Re: New EC Thread

[Panda]

GOOD TO SEE YOU BACK,PANDA

Thanks Badboy, I see there have been a lot of views in my absence ...but no one posting LOL Even Germany is feeling the pinch and I wouldn't be surprised if the Euro crashes, Greece is expendable but Spain isn't , according to the Analysts.

[Panda]

Europe Needs 'Painful Reforms' To Ease Crisis


As a eurozone crisis looms once again, German Chancellor Angela Merkel says hard choices must be made.


2:53pm UK, Tuesday 25 September 2012

Ms Merkel is calling for more austerity measures

The ECB has promised to help over borrowing

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Robert Nisbet

Europe Correspondent

More from Robert | Follow Robert on Twitter


German Chancellor Angela Merkel has said Europe must take "a deep breath" and bring in painful reforms if it is to conquer the debt crisis.

Speaking to business leaders, the politician acknowledged that Germany is "not an island" and is being buffeted by the harsh winds from so-called periphery countries such as Greece, which are struggling to stay solvent.

The Chancellor insisted that austerity measures to raise revenue and trim public sector bloat, together with structural changes to improve competitiveness, would help shore Europe's foundations.

But she dismissed calls for Germany to allow workers' wages to climb, to make its exports less competitive in order to give other countries a helping hand.

She also denied that Germany was blocking an effort to put the eurozone's 6,000 banks under a single regulatory body, although Berlin believes it necessary to supervise only "systemically important" lenders.
Property for sale signs in Barcelona, Spain
Her comments come as a series of events mark the resurrection of the eurozone crisis after markets were calmed by the promise of intervention by the European Central Bank (ECB) to reduce borrowing costs for troubled countries.

Today, anti-austerity protesters are vowing to surround the Spanish parliament, while police in Greece are preparing for thousands to take to the streets on Wednesday, as part of another general strike.

French President Francois Hollande on Thursday could outrage some of his supporters by unveiling a budget designed to bring the country's deficit from 4.5% to 3% of gross domestic product, which could see budget cuts and tax rises.

The socialist leader was elected on an anti-austerity ticket.

Again on Thursday, the Spanish Prime Minister Mariano Rajoy will unveil plans for his 2013 budget which could close tax loopholes, fine polluters and torpedo a tax break for home-buyers.
A Greek sign urging attendance at a 24-hour general strike
It will be his fifth austerity push since he won last December's election.

Then, on Friday, the result of stress tests into 14 Spanish banking groups will be released and is expected to show the housing collapse and economic slump has left many much weaker than had been predicted.

The troubled banks have already been promised an EU bailout to push up their capital reserves but, so far, the Spanish government has refused to ask for a sovereign bailout in order to trigger the ECB's bond-buying rescue mission.

The problems in the eurozone may appear to have faded, but the underlying problems of high debt and low growth remain across much of the continent.

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Greece
Russians bargain-hunting in Northern Aegean



25 September 2012I Kathimerini Athens

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jdn / flickr

Second homes, hotels, land and football clubs… Greece, and particularly the region of Thessaloniki, is being swept by a tide of Russian money. A financial windfall which could have an impact on the privatisation of the country’s infrastructure.

Stavros Tzimas

Ultra-nationalist Vladimir Zhirinovsky should be pleased. His prophecy, announced shortly after the collapse of the Soviet bloc, that the day when “Russians would wash their boots in warm seas” was near at hand, appears to be coming true. But this Tsarist dream of an empire that extends from the Mediterranean to the Indian ocean will not be realised by force of arms, but rather by tourist flows.

With his offer of a range of luxury holiday homes on the Kassandra Peninsula [southeast of Thessaloniki], entrepreneur Sergei Fentorov, a member of the Moscow Chamber of Commerce and Industry and a former nuclear submarine lieutenant, is already part of this dream.

And he is not alone. Just opposite, on the Sithonia Peninsula, the villa nestling amid four hectares of pine covered hills with a remarkable view on Mount Athos apparently belongs to Prosecutor General Yury Chaika, Russia’s second most powerful man after Vladimir Putin.


Bargains at prices that are undervalued 30%



More and more rich Russians are buying up second homes in the Halkidiki [region of Northern Greece], while Russian companies are purchasing hotels and investing in land. No one knows exactly how much they have already bought.

But it appears that Russians are already the owners of a major hotel development in Potidaea and another in Psakoudia, and that they aim to participate in a call for tender for a major hotel in Gerakini. At the same time, they are partners in a joint venture with a Greek company to build a further 600-bed hotel in the region.

A Russian company is also involved in the purchase 4,200 hectares in Sithonia, which is to provide the location for a five-star hotel, at a time when Russian interests control the quasi-totality of the surging tourist flows from former Soviet bloc countries.

“Usually, they are looking to buy bargains at prices that are undervalued 30%,” explains Gregoris Tassios, the President of the Halkidiki Hoteliers Union. “They invest in land, luxury villas and hotels. They have already acquired eight to ten hotels.”

“I don’t think Russia has a relationship with any other country in the world which is the same as the one it has with Greece,” explains Terenty Meshcheryakov, a member of the Saint-Petersburg regional government. This the reason why they are investing in real estate everywhere, and not just in Halkidiki.


Northern Greece being kept alive by the Balkans



Russian investors are taking an interest in islands like Crete, Corfu and Patmos. Russian funds have already bought the Thessaloniki football club P.A.O.K, and shown an interest in the national rail company OSE. In the business world, it is rumored that they may be hoping to acquire a port in Northern Greece, especially Thessaloniki, within the framework of the country’s privatisation programme. This would spare them the exorbitantly expensive nightmare of shipping through the Dardanelles Strait, which is mainly controlled by the Turks [ even though it is classed as international waters].

The Russians may not be the only ones undertaking massive investment in tourism in Northern Greece, the “Pearl of the Northern Aegean” has also attracted attention from investors in Balkan countries who are increasingly buying houses and small hotels, and sending more and more tourists to the region.

For example, Bulgarian President Rosen Plevneliev owns a chalet in Ouranopoli, former Macedonian prime minister Vlado Bučkovski has a home in Neos Marmaras, and a number of Serbian and Albanian government representatives have also acquired residences in the area. “We will have to take into account the fact that here, in Northern Greece, tourism and the general economy are being kept alive by the Balkans,” says a local hotelier.

[Panda]

Eurozone crisis
Federalism or death!



28 September 2012Le Point Paris


For French philosopher Bernard-Henri Lévy, Europe has no option but advance towards the simple goal of political union. If not, the euro will die.

Bernard-Henri Lévy

If there is no political Europe, the euro will die.

This death could take many forms and there may be many detours along the way.

It could be an explosion, an implosion, a slow death, a dissolution, or a division.

It could take two, three, five, ten years, and be preceded by a large number of remissions, which, on each occasion, give the impression that the worst has been avoided.

The trigger event might be the collapse of Greece, bludgeoned by austerity plans that are impossible to implement and unbearable for the people, or it might be sparked by some court of Karlsruhe that will refuse, in the name of Germany, to take on the unlimited risk prompted by the default of a member state.

But it will die. One way or another, if nothing happens, it will die. This is no longer a hypothesis, a vague fear, a red rag waved in the face of recalcitrant Europeans. It is a certainty. And this certainty is not only a logical deduction (that takes account of the absurd chimera of an abstract single currency cut adrift from economies, resources, and common taxation if things stay as they are) but also a historical one (all the situations over the last two centuries that are reminiscent of the crisis we are currently experiencing).

For the Euro is not the West’s first experiment with a single currency. There have been at least six such initiatives, and although, as always, the different situations are not comparable, a narrative of these experiments is rich in instruction.

Two of them clearly failed, and they failed for reasons ranging from national egotism to disparities in development between countries, which could not, without union, speak the same monetary language (and in the first of these cases, the key episode was a default by none other than... Greece!). These two long-forgotten initiatives were the Latin Monetary Union (1865-1927) and the Scandinavian Monetary Union (1873-1914).

Two quickly and clearly succeeded – and if in both instances they succeeded, it was because the process of monetary union was accompanied by political union. This was the case of the Swiss franc, which, with the adoption of the 1848 constitution that founded the Swiss Confederation after half a century of hemming and hawing over the political price of economic union, replaced the different currencies until then minted by Switzerland’s various cities, cantons and territories. And it was also the victorious lira that triumphed, at the moment of Italian unification, over a myriad of currencies indexed on the coinage of German states, on the French franc, on Italy’s duchies and ancient republics.

Thus two – having groped in the dark, having retreated, having nearly failed – succeeded; yes, two invented a veritable single currency, but only after a thousand crises, setbacks, temporary repeals; and thanks to courageous leaders, who understood that a currency can only exist if it sustained by truly common policies on budgets, taxation, the allocation of resources, labour laws, and all of the rules of the social game.

This is the story of the Deutschmark, which prevailed, almost 40 years after the Zollverein of 1834, over the florins, thalers, Kronenthalers and other marks of the Hanseatic cities; and it is also the story of the dollar, which – and we cannot say this enough – took 120 years to establish itself, and only truly came of age when it was decided to federalise the debt of the individual states of the Union.

The theorem is ineluctable.

Without federation, no single currency.

Without political unity, the currency will last for a few decades, and then, in the event of a war or a crisis, will crumble.

Without progress, in other words, towards the political integration identified as an obligation in every European treaty, but which no political leader, whether in France or Germany, appears to take seriously; without the surrender of competencies by nation states and an outright defeat of the "sovereigntists" who in reality are pushing populations towards isolation and disaster, the euro will fall apart just as surely as the dollar would have done if the Confederate forces, for example, had won the American Civil War.

In days gone by, people used to say socialism or barbarism.

Today we must say: political union or barbarism.

Or better still: federalism or fragmentation – and with fragmentation, social regression, job insecurity, massive unemployment and poverty.

Or better still: Europe will either achieve the political integration without which no common currency has ever endured, or it will step out of history and sink into chaos.

We no longer have a choice: it is either political union or death.

All the rest – the ritual incantations of some, the short-term deals of the other, the solidarity fund thingy and stabilisation bank gismo – will only serve to delay the moment of truth and prolong the illusion that the dying patient can still recover.

Translated from the French by Mark McGovern

[Panda]

Finland and the Netherlands have a tighter fiscal policy and are more likely to weather the storm say analysts.

Inflation in the EU has risen to 2.7% when it was expected to be 2.4%.

Greece may not get another bail-out according to the ECB and the IMF has been warned not to interfere. The IMF is meant to help poor Countries and there is very little in the kitty, so Mdme La Garde must not get too involved in the EURO crisis at the expense of other Countries.

Investors are not interested in buying European Bonds issued by those Countries in trouble , even Germany is starting to feel the effect of the World recession.

The social unrest in Greece and Spain has escalated and will only get worse as the austerity measures bite.

[Panda]

Staring into the eurozone abyss

• The domino effect
  
• Austerity versus growth
  
• A new union
  

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Shared times in 10 languages

The domino effect

• 
  European Council
  Yes, the euro is mortal
  
  
  The European Council cannot afford the hunt for a new compromise in the short term, warns the European press. European leaders must take seriously the risk that the single currency will collapse – and with it, the EU.
  
  28 June 2012121
  39
  PresseuropLe Monde, Handelsblatt, Público & 2 others
  
• 
  European Council
  Europe’s Vietnam
  
  
  On the eve of an umpteenth “last chance summit,” leaders of the EU’s 27 member states are continuing to stick to their guns, vainly hoping that the crisis will simply resolve itself. In their inability to come to terms with an increasingly negative situation, they are a lot like the American generals who continued to bombard Vietnam when they knew the war was already lost.
  
  28 June 2012156
  120La Repubblica Rome
  
• 
  Eurozone
  Germany — make the bad choice, not the disastrous one
  
  
  The finale of the euro has begun, warns the Süddeutsche Zeitung, and Angela Merkel will have to decide before the EU summit whether and how Germany can save the common currency.
  
  26 June 2012206
  202Süddeutsche Zeitung Munich
  
• 
  Debt crisis
  EU is the least worst option for Cyprus
  
  
  On 25 June, Cyprus submitted an official request for EU financial aid, and, as the O Phileftheros headline points out, the island can now count […]
  
  26 June 201230
  PresseuropO Phileleftheros , Politis
  
• 
  Eurozone crisis
  Saving Private Euro goes Rome
  
  
  Angela Merkel, Mariano Rajoy, François Hollande and Mario Monti, the leaders of the four heavyweight eurozone states, are meeting in Rome this June […]
  
  22 June 201246
  10
  PresseuropL'Espresso, Le Figaro, La Stampa, El País
  
• 
  G20
  Monti denies EFSF rescue is “bailout”
  
  
  Rumours have been rife for weeks, but it’s the British Daily Telegraph, at the close of the G20 summit in Mexico, that has smashed the taboo, revealing that Spain and Italy are on the verge of bailout. But is Mario Monti’s plan to use EFSF money to buy up debt really a bailout?
  
  20 June 201259
  16
  PresseuropThe Daily Telegraph, The Guardian, Corriere della Sera
  
• 
  Greece
  Back to dark ages if we go on like this
  
  
  The devastating effects of austerity on the Greek population are a warning that history is not an never-ending ascent to progress and enlightenment. Civilisations can also collapse, warns Boris Johnson.
  
  19 June 2012472
  15The Daily Telegraph London
  
• 
  Greece
  The worst has been staved off – for now
  
  
  Following the vote that gave victory to the “pro-memorandum” party, the European press breathes a sigh of relief: the concept of a Greece exit from the eurozone seems to have been ruled out for the moment. But the crisis in the single currency is far from having run its course.
  
  18 June 201269
  6
  PresseuropJornal de Negócios, Frankfurter Rundschau, La Vanguardia & 2 others
  
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  Italy
  In Rome, bailout is no longer taboo
  
  
  Despite reassuring announcements from the government, Italy’s Treasury is already peering closely at the terms of an assistance plan. Its goal: to find a painless solution that will prevent the third-largest economy in the eurozone from getting the Greek treatment.
  
  15 June 2012269
  164Linkiesta Milan
  
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  Cyprus
  A bailout, quick!
  
  
  It's been in the air for weeks — Nicosia is preparing to apply for €3bn to €4bn in emergency funding from the EU in order to recapitalise its struggling banks, highly exposed to Greek debt. But time is running out, writes the English-language Cyprus Mail.
  
  13 June 201279
  8Cyprus Mail Nicosia
  
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  Debt Crisis
  Italian press gets behind Monti amid bailout rumours
  
  
  Rumours that Italy, in the wake of Spain, may demand financial assistance from the EU have been vigorously denied, in particular by the […]
  
  13 June 201251
  125
  PresseuropLa Stampa, Il Sole-24 Ore
  
• 
  Banking crisis
  Everyone has been lying
  
  
  Banks and politicians are complicit in the banking disaster bank in Spain – and citizens will have to pay for the consequences. It’s a disgrace, angrily writes the director of Portugal’s Jornal de Negócios.
  
  12 June 2012425
  28Jornal de Negócios Lisbon
  
• 
  Spain
  Rajoy wins first hand in euro-poker
  
  
  After denying for weeks that the Spanish banking sector needed help, the Madrid government has gone to the EU with cap in hand. And to convince the Germans to go along, it played a clever bluff.
  
  11 June 2012108
  68El País Madrid
  
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  Spain
  Our time is nearly up
  
  
  Until this week, Madrid thought it would have to wait for the Greek elections before getting any help to solve its national bank crisis. But panic is now growing with no easy solution in sight.
  
  6 June 2012167
  166La Vanguardia Barcelona
  
• 
  Eurozone crisis
  Not even Germany is immune
  
  
  Bad news from the markets in Germany: for the first time since January, the DAX, the country’s major stock index, has fallen below […]
  
  5 June 2012123
  12
  PresseuropSüddeutsche Zeitung, Der Spiegel
  
• 
  EU economic scoresheet
  As crisis worsens, Brussels still in denial
  
  
  Despite clear evidence that its austerity policies are driving struggling members into ever deeper economic agony, the European Commission presented its annual economic report on May 30 seeking to defend a strategy that is bankrupt, argues the Guardian’s economics editor.
  
  31 May 2012342
  86The Guardian London
  
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  Banking crisis
  Can Spain make a solo comeback?
  
  
  Assurances from the head of government cannot amount to much: victim of a severe banking crisis, Madrid will soon be forced to seek help in the EU. Like Ireland, it will then be placed on a drip-feed – and under guardianship.
  
  29 May 2012213
  43El País Madrid
  
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  EU summit
  Hour of truth has come for Europe
  
  
  Let Greece leave the euro? Save Spain’s banks? Continue to stand fast on austerity, or give growth a chance? Plenty of questions that the leaders of the eurozone, meeting at the extraordinary summit on May 23, will have to find answers to if they want to preserve Europeans’ faith in the common project.
  
  23 May 2012103
  77El País Madrid
  
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  Editorial
  No way out?
  
  
  The term coined earlier this year when Greece was negotiating a write-off of part of its debt to the banks, “Grexit” (a portmanteau […]
  
  18 May 201248
  2
  Presseurop
  
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  Spain
  Budgetary discipline will bear fruit
  
  
  Faced with a further worsening of the financial crisis, Mariano Rajoy's government tries to give pledges to markets while demanding EU support. But when comparing his situation to those of Portugal and Greece, we realize that there is no alternative, says El Mundo.
  
  18 May 201258
  18El Mundo Madrid
  
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  Greek crisis
  The euro exit is a bluff
  
  
  As speculation rages about a Greek exit from the eurozone, we must grasp that the country cannot survive without the single currency and that Europe cannot afford to let it leave. That's why everyone should put their cards openly on the table.
  
  15 May 2012310
  84La Stampa Turin
  
• 
  Eurozone
  Banks could sink the euro
  
  
  Forget the debate about austerity versus growth, the future of the single currency is being played out in the banking sector. As a result of the crisis, governments and financial institutions have become so interdependent that they have weakened each other.
  
  14 May 2012352
  44NRC Handelsblad Rotterdam
  
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  Eurozone
  Greek threat raises its head once more
  
  
  The spectre of a Greek exit from the Eurozone has once again been raised by the political crisis in Athens: a scenario that is all the more dangerous for Spain, which is now more vulnerable, and one whose consequences would be geo-political as well as economic.
  
  11 May 2012280
  233El País Madrid
  
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  Economy
  IMF is a troublesome ally
  
  
  The International Monetary Fund, which recently warned Europe of the possibility of another crisis, forms part of the troika charged with rescuing countries in financial difficulty. However, over the last year under the presidency of France’s Christine Lagarde, the organisation which is often presented as a saviour has adopted a less conciliatory tone.
  
  18 April 2012202
  122NRC Handelsblad Rotterdam
  
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  euro zone
  The trillion-euro illusion
  
  
  On 29 March, EU finance ministers claimed to have come up with the right numbers with which to shield the eurozone from a new crisis. But it is a sleight-of-hand accounting that could crumble at the first sign of trouble.
  
  2 April 2012300
  8De Volkskrant Amsterdam
  
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  ECONOMIC CRISIS
  Western Europeans save more
  
  
  The crisis and rising unemployment have encouraged Western Europeans to save more. The Germans, Belgians and French are putting aside as much as 15-17% of […]
  
  2 April 201240
  1
  PresseuropDziennik Gazeta Prawna
  
• 
  Eurozone crisis
  Time for politics after the storm
  
  
  The European economy appears to have survived the worst of the crisis and to be on the road to recovery. However, progress towards this goal is is hampered by political hesitations and politicians doubts about their performance in future elections.
  
  14 March 2012107
  57La Stampa Turin
  
• 
  Greece
  Shipwreck has been avoided
  
  
  Having succeeded in convincing between 85% and 95% of its creditors to write down part of its debt, the Greek government has finally accomplished one of the tasks expected of it. But now it will have to convince the people that the sacrifices it has demanded will not be vain.
  
  9 March 201296
  146To Ethnos Athens
  
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  Fiction
  Hitchhiker’s Guide to the eurozone crisis
  
  
  What if the euro crisis were merely a devilish experiment set up by a gigantic computer disguised as Planet Earth? The Berlin cabaret artist Horst Evers runs though the euro crisis – but by the rules of Douglas Adams’ alternative universe. And he finds the human race isn’t quite up to their job.
  
  2 March 2012361
  10Cicero Berlin
  
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  Eurozone crisis
  The great European fire sale
  
  
  All over Europe, nations are looking for a quick way to raise cash. All of them seem to have the same idea – to sell off state assets.
  
  21 February 2012521
  57The Independent London
  

Austerity versus growth

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  France-Italy
  Latin “growth axis” vs. German “discipline axis”
  
  
  Are we assisting at the birth of what the La Repubblica headline describes as the “ Monti-Hollande growth axis”? In the wake of the Rome […]
  
  15 June 201258
  20
  PresseuropLe Monde, La Repubblica, La Stampa
  
• 
  Debt Crisis
  Berlin blind to lessons of history
  
  
  Germany has failed to grasp the historical dimension of the European crisis, warn British historian Niall Ferguson and Turkish economist Nouriel Roubini. In an essay […]
  
  11 June 2012117
  36
  PresseuropDer Spiegel, Financial Times
  
• 
  Ireland
  Why this fiscal compact is necessary
  
  
  As Ireland votes in a referendum on the German inspired fiscal compact on May 31st, the Irish Times invites the electorate to focus on the treaty and not on extraneous issues.
  
  30 May 201256
  1The Irish Times Dublin
  
• 
  Ireland
  “No, but...” to the fiscal compact
  
  
  In the midst of an economic crisis still in constant flux, it would be pointless for the Irish to vote Yes on the May 31st referendum on the fiscal compact, which for the moment is but a collections of penalties for misbehaving signatories. Come back later, argues Fintan O’Toole.
  
  30 May 201274
  63The Irish Times Dublin
  
• 
  Eurozone crisis
  The end of all-powerful Germany
  
  
  The advent of a new administration in Paris has shifted the balance of power in the European Union away from Berlin and German austerity — a development that has been welcomed in Athens as a source of renewed hope and a light at the end of the tunnel for the Greek population.
  
  24 May 2012275
  91To Vima Athens
  
• 
  EU summit
  Growth — the new magic word
  
  
  In recent months, EU leaders from all spectrums have embraced the notion of "growth". But how can it be generated? Although a practical discussion on this issue has not yet really arisen, infrastructure projects could perhaps be part of a solution to the crisis.
  
  23 May 2012255
  26Trouw Amsterdam
  
• 
  Editorial
  Let the debate begin!
  
  
  Is François Hollande the “darling of Brussels” lauded by left-wing daily Libération, or the “rather dangerous” man, feared by the liberal weekly, The Economist ? […]
  
  27 April 2012175
  8
  Presseurop
  
• 
  Debt crisis
  End of the road for European austerity?
  
  
  With France likely to vote in a socialist president critical of her fiscal pact, and a Dutch government collapsing on the issue of social reforms, German Chancellor Angela Merkel’s austerity model is taking a battering.
  
  24 April 2012577
  44The Guardian London
  
• 
  Economy
  2012 – the Hollande Revolution
  
  
  He is dull, pragmatic, consensual. And yet, if elected president of France, the Socialist candidate may be able to change the course of politics in Europe, a Spanish columnist believes.
  
  24 April 2012379
  10El País Madrid
  
• 
  Employment
  The crisis, golden opportunity for employers
  
  
  Pressed hard by the recession and national debts, European governments are rewriting the labour law, whether watering down job protection or cutting wages. And employers are smiling.
  
  23 March 20122120
  53Frankfurter Rundschau Frankfurt
  
• 
  Fiscal Compact
  Thatcher has won battle for Europe
  
  
  Intended to assure the euro will survive forever, the fiscal pact adopted in early March endorses the “authoritarian capitalism” promoted by the Iron Lady. The budget cuts it advocates, however, are being dictated not by democratically elected governments but by financial markets, writes a Swedish columnist.
  
  12 March 2012286
  25Aftonbladet Stockholm
  
• 
  European Council
  There are alternatives to the fiscal compact
  
  
  The new treaty signed by 25 member states in Brussels on March 2 is supposed to create a new era of fiscal responsibility and economic union, but it is half-baked and reinforces the EU’s undemocratic credentials, argues a British columnist.
  
  2 March 2012164
  42The Independent London
  
• 
  European Council
  Anti-austerity front grows in Europe
  
  
  The European Union Council, which begins on Thursday, is scheduled to sign the new fiscal compact. But at the same time, a dozen countries, led by Italy, are contesting the austerity policies imposed by "Merkozy" and calling for an economic stimulus package.
  
  1 March 2012299
  46Le Monde Paris
  
• 
  Eurozone crisis
  Europe says goodbye to solidarity
  
  
  The solidarity that has always been at the heart of the European project is based upon hard-headed self interest. For the union to survive the current crisis, it needs to relearn this simple principle.
  
  24 February 2012341
  86Financial Times London
  
• 
  Eurozone crisis
  No-one wants a German budget commissar
  
  
  The idea of pinning the second Greek bail-out on the acceptance by Athens of supervision by a European budget commissioner, a German proposal unveiled on the eve of the January 30 European Council meeting, is nothing less than a violation of state sovereignty, according to the European press.
  
  30 January 2012106
  61
  PresseuropPúblico, Le Monde, Ta Nea & 2 others
  

A new union

• 
  European Council
  Monti and Rajoy sign away the sovereignty principle
  
  
  The agreement reached in Brussels on the initiative of Spain and Italy means one thing: three and a half centuries after its birth by the treaties of Westphalia, the nation-state can only survive by delegating sovereignty.
  
  2 July 2012182
  42La Vanguardia Barcelona
  
• 
  European Council
  A leap forward
  
  
  Banking union, relaunched investment, deepening political and economic union; the summit of June 28 and 29 should reignite Europe, says columnist Bernard Guetta. Too bad the players managing the crisis are more like auditors rather than visionaries.
  
  29 June 2012136
  106France Inter Paris
  
• 
  European Council
  A stress test for the Europeans
  
  
  By offering greater control over national budgets and banks, the heads of EU institutions are taking up the federalist challenge launched by Germany. But this solution risks provoking resistance from some member states – without weakening the attacks from the markets.
  
  27 June 201269
  61El País Madrid
  
• 
  European Union
  10 countries for a United States of Europe
  
  
  Ten EU foreign ministers participating in a “study group for the future of Europe” aim to exert pressure to transform the EU into […]
  
  20 June 20121969
  33
  PresseuropDie Presse
  
• 
  Debate
  Where to, crisis-stricken Europe?
  
  
  The day after the emergency aid to Spanish banks was released, on the eve of a crucial vote in Greece and with rumours of an […]
  
  15 June 201228
  5
  PresseuropHandelsblatt
  
• 
  Debt crisis
  Political union: easier said than done
  
  
  Angela Merkel wants to move towards greater federalism and is suggesting a two-speed Europe. But that presents legal difficulties in Germany and is deepening the split with François Hollande.
  
  8 June 2012119
  28
  PresseuropFinancial Times Deutschland, Le Figaro
  
• 
  Debt crisis
  The price of the euro: German money, France’s independence
  
  
  In line with the newspaper’s pro-European position, today’s Süddeutsche Zeitung editorial argues that eurobonds are the only option to “save Europe” and will […]
  
  6 June 201285
  41
  PresseuropSüddeutsche Zeitung
  
• 
  Eurozone crisis
  Here comes the United States of Europe
  
  
  If Germany is to pay for the eurozone crisis, then fiscal and political union is the likely price. And plans for this are already being drawn up ahead of what could be a momentous EU summit on 28-29 June.
  
  5 June 2012817
  91The Guardian London
  
• 
  Eurozone crisis
  “Maastricht 2” to save Spain and Cyprus?
  
  
  Rapid degradation of the crisis in Spain and the news that Nicosia is about to ask the EU for financial aid, are forcing […]
  
  4 June 201292
  15
  PresseuropDiário económico
  
• 
  Eurozone
  Barroso for banking union
  
  
  On 30 May, at a news conference to present the European Commission’s annual report on the economies of the EU’s 27 member states, […]
  
  31 May 201237
  21
  PresseuropDer Standard
  
• 
  Debate
  Europe must choose
  
  
  “What will become of the European Union?” wonders The Economist. For the influential business weekly, the choice is simple, either a break-up of […]
  
  25 May 201298
  29
  PresseuropThe Economist
  
• 
  EU summit
  A way out of the crisis begins here
  
  
  In their discussion on common investment and eurobonds at an extraordinary summit on 23 May, the EU27 set aside the opposition between “virtuous” and “spendthrift” states and took a further step towards economic integration.
  
  24 May 2012162
  120France Inter Paris
  
• 
  Debate
  The European grand coalition
  
  
  Until now, ideological discussion has been off the menu in a Europe which lacked a genuine culture of debate. Now that we have a French President and a German Chancellor from opposing sides of the political divide, perhaps the EU can revive the interest of its citizens with public exchanges of views on important issues.
  
  16 May 2012159
  15Süddeutsche Zeitung Munich
  
• 
  Debt crisis
  You can’t buy your way to growth
  
  
  European leaders are seeking growth as a way to attenuate the social consequences of austerity measures. But simply giving money to the countries of Southern Europe, which do not have the adequate economic foundations, is a pipe dream, warns a Swedish commentator.
  
  19 April 2012279
  94Dagens Nyheter Stockholm
  
• 
  European Union
  German minister calls for new EU constitution
  
  
  Despite being rejected in referendums in France and the Netherlands in 2005, Germany is seeking to revive the EU Constitution, writes The Times. Speaking at […]
  
  15 March 2012100
  8
  PresseuropThe Times
  
• 
  Editorial
  New order
  
  
  This time around, there was no question of a last-ditch summit. Nonetheless, the 30 January European Council meeting will have far reaching […]
  
  3 February 201261
  21
  Presseurop
  

Editorial



Two years have passed since, May 9, 2010, when the 27 Eurozone leaders believed all that was needed to avert the danger of euro collapse was to create a €750 billion emergency fund.

But the crisis continued to spread, affecting major countries like Spain and Italy. The money earmarked for struggling countries has not prevented financial markets from destabilising the single currency. And austerity measures have only had the effect of weakening economies and deteriorating the living conditions of Europeans.

We must find something else. In 2012, it is growth and debt pooling that are central to the debate. But for that, the Europeans may have to enter into greater political union. A new Europe to negotiate its way out of the crisis? This is the challenge that this report aims to tackle.

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Spanish Banks Stress Tests Show Capital Deficit of $76.3 Billion


By Charles Penty and Emma Ross-Thomas - Sep 29, 2012 1:00 AM GMT+0100

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Play

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Will Spain Ask for the Cash It Needs?
Spain’s banks have a capital deficit of 59.3 billion euros ($76.3 billion), less than previously estimated, according to a test designed to lift doubts about the financial industry’s ability to absorb losses.





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Spain's Prime Minister Mariano Rajoy




Angel Navarrete/Bloomberg

Spain's Prime Minister Mariano Rajoy.

Spain's Prime Minister Mariano Rajoy. Photographer: Angel Navarrete/Bloomberg




2:52
Sept. 28 (Bloomberg) -- Randy Warren, chief investment officer at Warren Financial Services, talks with Bloomberg's Scarlet Fu about results of Spanish bank stress tests and investors seeking the safety of U.S. Treasuries. He speaks on Bloomberg Television's "Lunch Money."



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Spain Banks Have $76.3 Billion Capital Deficit Under Stress Test




Angel Navarrete/Bloomberg

The Kio towers, the headquarters of Bankia SA, in Madrid.

The Kio towers, the headquarters of Bankia SA, in Madrid. Photographer: Angel Navarrete/Bloomberg



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Spain Banks Have $76.3 Billion Capital Deficit Under Stress Test




Denis Doyle/Bloomberg

Banco Popular Espanol SA had a 3.22 billion-euro shortfall.

Banco Popular Espanol SA had a 3.22 billion-euro shortfall. Photographer: Denis Doyle/Bloomberg

The Bankia (BKIA) group, a nationalized lender, had a 24.7 billion-euro deficit and Banco Popular Espanol SA (POP) had a 3.22 billion-euro shortfall in stress tests conducted by management consultants Oliver Wyman and released yesterday. The tests of 14 lenders showed no deficit for seven including Banco Santander SA (SAN), Banco Bilbao Vizcaya Argentaria SA (BBVA) and Banco Sabadell SA, the Bank of Spain and Economy Ministry said in a statement.

Spain commissioned the stress test as part of terms to win a European bailout of as much as 100 billion euros for its banking system after more than 180 billion euros of losses linked to souring real estate. Demonstrating how lenders would bear an extreme scenario -- a three-year economic contraction -- is part of the government’s drive to show it’s fixing the economy while debating whether to seek another rescue package.

“The tests look credible with good methodology and it’s what Spain needed to do, but the market is still going to test them,” Luis Garicano, an economy professor at the London School of Economics, said in a phone interview.

The total capital deficit is less than the 62 billion euros Oliver Wyman estimated in June that banks would need. The 59.3 billion-euro shortfall number doesn’t account for mergers under way and deferred tax assets. With mergers and tax effects, the amount is 53.7 billion euros, according to the statement.

Shortfalls, Surpluses


Spain may end up needing about 40 billion euros of European funds for its banks, less than the stress-test shortfall, Deputy Economy Minister Fernando Jimenez Latorre said in a news conference in Madrid.

That’s because a so-called bad bank set up to house soured assets will help lenders reduce their capital needs as they also raise funds by selling businesses, he said. Spain, which will create such a vehicle under the terms of its banking bailout, will describe the criteria for doing so next week, Jimenez Latorre said.

In its worst-case scenario, Oliver Wyman said it assumed a real decline in gross domestic product of 4.1 percent in 2012, 2.1 percent in 2013 and 0.3 percent in 2014, and estimated that unemployment would rise to 27.2 percent in two years’ time. Barclays Plc predicts Spanish gross domestic product will shrink 1.8 percent in both 2012 and 2013. Morgan Stanley forecasts a 2.2 percent decline this year and 1.3 percent next.

Doubts Remain


The tests factored in Spanish 10-year debt yields of 7.4 percent this year and 7.7 percent in 2013 and 2014, Oliver Wyman said. The adverse scenario would mean retail mortgage default rates of 4.1 percent while accumulated projected losses on real estate developer credit would reach 43 percent of loan balances, the firm said.

The International Monetary Fund and the European Central Bank backed the stress test results. Even so, the exercise didn’t convince all analysts.

“They went to all this trouble but what they came up is a result that probably won’t change the opinions people had formed in June,” Daragh Quinn, an analyst at Nomura International in Madrid, said in a phone interview. “They’re still not going to convince people that they’ve definitively drawn a line under Spanish bank risks.”

Oliver Wyman’s use of 6 percent as the core capital ratio threshold in its worst-case scenario is a concern for some analysts, Quinn said. The equivalent effective rate used by Ireland for its stress test, including a buffer, was 9 percent.

Popular Plan


The seven banks with capital deficits in the adverse scenario also include the nationalized lenders Catalunyabank and NCG Banco, with a 10.8 billion-euro and 7.2 billion-euro shortfall, respectively, according to the statement.

A group including Ibercaja, Caja3 and Liberbank had a 2.1 billion-euro deficit and the Unicaja and Caja Espana-Caja Duero group a 128 million-euro surplus, the results show. Santander had a 25.3 billion-euro surplus and BBVA’s was 11.2 billion euros. CaixaBank (CABK) and Banca Civica had a combined 5.7 billion- euro surplus, while Bankinter SA (BKT)’s totaled 399 million euros.

Popular repeated its position that it won’t seek state aid and will present a business plan and strategy to bolster capital shortly, the Madrid-based lender said in a filing to regulators.

The test results follow the Sept. 27 announcement of Spain’s 2013 budget, which outlined the government’s plans to freeze public wages, end tax rebates on mortgages, tax lottery winnings and cut ministry spending. Spain is committed to cutting its budget deficit to 4.5 percent of economic output next year compared with a 6.3 percent goal for 2012.

Loan Quality


The stress tests analyzed 36 million loans and 8 million guarantees using information from the databases of lenders and the Bank of Spain, according to the statement. A team of more than 400 auditors verified the quality of loans by examining 115,000 loan operations.

The Oliver Wyman stress test follows government orders to banks in February and May to recognize 84 billion euros of losses on real estate assets and a royal decree last month that lays out a legal framework for dealing with failing lenders and setting up a bad bank to isolate soured assets.

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ECB’s Asmussen Joins IMF in Warning Greece May Need More Aid


By Stefan Riecher - Sep 29, 2012 12:00 AM GMT+0100


European Central Bank Executive Board member Joerg Asmussen said Greece may need more aid, joining the International Monetary Fund in expressing doubt that the two existing bailouts will suffice.

Even if Greece meets its budget goals, “there could be additional need for external financing because, for example, growth is worse than was initially anticipated,” Asmussen said at an event in Berlin yesterday. Such financial aid can only come “from the member states of the euro zone,” he said, ruling out ECB involvement because that would be “prohibited monetary state financing.”





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ECB’s Asmussen Joins IMF in Warning Greece May Need More Aid




Angelos Tzortzinis/Bloomberg

International lenders have so far pledged funds totaling 240 billion euros ($309 billion) to Greece, which also had 100 billion euros written off its debt by private-sector investors this year in the biggest restructuring in history.

International lenders have so far pledged funds totaling 240 billion euros ($309 billion) to Greece, which also had 100 billion euros written off its debt by private-sector investors this year in the biggest restructuring in history. Photographer: Angelos Tzortzinis/Bloomberg

The comments mean two thirds of the so-called troika that’s inspecting Greece’s financial position have now publicly spoken about the possible need for an additional bailout. IMF Managing Director Christine Lagarde said on Sept. 24 Greece faces a financing gap that won’t be solved by budget measures because a weak economy and delayed privatizations have worsened its fiscal situation.

“This is the first time that an ECB official is talking about more aid for Greece in such an explicit way,” saidJacques Cailloux, chief European economist at Nomura International Plc in London. “It can be interpreted either as a possible aid package or another” debt writedown, he said.

International lenders have so far pledged funds totaling 240 billion euros ($309 billion) to Greece, which also had 100 billion euros written off its debt by private-sector investors this year in the biggest restructuring in history.

Troika Returns


Inspectors from the troika, which comprises the European Commission, the IMF and the ECB, will return to Athens on Sept. 30 to continue to assess whether Greece is meeting the terms of its bailout and can receive the next installment.

In a March report on Greece, IMF economists said the country may need more aid from Europe or further debt restructuring if the current loan program went off track.

Lagarde has said the IMF will not lend Greece any more money and the ECB has rejected participating in a debt restructuring. German Finance Minister Wolfgang Schaeuble has also ruled out further aid, saying the last bailout stretched international creditors to their limits.

Greek Prime Minister Antonis Samaras has struggled to broker an agreement with the troika and his coalition partners on a package that will include more than 7 billion euros of cuts to wages, pensions and benefits in a country battling a fifth year of recession and with nearly a quarter of the workforce unemployed.

The two-year budget-cut package, worth 13.5 billion euros overall, is key to Greece receiving the next tranche of the existing bailout. Greece’s budget deficit is due to shrink to about 7 percent of GDP this year from 9.1 percent in 2011.

“There is a budgetary gap in Greece which needs to be closed,” Asmussen said. “The Greek government has to deliver.”

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Spain's crisis flares again as AAA club scuppers bank rescue deal


Spain's debt crisis has returned with a vengeance after Germany, Holland and Finland reneged on a crucial summit deal and scuppered hopes of direct eurozone help for Spanish banks.








Catalan leader Artur Mas has set off a constitutional crisis by calling a snap poll for November 25 – deemed a proxy referendum on independence






By Ambrose Evans-Pritchard, International Business Editor

8:50PM BST 26 Sep 2012

356 Comments




Yields on 10-year Spanish bonds punched back above the danger line of 6pc and spreads over German Bunds reached 450 basis points, intensifying pressure on Madrid as it continues to resist a sovereign bail-out.


The alliance of hardline creditors said the European Stability Mechanism (ESM) – or bail-out fund – could not be used to cover “legacy assets” from past banking crises, even after the eurozone’s banking supervisor starts work next year.


This prevents the ESM from recapitalising Spain’s crippled banks directly under a €100bn (£79bn) loan package agreed with Madrid in June. The burden will fall entirely on the Spanish state.


The Spanish newspaper Expansion said the AAA trio had “dynamited” the EU accord. The extra debt burden is likely to be around €60bn or 6pc of GDP, depending on bank stress tests to be unveiled on Friday. Pessimists fear it could rise to 15pc of GDP once full losses from the property crash are crystallised.


The European Commission appeared shocked by the German-led volte-face, saying the original summit deal was “quite clear”. All EMU leaders signed a pledge to break the “vicious cycle” between banks and states. The document said the ESM must be allowed to “recapitalise banks directly”, clearly referring to Spain.

Daily Telegraph Business 27/9/12

[Badboy]

POLICE IN GREECE ARE TELLING PEOPLE TO GO TO NEO-NAZI GOLDEN DAWN TO SOLVE CRIME PROBLEM BECAUSE POLICE HAVE NO RESOURCES.

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French Target Rich And Business In New Budget


The socialist French government launches a "fighting budget" but quickly cops flak for targeting the wealthy and big business.


2:08pm UK, Friday 28 September 2012

France's President Hollande has been criticised for slow social reform

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By Robert Nisbet, Europe Correspondent

The French government is targeting big business and the wealthy as it aims to reduce its budget deficit and kick start growth.

The ruling socialists are reducing the threshold for a wealth tax, bringing in a 45% marginal tax rate for high earners, while those earning over 1m euro (£820,000) a year will have to pay 75% of their taxable income to the treasury.

Industry is also in the firing line - tax breaks for business brought in by former president Sarkozy will be shelved, and large companies will be paying more capital gains tax.

"This is a serious budget, it's a leftist budget and it's fighting budget," French finance minister Pierre Moscovici said.

In all, these measures will contribute 20bn euro (£16bn) to the coffers, while spending cuts will account for another 10bn euro.

The 2013 budget is designed to reduce France's budget deficit from 4.5% to 3%.

France is the second largest economy in the eurozone, but has been struggling with stagnant growth for three successive years, and unemployment has just passed the psychologically and politically damaging barrier of three million.

Critics have rounded on the government over the budget, saying it sends a message that France targets the rich and dislikes for business.

"France is sick from a model that isn't viable," Guillaume Carou, CEO of Didaxis and president of the Club of Entrepreneurs, which represents 15,000 small businesses said.

"But (the government has) chosen to keep it, that's what the 2013 budget reveals."

President Hollande was elected four month ago on a tide of anti-austerity fervor, but has seen his popularity fall from 63% to 43%, as he has been forced to alter or abandon key electoral pledges

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POLICE IN GREECE ARE TELLING PEOPLE TO GO TO NEO-NAZI GOLDEN DAWN TO SOLVE CRIME PROBLEM BECAUSE POLICE HAVE NO RESOURCES.

Yes Badboy, the situation in Greece is very bad and now there is a dispute over whether Greece will get the next tranche because the austerity measures taken so far do not meet the requirements.

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Towards a diplomacy without inhibitions



28 September 2012El País Madrid

Kazanevski

To make Europe’s voice heard on the world stage, its policymakers should adopt a more incisive and strident tone. A number of rambunctious young ministers of foreign affairs, like Poland's Radoslaw Sikorski and Finland's Alexander Stubb, are revamping the old continent’s old fashioned sense of protocol.

Jordi Vaquer

“Your interests lie in Europe. It’s time that your sentiments did as well,” the Polish foreign minister told his British audience last Friday. That doesn’t sound like what we call diplomatic language, but Radislaw Sikorski is not a foreign minister from the old school. Sikorski didn’t mince his words in Oxford – support and take part in a stronger EU or risk isolation, he came to say – and neither did he mince them in November 2011 in Berlin.

You are not the innocent victim of others’ profligacy, he told his hosts. You repeatedly broke the Stability and Growth Pact, and your banks lent uncontrollably and bought high-risk bonds, then unloaded them onto the German citizenry. There in Berlin he also uttered a statement that, coming from a Polish minister, was nothing less than historical: “I fear German power less than I am beginning to fear German inactivity.” Unambiguous and straight to the point.

Sikorski is not your typical European foreign minister, but he’s not alone in his new style. Carl Bildt, the contentious foreign minister of Sweden, doesn’t bite his tongue or shy away from controversy either. Bildt’s remarks have caused serious discord, for example by comparing the Russian intervention in South Ossetia with the Nazi annexation of the Sudetenland, and declaring that ‘Israel is the danger’ (and not Iran).


Polish strategy is paradigmatic



Controversies aside, Sikorski and Bildt share their blunt and unambiguous style in the Foreign Affairs Council – the body that brings together foreign ministers from across the EU – with the young Finnish Minister, Alexander Stubb, who is a regular columnist, blogger and tweeter actively involved in national and European policy debates. Stubb, for example, going against the majority opinion in his country, defends Finland’s integration into NATO. Another diplomat with a similar style is the Bulgarian Nikolai Mladenov, who is particularly active in the Middle East.

Straight-speaking and relatively young, trained in English-speaking environments, with no diplomatic past, working together, dispensing with translations the better to communicate, these ministers will shape a new European foreign policy. Through incisive speeches and by working the social networks, by making alliances before meetings, cultivating intensive contacts with think tanks and opinion makers, and seeking the complicity of the common institutions with no fear of confronting them, the impact they are having on the EU’s foreign policy is greater than might be expected from the power of their states. At the same time, for that matter, they’re rolling everything along just where they want it to roll.

The Polish strategy is paradigmatic and not just because of the active role of the minister in challenging public opinion in other countries. In the context of its EU presidency in the second half of 2011, Warsaw boosted its support for Poland’s centres working in international relations and subsidised dozens of events across the EU, with the aim of setting Polish priorities at the centre of the discussions in Brussels and the national capitals.


A straightforward style



Poland is committing an important political analysis section to its ministry, which currently has five times more staff than Spain’s and is planning to double its size next year. Ideas, proposals and participation in a environment geared towards European thinking that transcends inter-governmental negotiations is becoming a key plank in Warsaw’s strategy.

The current crisis underscores the growing interdependence between EU Member States. Dealing with each other using the language and forms of traditional diplomacy and behaving in the EU as one would in any classic international negotiations can no longer be effective. The diplomatic language that prevails in Europe, the only thing that can stand up to the faits accomplis and direction by the big three (Germany, France and Britain) is not restricted to the inter-governmental circles of Brussels, the summits and the embassies.

It is a straightforward style that is not afraid of clashes of ideas, that no longer interprets diplomacy as an exchange of pre-defined interests in national capitals. European foreign policy is becoming an exercise in sharing analyses, shaping opinions, and shaping positions. It’s not enough to state one’s own position and proceed to negotiate it. The fundamental tasks of the foreign ministries today are to design and argue over ideas, before a public opinion that takes in all of Europe, with governments, media, analysts and citizens of other states, and collaborating with other diplomats as much with actors in society, the economy and the media. Those who have grasped this, starting with Poland, are at the heart of the new foreign policy of the EU.

Translated from the Spanish by Anton Baer

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PoliticsMember States

Portugal
Government backs off, for now



25 September 2012
PresseuropPúblico, Jornal de Negócios


The Portuguese government has backtracked on its controversial decision to increase employee social security (TSU) contributions, but has promised new tax increases in the 2013 Budget. Portuguese Prime Minister Pedro Passos Coelho finally withdrew the disputed measure, announced on September 7, after a political crisis that saw hundred of thousands of protesters in several cities on September 15. The measure also drew criticism from across the political spectrum, from the President to government members, as well as the business community which would have benefitted from the proposed hike.

The European Commission has already announced that the Portuguese government should quickly introduce new measures that will overwrite the TSU changes, "in order to avoid the discontinuation of European loans." According to Público–

Brussels insists that new measures should be endorsed by the troika of international lenders (European Commission, IMF and European Central Bank) ahead of the meeting of eurozone finance ministers on October 8, which will formalise the decision to release the sixth tranche of European loans destined to cover the state’s forthcoming financial needs.

The Lisbon daily adds –

For the country as well as the government, there is a before TSU and after TSU. For the Prime Minister, there is only one lesson to learn. And that lesson is that you cannot continue to govern by ignoring the country, by ruling without listening.

Business daily Jornal de Negócios goes even further in criticising the government, and accuses it of hiding the truth from the Portuguese people –

The credibility of the austerity policy is no longer about ideological differences, it is today a mathematical problem. It is not working. How can we trust in someone who estimated 11.6% growth in VAT revenues when, in the end, it fell 2.2%? (...) How can we rely on forecasts for 2013 after the failure of 2012? (...) Yesterday’s announcement of more taxes, was vague and ambiguous. (...) To sow uncertainty reveals not just amateurism, it reveals insecurity, lack of strategy, inability to lead a nation that is being undone by bills.

Jornal de Negócios signs off with a message and a question for the EU-ECB-IMF troika –

Gentlemen, the government has not cut state expenses as promised, but the Portuguese have done everything that you have asked. It failed. This failure is also yours. And only you can change policy because the government fears you and Portugal is counting on you. What will you do?

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Another Country whose population is angry at the austerity measures imposed at a time when growth is a near impossibility. How many protest marches by Portugal, Spain and Greece will it take for the Troika and EU to realise the plan will not work.????

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Today in Euro Crisis History: Geologic Time

By James Hertling

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| Sep. 26, 2012 12:20 PM EDT |
Posted in European Union (EU), Politics, United States

|



Europe’s debt crisis only seems like it has gone on forever. This series of blog posts looks at headlines from this date in previous years that highlight the roots, twists and turns of the current turmoil.

September 26, 2009

G-20 to Assume Mantle as World’s Main Economic Body

World leaders announced the Group of 20 nations is replacing the G-8 as the main forum for global economic coordination, reflecting a shift in power from rich countries to emerging markets.

The decision, unveiled in a White House statement late yesterday, comes as President Barack Obama, Chinese President Hu Jintao and other leaders gather in Pittsburgh for their third summit in a year to reshape the governance of the world economy following the worst financial crisis since the Great Depression.

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mistaken, says an economist.
Mario Deaglio

The coming of autumn, September 23, heralded the end of the summer not only for ordinary mortals, but for the financial markets too. From Tokyo to New York and across Europe, stock prices are beating a retreat almost everywhere.

What's going on? International markets are paying the price for the end of three illusions that kept them company through the summer. The first, still childish but nonetheless rather widespread, could be called "the illusion of a magic wand”. This mental deformation suggests that governments and central banks are capable of reversing, in the span of a few weeks or months, negative trends that have taken root over years. They could do it, the belief goes, by adding a minor regulatory provision of just a few lines, by amending a few rather impractical laws – and everything would be as it was before: the garden of (financial) delights will go back to watching its marvellous fruit ripen.

In reality, the crisis we have been living with for five years is a much more serious phenomenon. Its bacilli have nested almost everywhere, in the economy and throughout society, and not only in share prices. And the sickness will take years to extirpate – if it even can be extirpated. The consolidation measures are no easy sprint downhill. Players on the financial markets who do not want to believe that risk ending up with burnt fingers.


Are Europeans really ready to accept these sacrifices?



The second illusion of the markets is related to the first and wants, magic wand or no magic wand, to believe that the remedy to heal the real economy has already been found – which ought to have an immediate and positive impact on the stock market. In reality, the remedies proposed are two in number, and so far, neither is any solution: the first is to inject liquidity on a massive scale, which is the solution held to by the Americans, which lets them somehow keep the U.S. economy afloat but turns out to be incapable of truly restarting it.

The second is the European blend of fiscal austerity (today) and measures to restart production through healthy public finances (tomorrow), which is a solution that, by definition, calls for plenty of time, plenty of patience and a few sacrifices. Provided, of course, that the results come in.

Are Europeans really ready to accept these sacrifices and exercise the needed patience? This question gets responses that are hesitant, to say the least. That takes us to the third illusion: that governments can choose any sort of measure taking into account solely its economic sustainability and disregarding its political sustainability – i.e, how the people will react to it.

The best example is of course furnished by Greece, where the emphasis is on the need for this or that new slash to the budget, without which the "hole" in the public finances cannot be filled in. However, each new turn of the screw seems to intensify the public pain – as made evident by the very serious protests of 26 September – and swell the ranks of those who are attracted by the idea of blowing it all sky-high and leaving the single currency. This would certainly do no good to the euro and even less to the Greeks who, given the state of their balance of payments, would undoubtedly not be able to pay for the wheat and oil they need to let them get through the winter.


Living on another planet



While the picture is not so bleak in Spain, the room for manoeuvre there is very tight. Italy seems to have more leeway, if we are to believe the declarations of characters known for their severity, like the president of the Bundesbank, on Italy’s ability to cope without help from outside the country. Italy is one of the few countries where most families have substantial savings and where the fall in consumption seems related not just to a fall in the incomes of certain sectors of the population hit especially hard by the crisis, but to a widespread fear for the future.

The problem of political viability arises not just in the allegedly weak countries. It’s evident in France, where news coming in almost simultaneously shows unemployment levels passing the three-million mark and a collapse in the popularity of President François Hollande, who has lost 11 points in a single month. There is also evidence, very clear today, of a slowdown in the German economy and a mood in the ranks of the ruling coalition in Berlin that is far from upbeat. There is virtually no European country that, no matter how sturdy it looks, is not worried about where its economy is headed.

That's why the markets are falling or, at best, extremely wary. After all, even if the players on the financial markets often think they are living on another planet, the stock exchange mirrors the society, with its fears and uncertainties. The world is not confined to share prices but also includes the shopping lists of ever more worried housewives. And it is an illusion to believe that the markets will recover their health in the medium to long term if the housewives continue to fare badly.

On the web

• Original article at La Stampa it
  
• Süddeutsche Zeitung article de
  

ANALYSIS
Anger swollen by injustice


For Süddeutsche Zeitung, a sense of injustice is the cause of “the citizens’ anger” that has recently been expressed in Greece, Portugal and Spain –

Governments are on a state of alert, as the trend towards political extremism increases with every new demonstrator. This could be the demagogues moment of glory.

Two factors explain this anger, whether it be expressed by extremist parties in Greece, separatists in Spain, or a possible return of Silvio Berlusconi in Italy –

A society’s capacity for suffering is not solely determined by the price of bread or the value of unemployment benefit. It also depends on the strength of conviction and optimism that a government can generate. In Spain and Greece this leadership has been cruelly lacking. On the contrary, these countries have been marked by a growing sentiment that people are being treated unjustly because the rich remain sheltered and the banks have yet to be affected.

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EXCELLENT ARTICLE.

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Europe's Got A New Crisis, And This Time The ECB Can't Solve It




Joe Weisenthal|Sep. 26, 2012, 9:25 PM|13,056|20

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AP Images
Since the European sovereign debt crisis began, it was always clear that somehow it must end with the ECB.


The ECB has the unlimited firepower to back stop wobbly governments, and furthermore, every other modern economy basically works this way: The central bank, not the bond market, is the real funding mechanism for governments. That's why Japan, the UK, and the US don't have sovereign debt crises despite huge government debts.

So when ECB chief Mario Draghi unveiled a plan a couple of weeks ago to buy unlimited amounts of short-term government debt, it appeared that at least a mechanism that would actually work would soon be put into place.

And that mechanism (known as OMT) could work if it gets off the ground, but the rules are that a country has to seek outside aide and oversight in order to be eligible for bond buying, and here's where we run into a problem that the ECB can't solve.

In a note to clients this morning, in the aftermath of the massive protests in Spain, SocGen's Kit Juckes put it bluntly:

That's what the Spanish protests tell us - Mario may be Super, but cheaper funding won't save Europe unless there's a growth strategy.

When it comes to growth and internal issues, there's nothing that Draghi can do.

When it comes to Spanish PM Mariano Rajoy not asking for aide, because he's worried about a separatist movement in Catalonia, there's nothing Draghi can do.





AP
When it comes to Greek protesters waving Merkel/Nazi posters, because the country is in a seemingly intractable/permanent depression, there's nothing Draghi can do (for the most part).


Having an independent central bank that can just say "enough is enough" is great, but eventually politics intervenes. And beyond politics, much deeper things like national pride and regional pride get in the way.

The blow to democracy and the loss of confidence in institutions is a worsening problem, and there's not much for the ECB to do.

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Why the Euro Crisis Is Nowhere Near Being Over


Bailouts and easy money won't be able to resolve the structural problems of the euro zone, and increasing austerity won't fix things either
By Michael Sivy | @MFSivy | October 1, 2012 | 1



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DOMINIQUE FAGET / AFP / Getty Images
Spaniards attend a demonstration organized by "indignant" protesters, who rally against a system they say deprives citizens of a voice in the crisis, near the parliament building in Madrid on Sept. 29, 2012
It’s astonishing, but everyone is behaving as though the euro crisis were over. Long-term bond yields are bellwethers of investor confidence. And over the past few months, yields on 10-year Spanish bonds have fallen from 7.5% to 6%, while those on similar Italian issues have dropped to 5%. The U.S. stock market seems equally upbeat. The S&P 500 finished the third quarter last week at its highest level in more than four years. Share prices are shrugging off not only the likelihood of an economic slump in 2013, but also the possibility that a crisis in the euro zone could send shock waves throughout the global banking system.

Something seems very wrong with this picture — at least to me. Focus only on the European elite, and everything may appear under control. The May election of Socialist François Hollande to replace Nicolas Sarkozy as President of France has shifted European finances in the direction of easy money. The ruling three weeks ago by Germany’s Constitutional Court removed the biggest remaining stumbling block for future bailouts in the euro zone. And German Chancellor Angela Merkel has also softened on financial questions, declaring last Thursday, “We will continue to do everything necessary to develop the economic and currency union so that it is stabilized permanently.”

(MORE: LIBOR Lending Rate Gets Overhaul (Sort of))

But as soon as you turn from the elites’ self-congratulation to stories about people in the streets, you get a very different impression. Formerly middle-class Spaniards are scrounging for food in dumpsters. Greeks are rioting when they are not engaged in neofascist marches. Rich French people are thinking about leaving their country because of staggering new income tax rates. And former Italian Prime Minister Silvio Berlusconi — the “bunga bunga” man — is mulling a return to office by running against German oppression.

Everything can be straightened out, according to advocates of easy money, if enough cash is handed around by European financial institutions. “If Germany really wants to save the euro, it should let the European Central Bank do what’s necessary to rescue the debtor nations — and it should do so without demanding more pointless pain,” writes Paul Krugman in the New York Times. “The continued survival of the euro is assured,” writes George Soros in the New York Review of Books, although more ominously he adds: “The line of least resistance leads not to the immediate breakup of the euro but to the indefinite extension of the crisis.”

An indefinite extension of the crisis is precisely what appears to be in store. By lowering the cost of borrowing, expansive monetary policies do indeed reduce the short-term financial pressures on heavily indebted countries. But in my view, three long-term problems remain that have no easy solution.

(MORE: 6 Habits of Extraordinary Bosses)

First, countries can’t easily escape the consequences of past mismanagement. Greece, Italy and Portugal are all projected to run what are called primary budget surpluses next year. That means that their governments will take in more money than they spend, if you don’t count interest payments. In other words, they would now be in great financial shape, thanks to all their belt-tightening, if it weren’t for the burden of the debt they accumulated in the past. By contrast, the U.S. primary deficit is still a whopping 6% of GDP, significantly higher than that of every country in the euro zone. If weak European countries have to pay off all their past debts at the same time that they are running primary budget surpluses, they will face a very long period of austerity indeed.

The second problem is that over the past decade, the euro has created a severe misalignment in labor costs (after adjustment for differences in productivity). Labor costs in weak countries are as much as 20% higher than those in Germany. Part of the reason for the gap is that those countries let wages and benefits rise too fast in past years, and another part is the result of subpar gains in productivity. There are three possible fantasy solutions: everyone could leave the euro and then rejoin it at new exchange rates that equalized costs; everyone in high-cost countries could agree to 20% wage cuts; or a massive wave of new investment could boost productivity. None of those things is particularly likely. More realistically, countries with overpriced labor have a choice between simply leaving the euro zone or preparing for years of austerity that slowly grinds down their labor costs.

The third problem is that perpetual austerity is not only intolerable, it is also ineffective. Occasional protests that result in some broken shop windows are one thing. But current demonstrations in Europe against stringent austerity policies reflect the unraveling of the social fabric itself. What is worse, there is little chance that such policies can solve Europe’s financial problems within a reasonable time frame. There is simply too much debt to pay down and too many accumulated structural problems. Moreover, if austerity pushes countries into recession, their shrinking economies will actually become less capable of hitting financial targets.

(MORE: The Columbus Comeback)

There is, in short, no straightforward solution. At best, a careful balance will have to be maintained between, on one hand, the financial stringency required to chip away at debt while bringing European labor costs into better alignment and, on the other, the basic needs of the people who will suffer in the process. Europe is still immensely wealthy, and there is no reason to believe that today’s problems will necessarily end in catastrophe. However, the current level of complacent optimism seems somewhat naive. There figures to be a lot more mess to wade through before the euro crisis is truly over.


Read more: http://business.time.com/2012/10/01/why-the-euro-crisis-is-nowhere-near-being-over/#ixzz282cqdXhd

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Austerity
Please make austerity more flexible



1 October 2012El País Madrid

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Marked by the drive to balance public accounts, the budgets been recently presented by several countries will pave the way for more hard times, and even more recession. To break out of a deficit-austerity vicious circle, spending limits will have to be more flexible, argues the director of Slate.fr.

Jean-Marie Colombani

Following in the footsteps of its neighbours, France has now presented an austerity budget with cuts of 37 billion euros to bring the public spending deficit under the ceiling of 3%, the target set by the countries of the Eurozone. With a serious economic slowdown already underway, the additional brake of the French, Italian, Spanish and Portuguese austerity programmes will inevitably make 2013 an even more difficult year than 2012, which was marked by record unemployment.

Reabsorbing unemployment should be the absolute priority. With the recent demonstrations in Spain, the emergence of a fully fledged neo-Nazi party in Greece, and the growth of anti-European sentiment in public opinion across the continent, nothing is working. More and more economists, including Nobel laureate and New York Times columnist Paul Krugman, insist that heaping austerity upon austerity will not lead to a recovery in Europe, but to impoverishment and the possibility that the continent will enter a cycle that, this time around, will closely resemble the great depression of the 1930s.

To find the right path, the right dosage needed to free states of crippling debt, while setting them back on the road to growth and hope, is today the most difficult task. French Prime Minister Jean-Marc Ayrault has explained that this difficulty is largely dictated by the markets. To resolve the problem of its debt, the French Prime Minister has pointed out that France, like Spain, needs to borrow from the markets at the lowest possible rate of interest. This is indeed the case for France today, since the election of François Hollande.


A lack of competitiveness



However, if France fails to convince the markets that it will do what it takes to return to a deficit of less than 3%, it will soon be sanctioned and obliged to pay rates of interest that will make the burden of its debt unsustainable. With this in mind, the Eurozone should take action to do what single countries are unable to do: that is to adopt a more flexible approach to the 3% constraint, so that individual countries can benefit from tailor made timeframes in which to return to budgetary equilibrium.

Clearly, the malaise we all suffer from, with the exception of Germany, is a lack of competitiveness. It is this alone that justifies most of the efforts and sacrifices demanded. But we must nevertheless consider, in order to avoid a prolonged recession in Europe, a means to returning flexibility to the system. This is a matter of the utmost urgency. As for the rest, the new treaty, now being submitted for ratification, offers an opportunity inasmuch as it distinguishes between structural and cyclical deficits.

Firstly, steps must be taken to ensure that structural deficits are reabsorbed and made to tend towards zero, while cyclical deficits, which are determined by conjunctural phenomena, should be managed over the course of cycles. This distinction has opened up a breach, let’s take advantage of it.


More lenient timeframes



We might recall the previous stages of the crisis. Which began in the United States. This American crisis was perceived as a serious threat to global finance and the global economy. G20 countries responded by coordinating their analyses and coordinated action. We are now faced with a situation in which US exports to Europe have declined by 10 %, Chinese exports to Europe are down by 5%, and other countries like Brazil have been negatively affected by economic weakness in Europe.

Surely this is a problem that should be addressed by further collective action in the G20. After all, it is logical and fair to point out that measures that were taken for the benefit the United States should now be implemented for the benefit of the European Union. Unfortunately, however, the bid to recover from what was a major American crisis, was also marked by resurgence of national interests and a growing trend towards protectionism. Now we must take steps to reverse this momentum, and to ensure that the G20 takes the necessary coordinated action.

At the same time, Europe must accept that individual countries do not have the same capacity to fight deficits, and that we should have the wisdom to allow some of them more lenient timeframes. Finally, it is also time apply a number of decisions that have already been taken. François Hollande prides himself on the fact that he was able to complement the Fiscal Compact with a “growth pact” to be backed by a budget of at least 120 billion euros. Why are governments not already deploying these funds to boost economic growth?

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Budget
The secret of 3% finally revealed



28 September 2012
PresseuropAujourd'hui en France - Le Parisien

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Aujourd'hui en France - Le Parisien, 28 September 2012

At a time when the countries of the Eurozone are presenting austerity budgets to ensure that public spending deficits do not exceed the 3% of GDP ceiling required for the single currency, Aujourd’hui en France reveals “the incredible story of the birth” of this limit. The daily has found “the man who, at the request of [former French president] François Mitterrand, hastily came up with the emblematic figure.”

Guy Abeille, age 62, a former senior Budget Ministry official and “the inventor of the concept, endlessly repeated by all governments whether of the right or the left, that the public deficit should not exceed 3% of the national wealth,” told the newspaper–

We came up with the 3% figure in less than an hour. It was a back of an envelope calculation, without any theoretical reflection. Mitterrand needed an easy rule that he could deploy in his discussions with ministers who kept coming into his office to demand money. [...] We needed something simple. 3%? It was a good number that had stood the test of time, somewhat reminiscent of the Trinity.

The daily remarks on the strange character of this anecdote: “In an irony of history, the technocrats in Brussels drew on the legendary 3% for inspiration when creating another rule [stipulated by the new Fiscal Compact], just as factitiously Cartesian, which obliges states to limit their structural deficits to 0.5%. Why not 1% or 2% ? No one really knows.”

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Spanish Banks Need More Capital Than Tests Find, Moody’s Says


By Dakin Campbell - Oct 1, 2012 11:46 PM GMT+0100


Spain’s banks face a capital shortfall that could climb to 105 billion euros ($135 billion), almost double the estimate the government provided last week, according to Moody’s Investors Service.

The nation’s lenders may need infusions of 70 billion euros to 105 billion euros to absorb losses and still keep capital ratios above thresholds outlined in legislation last year, Moody’s analysts wrote yesterday in a report. That compares with the 53.7 billion euro shortfall found last week after officials commissioned a stress test designed to lift doubts about the financial industry’s ability to withstand losses.





Enlarge image

Spanish Banks Need More Capital Than Tests Find, Moody’s Says




Angel Navarrete/Bloomberg

Customers gather around a broken automated teller machine (ATM), outside at a BBVA bank branch in Madrid.

Customers gather around a broken automated teller machine (ATM), outside at a BBVA bank branch in Madrid. Photographer: Angel Navarrete/Bloomberg




4:07
Oct. 2 (Bloomberg) -- Bill Blain, a strategist at Mint Partners, talks about the outlook for Spain's banks and bond markets, and the political impact of a bailout request. He speaks with Mark Barton on Bloomberg Television's "On the Move." (Source: Bloomberg)

Audio Download: Egan Says Growth in Spain Is Five to Ten Years Away, 10/1


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Spanish Banks Need More Capital Than Tests Find, Moody’s Says






A customer waits for a bus at a bus stop outside a Banco Santander SA branch in Madrid, Spain. Photograph: Angel Navarrete

A customer waits for a bus at a bus stop outside a Banco Santander SA branch in Madrid, Spain. Photograph: Angel Navarrete

“The recapitalization amounts published by Spain are below what we estimate are needed for Spanish banks to maintain stability in our adverse and highly adverse scenarios,” the analysts, Maria Jose Mori and Alberto Postigo, said in the report. “If market participants are skeptical about the stress test, negative sentiment could undercut the government’s efforts to fully restore confidence in the solvency of Spanish banks.”

Spain announced the results of the test, conducted by management consulting firm Oliver Wyman, after commissioning the review of 14 lenders as part of terms to win a European bailout of as much as 100 billion euros for its banks. Lenders suffered more than 180 billion euros of losses linked to souring real estate loans. The government ordered banks in February and May to recognize 84 billion euros of losses on real estate assets.

Extreme Scenario


The 53.7-billion-euro figure takes into account mergers under way and deferred tax assets, the Bank of Spain and Economy Ministry said in a Sept. 28 statement. Without those effects, the shortfall climbs to 59.3 billion euros, according to the statement. The estimate is less than the 62-billion-euro shortfall found by Oliver Wyman in June.

Demonstrating lenders’ ability to withstand an extreme scenario -- a three-year economic contraction -- is part of the government’s drive to show it’s fixing the economy while debating whether to seek another rescue package.

While many assumptions in the stress test were conservative, some may be questioned, Moody’s said. The test used a 6 percent core capital ratio under a stressed scenario, while the ratings firm assumed capital ratios of 8 percent to 10 percent, according to the report. The rate used by Ireland for its test, including a buffer, was 9 percent.

Banco Popular


The review showed no deficit for seven Spanish lenders, including Banco Santander SA (SAN), Banco Bilbao Vizcaya Argentaria SA (BBVA)and Banco Sabadell SA. The Bankia group, a nationalized lender, had a 24.7 billion-euro deficit and Banco Popular Espanol SA (POP) had a 3.22 billion-euro shortfall. Banco Popular slid more than 6 percent yesterday after the firm said it will seek to raise as much as 2.5 billion euros from a stock sale and suspend its October dividend.

The stress tests analyzed 36 million loans and 8 million guarantees using information from the databases of lenders and the Bank of Spain, according to the statement. A team of more than 400 auditors verified the quality of loans by examining 115,000 loan operations.

Even as Moody’s expressed concerns that the government underestimated the banks’ capital needs, a recapitalization is still “intrinsically credit positive” for all of the nation’s lenders since it would involve more capital and more banks than earlier efforts, the ratings firm said.

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Banco Popular Espanol SA (POP) is defying the findings of Spain’s bank stress tests as it seeks new money from Allianz SE (ALV) and other investors to plug a capital shortfall.

The stress test by consultant Oliver Wyman showed Popular had a capital deficit of as much as 3.22 billion euros ($4.15 billion) and would earn 5.8 billion euros in pre-provision profit from 2012 to 2014 or 4.2 billion euros in its worst-case scenario. Popular, Spain’s sixth-largest lender by assets, said yesterday it would have an operating profit of 7.2 billion euros over that period as it unveiled plans for a share sale of as much as 2.5 billion euros to boost capital.





A pedestrian passes a Banco Popular Espanol SA branch in Madrid. Photographer: Denis Doyle/Bloomberg

The lower the bank’s future earnings, the more the lender will have to raise capital from investors, diluting existing shareholders and increasing the likelihood it will have to seek a government bailout.

“Oliver Wyman has reduced our pre-provisioning profit by 42 percent -- obviously we don’t share that,” Jacobo Gonzalez- Robatto, Popular’s chief financial officer, said in a webcast for analysts yesterday. “Time will tell that we are right, and they are wrong.”

After concerns about real estate losses helped push Madrid-based Popular’s shares down 90 percent from their 2007 peak, the bank risks further straining its credibility by challenging the results of stress tests that the government says are the most detailed analysis yet of Spain’s lenders. Popular was Spain’s only publicly traded bank that hasn’t been nationalized to have a capital shortfall in the tests.

Stress Tests


“You’d think meekness would be preferable to valor in Popular’s case, especially when they seem to have the whole range of opinion lined up against them,” said John Raymond, a banking analyst at CreditSights Ltd. in London. “It would probably go down better if they just acknowledged the numbers because in fact it’s hard to say what will happen.”

An Oliver Wyman spokeswoman in Madrid declined to comment.

Spain published the results Sept. 28 of the firm’s independent stress test of the banking system that showed seven banks, including Popular, out of 14 that were analyzed had a combined capital shortfall of 59.3 billion euros. Spanish banks face a capital shortfall that could climb to 70 billion euros to 105 billion euros to absorb losses and keep capital ratios above regulatory thresholds, Moody’s Investors Service said in a report yesterday.

Share Sale


Popular will ask existing major shareholders, including Allianz, which has been an investor for 25 years, and Credit Mutuel Group to buy shares in its capital increase, Gonzalez-Robatto said. Allianz, Europe’s biggest insurer, holds a 6.3 percent stake while a shareholders’ syndicate has 9.7 percent and Credit Mutuel Group 4.5 percent, according to regulatory filings.

“We’re not going to build a rosy picture just to mislead investors,” Gonzalez-Robatto said. “We want to be entirely realistic. Why? Because our shareholders trust us.”

Popular’s shares slid 1.8 percent to 1.57 euros at 10:51 a.m. in Madrid trading, extending yesterday’s 6.2 percent decline. It had the largest decline among the 38 members of theBloomberg Europe Banks and Financial Services Index.

It’s unclear why an investor such as Allianz would want to participate in a share sale, said Stefan Bongardt, an analystwith Independent Research GmbH in Frankfurt, who has a hold recommendation on Popular’s shares.The bank’s share increase could be equal to 75 percent of its current market value.

Reducing Holdings


“To invest money in a Spanish bank is not a good idea when everyone is reducing their exposure to the south,” he said.“Allianz should have better investment opportunities than a Spanish bank.”

Allianz declined to comment on whether it will take part in the share sale because Popular hasn’t made a formal approach, Stefanie Rupp-Menedetter, a spokeswoman for the Munich-based insurer, said in a phone interview. A spokesman for Paris-based Credit Mutuel, a customer-owned bank, declined to comment.

Popular combined its decision to seek as much as 2.5 billion euros from investors with a new business plan that confirms its operating profit predictions, speeds up recognition of loan losses and relies less on anticipated one-time gains from asset sales. The bank will suspend its October dividend and take 9.3 billion euros of writedowns in 2012 as it predicts a loss for the year of 2.3 billion euros, it said in a filing.

The plan is to clean up the balance sheet, restore its dividend next year and return excess capital to shareholders in 2014, Gonzalez-Robatto said. Popular wants to avoid taking state aid because as a private company its should resolve the concerns related to Spain’s property boom by itself, he said.

Popular’s Plan


Banks that need to bolster capital by more than 2 percent of risk-weighted assets must issue convertible bonds to be bought by the government’s rescue fund as a precautionary measure to cover the shortfall. The 3.22 billion-euro deficit equals 3.9 percent of risk-weighted assets, putting pressure on Popular to raise funds quickly or face taking state aid.

Popular can generate revenue by re-pricing loans to customers more quickly than competitors and also has “floors”on mortgage loans that limit declines in income when interest rates fall, said Gonzalez-Robatto. Popular, which has 2,714 branches and 109 billion euros in loans, made 1.18 billion euros in pre-provision income in the first half of this year compared with 1.13 billion euros for CaixaBank SA (CABK), which has 6,541 branches and 229 billion euros of loans, he said.

“These guys have been taken out by the crisis, and they have shown they do not know what is coming down the line at them,” Simon Maughan, a financial industry strategist at Olivetree Securities in London, said in a phone interview.“They’re still telling people what they’ll be making two years out when they’ve shown that they don’t know

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October 2012 Last updated at 11:44

EU says banks should split risky trading from banking


Europe's biggest banks would be affected, should these changes be brought in
Continue reading the main story

Eurozone crisis

• Six burning questions for Spain
  
• Q&A: What went wrong in Spain?
  
• How eurozone crisis affects you
  
• Crisis in graphics
  

A European Union advisory group says that Europe's banks should be split into separate legal entities, in order to protect ordinary retail banking from risky trading.

The review was set up to look at whether banks should be structurally reformed to avoid another crisis.

The group agreed that banks should separate certain high-risk banking activities from everyday banking.

Banks likely to be affected include Deutsche Bank and BNP Paribas.

The report's suggestions echo those put forward in a report into the UK banking sector by Sir John Vickers and proposals in the US, both designed to avert further banking crises in these countries.

The EU's report also looked at the risks of lending on properties, and recommends it should be underpinned with larger capital reserves.
Bonuses
It also examined ways of spreading the risk burden of a collapsed bank to a wider group, so that bondholders, as well as shareholders and the state, would take some of the losses in future.

It suggested that bankers should accept such a bond, the value of which would fall if risky trades or lending lost money, as part of their bonus.

The report also says banks should have higher capital "buffers" to protect against future banking crises.

The EU report's plans, which the group said should be discussed before the end of the year, are just one of a number of high-level reviews of the banking sector.

The report will be passed to EU internal markets commissioner Michel Barnier, who will make the decision on whether to present proposals in line with its recommendations and whose officials write the first draft of new laws.

Mr Barnier said: "The Commission will look at the impact of these recommendations both on growth and on the safety and integrity of financial services."

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