A point of view ....however biased ... I hope is wrong

After the coming bankruptcy of the United States, the battle for freedom from the international banksters will begin in earnest. The fact that the founding fathers of the fledgling United States were wise enough to insist in the constitution that the people would need to bear arms, that for me that will be the saviour of us all. For had they not understood as a result of their own fighting with the international banksters what a threat to individual liberty they actually are, they would not have left the populace of the US as prepared as they have in order to to deal with its now throroughly
corrupted government. Now, we have all seen in recent weeks how there is a concerted effort taking place in order to disarm the populace of the US. With the powers that be dressing it up as something that would be good for all Americans, when they themselves send their own children to school under the protection of armed guards.The truth is, the united states government is now nothing more than another branch of Wall Street, with as many bankers being in it as there are in the biggest of banks. Obama is literally surrounded by bankers, they scrutinize his every move. They write his speeches for him, he merely reads them out. Often not understanding much of what he is actually talking about. And of course, it now matters not for which side you cast your vote, as in essence both sides are merely the other side of the same coin. I thank god that many of those who were previously sheep now recognize what I have written here, after having watched how the banksters have received such preferential treatment as they have from our governments over recent years. Soon the US will have been bankrupted by the international banksters and then its corrupted government will turn upon its own people in an attempt to save itself from their wrath. A wrath which will be well deserved, for their crimes against the people are many. So to the founding fathers I say "well done good Sirs, your foresight may well have saved your nation". For without your efforts your people would not have the means in order to defend themselves from tyranny. I wish all honest, hard working people the best of luck in the coming battles for freedom....

America has gone INSANE....gun issues and violence and arguments over ''rights'' to own and keep military assault weapons holding more than 10 clips? ...arguments over universal healthcare (obamacare)and now this fiscal cliff, with a govt being held hostage over rad tea partiers?! obama asking the most wealthy to pay more taxes, to carry their fair share (with majority of rational americans agreeing with him)? and instead you have the rad republicans/tea partiers dissing obama's suggestion of anyone over $250k to pay more taxes and instead wanting that income threshold increased to $750+k. before doing so... like wtf? you can't make this stuff up....any 1st world, democracy respecting country would have no issues with these ''divisive'' themes.but no, not the ''good ole' USA''....you couldn't find better ironic insanity in a novel.
the entire world shakes her head at disbelief....that any american citizen can truly, sanely, honestly believe their |(broken) homeland is still ''the greatest country in the world'' needs their meds increased...and soon....instead America has become a modern version of Gibbons " Rise and fall of the Roman empire.''

It's very possible that Berlin will have to absorb the costs of its bank bailouts. At the height of the financial crisis, the German government supported ailing financial institutions such as Hypo Real Estate, Commerzbank and WestLB with capital injections and guarantees amounting to nearly €180 billion. Large quantities of toxic assets were transferred to so-called "bad banks."

But it's questionable whether these banks will ever be able to completely pay back this money. If that is the case, the federal government will have to waive its claims and permanently absorb the debt.

Schäuble's team foresees the possibility of a similar development with the euro rescue. Indeed, "irrevocable ESM payment defaults" is one of the reasons they list for their contingency plans. Behind the bureaucratic jargon lies the concern that Germany -- despite the government's solemn statements to the contrary -- will have to pay for the euro rescue.

Germany is currently supporting the European Stability Mechanism (ESM) to the tune of at least €190 billion. A portion of these guarantees and loans could actually be lost if Greece's government creditors forgive some of the country's debt. The losses to German public coffers could then easily amount to tens of billions of euros.

Consequently, Finance Ministry officials contend that the government will have to make cutbacks elsewhere in the future. Now, in a scenario that euroskeptics have long been warning about, German Chancellor Angela Merkel's government has finally admitted, for the first time, that to balance out the impact of the monetary crisis it will have to reduce expenditure for pensioners and people taking early retirement.

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.

A United States of Europe would serve no purpose other than the self-agrandisment of politicians.
The issue is for the different Euopean tribes to avoid the pitfalls of fiscal union and its necessary prerequisite the ballot box.
Fiscal union does not work. You only have to look at the post-industrial parts of the UK and US to see that. make believe jobs created out of ever increasing and ulitimately unsustainable government spending do not work. Ballot boxes are fine for issues of social importance, abortion, same sex marriage etc. Anything of importance has been long recognised as being dangerous to be decided by the population at large, be that by Plato, John Adams or James Madison. The USA is a country of individuals who chose to leave their home country. Europe is the complete reverse, so pyschologically very different. Better to have national politicians who act as lightning rods for popular discontent and have supra-national bodies of technocrats pulling the strings. Italy has rarely been run so well....

"The path toward joint liability is far more likely to lead to a deep rift within Europe, because turning the eurozone into a transfer and debt union that can prevent the insolvency of any of its members would require more central power than currently exists in the US."

Who cares what they do in the US? Since when has that been the benchmark by which European leaders are expected to measure themselves? If these are unprecedented times then maybe they require unprecedented responses? This article appears to argue that because the US doesn’t have such powers, then the EU shouldn’t have them either. I repeat, who cares what powers the US does or doesn’t have?

The great thing about mainland Europe, is that “closer integration” is practically meaningless on the ground. In the average European home, I doubt if many people care how many additional layers of governance are added to the top ('Intergalactic president’ anyone?) as long as those layers have a legitimate governing role and as long as the people still feel connected to the system at a local level. In most European countries in which I’ve had the privilege to live, this has very much been the case – (the major exception being, regrettably, my homeland; the UK. Westminster already feels remote and leaves the UK regions feeling pretty disconnected from any meaningful power or influence. Additional layers at the top – like Brussels – just add to the feeling of isolation.)

At the other end of the scale, the problems faced by people in their daily lives are increasingly less respectful of national boundaries – environment, business, social responsibility and resources - hence the enthusiasm for European level co-operation.

As I said, the number of layers of governance are not the issue; peoples feeling of ‘connectedness’ at the bottom is what really matters, and in this respect, it doesn’t matter how many regions, languages, identities and cultures co-exist under the umbrella of a single entity, with specific inter-national / inter-regional responsibilities …. as long as it is felt to be doing a useful job!

European Commission president José Manuel Barroso has rebuked EU leaders for not doing more to develop growth across the EU, following this morning's Tripartite Social Summit.

Barroso told reporters that he was unhappy with progress so far, and demanded a new sense of urgency. He also signalled to Berlin to allow austerity to be relaxed. Easier said than done.

The full statement is online, but, here's the key section: 

Very frankly I am not happy with the progress made so far.That's why I call on the European Council to accelerate the adoption and implementation of many important growth-enhancing measures included in the Growth and Jobs Compact. It is true that we have been making more efforts in terms of fiscal consolidation than on the measures for growth that were already agreed at the European Council level. We need to balance the important efforts made in terms of sound public finances with the right measures to have growth enhancing policies. We also need to move ahead with our structural reform agenda – the country-specific recommendations have to be implemented at national level....Regarding the deadlines of bank supervision in relation to recapitalizing Spanish banks, people forget that there already exists a 100 billion euros credit line that can be used for those. The problem with this line of credit is that it goes through the Spanish state, so it increases the Spanish public debt (but Olli Rehn, in the previous link says this won't increase Spain's structural deficit.)
So, if I understand well, the use of banking supervision in regard to Spanish banks would be if 1) the opened credit line were not enough or 2) Spain's budget situation became very bad and it needed to avoid recapitilizing banks through state budget. I believe the compromise obtained is quite good: if there is no new crisis regarding Spain, there is time to put in place a deep/thorough banking supervision, with closing bank powers etc; if a new crisis emerges in Spain in Q1 2013, overcoming conditions 1 and 2 up there, then it will be possible to say (maybe), "we have put in place the legal framework, let's make something in a hurry for those".
It's a question of having some instrument ready, just in case, even if the goal is not to use the instrument.

A pathetic gesture by a group of Nordic Europhiles intended to boost EU morale in dark times.

Has the committee which runs the Nobel Peace Prize been infiltrated by satirists or opponents keen on discrediting the organisation? Norwegian radio reports this morning, carried by Reuters, suggested that the European Union is to be awarded the prize for supposedly keeping the peace in Europe for the last sixty years. Was this a Nordic spoof? Apparently not.

It is only a few years since President Obama was ludicrously awarded the Nobel peace prize for winning the 2008 election and not being George Bush. Since then Mr Obama has continued the war in Afghanistan, stepped up drone attacks and got America involved in Libya's bloody revolution, suggesting that it is better to hand out baubles after someone has finished their job rather than when they are just getting started or are half way through. Incidentally, the same stricture should have applied to bankers honoured by New Labour when they were still running banks which later blew up.

Giving the EU a peace prize is at best premature, like knighting Sir Fred Goodwin in the middle of the mad boom. We have no idea how the experiment to create an anti-democratic federation will end. Hopefully the answer is very peacefully, but when Greek protesters are wearing Nazi uniforms, and Spanish youth unemployment is running at 50 per cent, a look at history suggests there is always the possibility of a bumpy landing.

Daftest of all is the notion that the EU itself has kept the peace. It was the Allies led by the Americans, the Russians and the British who defeated and disarmed the Germans in 1945. The German people then underwent the most extraordinary reckoning, transforming their country into an essentially pacifist society. The EU had very little to do with it. Throughout that period it was Nato, led by the Americans and British, which kept the peace in Western Europe. The American taxpayer picked up most of the resulting tab, and the British paid a significant part of the bill too.

Under this defence umbrella, the federalists who wanted to reconstruct the notion of Carolingian Empire which dominated 9th century Europe, created what we have come to know and love as the EU. Of course there are advantages in what they constructed – the single market and easier travel, making the South of France and Tuscany more accessible. But they also built an appallingly designed single currency, a horlicks of an agricultural policy and rapacious bureaucracy determined to stifle the nation state in the name of utopian, unachievable continent-wide homogeneity. And at every turn those driving it looked for ways to outwit the democratic will.

It is said that those in charge of the Nobel Peace Prize have made their latest award to distract attention from the eurozone crisis, which only adds a further surreal twist. The last year or so in Europe has been marked by demonstrations and extensive European rioting. There are words one can use to describe what is going on, but "peaceful" isn't one of them.(By Iain Martin)

The ECB is prohibited from directly purchasing bonds from governments

The ECB is prohibited from directly purchasing bonds from governments, and yet purchases on the bond markets are among the instruments at its disposal. It is permitted to make such purchases, but only for reasons of monetary policy, such preventing deflation, for example.

Bond purchases are a treatment with side effects. Falling interest rates on sovereign bonds reduce the cost of government borrowing. The question is whether these side effects are the real motivation behind the ECB decisions, while the arguments surrounding monetary policy are merely a pretext. In that case, the purchases would be little more than government financing in disguise.

Germany's Federal Constitutional Court could very well be of the same opinion. In its recent ruling on the European Stability Mechanism (ESM), the court did not fail to express its skepticism of the bond purchases. The court will address the legality of the bond purchases in upcoming proceedings.

Even then, however, the German court will likely refer the case onwards to the European Court of Justice, which will then be forced to decide whether the central bank is still acting within the bounds of its mandate. Both the ECB and the Bundesbank are already preparing for the legal battle and are reviewing the legal underpinnings of their respective positions.

"The ECB's argument that the bond purchases have to do with monetary policy is a pretext," says Jürgen Stark, the central bank's chief economist until the end of last year. "If the transmission mechanism of monetary policy is indeed disturbed, the ECB must intervene, irrespective of whether or not a country has subjected itself to a bailout program."

For Stark, who resigned in protest over the ECB's first bond-purchasing program, a red line has been crossed once again. "We are talking about the financing of governments here," he says. That, he points out, is in violation of European Union treaties. "The ECB is operating outside its mandate," he concludes....Academics share his assessment. "Common sense tells us that the ECB, with its purchasing program, is doing something completely different from expressing its concern over price stability," says Clemens Fuest, a professor of economics at the University of Oxford. According to Fuest, the ECB, following the example of the International Monetary Fund, is upgrading itself to a European bailout institution, which provides assistance based on certain conditions. It loses its independence as a result, says Fuest, because it can hardly refuse to provide assistance if its conditions are met. "The ECB has overstretched its mandate," Fuest believes.

Even supporters of the bond-purchasing program are critical of Draghi's approach. "The ECB should have continued to cite market failure as justification for its purchases," says Peter Bofinger, a monetary expert at the University of Würzburg in southern Germany and a member of the German Council of Economic Experts which advises the government on economic issues. "Then it could have intervened whenever it felt it was appropriate."

Mr Ayrault made clear the frustrations in the new socialist government over the handling of Greece by eurozone leaders, including the German chancellor, criticizing them for a “political weakness” and “a lack of vision”. I think Merkel is guilty of both of these things. She makes big, definitive statements, then undermines them a few days later. The people of Greece (and of Spain, Ireland and Portugal) deserve to know where they stand. The last Greek election was a farce because it was fought between a party that said it would simply cancel the debt with no consequences and a party that said it would renegotiate the bailout. Surely, if Merkel's "heart bleeds" for the Greeks, she's morally obliged to be straight with the Greek people. These are real people who can't make big life decisions - like whether to stay in Greece, whether to start a business, whether to start a family - because their country is in limbo. And it's in limbo because they don't know how much support they have from Germany. They don't have a clear way to stay in the EZ... they're just being strung along. Maybe it's good for her re-election chances - or her opinion poll numbers - but it's a lousy way to treat people.As things stand, we're still waiting for the Troika's official report into Greece's progress. Ayrault's comments add weight to the theory that Athens will be granted more support in the event that it has missed a significant chunk of its targets. We'll bring you reaction to Ayrault's comments as soon as possible.

Portugal is on the brink of abandoning its controversial plans to hike taxes on workers, in a victory for the huge numbers of people who protested a week ago. Pedro Passos Coelho, the Portuguese prime minister, is due to hold talks with employers and trade unions today to discuss alternative proposals. The public opposition to his plan to effectively slash workers' pay to fund lower taxes for companies appears to have forced Lisbon to change course.

There isn't a banking union, and no chance it will happen

As regards any idea of a Federal Europe is concerned it's interesting to see what's happening in Spain which is apparently in danger of fragmentation......"Hundreds of thousands of Catalans took to the streets of Barcelona  in an unprecedented show of mass support for autonomy from Madrid, blaming Spain’s economic crisis for dragging their wealthy region down.The central government said the crowd was 600,000 strong. Catalan police gave figures as high as 1.5 million...They held up banners and signs saying “No to the Fourth Reich”, “No to Europe”, “Independence Now!” and “Catalonia: the New European State”.  Catalans complain of paying billions of euros more in taxes than they receive back from Madrid, even as their regional government has been forced to fire workers and cut services."  In general people don't like the idea of supporting other populations, even within their own country. Asking nations to do it within a federation simply won't work.  There isn't a banking union, and no chance it will happen. They're talking about common banking regulation and Germany has said 'Nein' to Draghi's suggestion.....Reuters - Schäuble said that, despite the current crisis in the Euro zone, the Euro will ultimately emerge as the common currency of the entire European Union. He said he “respects” Britain’s decision to keep the pound, but insisted that the survival and eventual stabilisation of the Euro will convince non-members to join the currency club. “This may happen more quickly than some people in the British Isles currently believe,” he added....I say: Yet another example of the EU apparatchiks trying to gain control of the UK's financial structure by stealth....(and the other non Euro countries) - but the UK is the big target here.   Come on Great Britain! ... cut the head off this serpent and tell the EU to bugger off ... you'll be doing yourselves a great favor, not to mention the rest of Europe...Does anyone in their right mind think trade with the UK will stop if they leave the EU?   The vast majority of UK exports come here to the USA, Germany second, then France. A vast majority of UK imports come from Germany, USA second, then China, Netherlands, Norway, and France.  50 million quid a day dumped into this black hole the EU, and for what?!  Will Germany stop selling to the UK if they drop out of the EU?
Hell no! it's a major part of their economy.

The EU is the nightmare that just keeps growing

I don't know what's more puke-inducing: (1) hearing Barroso stating that the EU must be turned into a "federation of nation states" in which member countries will surrender more sovereignty to Brussels whilst moving towards full integration; or (2) seeing Barroso's fat, ugly face plastered in numerous DT threads. OMG what a horrible day for the EU!!!.....So how much more crap can the EU citizenry take? ... How many more rights and privileges will be transferred over to Barroso and the other Brussels Eurocrats before the citizens finally revolt? ... How many more hundreds of billions of tax dollars will the Eurocrats waste in their delusional, warped quest towards an ideal Euro-federation? ... How many new bailout funds will be developed? ... How many more ESMs will emerge? ... How many more Draghi speeches promising UNLIMITED FUNDING for the PIIGS will transpire? ... How many more summits between Merkel and the Latin Desperadoes will be required to keep this disaster afloat? ..... The EU is the nightmare that just keeps growing.

 Mircea Halaciuga, Esq.
004.0724.58.1078
PROXEMIS - Managementul Riscurilor

Schauble supports a European government,which clearly means that Merkel does too. Both of them know well that such a government will be dominated by the Germans, know the the Krauts will have the major voice in policy decisions.The notion that voters in E.U. states might not care for sovereignty losses, in effect to Germans seems to be of little concern to them and to to Trichet.  Recently Merkel called for 'More Europe' with sovereignty surrenders, an echo of what a former Chancellor Gerhard Schroeder called for last year a United States Of Europe.To repeat ,any USE would be German dominated so in effect what Merkel , Schauble,Schroeder want is a United States Of Germany,which would give Merkel much more scope for her arrogance and meddling in the internal matters of other states, like telling voters in France to back Sarkozy..Where will she next meddle will she try in in the UK in 2014, imagine the vitriolic reaction, I would love it?  Last year Merkel told David Cameron to accept a financial transactions tax,it is not for any German to tell a British P.M. even one as weak as Cameron what to do.  It is I think inevitable that in the U.K. an E.U. referendum is inevitable despite the lying reasons from Cameron, Clegg, Milliband for not holding one,I want to cast my vote.If eurosceptism continues to grow such a vote might be to leave the E.U.,I have a feeling that in many E.U. members such a result would be welcome....  For starters, the Stability and Growth Pact (SGP), intended to ensure sound fiscal policies in the eurozone, was never correctly implemented. On the contrary, in 2003 and 2004, France, Italy and Germany sought to weaken it. The European commission, the European Central Bank and the small and medium-sized eurozone countries prevented the SGP from being dismantled, but its spirit was gravely compromised.  Moreover, eurozone governance did not include monitoring and surveillance of competitiveness indicators – trends in nominal prices and costs in member states, and countries' external imbalances within the eurozone. (In 2005, long before the crisis, I called, on behalf of the ECB's governing council, for appropriate surveillance of a number of national indicators, including unit labour costs). A third source of weakness is that no crisis-management tools were envisaged at the euro's launch. For much of the world at the time, "benign neglect" was the order of the day, particularly in the advanced economies. Finally, the high correlation between the creditworthiness of a particular country's commercial banks and that of its government creates an additional source of vulnerability, which is particularly damaging in the eurozone.

Potential foreign buyers of Spain's sovereign debt are likely to wait on the sidelines, however, until the efforts to clean up the financial sector start to show that banks are beginning to lend again to the euro zone's fourth-largest economy, said Jordi Fabregat, a finance professor at Esade Business School in Barcelona.  Additional clarity about European Union countries' willingness to help weaker brethren could also draw investors. Those outcomes could take months or years.

The latest measures show "Spain's determination to comply fully with the requirements" to get financial support from the EU, said European Monetary Affairs Commissioner Olli Rehn.

The government hopes to limit its ownership in the bad bank to 50%, with private investors taking the rest. Finance Ministry officials indicated on Friday that they hoped to take a page from the Irish model for cleaning up the banking sector while avoiding its pitfalls. Many analysts say the Irish government paid too much for the banks' bad assets.

Spain wants to focus on the transfer of land and unfinished buildings that account for half of the €180 billion in problematic property assets held by banks. The government still has to specify potential purchase prices.  Bankia, the ailing lender that is a focal point of Spain's banking crisis, stands to shed a significant amount of toxic property. Spain's fourth-largest bank by assets, Bankia on Friday posted one of the largest losses on record for Spain's financial sector. It posted a loss of €4.45 billion after booking loan losses of about €6.57 billion. The bank said an extensive cleanup of its balance sheet conducted since the government took it over in May spawned total charges of about €7.5 billion. The losses were in line with projections disclosed by the company's management after the government's takeover, Bankia Chairman José Ignacio Goirigolzarri said.  Spain's bank bailout fund plans to inject capital immediately into Bankia before the first tranche of EU aid to the Spanish financial sector is made available, which likely will arrive by November. The bridge funding could be between €4 billion and €5 billion.

Spain wil fall under the German boot as well...

Prime Minister Mariano Rajoy has said he would not take a decision on whether to apply for a new aid package, on top of a €100bn loan for the country's banks, until he knew what conditions would be attached. Possible options would be for Spain to apply for a precautionary credit line or to petition the European rescue fund to buy Spanish sovereign bonds to force down yields. European Central Bank President Mario Draghi earlier this month laid out plans. The yield on Spain's benchmark 10-year government bond , dropped on Friday to 6.49 percent, its lowest level since early July, as banks took the bonds for use as collateral to raise funds. Rajoy has slashed public spending and hiked taxes in an effort to deflate one of the euro zone's largest public deficits and convince nervous markets, which have pushed borrowing costs to 14-year highs, he can control the country's finances. Botella was made mayor after the conservatives came to power in December and her predecessor was named to Rajoy's cabinet. She said she blamed the previous Socialist government for leaving the country with a massive public account shortfall and leaving Rajoy no choice but to seek international aid. Source: Reuters

The eurozone is bust.

"Mario Draghi, president of the European Central Bank, will meet the head of Germany's Bundesbank in an effort to gain support for his controversial bond purchase plan"

Well....he never said he had a bond buying programme. That notion is the result of idiotic media and markets reading between the lines. He never 'pledged', swore an oath or promised anything. He merely said the ECB would do everything within its very limited price stability mandate to save the euro. That's it.... My understanding is not that he is going to see the Bundesbank but that he has been summoned. Germany is still awaiting an important court ruling. .... Draghi will be told, that Germany is now ready to pull out, and that, "that", will give the ECB all the freedom it has prayed for. Draghi will also be told that Germany can no longer continue with stealth measures to monetize southern debt and that he either re finds the party hymn-sheet or finds himself with the power to write a whole new one, the one of his own....Expect no extraordinary interventions next week. Expect a new hard line Draghi.... hahahahaha ~!!!!....The eurozone is bust. Why should it be enabled to go on borrowing with no strategy that would lead anyone to believe it could even sustain these rising debts let alone ever repay any of them. Anyone who thinks the industrious north will beaver away for years to keep the drones in the south in the life to which they have grown quite accustomed, needs to go away to quiet room.........If they continue down this path we will have unions in Germany demanding parity with the Greek and Spanish entitlements.....and wage hikes to reflect their 'war effort'. and that would be for starters......There is one thing worse than the people rebelling and putting an end to it. It is the people putting up their hands and saying perverse incentives! Sign me up!

The Eurozone - compared with a YoYo which springs up everytime a summit happens and falls in between.

So how long this time? Economist Wolfgang Münchau argues in today's FT that it could be 20 years before we solve the eurozone crisis: "The consensus among observers had been that the EU had taken an important step in the right direction by agreeing a pathway towards a banking union, but that they did not do enough on crisis resolution. I disagree with that statement. I think it was a very large step – in the wrong direction. The summit made a concrete crisis resolution decision contingent on a future decision, which will be even harder to reach, and thus even more likely to fail". They agreed that there shall be no common bank overcapitalization until a full banking union is established. And the Bundesbank has reminded us that the latter is not possible without a political union. The logical implication is that we won't solve the crisis for the next 20 years. What we know now is that Germany will not agree to mutualised deposit insurance. It cannot even agree to give the European Stability Mechanism a banking licence so that it can leverage itself. If Germany cannot do the minimum necessary now, why should anybody think it can agree a political union? This is less credible than the promise by an alcoholic to give up drinking in five years.

WASHINGTON—The Federal Reserve shocked bankers Thursday by approving a proposal that would force even the smallest lenders to comply with the elaborate international bank-capital standards known as Basel III.

The draft requirements would apply to all 7,307 U.S. banks, according to a proposal circulated by the Fed. Many bankers had expected regulators to exempt some small lenders from the new rules, which are aimed at shoring up the biggest global banks whose troubles fueled the financial crisis.

While the core Basel III rules will apply to all banks, other aspects of the new regime single out the biggest, most complex institutions and transactions.

BRUXELLES - Considering that the ESM currently has no money yet, and that many of the largest proposed contributors are actually those countries most likely to seek bail out, it appears to be a concept failed before its inception.

The only thing currently keeping the Euro afloat is bluff and bluster floating on a cycle of summits. News of the size of the Spanish bail out is being managed and uncovered in tantalising steps like a magician's trick

"JP Morgan is expecting the final package for Spain to rise above €350bn, while RBS says the rescue will "morph" into a full-blown rescue of €370bn to €450bn over time - by far the largest in world history." All this as Italian banks are on life support. "Italian banks tapped the European Central Bank for 272.7 billion euros ($343.1 billion) In May, a 0.6% rise from the previous month, said the Bank of Italy Thursday." All of this is held upright by IOU's whose credibility will come under serious scrutiny if Greece defaults.

Now the party is over.....

Even a default , bank bankruptcies and a return to original currencies would be only a temporary relief for the economies of the countries of Europe. The rot would continue because the monetary system that has been in place since 1971 is unworkable in the long run. By this I mean the issuance by central banks of irredeemable digital "money" as debt allied with fractional reserve banking and a macroeconomic theory that justifies the price fixing of the rental of this "money" which comprises one half of every transaction. For the most part, most countries got what they wanted from the Euro, initially at least. The PIIGS (and Belgium) gained a stronger currency, easy access to the capital markets and an ability to borrow - unchecked - France checked Germany and Germany both moved to the center of Europe and her exporters benefited from a currency devalued by 30-40%. Now the party is over, but there are still now there are no discernable, serious voices in Europe's major democracies that wish to leave the Euro...Indeed, it's difficult to see what the process would be that leads to a Euro unwind. I'm not sure that Frau Merkel has the political mandate to start writing checks to individual countries without further surrender of sovereignty by those countries to the EU/EC, so I don't think that there is much point in brow-beating her over it. .... In short, her hands are tied: the paradox here being that the [German] political system that produces weak coalition governments incapable of making decisions was part of the post WW2 settlement for Germany. What the world needs is to recognize that this "big picture" thinking is delusional. It is all a dream of perpetual prosperity that has turned into a nightmare. We must as soon as practicable introduce competing currencies with sound money, traditionally gold and silver, free banking, removal of legal tender laws and abolition of fractional reserve banking. This can be accompanied by the re-introduction of real bills trading with 91 day maturities into gold or silver on commodities in most urgent demand. This market was closed during WWI and not re-opened because it would have given Germany the opportunity to recover quickly through fluid multi-lateral trade. It provides the wage fund without which we descended into the Great Depression. It would also serve every nation to abandon the so-called free trade agreements and initiate true free trade. All of these measures would ultimately lead to the disintegration of artificial treaty unions like the EU and the return of truly sovereign nations. The present political class would also be swept away in the hurricane of real change.

S&P delivers it's verdict on the European Central Bank's long-term refinancing operation

Standard & Poor's Ratings Services today lowered the 'AAA' long-term issuer credit rating on the European Financial Stability Facility (EFSF) to 'AA+' from 'AAA' and affirmed the short-term issuer credit rating at 'A-1+'. We removed the ratings from CreditWatch, where they had been placed with negative implications on Dec. 6, 2011. The outlook is developing. When we announced the placement of the ratings on the EFSF on CreditWatch on Dec. 6, 2011, we said that, depending on the outcome of our review of the ratings of the EFSF's guarantor member sovereigns, we would likely align the issue and issuer credit ratings on the EFSF with those of the lowest issuer rating we assigned to the EFSF members we rated 'AAA' (as of Dec. 6, 2011), unless we saw that sufficient credit enhancements were in place to maintain the EFSF rating at 'AAA' (see "European Financial Stability Facility Long-Term 'AAA' Rating Placed On CreditWatch Negative," published Dec. 6, 2011). On Jan. 13, 2012, we announced rating actions on 16 members of the European Economic and Monetary Union (EMU or eurozone; see "Standard & Poor's Takes Various Rating Actions On 16 Eurozone Sovereign Governments," Jan. 13, 2012). We lowered to 'AA+' the long-term ratings on two of the EFSF's previously 'AAA' rated guarantor members, France and Austria. The outlook on the long-term ratings on France and Austria is negative, indicating that we believe that there is at least a one-in-three chance that we will lower the ratings again in 2012 or 2013. We affirmed the ratings on the other 'AAA' rated EFSF members: Finland, Germany, Luxembourg, and The Netherlands. Germany and Finland, the remaining AAA-rated countries in the single currency, are expected to come under pressure to increase their commitments to bolster the EFSF's funds to prevent a further downgrade and the likelihood that lenders will demand higher interest costs. The blow to the EFSF came as bankers poured cold water on hopes for an early deal between Greece and its creditors after they accused Athens of making "completely unreasonable" demands for debt payment cuts. Charles Dallara, head of the Institute of International Finance which represents Greece's private creditors, said talks had yet to reach agreement on any aspect of a deal following demands from Greek negotiators for ultra-low interest rates on its outstanding debts.

The European Central Bank announced a shakeup in responsibilities on its board yesterday

EU, IMF and ECB inspectors are expected in Athens mid-January to flash out the new bailout plan agreed in principle by EU leaders in October to avoid a Greek default and a euro exit. Opinion polls show Greek voters want the government to do all it takes to stay in the euro even if they disagree with austerity reforms. Asked if the government would have to take extra austerity measures to make up for last year's fiscal slippages, Mr Kapsis said: "We will see. There could be a need for extra measures." The talks with bankers on a debt swap deal that is a key aspect of the rescue plan are particularly difficult. "The next three to fourth months are the most crucial and that is the reason this government exists," Mr Kapsis said. Prime Minister Lucas Papademos said in a New Year's Eve address over the weekend that Greece must stick to reforms to stay in the euro.if Greece had left the Euro months ago they would already be on the road to recovery. Instead they are receiving special drawing rights SDR's the New World Order currency from the IMF and getting deeper and deeper in trouble. Just go bankrupt Greece and save what you got left, democracy, people will win this battle if you don't, we are all doomed to having chips under our skin and a world currency.

The European Central Bank announced a shakeup in responsibilities on its board yesterday, as two new members arrived to replace Jürgen Stark, the German member who resigned amid controversy about the bank's role in the spiraling sovereign debt crisis, and Lorenzo Bini-Smaghi of Italy. Peter Praet, a Belgian technocrat who was already a member of the ECB governing council, has been handed the role of chief economist previously held by the hawkish Axel Weber, who left last year after expressing skepticism about the ECB's bond-buying program, which has helped to drive down Spanish and Italian borrowing costs. Praet was given the job ahead of ECB newcomers Jörg Asmussen, from Germany, and Frenchman Bernard Coeure. That decision avoids a potential controversy about whether a German or French number-cruncher should have the role, at a time when Paris and Berlin have different views about the ECB's responsibilities in tackling the sovereign debt crisis. French president Nicolas Sarkozy has made clear he would like to see the ECB acting as a lender of last resort, a view shared by Britain; but German chancellor Angela Merkel has repeatedly rejected the idea, fearful it could unleash inflation.

Top of the agenda

Talks in Brussels finally produced a deal on a tighter fiscal union (and rules) for eurozone members - just not the one the markets were hoping for. Having failed to secure agreement among all 27 leaders to change the European Union treaty the leaders have instead drawn up a new "intergovernmental treaty". The failure to secure the backing of the UK and others, only increases uncertainty. Without agreement among all 27 countries, it remains unclear how the new fiscal rules will be enforced. The European Commission cannot legally have a formal role in any agreement outside the EU treaties. "We would have preferred a reform of the treaties among 27. That wasn't possible given the position of our British friends. And so it will be through an intergovernmental treaty of 17, but open to others," said French president Nicolas Sarkozy this morning. Having got a few hours sleep the European leaders reconvene later today to sign an accession treaty today to bring Croatia into the EU. Following that ceremony the new "17+ eurogroup" are expected to meet. Will EU officials attend the meeting?