Moody's said the eurozone debt crisis had made policymakers more reluctant to cede sovereignty, while "significant fiscal union" was "off the table".  "The process of further integration seemingly relies on further shocks almost by design," it said. Brussels' flagship growth plan also faced significant difficulties as countries with room to invest refused to increase public spending, while fear of further bail-outs meant the banking union remained incomplete, it added. Moody's said the Greek crisis also remained a big threat to the eurozone and EU. "The risk of “accidents” remains high in a process that suffers from partial solutions and, increasingly, public scepticism," it said.

"Crises can be great catalysts for change, and this has been the case in the euro area.  "Still, significant vulnerabilities remain - with 'Brexit' and 'Grexit' still key risks. In a period of relative financial calm, the political will to further pool sovereignty evaporates quickly, and it is only against the alternative of a break-up of the existing system that further measures come back into consideration."  "There are no empires in Europe any more and our leaders would do well not to try to recreate one." The economics professor added that the global economy would be in "deep trouble" if interest rates remained at their record lows for a long period of time as he called for urgent action to boost productivity and trade. "A Keynesian stimulus can only buy time," he said.

"I'm not saying central banks should raise rates and say: 'to hell with it', but central bankers should deliver speech after speech to say 'we can do no more'". Separately, Adam Posen, a former Bank of England policymaker, urged Mark Carney, the current governor, to speak out against the “delusional fantasy” that Britain could thrive outside the EU.

Europe will remain dependent on Russian gas for years to come, energy giant Centrica has warned, dismissing suggestions the EU can replace it with other sources as "unrealistic". European leaders have scrambled to try to cut reliance on imports from Vladimir Putin's Russia since the Ukraine crisis escalated last year, with Ed Davey, the energy secretary, suggesting loft insulation and wind farms were needed to "take on the Kremlin".  But Rick Haythornthwaite, Centrica chairman, told shareholders on Monday: "Whatever we might want as Europe, we need to be very careful about being pragmatic about the realities of it... I think it's unrealistic to think that Russian gas is going to be replaced in the near-term."  Iain Conn, Centrica chief executive, added: "Russia supplies... about a third of Europe's gas. You can't switch that off easily without huge consequence. There is no way the United States can supply that volume of LNG to replace it."  If sanctions were imposed on Russian gas companies would have to comply, he said, but it would have "a very significant impact on Europe's ability to balance its natural gas sources and uses", particularly in Eastern Europe which was "not plumbed in to many alternatives".   But he added that Russia had been a "a reliable supplier of gas all the way through the Cold War" and that it needed European demand. "Russia realises that plays a very important part in Russia's own future and there's as much value in this co-dependency as there is potential threat," he said...He's got balls - the last European energy guy to suggest Russian sanctions were unwise ended up smeared across the landscape after Langley flew his plane into a snow plough.

The leading oil producer in Latin America, Venezuela, was meanwhile negotiating another big loan with China, as it takes a battering from the price drop and its own planned economy. While Venezuelan President Nicolás Maduro was in Beijing on , the daily El Nacional reported that China had already lent Venezuela more than $50 billion since 2007, though about half of that had been written off. Every Venezuelan it noted, owed China over $761. In oil-rich Mexico, experts were observing that the state may well have to envisage smaller budgets for several years, not just this year, as Mexico's own export blend may end up costing around just $30 a barrel. Milenio newspaper cited the Senate President Miguel Barbosa as suggesting that the cabinet should start drafting "austerity" plans — a word rarely heard in Mexico. The South China Morning Post reported on the economic stakes of the visit of Latin American leaders in China, although the Hong Kong daily also noted that the first windfall of lower oil prices could be felt in the air: lower costs for the world's airlines.  Analysts around the world widely agree that the most notable new factor in the current trend in energy production is the flood of mostly American-extracted shale gas into the market.  The Guardian notes that U.S. oil production has increased 48% over the past five years, which was originally offset by drops elsewhere. But as demand has also abated, prices have dropped, and may continue downward. Stephen Schork, a U.S.-based market analyst, told the London daily that investor “psychology” is driving oil trading. “We could get a rebound to $70 but we could see $30 before we see $70.”  The political ramifications weigh in the most immediate way on Russia, which may have to reconsider its aggressive policy towards  Ukraine, as it suffers the effects of both "western" sanctions and the sustained drop in oil prices.

Russia's gas supplies to Poland have dropped by 45%, Poland's state gas firm PGNiG says, amid tensions over Ukraine.

The news came just hours after Poland stopped providing gas to Ukraine through "reverse-flow" pipelines. The Russian gas volumes were 24% lower on Tuesday and 20% lower on Monday, according to PGNiG. That shortfall prompted Poland to halt reverse-flow. Poland and Ukraine rely heavily on Russian natural gas. Russia is in a pricing dispute over gas with Ukraine. Some analysts believe Russia, which stopped gas supplies to Ukraine in June over the pricing dispute, is punishing Poland for sending gas to Ukraine. Ukrainian forces have been fighting pro-Russian rebels in eastern Ukraine since April, after the separatists declared independence in two regions. Russia has denied arming the rebels and sending soldiers across the border. On Wednesday Russia's state gas monopoly Gazprom denied Poland's allegation that it had reduced gas supplies. "Currently exactly the same volume of gas is being delivered to Poland as on previous days - 23m cubic metres daily," Gazprom said in a statement (in Russian) quoted by Russia's Ria Novosti news agency. Hungary and Slovakia pump much more gas to Ukraine than Poland via reverse-flow, but they have not yet reported a significant drop in their supply from Russia.

Earlier this year Gazprom and Russian President Vladimir Putin warned of consequences if EU member states went ahead with reverse-flow deliveries to Ukraine. Mr Putin argued that such deliveries would undermine existing gas contracts with the EU.

The Russian business daily Kommersant reports (in Russian) that this week Poland asked for extra Russian gas supplies because of a cold snap, but Gazprom refused, saying it did not have enough gas to pump into Russia's underground storage tanks.

Iran has sent 2,000 advance troops to Iraq in the past 48 hours to help tackle a jihadist insurgency, a senior Iraqi official has told the Guardian. The confirmation comes as the Iranian president, Hassan Rouhani, said Iran was ready to support Iraq from the mortal threat fast spreading through the country, while the prime minister, Nouri al-Maliki, called on ordinary Iraqis to take up arms in their country's defence. Addressing the nation on Saturday, Maliki said rebels from the the Islamic State of Iraq and the Levant (Isis) have given "an incentive to the army and to Iraqis to act bravely". His call to arms came after reports surfaced that hundreds of young men were flocking to volunteer centres across Baghdad to join the fight against Isis. Rouhani also made reference to the facet Tehran was cooperating with its old enemy Washington to defeat the Sunni insurgent group – which is attempting to ignite a sectarian war beyond Iraq's borders. The Iraqi official said 1,500 basiji forces had crossed the border into the town of Khanaqin, in Diyala province, in central Iraq on Friday, while another 500 had entered the Badra Jassan area in Wasat province overnight. The Guardian confirmed on Friday that Major General Qassem Suleimani, the head of the Iranian Revolutionary Guards elite Quds Force, had arrived in Baghdad to oversee the defence of the capital. There is growing evidence in Baghdad of Shia militias continuing to reorganise, with some heading to the central city of Samarra, 70 miles (110km) north of the capital, to defend two Shia shrines from Sunni jihadist groups surrounding them. The volunteers signing up were responding to a call by Iraq's most revered Shia cleric, the Iranian-born grand ayatollah Ali al-Sistani, to defend their country after Isis seized Mosul and Saddam Hussein's hometown of Tikrit in a lightning advance. Samarra is now the next town in the Islamists' path to Baghdad.

Brussels (in fact the 4-th Reich) tries to take over the Ukraine by stealth in the way it has taken over most of Western Europe and expects Russia to sit back and let them. Any idiot could see that there was no way the Kremlin was going to lay down and effectively let NATO take over their only sizeable Black Sea port....So Russia steps in with a counter offer based on bribing the Ukrainian government to abandon its plans to join the EU and instead strengthen its links with Russia in a not dissimilar way to the way in which Brussels was bribing Ukraine to strengthen its like with the EU...Then all hell is let loose...Now who is to blame for creating this mess?  I would like to think those in Brussels would learn from this - but they wont!  The Western powers are scrambling to bolster defenses against a halt in Russian gas supplies after the Kremlin tightened the energy noose on Ukraine, and paramilitary actions in eastern Ukraine increased the risk of a full-blown sanctions war.

The Geneva deal reached last week to defuse the crisis is close to disintegration, with the US government openly accusing Russia of carrying out covert operations across the Donbass region.

US Vice-President Joe Biden warned that Russia will pay a very high price unless the Kremlin withdraws troops massing on the Ukrainian border. “We will not allow this to become an open-ended process. Time is short,” he said in Kiev.

Two key US senators have already called for sanctions on large Russian banks, mining companies and energy groups, including the state gas monopoly Gazprom. Any such move would freeze gas deliveries to the EU, since few European banks would risk defying US regulators by handling Gazprom transactions.

Dmitry Medvedev, Russia’s premier, accused the Americans of “pure bluff”, challenging the US to show its teeth. “You can, of course, continue to expand the 'black list’: it will lead absolutely nowhere,” he told the Duma...

In case you thought that America's shale gas would ride to the rescue, then think again.

"Charif Souki, Cheniere’s chief executive, said that the idea of his company’s exports alone liberating Europe from Russia’s Gazprom was “nonsense” and that only six to eight of 20-plus proposed rival export projects were “real”."

"Asked if Cheniere’s terminal could rescue eastern European countries from their dependence on Russia, Mr Souki said: “It’s flattering to be talked about like this, but it’s all nonsense. It’s so much nonsense that I can’t believe anybody really believes it.”

Public Debt to GDP %  and  External Debt to GDP %

france .........................94% ....................243%

germany......................80%.....................203%

Italy ..........................137%.....................157%

u.s.a............................77%.....................100%

u.k..............................92%.....................449%

and...

RUSSIA.......................7%...............33%

 

Slump in eurozone manufacturing could prompt ECB to cut rates

With manufacturing in all eurozone member states contracting, analysts say GDP in the currency bloc is likely to have dropped in the first quarter.

Here's Howard Archer of IHS Global Insight:

The deeper contraction in Eurozone manufacturing activity in March is both disappointing and worrying. It now looks odds-on that the Eurozone suffered further GDP contraction in the first quarter of 2013, likely around 0.3% quarter-on-quarter, while the increased drop in orders and declining backlogs of work does not bode at all well for second quarter prospects.

But he does not expect the European Central Bank to rush to cut rates in order to try and drive a recovery.

Despite mounting signs that the already weak Eurozone economic situation is deteriorating anew and muted inflationary pressures, the ECB still seems likely to hold off from cutting interest rates at its April policy meeting on Thursday.

The ECB currently appears reluctant to take interest rates down from 0.75% to 0.50%, partly due to some doubts that such a move would have a beneficial impact given current fragmented conditions in credit markets. And there is a risk that this fragmentation could be magnified by the recent events in Cyprus.

However, some governing council members did favour an interest rate cut in March, and we suspect that likely ongoing disappointing Eurozone economic news will increasingly prod the ECB towards acting within the next few months. We suspect that the ECB will eventually take interest rates down from 0.75% to 0.50%, very possibly around June.

Russia's largest oil producer, state-controlled OAO Rosneft, ROSN.RS -0.31%said Monday it has raised $16.8 billion in bank loans and plans to sign a trade-finance package with two international oil traders to finance the buyout of TNK-BP BP.LN -0.01%. Rosneft is acquiring TNK-BP, Russia's number three oil producer, from BP PLC and the AAR consortium of Soviet-born billionaires in deals worth $55 billion in cash and shares that will create the world's largest listed crude producer. Under the deal, agreed to in October, the AAR tycoons will get more than $28 billion when the deal closes in the first half of 2013. BP will hold a 19.8% stake in Rosneft as part of its deal to sell out of TNK-BP.

To finance the purchase of BP's 50% stake in TNK-BP, Rosneft said it obtained a five-year loan of $4.1 billion and a two-year $12.7 billion loan from a group of international banks. Under the agreement, Rosneft said it plans to sign contracts to supply up to 67 million metric tons of crude oil in total for a period of five years, subject to a prepayment. Rosneft would use future oil exports as collateral for the trade financing from the traders. The supplies are expected to commence in 2013, the company said, but didn't provide any financial details of the deal.

Why is everyone so surprised .........

Christine Lagarde, the head of the International Monetary Fund, will cut short her trip to Asia to ensure that she is present at next Tuesday's Eurogroup meeting on Greece, according to a spokesman. Gerry Rice told reporters: The managing director will participate in the eurogroup meeting on November 20 as she usually does, and that will mean shortening her current trip to Asia. On Monday, Ms Lagarde openly disagreed with Jean-Claude Juncker, the head of the Eurogroup of finance ministers, over a critical target for reducing Greek debt levels. The EU wants to give Greece an extra two years to meet its debt reduction target of 120pc of GDP by 2022 instead of 2020. The IMF doesn't. The 2020 “debt sustainability” target was a condition for the IMF’s involvement in the second Greek bail-out. Speaking to an audience in Milan, Mr Draghi also said that Europe's debt crisis proved that there was still a need to complete economic and monetary union, though he added that countries faced a long road towards this, with much uncertainty. European governments should focus on spending cuts, not tax rises to get their deficits down, according to the head of the European Central Bank. Mario Draghi said that the ECB's action (via its €1 trillion LTRO bazooka and announcement of the OMT programme) had helped to calm markets, but that it was up to governments to regain credibility....Why is everyone so surprised by the fact the Eurozone is in recession (for that matter pretty much all or Western Europe!)???? The shock expressed on these threads staggers me!!! Lazy, stupid people have always been poor and always will!!
A continent populated by indolent masses addicted to cheap credit and state handouts and totally unwilling to do a hard day's work for a reasonable wage!! And you think that's a recipe for an economic miracle???  The only miracle is that the farce that is the Eurozone hasn't already imploded!!
I don't need a Belgian in a cheap suit to spout figures and forecasts at me.....I can pretty much tell you what's going to happen next unless you lot start rolling your sleeves up!!

The reporting in germany on the government response to developments at the IMF conference:

-Merkel refused to comment on the suggestion of a two year extension, saying she'd await the troika report.
-Schäuble ruled out OSI, sounded extremely unconvinced about a two year extention for Greece, and basically said things were going better than the media presented it.
-Brüderle (FDP Floor-Leader) said that he didn't see a majority in the Bundestag for a 3rd Greek Bailout. Which is polite language for "we're not voting for it". The CSU would be against, but has made no public comment. Plenty in the CDU would be against too, but the majority will hold to Merkel's line. The SPD are for it, as I think are the Greens.

So it looks like another one of those wrapped-together-with-sticky-tape temporary coalitions, to get it through the Bundestag. And probably bundled together with other applications from Spain, Slowenia, Cyprus.

European Central Bank policymaker Jörg Asmussen has argued against Greece leaving the eurozone, at the IMF/World Bank shindig in Tokyo.   Asmussen argued that Athens was making good progress.  The Greek authorities have to demonstrate that they can continue to stick to their commitments... This is the best way out of its crisis: for Greece to reform within the euro area....CNN is also focusing on the growing divisions between the IMF and the eurozone over austerity....Its correspondent, Andrew Stevens, writes from Tokyo:The EU will produce its own conclusions about the impact of austerity measures next month. Whether that brings us any closer to a consensus is hard to judge.....Remember the old joke about economists: if you laid all the economists in the world end-to-end you still wouldn't reach a conclusion.  But this is no joking matter. Millions of Europeans have fallen into poverty or at least economic hardship as a result of the current austerity programs.

Even the ECB's support is not obvious. Monetary hawks – the Bundesbank and several other core central banks – who were worried about a new open-ended ECB mandate pushed successfully for strict and effective conditionality for countries benefiting from the bond purchases. As a result, they can pull the plug on the programme if its stringent criteria are not met.  Moreover, Greece could exit the eurozone in 2013, before Spain and Italy are successfully ringfenced; Spain – like Greece – is spiralling into depression, and may need a full-scale bailout by the "troika" (the ECB, the European commission, and the International Monetary Fund). Meanwhile, austerity fatigue in the eurozone periphery is increasingly clashing with bailout fatigue in the core.  Small wonder, then, that Germany, politically unable to vote on more bailout resources, has outsourced that job to the ECB, the only institution that can bypass democratically elected parliaments. But, again, liquidity provision alone – without policies to restore growth soon – would merely delay, not prevent, the breakup of the monetary union, ultimately taking down the economic/trade union and leading to the destruction of the single market.  In the United States, the latest economic data – including a weak labour market – confirm that growth is anaemic, with output in the second half of 2012 unlikely to be significantly stronger than the 1.6% annual gain recorded in January-June. And, given America's political polarisation and policy gridlock, we can expect more fights on the budget and the debt ceiling, another rating downgrade, and no agreement on a path toward medium-term fiscal consolidation and sustainability – regardless of whether Barack Obama is re-elected as president in November. On the contrary, we should expect agreement only on the path of least political resistance: avoidance of tough fiscal choices until the bond vigilantes eventually wake up, spike long rates, and force fiscal adjustment on the political system.....

"Ineffective governments with weak leadership are at the root of the problem. In democracies, repeated elections lead to short-term policy choices. In autocracies like China and Russia, leaders resist the radical reforms that would reduce the power of entrenched lobbies and interests, thereby fuelling social unrest as resentment against corruption and rent-seeking boils over into protest."

There are indeed two problems which could be called "ineffective governments" and "power of entrenched lobbies and interests" but I disagree with the implication that the former belongs only to "democracies" and the latter only to "autocracies".
Britain's "democratic" government is ineffective, but it's ineffective because its leaders resist radical reforms that would reduce the power of entrenched interests -- there is zero attempt to seriously address the overweening power of corporate wealth and its corruption of the political balance, and far from attempting to rectify Britain's diseased inequalty, the government seeks to demonise the most vulnerable people.
Judging by actions and policies, Britain's government is every bit as craven before wealth, and subjugated to corporate corruption, as China's. The millionaires around the Cabinet table regard the poorest and weakest in their society with just as much contempt as those in the Politburo.

Greece has a German Governor - Horst Reichenbach - there is no "troika"

The Greek people can hardly complain when this greek government (right-wing) tries to accept the capitlistic approach of the IMF/EU. They had the chance only a few months ago to elect a party (Syriza) into Government that wanted to put Greek people first and they decided against it. They will now have to pay the price. Just as the Greeks led the way with Democracy over 2500 years ago, they should now be taking the first steps of overhauling systems put in place to ensure the continuation of Capitalism, by letting the "rule of the people" rather than the "rule of the creditors" such as Germany and other countries of the European Union decide. Although the measures, such as extending the working week, supposedly only apply to Greeks in a dysfunctional economy - the aim is clearly also to remind those at home, e.g. fellow Germans back home or in the UK for that matter, that work is the only way to save yourself. Instead, Greece should take advantage of this symptom of global financial mismanagement by those in 'power', and set it's own agenda for the "good of the people". Well, half of so called Europeans (the term is BS) (by "you" I mean non-Greeks) wanted for people to vote Syriza and the rest, especially the creditor countries, were "pushing" for the same old governments, by literally starting a campaign (or propaganda) of fear. So, damned if we did and damn if we didn't. You don't care now, others would not care if it was the other way around. Big whoop....I say : Greece will have to exit the Euro and return to the Drachma - with all the extreme pain this will lead to (making the current situation look like a picnic), but long-term, it will have to reform its labour laws and skills base, in order to compete with the likes of China, Germany and Eastern Europe (regardless of its currency). Borrowing to maintain a good standard of living is no longer an option.

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