Best wishes to the Greek people. Considering that I am a right of centre poster I'm not always that impressed by some strikes. Much of that comes from the British memory of the 1970s 'I'm alright Jack' (Peter Sellers film) type of Union action which was unhelpful to the British economy.

 Greece is an entirely different case, and more or less the only avenue that your average Greek citizen has left to register their protest at the troika and corrupt Greek political class. Though one day mass walkouts can only go so far, and have to wonder if more sustained action will eventually be needed to bring down the government.

Eurozone industrial output slips in May - Industrial output in the eurozone has come in largely as expected, slipping 0.3% in May from April.

In annual terms, output fell 1.3%, according to data from Eurostat.

There was some mildly positive news in revisions to previous data, with output now believed to have expanded 0.5% on the month in April, compared with a previous reading of 0.4%.

Further details from Eurostat also bring some welcome cheer for Portugal, which tops the industrial growth league in May. Eurostat reports:  Among the European Union member states for which data are available, industrial production fell in thirteen, rose in nine and remained stable in the UK. The largest decreases were registered in Romania (-10.7%), Lithuania
(-6.3%) and Sweden (-3.8%), and the highest increases in Portugal (+6.1%), Latvia (+2.2%) and Estonia (+2.0%).

Looking at the drivers of production throughout the eurozone, Eurostat says:  In May 2013 compared with April 2013, production of durable consumer goods dropped by 2.3% in the euro area. Capital goods decreased by 1.5%. Energy rose by 0.1%. Intermediate goods grew by 0.4%. Non-durable consumer goods increased by 0.6%.

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

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

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

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

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

 

The "head retard" speaks ....what a clown !!!!

For his part, EU Council head Herman Van Rompuy downplayed the importance of a technicality on Serbia. The small print says EU leaders, not foreign ministers, must sign off a European Commission negotiating mandate before the talks take place. The detail raises the risk that leaders might punish Serbia if it backslides on a deal to mend relations with Kosovo.   But Van Rompuy noted: "This is normal practice that we are following. When the European Council confirms the mandate, it will not add any additional conditions."

The summit took place just 48 hours before Croatia celebrates EU accession.  Barroso and Van Rompuy are going to Zagreb for festivities on Sunday and to Belgrade and Pristina on Monday.

"You are most welcome, Zoran, in this club," Van Rompuy told Croatian leader Zoran Milanovic earlier on Friday.

Milanovic said: "I am sort of emotional at this moment … Twenty two years ago it looked as though everything would be resolved in a few weeks' time. Then the war happened."...He added: "We will do everything and anything to help and assist our neighbours who are not yet in the club."  The adhesion of the small country will see the EU's population rise from 502.4 million to 506.8 million.

Croatia's EU commissioner is to handle consumer affairs. Zagreb also gets seven votes in the EU Council and 12 MEPs, while the commission is hiring 249 Croatian officials, including a director general.

The French and German leaders said next to nothing on Croatia in their press briefings.  In a minor blip, Germany's Angela Merkel last week cancelled her trip to Sunday's celebrations in Zagreb.

Her people said it is due to agenda reasons. But Croatian and German media say it is linked to Zagreb's refusal to extradite a Yugoslav-era spy wanted for murder.  In another blip, which highlights Croatia's struggle to curb high-level corruption, Finnish prosecutors on Friday said they will try three people for bribing Croatian officials in an arms deal.  Meanwhile, grim economic figures will see Zagreb fall foul of EU benchmarks the minute it joins. Its deficit is to hit 4.7 percent this year, breaking the EU's 3 percent rule, while its debt is heading for 62.5 percent, compared to the EU's 60 percent norm.  After four years of recession, unemployment is 18 percent, rising to 51 percent for the under-25s.  Milanovic told French daily Le Monde on Friday it is "absurd" to compare Croatia with bailout country Greece.

Noting his government's mix of left-wing and liberal policies, he added: "At the risk of sounding pretentious, I would say our vision is the Scandinavian [economic] model."

The German central bank, the Bundesbank, will have a central role in this week's Federal Constitutional Court hearing on complaints filed against the permanent European bailout fund known as the European Stability Mechanism (ESM) and the bond purchase program of the European Central Bank (ECB). It makes clear in its written statement that the bond purchases announced by the ECB are "to be judged critically."  The Bundesbank concedes that the purchase of bonds by central banks is a common practice, but notes that in the case of the United States, Japan or the United Kingdom, central banks only buy bonds of high creditworthiness. The ECB, by contrast, plans to buy bonds of "poorly rated member states" in order to reduce their high-risk premiums, writes the Bundesbank.   In doing so, Bundesbank officials are deliberately ignoring the fact that the budget deficits and debt levels of the aforementioned three countries are in some cases considerably higher than in the crisis-hit nations of the euro zone. The "high creditworthiness" doesn't reflect budgetary discipline there. Rather, it stems purely from the fact that the central banks in question opted for large-scale bond buying to give a clear signal to market participants: the US, Japan and the UK will never suffer a liquidity problem in the bond markets.   The Bundesbank also questioned the central line of argument of the ECB, which mainly justifies its bond purchase program by saying that the monetary transmission process in the euro zone has been interrupted. The Bundesbank gives a very good description of how such a disruption can be diagnosed. It depends, the Bundesbank writes, on whether the financing conditions in the real economy move in harmony with the ECB's leading interest rates. Which would mean in practice that companies throughout the entire euro zone could obtain bank credit at comparable interest rates.

 

FRANKFURT—Germany's central bank Friday cut its growth forecast for Europe's largest economy this year and next, tying the nation's fate to whether the euro-zone emerges from recession. "Much will depend on whether the economic situation stabilizes in the euro-area crisis countries," Jens Weidmann, president of the Deutsche Bundesbank, said in a statement. In its semiannual economic projections, the central bank lowered its growth forecast to 0.3% this year from its December estimate of 0.4% expansion, and reduced its forecast for 2014 growth to 1.5% from 1.9%. Germany has managed ride out the euro-zone crisis while many other European economies have floundered, but weak investment and sagging exports amid recession in some euro-area countries and the slowing global economy caused Germany's economy to contract sharply in the fourth quarter. Germany narrowly escaped recession in the first quarter, when its gross domestic product, a measure of economic growth, increased just 0.1%, on the back of robust private consumption. The Bundesbank's forecasts follow those of the European Commission, which last month lowered its 2013 growth outlook for Germany to 0.4% from a previous estimate of 0.5%. Earlier this month, the International Monetary Fund also cut its estimate for German growth in 2013 to "around 0.3%" from 0.6%. Despite the dulled forecasts, the Bundesbank said Germany's economy is slowly picking up again, as other euro-zone economies bottom out and the world economy gains momentum. A solid labor market, wage increases and a general easing of inflation are supporting private consumption in Germany, Mr. Weidmann said. According to the Bundesbank, consumer price inflation, as measured by the Harmonized Index of Consumer Prices, is set to accelerate modestly this year to 1.6% from its December forecast of 1.5%. Next year, it will slow to 1.5%, the central bank said.

The subway workers were on strike in Lisbon on Thursday. Next month it will be the turn of the teachers. Portugal's blue-collar trade unions are gearing up to bring almost a million workers out later in the summer as the country's protest against austerity intensifies.

It is a similar story across large parts of the eurozone. There have been mass protests in Madrid, Dublin and Athens against policies designed to reduce budget deficits and bring about economic reform. Now, after six successive quarters of recession, it seems the protesters have something to cheer about. Austerity in the eurozone is in retreat.  The European commission has told six countries – France, Spain, Portugal, Poland, the Netherlands and Slovenia – that they will have up to two extra years to put their public finances in order. In truth Brussels had little choice, because weak growth had reduced tax revenues and made it impossible for exacting budget targets to be met.

What's more, the commission found that it was one thing to dictate terms to the small countries on the periphery of the eurozone, but quite another to lay down the law to France, where François Hollande's loss of popularity in his first year in office surpasses that of any previous president.

If the E.U. Elite have their way they will not allow the EU Project to die or fail, not at least until they have stolen what they see and believe is justly theirs and as far as I can ascertain they are about ten years into the final stages of the grand plan, the Elite being the people behind the showmen at the forefront.
Mrs. Merkel is just such another Maggie a strong woman politician placed in her position by election where as Barosso, van Rumpuy, Drahgi etc. were mere placements and through general agreement cannot be removed other than by death or resignation, a most unsatisfactory arrangement; sooner or later the whole edifice will collapse for my part the sooner the better....

The euro is still stronger than the US dollar.  Europe went socialist with a medium to small sized economies and the US is trying to go socialist with a much larger economy but give us time we will also self destruct like the southern Europe is.  I include France in that group also. 

Of course this fall will be followed by the rest of Europe. Fortunately USA has a slim chance to correct our socialism issues. Europe does not  as they are to far ingrained in their economies.
Catastrophic though it certainly is there may yet still be more mileage in the troublesome euro and EU project but the end is nigh....Well..."The economic situation is worsening from month to month, and unemployment has reached a level that puts democratic structures ever more in doubt," Oskar Lafontaine the founder of Euro said !

Speaking ahead of a confidence vote in the lower house, Mr Letta said Italy could not afford to focus simply on trying to cut its huge public debt and needed a new emphasis on lifting the economy out of recession. He will be backed by his own center-left Democratic Party, Silvio Berlusconi's center-right People of Freedom (PDL) party as well as centrists led by former prime minister Mario Monti, with a second vote in the Senate on Tuesday.

"We will die of fiscal consolidation alone, growth policies cannot wait any longer," Mr Letta said, noting that the country's economic situation remains "serious" after more than a decade of stagnation.

However he pledged to stick to Italy's budget commitments to its European Union partners, announcing he would visit Brussels, Paris and Berlin this week. Financial market reaction to Letta's appointment and the end of months of political stalemate after last February's inconclusive election was positive, with bond yields falling and shares rising....So Letta thinks he can revive the economy! How pray? Any fool can see that Italy can't even find breathing space while it remains strapped into the "Gold-Standard" like EMU straight jacket and shackled to the brick wall of Germanic inspired demands to collapse public spending, aka austerity. 

Until this otherwise clever nation comes to its senses and exits EU/EMU, Italy seem destined to continue its underworld sojourn in the dank dungeons of economic bondage and fiscal discipline. 

Responding to Berlusconi's demands for an unpopular housing tax to be scrapped, Mr Letta said payments due in June would be halted prior to a wider overhaul of property taxes but he did not promise to abolish the tax altogether. He also said he hoped an increase in sales tax, which would see the main rate rise from 21pc to 22pc planned for July, could be delayed. In a speech laying out an ambitious programme of reforms, Mr Letta said the welfare system would have to be strengthened, taxes weighing on employment and young people would be cut and measures to get more women into the workforce would be passed. He promised to change the current electoral law, which contributed heavily to the inconclusive election result in February and left Italy in political limbo for two months as the parties wrangled over forming a government. He also said he would review the progress of reforms in 18 months' time and if he felt that he had been blocked by other parties he would not hesitate to assume the consequences, an apparent suggestion that he would resign.

When is Brussels going to admit:
"The Euro experiment is a big failure.  The southern countries can only survive with a much reduced exchange rate, as their main industry is inexpensive tourism.  We need to find a way to set them free from the Euro and we will take a 50% write-down on our loan exposures."
The alternative is explosive doom.... I agree, but already power has clearly migrated from Brussels to Frankfurt.  Even now Brussels is only in charge of important matters like banana curvature tolerances, getting rid of proper light bulbs and deciding who should collect their wonderful Nobel Peace Prize.

Germany - THE 4TH. REICH : Cyprus's MOU is finalized - The conditions of Cyprus's bailout deal have been agreed, according to the German government.

Reuters has the details: A final memorandum of understanding between Cyprus and international creditors on the island's bailout has now been finalized, a German finance ministry spokesman said on Wednesday....Martin Kotthaus also told a regular news conference he expected the bailout package to remain at 10 billion euros.

Curiously, Finnish finance minister Jutta Urpilainen had suggested this morning that the Cyprus bailout programme could be tweaked, when EU finance ministers meet in Dublin on Friday and Saturday.

Urpilainen told reporters: "I think the final outcome is good and sustainable, and I think it is good to go forward with this but it is good to note that some details might still be changed on Friday.

There are also reports that ministers will be advised to extend the maturity on certain loans given to Portugal and Ireland by seven years."

According to Reuters, the Troika of international lenders believes it is right to lower both countries' debt repayment burdens by spreading payments over a longer time.

Will Cameron sell the UK , capitulate?...I THIK YES, HE WILL BOW TO THE DEMANDAS of the 4th Reich  -- Talks between the Tories and the new Alternative fuer Deutschland (AfD), an anti-euro party, came to light as the Prime Minister and his family flew to Germany as the personal guests of the Chancellor at the castle of Meseberg, her country retreat.

The invitation for Mr Cameron to bring his wife Samantha and his children, Nancy, nine, Elwen, seven, and Florence, two, to stay in the elegant 18th century castle north of Berlin was intended to underline that the visit was a special courtesy, "perhaps not just pure routine". "It is a meeting linked to numerous, highly intensive, good discussions that the Chancellor has had with Prime Minister Cameron," her spokesman said. Mr Cameron's aides admit that winning Mrs Merkel's support will be vital to his attempts to negotiate a looser British EU membership deal, a new settlement he has promised to put to a referendum by 2017.

George Soros, the billionaire speculator best known as "the man who broke the Bank of England" in 1992, has launched a stinging critique of Germany's role in the euro crisis and suggested the single currency's prospects would be improved if its most dominant member were to quit. In an incendiary speech made on Tuesday afternoon in Germany's financial centre of Frankfurt, the hedge fund trader told Europe's richest country it had gone too far during the bailout of Cyprus, was itself heading for recession and should either leave the euro or reverse its long held opposition to eurobonds – a form of sovereign debt that would mean each member country's borrowings were guaranteed by the whole eurozone.  "My first preference is eurobonds; my second is Germany leaving the euro," he said in his lecture, entitled: How to save the European Union from the euro crisis. "It is up to Germany to decide whether it is willing to authorise eurobonds or not," he said at Frankfurt's centre for financial studies.  "But it has no right to prevent the heavily indebted countries from escaping their misery by banding together and issuing eurobonds.  "In other words, if Germany is opposed to eurobonds it should consider leaving the euro and letting others introduce them." In an address which appealed over German chancellor Angela Merkel and directly to German voters, who go to the polls in federal elections later this year, Soros implored the country to change course. "I hope that by offering you a different perspective I may get you to reconsider your position before more damage is done," he said. "That is my goal in coming here."

He added: "The financial problem is that Germany is imposing the wrong policies on the eurozone. Austerity doesn't work. You cannot shrink the debt burden by shrinking the deficit.

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).

Some thoughts about EUROPE - The once-booming former Yugoslav republic was plunged into recession by the economic crisis, which dented demand for its exports of manufactured goods, machinery and transport equipment, chemicals and food. The economy is expected to shrink by at least 2% this year. But the statistic that has everyone concerned is the €7bn of bad loans on Slovenian banks' books, an amount equivalent to around one fifth of the country's total GDP. The rating agency Moody's has already downgraded Slovenia's second largest bank, and the IMF has estimated that the government needs to recapitalize the nation's lenders to the tune of at least €1bn. Perhaps most worrying is the fact that the Slovenian prime minister, Alenka Bratušek, was moved to say this week that her country would not be seeking a bailout. Bond investors are not taking any chances. Prices of Slovenian government debt have plunged, sending yields rising by an eye-watering 0.8% on Wednesday alone. Slovenia's 10-year debt is now yielding around 6.15%, not far from the 6.49% yield on 10-year bonds from Portugal, which is already in a bailout program. Laurence Wormald at SunGard Financial Systems said: "The evidence suggests that action will be needed by Slovenia within the next two, three months. However, a bail-in is likely to be less drastic than the one in Cyprus, since Slovenian banks are much less leveraged than those of Cyprus. Also Slovenia is different from Cyprus in one crucial respect, in that Slovenia has not created a large offshore banking center." After Slovenia, who's next? The research house Capital Economics has its money on Malta and Luxembourg....

 

I think there are only 2 options left:
1. Either a split up into a northern and southern Euro-zone
2. or Germans, leave the Euro-zone. This would mean to forgive debt in the amount of about 1,2 trillion Euros, but I think it is worth it. A growing number of Germans is sooo fed up with this Euro-debacle.  Naive and stupid as we actually are, we initially thought this was meant to be a peace project. And now take a look around. A bunch of incompetent Eurocrats turned this beautiful idea into a devastating nightmare. Before we knew what was happening we were catapulted to the helm of Europe and everyone expected us to wave a magic wand to solve the crisis.
Unfortunately we didn't have a magic wand and so we proposed the same recipe for southern Europe which put Germany back on track 10 years ago. Now it doesn't work for a number of intricate reasons, and suddenly Merkel gets depicted with a Hitler mustache, with the German economy morphed into a German Panzer conquering Europe - accused to have sold our products at gunpoint to helpless southern Europeans.
I think it is time for all Europeans to leave this Euro-zone-kindergarten to avoid further misunderstandings.
 

“it was only 'a failure of animal spirits' (to use Keynes' description of the loss of confidence) that caused the 1930s economic depression.” ...It was the same economic measures of calling in their loans (as they are doing to Greece, Spain, etc.) and tightening the money supply as well as raising interest rates that caused the FED orchestrated “Great Depression” of 1929. This is what precipitated the Stock Market Crash – and then they used that as the excuse for further controls on the money supply, instead of doing what Keynes wanted: flow more money into the system to stop the growth of unemployment so as to kick-start the economy again. This time though they used the “bad debt trading of derivatives on the housing bubble” to orchestrate this upcoming depression. If the people of Ireland, Greece, Spain, Italy etc. were given a fair paper ballot referendum (not computers so easily manipulated as the Bush elections showed us in America) then I believe they would get out of the Euro. Argentina managed it, and now the IMF and the FED are seething and frothing at the mouth and taking them to court or rather suing them because they had the audacity to want their national sovereignty back! Check out "fractional reserve" lending on "The Money Masters" on You Tube to get a clear picture as to how the whole civilized world is being fleeced for the gain of a few private individuals. It is not a conspiracy theory, it is simple fact. Another of their goals is to have us fight amongst ourselves, instead of trying to solve the real problem which is “fractional reserve lending.” The German taxpayers, for example, are rightly angry but for the wrong reasons! The ECB is pulling the wool over their eyes just like the FED is pulling the wool over the eyes of America. The ECB is making out that they need money to bail out Greece, Spain, etc. when they have really lent out far more than they have in their vaults already! They are also being backed by the FED with “fractional reserve” dollars to the tune of 85% of their assets. The whole Ponzi scheme is based on thin air dollars – so in effect there is no need to fleece the German taxpayer as well. But it does serve to divert attention from the real culprits: private banking in the form of the ECB, the FED and the IMF! In this way the Greeks are seen as lazy, no-good for nothings to the Germans and the Germans are seen as “Nazis” by the Greeks. Divide and conquer is an age old adage and it is diverting attention from the real culprit: Private Banking in the form of the FED and the ECB and they are getting away scot-free when they are causing this depression in the first place. Since everything anyway is based on “fractional reserve lending” or “thin air” debt, then why are interest rates up and money tight in both America and Europe? This is the cause of the economic crisis – not because some Greek café owner didn’t give out a receipt to a customer! The FED did it in 1929 to cause the Great Depression: raise interest rates and tighten the money supply just when they should be doing the opposite according to Keynes to get out of this slump. Private banking is orchestrating this depression and it is getting worse and worse every day leading to more nations slowly falling under their total control. It is ironic that Greece is the first victim of this multi-headed Hydra from Greek Mythology composed of the IMF, the FED, the ECB, the NCBs, and others! Even Hercules would have a hard time with this one as there are too many heads working in concert this time to enslave the world in debt. Whenever nations or empires printed or coined their own money that was debt and interest free the world prospered. The Romans with their bronze coins, England with her Tally Sticks, and Lincoln with his “Greenback Dollars” printed directly by the US Treasury. Many would argue that money would be worthless if we cut out private banking to print our money, but just the opposite would happen. If a country can issue a debt-laden interest bearing bond on good faith to a private bank to print its money, it can also issue a debt-free paper note to the public directly!

A Guide To Committees, Groups, And Clubs

September 28, 2012

Political leaders and officials from around the world shape the work of the IMF through their various fora and bodies. With the IMF at the center of the coordinated global response to events in international financial markets and the world's economies, understanding what these groups do and how they work is important.

International Monetary and Financial Committee Development Committee Financial Stability Board Group of 7 Group of 8 Group of 10 Group of 15 Group of 20 Group of 24 Group of 77 Creditor Clubs Archive:Group of 5 Group of 22 Group of 33

International Monetary and Financial Committee

The IMFC is responsible for advising, and reporting to, the IMF Board of Governors as it manages and shapes the international monetary and financial system. The IMFC also monitors developments in global liquidity and the transfer of resources to developing countries; considers proposals by the Executive Board to amend the Articles of Agreement; and deals with unfolding events that may disrupt the global monetary and financial system.

The IMFC usually meets twice a year, in September or October at the Bank-Fund Annual Meetings and in March or April at what are referred to as the Spring Meetings. The Committee discusses matters of concern affecting the global economy and also advises the IMF on the direction of its work. At the end of the meetings, the Committee issues a communiqué summarizing its views. These communiqués provide guidance for the IMF's work program during the six months leading up to the next Spring or Annual Meetings. There is no formal voting at the IMFC, which operates by consensus.

The IMFC has 24 members who are central bank governors, ministers, or others of comparable rank and who are drawn from the governors of the Fund's 188 member countries. The membership reflects the composition of the IMF's Executive Board: each member country that appoints, and each group of member countries that elects, an Executive Director appoints a member of the IMFC. The group is currently chaired by Tharman Shanmugaratnam, Deputy Prime Minister and Minister for Finance of Singapore, who was selected to head the Committee in March 2011. A number of international institutions, including the World Bank, participate as observers in the IMFC's meetings.

IMFC Membership
Nationalities of current members:
Singapore (Chair) Algeria Argentina Australia Belgium Brazil Canada China	France Gabon Germany India Indonesia Italy Japan Netherlands	Russia Saudi Arabia South Africa Spain Sweden Switzerland United Arab Emirates United Kingdom United States

Development Committee

The Joint Ministerial Committee of the Boards of Governors of the Bank and Fund on the Transfer of Real Resources to Developing Countries, better known as the Development Committee, was established in October 1974 to advise the Boards of Governors of the IMF and World Bank on critical development issues and on the financial resources required to promote economic development in developing countries. Over the years, the Committee has interpreted its mandate to include trade and global environmental issues in addition to traditional development matters. The Committee usually meets twice a year following the IMFC meeting.

The Development Committee has 25 members (usually ministers of finance or development) who together represent the full membership of the IMF and World Bank. The present chairperson is Marek Belka, President of the National Bank of Poland.

Development Committee Membership
Poland (Chair) Argentina Bahrain Belgium Brazil Canada China Côte d’Ivoire Denmark France	Germany India Indonesia Italy Japan Mexico Morocco Netherlands New Zealand	Nigeria Russia Saudi Arabia Switzerland United Kingdom United States Zimbabwe

Financial Stability Board

In order to strengthen the surveillance of financial markets, the G-20 leaders decided in April 2009 to expand the membership of the former Financial Stability Forum and renamed it the Financial Stability Board. The new membership includes all G-20 countries, the former FSF members, Spain, and the European Commission.

The FSB is designed to help improve the functioning of financial markets, and to reduce systemic risk through enhanced information exchange and international cooperation among the authorities responsible for maintaining financial stability.

The FSF first met on April 14, 1999, at IMF headquarters, and has since then met semi-annually. The FSF was made an observer of the IMFC in September 1999.

Mark Carney, Governor of the Bank of Canada, chairs the FSB in his personal capacity. The FSB consists of a Plenary, a Steering Committee, other committees and sub-groups as needed, and a secretariat based in Basel, Switzerland. The Plenary is the decision-making organ of the FSB; its members are the heads of members' treasuries, central banks, and supervisory agencies; the chairs of the main standard-setting bodies and central bank committees; and senior representatives of international financial institutions (Bank for International Settlements, European Central Bank, European Commission, International Monetary Fund, Organization for Economic Cooperation and Development, and The World Bank). The Steering Committee provides operational guidance between plenary meetings to carry forward the directions of the FSB; its composition is decided by the Plenary at the proposal of the Chair. The Plenary may establish Standing Committees and working groups as necessary.

Financial Stability Board Membership
Chairman (1)
National Authorities (24)
International Financial Institutions (6)
International Regulatory and Supervisory Groupings (6)
Committees of Central Bank Experts (2)

Group of Seven

The Group of Seven (G-7) major industrial countries began to hold annual economic summits (meetings at the level of head of state or government) in 1975. At the level of finance minister and central bank governor, the G-7 superseded the G-5 as the main policy coordination group during 1986–1987, particularly following the Louvre Accord of February 1987, which was agreed by the G-5 plus Canada and subsequently endorsed by the G-7. Since 1987, the G-7 finance ministers and central bank governors have met at least semi-annually to monitor developments in the world economy and assess economic policies. The Managing Director of the IMF usually participates, by invitation, in the surveillance discussions of the G-7 finance ministers and central bank governors. Although, Russia has joined the group, thereby forming the Group of Eight (see below), the G-7 continues to function as a forum for discussion of economic and financial issues among the major industrial countries.

G-7 Members
Canada	Japan
France	The United Kingdom
Germany	The United States
Italy

Group of Eight

The Group of Eight (G-8) was conceived when Russia first participated in part of the 1994 Naples Summit of the G-7. Again in 1997, Russia joined, for political discussions, the Denver Summit after the conclusion of the G-7 economic summit. At the 1998 Birmingham Summit, Russia joined as full participant, which marked the establishment of the Group of Eight, which convenes annual summits of the heads of state or government of the major industrial countries to discuss the major economic and political issues on their agenda.

G-8 Members
Canada	Japan
France	Russia
Germany	The United Kingdom
Italy	The United States

Group of Ten

The Group of Ten (G-10) refers to the group of countries that have agreed to participate in the General Arrangements to Borrow (GAB), a supplementary borrowing arrangement that can be invoked if the IMF's resources are estimated to be below member's needs. The GAB was established in 1962, when the governments of eight IMF members—Belgium, Canada, France, Italy, Japan, the Netherlands, the United Kingdom, and the United States—and the central banks of two others, Germany and Sweden, agreed to make resources available to the IMF for drawings by participants, and, under certain circumstances, for drawings by nonparticipants. The GAB was strengthened in 1964 by the association of Switzerland, then a nonmember of the Fund, but the name of the G-10 remained the same. Following its inception, the G-10 broadened its engagement with the Fund, including issuing reports that culminated in the creation of the Special Drawing Right (SDR) in 1969. The G-10 was also the forum for discussions that led to the December 1971 Smithsonian Agreement following the collapse of the Bretton Woods system. The following international organizations are official observers of the activities of the G-10: The Bank for International Settlements (BIS), European Commission, IMF, and OECD.

G-10 Members
Belgium	Netherlands
Canada	Sweden
France	Switzerland
Germany	The United Kingdom
Italy	The United States
Japan

Group of Fifteen

The Group of Fifteen (G-15) was established at the Ninth Non-Aligned Summit Meeting in Belgrade, Yugoslavia in September 1989. It is composed of countries from Latin America, Africa, and Asia with a common goal of enhanced growth and prosperity. The G-15 focuses on cooperation among developing countries in the areas of investment, trade, and technology. The membership of the G-15 has expanded to 17 countries, but the name has remained unchanged.

G-15 Members
Algeria	Indonesia	Nigeria
Argentina	Iran, Islamic Republic of	Senegal
Brazil	Jamaica	Sri Lanka
Chile	Kenya	Venezuela, República Bolivariana de
Egypt	Malaysia	Zimbabwe
India	Mexico

Group of Twenty

The Group of Twenty (G-20), which superseded the Group of 33 (see below), was foreshadowed at the Cologne Summit of the G-7 in June 1999, but was formally established at the G-7 Finance Ministers' meeting on September 26, 1999. The inaugural meeting took place on December 15–16, 1999, in Berlin. The G-20 was formed as a new forum for cooperation and consultation on matters pertaining to the international financial system. It studies, reviews, and promotes discussion among key industrial and emerging market countries of policy issues pertaining to the promotion of international financial stability, and seeks to address issues that go beyond the responsibilities of any one organization.

As the global economic crisis unfolded, and with the meetings of G-20 Heads of State and Government in November 2008, and in April and September 2009, the G-20 assumed an increasingly active role on global economic issues. This culminated in leaders designating the G-20 as "the premier forum for our international economic cooperation" during their Pittsburg Summit.

The membership of the G-20 comprises the finance ministers and central bank governors of the G-7, 12 other key countries, and also the European Union, which is represented by the rotating Council Presidency and the European Central Bank. To ensure that global economic fora and institutions work together, the Managing Director of the IMF and the President of the World Bank, plus the Chairs of the IMFC and the Development Committee, also participate in G-20 meetings on an ex-officio basis. Mexico is the 2012 chair of the G-20, to be followed by Russia in 2013.

G-20 Members
Argentina	France	Japan	South Africa
Australia	Germany	Korea, Republic of	Turkey
Brazil	India	Mexico	The United Kingdom
Canada	Indonesia	Russia	The United States
China	Italy	Saudi Arabia	The European Union

Group of Twenty-Four

The Group of Twenty-Four (G-24), originally a chapter of the G-77, was established in 1971 to coordinate the positions of developing countries on international monetary and development finance issues and to ensure that their interests were adequately represented in negotiations on international monetary matters. The group, which is officially called the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development, is not an organ of the IMF, but the IMF provides secretariat services for the Group. Its meetings usually take place twice a year, prior to the IMFC and Development Committee meetings, to enable developing country members to discuss agenda items beforehand. Although membership in the G-24 is strictly limited to 24 countries, any developing country can join discussions. China has been a “special invitee” since 1981. Palaniappan Chidambaram, Minister of Finance for India, is the current chairman of the G-24.

G-24 Members
Algeria	Egypt	Iran, Islamic Rep. of	Philippines
Argentina	Ethiopia	Lebanon	South Africa
Brazil	Gabon	Mexico	Sri Lanka
Colombia	Ghana	Nigeria	Syrian Arab Republic
Congo, Dem. Rep. of	Guatemala	Pakistan	Trinidad and Tobago
Côte d’Ivoire	India	Peru	Venezuela, República Bolivariana de

Group of Seventy-Seven

The Group of Seventy-Seven (G-77) was established on June 15, 1964, by the "Joint Declaration of the Seventy-Seven Countries" issued at the end of the first session of the United Nations Conference on Trade and Development (UNCTAD) in Geneva. It was formed to articulate and promote the collective economic interests of its members and to strengthen their joint negotiating capacity on all major international economic issues in the United Nations system. The membership of the G-77 has expanded to 132 member countries, but the original name has been retained because of its historical significance. The Chairmanship rotates on a regional basis (between Africa, Asia, and Latin America and the Caribbean) and is held for one year. Currently, Algeria holds the Chairmanship of the Group of 77 in New York for 2012.

G-77 Members
Afghanistan, Islamic Republic of	Djibouti	Libya	São Tomé and Príncipe
Algeria	Dominica	Madagascar	Saudi Arabia
Angola	Dominican Republic	Malawi	Senegal
Antigua and Barbuda	Ecuador	Malaysia	Seychelles
Argentina	Egypt	Maldives	Sierra Leone
Bahamas, The	El Salvador	Mali	Singapore
Bahrain	Equatorial Guinea	Marshall Islands	Solomon Islands
Bangladesh	Eritrea	Mauritania	Somalia
Barbados	Ethiopia	Mauritius	South Africa
Belize	Fiji	Micronesia, Federated States of	Sri Lanka
Benin	Gabon	Mongolia	Sudan
Bhutan	Gambia, The	Morocco	Suriname
Bolivia	Ghana	Mozambique	Swaziland
Bosnia and Herzegovina	Grenada	Myanmar	Syrian Arab Republic
Botswana	Guatemala	Namibia	Tajikistan
Brazil	Guinea	Nepal	Tanzania
Brunei Darussalam	Guinea-Bissau	Nicaragua	Thailand
Burkina Faso	Guyana	Niger	Timor-Leste
Burundi	Haiti	Nigeria	Togo
Cambodia	Honduras	Oman	Tonga
Cameroon	India	Pakistan	Trinidad and Tobago
Cape Verde	Indonesia	Palestine	Tunisia
Central African Republic	Iran, Islamic Republic of	Panama	Turkmenistan
Chad	Iraq	Papua New Guinea	Uganda
Chile	Jamaica	Paraguay	United Arab Emirates
China	Jordan	Peru	Uruguay
Colombia	Kenya	Philippines	Vanuatu
Comoros	Korea, Democratic People’s Republic of	Qatar	Venezuela, República Bolivariana de
Congo, Dem. Rep. of	Kuwait	Rwanda	Vietnam
Congo, Rep. of	Lao P.D.R.	St. Kitts and Nevis	Yemen
Costa Rica	Lebanon	St. Lucia	Zambia
Côte d'Ivoire	Lesotho	St. Vincent and the Grenadines	Zimbabwe
Cuba	Liberia	Samoa

Creditors Club

Paris Club

The Paris Club is an informal group of official creditors, industrial countries in most cases, that seeks coordinated and sustainable solutions for debtor nations facing payment difficulties. Paris Club creditors provide debt treatments to debtor countries in form of rescheduling or reduction in debt service during a defined period or as of a set date. Although the Paris Club has no legal basis, its members agree to a set of rules and principles designed to reach a coordinated agreement on debt rescheduling quickly and efficiently. This voluntary gathering dates back to 1956, when Argentina agreed to meet its public creditors in Paris. Since then, the Paris Club, and related ad hoc groups, has reached 426 agreements covering 89 debtor countries. The Paris Club and the IMF have extensive contact, since the Paris Club normally requires countries to have an active Fund-supported program in order to qualify for a rescheduling agreement.

London Club

The London Club is an informal group of commercial banks that join together to negotiate their claims against a sovereign debtor. The debtor initiates a process in which a London Club “Advisory Committee” is formed. The Committee is chaired by a leading financial firm and includes representatives from other exposed firms. Upon signing of a restructuring agreement, the Committee is dissolved.

Archive

With the passage of time, a number of committees, groups and clubs have changed or have been superseded. Some of these are archived in this section.

Group of Five

The Group of Five (G-5) major industrial countries was established in the mid-1970s to coordinate the economic policies of France, Germany, Japan, the United Kingdom, and the United States. (These countries' currencies also constituted the SDR, an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries). The G-5 was the main policy coordination group among the major industrial countries through the Plaza Agreement of September 1985. It was subsequently superseded by the G-7.

Group of Twenty-Two

The establishment on a temporary basis of the Group of Twenty-Two (referred to also as the “Willard Group”) was announced by President Clinton and the other leaders of APEC countries at their meeting in Vancouver in November 1997, when they agreed to organize a gathering of finance ministers and central bank governors to advance the reform of the architecture of the global financial system. The G-22 comprised finance ministers and central bank governors from the G-7 industrial countries and 15 other countries (Argentina, Australia, Brazil, China, Hong Kong SAR, India, Indonesia, the Republic of Korea, Malaysia, Mexico, Poland, Russia, Singapore, South Africa, and Thailand). It first met on April 16, 1998 in Washington, D.C. to examine issues related to the stability of the international financial system and effective functioning of global capital markets. It was superseded first by the G-33 and then by the G-20.

Group of Thirty-Three

The Group of Thirty-Three (G-33) superseded the G-22 in early 1999, and was itself superseded by the G-20 later in the year. Several seminars of the G-33 on the international financial architecture were convened at the initiative of the finance ministers and central bank governors of the G-7. The first meeting was hosted by Germany in Bonn on March 11, 1999.

The G-33 consisted of the finance ministers and central bank governors of Argentina, Australia, Belgium, Brazil, Canada, Chile, China, Côte d'Ivoire, Egypt, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, the Republic of Korea, Malaysia, Mexico, Morocco, the Netherlands, Poland, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, the United Kingdom, and the United States.

---

¹ The IMF also has a set of credit arrangements with members and institutions, the New Arrangements to Borrow (NAB), which became effective in November 1998. In March 2011, NAB participants ratified the expansion of the NAB up to SDR 367.5 billion (about $560 billion), once all new participants have adhered to the expanded NAB. In November 2011, Poland joined the NAB, bringing its total size to SDR370.0 billion (about $565 billion).

....What an incompetent! - Ollie Rehn's opinion in WSJ...

"A casual reader of much recent commentary could be forgiven for believing that European governments are blindly enacting harsh policies of austerity, under the watchful eye of a European Commission obsessed with enforcing arbitrarily chosen nominal deficit targets. It is time to debunk this damaging myth.

In fact, the European Union's Stability and Growth Pact can adapt a country's agreed fiscal adjustment path if the economic situation calls for it.   Alongside the nominal targets for deficit reduction, each new recommendation issued to a member state specifies the structural fiscal effort to be achieved each year until the excessive deficit is corrected. While the nominal targets may continue to dominate the headlines, the Commission focuses its assessments of member states' actions first and foremost on their compliance with the agreed structural effort.

This is consistent with another little-known, yet key element of the pact: the medium-term objective of a balanced budget in structural terms. The appropriate pace of progress towards this medium-term objective is agreed by taking into account the specific economic circumstances of each EU member state. Accordingly, a member state may receive extra time to correct its excessive deficit. This has occurred twice this year already: in July for Spain, and in October for Portugal. Both now have until 2014 to bring their government deficits back below 3% of GDP. ".... excerpt of OR's article in the WSJ

Amusing - This man is a deluded clown.

"Mr Van Rompuy – who said the EU was the “biggest peacemaking institution ever created in world history"....Amusing - This man is a deluded clown. Now the EU is working out how to pillage wealth whoever it can to keep the half baked plans of domination alive. There is no heart in the eyes of these arrogant, anti democratic creators of a systematically ignorant European rule and ruling class. The final triumph of ignorance is economic collapse, waste, decay and chaos. The best system of government to ensure well informed executives and to motivate rulers to listen is Democracy. The further rulers stray from Democracy the more arrogant, ignorant and arbitrary they become. The EU has not gone all the way but it is on an irreversible downward slide. We must let go of these nasty losers and leave them to slide, alone, into the chasm of failure and self created ignorance. So far our craven politicians neither see nor care because they are blinded by their small minded immature and childish careerist ambitions and selfishness. Well....Doubtless ,the German people will feel much the same when the grim reality of the extent of betrayal hits them with the force of an express train......Stalin, Hitler, Pol Pot and Genghis Khan were similarly deluded, but they weren't anywhere near so comical as Rumpy.The EU needs money, lots of it, and fast, so expect Rumpy and his evil elves to keep proposing more and more of their madcap money making schemes. Having seen a little of what Irish and Greek banks were up to before they fell in to a heap I don't rate the chances of forming a banking union very highly, and trying to pool budgets and debt without the banks in a stable condition is utterly hopeless. None of this is ever going to get Merkel's seal of approval.

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."

NICOSIA, Cyprus—Euro-zone finance ministers indicated Friday they are open to giving Athens more time to meet budget targets and that they aim to decide by the end of October on whether to give Greece its next installment of a bailout money….In their first gathering after a long summer hiatus, finance ministers from the 17-member currency bloc spent the morning discussing the economic and financial crises of Greece, Spain, Portugal and Cyprus. They were joined later by the 10 ministers from the rest of the European Union to debate proposals, released this week, for a system of common banking supervision.  European Central Bank President Mario Draghi, center, with IMF chief Christine Lagarde, left, Eurogroup President Jean-Claude Juncker and German Finance Minister Wolfgang Schäuble talk at the start of a two-day informal meeting in Cyprus….The meeting comes days after the European Central Bank announced a revamped plan for purchases of government bonds in the open market in coordination with the euro zone's rescue funds, and follows a German constitutional court ruling clearing the way for the launch of the European Stability Mechanism, the permanent bailout fund.  Friday's gathering turned attention back to the governments of bailed-out countries and what they will do to implement tough reforms to qualify for support from the currency bloc.   Ministers sought to keep pressure on the Athens government, which hopes to win approval soon for the next disbursement in its €173 billion ($224.7 billion) second bailout package…. The Greeks "need to show very strongly decisive action" on structural reforms and spending cuts, said Luxembourg's Jean-Claude Juncker, head of the Eurogroup of finance ministers. Athens must agree to a "set of credible measures to close the fiscal gap between 2013 and 2014," he said.

..."troika" ???? Greece has a German Governor - Horst Rechenbach ...what "troika" ??

The so-called "troika" of inspectors from the European Commission, the European Central Bank and the International Monetary Fund returned to Athens on Friday to conclude a report on Greece's progress in meeting the terms of its latest bailout, Reuters reported.

The inspectors, who held talks with Greece's finance minister on Sunday, must approve the plan to trim roughly €12bn from the state budget over the next two years if Athens is to get a green light for the bailout money it needs to avoid bankruptcy.

"The troika has not accepted all the measures, but we have alternative proposals," said Socialist leader Evangelos Venizelos, a junior partner in the ruling coalition who was briefed by the finance minister at a party leaders' meeting.

Greek Finance Minister Yannis Stournaras played down the inspectors' objections, saying they had rejected only a "few" measures. A senior Greek government official had said earlier that the troika had sought more details on the proposals to understand them better.

Officials declined to specify what the objections related to but a source familiar with the matter said they were over measures to save roughly €2bn by cutting expenses in the public sector.
FRANKFURT - Deutsche Bank AG's new co-chief executives are expected this week to explain how they aim to turn around the underperforming company, amid considerable investor skepticism.
The strategy presentation to investors comes just over 100 days after Anshu Jain and Jürgen Fitschen took over one of Europe's largest bank by assets. The two chiefs vowed to thoroughly review the bank's vast operations, with an eye to boosting profits amid tougher regulation and Europe's debt crisis.  With a balance sheet of €2.2 trillion ($2.8 trillion), Deutsche Bank is one of the world's largest banks, yet one of the least well-capitalized.
LONDON -- A panel of European officials would be given sweeping new powers to police the financial sector across the continent but also in the City of London.  They would be given "full decision making powers" to impose EU law and to arbitrate disputes between Britain and the eurozone over the risks posed by British banks, according to the proposals being tabled on Wednesday at the European Commission. Decisions taken by the powerful body would be automatically binding unless Britain was able to win the unlikely backing of a majority and overturn them.  Rulings by the panel could create huge costs for the British government and banks if they were ordered to bail out a struggling institution, contribute to cross-border bail-out funds, or allow the EU to rule over breaches of European law. The moves stem from proposals for a eurozone "banking union". The radical new EC blueprint for banking regulation at the EU level is focused on giving the European Central Bank new powers to supervise the eurozone's banks, in order to shore up struggling financial institutions in southern European countries such as Spain. But the ECB's new role would see the existing European Banking Authority (EBA) - the current pan-European bank regulator that has its headquarters in London - being radically overhauled and strengthened. Its panel of European officials would be given new powers to stamp its authority on potential disputes between both eurozone and non-eurozone countries, including Britain.

Austerity was always a dumb idea...

We are not in a recession because industry is incapable of producing enough goods, or because there are productivity problems, or cost or quality problems.

One of the most notable phenomena of the past three years has been a 25% increase in exports. You simply can't get that kind of increase if you are producing goods that are inferior in quality or price.  Foreign buyers obviously don't have to buy your goods, so if they increase their purchases by 25% in such a short period of time, quality and price aren't the issue, and if you can ramp up export production by 25% in a couple of years, then obviously capacity and productivity aren't the problem either.....So what is the problem? It is that consumers got over-leveraged and took on too much debt while house prices were rising and unemployment was low, pre-2007. Then, when the house bubble burst, and unemployment started to climb, consumers got nervous about debt levels and future employment prospects and started to pay down debt, which means cutting back on consumption.We are not short of productive capacity - we are running well below long-term trend - and we are not production constrained. We are in a recession because of shortage of domestic demand.  Incidentally, if you think about it, if we really were production, capacity or productivity constrained, but had eight percent unemployment, that would be very weird indeed.  Instead of increasing it's level of debt the Private sector is reducing it (Deleveraging) - This is the result of the bursting of the credit bubble resulting in Falling demand -
If Government attempt to reduce it's own debt at the same time as the private sector it will cause the shrinking economy to contract faster - Deflation will only make the private sector more cautious making it contract further - Austerity was always a dumb idea that is never going to work as long as the private sector debt is contracting.