GERMANY - Timmermans these days is having to exercise his utmost diplomatic skill in order to avoid an escalation of tensions. When, during a visit to Amsterdam on Thursday, Timmermans was asked about the Polish foreign minister's jibe, he could have struck back. But there is already enough tension, so he chose to take a different tack, instead praising the transformation of Eastern European countries from socialist dictatorships to free societies. But, he added, true democracies include two important elements: the protection of human rights and adherence to the rule of law. The fact that Timmermans had to utter something that obvious says a lot about the current state of the European Union -- and developments in Poland. In less than two months, the country's new nationalist-conservative government has succeeded in disempowering the constitutional court, passing a law establishing government control over public broadcasting and installing party-aligned political appointees at the head of its intelligence services. "We want to cure our country of a few illnesses," Foreign Minister Waszcykowski told Germany's tabloid Bild earlier this month.

Explosive job growth in the oil and gas sector propped up the U.S. economy for several years in the wake of the recession, as the fracking revolution put American energy workers back to work.

But 2015 was the year that job gains in the energy sector came to a screeching halt as rock-bottom oil prices triggered layoffs of more than 258,000 workers globally, according to a comprehensive analysis by industry consultant Graves & Co. And the energy business is poised to endure a fresh round of job cuts and bankruptcies in early 2016, analysts say.  The number of active oil and gas rigs in the U.S. fell 61% to 698 as of Dec. 31, compared to a year earlier, according to Baker Hughes Rig Counts....Oil companies in Texas have endured revenue losses of up to 70% over the last year, he says.  Dan Heckman, national investment consultant for U.S. Bank Wealth Management, said he expects to see a fresh round of layoffs, production cuts and bankruptcies in the oil and gas business in early 2016.  The current U.S. unemployment rate for the oil, gas and mining sector is 8.5%, but could top 10% by February, about double the overall jobless rate, Heckman projected.   Oil production leader Saudi Arabia has refused to slash output to bolster prices, and U.S. producers have kept wells flowing to pay off investments ordered in the 2000s when new fracking technology triggered a spike in American energy production.  "Many of these companies are in negative cash flow, and that’s not a sustainable dynamic," Heckman said.  It’s a game of chicken, with energy analysts closely watching to see where production cuts take place in an effort to boost prices.  Projections for a prolonged period of low oil prices provide little hope for a quick rebound. Most analysts believe oil prices will stabilize in 2016, but probably won’t rise much until the second half of the year, barring unexpected geopolitical instability.  It’s a sharp reversal of fortunes for an industry that was celebrated for the economic windfall it provided for oil-rich states such as Texas, North Dakota and Pennsylvania as other areas of the economy remained soft.  The number of jobs at oil and natural gas companies rose 40% from the start of 2007 through the end of 2012, even as total U.S. private-sector employment rose only 1%, according to the U.S. Energy Information Administration.

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

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

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

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

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

On 16 July 2014, the Supreme Court provided clarity on the nature of a principal’s entitlement to recovery of a secret commission or bribe received by an agent.  The court ruled that when an agent acquires a benefit as a result of his fiduciary position, including a secret commission or bribe, he is to be treated as having acquired the benefit on behalf of his principal and so holds it on trust for the principal.  The ruling is significant in the context of insolvency, as the effect of the decision is to give a principal a preferential claim over the assets of his agent, as against an unsecured creditor.  It also permits the principal to trace the bribe into the hands of others (where they are not bona fide purchasers), which can be crucial where the agent has dissipated his assets.  This ruling confirms a principle which has, to date, been treated inconsistently by the courts since the nineteenth century.

Facts of the case : In December 2004, FHR European Ventures LLP (FHR) purchased the issued share capital of the Monte Carlo Grand Hotel SAM from Monte Carlo Grand Hotel Ltd (the Seller).  Cedar Capital Partners LLC (Cedar) were consultants who acted as FHR’s agent in negotiating the purchase of the hotel.  However, Cedar had also entered into an “Exclusive Brokerage Agreement” (Agreement) with the Seller, under which Cedar received a €10m fee on conclusion of the sale and purchase of the hotel in or around January 2005.

In November 2009, the claimants brought proceedings to recover the €10m fee from Cedar on the basis that they had failed to disclose the Agreement to the claimants and breached their fiduciary duties.  The claim was successful at first instance, but the judge refused to give the claimants a proprietary remedy in respect of the monies (which would otherwise have put the claimants in a favorable position over unsecured creditors in the event of insolvency).  Instead, FHR was held to have a personal claim against the agent.

The Court of Appeal granted the claimants’ appeal on this point and made a declaration that Cedar received the €10m fee on constructive trust for the claimants and so was entitled to a proprietary remedy.  This decision has now been upheld by the Supreme Court.

The argument focused on the limits of the application of a rule of equity that an agent who acquires a benefit as a result of his fiduciary position or pursuant to an opportunity resulting from his fiduciary position, is to be treated as holding that benefit on behalf of, and so on trust for, the principal. If the rule applied in the context of a bribe or secret commission, it would give the principal a proprietary claim to the bribe as well as a personal claim against the agent; if not, the principal would have only a personal claim against the agent. Cedar argued that the claimants should not be entitled to a proprietary remedy in such a case, on the basis that a bribe or secret commission was always intended to be made to the agent, not his principal; it was never the principal’s property.  Accordingly, it would be wrong to assume a constructive trust and there should be an exception to the equitable rule to that extent.  FHR argued that the equitable rule should apply, on the basis that equity does not permit an agent to rely on their own wrong to justify retaining a benefit received as a result.    Lord Neuberger, who delivered the judgment, reviewed the conflicting authorities and concluded that it was not possible to decide the case on the basis of clear legal authority and so it was necessary to consider the matter from the perspective of principle and practicality.  He considered Cedar’s argument to be the more complicated to justify and also unattractive, given that in a situation where the agent receives a bribe or secret commission from a third party, there would be a strong possibility that that payment would disadvantage the principal.  Looking at the facts of the case, Lord Neuberger considered that had the Sellers not paid the €10m to Cedar, it may have accepted a reduced price to reflect the fact it did not have to pay the large fee to the consultant.  Furthermore, given the heightened awareness and concern about bribery, the Supreme Court said that it expected “the law to be particularly stringent in relation to a claim against an agent who has received a bribe or secret commission” (at paragraph 42).

FHR’s arguments had the merit of simplicity and were consistent with the fundamental principles of the law of agency.  They were also consistent with the position in other common law jurisdictions, namely Australia, New Zealand, Singapore, Canada and the US.  It also seemed curious that if Cedar’s arguments were preferred, this could have the effect that a principal whose agent wrongly accepted a bribe would be worse off (in terms of recovery) than where the principal had obtained a benefit “in far less opprobrious circumstances” (at paragraph 41).

Accordingly, the Supreme Court favored the claimant’s argument, concluding that “there is no plainly right answer, and, accordingly, in the absence of any other good reason, it would seem right to opt for the simple answer” (at paragraph 35).  This decision provides a welcome clarification of the position of the status of bribes and secret commissions paid to agents.  It provides a departure from the jurisprudential differentiation between different types of benefits that an agent may receive in breach of his duties that had occupied the minds of lawyers and their textbooks for many years.  The judgment is likely to have a significant impact on cases where the agent in question has dissipated his assets or has become insolvent, such that the principal may not otherwise have been able to (1) recover the full amount of the bribe or secret commission from the remaining assets when other creditors are taken into account and/or (2) trace the funds into the hands of non-bona fide purchasers.  Of course, where a principal seeks to recover what is, in effect, a bribe paid to the agent, this may create other issues for the principal to grapple with, not least the money laundering provisions in the proceeds of crime legislation.  If not carefully considered and complied with, the principal may find himself committing a criminal offence by recovering “criminal property”.

Case reference: FHR European Ventures LLP and Others (Respondents) v Cedar Capital Partners LLC (Appellant) [2014] UKSC 45 

The global economy had another difficult year in 2013. The advanced economies' below-trend growth continued, with output rising at an average annual rate of about 1%, while many emerging markets experienced a slowdown to below-trend 4.8% growth.

After a year of subpar 2.9% global growth, what does 2014 hold in store for the world economy?

The good news is that economic performance will pick up modestly in both advanced economies and emerging markets.

The advanced economies, benefiting from a half-decade of painful private-sector deleveraging (households, banks, and non-financial firms), a smaller fiscal drag (with the exception of Japan), and maintenance of accommodative monetary policies, will grow at an annual pace closer to 1.9%.

Moreover, so-called tail risks (low-probability, high-impact shocks) will be less salient in 2014.

The threat, for example, of a eurozone implosion, another government shutdown or debt-ceiling fight in the US, a hard landing in China, or a war between Israel and Iran over nuclear proliferation, will be far more subdued.

Still, most advanced economies (the US, the eurozone, Japan, the UK, Australia, and Canada) will barely reach potential growth, or will remain below it.

Households, banks and some non-financial firms in most advanced economies remain saddled with high debt ratios, implying continued deleveraging.

High budget deficits and public debt burdens will force governments to continue painful fiscal adjustment. And an abundance of policy and regulatory uncertainties will keep private investment spending in check.

The outlook for 2014 is dampened by longer-term constraints as well. Indeed, there is a looming risk of secular stagnation in many advanced economies, owing to the adverse effect on productivity growth of years of underinvestment in human and physical capital.

And the structural reforms that these economies need to boost their potential growth will be implemented too slowly.

While the eurozone's tail risks are lower, its fundamental problems remain unresolved: low potential growth; high unemployment; high and rising levels of public debt; loss of competitiveness and slow reduction of unit labour costs (which a strong euro does not help); and extremely tight credit rationing, owing to banks' ongoing deleveraging.

Meanwhile, progress toward a banking union will be slow, while no steps will be taken toward establishing a fiscal union, even as austerity fatigue and political risks in the eurozone's periphery grow.

In Japan, prime minister Shinzo Abe's government has made significant headway in overcoming almost two decades of deflation, thanks to monetary easing and fiscal expansion.

The main uncertainties stem from the coming increase in the consumption tax and slow implementation of the third "arrow" of Abenomics, namely structural reforms and trade liberalisation.

In the US, economic performance in 2014 will benefit from the shale energy revolution, improvement in the labour and housing markets and the "reshoring" of manufacturing.

The downside risks result from: political gridlock in Congress (particularly given the upcoming midterm election in November), which will continue to limit progress on long-term fiscal consolidation; a lack of clarity about the Federal Reserve's planned exit from quantitative easing (QE) and zero policy rates; and regulatory uncertainties.

Emerging markets' difficult year in 2013 reflected several factors, including China's economic slowdown, the end of the commodity super cycle, and a fall in potential growth, owing to delays in launching structural reforms.

Moreover, several major emerging economies were hit hard in the spring and summer, after the Fed's signal of a forthcoming exit from QE triggered a capital flow reversal, exposing vulnerabilities stemming from loose monetary, fiscal, and credit policies in the boom years of cheap money and abundant inflows.

Emerging economies will grow faster in 2014 – closer to 5% year on year – for several reasons. Brisker recovery in advanced economies will boost imports from emerging markets.

The Fed's exit from QE will be slow, keeping interest rates low. Policy reforms in China will attenuate the risk of a hard landing.

And, with many emerging markets still urbanising and industrialising, their rising middle classes will consume more goods and services.

Still, some emerging markets – namely, India, Indonesia, Brazil, Turkey, South Africa, Hungary, Ukraine, Argentina, and Venezuela – will remain fragile in 2014, owing to large external and fiscal deficits, slowing growth, below target inflation and election-related political tensions.

Some of these countries – for example, Indonesia – have recently undertaken more policy adjustment and will be subject to lower risks, though their growth and asset markets remain vulnerable to policy and political uncertainties and potential external shocks.

The better-performing emerging markets are those with fewer macroeconomic, policy and financial weaknesses: South Korea, the Philippines, Malaysia and other Asian industrial exporters; Poland and the Czech Republic in Europe; Chile, Colombia, Peru and Mexico in Latin America; Kenya, Rwanda and a few other economies in sub-Saharan Africa; and the Gulf oil-exporting countries.

Finally, China will maintain an annual growth rate above 7% in 2014. But, despite the reforms set out by the Communist party's central committee, the shift in China's growth model from fixed investment toward private consumption will occur too slowly.

Many vested interests, including local governments and state-owned enterprises, are resisting change; a huge volume of private and public debt will go sour; and the country's leadership is divided on how quickly reforms should be implemented.

So, while China will avoid a hard landing in 2014, its medium-term prospects remain worrisome.

In sum, the global economy will grow faster in 2014, while tail risks will be lower.

But, with the possible exception of the US, growth will remain anaemic in most advanced economies, and emerging-market fragility – including China's uncertain efforts at economic rebalancing – could become a drag on global growth in subsequent years.

Public confidence in the European Union has fallen

Public confidence in the European Union has fallen to historically low levels in the six biggest EU countries, raising fundamental questions about its democratic legitimacy more than three years into the union's worst ever crisis, new data shows.

After financial, currency and debt crises, wrenching budget and spending cuts, rich nations' bailouts of the poor, and surrenders of sovereign powers over policymaking to international technocrats, Euroscepticism is soaring to a degree that is likely to feed populist anti-EU politics and frustrate European leaders' efforts to arrest the collapse in support for their project.

Figures from Eurobarometer, the EU's polling organisation, analysed by the European Council on Foreign Relations (ECFR), a thinktank, show a vertiginous decline in trust in the EU in countries such as Spain, Germany and Italy that are historically very pro-European.

The six countries surveyed – Germany, France, Britain, Italy, Spain, and Poland – are the EU's biggest, jointly making up more than two out of three EU citizens or around 350 million of the EU's 500 million population.

The findings, published exclusively in the Guardian in Britain and in collaboration with other leading newspapers in the other five countries, represent a nightmare for Europe's leaders, whether in the wealthy north or in the bailout-battered south, suggesting a much bigger crisis of political and democratic legitimacy.

                        

"The damage is so deep that it does not matter whether you come from a creditor, debtor country, euro would-be member or the UK: everybody is worse off," said José Ignacio Torreblanca, head of the ECFR's Madrid office. "Citizens now think that their national democracy is being subverted by the way the euro crisis is conducted."

EU leaders are aware of the problem, utterly at odds over what to do about it, and have yet to come up with any coherent policy proposals addressing the mismatch between the pooling of economic and fiscal powers and the democratic mandate deemed necessary to underpin such radical policy shifts.

José Manuel Barroso, the European commission president, said on Tuesdaythis week the European "dream" was under threat from a "resurgence of populism and nationalism" across the EU. "At a time when so many Europeans are faced with unemployment, uncertainty and growing inequality, a sort of 'European fatigue' has set in, coupled with a lack of understanding. Who does what, who decides what, who controls whom and what? And where are we heading to?"

The most dramatic fall in faith in the EU has occurred in Spain, where the banking and housing market collapse, eurozone bailout and runaway unemployment have combined to produce 72% "tending not to trust" the EU, with only 20% "tending to trust".

The data compares trust and mistrust in the EU at the end of last year with levels in 2007, before the financial crisis, to reveal a precipitate fall in support for the EU of the kind that is common in Britain but is much more rarely seen on the continent.

In Spain, trust in the EU fell from 65% to 20% over the five-year period while mistrust soared to 72% from 23%.

In five of the six countries, including Britain, mistrust prevailed over trust by sizeable margins, whereas in 2007 – with the exception of the UK – the opposite was the case.

Five years ago, 56% of Germans "tended to trust" the EU, whereas 59% now "tend to mistrust". In France, mistrust has risen from 41% to 56%. In Italy, where public confidence in Europe has traditionally been higher than in the national political class, mistrust of the EU has almost doubled from 28% to 53%.

Even in Poland, which enthusiastically joined the EU less than a decade ago and is the single biggest beneficiary from the transfers of tens of billions of euros from Brussels, support has plummeted from 68% to 48%, although it remains the sole country surveyed where more people trust than mistrust the union.

In Britain, where Eurobarometer regularly finds majority Euroscepticism, the mistrust grew from 49% to 69%, the highest level with the exception of the extraordinary turnaround in Spain.

A separate, more detailed study published this week on the impact of the currency and debt crisis and the austerity policies that have followed also found steep falls across the EU in faith in democracy and national political elites.

The study for the Cabinet Office by the European Social Survey, linking university researchers across the EU, found that soaring unemployment, anxiety and insecurity had eroded faith in politics.

"Overall levels of political trust and satisfaction with democracy [declined] across much of Europe, but this varied markedly between countries. It was significant in Britain, Belgium, Denmark and Finland, particularly notable in France, Ireland, Slovenia and Spain, and reached truly alarming proportions in the case of Greece," it said.

The financial crisis "not only eroded the objective economic conditions of many citizens, but also created widespread anxiety about a country's future even among those who did not experience hardship directly".

Faced with this erosion of political support and the battering traditional politics is taking from populist newcomers such as Beppe Grillo's Five Star movement in Italy, policymakers appear at a loss.

On Monday, Barroso said the austerity policies being applied, mainly under pressure from Berlin, had reached the "limits of political and social acceptance" and were "unsustainable" in their current form. On Tuesday, though, the commission in Brussels sought to row back on his remarks.

Within the eurozone, the key response to the crisis, apart from bailouts, has been to embark on a systematic surrender of budgetary and fiscal powers from national governments and parliaments to Brussels, as well as having countries being bailed out overseen by a "troika" of technocrats and economists from the commission, the European Central Bank and the International Monetary Fund. These are "federalising" steps in a long process of eurozone integration that might see it transformed from a currency into a political union.

"The EU has hit home and is here to stay as a watchdog of budgets, labour markets, pensions etc. This is unprecedented, and risky," said Torreblanca. "Unless it is fixed, it will feed the vicious circle between anti-EU populism and technocracy which we are currently seeing operating."

Barroso argued strongly in two speeches this week that federalism was the only answer to Europe's crisis of finances and of confidence. The German chancellor, Angela Merkel, brushing off widespread fears of a new German "hegemony" in Europe and the eurozone, also said that governments had to give up much more power to Brussels.

"We still haven't found the answer to the question of whether we're actually now prepared to unite on common economic parameters inside the single currency area," she said in a Berlin debate with the Polish prime minister, Donald Tusk. "If we want to have a common currency, a common Europe, we have to be ready to give up our hard-won habits … That means we have to be prepared to accept that in the end Europe has the final word in certain things. Otherwise we can't keep on building this Europe … To an extent, we have to jump over our own shadows. I'm ready for that."

But Tusk delivered an unusually stark warning that German prescriptions could bring increasing nationalism and populism across the EU in a backlash that was already well under way.

"We can't escape this dilemma: how do you get a new model of sovereignty so that limited national sovereignty in the EU is not dominated by the biggest countries like Germany, for example," he said pointedly. "Under the surface, this fear will be everywhere: in Warsaw, in Athens, in Stockholm. It will be everywhere without exception."

Aart de Geus, head of the Bertelsmann Stiftung, a German thinktank, also warned that the drive to surrender more key national powers to Brussels would backfire. "Public support for the EU has been falling since 2007. So it is risky to go for federalism as it can cause a backlash and unleash greater populism."

EU Parliament adopts "most comprehensive and most far-reaching banking regulation in European history" with overwhelming majority

"Today's decision makes European banks more resilient, so that no more taxpayers' money has to be used to prop them up", explained Othmar Karas MEP, Vice-President of the European Parliament. The new set of rules for banks, which was adopted with an overwhelming majority, comprises more than a thousand pages and is the basis for the planned banking union. "The new single rule book for all 8200 banks in the EU is the foundation on which the house of the Banking Union is to be built. The single supervisory mechanism will be the roof. As walls to the house, we must now feed in the Resolution framework for banks and the deposit guarantee schemes. The new set of rules is the most comprehensive and most far-reaching banking regulation in the history of the EU", he said. Karas was Parliament's negotiator for the law known as the CRD (Capital Requirements Directive) or Basel III....Part of the new rules is that for the first time, there will be a cap on bankers' bonuses. Bonuses may not be higher than the salary. Only in exceptional cases, the shareholders of a bank may decide that bonuses may amount to a maximum of twice as much as the fixed salary. "The rules concerning bankers' bonuses do not regulate the amounts of the salaries. As legislators, we do not regulate salary levels. But we install fairness and transparency and we contribute to a change in culture", said Karas. The most important part of the new rules is tightened capital requirements for banks. From 1 January 2014 onwards, European banks have to put aside more and better capital to be prepared for possible crises. Unprecedented is the new rule that banks have to publish, country by country, what their profit is, how much tax they pay and how much they receive in subsidies. This increases transparency.

"The new capital requirements are key to an efficient banking supervision and therefore a crucial condition for the banking union", said Marianne Thyssen, EPP Group MEP responsible for the negotiations on the new single European banking supervision. "Today's large majority for the new banking regulation is a major success for Othmar Karas and an important step on the road to a safer banking sector. Both the new capital requirements and the reinforced European banking supervision will help to avoid crises. Prevention is better than cure", said Thyssen.  For the first time, criteria for the liquidity of bank capital are being introduced. Banks have to be able to fulfill their liabilities in stress situations for a period of at least 30 days. Particularly important to Othmar Karas has been making loans to Small and Medium-Sized Enterprises (SMEs) easier: "Banks must focus on their core business, which is financing the real economy." The new law reduces the capital requirements for loans to SMEs and business start-ups. Granting loans become easier this way. In addition, continental European banks are being strengthened in their competition with Anglo-American competitors by recognizing the characteristics of European banks as decentralized structures and loss-sharing agreements. "Our aim is to make European banks as firm as a rock on the global financial markets", concluded Karas.

Gross domestic product (GDP) in the world's second-largest economy expanded 7.8pc last year in the face of weakness at home and in key overseas markets, the National Bureau of Statistics (NBS) announced on Friday.  But it grew 7.9pc in the final three months of 2012 as industrial production and retail sales growth strengthened at the end of the year, snapping seven straight quarters of slowing growth in a positive sign for the spluttering world economy.

The official statistics come as optimism grows among analysts that China will pick up steam in 2013 after two years of relative weakness, although they - and the government - caution that the improvement will not be dramatic. "The international economic environment remains complicated this year and... there are still unbalanced conflicts in the Chinese economy," NBS spokesman Ma Jiantang told reporters.  Still, Ma added: "We expect China's economy to continue to grow in a stable manner in 2013."  The problem is that the economic and social arrangements that have emerged in China on the back of a decade or so of double-digit growth don't work, ie are unsustainable when the growth rate subsides. This is what worries the hell out of the Chinese leadership. The risk is that Chinese society becomes unstable. It's really no different to us over here having got used to trend economic growth of, say, 2.0% - 3.0% pa trying to sustain our own massively indebted complex societies on annual growth rates of 1.0% - 1.5%. In essence, we're going bust....The fundamental issue in all of this is that politicians won't tell their societies that they/we are indeed going bust. By the same token, many/most folk don't fully appreciate that a society that has emerged on the back of 60 years of a trend of, say, 2.5% pa growth (as is the case in the UK) cannot survive in recognisable form for more than about 5 years, 10 years at the very most, without that society fracturing. China certainly has its problems; we certainly have ours. Our mutual predicament is that "infinite" economic growth predicated on "infinite" supplies of cheap energy, primarily cheap oil, is by definition unsustainable. .....We have entered interesting times.

Italian centre-left Democratic Party chief Pier Luigi Bersani is set for a run-off vote next week against young pretender Matteo Renzi, after millions of supporters chose their nominee for next year's general election.With 40 percent of the votes counted from Sunday's balloting,  Bersani was in front with 44.3 percent support, followed by Florence mayor Renzi with 36.3 percent, the organising committee said. More than four million supporters took part in the vote which will now head for a second round run-off on Sunday. A general election is expected in April 2013 with the winner of the centre-left nomination one of the favourites to replace Mario Monti as Italy's next prime minister. All the most recent polls show the Democratic Party coming first in the general election. Observers were surprised by the large turnout for the primaries and many polling stations were overwhelmed, with large queues forming outside. More and more Italians are feeling the pain of a recession that began in the second half of last year and is forecast to continue into next year. The main drama is between 61-year-old Bersani, a cigar-chomping former communist with a liberal economic orientation, and rising star Renzi, who at just 37 is a new face in politics, inspired by US President Barack Obama. The primary is being held at a time of deep economic crisis and political uncertainty in Italy, with a series of corruption scandals within the main parties sparking voter apathy and disgust with traditional leaders. Both men have said they will follow the broad course of reforms set by unelected technocrat prime minister Monti, but will seek to curb some of the more unpopular austerity measures he has advocated and do more to boost growth. "We have to show the rest of the world that we don't just have Monti," Bersani, a former economic development minister, said last week. "People want to take part, they want to have a politics that is in touch with the streets, with the squares, that returns hope to the country," he said.   Monti, a former European commissioner, took over from Silvio Berlusconi a year ago as Italy struggled with the eurozone crisis. While his cuts have angered many, he is seen as having saved Italy from a Greek-style collapse.

The eurozone will struggle to emerge from a double-dip recession next year as deep budget cuts stifle growth, the European commission has said.  In a gloomy health check on the state of the 17 countries that belong to the monetary union, Brussels said a sharper than expected fall in output in 2012 would be followed by a virtually non-existent recovery in 2013.  The commission said the eurozone as a whole would contract by 0.4% this year and grow by 0.1% in 2013. It cut its forecasts for the single currency's "big four" economies – Germany, France, Italy and Spain – as it predicted that unemployment would rise to a fresh peak of 11.8% next year.

"Europe is going through a difficult process of macroeconomic rebalancing, which will still last for some time," said the economic and monetary affairs commissioner, Olli Rehn. "Europe must continue to combine sound fiscal policies with structural reforms to create the conditions for sustainable growth to bring unemployment down from the current unacceptably high levels."

Brussels blamed the deepening sovereign debt crisis and financial market concerns about a possible breakup of the eurozone for the "disappointing" growth performance in 2012. It said domestic demand would make no contribution to eurozone GDP in 2013 as the lack of jobs and tax increases hit consumer spending.

The commission expressed confidence that by 2014 the benefits of the austerity programmes would bear fruit, leading to expansion of 1.4%.

Although the UK is expected to grow by just 0.9% next year, Brussels believes it will expand more quickly than any of the major economies of the eurozone. The commission has pencilled in growth of 0.8% for Germany, 0.4% for France, a contraction of 0.5% for Italy and a retrenchment of 1.4% for Spain. In all cases the predictions are for output to be weaker than expected by national governments, leading to budget deficit reduction targets being missed.

Greece is one eurozone economy where the commission's forecasts are less pessimistic than those of the government. The EU executive believes the Greek economy will shrink by 6% this year and 4.2% in 2013 before finally emerging from a six-year slump with growth of 0.6% in 2014. The government is assuming contraction of 6.5% in 2012, 4.5% in 2013 and growth of 0.2% growth in 2014.

Francois Hollande will travel to Berlin with leaders for crisis talks on Tuesday after Germany said a Greek sovereign debt restructuring was “out of the question”.  On Monday, the French president met with Jim Yong Kim, head of the World Bank, and IMF chief Christine Lagarde, as well as leaders of the World Trade Organisation and the OECD, to discuss solutions for Greece, including a debt buy-back. The group will talk about the ideas with Ms Merkel on Tuesday.

European markets dropped ahead of the pivotal talks amid worsening bank problems gripped both Greece and Spain. Greek banks plunged almost 16pc after the finance ministry in Athens said that Brussels’ bail-out fund would not recapitalise the banks. The collapsed dragged the Athens exchange down 6.3pc.-- Are the German public finally being told the truth ?"For German finance expert Max Otte, such a debt haircut is nothing but an orderly insolvency and an acknowledgement of bankruptcy. "It's two words meaning the same thing," Otte said, "but there's no denying that Greece is bankrupt." So far, Germany has lent Greece some 80 billion euros by granting emergency credit lines or buying up sovereign debt through the ECB. A 50 percent debt cancellation, then, would leave Germany with a loss of 40 billion euros. It would be the first time that German taxpayers would actually lose money in an attempt to rescue Greece from bankruptcy. "Up until now, Germans have been told that their country was only assuming liability for a certain sum without taxpayers actually facing any costs," said Johann Eekhoff, the director of the Cologne-based Institute for Economic Policy".... 

Not looking good for France-business optimism is down again:"...National statistics institute INSEE said on Tuesday [23rd. October] its indicator for morale in the manufacturing sector slumped to 85 in October, worse than the lowest estimate in a Reuters survey of 23 economists. The poll had forecast business morale would be unchanged from last month at 90. The indicator was dragged lower by a sharp deterioration in survey responses relating to total orders and demand, which slumped to -39 from -28 in September - dragged lower by the deepening recessions in southern euro zone nations such as Italy and Spain, which rank amongst France's main export markets..."That's a big drop by any stretch of imagination...As a member of the public I would like to go on record as saying that I am not deeply unhappy with the the EU. In fact, I am absolutely bloody furious ! A bigger bunch of narcissist, egotiscal lunatics I have never seen in my life. Their battle cry of "The project is more important than people" is never far from their lips. Mr Hague do everyone a favour and tell "call me Dave" to get going on planning a referendumon th EU now, the UK voting public would thank you for it. As far as I'm aware the ESM is outside any laws and jurisdictions, not just those of Europe.

If this lot doesn't constiture being above the law, I don't know what does: "...In the interest of the ESM, the Chairperson of the Board of Governors, Governors, alternate Governors, Directors, alternate Directors, as well as the Managing Director and other staff members shall be immune from legal proceedings with respect to acts performed by them in their official capacity and shall enjoy inviolability in respect of their official papers and documents.

The ESM, it's property, funding and assets, wherever located and by whomsoever held, shall enjoy immunity from every form of judicial process except to the extent that the ESM expressly waives its immunity for the purpose of any proceedings or by the terms of any contract, including the documentation of the funding instruments.

The property, funding and assets of the ESM shall, wherever located and by whomsoever held, be immune from search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.

The archives of the ESM and all documents belonging to the ESM or held by it, shall be inviolable. The premises of the ESM shall be inviolable.  The official communications of the ESM shall be accorded by each ESM Member and by each state which has recognised the legal status and the privileges and immunities of the ESM, the same treatment as it accords to the official communications of an ESM Member.  To the extent necessary to carry out the activities provided for in this Treaty, all property, funding and assets of the ESM shall be free from restrictions, regulations, controls and moratoria of any nature.

The ESM shall be exempted from any requirement to be authorised or licensed as a credit institution, investment services provider or other authorised licensed or regulated entity under the laws of each ESM Member..." And it's officers, staff, and associates, past and present, are also bound to secrecy: "...The Members or former Members of the Board of Governors and of the Board of Directors and any other persons who work or have worked for or in connection with the ESM shall not disclose information that is subject to professional secrecy. They shall be required, even after their duties have ceased, not to disclose information of the kind covered by the obligation of professional secrecy..." I know that all the politicians are fully aware of these ilegalities , but it's worth impressing it once more, because I can't believe how any nation or state would sign up to this!

Enormous growth with cheap money, that's United Europe

That is what we experienced in the last decades of the EU. Regard Spain, it changed, grew and modernised, in rural regions partially medieval,her life with an unmatched velocity never experienced before in history. - And ended in the financial crisis. That was mainly the fault of the socialists, with the coward Zapatero, now fleeing before the voters, and by socialists inbred attitude to waste the money, that others earned. And this horror experience shall now be revived in France with a President to elect who already declared that he would disregard the rules for austerity- and preferably waste German money.
By the way:I just returned from the "total emergency“ in Spain’s most suffering region Catalonia, nearly bankrupt. The restaurants were filled with Spanish families. Enjoying excellent food with pescados, mariscos and bogavantes (lobster) together with cava and one of the favourite cars seems to be the Porsche Cayenne... With the speed at which the level of quoted debt is increasing and far greater than any rate of inflation surely there must be questions on how big the black hole in the finances actually is. If you told me it was a 100 billion today then all of a sudden it lurched to 300 billion any sane person would say "WTF". ... SO SOMEBODY HAS BEEN LYING OR HIDING THE TRUE SCALE OF THE PROBLEM! At that point you can't fix it the size of the problem is not yet determined so honestly now "how big is the problem"??? You will not get a straight answer on this because they would be called out on it tomorrow when it has doubled yet again!....Germany’s ECB board member, said today: “The risk premia of sovereign bonds now reflect not just the insolvency risk of some countries but an exchange rate risk, which should not theoretically exist in a currency union. The markets are pricing in a break-up of the eurozone. Such systemic doubts are not acceptable".
Ahhh, "theoretically"... Well, theories are often very, very wrong indeed. Or were Greece, Ireland, Portugal, now Spain and next Italy all supposed to be declared insolvent as part of the euro "master plan", eh? ...Want some more data for your "theory"?....there, you see..."The Catastrophic State of Italy's Labor Market - September 4, 2012 - Spiegel. Italy's economy remains in freefall. The country is shedding jobs, production rates are abysmal and the infrastructure is appalling. Banca d'Italia, now forecasts a 2 percent drop in GDP this year"

TRUTH IS : Private sector activity shrank for the tenth time in 11 months

Who on earth is investing to raise these stock markets so high? If I were Warren Buffet I would say this is a typical bubble Companies are not making real profits Banks aren't either so who is doing the investing????...Bond yields are down, oil prices high, USA crops are devastated by drought, housing in USA is still very much wasted. So are "the powers that be" simply doing what analysts do talking up the benefits of share ownership until even "my mate Joe Blw" decides that investing in stocks beats keeping his money under the mattresse ? I have had it with markets banks and politicians lies and deceits. I am closing all my banking accounts and simply paying in earwigs from now on.We are living in the Alice of Wonderland World. The more bad economic data we gets, the more the worlds stock markets rise..... Hopes that Europe’s leaders will act decisively drowned out weak data showing the eurozone endured another torrid month in July. Private sector activity shrank for the tenth time in 11 months and pointed to a 0.6pc rate of quarterly contraction, according to the purchasing managers index. Offsetting that was the strong US jobs data. July saw 163,000 people find work in the world’s largest economy, beating forecasts of 100,000. The sense of relief was sharpened because almost all the recent US data have pointed to a deterioration since the first quarter of the year. “It will alleviate fears that the US might be tipping back into recession,” said Nigel Gault, an economist at IHS Global Insight. The utterly repellent EU freak show stumbles from crisis to crisis, a crisis which conveniently gives the bureaucrats an excuse to force member countries into a fiscal union with budget control being handed over to Brussels, effectively crushing the last breath of democracy of the nation state in favor of an EU super state, but the light of freedom, sovereignty, cultural identity and the ability to decide one owns destiny will not be extinguished whilst the euro sceptics still have a voice. The common market worked well, that is where Europe should be heading not more Europe.....However : While U.S. employers hired an additional 163,000 "human resources" they also sacked an additional 195,000 "human resources" last month, including a decrease of 228k full-time jobs which was only partially offset by a 31k rise in part-time jobs (defined as 1 to 34 hrs/wk). Furthermore, a new group of 199,000 Americans joined the "Working-Age" pool last month and will need jobs as well. Not only is the U.S. economy in such a severe situation as reported, it is, in fact, in a worse one. Currently some 87 million Americans, or about 36% of the working-age population of the U.S., are no longer even looking for work and are considered "out of the labor force." If it were not for workers who dropped out of the labor force, the real UE rate would be far north of 11%. All of this MSM "rah-rah" reporting and "growth and recovery" hopium smoking needs a reality check.

Germany, the Netherlands and Luxembourg had the outlooks for their AAA credit ratings lowered to negative by Moody’s Investors Service in past week, citing “rising uncertainty” about Europe’s debt crisis, the risk of Greece leaving the eurozone, and the growing likelihood of massive bailout bills in Spain and Italy. On the whole, they seem like pretty sound reasons to me.

The IMF has, as I predicted, written off Greece. The Greek elite is, in turn, not even trying to hide how little effort they’re exerting to put their own public sector feathered-nest in order. The managements of Greek state-run enterprises seem to be so forgetful, they forgot to implement government decisions concerning wages cuts for thousands of employees at state-run enterprises (DEKO) and other state bodies and organizations. And the Coalition itself omitted to pass the legislation forcing them to do it.

The Troika arrived in Athens this week, to be vociferous in pointing out the non-compliance. (I doubt if they’ll bother to mention that all the forgotten public sector cuts have been dumped onto the already flatlining private sector). It is just possible that the Troikanauts will say “That’s it, no more money”, but unlikely: with Spain and Italy in bond-yield intensive care, this would be bad timing.

Spain’s two-year bond yield saw its biggest one-day move since the eurozone debt crisis broke out in early 2010, closing at 6.53 per cent. “Spain is close to losing access to markets entirely,” said John Stopford, a senior fund manager at Investec Asset Management. “It’s not sustainable to borrow at these levels for very long.” He’s not wrong: Spain is entering the Greek Twilight Zone --- An association representing German banks has called for an extra year to implement tougher rules that would force them to hold more cash as a buffer against possible financial crises. The BVR group of private and public banks called for a delay until January 1, 2014 for the entry into force of the so-called Basel III regulations due to the "enormous technical restructuring and implementation work" needed. The planned implementation at the beginning of 2013 was "no longer realistic" said the group.

Eurozone leaders hoping for a quiet few weeks will be sorely disappointed. Short-selling bans on banking and insurance stocks by financial authorities in Rome and Madrid are a sure sign that all is not well, although I fear that these restrictions will only offer the most temporary of respites. After the summit in June that provided a brief burst of euphoria, there were mutterings that the crisis was not over, and the pessimists have now been proved right..... after a particularly grim day, European markets have closed and its time to rake over the pieces.....Growing fears that Spain could need a bailout, worries about whether Greece will get more money or will instead quit the eurozone, and a drop in EU confidence have conspired to sent shares and the euro sharply lower and bond yields higher. News of a ban on short selling in Italy and Spain - whether misguided or not - seemed to help haul markets slightly back from the brink. We may rapidly be approaching a decisive moment for the eurozone; previous bailouts were of smaller countries that were of manageable size. Spain is a different order of magnitude entirely, and it may not be possible to rescue this economy in the same way that Greece, Ireland and Portugal were bailed out. Eurozone leaders will likely hold yet another summit, but they will need more than fine words if they are to truly save the single currency.

Potential Defaults....

 Potential Defaults. The chairman of Deutsche Schiffsbank, a Commerzbank subsidiary based in Hamburg that is focused on the shipping industry, had been summoned to Frankfurt to present the bank's financial results. But the presentation was cancelled; Commerzbank had no need for the numbers, having previously decided it no longer wanted anything to do with German shipping.

The executive board of Deutsche Schiffsbank was not notified in advance of the parent company's reversal. The supervisory board was also taken by surprise. Only three months earlier, Commerzbank CEO Martin Blessing had declared the financing of ships and commercial real estate to be part of the bank's core business. And although it was expected to shrink, Germany's second-largest bank intended to create a separate segment for the business.  But the executives had underestimated the risks that the European sovereign debt crisis presents to Commerzbank, and how much capital the ship and commercial real estate business ties up. Now Blessing has slammed on the brakes. Deutsche Schiffsbank Chairman Otto characterized the parent company's about-face as the "decision of a cautious businessman and not of a skydiver."

Commerzbank has recently made a huge effort to satisfy and even exceed the capital requirements set by the European Banking Authority (EBA). But if the euro crisis worsens, new gaps could soon open up, say banking industry insiders.

In Spain alone, Commerzbank is exposed to the tune of €14.2 billion ($17.9 billion) via investments in banks, companies and the government. The lower the rating agencies assess the creditworthiness of these borrowers, the more capital the bank will have to place in reserve for these investments in the future -- to say nothing of potential defaults.
The Finnish finance minister, Jutta Urpilainen, said in a newspaper interview this morning that she'd consider crashing her AAA-rated country out of the eurozone rather than face paying the debts of another country: Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland. Finland will not hang itself to the euro at any cost and we are prepared for all scenarios. Collective responsibility for other countries' debt, economics and risks; this is not what we should be prepared for. We are constructive and want to solve the crisis, but not on any terms.

UPSSSSS....!!!!

Finland and Holland move to block bond-buying plans, casting the first doubts on last week's summit deal, as figures show a slide in Spain, Greece and Italy's manufacturing activity and a rise in unemployment across the eurozone....A little more detail on this German court hearing. Germany's parliament last week approved the ESM, but President Joachim Gauck said he will not sign it into law until the powerful constitutional court has given its go-ahead. Several critics have already filed complaints against the ESM with the court, who will hear these complaints on Tuesday 10 July - one day after the fund is supposed to take effect. Over in Greece, ministers are deep in talks over how to ease the punishing terms of its bailout before a review by the country's lenders. Antonis Samaras, the country's prime minister, wants more time to meet targets and to dilute austerity measures. Reuters reports that ministers from the conservative-led coalition were huddled in talks on Monday to work out the plan before "troika" inspectors from the EU, ECB and IMF begin their review of Greece's faltering progress in fiscal adjustment and reforms.

Angela Merkel, the German chancellor, was asked about this today. She said we must accept decisions of other states and there is no need to make decisions now... Confusion still reigns, it would appear, over whether direct overcapitalization of banks by the eurozone's permanent rescue fund would require a treaty change. Yesterday, the European Commission said no legislative changes were needed in the treaty governing the European Stability Mechanism. But the Dutch government said today it was uncertain if a direct overcapitalization of banks by the euro zone's permanent rescue fund would require a treaty change. For now, however, it was assuming that no treaty change would be needed and, when appropriate, the cabinet would propose that parliament approve the addition to the ESM's mandate.

France's finance minister has said that the country's revised budget, due to go before the cabinet on Wednesday, will rein the government's deficit to a targeted 4.5pc of GDP. ...

Reuters reports that Pierre Moscovici said that without budget amendments the deficit would hit 5.0pc of GDP this year - implying the government needed some €10bn in new deficit cutting measures. 

I wonder how much more the people of Greece can take before they collectively snap.

Greece's hopes of quickly securing a €130bn bailout looked to be dashed on Monday after a weekend of rioting and parliamentary tumult when the Papademos government pushed through a new austerity package. Eurozone finance ministers are expected to meet in Brussels on Wednesday and had been preparing to endorse the rescue programme for Greece. But in the wake of the drama in Athens, it became clear that the eurozone was not yet ready to wave through Greece's second bailout in two years. Olli Rehn, the European commissioner for monetary affairs, made plain that the Athens vote was not a clincher. It was a "crucial step" towards qualifying for the second "programme", but not the final step. It looked as though a definitive decision would be left to an EU summit on 1 March. The German parliament has to support the new bailout and will not debate it until 27 February. Eurozone finance ministers met last week, postponed a Greek decision, delivered an ultimatum to Athens on what it had to do, and called another meeting for Wednesday that had been expected to agree the bailout. But the best that Greece can now hope for is an agreement "in principle"....Well, it was a "crucial step" towards qualifying for the second "programme", but not the final step.... Only to be expected I suppose. This is what blackmailers always do. Move the goalposts when you give them what they want. The Greek government were expected to sign off on a deal that enslaves a whole generation in less than 24 hours to the accompaniment of wails of exasparation from the Troika of lenders (headed by "Horst Rechenbach" - a German ) they were dragging their feet in 'typical Greek fashion' (when will Europe ever break away from this lethal stereotyping?). But now that they are doing the same, they are "just being careful". ---- This is a Greek tragedy. We are witnessing financial sadism on the part of the IMF, ECB and the Germans. Merkel is up for re-election and these shocking austerity measures are to appease her German electorate and secure victory in the forthcoming elections.Look at the Greek government. They are now an unelected rabble led by a former Goldman Sachs crony. These austerity measures are being implemented in order to pay off the International bankers. They will not work because the Greek economy is shrinking( we will be next in this country, going down that very same road) You have to ask yourselves the question why is Greece increasing its military hardware when the people are heading for starvation? Answer...........The Germans have badgered the spineless Greek government into buying German armaments while the country goes down the pan. I feel for the Greek people and the real culprits are the bankers and spineless politicians who should all be in prison, not only in Greece but here also. Its seems civil unrest will be the order of the day all around the world in the coming decade. We are entering a very dark age. Sunday nights vote was meaningless. Elections are due in April, and for those who voted for the measures last night the majority will not be re-elected. Quite what the make up of the new Greek parliment will look like it anyones guess, but it is highly doubtful they will honour any vote taken last night. These measures will not be implimented. I know that, you know that, so do all the EU finance ministers, the Troika know that, so what will they do? ... Turn their faces and vote for the bailout, even when they know it is unworkable.

Its amazing how many economists can forecast things but never seem to design the economy such that these collapses do not happen.

I had the curiosity to look up Angele Merkel's interview in the following five newspapers - I also realized the difference between the UK newspaper and everybody else. Click the links, see for yourself -- Germany, Suddeutsche Zeitung: Angela Merkel on European Union "Germany's strength is not infinite" She has been called the Iron Chancellor and a female Bismarck: the debt crisis has promoted Chancellor Merkel to Europe's most powerful politician. For the first time she has an interview with six European newspapers about this power, she explains what she means by solidarity - and warns EU states against excessive demands on Germany in the debt crisis.....Five bullets:
- "Germany's strength is not infinite"
- "Europe will be stronger after the crisis"
- "We do not cut ourselves off"
- "Euro bonds are not a solution"
- "My vision is of a political union"

France, Le Monde: Angela Merkel: "My vision is of a political union"

For thirty-five years behind the Wall, Angela Merkel dreamed of Europe. Now, for the Chancellor, Europe is domestic policy.

Italy, La Stampa: Merkel: "My vision for Europe is a political union " ; Poland, Gazeta Wyborcza: Blood, sweat and tears Angela Merkel....Finally, without beating about the bush, she starts talking about the problems of Europe. No, I'm not afraid to break the European Union and I can see it in the future as a political union. Yes, I want to Poland to participate in the deliberations of the fiscal pact.....Spain, El Pais: "Diplomatic treatment is not sufficient. Half measures will not solve this": UK, The Guardian: Angela Merkel discovers her inner European The euro crisis appears to have ignited in the German chancellor a passion for the EU Angela Merkel casts doubt on saving Greece from financial meltdown

German chancellor speaks candidly to the Guardian and five other leading European newspapers as part of a unique collaboration to explore the EU's predicament...or is she ?