After Berlusconi was sidelined and the boring Enrico Letta was replaced by the sympathetic and purposeful 39-year-old Matteo Renzi as the head of government, many thought that Italy was finally on the right track. But it's not...On the contrary: The land is stuck in a recession. Its levels of sovereign debt, the number of bankruptcies and the rate of unemployment are perpetually setting new records. As a result, some Italian political leaders have long sought a multi-billion euro growth stimulus program -- a call that new European Commission President Jean-Claude Juncker is likely to heed. The magnitude and form of such a program, however, still needs to be determined so that it at least maintains the illusion of conforming with the Stability and Growth Pact. But without many other changes in Italy, including its grasp on reality, simply injecting money isn't likely to change much. "For 20 years," economic expert Daniel Gros told La Repubblica newspaper recently, Italy has been claiming that others need to "give it another year, then you will see our wonderful reforms." And even Mario Draghi -- the Italian president of the European Central Bank, which has been flooding the continent with cheap money, especially in crisis flashpoints like Italy -- bluntly admonished the country in August for failing to implement substantive structural reforms ...

But it's not that Italy is even lacking in money. The assets of Italian banks and insurance companies have risen by over €1.2 trillion since 2008. But manufacturing asset bases have, by contrast, fallen by €200 million. It's a grim distribution: the one sector doesn't seem to want to invest, while the other is unable.

Italians themselves face a similar situation. On average, every Italian has about €4,000 more in net assets than the average German, but wealth is even less evenly distributed in Italy than it is in Germany, weakening domestic demand: The rich have everything, the poor can't afford anything.

"DRAGHI SAYS EU BUDGET RULES ARE THERE TO BE RESPECTED" - Draghi also realises that big countries will ignore them with impugnity - just like they did the first time around. France is already in violation and knows full well that the EU and the ECB are utterly importent in the face of that.  Just as they were when Germany - yes, Germany - lead the way in breaking the rules shortly after the euro came into being. All countries remember this, espescially the ones on the receiving end of imperious Germanic lectures about "doing their homework".  Germany has made the classic mistake of doing well when others around it are doing badly, presuming this state of affairs will persist eternally and feeling it has a free hand to treat it's neighbours as it pleases. The moment German needs demand it, the Fiscal Pact will be out of the window; Anegla Merkel would be out of office within weeks if her government were to attempt the sort of austerity it has, in essence, forced upon Greece. The Netherlands were, if anything, even more hawkish than the Germans regarding "lazy Southerners" and wanted things like automatic fines. Then their own economy began to suffer the same problems and they also breached the rules - you don't hear much from them these days. Our Scottish friends may wish to ponder the huge difference in the treatment meted out to small countries as opposed to large ones in the EU. Of course, none of this should be greeted with any Satisfaction in the UK. A recession in the eurozone is bad for us too. Though thankfuly we have at least managed to dodge the madness of dropping a hand-grenade into the economy via a Scottish separation. Now, a worsening recession means there will be less taxable income for governments to fund ever growing entitlements. Add that to a huge pile of moldering away bad debts. What I see is not a solvable problem the way the world works today.

Neither Draghi or any of the bankers even bother to talk about the real problem of not enough regional income and too much government spending. Draghi’s only solution is some form of money printing. Printing money to pay bills might work over the short term. But long term, it cannot. If money printing works in the real world why not print and give every one a billion dollars, euros or yen?

The most Draghi can do is have the ECB print money to service existing bad debts made by banks and governments. But printing money to pay interest and principle on loans is not debt service. That is called money printing, debasing the currency whatever. Yes, governments want to do whatever possible to avoid bad times for its citizens. But, as someone else once said, the road to hell is paved with good intentions.

The “troika” of the International Monetary Fund (IMF), European Commission and European Central that bailed out the Greek economy are waiting for further austerity measures before the IMF disburses a further tranche of €3.5bn in loans. Athens is currently awaiting the final tranche of €1.8 billion euros from the European Financial Stability Facility. 

Greece must also put forward proposals to the troika on how it will meet a projected €2 billion budget gap in 2015. The index reshuffle was made to the S&P Dow Jones emerging markets BMI index and at the same time Qatar and the United Arab Emirates stock indices were promoted from frontier to emerging markets status with a weighting of 0.9pc and 1.0pc in the index respectively.  The reclassification by S&P Dow Jones Indices follows the move by the more widely followed MSCI and Russell Indexes last year who also downgraded Greece to emerging market status. The FTSE index has Greece on its developed market watchlist. 

The changes to the S&P Dow Jones emerging BMI index will become effective on September 22 ... The Greek government have done nothing to restructure their public sector and are now talking about tax cuts! The EU is terrified because Syriza are leading in the opinion polls and are saying that the will refuse to pay back any of their loans (until economic prosperity returns LOL) and will restore all wage and pension cuts to the public sector. They are also talking about a campaign to cause the break up of NATO should they gain power. Greece has been downgraded to an emerging market by S&P Dow Jones Indices, in a blow for the country which was badly hit during the financial crisis.  The Greek market was assigned a weighting of 0.8pc by S&P Dow Jones Indices making it a relative minnow in the emerging market index compared to China which constitutes about a quarter (24pc) of the measure and Brazil and India which make up 11.3pc and 10pc respectively 

The shift could mean that pension funds and more cautious investors will have to move out of the Athens stock index. Greek stocks opened yesterday down 0.4pc to 1,156 on the Athens stock exchange and the bond yield on Greek debt increased, meaning that investors view it as a riskier prospect.

The downgrade comes as Greek government officials held talks in Paris at the start of the month to demonstrate that its austerity measures are on track. The talks were organised ahead of a full sixth review of Greece’s austerity programme to be held by troika officials in Athens at the end of this month.

The Greek economy has to fix its finances under the terms of two bailouts worth a combined €240bn

There is another gloomy assessment of the world's jobs market On Tuesday. The International Labour Organisation, the World Bank, and the Organisation for Economic Co-operation and Development (OECD) have produced a labour market update for the G20 employment and labour ministers' meeting in Melbourne.

It highlights "large employment gaps remain in most G20 countries", the grouping of the world's biggest developed and emerging market economies. The authors also say that "the quality of employment remains a concern" and that "the deep global financial and economic crisis and slow recovery in many G20 countries has resulted not only in higher unemployment but also in slow and fragile wage gains for G20 workers." The paper concludes: "Seven years after the onset of the global financial and economic crisis, the economic recovery may be strengthening but remains weak and fragile. The employment challenges across most G20 countries are still very sizeable both in terms of a persistently large jobs gap and low quality of many available jobs."The current growth trajectory, if unchanged, will not create enough quality jobs – giving rise to the risk that the jobs gap will remain substantial, underemployment and informal employment will rise, and sluggish growth in wages and incomes will continue to place downward pressure on consumption, living standards and global aggregate demand. Underlining these challenges is the fact that income inequality continues to widen across the G20 countries. "The G20 commitment to boost GDP by more than 2% by 2018 over and above the baseline projections is certainly a welcome step, although it will be important to ensure that this additional growth is job-rich and inclusive"....Of course the report is gloomy - and if the present way of sharing out work is to persist it can only get gloomier. Automation is creeping through every aspect of our lives, gone way beyond the industries now and the amount of work left for humans dwindles by the day.It pays businesses to get rid of people wherever they can - people are its greatest expense. They are now commodities to be plugged in then cast aside as the profit/loss account dictates. Unless someone thinks up something soon to share out what remains of human work, the whole edifice will collapse. People unemployed? No money to spend? - No one to buy the outpourings of these factories; to buy services etc. No wonder the rich are worried about the "stagnant" economy.

France must reform its labour rules. The Unions must be tamed. The 35 hr week is nonsense. And employers must be allowed to hire and fire - mobility of labour is imperative. The only way economies can be rescued is by relaxing labour rules and by encouraging employers and would be employers to take on more workers - but the regulations must be permanent. If more people are in employment, social security payments will be reduced, income taxes will rise, overall production will rise and the voters will feel more content. Do not allow Unions to dictate nor politicians who buy votes by promising more entitlements. Many people will inevitably vote for freebies but politicians need to be responsible....The 35-hour limit to the working week, regardless of who you are and what you do (except of course M. Hollande, who has much more important things to do and not enough time to do them in...) stems from the stupid left-wing idea that there is a finite amount of work to go around. It was introduced as a way of supposedly reducing unemployment by sharing this work around. This naivety is shared by lefties everywhere, and explains why health, education and other needs of society must be shared out equally. Hence the leftie hostility to buying a better education or private health care. In fact work creates work (ask any successful self-employed person). Being creative, whether it be widgets, services or arty-farty things generates the demand for further widgets, services and art-farty things, and more jobs, for as many hours as people are willing to work. The French have been unbelievably stupid in failing to see this, so it is no surprise that they have shot themselves in the foot and their economy is barely breathing. Mind you, this disease is not limited to the French; the UK has a healthy dose too. The mind boggles at what this nation of ours could achieve if government and the EU was not stifling enterprise with excessive taxes, rules and regulations.

About the European no-union...

BRUSSELS, August 31 /ITAR-TASS/. Slovakia said it might veto new EU sanctions against Russia, Slovak Prime Minister Robert Fico said after the EU summit on Sunday.

“I believe that the sanctions will become senseless and counter-productive. Slovakia may use its right of veto,” Fico said, explaining Slovakia would use its right of veto if it decided that the new anti-Russian sanctions would undermine its economic growth.

The Slovak prime minister said there was no point in imposing new sanctions until the EU knew the results of the previously adopted penalties. In July, the European Union imposed economic sanctions against Russia over it policy in eastern Ukraine. They include a ban on conclusion of military contracts; restrictions on acquisition of some new technologies, equipment and materials for its oil sector as well as some restrictions on banking services.

Maja Kocijanic, a spokeswoman for the EU high representative for foreign affairs and security policy, said last Friday that the EU Commission was still to analyze the consequences of the EU-imposed anti-Russian sanctions.

The EU summit has given the EU Commission one week to prepare proposals on tougher sanctions against Russia, European Commission President Herman Van Rompuy told a news conference after the EU summit in Brussels. He said the further steps on sanctions would depend on the situation in Ukraine, which was getting worse every day. The EU summit noted the recent escalation of military conflict in Ukraine of which it had been informed by Ukrainian President Pyotr Poroshenko.  The European Council voiced its concern with the Russian military presence in Ukrainian territory.

Un premier sondage cruel, pour ne pas dire effrayant ! 59 % des personnes interrogées par le nouvel institut Odoxa approuvent le limogeage d'Arnaud Montebourg par François Hollande et Manuel Valls. Les sympathisants du PS sont même plus nombreux (75 %) à approuver cet acte d'autorité que ceux de la droite (57 %).
Mais, ce coup d'éclat ne renforce pas la confiance des personnes interrogées dans l'exécutif. Loin de là ! Huit Français sur dix pensent que la politique économique du gouvernement n'est ni juste, ni claire, ni efficace... "Même les sympathisants de gauche ne sont qu'une minorité à penser que cette politique sera claire (36 % seulement) et efficace (34 %)", souligne Gaël Sliman, président d'Odoxa. On ne pouvait cauchemarder pire résultat...

Le clou de ce sondage (*) est que le refrain de la dissolution entonné depuis plusieurs mois par la droite fait de plus en plus d'adeptes. 63 % des sondés demandent à Hollande de dissoudre, alors qu'ils n'étaient que 52 % en novembre 2013. Des résultats inquiétants car l'une des vertus d'un remaniement ministériel est de redonner de l'air et de la confiance à la nouvelle équipe. Un "effet de bord" positif totalement invisible selon l'institut Odoxa...

The EU and ECB do much talking but do little in the way of action, meanwhile people continue to suffer in Cyprus, Greece, Portugal, Spain, Ireland. The EU/ECB are 5 years behind US and UK and 2 years behind Japan.The crisis has left Europe with three distinct problems: shaky public finances, crippling long-term unemployment, and limping banks. This summer’s news suggests they are coalescing to form Japanese-style vicious circle. The bond market turmoil was fixed by a dramatic intervention by the European Central Bank (ECB) in summer 2012. Interests rates for the most vulnerable economies – Portugal, Italy, Ireland, Greece, Spain – are down to historic lows; too low, a pessimist might argue. But the price that Germany exacted for ECB president Mario Draghi’s rescue was exorbitant: Europe-wide acceptance of a punishing austerity agenda. Even in Germany itself, where the federal government has reached fiscal balance, the pressure is now on its states, the Länder, which are struggling to balance their books by 2018. Austerity proponents such as finance minister Wolfgang Schäuble insist that squeezing public expenditure will free up private investment. But Europe’s banks, with Deutsche Bank very much in the lead, remain in a state of shell shock. Whereas the US and the UK have moved rapidly to put in place new, confidence-boosting regulation, Germany has been dragging its feet over a European banking union. As the summer ends, the sense of impasse is inescapable. Germany cannot truly prosper without a growing Europe. Europe cannot prosper without ​exporting to a buoyant German economy. But with the Christian Democrats in charge of German fiscal policy, is there any hope of change?

I imagined the U.S. GDP will be going up a bit more since Israel will have used up lots of ammunition and shooty things and will have to replace them. Bombing things works wonders for GDP. As do car accidents, fires, natural disasters of all kinds and human suffering in general, all of which will induce people to go out and buy stuff to cheer themselves up. Even better, create an atomized society of really sad, lonely people who will consume lots and lots of trash to convince themselves that their empty lives have meaning. Oh no, hang on, we've already done that. Back to bombing things thenThe US is facing economic disaster...all the indicators are there. First of all the College debt stands at 800billion and is shackled around the neck of college graduates before they even start their working career. Its a scam, education should be the first priority of a government not some ponzi scheme, it should not be a power that shackles people into enslavement at no cost to the corporate juggernauts.(coming to the UK soon)

They made a poll some time ago on doctors in the US and 40% said they would have done something different if they had known the hassle of the death and the years of hard work it took to get to a break even point.  Watching the US news they seem to be praying on another upswing in the property market for economic recovery. Yes because property bubbles have proven to solve all problems...and now you can also get subprime loans to buy cars(GMs favourite tactic)another disaster in the making.  Then you have the serious economic issues linked to climate change which is really knocking the GDP with all the repair costs and knock on effects. The state of California and Nevada are bone dry, the armageddon coming from the water shortages are going to have massive repercussions for the rest of the US especially when you consider that California is the bread basket of America. And then lets not talk about the Fed who have been printing money like nobodys business...the only way thats sustainable is if the Dollar remains the default currency of the world any seismic shift to that thinking would tank the US economy immediately.

Howard Archer, chief European economist at IHS Global Insight, said he believed the ECB would "sit tight for now at least". The ECB last month took its deposit rate into negative territory - effectively charging lenders for parking money with the central bank - a move which may take time to take a toll on the economy.  Nonetheless he added that continued low inflation meant that "expectations will likely persist that the ECB will ultimately have to take further action".  Within the headline inflation figure, price drops in vegetables, telecommunications and fruit offset rises in the cost of tobacco, restaurants and cafes and rents. ...Consumer prices in the eurozone rose 0.5pc in the year to June, unchanged from a month earlier, according to latest official figures.   Core inflation, which strips out the more volatile elements of energy, food, alcohol and tobacco, however edged up to 0.8pc in the year to June, from 0.7pc a month earlier.  The increase in core inflation is likely to ease fears that the bloc could enter a deflationary spiral and ease pressure on the European Central Bank to unleash further stimulus.  How about this! Inflation will likely dip by another 0.1% over July-August, cheaper food, less energy but come up again around September-October (first heating needed). This may well just allow the ECB, especially if there is no further deceleration in German growth and FRITSP flatten the tiniest bit, to avoid physical QE.
Germany will not support QE, other than with meaningless,metaphysical mumblings, but the slither of improvement and the national preponderance of Germany, well understood by JUncker 87, will allow Germany to accelerate 'more Europe' in terms of 3% budget (that France keeps delaying), a real banking union with realish stress tests, some form of not too debilitating FTT, common EZ business taxes etc. I think a short period of very, very slight improvement will cause a 'more Europe' drive and stop QE being an issue. The 'more Europe'will show us, notably in France, Italy and Portugal, how much political distrust, intolerance and national anger the euro has caused.

However, the EZ inflation figure of 0.5% is meaningless as the EZ is NOT one country.  What I want to see is the inflation rate for each EZ member state to see whether the 0.5% rate hides wide variations in inflation, as I suspect it does. What, for example, is the inflation rate for the EZ if you take Germany out of the equation?  If Germany, for example, has a lower rate of inflation than most other EZ countries, then we can conclude that Germany is becoming more competitive which would be bad news for the poorer member states trying to compete with Germany in the single market. But if other poorer EZ countries have a lower rate of inflation or even falling prices compared to Germany that too is very bad news for poorer EZ countries as that would mean falling tax revenues, falling wages and falling purchasing power in the economy and all that would combine to increase budget deficits and pressure on national banks.  What is needed from an economic point of view for the EZ is for Germany to have price inflation of 4% and everyone else to have price inflation of 2% for several years. That won't happen and therefore the gap between the richer member states led by the economic powerhouse of Germany over the poorer members will continue to get progressively bigger year after year. It is worth noting hat the gap between Germany and the poorer member states was closing before the advent of the Euro and that the Euro has permanently reversed this process. It is worth bearing in mind that German inflation rose from 0.6% to 1.0%. Across the majority of the euro-zone inflation actually fell even further. The euro-zone is still slipping towards the abyss even after Draghi's intervention last month. Draghi of course will use this "stable" situation as an excuse to once again do nothing.

The head of the International Monetary Fund has warned that a persistent violation of ethics among bankers and rising inequality pose a major threat to growth and financial stability.

Christine Lagarde told an audience in London that six years on from the deep financial crisis that engulfed the global economy, banks were resisting reform and still too focused on excessive risk taking to secure their bonuses at the expense of public trust.

She said: "The behaviour of the financial sector has not changed fundamentally in a number of dimensions since the crisis. While some changes in behaviour are taking place, these are not deep or broad enough. The industry still prizes short-term profit over long-term prudence, today's bonus over tomorrow's relationship.

"Some prominent firms have even been mired in scandals that violate the most basic ethical norms - Libor and foreign exchange rigging, money laundering, illegal foreclosure."

Lagarde warned the too-big-to-fail problem among some of the world's largest financial institutions was still unresolved and remained a major source of systematic risk, with implicit subsidies of $70bn (£42bn) in the US, and up to $300bn in the eurozone.

In a speech littered with quotations from Winston Churchill to Pope Francis and Oscar Wilde, Lagarde said international progress to reform the financial system was too slow. "The bad news is that progress is too slow, and the finish line is still too far off. Some of this arises form the sheer complexity of the task at hand. Yet, we must acknowledge that it also stems from fierce industry pushback, and from the fatigue that is bound to set in at this point in a long race." Lagarde told the inclusive capitalism conference that rising inequality was also a barrier to growth, and could undermine democracy and human rights. The issue has risen up the agenda in recent months with the publication of the French economist Thomas Piketty's book, Capital in the Twenty-First Century.

"One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy," Lagarde said.  Borrowing from Oxfam research, she noted that the world's richest 85 people, who could fit into a single London double-decker bus, control the same wealth as the poorest half of the global population of 3.5 billion people.

Options to address inequality include more progressive tax systems and greater use of property taxes, she said.

"We must recognise that reducing inequality is not easy. Redistributive policies always produce winners and losers. Yet if we want capitalism to do its job – enabling as many people as possible to participate and benefit from the economy – then it needs to be more inclusive. That means addressing extreme income disparity."

Lagarde compared the rising awareness of social responsibility tied into the financial system with the world's expanding environmental consciousness. "Just as we have a long way to go to reduce our carbon footprint, we have an even longer way to go to reduce our 'financial footprint'. Yet we must take those steps."

Source EU Observer - BRUSSELS - The setting could not be less spectacular – one of the more nondescript rooms in the European Parliament's glass towers overlooking Place Luxembourg in Brussels, where a handful of officials gather with armfuls of papers.  At intervals, members of the Parliament's catering staff silently walk round the room offering tea and coffee. Unless you were involved, you wouldn't know that the meeting – one of around 1,000 so-called 'trialogue' meetings to take place in 2013 – was actually happening.  At this particular gathering to discuss plans to re-write the EU's accounting directive in March 2013, MEPs from the Parliament's legal affairs committee – Klaus Lehne, Arlene McCarthy, Eva Lichtenberger, Alexandra Thein and Saj Karim – made a breakthrough.  They secured rules that will shine a light on the payments made to governments by companies working in the controversial extractive industries – rules that should help prevent corruption and dodgy dealing between companies and governments.  An Irish government official, whose country has been tasked with leading the talks (because Ireland held the rotating EU presidency at the time), agreed that, without exception, all payments over €100,000 must be publicly disclosed. This will apply to every individual project or contract undertaken by a company.  The new reporting requirements will mark a sea-change in how the industry is regulated yet the trialogue meeting where it happened remains a closed process.  Search for any mention of trialogues in the EU treaties and you will draw a blank.  This is because despite being an accepted part of the lawmaking landscape, in legal terms trialogues don't exist.  All trialogue meetings are informal and the timing of the meetings are not known to most MEPs, let alone the ordinary public. There are no formal minutes taken. Some are over within a few minutes. Others can go on all day and well into the night.   The last trialogue on the single resolution mechanism (SRM), the final, and arguably most controversial piece of banking union legislation, lasted 16 hours through the night on 19 March as lawmakers sought (successfully) to close a deal in time for the end of the parliamentary term.  Despite the sense of intrigue that should surround a lawmaking process that few people are aware is happening, attending the average trialogue meeting would be a perfect cure for insomniacs, as civil servants and politicians drone through a bill line by line, article by article.  But they matter. If the EU's bi-monthly leaders' summits are the glamorous (in the loosest sense of the word) side of the EU, the trialogue meetings are the main engine driving the sausage factory that churns out EU laws in Brussels.

The triumph of the trialogue - In terms of numbers, the volume of legislation does not appear to have changed much in the past two legislatures. MEPs and ministers adopted a total of 447 laws in the 2004-9 parliament. By November 2013, politicians had signed off on 395 files and, even with a wild flurry of activity as they seek to conclude as much legislation as possible before May's elections, the total number of files is likely to be around 500.  But what has changed is the way the laws are agreed.

The formal structure for breaking the impasse between the institutions mentioned in the treaties is the conciliation committee.

The European Parliament (EP) has adopted new rules to fight money laundering. The main purpose of the new Anti-Money Laundering Directive is to guard the stability of the financial system from money laundering and terrorist financing. It provides authorities with new tools to prevent criminals from legalising illicit proceeds. The EP has introduced several changes in the European Commission's proposal, a key change being the introduction of an EU-wide register of beneficial ownership. The register would make it possible for police and tax authorities to uncover who is actually the true beneficiary of any EU legal entity, making life much more difficult for criminals. "For years, criminals in Europe have used the anonymity of offshore companies and accounts to obscure their financial dealings. Creating an EU-wide register of beneficial ownership will help to lift the veil of secrecy of offshore accounts and greatly aid the fight against money laundering and blatant tax evasion", highlighted the European Parliament Rapporteur on this issue Krišjānis Kariņš MEP.

Illegally-laundered money accounts for as much as 5% of the world's GDP and is a challenge both for the competitiveness of the legal sector as well as for government coffers. The 4th Anti-Money Laundering Directive is aimed at limiting the scope of criminal and terrorist activity in Europe. Estimates suggest that money laundering accounts for as much as 2.7% of the world’s economic activity (GDP) - or $1.6 trillion in 2009. This is a challenge for both the competitiveness of legal business, as well as for government coffers. A key change supported by the EPP Group and the other political groups is the creation of an EU-wide register of beneficial ownership which is necessary to stop criminals from hiding behind company structures and trusts. The register would make it possible for police and tax authorities to uncover who is actually the true beneficiary of any EU legal entity, making life much more difficult for criminals. Additional changes include exemptions for certain gambling services and products (e.g. state lotteries), subject to approval by the European Commission, certain exemptions for e-money products, the introduction of a 'white list' - jurisdictions with high anti-money laundering standards, the introduction of a 'politically-exposed persons' list – a list of high-ranking government officials, Members of Parliament and others in similar positions.

The EP adopted the changes to the Directive at first reading. It is awaiting the Council's position. "The EP has taken a tough stance against secrecy that aids criminals in hiding their proceeds. History repeatedly shows that criminals, corrupt politicians and dictators have legalised their illicit proceeds in the European Union. We should put an end to this. Today is a good day for law-abiding citizens, but a lousy day for criminals", concluded Krišjānis Kariņš MEP.

Six of the world's leading central banks, including the US Federal Reserve, say they will provide each other with ready supplies of their currencies on a standing basis, extending arrangements set up to steady the global financial system during post-2007 turbulence.

The decision, announced on Thursday, extends currency swap arrangements that until now had been considered temporary measures.

The central banks are: the Fed, the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank.

The so-called swap lines enable those central banks to make sure banks in their home countries can always borrow ready cash from them in any of the currencies involved, should they need it.

The ECB said the arrangements "have helped to ease strains in financial markets" and "will continue to serve as a prudent liquidity backstop".

The Fed and the ECB started their first dollar-euro swap arrangement in December 2007 as the losses on mortgage-backed bonds began to shake the banking system. Subsequent bilateral deals between the different banks were added during the financial turbulence that followed, which included the collapse of the US investment bank Lehman Brothers in 2008, sudden extreme falls on stock markets, the subsequent recession and Europe's crisis over too much government debt in several countries.

Central banks serve as custodians of their countries' currencies and play an important role in supporting the stability of banks so companies can do business and the economy can function properly.

They typically provide liquidity – ready cash to meet the demands of everyday business – to their banks, even when banks may be having trouble borrowing elsewhere due to market trouble. With the new currency arrangements, they can do this in currencies other than their own.

For example, the European Central Bank holds credit offerings in US dollars for periods of seven days and three months, offering as much in dollars as European banks may want in return for collateral such as bonds or other securities.

World Bank cuts China growth forecasts - America's deadlock isn't the only issue worrying the City today. The World Bank has warned that East Asia's economic growth is slowing as it cut its GDP forecasts several nations, including China.

In a new report, the Bank said weaker commodity prices means weaker growth in the region. It also urged Chinese policymakers to tackle the consequences of recent loose policy and tighten financial supervision.

Here's a flavour:Developing East Asia is expanding at a slower pace as China shifts from an export-oriented economy and focuses on domestic demand," the World Bank said in its latest East Asia Pacific Economic Update report.

"Growth in larger middle-income countries including Indonesia, Malaysia, and Thailand is also softening in light of lower investment, lower global commodity prices and lower-than-expected growth of exports," it added.

It now expects the Chinese economy to expand by 7.5% this year, down from its April forecast of 8.3%. For 2014, the forecast is cut from 8% to 7.7%.

Greece may need a third aid package as soon as next year, Klaus Regling, the head of the European Stability Mechanism (ESM) permanent bailout fund is quoted as saying in the Friday edition of the German business daily Handelsblatt. He also said that it was conceivable that Greece might not be in a condition to raise money by selling sovereign debt on the open market in 2014.

"Given these circumstances, Greece will probably need another aid package," Regling said, which would require the approval of the finance ministers of the 17 euro-zone countries.

Regling is not the first to publicly voice expectations that there will be a third bailout package for Greece. In August, German Finance Minister Wolfgang Schäuble expressed a similar belief although he explicitly noted that it would have to come without fresh payments from other euro-zone countries.

In the interview, Regling also criticized as "irresponsible and unfounded" the fact that "some in Northern Europe are stoking fears against the euro." The costs and risks associated with the euro bailout need to be assessed in a reasonable manner "in Germany too," he added.

So far, Greece has received two large bailouts. The first aid package included €110 billion ($150 billion) and was first agreed upon by the euro-zone member states and the IMF in 2010 (see table). Back then, the permanent euro bailout fund had not yet been established, so €80 billion of the loans provided at the time came from the individual euro-zone countries. But only €53 billion of these loans were actually paid out to Greece.

A leading member of Germany's leftwing Die Linke party has warned that a grand coalition between Angela Merkel's CDU and the Social Democrats would leave the country with a weak opposition unable to stand up to a powerful government.

Gregor Gysi, writing in the Guardian, says: "Europe will be watching how serious Germany is about democratic principles."

A powerful coalition is looking the most likely outcome of negotiations between the parties, particularly after the SPD's leadership announced on Friday that they would start exploratory discussions with the CDU next week.

Gysi says such a coalition would have 503 out of 630 seats in the Bundestag, leaving only 127 seats for Die Linke and the Greens. This would mean that they could not effectively interrogate or block legislation passed by parliament.

A former member of the East German Communist party, Gysi was a key figure in Die Linke's election campaign. The party gained 8.6% of the vote in last Sunday's general elections, making it the third largest force in the next parliament.

However, the party suffered a 3.3% decline in its share of the vote from the last election, losing 360,000 voters to the newly formed anti-euro Alternative für Deutschland (AfD), particularly in the east where Die Linke has traditionally been most successful.

In an interview on Friday, Die Linke's party leader, Katja Kipping, has suggested a joint member's vote among all left-of-centre parties on the country's political future. "The cleanest solution would be if all parties left of the centre would ask their base if they preferred red-red-green or a coalition with Merkel," she said.

A coalition between the SPD, the Greens and Die Linke would achieve an overall majority over Merkel's party and its Bavarian sister-party, the CSU, but any coalition with Die Linke is still considered a taboo because of some of its politicians' links to the old communist GDR regime. Both the Social Democrats and the Greens have ruled out such a union for now.

Either way, it is looking increasingly unlikely that the next German government will be formed any time soon. According to a report in Süddeutsche Zeitung, the SPD is also considering a member's vote on the possibility of a grand coalition.

Such a vote would most likely be held before the party's conference in mid-November. Many party members are said to be against a grand coalition since the party suffered from such an arrangement in 2005 – 2009.

In spite of Merkel's triumphant win on Sunday, the onus is on her to coax a reluctant SPD into coalition talks. Tax rises, dual citizenship and the introduction of a minimum wage have been mooted as areas in which the conservatives may make concessions in order to lure the Social Democrats to the negotiation table.

According to a survey by state broadcaster ARD, a grand coalition would be the solution most favoured by German citizens. Forty-eight per cent of those asked would most like to see a coalition between the CDU and the SPD, while only 16% would prefer a red-red-green accord.

Five banks – Wells Fargo, JP Morgan, Citigroup, Bank of America and Ally Financial – hit in 2012 with bill totalling £15.6bn for abusing the procedures to repossess homes.

$9.3bn 13 Banks, including JP Morgan, Wells Fargo and Bank of America, ordered this year to pay equivalent in cash and other help to homeowners for abusing procedures to repossess their homes. $1.9bn

HSBC's 2012 fine for failing to prevent money laundering on a massive scale.

$1.5bn

UBS (Switzerland) was fined this much last year for manipulating Libor, the interbank lending rate.

$1.4bn

10 banks, including JP Morgan and Goldman Sachs, hit in 2003 with fines for serious conflicts of interest between their research for investors and their investment banking businesses.

Tullow Oil, one of the Britain's most successful exploration groups, has made its first discovery in the Arctic in a move which will encourage more drilling and anger green groups campaigning against fossil fuel extraction in the region.

Shares in Tullow climbed more than 3% as well operator OMV said it had struck a reservoir in the Barents Sea off the far north of Norway which could contain up to 160m barrels of oil and 40bn cubic feet of recoverable gas.

"This is a major frontier light oil discovery for Norway, Tullow Oil and our co-venturers. We look forward to pursuing the exciting exploration and appraisal follow up arising from this breakthrough discovery," said Angus McCoss, exploration director at Tullow, which holds a 20% stake in the prospect.

"The well results are a breakthrough for the regional exploration activities as the presence of good quality oil shows the possible large potential of an area, which will see more exploration drilling in the near future," said OMV in a statement.

The Austrian company said the production licence 537 in which the well was drilled could hold as much as 500m barrels of oil equivalent based on similar geological evidence nearby.

Tullow has become a stock market favourite on the back of major discoveries in Uganda and Ghana that helped establish those African nations as new oil producers.

The company, led by Irishman Aidan Heavey, has also become the targets of various campaign groups who have accused it of political lobbying, tax avoidance and even bribery, allegations it has steadfastly denied.

But the oil strike in the far north is a significant step for Tullow, which last autumn bought a 40% stake in exploration acreage of Greenland just weeks after the boss of French oil group, Total, said drilling in the Arctic should be abandoned because of the potential reputational and environmental damage if there was an oil spill.

In March this year a new government in Greenland put a moratorium on the granting of fresh oil and gas licences in its Arctic waters but existing licences are still valid. British oil company Cairn Energy, which pioneered a new bout of exploration off Greenland two years ago, said it would resume its controversial exploration in that area in 2014.

Greenpeace has made protection of the far north one of its key campaigns and last month its Arctic Sunrise vessel was chased out of Arctic waters by Russian coast guards after it approached a drill rig working for Moscow-based oil company, Rosneft.

Russia and Norway signed an historic agreement to carve up the Barents Sea between them in 2010, a move which was expected to herald much more drilling in the region.

The Oslo government unveiled 20 new exploration licences in the Barents during the summer and Statoil has already made big finds in the more southerly part of the Barents

Andrew Whittock, an oil analyst with Liberum Capital in London, said the Tullow find was significant although these were early days to try to assess the reservoir's ultimate potential. "This proves a new shallow play in the region. Good news but (it) needs more appraisal."

The funds to back

For brave investors, Mr Fahy has previously recommended Artemis European Growth, up 42pc over the past year but he added: "If investors are looking for ‘cheap’ – then the obvious market to be dripping money into is China."

Ben Yearsley of Charles Stanley Direct, a low-cost fund supermarket, is also lukewarm on European stock markets but said: "Looking for the positives, Europe doesn't look expensive and the dividend yield from equities is good so it could be bought and tucked away for the long term."  He favors Henderson European Special Situations (with a typical historic annual cost of 1.76pc), managed by Richard Pease, and Jupiter European fund (1.79pc) and Jupiter European Opportunities investment trust (1.12pc), both managed by Alex Darwall. Blackrock European Dynamic (1.68pc) is another favorite. "All are run by good quality, long-term managers," added Mr Yearsley.

Cheap tracker funds

For cheaper options, consider a fund that only tracks the market. The Vanguard FTSE Developed Europe fund charges 0.25pc a year and yields 2.6pc.  A year ago, the dividend yields, which give a rough indicator of value, were stunning on some European stocks with Swiss drugs maker Novartis paying nearly 5pc and German insurer Allianz at 4.6pc. Today they pay 3.6pc and 2.8pc, respectively. Investors have certainly missed the buying opportunity of a year ago. Those who want to back only high-yield stocks could consider the iShares DJ Euro STOXX Select Dividend 30, an exchange traded fund that can be brought through a stockbroker. Its annual cost is 0.4pc and it yields 6.2pc.

Cheap shares

David Dudding, who runs the Threadneedle European Select fund, which has returned 91pc over five years compared with an average 35pc for the sector, said: “Pricing power is everything in share investing.” Two examples he cites are Nestle, the food giant, and Kone, a lift manufacturer. “The market sees Nestle as a boring dividend payer,” he said. “I see it as an attractive growth stock. Meanwhile the lift market is very hard to break into. It takes a long time to build up significant scale, so there’s little downward pressure on prices and firms have great repeat business from maintenance contracts.” Advisers say long-term investors should have some exposure to Europe to keep a balanced portfolio, although this could also be achieved through a global fund. Mr Fahy tips Artemis Global Income which has 23pc of investors money in Europe. He added: “If you believe the eurozone can continue to muddle through for the remainder of 2013, then hold your nose and stay on your toes, ready to take profits.”