The US Federal Reserve has raised interest rates for only the second time in a decade.
Janet Yellen, the chairman of the Fed, described the move as “a reflection of the confidence we have in the progress that the economy has made and our judgment that progress will continue”.  But with “considerable uncertainty” surrounding the economic outlook, how is Donald Trump’s election as US president likely to shape the path of interest rates?   After the financial crisis, the Fed slashed rates close to zero in a bid to support economic activity and prevent a bigger rise in unemployment.
It kept them there until December 2015, when it raised its target range to between 0.25pc and 0.5pc.

Back then, policymakers signalled that four more interest rate rises were on the way if world events turned out as they predicted.  They didn't.  At the start of 2016, stock markets were rocked by fears over the Chinese economy, and policymakers opted to keep rates unchanged, noting that they were "closely monitoring global economic and financial developments".  The Brexit vote in June also caused concern among policymakers.  Even before the vote, policymakers noted that "the upcoming British referendum on membership in the European Union could generate financial market turbulence that could adversely affect domestic economic performance." While the Fed's mandate states that policymakers must "promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates" in the US, global events matter.  The US presidential election also gave policymakers reasons for pause.  At the start of last month, they judged that "the case for an increase in the federal funds rate [ie. interest rates] has continued to strengthen but [we] decided, for the time being, to wait for some further evidence of continued progress toward its objectives."  While the UK voted for Brexit and the US voted for Donald Trump, the market reaction has been relatively calm.Investors are now expecting a mini-economic boom in the US and have pulled cash out of bonds and emerging markets and into US equities. Following last night's announcement, yields on two year Treasury bonds climbed to a seven-year high on expectations of faster rate hikes.
Implied borrowing costs across Europe also ticked higher, with UK benchmark 10-year gilt yields

Raiffeisen Bank has snuck a gloomy prediction for the Romanian economy in the prospectus of the MedLife IPO, which it intermediates. "Most analysts claim that Romania needs a new stand-by agreement with the IMF", the MedLife prospectus , published yesterday in order to inform the investors interested in the Romanian stock market and in the MedLife shares in particular. The announcement is mind-boggling, especially as politicians and government members assure us that we are going to have economic growth, higher wages and lower taxes. Furthermore, prime-minister Dacian Cioloş has publicly announced that he would challenge all populist laws with the Constitutional Court. "Raiffeisen Bank" has dropped the aforementioned "bomb" in the Medlife IPO, five days ahead of the parliamentary elections. Except it hasn't taken responsibility for it directly, instead alleging this idea is the result of consensus from "most analysts", without naming them. It is not out of the question that "Raiffeisen Bank" just wanted to make noise and draw attention from investors, as the Romanian stock market has failed to become attractive, despite the projects for expansion conducted by the Bucharest Stock Exchange (the Project to remove the barriers to the entry on the stock market) and by the Financial Oversight Authority (the STEAM project, which has as its goal the move up to the emerging market status) and having brought in Pole Ludwik Sobolewski as CEO. Despite all these efforts, the BSE daily turnover only occasionally passes 7 million Euros a day. "Raiffeisen Bank" has stood out lately, precisely by the fact that it has threatened the Romanian government with a lawsuit in the International Court of Arbitrage, as well as following the ruling of the Supreme Council of Magistrates (CSM), which accused the bank of trying to intervene in the ruling rendering process in relation to the laws concerning the banking sector. The bank later changed its tune and sponsored an event of the Romanian government, which was attended by German finance minister Wolfgang Schauble.

EU council chief Donald Tusk has left his meeting with Mr Tsipras and given a short statement to reporters.  Here's what he had to say: "I have called this summit because time is running out, not only for Greece but all of us. We only have one week before the current programme expires. This means the lets-wait-and-see strategy must end.  "It is my responsibility to ensure we respect all taxpayers in all a countries. If they hadn't borne the burden of austerity, they wouldn't be able to help Greece today.  " I am absolutely convinced that the blame game leads nowhere. I want all cards on the table. This doesn't mean negotiating technical details, but to end the political gambling. Since I called this informal meeting, some promising things have happened, including today's talks. And the latest Greek prosposals are the first real proposals in many weeks, although they still need an assessment from the institutions.  "We must avoid the worst case scenario, which means an incontrollable, chaotic Greixdent." ...George Saravelos of Deutsche Bank highlights that the only thing keeping Greece in the euro is the ECB.   The central bank moved to raise its ceiling on emergency funds today by a further €1.3bn as the country is in the throes of a bank run. Saravelos now thinks the ECB will now be called upon every day to hike its liquidity limit to prevent a banking collapse. But, in order for that to happen, European leaders need to provide some positive signs out of tonight's series of meetings.  Some insights:  Written acknowledgment of progress is likely to be required to maintain ongoing ECB financing of Greek banks, with the central bank approving an additional increase in ELA provision to the Greek banking system this morning given accelerating deposit outflows. Given the scale of deposit outflows and ECB discomfort with rising exposure, ELA approval is likely to take place on a daily basis over the course of the week depending on the evolution of talks.  If progress is achieved over the course of the day, the Euro leaders summit is likely to open discussions for post-programme arrangements, though press reports that a parallel discussion around a "plan B" of a breakdown in talks is also possible.  The Euro leaders summit is likely to address some of the parameters for a third programme, inclusive of the potential for debt relief. We would expect a re-affirmation of the November Eurogroup 2012 commitments on the latter to be the most likely outcome.  Nothing is likely to be finalized unless a full staff-level agreement has been reached between Greece and its creditors over the next few days. There will be a second (and likely last) opportunity for Greece to be discussed at the Euro-area leaders level in Thursday/Friday’s EU leaders’ summit.

The eurozone recovery is weak, its financial markets too fragmented, and the region risks falling into deflation, the International Monetary Fund has warned. The IMF urged members to shore up the single currency bloc, including repairing bank balance sheets and stepping up reforms to boost employment. It repeated a recommendation that the European Central Bank should be ready for quantitative easing should inflation stay too low. The Washington-based body concluded after its latest visit to the region that the euro area recovery was taking hold and action by national politicians and the ECB had helped boost investor confidence. But the euro-skeptic outcome of the European elections posed risks to the single market and the economic recovery was "neither robust nor sufficiently strong". "The recovery is weak and uneven. Inflation has been too low for too long, financial markets are still fragmented, and structural gaps persist: these hinder rebalancing and substantial reductions in debt and unemployment," said the report. It was completed in June, before troubles at one of Portugal's biggest banks sparked the latest bout of jitters in financial markets. The suspension of shares in Banco Espírito Santo last week prompted panic selling on both sides of the Atlantic amid concerns it would lead to a wider run on the eurozone's debt-ridden banking sector.  While markets have recouped some of their losses following reassurances from policymakers that the problems are contained, analysts said last week's turbulence was a wake-up call over unresolved problems.  The IMF highlighted "lingering damage" from the crisis, such as high unemployment, particularly among young people, and said that activity and investment were yet to return to pre-downturn levels. Growth was unevenly spread across countries and the flow of credit to businesses in stressed economies was contracting. "Weakness in banks' balance sheets and uncertainty about their quality are contributing to fragmentation, constraining the ability and willingness of banks to support credit and investment," the IMF said.  The fund added that inflation was worryingly low and deflation a real risk, prompting a raft of policies from the ECB to avoid the region tipping into it.  "Risks to growth are still tilted to the downside. With limited policy space in the near term, further negative shocks – either domestic or external – could undermine financial market sentiment, halt the recovery, and push the economy into lower inflation and even deflation," the IMF said. It painted a long road to full recovery. Growth was expected to accelerate only a little next year, to 1.5% from 1.1% in 2014 – a slight downgrade from April's prediction of 1.2% growth this year. That outlook compares with the IMF's forecast for the UK economy to grow 2.9% this year and for the US to expand 2%.  Inflation in the eurozone was forecast to remain below the ECB's target of around 2%. The IMF predicts inflation of 0.7% this year and 1.2% in 2015.  It recommended that policymakers focus on three areas to strengthen the recovery: supporting demand, repairing balance sheets and advancing structural reforms.  "Such policies would help mitigate risks to the recovery and reduce spillovers from low growth and low inflation to the rest of the world," it added.  It welcomed actions so far by the ECB and said it was reassuring the central bank had expressed willingness to do more if inflation remains too low. Such action should include asset purchases, known as quantitative easing, in the IMF's view.

"Buying sovereign assets, in proportion to ECB capital key, would reduce government bond yields, induce higher equity and corporate bond values, and ultimately raise demand and inflation expectations across the euro area," Monday's report said.... what misleading drivel….the euro zone is not weak…it is bankrupt insolvent skint…how exactly does a bank repair their balance sheet…apart from making profit…and how can they earn their way to profitability when in the real economy millions upon millions of eu citizens are jobless homeless or up to their eyeballs in debt….and most banks are stuffed up to the gills in toxic bonds from greece italy slovenia spain portugal ireland bulgaria …and most eu states have national debts fast approaching 100% of gdp if not greater than 100%..it is misleading because the article can't be referring to earning their way to better books of account so the article must be referring to other ways of improving balance sheets and that is is where it is misleading…..printing money….quantative easing…creating loans out of fresh air….are all just a dishonest kicking the can down the road...

European banks will be expected to prove they can survive a 7% drop in GDP under new tougher stress tests unveiled by the regulator.   It says banks should also be able to withstand a 14% fall in house prices and up to a 19% drop in share prices under a worst-case scenario.  The tests are designed to try and prevent further taxpayer bailouts.  Five months before the European Central Bank becomes the euro currency zone's official bank watchdog, the pressure is ratcheting up on the 124 largest banks to ferret out the worst of the non-performing loans and assets weighing down their balance sheets.   A 7% fall in GDP might look less likely today - but Greece is still emerging from a recession four times more severe than that.   Identifying financial holes on bank balance sheets in is one thing. But plugging them is quite another now that the responsibility is being shifted from governments to bank shareholders and bondholders.  The signs are that sometime soon, lenders in Germany and France may have to join the likes of Italian, Spanish, Portuguese and Greek lenders in finding more capital - principally by asking their investors to cough up for new shares.   The main worry remains what the regulators will do with banks that are seen to fail their tests but can't raise the cash.  By any measure, Europe's collective financial backstop is billions short of the size needed to cope with a new wave of bank meltdowns. "It will provide a common framework for the next stops to be taken by supervisors and banks," said European Banking Authority (EBA) chair Andrea Enria.  The tests are much tougher than the EBA's 2011 stress tests when it projected a worst-case scenario of just a 0.5% fall in GDP.   At the time, the tests were widely criticised for being too soft, particularly after 18 of the EU's 27 countries at that time had weaker growth than the "adverse" case they were tested for.  "The key is that the scenario is at least as deep and dark as the great recession, the financial crisis of 2008/2009," said Mark Zandi, Philadelphia-based chief economist at Moody's Analytics.   Banks that fall short of capital under the EBA's worst-case imagined scenarios will have to produce a plan to boost their reserves by raising fresh funds from investors, selling assets or hanging on to profits instead of paying dividends.  European banks have already made several reforms, including raising billions of capital ahead of the latest tests.  "What we're looking for is relevance of the scenarios, do they address what we believe is the risk on the ground?" said Neil Williamson, head of EMEA credit research at Aberdeen Asset Management.

Experts "travaille" sur les "eurobonds" à Strasbourg - we are screwed !

Les "eurobonds" reviennent. La Commission européenne a annoncé mardi 2 juillet à Strasbourg la formation d'un groupe d'experts pour évaluer les avantages et les risques d'une mutualisation partielle de la dette au sein de la zone euro, vue comme une première étape vers la mise en place d'obligations communes (euro-obligations).

La Commission avait décidé de mettre en place ce groupe d'experts en contrepartie d'un renforcement de la discipline budgétaire décidée au printemps, et sous la pression du Parlement européen. Onze experts font partie de ce groupe, dont l'économiste française Agnès Benassy. Ce groupe devait initialement présenter ses conclusions d'ici mars 2014, mais aucune indication calendaire n'a été fournie mardi.

Le rôle de ce groupe est d'analyser les avantages et obstacles à la mise en place d'un fonds d'amortissement, qui permettrait de mutualiser une partie de la dette de la zone euro, ou la mise en place d'"eurobills", des titres de dette communs à court terme.

PRESSION DE BERLIN - Le sujet est particulièrement délicat car l'Allemagne, qui emprunte à très bas coût sur le marché de la dette, refuse toute forme de mutualisation de la celle-ci au sein de la zone euro. Le sujet a été maintes fois évoqué, et toujours repoussé à plus tard, sous la pression de Berlin.

Pendant la partie la plus aiguë de la crise, de nombreux responsables politiques et économistes plaidaient pour la mise en place d'euro-obligations, afin de faire baisser la pression sur les pays les plus fragiles de la zone euro, dont les taux d'emprunt atteignaient des niveaux insupportables.

"Les membres de ce groupe d'experts, dirigé par M^me Gertrude Tumpel-Gugerell, ancienne membre du directoire de la Banque centrale européenne, possèdent une expertise impressionnante et ont des parcours variés. Je leur fais confiance pour donner des conseils précieux sur ces questions très complexes d'un point de vue politique, économique et juridique", a affirmé le président de la Commission, José Manuel Barroso, qui s'exprimait devant le Parlement européen.

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.

Mired in what economists are calling a "great depression", with its GDP set to contract for a sixth straight year, Greece is projected to see unemployment exceed 30% by the year's end as a growing number of businesses file for bankruptcy. Over 60% of those without work are under 25.

Public-sector firings are among a series of neuralgic points likely to be raised by the troika. Representatives, who indicated they would not be visiting Athens "to renegotiate its rescue package but supervise its economic performance", are also expected to address the thorny issues of progress on privatisations, tax administration reforms and bank recapitalisation.

Paitence is in short supply. Creditors have committed more funds to Greece – at €240bn, the biggest bailout in world history – than any other troubled economy since the tiny nation, revealing the unsustainable level of its public debt, triggered the eurozone crisis in late 2009.

Piling on the pressure ahead of the monitors' visit, the Euro Working Group chief, Thomas Wieser, emphasised that Athens had to keep its side of the deal. "All that was agreed in the bailout plan has must be implemented. These reforms were agreed to make the Greek economy stronger, flexible and more competitive," he told the Greek newspaper Realnews.

Although the IMF has publicly admitted that it seriously underestimated the impact of Greece's recession on its ability to deliver, there are growing concerns over the government's determination to crack down on tax collection – the single biggest drain on the country's economic performance.

A confidential report prepared by the EU and IMF and leaked to the Greek media last week showed that the nation was lagging severely in key revenue targets, with Athens' tax collection mechanism being singled out for particular criticism.

While Greece had managed to rein in public spending – pulling off the biggest fiscal consolidation of any OAED country – tax avoidance, particularly among high earners, remained "astounding", said the report, estimating that at €55bn unpaid tax amounted to nearly 30% of GDP.

Spain ...

The eurozone's fourth largest economy contracted for the seventh straight quarter in the final three months of 2012, shrinking by 0.8pc as the recession worsened by more than previously estimated

Output shrank by 4.7pc, due to a fall in domestic demand, while exports grew by 2.8pc over the quarter, Spain's National Statistics Institute said on Thursday. Economists had expected output to decline by 0.7pc in the three months to the end of December.

“The key numbers are consistent with very weak survey data,” Guillaume Menuet, senior economist at Citigroup, told Bloomberg. “It is about time the real economy numbers match the challenged picture which has become the mark of many countries across Europe including Spain in the last three to six months as across-the-board austerity damages growth.”

Uniunea Europeana va disparea?

Seful Erste a mentionat ca faimoasa plasa de siguranta a Europei in privinta politicilor de securitate sociala a facut continentul „un loc frumos pentru a trai”, dar, partial, a actionat ca o frana in calea spiritului antreprenorial, intrucat „oamenii au realizat ca traiul este mai comod, fara a fi antreprenor”.
Diferitele reglementari impuse de tarile din UE sectorului bancar in urma crizei, pentru a limita fluxurile de capital transfrontaliere, sunt contrare principiilor Uniunii in privinta liberei circulatii a marfurilor, serviciilor, capitalului si fortei de munca, a adaugat Treichl.

„In timpul crizei, numeroase tari, de fapt, toate tarile din Europa, au infiintat garduri, in scopul de a proteja pietele financiare locale. UE a aparut pentru ca frontierele sa dispara, dar in termeni de lichiditate si de capital, in ultimii patru ani au fost stabilite granite din nou”, a precizat Andreas Treichl, pentru emergingmarkets.org.

„Germania ridica granite, Austria la fel, Cehia la fel, aceste lucruri se fac peste tot”.

In tarile din Europa de Vest, autoritatile de reglementare au impus masuri pentru a se asigura ca bancile finanteaza operatiunile filialelor din Europa Centrala de pe plan local, decat cu bani de la parintii din Vest. La randul lor, tarile est-europene au impus masuri prudentiale de prevenire a retragerilor bruste de capital de catre bancile-mama, a indicat seful Erste.

„Daca astfel de lucruri au loc in timpul crizei, e de inteles, insa daca vrem sa avem o Europa in sens economic, aceste situatii trebuie sa inceteze”, a completat Treichl.

„Fiecare tara are o multime de instrumente pentru a impiedica bancile sa mute fonduri in afara tarii. Din tot ceea ce s-a facut nimic nu este ilegal, e doar complet impotriva spiritului Europei”.

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

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

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

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

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

Greek finance minister: Bankruptcy is still a risk - Greece's finance minister has slightly deflated the sense of optimism as we ease into the Christmas break, by warning that the country faces another very difficult year.

Yannis Stournaras has cautioned against getting carried away by recent progress, pointing that things could unravel next year "if the political system finds the situation too difficult to handle".

He made the comments in an interview with the Financial Times, published just a day after Greece's credit rating was upgraded.

Stournaras is not all doom and despair, arguing that 2013 will be crucial:

We can make it next year if we can stick to the programme agreed with the EU and IMF.

But only if the Greek people accept the job cuts and austerity measures that were contained in the 2013 budget. Stournaras warns that this is far from guaranteed:

What we have done so far is necessary but not sufficient to achieve a permanent solution for Greece...The issue now is implementation.

As such, there's a 'possible risk' of Greece leaving the euro, he added, despite Athens having now received its latest aid tranche.

With bond yields falling sharply, and yesterday's general strike passing off peacefully, Greece has reached a calmer state. But it's going to be a grim winter for many Greeks - and Stournaras is clearly concerned that he may struggle to hit his deficit targets and improve the competitiveness of the battered Greek economy.

As he put it:

We still face the possible risk of bankruptcy.

But get through 2013, and the future will be brighter, he added.

A political and economic system in which underachievers forcibly redistribute their mediocrity to the rest of society

E.U = Socialism: A political and economic system in which underachievers forcibly redistribute their mediocrity to the rest of society...or is it ???....Liberal bloggers always point to socialist Europe as a shining example of how wonderful life can be? Oliver Stone is coming out with a documentary about how Hitler and Stalin were just misunderstood. I read daily about how Europe is in economic free fall and see the same in the tea leaves for America. So death and destruction are goals to admire now??? God help us! Oh yeah, god is dead according to these nihilist lunatics. Oh yeah, I can't say lunatic anymore now that Congress has voted to ban that word. I'll stick with God help us.

Life is actually much better for European working class than in the US. US workers are more and more like obedient little slaves, working two jobs just to earn enough for living. 10-12 hour days and maybe two weeks holiday per year. Then they eat shit food which basically poisons them over the decades slowly but surely, causing high cholesterol, hypertension, diabetes and all sorts of other sicknesses. When they got sick, their health insurance is a form of financial torture, designed to find ways to not to pay. Public education is quite crappy and social safety nets are mostly missing.

The creation of the EU and the common currency was never anything more than a thinly veiled campaign to force European nations into a monolithic Socialist union and help the new Soviet Union (EEC) acquire the production and energetic capacities of Europe, while Germany gets to "administer" the EU states. Economists around the globe warned of the consequences and kept on warning over the last 15 -20 years. The voters in Europe ignored the harsh facts and instead chose bread and circus... and now they reap the benefits of their stupidity and greed. The Forth Reich is ruling Europe since the "independent union nations" budgets have to be approved by the Bundestag before being implemented !!! Deucland uber ales !!!

In a dramatic about-turn, German Finance Minister Wolfgang Schaeuble ditched his earlier objections that had led him to clash openly with his French counterpart, Pierre Moscovici, last week over the ECB's role in banking supervision.
With time running out to meet a year-end deadline, both sides managed to settle their differences and Germany won concessions to temper the authority of the ECB's Governing Council over the new supervisor.
Agreement on bank surveillance is a crucial first step towards a broader "banking union," or common euro zone approach to dealing with failing banks that in recent years dragged down countries such as Ireland and Spain.
The next pillar of a banking union would be the creation of a central system to close troubled banks.
The decision also sends a strong signal to investors that the euro zone's 17 members, from powerful Germany to stricken Greece, can pull together to tackle the bloc's problems. 

The European Commission has cut sharply its growth forecast for the eurozone, warning that the "difficult process of rebalancing will last for some time".

It now projects the bloc will narrowly avoid recession next year, growing by 0.1%, compared with its previous estimate of 1% growth, and thinks the EU economy will shrink this year.

Unemployment would also continue to rise next year, the Commission said. The revision helped push global stock markets lower.

The Paris and Frankfurt exchanges closed down 2%, while London's FTSE 100 ended the day 1.6% lower. New York's Dow Jones lost 313 points, or 2.4%, at 12,933, its lowest level since early August.

The euro also weakened against the dollar following the revision, falling by half a cent to $1.278. Against the pound, it fell by a fifth of a pence to 79.93p.

Figures released earlier on Wednesday showing the biggest monthly fall in German manufacturing output since April, also weighed on markets.

As did concerns about the upcoming so-called fiscal cliff in the US, now that the US election has been won by Barack Obama.

"Having been fixated on the US election and the preferred market outcome of an Obama victory, the initial morning feel good bounce [has fizzled out], as markets quickly moved on to the next potential banana skin," said Michael Hewson at CMC Markets.

"In this case there are several, starting with today's Greek parliamentary vote on austerity, not to mention concerns about how the newly elected president will deal with the US fiscal cliff concerns."

Under current plans, $600bn (£375bn) of tax rises and spending cuts will kick in in January, with many analysts saying this will push the US economy back into recession.

Interviewed by the Guardian and five other European newspapers from France, Germany, Spain, Italy and Poland, Hollande also called for monthly meetings of the national leaders of the 17 eurozone countries to end the cycle of "so-called 'last-chance' summits", which he said in the past had led only to "fleeting successes".

He said domestic electoral considerations should not get in the way of solving the euro-crisis. Merkel "is very sensitive to questions of internal politics and to the demands of her parliament. I understand that, and can respect that. But we all have our own public opinion. Our common responsibility is to put Europe's interests first."

France's first socialist president for 17 years also rejected the idea that Germany was the only nation putting its hand in its pocket for everyone else.

"We're all taking part in this solidarity. The French, the Germans, just like all the Europeans in the ESM [the eurozone's new rescue fund]. Let's stop thinking that there's only one country who's going to pay for the others. That's false. However, I know the sensitivity of our German friends to the problem of supervision. Whoever pays should control, whoever pays should sanction. I agree. But budgetary union should be completed by a partial mutualisation of debts through eurobonds."

Hollande's assertion of the need for the eurozone to pool some of its debt through eurobonds challenged one of Merkel's red lines. She has repeatedly refused to countenance the proposal and there is scant chance of her shifting that position as she moves into an election year.

"We are near, very near, to an end to the eurozone crisis," said Hollande. But decisions taken at the last EU summit in June had to be implemented "as fast as possible".

..."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.

QUATRO REICH = THE EUROPEAN UNION

EUROPEAN UNION —The European Central Bank should police the more than 6,000 banks in the euro zone, the European Union's executive said Friday, setting itself up for a clash with Germany, which wants to retain oversight over smaller lenders.  A proposal from the European Commission, to be finalized in coming days, will call for the central bank to set up an agency to take responsibility for supervision of all banks in the 17-nation currency area. The proposal follows a June decision from euro-zone leaders who wanted the supervisor created as a step to break the "vicious circle" between weak banks and governments with strained finances that have eroded confidence in the euro zone. The proposal, however, falls far short of creating the true "banking union" that the ECB and the commission have called for. It doesn't set up a regional fund for guaranteeing bank deposits or give powers to euro-zone agencies to wind down or restructure shaky banks and distribute losses among investors. The ECB would, however, be able to take operating licenses away from unstable lenders. The supervisory agency would be run by a separate decision-making panel at arm's length from the ECB, in an effort to prevent conflicts of interests with the central bank's main role of fighting inflation and to allow EU states that don't use the euro to join.   As the supervisor, the ECB would have to make sure banks build up sufficient capital levels to absorb economic and financial shocks—such as the real-estate crashes that triggered the Irish and Spanish problems or over-investments in shoddy products like the U.S. subprime mortgages that sank banks across Europe in 2008.The threat to withdraw a license would be the ECB's most potent enforcement tool. "That's the first crucial element: to empower the European supervisor with the right to withdraw the license," said Guntram Wolff, deputy director of Brussels-based think tank Bruegel. But other powers and responsibilities that are central to creating a unified banking framework for the euro zone would remain in national hands. Proposals that would force private investors to share the burden—for instance by converting debt into equity once a bank's capital falls below are certain level—aren't set to come into force until 2018. In a sign of possible movement, German Finance Minister Wolfgang Schäuble, in an opinion piece in the Financial Times Friday, said the so-called bail-in mechanism should already come into force in 2015. (WSJ)

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.

 

Smoke and mirrors...

Lord Rothschild has taken a near-£130m bet against the euro as fears continue to grow that the single currency will break up. --- If Lord Rothschild doesn't know what is going on, well, then nobody does..... As a wise man once said "watch where the wise money goes".The member of the banking dynasty has taken the position through RIT Capital Partners, the £1.9bn investment trust of which he is executive chairman. The fact that the former investment banker, a senior member of the Rothschild family, has taken such a view will be seen as a further negative for the currency. The latest omen follows news in The Daily Telegraph late last week that the government of Finland is already preparing for the euro’s break-up. RIT, which Lord Rothschild has led since 1988, had a -7pc net short position in terms of principal currency exposures on the euro at the end of July, up from -3pc at the end of January. Given a net asset value of £1.836bn at the end of July, the position is worth £128m. Sources close to RIT suggested that the position was not a dogmatic negative view on the euro as a currency, but rather a realistic approach on a currency that remains relatively weak....Meanwhile, Germany and France, the eurozone’s two biggest economies, did better than expected, even if their second quarter performances were far from being success stories. Germany’s GDP grew by 0.3%, beating its own forecasts, and France flat-lined at 0% growth, but avoided slipping into a much feared recession…..On news of Germany and France’s numbers, stock markets bounced up and share prices rose across the continent. Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 all finished with slight gains on Tuesday.  According to Jeremy Batstone-Carr, director of client research for Charles Stanley, a financial advising firm, the figures as a whole should be a cause for worry. “According to further looking projections, data for Germany suggests the next six months will be just as bad if not worse,” he said.  The data also showed a clear divergence between the region’s northern core countries and weakness in the southern periphery countries, which threatens to exacerbate existing problems. Hard-hit over the past three months were Italy (-0.7%), Finland (-1.0%) and Portugal (-1.2%).  On another gloomy note, Britain’s economy shrank by 0.7 percent, according to Eurostat. That compared to .03% negative growth for the first quarter of the year, which meant that Britain has been in recession for the last nine months. Recession is defined by economists as two consecutive quarters of contraction.  During the same three-month period, GDP increased by 0.4% in the United States and 0.3% in Japan - Europe’s main economic partners.