ECB recommends dropping the guarantee of bank deposits. The Banking Recovery and Resolution Directive, which came into effect less than two years ago, explicitly states that the guaranteed deposits may not be frozen and may not be subject to suspension of payments.  With the recommendation to drop the guarantee of bank deposits, the ECB has included the central banks and the Bank of International Settlements in the list of institutions whose accounts and transactions may not be frozen. But we shouldn't be overly worried, because the ECB has proved "generous". "During the transition period, depositors will have access to an adequate quota of their guaranteed deposits to cover the cost of living within five days from submitting the request", the proposal of the ECB shows. But who sets the cost of living and which is the "competent authority" that decides on the withdrawal of the funds? The national institutions for the guarantee of bank deposits have been created precisely to stop or at least to temper massive bank deposit withdrawals. The new proposal of the ECB directly undermines this institutional framework. "If the collapse of a bank looks imminent, a substantial number of guaranteed deposits may be subject to massive withdrawals, because customers want to ensure direct access to their own resources or no longer trust the guarantee scheme", the ECB document further states.The true stake is presented thereafter: "Such a scenario is very likely especially in the case of major banks, where the volume of guaranteed deposits is extremely high and can lead to the erosion of the trust in the guarantee scheme".  In the opinion of the European Central Bank, "if the moratorium applied to deposits doesn't include the guaranteed ones as well, then that moratorium can alert the customers with guaranteed deposits that a bank is at imminent risk of collapse", and under these circumstances "the moratorium can prove counterproductive and can result in a deposit flight instead of preventing it". Such proposals aren't just simple prudential measures of authorities that want to show that they have learned the lessons of the crisis, but instead they represent, particularly in the case of the European Central Bank, a tacit acknowledgment of the fact that the monetary policy has failed.

Gerhard Schröder defied critics on Wednesday night, insisting that joining the board of Russian energy giant Rosneft was entirely up to him.

"I will do this. This is about my life and I decide – not the German press," he said in his usual candid manner. He was speaking at an election campaign event for the Social Democrats (SPD) in the northern town of Rotenburg on the Wümme. He added that he could not see a problem and that "I'm not going to allow anyone to make it into one."Schröder, who was German chancellor from 1998 to 2005, was harshly criticized for his decision by the media, but also – among others - by his successor Angela Merkel as well as Martin Schulz from his own SPD party.  Rosneft has been subject to EU sanctions due to Russia's unlawful annexation of Crimea, the Ukrainian peninsula.  Schröder, however, stressed that getting involved with the world's biggest oil company was in Germany's interest. "I stand by what I've said before – that it's not wise to isolate our big neighbor Russia both politically and economically," he said adding that his critics were apparently interested in a new Cold War with Russia.  He said he was "fed up" with the criticism of Russia and its president, Vladimir Putin, saying that compared to US President Donald Trump, Putin was "highly rational" and that "demonizing Russia" would get us nowhere.He emphasized that Rosneft was an international company and not "the extended arm of the Russian government." Russia owns just over 50 percent of Rosneft.  The former German chancellor is known for his connection to Russia – he once dubbed Russian President Vladimir Putin a "flawless Democrat."  After he lost to Merkel in the 2005 election, he joined the Nordstream pipeline consortium, which is controlled by Russia's Gazprom. He has since switched to join an extension of the original pipeline, known as Nordstream 2. Schröder is due to be formally elected to Rosneft's supervisory board on September 29. It is not clear yet whether he will lead the board or just become a member.

The chief executive of Goldman Sachs has warned that London’s financial centre will “stall” due to the turmoil of the Brexit process.  Lloyd Blankfein, who runs the world’s second-largest investment bank, said a three-decade expansion that has turned London’s financial services sector into a world leader could grind to a halt.  “It will stall, it might backtrack a bit, it just depends on a lot of things about which we are uncertain, and I know there isn’t certainty at the moment,” Blankfein said in an interview with the BBC. “I don’t think it will totally reverse.” Blankfein also said there would need to be an implementation period of at least a “couple of years” after the Brexit deal had been agreed in early 2019 to allow companies to adjust. “We are talking about the long-term stability of huge economies with hundreds of millions of people and livelihoods at stake, and huge gross domestic product,” he said. “So, if it takes a little while, I’d rather get it right than do things quickly.”   If not enough time were factored in, banks such as Goldman would have to act “prematurely” and possibly move some of their operations and jobs.

List of stocks that have been upgraded by Merril Lynch

1. Marathon Oil Corp. (NYSE: MRO) to a buy from neutral, with a price target of $21, which is higher than the $18 consensus of various analysts. The new target price implies a gain of more than 33% from the current price of $15.7.

2. Noble Corporation PLC (NYSE: NE) from underweight to neutral. However, the target price of the stock is unchanged at $7.5, which is below the consensus target price of $8. The stock closed at $6.39 hitting a new multi-year low.

3. Patterson-UTI Energy Inc. (NASDAQ: PTEN) to neutral from underperform. The new target price on the stock is $22, whereas the consensus target price is also the same. The stock closed at $19.96.

4. Sasol LTD. (NYSE: SSL) to a buy from an earlier rating of neutral. While the consensus target price of the stock is $32.09, the stock closed the day at $27.71.

5. Devon Energy Corp. (NYSE: DVN) makes it to the US 1 list of top ideas for Merrill.

Notwithstanding, the valuations of the energy sector at 40 times its forward price-to-earnings (P/E) is more than double to the S&P 500’s forward P/E of 17, according to Yardeni Research.

Though the Merrill Lynch report agrees that “energy looks expensive on depressed earnings,” they believe that “higher oil prices should drive higher earnings estimates. Investors are still underweight the sector and the sector’s weight in the S&P 500 has fallen to historically bullish levels”.

An oil analyst with advisory group Peel Hunt, Werner Riding said: “I don’t think the North Sea is dead by a long shot. New successful companies will be born from this downturn, and it’s the smaller more nimble players who could benefit the most from low asset prices.” He added that small-cap players including Faroe Petroleum and Serica are both likely to complete deals within the next six months, at the bottom of the oil price cycle, before seller expectations become too optimistic. “I’d be surprised if both didn’t try to acquire more production assets before the end of the year. In particular Faroe will want to offset to the loss of production from the Njord area which is due to come offline this summer and will make a material impact on revenue if that production isn’t replaced,” he said. Faroe boss Graham Stewart confirmed that although the group is not currently in late stage discussions with anyone specific he expects to complete “a value enhancing acquisition by the end of the current year”.  A spokesman for Serica said the company is “keeping its ears to the ground”.  Mayfield’s Mr McKelvie said that as low oil prices have become entrenched asset-holders are beginning to accept a new economic reality which is helping to close the gap between bids and offers in asset sale talks. Meanwhile investors are more willing to support new deals, he said.  “Six months ago when we began looking at this people could see the opportunity but weren’t sure. But in the last two weeks we’ve been talking to investors and they’re more up for it. “Getting that pool [of investors] together has been really important, and the fact that these investors can now see the opportunity is good for us,” he said.

The Austrian authorities have taken yet another step on the mined field of financial "stability" of the so-called hard core of the Eurozone. Amid the nearing of the deadline for the moratorium set on the payment of the debts of Heta Asset Resolution, the bad bank set up for the takeover of the non-performing land of Hypo Alpe-Adria, the creditors have been presented with the buyback terms for the bonds guaranteed by the land of Carinthia. Their total par value is 11 billion Euros, and the "offer" includes the payment of 75% of the par value for senior bonds and 30% of the value of subordinated bonds, which means a total loss of approximately 3.2 billion Euros for lenders. "Creditors that refuse the offer could wait for as long as ten years for a ruling of the judicial system in their favor", said Hans-Joerg Schelling, the Austrian finance minister, according to Bloomberg. Schelling further said that "the offer is excellent", according to Bloomberg, and creditors "should be rational and accept it". For the buyback of the Heta bonds, Austria has set up a special investment vehicle, Kaerntner Ausgleichszahlungs-Fonds (The Fund for the Payment of Compensations of Carinthia). Unfortunately for the authorities in Vienna, the notion of "rational" is understood differently by creditors. "What the Austrian authorities have done is unprecedented in the developed world: they have announced a figure that they consider acceptable and they have asked the creditors to accept the offer", the partner of Swiss company Gold Partners AG who owns 200 million Euros worth of Heta bonds, told Bloomberg. The list of creditors that oppose the offer includes far bigger names however, such as German banks Commerzbank AG and NordLB, as well as PIMCO, the American investment fund manager owned by Allianz AG.  Bloomberg estimates show that the exposure of those who have rejected the proposal of the Austrian authorities is about 5 billion Euros and represents approximately 45% of the total debt, as the terms of the offer are non-negotiable, and its acceptance by two thirds of the creditors involves its unconditional application and for the other creditors as well.

Funny that they were all expecting Russia to crumble, but instead its the ISIS supporting country of Saudi Arabia and the Ukrainian Na@tzi supporting country of Canada that are the worst hit thus far. Russia is diversifying the economy with a 2 year plan to become completely independent and its paying off fast. A guaranteed $400 billion energy agreement with China probably helps some too, as does the Nord Stream 2 project that is still a go. So, I'm thinking that in WW3, Russia are the good guys and the US has picked some pretty terrible allies who support ISIS in the Middle East and fascism in Ukraine. My, that was a quick fall from grace as Worlds super cop to aiding and abetting terrorists and Na@tzis. The alliances and proxies of the Syrian Front explained. World War III - The New Axis of Evil.. The general manager of state-run Russian energy company Gazprom Exports, Elena Burmistrova, said at the ninth European Natural Gas Conference in Vienna that the two-pipeline Northern Stream project does not require any financial support and will not cost the European Union anything. Burmistrova provided details regarding the two underwater pipelines that will carry 55 billion cubic meters of natural gas from Russia to Germany under the Baltic Sea. Burmistrova said Europe will need more natural gas in the future, and since prices have dropped more than expected, the competition in the market has become fiercer. Currently, Gazprom supplies 25 to 30 percent of Europe's gas demand, and with the Northern Stream-2 project, this will be secured, as more countries in Central and Eastern Europe will be able to receive Russian gas. "Since we will be using the same design as the previous Northern Stream line, we will not need months to design it. Currently, large energy companies support the project, which means we won't require any financial support from the EU. All financial matters are being discussed and resolved together with our partners," Burmistrova said. Gazprom CEO Viktor Zubkov also stressed that the project will be beneficial for Europeans. Once it is implemented, Russia can sell gas to Europe at better prices. "Not only Russia but other gas providers should also decide on the role they want to play in the middle- and long-term with their relations with the EU. We will always be a reliable resource for Europe; however, we need to establish a common dialogue," Zubkov said.  The official contract was signed between Gazprom, the German companies E.ON and BASF and the Austrian based OMV last September. However, Eastern European countries such as Poland, Slovakia and Ukraine are objecting to the project, as they don't want to lose the $3 billion in transit fees they receive.

Stocks plunge by as much as 6pc as markets hit by regulatory probe and fresh fears over stability of the financial sector .. China's stock market plunged on Friday after several brokerage firms said they were being investigated by regulators over securities violations.

The Shanghai Composite Index fell by as much as 6.14pc to 3,412.43, while the Shenzhen composite, which tracks stocks on China's second exchange, tumbled 6.66pc, to 2,170.73.

Citic Securities and Guosen Securities plunged by the daily limit of 10pc in Shanghai after admitting they were under investigation for alleged rule violations.

Reports in the media suggested Haitong Securities was also being probed as the shares were suspended on Friday. Experts have called time on China's three-decade growth miracle, as the economy makes the delicate transition towards domestic consumption from investment-led growth. Official figures show growth fell to a six-year low of 6.9pc in the third quarter.

"We are open to a whole menu of monetary policy instruments," Mr Draghi said, noting that further interest rate cuts had been discussed. "The discussion was wide open."" Sounds like he has Yellen's Disease, but printing money is always the solution for the left to fix fiscal abnormalities... “The ECB will almost certainly be delivering an early Christmas present this year,” said Nick Kounis, the head of markets and macro research at investment bank ABN Amro. Draghi is an enthusiastic proponent of “forward guidance”, the strategy of sending strong verbal policy signals in order to shift financial markets – in this case, driving down the euro.  His dramatic pledge in the summer of 2012 – in the middle of the Greek debt crisis – that the ECB would do “whatever it takes” to save the single currency helped to reassure panic-stricken investors. Jeremy Cook, the chief economist of international payments company World First, said ECB policymakers were likely to have become increasingly concerned in recent weeks about the strengthening of the currency, which makes eurozone goods less competitive on international markets. “Draghi and the executive council couldn’t have been clearer that additional policy easing was coming if they’d had the words ‘sell the euro’ tattooed on their faces,” he said. Euro area GDP rose 0.4% in the second quarter of 2015, a slight slowdown from 0.5% growth in the previous quarter. We must all call attention to the salient fact that the EU, US, UK and Japan are riding along using debt to sustain their economies. QE and other nostrums directly related to money printing thus monetizing the debt must be clearly understood...A number of reasons they do this:

1) kicking the can in the hope some visionary guides us to economic enlightenment before the global economy implodes in it's entirety

2) this is simply a response to the US' decision not to raise rates as well as the Yuan's devaluation a number of months ago. Given the Euro depends on exports, a weaker Euro will prop up the currency. Make no mistake, we're at war, a currency war

3) this is also being pushed as a solution by those who seek to gain the most, ie banks and investment funds. Governments in the aforementioned states are too large and expensive, too inefficient, too prone to spend without consideration of how the debt is affected by the deficits and too prone to call for more taxation in every case where they run short of money.So now it is completely safe to say that the relationship between stocks and underlying fundamentals now NO LONGER EXISTS.

No if's, no maybe's, just absolute fact. Stock valuations are entire fiction. The entire purpose of the Fed / ECB / BoE/ BoJ is to make something levitate. What they cannot do is make anyone with a brain believe a word of it. It is almost game over, pension fund over, banking system over, savings over.  Quantitative easing is not the answer, reality is the answer. Let's just accept that our standard of living is going to fall. QE will delay it and make matters worse, facing reality on the other hand will ensure that the fall in our standard of living will happen now, but won't be as painful in the future when compared to the QE option. The reality is - Too much debt

One of the three following options are open to the central planners.

1. QE for as long as possible - outcome - Dreadful economic future.

2. Attempt to reduce the deficit to zero by the end of this Parliament. - outcome - significant reduction of our standard of living and civil unrest.

3. Attempt to reduce the deficit over a long period of time, bearing in mind the paradox of thrift will make this a slow and relatively painful process, but from my point of view, this is the best option open to us.  A tipping point passed many years ago, we needed brave politicians dealing with the debt issue. However. I can understand why politicians did not grasp the nettle, a fickle public would not vote for them, after all, who wants harsh reality.

The US Federal Reserve plans to raise interest rates this year on the back of an improving American economy, and that is taking the shine off gold. ... Why? Because gold is a store of wealth for investors, but generates no returns from regular interest payments or dividend income. Investors have been happy to park their money in gold over the past six years while returns from other 'safe haven' assets have remained low and the economic backdrop has remained volatile. But, with borrowing costs set to rise, commodities, such as gold, are losing favor with investors, as higher returns can start to be generated elsewhere. The UK interest rate is 0.5pc. In the US, the interest rate, set by the Federal Reserve, is 0.25pc. US Federal Reserve chairman Janet Yellen has suggested interest rates should rise by the end of the year, while Mark Carney, the governor of the Bank of England, also signaled that UK interest rates could begin to rise around the beginning of 2016, if not earlier. .. The US dollar has been growing stronger, boosted by a resurgent American economy and the prospect for a rate rise in the next few months. The US dollar index, which tracks the price of the US dollar against the world’s currencies, has increased by more than 20pc within the past year.   The value of the US dollar typically follows an inverse relationship with commodities. When the dollar strengthens against other major currencies, the prices of commodities - such as gold - typically drop. When the dollar weakens, commodities generally move higher. The main reason for this is because most commodities are freely traded in international markets and prices are quoted in US dollars.  Foreign buyers will purchase commodities with dollars, so, when the value of the dollar drops, they will have more buying power, and demand increases. Similarly, when the value of the dollar rises, they have less buying power and commodities become more expensive, muting demand and sending commodity prices lower. .. The slowdown in the Chinese economy, the world's largest consumer of commodities, has also caused the gold price to fall steadily since 2011.  China has increased its reserves of gold bullion by 60pc since 2009. However, on Friday the People’s Bank of China revealed it has been buying far less gold than expected. China updated its gold bullion reserves for the first time since 2009 last week, showing that while reserves had increased, the 57pc gain to 1,658 metric tons was smaller than the 3,500 tons analysts had been expecting.

The Federal Reserve is still on course to raise interest rates this year, as delays could mean the central bank is forced to hike more rapidly than it is safe later, its chairman has said.

Janet Yellen indicated that delaying increases in interest rates would mean that the central bank could "have to do so more rapidly" if caught behind the curve.   In her testimony before the Senate Committee on Banking on Wednesday, she said that if the economy progresses as expect, "economic conditions would make it appropriate at some point this year to raise" the Fed's key interest rate. ...Ms Yellen said: "The situation in Greece remains difficult. And China continues to grapple with the challenges posed by high debt, weak property markets and volatile financial conditions."   Mr Page said that the central bank would most likely start to raise its rates in September, but that it is not expect to clearly signal this until closer to that date. The Fed chairman remarked that "economic growth abroad could also pick up more quickly than observers generally anticipate, providing additional support for US economic activity".   Yellen has no intention of raising rates, as to do so would implode the asset bubbles and Ponzi schemes that allow the most efficient looting and asset stripping of the 99% by the Fed's oligarch accomplices. As long as ZIRP and QE can be maintained, savers and pensioners will be forced into the Wall Street-Federal Reserve Rigged Speculative Casino, where they can be fleeced at will by Yellen's Wall Street co-conspirators. So ignore the incessant droning by Yellen & other Fed mouthpieces about raising rates - it will not happen unless and until Yellen has to invervene to stop a dollar crash. The Fed's War on Savers and the responsible has no end in sight.

Greece requires to be bailed out...Just like the banks were a few years back...Hundreds of £Billions were dished out and also Q.E. was introduced and indeed will continue, just so the financials continue to operate...Kicking that can down the road. Now ask yourself what's the difference between banks and Greece...Both were broken by miss management and greed. Today however the banks and financials continue on their merry way...richer than ever, whilst the people of Greece (and others) must suffer austerity and unemployment...The divide between the rich in the centers of finance and politics, getting wealthier as their assets and investments go up in value maintained all the while by Q.E. and bail outs, and the rest of societies, grows wider by the day.  Greece meantime...There is an argument here, for Greece just throwing in the towel and defaulting on their debt, returning to the Drachma and say stuff it, we've had enough of this, Let the financials suffer for a change...Once this course of action happens, as sure it will, others will follow and the Euro will then be no more...First to leave will benefit the most...When?, that is the question...One is a loan and the other one is a "Donation" (well supposed to be a loan). Notice under TARP, the US government made profits - from the interest charged and the capital gains when the securities were sold. In contrast to Greece, so far 53.5% of the original loans were written off. Yet, Greece wants more debt write-off.And the same time, it wants Europe to lend it more money, which no doubt a portion will be written off in the future.  If you were the lender, would you lend your OWN MONEY to Greece?!?  As to the issue of reforms - every single country, when bloated must reform - whether the country is the US, Russia or Greece. Remember that unemployment in the US nearly reached 10M at one stage.  The extra-ordinary loans were made, so that companies and countries could carry out the necessary reforms and transition into a new viable and competitive entity (for example GM or Ireland).  Europe and IMF have offered Greece the loans, so it could carry out reforms.  But Greece only wants the money, but "does not" want to carry out reforms.  Which in the end results in Greece and companies within Greece, to remain un-competitive, which results in Greece asking for more "Loans" from Europe and IMF and more "write-offs".

A vicious cycle - no?!?

Did the U.S. government really seal the fate of the U.S. economy back in March 2010, when it passed H.R. 2847? On July 1, 2014, H.R. 2847, better known as HIRE (the Hiring Incentives to Restore Employment Act) goes into effect. On the surface, the bill provides payroll tax breaks and incentives for businesses to hire unemployed workers. But it’s a little-known provision within Bill H.R. 2847 that is causing some financial pundits to predict the end of America. The provision known as FATCA (the Foreign Account Tax Compliance Act) insists foreign banks keep better track of the flow of money owned by U.S. citizens.  FATCA requires banks in other countries to send the IRS personal information (name, address, and account information) about transactions their American customers make. If a bank fails to comply, the U.S. will impose a 30% withholding tax.  The fear is that foreign banks will not want to have to deal with the IRS and instead will choose to take the path of least resistance by avoiding American customers, and by extension, their U.S. dollars altogether. At the same time, FATCA could also be cost-prohibitive for small- and medium-sized foreign banks; meaning it’s cheaper and easier to just divest from U.S.-based assets.  Why would any bank willingly refuse to do business with a U.S. customer? Because there are more financially secure markets elsewhere for foreign banks to invest in: China, Russia, Germany, Australia, France, Canada…the list goes on. How is that possible? After all, the U.S. dollar has been the world currency since World War II, and being the world’s currency means Americans can deal directly with any country with their own currency.In effect, the U.S. doesn’t need to produce anything to create wealth; it can just print more money to get out of debt or create the illusion of liquidity. The same cannot be said for the rest of the world, however, If Germany wants to buy oil from Russia, it has to exchange its currency for U.S. dollars; it can only do this by generating revenue from products and services others want to buy.  Why will the world no longer want to favor the U.S. dollar as the reserve currency? Simple: the Federal Reserve has, with its quantitative easing policy, dumped more than $3.0 trillion into the U.S. economy since 2008. Where did it get the money? It printed it out of thin air. Its simple math: the more there is of something, the less value it has. Not only has the U.S. dollar been devalued, the country has seen its national debt soar. Before the markets crashed in 2008, the U.S. was in debt to the tune of $10.0 trillion; today, the U.S. holds debt of $17.7 trillion! With the U.S. dollar losing favor as the reserve currency, countries will no longer want to hold large quantities of U.S. dollars and foreign businesses will turn their backs on U.S. markets. With fewer people wanting to hold U.S. currency, the U.S. will no longer be able to print its way out of debt.

And with fewer foreign banks willing to take U.S. deposits, Americans, with their fists full of devalued currency, will be unable to exchange it for more stable currencies.  So, will H.R. 2847, once implemented on July 1, 2014, lead to the end of America? No, for many reasons. First, the U.S. is the world’s biggest economy; we produce and consumer more than anyone else. While the U.S. dollar has been devalued, it still holds value compared to other currencies and economies.  The U.S. government is also transparent. Foreign institutions can access our economic data and forecasts and rely on the data; the economic data provided by certain other global powerhouses is not quite as trustworthy or transparent.  Instead of concentrating on July 1, 2014 and H.R. 2847 being the end of America, it might be better to look at what America will look like at the end of 2014.  According to the mainstream media, the U.S. economy is back on track after weathering the biggest financial meltdown since the Great Depression. Wall Street pundits and even the U.S. government point to a number of factors suggesting the U.S. economy is back on solid footing: the five-plus-year bull run on the stock market, the major indices trading at record highs, housing prices having rebounded, and the job market improving.  Unfortunately, those numbers do not tell the full story. The major U.S. indices may indeed be trading at record highs, but the economic foundation holding those stocks up is shaky at best.  Since the beginning of 2013, quarter after quarter, more and more companies on the S&P 500 have revised their earnings guidance lower. To compensate for weak results, companies masked their poor earnings and revenues with cost-cutting measures and near-record stock buyback plans. The unemployment rate is 6.3%, but the underemployment rate is an eye-watering 12.3%. On top of that, 46.1 million, or 14.5% of the country, receive food stamps. And more and more Americans are in debt; according to the most recent data, Americans owe $11.65 trillion in debt. The average credit card debt is $15,191, the average mortgage debt is $154,365, and the average student loan debt is more than $33,000.  What about U.S. housing? Housing prices have risen 25% since the beginning of 2012, but still need to increase more than 20% to reach their pre-recession highs. And the U.S. housing market is too expensive for most first-time home buyers.  In fact, first-time home buyers, the barometer for how well the U.S. economy is doing, accounted for around 16% of new-home purchases in April, down from a range of 25% to 28% between 2001 and 2007. As for existing home sales, first-time buyers made up just 29% of purchases; the 30-year average for first-time homebuyers, and a number economists consider healthy, is 40%. And overall, the homeownership rate in the U.S. is at its lowest levels in almost 20 years.  Bill H.R. 2847 will not be the end of America; on July 1, 2014, America will look identical to the way it does now. But as for America at the end of 2014, that’s another story. The surface data appears really great, but it’s not a true reflection of Main Street. Take a closer, more detailed look at the economic data and you’ll see that the U.S. economy will be much worse on December 31, 2014 than it is today.  To get a handle on debt and raise the standard of living on Main Street, the broader U.S. economy needs to experience sustained growth—and that just isn’t in place yet.

Greece's finance minister has ramped up the political stakes in his country's debt drama, by personally telling President Barack Obama to push eurozone creditors over his country's bail-out crisis. In an 12-minute exchange with the President on the sidelines of an event marking Greek Independence day, Mr Varoufakis is reported to have repeated his desire for the US leader to influence events.   Mr Obama is reported to have responded by urging flexibility from both parties.  

Greece's Leftist government has looked to the White House to play the role of honest broker in protracted negotiations with its international creditors. Following Syriza's election in January, the President called for an end to harmful austerity policies and the introduction of a "growth strategy in order for them to pay off their debts to eliminate some of their deficits.” ...  Hopes of a deal before a meeting of the eurozone's finance ministers on April 24 have rapidly faded as both sides show no signs of bridging their differences over Greece's cash-for-reforms bail-out extension.   "In the absence of a deal in the next few weeks, the government might not be able to avoid default, which – we fear – would likely raise the risk of Grexit," said Reinhard Cluse at UBS.  The situation has become increasingly critical as Greece's public funds dwindle and the government faces a near €1bn IMF bill in the first two weeks of May. IMF managing director Christine Lagarde repeated that she would not countenance any delay in payment to the Fund.  “We will do everything we can so lending to the Fund remains the safest lending route any debtor can adopt. That is my determination” said Ms Lagarde. ...  Unfortunately for the Greeks, this is not Obama's call to make here. The Euro Zone is left to its own faltering accord. Quite sometime ago, Greece was thrown out of the Markets, and there is very little anyone can do to get Greece back in with all of this airing their dirty laudry infighting. Calmer heads did not prevail after the Greeks elected this Syriza government. Austerity and internal deflation have political consequence. The EU wont work with Syriza, but an overwhelming majority of Greeks approve of them. Would not be at all surprised if we see a Grexident soon. Only then will all of the self appointed experts report what really went wrong here, just like with Lehman. Heads will roll after the fact. Not Obama's call to make. His advice? Play nice guys. Geithner shook his head in disbelief at how this matter was handled quite sometime ago as well. Little good anyone can do the Greeks now. This situation calls for Greek self help. No not the Troika's prescription. Sorry to say, there is no way around declaring insolvency, rebooting, and starting over.

How does it work in this world of smoke and mirrirs...

The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.  The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. As of March 17, 2015, 204 billion SDRs were created and allocated to members (equivalent to about $280 billion).  Only a few years after the creation of SDRs, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs. However, more recently, the 2009 SDR allocations totaling SDR 182.6 billion have played a critical role in providing liquidity to the global economic system and supplementing member countries’ official reserves amid the global financial crisis. The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations...

IMF members often need to buy SDRs to discharge obligations to the IMF, or they may wish to sell SDRs in order to adjust the composition of their reserves. The IMF may act as an intermediary between members and prescribed holders to ensure that SDRs can be exchanged for freely usable currencies. For more than two decades, the SDR market has functioned through voluntary trading arrangements. Under these arrangements a number of members and one prescribed holder have volunteered to buy or sell SDRs within limits defined by their respective arrangements. Following the 2009 SDR allocations, the number and size of the voluntary arrangements has been expanded to ensure continued liquidity of the voluntary SDR market. The number of voluntary SDR trading arrangements now stands at 32, including 19 new arrangements since the 2009 SDR allocations.

In the event that there is insufficient capacity under the voluntary trading arrangements, the IMF can activate the designation mechanism. Under this mechanism, members with sufficiently strong external positions are designated by the IMF to buy SDRs with freely usable currencies up to certain amounts from members with weak external positions. This arrangement serves as a backstop to guarantee the liquidity and the reserve asset character of the SDR...

The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, the SDR was redefined as a basket of currencies. Today the SDR basket consists of the euro, Japanese yen, pound sterling, and U.S. dollar. The value of the SDR in terms of the U.S. dollar is determined daily and posted on the IMF’s website. It is calculated as the sum of specific amounts of the four basket currencies valued in U.S. dollars, on the basis of exchange rates quoted at noon each day in the London market.  The basket composition is reviewed every five years by the Executive Board, or earlier if the IMF finds changed circumstances warrant an earlier review, to ensure that it reflects the relative importance of currencies in the world’s trading and financial systems. In the most recent review (in November 2010), the weights of the currencies in the SDR basket were revised based on the value of the exports of goods and services, and the amount of reserves denominated in the respective currencies that were held by other members of the IMF. These changes became effective on January 1, 2011. In October 2011, the IMF Executive Board discussed possible options for broadening the SDR currency basket. Most directors held the view that the current criteria for SDR basket selection remained appropriate. The next review is currently scheduled to take place by the end of 2015.   Under its Articles of Agreement (Article XV, Section 1, and Article XVIII), the IMF may allocate SDRs to member countries in proportion to their IMF quotas. Such an allocation provides each member with a costless, unconditional international reserve asset. The SDR mechanism is self-financing and levies charges on allocations which are then used to pay interest on SDR holdings. If a member does not use any of its allocated SDR holdings, the charges are equal to the interest received. However, if a member's SDR holdings rise above its allocation, it effectively earns interest on the excess. Conversely, if it holds fewer SDRs than allocated, it pays interest on the shortfall. The Articles of Agreement also allow for cancellations of SDRs, but this provision has never been used. The IMF cannot allocate SDRs to itself or to other prescribed holders.  General allocations of SDRs have to be based on a long-term global need to supplement existing reserve assets. Decisions on general allocations are made for successive basic periods of up to five years, although general SDR allocations have been made only three times. The first allocation was for a total amount of SDR 9.3 billion, distributed in 1970-72, the second—for SDR 12.1 billion—distributed in 1979-81, and the third—for SDR 161.2 billion—was made on August 28, 2009. Separately, the Fourth Amendment to the Articles of Agreement became effective August 10, 2009 and provided for a special one-time allocation of SDR 21.5 billion. The purpose of the Fourth Amendment was to enable all members of the IMF to participate in the SDR system on an equitable basis and rectify the fact that countries that joined the IMF after 1981—more than one fifth of the current IMF membership—never received an SDR allocation until 2009.   The 2009 general and special SDR allocations together raised total cumulative SDR allocations to SDR 204 billion.  The SDR interest rate provides the basis for calculating the interest charged to borrowing members, and the interest paid to members for the use of their resources for regular (non-concessional) IMF loans. It is also the interest paid to members on their SDR holdings and charged on their SDR allocation. The SDR interest rate is determined weekly and is based on a weighted average of representative interest rates on short-term debt instruments in the money markets of the SDR basket currencies.

According to a poll published a week ago, more than half of Germans would like Greece to leave the eurozone, a rise of more than 10% on February. It is a sentiment that is likely to hang heavily in the air when the Greek prime minister, Alexis Tspiras, makes his first visit to Berlin on Monday.

“It feels a bit like the Emperor’s New Clothes,” says Anton Brandt, referring to the Hans-Christian Andersen fairytale. “It just needs that child to stand up and say: ‘ha! they’re taking the piss out of us all’, but no one dares do it, especially not a German because we’re scared we’ll be accused of being anti-European,” the 38-year old administrator adds. “There’s no worse insult you can make towards a German.”  “The public mood is tipping,” said Thomas Oppermann, chairman of the Social Democrats (SPD) parliamentary group, speaking on a political TV chatshow Hard But Fair, which posed the question: ‘Bankrupt, insulted and brazen – does Greece deserve this image?’

The programme highlighted how any sympathy once felt for the Greeks is quickly drying up as feelings of resentment set in. Not least because Germany is the largest single contributor to Greece’s multibillion-euro bailouts and few see an end in sight to payments as long as Greece fails to implement any of the reforms it has promised. “But we must ask how dangerous would the exit of the weakest member from the eurozone be?” Oppermann added.  For years the German government has repeatedly excluded the possibility of Greece being forced to leave. The chancellor, Angela Merkel, appeared to repeat that conviction at the end of last week during an address to the Bundestag, in which she said: “We have a long and difficult road ahead of us.” But the more feelings of resentment towards Greece fester, the harder it will be for Merkel to keep voters – and members of her own party – on board.  It was no surprise that she drew nervous laughter from some politicians when she said she was looking forward to the opportunity to talk “and perhaps also to argue” with Tsipras. No one is in much doubt that arguing will be more likely than talking when Merkel receives him – with a military guard and a red carpet – at her chancellery.  The atmosphere between Athens and Berlin has soured in recent weeks over calls from Tsipras for Germany to pay war reparations for the Nazi occupation during the second world war.   German chagrin was only stoked further when the Greek defence minister threatened to send 10,000 refugees to Germany, and said he couldn’t guarantee there would not be a few Islamic State (Isis) terrorists among them.

This all followed years of tensions, in which Greek newspapers have repeatedly portrayed Merkel and her finance minister, Wolfgang Schäuble, as Nazis, and the German media in turn has depicted the Greeks as lazy and corrupt.

While opinions have been divided over the compensation claims, with Merkel’s government insisting the case was legally closed, one German couple took it upon themselves to, as they saw it, right a historical wrong.

On the back of an envelope, Ludwig Zaccaro and Nina Lange calculated that if the compensation claim was divided equally amongst the Germans, their own share would be €875 (£630), and so they paid the amount to a charity supporting austerity-hit families in the town of Nafpolio in the Peloponnese.   “We said ‘this is a symbolic gesture, that if we do this, maybe other Germans will follow’,” Zaccaro said. “It’s time to stop demanding the Greeks pay.”

Georg Franke, a 57-year old market-stall holder in Potsdam, said while he believed the Greek government’s behaviour had been “childish”, he did not find its second world war compensation claims so outlandish.   “The trouble is, Germans know a lot about the atrocities carried out in their name by the Wehrmacht and the SS against the Jews from Germany, Poland and Hungary, as well as the Slavs, but we learnt very little in school about the horrors carried out against the Greeks. It was only recently, around the 70th anniversary of the liberation of Auschwitz, that I saw a documentary which touched on how they [Jewish Greeks] were almost all wiped out and it brought it home to me.”

The reason perhaps for the lack of discussion about the past is that for years, it suited both sides. Greeks began coming to Germany as Gastarbeiter (guestworkers) in their hundreds of thousands from the 1960s onwards. German tourists flocked to Greece’s holiday resorts. Both a mutual respect and a mutual dependency brought them closer together. Today, an estimated 300,000 Greeks live in Germany.  Germans still love to holiday on Greek islands. But Jorge Chatzimarkakis, born in the German city of Duisburg to a Greek Gastarbeiter, a member of the European parliament for the German liberal FPD as well as being a special envoy for the Greek government, in which role he has also demanded compensation and the setting up of a Marshall Plan-style reconstruction fund, said much of the erstwhile goodwill had evaporated since the financial crisis began.

“Relations are now a minefield,” he said. “I would not in my wildest dreams have imagined that there would have been such a hard confrontation course. It scares me.”

Despite the understanding of Franke, the market-stall holder, for the Greeks’ search for recognition for their wartime suffering, he believed, like many Germans, that it was wrong to mix the two issues.

“It makes you suspicious that the sum they’re demanding in compensation - around €300bn – is so amazingly close to the Greek debt total.” But he added that the German word for “debt” and “guilt” – Schuld – is the same. “The Greeks know that and they’re playing on that for all it’s worth,” Franke added.

In the latest brouhaha over eurozone QE, three German businessman are seeking to block the bond-buying programme, claiming it contravenes the Maastricht Treaty's prohibition of monetary financing of governments. Entrepreneurs Heinrich Weiss, Patrick Adenauer and Juergen Heraeus are seeking to challenge QE at the German Constitutional Court, having already taken the ECB to court over its Outright Monetary Transaction (OMT) scheme announced in 2012.  According to one of the claimants: "QE is a quantum leap, which essentially means countries' debt is being financed via the printing press."  The central bank's action (and inaction) seems to be winning it no friends among debtor and creditor countries, which means it's probably just about doing OK.   Mario Draghi is also looking suitably pleased with himself having thoroughly repudiated any claims that the ECB was "blackmailing" Athens by refusing to increase its liquidity support.  A stony-faced Merkel reiterated what she had said in Brussels on Friday after a late-night session with Tsipras – that a 20 February agreement with the eurozone extending Greece’s bailout until the end of June remained the yardstick. That agreement obliges Tsipras to deliver a persuasive menu of detailed fiscal and structural reforms which need to be vetted by the eurozone before any further bailout funding can be released.  Asked if she had reached any agreements with Tsipras, Merkel avoided the question and stressed she was only one of 19 eurozone national leaders. Tsipras was believed to have told the German leader that Greece faced insolvency within weeks without the release of more funds, which are being held up because he has failed to produce a coherent policy package.  “The medium-term liquidity problem is well known,” he said. “We inherited it.”  While neither side wants Greece to leave the euro, the lack of agreement in Berlin signalled a digging in of hardline positions on both sides that could result in a major negotiating failure.  Support for the Greek government remains strong at home, in inverse proportion to the lack of trust in Tsipras among his main creditors. A growing majority of Germans do not believe Greece will do what it must to stay in the euro and would prefer to see it leave. The Eurasia group risk consultancy on Monday raised its assessment of the chance of Greece having to quit the euro to 30%, up from a previous 20%.

The European Central Bank is getting ready to announce details of the unprecedented programme of government bond-buying it hopes will lift the bloc out of recession and a vortex of falling prices.

Convening in Cyprus on Thursday, President Mario Draghi and his 25-member governing council will be signing-off on plans to purchase €60bn-a-month in government and private sector assets first announced in January.   The move came after the ECB president fought a protracted struggle with the eurozone's creditor bloc to unleash a wave of stimulus and rescue the bloc from deflation. Thursday's meeting of the ECB is expected to iron out a number of the technicalities involved in the package, such as the proportion of risk which will be shared by the eurozone’s national central banks and the ECB.   Mr Draghi is also likely to be quizzed on the open-ended nature of the asset purchases. Speaking earlier this year, the Italian said the intervention would run to September 2016, or until the ECB saw "a sustained adjustment in the path of inflation" towards its 2pc target rate... "The central bank has introduced QE at a time when many see signs that the cycle may be turning for the better in the eurozone," said Mauro Vittorangeli, of Allianz Global Investors.

"The big question for markets in coming months will be how long QE will last if the cycle starts to pick up. In those circumstances, it is possible that the ECB might decide to taper before September 2016," he added.   Mr Draghi is also likely to face questions on Greece's funding crisis. The ECB could move to restore normal lending operations to Greek banks after refusing to accept the country's bonds as collateral in February.   Speaking to the European Parliament last week, Mr Draghi said the bank was “ready to reinstate the waiver as soon as the governing council will decide that the conditions for a successful completion of the programme are in place”.   The Bank will also release its latest set of economics forecasts. Economists expect growth will be revised up from the 1pc annual GDP increase predicted in December.   The collapse in global energy prices is expected to see inflation revised downwards for 2015, and begin to approach, rather than hit, the 2pc target rate by the end of the ECB's forecast horizon in 2017, according to Societe Generale.

The termite-eaten timbers under the rotten edifice of the EU are crumbling.

The Alpine region of Carinthia faces probable bankruptcy after Austria’s central government refused to vouch for debts left by a disastrous banking expansion in eastern Europe and the Balkans.

It would be the first sub-sovereign default in Europe since the Lehman Brothers crisis, comparable in some respects to the bankruptcy of California's Orange County in 1994 or the city of Detroit in 2013. Austria’s finance minister, Jörg Schelling, said Vienna would not cover €10.2bn (£7.4bn) in bond guarantees issued by the Carinthian authorities for the failed lender Hypo Alpe Adria, or for the "Heta" resolution fund that succeeded it. This leaves the 550,000-strong province on the Slovene border to fend for itself as losses spin out of control.  “The government won’t waste another euro of taxpayer money on Heta,” he said, insisting that there must be an end to moral hazard. The Hypo affair has alredy cost taxpayers €5.5bn. The Austrian state has said it will cover €1bn of its own guarantees “on the nail” but nothing more. 

Sources in Vienna suggested that even senior bondholders are likely to face a 50pc writedown, becoming the first victims of the eurozone’s tough new “bail-in” rules for creditors. These rules are already in force in Germany and Austria, and will be mandatory everywhere next year.

The cracks are widening - and just a few days ago we heard Austria telling us to treat Greece like lepers.  The euro falls like a brick - with a lot further to go.  It will be interesting to see who dumps this toxic currency first....Germany? France or Italy - a race to the bottom.

 

The motor for economic growth is the spending power of the lower and middle income groups. 20% of the pensioners money flows back into the government coffer with VAT.

Those selling must pay taxes, also the manufacturer and farmers that make the products. Selling, buying creates demand that in turn creates jobs.  The UK used quantitative easing, (printing money-leaving the incurred debt to be paid for by later generations) to increase the availability of cash .  Manufacturing is not the economic motor of the UK, the banks that have moved on from lending to businesses now make their money from speculation in 'money products' leaving manufactures without loans and cash strapped like never before.  Without is social safety network and pensions the UK would see consumer power decimated, its the poor that actually keep the UK ponzi scheme afloat.  The new Greek government has pledged to repay in full  obligations to the International Monetary Fund and the European  Central Bank. Finance Minister Yanis Varoufakis outlined plans  to swap some debt into new securities and link repayment with  economic growth.   Until now Greece has been paying its debts with a credit card making the debt larger and unsustainable.  The Greeks must return to growth, for the first time since the 2e world war it has a government that could deliver....As the EU's favourite soap - Greekenders - was entering its fifth  season, we wondered if the writers had run out of ideas.  Of course, we still had all our favourite characters - tough, tight-fisted housewife Mrs Merkel, miserable old sod Mr Schäuble, suntanned (crocodile-skinned?) fashionista Ms Lagarde and stylish, suave Italian lothario Mario Draghi.  But with the endless austerity and falling viewing figures, we wondered whether Greekenders was on the way out as Europe's favourite evening entertainment, whether we were heading for what we in the TV business call a "Grexit".  Thankfully the Greekenders writers have responded to public concern about a boring plot with the introduction of two exciting new characters.  There's the flamboyant young second-hand car dealer Alexis Tsipras with his flashing smile, filmstar looks and smooth sales patter.  And there's the new accountant - Yanis Varoufakis. But the new Greekenders accountant is not some boring, besuited nobody. He's a young, shaven-headed,  motorbike-riding smoothie with a Mediterranean charm and a way with the numbers that might even put a bit of fire into the cold, stone-like hearts of grim misery-guts Merkel and crocodile-skinned Ms Lagarde.