Yesss.....we are brushing the dust under the carpet ...see you after the holydays

The use of the European Central Bank's overnight deposit facility reached a new record high for the year Thursday, suggesting recent measures by central banks and policy makers still aren't enough to restore confidence in inter-bank lending markets. Banks deposited €346.99 billion ($453.38 billion) in the overnight deposit facility, up from €264.97 billion a day earlier and a previous high for the year of €346.36 billion, reached earlier this month. The high level reflects ongoing distrust in inter-bank lending markets, where banks prefer using the ECB facility as a safe haven for excess funds rather than lending them to other banks. The high deposit level also suggests markets aren't fully convinced that the ECB's massive long-term loan allotment is enough to fortify the currency bloc's banking sector. The central bank extended nearly half a trillion euros in long-term loans to euro-zone banks Wednesday, hoping to ease fears of a new credit crunch as banks struggle to borrow from markets. The turmoil has hit the French economy during harder than first thought forcing a revision of the country's third quarter growth figures down to 0.3pc from 0.4pc. Household disposable income, or the cash that consumers have to spend, "markedly decelerated", said France's Insee statistics body. Spanish producer-price inflation slowed for a second month in November, after the economy stalled. Prices of goods leaving factories, mines and refineries rose 6.3pc from a year earlier, after increasing 6.5pc in October, the National Statistics Institute in Madrid said. In Italy, consumer confidence fell in December to the lowest since January 1996 as households grew concerned about austerity measures and a probable recession. And Greece's unemployment rate has soared again - it rose to 17.7pc in the third quarter, from 16.3pc in the second, according to Hellenic Statistical Authority data. Meanwhile, Mr Juncker said he was determined to push ahead with the controversial Financial Transaction Tax (FTT), at the eurozone level if not across the G20 and EU. He added: "And if it's not a financial transaction tax, then another form of financial responsibility for the financial sector." Europe is suffering from a debt crisis marked by worries that heavily indebted governments such as Italy may be unable to pay off their bonds. That means trouble for banks because they typically hold government bonds. The large deposits come despite Wednesday's massive central bank credit operation, in which the ECB let banks borrow as much as they wanted for up to 3 years. As a result 523 banks took €489bn, the largest ECB loan operation in the 13-year history of the euro. The ECB has increased lending to banks to help them get through the crisis. Some are finding it impossible to raise money elsewhere, so the ECB steps in as lender of last resort, a typical role for central banks in times of turmoil....So, the banks deposited billions in order to borrow twice AS MUCH ??? to and from BCE ...what is this nonsense ???? The ECB further said banks borrowed €6.34 billion from the ECB's overnight lending facility, compared with €7.55 billion borrowed a day earlier. When markets are functioning properly, banks only use the facility to the tune of a few hundred million euros overnight.

Upppsssss....Euro-Zone Treaty May Be Illegal

The euro-zone 17 in combination with six other countries quickly began moving forward on their own. But is such a move legal? European Union lawyers have their doubts that the kind of euro-zone fiscal union within the EU would be allowed. Changes to the EU treaty, after all, must be unanimous. Furthermore, EU officials in Brussels say, because monetary union is regulated extensively in the Lisbon Treaty, reform can only be implemented within the existing legal framework. The legal services experts of the European Commission, the European Central Bank and the European Council, which represents the member states in Brussels, are all in agreement. A treaty concluded only by the 17 euro-zone governments would be illegal, they say. Individual countries could only issue a "political declaration of intent," in which they determined, for example, how they would decide on the use of sanctions against budget offenders. But such a declaration would have no legally binding character and, as officials point out, could also be revoked following the election of a new government. This is principally a reference to France, where the Socialist presidential candidate François Hollande has already announced that he would not accept any incursions into national sovereignty. Shortly before the summit, many European leaders were pushing for a quick rescue plan. At the convention of the European People's Party (EPP) in Marseilles, the conservative group which currently constitutes the largest faction in the European Parliament, smaller countries also spoke out in favor of a strong Europe with strict rules.

Significant - The British prime minister said early on Friday morning he could not allow a "treaty within a treaty" that would undermine the UK's position in the single market.

The move marked a victory for Nicolas Sarkozy, who had been pressing for an inter-governmental agreement among the 17 members of the eurozone to underpin tough new fiscal rules for the single currency. "We could not accept this," he said of Cameron's demands. The French president, who has been pressing for the formalisation of a "two-speed Europe", was pleased on Friday when the number of EU member states indicating their support for a separate treaty reached 23. Britain was joined by Sweden, which rejected euro membership in a referendum, the Czech Republic and Hungary.

Angela Merkel, the German chancellor, who had hoped to agree a revision of the Lisbon treaty, said she believed the accord would stabilize the euro. "I have always said, the 17 states of the eurogroup have to regain credibility," she said. "And I believe with today's decisions this can and will be achieved." Cameron wielded the British veto in the early hours of the morning after France succeeded in blocking a series of safeguards demanded by Britain to protect the City of London. Cameron had demanded that:

• Any transfer of power from a national regulator to an EU regulator on financial services would be subject to a veto.

• Banks should face a higher capital requirement.

• The European Banking Authority should remain in London. There were suggestions that it might be consolidated in the European Security and Markets Authority in Paris.

• The European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone. The summit also agreed that: Eurozone countries will provide up to €200bn in extra resources to the International Monetary Fund to help countries in difficulty. The eurozone's two bailout funds, the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF), will be managed by the European Central Bank.

MerKozy "demand tough new eurozone treaty" - demand of whom ???...what a farce !!!

Smoke and mirrors - - Speeding up implementation of the permanent bailout funds, the European Stability Mechanism, to 2012"... The intra-euro zone ESM treaty, draft signed on July 11th here: http://consilium.europa.eu/med... is legally dependent upon the EU treaty change agreed by EU leaders on March 25th: http://eur-lex.europa.eu/LexUr...which now awaits ratification by all 27 member states "in accordance with their respective constitutional requirements" before it can come into force. That is the EU treaty change which Hague ruled would not be put to a referendum, in his statement laid before Parliament on October 13th. "In my opinion the European Council Decision of 25 March 2011 amending Article 136 TFEU with regard to a stability mechanism for Member States whose currency is the euro adopted under Article 48(6) TEU does not fall within section 4 of the Act and no referendum is required in the UK." Far from speeding up the Bill to approve that EU treaty change, Cameron should announce that pending further negotiations he will not be proceeding with its ratification ... About half an hour ago, the Financial Times reported that S&P is putting the 6 AAA-Eurozone counteries, i.e. France, Germany, Netherlands, Austria, Luxemburg and Finnland COLLECTIVELY on negative watch, meaning that there will be a 50pc chance of a downgrade in 90 days. S&P cited "political turmoil" in the midst of the eurocrisis as a main reason for their decision, knowing this move will lead to yet more recriminations of politicians against itself: http://www.ft.com/intl/cms/s/0/7cf2e0ae-1f63-11e1-9916-00144feabdc0.html#axzz1fgeFjZei .... So much for the new investor confidence in the new approach of the eurozone leaders towards a solution of the crisis.

Oh dear, yet more huffing and puffing from Frau Merkel and her toy pig Psycho-Sarko... They talk and try oh so hard to sound as if they know what is going on but fail to face reality each and every time. To say no more "haircuts" is a bit "rich", given how they mugged bond holders only a few weeks ago - can these two be trusted ever again?? ... They miss the point, in my humble opinion - they must have full fiscal union to make the You - Owe work... however, a small problem is that the people (oh no not them again!!!) do not wish to have full fiscal union depriving them of sovereignty...
Alternatively they can accept the grim reality, that Delors little idea born with flaws can never get better and is occupying a vital bed in Intensive Care...Here are the main points of the new treaty include:

1 - Automatic sanctions for breaching deficit ceilings of 3pc of GDP and a requirement for balanced budgets.
2 - Speeding up implementation of the permanent bailout funds, the European Stability Mechanism, to 2012, with the introduction of qualified majority - 85pc - for decisions, instead of unanimity.
3 - No more haircuts for bondholders.
4 - A monthly meeting of euro zone leaders until crisis ends, focusing on growth in Europe.
5 - ECB's role to remain unchanged - will not be lender of last resort - and there will be no eurobonds.

As the two spoke yields on 10-year Italian bonds, which last week were trading at "unsustainable" level above 7pc, slipped below 6pc.

Confidence that European leaders will come up with a credible plan to end the debt crisis at a crucial summit this week also buoyed stock markets. PRESS REACTION : -- Bruno Waterfield, the Telegraph's Brussels Correspondent, tweeted, citing a diplomat: "Looks like Sarko caved on most points, EU 27, automatic sanctions, ECB." -- While Simon Nixon, European editor of the Wall Street Journal's Heard on the Street column, suggested that France was a big winner. -- "Amid all the bluster from Merkozy presser, big winner seems to be Sarkozy (and de Gaulle), losers are Germany and UK."

Could anyone give or sell us a "Survival kit?"

France is being particularly watched on its commitments to cut high deficits as losing its triple-A rating would undermine the euro zone's bailout facility, the European Financial Stability Facility. In the space of less than three months, President Nicolas Sarkozy has responded by crafting two austerity plans to save €19 billion ($25.7 billion) by the end of next year. The second austerity plan came as the government slashed its 2012 growth forecast to gross-domestic-product expansion of 1% from 1.75% previously. Economists are now concerned that austerity could bite significantly into growth. Deutsche Bank analyst Gilles Moec said in a research note Monday that the two austerity packages and the tightening already programmed could take 1.2% off French GDP next year. Moody's noted in its report Monday that the growth outlook and the European debt crisis are "important risk factors" for the French government's finances. Mr. Baroin defended the government's austerity plans, which are mainly centered on tax increases in the short term, including VAT hikes. "These measures will not have a negative impact on growth of the French economy," he said. On a funny note : How about a list of actions eurozone holders can take to lessen the horror when the euro crashes in a disorderly fashion.
1. Buy non-EU currency. Which ones?
2.Buy gold.
3. Buy property rather than have cash in the bank.
4. Stock up on long life essential food supplies, batteries, paper.
5. Ensure at least 6-9 months of regular medications.
Could anyone give (sell) us a "Survival kit?"... Civil unrest anybody?

BERLIN—German Chancellor Angela Merkel on Monday responded to growing criticism of euro-zone bailouts from within her Christian Democratic Union party with a passionate call for Germany to shoulder the burden of saving Europe's most ambitious project and to step up to the challenges of these uncertain times. During a party convention in the eastern German city of Leipzig, where in 2003 Ms. Merkel made a pledge to return Germany to its role as Europe's undisputed economic leader within a decade, the chancellor rebuffed accusations she had abandoned the conservative party's long-standing positions on core issues—from social policies to nuclear energy and now minimum wages and euro-zone bailouts. German Chancellor Angela Merkel at the CDU party congress Monday in Leipzig, Germany. "We live in times of epic change," Ms. Merkel said. "Our political compass has not changed. But the context is constantly changing." Some party members called for Ms. Merkel to make it possible to boot profligate euro-zone nations out of the 17-member club. Ms. Merkel told her party that 30-year-old policies couldn't supply the appropriate answer to Europe's "most difficult hours since World War Two." She insisted that the party must go with the times. In a one-hour speech at the two-day convention that is being held under the motto "For Europe, For Germany," Ms. Merkel pounded the themes that have become a steady drumbeat in her daily messages back in Berlin about resolving the euro-zone debt crisis: that the euro crisis will take years of hard work to fix and that the crisis offers the opportunity to recreate the European project. "We need to send a clear signal," Ms. Merkel told the delegates. "We don't whine; we don't complain. We know instead that we have a job to do." ...I ask : What job ? : THE JOB IS TO FULFILL THE RIBBENTROP - MOLOTOV PACT PROVISIONS and TAKE OVER EUROPE !!!!!!! The Russians already met their task of taking over the European Energy resources !!!

Italians have low personal debt, the second biggest manufacturing economy in Europe and Berlusconi claims the restaurants in Rome are full. So why is Italy now at the centre of the euro zone crisis? -- I say: could it be that according to the Ribbentrop -Molotov pact of 1939, the time has come for Germany to take over Europe after the Russians became the owners of the European energy capacities? It certainly looks this way !!

There is an "implanted fake problem" in the Italian business environment that prevents growth. Italy scores low in the World Bank indicator of how easy it is to do business – 80th place . The problem is bureaucracy and sluggishness of the justice system in courts to clear financial and business matters. People say: despite all the problems Berlusconi made a fortune and built a big business. The state and tax system never helps business; they are an obstacle to be overcome. It's remarkable that despite all of this Italian firms still do so well. There are also entrenched special interests that hold a monopoly over certain services, such as lawyers, notaries and all services that business need to operate and the state and Italy has no independent state service like France, there is too much vested interest. If Italy fails to repay its debts the impact would be far worse than if Greece defaults as it has a much greater overall level of debt, meaning its creditors, mostly European banks, would be in serious trouble. The immediate problem for Italy is in the bond market. The bond markets are essentially the trade in government debts and Italy's is among the largest at around €1.9tn. The yield on the price of government Italian bonds has risen sharply – this is equivalent to the interest rate charged to the Italian government to borrow money.

Silvio Berlusconi has agreed to resign by January

Italy is very much to the forefront again - the government is hanging by a thread. Italian newspaper Repubblica is reporting that Silvio Berlusconi has agreed to resign by January in exchange for agreement from his coaltion partners on reform of pensions and government bureaucracy.

Italy, which has €1.9 trillion (£1.65 trillion) of debt, will try to sell €10.5bn of government bonds today, even as it races to come up with a credible debt-reduction plan in time for today's summit in Brussels. Obviously if Italy is without a leader, or can't get agreement on debt reduction, it will make getting a final agreement at this afternoon's meeting all the harder - it is the eurozone's third-largest economy after all...

The International Monetary Fund is considering taking part in the bail-out fund via a special investment vehicle (SPIV), Reuters reported. To increase the firepower of the €440bn EFSF without actually putting more money into it, the SPIV (try not to laugh at the name) will be able to issue debt and use the money raised to buy the bonds of indebted nations in the secondary markets, or make loans to governments. The SPIV would be able to raise money from private investors and sovereign wealth funds, and the IMF could also contribute. Of course, when the IMF is involved, it means stakeholders countries taxpayers are on the hook because of the country's contribution to the fund.

London, 07 October 2011 -- Moody's Investors Service has today downgraded the senior debt and deposit ratings of 12 UK financial institutions and confirmed the ratings of 1 institution. This concludes its review of systemic support assumptions from the UK government for these institutions initiated on 24 May 2011. The downgrades have been caused by Moody's reassessment of the support environment in the UK which has resulted in the removal of systemic support for 7 smaller institutions and the reduction of systemic support by one to three notches for 5 larger, more systemically important financial institutions. According to Moody's, announcements made, as well as actions already taken by UK authorities have significantly reduced the predictability of support over the medium to long-term. Moody's believes that the government is likely to continue to provide some level of support to systemically important financial institutions, which continue to incorporate up to three notches of uplift. However, it is more likely now to allow smaller institutions to fail if they become financially troubled. The downgrades do not reflect a deterioration in the financial strength of the banking system or that of the government.The rating actions include a one-notch downgrade of Lloyds TSB Bank plc (to A1 from Aa3), Santander UK plc (to A1 from Aa3), Co-Operative Bank plc (to A3 from A2), a two-notch downgrade of RBS plc (to A2 from Aa3) and Nationwide Building Society (to A2 from Aa3); and downgrades of one to five notches of 7 smaller building societies. The ratings of Clydesdale Bank were confirmed at A2 (negative outlook).

As outlined in the May press release, we have reviewed the standalone ratings of all entities prior to concluding on the debt ratings. A separate announcement today covers the upgrade of the standalone rating of Co-Operative Bank to C- (mapping to Baa1 on the long-term debt scale) from D+ and earlier announcements cover the upgrades of the standalone ratings of Santander UK, Nationwide, Yorkshire, and Principality Building Societies. A detailed summary of the rating actions and the current levels of systemic support for UK financial institutions is available here http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_136526.
Separate announcements will follow on entities included in the May 24th review, but not concluded in this action: this includes certain subsidiaries of RBS and Lloyds, as well as Bank of Ireland (UK).

The recent Franco-Prussian, upssss, Franco-German summit in Paris between Chancellor Angela Merkel and President Nicolas Sarkozy, the latest in a series of failed attempts by the deluded duo to overcome the sovereign debt crisis, ended with ringing tones of a "true European economic government". Cue alarm bells this side of the Channel at the prospect of the 17-strong eurozone at the very least being transformed into a fully-fledged fiscal union, nay a united federal state, with headquarters in Berlin. Germany would dictate the terms of its creation, oversee it and severely punish those which failed to live up to its own standards of Disziplin und Ordnung, Sparsamkeit und Stabilität.This paranoid fantasy was expressed most crudely in yesterday's Daily Mail by Simon Heffer, whose lengthy rant, not only eurotoxic but virulently anti-German, ended with the phrase: "Welcome to the Fourth Reich." Pitiful if it were not so perniciously poisonous.Even the notion that Merkel and Sarkozy are talking about an "economic government" is wholly erroneous. When the German chancellor talks of Wirtschaftsregierung or the French president of gouvernement économique the Brits would say "economic governance". In Paris it's shorthand for reining back politically the European Central Bank's independence; in Berlin for fiscal probity. The Franco-German pair did little more on Tuesday than rehearse arguments and notions that date back to at least earlier this year for improved economic governance in the wake of the initial Greek crisis. This means turning the EU's discredited stability and growth pact into a more effective mechanism for preventing excessive budget deficits, imposing stricter debt ceilings and resolving economic imbalances.

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