks in Paris on Tuesday evening to try to narrow differences on the currency area's future

- Mervyn King has warned that the outlook for the UK economy has worsened during recent weeks due to the eurozone turmoil; that came as public sector net borrowing rose much more than expected

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

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

SPAIN ...Merkel wins , the german boot upon the spanish neck...

Austerity is already harsh in what has traditionally been the continent's most euro-enthusiastic country - Spain. Unemployment, now affecting one in four workers, is set to continue well into next year. In the Spanish capital, a largely conservative place, the mood is of resignation rather than revolution. There will be no Athens-style protests in Madrid – or not soon, although the ongoing battles between balaclava-wearing miners and police in northern Asturias are proof that anger is spilling over elsewhere. Photographers seeking dramatic pictures on protest days travel to Barcelona, where radical left wingers see police persecution in a wave of recent arrests, while police say they are picking up those behind street violence during strikes. With the rescue money in Spain's "bailout lite" looking likely to go straight to former savings banks, the roots of its banking problem lie fully exposed. A decade-long housing boom, fueled by cheap credit thanks to low interest rates needed by Germany, has left the banks stuffed with toxic real estate. It is clear : "Europe needs fiscal integration with a fiscal authority and banking integration, a banking union with eurobonds, a banking supervisor and a European guaranteed deposit fund," Rajoy said last week. A bank bailout does not provide that. "The future of the euro is going to play out in the next few weeks in Spain and Italy," finance minister Luis de Guindos has warned. The problem is that Spain has already introduced harsh austerity measures, with official unemployment at around 25% and over 50% for those under 25. If they push that any further social explosion awaits. The further problem is that within this system there is no alternative to a very bad decision. Either you bail out the banks and shift the debt around the central banks in order to put off the awful day or you let them go to the wall and then watch the whole economic system collapse around our ears right now.

The trouble is that the orthodoxy of the last 50 years means that the IMF, World Bank, European Bank and almost every university economics department are run by Economists brought up on a paradigm that has failed spectacularly....Monetarism, Thatcherism, Hayek, Friedman, the Chicago School and the Austrian School ... all bollocks. We need a new paradigm and young economists with new ideas. Otherwise we really are screwed.

Spain's unemployment rate is rising rapidly. While the labor ministry doesn't give an unemployment rate, Spanish unemployment stood at 23.6% in February, according to data published Monday by the European Union's Eurostat agency, more than twice the 10.8% average rate for the 27 EU members and an increase from the 23.3% rate in January. Spain's economy is expected to contract 1.7% this year, according to the government's estimates, and the central government is struggling to balance demands to slash the country's deficit without hurting economic activity too heavily. Last week, it announced budget cuts worth more than €27 billion, or about 2.5% of gross domestic product, through decreases in spending and tax increases along with other measures. But in an interview Monday with The Wall Street Journal, Finance Minister Luis de Guindos said the government worries that cutting the budget too severely could curtail economic growth.

Italy has pledged to eliminate its budget deficit by 2013, although a senior Treasury official has emphasized that it has no explicit target for this year. Italy has vowed fiscal consolidation worth 7% of GDP since 2010 to reach that 2013 target. Underscoring just how harshly Italy's tax-heavy policies are affecting domestic consumption was underscored by foreign car dealers association Unrae's report this week that Italian car sales fell 21% in the first quarter—the biggest season for such purchases—and March unit sales hit a 32-year low. Prospects are dim. "Consumers have insurmountable obstacles ahead of them, with higher income tax rates from March, higher property taxes as of June and a value-added tax hike in September," said Unrae President Jacques Bousquet. Italy's budget targets are based on a GDP contraction of only half a percentage point this year and a modest return to growth in 2013. Late last year Italy, responding to pressure from European Union officials, installed Mario Monti to head a government of technical experts. Its first act was to pass a supplementary round of tax increases and public-spending cuts in December to stay on course to reach its targets even as growth slowed. The commission's latest warnings from Copenhagen are identical.