The US recovery suffered a severe setback at the start of the year with the rate of economic expansion far slower than economists had anticipated, according to data released on Wednesday.

US GDP rose by just 0.05pc in the first quarter, well below the 0.2pc expected by analysts and far weaker than the previous quarter's 0.54pc increase. Analysts blamed the strengthening dollar for the poor performance, as the currency's strength hit exports for a fourth consecutive month. The growth data is likely to stay the Federal Reserve's hands in raising interest rates later this year. The FTSE 100 and dollar both lost ground as the data were released. Chris Williamson, chief economist at Markit, said: "A stalling of US economic growth at the start of the year rules out any imminent hiking of interest rates by the Fed.  "The slowdown looks temporary, as a rebound from the first quarter weakness is already being signalled by forward-looking survey data, but the sustainability of any upturn is by no means convincing yet."  Ahead of the release, analysts at Deutsche Bank said: "The first quarter of the year has been the weakest in recent years, and 2015 is likely to be no exception”.  A string of weak first quarter performances has led some economists to question whether the Commerce Department, which releases the figures is "seasonally adjusting" the data correctly. As a result, some believe that the performances in the second to fourth quarters have been overstated. If that proves to be the case again this year, US growth figures should bounce back

Top 10 Imports to USA

1. Oil: $389.3 billion (16.7% of total US imports)

2. Machines, engines, pumps: $311.2 billion (13.4%)

3. Electronic equipment: $303.5 billion (13%)

4. Vehicles: $253.3 billion (10.9%)

5. Medical, technical equipment: $72.1 billion (3.1%)

6. Gems, precious metals, coins: $67 billion (2.9%)

7. Pharmaceuticals: $63.4 billion (2.7%)

8. Organic chemicals: $54.7 billion (2.3%)

9. Furniture, lighting, signs: $51.4 billion (2.2%)

10. Plastics: $46.5 billion (2%)

In 2013, total U.S. trade with foreign countries was $5.02 trillion. This consisted of $2.272 trillion in exports and $2.744 trillion in imports of both goods and services. This makes the U.S. the world's third largest exporter, after the European Union (EU) and China, and the world's second largest importer, after the EU.

America is in the Global Economy. If cutoff, it would most likely collapse pretty quickly.

The markets are correct to worry about a slowdown, because the main reason for the fall in oil prices is simply a lack of demand, possibly supplemented by some geopolitical shenanigans.

Whilst the fall in the price of petrol and diesel is to be welcomed, these low crude oil prices are unlikely to last, and will depend on how much financial pain oil producing nations and energy companies can stand. Beyond 12 months or thereabouts too many energy companies will have, or be in the process of going bust. To delay bankruptcy, many energy companies are already cutting back on investment in newer more expensive sources of oil, especially for US oil shale where rig counts are already falling as US Rig Count Continues To Plunge To 10-Month Lows reveals. If this reduction in supply capacity goes too far it will result in future shortage and higher prices.

These low prices are a mixed blessing so make the most of them while they last.

I have been running business's for other people and myself since 1983. Running an economy may indeed be unlike running a household, but it is EXACTLY like running a business. Some of the most famous business's in the world went bust because they could not finance their debts, or were the victim of bad debts where their customers could not finance theirs. You need cash flow, you need working capital, you need a stable exchange rate, you need to keep an eye on all the important ratio's one of which is liquidity and you need to make a profit both as a business and a country. Which is where we could get too deep on financing long term deficits on the balance of payments. Cliches are cliches because they are right.
One cliche is "cash is king" If you have money, then you can buy assets, invest in assets and make some good deals. The world will beaty a path to your door. If you are skint, like Cyprus the world does not beat a path to your door, it bashes your door in.

Here's another cliche: If you owe the bank $50,000 you have a problem. If you owe the bank $50,000,000 the BANK has a problem....The Fallacy of Composition argument that national economies and indeed the global economy as a whole are like a household or business economy and should be run as such was laid to rest thirty seven years ago!.  In summary there are three vital economic ideas politicians and the electorate need to understand to fight recessions and achieve economic growth these are Fallacy of Composition, Sectoral Balances Accounting and Sovereign Currency Creation of Money.... And so the debate trundles on. Austerity or more money printing. I suppose the only way to find out is to suck it and see. Well in fact we are getting a hybrid policy which has elements of both approaches: loose monetary and tight fiscal policy. The upshot, stagflation. Was there ever a more egregious policy mismatch. Anyway we (central banks around the world that is) seemed to have produced a stock market rally and the beginnings of a rally in the housing market. News papers are full of 'soaring' equity prices as a sign that the 'recovery' is firmly in place. Recovery for whom I wonder? All that QE money had to go somewhere and it hasn't gone into productive investment, but hey, the headlines are good.  Unfortunately the whole thing looks like Global Bubble MKII and we can safely predict it will end in the same catastrophic manner as the 2007 debacle notwithstanding all of the media hype.. If it walks like a bubble etc., ... Is this the famed Keynesian stimulus at work I wonder? If so it isn't quite running to plan.  This depression has a long way to run. Like the 1929 slump it began with loose credit and excess demand in the US stock market followed by the failure of the Vienna Bank Credit Anstalt and ran right up to WW2, albeit with a partial recovery. But even as late as 1938 US unemployment was running at 20% and world trade was being stifled by a tariff war which added a further twist to the slump. Sovereign nations with their own currencies were engaged in a currency and trade war against each other to gain competitive advantages in the diminished world export markets. All eerily similar to today's situation.  Here's a prediction, an inflationary upturn with any number of asset price bubbles as the corollary - this is not an accident it is policy - then the inevitable pop and back in the **** only this time even deeper. That is what is on offer from the Treasury and central bank mandarins.

At the summit of the Group of 20 leading economies in Los Cabos, Mexico, Mr. Rajoy told his counterparts that it was necessary to "break the link between risk in the banking sector and the sovereign risk," a Spanish official said. Officials in Brussels cautioned the momentum hasn't moved in favor of making such far-reaching changes to the Spanish bank-aid plan. But they said at least one issue is back on the table: putting bank rescue loans on equal footing with government bonds held by private investors. Germany has insisted that official loans should have a preferred status, meaning they shouldn't suffer losses even if private bondholders are forced into a restructuring.

Some analysts have blamed this prospective subordination of private creditors as contributing to the retreat of Spanish bond markets since the bank-bailout plan was announced 10 days ago. Others argue investors should assume official lenders will have preferred status anyway....putting the ESM on equal footing with regular bondholders would only resolve part of the problem—assuming that investors would actually believe a statement to that effect by euro-zone leaders, said Guntram B. Wolff, deputy director of Brussels-based think tank Bruegel.

The much bigger issue remains the country's growing debt load, he added, for which no institution has offered a credible solution so far. Spain's demand for direct capital injections for its banks rather than lending the money first to the government is being supported by the European Commission, the EU's executive, and some other EU governments, but is still being resisted vehemently by Germany, officials said. One EU official, however, said that "it is still early days" and that the exact structure of the aid hadn't been decided yet.

World leaders meeting at the weekend’s G8 summit in the US are to focus heavily on the European crisis Saturday, after President Barack Obama aligned himself with the new French president’s drive for more economic stimulus. ...AFP - Leaders of the world's most powerful nations were to focus their attention on Europe's economic woes Saturday after President Barack Obama threw his weight behind French calls for more pro-growth policies. Obama set the stage for a fractious G8 summit here by forging an alliance with new French President Francois Hollande over the need to jolt Europe back to growth. Fearing Europe's economic crisis is poised to worsen -- with dangerous repercussions for the US economy and perhaps his chances of re-election -- Obama weighed in, risking the ire of German Chancellor Angela Merkel who has championed an austerity-first approach. Shortly before welcoming Merkel and other leaders to the famed presidential retreat outside Washington, Obama noted Friday that events in Europe held "extraordinary" importance for the United States. The G8 needs to discuss "a responsible approach to fiscal consolidation that is coupled with a strong growth agenda," he said. To kick-off the summit a tie-free Obama greeted leaders shortly after dusk Friday at the threshold of his wood cabin for an informal dinner that lasted more than two hours. But the dressed-down atmosphere did little to relieve tensions, which have been stoked by the belief that two years of painful cuts demanded by Germany and others have undercut Greek growth and made recovery more difficult. In what may have been a telling moment, Obama greeted Merkel at his Laurel Lodge with a cordial: "How've you been?" When her response came: a shrug and pursed lips, Obama conceded: "Well, you have a few things on your mind." Publicly European leaders have attempted to smooth over the splits within the G8, insisting austerity and stimulus need not be mutually exclusive. "We need to take action for growth while staying the course in terms of putting our public finances in order. Stability and growth go together, they are two sides of the same coin," European Commission chief Jose Manuel Barroso said ahead of the summit. But with Greece's fiscal crisis apparently approaching denouement, those good words may be sorely tested....
The euro zone crisis is set to dominate four days of intense diplomacy which began in Washington Friday morning and continued through a meeting of G8 leaders at the presidential retreat Camp David on Friday evening. Discussions will continue there on Saturday and on to a Nato meeting in Chicago.
In talks at the White House, only hours before the Camp David summit, Obama met the new French president, François Hollande, for a one-to-one conversation in which he explored the possibility of a new approach to the eurozone crisis based on a pro-growth, stimulus strategy. Obama has been pressing for such a strategy for the past three years and has a potential ally in Hollande.
The White House welcomed what it sees as a change in the debate since Hollande's election that tilts the balance slightly more in favour of a growth strategy. The French president is proposing an EU-wide financial transaction tax (FTT) that could raise up to €57bn a year that could be used to stimulate the 27-nation bloc. After meeting Obama, Hollande was scheduled to meet David Cameron in Washington before flying to Camp David.
However on arriving in the US, Cameron said: "On the financial transactions tax I'm very clear. We are not going to get growth in Europe or Britain by introducing a new tax that would actually hit people as well as financial institutions. I don't think it is a sensible measure. I will not support it."

What did they do for the 2,500 years or so before they joined the EU?

When is Europe going to learn: austerity does NOT work ?--All the EU is doing is making things worse by forcing austerity on Greece....Greece needs an economy and destroying it's tax base won't help create one. It is not like a household budget no matter how many people without a grasp of national economics keep comparing it to one. Currency MUST circulate to make the economy of Greece recover, austerity takes currency out of circulation and makes the situation far worse than it would have been had nothing at all been done in the first place. Time to put an end to the mad conservative Austrian/German economic school experiments, they have been proven as failures time and time again. Without the US Fed, that pumped over 16 trillion Dollars into BCE, Germany and the like (France, Italy,Spain...), would have gone bankrupt long time ago. more so, the US maneuvered the exchange rate in order to help Germany report "banner exports" and a growing economy (even though Germany is on the brink as well). ENOUGH B.S.!!!...Help the Greek people back onto their feet and the government will have the income necessary to pay down its debt, keep forcing austerity on them and they will just starve while the government coffers remain empty. HORST REICHENBACH - THE "GOVERNOR" OF GREECE should ease the IV Reich imposition of rule !

Source : Ambrose Evans-Pritchard- 7:21PM GMT 12 Feb 2012 ****The US, Canada, Britain, France, Greece, and other signatories at the London Debt Agreement of 1953 granted Chancellor Konrad Adenauer a 50pc haircut on all German debt, worth 70pc in relief with stretched maturities. There was a five-year moratorium on interest payments. The express purpose was to give Germany enough oxygen to rebuild its economy, and to help hold the line against Soviet overreach. This sweeping debt forgiveness caused heartburn for the British - then in dire financial straits, themselves forced to go cap in hand to Washington for loans. The Greeks had to forgo some war reparations. Yet statesmanship prevailed. The finance ministers of the day agreed to overlook the moral origins of that debt, and the moral hazard of “rewarding” a country that had so disturbed the European order. The Wirtschaftswunder whittled down the burden of German debts to modest levels within a decade. Germany emerged as a vibrant democracy and a pillar of the western security system. Greece has less strategic relevance, and must comply with tougher terms.

Don't bet against the Fed

I was watching the news last night and the reporter on Sky used the worst word possible to show positive steps to resolve this. He Said "Diplomatic" - Diplomatic solutions to a financial problem isn't what the people need to hear. People need a clear process with definite and demonstrable actions to convince the various governments employers "The People of Europe" that there is more to this than hot air and an employment club for failed politicians and cronies of the political establishment.

The German chancellor warned that Standard & Poor's decision to downgrade nine euro-zone countries on Friday evening demonstrated that politicians needed to step up their efforts to resolve the crisis, warning that it was a "longer process" that would take more than a few months. "The decision confirms my conviction that we have a long way ahead of us before investor confidence returns," she said in a radio address. Germany was not among the countries downgraded. The downgrades, after markets closed on Friday, marked a further escalation of the debt crisis, which has seen investors lose faith in euro governments' ability to service their debts. Stalled talks over "haircuts", or write-downs, of Greek government debt will further worry investors, as they pose the threat of Athens making a disorderly default. Nicolas Sarkozy, the French President, yesterday called for cool heads after his country was scalped of its prized triple-A rating, pushing up its borrowing costs The fourth quarter of 2011 was a disaster especially for hedge funds. Markets normally thrive on volatility but conditions have become so unstable that even some of the most seasoned of investors have quit the field preferring instead to conserve cash.
The doyen of hedgie's George Soros has pulled out. The old market adage was, don't bet against the Fed. Today, this should read don't bet against the ECB. The EU has vowed to do "whatever is necessary" in the markets...we can only laugh ...what a messsss!

The West's economic malady is basically caused by an American decision about 15 years ago, as the nation's industrial policy in a post industrial world. The policy is imposed on the rest of the world through a new form of American "banking", which eventually led to the 2008 debacle. Since then, only two major economies (Germany and China), BOTH of which resisted the continued predatory practices by American banksters, and both economies recovered. Other Western nations were not as vigilant, and have no hope of recovering. Today, American banking is synonymous with "trading". Trading what? Mostly derivatives. I believe it was reported that B of A made 90% of its profits in 2010 on trading; the number of SBA loans made also dropped by about 90% from previous levels. American banks don't bank (lend) anymore, they trade. One can not create or maintain stability by pushing a national policy of rounding up all the major banks and financial institutions of the nation, and have them GAMBLE (derivatives trading is purely redistributive, and produce nothing) as a principal occupation, at a scale 50 times the GDP of the entire nation. Worse yet, this irresponsibility is further forced upon the world, on all other nations that wish to trade with America, in the name of free trade. Trying to achieve stability for the world that way, is like walking south from Paris, in order to reach London.

Most notably, the Dow Jones Industrial Average jumped 700 points in the last three days of November to give the index an overall gain of 0.8 percent for the month. Much of the market's returns are determined by surprises, not simply by good or bad news. A company can experience its greatest quarter ever and still see its stock price hammered simply because the outstanding news still wasn't as good as the market expected. The same is true of bad news: A stock can soar if its company reports overall poor results that were much better than expected. The market as a whole responds similarly. In this case, we see the IMF action to provide liquidity to banks on a major scale, addressing the liquidity problem threatening the markets. Also, many economic indicators -- such as consumer confidence numbers, employment numbers and retail sales figures from the past weekend -- were all positive surprises. The market reacted accordingly.

Therefore : always keep in mind these two issues. Your plan should realize that surprises will occur and that just because things are bad (or good, for that matter) doesn't mean it will continue that way.

Analysts at Credit Suisse expect Goldman to have lost $392m in the three months to the end of September, while analysts at Barclays predict losses in the region of $180m. The trading revenues at Wall Street banks have been damaged over the summer by the sharp decline in global stock markets, the volatility across many asset classes and shaken confidence among chief executives to do deals.‬ The third quarter saw the FTSE 100 drop 13.7pc, the Dow Jones Industrial Average fall 12.1pc and the S&P 500 sink 14.3pc. Analysts at Credit Suisse expect that to have reduced revenues at Goldman's Fixed Income, Currency and Commodities division – a key driver of profits for the bank over the last decade. Revenues are expected to drop to $1.8bn, a 37pc fall on last year. "We expect overall fixed-income sales and trading activity to be very weak during the quarter," said Howard Chen, an analyst at Credit Suisse.‬ Goldman's investment banking division, which has been hit by macro-fears about the European debt crisis and an economic slowdown in the United States, will see revenues nose-dive 29pc to $825m, compared with the same quarter last year, according to Credit Suisse. The prospect of Goldman's first loss since 2008 underlines the pressure facing what is historically one of the industry's top performers. The bank has already announced a $1.2bn cost-cutting programme to be cut from its operations by mid-2012. But the new plan will increase cuts by as much as $250m. This could equal up to 5pc of the firm's expenses based on its 2010 spending. Wall Street recruiters say that Goldman, alongside other banks, may choose to make deeper cuts to jobs to be able to pay its best staff bigger bonuses.‬ When finance ministers from the G20 major economies meet next weekend, they could be excused for having a sickening feeling of deja vu. This time it's Paris, not London, but, just as in May 2009 when Gordon Brown brought the power-brokers of the world economy together in Docklands, they are trying to prevent a financial crisis spiralling out of control and dragging the global economy into recession. This time, though, there is far less political agreement or goodwill. Instead of the US, where the collapse of Lehman Brothers sent consumers and investors into panic mode, this time the focus is firmly on the eurozone, and time is running out. Greece is on the brink of going bust if it doesn't receive a fresh injection of cash, and bond vigilantes are focusing their fire on the much bigger Italian and Spanish economies, which had their debt downgraded by Moody's on Friday. Meanwhile, many economists think the eurozone as a whole may already have sunk into recession.

The US Federal Housing Finance Agency (FHFA), which is overseeing the remains of failed mortgage giants Fannie Mae and Freddie Mac, is reportedly planning to argue that America's biggest banks failed to check the health of mortgages before they sold them on to investors. The collapse of hundreds of thousands of sub-prime mortgages triggered the 2008 credit crisis and the collapse of Fannie and Freddie. The New York Times said the FHFA is expected to file the lawsuit against the banks, including Bank of America, JP Morgan, Goldman Sachs and Deutsche Bank, as early as Friday. The agency, which is seeking billions of dollars in compensation, claims the banks failed to notice that borrowers were taking on mortgages that they could not afford. The FHFA lawsuit, which follows a subpoena issued to the banks last year, demands that the banks pay compensation to cover some of the $30bn (£18.5bn) Fannie and Freddie lost on mortgage-backed securities. Most of Fannie and Freddie's losses were borne by US taxpayers after the government was forced to step in and bailout the pair to the tune of $141bn. It follows a similar $900m lawsuit filed against Swiss bank UBS in July. At the time UBS said it would "vigorously" defend all charges brought against it. In total the FHFA issued 64 subpoenas to the issuers and servicers of mortgage-backed securities last year. Last week the agency's director, Edward DeMarco, who declined to discuss the pending lawsuit, said there were "more to come". The banks declined to comment to the New York Times.

The Fed chairman admitted that recovery from recession had been slower than hoped and that short-term growth prospects for the US had been adversely affected by Europe's debt crisis, and by the wrangling between Democrats and Republicans over the US budget. He stressed that any repetition of that partisan in-fighting could make global investors less willing to hold US assets or to put money into job-creating enterprises. "Bouts of sharp volatility and risk aversion in markets have recently re-emerged in reaction to concerns about European sovereign debts and developments related to the US fiscal situation, including the recent downgrade of the US long-term credit rating by one of the major ratings agencies and the controversy concerning the raising of the US federal debt ceiling," said Bernanke. "It is difficult to judge by how much these developments have affected economic activity thus far, but there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks." While the Fed was alert to the risks, he said there was also a strong case, despite the poor state of America's public finance, for the new jobs package being planned by the Obama administration to tackle long-term unemployment. "Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery. Fortunately, the two goals of achieving fiscal sustainability – which is the result of responsible policies set in place for the longer term – and avoiding the creation of fiscal headwinds for the current recovery are not incompatible. Acting now to put in place a credible plan for reducing future deficits over the longer term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives." Rejecting the idea that slow growth could morph into a long-lasting downturn, Bernanke said there had been some encouraging signs, including a 15% rise in US manufacturing output and a narrowing of the trade deficit.

US government debt is a cornerstone of the world's financial system, is held in large amounts by foreign creditors such as China and Japan and is used as collateral on a daily basis by banks and investors. While the move has been anticipated by markets since last week's deal in Washington agreed a cut of only $2.5trillion in the deficit, it's unclear how markets will react when they open on Monday. America's debt is still rated AAA by Moody's and Fitch, the two other largest agencies. Analysts at Capital Economics said the move will "surely rock the financial markets when they open on Monday" but added that any moves are likely to be short-lived because the slowing global economy makes US government debt, or Treasuries, an attractive place for investors to park money. At roughly $9trillion in size, the Treasury market has advantages and liquidity that rival government bond markets, including Britain's, cannot match. Despite the threat of the downgrade, the prices for Treasuries are close to their highs for the year as investors seek safe-havens and expectations for economic growth diminish. Whatever the reaction next week, investors are clearer that the downgrade is a severe blow to America's prestige and is also likely to increase the US government's borrowing costs. JPMorgan this month estimated that such a move could add about $100bn a year to America's funding costs as lenders demand more to compensate for the greater risk. The US spent $414bn last year on interest payments. "I have a feeling the dust may settle quite quickly," said David Buik of BGC Partners in London. "The US Treasury market is the most liquid in the world." Either way, it frays nerves further before what was already going to be tense opening of financial markets next week.

The following is a statement issued by Standard & Poor's announcing the downgrade in US government debt from AAA to AA+

Overview :
• We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

• We have also removed both the short- and long-term ratings from CreditWatch negative.

• The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

• More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.

• The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

Rating Action
On August 5, 2011, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA'. The outlook on the long-term rating is negative. At the same time, Standard & Poor's affirmed its 'A-1+' short-term rating on the US. In addition, Standard & Poor's removed both ratings from CreditWatch, where they were placed on July 14, 2011, with negative implications. The transfer and convertibility (T&C) assessment of the US – our assessment of the likelihood of official interference in the ability of US-based public- and private-sector issuers to secure foreign exchange for debt service – remains 'AAA'.

With unemployment officially nudging 790,000 – although believed to be far bigger with the closure of some 150,000 small and medium-sized businesses over the past year – there are fears that Greece, the country at the centre of Europe's worst financial debacle in decades, is slipping inexorably into political and social crisis, too. Rising racist tensions and lawlessness on the streets this week spurred the soft-spoken mayor of Athens, Giorgos Kaminis, to describe the city as "beginning to resemble Beirut".With unemployment officially nudging 790,000 – although believed to be far bigger with the closure of some 150,000 small and medium-sized businesses over the past year – there are fears that Greece, the country at the centre of Europe's worst financial debacle in decades, is slipping inexorably into political and social crisis, too. Rising racist tensions and lawlessness on the streets this week spurred the soft-spoken mayor of Athens, Giorgos Kaminis, to describe the city as "beginning to resemble Beirut".

ATHENS—Greece was paralyzed by a nationwide general strike Wednesday as hundreds of thousands of workers, shopkeepers and civil servants walked off the job in a 24-hour protest over the government's austerity program. The strike affected public services, with government ministries, local government offices, courts and schools all closed, and hospitals and many state-owned enterprises running with reduced staff. Mass transit around the capital ground to a halt as bus, trolley, tram and subway operations were suspended, and Athens's electric rail operated on a reduced schedule. More than four dozen domestic flights were canceled ahead of a four-hour walkout by air traffic controllers, and ferry operations to Greece's islands were also suspended. "The austerity measures are beginning to affect all of society even more now. The economic situation is becoming very difficult for both Greek businesses and for workers," said Anthony Livanios, an independent political economist and commentator. "Even so, the government appears determined to continue with its policies." Recent public opinion polls showed seven out of ten Greeks expect the austerity program to continue even beyond 2013 when the current bailout deal with the EU and IMF ends. The ruling Socialists have seen their popularity drop sharply in the past year, although they still retain a 3.5 percentage-point lead over the center-right opposition.

BERLIN - The succession of European Central Bank President Jean-Claude Trichet will not be a topic at this week's Group of 20 meeting and will be dealt with after March, German Finance Minister Wolfgang Schaeuble said on Friday. "We will then see (if there will be a German candidate). The important thing is that we will have a good candidate," Schaeuble added in an interview with German radio channel Deutschlandfunk.BCE,EURO,Dollar,RON,Crisis Agerpres, Mediafax
FRANKFURT - Emergency borrowing from the European Central Bank remained exceptionally elevated for a second straight day on Friday, intensifying speculation that one or more euro zone bank might be facing new funding problems. ECB figures showed banks borrowed more than 16 billion euros in high-cost emergency overnight funding, the highest amount since June 2009 and well above the 1.2 billion euros which banks were taking before the figure first jumped on Thursday. The ECB gives no breakdown of the borrowing figures and declined to comment on Friday when asked for an explanation for the jump. Traders remained unsure whether the spike was due to a serious funding issue or whether a bank had simply made an error earlier in the week by not borrowing enough at the ECB's regular weekly funding handout. If a bank, or number of banks, did not get enough funding, and were unable to make up the difference in open markets, they would be forced to use the ECB's emergency facility until the next ECB tender came around. The next ECB offering is on Tuesday, banks get the money on Wednesday, meaning any change would evident in figures published early on Thursday. "As no bank or banking group from any euro zone country is aggressively seeking money in the interbank market at the moment, it is likely that something went wrong at the main refinancing operation," said one euro zone money market trader. "The bank or banking group needs to tap the ECB for the money whether they like it or not, or they are doing that so as not to appear active on the money market and to thereby be stigmatized," he added

European bank shares were down 1 percent by 1100 GMT while the euro fell against the dollar and other major currencies for much of the morning. Money markets showed little reaction, however. Key euro bank-to-bank lending prices remained on a downward trajectory, a direction traditionally at odds with rising tensions. The theory that the spike was due to human error appeared to be supported by data from the ECB's latest weekly funding operation. Banks borrowed the lowest amount since June at the tender, 19 billion euros less than the previous week and well below expected demand of around 160 billion euros.

However, a monetary source in Italy, speaking on condition of anonymity, told Reuters that the increase in borrowing was not a technical problem and was a sign that money markets were still not functioning correctly and geographically split in the wake of the global financial crisis. The source said the Italian banking system continued to have good access to money markets, while high-level Spanish financial source said the jump was not down to Spanish banks. The borrowing jump added extra complexity to the question of whether the ECB will scale back, or extend, its money market support measures at its next meeting on March 3.

ECB President Jean-Claude Trichet said in a recent interview that the health of money markets had improved, although Belgium's Guy Quaden said this week liquidity support remained necessary. "If the increased use of the marginal borrowing facility is due to new problems in the banking system this would call for an extension of the ECB's liquidity support," said UniCredit analyst Luca Cazzulani. "The ECB knows exactly who is borrowing the money and why they are doing it. If it is due to a mistake then it should not influence their thinking at all." The extra 0.75 percent which banks have to pay for overnight funding from the ECB normally means it is used only as a last resort. The last time before this week that overnight borrowing exceeded 10 billion euros was on June 24, 2009, when it was 28.7 billion euros, the highest ever. This year, emergency overnight borrowing has been above 1 billion euros only twice. Traders said while mistyping the required amount or missing the ECB's tender altogether would be an unlikely mistake, it could happen. "It would be a huge oversight and pretty unlikely but it is possible if a lot of things conspired against you," said one London-based money market trader. "If it is a mistake then someone's boss is not going to be very happy." A number of banks, mainly from the euro zone's most debt-strained countries but also troubled banks in core countries, remain barred from open money markets and almost completely dependent on the ECB for funding.

Financial-Banking Analysis

For the new democracies and market economies of the Eastern European region, 2009 has been a rude awakening, the biggest shock since they switched from Soviet communism to western capitalism 20 years ago. "There is no doubt the region is in deep crisis," said the European Bank for Reconstruction and Development last week. "The worst output collapse since the great recession that followed the end of communism."

Most analysts expect the National Bank of Romania to come with a less optimistic forecast as far as this year's price increase is concerned, after last autumn it expected inflation to slow down to 3.4% in December 2011, i.e. close to the official target of 3%. According to an internal survey conducted by the Association of Financial-Banking Analysts, the average analyst forecast for the 2011 inflation is 4.3%, i.e. also above the upper inflation target limit.
The main risks now have to do with the international trend of making food and fuels more expensive, which has already been felt on the Romanian market. Last year consumer prices climbed nearly 8%, although the official inflation target was 3.5%. The shock of the VAT hike from 19% to 24% in the summer, as well as the food price increases that occurred in autumn overturned the downward trend of inflation.

Denmark's Vestas, the world's leader in the field of wind farm technology, with turnover worth above 6bn euros in 2009, decided to open an office in Romania this year considering the company has already sold turbines with a 450 MW capacity for investments in Dobrogea. After six years' research, Vestas now says it is time it started developing domestically.
"We have been eyeing Romania over the past five or six years, but it is now that we decided to open a local office. This is a decision that proves the domestic market has reached a certain maturity. We are in the right place at the right moment. Romania is the most promising country in Eastern Europe," says Hans Jorn Rieks, chairman for Central Europe with Vestas.
The best-known wind farms due to be equipped by Vestas are the ones being built by Energias de Portugal in two towns of Dobrogea, Pe[tera and Cernavod`.
According to Rieks, the big concern as regards the Romanian market is legislation. "The existence of clear legislation will open the market to several players as banks are always looking at something tangible and are not willing to take on risks," he says. (Z.F)

BRUSSELS, Jan. 27 - The European Financial Stability Facility (EFSF), the rescue fund set up by Eurozone countries last May, Tuesday saw strong demand for its debut bond issued to raise cash for Ireland. Demand for the five-year bond was reportedly nearly nine times of the 5 billion euros (6.8 billion U.S. dollars) on offer, which is seen as a sign of confidence in the facility. Klaus Regling, chief executive of the EFSF, said that the strong demand "confirms confidence in the strategy adopted to restore financial stability in the euro area." The 440-billion-euro (580-billion-U.S. dollar) EFSF is not offered directly by eurozone countries, but guaranteed by them to borrow money by issuing bonds on the market for debt-laden eurozone members. According to the aid package endorsed by European Union (EU) finance ministers last November to Ireland, the EFSF, will raise 17.7 billion euros in total for Dublin.

Earlier this month, the European Commission also raised 5 billion euros for Ireland through its first bond issuance under the European Financial Stabilization Mechanism (EFSM), which is guaranteed by the EU's budget. Markets snapped up the bond within one hour.