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A way out of the crisis begins here


24 May 2012
France Inter Paris Comment10


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Peter Schrank


In their discussion on common investment and eurobonds at an extraordinary summit on 23 May, the EU27 set aside the opposition between “virtuous” and “spendthrift” states and took a further step towards economic integration.

Bernard Guetta

In the European Union, there is a major difference between formal and informal summits. Formal summits are supposed to result in decisions, whereas the goal of informal summits, like the one held yesterday evening, is to evaluate support for a number of proposed options and to outline the compromises which play an essential role in the union.

This is exactly what happened yesterday. In the course of six hours of discussions, François Hollande pushed his pawns to challenge the position held by the German Chancellor who insisted that “eurobonds would not make any contribution to stimulating growth”.

Backed by several countries including Sweden, Finland and the Netherlands, Mrs Merkel reiterated her opposition to the idea of pooled member-state debt liability, which France wants to establish to ensure a common guarantee and standard rates of interest for Eurozone borrowing that would be significantly lower than those currently charged to weaker countries in the currency bloc.

A perfectly pragmatic debate

Given that there was no possibility of unanimous support for such an initiative, it was not expected that the idea would be retained, and this proved to be the case… However, significant change appears to be on the way.

Along with solid convergences on the necessity for shared investment, it has now been confirmed – and this is a new development – that an initiative to introduce eurobonds would have the backing of a majority of EU countries, including the UK, which usually blocks any move that could lead to a greater integration policy integration.

The lines in the debate have been redrawn and the two sides are no longer defined by liberal or social democratic political colours or their advocacy of a Europe of nations or greater federalism. In short, this is a genuine and perfectly pragmatic debate on the best means to relaunch growth and restore budgetary order – as Mrs Merkel termed it, “a balanced debate” – which will now result in the drafting of a road map.

European Council President Herman Van Rompuy has been tasked to prepare a report, to be presented on the 28 June summit, on staged development towards “a deeper monetary union”, which will notably focus on “eurobonds in a long-term perspective, integrated banking supervision and resolution and a common deposit insurance scheme".

The discreet and clever Mr Van Rompuy

So instead of attacking each other, European states have demonstrated their determination to establish greater economic integration, and the question of eurobonds will be explored within this framework.

The discreet and clever Mr Van Rompuy now has five weeks to deliver a fully orchestrated version of this new tune which will circumvent opposition between those who insist that the most fragile countries have no hope in investing in growth because they are forced to seek funding at unsustainable interest rates, and those, like Mrs Merkel, who fear that these countries will not maintain efforts to reduce their debt if they have the option of borrowing under more favourable conditions.

In view of these two positions, the only possible compromise is to push for more common regulation and further integration. And that is what Europe’s member states have decided to do, if they succeed, the European Union will once again demonstrate that it can, as always, make progress when its back is to the wall.

Translated from the French by Mark McGovern

On the web
Original article at France Inter fr


From Germany

“Merkozy” is truly dead and buried

The tone has changed behind the scenes in Brussels, says Die Zeit, the day after the extraordinary informal summit of 23 May. In office for less than ten days, French President Francois Hollande has broken with the agreement that distinguished the Merkel-Sarkozy duo and has set the Chancellor on the defensive with his proposals for growth and "Eurobonds". The Hamburg weekly wonders whether the proposal is robust enough to tackle the crisis –


But what is the real difference Hollande will make? What will remain of all the fanfares, of the eurobonds and the growth pact, now that his debut is behind him and the crisis has caught up with the new president? Hollande has cleverly used his first days in office to influence Europe’s agenda. He was unable to isolate Merkel, but he did put her on the back foot. In any case, the “No” [of the Chancellor] is always a difficult position to stick to if things in Europe fail to get better. Even harder to stick to, if the other side keeps coming up with proposals.

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Presseurop
English (4)

Presseurop
French
steinberg98 | 24.05.2012 | 15:22


Il faudra bien vous dire Messieurs,Mesdames,Quoique que vous tenteraient pour redrésser la croissance et régler le problème Grec et autre,dites-vous bien que les mécanismes ne sont plus appropriés ,le capitalisme a changer et comme cela a déjà été dit ,nous allons vers une économie solidaire ,une économie au service de l'homme et des femmes ,une économie à visage humain,et si vous n'avez pas compris que c'est vers cela qu'on ira,c'est en vain que vous travailleraient pour tenter de redréssé l'économie.



Presseurop
Dutch
Johant601 | 24.05.2012 | 15:25


More government spending is leading to more debts and to more problems. Government expenses, via eurobonds or whatever means, are not a long term solution for growing out of the crisis. The only things that work are a leaner public sector, and making European states more attractive for private investors.

Making it easier for highly indebted states to lend more money is not solving anything. It is only making the problem worse. It is like treating a drug addict by giving him access to cheaper heroin. Look at the ever growing US budget deficit; it is a time bomb that is bound to explode some time in the future.



Presseurop
German
bohoo456 | 24.05.2012 | 16:25


The UK have a natural interest in Eurobonds as well as the US: They want to see a quick fix to calm their markets (UK) and get re-elected (Obama). The list of countries who are against Euro bonds includes Eastern European States as well, broadly all those states who are afraid of Moral Hazard risks. And without a fiscal union, this risk won't dissappear. And if all interest rates were exactly the same, that would be rather a problem than a solution so in the long run they'll have to find a partial solution which reduces the interest rates but which enables different rates at the same time which function as a risk signal and an incentive at the same time.

I think they should focus on a European bank rescue fond instead which could be funded by the banks themselves and on standardizing and tightening banking rules in Europe. These problems seem to be more urgent if one looks at the risks in Spanish banks' balance sheets. I don't think that Spain will be able to recapitalize its banks by itself.



Presseurop
Czech
lexx15 | 24.05.2012 | 16:35


V poslední době jsem četl poměrně značný počet článků, ve kterých se rozvíjí nejrůznější nápady, jak nejlépe nastartovat hospodářský růst v EU. Prakticky všechny prezentované nápady počítají s vysokobjemovými státními investicemi, nejlépe za společné Eurobondy, do nejrůznější infrastruktury...

... ale prakticky nikde jsem neviděl návrhy na: zrušení zbytečně zatěžujících regulací EU, uvolnění pracovního trhu, otevření a další liberalizace služeb a obchodu v rámci EU, snížení subvencí (když už se mají konsolidovat státní rozpočty), zrušení neefektivního a drahého boje proti CO2 atd..

Přemýšlím o tom špatně?



Presseurop
German
TH66193 | 24.05.2012 | 16:48


Ständig diese penetranten Forderungen nach Eurobonds nach dem Motto: Irgendwann werden sie nachgeben. Hoffentlich nicht. Wir haben kein Vertrauen in eine integrierte Bankenaufsicht. Wie solche Gremien arbeiten wissen wir schon. Man muss sich nur die EZB anschauen.

Auch nicht in Politiker, welche ihr Land überschulden um Wähler zu kaufen und Klientel zu bedienen.



Presseurop
English
Johant601 | 24.05.2012 | 16:54


Even the German SPD and the Greens have opposed Hollandes ideas in public now, as have the Austrians and the Dutch. So I think Merkel is strongly backed, both inside and outside Germany.

Aditec had an interesting idea lately; why don't the states that are in favor of eurobonds introduce them among themselves? That way they can reduce the lending risks for their own states, even when Austria, Finland, the Netherlands, Germany, and the Eastern European states won't participate.



Presseurop
English
NunoD457 | 24.05.2012 | 17:27

Johant

Even the German SPD and the Greens have opposed Hollandes ideas in public now, as have the Austrians and the Dutch.

It seems that the Austrian chancellor likes eurobonds.

http://www.dn.pt/inicio/globo/interior.aspx?content_id=2542212&seccao=Eu...



Presseurop
English
NunoD457 | 24.05.2012 | 17:29


"Faymann disse que a Itália, Dinamarca e Luxemburgo partilham de idêntica posição à agora subscrita pela França e Áustria."



Presseurop
English
Johant601 | 24.05.2012 | 17:50 edited 17:54

NunoD

It seems that the Austrian chancellor likes eurobonds. http://www.dn.pt/inicio/globo/interior.aspx?content_id=2542212&seccao=Eu...

Yes, but he is pretty much alone in his government. Even his own finance minister has spoken out very clearly on the topic yesterday.



Presseurop
French
Nebehr252 | 24.05.2012 | 17:51


I'm glad that things seems to be finally starting to move even at European summit. In the end I don't care if the final solution will be eurobonds or another one, but it's good that we all discuss every different proposition without taboos. What we really need now is to debate : it can be often harsh because of the different points of view, but it's the only way to confront ourselves to reality and force ourselves to think new solutions. Sometimes a little clash between friends is necessary to the foundation of a long-lasting relation.

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Drachma coins are on display in this picture illustration taken in Athens November 11, 2011. Greece's prime minister designate will name a new crisis cabinet on Friday to roll out painful austerity measures and calm the political turmoil that has threatened to bankrupt Athens and force it out of the euro zone.

Credit: Reuters/Yiorgos Karahalis

By Douwe Miedema and Sarah White

LONDON | Fri May 11, 2012 12:09pm BST

LONDON (Reuters) - Banks are quietly readying themselves to start trading a new Greek currency. Some banks never erased the drachma from their systems after Greece adopted the euro more than a decade ago and would be ready at the flick of a switch if its debt problems forced it to bring back national banknotes and coins.

From the end of the Soviet Union - which spawned currencies such as the Estonian Kroon and the Kazakh Tenge - to the introduction of the euro, they have had plenty of practice in preparing their systems to cope with change.

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Planning behind the scenes has been underway since Europe's debt crisis erupted in Greece in 2009, said U.S.-based Hartmut Grossman of ICS Risk Advisors who works with Wall Street banks.

"A lot of the firms, particularly in Europe and also here, have been looking at that for a long time," said Grossman, who added that the latest Greek political crisis had brought matters "to a little bit of a head".

"But there really has been contingency planning at all of the financial institutions for that to happen ... Greece leaving the euro zone is not a new idea," he said.

The EU says it wants Greece to stay in the common currency, and opinion polls show Greeks want to keep it. But they also voted last Sunday for parties opposed to a bailout with the EU and IMF, throwing Greece's future in the bloc back into doubt.

The elections threw into doubt the EU/IMF aid package that came at the price of harsh austerity measures, and was reached only after much haggling between banks and politicians over a 100 billion euro debt reduction.

While the deal averted financial market catastrophe by allowing Greece to continue repaying its reduced debts, any future problems could be yet more troublesome, even if Athens managed the process in a more or less orderly fashion.

A Greek departure from the euro would create legal and practical problems for the banks which would dwarf the relatively straightforward technical job of dealing in a new currency.

SCENARIOS

Greece would almost certainly impose foreign exchange controls if it were to drop out of the euro, bankers said, but dealing in any new currency would still be possible.

"Forex desks can get ready relatively quickly. It depends on exactly how the exit from the euro happens," said Lewis O'Donald, the London-based Chief Risk Officer at Japanese investment bank Nomura.

Currencies that are not freely tradable, such as the Chinese yuan, are widely mirrored in off-shore foreign exchange markets through the use of derivative instruments, such as non-deliverable forwards, or NDFs.

The problem may be bigger for euro zone banks which need cash for individuals or companies doing business in Greece. They face the problem of what exchange rate to use, depending on the laws Athens might draw up for trade it its currency.

If Greece forced an exchange rate of, say, one euro to one new drachma, this could impose huge losses on foreign banks because such a rate would not hold on the markets.

Controls on the movement of capital could be a nightmare for banks with loans in Greece, potentially making it illegal for companies to repay debt in euros.

Even if it were not illegal, companies might no longer be able to repay foreign creditors because their cash had been converted overnight into drachmas - a currency that would rapidly lose its value due to the dire state of the Greek economy. That would, in turn, make it tough for any lender to get its money back, whatever contract it might have.

"Our assumption is that an exit route somehow has capital controls in place, or an inability for a creditor to enforce (legal rulings) under English law into Greece," O'Donald said.

SHOUTING 'FIRE!'

Banks have studied several options to protect themselves as best they can, including switching to U.S. law for new derivative transactions or loans. So far few have taken such steps due to doubts about how effective they would be, and also because they are afraid to add to market concerns.

"Banks are very, very reluctant to start shouting 'fire!'. They know what happens and what panic looks like," said one London-based lawyer advising financial firms.

Instead, most are simply checking the governing law of their contracts, hedging against defaults and running through every legal argument a Greek euro exit could throw up.

"There are still areas which will be grey in some respect and which will lead to conflicts of law that may have to be resolved in court," Nomura's O'Donald said.

Many banks have been simulating a rupture of the euro in "war games". But little is known about how an exit would work, and legal departments are poring over financial contracts, raising questions about the very nature of a currency.

"If transactions are denominated in the euro, what is the status of those transactions in the event that there is a change of the make-up of that currency?" said Miles Kennedy, a partner at accountancy firm PricewaterhouseCoopers.

With such questions unanswered, stuffing cash machines with enough drachma banknotes is almost an afterthought.

For Greece itself, it certainly won't pose a problem. The country's national bank has its own banknote printing press and mint and has continued to print euro banknotes ever since joining the single currency in 2001.

(Additional reporting by Jessica Mortimer in London and Lauren Tara LaCapra in New York; editing by David Stamp and Janet McBride)

Business

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PARIS — On a day when the normally understated president of Europe’s central bank called on the Continent’s leaders to “take a courageous leap of political imagination,” two of the most important figures went home Thursday from an inconclusive summit meeting to tend to domestic matters.


It was not entirely clear what steps the president of the European Central Bank, Mario Draghi, was advocating in his speech in Rome, but President François Hollande of France and Chancellor Angela Merkel seemed more intent on laying the groundwork for changes in Europe’s approach to the euro crisis than on any immediate gestures.

Mr. Hollande has cast himself as the European leader pushing hardest to forge a growth-oriented “new path” through the euro zone’s grinding debt crisis, pitting him against the austerity-minded Ms. Merkel.

Unstated in this drive, but crucial to it, is that Mr. Hollande’s Socialist Party is running hard to secure a victory in parliamentary elections next month, hoping to add the 577-seat National Assembly as the last of the levers of French power it does not already control. (A Socialist-led bloc won an absolute majority in the Senate in September, a first since the Fifth Republic was founded in 1958.)

Opinion polls indicate that a Socialist carte blanche may well be within Mr. Hollande’s reach. But even armed with such a mandate, analysts say, Mr. Hollande would probably face considerable constraints in pressing for some of the solutions he has championed, including the creation of so-called euro bonds jointly guaranteed by all 17 nations that currently use the single currency.

Shoring up her own bases, Ms. Merkel met Thursday with party leaders from across the German political spectrum, including the opposition Social Democrats and the Greens, seeking their support for proposals that would create a permanent bailout fund for troubled euro zone countries while also tightening oversight of spending.

Emboldened by the shifting political winds on the Continent, her opponents made clear they would do so only if the plans included concrete measures aimed at stimulating growth and creating jobs. Although no agreements were made during the talks held Thursday at the chancellery, Sigmar Gabriel, the leader of the Social Democrats, said that “what is clear is that Ms. Merkel and her government are moving toward our calls for growth and investment package.”

“The government’s blockade on this has broken down,” Mr. Gabriel said.

Greece and other wobbly euro-zone countries, like Spain, are banking on Mr. Hollande to succeed in his pro-growth agenda and to be the point man with Germany for a loosening of the stringent spending cuts and structural reforms that his predecessor, Nicolas Sarkozy, agreed on with Ms. Merkel.

But even as a growing anti-austerity movement sweeps across the currency union, Mr. Hollande’s room to maneuver could be far narrower than he would like to think.

On Thursday, Moody’s, the credit rating agency, reminded investors that despite the change of government, it was maintaining its negative outlook on France’s AAA credit rating. That was based on the nation’s high public debt — nearly 90 percent of gross domestic product — and an “overall level of uncertainty regarding the government’s ability to achieve its fiscal consolidation and growth targets.”

Mr. Hollande campaigned on a promise of more than $25 billion in new spending programs over the next five years. He said he would increase the minimum wage, hire 60,000 more teachers and restore a minimum retirement age of 60 for some manual workers (rolling back an increase to age 62 by the Sarkozy government). Those measures are meant to be offset by $36 billion in tax increases, with an eye to achieving a balanced budget by 2017.

But some of Mr. Hollande’s advisers are already hinting that an audit of France’s finances scheduled for this summer is likely to reveal a much larger hole in the government accounts than had been acknowledged by his predecessor, Mr. Sarkozy.

“There are certainly deficits, things hidden in the shadows,” Mr. Hollande’s prime minister, Jean-Marc Ayrault, said recently of the audit. “We will discover the reality and strike a balance between fostering growth and making the necessary efforts to reduce the debt.”

Meanwhile, many private economists say France’s official forecasts for economic growth — 1.7 percent of G.D.P. next year, rising to 2.5 percent after 2013 — are wildly optimistic.

That could make for a far tighter budget program than Mr. Hollande has been expected to present to an extraordinary session of Parliament in July. Any backtracking on his election promises could well be seized upon by members of the populist National Front, which is expected to win several seats at the expense of Mr. Sarkozy’s Union for a Popular Movement — the first time the far right will have been represented in Parliament since the late 1980s.

As if the challenges he faces at home were not enough, Mr. Hollande must also find ways to bridge the left-right divide between European leaders that widened over the last year as Ms. Merkel and Mr. Sarkozy — a conservative tandem that became known as “Merkozy” — pushed their austerity drive.

Mr. Hollande used the occasion of a six-hour dinner with his 26 other European Union counterparts in Brussels on Wednesday to raise his profile by broaching the controversial subject of euro bonds, an idea that has been fiercely resisted by Berlin. Attendees described the discussion as light on detail, and Mr. Hollande himself conceded that while “there was no conflict, no confrontation between the various countries,” some leaders — whom he did not name — “were even more against euro bonds” than Ms. Merkel.

Melissa Eddy contributed reporting from Berlin, and Paul Geitner from Brussels.

[Badboy]

NOT SURE IF ALREADY MENTIONED,BUT GREECE MAY BE DAYS AWAY FROM RUNNING OUT OF DRUGS,CANCER SUFFERERS ARE GOING HOSPITAL TO HOSPITAL TRYING TO FIND CANCER DRUGS ETC ETC

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The latest Poll in Greece shows Typras and his Party, Syriza ahead , but a lot can happen between now and 17th June.

Chinese Banks are not meeting targets and may have a hard landing.

HSBC Head of Currency Strategy says Greece will have no option but to accept austerity to received the next bail out.However, if this does not avert
another Euro Crisis, the rest of the World will join in trying to stem the crisise they did for Lehmann Brothers.

Monti, the Italian PM says he is confident that Eurobonds will be agreed soon , Merkel must if Italy comes out of the Euro.

Since Germany is the richest Country the Bundesbank will disagree, maybe even the German population will resent this burden placed on Germany since
several Countries are unlikely to meet the 3%GDP .

The health of Eurpoe's Banks is cause for concern and the funding costs will be different in different Countries.

Standard Chartered Cheif Economist Gerard Lyons says frozen Europe means Draghi has to buy more Bonds which risk being written off after the 3 yrs
period, because this financial crisis is going to take a long time to overcome.

Bankia Bank, the biggest Spanish Bank has been suspended , a Board meeting will be held today. It appears the Accounts for 2011 could not be signed off by the Auditors.......a very serious situation.

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25 May 2012 Last updated at 15:55 Share this pageEmail Print Share this page

1.2KShareFacebookTwitter.Bankia shares suspended amid bailout request reportsContinue reading the main story
Bankia history

Formed in December 2010 from merger of seven troubled banks
Most toxic assets moved into holding company BFA
Listed on the Madrid stock exchange in July 2011
Chairman Rodrigo Rato resigned earlier in the month before Bankia was part-nationalised
Continue reading the main story
Eurozone crisisSpain's blame game
Q&A: Is Santander UK safe?
Q&A: Spain's woes
What if Greece leaves the euro?

Trading in shares in Spain's Bankia has been suspended in Madrid.

It asked for them to be suspended ahead of a board meeting this afternoon to reformulate its accounts for 2011 and submit a plan to shore up its finances.

The bank is reported to be due to ask the government for a bailout of more than 15bn euros ($19bn; £12bn).

Also on Friday, there were appeals for help from another Spanish institution: its wealthiest autonomous region, Catalonia.

"We don't care how they do it, but we need to make payments at the end of the month," said Catalan president Artur Mas.

"Your economy can't recover if you can't pay your bills."

Catalonia represents one-fifth of the Spanish economy. It has to take out 13bn euros of loans this year to refinance maturing debt, not to mention funding whatever deficit it has for the current year.

The regions have been having trouble borrowing money commercially, so the central government has given them a special credit facility from the Official Credit Institute (ICO).

Those credit lines run out in June and the government has said it will come up with a new mechanism to provide credit for the regions, but there has been some nervousness amid reports that there is disagreement within the government about what form the guarantees should take.

Part-nationalised bank

Bankia, which is Spain's fourth-largest bank, was part-nationalised two weeks ago because of its problems with bad property debt.

Continue reading the main story
Analysis

Tom Burridge

BBC News, Madrid

--------------------------------------------------------------------------------
One economist told me that suspending trading in Bankia's shares today "makes sense", given the uncertainty about the bank's position and doubts about how much public money will be lent to the bank to allow it to clean up its bad loans.

Lending money to the bank via a government restructuring fund would be more palatable to the Spanish taxpayer as the government would hope to get the money back in the future.

However, recovering all of the money used to bail out Bankia would be hard given the extent of the bad loans that it has accumulated.

But Spain's economy minister has been at pains to point out that Bankia is a special case and the rest of the Spanish banking system is in better health.

As part of the process, the government injected 4.5bn euros into the bank.

Economics professor Pedro Schwartz said Spain's bank reorganisation fund, Frob, only has 6bn euros left, so the government will have to find the additional money to support Bankia elsewhere.

"It won't try to find that money by issuing more bonds - because the bonds are very expensive."

"The feeling of the market here is that it might have to be a rescue from the European Union. That is casting a shadow over the whole financial sector in Spain at the least agreeable moment ," said Prof Schwarz from University of San Pablo-CEU in Madrid.

On Friday, the yield on Spanish government bonds, which are taken as an indicator of how much it would cost the state to borrow money, rose to 6.3% having started the day below 6%.

Potential losses

Spain's economy minister Luis de Guindos said on Wednesday that the government would pump at least 9bn euros into Bankia but that more would be available if it was needed.

Shares in Bankia's parent company Banco Financiero y de Ahorros (BFA) have also been suspended.

Bankia had to reassure its savers last week that their money was safe after a Spanish newspaper reported a run on the bank.

Bankia was created in 2010 from the merger of seven struggling regional savings banks. It holds 32bn euros in distressed property assets.

Its shares fell 7.4% on Thursday to close at 1.57 euros, which is 58% down from their listing price in July 2011.

'Huge exposure'
Prof Santiago Carbo Valverde, University of Granada: "Bankia had huge exposure to bad loans"
There have been four attempts by Spanish governments to shore up the banking system since the global banking crisis of 2008.

As part of the latest plan, lenders are having to make 30bn euros of extra provisions to cover potential losses on property loans, which comes on top of 54bn euros they were ordered to set aside in February.

The health of Spain's banking system is key to whether the country eventually needs to seek a bailout itself from the eurozone and the International Monetary Fund.

But Professor Santiago Carbo Valverde of the University of Granada, told the BBC that he thinks Spain's other large banks are not in as difficult a situation as Bankia.

"Bankia has huge exposure to real estate and bad loans, much larger than other banks.

"Other banks may have trouble as the government is demanding more capital, but I don't think we will have another big case like Bankia.

"The three largest ones are in better shape as they have lower exposure to bad loans and they are more internationally diversified."

Spain's credit rating was downgraded by Standard & Poor's last month on the basis that it would probably have to take on more debt to support its banks

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Even the gods can’t get their heads around this crisis


25 May 2012
The Times London Comment


Christo Komarnitski


Europe’s economic woes have forced us to try to understand the secret Olympian world of global finance. But now that we pay more attention to bond yields and stability mechanisms, isn’t it clear that the experts up on their lofty peaks don’t know what’s going on either?

Hugo Rifkind

It’s annoying, the way that none of the analogies quite work. Greek mythology, in particular, is so much less helpful than it ought to be. The tale of the Trojan Horse, for example, ought to be a godsend for illustrating how Greece, a hollow shell that contained only debt and false expectations, infiltrated the eurozone and ruined everything.

Only, tell the story like that, and you end up implying that Greece did it on purpose. Actually, Greece was more like a Trojan Horse desperately trying to hold itself together so the bad stuff didn’t burst out. A Pandora’s Box of a wooden horse, really, rolling up a hill it naively believes it will never have to roll down, for ever having to feed the monster in the cellar, which has a bullish head and a body that, frustratingly, isn’t like a bear.

The people who built this horse, and might or might not be inside it – I’m losing this – were briefly thrilled that lots of unremarkable stuff seemed to be turning into gold, but now find themselves afraid to stare the truth in the face in case it turns them into stone.

Look, you get the idea. Am I helping? I’m not sure I am.

If Greece were a person, it would be the spendthrift nephew who won’t get a proper job and who keeps getting bailed out by wealthy old Aunt Germany. Only that doesn’t quite work either, partly because Greece is older than Germany, but also because in that dynamic Aunt Germany could just turn the money tap off.

But actually, Aunt Germany can’t do that, not just because her wayward relative now owes her so much money that her bank might take her house if it knew he wasn’t going to pay her back, but also because – oh, God, it’s getting difficult now – most of the money that Greece has borrowed isn’t really Aunt Germany’s money at all, but was lent by other people, not even related to them, who considered Greece a safe bet because Aunt Germany would always be there with her chequebook.

And if Aunt Germany – are you still with me? I wouldn’t blame you if you weren’t – if Aunt Germany stops always being there, then these people wouldn’t just stop lending money to Greece, but also to all her other useless relatives, including her niece Spain, who is basically a homeless prostitute on drugs, her godchildren Ireland and Portugal, who were in a similar state but have found themselves a place in a shelter and are really starting to turn their lives around, and most crucially her brother France, who still wears a smart suit and goes to flash restaurants for the sake of appearances, but also goes home every night and screams himself to sleep at the secret horror of his credit card bill.

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Merkel’s secret plan to save Greece like East Germany

David Charter Berlin
Last updated at 2:06PM, May 25 2012


Angela Merkel is secretly preparing a six-point rescue plan to revive Greece in the same way that East Germany was modernised after the fall of Communism. The German Chancellor’s plan to transform ailing eurozone countries through privatisations, soft investment rules and the relaxation of employment laws and practices will be presented to the European Union for discussion in the coming weeks, according to tomorrow’s Der Spiegel magazine. It is likely to provoke an outcry in Greece because its core message will be to “behave more like the Germans” to build a sustainable future. Chancellor Merkel will present her proposals as Germany’s contribution to the call for a European growth strategy, championed by the new French President, François Hollande, and aimed at all countries that are suffering in the economic crisis. Mrs Merkel has grown tired of the Greek failure to modernise…

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11:15pm UK, Friday May 25, 2012

Spain's fourth largest bank Bankia has asked for 19bn euros (£15bn) in state aid - on top of a previous injection of 4.5bn euros.

Jose Ignacio Goirigolzarri, the bank's president, said the bailout would "reinforce the solvency, liquidity and solidity of the bank".

In a statement, the struggling lender said it would ask Spain's bank restructuring fund FROB for a capital increase.

The Spanish market suspended trade in the bank's plunging shares ahead of the announcement.

Bankia was also one of five Spanish banks downgraded by ratings agency Standard and Poor's on Friday.

The troubled lender was part-nationalised several weeks ago.




Its shares have been whipped about violently in recent weeks on fears it could succumb to the massive losses it has built up in in bad loans in the country's collapsed real estate sector.

Bankia, which holds 10% of Spaniards' deposits, is seen as the weak spot in Spain's fragile banking system, bearing the brunt of loan losses stemming from the property crash in 2008.

The Spanish government said earlier in the week that it would provide any capital outlined in the new management's recapitalisation plan through the state-backed restructuring fund.

The prospect looked ever more likely as Catalonia, the country's wealthiest autonomous region, said it needs financial help from the central government as it is running out of options for refinancing its debt, worth more than 13bn euros (£10.4bn),this year.





Market View: James Bevan, CCLA


"We don't care how they do it, but we need to make payments at the end of the month. Your economy can't recover if you can't pay your bills," Catalan President Artur Mas said.

The region's credit facility from the central government is due to run out in June but it has pledged to find a new solution.

Last year many of Spain's 17 regions financed their debt by falling behind in payments to providers such as street cleaners and hospital equipment suppliers.

"Irrespective of what happens to Greece, Spain remains a very significant threat to the whole coherence of the eurozone, and we did have a taste of that again today with the suspension of Bankia shares," Jane Foley from Rabobank told Sky News.




FTSE 100 1-Day Chart


Elsewhere on the stock markets, European shares rallied after stinging losses earlier in the week, and the FTSE 100 closed having made a gain on the week despite continuing eurozone debt fears.

The latest voter poll from Greece showed anti-bailout leftist Syriza party was maintaining its lead ahead of elections on June 17 which are thought critical to the country’s continued membership of the euro.

:: Read our glossary of financial jargon related to the eurozone crisis by Sky News economics editor Ed Conway

[Panda]

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In an interview with the Guardian newspaper, Ms Lagarde suggested it was payback time for Greece.

Greece has pledged to implement tough austerity measures in return for a multi-billion euro bailout.

But the deal is now under threat after inconclusive elections in May.

As Greece awaits a new poll in June, there are now fears that Athens may be forced to leave the eurozone.

This could potentially trigger a run on banks - not only in Greece but in other eurozone nations, experts warn.

Uncompromising stance

In the interview published on Friday, the International Monetary Fund head said: "As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.

"I think they should also help themselves collectively," Ms Lagarde said.

She added: "I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time.

"Because I think they need even more help than the people in Athens."

And when asked if she was saying to the Greeks and other European nations that they had had a nice time and it was now payback time, Ms Lagarde responded: "That's right."

She also reiterated that the IMF had no intention of softening the terms of Greece's austerity package.

Greece has been in recession for five years, crippled by a debt mountain, high unemployment and labour unrest over the austerity measures.

Opinion polls now suggest that the leftist bloc Syriza, which came second in Greece's 6 May election, is likely to win the vote on 17 June.

It opposes the stringent conditions imposed on Greece under its massive EU-IMF bailout deal

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26 May 2012 Last updated at 05:20 Share this pageEmail Print Share this page

189ShareFacebookTwitter.Spain's Bankia to explain call for 19bn-euro bailout The health of Spain's banks are key to whether the country might need an international bailout Continue reading the main story
Eurozone crisisSpain's blame game
Q&A: Is Santander UK safe?
Q&A: Spain's woes
What if Greece leaves the euro?

The board of debt-ridden Spanish bank Bankia is expected to explain why it needs 19bn euros' worth ($24bn; £15bn) of loans from the government.

Executives have called a news conference for Saturday in which they are to outline a restructuring plan after the bank restated its 2011 figures, admitting massive losses.

Trading in shares in Bankia - Spain's fourth-largest bank - were suspended by the Madrid stockmarket on Friday.

Bankia is already part-nationalised.

Europe is watching the banking sector in the region closely amid the economic crisis.

Spanish banks, which lent heavily during the property bubble, are seen as particularly shaky as they now hold massive amounts of soured investments.

Downgraded

Correspondents say the bailout of Bankia would be the biggest of its kind in Spanish history.

Late on Friday, Jose Ignacio Goirigolzarri, the bank's president, tried to reassure observers, saying the bailout would reinforce the "solvency, liquidity and solidity of the bank".

His comments came after Bankia restated its results - saying it made a 2.98bn-euro loss for 2011 rather than the 309m euros in profit it announced in February - and asked for the aid from Spain's bank bailout fund, FROB.

On the same day, rating agency Standard and Poor's (S&P) downgraded the bank, along with four other lenders, to "junk" status.

Continue reading the main story
Bankia history

Formed in December 2010 from merger of seven troubled banks
Most toxic assets moved into holding company BFA
Listed on the Madrid stock exchange in July 2011
Chairman Rodrigo Rato resigned earlier in the month before Bankia was part-nationalised

Two weeks ago, the government intervened and awarded Bankia a 4.47bn-euro loan.

Bankia had to reassure savers last week that their money was safe after a Spanish newspaper reported a run on the bank.

Bankia was created in 2010 from the merger of seven struggling regional savings banks. It holds 32bn euros in distressed property assets.

Its shares fell 7.4% on Thursday to close at 1.57 euros, down 58% from their listing price in July 2011.

There have been four attempts by Spanish governments to shore up the banking system since the global financial crisis of 2008.

As part of the latest plan, lenders are having to make 30bn euros of extra provisions to cover potential losses on property loans. This is in addition to 54bn euros they were ordered to set aside in February.

The health of Spain's banking system is key to whether the country eventually needs to seek a bailout itself from the eurozone and the International Monetary Fund (IMF).

Spain's credit rating was downgraded by S&P last month on the basis that it would probably have to take on more debt to support its banks.

[Badboy]

THERESA MAY HAS ANNOUNCED CONTINENCY PLANS IF EURO COLLAPSES CONCERNING IMMIGRATION CHECKS.

[Panda]

THERESA MAY HAS ANNOUNCED CONTINENCY PLANS IF EURO COLLAPSES CONCERNING IMMIGRATION CHECKS.

Morning Badboy, yes, I saw that but she has jumped the gun, under EU Rules, there is no restriction on EU Members going to other Countries. Poland
is not in the Union but the EU will argue about the number who emigrate here , and of Course the Middle East immigrants would be discriminating
against the EU. Of course, it doesn't preclude the Rich Greeks who are taking their money out of Greek Banks and buying expensive Properties in London.

[AnnaEsse]

THERESA MAY HAS ANNOUNCED CONTINENCY PLANS IF EURO COLLAPSES CONCERNING IMMIGRATION CHECKS.

Morning Badboy, yes, I saw that but she has jumped the gun, under EU Rules, there is no restriction on EU Members going to other Countries. Poland
is not in the Union but the EU will argue about the number who emigrate here , and of Course the Middle East immigrants would be discriminating
against the EU. Of course, it doesn't preclude the Rich Greeks who are taking their money out of Greek Banks and buying expensive Properties in London.

Panda, Poland joined the EU in 2004.

[Panda]

THERESA MAY HAS ANNOUNCED CONTINENCY PLANS IF EURO COLLAPSES CONCERNING IMMIGRATION CHECKS.

Morning Badboy, yes, I saw that but she has jumped the gun, under EU Rules, there is no restriction on EU Members going to other Countries. Poland
is not in the Union but the EU will argue about the number who emigrate here , and of Course the Middle East immigrants would be discriminating
against the EU. Of course, it doesn't preclude the Rich Greeks who are taking their money out of Greek Banks and buying expensive Properties in London.

Panda, Poland joined the EU in 2004.

My mistake AnnaEsse a few more Countries waiting to join and the whole Eurozone is one big mess.!!!! If Greece defaults Britain is owed a lot of money , if Spain seeks a bailout, where is the money coming from? La Garde got the cheek to tell Britain to go for quantitive easing , printing more money which will ensure the next generation pays for it.!! The analysts are saying even if Greece accepts the terms because it needs the bailout, it
will default by the end of the year and would be better off to wipe the slate clean and default now so they can use their own currency . The Euro is
proving a handicap because Governments can't manipulate it like they could their own Currencies.

[Badboy]

ISN'T/WASN'T THE BALTIC STATES(LITHUANIA/LATVIA/ESTONIA GOING TO JOIN OR ARE THEY ALREADY IN THE EU.
ITS STARTING TO GET CONFUSING.

[AnnaEsse]

ISN'T/WASN'T THE BALTIC STATES(LITHUANIA/LATVIA/ESTONIA GOING TO JOIN OR ARE THEY ALREADY IN THE EU.
ITS STARTING TO GET CONFUSING.

List of EU member states

http://www.eucountrylist.com/

[Badboy]

ISN'T/WASN'T THE BALTIC STATES(LITHUANIA/LATVIA/ESTONIA GOING TO JOIN OR ARE THEY ALREADY IN THE EU.
ITS STARTING TO GET CONFUSING.

List of EU member states

http://www.eucountrylist.com/

THANKS FOR THAT,ANNAESSE

[Angelina]

This is ridiculous, how many more are we expected to support in this very small country. I have a great idea, let's all move to Greece and they can come here. We can start up again and enjoy much better weather!

[Panda]

Macedonia is joining and I think Croatia, both small Countries , relatively poor, so will not contribute much. When Ted Heath took us into Europe, we
thought we were joining "a Common Market", not a dictatorship which tells us what to do. Germany and France were the first Countries to break
the 3%GDP years ago, the Auditors of the EU could not sign off the Accounts for the EU for several years , I bet they can't even now. The EURO will
collapse so why not let it do so now and let all Countries manage their own affairs again. The World is in recession anyway so the pain will be overcome in a few years and ensure nothing like this happens again.

[Angelina]

Macedonia is joining and I think Croatia, both small Countries , relatively poor, so will not contribute much. When Ted Heath took us into Europe, we
thought we were joining "a Common Market", not a dictatorship which tells us what to do. Germany and France were the first Countries to break
the 3%GDP years ago, the Auditors of the EU could not sign off the Accounts for the EU for several years , I bet they can't even now. The EURO will
collapse so why not let it do so now and let all Countries manage their own affairs again. The World is in recession anyway so the pain will be overcome in a few years and ensure nothing like this happens again.

Ted Heath was a lying B*******

[Panda]

Macedonia is joining and I think Croatia, both small Countries , relatively poor, so will not contribute much. When Ted Heath took us into Europe, we
thought we were joining "a Common Market", not a dictatorship which tells us what to do. Germany and France were the first Countries to break
the 3%GDP years ago, the Auditors of the EU could not sign off the Accounts for the EU for several years , I bet they can't even now. The EURO will
collapse so why not let it do so now and let all Countries manage their own affairs again. The World is in recession anyway so the pain will be overcome in a few years and ensure nothing like this happens again.

Ted Heath was a lying B*******

Hi Angelina, yes he was, Tony Blair promised a Referendum , again the public were conned. Ireland is having a Referendum and I hope the Irish see sense and vote to get out, they were doing well until this catastrophe !!!!!

The EU is a shambles, 18 meetings over the last 2 years yet still nothing acheived....neither will it be. We have 27 Countries with 27 Languages, customs and self interest so nothing will be done . Keep the EU but just for Defence and this time make sure EVERY Country provides their share of
expense, it's always the U.S. and Britain bearing the burden.,

[Angelina]

Macedonia is joining and I think Croatia, both small Countries , relatively poor, so will not contribute much. When Ted Heath took us into Europe, we
thought we were joining "a Common Market", not a dictatorship which tells us what to do. Germany and France were the first Countries to break
the 3%GDP years ago, the Auditors of the EU could not sign off the Accounts for the EU for several years , I bet they can't even now. The EURO will
collapse so why not let it do so now and let all Countries manage their own affairs again. The World is in recession anyway so the pain will be overcome in a few years and ensure nothing like this happens again.

Ted Heath was a lying B*******

Hi Angelina, yes he was, Tony Blair promised a Referendum , again the public were conned. Ireland is having a Referendum and I hope the Irish see sense and vote to get out, they were doing well until this catastrophe !!!!!

Hi Panda, don't mention that other B****** Tony Blair unless you want to put my blood pressure up

Seriously, this is a very worrying situation. I don't think there's one politician who has any idea what to do or how to solve the situation. I'm fed up with paying for people who don't work/pay taxes and the Germans must feel a whole lot worse about it.

The EU is a shambles, 18 meetings over the last 2 years yet still nothing acheived....neither will it be. We have 27 Countries with 27 Languages, customs and self interest so nothing will be done . Keep the EU but just for Defence and this time make sure EVERY Country provides their share of
expense, it's always the U.S. and Britain bearing the burden.,

[Panda]

The Gerrmans by nature believe in Austerity, Martin Luther was a firm believer in not living beyond ones means. Germans for the most part rent rather than buy their Homes, do not like debt and would you believe the workers havn't had a rise in 10 years while they were rebuilding East Germany. There
is no doubt Germans are a hardworking Nation, even if they do get up at some ungodly hour to put their Towels on Hotel Loungers by the Pool.....true. The crazy part is the weak Euro benefits the Germans because they are Exporters so the weaker currency suits them.

[Angelina]

The Gerrmans by nature believe in Austerity, Martin Luther was a firm believer in not living beyond ones means. Germans for the most part rent rather than buy their Homes, do not like debt and would you believe the workers havn't had a rise in 10 years while they were rebuilding East Germany. There
is no doubt Germans are a hardworking Nation, even if they do get up at some ungodly hour to put their Towels on Hotel Loungers by the Pool.....true. The crazy part is the weak Euro benefits the Germans because they are Exporters so the weaker currency suits them.

What I always wonder with people that rent their homes, how do they pay for them once they retire? In the UK renting is about the same cost as having a mortgage (I think).

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