On a busy day of diplomatic activity, President Barack Obama and the German chancellor, Angela Merkel, agreed on Saturday that Russia would face “additional consequences” if it intervened in Ukraine without permission from the Ukrainian government, the White House said.  In a statement about a call between Obama and Merkel that took place while Obama was aboard Air Force One, flying to Massachusetts for a scheduled vacation, the White House said: “The two leaders agreed that any Russian intervention in Ukraine, even under purported ‘humanitarian’ auspices, without the formal, express consent and authorisation of the government of Ukraine is unacceptable, violates international law, and will provoke additional consequences.” Fighting in eastern Ukraine continues in a crisis dating from the fall in February of Viktor Yanukovych’s pro-Russian Kiev government. Russia subsequently occupied and annexed Crimea; in July a Malaysia Airlines plane, Flight MH17, was brought down over Ukraine by a missile the US believes was fired by pro-Russia separatists. The White House added that the two leaders also reiterated their commitment to urge Russia to seek a political solution to the crisis in Ukraine. According to a statement from Russia’s foreign ministry, the foreign minister, Sergei Lavrov, spoke by telephone with his US counterpart, the secretary of state, John Kerry, and called for “urgent measures for preventing an impending humanitarian catastrophe in south-eastern regions” of Ukraine.  The statement said: “John Kerry confirmed such work is being carried out with the Kiev authorities.” Kerry was in Burma on Saturday. He pressed his host country on human rights and sought to address tensions between local powers and China over the South China Sea. On Saturday morning, on the South Lawn of the White House, Obama delivered a statement regarding air strikes against Islamist militants in Iraq and humanitarian airdrops to Yazidi refugees on Mount Sinjar. Obama detailed calls that morning with the British prime minister, David Cameron, and the French president, François Hollande about contributing to the aid effort in Iraq.

The White House later said Obama and Cameron were calling for an immediate cessation of hostilities between Israel and Hamas in Gaza and pressing for action that would lead to a permanent ceasefire.

Obama has spent at least part of his summer in Martha’s Vineyard each year he has been president except 2012, when he was running for re-election. This year he will break his vacation midway through, with a two-day return to Washington.

Advisers have been cagey about why the president is returning to Washington, saying only that he plans to hold in-person meetings at the White House.

On 1 August, new guidelines came into force for Member States to use in assessing whether support measures to rescue and restructure firms in difficulty are compatible with State aid rules. The revised guidelines (the Guidelines) have replaced the previous 2004 guidelines.  They will be applied to any new aid schemes notified to the Commission from 1 August.  Member States also need to bring their existing aid schemes into line the new Guidelines within six months, by 1 February 2015.

Background : The Commission takes the view that State aid granted by Member States to companies in distress has high potential to distort competition in the single market as it keeps alive companies that would otherwise have exited the market. Exit of less efficient businesses allows their more efficient competitors to grow and returns assets to the market.  By interfering with this process, rescue and restructuring aid may significantly slow economic growth.  The Commission however also recognises that certain forms of aid can assist otherwise healthy businesses to restructure themselves in a way that ensures their long-term viability.  It also recognises that aid may be needed to address short term liquidity problems, particularly for SMEs.  The Guidelines therefore reflect the Commission’s policy that State aid should only be permitted where all other market options have been exhausted and where it is necessary to achieve a well-defined objective of common interest. According to the Guidelines, State aid is only allowed under conditions that mitigate its potential harmful effects and promote effectiveness in public spending.

Review of 2004 Guidelines : The review of the 2004 guidelines is a key element of the State Aid Modernisation (SAM) programme. One of the main aims of SAM is to ensure that State aid rules support the provision of “good aid” that promotes economic growth and objectives of common interest, in particular by simplifying the requirements that apply to that type of aid.  Since the previous guidelines were adopted in 2004, the Commission has gained nearly ten years' experience in dealing with rescue and restructuring cases, including perhaps the greatest challenge it has yet faced in this area: the support granted to rescue and restructure banks (which are not subject to these guidelines but to other, specific rules applying to the financial sector).  That experience has shown that, although the basic principles of the guidelines are still sound, they could be improved in a number of ways to ensure that aid is better targeted where it is needed most and that it is given in the least distortive form possible.

What has not changed from the previous guidelines?

Some of the key principles remain unchanged from the 2004 guidelines:

• “Rescue aid” may be granted to companies in financial difficulty for a temporary six-month period. Rescue aid takes the form of loan guarantees or loans and its purpose is to keep the company afloat for the time needed to work out a restructuring or liquidation plan.
• Beyond six months, the aid must either be reimbursed or it must be notified to the Commission for it to be approved as “restructuring aid”. For a restructuring plan to be approved as compatible with the State aid rules, it must ensure that the long-term viability of a company is restored without additional State support, that the distortions of competition resulting from the State’s support are addressed by specific measures, and that the company contributes towards the costs of the restructuring.
• Restructuring aid may only be granted once for a maximum of 10 years in order to prevent companies that are not viable being kept alive artificially through public support.

 What are the main changes?

• New rules allowing temporary restructuring support for SMEs – these rules are designed to simplify the granting of state funding for restructuring while also reducing distortions of competition by favouring less distortive measures (e.g. loans and guarantees) over structural aid (e.g. direct grants or capital injections). Support to SMEs can be granted for a maximum period of 18 months on the basis of a simplified restructuring plan. The new rules are intended to enable Member States to help SMEs address liquidity problems, which is particularly important in the current economic context.
• Better filters in assessing compatibility of restructuring aid – in demonstrating that the aid achieves an objective of common interest, Member States will now have to demonstrate that the restructuring aid is needed to prevent hardship (e.g. in areas of high unemployment) and that the granting of the aid will make a difference in that respect (e.g. to reduce the scale of job losses). These new filters aim to ensure that State aid is used where it is really needed.
• New rules requiring investors to pay a fair share of the costs of a company’s restructuring – these rules are based on the concept of “burden sharing” and they ensure that investors, particularly shareholders, are responsible for covering incurred losses before any aid is granted by the State. The rules also ensure that the State will receive a fair return on its investment if the restructuring plan succeeds. The objective behind these rules is to ensure that aid is used to maintain viable economic activity and jobs, and not simply to bail out investors.

Scope : The Guidelines will apply to aid for all undertakings in difficulty, except those operating in the coal or steel sector and those covered by specific rules for financial institutions. An undertaking is considered to be “in difficulty” when, without intervention by the State, it will almost certainly be condemned to going out of business in the short or medium term. A company in its first three years of operations is not eligible for aid under the Guidelines. A company belonging to or being taken over by a larger business group is also not normally eligible for aid under the Guidelines.

Application : The Commission will apply the Guidelines from 1 August 2014 until 31 December 2020. Notifications registered by the Commission prior to 1 August 2014 will be examined in light of the previous guidelines. The Commission will examine the compatibility of any rescue or restructuring aid granted without its authorisation on the basis of the Guidelines if some or all of the aid is granted after their publication in the Official Journal (31 July 2014). In all other cases, it will conduct the examination on the basis of the guidelines which applied at the time the aid was granted.  Member States will also need to bring their existing aid schemes into line with the new guidelines over a transitional period to 1 February 2015.

A summary of the content of the Guidelines can be found in the Commission’s press release. If you would like to know more about the new Guidelines, please do not hesitate to get in touch with one of the partners named below, or your usual CMS contact.

We,(the whle world economy in fact)are sliding towards another debt-ridden disaster, with the eurozone and China one shock away from a fresh crisis, according to a leading economics consultancy.

Fathom Consulting, which is run by former Bank of England economists, said current levels of low volatility masked systemic risks in the global financial system.

Danny Gabay, director of Fathom, said an oil price shock would be enough to trigger a "hard landing" in China as growth slowed, house prices plummeted and the country's already huge amount of non-performing loans soared.  Mr Gabay drew parallels between China today and America in 2006, when a number of households began to default on their sub-prime mortgages but authorities played down the potential impact on the rest of the global economy. Fathom also said high levels of non-performing loans in the eurozone posed a threat to the 18-nation bloc, while a strong euro and contracting private sector credit would push the eurozone into deflation within the next 12 months.  Charles Goodhart, senior economic consultant at Morgan Stanley and a former Bank of England rate setter, compared Fathom's assessment of global risks to the ideas of Hyman Minsky, who believed that "stability is destabilising" and the global financial system itself could generate shocks because of investor complacency.  "When you have so much stability, particularly at very low yields, what everyone does is they reach for yield, and they take on riskier and riskier positions. When something causes the balloon to blow up, then you're in real trouble," said Mr Goodhart. Mr Goodhart said Beijing's "remarkable track record" of "managing success" led him to believe that China would be able to contain another crisis.  However, Mr Gabay argued that the Chinese authorities might be reluctant to prop up the whole banking system in the event of a crisis, as this could send out a signal that the state was prepared to shoulder all losses.  "A lot of people say that the authorities can afford to bail the system out, and there's nothing to worry about. But I think you'd be very silly to think that Lehman Brothers happened because the Americans couldnt afford to stop it. Of course they could afford it. They just didn't.  "We see a soft landing in China, but there's a very significant risk that they will be unable to contain the "inevitable" banking crisis, because they're not superhuman, and there's a lot of money sloshing around out there that's non-performing." Fathom expects eurozone inflation to fall "below zero within a year", with core inflation, which strips out volatile items such as food and energy, "way below that".  "A substantial proportion of the eurozone is expected to be in deflation," said Mr Gabay. "And that's what ultimately we think will force the European Central Bank's hand [to launch quantitative easing]"... There will be a "shock" that will plunge the global economy into another recession. However, the cause will have nothing to do with China and will be much closer to home.

Being "European", the only thing you have to be aware of is the inevitable rise in interest rates. It is the inevitable delay in the rise of interest rates that has allowed the Europe's even Germany's an UK's economy's faint heart beat to continue for the past 8-9 years! More so, "nothing lasts forever" and the BoE as well as ECB ( and the other "sheisters" ) and other central banks raising their interest rates (and you've heard it here first!), will actually be the go-ahead for the beginning of the end of all major (and dare I say now worthless and useless ) indebted currencies (this financial crisis & QE was the finial nail in the coffin for individual currencies as we once knew ) and the creation of just 3 or 4 new currencies to be used globally.

Don't worry about China. Worry about that Canadian (and others.) who are firmly in the pockets of some extremely undesirable characters.

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

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

We are 5-6 years into our jobless recovery. And even this tepid recovery shows signs of stalling.
Today's GDP numbers ARE a positive sign, but unfortunately are just not very relevant to the typical American these days.

The combination of Outsourcing, Automation, and Illegal Immigration have decimated the working class and working poor, with no end in sight. Wages can't rise with these headwinds... and if they did then the Fed would immediately raise interest rates to ward off the "wage price spiral" crushing wages again. They think it's ok for Stocks to jump out of control... but wage raises for the plebes is unacceptable. For example - One was laid off in 2010 shortly after the start of the recession. He highly skilled in my field, yet have been bouncing around from job to job all making starting salary numbers, despite being 40 years old. Paying my mortgage is a struggle. Paying his health insurance is worse ($375/month from Freelancer’s Union). He is forced to buy cheap bare minimum car insurance ($18/month from Insurance Panda). His daughter is forced to attend a public school that is in increasingly worse condition thanks to illegal children and welfare leeches moving in. Yet here I am, unable to afford a quality education for her....

Federal Reserve monetary policy moves (although necessary) have mainly benefitted Big Business (especially Finance) and speculators, to the detriment of savers. Zero Interest Rate policy and Fed Purchases in the Open Market simply don't help the Average American much. Thus we see a booming Stock Market (which is clearly an echo bubble based on Fed policy and not on macroeconomic data) and we saw a mini echo RE bubble (especially the "luxury rental" segment)

People ask why the Stock Market isn't jumping with today's news. The answer is obvious. It likes the increase in GDP, but it doesn't like the idea that the Fed may need to stop goosing the market. The Fed is trapped with no exit strategy.

There is no Fiscal Policy these days due to Republican intransigence.

We need a drop in REAL unemployment and increased WAGES, and should focus on those.

UK - Lady Warsi, the senior Foreign Office minister, has resigned from the government in protest at its policy on Gaza, describing it as “morally indefensible”. Warsi announced her departure on Twitter on Tuesday, saying: “With deep regret I have this morning written to the Prime Minister & tendered my resignation. I can no longer support Govt policy on #Gaza.” In her resignation letter, Warsi said the government’s “approach and language during the current crisis in Gaza is morally indefensible, is not in Britain’s national interest and will have a long term detrimental impact on our reputation internationally and domestically”. She said the UK’s stance was “not consistent with the rule of law and our long support for international justice”, adding: “The British government can only play a constructive role in solving the Middle East crisis if it is an honest broker and at the moment I do not think it is.”

The chancellor, George Osborne, hit back immediately, saying her decision was unnecessary and insisting that ministers were committed to working to secure peace in the region.

“This a disappointing and frankly unnecessary decision,” he said. “The British government is working with others in the world to bring peace to Gaza and we do now have a tentative ceasefire which we all hope will hold.” But Labour leader Ed Miliband said Warsi had acted with “principle and integrity” and urged Mr Cameron to re-think his position. “I hope that David Cameron will reflect on what she says in her resignation letter and change his approach,” he told BBC News. “He needs to break his silence and say that Israel’s actions have been unjustified and indefensible. He needs to show that he can be even-handed and, without fear or favour, argue for the long-term solution that we need to this tragic conflict.”

In an interview with the Huffington Post, Warsi said: “Our position not to recognise Palestinian statehood at the UN in November 2012 placed us on the wrong side of history and is something I deeply regret not speaking out against at the time.”

The Tory peer said that, having now stood down, she wanted to “speak more freely” on the issue and her first demand after handing in her resignation letter was for the UK to introduce an arms embargo against Israel. “It appals me that the British government continues to allow the sale of weapons to a country, Israel, that has killed almost 2,000 people, including hundreds of kids, in the past four weeks alone. The arms exports to Israel must stop.”

Here’s some legal comment from Mark Stefanini, litigator at international law firm Mayer Brown“Argentina has elected to isolate itself from international capital markets rather than pay its holdout creditors. It remains to be seen whether approaches such as a new bond swap for bonds governed by Argentine law and jurisdiction will be attempted to enable Argentina to avoid the full economic consequences of this decision.“Argentina has chosen to avoid the risk of incurring further liability to restructured bondholders under the ‘Rights Upon Future Offers’ (RUFO) clause [see previous post] and to maintain its defiant resistance but in doing so, she faces economic consequences that are far more difficult to quantify. In the face of this defiance, holdouts may well redouble their efforts to obtain access to Argentine assets overseas using the additional discovery ordered by the Supreme Court on 16 June as a starting point resulting in further cases developing the sovereign immunity laws of relevant jurisdictions.”

The holdout creditors, led by NML Capital (part of Elliott Capital), have already shown an appetite for chasing Argentinian assets.  This is something that goes back to the 1970's. I sincerely recommend to anyone to read 'Confessions of an Economic Hit Man' by John Perkins. The premise is simple enough. Chicago University educated 'advisors' would go from Third World country to Third World country.
During their time in each of these places; they would encourage whichever pliant, recently CIA installed, despot happened to be there at the time, to take on a load of 'debt'. Everyone involved in said deals got something out of it. The dictators got a load of cash that they knew that they personally would never have to pay back. This they could then spend on bribes, kickbacks, patronage, and vanity projects.
The US (who were basically running the IMF at the time - and still are) got a proverbial 'insurance policy'. The country in question might be under their thumb now, but what about 10, 20, even 30 years down the line? How do you prevent it from falling into the Soviet sphere of influence? That was where the debt came in.
At key points, the IMF would issue directives against certain countries, using the debt as leverage. Thus, even without a client despot in charge, the US would still be holding the key levers on these countries economies. Now fast forward to 2014 and there are a lot of changes afoot. For one, the Soviet Union is long dead, and the 'Domino Theory' is no longer valid. But what of the debt? That is where the vulture funds come in.  These were basically a disaster waiting to happen. Ruthless hedge fund managers eyed up these old Cold-War era systems of control, and saw in them a way of making incredibly large amounts of money. They would do this, not just legally, but within the internal logic of the market as well. They would buy up these old debts and using every legal and financial trick in the book; they would squeeze them for all they were worth. Most of the time, these were against poor, small countries with no real way to fight back. Argentina is another matter. It is the 8th largest country in the world. It has 42 million people and a GDP of close to $800 billion dollars (the 22nd largest). This is not some country that you bully like it was a small state in Africa. Here is a country with the means to fight back. The question is, what next? Argentina has had a particularly fractious relationship with the West and for good reason. I could mention those generals and where their support came from; but that would be too obvious. What puzzles me is the fact that the word 'China' hasn't come up yet.