"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.

French unions and businesses on Friday agreed on broad changes to labor laws, a key plank of President François Hollande's efforts to arrest rising unemployment and restore France's competitive edge. But after months of wrangling, only three of the five labor unions around the table gave their backing to the accord, depriving Mr. Hollande of the unanimous support that would give him a strong political boost.

New ways for employers to cut pay and working hours in tough times

• Simplification of legal procedures for layoffs
• Health insurance benefits extended to more workers
• Higher levies in fixed-term contracts to encourage permanent hires
• Incentives to hire young workers on permanent contracts.

"This is the first time in over 30 years that a negotiation at this level and with such depth has reached agreement," Mr. Hollande said. "This is a success for social dialogue." The government will now present the text to Parliament, where Mr. Hollande has a majority. French President François Hollande, right, speaks to Prime Minister Jean-Marc Ayrault after a meeting with French government ministers, focused on France's economic situation and employment, earlier this month. Negotiators still have to return to their unions to finally sign off on the agreement. Joseph Thouvenel, a representative for the Christian CFTC union, and moderate CFDT union negotiator Patrick Pierron said they will give a favorable opinion, and the CFE-CGC union negotiator Marie-Françoise Leflon said she had helped achieve a more balanced agreement. "The objective of creating conditions to fight insecurity and boost employment has been achieved," Mr. Pierron said. "We have met the challenge of getting extremely positive things for business and new points for employees," said Patrick Bernasconi, the negotiator for employers' group Medef. As expected, two more radical unions the CGT and the FO, said they won't sign the pact. Under terms of the agreement, business associations secured a victory that will allow companies to cut working hours and wages when times are tough, as German businesses have done during the global economic crisis to ensure their survival. Employees will have their jobs guaranteed during those periods of flexible wages and hours.

Protests on the streets of Madrid on Monday highlighted the tensions inside the euro area after banner-waving protesters blamed Brussels, Berlin and the right of centre PP government of Mariano Rajoy for privatisations and cuts in healthcare spending.

Elga Bartsch, an analyst at Morgan Stanley, said she was anxious that Barroso and his colleagues in Brussels would fail to resolve long-running disputes over the EU's new institutions.

"The euro crisis seems contained for now. But we think it is not resolved for good. In addressing the fundamental flaws in the euro's institutional set-up, progress on banking union will be key. Assuming no crisis escalation, the euro area should re-emerge from recession and return to sub-par growth. Politics is the main risk," she said. Political deadlock, which has also characterised the reform agenda in Washington and Tokyo, could allow social unrest to grow and wreck any coherent reform plans, she said.

"An extended recession, diverging political positions and several elections create a difficult backdrop for in-depth reforms. We therefore expect only limited progress on an effective resolution of the crisis this year. We believe that progress on banking union, where preparations are under way for a Single Supervisory Mechanism (SSM) and where discussions continue on harmonising, and possibly pooling, bank resolution and deposit guarantee schemes, will be key."  Merkel faces a general election in the autumn against a resurgent Social Democratic party (SPD) while the Italians are expected to go to the polls next month in an election that could see a revived Silvio Berlusconi with enough votes to block reform measures.  Global stock markets, which have warmed to the message that the euro crisis is abating, drifted lower as some investors sought to cash in on last week's strong gains and worries grew of more political brinkmanship in Washington. Major indices surged last week after the US Congress passed a bill to avoid a "fiscal cliff" combination of government spending cuts and tax increases.

The deal, however, remains incomplete. Politicians will face another deadline in two months to agree on more spending cuts while a debate over the country's $16 trillion (£9.9tn) debt ceiling is also looming.  Concerns that the eurozone will suffer another year of economic downturn after entering recession last year were heightened by comments from OECD boss Angel Gurría who said the 17 member zone could continue contracting into 2014.

Britain's FTSE 100 fell 0.4% to 6064 while Germany's Dax was down over 0.7% to 7719.78. France's Cac-40 lost 0.8% to 3701.06.

Wall Street opened lower as well, with the Dow shedding 0.4% to 13,377.13 and the broader S&P 500 falling 0.4% to 1460.14.

The one bright spot for the markets was the banking sector, where stocks were up after global regulators eased new rules obliging lenders to set capital aside. The so-called Basel III rules are a set of new international standards to make sure banks protect themselves from the same trouble that caused the 2008 financial crash. On Sunday, the officials setting those rules delayed the date by which banks needed to have certain amounts of cash readily available.

The European Central Bank has announced a shake-up of responsibilities among its executive board, putting new arrival Yves Mersch - formerly governor of Luxembourg's central bank - jointly in charge of heading up plans for the eurozone banking union alongside vice president Vitor Constancio.

Hungary's central bank has cut its interest rate - the highest in the EU - for the fifth time in as many months. The Magyar Nemzeti Bank lowered the two-week deposit rate to 5.75pc from 6pc, continuing a trend of lowering the rate by a quarter point every month. The bank's president is due to appear at a news conference this afternoon to explain the decision, which is perceived as risky in the face of high inflation of 5.2pc.

Bloomberg reports that central bank chiefs from across the world are set to meet as early as January 6 to revisit the terms of the Basel III rules drafted in 2010. At the heart of discussion will be requirements on how much liquid capital banks must hold as a proportion of their total balance sheet, which the regulations say should be enough to survive a 30-day credit squeeze. Central bankers, including ECB President Mario Draghi, say could drag down interbank lending, and slow economic recovery.

EU lawmakers have admitted they will fail to meet the globally-agreed January deadline for the implementation of tougher capital requirements on banks. A meeting planned for today to thrash out the final details of a deal after talks last week stopped short of full agreement has been postponed. The move sees the EU join the US in delaying the introduction of the regulation, known as the Basel III rules, which are widely expected to come into force one year later than planned, in January 2014.

Spanish economy minister Luis de Guindos has revealed plans to fully compensate those who lost investments by purchasing complex financial instruments they did not understand. His plans will give the hundreds of thousands of Spaniards misleadingly sold high-risk instruments a chance to claim compensation for the losses which followed the banks' €37bn bail-out.

Romanian President Traian Basescu signed on Monday the decree designating Victor Ponta, leader of the Social Democrats (PSD) and co-head of the Social Liberal Union (USL) as prime minister of Romania. The move comes as the USL, the alliance of PSD and the Liberals (PNL), obtained a large majority of votes in the December 9 parliamentary elections.

Ponta has been serving as prime minister for seven months. In spring this year, his alliance replaced a rightist government who had only spent several weeks in office. Over the seven months, USL's main focus was a battle with President Basescu, which included a failed and controversial referendum to remove him from office.

A presidential press release on Monday announced Victor Viorel Ponta was designated candidate for prime minister, in charge with forming a new government due to be validated by the Parliament.

The press release says that during consultations between political parties and the President on Monday morning there was only one proposal for prime minister. As a result, President Basescu designated Ponta as candidate for prime minister.

Ponta has ten days to form a government and come before the newly elected Parliament to receive the vote of support. The USL leader has said he wanted to move faster than that so that Romania have a government by Christmas.

Italian centre-left Democratic Party chief Pier Luigi Bersani is set for a run-off vote next week against young pretender Matteo Renzi, after millions of supporters chose their nominee for next year's general election.With 40 percent of the votes counted from Sunday's balloting,  Bersani was in front with 44.3 percent support, followed by Florence mayor Renzi with 36.3 percent, the organising committee said. More than four million supporters took part in the vote which will now head for a second round run-off on Sunday. A general election is expected in April 2013 with the winner of the centre-left nomination one of the favourites to replace Mario Monti as Italy's next prime minister. All the most recent polls show the Democratic Party coming first in the general election. Observers were surprised by the large turnout for the primaries and many polling stations were overwhelmed, with large queues forming outside. More and more Italians are feeling the pain of a recession that began in the second half of last year and is forecast to continue into next year. The main drama is between 61-year-old Bersani, a cigar-chomping former communist with a liberal economic orientation, and rising star Renzi, who at just 37 is a new face in politics, inspired by US President Barack Obama. The primary is being held at a time of deep economic crisis and political uncertainty in Italy, with a series of corruption scandals within the main parties sparking voter apathy and disgust with traditional leaders. Both men have said they will follow the broad course of reforms set by unelected technocrat prime minister Monti, but will seek to curb some of the more unpopular austerity measures he has advocated and do more to boost growth. "We have to show the rest of the world that we don't just have Monti," Bersani, a former economic development minister, said last week. "People want to take part, they want to have a politics that is in touch with the streets, with the squares, that returns hope to the country," he said.   Monti, a former European commissioner, took over from Silvio Berlusconi a year ago as Italy struggled with the eurozone crisis. While his cuts have angered many, he is seen as having saved Italy from a Greek-style collapse.

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.

A country isn't a business...

A country isn't a business, even though there are politicians who like to treat their voters as if they were employees. Politics is the art of mediating between the political and economic markets, convincing parliaments and citizens that economic policy promotes their prosperity and the common good, and convincing markets and investors that nations cannot be managed in as profit-oriented a way as companies.

After four years of financial crisis, this balance between democracy and the market has been destroyed. On the one hand, governments' massive intervention to rescue the banks and markets has only exacerbated the fundamental problem of legitimization that haunts governments in a democracy. The usual accusation is that the rich are protected while the poor are bled dry. Rarely has it been as roundly confirmed as during the first phase of the financial crisis, when homeowners deeply in debt lost the roof over their heads, while banks, which had gambled with their mortgages, remained in business thanks to taxpayer money.

In the second phase of the crisis, after countries were forced to borrow additional trillions to stabilize the financial markets, the governments' dependency on the financial markets grew to such an extent that the conflict between the market and democracy is now being fought in the open: on the streets of Athens and Madrid, on German TV talk shows, at summit meetings and in election campaigns. The floodlights of democracy are now directed at the financial markets, which are really nothing but a silent web of billions of transactions a day. Every twitch is analyzed, feared, cheered or condemned, and the actions of politicians are judged by whether they benefit or harm the markets.

Not looking good for France-business optimism is down again:"...National statistics institute INSEE said on Tuesday [23rd. October] its indicator for morale in the manufacturing sector slumped to 85 in October, worse than the lowest estimate in a Reuters survey of 23 economists. The poll had forecast business morale would be unchanged from last month at 90. The indicator was dragged lower by a sharp deterioration in survey responses relating to total orders and demand, which slumped to -39 from -28 in September - dragged lower by the deepening recessions in southern euro zone nations such as Italy and Spain, which rank amongst France's main export markets..."That's a big drop by any stretch of imagination...As a member of the public I would like to go on record as saying that I am not deeply unhappy with the the EU. In fact, I am absolutely bloody furious ! A bigger bunch of narcissist, egotiscal lunatics I have never seen in my life. Their battle cry of "The project is more important than people" is never far from their lips. Mr Hague do everyone a favour and tell "call me Dave" to get going on planning a referendumon th EU now, the UK voting public would thank you for it. As far as I'm aware the ESM is outside any laws and jurisdictions, not just those of Europe.

If this lot doesn't constiture being above the law, I don't know what does: "...In the interest of the ESM, the Chairperson of the Board of Governors, Governors, alternate Governors, Directors, alternate Directors, as well as the Managing Director and other staff members shall be immune from legal proceedings with respect to acts performed by them in their official capacity and shall enjoy inviolability in respect of their official papers and documents.

The ESM, it's property, funding and assets, wherever located and by whomsoever held, shall enjoy immunity from every form of judicial process except to the extent that the ESM expressly waives its immunity for the purpose of any proceedings or by the terms of any contract, including the documentation of the funding instruments.

The property, funding and assets of the ESM shall, wherever located and by whomsoever held, be immune from search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.

The archives of the ESM and all documents belonging to the ESM or held by it, shall be inviolable. The premises of the ESM shall be inviolable.  The official communications of the ESM shall be accorded by each ESM Member and by each state which has recognised the legal status and the privileges and immunities of the ESM, the same treatment as it accords to the official communications of an ESM Member.  To the extent necessary to carry out the activities provided for in this Treaty, all property, funding and assets of the ESM shall be free from restrictions, regulations, controls and moratoria of any nature.

The ESM shall be exempted from any requirement to be authorised or licensed as a credit institution, investment services provider or other authorised licensed or regulated entity under the laws of each ESM Member..." And it's officers, staff, and associates, past and present, are also bound to secrecy: "...The Members or former Members of the Board of Governors and of the Board of Directors and any other persons who work or have worked for or in connection with the ESM shall not disclose information that is subject to professional secrecy. They shall be required, even after their duties have ceased, not to disclose information of the kind covered by the obligation of professional secrecy..." I know that all the politicians are fully aware of these ilegalities , but it's worth impressing it once more, because I can't believe how any nation or state would sign up to this!

The fourth REICH in full action according to the Ribbentrop - Molotov Treaty ... Europe is under the German boot !!!!..

Mario Draghi has defended his Outright Monetary Transactions plan to the Bundestag in the last few minutes.

Draghi promised German MPs that the pledge to buy unlimited quantities of bonds will dispel fears over the euro's future.

The ECB president also began his two-hour appearance in Berlin by repeating his line that politicians, not central bankers, must take the decisive steps to ensure Europe's future

Here's how Draghi defended the OMT, which he insisted did not put taxpayers at risk.

We designed the OMTs exactly to...restore monetary policy transmission in two key ways.

First, it provides for ex ante unlimited interventions in government bond markets, focusing on bonds with a remaining maturity of up to three years. A lot of comments have been made about this commitment. But we have to understand how markets work. Interventions are designed to send a clear signal to investors that their fears about the euro area are baseless.

Second, as a pre-requisite for OMTs, countries must have negotiated with the other euro area governments a European Stability Mechanism (ESM) programme with strict and effective conditionality. This ensures that governments continue to correct economic weaknesses while the ECB is active. The involvement of the IMF, with its unparalleled track record in monitoring adjustment programmes would be an additional safeguard.

The full statement has been uploaded to the ECB website.

Draghi also warned that deflation is a bigger risk than inflation today, which may not convince German lawmakers who fear a return to the 1920s.

The dysfunctional eurozone.....

Uncertainty is increasing and  is unlikely to subside until Germany defines the 'new reality' for the eurozone. The fall in UK inflation re-opens the door for QE ... Watch out for action by other central banks looking for ways to stimulate growth

Eurozone --- The dysfunctional eurozone remains a major concern to all. Recessionary forces are strengthening and no sensible solutions are close to implementation. In Spain, with recession drifting towards depression and unemployment over 25%, investors are heading for the exit, leaving the local banks, funded by the ECB, as the only material buyers of government debt. Voters throughout Europe are exercising their democratic rights and are voting against further austerity. Uncertainty is increasing and is unlikely to subside until Germany defines the 'new reality' for the eurozone – a move to a more federal Europe with no leavers, partial fragmentation or breakup. No one can be certain about the outcome. Forget market manipulation by international banks and hedge funds; Germany is the ultimate insider.  In Greece, having delivered a protest vote, perhaps the Greek voters will shift back on 17/6, allowing the formation of a government that will cooperate with the EU/ECB/IMF

And another warning: the recapitalisation of Greece's banks may now need to be raised to €50bn. The previous estimate, I believe, was €40bn.

On Monday night (feb. 21st. 2012), the eurogroup debated three options to reduce the Greek debt burden without boosting the funds. If the ECB waived its profits on its Greek bonds, experts say €15bn could be wiped off the country's debts. Politicians also discussed reducing eurozone interest rates or investigating whether national central banks could participate in a debt swap, though with costs to taxpayers these two are more controversial. Officials also reopened the tortuous private bondholder talks to see if Greece's private creditors would take a bigger than 50pc haircut on €200bn-worth of bonds..... Meanwhile, Economists have since grown more sanguine about prospects, largely as a result of the "Draghi bazooka" – the European Central Bank's emergency funding scheme for lenders named after ECB chief Mario Draghi. The ECB pumped €489bn into the banking system in December through its three-year funding operation, and is expected to do as much again on February 29. The move is widely considered to have staved off a banking crisis, preventing a catastrophic repeat of the credit crunch of 2008 and 2009. Within the OECD area, there was a wide divergence of performance. Early signs that the US will lead the world back to economic health were evident in the 0.7pc growth the world's largest economy posted in the final quarter. Europe pulled the OECD down, though, with the European Union as a whole contracting by 0.3pc. Overall, the 0.1pc growth was a sharp decline from 0.6pc in the previous thre months and the lowest since the area came out of recession in 2009

Olli thinks is a mild recession, I shudder to think how bad it would have to get for him to call it severe.

The incompetent E>U Commissioner - Olli Rehn, also vice-president of the European Commission, believes the Greek debt swap talks shoud be concluded in "coming days" and urges the country to show stronger political unity. "We are living through a mild recession which can be relatively short under the promise the euro area and the EU will take the necessary decisions on fiscal consolidation and firewalls. Then it can return to growth in the second half of the year." Meanwhile, Spanish unemployment hits 22.9%, and the Greek government, despite having to default on 70% of its sovereign debt, and its €130 billion bailout, still needs another €15 billion to avoid bankruptcy . . . oh, and Greek parents are having to abandon their children to charities because they cannot afford to feed them. If that's what Olli thinks is a mild recession, I shudder to think how bad it would have to get for him to call it severe. So - what's the weather like on Planet Zog at the moment, Olli? The Eurocratic elite view the appalling economic conditions in Greece, Spain, Portugal and some areas of Italy with a completely dismissive attitude, and just pretend these problems don't exist. There is nothing stopping the Spanish and Greeks from learning English and German and relocating throughout Northern Europe if these conditions persist, in which case we will see higher unemployment spread throughout Europe as the population migrates to where the jobs and relative economic prosperity is. By EU law, all countries are under no obligation to employ workers of their own nation first and so will employ whomever they deem the most qualified or in the case of low skilled jobs the hardest workers. This will cause a sharp rise in nationalism and a backlash against the EU in northern European nations such as the UK, Germany, Finland, Sweden, and Denmark as unemployment rises and result in an increasing liklihood that any new EU treaties would not pass on a referendum and possibly put the ESM in jeapardy.
The other possibility is that we will see widespread civil unrest throughout the Southern EU. Unemployment like that being experienced in Spain almost inevitably leads to civil unrest at some point. Zero agreement on Greek bailout yet BUT MEPs have passed a vote that the EU Flag should appear on sports shirts and for the EU Flag to be flown at all European major sporting events. Reminiscent of "Escape to Victory" film where the German propaganda football match took place in a stadium draped with Swastikas ... Wonder if Frau Merkel offered the Chinese the sports shirt and flag production contracts in return for euro support.

During talks in Brussels on Friday night, senior British officials reassured other EU countries that David Cameron would not pick a fight over the issue during the summit today. Without its own institutions at a 'federal' or EU level, the main enforcing role the new pact has is the ECJ role and the Prime Minister is not prepared to be accused of sabotaging the eurozone by blocking it. “The British have made it clear that they would not challenge the treaty before it is signed or before it enters into force,” said a EU negotiator in the talks. "Britain is going to give the eurozone the benefit of the doubt so it can put its house in order." The latest and fourth draft of a "Stability, Coordination and Governance (SCG) Treaty" will be given political agreement today, probably with some amendments before being signed in March. The SCG treaty “empowers the Court of Justice to verify the transposition of the balanced budget rule at national level”. “The current draft gives the court the authority to impose financial sanctions in case a contracting party was found by the court not to have taken the necessary measures to comply with its judgement,” says an EU paper on the text. The main debate is between Poland, an other non-euro members over who can attend fiscal compact summits.

Free as long as ...accept, pay, agree...

EUROPE will speak german - "Free" as long as you: Pay 50 million a day membership fees ; Agree to sanctions if your GDP debt deficit is more than 3 % ; Accept that we shall oversee and approve your budgets from Brussels/ Frankfurt HQ ; Rob you of the right to vote ; Impose further Tobin taxes on your financial transactions ; Impose the will of a European Commision of 27 unelected Kommisars and its Communist President many of whom have been Communists or former Supreme Soviet activists upon you.The EU is an evil institution. It is systematically removing the power of people to have any say in what happens to them. It is turning people into slaves rather than free people. It removes the democratically elected leaders of nations which criticize it, and then it replaces them with their unelected puppets. And all to further the agenda of the financial and political elites who hide in the shadows behind it. SHUT IT DOWN NOW, AND TRY THE LOT OF THEM FOR THEIR CRIMES AGAINST THE PEOPLE. The powers behind the EU (read banking elites) are removing democratically elected leaders of nations and then replacing them with their unelected henchmen (more bankers). And all to further their power mad agenda. You sir, need to get treatment in order to remove your head from your anus. Maybe then, you would be able to remove the crap from your eyes, which would in turn allow you to see what is actually going on. Free trade zone my backside, everything is being controlled by those who have been wrongly given the power to issue our currencies. Standard & Poor's warned France, Germany and 13 other eurozone members before last week's summit they faced a possible downgrade amid worsening economic conditions. But economists said France, which has been under the shadow of a downgrade for months, could fall further and faster than others despite the agreement reached in Europe on rules for budget-tightening. France, the second-biggest economy in the eurozone, was the only AAA country singled out for a possible two-notch credit downgrade because of growth predictions seen as too optimistic, the threat of recession, budget cuts judged to be inadequate and the exposure of its banks to the sovereign debt crisis in Greece, Portugal, Italy and Spain. A Reuters survey of 13 economists found 11 thought France would be downgraded by one of the major ratings agencies within the next three months. That would cause serious difficulties for Nicolas Sarkozy's 2012 re-election battle because he has staked his campaign on his personal ability to lead France out of the economic crisis. A downgrade could push the government to hurriedly introduce a third austerity plan, after two rounds of limited budget cuts and tax rises in recent months. Unlike Britain, France has focused chiefly on tax rises rather than sweeping spending cuts. "If we lose the triple A, I'm dead," the president was recently reported saying in private. A poll this weekend found just over half of French people feared a credit rating downgrade would have a big impact on their daily lives. A one-notch cut would hit the country with extra interest payments of up to €3bn (£2.5bn) a year if the markets react by pushing up bond yields.

" A senior German official" has been talking to Reuters. The unnamed official has said they are "not sure if summit will reach conclusion on using IMF funds in eurozone crisis" and "can't forsee running EFSF and ESM simultaneously". They have also said they are "more pessimistic than last week on overall summit deal". Well, that's reassuring....Meanwhile : The ECB said banks asked for $50.7bn in 84-day dollar funds and $1.602bn in the 1-week tender in the operations, in which they are guaranteed to get all funds they requested. The demand was well above the $10bn median forecast in a Reuters poll of money market traders. Traders attributed banking strains in countries mired in the debt crisis as the main reason for the high amount allocated. Remember that liquidity boost last week? Reuters reports that banks took more than $50bn from the European Central Bank today in its first offering since slashing the cost of borrowing dollars, a sign that some euro zone banks have problems finding dollar funding as the region's debt crisis intensifies.www.ziaruldeinvestigatii.ro

PRAGUE—The Czech Republic's euro-skeptic leadership is taking some new swipes at the neighboring single-currency zone, which is struggling to quell internal dissension about how to deal with its weaker members' debt woes. On Monday, Czech Prime Minister Petr Necas told a group of Czech diplomats: "We agreed to join a [monetary] union, not a transfer union or debt union." He went on to say that an independent currency was critical to the country's economic health. The Czech Republic, along with all the former Eastern Bloc countries now in the European Union, is required to adopt the euro eventually, as a condition of membership. But there is no deadline for joining, and Prague has long made it clear it is in no rush. Other Central European states that once hungered to belong to the euro zone are also backing away from the troubled union, hesitant about tying their fates to those of struggling and more profligate neighbors. Last week, Czech President Vaclav Klaus, speaking at an economic and political forum in Austria, dismissed Czech participation in the euro zone as "not an issue," blamed the euro for the financial crisis now roiling Europe. Mr. Klaus said the euro-zone states were too different to fit into the "straitjacket" of the single currency. He said the euro could only survive by cutting the number of countries using it or by draconian enforcement of common economic policies. He said he preferred the first option. The euro zone would like to have more countries like the Czech Republic. Its outstanding public debt is about 40% of annual gross domestic product, and its annual budget deficits are relatively narrow.

The following is a statement issued by Standard & Poor's announcing the downgrade in US government debt from AAA to AA+

Overview :
• We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

• We have also removed both the short- and long-term ratings from CreditWatch negative.

• The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

• More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.

• The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

Rating Action
On August 5, 2011, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA'. The outlook on the long-term rating is negative. At the same time, Standard & Poor's affirmed its 'A-1+' short-term rating on the US. In addition, Standard & Poor's removed both ratings from CreditWatch, where they were placed on July 14, 2011, with negative implications. The transfer and convertibility (T&C) assessment of the US – our assessment of the likelihood of official interference in the ability of US-based public- and private-sector issuers to secure foreign exchange for debt service – remains 'AAA'.

Germany and France struck a deal early on Thursday morning intended to rescue Greece and the euro from financial ruin. After six hours of talks in Berlin prior to a crucial summit in Brussels, Chancellor Angela Merkel and President Nicolas Sarkozy agreed a compromise on the losses that Greece's private creditors are to take, in a complex new bailout for Athens, German and French government sources said. Jean-Claude Trichet, the president of the European Central Bank, who has been Merkel's most vocal opponent in the wrangling over how to respond to the euro crisis, rushed to Berlin late on Wednesday night to take part in the negotiations. No details of the pact were revealed. But senior officials at the European commission in Brussels disclosed that a compromise was in the air to save Greece and halt contagion by levying a tax on banks in the eurozone – opposed by Berlin and proposed by Paris – as well as a long-term Greek debt rollover stretching for decades, and other measures aimed at reducing Greece's crippling debt level. It appeared that the multi-pronged formula would inexorably lead to Greece being deemed to be in sovereign default, at least temporarily. The last-minute deal, following a telephone dispute between the two leaders on Tuesday, is to be put to the heads of the European commission, council and central bank this morning before an emergency summit of the 17 leaders of single-currency countries. The Brussels summit – the 10th time in 18 months that European leaders will have tried to save the euro and Greece from collapse – is being staged amid grave pessimism that politicians will be able to bury their differences and combine to rescue the single currency. It remained to be seen if the Franco-German compromise would win the support of other leaders and would go far enough to satisfy the financial markets. Amid a febrile mood and an ominous sense that the euro was facing a make-or-break moment, an unusual hush descended on the key European capitals on Wednesday. It was as if leaders and officials had been struck dumb by the weight of the responsibility bearing down on them. The silence was broken only by José Manuel Barroso, the president of the European commission, who chastised the current crop of EU leaders, declaring that "history will judge this generation of leaders harshly" if they refuse to act decisively in the euro's darkest hour. The emergency summit brings together the 17 government leaders of the eurozone, plus the heads of the European Central Bank, the commission, and Christine Lagarde, until recently French finance minister and the new head of the International Monetary Fund. The main challenge is to forge a pact that will reduce Greece's crippling level of debt. The fundamental issue is who pays for that. On Wednesday night, the Germans insisted that Greece's private creditors pick up a large part of the tab, the main dispute with Sarkozy and Trichet. The markets are more than jittery, and Washington is nervous. President Barack Obama intervened on Tuesday by phoning Merkel. "Might this meeting finally bring an end to the farce surrounding the euro area's response to Greece?" said Daiwa Capital Markets. "No chance."

Europe's new banking regulator warned that an escalation in the eurozone crisis could pose "significant" challenges even as it announced only eight banks out of 90 had failed an annual check of their financial strength. A further 16 banks were also deemed to be in a potential danger zone as they only just passed the tests, which looked at the impact on banks' capital cushions of a deterioration in the economy and house prices. However, the tests failed to consider what may happen to banks if a major European country – such as Greece – defaulted on its debt, promoting many analysts to argue the hurdles were set too low. As the results of the tests were announced by the European Banking Authority (EBA), European Union president Herman Van Rompuy called the leaders of the 17 members of the eurozone to a summit next Thursday to thrash out the much anticipated second bailout for Greece. Anxiety about Greece continues to put the eurozone under severe stress and Andrea Enria, chairman of the EBA, described current market conditions as "under severe strain" as he said: "Further deterioration in the sovereign debt crisis might raise serious challenges." All Britain's banks – bailed out Royal Bank of Scotland and Lloyds Banking Group as well as Barclays and HSBC – passed though they suffered a 25% reduction in their capital cushion during the adverse scenarios imposed upon them by the Europe's banking authorities. Only Greek banks suffered a larger fall – of 40% – demonstrating the wide range of exposures of Britain's banks.