Western stock markets seem to be assuming that this little spat with Russia will blow over, and that it will soon be business as usual.

It won't. There's a terrible inevitability to events.

The annexation of Crimea was a no-brainer, since Russia needed to protect its naval bases there. The installation of puppet Russian administrations in the Southern and Eastern Ukraine is also inevitable. The problem here is that the process will not be peaceful, and the appearance of Russian tanks in Ukraine to "protect" Russian-speaking people is a certainty.

This will trigger off draconian economic sanctions by the USA and the EU, and Russia will inevitably respond the only way it can, by turning off the gas pipeline. It is impossible to predict events beyond that, but what we can be sure of is that it will not be pretty and it will not be good for world stock markets....Anyone who has worked in resources realizes that to-date, there has been enormous levels of Western investment into Russia, especially into the energy sector; the demand from which will not dissipate over time. If push came to shove, massive debts to Western (especially German) banks would be dishonored entirely, coupled with the nationalization of EU energy assets. There is no doubt Russia will have a tough time of it - but understand that the Russian psyche can handle it. The confiscation of wealth from the West (Germany) as a net creditor, and UK based resource companies would be a very, very large financial blow, which could take decades to recover from. Not including the resultant damage to European manufacturing from massively higher energy costs.

Nothing in life is simple. Cliché characterizations are unless, Putin is doing what he thinks is best... don't forget, the guy is a student of history. Perspective is everything. History does nothing but demonstrate time and time again, its the small insults, the loss of pride in a relatively benign situation, that quickly spins out of control; underlying the unpredictability of human emotion maybe.

I assume the EU never did any forward inductive analysis before they backed a group that overthrew a democratically elected government !!! Because this was always the most obvious outcome under any Game Theory analysis. It is abundantly clear (to me at least) that since Crimea has left, any future Ukrainian elections will no longer allow ethic Russians (numerically) the chance of political power. It is a mathematical inevitability that they will increasingly become a sidelined as massive minority.

Furthermore, given the Ukrainian leadership has no intention of allowing political and economic devolution (which is also opposed by the EU) – realistically, the only political and logical outcome for this minority is self-determination via force of arms. Of course Russia will inevitable have to enter the fray (remember the Falklands anyone???).

AEP's economic threats are mere futile war drum beats from yesterdays story. This book has already been written. The best that strategists can hope to glean from this transition, is to make it as comfortable and as less disruptive as possible. But given nationalism is not a fertile field for logical outcomes - the risk remains that this situation could get a lot larger and uglier as well. The Ukrainian government for one, appears desperate to want to ramp this up significantly...

Whilst Washington is throwing paper darts in the form of notional Russian debt obligations to insolvent Western banks, the Russians just dig up more oil, gas, gold (whatever, you name it..) and trade with China, India, Brazil etc.
All the US government has is paper money and missile systems that don't work, a rigged stock market, a rigged US treasury market and shale gas/oil that takes more dollars to extract (ex. tax break) than it costs in the market.

The only reason there aren't riots outside Wal-Mart is the debt forbearance shown by China for the plastic junk the infantilized US population seem to need to live the American dream (or is that nightmare..?).

The US empire is running on empty and we're seeing the results now in this last desperate attempt to show they're still a 'contender'. If it wasn't so scary it would be pathetic - what a sad end for that marvelous tool for what could have been human emancipation, the American constitution.

Instead of leading the world (which I think was a possibility before the NeoCon tragedy), they are vaporizing men, women and children with drones in countries most American couldn't even find on a map, under some phony pretext, to boost the military-industrial complex. It's like watching a person destroying themselves with drugs and their family members around them....I'm genuinely saddened by it.

Best wishes to the Greek people. Considering that I am a right of centre poster I'm not always that impressed by some strikes. Much of that comes from the British memory of the 1970s 'I'm alright Jack' (Peter Sellers film) type of Union action which was unhelpful to the British economy.

 Greece is an entirely different case, and more or less the only avenue that your average Greek citizen has left to register their protest at the troika and corrupt Greek political class. Though one day mass walkouts can only go so far, and have to wonder if more sustained action will eventually be needed to bring down the government.

Eurozone industrial output slips in May - Industrial output in the eurozone has come in largely as expected, slipping 0.3% in May from April.

In annual terms, output fell 1.3%, according to data from Eurostat.

There was some mildly positive news in revisions to previous data, with output now believed to have expanded 0.5% on the month in April, compared with a previous reading of 0.4%.

Further details from Eurostat also bring some welcome cheer for Portugal, which tops the industrial growth league in May. Eurostat reports:  Among the European Union member states for which data are available, industrial production fell in thirteen, rose in nine and remained stable in the UK. The largest decreases were registered in Romania (-10.7%), Lithuania
(-6.3%) and Sweden (-3.8%), and the highest increases in Portugal (+6.1%), Latvia (+2.2%) and Estonia (+2.0%).

Looking at the drivers of production throughout the eurozone, Eurostat says:  In May 2013 compared with April 2013, production of durable consumer goods dropped by 2.3% in the euro area. Capital goods decreased by 1.5%. Energy rose by 0.1%. Intermediate goods grew by 0.4%. Non-durable consumer goods increased by 0.6%.

MADRID—Spain's central bank said Tuesday the Spanish economy contracted at a faster pace in the third quarter and the country may miss its budget-deficit target because of tax-revenue shortfalls.

The euro zone's fourth-largest economy contracted by 1.7% from the same period last year, compared with a 1.3% contraction in the second quarter, the central bank said.

In the first estimate of Spain's economic performance during the July-to-September quarter, the Bank of Spain said that on a quarterly basis gross domestic product likely contracted 0.4%, the same as in the second quarter. The central bank's estimates are often very close to or in line with final government estimates issued later. The government's first third-quarter GDP estimate is due Oct. 30.

The central bank also said that "it can't be ruled out" that Spain's government would miss its budget deficit target for this year, currently at 6.3% of GDP after a series of revisions, largely because of tax-revenue shortfalls. Last year, Spain's deficit stood at 9.4% of GDP, more than three percentage points above the target.

"The efforts to lower spending at the public sector have had a net contracting effect (on the economy) in the central months of the year," the Bank of Spain said. "We see drops in consumption and investment by all levels of government above those seen in previous quarters."

Brussels- The EU agreement on banking union is "no triumph". The evidence sits hidden in plain sight in the difference between the summit text before and after yesterday's negotiations...

The summit deal on banking supervision was no triumph. It was another EU exercise in decision dodging and fudge as German procrastination won the day.

Angela Merkel wanted to postpone a new European Central Bank banking supervisor because that in turn delays decision on using the euro’s bail-out fund to recapitalise banks until after German elections.

To see the tricksy, evasive, responsibility-doging fudge – a tortuous linguistic exercise that went into the early hours of today – it is necessary to contrast before and after.

Here is the original draft that the leaders began discussing yesterday: “We need to move towards an integrated financial framework, open to the extent possible to all Member States wishing to participate. In this context, the European Council invites the legislators to proceed with work on the legislative proposals on the Single Supervisory Mechanism (SSM) as a matter of priority, with the objective of completing it by the end of the year:”

Here is the agreed summit text: "We need to move towards an integrated financial framework… In this context, the European Council invites the legislators to proceed with work on the legislative proposals on the Single Supervisory Mechanism (SSM) as a matter of priority, with the objective of agreeing on the legislative framework by 1 January 2013. Work on the operational implementation will take place in the course of 2013.”

This is no triumph. The EU has gone from a deadline to “complete” from one to “agree” with the schedule slipping from December 2012 to anytime next year. This will mean that Chancellor has deferred the issue of using the ESM to directly recapitalise banks until after elections in September 2013, significantly reversing a June summit decision.

"The Godmother"

A new book discribing Angela Merkel as a power-obsessed egomaniac whose authoritarian tactics threaten the foundations of democracy is creating a stir in Germany and focusing attention on opposition to the chancellor inside her party. "The Godmother" probably would have drawn little attention were the book's author, Gertrud Höhler, not an influential conservative voice in the chancellor's own Christian Democratic Union. Gertrud Höhler, presenting her new book Thursday, was a longtime adviser to Helmut Kohl and other conservatives in Ms. Merkel's party.A former adviser to Helmut Kohl and other senior German politicians and business leaders, Ms. Höhler is a frequent presence in the German media. She is a fixture of the old guard of Ms. Merkel's CDU.   In the book, which hit stores on Friday, the author assails Ms. Merkel's pragmatic governing style as a betrayal of core conservative values and accuses the chancellor of trying to consolidate her power by crushing internal opposition. In one passage, Ms. Höhler appears to draw a parallel between Ms. Merkel's solitary style of ruling and past authoritarian German rulers such as Hitler and Communist leader Erich Honecker. "System M," as Ms. Höhler describes the chancellor's governing style, "is establishing a quiet variation of authoritarian power." Ms. Höhler's extreme views of Ms. Merkel aren't shared by many conservatives. Yet she is not alone in accusing the chancellor of abandoning conservative ideals in the name of political expediency and for purging the party's senior ranks of anyone who could challenge her authority. While frustration with Ms. Merkel's governing style has been palpable for some time within her conservative base, the chancellor is more popular than ever with Germans overall. That broad popularity—Ms. Merkel enjoys the highest approval ratings of any elected German leader—has made it nearly impossible for her internal critics to gain traction....(source WSJ)

So, as a good socialist I transfer the debt to the average Joe

The vast majority of the EU states are socialist, so I believe, the main aim of socialism is to transfer wealth from those that have to those that have not to make it a fairer society.--- So as a good socialist I transfer the debt to the average Joe tax payer to protect the wealth of shareholders, bondholders and depositors. So Joe tax payer gets poorer and the rich get richer.---So I am a capitalist, I believe in a free market....Joe tax payer is protected for small amounts by the government i.e. all taxpayers. Its just insurance really Joe taxpayer has already paid for with his taxes. The bank goes bust free market forces. The shareholders, bondholders and wealthy depositors get stuffed. Wealth redistribution at a stroke with out the need for expensive tax collection and redistribution....I am sure all the educated people will tell me were I am going wrong....The wealthy by winning the competition have power to circumvent the market forces. So no pure market exists or is possible, and if ever it happened it would destroy itself in monopoly. It is even doing a good job of this at the moment without this 'purity'....Question - rhetoric : With so much continuing financial doom and gloom around Europe, the Euro and Spanish banks why have European stock markets followed far East markets and risen by more than 1% on opening this morning?. Is there something happening out there in the 'markets' that only a select few are aware of?... The ECB has  let the broader M3 money supply contract for the whole eurozone late last year, badly breaching its own 4.5pc growth target. This was not purist hard-money discipline. Let us not dress it up with the bunting of ideology, or false authority. It was incompetence, on a par with the errors of 1931.

Spain’s Bankia fiasco has merely brought matters to head, though the details are shocking enough. A €4bn bail-out in mid-May. A €23bn bail-out two weeks later. You couldn’t make it up.

Greece got a new finance minister

Greece got a new finance minister on Wednesday, days after the crisis-hit country's interim prime minister Lucas Papademos said he was convinced Athens was "more than halfway along the path" to economic growth and recovery. Filippos Sachinidis was promoted from deputy minister after Evangelos Venizelos stepped down to take over the helm of the socialist Pasok party ahead of parliamentary elections which could come as early as next month. Sachinidis is a moderniser and former banker widely seen as a pair of safe hands as the debt-stricken nation navigates its worst crisis in modern times. His appointment was welcomed by both Pasok and the centre right New Democracy, the two parties power-sharing under Papademos, himself a former vice-president of the European Central Bank. The change of guard came as the country that triggered Europe's debt crisis in December 2009 raced against the clock to implement reforms demanded by the EU, ECB and International Monetary Fund in exchange for €130bn in extra aid to prop up its moribund economy. A first instalment of rescue funds worth €7.5bn was disbursed to Athens this week. Receipt of the money, which included €1.6bn from the IMF, followed this month's unexpectedly successful bond swap between Greece, banks and other private holders of its debt. A further €35bn is lined up to be injected into the country's cash-starved banking system – widely seen as a vital step to reinvigorate an economy mired in austerity-driven recession.

Announcements coming out of Italy.

Announcements coming out of Italy. Monti and the unions are out of talks and I'm reading Monti has said unions accepted reform of article 18 firing restrictions for workers – except CGIL. CGIL is Italy's most important union with as many as 5.5 million members.Monti said he was "worried" by CGIL's dissent, but the question was now closed and after meetings tomorrow to finalise details the government would press ahead with legislation.The labour minister Elsa Fornero said protection will be lifted for all workers, not just new hires.....Meanwhile - Day eleventh hundred and six: Good news... no default in Greece. Only 30% of the population is in or around the destitution mark and it's not expected to rise above 50 or 60% in the next couple of years. The economy is picking up nicely with only a piffling full blown depression to handle... Easily sorted though once wages hit Bangladeshi levels later this year. Prices of course still as high as Northern European countries but there is evidence to suggest that children can manage on much lower amounts of bread and milk than once thought. Malnutrition still effects development of course, but seeing as future generations only have working as waiters or farm workers to look forward to for the next 30 years or so it might actually be better that they don't have the cognitive powers to get above themselves....So nice to see light at the end of the tunnel !!

Post for march 20th.2012

The final results of today's Greek credit default swap auction are in! Greece's old bonds have been valued at 21.5% of their face value, following its debt restructuring. That means that CDS contracts should pay out 78.5 cents in the euro. The total net value of CDS contracts on Greek debt comes to around $3.2bn, which means (I think) that the banks who issued that debt must pay out around $2.5bn to those who took out the insurance. Credit default swaps are meant to protect against losses on bonds -- so today's auction has effectively found that Greek bond with a face value of €1m would only be worth €215,000. So, if the investor had also taken out €1m of Greek debt insurance through a CDS, s/he should receive €785,000 to cover the loss on the bond.
Or as Markit (which conducted the auction) explained: Market participants who bought protection against a Hellenic Republic default will receive the face value of their bonds in exchange for a payment of 21.5% of face value to protection sellers. UPDATE: Reuters has also calculated that the auction means CDS contracts will pay out around $2.5bn. In conclusion : Greece's creditors are due to receive $2.5bn in insurance payments, following the country's debt restructuring. A credit default swap auction that Greek bonds are worth 21.5% of their face value.

Eurozone leaders will inject more than €250bn (£207bn) into the single currency's protection fund in a desperate effort to prevent contagion from Greece, it emerged on Friday. Finance ministers will agree the package in a fortnight, although it will still leave the insurance scheme around €1.3tn short of City estimates of the firewall needed to protect Italy and Spain from a panic that would follow if Greece went bust. Officials said the main protection fund, the temporary €440bn European Financial Stability Facility (EFSF), will be increased to around €700bn, before the introduction next year of the permanent European Stability Mechanism. The extra funds are expected to be in place by the summer to insure against a lending freeze by private investors. Brussels has dismissed estimates that a €2tn fund would be needed to provide sufficient confidence in the eurozone. Officials believe a compromise between Germany and France, which wanted to put in place a bigger firewall, will safeguard the euro's future. The German government has lobbied for the fund to be restricted to protect its taxpayers from potential liabilities, which will mostly fall on Berlin.German officials believe the scale of the fund will be sufficient to ringfence Greece and allow it to go bust without spreading fears of contagion to other countries.

New Challenge Could Be Launched at Highest Court

GERMANY - A new panel of lawmakers set up by the German parliament to reach quick decisions on the release of rescue funds from the European Financial Stability Facility (EFSF) may be in breach of the German constitution, a study by the parliament's research unit has shown. The panel is intended to ensure that parliament has a say in the release of funds from the EFSF, following a Constitutional Court ruling last month which said the parliament must be involved in measures to bail out other euro-zone member states. The nine-member body, to be selected from the parliament's budget committee, is to approve bailout decisions with the necessary speed and confidentiality to avoid fanning financial market turmoil. New Challenge Could Be Launched at Highest Court - But the study, undertaken by legal experts and commissioned by a member of parliament from the opposition center-left Social Democrats, Swen Schulz, has cast doubt on whether the panel will preserve an adequate degree of parliamentary sovereignty on budget decisions amounting to billions of euros. "Delegating this authority to a special body shifts responsibility onto a small number of people and obstructs the involvement of all members of parliament in the parliamentary process," the study says. Schulz is now considering taking the matter to the Constitutional Court, which is Germany's highest judicial authority. "A nine-member panel can't replace the Bundestag in such an important question," he says. Last month, the court rejected lawsuits filed by eurosceptics aimed at blocking the participation of Europe's biggest economy in bailout packages for Greece and other euro-zone countries. But it said the government must seek the approval of parliament's budget committee before granting aid.

Standard & Poor's Ratings Services has downgraded Spain a notch, citing increasingly unpredictable financing conditions that could squeeze a private sector already pressured by struggling economic growth. The move comes as politicians in Slovakia finally voted to expand Europe's bail-out fund, ending a nail-biting stand-off that threatened the Greek rescue mission and rattled global markets. S&P expects theowing challenges for Spain's private sector as it seeks fresh external financing to roll over high levels of external debt. S&P now rates Spain at AA-, three steps below the top AAA rating. Its outlook is negative. Slovakia became the last of the 17 members to ratify new powers for the €440bn (£385bn) European Financial Stability Facility (EFSF) in a move that will deliver eurozone leaders as much as €3 trillion firepower against the escalating debt crisis. The news came as the Financial Times reported that emerging market countries are working on ways to contribute money rapidly to expand the effective firepower of the International Monetary Fund, with the aim of increasing its role in fighting the eurozone sovereign debt crisis. An announcement is due at the G20 in early November, it is claimed.

Saving Merkel and the Bruxelles "shysters"

Germany's highest court has ruled that Angela Merkel's controversial decision to contribute billions of euros to the first rescue package of Greece and other fiscally troubled countries last year was not illegal. But the federal constitutional court also decreed that parliament should be more involved in such decisions. The ruling means that Germany's agreement to take part in the financial rescue of Greece will not be affected, but participation in future bailouts might be more complicated. European stock markets were boosted by the ruling, which heads off the prospect of total chaos in the eurozone but could lead to delays in further interventions. Presiding judge Andreas Vosskuhle told the court that although Germany's participation had not violated parliament's right to control spending, "the government is obligated in the cases of large expenditures to get the approval of the parliamentary budgetary committee". The verdict "should not be misinterpreted as a constitutional blank cheque for further rescue packages," he added. The three cases had been brought by a group of Eurosceptic academics and a rebel MP from the Bavarian sister party of chancellor Merkel's Christian Democratic Union (CDU). They argued that the bailouts violated German law, as well as European treaties, and could turn the EU into a "transfer union", where rich states such as Germany finance the fiscal indiscretions of poorer members like Greece.

FRANKFURT — Chancellor Angela Merkel of Germany on Sunday re-emphasized her opposition to issuing bonds backed by all the euro zone countries, a position that will be greeted enthusiastically by many of her fellow citizens but could unsettle investors at the beginning of what could be another difficult week in global financial markets. Mrs. Merkel told ZDF television in an interview broadcast Sunday that the so-called euro bonds would be an option only in the distant future. “It will not be possible to solve the current crisis with euro bonds,” she said. She added that “politicians can’t and won’t simply run after the markets.” “The markets want to force us to do certain things,” she added. “That we won’t do. Politicians have to make sure that we’re unassailable, that we can make policy for the people.” The German finance minister, Wolfgang Schäuble, echoed Mrs. Merkel’s comments, saying that common debt would make it easier for governments to avoid pursuing responsible fiscal policies. In any case, he told the newspaper Welt am Sonntag, it would take too long for countries in the euro zone to amend the treaty on monetary union, which would probably be required to allow the issuance of such bonds. “We have to solve the crisis within the existing treaty,” Mr. Schäuble said. The statements by the German leaders are in tune with public opinion in Germany as well as in other countries, like the Netherlands. The Dutch finance minister, Jan Kees de Jager, told the magazine Der Spiegel in an interview published Sunday that Mrs. Merkel should remain firm in her opposition to euro bonds.

The lack of confidence in international governments to address the issues underlying current economic turbulence is a "serious malaise", the chancellor George Osborne has claimed. In an article for the Financial Times, co-authored by other finance ministers from around the world, Osborne said they believed the biggest barriers to economic recovery were political, not economic and they called for "political leadership and courage" and for the eurozone to take further steps to reassure markets. "The eurozone has taken steps to deal with the problems of contagion via an enhanced role for the European financial stability facility, and the European Central Bank's purchases of sovereign bonds. Now it needs to demonstrate commitment to greater fiscal integration and governance arrangements that avoid moral hazard and entrench fiscal responsibility," they said. But they are demanding action to be taken on the amount of credit that banks store: "Greater political resolve is also needed to strengthen bank balance sheets on a sustainable basis." The call comes as the president of the World Bank warned that stock markets were entering a "new danger zone" in a scathing critique of economic leadership in the US and Europe. Robert Zoellick said the global economy was going through a multispeed recovery with western economies stuck in the slow lane following the downgrading of US government debt and the ongoing crisis in the eurozone.

The ECB's U-turn on buying Spanish and Italian bonds may suggest that the eurozone's financial establishment is edging towards fiscal union. But don't confuse a shuffle, performed over a weekend in the midst of a crisis, with the real thing. German public opinion will continue to dictate chancellor Angela Merkel's freedom to act. Will the ECB “sterilize” its purchases?... So far, the ECB has said it isn’t printing euros to run its secondary-market bond buying program (which has been going for more than a year for Greece, Ireland and Portugal). That’s because for every euro it spends on government bonds, it vacuums up a euro–thus there’s no net increase in liquidity. Up to now, the ECB has done this every week by taking in deposits; the volume is now at €74 billion. Can the ECB continue to do this if the volume is several times bigger? We are somewhere in Act IV or V of the euro-zone debt drama, but, lo!, the European Central Bank has descended, deus ex machine, to buy Italian and Spanish bonds. This is a major, major development. Here are three things to consider. How long will it last?.... The ECB very much did not want this role of crisis-fighter of last resort. For months, it had agitated for euro-zone governments to seize the mantle. The governments’ attempt, at the July 21 summit, was judged too little by markets, and the rout of Italy commenced. The governments then made clear they weren’t interrupting their August holidays to do anything else before the fall, and so the crisis was left to the folks in Frankfurt. Look for them to try hard come September to hand it off to Paris, Berlin and Brussels. This is the crux of the euro-zone tug-of-war: Do the governments of the strong countries tax their citizens to pay for the rescue? Or does the ECB create euros to pay for it?

The European Central Bank has moved to halt Europe's runaway debt crisis by pledging to buy government bonds from Italy and Spain. The move to prop up Europe's struggling nations came after a day of frantic discussions between the finance ministers of the world's leading economies. Markets open for the first time since Standard & Poor's decision to cut the US's credit rating from AAA late on Friday. In a statement, the ECB said it welcomed announcements by Spain and Italy of "new measures and reforms" aimed at the financial problems and urged both governments to roll them out swiftly. The agreement of the bank's policy-making governing council is a watershed moment for the ECB. The central bank has so far insisted that the main responsibility for acting lies with national governments. But last week a more modest bond buying effort failed to halt the European slide. The ECB said it had taken note of a statement by France and Germany released on Sunday stressing their commitment to European financial reforms. Silvio Berlusconi's government cobbled together an emergency austerity package for Italy late on Friday to placate the bond markets. Italy's borrowing costs shot up last week amid fears that its debts have become unsustainable. The Tokyo Stock Exchange opened down 1.4% after the announcement, the first test of the move ahead of the opening of European and US markets. US markets also looked set to open down with futures traders betting the markets would open below Friday's closing prices.

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'.

The cost of insuring European sovereign and corporate debt against default using credit default swaps jumped higher in early trading Friday, as the intensifying euro-zone debt crisis and fears of a global slowdown hit financial markets around the world. The SovX Western Europe index, which investors can use to buy or sell default protection on a basket of 15 sovereign borrowers, was 12.5 basis points wider at 305/311 basis points, according to index owner Markit. CDS function like a default insurance contract for debt. A widening of one basis point in a five-year CDS spread equates to a $1,000 increase in the annual cost of protecting $10 million of debt for five years. The iTraxx Crossover index of 40 mostly sub-investment grade corporate borrowers was 39 basis points wider at 549/553. And the Europe index of 125 investment-grade borrowers was six basis points wider at 137/138. The rise in default-insurance costs comes as stock markets around the world tumble on euro-zone debt fears and worries about a slowing world economy, even after the European Central Bank Thursday bought sovereign bonds for the first time since March. “Today’s U.S. nonfarm payroll figures will be pivotal for market sentiment,” said Christian Weber, strategist at UniCredit Bank.

Europe's leaders, have been warned to adopt a more "cautious" approach when discussing multiculturalism. The Norwegian chairman of the Nobel peace prize committee has told them they risk inflaming far-right and anti-Muslim sentiment. Thorbjørn Jagland, a former prime minister of his country, said leaders such as the British premier would be "playing with fire" if they continued to use rhetoric that could be exploited by extremists. Four months ago in Munich, Cameron declared that state multiculturalism had failed in Britain, a view immediately praised by Nick Griffin, leader of the BNP, as "a further huge leap for our ideas into the political mainstream". Marine Le Pen, vice-president of the far-right National Front party in France, also endorsed Cameron's view of multiculturalism, claiming that it corroborated her own party's line. Jagland's comments come in the wake of the Oslo bomb and the massacre on Utøya Island that left 77 people dead. The killer, Anders Behring Breivik, said he was inspired by the right-wing English Defence League. Breivik sent his manifesto, published online hours before the attacks, to about 250 British members of the BNP, the EDL and the Stop Islamisation of Europe group. Jagland, who is also secretary general of the Council of Europe, told the Observer: "We have to be very careful how we are discussing these issues, what words are used. "Political leaders have got to defend the fact that society has become more diverse. We have to defend the reality, otherwise we are going to get into a mess. I think political leaders have to send a clear message to embrace it and benefit from it.