EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2

One of the Countries waiting in the Wings to join is Macddonia......they must be mad!!!! Had the EU refused to bail out Greece two years
ago, the Country would be in less of a mess than it is now. Merkel had a dream of a larger Europe with Germany at the helm, she and Sarkozy
both face Elections next year and I suspect both will no longer be Prime Ministers. The concept was flawed from the beginning, 27 Countries,
17 having a Universal currency yet different languages and cultures whose economies are not in sync.

Christine La Garde , only recently elected , French, obviously trying to help the EU, will not be too popular with the emerging markete and
Brazil, China, India , etc were miffed anyway at yet another European appointed head of the IMF.

Panda

Aha - so I was right in thinking there were other things afoot- Macedonia - cripes what sort of GDP do they boast! It gets worse thought I was being a bit "off stream" in suggesting this.

I don't really mind Christine Le Garde so much anything was better than Strauss Khan!

Angelique wrote:Panda

Aha - so I was right in thinking there were other things afoot- Macedonia - cripes what sort of GDP do they boast! It gets worse thought I was being a bit "off stream" in suggesting this.

I don't really mind Christine Le Garde so much anything was better than Strauss Khan!

what put me off her was she was accused of making an unauthorised loan when she was Finance Minister in France. There was anothe country ready to join , I can"t remember the name, think it begins with P. Also, Angelique, the Auditors for the EU couldn"t sign off the accounts for years because they couldn"t balance the books. What financial control does the EU have over it"s members....none!!! Denmark is the
latest to have montary problems but can"t borrow from their Banks because the Banks are broke, will Merkel and Sarcozy rush to their aid?

A small precis of yesterday"s events



Greek Prime Minister George Papandreou confirms he is stepping down, but discussions on the identity of his successor have collapsed. Photograph: BBC News

9.20pm: What a dramatic day in Europe's ever-deepening debt crisis - with Italy's borrowing costs soaring and Greece's efforts at creating a unity government ended in more discord than ever.
Back at 7.40am I suggested today would be all about Great Expectations. Consider them dashed.
Here's a closing summary
• Greece is locked in political limbo tonight. George Papandreou told the nation he would step aside to allow a unity government to take over, but talks at the presidential palace over the composition of the new administration swiftly collapsed. Talks will restart at 10am in Athens on Thursday (8am GMT)
• After a day of twists, Lucas Papademos is again seen as the most likely next prime minister. Philippos Petsalnikos, Papandreou's favoured replacement, was blocked by fellow Pasok members
• Italy's bond yields shot to record highs. The yield on the country's 10-year bonds hit 7.5% -- levels where a financial rescue starts to look inevitable.
• Will the euro break up? Germany and France are reportedly considering a two-speed Eurozone, while Angela Merkel's party is examining ways for countries to leave the union
• Markets fell across Europe, while on Wall Street the Dow Jones tumbled. Analysts fear more turmoil, and heavy losses, ahead
Great debate in the readers comments, as ever. Goodnight!
9.03pm: Wall Street has just closed after a dire trading session, leaving the major US indices in a sea of red.
The Dow ended down 3.19% or 388 points to close at 11,782, the S&P 500 lost 46.71 points (3.66%) to close at 1,229.21 and the Nasdaq fell 105.84 to close at 2,621.
The 3.2% fall on the Dow is rather worse than the 1.9% drop recorded on the FTSE 100. Might mean another sell-off in London tomorrow morning....
8.57pm: Italy may be scrambling to get Mario Monti, the former EU competition commissioner, lined up to replace Silvio Berlusconi as prime minister.
Italians in Milan. Photograph: Mike Longhurst/Rex Features Monti was named as a life senator this evening by Italian President Giorgio Napolitano. That means he could now be appointed to lead either a cross-party grand coalition or a non-party technocratic government -- two of the possible solutions to the crisis.
More from John Hooper here, including the warning from the head of Italy's equivalent of the CBI that Italy is now "in the abyss"
8.35pm: Dominic Rushe also also compiled a list of "10 reasons to be fearful" about the Italian debt crisis.
They include the fact that Italy is the eighth largest economy in the world, the startling speed at which government bond crises can escalate, and the limited resources of the European financial stability fund.
Oh, and the little matter of all the credit default swaps on the books of America's biggest banks. Click here to read them all.
As Dominic warns:

If Italy goes down in a disorderly default, it will make the Lehman Brothers collapse feel like a Roman holiday.

Perhaps Italy will be the 'event' that triggers the major panic which Lance Roberts warns of tonight....
Wall Street may be heading for troubled times.... Photograph: Sipa Press/Rex Features 8.22pm: Our man on Wall Street, Dominic Rushe, has been talking to Lance Roberts, CEO of Streettalk Advisors, the investment management company.
The Dow is now off close to 350 points but Roberts doesn't think we've even begun to see the problems coming down the line.
The recent rally on Wall Street was mainly due to technical reasons, he told Dominic. Pension funds et al had sold too much stock but needed to get back into the market to meet their investment criteria. "The markets were so oversold going in to October that they rallied on any bit of good news. Well we've run through that course," Roberts says.
He adds that:

Go back 800 years and you'll fund a series of events when individual countries get into debt crises. This is the first time we've had a global crisis of this magnitude.

Two weeks from now the Senate "super-committee" is due to report on ways the US can tackle its massive debts – no one is expecting much of in the way of solution which will lead to yet more infighting in Washington and the threat of massive cuts in spending.
Roberts says there may be, worrying, parallels with the last crash when the collapse of Lehman's triggered a global meltdown. All we need is an "event".....
8.02pm: No doubts that this is serous. European Central Bank governing council member Carlos Costa is warning tonight that the ECB has "taken its capacity of action to the limit".
A call for the ECB to be handed more tools to fight the crisis.

Europe needs to understand it is living through a "very serious" moment, he continues.
Costa also says that there "no reason" to consider the euro as the most fragile part of the international crisis. Hmmm - one or two reasons suggest themselves....
7.50pm: Two confusing developments tonight:
1) a report that Angela Merkel's Christian Democratic Union party wants to make it possible for European Union members to exit the euro.
This comes from Handelsblatt, the German language business newspaper. An article appearing in tomorrow's edition apparently claims that:

A commission within the party, that is crafting a framework to be presented at a party meeting, has proposed allowing a euro member who doesn't want to or isn't able to comply with the common currency rules to leave the euro region without losing membership in the EU.

Angela Merkel pictured with and parliamentary colleagues. Photograph: Maurizio Gambarini/EPA 2) An 'exclusive report' on Reuters that France and Germany are exploring the idea of a core eurozone. (Presumably with the more rotten members of the currency union excluded).
It continues:

France and Germany have had intense consultations on this issue over the last months, at all levels," a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.
"We need to move very cautiously, but the truth is that we need to establish exactly the list of those who don't want to be part of the club and those who simply cannot be part.

Frankly I'm not sure what to make of either of these, except that they both chime with the theory expressed earlier that France and Germany have renounced the belief that the eurozone must remain intact.
FT Alphaville are debating both now, here....
7.35pm: This evening's shenanigans are particularly disappointing, as they came immediately after Papandreou tried to play the role of responsible senior statesman. Those comments now look somewhat ludicrous.
As Reuters puts it tonight:

A final decision had been all but certain Wednesday night, with Papandreou delivering a farewell televised speech to the nation in which he wished his successor although he did not name him.
"Today the main political forces are joining together, to guarantee to Greece's citizens that in the following months we will do whatever is necessary not only to secure the country's position in the euro and implement the (debt deal) decisions ... but also to make use of its great benefits," he said.
"I want to wish every success to the new prime minister and the new government. I will stand at their side and will back this national effort to the utmost of my ability."
But less than an hour later, the president's office was calling a new meeting for power-sharing talks for Thursday, and a final deal seemed as far away as ever.

We're still expecting talks to reconvene at 10am local time (8am GMT)....
7.09pm: The US stock market is tumbling in the face of Europe's debt crisis - and the lack of firm progress.
The Dow Jones index just fell by 409 points to 11761 - that's a 3.3% decline.
If it finishes that low, it'll be the biggest daily fall since mid-August, I think. CNBC reports that we've only had four 400-point-plus declines during 2011.
6.42pm: The political fallout continues in Greece, with talks over the formation of the (dis?) unity government on hold until Thursday morning.
Mega TV, Greece's most popular news show, is reporting that officials are now back at Plan A: that Lucas Papademos, the economist and former vice president of the ECB, becomes prime minister

Antonis Samaras, arriving back at his New Democracy party HQ, has just told reporters that it is up to PASOK, as the party with the parliamentary majority, to propose who it wants for PM, says Helena.
Antonis Samaras. Photograph: John Kolesidis/REUTERS Samaras said that:

Many would like it but New Democracy does not want to become part of the problem...My problem is not faces ... but to get the sixth tranche of aid released, the [debt deal] approved so that normality can return to markets and elections held.

6.19pm: We've settled on a term to describe the situation in Greece -- HAOS (chaos).
Helena has established why the talks of the 'unity' government fell apart in the last hour:

Negotiations appear to have collapsed on Papandreou's choice of Philippos Petsalnikos as his successor - a choice that has stirred outrage within the ranks of his own PASOK party (not to mention the conservative opposition).
MPs agreed that the one-time factory worker, who lacks expertise in the field of economics and has almost no international experience, simply doesn't fit the bill, at such a critical time, to become the nation's next PM.

So, not the unifying compromise candidate that Papandreou had hoped....
6.04pm: So who is running Greece tonight?
Until the new government is sworn in, which presupposes that it is ever announced, George Papandreou will remain in the post.
Another extraordinary development. Helena reports that:

Greeks saying they don't know whether to laugh or cry at this tragi-comedy.

5.51pm: Dashed hopes in Greece. The struggle to appoint a new cabinet has hit major problems.
It has just been announced that a meeting of party leaders will be held tomorrow at 10am local time!
If this process was a farce this morning, I'm struggling to think of a term for it now. Maybe there's something appropriate in Greek....
Update: Antonis Samaras is now leaving the presidential palace.
5.49pm: Leaks are emerging from the talks which Greece's two main political leaders are currently holding with head of state president Karolos Papoulias, says Helena Smith in Athens.

Greek SKAI TV is reporting that Antonis Samaras, leader of New Democracy, says he has "no objection" to Lucas Papademos, the esteemed economist and erstwhile vice president of the ECB, becoming prime minister or Philippos Petsalnikos, the speaker of the House, or "any one else" that outgoing PM George Papandreou suggests.

Papademos was the front-runner until today, when Petsalnikos suddenly became the favourite. Now....
Well, as Helena says:

Three days into these tortuous negotiations to get out of the political impasse caused by Papandreou's decision to make way for a national unity government, Samaras' latest statement would suggest that the field really is open!

5.44pm: Speaking of the eurozone, David Gow reports on alarming divisions that emerged today between German chancellor Angela Merkel and a group of top German economists:

Angela Merkel has a habit of falling out with people. First, it was the G20 and EU-27 when she refused to let the European Central Bank resolve the eurozone debt crisis by stepping in with a huge bond-buying programme or even some quantitative easing as, say, Irish finance minister Michael Noonan is demanding.
Now she's fallen out with her "expert council" or "economic wise men" who today proposed a "European Redemption or Settlement Pact" instead of ECB intervention. This would see eurozone countries with a debt-to-GDP-ratio above the Maastricht ceiling of 60% (most of them) put the over-the-limit amount into a redemption fund with shared guarantees. Wolfgang Franz, the council's head, said strict procedures would see this fund dissolve itself in 20 to 25 years along with all outstanding debt.
Too much for Merkel -- who slapped the idea down immediately as Franz handed over their autumn report which, by the way, foresees German growth next year sliding below 1%. This, she said, would require a huge number of treaty changes. Ha: we thought she wants treaty change...Well, she does but not that amount...Merkel is more interested in enabling posses of witchfinder-generals to impose German-style fiscal rigour and budgetary surveillance on sinner states such as the PIIGS and even, eventually, France once the spendthrift socialists are back in power....

But Britain's own deputy prime minister won't tolerate changes to the EU treaty either, it seems:

Treaty change? Over our dead bodies, said Nick Clegg earlier today, on a swift visit to the EU capital where he cut his political teeth. Clegg had a chat with Herman Van Rompuy, European council president, who is drawing up a report on "limited" treaty change for the December 9 EU summit. You can't, said a sober-looking, almost funereal Nick, have Europe's leaders closeted for several years in a windowless Brussels office working out the minute detail of line-by-line treaty change. Akin, he said, to "when a house is on fire and you call the architect to discuss the plans instead of dealing with the conflagration."

5.33pm: Breaking news on Reuters: Eurozone officials in Brussels are saying they have no plans for a financial rescue package for Italy.
One official said that:

Financial assistance is not on the cards.

An appropriate analogy - given the high-stakes game of poker being played out. Unless he was hinting that the eurozone was a house of cards, poised to collapse? Other theories welcome...
The EU official went on to explain that the size of Italy's debts (total national debt is close to €2 trillion) means a bailout ala Greece or Ireland isn't possible. That chimes with the analysis by Gary Jenkins that we ran this morning, which put the bill for such as rescue plan at €1.4 trillion.
5.14pm: High drama in Athens! Helena Smith reports that:
Giorgos Karatzaferis leader of the populist far right LAOS party has just stormed out of the meeting with the president denouncing "the tactical games" being played by Papandreou and Samaras.
Smoke (metaphorically) coming out of his ears .... "the president will tell," he railed.
5.04pm: Antonis Samaras, Greece's main opposition leader, has now make his way to the presidential palace for a meeting of party heads (left-wing opposition parties are not expected to attend) before the new cabinet and pm is announced.
Even for a nation that is so deeply politicised, today has been packed with too much suspense (Helena Smith tells me from Athens)
Photograph: Bloomberg/Getty Images Greeks are on the edge of their seats. Is it or is it not Philippos Petsalnikos (pictured here, on the left, with close friend Papandreou)
Other party leaders have now arrived at presidential palace -- indicating that Papandreou has done the deed and resigned.
4.59pm: Although this crisis is dominating the headlines this week, Italian debt has been heading for the 'danger zone' for months.
Italian 10-year bond yields through 2011. Source: Bloomberg City traders are talking about a 'slow-motion train crash', with EU leaders ignoring the warning signs.
This chart from Bloomberg shows how Italian ten-year bond yields have been worryingly high through 2011, dipping in August on hopes that Europe would agree a comprehensive strategy to tackle the debt crisis, and rallying this autumn as this proved a stretch too far.
4.49pm: European stock markets are now closed, after a pretty poor day.
The FTSE 100 ended 109 points lower at 5460, down 1.92%. The worst performer was Admiral, walking the plank to the top of the fallers list with a 25% slump after a profits warning. Banks were also badly hit, with HSBC, Barclays and Royal Bank of Scotland all down more than 5%.
Italian banks suffered worse losses - with Unicredit falling almost 7%. That dragged the main Italian index, the FTSE MIB, to a 3.7% decline.
Tomorrow may be even worse, judging from this tweet from Italian journalist Fabrizio Goria.
FGoria: A senior Italian trader said to me: "If today was a bloodbath, tomorrow will be worse". #Italy
The euro has fallen further, dropping below the $1.36 level - down two and a half cents today.
4.20pm: Helena Smith confirms from Athens that George Papandreou is now formally tending his resignation to head of state Karolos Papoulias after his "plaintive farewell address".
Papandreou's speech included a promise that the new coalition government would be the start of a "new era" that would lead to a "new political mentality and culture.":

Despite our differences, which we have put to one side, we have chosen a government that will supersede political parties and personal prejudice to enforce the decisions of 26/27 October [the day EU leaders hammered out debt deal for Greece] and to open a new era in our country. More than ever we have the need to believe in ourselves.

Helena says this is:

Powerful stuff from a man who has faced the wrath of Greeks almost from the day he assumed power in October 2009 and was forced, upon discovering the true state of the country's public finances, to enforce a draconian deficit-reducing programme of austerity measures.

4.06pm: In conclusion, Papandreou insists that he has done a good job as prime minister. He says that Greece has avoided the "sure bankruptcy" that would surely have resulted without the bailout deals agreed.
Papandreou also takes a statesmanlike stance, towards the end of a dignified speech:

I never put myself clinging to power...
I never put my own position before anything else... all my decisions were taken for the future of Greece. Soon we will have a government that will take the necessary national steps not just so that we stay in the euro but to apply whatever decisions are necessary to get out of this crisis, a crisis that has come from the mistakes of our past," he said without giving away who his successor will be.

Papandreou - who followed his father and grandfather in running Greece - thanks his staff for their work, and the Greek population for their "patience and sacrifices"
Finally, he pledges loyalty to the unity government that will now be formed:

I will be at there side and support every effort, in Greece and abroad

And with that, he was gone - without announcing the name of his successor [Philippos Petsalnikos???]. The only clue was that it will be a person who 'unites'.
Out in Greece, Diane Shugart reports that Papandreou is now heading from his office to the presidential palace - to hand in his resignation.
4.01pm: Papandreou confirms that a new government will be formed. He says this administration needs to continue with his own work at reforming the country, through 'small and deep changes."

We have only touched the tip of the iceberg.

Those changes, Papandreou says, include addressing endemic tax exasion in Greece, and bringing much of the Greek money that is invested abroad.
3.59pm: Papandreou goes on to say it was important for all Greek politicians to work together "with love for our country."
Photograph: BBC News He then defends the bailout plan agreed in Brussels, saying the agreement to impose a 50% haircut on Greek debt would help to ease the country's crisis.
3.54pm: George Papandreou is now addressing the nation on television. Looking deeply serious, the prime minister (who we expect to resign very soon), is telling the Greek people that it is vital that politicians co-operate.
If we cannot have national co-operation now, when can we, Papandreou asks. He insists that he sought to work with other politicians to wok together from the start of the crisis....
3.47pm: The rumour that the next Greek prime minister will be Philippos Petsalnikos is gaining traction and being widely reported.
So who is he? Well, he's a long-time ally and friend of George Papandreou - and a member of the outgoing PM's Pasok party. Greek media question whether the sixty years old has the economic expertise and international experience to guide Greece through the storms ahead. However, as the speaker of the Athens parliament he should command respect across the parliamentary spectrum....
In short, a compromise candidate -- no bad thing when you need to get the whole country pulling together.
3.33pm:Wondering how Italy was brought to today's perilous state?






Link to this audioMy colleagues Larry Elliott, Tom Clark and John Hooper have the answers, in this week's The Business podcast.
3.23pm: There's news coming out of Rome this afternoon that Silvio Berlusconi's allies might be split over the next move. That's only going to add to fears that Rome is slipping into political chaos.
Reuters reports that two different factions within the ruling coalition have opposed the PM's call for early elections.
One ally, Gianfranco Micciche, said in a statement that an election now would make the crisis even more severe:

Going to the vote now would mean making the country more unstable and less credible... A frenetic and very tense election campaign would certainly not help Italy to recover.

No argument there.
Looking at the bond markets, the yield on 10-year Italian debt is hovering below 7.3%. So the European Central Bank has managed to drag yields down slightly, but not below the 7% mark.
Greek prime minister George Papandreou's resignation follows days of negotiations. Photograph: Handout/Reuters 3.07pm: This won't get too many jaws dropping. The
meeting between Greek prime minister George Papandreou and president Karolos Papoulias hasn't started. Instead it's been delayed by an hour. Now scheduled at 6pm Athens time (4pm GMT).
This gives time to flag up this question from reader mswinkle, who asks why Greece wasn't granted a referendum.
Mswinkle cites this quote from Angela Merkel:

What we got in Cannes was the feeling that there is no such thing any more as domestic policy making. Domestic is what's inside the currency area. Greece can no longer decide all by itself the issue of whether it should hold a referendum or not.

That sounds like a remarkable declaration about the extent of European integration, especially if you read it alongside Merkel's call this morning for new treaty changes.
There's another theory about the aborted referendum floating around -- that Germany and France blocked it originally simply because they were terrified last week that Greece would vote No and then quit the euro....
...but have now had a change of heart in recent days. Perhaps because the financial markets did not stampede in panic at the thought of Greece returning to the drachma. So is Merkel now thinking that the Pandora's Box has been opened without any alarm, so Greece can be jostled to the exits?
2.49pm: We're still expecting major developments in Greece shortly, with prime minister George Papandreou due at the presidential palace at 3pm.
Wouldn't want to speculate about what happens next -- the most likely outcome is that Papandreou tenders his resignation, formally steps down and a new prime minister is named.
Will it be one-time shoe-in Lucas Papademos? The Financial Times says no - its guy in Athens reckons Philippos Petsalnikos, the parliamentary speaker, has leapfrogged his way to the front.
Not long to wait....
2.35pm: The US stock market has just opened, with heavy falls as the eurozone debt crisis continues to make shockwaves on both sides of the Atlantic.
The Dow Jones industrial average fell 254 points, or 2%, to 11916, in a sharp early sell-off, with the S&P 500 suffering a similar decline.
Wall Street correspondent Dominic Rushe says that after yesterday's 100-point rally the US markets woke up in a very jittery mood.

The Eurozone fears seem to be really taking hold after two consecutive positive trading days, with four 'up days' in the last five.

1.52pm: Another alarming development. The key measure of financial stress in the British banking system - Libor, the London Inter-Bank Offered Rate - rose again this morning to within a wafer of 1% for the first time since the 2008 financial panic.
My colleague Patrick Collinson has more details, and explains why this is bad news for those looking for a mortgage.

Libor is the rate at which banks are prepared to lend money to each other, and this morning it hit 0.99813%. What does it mean? Essentially that the banks are charging each other almost twice as much as the Bank of England's base rate of 0.5% to borrow money for three months.
In normal conditions, the gap between base rate and Libor is typically 0.2%, but the rise to 0.5% indicates growing alarm among banks as to whether they should be lending to each other. But while the rise is worrying, the 'spread' between Libor and base rate is still below the 1.7% rate it hit in October 2008 when banks were collapsing and the taxpayer was bailing them out.
The bad news is that Libor is one of the key elements in mortgage pricing, and a sustained rise in Libor soon feeds through to higher fixed rate loans.

1.30pm: With Italy being dragged into deeper trouble, and the announcement of a new Greek government possibly coming in two hours, it's time for a lunchtime round-up.
• Italy's financial crisis deepened this morning. The yield on its ten-year government bonds jumped to nearly 7.5%, a level seen as unsustainable.
• The country's political future remains cloudy despite Silvio Berlusconi's pledge to resign last night. The outgoing prime minister anointed Angelino Alfano as his favoured replacement and indicated his support for early elections. That risks prolonging the crisis
• Italy's president said the country must regain credibility. But with no clear path forward, the euro fell against other major currencies. Analysts calculate that an Italian bailout could cost €1.4 trillion
• Elsewhere in the euro crisis, talks over the new Greek government continued. The latest indications are that George Papandreou could resign at 3pm GMT
• Angela Merkel said Italy's troubles underline the need for changes to the EU treaty. German chancellor also admitted that the rest of the globe cannot wait for Europe to sort itself out.
German chancellor Angela Merkel speaks to the president of the European Central Bank, Mario Draghi, on the second day of the G20 summit in Cannes. Photograph: Reuters 12.53pm: Italy's soaring bond yields will intensify the pressure on Germany to allow the European Central Bank to launch a massive rescue operation.
After an uncharacteristic quiet morning (were they transfixed by the bond yields), Europe's leaders have broken cover. Angela Merkel told an audience in Berlin that the extent of the crisis means Europe must make "a breakthrough",
She said the situation in Europe was "so unpleasant" that fundamental change was needed, including - and this might alarm eurosceptics - an "EU Treaty change".
A treaty change could allow tighter control of EU members' budgets. It could also make full-blown eurobonds possible - allowing weaker nations to borrow with the support of their stronger neighbours behind them (another unpopular idea in Germany).
The German chancellor added that "the world isn't waiting for Europe". That echoes the message from other G20 leaders.
Merkel's spokesman, Steffen Seibert, also won the prize for understatement after telling reporters that "Italy has a debt problem", and must also boost its competitiveness.
12.33pm: Developments on the Greek political crisis -- Greek TV is reporting that George Papandreou, the outgoing prime minister, will meet president Karolos Papoulias at 5PM local time (3GMT).
Emerging from the presidential palace the octogenarian Papoulias said "we have finished" - words that are now being interpreted as agreement finally being reached over the make-up of a new government.
In Athens, Helena Smith says everyone is heaving a sigh of relief, after the process dragged into another day.
This comes after the governor of the Bank of Greece weighed into the crisis, calling it "imperative" that a new government is formed immediately.
Helena reports that:

In a rare intervention, central bank governor George Provopoulos appealed to the country's political leaders to resolve their differences pronto, warning that Greece's membership in the euro zone is at stake.
"I consider it imperative that a new government is formed immediately and that the new government and the major political parties commit to the full implementation of the agreement of the [EU] Heads of State of October 27," he said in a statement referring to the latest bailout program agreed for Athens.

12.02pm: The European financial crisis is causing shivers across the world.
Stuart Gulliver, chief executive of HSBC, speaking to journalists this morning as Italian yields shot through 7%, warned that:

There is a feeling in Asia that this crisis could go terribly wrong.

So what could be done? My colleague Nils Pratley argues that the European Central Bank might get more wriggle room if Silvio Berlusconi quit now, rather than merely promising to go.

The European Central Bank is not allowed to buy vast quantities of sovereign debt and its new boss, Mario Draghi, is disinclined to read his rulebook a different way....
...If Silvio Berlusconi were to depart immediately rather than at an unspecified time, it might be possible for the ECB to step up its buying of Italian bonds via its established Securities Market Programme, which is designed to support monetary policy; it would a blurring of the lines but, arguably, the lines are already blurred.

More here, including a graph showing how rising Italian yields eat into government revenue.
11.42am: Robert O'Daly, of The Economist Intelligence Unit, explains why the prospect of an Italian general election is so unappealing (as I said in this last post):

An early general election would only increase investors' fears because under the current electoral laws there is a considerable risk that whoever wins the most votes would not have a clear majority in both houses of parliament.
This would make effective government almost impossible, as bills must be passed in both houses in exactly the same form to become law.

The sell-off in the financial markets continues - the FTSE 100 is now down 116 points, or over 2%. The Italian FTSE MIB is down 4.5%.
And the yield on 10-year Italian bonds is holding steady at a frankly alarming level of 7.48% (up from 6.8% overnight - a remarkable move). The European Central Bank is buying, but it's not enough....
11.30am: Italy's president has just spoken out about the crisis that is enveloping his country today.
Giorgio Napolitano told an audience at the Quirinale Palace that:

Italy must regain credibility and confidence as a country for us first of all to get out from a very dangerous squeeze on financial markets on our public debt and on the conditions facing our banking institutions.
This requires an immediate and sustained commitment to the management of our public debt.

That won't be enough to reassure the financial markets. As mentioned earlier (and explained yesterday here by John Hooper) the Best Way to calm international investors would be to create a unity government run by 'technocrats' who would drive through unpopular austerity measures and put Italy on the path to deficit reduction and economic growth [now there's a challenge] .
A typical Italian election might last 60 days -- bond-holders are unlikely to tolerate that kind of uncertainty (and Italy can't simply ignore them as it needs to roll over €300bn of debt in 2012).
11.15am:As if the European crisis wasn't also bad enough with Italy's woes, over in Greece the search for a prime minister is still continuing. We had hoped to get a decision anytime now -- instead it appears that Lucas Papademos is no longer the favourite candidate.
Helena Smith reports:

Greece's quest to find itself a prime minister has descended into farce following an all night thriller here with phones buzzing, meetings being called and cancelled, potential candidates being summoned by party leaders for closed-door talks and new names surfacing all the time.
At last count there appear to be five men (no women as far as I know) being considered for the post. Lucas Papademos, former vice president of European Central Bank who was a shoo-in last night, with the Greek media at least considering his elevation to the position "a given," now no longer seems to be the assured front-runner. Greek TV are quoting senior EU officials in Brussels as saying that Athens' quarreling politicians are "playing with fire."

Greek media are warning that Italy's debt crisis could crush their own bailout.
Indicative of the mood, the front page of the mass-selling Ta Nea newspaper proclaims today: "Italy's ghost is [hovering] over the sixth tranche" in a reference to the war of words that has also erupted over debt-stricken Greece's latest €8bn rescue loan.
As Helena points out, Greece's opposition leader Antonis Samaras is no fan of Greece's austerity plans.

Twenty four hours after Euro zone president Jean Claude Junker upped the ante saying Greece's political class would have to commit to economic reforms in writing before receiving the aid, the conservative main opposition New Democracy is still foaming at the mouth with senior party cadres ruling out such a move "point blank."
Antonis Samaras, ND leader, it should be remembered has said persistently that he wants to "renegotiate" the bailout agreements for Greece arguing that their pursuit of growth through austerity has only made the country's plight worse. This raises the spectre of the funds, which should have been disbursed in September, not being released at all.
As Ta Nea also says, events in Rome may soon mean there is no money to give to Greece at all. Athens, meanwhile, is counting the days until the coffers dry up - without the fresh loan public sector wages and pensions will go unpaid. Finance Minister Evangelos Venizelos says the country has enough money to last it until mid-December - - all of which imbues the quest for a new government with added urgency.
Greeks were hoping to have a new cross-party government by midday - but at this rate who knows?

10.54am: Why does it matter if Italy faces the prospect of paying upwards of 7% to borrow from the financial markets?
Because Italy's national debt is 2.7 times as large as Ireland, Greece and Portugal combined.
And because more than €120bn of long-term government bonds mature in 2012, along with €180bn of short-term debt (aka bills). So to 'roll over' this debt, Italy needs to be able to borrow the same amount from international investors (on top of any deficit it runs next year).
Gary Jenkins of Evolution Securities warned that it simply wouldn't be affordable for the EU and the IMF to bail Italy out.
In fact, he says, it could cost €1.4 trillion.

If we look at it simplistically, the two Greek packages plus the Irish and Portuguese bailouts come at a cost of €388bn, add to that the ECB purchases to support these markets up to August this year of €74bn and about €50bn from private sector involvement in the second Greek deal (€80bn less €30bn collateral provisions already accounted in the second €130bn package) and the total cost is €512bn.
Now multiply by 2.7 to get an estimate of the cost of bailing out Italy, we are looking at €1.4trn.

10.36am: The euro is also falling against other major currencies as Italy's woes threatens the wider eurozone.
The Euro has fallen by over one and a half cents against the dollar, to $1.3664, as this graph shows.
The Euro is also down half of one pence versus the pound, at 85.5p.
European stock markets are following it- with the FTSE 100 down 93 points at 5474 and the Italian stock market falling by 3.7%.
10.27am: Looking at the interest rate on Italian bonds again, the 10-year yield just hit 7.25%. Investors are putting the European Central Bank in a vice -- especially new president, Mario Draghi (the former governor of the Bank of Italy).
The word in the City is that the ECB is buying up Italian debt in the market, in an attempt to push down the yield. But it's not clear that it's working....
10.21am: So why didn't Berlusconi's resignation calm the markets, rather than creating more alarm? There are three main reasons:
1) The political uncertainty. Berlusconi has promised to go, but he hasn't actually quit. He indicated this morning that he still favours early elections -- but that would mean a lengthy campaign and no promise of a clear victor at the end.
Investors would much prefer some kind of unity government who could press on with the urgent task of bringing in economic reforms. Not just pass a budget this month - actually implement it.

2) Europe's own confusion. The deal agreed two weeks ago in Brussels looks less impressive by the day. The plan to extend the European financial stability facility to €1trn is floundering because the rich emerging markets are unwilling to provide the funds.
3) Italy's financial position. Its national debt is approaching €2 trillion, giving a debt-to-GDP ratio of 120%. Too big to bail?
The failure of the G20 to make serious progress in Cannes last week could now rebound on them.
Italy was expected to auction €5bn of government debt on Thursday - government sources were insisting yesterday that it will still go ahead....
9.58am: The news that Italian bond yields have crashed through the 7% mark adds to the sense of escalating panic over the country.
Jane Foley, senior currency strategist at Rabobank, predicted that the European Central Bank will have to accelerate its programme of buying up Italian debt. The political situation in Italy, though, threatens to drag the eurozone crisis into a new level.

The markets are coming to terms that the removal of Berlusconi as Italy's Prime Minister provides little by way of solution. Perhaps a bigger problem facing Italy is the lack of a strong and credible opposition. The markets are hoping for a technocrat interim government charged with the difficult task of implementing structural reform.

9.35am: Italian bond yields just breached the 7% level (as measured by Tradeweb*) in the last few minutes. That's a very worrying development - a clear sign that the financial markets are losing faith in Italy fast.
As Joshua Raymond of City Index pointed out - there may not be confidence vote in Italian parliament but "there's one right there in bond yields".
The cost of insuring Italian debt has also risen again this morning.
Akif Ince, credit data analyst at Markit, warned that:

Berlusconi's pledge to resign has not helped tighten Italy's CDS [credit default swap] spreads so far this morning. Furthermore, spreads of Italian banks have not yet responded positively.

* - confusingly, there are two different measures for bond yields. One set of data from Tradeweb and another sourced by Reuters. The Reuters yield is currently 6.99%. So take your pick - either way it's bad.
UPDATE: The Reuters measure of yield is also over the 'unsustainable' 7% mark. So no dispute about it.
8.41am: As John Hooper points out below, Berlusconi's exit has provided little relief to Italy's government bonds.
The yield on 10-year Italian debt remained deep into the danger zone this morning, spiking early before hovering around 6.75%.
This was apparently triggered by LCH, a City firm that clears trades, to demand more collateral from investors who buy and sell Italian debt.
LCH decision to hiked the margin that traders must post to insure trades against losses - 11.65% from 6.65% - was reminiscent of a similar move last year involving Irish debt. That proved a key moment in Ireland journey into an IMF-led bailout.
As my colleague Jill Treanor explains:

A hike in the market call can be a very troubling indicator for bond markets. After LCH Clearnet increased Irish bond margin requirements on November 10 2010, its bond yields surged. With financing costs becoming unsustainable, Ireland applied for a bailout on November 22.
Then this year, the clearing house removed Portugal from its single-A basket on March 25. Again, yields reacted negatively and Portugal applied for a bailout on April 6".
LCH is the largest clearer of fixed income products, such as bonds, in Europe. As it clearer, it effectively guarantees trades that take place so it puts up margins when it becomes concerns that there is an increased risk of default.

FT Alphaville also has a typically good explanation - and the full statement.
The stock market rally has also lost its early fizz - the Berlusconi Bounce lasted barely 30 minutes, with the FTSE 100 up just 18 points now.
8.28am: Silvio Berlusconi has been discussing his decision to step down. As we suggested yesterday, Angelino Alfano appears the likely successor. And crucially -- Berlusconi told the state-owned RAI radio network that he honestly plans to step down for the good of Italy.
John Hooper in Rome has the story:

Beyond the rhetoric (those who voted against him yesterday "betrayed their mandate ... betraying Italy too), there are a few points of interest for anyone watching yields and spreads (though the Milan bourse opened higher, the gap between 10-year Italian bonds and German bunds has remained stubbornly close to 500 basis points).
The first point is that Berlusconi said he would appeal to the opposition to help him pass the austerity measures agreed with the European institutions. He did not think it would be necessary to make them the subject of a potentially disruptive confidence vote.
The second is that he really is going. Or at least he says he is. Here is the full quote: "I believe it is clear that I have put the interest of the country ahead of my own, that of my government and that of my political party. I have given a guarantee, I have given an assurance of my decision to resign after the approval [of the austerity package].
Finally, but most importantly from a political standpoint, he said he thought that the secretary of his party, the Freedom People, Angelino Alfano, was in "pole position" to be the right's candidate at the elections he wants to see early next year. His appointment would signal a "generational change", Berlusconi said.
The Italian justice minister, Angelino Alfano, could replace Berlusconi as leader of the People of Freedom party. Photograph: Max Rossi/Reuters But he certainly left plenty of wriggle room. The decision would be up to his party's members. And, as for Berlusconi himself, he would do "what the party asks of me in the interests of the country".

8.10am: European stock markets just opened higher, as traders welcome last night's developments in Italy and the prospect of a new Greek prime minister before nightfall.
The FTSE 100 jumped 48 points to 5615 (up 0.86%), while the German DAX and the Italian FTSE MIB both rose by 1.4%.
Terry Pratt of IG Group said markets were "universally cheered" by the news that Berlusconi is set to resign after the next Italian budget is approved:

Although there's still a lack of clarity here as to precisely how the next leadership will be formed, investors are clearly encouraged by the fact there will now be change at the top and for the time being at least, this is bringing the bulls back into play.

Asia also joined in the general feeling of relief, with Japan's Nikkei ending 1.16% higher.
7.55am: The word from Athens is that prime minister George Papandreou is expected to meet with Greece's president, Karolos Papoulias, at midday local time (10am GMT).
A meeting of political leaders is then expected to be called. Dow Jones is quoting a "government insider" who says:

After this, a new government will be announced.

This comes after days of deadlock between rival political leaders. Outgoing prime minister George Papandreou and opposition leader Antonia Samaras have been struggling to agree on the formation of a government of national unity.
There is also anger in Greece that the European Union has demanded written assurances that the national unity government will push Greece's €130bn bailout deal through parliament before early elections are called.
There are also reports that Samaras, the head of New Democracy, has come under fire from his own side for yielding too much during the negotiations. Reuters quoted a member of Papandreou's side who pinned the blame on the opposition:

Greek main opposition party leader, Antonis Samaras, has played a key role in this week's talks. Photograph: Louisa Gouliamaki/Getty Images The problem is now New Democracy...There are internal objections to the party going back on so many of its positions.

7.40am: Good morning. It's gearing up to be another exciting day of eurozone drama.
If yesterday's theme was A Tale of Two Cities (Athens and Rome), then today could be dubbed Great Expectations. After days of negotiations, the word from Greece is that the talks to create a government of national unity are close to resolution.
An announcement could come before lunchtime -- but further delays cannot be ruled out.
Italy is also in a state of political flux after Silvio Berlusconi agreed to step down once new budget measures have been approved by parliament. Who might replace the great survivor?
Traders are expecting shares to rise this morning -- but any Berlusconi Bounce could be short-lived. This crisis has a habit of surprising us....



Posted by Graeme Wearden Wednesday 9 November 2011 21.20 GMTguardian.co.ukArticle history

MPs agreed that the one-time factory worker, who lacks expertise in the
field of economics and has almost no international experience, simply
doesn't fit the bill, at such a critical time, to become the nation's
next PM."

Says it all really.!!!!!

EFSF

Europe’s financial flop fund

8 November 2011
Süddeutsche Zeitung
Munich


Presseurop based on Harrison Eastwood

• 
  
• 
  

• Text larger
  
• Text smaller
  
• Send
  
• Print
  

The EFSF was meant to save the single currency. And yet it has found no buyers. Investors are shying away from a complicated, uncertain financial product whose weaknesses the politicians are trying to cover up.
Cerstin Gammelin
It was supposed to bring some relief for the headaches of the euro club, but now it’s becoming one itself. The European Financial Stability Facility, or EFSF, set up to help the single currency, has itself ended up in the sick bed. Meant to revive European states brought low by financial distress, in the few months of its existence the bulwark has needed several facelifts already.
In fact, the fund itself had to be resuscitated and indeed saved from being cleaned out and exhausted prematurely. It has been expanded and leveraged – and yet in Cannes, the bottom line was rather sobering once more. The fund is still not the picture of health it ought to be.
For its task of building a firewall around the currency union 2 trillion euros high, the Facility lacks the necessary money. It’s still only good for beating back a few small fires. If Spain or Italy catch the flames, the fund is finished. And so once again this Monday in Brussels the ministers of finance of the euro club had to think long and hard over just where the saving billions could come from.
Triple-A is looking wobbly

They had actually hoped the money would flow out of Asia and Russia. In China and Japan there are plenty of richly endowed public and private money pots, whose owners used to snap up euro securities and EFSF bonds as well. With this money in mind the euro countries recently started remodelling their rescue fund to attract even more of these wealthy investors, whose billions they meant to use to top up the firewall.
But their calculation isn’t adding up. The Asians are reluctant, and so are the Russians. No one, really, is ready to put more money into EFSF securities. In the past week the European Financial Stability Facility even dropped the plan to bring out a new bond issue. Nothing to worry about it, said the founders of the fund, who played down the retreat by claiming it was just a trial run.
Financial managers, though, saw it as bad news, revealing as it did that there was no demand for the bonds. And they were proved right when the EFSF put out a new bond issue this Monday. Buyer interest was low – and risk premiums higher than ever.
In the back rooms of the credit-rating watchmen the word is going round that the highest rating, the triple-A, is looking wobbly. And it’s those three ‘A’s that generally ensure investors will buy up euro securities despite the crisis.
For many investors the fund has clearly become too complicated. The great rescue tool of the euro countries resembles those complex financial products that investors barely understand and wisely keep their fingers away from. When the euro club set up the Facility, it was announced that it would have 440 billion euros. In the actual pot, however, there were only 280 billion euros in credit.
Fund structure is too complex

The financial world felt duped, and worries grew that the money might not be enough and more countries would have to be bailed out. And so the club boosted the fund to 440 billion euros of credit, which required a total of 780 billion euros, since the remainder was to be held in reserve as a guarantee for that triple-A rating.
That this sum is also not enough has become clear as Italy's debt has swung into the focus of the financial markets. The sum being talked about now is almost 2,000 billion euros. But once again, the fund structure is too complex to entice the big investors, and it hasn’t worked out.
Certainly, the euro club can still tour through Asia and spread the word about its complicated “European Financial Stability Facility”. Behind the scenes, though, the road has long since been paved for tapping into the spring that so far has been the only place to go for a few headache-free days: the European Central Bank.
Translated from the German by Anton Baer

Unity Call Amid Reports Eurozone May Splinter

• 8 Comments
  
• 
  
• 
  

10:11am UK, Thursday November 10, 2011


The president of the European Commission has pleaded for the continent's
countries to pull closer together to solve the economic crisis threatening to
engulf it.


Jose Manuel Barroso issued a call for the EU to "unite or face irrelevance"
in the face of the increasingly desperate situations in Italy and Greece.

He spoke in Berlin last night amid reports that officials from France and
Germany had held private talks on some countries could be ejected from the
eurozone to assure the single currency's future.

It is particularly threatened by the prospect of a bailout for Italy - seen
by many experts as unaffordable - as its borrowing costs hover at record
highs.

It is a crisis the markets fear may bring about the disorderly break-up of
the euro which would likely plunge not just the eurozone but the rest of the
world into recession.


countries, cash and crisis: bond yields explained








"(The crisis) will jeopardise the future prosperity of the next generation,"
Mr Barroso said.

"That is the threat that hangs over us. And it is
that threat that guides our commitment to resolving the situation in Greece and elsewhere -
provided that those countries play their part as well."

Mr Barroso said the world was facing fundamental changes to the economic
order and European countries had to stand together.

"The challenge is how to further deepen euro-area integration without
creating divisions with those who are not yet in it. The world needs a stronger
Europe: more Europe, not less," he said.

His comments came after another day of heavy losses
on the financial markets as Italy's borrowing costs hit
7% - the level which triggered bailouts in Portugal and Ireland.

Mr Barroso said the EU was facing a "defining moment" and called on
"responsible leaders" to go out and make the case for Europe.

"Populism and sometimes even nationalism raises its head across our
continent, claiming that too much Europe is the cause of our current
difficulties; claiming that less Europe, or even non-Europe, would bring
solutions," he said.

"This is ignoring the global realities as well as our common history that
teaches us that this continent is simply too small and too inter-dependent for
us to stand apart - to turn our backs to each other."

If the euro area of the 17 single currency member
states, or the entire 27-country EU, broke apart, he said, the
estimated initial cost was up to 50% of EU gross domestic product, with ongoing
threats to prosperity.


Protesters have long called for Italy's premier Silvio
Berlusconi to resign



"We must show our citizens what is at stake. We must choose the path of
strength over weakness. Unity over fragmentation. The hard choice over the easy
one," he said.

"The EU does not promise paradise, but it is our best chance for prosperity.
It is the single greatest achievement of our time. Our best means to use the
crisis as an opportunity for creativity out of destruction."

The equity market sell-off continued on Thursday, with the FTSE 100 share
index opening 1.7% lower following sharp falls in Asia - building on the 1.9%
decline in London on Wednesday.

But European markets later rebounded despite new EU economic forecasts, which
warned of a greater recession risk.

It slashed its forecast for GDP growth in the single currency area to 0.5%
for 2012.

1:58pm UK, Thursday November 10, 2011


A senior banker will succeed George Papandreou as the Greek prime minister,
taking on the responsibility of pulling the debt-ridden country out of economic
crisis.


Former European Central Bank vice-president Lucas Papademos will be sworn in
to the top job at lunchtime on Friday.

News of his new post comes a day after a coalition government was formed
following three days of intense power-sharing talks between the two main
political parties.

The move was announced by Prime Minister George Papandreou who is stepping
down as leader to make way for the new administration.

Parliament speaker Filippos Petsalnikos, 60, was initially tipped to lead the
interim government but it has been announced Mr Papademos, 64, will take on the
role.


Lucas Papademos, 64, has been announced as Greece's new
prime minister



Speaking soon after the announcement, Mr Papademos admittedhe had a tough job
ahead of him and that the country was at a "crucial crossroads".

"The Greek economy is facing huge problems despite the efforts undertaken,"
he said.

"The choices we will make will be decisive for the Greek people. The path
will not be easy but I am convinced the problems will be resolved faster and at
a smaller cost if there is unity, understanding and prudence."

In an address to the nation on Thursday, outgoing leader Mr Papandreou wished
the new government well.

He said: "I am proud that, despite the difficulties, we avoided bankruptcy
and ensured the country stayed on its feet.

I think they're making progress. It's not as fast as the world needs, but
they're making progress.

Timothy Geithner, US Treasury
Secretary


"I would like to wish every success to the new prime minister and of course
the new government. I will stand by them and I will support them with all my
strength."

He added Greece will now implement the £110bn (130bn euro) rescue package on
offer from Europe and do its utmost to stay in the euro.

Approval of the deal will allow the release of an £6.88bn (8bn euro) loan
instalment, without which the country will go bankrupt before Christmas.

Mr Papandreou's statement came after intense negotiations between his
socialist PASOK party and the opposition conservatives, led by Antonis
Samaras.


It was initially rumoured Mr Petsalnikos (R) would replace
Mr Papandreou (L) as prime minister



The latest crisis in Greece was triggered by Mr Papandreou's surprise
announcement last week that he would hold a nationwide referendum on the rescue
package.

It prompted an angry backlash from European leaders who had hammered out the
agreement barely a week before.

Mr Papandreou also faced a revolt from his socialist party colleagues.

He later withdrew the referendum plan after Mr Samaras indicated he would
support the debt deal.

The squabbling in Athens came as another threat emerged to the euro with the
borrowing costs of Italy, one of Europe's largest economies, hitting historic
highs.


Italy's Silvio Berlusconi has promised he will
resign



It happened despite Prime Minister Silvio Berlusconi pledging to resign after
MPs passed economic reforms demanded by the EU to keep the Italian economy
afloat.

Both Italy and Greece are under intense pressure to reassure financial
markets they are tackling their massive debts, which are threatening to sink the
17-country eurozone.

US Treasury Secretary Timothy Geithner said the two countries were belatedly
moving forward with recovery plans.

"I think they're making progress," Mr Geithner said. "It's not as fast as the
world needs, but they're making progress.

"We're doing everything that we can to encourage them to move more quickly
and where we can help them, we're going to help them."

Rumour has it that Merkel and Sarkozy are discussing the possibility of letting some EU Members fail and leave the EU because they know they
cannot raise enough money to bail out all of them. It is estimated that Greece will have a debt of 198% of GDP in 2012.

There is also a rumour that Merkel and Sarkozy have fallen out over the way the crisis has been handled.

Thee EU sees only .5% growth in 2012.

The EFSF Bail out Fund may face delays due to disagreement between Merkel and Sarkozy.

Italy needs to convince the market it can handle debt. Will the IMF be lender of last resort?

Standard & Poors have said France will not lose it"s AAA rating

Will Obama back Portugese bail out since Italy has taken priority.?

DAVID CAMERON MADE A SPEECH ABOUT THE EUROZONE CRISIS,FORGOTTEN WHAT ACTUALLY SAID.

IMO, the reason why Sarkozy and Merkel are 'fiddling whilst Rome burns' is that they are waiting for the rest of the world to panic about the financial effects and cough up the money to bail the eurozone out. They do not want to have to do it with their money.

Well I hope that the rest of the world holds their nerve and calls S & M's bluff (Actually first time I have looked at their initials like that!!!!)

It is their mess and they should sort it out , pay for it , or call it a day. I believe everyone will survive better than is predicted. You cannot fool all of the people all of the time

I hope that we all hold out and make them sweat.

Angelique they will not be smirking then

Apparently half the EFSF Fund of E440 billion was set up by Germany, but it"s obvious now that no Country wants to invest in it. The rest
of the World says the ECB should step in and behave like the Bank of England or the Fed, but the Treaty would have to be altered for it to do so......how much money is in the ECB?

Whatever happens , the Euro will lose value, Italy and Greece will never stick to an austerity plan , and contagion will spread. To say Italy is too big to fail , what about if other Countries in the EU fail and it"s like a domino effect? In the middle of all this new PM"s are appointed who
will probably have to read up on what"s gone on before, caretake for a few weeks and Elections will then be held with possibly new Parties
or coalitions being formed.......,..you couldn"t make it up could you.!!!

In a discussion on Newsnight tonight it was suggested that there might be a break-up of the EU and Germany and other Northern Countries
such as The Netherlands, Finland, Sweden, Denmark and Norway form another Union, using the Deutchemark as one currency.

The credibility of the Euro System is now under scrutiny and Alan Greenspan says Europe is the biggest problem and he doesn"t see any sign of the EU doing anything constructive.

The Centre for European reform says the ECB needs to take action but it has not the remit to act as a Bank. This was deliberately introduced
in the Treaty because Germany is paranoid about going back to the old days when currency had so little value it was used to light fires

One of the German Representatives commented that the EU was founded to unite the Nations after the 2nd World War but the cracks are showing now because of this crisis and squabbling among Countries.

8:59pm UK, Thursday November 10, 2011





The eurozone's economic gloom has deepened with a stark
warning of a "serious recession" next year - which is likely to hit the
UK.


Azad Zangana, European economist at Schroders, told Sky's Jeff
Randall that the outlook for the region "is negative and politicians
have missed their opportunity to prevent a European credit crunch".


The global investment firm warned in its economic outlook report:
"Many eurozone banks are already on life support - unable to raise funds
in capital markets and heavily reliant on liquidity from the European
Central Bank.


"However, this will not be enough to stop banks from de-leveraging, and reducing lending to the real economy.


"As a result, we are now forecasting a serious recession in the
eurozone in 2012, which is also likely to result in recessions in the
wider European region, including the UK."


The comments come as Prime Minister David Cameron said Italy now posed a "clear and present danger" to the eurozone's future.







SCHRODERS EUROPEAN ECONOMIST ON RECESSION PREDICTIONS












He repeated his call for eurozone leaders to act swiftly to save the
single currency: "Italy is the third largest country in the eurozone.


"Its current state is a clear and present danger to the eurozone and the moment of truth is approaching.


"If the leaders of the eurozone want to save their currency then they
- together with the institutions of the eurozone - must act now."


The Prime Minister warned: "The longer the delay, the greater the danger.


"Here in Britain, outside the euro, we must prepare for every eventuality - and that is exactly what we will do."


The European Commission economic forecast echoed the fears, with
Economic and Monetary Affairs Commissioner Olli Rehn warning: "Growth
has stalled in Europe, and there is a risk of a new recession."












Italian Prime Minister Silvio Berlusconi could be gone by the weekend





The fresh fears come despite the announcement of a new - interim - leader to bring stability in Greece.


Former European Central Bank vice-president Lucas Papademos has been
installed as caretaker leader in the interim government, whose urgent
job is to approve the terms of more austerity measures in exchange for
the latest slice of EU bailout money to stave off bankruptcy for a few
more months.


Meanwhile, in Italy, it appeared Prime Minister Silvio Berlusconi may be gone by the weekend.


He had pledged to stay until economic reforms were in place - which
Italian President Giorgio Napolitano said could now be approved in days,
rather than weeks.


That would clear the way for a new government, likely to be headed by former EU Commissioner and leading economist Mario Monti.

The
EEC: Ever Closer Reunion?








Tim
Marshall November 10, 2011 12:09 PM





The European Union, in its earliest form, was set up to stop the Germans and
French fighting each other. After the shock of World War Two they hugged each
other so close economically - neither could get an arm free to hit the
other.

As they launched the European Coal and Steel Community
the French foreign minister Robert Shuman said 'Europe will not be
made all at once, or according to a single plan. It will be built through
concrete achievements which first create a de facto solidarity'

And so it came to pass. The coal and steel marriage begat the European
Community, which begat the European Economic Community, which begat the European
Union, and for 60 years there was no smiting. The idea - grow the geographic
space of stability, the mantra - ever closer union.

It was a natural political progression to have a single
currency. The critics said the advocates were trying to pour a political idea
into a economic system which didn't exist - fiscal union.

There was an unspoken deal for the different peoples; Your nationality is
weakened, but your prosperity is strengthened.

However, some countries had cooked the books to get into the Euro. Their debt
was too high, their economies too weak. The deal held until the 2008 crash and
the money ran out. But the people still want their pensions in full, the roads
built, the hospitals funded and the wages paid.

Now the panic is setting in. Fear is contagious. There's a fund to bail out
Eurozone countries, but if you spend too much of it on Greece, and then Italy
goes belly up - will you have enough left to save Italy? So, should you cut part
of the Euro off, Greece, to save the rest of it? If you do that -the idea of
ever closer union is dead.

Another problem: the democratic deficit. Paris and Berlin want Athens and
Rome to form coalition temporary governments. Why? Because only an interim
government will dare implement the massive social cuts required to bring debts
down. Those who cut may not be elected afterwards. But, how come France and
Germany get a say in the governments of other countries?

These, and others, are the dilemmas with which Europe is struggling. If the
Euro collapses it doesn't mean we return to fighting each other, but it does
suggest, after the economic fall out settles, that the future will be closer to
the European Economic Community model.

It also sets us on the route of a return to greater nationalism and the
perils which lie therein.

• Business
  
• Eurozone crisis
  

Eurozone crisis threatens to spread to France as Paris is warned over its debts

Nicolas Sarkozy's government told to do more to cut state spending as figures reveal a slump in the country's industry

y
Eurozone crisis fears have led investors to tell Nicolas Sarkozy, the French president, to do more to reassure markets over debt Photograph: Philippe Wojazer/AFP/Getty

France is under pressure to reassure markets that it can cope with the deteriorating situation in the eurozone, after official figures showed a slump in industrial production that could wipe out any chance of growth next year.
The eurozone's second largest economy came under fire from the European Union and international investors for not doing more to cut government spending amid fears the debt crisis would escalate and ensnare the French economy.
Bond yields, which determine the interest rate for government borrowing, rose as France snubbed the EU call for more austerity measures, saying the country's latest round of belt tightening would be enough to bring its deficit within EU limits.
The gap between French and German bond yields hit a new record as German yields fell to 1.78% and French yields rose to 3.48% on 10-year bonds.
The febrile atmosphere surrounding Paris was heightened after the ratings agency Standard & Poor's mistakenly issued a notice stripping France of its coveted AAA rating. The agency has threatened to issue a downgrade, which would push up bond yields further, but said the document was a mistake.
Some economists said the gloomy picture in France meant the country had fallen out of the first rank of euro nations.
Much of its success in recent years had depended on making loans to peripheral eurozone countries, many of which were now in deep trouble and possibly unable repay all their loans. French banks have written off most of their loans to Greece, but would need a big bailout by French taxpayers if their loans to Italy suffered a similar fate.
Estimates French banks have lent around €300bn to the Italian government and Italian banks meant Paris could struggle to avoid being drawn into the debt crisis.
President Nicolas Sarkozy's government announced on Monday a second savings drive in three months, as it battles to keep its deficit targets within reach in AAA rating as one of the world's safest borrowers.
Forecasting lower growth in France than the government, EU economic and monetary policy commissioner Olli Rehn urged further steps to ensure France is able to cut its public deficit to an EU limit of 3% of GDP in 2013 from an estimated 5.7% this year.
"We believe that it is best that France announces, as early as possible, the measures that are needed to keep its deficit in line with the official targets for 2012 and 2013," Rehn said.
But French finance minister Francois Baroin and budget minister Valerie Pecresse said the latest saving measures had built in leeway to offset the impact of lower than expected growth both in 2012 and 2013.
French industrial production slumped 1.7% month on month in September, coming in lower than expected. The poor figures were compounded by a Bank of France business sentiment indicator that fell back to 96 in October, from 97 in September and a prediction by the EU that France would grow at 0.6% next year instead of the previous estimate of 2%.
Michael Derks, Chief Strategist at currency trader FxPro, said a break-up of the euro would leave France outside the top rank. "The 'outs' will likely consist of Greece, Portugal, Ireland, Italy and Spain, while the 'ins' would definitely be Germany, Austria, the Netherlands and Finland. France would be aghast at not being an automatic inclusion in this 'in' group, but the way its bond yields are headed, membership is definitely not guaranteed. Likewise, Belgium is also in danger of being cast adrift."
Stephen Lewis, chief economist at Monument Securities said: "The Mediterranean nations' economies almost certainly diverge too far from the German template for them to sustain the fiscal discipline that the new arrangements would demand. The question is whether even France would be able to keep up. Doubtless, the Franco-German negotiators would maintain the presumption that it could, seeing that divergence between France and Germany would defeat the purpose of the EU. But that political imperative might still run counter to economic reality.

Apparently the German Government is to discuss break-up over the next few days. The yield on the sale of Spanish Bonds has increased
as growth slows.

It is thought the ECB will be lender of last resort as Portugal"s CCC rating rules out Bond sales.

The President of Italy, Napolitano is 86 yrs old.

Zecchini , Analyst at University of Rome says Mario Monti has only 50% chance of implementing reforms and must implement the following
immediately:-

Try to put a lid on expenditure

Programme of selling public assets

Spain is stagnant , another 6,500 jobs to go because Telefonica has made such a huge loss, borrowing costs have surged.

Ireland also faces fresh austerity because of the Italian crisis.

UUM, looks like fireworks in Italy if the new interim Prime Minister tries to implement austerity measures. There is a demonstration now with
protesters displaying their underwear with the message "already taking the shirts off our backs", sorry, I don"t mean to laugh.

Italian Banks are more exposed to Sovereign debt than Business debt, French Banks most exposed to Italian Businesses. The Markets have steadied now that Greece has a new Leader .

I HAVE HAD A THOUGHT,PERHAPS FIRMS SHOULD HAVE A PROFIT SHARING SCHEME OR SIMILIAR, THE MONEY GIVEN IN SUCH SCHEMES COULD STIMULATE THE ECONOMY.
IF EVERYONE BROUGHT FROM FIRMS WITH SUCH SCHEMES,THE UNWORTHY FIRMS WOULD SUFFER.

Badboy wrote:I HAVE HAD A THOUGHT,PERHAPS FIRMS SHOULD HAVE A PROFIT SHARING SCHEME OR SIMILIAR, THE MONEY GIVEN IN SUCH SCHEMES COULD STIMULATE THE ECONOMY.
IF EVERYONE BROUGHT FROM FIRMS WITH SUCH SCHEMES,THE UNWORTHY FIRMS WOULD SUFFER.

You mean like the Co-op Badboy and Tesco, except you don"t get the money, you get a voucher for the discount you have earned so it goes back into the Store anyway.

Fears Euro Debt Crisis May Spread To France

• 54 Comments
  
• 
  
• 
  

12:44am UK, Saturday November 12, 2011


Fears of eurozone debt contagion have hit France - as Italy and Greece moved
to change their governments in a bid to stabilise their battered economies.


Leading economists have warned the £261bn worth of Italian debt that French
banks hold leaves them dangerously exposed to the spreading financial woes.

That figure represents more than half of all European bank lending to
Italy.

British banks, on the other hand, could also be affected by a French crisis
due to the amount of French debt the UK holds.

The French fears come after ratings agency Standard & Poor's accidentally
sent out a message saying it was downgrading the country's prized "AAA" credit
rating.

The error stood for an hour and a half before it was retracted by the agency
- but fears spread across financial markets that it could be a sign of things to
come.


Italy's former European Union Commissioner Mario Monti (L)
arrives at the Italian senate



Meanwhile, the Italian senate voted through austerity measures in a bid to
contain the eurozone debt crisis, paving the way for the end of the Berlusconi
era.

The measures include an increase in the retirement age to 67 and widespread
job cuts.

Having received approval in the upper house, the bill is expected to be
passed through parliament when it is voted on in the lower house on
Saturday.

PM Silvio Berlusconi has indicated he would stand down as soon as the reforms
are fully approved, which could come as early as this weekend.

Sky's Nick Pisa, in Rome, says respected economist Mario Monti, 68, is being
lined up as the potential leader of a broader all-party technical government
which is expected to be up and running by Monday at the latest after Mr
Berlusconi resigns.

"Mr Monti was greeted with a warm round of applause when he took his seat in
the Senate as the debate got under way," he said.

Italy is the third largest economy in the eurozone but it has a public debt
of 1.9trn euros.

Earlier in the week its borrowing costs reached record highs prompting
concerns that it could default on the debt.


Newly appointed Greek Prime Minister Lucas Papademos
swears in during a ceremony at the presidential palace in Athens



European stock markets received a boost as Italian policymakers approved the
financial reforms, and the country's borrowing costs continued to fall.

Greece has sworn in its new prime minister Lucas
Papademos, as well as his cabinet.

Finance minister Evangelos Venizelos is to remain in his current post.

US President Barack Obama has urged European leaders to take dramatic action
to stem the crisis, echoing calls by his treasury secretary Timothy
Geithner.

Mr Geithner said Europe must act quickly to quell its debt crisis
and said economies on the Pacific Rim should boost demand to strengthen their
defences against a fallout.

Can Europe pull back from the brink?

Can Europe pull back from the brink of total economic chaos? Newsnight's Paul Mason and the FT's Gillian Tett weigh up the options and make their predictions

• 
  
  
  
  • 
    
  • 
    
  • reddit this
    
  
  
• Comments (76)
  

• 
  
• 
  
  
  
  • Interview by Susanna Rustin
    
  • guardian.co.uk, Friday 11 November 2011 23.02 GMT
    
  • Article history
    
  
  

Newsnight’s Paul Mason and the FT’s Gillian Tett debate the eurozone crisis. Photograph: Felix Clay

This week the crisis in the eurozone boiled over and the prime ministers of two countries were forced out as a breakup of the single currency was openly discussed for the first time. Paul Mason of BBc2's Newsnight and Gillian Tett of the Financial Times discuss what will happen next with Susanna Rustin.
Susanna Rustin: Were you surprised to see two European leaders replaced by technocrats?
Gillian Tett: No – the situation calls for very firm, forward-looking action that is almost impossible in a rowdy democratic political system at the moment.
Paul Mason: Don't kid yourself these are technocrats. In Greece there is effectively a political truce but I don't know how long New Democracy [the opposition] will stick with a plan they fundamentally disagree with, because of its emphasis on taxing the middle class. Mario Monti will give Italy about a month's grace.
GT: The problem is you neither have anybody who has the authority to force a solution, nor do you have sufficiently free markets and genuine democracy to get a bottom-up solution. So you're caught in this limbo-land where you stagger from one mini-crisis to another.
SR: If elected governments in Greece and Italy can't manage these crises, where does that leave the rest of us?
PM: Greece's two main parties have very strong networks that have kept in check much of the outrage. In Italy two thirds of the short-term problem was the credibility of the Berlusconi government.
GT: Just as the past four years have raised questions about the way modern finance works, they are raising profound questions about our systems of government: we have no institutions to plan for the future, nor institutions that can quickly respond to a crisis. This is one of the reasons faith in so many public institutions is collapsing, alongside faith in the bankers. It's why you've got this Occupy Wall Street protest.
SR: Will economic reforms in Italy and Greece work?
GT: It's still about trying to buy time. People thought, if they bought time, two things would happen: first, Europe would start growing again and make the debt problem less bad. And second, some political consensus would emerge. But the more time that passes, not only is growth faltering and making the debt worse, but consensus is not emerging and arguments are developing instead.
PM: What is likely in the next few months is the emergence of mainstream politicians saying this far and no further, protectionism, roll back the free market, and it could come quite quickly.
GT: But the cost of a breakup is so high. Right now bankers are doing fire drills and the point everyone keeps making is that you have this fantastically complex interconnected global financial system, and the terror is there is some clause no one has thought of that creates a panic.
PM: Just because the cost of breakup is so great doesn't mean it won't happen. I was leaked some bank research and the sliding scale of banks that went bust was so frightening I decided it was impossible to report without causing panic.
GT: But I still think they may go to the brink, realise the cost of it and pull back. But pulling back will mean the ECB [European Central Bank] will have to underwrite the system, the IMF will have to be involved, probably force capital injections into the larger banks. And there will be some kind of joint action, if not fiscal union, which means Germans supporting the weaker members.
PM: But if you nationalise the banks but don't take social control and sit there as Alistair Darling did in 2008 and say politicians shouldn't control banks, then executives of those banks just game the system. They've got all the capital they need, they don't carry on lending, and growth doesn't return.
SR: Do you think the euro will break up?
GT: I think it's a possibility.
PM: It's inevitable Greece will default and exit. I think Ireland will be saved because there's too much riding on it as a big version of Monaco. Portugal doesn't really matter, it's not systemic, and so it all comes down to Italy.
GT: But if Greece exits everyone will say, will others follow? What frustrates US policymakers is that this is the first big global crisis since the collapse of Bretton Woods where there is really no one in charge. The Americans know they can't fix Europe, they haven't even paid their dues to the IMF this year. The Germans are in a leadership position but don't want to exercise it. There's no one else. Mario Draghi [ECB president] is one of the few figures who could act, but the timing is terrible. He's only just arrived.
PM: Never in any of the policy actions do you see the seeds of the new, the basis for a new version of capitalism.
GT: There are two or three potential seeds. Anyone interested should read two key sources – one is a piece by Carmen Reinhart about financial repression, that argues the way the west cut its debts after 1945 was by forcing the pools of capital in the economy – the savers, the pension funds – to buy government bonds at rates slightly below the rate of inflation. If you can maintain that for 10-20 years, due to the magic of compounding, you actually help pay down debts. The other amazing book is Debt: The First 5,000 Years by David Graeber. He argues that whenever you have periods of crazy expansion of virtual credit, like today, you either have to have a safety valve of forgiveness, like in Mesopotamia where you wiped the tablets clean every seven years, or you have an outbreak of social violence so intense you rip society apart. Either you have inflation, or default, or forgiveness.
SR: So the debts won't be paid back?
GT: Not a hope.
PM: But society has the right to have a discussion about whether we repress – ie inflate people's debts and savings away – or wipe clean, Mesopotamia-style. We have the right to talk about it, because there are social implications.
GT: Someone is going to take the pain. The question is how we allocate it.
PM: It's morally challenging to wipe the slate clean. If you have a fiat money system where you can print money endlessly, then you adopt a slate-wiping system on systemic debt on top of which you've already got Chapter 11, the most lenient form of bankruptcy ever, you've created a rule-free capitalism.
GT: I'm not endorsing wiping the slate. The least obnoxious way to get down this debt burden may well be financial repression. But if you keep propping up the system you don't necessarily make the pain any easier to deal with long-term. In Japan in the 1990s, the authorities kept propping everything up, and because they never let the market adjust, they created this insidious sense of fear.
SR: Is that the scenario Europe faces?
GT: It's the scenario many politicians would like to create but they may not get the chance. It may be a brutal crash.
PM: It's compounded by the Obama administration's lack of confidence. OK, you can say the objective situation in America is decline. But also there's an element of lack of interest. It's a problem of the sclerosis of politics. I despair of the level of political leadership.
GT: After the second world war, finance ministers gathered at Bretton Woods and tried to create a new system. That's what you need to do today. Take the G20 leaders, put them on an island and tell them to devise a rational roadmap for the global economy for the next century.
SR: Could Britain join the euro?
PM: I think there's a strong argument for a rebalanced Britain to join a northern bloc, but there's an even stronger argument for Scotland to join it.
GT: The global economy right now is like a geological region where you've had the tectonic plates shifting slowly, largely unseen, and then you suddenly have a clash, and you get new mountain ranges thrown up. The scale of potential change if this turns into full-blown crisis could be significant and it could happen much faster than people think.

This was published yesterday - I have highlighted the interesting bit as it's rather a long article.


The folk memory that makes Germany reluctant to act over the euro - The Daily Telegraph article


Buying vegetables with baskets of notes in 1920: but it was national pride in the Deutschmark that brought about the postwar 'economic miracle’ Photo: ROGER-VIOLLET/TOPFOTO

A spectre is haunting Europe – the spectre of German domination. As the Heath Robinson structures of the European Union buckle under the weight of their own contradictions, the question on everybody’s lips concerns the Germans. What will they do about the eurozone crisis? Will they try to save the dream of a federal Europe – or let it go up in a puff of smoke?
In the old days, what gave European statesmen nightmares was known as “the German Question”: once it was united by Bismarck, Germany was too big and powerful to be balanced by the other Continental powers. After starting two world wars, the division of Germany was seen as the price of peace in Europe. At the time, the French writer François Mauriac observed with heavy-handed irony: “I love Germany so much that I am glad there are two of them.”
Today the German Question has returned in a new form. Silvio Berlusconi, like other fallen European leaders from Bertie Ahern to George Papandreou, could be forgiven for blaming the Germans for his defenestration. These days it is the call from the Berlin Chancellery, rather than the White House or the Kremlin, that Europe’s weaker brethren dread.
I recall vividly an occasion in 1991, soon after the putsch against Margaret Thatcher, when she presided over a small dinner of sympathetic young intellectuals. I congratulated the former prime minister on her resolute stand in the Cold War, alongside Ronald Reagan, which had done so much to bring down the Berlin Wall. The Iron Lady’s face darkened. In her most imperious tone, she expostulated: “Are you saying that I am responsible for that?”
German reunification was – and is – her deepest regret. She welcomed the liberation of Eastern Europe from communism, but she feared European monetary union, or what her lieutenant Nicholas Ridley called “a German racket designed to take over the whole of Europe”.
RELATED ARTICLES
If the eurozone implodes, Britain will go with it 09 Nov 2011
Angela Merkel: EU needs more power to rein in spending 09 Nov 2011
The euro is reaching the point of no return 09 Nov 2011
ECB stymied on debt crisis without fiscal union 08 Nov 2011
Europe’s Politburo 07 Nov 2011
Gag on naming Nato official who had affair with 'spy' 07 Nov 2011
Ironically, the Germans themselves have played to the gallery by suggesting that the alternative to the single currency may be war. “If the euro fails, Europe fails,” Chancellor Merkel told the Bundestag last week. “We have an historical obligation to protect by all means Europe’s unification process, begun by our forefathers after centuries of hatred and bloodshed.”
Angela Merkel is by no means alone in resorting to such hyperbole. Astonishingly, the doctrine that only European unification can prevent an atavistic return to the horrors of “nationalism” (for which read Nazism) has long been and remains the received wisdom in German political circles.
It is, of course, nonsense. The notion that Germany, the most resolutely pacifist of the great powers, might be itching to revert to its militaristic Prussian past belongs in the realm of fantasy fiction. But not even Andrew Roberts’s The Aachen Memorandum or Robert Harris’s Fatherland (to cite two novels that imagine a post-war Europe ruled by Germany) could conceive of our present predicament.
What makes the crisis so intractable is that Germany, the only country that can bring about a solution, is prevented from doing so by its political culture – an elite locked into a version of history that bears little relation to reality.
The great post-war German chancellors – Konrad Adenauer, Ludwig Erhard, Willy Brandt, Helmut Schmidt, Helmut Kohl and now Angela Merkel – all believed that hyper-nationalism, exacerbated by hyper-inflation, was the cause of what the historian Friedrich Meinecke euphemistically called “the German catastrophe”.
You would need to be at least 100 years old to have a first-hand memory of the hyper-inflation that brought the Weimar Republic to its knees in 1923. But the folk memory certainly persists: the images of valueless paper money were seared on to the collective consciousness and reinforced by the Nazis in order to discredit Weimar democracy.
Adam Fergusson, in his classic account When Money Dies, correctly writes: “What really broke Germany was the constant taking of soft political options in respect of money.” That lesson certainly persists and is highly influential on Chancellor Merkel’s refusal to allow the European Central Bank to start printing trillions of euros to bail out the “Club Med” economies from their self-inflicted debt crisis. The German fear of inflationary soft options drove the Stability and Growth Pact, which was supposed to keep the eurozone on an even keel, but proved to be a dead letter because several members refused to adhere to it.
What foreigners forget, however, is that the Germans suffered the same inflationary ordeal again after the Second World War, when for three years packets of Marlboro cigarettes served as the only reliable currency in the Western zones of occupation. This second hyper-inflation is very much a living memory, but what most people remember about it is how it was brought to an end: with a new currency, the Deutschmark, which was launched by the economics wizard Ludwig Erhard against the wishes of the American, British and French occupiers – not to mention the Soviets, who saw it as an act of German revanchism. They weren’t entirely mistaken: long-term, the Communist East could not survive the introduction of a hard currency in the West.
Drastic, dramatic and dynamic, Erhard’s “currency reform” and its accompanying “bonfire of controls” were so successful that within a few years the “economic miracle” had enabled West Germany to leapfrog over Britain in exports, production and standard of living. With the Germans anchored in Nato, they could pursue their European destiny in the EEC, with the Deutschmark by far the strongest currency in the new trading bloc. Germany could atone for its past by playing the role of Europe’s central banker.
In German folk memory, the creation of the euro is seen as merely a grander version of the same story, only on a continental scale. Missing from this narrative, however, is the fact that the success of the Deutschmark always depended on patriotic pride: German money for the German people. It was the first step towards the reassertion of German national independence and was embraced by the people as such.
It was swiftly followed by the creation of the Federal Republic, the antithesis of Hitler’s “Führer-state”. The new republic gave birth to “constitutional patriotism”, a term coined not by conservatives but by a Marxist professor, Jürgen Habermas. Germans took pride in the iron financial discipline imposed by the Bundesbank and the rigorous rule of law imposed by the German Constitutional Court. The Germans, in short, became good Europeans by being good Germans. They were true to the national characteristics for which they are respected, and which can be summed up in Adenauer’s slogan: “No experiments!”
None of this applied to the euro. The creation of a single currency for 11 (now 17) nations was an experiment in post-nationalism. It was the riskiest experiment in European history, one that could only ever have been contemplated, let alone essayed, by the most insulated oligarchy in European history. In so far as it is backed by any lender of last resort, it is not a European institution, but the Bundesbank.
The euro, then, is actually very un-German. Yet the German political class has sworn allegiance. The firm of Merkel & Co is determined to keep the euro as a going concern because they have invested too much political as well as financial capital in this gimcrack scheme to admit their mistake.
Sooner or later, the lethal combination of free markets and a free press was bound to expose the euro as a confidence trick. Now that this has happened, the Germans are demanding that their leaders restore confidence in the currency. For the moment, their efforts are focused on preventing Italy and the other defaulters from leaving the eurozone. Such efforts look doomed to fail. Germans are used to bailing out their own eastern provinces, but they cannot do the same for half of Europe.
According to the historian Timothy Garton Ash, the talk in Berlin political circles is of a “German Europe”, fit to compete with China (and, I would add, a resurgent America). But Europe is not ready for a German makeover. Nor is this what most Germans really want. A majority of Germans (54 per cent) long for the return of the Deutschmark. Their allegiance is still to their own country and its institutions. They have no desire to run those of others.
A solution to the crisis begins to suggest itself. The centre cannot hold. Therefore Germany should offer its fellow member states in the eurozone a looser relationship that would allow national currencies to find their own value. Admitting that the euro has failed as a currency would not mean that “Europe” has failed too. It would be a long-overdue recognition not only of economic, but also of human, reality. The end of the euro need not mean the end of Europe.
In the next few days we shall discover whether Chancellor Merkel and her grizzled, tough-minded finance minister, Wolfgang Schäuble, are ready to face that reality. Unlike Berlusconi, they are not yet discredited in the eyes of their nation. That fate only awaits them if they delay much longer before accepting the inevitable.
Daniel Johnson is the editor of Standpoint (www.standpointmag.co.uk)

Having thought about this situation "in the whole" as it were - this does seem to me exactly like a comment I read some time ago in a blog:

It went something like this - "Germany has tried several times to defeat not only this country, as in the past, but any country which it feels it can overpower. The Germans are a very patriotic and hard working people, but only in the sense of "their country". They would, if given the opportunity, like to govern over a vastly larger area. This Europe which has been created can so easily facilitate their power lust." (see previous post about "Why Germany Won't Act")

Merkel talked a few days ago about "there should be more Europe" - I took this to mean that the Members should be increased. Am I wrong in thinking that this could be a way of these countries that join who really are not very economically viable, joining but finding they are eventually in the same position as Greece and Italy? Victims of being drawn in a "spiders web" and then left at the mercy of who - Germany?