The People’s Bank of China said it would lower its one-year benchmark lending rate at the weekend by almost half a percentage point to 5.6% and cut its one-year deposit rate amid concerns that the world’s second largest economy is weakening. The FTSE 100 closed 1% higher at 6750.76 on Friday, while the Dow Jones was also higher in early trading.  Analysts said one of the main effects of the interest rate cut would be to force down the Yuan against the yen and the dollar, helping China to export its way out of trouble. The Yuan has already fallen 10% against the dollar since the summer from a level that was widely regarded as overvalued and may have further to go in the coming months as the economy struggles and the US recovery gathers pace.  The interest rate cut will be welcomed by the millions of Chinese homeowners who pay a large proportion of their salary each month on mortgage payments. Rocketing mortgage debt has become a huge problem in China alongside the massive debts racked up by state enterprises and local authorities.  Officials at the central bank, aware that many homeowners have reduced spending on other items, will hope lower borrowing costs and the cut in deposit rates will encourage them to boost expenditure in other areas of the economy.  China’s slowdown was highlighted by David Cameron as one of his red warning lights signaling the danger of a second financial crash. He said faltering growth in emerging markets was a cause for concern alongside the escalating dispute in Ukraine and the Ebola crisis.  Beijing has maintained that GDP growth continues to stay above 7%. Government figures for the third quarter this year estimated growth at 7.3%.   Meanwhile back in unemployment and recession hit Europe no action from the EU Eurocrats; 7 years after the event they continue to run up their expense claims and take their pay and pensions, while debating what to do.... Pitiful...

The Czech Republic‘s Interior Ministry is to tighten security measures at government offices after envelopes laced with poison were sent to two ministries.     "The central crisis committee agreed to raise security at selected state institutions, mainly ministries, and raise protection at other places," Reuters quoted Czech Interior Minister Milan Chovanec as saying on Friday.

The letters, which contained deadly doses of poison, were recently sent from Sweden and Slovenia by unknown persons and were stopped before reaching the intended addresses of Chovanec and Finance Minister Andrej Babis.   “We do not want to raise panic but... we need to adopt these security measures," Chovanec added.  The interior minister went on to say that hundreds of letters containing unusual substances are sent to government buildings each year, but this is the first case of harmful substances being used.    The Czech Republic, a European Union and NATO member, does not have any records of terrorist attacks over the past decades.

Across Europe, government bond yields are NEGATIVE, i.e. you have to PAY these bankrupt governments for the privilege of loaning them money.  And as IMF director Christine Lagarde said last week that a diet of high debt, low growth and high unemployment may yet become “the new normal in Europe”. Each of these data points signals an obvious long-term trend. We can see where this is going. But here’s the good news: none of this need affect you. The power is in your hands.

Even if the Swiss divorce themselves from prudent policy, and even if your government refuses to maintain sound money, you still have options.

You can choose to maintain a portion of your savings at a well-capitalized bank abroad in stronger currencies. You can choose to hold some physical precious metals (or even cryptocurrency) overseas at a secure location where it can’t be confiscated by a bankrupt government.

You can choose to own productive assets abroad or collectibles that cannot be conjured out of thin air by central bankers. All of these tools and resources already exist today. And for now, they’re available for anyone to take advantage of.

The ECB and the Euro have not united Europe in any way since their inception - other than a common un-payable astronomical debt via a common currency! The EEC was a far better instrument for uniting Europe - with each government controlling its own borders and in control of their own currencies - and their own prices! Central banks such as the FED and the ECB are screwing the life out of the working man and having a right laugh about it too with their corporate and politician underlings! Actually, the truth lies in not just "debt forgiveness" but in "debt-free money" directly from government treasuries everywhere... value based on individual GDPs. But the central bank stockholders who meet at the Bank of International Settlements in Switzerland will not relinquish their 6.66 % (how odd) of the entire national debt of the Western World very easily! Assassinations, wars, and depressions are just some of the tricks they pull out of their hats to keep us all enslaved to debt-based money! The only solution would be to have leaders with "balls" open their books, throw the buggers in jail, and then start printing currency based on good faith and national assets....

Nein, Nein, Nein. Germany will not allow the ECB to do full scale QE. Anything that is done will be too small, too late and of little use. The German electorate are so ingrained in their own dogma that they will never allow the politicians to change course. Even if they did it would be challenged through the Constitutional Court which has already fired a warning shot over the bows of the ECB about OMT.

Not that QE is the answer, it certainly isn't and at best is a poor stop gap measure in the hope of kick starting the economy to get to a 'virtuous circle' of economic growth. That hasn't happened because the money doesn't escape to the real economy where it is needed. Helicopter money would work better.  Any other solution is off the cards because the Germans would see it as moral hazard to help the struggling economies in the EZ. Good grief I was wrong about the euro fracturing, but was right about the cost of saving the currency would be at the expense of economies in the EZ. Anyone with an interest could see that coming. I have also predicted that they will throw everything including the kitchen sink to save the euro, even to the point of allowing economies to collapse into depression. The only way it can be broken if for eurosceptic parties to challenge the system and break it up. That is a long process as elections only happen every few years and the game is stacked in favour of the establishment, but it is as the FN in France shows.

The zealots in the EU and their banker chums are willing to go all in, rather than take a backward step like an orderly breaking up of the euro. Just how much punishment do the people or Europe have to endure before they throw these parasites off their backs?

Worries about the eurozone came to the fore this week after a poor set of industrial production figures from Germany was swiftly followed by news of a 5.8% fall in its exports, compared with expectations of a 4% decline. The fall was the biggest since January 2009, and showed the effects of the sanctions on Russia over Ukraine, as well as the wider slowdown in the eurozone.

Germany’s economy shrank by 0.2% in the second quarter, so a second consecutive contraction in GDP in the third quarter would tip it into a technical recession. There were reports that the government would next week lower its estimates for GDP growth to 1.2% for both 2014 and 2015, from 1.8% for this year and 2% for next year.

Mario Draghi, the president of the European Central Bank, added to the gloom on Thursday by saying in Washington that the eurozone recovery was running out of steam.

Analysts are nervous that Draghi’s plans to stimulate the flagging eurozone economy with a bond-buying programme have still not been fully implemented and may not be sufficient anyway. Other central banks, notably the US Federal Reserve, have been gradually turning off the money that has been supporting the global markets for the past six years since the global crash which followed the collapse of Lehman Brothers. The prospect of this support ending, and of interest rates rising, had already started to unsettle markets. There was a brief respite from the week’s slide when the minutes of the latest Federal Reserve meeting suggested it was in no rush to raise rates, but this proved short-lived... It becomes clearer by the day that the Eurozone is heading back into crisis - several of the Mediterranean members have never really recovered from the recession of 2009 - unemployment in Greece is 29% whilst youth unemployment in Spain is over 50%. These are depression levels.
Whilst ever Germany insists on continuing with its austerity programme for the EZ, it will languish in low growth/no growth. Now that even Germany is feeling the effect of lack of demand for its exports to the other EZ countries, perhaps some change will occur in policy. If not, then a second crisis for the EZ will spell the political end of the project, with unpredictable results for the European Union overall.

Real GDP growth made up the ground lost to the 2008 crash in the 1st quarter of 2011 and though sluggish has remained positive. The Euro are as a whole has yet to make that ground. Only Germany, Austria and Belgium have outperformed France.

Employment participation rates for the key 25-54 demographic though off their pre crash peak of 2008 by a slightly more than 2% remain considerably than the Euro area as a whole and much higher than the US. Long term interest rates are at all time lows reflecting investor confidence, inflation is less than 1%, and its current account balance as a percentage of GDP is mildly negative , though, improving and significantly better than the US.

France is a good example of how public expenditure and strong labour laws acts as a buffer to to the privations of a severe economic downturn. Austerity and relaxed labour regulation imposed by the right wing ideologues on the countries of Southern Europe have devastated those economies causing wide spread and wholly unnecessary suffering. The right wing dogma attributing Europe's woes to excessive debt that can only be mitigated by draconian cuts in the face of a weak economy have led to the real threat of a deflationary spiral that would further weaken European economies and be much harder to recover from. Europe, like the UK and the US need to stimulate their economies back to full employment and adequate sustainable demand. The money borrowed to accomplish this would be offset by a combination of increased revenues from positive growth, a return to progressive, avoidance proof taxation and a 2-3 % rise in inflation. Debt forgiveness though laudable in intent does nothing to address the long term underlying causes of the havoc wrought by the unregulated, heads we win, tails you lose, cowboy free marketeers and banksters.

Mr Draghi said the ECB's commitment to buy bundles of bank debt, known as asset backed securities (ABS), and offer cheap loans to banks in order to stimulate lending was the correct first course of action in an environment where borrowing costs are already very low.  "When you reach the lower bound you only have one instrument. It’s very clear that if we are going to go down this route [of QE], we have a spectrum of interest rates and spreads which is already very low. That’s why we started with addressing flows in the private sector, because we believe flows will directly affect private lending."

Mr Draghi has said he intends to steer the size of the ECB’s balance sheet back to the levels seen at the start of 2012, indicating an increase in assets of as much as €1 trillion (£800m). ,,,The euro is not a currency. It is a political project with political goals and intent, to show the world that the nations of Europe can exist with one currency. Well that's proved hogwash. They are disparate, divided countries. Trade amongst them, remove sales tariffs, but don't pretend they can function as one entity. Bank bailouts were forbidden by the treaty of Rome, I believe.

If that treaty is void, what else are they ignoring that they created to bind them? Oh, that's right. Nothing, because Lisbon made all treaty self amending - they can change it without our permission or consent. Such is the dream of demented communists, socialists and troughers who have no interest aside form lining their own pockets with tax payers cash.Just exactly what deflation index is so horrifying a prospect for the economy? I don't see school fees dropping; medical expenses and insurance defy gravity; I don't see car prices falling; my risk insurance premiums only go up; electricity, rates and taxes levitate on their own; housing, thanks to large doses of money printing, is more expensive and rents are being urged higher...so what is the crucial expenditure that I am going to defer because prices are falling, damaging the economy beyond repair? It sure as hell isn't these bulge bracket "non-discretionary" items in the average monthly basket. I suppose the spotty gurus in the banks think that because food, clothing, TV screens and cell phones are falling in price, we are all going to wander around wretchedly skinny, naked and suffering withdrawal symptoms from being TVandCellphoneless, while we wait for a bargain? So let's get real...it is not about deflation, certainly not of anything measured by CPI indices...it is about zombie banks and zombie assets, so why not ask the geniuses poring over the CPI figures to publish a pricing index of what they are really wanting to watch?,,,hmmm...They are more worried about pension funds having to accept write off of their government debt.. Which will be coming if deflation sets in. Debt will rise as a percentage of GDP and as incomes drop then the debt is less affordable... Also I would like to point out here that everyone who seems to think that falling prices are a good thing are as dumb as a box of rocks....If there is deflation and prices are falling do you not think that salaries will fall too?? How are businesses that get less for their product going to carry on paying the same wages??

In a debt based system, the only real growth you can have is via increasing debts. But you can't have infinite debt, so booms and busts are inevitable. However, this bust has been delayed for so long that it will be gigantic... Please prepare - get extra food in. Get to know your neighbours. Learn survival skills. Pray....Global debts have reached a record high despite efforts by governments to reduce public and private borrowing, according to a report that warns the “poisonous combination” of spiralling debts and low growth could trigger another crisis. Modest falls in household debt in the UK and the rest of Europe have been offset by a credit binge in Asia that has pushed global private and public debt to a new high in the past year, according to the 16th annual Geneva report. The total burden of world debt, excluding the financial sector, has risen from 180% of global output in 2008 to 212% last year, according to the report.  The study by a panel of senior academic and finance industry economists accuses policymakers in many countries of failing to spur sustainable growth by capitalising on historically low interest rates while deterring exuberant lending.

It called for Brussels to write off the debts of the eurozone’s worst-hit countries and urgently embark on a “sizeable” programme of electronic money creation or quantitative easing to push down long-term interest rates. It said unless policymakers kept a lid on risks in the financial system, especially overvalued property and stock markets, a trend for investing in assets with borrowed money could run out of control. The Geneva report, which is commissioned by the International Centre for Monetary and Banking Studies, follows a study earlier this year by the Bank of International Settlements (BIS), which diagnosed the same problem, but said risky borrowing could only be discouraged by higher interest rates.

The Geneva report instead argued a concerted effort to tackle the after-effects of the crisis was needed to mitigate a “poisonous combination of high and rising global debt and slowing nominal GDP [gross domestic product], driven by both slowing real growth and falling inflation”.

The ECB and the Euro have not united Europe in any way since their inception - other than a common un-payable astronomical debt via a common currency! The EEC was a far better instrument for uniting Europe - with each government controlling its own borders and in control of their own currencies - and their own prices! Central banks such as the FED and the ECB are screwing the life out of the working man and having a right laugh about it too with their corporate and politician underlings! As just one example, in 1955 the starting wage at a John Deere plant in the USA was $13.50 an hour and gasoline cost 25 cents a gallon back then! It now costs $4 a gallon which is 16 times higher - but the minimum wage in the USA is around $7 an hour. And guess what - the starting wage at John Deere is still $13.50 an hour! According to the cost of gasoline it should be 16 x $13.50 = $215 dollars an hour!!! Similar scenarios are playing out in Britain and the rest of Europe as well! So when the bank controlled media starts spouting about real growth - I would say that is a load of horse manure! Actually, the truth lies in not just "debt forgiveness" but in "debt-free money" directly from government treasuries everywhere... value based on individual GDPs. But the central bank stockholders who meet at the Bank of International Settlements in Switzerland will not relinquish their 6.66 % (how odd) of the entire national debt of the Western World very easily! Assassinations, wars, and depressions are just some of the tricks they pull out of their hats to keep us all enslaved to debt-based money! The only solution would be to have leaders with "balls" open their books, throw the buggers in jail, and then start printing currency based on good faith and national assets. Organizations like Positive Money in the UK are trying to spread awareness of this major problem in our economies! Let's hope they are successful!

Key gauges of Germany manufacturing slumped in September, falling to a 15-month low as ongoing tensions over Ukraine weighed on the sector.  Markit’s purchasing managers’ index (PMI) for the sector dropped to 50.3, from 51.4 a month earlier. The reading is barely above 50, implying that the sector is expanding, but slowly. 

No analyst polled by Reuters expected a number this bad.

The most pessimistic expert forecast that the PMI figure would fall to 51, while the average analyst believed Germany’s PMI would drop to 51.2.  Germany’s factories are particularly exposed to any conflict between Russia and its neighbours, as well as the tit-for-tat sanctions exchanged between Russia and the EU.   Yes, it is difficult to imagine more stupid and counter-productive foreign policies than those pursued by the brain-dead European ruling class. Europe and Russia are natural allies, both geographically and in terms of commercial and energy interests. We must vote a new generation of leaders into office all across Europe, one which is not stuck in cold war thinking and glued to American energy policies and global militarism....The terrible thing about the huge losses being incurred by EU countries in the tit-for-tat sanctions by Russia is the feeling that the EU simply didn't think Russia would respond! Instead Poland, Greece and others have lost a large market for their agricultural products. France seems determined to destroy any future military (and no doubt civilian) technology sales to Russia. In the meantime Russia is seeking and finding alternative sources. So the Russian market is waving goodbye to the EU. (Interestingly, that good NATO member Turkey is one of the new sources.)...Meanwhile, just to ramp things up even more, the US is to sell cruise missiles to Poland which are capable of hitting targets in Russia.

Spending money wont save the EU. If you want to save the EU then try creating wealth rather than destroying it through taxes, regulations and stupidities like green energy scams. Do you morons seriously think that you can power an advanced economy with windmills! By creating wealth and encouraging business and investment you can create employment rather than unemployment. The EU has been destroying wealth and discouraging business and investment for decades (Exhibit A - France, Exhibit B - all the others), and still the idiots learn nothing, they refuse to change.

How did this guy ever win the title 'Super Mario' when he doesn't understand the fundamentals of economics?

"Mr Draghi suggested that countries in Europe should be encouraged to increase spending within the existing rules designed to reduce deficits and rein in debt in order to boost economic reform and create more jobs"

Please correct me if I am mistaken , but this statement seems like double speak or BS nonsense.

On the one hand 'the existing rules' says no spending past 3% (the fiscal compact) and then he says they should be 'encouraged to 'increase spending' !!

WTF, France et al are already way past 3% . So what on earth is he talking about?

Spending can't be increased.

He makes no mention of reducing the welfare budget for example, (unless that means " national structural policies") ,so I can only assume he is just 'talking the talk!'

His LTRO and the newer version of offering cheap loans do not seem to working.

PARIS – There is something misleading about the current political excitement on both sides of the Seine. The ouster of three rebel ministers by a surprisingly firm president, a government reshuffle, a standing ovation delivered at Medef, the employers’ union, for the Socialist prime minister who dared to proclaim, “I love business!”: All the action was set in Paris. Yet one could fantasize that, some 900 kilometers away, Berlin’s invisible hand was quietly at play.

Germany determines so much of France’s economic life these days that it seems like the proverbial 800-pound gorilla in our political process. Last week’s crisis erupted when the economy minister, the leftist Arnaud Montebourg, called for an alternative economic policy, in an interview with Le Monde. Nothing really new there, but he went one step too far when he launched an attack on Germany. “We need to raise our voice,” Montebourg said. “Germany is caught in a trap of austerity that it has imposed across Europe.”

Prime Minister Manuel Valls didn’t wait long to let it be known that Montebourg had crossed a “yellow line,” when his office declared: “An economy minister cannot use such words … to talk about a European partner.” Unlike President Obama’s red lines, yellow lines in France are usually enforced. Two days later, Montebourg was out.

To France, Germany is not just any “European partner” – it is the most important partner. Together, these two founding members of the European Union are supposed to form “an engine,” “a tandem,” “a couple.” They are the pillars of Europe.

But the Franco-German engine has stalled. Battered by the euro crisis, the famous couple is decoupling. The imbalance between the German economy, strengthened by reforms launched by Chancellor Gerhard Schröder well before the crisis struck, and the French economy, unable to recover its competitiveness, is so deep that it is ruining the whole European dynamic.

On Aug. 22 the German newspaper Handelsblatt dedicated a cover story to “The French Patient” and “the economic decline of what used to be a proud nation.” In “A Tour of France: Examining the New Sick Man of Europe,” Der Spiegel this summer poked fun at those French people dreaming of having “la mannschaft” instead of “le malaise.”

Fifteen years ago, Germany was “the sick man of Europe.” Today it is France’s turn. One difference, though, is that 15 years ago the common currency, the euro, was just being launched. Today both economies are much more integrated and must enforce a common budgetary policy. Thanks to the strength of the German economy, Berlin has the upper hand.

President François Hollande has gone through phases about this. Early in his term, he antagonized Chancellor Angela Merkel by trying to head a group of Southern European countries favoring pro-growth policies. It was a disastrous mistake. A master of compromise, he then tried to recover using his left wing, allowing Montebourg and his friends to vent their anger at home against Bismarck and Merkel’s “intransigence,” while ostensibly trying himself to play the perfect partner in the Franco-German couple. That didn’t work either.

Desperate to get the French economy back on track, Hollande is trying something new: a government unanimously committed to his vision of structural reforms and a team that won’t utter a word against the German economic line.

That doesn’t mean that Hollande has given up hope of extracting more flexibility from Merkel on the pace of deficit reduction. The great debate on austerity versus growth is closing in on the chancellor, as Nobel Prize laureates, newspaper editorials and now, more importantly, Mario Draghi, the president of the European Central Bank, advocate demand-side policies to complement structural reforms in order to fight unemployment.

Those who wonder why France doesn’t just do what Germany did under Schröder over a decade ago forget one crucial factor: Back then, the economy was growing; cutting the budget deficit in a zero-growth environment is a different challenge. Even the German economy is slowing down. The French president is betting that, having provided Merkel with all the evidence that this time he finally means business, Berlin and therefore Brussels will give him some breathing space. Halfway into his term, Hollande has come to acknowledge the power of Germany. Today the real economic leader of the eurozone is Wolfgang Schäuble, the German finance minister, who has held the job for five years. It is Schäuble who opposed the candidacy of Pierre Moscovici for the top economic job at the European Commission because of Paris’s record on deficit reduction. (After much wrangling, Merkel finally compromised: Moscovici should get the post, but a more fiscally orthodox Finn, Jyrki Katainen, will be placed above him as vice president of the commission.) It is Schäuble with whom Michel Sapin, the French finance minister, confers at every important political juncture, as he did again last week after the government reshuffle.

Yet it would be too simplistic to see this process, as the French left tends to do, as merely humiliating subservience. Political intertwining between France and Germany cuts both ways: Germany needs France as much as France needs Germany. When German diplomats, businessmen, politicians or even journalists express their deep concern to French colleagues about the Gallic crisis, they are actually sincere. A weak France is not in Germany’s interest, not only because France is its first customer, but also because the last thing Germany wants is to be leading alone. The way Merkel carefully includes Hollande in her dealings with President Vladimir Putin of Russia is revealing: Even though she is in the driver’s seat on the issue of Ukraine, generally on foreign and security policy she wants to be seen as working with France.

The Germans would love to freely enjoy their successes, unhindered by the burden of history. The eurozone would be much better off powered once again by a dual engine. For France and Germany, recoupling is the only option – if only their leaders could help.(source NYT)

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

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

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

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

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

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

A decision by Russia to cut its gas exports to Poland without warning rekindled fears last night about Europe's reliance on Siberian gas at a time of increasing tension between Moscow and the west. The Polish state energy group, PGNiG, said it was trying to find out why volumes had been slashed by up to 24% at a time when it had been exporting gas itself to Ukraine to make up for Russian shortfalls there. Its counterpart in Kiev, Ukrtransgaz, accused Kremlin-controlled Gazprom of deliberately penalising Poland and undermining onward gas supplies to Kiev. "Today Russia started limiting gas supplies to Poland in order to disrupt the reverse (flows) from Poland that we receive ... Poland stopped reverse supplies to Ukraine in the range of 4m cubic metres," said Ihor Prokopiv, chief executive of Ukrtransgaz, according to the Russian news agency, RIA. Nick Perry, a British energy consultant, said that it was not surprising that the west was nervous about Gazprom's actions. "Since the 1990s, the International Energy Agency (IEA) has been investigating how Europe would survive if they lost some of its biggest sources of gas for six months. People have been looking at this for a long time." But Gazprom sources insisted the shortfall could be attributed to maintenance work that was going on fields and pipelines ahead of the important winter season when demand is at its highest. A formal statement from the group sidestepped the issue by saying it was pumping gas to all destinations "according to the resources available for exports and for the continuing pumping to storage facilities in the Russian Federation".

Jonathan Stern, a gas expert at the Oxford Institute for Energy Studies and a member of the EU-Russia Gas Advisory Council, believed there was more likely a technical not a political problem....well ... Doesn't Poland have an agreement with Russian Gazprom, in which it stated that it is not allowed to 'reverse flow' gas? Therefore Poland should blame themselves for breaking the contract in the first place. Think about it as a business. You sell two people apples (A and B). You sell them at difference prices in accordance with the a long-term contract, 'A' for lower price and 'B' for higher. Then A decides to make a himself a profit and starts reselling those apples to the other person (B). Soon, B decides to stop buying apples from you and rather buy them from A. Hence you lose-out on your profits. You can take A as being Poland, B as Ukraine, and you the apple seller as Russian Gazprom. See the logic?

Germany's newest party, the Eurosceptic "Alternative for Germany" (AfD), has won its first seats in the state parliament of Saxony, according to preliminary results.

Chancellor Angela Merkel's Christian Democrats won the vote with 39.5% according to exit polls. The AfD, which says it is anti-euro (the currency), rather than anti-Europe, won around 9.6% of the vote. Eurosceptic parties made large gains in the European elections in May. The projected results from Saxony, a state in eastern Germany, indicate a much more successful showing at the ballot box than had been predicted. The BBC's Damien McGuinness in Berlin says this is the first time that an anti-euro party has won seats in a German state parliament - which is big news in a country where support for the European Union is traditionally strong.

The AfD appeals to some conservative voters who think that Angela Merkel has moved too far to the centre, he adds.

The new party, which is one year old, entered the European parliament in May's elections, calling for the breakup of the euro and campaigning against bailouts for southern European countries.

However the party is seen by some as being controversial, accused of catering to nationalist sentiment and attracting right-wing extremists, our correspondent adds.

Angela Merkel, whose party sits on the centre-right, has ruled out any future coalition with AfD.

Ukraine could need a further $19bn in emergency international funding by the end of next year if there is no resolution to the escalating conflict in the east of the country, the International Monetary Fund (IMF) has warned.

Peace talks are scheduled to resume this week in Minsk as the humanitarian disaster deepens and the outlook for Ukraine's economy darkens. Factories are shutting down, the country's industrial heartlands are under attack and the currency has been in freefall, contributing to a sharp increase in prices.

The IMF last week approved a $1.4bn (£840m) loan to Ukraine, the second tranche of its $17bn bailout programme agreed in April to stave off default.

Ukraine urgently needs IMF loans to support its budget and prop up its faltering currency as its debts come up for repayment. Almost $4bn must be repaid before the end of the year, with $9bn due in 2015. In exchange for IMF aid, Ukraine's government has agreed on sweeping economic reforms, including curbing public-sector wage increases, increasing energy prices to bring them more in line with market values, overhauling banking and currency regulations and tackling chronic graft that has made the country one of the most corrupt in the world.

The IMF praised Ukraine's progress, but said risks to the programme had increased. Since mid-July, the conflict has escalated, while Naftogaz, Ukraine's national gas company, and Gazprom, Russia's state energy group, have been locked in a standoff over the price of gas, which until recently the Russians supplied at a hefty discount. The dispute is likely to further increase Ukraine's debts.

This whole mes was a creation of the EU's imperialist ambitions , they financed the opposition to the democratically elected President with at least a billion Euros , succeeded in overthrowing him and in putting their placemen in power and then sat back. However as the West has discovered in Iraq, Afganistan ,Libya, and Syria it is extremely easy to interfere in the affairs of another country but very difficult to control events thereafter . However even the most stupid western politician should have understood Russia would not just stand by. Unfortunately our leaders have shown they are totally stupid as far as intervention in foreign countries is concerned.
Putin is in the right to defend what he cosnsiders to be his sphere of influence. As this mess continues the economic consequences for everyone but particularly the average EU citizen goes from bad to worse...

If I understand it correctly the latest false Kiev claim goes like this:

1. A mighty Russian force attacked Ukraine through the border.
2. A heroic Ukrainian army destroyed at least 50% of this menacing force.
3. The Russians put their tail between their legs and retreated before the mighty Ukrainian army could wipe out the rest of them.
4. Apparently the terrified Russians had the good sense in them to take back to Russia all their destroyed equipment for reasons of protecting the Ukrainian environment.

In all of this excitement, no soldier or journalist was able to use their iphone and capture some evidence. No aerial satellite photography either. Other than these minor details (of no evidence existing anywhere) this is a decisive victory for Kiev's unstoppable forces... Lies, upon lies, upon lies. Such is the natural environment for the beast called EUSSR. It has to feed on lies otherwise it dies. And since it refuses to die it has to constantly fabricate new lies just to keep up with its corrosive self-indulgence.

The latest monthly index of purchasing managers (PMI), from data firm Markit, found that France's economy continues to struggle. French manufacturing activity is falling at its fastest rate in 15 months. Growth in the country's service sector picked up, but the overall French private sector is flatlining after shrinking for the past three months. The composite PMI for the eurozone fell to a two-month low of 52.8 this month, down from 53.8 in July. Factory output weakened, with the eurozone manufacturing PMI falling to a 13-month low of 50.8, closer to the 50-point mark that separates expansion from contraction. Firms also reported that job creation had slowed to near-stagnation in August, suggesting that progress in cutting eurozone unemployment is stalling. "The ongoing subdued and fragile nature of the upturn in economic activity also remains too weak to encourage companies to take on staff in sufficiently large numbers to have a meaningful impact on unemployment," Markit said, warning that economic and geopolitical uncertainties are also deterring firms from hiring.Merkel is far more responsible than perhaps some others because she has ruled European economic policy by diktat. She has forced all of Europe to adhere to ideological Neoliberalism. Her policy of moralizing and condescension toward the people of Europe have caused more economic suffering than even the Great Depression created. The overwhelming failure of Neoliberal economic policy especially as practiced by Merkel has devastated millions of lives. These failures are not just for today but will continue to create gratuitous suffering and the rapid flow of wealth too the very top for decades to come. The rulers of today are ideologues who are making policy based of their own views and philosophy of Neoliberalism any sort of evidence has nothing to do with policy just - make the rich richer and everyone else, well get accustomed to life as we see it in Bangladesh (Neoliberal paradise) today.

The EU (the 4-th Reich in fact) instigated this thing in Ukraina with a coup d'état against Ukraine's former president - and from thereon we are rolling on into a quagmire of tit-for-tat sanctions and embargoes and ultimately, an invasion by Russia, not only of Ukraine, but, the EU and NATO countries as well!

Putin will not back down especially if the west figures they have him cornered against the wall, that's when his fangs and claws will come out and rip apart everything and everybody and every entity that is against him and, particularly against HIS Russia. Read up on Wolverines! That's what Russia will become! A Wolverine! Hell be Damned, it will be Hell for Leather!

There will be no winners here, but, I'll tell you one thing for sure, the EU and the western infiltrators/meddlers will get the FIRST bloody nose out of this!

I say let the 280 some Russian trucks of AID into east Ukraine carry on to their destination! Let them go with an 'appropriate crew' for each truck, not just the driver, as Ukraine is demanding! That's idiotic of Ukraine to limit the AID with just one driver per truck! Where is Ukraine's AID, where is the UN's AID, where is the EU's AID! There's none, because all that lot want is to annihilate the ethic Russian speaking MAJORITY in that Territory! Let that AID convoy proceed and if there happens to be a 'misstep' along the way 'by the Russians', then deal with it CAREFULLY and RATIONALLY with Ukraine's national security in mind! But watch your step, Ukraine, you and the whole world are on the Brink of a World War!

I can vividly sense the HATRED of the Russian Ethnic Peoples of east Ukraine!...The miscalculation was entirely that of the EU and the West they thought they could interfere in the affairs of a foreign country without any consequences. Totally provocative of the West to aid the original rebels and then send in the US Vice President ,head of the CIA and dear old Baroness Ashton to give finacial help and advice immediately after the democratically elcted President had been ousted.

European diplomats reached a deal on “tier 3” sanctions aimed at shutting Russian banks out of global capital markets and slowly suffocating the Russian economy, though the original plan to limit technology for oil and gas exploration has been diluted. Creditors have already frozen a $1.5bn loan for VTB bank due to be agreed last week.  The European Commission said the measures are likely to cut 0.3pc of GDP off EU economic growth this year, and 0.4pc next year, even if the crisis is contained without a serious disruption of energy supplies. “This is a significant hit to growth. It implies such low growth in parts of southern Europe that it makes it almost impossible to arrest the rise in debt ratios,” said Mr Tilford.  The Moscow newspaper Izvestia said Russia’s parliament is already drawing up legislation to blacklist “aggressor countries”, specifically targeting auditors and consultants. These include Deloitte, KPMG, EY (formerly known as Ernst & Young), Boston Consulting and McKinsey.  Tim Ash, from Standard Bank, said this would trigger clauses on bond covenants that rely on external audits. “If they go down this path they could provoke a brutal market reaction,” he said.  David Owen, from Jefferies, said a lack of genuine economic recovery is what lies behind Europe’s falling yields, already replicating the pattern seen in Japan in the 1990s. “A third of all countries in the eurozone are already in deflation once you strip away taxes, and another four have no inflation, including France and Spain,” he said.   “Corporate profits fell in the first quarter, and so did household disposable income, if you exclude Germany. We are seeing no growth at all in world trade, which is highly unusual. The CPB trade index rolled over in May and fell 0.6pc,” he said.  Mr Owen said investors are starting to price in quantitative easing by the ECB, which would entail sovereign bond purchases and potentially push yields lower. The Bundesbank would be the biggest buyer on a pro-rata basis under the ECB’s “key”, but German debt is relatively scarce. “Investors know this and it is driving Bund yields even lower,” he said. 

For Russia, deep recession looks inevitable. The commission said sanctions will cut Russia’s growth by 1.5pc in 2014, and by 4.8pc in 2015. A return to the Soviet stagnation of the early 1980s is becoming all too likely.

Russia's ambassador to Britain, Alexander Yakovenko, said the U.S. has no real evidence. "Russia doesn't supply weapons to local de facto (separatist) authorities in eastern Ukraine...no evidence whatsoever has been presented that the Russian government has been doing this."  However, a NATO source confirmed to Reuters that they had seen arms being transported from Russia to eastern Ukraine. The information Russia is denouncing is coming from multiple sources around the world. The U.S. is even saying that artillery shelling now being directed at Ukraine is being fired by the Russian military from the other side of the border. While U.S. intelligence has not directly stated Russia is responsible for the shooting, they have been able to link Russia to the missile, and "still believed the separatists were likely to blame." Additionally, Alexander Khodakovsky, a rebel leader, stated the separatists have a BUK missile system. This missile system is likely what fired the shot that took down MH17. Alexander Borodai, the self proclaimed prime minister of the Donetsk People's Republic, denied having this system.  Anatoly Antonov, deputy defense minister, said that U.S. intelligence did not do diligent research, and instead "mostly cited social networks." In fact, had U.S. intelligence cited only social networks, they would have been able to confirm the separatists were responsible almost two hours before anyone knew the plane crashed. Before news of the MH17 crash broke, rebel leader Igor Girkin posted on social media that rebels had shot down a "military transport aircraft." Instead, it ended up being a commercial airliner. Girkin quickly removed the post.