Bank of America’s monthly survey of investors showed a dramatic rise in confidence in August, with a net 72pc expecting growth to accelerate over the next year. It is the highest in reading since 2009. Almost everybody expects bond yields to rise as deflation fears evaporate, with just 3pc still worried about the risk of an economic relapse. Managers have slashed their bond allocation to a 28-month low.

The survey is watched by veterans as a "contrarian indicator", tracking herd mentality at key moments. Michael Hartnett, the bank’s investment strategist, advised clients to take the opposite trade and buy US Treasury bonds.

The exuberant mood comes as margin debt on Wall Street hovers near $377bn, just below its all-time high and well above peaks before the dotcom crash and the Lehman crisis. Since the first of the year, retail investors (unsophisticated sheep) have shoveled a bit south of 100B into stock mutual funds. You can always rely on the middle class investor to identify the proper time to exit equities.

This new stampede of sheep is contrasted with the sheep pulling out a little south of 200B in first six months of last year.

Sell Low, Buy High - the operative slogan of those late to party, drinking the dregs from the punch bowl. A likely apocryphal story about Bernard Baruch, a legendary Wall Street trader, expressed that he knew that it was time to get out of the market when his shoe shine boy offered him hot stock tips.

Professional investors and hedge fund managers are holding unprecedented levels of cash (30-40%) and are awaiting the sheep's perfect timing of the market top. They know better than to try and game central banks. There is no underlying strength in just about any economy - just central bank roulette.

• You may ask yourself, how do I work this?
• You may ask yourself, where is that large automobile?
• You may tell yourself, this is not my beautiful house
• You may tell yourself, this is not my beautiful wife
•  
• Letting the days go by, let the water hold me down
• Letting the days go by, water flowing underground
• Into the blue again, after the money's gone
• Once in a lifetime, water flowing underground
•  
• Same as it ever was, same as it ever was,
• same as it ever was, same as it ever was

The five countries that implemented Merkel's anti-crisis recipes and cut spending massively in areas such as health and education, have been in or close to recession since 2008. Unemployment tops 27pc n Spain and Greece.   Their leaders, however, disagree with the public view. Confident that Merkel will tone down her budget cutting mantra and accept more burden-sharing within the euro zone, they are positioning themselves as close allies of Europe's main paymaster.  "I think we will see a different Mrs. Merkel after the elections," said Cypriot President Nicos Anastasiades, echoing a view shared by most of his fellow southern European leaders.  In Greece, where crunch time for plugging a budget gap with a third bailout of the country starts at the end of September, hopes are high that debt issues can finally be sorted out after the German election, maybe through a new debt write-off.  In Italy and Portugal, policymakers believe Merkel will accept a shift from the emphasis on unpopular austerity to a more balanced model for managing the economic crisis if she wins.  In Spain, where banks were rescued with 42 billion euros of European money, expectations are that the chancellor will lean towards common euro zone debt issuance and accept a full-fledged banking union, unlocking credit in the recession-hit nation.  While market turmoil has eased in the euro zone and last year's massive capital outflows from southern Europe to safe-haven Germany have started to reverse, the underlying problems are far from resolved.  The correction pace of imbalances in the European Central Bank's Target 2 cross-border payments system, a key indicator of financial stress within the single currency zone used by ECB President Mario Draghi to monitor monetary policy, remains slow. Continued German support will be key to keep the fever down. Senior government sources in southern European countries insist Merkel has signaled flexibility on these issues in recent private talks. But she has given no public indication of such a U-turn and many in Berlin caution it is highly unlikely to happen, warning against wishful thinking.

ECB is one of the very few that do not publish minutes of its meetings. Current rules mean they are published 30 years after rate decisions are taken. Other banks, such as the Bank of England or the US Federal Reserve, publish their minutes with a time lag of some weeks. On the eurozone, Draghi suggested that economic indicators showed that it had come through the worst of the crisis. He also indicated that the low interest rate is to be kept in place for the foreseeable future using "forward guidance" language, first introduced at a press conference last month. The move is a bid to signal to markets that the ECB will keep rates slow enough to spur economic growth, amid tentative signs of economic recovery. Asked to compare the situation to this time last year, when the eurozone was in the throes of the crisis, Draghi said: "All in all the picture seems to be better from all angles than it was a year ago." Draghi said that looking beyond the game-changing promise he made a year ago to do "whatever it takes" to save the euro, single currency states had made "significant" progress in policy implementation over the 12 months. He singled out reform efforts undertaken in bail out countries Greece, Ireland and Portugal and noted the labour market reforms in Spain.

"Look at the results," he said. "If you look at structural improvements, all across the board I don't think you can find a country which hasn't improved."

"Look at current account surpluses - the actual figures are quite impressive ... you have strong increases in exports, not just in Germany but in Spain and Italy."

Silvio Berlusconi, Italy's longest-serving postwar prime minister, has railed against the country's "uncontrollable and uncontrolled" judiciary and accused them of persecuting him with a "fury that has no equal anywhere in the civilized world" hours after being handed his first definitive criminal conviction in more than two decades of legal battles. In a defiant video message broadcast on one of his own private television channels, the billionaire centre-right leader denied having committed the tax fraud of which he was convicted and for which he was sentenced to a four-year jail term by Italy's supreme court. "No false invoice exists in the history of [Berlusconi's television empire] Mediaset," he said. In the wake of the landmark verdict, which threatened to plunge the eurozone's third-largest economy back into political instability, he said: "In return for all this, in return for the commitment that I have lavished on my country in the course of almost 20 years, now almost at the end of my working life, I receive as a reward accusations and a sentence founded on absolutely nothing which deprives me of my personal freedom and my political rights."  As Italian politics reeled from the decision of the five judges at the court of cassation, Giorgio Napolitano, the 88-year-old president, and Enrico Letta, the centre-left prime minister in charge of a fragile coalition with Berlusconi's Freedom People (PdL) party, pleaded for calm to prevail. After more than seven hours of closed-door deliberations, the judges dismissed Berlusconi's final appeal against his convictions for the fraudulent purchase of broadcasting rights by Mediaset, ordering him to serve a jail sentence that had already been cut to one year according to a 2006 amnesty. Owing to Berlusconi's age – he will be 77 in September – it will not be served in prison but through house arrest or community service. The only element of the verdict which prevented it from being an unmitigated disaster for the three-times prime minister was the judges' decision to order another court to determine the length of his ban from public office. Prosecutors this week had argued that the ban, which their lower court equivalents had fixed at five years, should be cut to three.  Had the ban been upheld, it would have stymied Berlusconi's immediate political ambitions. As it is, he will be able to continue as a senator in Italy's upper house of parliament and leader of his party – although he made clear in his video message on Thursday night that that party would not be the PdL but a revamped Forza Italia, the party named after a football chant with which he entered politics in 1994. Even as Letta appealed in a statement for "a climate of serenity", the huge pressure that the conviction will place on his government was starting to show. Government under secretary Michaela Biancofiore, a member of the PdL, was reported to have said she would be resigning in protest at the verdict. Luca d'Alessandro, a PdL MP and secretary of the lower house of parliament's justice commission, said: "This country was famous for being the cradle of the law. Today it has become its tomb run by a corporation of grave diggers in gowns who have carried out the perfect crime. Honour and solidarity with Silvio Berlusconi, who is certainly more innocent and clean than those who unjustly convicted him." But the verdict was thought likely to prompt equally strong reactions within Letta's centre-left Democratic Party (PD), many of whose members were already squeamish about joining forces with their political bête noire and may draw the line at continuing in a coalition with a convicted criminal. Immediately after the verdict, Nichi Vendola, head of the opposition Left Ecology Freedom party, said it was "not possible" for the coalition to continue. "Faced with this conviction I think it is necessary to bear the consequences: it is not possible to imagine that the PD can remain an ally of Silvio Berlusconi's party. It is not possible to imagine that Silvio Berlusconi can remain at the centre of the political scene. I think that big changes are necessary to give a moral response to the country." Beppe Grillo, the figurehead of the anti-establishment Five Star Movement, declared on his blog: "The verdict is like the fall of the Berlin wall in 1989." Berlusconi's lawyers were led by Franco Coppi, a lawyer specialised in cassation appeals who successfully defended former prime minister Giulio Andreotti against charges of mafia ties. After the verdict they issued a statement saying they were evaluating all their options "even at the European level so that this unjust sentence is radically changed". Until Thursday night not a single one of Berlusconi's many court cases had ended in his definitive conviction. Several lower grade convictions were either thrown out, overturned on appeal or timed out owing to their statute of limitations. On Wednesday, his defence lawyers had argued that he should be acquitted because his political commitments meant he was not actively involved in the company. They also argued that the crime of which he was accused was not technically a penal offence. But prosecutors, supporting the verdicts of two lower courts which convicted Berlusconi in October last year and again in May, said Berlusconi's control over Mediaset was "ongoing" at the time, and he was "the mind" behind the system of tax fraud. Berlusconi was not present at the court but spent the day at his Rome residence, Palazzo Grazioli, reportedly with two of his children, his closest advisers, lawyers and girlfriend Francesca Pascale. It is not only with the court decision on his public office ban that his legal battles will continue. In June he was given a lower-grade conviction and sentenced to seven years in jail and a lifetime ban on public office for paying for sex with an underage prostitute and abusing his office to cover it up. He is appealing against the verdict – and, even if that appeal fails, he will be allowed a second.He is also appealing against a conviction for publishing the transcript of a leaked wiretap in his family newspaper, Il Giornale, for which he was ordered to serve a one-year jail sentence. In October, meanwhile, a court is due to rule on whether he should be tried for allegedly bribing a senator to switch political sides. He denies the allegations.

Greece's coalition leaders are due to sit down in two hours time to discuss the way forward, following the row over state broadcaster ERT's closure. The Junior partners, Evangelos Venizelos of Pasok and Fotis Kouvelis of Democratic Left, have already held a meeting to agree a joint position ahead of their crunch talks with PM Antonis Samaras. Could the government collapse? Mujtaba Rahman, European director at Eurasia Group, reckons not.Here's highlights from Rahman's latest analyst note: Importantly, neither PASOK nor Democratic Left have threatened to leave the government. Instead, they have been looking to extract certain concessions. Venizelos wants a cabinet reshuffle to actually increase his party's participation and visibility in the government (his original strategy was to shadow the government in case things went wrong; however, as the program has performed Samaras has been swallowing all of the credit). In terms of specifics, the current speculation is that PASOK is targeting the ministry of administrative reform as well as some deputy minister positions in the health and labour ministries. Likewise Kouvelis does not object to a reshuffle. Venizelos's and Kouvelis also keep repeating their desire for a renewal of the government's agreement and better "coordination of the government". In the aggregate, these statements should be interpreted as a warning to Samaras that he cannot decide on big policy issues without more active involvement and agreement of the coalition heads. Of course, the latest opinion polls show that Pasok and Democratic Left would be big losers if an election was held soon. Both are currently polling around the 4-7% mark, compared to New Democracy at 29-30%....Rahman adds: Samaras personally comes in around 43% compared to Syriza's Tsipras at 37%, depending upon the poll). And government collapse would almost certainly lead to an internal leadership challenge within PASOK.

Another global economic crash?

"Was jittery Thursday a foretaste of another global economic crash?

The sharp slide in share prices was either a blip in the road to recovery or a sign that the unwinding of quantitative easing will lead to disaster. Our writers argue it out" - the Telegraph on Sunday. The banking system, sovereign debt, equity markets are all FUBAR and bare no relation to the underlining fundamentals from where price discovery should come from. That is the problem and much of it has to do with ZIRP/QE, Draghi mouthing off, which although stops any immediate crash it is still just blowing bubbles and 'can kicking' where at any point to try to unwind from that position still leaves a gap between there and real growth coming back to stop the shortfall when ZIRP/QE Draghi on a buying spree taper away from their positions. Five years on from the WFC they are no nearer to fixing the problem, or the disaster of the euro. My guess is that eventually in the coming years governments will choose from the inflation poison chalice, rather than the default poison chalice, they nearly always do. Fiat money will become very devalued, and to my mind they have already set off on this path with orchestrated currency wars, and the printing presses a rolling If another big financial crash occurs I wonder what all those experts in the astrology like subject known has economics will be citing has the cause, let alone the required solutions. Not that the accountants, politicians, top business people, and goodness knows who else have demonstrated any more competence, except to ensure that the people that are made to pay for the disaster are those least responsible for it, and least able to afford to pay. Am I the only one who is coming to the conclusion that much of the human world is being run by self serving ego maniacs?

But more importantly the facts behind Thursdays ''market blip'' relates to leverage and debt. After the 2008 crash we have failed to de-leverage, the losses have been largely hidden by accounting tricks or taken over by the taxpayer. Instead of de-leveraging and re-capitalizing the banks QE and ZIRP have resulted in a massive leveraged derivative bubble now waiting to burst.

Thursdays blip might be the realization that.

1. That despite 5 years of recession endless money printing we are still seeing no real growth, outside of that provided via stimulus then it may be that these policies of QE and ZIRP are in fact failed policies, when the markets realize this investors will start to control interest rates not Bernanke and other central bankers.

2. Despite Abe's shock and awe policies Japanese rates doubled on Wednesday, Thursday. If markets suspect (and I think they do) that Japanese monetary policies are failing as indicated by rising rates, then we maybe witnessing the beginning of the end for Japan and the rest of the world! why?

3. When investors realize QE and ZIRP have failed we will see the 1.5 quadrillion dollar derivative market melt down and it wont be an ordinary unwinding. Chaos is not a word that will describe the result as counter parties evaporate and the world banking system collapses....

Funny how words change their meaning. I remember watching a Fred Astaire Ginger Rogers film on Channel 4 one Saturday afternoon called 'The Gay Divorce'. Of course the word 'Gay' has changed completely since the 1930s and it was all very comic.

In contemporary mainstream economics the word 'recovery' seems also to have undergone a transmutation. Once upon a time it meant falling unemployment, increasing investment, rising wages and prices, all based upon official statistics you could actually believe.

Today recovery means asset price bubbles, wage repression, pension repression, grinding down the poor the sick and the old, stubborn levels of unemployment/underemployment, a massive liquidity trap, counterfeit statistics from the Bureau of Labor Statistics, and the Office Of National Statistics - but hey, stock markets are booming, companies are sitting on piles of cash, share buybacks are all the rage, the financial elite is raking it in again, the tax avoidance industry has never been healthier or more ubiquitous. Yes this is some Central Bank engineered 'recovery'.

What really amazes me is the degree to which financial commentators are taken in by such blatantly crude propaganda. Which reminds me of the old saying: ‘You cannot hope to bribe or twist (thank God!) the British journalist. But, seeing what the man will do un-bribed, there's no occasion to.'Of course there are exceptions, but the majority of commentators and opinion formers seem satisfied to simply spew out the 'official' Pollyanna rubbish. The reason for this is that they actually believe it themselves.

GERMANY–Deutsche Bank said Monday it will raise €2.8 billion ($3.65 billion) in fresh capital in a dramatic about-face for the bank, which has repeatedly said it won't turn to shareholders for help boosting its capital cushion. The bank, Europe's second-largest by assets, has long faced doubts from investors and analysts about whether it has enough capital to absorb potential future losses and to meet increasingly stringent regulatory requirements. On paper, Deutsche Bank had one of the thinnest capital ratios of large European banks.  The Basel rules don't fully kick in until 2019, but banks across Europe are under pressure from regulators and investors to comply with the rules well before then. Few investors or analysts expected the bank to meet the targets in 2013.  The size of Deutsche Bank's capital hike is relatively modest compared with what some bankers, analysts and investors think it needs. Analysts previously estimated the bank needs up to €10 billion. Deutsche Bank executives have been meeting in recent weeks with senior investment bankers to sound them out about how much capital the bank would need to raise to placate investors, according to people who participated in the meetings. The bankers' response: Deutsche Bank should come up with at least €6 billion and possibly as much as €10 billion to put the capital concerns behind it, these people said. The bank's change-of-heart apparently stemmed from executives' frustration with the lack of reaction among investors to the bank's strategic changes, according to industry officials. The bank's management felt they could raise a token amount to alleviate market concerns without destroying credibility, these people said. "This is a blatant U-turn," said a senior investment banker who was involved in the talks. "It's a real climb-down for them."  The timing of the capital increase could raise questions because earlier this year, with Deutsche Bank's stock trading more than 15% above its current levels, executives insisted they had no plans to raise new capital. If they had proceeded with the share sale at the time, they could have raised more capital by selling a fewer number of shares, a preferable outcome for the bank's existing shareholders. While Deutsche Bank didn't disclose the terms of the share sale, industry officials said the deal's structure would likely involve a small number of big institutional money managers picking up the shares at a small discount to the stock's current trading price. Because the share sale is relatively small, Deutsche Bank doesn't need to go through the process of offering all existing shareholders the right to participate, a potentially costly and complex process that Deutsche executives were eager to avoid....NOW, WE ALL KNOW THAT THE fed PUMPED OVER 25 TRILLION DOLLARS IN THIS BANK IN THE PAST TWO YEARS !!! Show us the money Mrs. Merkel !!!!

Capital Economics: eurozone crisis wil flare up again this year -

Here's some analysis from Julian Jessop of Capital Economics on today's minutes from the Federal Reserve Open Market Committee meeting last month. Among other points, he predicts more alarm in the eurozone this year.The revelation (although hardly new) in the latest FOMC minutes that some members would favour at least a tapering of QE by the end of the year has refocused attention on the role that Fed buying has been playing in keeping Treasury yields low. (See US section below.)The conventional wisdom appears to be that 10-year Treasury yields are only likely to remain below 2% if the US central bank maintains its current pace of buying. In fact, the launches of successive bouts of quantitative easing have seen yields rise, rather than fall. Instead, the prospects for Treasuries depend mainly on the outlooks for short-term interest rates, inflation expectations, safe haven demand and other overseas buying, which together should keep yields low for at least another year.At first sight, it might seem obvious that the Fed’s purchases of government bonds under QE3 have been a key factor keeping their yields low, and hence that any scaling back of these purchases would inevitably see yields surge. But the reality is more complicated. Indeed, Treasury yields actually rose during most of the period when the Fed was buying government bonds during QE1 and QE2, and are higher now than when the Fed launched QE3.There are several ways in which large-scale central bank purchases of government bonds can put upward pressure on their yields. One is by raising long-term expectations for inflation. Another is by improving the prospects for the real economy and increasing the appetite for risk, thus encouraging investors to buy assets such as equities or industrial commodities rather than safe-haven government bonds. (Correspondingly, these riskier assets might be the major casualties if the Fed stops buying Treasuries, rather than Treasuries themselves.) To the extent that QE succeeds in restoring confidence, it might lead investors to revise up their expectations for the average level of short-term interest rates over the life of the bond too. The upshot is that we would not necessarily expect a sustained rise in Treasury yields even if the Fed, perhaps mindful of the implications for its balance sheet and eventual exit strategy, does scale back its purchases later in the year. These concerns may matter less for “conventional” monetary policy and high unemployment would still be likely to keep official interest rates on hold near zero. There is also now more room for inflation expectations to drop again, especially if commodity prices continue to fall.Finally, other investors might simply step up to take the Fed’s place. In particular, we expect a renewed escalation of the euro-zone crisis in the second half of the year to boost safe haven demand for Treasuries. And at the margin, the fact that the Bank of Japan will now be buying a lot more JGBs may encourage (or even force) some Japanese institutions to increase their purchases of Treasuries instead.

WoWWWW....I can't believe this ...

Largest German bank’s Singapore unit helped birth companies and trusts in tax havens. Germany’s largest financial institution, Deutsche Bank, helped its customers maintain more than 300 secretive offshore companies and trusts through its Singapore branch, an investigation by German newspaper Sueddeutsche Zeitung, German public broadcaster NDR and the International Consortium of Investigative Journalists has found. More than 100 customer consultants at Deutsche Bank Singapore helped create or manage 309 offshore entities for its customers in the British Virgin Islands and other tax havens, according to secret records obtained by the news organizations. Besides Deutsche Bank, the article on the same topic at the Sueddeutsche also mentions UBS and JP Morgan and "virtually all big banks" as being implicated in the offshore scandal.  I know it's kind of stating the obvious, but these offshore money bunkers are only possible with the help of a) the big banks and b) the big four accounting firms - as clearly stated in "the tax free tour", an excellent dutch documentary on this subject. The biggest part of it is in english. The outrage I see by politicians is kind of funny - as if we only find this out now. Because of course, this entire system has been allowed by our leaders - and us. In other news, there now seem to be 400 Belgians on the list as opposed to a hundred yesterday. BUt we have already been assured that there are no politicians or leaders of BEL20 companies involved, and neither are the very wealthy families in there. Hmmmm...

Bernanke: RELAX!! With $85 Billion being pumped into EU Stocks and Bundesbank...All is WELL!

Eurozone unemployment hits new high

Eurozone unemployment data is in and makes predictably grim reading.

Joblessness in the currency bloc hit an all-time high of 12% in February, compared with an original estimate of 11.9% for January, which has since been revised up to 12%.

That is a big jump from this time last year, when the unemployment rate was 10.9%.

As usual, there were huge discrepancies between the member states, with the lowest unemployment rates were recorded in Austria at 4.8% and Germany at 5.4%. The highest rate was in Greece, which recorded a rate of 26.4% (although figures are from December 2012), and Spain, where the rate is 26.3%.

Unemployment in the European Union Source: Eurostat

Codes as follows... Belgium (BE), Bulgaria (BG), the Czech Republic (CZ), Denmark (DK), Germany (DE), Estonia (EE), Ireland (IE), Greece (EL), Spain (ES), France (FR), Italy (IT), Cyprus (CY), Latvia (LV), Lithuania (LT), Luxembourg (LU), Hungary (HU), Malta (MT), the Netherlands (NL), Austria (AT), Poland (PL), Portugal (PT), Romania (RO), Slovenia (SI), Slovakia (SK), Finland (FI), Sweden (SE) and the United Kingdom (UK).

Where is the money going? It is being transferred onto the balance sheets of bankrupt banks from the taxpayers. Banks then use it hike their salaries repair their pension funds. Then the attempt to repair and cover up for their disastrous lending practices.

They starve the real economy of working capital. It was decided in the European looney union that every banks was too big to fail. Now they have decided to let whole countries go to the wall because their banking policies were another disaster. Hans Werner Sinn suddenly copped that the obligations of the top 6 debtor countries is over 8.3 trillion. The gloves are off and now they are in confiscatory mode not just hitting bond holders but large depositors who are going to have to flee very fast if they are to escape with their wealth.Make you laugh when you see Osborne, in the middle of all this, trying to buy the next election taking people for complete fools by handing them loans they would otherwise be able to afford. People should consider that act of treachery as tantamount to being handed a long length of rope with which to hang themselves and their families. Forget Osborne and his ilk, keep saving and you will get them for the price of your savings in due course.

Nigel Farage tonight-Get your money out of europe-BANK RUN, NOW !!!!

Nigel Farage tonight-Get your money out of europe-BANK RUN

“I must say the thing I find the shabbiest about it is there insisting that it doesn’t need to be subjected to a vote in the Cypriot Parliament. I very much hope that the members of the Cypriot Parliament say, ‘To hell with that, we demand another vote.’

It’s funny isn’t it, the Germans are going to have a vote on it in their Parliament, but the Cypriots are being told that they shouldn’t have a vote on it. If that’s not moving into a German dominated Europe, I don’t know what is.

I said last week that I felt any savers who had money in other eurozone banks, particularly in the Southern eurozone countries, really ought to think seriously about getting their money out. Well, this afternoon something far more serious has happened. The Dutch Finance Minister, about an hour and a half ago, said that he saw the Cyprus eurozone bailout as now being a template of how they intend to act in the future. So the burden of all of this will now fall on the private sector, and not on the public sector.

Frankly, what that now says is that anybody that has money, or anybody that has big money sitting in a Spanish or an Italian bank, and particularly if you happen to be a financial officer for a company, it would be criminally negligent of you to now leave your money or a company’s money in a Spanish or an Italian bank.

I think what they’ve done today is to spark a major run on those banks. I see that some of the banks stocks have fallen 6% this afternoon, and I think in their desperation to keep the eurozone propped-up, I really believe that long-term they have made an absolutely fatal error. They have now crossed the bounds into one of complete criminality, and from this their reputations will never, ever recover.”

Angela Merkel said last year, if The Euro collapsed "there might not be peace in Europe in sixty years"....Sounds like a threat...The Germans are sending out a clear message. Get your finances in order if you want to be treated as a Eurozone member. There can be no sound money unless and until all the member states of the Eurozone play by German rules. Cyprus are disposable when it comes to German exports.

Strange how they didn't send out that message so clearly fifteen years ago when Kohl rejected economic advice and insisted that Italy must be allowed to join the euro on political grounds.

"Operation Self-Deceit: New Documents Shine Light on Euro Birth Defects  Newly revealed German government documents reveal that many in Helmut Kohl's Chancellery had deep doubts about a European common currency when it was introduced in 1998. First and foremost, experts pointed to Italy as being the euro's weak link." Well....

The eu allowed countries to break the entry conditions of joining the EZ. They then allowed countires to break the ficsal stability pact that was suppoed to hold everyone together. Germany were the first to break the deal, so you cant blame the med countries from realising that the rules do not apply.

I do not support the incompetatance theory. The EU knew exactly what it was doing. By providing enough rope the smaller weaker countries have been allowed to hang themselves. If there was any real motive to have all the EZ countries performing the EU would and should have stepped in long before the situation became serious. They had the law in the terms of the treaties to force the med countries to comply, but did not take any action. They are complicit in problem that these countries face and are now taking advantage to destroy competition and asset strip where they can.
Meanwhile : The central bank in Cyprus imposed a €100 a day withdrawal limit at cash machines for all local banks on Sunday to avert a run on lenders, as the island's leaders meet its international lenders for last-ditch talks to avert a financial meltdown.

Another euro-pegged government defending an overvalued exchange rate bites the dust, a reminder that the underlying economic and social disaster across the Europe’s Arc of Depression is still getting worse. Bulgarian prime minister Boiko Borisov resigned this morning after days of mass protests against austerity across the country. “I will not participate in a government under which police are beating people. Every drop of blood is a shame for us,” he said. “Our power was handed to us by the people, today we are handing it back to them.” This follows the defenestration of the free-market finance minister earlier this week. Bulgaria is of course a complicated country, still grappling with the legacy of communist rule and a police state. It is a stronghold of organised crime, offspring of the old security services. It went through near hyper-inflation in the 1990s and does not want to flirt with that again. The immediate protests are as much about Mafia control and soaring electricity prices as about spending cuts. But Bulgaria is also in much the same position as Greece, Portugal, Spain, and Italy, trapped in the ante-chamber of monetary union with a misaligned currency, forced to undertake an internal devaluation....

Britain's 15 years of consecutive growth were ignited by the leaving of the ERM straight-jacket that Thatcher signed us up to.

Germany has three choices:

1. It coughs up to pay the debts of the poorer countries.

2. It allows the poorer countries to leave the Euro.

3. It deals with the consequences of a wave of civil unrest and possibly terrorism/revolution across Europe.

They, along with France, made this bed - now its time that they lay in it.

A deepening recession in the 17-nation eurozone sent shares lower on Thursday amid evidence that the problems of the single currency's crisis-hit periphery were spreading northwards to affect monetary union's core economies of Germany and France.

Despite an easing of financial tensions in the second half of the year, gross domestic product in the members of the monetary union dropped by 0.6% in the final three months of 2012, a heftier decline than the markets had been expecting.

An across-the-board fall in output that affected both large and small economies meant that the eurozone economy failed to register an increase in activity in a single quarter of 2012, with a flat first three months of the year followed by three successive drops in output. The combination of weakening activity and high budget deficits prompted a warning from the credit rating agency Standard & Poor that Spain, France, Italy and Portugal were at risk of a downgrade in 2013.

Although Britain also registered a fall in output in the final three of 2013 and is one quarter of contraction away from triple-dip recession, Moritz Kraemer, managing director of European sovereign ratings at S&P said it was not a foregone conclusion that the UK would be stripped of its coveted AAA rating.

Eurostat, the EU's statistics office, said seven eurozone countries – Greece, Spain, Italy, Cyprus, the Netherlands, Portugal and Finland – were already officially in recession after suffering two or more successive quarters of falling output.

The poor performance of the eurozone's two biggest economies meant the drop in GDP in the fourth quarter was worse than the 0.1% fall in the third quarter. Consensus among analysts polled by Reuters had been for a 0.4% drop.

Germany's main stock market index, the DAX, fell by 1% yesterday, with shares in Paris, Milan and Madrid also losing ground. The euro dropped against the dollar and the yen on the foreign exchanges amid speculation that the European Central Bank will cut interest rates in a response to the fall in output.

The US grew by 2.2% in 2012 and Japan by 1.9%, while GDP in the eurozone contracted by 0.5%.

New revelations about the extent of the tensions between the EU and the IMF.  Speaking on Greek news channels, the economist Iannis Varoufakis said that officials at the IMF told him that in order to justify their participation in the bailout programme they used the wrong fiscal multiplier on purpose when calculating the terms of the Greek MoU. He suggested that powerful countries contributing to the fund have been putting pressure on the IMF to admit the mistake because it is now so blatantly obvious that the affects of the crippling austerity measures in Greece are in no-one’s interest.

 The EU on the other hand are determined not to rock the boat before the German elections by admitting to a faulty policy that will inevitably lead to a huge debt write down (this time it will actually affect the ECB and large bond holders). Hence Oli Rehn’s statement yesterday that they don’t care what ‘mistakes’ have been made – the Greeks have to abide by the terms of the MoU.

 Question: where does this leave the Greek people? How long can they carry on making such huge sacrifices to honour their commitments to a faulty fiscal programme which is ruining the lives of millions and driving the Greek economy into a depression of surreal proportions?

France is another PIG. In fact, France is the "F in PIG". It's just a matter of time until the Euro does to France what it has done for Italy.
Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage.

“There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”

The comments came as President Hollande attempts to improve the image of the French economy after pledging to reduce the country’s deficit by cutting spending by €60bn (£51.5bn) over the next five years and increasing taxes by €20bn.

Data from Banque de France showed earlier this month that a flight of capital has already left the country amid concerns that France’s Socialist leader intends to soak the rich and businesses. The actor Gérard Depardieu has renounced his French citizenship and decamped to Russia in protest, while David Cameron said Britain will “roll out the red carpet” to attract wealthy individuals.

Pierre Moscovici, the finance minister, said the comments by Mr Sapin were “inappropriate”. France has declared war on business.
This country has been told for decades it could ignore globalisation, and that the Brits and Americans are more-or-less contemptible.Their businesses close and capital leaves as fast as it can.They described Sarkozy as Mr Bling because he had one expensive inauguration dinner.They have been lied to about reality and there are vast numbers of unreconstructed communists and super-socialists, with a bureaucracy that defies belief. For Germany, France now is THE problem - not Britain, which is similar to Germany in many ways.Hollande is loathed by many in France and now feared by most for the insanity and naivety of what he is doing.There is no budget correction here, just rapid decline, illusion and mounting irrelevance.This place is becoming very frightening...

Well ....There is a common theme here...Someone has nicked all the money, from virtually every country in the world. And we are all sat here twiddling our thumbs worrying about all the debt.   ...  Now think about debt.... How can nearly all the countries in the world, legitimately be in debt?..Who is the debt owed to?...  Whoever these people are, must live in some of these countries, and I am almost certain, that they have - or they think they have - complete power and control over what is going on in these countries...

They are not as some people try and make out - the likes of pensions and insurance companies - otherwise pensioners wouldn't themselves be in the process of being totally screwed. All these problems should be resolvable. Money, no matter what it is based on, does not simply evaporate into thin air and completely disappear.

So the people of all the countries in the world must take this one step at a time, and identify whose hands are actually on the levers of power.  What are the fat controllers planning to do with all their power, if we do not take back control from them?..They are going to try and kill us all. That is what always happens with such enormous power. Ask any old German or Russian who actually survived and witnessed it...We helped come to their rescue. No one's going to come to ours except ourselves.

And the dollar falllsss, and the markets rrrriseee...?? abslute madness...?

LONDON—Euro-zone industrial output declined the most in three years in November, pulled lower by countries in the region's south facing recession as they attempt to cut debt and deficits through austerity policies. The decline is a further indication that the wider economy could contract for a third consecutive quarter in the final three months of 2012 as fiscally frail countries struggle with still-high borrowing costs and demand for goods suffers amid continuing job cuts. Output dropped 3.7% from a year earlier, the biggest decrease since November 2009, when output slumped 7%, Eurostat, the official European statistical office said Monday. Industrial output fell 0.3% in November compared with October, the third consecutive slide on a month-to-month basis. The yearly decline was due to weakness across the board with production of intermediate and capital goods falling at the steepest pace since 2009. In October, industrial output retreated 3.3% on the year and 1.0% on the month, Eurostat said. The October data were revised after previously being reported as falling 1.4% on the month and 3.6% on the year. The November figures were weaker than expected. Economists surveyed by Dow Jones Newswires last week projected the data to show industrial output rose 0.2% on the month and fell 3.2% on the year. The data provide further evidence that the economy of the 17-nation currency bloc contracted for a third straight quarter in the final three months of 2012. "November's euro-zone industrial production data provided further strong signs that the recession in the region as a whole intensified in the final quarter of last year," said Ben May, European economist for Capital Economics. Ireland, Greece, Spain, Italy and Portugal all saw production decline in November compared with October. Italy also published its full industrial production release Monday. Output fell 1.0% on the month and by 7.6% on the year in November last year, a bigger fall than expected. Output has declined for six straight months in monthly terms, and 15 consecutive months on an annual basis. Italy's national statistics agency Istat said the decline was mainly due to a fall in investment and energy output. Eurostat also reported that Germany saw a meager 0.1% monthly increase in November, while in France, output grew 0.5% over the same period.

Americans, or at least a good number of Americans, seem to have a great problem in keeping their noses out of other peoples affairs. This time it is the turn of us, "the Brits", to come under the spotlight and to receive the guidance, advice, or perhaps more accurately the "warning" instructions, from the great American busybody to dismiss any thoughts or suggestions of having a referendum on the question of European membership, and to remain within the European Union. Now personally, I believe that continued membership of Europe would be more and more disastrous over time and that we should determine our continued relationship with those across the Channel by the means of a referendum. I would argue that point of view with anyone in this country be they politician, public, press or in fact anyone else that may have a point of view different to mine. However, the thought of "outsiders", particularly Americans, (who's record of offering "advice" to all and sundry outside their own shores is, at best, unfortunate) offering the instruction that not only should we remain in the European Union, but we should also forget expressing a view on membership, is particularly galling. The American people have recently had an election to choose the person who they want to be their President for the next four years. During that time of electioneering, right up to the date of polling, I nor many others in this country, have had the temerity to instruct the American people who they should or should not, vote for as their President. Apart perhaps from a few private comments to friends or others about the candidates public remarks or attitudes , it would be quite wrong of those outside to try to influence the outcome. Many American politicians and State department sycophants, evidently do not share this attitude and consider it their duty as the self appointed "guardians of the world" to throw in their opinions and platitudes on any matter. History is littered with the results of American "advice" and the consequences of their interventionist policies. It may be a vain hope, but the State department, the President for the time being and the countless other interfering American meddlers, really should keep their grubby little fingers out of other peoples pies and their noses out of others people business.

Growth in China, Risks in the USA...If the situation in Southern Europe doesn't improve in 2013, the German economy will become even more dependent on consumers in the rest of the world -- particularly in the United States and China.

Concerns about a slump in Chinese growth have eased recently, with the World Bank revising its growth forecast upwards. And demand from emerging economies continues to be good.

But the situation in the US is more difficult. President Barack Obama's re-election has dispelled some uncertainty, but the country's political divide is deeper than ever before. The brinkmanship that saw a deal reached on Jan. 1 on the "fiscal cliff" may have averted disaster, but it hardly inspires confidence in the world's largest economy. And while there may have been a last-minute deal, it is difficult to predict what effect it will have. After the Democrats and Republicans reached an 11th-hour deal on the budget in 2011, rating agency Standard & Poor's responded to the deal by stripping the US of its highest rating.

The shakier the global economy, the more important domestic demand becomes. In Germany, companies have been wavering for some time, with investment in new equipment declining over the past year. Consumers, on the other hand, have been a driver of the German economy, a first in a country that has often been criticized for its heavily export-dependent economy.

"Even during the financial crisis, consumption was solid as a rock," said Ifo's Carstensen. "That was because the labor market was supported by measures such as shorter working hours."

However, at the end of 2012, that mood deteriorated, with the GfK consumer confidence index falling twice in a row, largely because of fears over employment prospects. According to a survey by insurer Allianz, the fear of job losses has increased significantly over the past year. Thus far, many German companies had continued to hire new staff, while existing workers benefited from salary increases secured through collective bargaining agreements. According to Weber, however, "that positive trend in the labor market is broken."

During the 2009 financial crisis, after the federal government introduced its short-time working program, many German companies sucessfully avoided layoffs. And Weber believes 2013 will not see any catastrophic plunge. "There will be no major downturn," he says, but rather "more of a long, drawn-out dampening."