Finland and Russia. Well Finland is the only EU member nation to border Russia and not be a NATO member. I suspect they are wary of Russia but have a greater understanding of Russia's somewhat justified paranoia and anger with broken ' influence space' NATO invasions since the 1990's. They seek the old USSR relationship probably which worked well for Finland. Your last sentence captures this.  BTW by many polls the most pro-EU Nordic - not members yet (and they were in the list with Denmark, UK and Ireland in the 1960's - is Norway. Following April's elections, Juha Sipila, the prime minister, Timo Soini, the eurosceptic foreign minister and Alexander Stubb, the finance minister, have pledged to create more jobs, to get the economy moving and avoid a "lost decade" from a lack of reforms.  Finland is out on its own compared to the other Nordic countries in joining the Euro. Norway isn't even in the EU, Sweden has done well keeping the Krona and Denmark has kept their Krona but ties it to the Euro, a tie that could easily be broken if the proverbial hits the fan. Finland is looking rather isolated. Of course the Baltic states are in the Euro but they have all paid a heavy price for membership.  Would I be right in thinking that Finland is being hurt by Russian retaliatory sanctions rather more than other countries? Whilst they must have an historical healthy fear of Russia, I would imagine they are far more scared about the West restarting the Cold war in extreme earnest because of western interference in the internal affairs of Ukraine.

European Central Bank (ECB) president Mario Draghi unveiled bigger-than-expected quantitative easing measures on Thursday but still faced a fierce fight from Germany over any policy that could mutualise debt in the eurozone.  "The combined monthly purchases of public and private sector securities will amount to €60bn euros,” said Mr Draghi at a press conference following a meeting of the ECB’s governing council.  “They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation," he added, meaning the package will amount to at least €1.1 trillion.  Mr Draghi’s package of asset purchases, including bonds issued by national governments and EU institutions such as the European Commission, is intended to boost the eurozone’s flagging economy and to ward off the spectre of deflation.  It took a dramatic toll on the euro, which dropped to an 11-year low against the dollar at $1.14. ....A trillion euros here, a trillion euros there... Before you know where you are, you;re talking real money....And still the fantasy rolls on...that somehow things will be OK in the end with the single currency, despite individual countries having different tax and fiscal regimes, different industrial, agricultural and commercial capacity, different wage and benefits structures...the list goes on and on. We all know that the Eurocrats love the idea of a superstate, and that such arrangement is the only way a single currency can work. Unfortunately for these dreamers, there are several problems along the way - by and large voters don't want it, national governments don't wish to lose power, the countries have wide differences in social and economic outlook. Fiddling the figures to pretend that certain late entrants to the Euroclub met the necessary requirements for entry was the beginning of the end of any credibility in the project. Doubtless QE will be another nail in its coffin. Little wonder that all the big banks have dusted off their plans for a return to the mark, franc, peseta, drachma et al... So much for German law and High Court. They'll do their usual faux debate, issue more faux warnings, etc. They have nothing better to offer. They look at the Dresden marches and see the ghost of old Prussia, Most Germans would sooner join Islam. What Draghi did is completely illegal, but it saves the Union. It was wink-wink from Berlin all along. Mutti has things under control, and Germans' only fear is that Mutti will step down. Last week the Reich outlawed marches offensive to violent religions--much to the relief of most Germans. Dhragi thus saves beer, bratwurst, cars for the foreseeable future, the past remains buried--which means no more Israeli blackmail--and beyond that a German has no business thinking about. Meanwhile, the Project shrugs and drags its carcass on to the next crisis. Like the Plague, all it has to do is stay alive for its next victim.

Opec's oil production is unlikely to change much in 2015 and there is no need to panic at the crude price drop, Opec's secretary general has said, adding to indications the exporter group is in no hurry to cut output.

Abdullah al-Badri said output of higher-cost oil supplies such as shale would be curbed if oil remained at around $85 a barrel, while the organisation enjoys lower costs and will see higher demand for its crude in the longer term.

The drop in the oil price to below $100, the level many Opec members had endorsed, has raised questions over whether Opec will cut supply when it meets in November. Mr Badri said Opec's output was unlikely to change much next year, adding to signs a decision to cut in November is unlikely.

"I don't think 2015 will be far away from 2014 in terms of production," Mr Badri said at the annual Oil & Money conference in London. "There is nothing wrong with the market."

Brent crude has dropped more than a quarter from above $115 per barrel in June as abundant supplies of high-quality oil such as US shale have overwhelmed demand in many markets, filling stocks worldwide.

A survey measuring business activity in the eurozone shows the economy remains "stuck in a rut", according to the company behind the report. The eurozone purchasing managers index (PMI) fell to 52 in September, down from an initial estimate of 52.3.

Anything above 50 indicates expansion, but at this level, Markit said, the overall picture is one of an economy struggling against multiple headwinds. However, separate figures showed retail sales rose 1.2% in August from July.  And compared with August the previous year, retail sales were 1.9% higher.

"It may be that retail sales were lifted in August by people determined to enjoy their summer holidays after a difficult year. There may also have been a boost to retail sales coming from squeezed consumers looking to make the most of the summer sales in some countries," said Howard Archer, economist at IHS Global Insight. Markit said that France saw solid declines in both manufacturing production and service sector activity. The contraction in Italy was centred on the service sector, as manufacturing output expanded.  On Thursday the European Central Bank (ECB) detailed plans to buy assets to boost the economy. Markit's chief economist, Chris Williamson, said the latest PMI survey added to pressure for the ECB to expand its asset purchase plan. Meanwhile the Chancellor George Osborne said the weakness in the eurozone was "probably the greatest immediate economic risk" to the UK. 40% of the country's exports are destined for the eurozone.

He urged businesses to look further afield, to places such as Asia and South America. "Too many of our small and middle-sized businesses have felt daunted about entering into export markets. That's not the case for small and medium-sized companies for example in Germany," he told the Institute of Director's conference in London.

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

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

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

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

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

Stupid is what Stupid does ...judge for yourself !

Credit rating agency Standard & Poor's incited the ire of European Union officials on Friday when it snatched away the region's top AAA rating, citing tensions between member states and a deterioration in their overall financial health.

Downgrading the EU to AA+, the agency said the 28 countries' combined creditworthiness had declined – but officials and leaders shot back with an assertion that the region had barely any outstanding debt relative to GDP.

EU rules say that countries using the euro are not allowed to have an annual deficit of more than 3% of GDP, but several countries have failed to keep to that rule in recent years.

Note that Germany, Italy and France were all among the first countries to break the Maastricht rule during the last decade, while Spain and the Republic of Ireland ran surpluses before the 2008 crisis. Since 2008, peripheral economies such as Spain, Greece and Portugal have run big deficits, because their economies have slumped, generating less tax revenues and requiring more unemployment benefit payments.
Ireland experienced an exceptionally enormous deficit of 31% of its GDP in 2010, largely due to the cost of rescuing its banks.
Italy, however, has faired surprisingly well. In fact, if you exclude the cost of interest payments on its enormous debts (which the graph does not), the Italian government has consistently run budget surpluses.

Germany's conservatives and left-leaning Social Democrats reached an agreement this week to create the next federal government after weeks of negotiations following the Sept. 22 election. With Chancellor Angela Merkel of the conservative Christian Democratic Union (CDU) at its helm, the coalition government has agreed to a number of joint policy initiatives that will see the establishment of Germany's first-ever legally mandated minimum wage and generous changes to the country's pension system, including the option of retirement at 63. At the same time, the CDU, its Bavarian sister party, the Christian Social Union (CSU) and the center-left Social Democratic Party (SPD) are pledging to deliver these gifts without raising taxes.  Christoph Schmidt, the head of the German Council of Economic Experts, which advises the German government, said he doesn't believe the government has the funding for all the gifts being given to voters. "It may be possible to finance the planned extra spending until 2017 without raising taxes or fresh borrowing, but it won't be possible after that," he told the newspaper Die Welt. Schmidt said the plans for allowing retirement at 63 instead of the current 67, along with additional benefits for women who left work to raise children and other pension perks would create lasting additional expenditures. Ultimately, he warned, the money would have to come from either higher individual pension contributions, higher taxes or through a general reduction of pension benefits.

Meanwhile, Clemens Fuest, director of the European Center for Economic Research (ZEW), warned of both the pension changes and the new minimum wage. "The biggest problem is the combination of stricter labor market regulations, the sinking of the retirement age and the introduction of new retirement benefits," he said. "That's going to drive up social security contributions and reduce employment at a time when we actually need more jobs."

German Finance Minister Wolfgang Schäuble of Merkel's CDU has defended the proposals, saying everything has been calculated solidly. He told a German public broadcaster there would be €23.06 billion in additional spending between 2014 and 2017 and there is plenty of room for maneuver in the current budget. He said his ministry is already anticipating budget surpluses of €15 billion a year during that period.

The coalition agreement dominates the coverage of German newspapers, where editorialists at many papers criticize the planned new spending, which they believe sends a bad message in times of European austerity. Others praise the new worker protections planned by the future government.

The conservative Die Welt writes: "The coalition contract reflects the spirit of regulation-loving statism. The very policies set in motion by former Chancellor Gerhard Schröder through his reforms of social and labor laws that created the breathing room needed for the economy to flourish and for unemployment to fall are now being systematically dismantled. In the case of the SPD, this is the result of shame over the success of Schröder's Agenda 2010 (which cut worker protection and benefits for the long-term unemployed and also cost the party votes). In the case of the conservatives, it's attributable to 'Merkelism' -- e.g. a chancellor who has transformed her CDU into the first postmodern political party in Europe, one in which the idea that 'anything goes' is now an actual party value."

"The message this sends to the rest of Europe is disastrous. We preach austerity to the debt crisis countries and yet we continue to fatten Germany's already plump social system instead of putting it on a diet. Germany can no longer be considered a role model for Europe." The conservative Frankfurter Allgemeine Zeitung writes: "Grand coalitions are by their nature generous. That's one of the reasons they are more popular with people than smaller coalitions. And it doesn't appear that the third grand coalition government in postwar German history will disappoint, either. Because each of the three parties in the new government is showing a big heart for the little man, and each wants to make sure that its handwriting is recognizable on the coalition contract. The result is a cornucopia of good deeds courtesy of the social system that are now to be distributed across the country. Be it a national minimum wage (the first in Germany), pension increases for women who have raised children or dual citizenship for children of immigrants born in the country, there is something in here for everyone. And the parties want the wealthy to be grateful that the government won't be resorting to tax increases to pay for it -- at least not in the beginning. Still, many Germans will eventually learn the hidden costs of this blessing -- namely the next generation. But none of the three party leaders is going to allow that to overshadow this very generous alliance."

The leftist Die Tageszeitung writes: "Some are saying that this grand coalition has no vision, but that's not true. The coalition contract isn't just the sum of individual interests that somehow had to be brought in sync. There is a threat that runs through it. The spirit of the contract is the cautious re-establishment of corporatism at the federal level. It is no coincidence that the unions are backing this coalition in a way that they didn't the last time there was a grand coalition in 2005."

"Among the positive aspects are improved conditions for the working poor. Starting in 2017, the country will have a minimum wage of €8.50. Precarious jobs will also be better regulated. Some things are still murky, but the direction is clear: Those with jobs will no longer be able to be exploited the same way they were. It also an open question whether a left-leaning government could have achieved more in terms of labor policy against strong resistance from industry. That's why it is both probable and logical that the SPD party members will vote yes on this coalition agreement."

The left-leaning Berliner Zeitung writes:

"When two wish lists are added together to become a coalition agreement, it comes with a high price. What weighs more heavily than the money, however, is that this coalition will not push through forward-looking structural reforms. Nor is it clear how it will effectively address the problem of demographic change. We have the oldest population in Europe. The problems that creates aren't just restricted to areas like long-term care, health care provisions and family policies. It also has consequences for the ability to innovate, training and families. What are we going to do?"

"Merkel has said that this grand coalition will be one to address big challenges, but it is really just a government that unites two large political parties. Neither the SPD nor the conservatives will have to pay the price - instead it will be the country that does so in the long run. We shouldn't expect much from it. … It is the coalition of a country that lives in prosperity. The rich will stay rich, the poor will be a bit better off. But there will be no real redistribution of wealth or structural reforms." The center-left Süddeutsche Zeitung writes: "The coalition package contains enough packing material so that the sensitivities of this and that for the coalition partners can be protected. But that's also the case with most coalition agreements. Still, if you remove the packing material, some remarkable things are left over: Minimum wage, dual citizenship, pension increases, road tolls. There's a lot for the SPD and for the CDU. The surprise factor in all this is low, given that these points have been at the core of talks for weeks now. One still cannot disregard the fact that a minimum wage, dual citizenship and pension promises are systematically important things -- projects with social pacification force."

(TRIESTE) - Italy will be eyeing Russian cash for its crisis-hit economy as President Vladimir Putin and Prime Minister Enrico Letta hold a meeting on Tuesday where they will unveil a 1-billion-euro ($1.4-billion) joint investment fund.

Italian officials said they will test Russian interest in troubled flag carrier Alitalia, which is looking for a foreign partner, and Ilva, a giant steel plant that has been partly shut down over environmental concerns.

"Some 20 business deals will be signed in three main sectors: finance, energy and industry," an adviser to the Italian prime minister's office said ahead of the bilateral meeting in Trieste in northeast Italy.

Russian officials said that the new fund -- financed by the Russian Direct Investment Fund and Italy's Deposits and Loans Fund -- "will stimulate mutual investments" and is set to make its first payments next year.

Italy's La Stampa daily said Putin had brought his "petrorubles to seduce Rome", while former premier Romano Prodi -- who also met with Putin -- said ties between Italy and Russia "have never been so intense".

The Putin-Letta meeting was due to start at 1030 GMT, to be followed by a press conference at 1415 GMT.

The talks come on the final leg of Putin's two-day trip to Italy, which has included an audience with Pope Francis and a dinner with scandal-tainted former prime minister and old friend Silvio Berlusconi on Monday.

Activists said they will hold a protest against homophobia in Russia, following a small rally for the jailed Russian punk group Pussy Riot in Rome. Berlusconi and the Kremlin were also forced to deny rumours that Putin was preparing to offer the media tycoon Russian papers to flee legal troubles that are set to get him expelled from parliament on Wednesday. Italian media said energy giants Eni and Enel at the talks would also be looking to lower the prices for imports from Russia, as Italians struggle to make ends meet amid the country's longest post-war recession.  Business daily Il Sole 24 Ore said one of the deals due to be signed would boost the stake of Italian oil services company Saipem in the South Stream pipeline project from Russia to Turkey under the Black Sea.  Another agreement -- the first of its kind for a European Union country -- would give Italian companies preferential customs treatment in Russia, it said.

The report also said Italy and Russia would launch a new e-commerce platform to sell Italian products in Russia and Italian shipbuilder Fincantieri would sign a deal to build ships for the offshore oil industry.  Trade turnover between Italy and Russia stood at $45.8 billion (33.8 billion euros) in 2012 and has increased by 24 percent between January and September compared to the same period last year, Russian officials said. A Kremlin official said the two leaders would also touch on international issues and "above all the situation in Syria", a day after negotiators announced Syria peace talks would be held in Geneva in January.  There will also be agreements in the cultural sphere, including one to set up a branch of Russia's famous Hermitage Museum in Venice on St Mark's Square.

FRANKFURT—A top European Central Bank official said the ECB could make asset purchases if needed, as euro-zone policy makers increasingly float the prospect of deploying a tool that is commonly used by other major central banks but stirs deep divisions in Europe. The comments, by ECB Vice President Vitor Constâncio, are the latest in a string of assurances by top officials at the central bank that it still has an array of policy options in its arsenal, even after reducing interest rates to record lows earlier this month. Recent ECB references to the idea of asset purchases, known as quantitative easing, are "only as a possibility and nothing else. Everything is possible. That was what Peter Praet said," Mr. Constâncio told reporters on the sidelines of the 16th annual Euro Finance Week in Frankfurt."If our mandate is at risk we are going to take all the measures that we think we should take to fulfill that mandate," Mr. Praet, who also heads the ECB's powerful economics division, said in the interview last week. "The balance-sheet capacity of the central bank can also be used," he added. "This includes outright purchases that any central bank can do."The officials gave no indication that such a policy is under serious consideration now. Mr. Praet said in the interview that inflation risks are balanced after the ECB's rate cut, which brought its main policy rate to 0.25%. Mr. Constâncio on Tuesday said the ECB hasn't discussed how it would conduct quantitative easing technically. The euro largely shrugged off his comments.Still, simply raising the idea of quantitative easing marks a significant shift in rhetoric from the central bank. ECB President Mario Draghi sidestepped a question about the policy at his monthly news conference on Nov. 7, saying only that the ECB had "a whole range of instruments" that could be activated before hitting the floor on interest rates. It is "remarkable how the attitude of some ECB Governing Council members toward [quantitative easing] has changed," BNP Paribas BNP.FR +0.41%BNP Paribas S.A.France: Paris ^€54.01 +0.22+0.41% Nov. 20, 2013 10:29 am Volume : 575,621 P/E Ratio 12.83Market Cap€68.13 Billion Dividend Yield 2.78% Rev. per Employee €155,68211/13/13 BNP Paribas SA Buys Belgium's ...10/31/13 BNP Paribas's Interesting Lack...10/31/13 BNP Paribas Profit Rises Despi...More quote details and news »BNP.FR inYour ValueYour Change Short position economist Ken Wattret said in a research note. "What was once a taboo, then a last resort is now an option under consideration."

FRANKFURT--The European Central Bank will force the euro zone's largest banks to set aside 8% of their risk-adjusted assets as a capital buffer, which will form one plank of the ECB's assessment of bank balance sheets next year, according to a person familiar with the matter. Euro-zone banks, which will be supervised by the ECB starting at the end of next year, will be required to hold a 7% capital buffer. The region's most significant banks will have to hold an additional percentage point, the person said. The buffers protect banks against losses they may take on loans and other assets. An ECB spokesman declined to comment.

The target of 7% is in line with what a bank has to achieve under the new "Basel III" rules on capital in order to pay its dividends and bonuses without restrictions. However, it's lower than the 9% required by the capital exercise that the European Banking Authority carried out over 2011-2012. Theoretically, the new Basel standards don't come into force until 2018, but pressure from both regulators and financial markets has led most banks to report under the new standards already. The one percentage point surcharge for 'significant' banks echoes the Financial Stability Board's intention to impose a capital surcharge of up to 3.5 percentage points for Systemically Important Financial Institutions--also known as banks that are 'too big to fail.' The FSB will phase in these surcharges between 2016-2019. According to its latest assessments, Deutsche Bank AG (DBK.XE) would be liable to a surcharge of 2.5 percentage points, with a dozen other EU banks being subject to surcharges of between one and two percentage points. However, it isn't clear how the ECB will define its list of significant banks.

The ECB will release additional details on how it will handle its asset quality review at a press conference Wednesday. Europe's central bank will conduct the review in the first half of next year, before it takes on the role of bank supervisor. Currently, banks across the 17-member currency bloc are overseen by national regulators. The review is seen by most analysts as a critical part of efforts by European officials to address capital needs of banks, particularly in southern Europe, and to spur new lending to the private sector.

Central bank governors and senior regulators are set to ordain that banks must have a minimum core tier one capital ratio, including a new so-called "buffer" to protect against extreme economic conditions, of 7%, I can reveal.

This is considerably lower than was wanted by the "hawks", the US, UK and Switzerland. They wanted a core tier one capital ratio of 8 to 9% including buffer, which is what British banks currently have to maintain. In fact most British banks currently have a core tier one ratio of around 10%.

But the new 7% minimum has been agreed in the face of stiff resistance from a number of countries, led by Germany, many of whose banks typically have much lower stocks of core capital in the form of equity and retained earnings - and will have great difficulty meeting the new standard.

This new international minimum was negotiated by regulatory and central banking officials in a meeting of the Basel Committee on Banking Supervision earlier this week. It is expected to be approved by the governors and senior regulators when they meet in Basle on Sunday. It will then be ratified in a final, supposedly irrevocable way by the heads of the G20 governments, at their summit in November. The 7% minimum represents a dramatic increase on the current minimum of 2%. That 2% minimum is widely seen as far too low: banks' low levels of capital relative to their assets was a major contributor to the severity of the 2008 banking crisis, as investors lost confidence in their ability to survive losses.

As they approached collapse, the capital ratios of Northern Rock and Royal Bank of Scotland fell to dangerously low levels - which is why Northern Rock was nationalized and RBS was semi-nationalized.

The point of capital is to absorb losses when loans and investments turn bad.

Although this new 7% minimum ratio of core capital (in the form of equity and retained earnings) to assets (loans and investments) as measured on a risk-weighted basis represents a significant increase, some will argue that the ratio is still too low.

One reason for this is that the absolute minimum capital ratio, without buffer, will be around 4%, or double the previous minimum.

Under the new system, if a bank's capital ratio falls below 7% or would fall below 7% when the bank is tested for financial stresses, the bank will be forced by regulators to raise new capital. And if the ratio falls below 4%, the bank will be put into "resolution" - which means that it will be taken over by regulators and wound up.

It means that banks' core capital ratios must always be above 7% in normal economic and financial conditions. But regulators would tolerate those ratios falling below 7% for short periods during economic downturns.

A senior regulator has told me that many of the biggest banks - those "too-big-to-fail" banks whose collapse would cause ruptures to the financial system - will in practice be forced to hold more than the 7% minimum.

"There will be some kind of add-on for systemically important banks," he said. So the likes of Barclays, JP Morgan, Royal Bank of Scotland, UBS and so on will in practice have to maintain core capital ratios greater than 7%.

The major concern of banks about the imposition of the higher capital ratios is that it will constrain their ability to lend in the transition period, as they build up stocks of capital - and that could undermine the global economic recovery.

The point is that there are two ways for banks to raise capital ratios: they can persuade investors to buy new shares; or they can shrink their balance sheets relative to their existing stock of capital by lending and investing less.

Because of the threat to economic growth of rapid implementation of the new capital ratios, the regulators and central bank governors are expected to give banks several years to meet the new standards.

The Basel Committee on Banking Supervision softened some of its proposed capital and liquidity rules while introducing new restrictions on how much lenders can borrow in order to rein in their risk-taking.

The panel agreed yesterday to allow certain assets, including minority stakes in other financial firms, to count as capital, according to a statement. The committee set a leverage ratio to apply to banks globally for the first time, which could become binding by 2018, pending further adjustments to the method of calculating banks’ assets.

“Even after all the compromises, the banks aren’t off the hook from tighter capital and liquidity rules,” said Frederick Cannon, chief equity strategist at New York-based Keefe, Bruyette & Woods.

France and Germany have led efforts to weaken rules proposed by the committee in December, concerned that their banks and economies won’t be able to bear the burden of tougher capital requirements until a recovery takes hold, according to bankers, regulators and lobbyists involved in the talks. The U.S., Switzerland and the U.K. have resisted those efforts. The announcement reflects the give and take between the two sides, said Barbara Matthews, managing director of BCM International Regulatory Analytics LLC in Washington.

German Concerns

Germany hasn’t signed yesterday’s preliminary agreement, said Sabine Reimer, a spokeswoman for BaFin, the country’s financial regulator.

“One country still has concerns and has reserved its position until the decisions on calibration and phase-in arrangements are finalized in September,” the committee said in a footnote to its statement.

Sumitomo Mitsui Financial Group Inc., Japan’s second- largest bank by market value, led banks higher in Tokyo after the committee agreed to allow some deferred tax assets to be counted as capital. The nation’s banks and regulators had fought against excluding deferred tax assets.

“The Basel Committee’s easing of restrictions gives investors a reason to take another look at Japanese banks, which have been cheap recently,” said Mitsushige Akino, who oversees about $450 million in assets in Tokyo at Ichiyoshi Investment Management Co.

Sumitomo Mitsui rose 2.8 percent to 2,587 yen at the 3 p.m. close of trading in Tokyo. Mitsubishi UFJ Financial Group Inc., the country’s largest bank, gained 2.5 percent and Mizuho Financial Group Inc. climbed 2.2 percent.

‘Making Concessions’

“They’re definitely making concessions on the definition of capital and the liquidity ratios,” said BCM International’s Matthews, who used to lobby the committee on behalf of banks. “Those were necessary to convince the Germans to accept the leverage ratio. But even though we see a lot of concessions, there are also limits to the concessions. So this isn’t fully caving in.”

The Basel committee, which represents central banks and regulators in 27 nations and sets capital standards for banks worldwide, was asked by Group of 20 leaders to draft rules after the worst financial crisis in 70 years.

Yesterday’s agreements were announced after a meeting of the group of governors and heads of supervision, which oversees the committee’s work. While the committee narrowed differences when it met two weeks ago in Basel, it left most of the final decisions to its board, members said.

The board said some of its proposals might not be completed by the end of this year, the deadline set by the G-20. Liquidity requirements for how much cash and cashable securities banks need to hold against their longer-term liabilities and counter- cyclical buffers, which would raise minimum capital requirements in times of faster economic growth, have to be worked on longer, the board said.

Lobby Efforts

European banks lobbied against the proposed exclusion of minority interests that banks hold in other financial institutions. Japan fought the hardest against the elimination of deferred tax assets, past losses that lenders use to offset tax charges in future years. The U.S. has opposed removing mortgage-servicing rights, contracts to collect payments, which are unique to U.S. banks.

The compromise announced yesterday would allow a bank to count part of a stake it owns in another financial firm in relation to the risk the capital is supposed to cover at the entity in which it invested. Deferred tax assets and mortgage- servicing rights would be included in capital up to a limit. The total for all three could not exceed 15 percent of a lender’s common equity.

While the capital ratios allow banks to assign weights to assets based on their risks, the new leverage figure considers all assets without a risk assessment. The committee initially set it at 3 percent -- meaning a bank’s total assets cannot be more than 33 times its Tier 1 capital, which includes securities that could help a lender cover unexpected losses.

Level Playing Field

The new rule also defines how assets are tallied, so as to level the playing field between different accounting standards and bring off-balance-sheet items into the calculation. The ratio will be tested from 2013 until 2017, and banks would be required to start publishing their individual leverage figures starting in 2015.

Bankers including Deutsche Bank AG Chief Executive Officer Josef Ackermann and HSBC Holdings Plc Chairman Stephen Green have said that the new rules may force banks to reduce lending, potentially limiting economic growth.

While yesterday’s announcement resolved several issues, many areas of contention, such as the actual minimum capital ratios that will be set, remain outstanding, said KBW’s Cannon.

“The definition of capital had to be finalized before the numbers can be put on, but there are still many moving parts,” said Cannon, whose research firm specializes in financial companies. The committee is planning to present a final package of reforms to the G-20 leaders meeting in Seoul in November.

Risk-Weighted Assets

Banks currently need to hold capital equal to a minimum of 8 percent of risk-weighted assets. Half of that must be Tier 1, and half of the Tier 1 needs to be common stock. Both Tier 1 and common-equity ratios will be increased, Cannon and other analysts expect. The Basel committee is also revising how the risk weighting will be done.

Like the leverage ratio, the liquidity rules are new to the Basel standards. The liquidity coverage ratio sets the amount of cash that needs to be held by a lender against any payment coming due within a month, while the net stable funding ratio considers liabilities up to 12 months.

The committee announced several modifications to the definition of liquid assets and of how to measure the safety of different types of funding. Government deposits will now be considered the same as corporate cash put in a bank, instead of treated as other banks’ money as originally proposed. Bank deposits are seen as less stable.

The changes should please banks, said Cannon.

“They compromised more on the short-term ratio than we were expecting,” he said.

Angela Merkel's domestic policy in her third term will likely be confined to higher spending. But she has grand plans for Europe. SPIEGEL has learned she wants Brussels to have far more power over national budgets. It's a risky move that EU partners and the Social Democrats are likely to oppose.

In the end, the atmosphere became downright festive in the Berlin Hall of the Parliamentary Society, a building next to the Reichstag. Chancellor Angela Merkel's conservatives and the center-left Social Democratic Party (SPD) had met there three times in the last three weeks to sound out whether they could form a coalition government. The decision was still up in the air.

Merkel gave SDP Chairman Sigmar Gabriel a questioning look, and said: "Would you like to say something?" But Gabriel beckoned to her to speak. "I have my delegation's support for what we discussed," she said. "So do I," Gabriel replied.

The grand coalition took shape shortly before 3 p.m. last Thursday. For the third time in postwar German history, Merkel's Christian Democratic Union, together with its Bavarian sister party, the Christian Social Union (CSU), and the SPD are preparing to form a coalition government. The talks are expected to begin this Wednesday. The chancellor is in a hurry because she wants to have a new government by Christmas at the latest. "Christmas will be here sooner than you think," she told fellow members of the CDU executive board on Friday afternoon.  At the beginning of her third term, Merkel has more power in Germany and Europe than any chancellor before her. There hasn't been such a strong majority behind a government in Germany's parliament, the Bundestag, since the first grand coalition half a century ago. In the midst of the European crisis, Germany has become the undisputed dominant power in Europe.

The grand coalition will hand Merkel a majority she could use to shape Germany and Europe and address major issues, including constitutional reforms in Germany and the reform of European Union institutions.

Merkel, unlike SPD Chairman Gabriel, has been unchallenged in her own party since her election victory. Little is left of the accusations that critics had leveled at Merkel, except one: That she is a chancellor without an agenda, plan or vision; that her style of government is reactive rather than proactive; and that she doesn't know where she wants to take her government and Germany.

Big Plans for Europe - In the past, Merkel has treated governing primarily as repair work. The major issues of her first two terms in office, the financial crisis and the fight to save the euro, were suitable for that approach. Will that change, now that she has the necessary power and means? Hardly at all, when it comes to Germany. There are no major reforms in the works at government ministries, and the grand coalition will focus on increasing spending to fulfil some of the parties' campaign promises.

In contrast, officials at the Chancellery are forging plans for Europe that are practically visionary for someone like Merkel. If she prevails, they will fundamentally change the European Union. The goal is to achieve extensive, communal control of national budgets, of public borrowing in the 28 EU capitals and of national plans to boost competitiveness and implement social reforms. The hope is that these measures will ensure the long-term stability of the euro and steer member states onto a common economic and fiscal path. This would be the oft-invoked and ambitious political completion of Europe's monetary union -- a huge achievement.

It isn't a new goal, but what is new is the thumbscrews Brussels will be allowed to apply if Merkel has her way, including sooner and sharper controls and veto rights, as well as contractually binding agreements and requirements. In short, this would amount to a true reconstruction of the euro zone and a major step in the direction of an "economic government" of the sort the SPD too would like to see put in place.

Germany's current economic strength helps to explain these visions for Europe, since stricter budget controls wouldn't pose a threat to Berlin at the moment. Jobless levels are so low that the country has almost reached full employment, and the budget is in good shape, at least at the national government level. In fact, public coffers are so full that the government can afford to boost domestic spending.

More Money to Spend - And that's precisely what the members of that coalition intend to do. The first item on their agenda is to hand out benefits and spend money. Thanks to the strong economy, this won't even require raising taxes. In his financial planning for the medium term, Finance Minister Wolfgang Schäuble anticipates growing national budget surpluses from the year after next: €200 million ($274 million) in 2015, €5.2 billion in 2016 and €9.6 billion in 2017.

In other words, the government will have an additional €15 billion at its disposal in the coming years. This gives Merkel and Schäuble the necessary leeway to fulfill the desires of the CDU/CSU and the SPD for more investment in infrastructure and education without having to raise taxes. There is talk of an €11 billion fund for infrastructure alone.

Prior to the election, Merkel and Schäuble had announced their intention to use the surpluses to pay off old debts. That won't happen now, and yet the conservatives are not plagued by a guilty conscience, noting that despite the additional spending plans, the country will still remain within its debt limit requirements.

The reorganization of the financial relationships between the national and regional state governments, which is on the agenda in this term, will likely be costly for the national government. Many states would have to cut billions from their budgets so that they can make do without new borrowing starting in 2020. Many state governors complain that it's a burden their states can't handle without national government assistance. They are hell-bent on demanding financial support from Berlin in return for agreeing to a reform of the system of transfer payments from richer to poorer German states.

The states' ability to block legislation in the Bundesrat, the legislative body that represents the states, will likely become costly for the new administration long before that. Merkel is worried at the way in which preliminary coaltion talks in recent weeks turned into haggling over money between the national and state governments. "We just had a national parliamentary election, not 16 state parliamentary elections," an irritated Merkel recently told the CDU/CSU parliamentary group.

There may also be a major restructuring in the way transport projects are funded, due to the states' lack of money. The CSU's pet project, the automobile toll, stands a good chance of being approved, since it would generate new revenues.

More Powers For European Commission - During the negotiations, CSU Chairman Horst Seehofer presented a plan for how the toll could become a reality. It calls for drivers to pay an "infrastructure fee" in the future. Germans would be able claim the fee as a credit against the motor vehicle tax, so that the cost could ultimately be imposed on foreign drivers. According to the document, prepared by Transportation Minister Peter Ramsauer, this would be possible under European law. The new coalition won't face serious resistance to its spending policies, not even from the opposition. With the elimination of the pro-business Free Democratic Party (FDP) from the Bundestag, the voice of moderation in budget policy has disappeared. Only the economic wing of the CDU/CSU is likely to put up weak resistance. So Seehofer will get his toll, the states will be kept happy with financial gifts and the social security offices will hand out benefits. This doesn't exactly sound like an ambitious program for Merkel's second coalition government with the Social Democrats. Instead, it feels like more of the same, or a program of minor improvements, at least on the home front. But regarding Europe, Merkel is heading for strategic decisions and is likely to show more courage to take political risks than usual.

Schäuble, the last dyed-in-the-wool European among Germany's top policymakers, can be pleased. Merkel wants tangible amendments to the European Union treaties: more power for Brussels, and even more power for the much-criticized European Commission. "Unfortunately, there is no other option," say government officials.

Carrot-And-Stick Approach - Last Thursday, after the final round of exploratory talks with the SPD, Merkel brought European Council President Herman Van Rompuy into the loop in a private conversation at the Chancellery. It was a back-door initiative of the kind so typical in EU policymaking. Documents are already being put together at the German Finance Ministry over how "Protocol 14" of the EU Treaty could be beefed up. It currently contains a few general statements on cooperation in and control of the euro zone. But now, if Berlin is able to implement its carrot-and-stick approach, tangible powers for the European Commission will be added to the protocol.

For instance, the Commission could be given the right to conclude, with each euro country, an agreement of sorts to improve competitiveness, investments and budgetary discipline. Such "contractual arrangements" would be riddled with figures and deadlines, so that they could be monitored and possibly even contested at any time. In return, a new, long-discussed Brussels budget will become available to individual countries, an additional euro-zone budget with sums in the double-digit billions for obedient member states. Protocol 14 could also be used to install the full-time head of the Euro Group. The influential job is now held by one the member states' finance ministers, currently Dutch Finance Minister Jeroen Dijsselbloem. Devoted Europeans like Schäuble have long dreamed of installing a "euro finance minister."

Resistance Against Merkel's European Plans - If Chancellor Merkel is focusing on an amendment of this central part of the EU treaties, it is a remarkable about-face. Still, the new course is risky, and it has many detractors and an uncertain outcome. None of this is to the chancellor's taste, at least not the chancellor we know. But Merkel has already deployed her key European strategist. The relevant department head in the Chancellery, Nikolaus Meyer-Landrut, outlined the German plan at a Brussels meeting in early October. It didn't go down very well. Opponents of the common currency are rapidly gaining popularity in almost all euro countries. Every change in the balance of power in Europe and every upgrading of the European Commission make governments more vulnerable to domestic political attacks. More power for "Brussels?" No way. There are even growing doubts in the European Parliament, albeit for completely different reasons. Both leftists and conservatives fear that anyone who opens the door to amending the treaties "won't be able to close it again that quickly," says a top Christian Democrat. Especially the British government, driven by the radical, anti-European UK Independence Party (UKIP), could use the opportunity to retrieve powers from Brussels, essentially renationalizing the European Union.

The SPD could raise objections. "The SPD won't support any arrangements if Merkel conducts parallel negotiations with Britain's David Cameron to transfer EU powers back to member states," Axel Schäfer, deputy leader of the SPD's parliamentary group, told SPIEGEL ONLINE. He added that the SPD won't accept any treaty changes that relate to referendums in individual EU states.

The president of the European Parliament, German Social Democrat Martin Schulz, has already warned Merkel privately that he won't back any change in EU treaties. He wants national governments to make the euro zone resilient to future crises by using the instruments created step-by-step over the last three years -- without treaty changes. Schulz fears that a treaty change would take too long and that referendums necessary in some countries couldn't be won given current poor public sentiment regarding the EU. "We will check all the chancellor's proposals to see whether they can be implemented in all EU states," says Schulz, who will be part of the SPD's negotiating team in the coalition talks, responsible for all issues pertaining to Europe.

But Merkel seems undaunted by these obstacles. And she already has a timetable. First she wants to wait and see what happens in the May 2014 European parliamentary election. Then the new president of the European Commission will have to be chosen once the second term of the current incumbent, José Manuel Barroso, ends in 2014. Merkel got him the job and ensured he got a second term. But these days, she doesn't even bother disguising her contempt for Barroso.

Once the new European Commission is in office, the political window for Merkel's European vision is expected to open. It doesn't seem to bother her that she will be in a clear minority when she embarks on her reform plans. She is familiar with this position from the first days of the euro debt crisis, when she wanted to include the International Monetary Fund as a key authority in distributing aid packages, and almost all other euro countries were against the idea. At the time, she said privately: "I'm pretty much alone here. But I don't care. I'm right."

NIKOLAUS BLOME, CHRSTIANE HOFFMANN, PETER MÜLLER, CHRISTIAN REIERMANN, GORDON REPINSKI, CHRISTOPH SCHULT

9 trillion dollars goes "missing" - how much of it is in The Budesbank???

There is one major flaw in the money system that I have never heard a single person mention, don't know why, maybe only I can see it, maybe it is the tin foil hat I wear that gave me it, but I am watching the most powerful man in the world clueless on how this happened, well the way I see it is that other countries like china created wealth, but did they really create it or did they borrow it.  If china created its wealth then that would have meant that it built its infrastructure and businesses internally, then it would have added wealth to the worlds circuit of money and been stable.  But if its infrastructure and businesses were borrowed from somewhere else then that is a transfer of wealth from one area to another and if the market of each depend on each other then its life is limited to the point when so much has been transferred so that it reverses in direction so starts an harmonic cycle decreasing in height until both end up even or at war, so very unstable.  This also means that's china's development was not natural as was the development in the west, now if china was many years ago about to start natural development and the west wanted to stop it or control it then this would have been a good plan. but that would have meant a Kissinger type person was about when the US and china first talked.  Anyway as china's development is not natural then it will collapse when who ever borrowed them the stuff wants it back.  And that's why I think it is all a Hollywood script, all written years ago by the likes of Kissinger. they are playing global power games using us poor mugs as pawns.   My simple high school / secondary school dropout understadning is that the United States government ( specifically the Obama adminstration) is operating one of the biggest PONZI schemes in history. OK, I have no law training or degree and I ain't no bean counter. However, this particular administration blackmails the house ( read Republicans) to constantly increase the debt limit. My understanding is that the main buyers of US Treasuries (China and the UK) are farely well maxed out on purchasing US Treasuries and there are no new substantial buyers, so, as the US $ is the main reserve currency it somehow has the right to print more money without having actual physical reserves (gold) to backup all the money it has spread aropund the world. Thus when they increase the debt limit they print more money in order for the Fed (Federal Reserve) to buy (although I understand not directly) their own older treasuries and even newly printed treasuries. His Obamaship and his sycophantic Democratic poodles are intent on going ahead with the Demoncare (the Demoncrats own it as no Republicans voted for it and the majority of the US public do not want it) despite the fact that it is going to need 1.8 trillion dollars to set it in motion. They cannot raise taxes to pay for that so they will increase the debt limit next year, print some more money. Prince Harry over at the Senate meanwhile want to increase next years budget by 1 trillion 5 billion (strange figure). Today the Whitewash House announced that it was going to bail out the forever profligate Democratically controlled bankrupt city of Detroit. Another 17 billion dollars. Has the US taxpayer agreed to that and do they have the money to even do it? Perhaps, they will print more money and also shaft the Detroit debtholders just as they did with Chrysler and GM and favoured banks and financial institutions.    I wonder what the true value of the US $ is today compared to when the investors in US Treasuries bought them. To me it's like when I bought my house for 220,000. I sold it 17 years later for 405,000 and everyone said what a great profit I made on my "real eastate investment". Except, that when I tallied up that I had paid about 370,000 in interest to the kind and gentle banks and the value of the CDN $ had declined I do not think I made anything.  If the house (which i understand is supposed to control the purse strings - although the Emperor Obama (O.K. he has some nice clothes except for nasty golfing shorts and grandpa jeans says he will not negotiate on Demoncare, the debt ceiling, the public debt, any move to cut spending, any move to reduce taxes any attempt to prevent tax increases) allows the Administration to increase the debt ceiling and stop the profligate spending the the rating agencies need to downgrade the US credit rating  (that will help exports from the US anyway and increase the cost of imports (which may provoke the use of every available US sourced  enernergy resource instead of the trillions that it costs to import from countries that hate the US anyway). The mandarins should also stop giving further credit to the US (cut up it's credit card and force it to use a current account debit card). And while they are at it maybe they should devalue the greenback.  The US currency has the motto "In God We Trust". I have news for the big spenders, that was not put on the currency to indicate that they trusted God to be the lender of last resort when they had spent their money on idols. Plus, if there is a deity I doubt that he has much trust left in the three equal but separate parts of the US government or any level of US government. OK, you can now tell me I do not know what I am talking about and how everything I said is wrong (no abusive language please, it just reflects on you, not me). However, when you are telling me how wrong I am then tell me how wonderfully brilliant and correct the US governance is.
 

....So 9 trillion dollars goes "missing" and I'm sitting here poor, eating GMO foods because I can't afford anything better... my cat has problems breathing and I don't know if I'll have the money to take her into the veterinarian but hey! at least they all the money they could ever need, they probably wipe their ass with money they are so rich.

GREECE - During the first seven months of 2013, the surplus reached €1.1bn (£921m), he said, adding this would enable the country to negotiate with its creditors, the European Union (EU) and the International Monetary Fund (IMF).

Greece has received massive rescue funding, tied to tough conditions, from the EU and the IMF to help it overcome a debt crisis which threatened the eurozone.

However, the a resulting structural reforms, including an overhaul of its public sector and its tax system, have proved unpopular.

On Saturday Samaras promised no further austerity measures would be introduced, saying the economy "cannot take" them any more.

"Debt levels will be manageable, Greece has respected its commitments... now, the creditors must also respect what was agreed," he added.

Protests in Thessaloniki, the country's second largest city, were organised by the private and public sector trade unions, GSEE and Adedy, who called for "fighting austerity and poverty".

Police said about 4,500 extra officers had been sent to the city to avert rioting during the four-hour demonstration.

The EU and the IMF recently praised the Greek government's progress in turning the economy around, but bemoaned delays to a programme of privatisation and reform, and the fact that the country will likely need further aid in 2014 and 2015 amounting to around €10bn.

Lagarde was a Minister in the French UMP party. A  coincidence that she is in favor of maintaining financial UMP - in other words funny money. Tapering or whatever euphemism one uses for reducing the amount of money printing is going to be painful as markets are forced to realize the price of debt. Exit strategies are mathematically impossible as we all  know the Central Banks could only withdraw a fraction of the funny money they created.
The UK needs a new bonanza on the scale of North Sea oil to allow any unwinding of QE. Without it there would be a severe depression.
Our fiat currencies have been hijacked by a financial community that operates in  a parallel world to the real economy. There is no way out of this mess unless the masses are driven into poverty and unrest or the global financial system collapses. 

Laggard and Blancmange should both be long gone, having perhaps irreparably damaged a global institution called the IMF by trying to turn it into a French version of a € lifeboat

"The day will come when this period of exceptionally loose monetary policy... must end," she said in a speech to a global gathering of central bankers hosted by the US Federal Reserve in Jackson Hole, Wyoming, on Friday.

"We need to plan for that day, especially since we do not know exactly when it comes," said Ms Lagarde, the managing director of the International Monetary Fund.

"Just as with entry, exit will take us into uncharted territory."

Speaking as the Fed's plans for slowing its $85bn-a-month bond-buying program have shaken emerging economy markets, Ms Lagarde said such "unconventional monetary policy" (UMP) approaches remained important.

"Let me say it up front: I do not suggest a rush to exit. UMP is still needed in all places it is being used, albeit longer for some than for others."

She said specifically that both Europe and Japan still have much to gain from such programmes, which mostly aim to enhance growth by pressing interest rates lower.

But she said the IMF and policy makers should be thinking about the ramifications of reeling in easy-money programmes.

"That includes the implications for global economic and financial stability: the whole system, not just one part of it."

The Federal Reserve has lost control of long-term interest rates, which have soared over the past three months, says Joel Naroff, president of Naroff Economic Advisors and a member of Newsmax's Financial Braintrust Alliance (FBA).
The 10-year Treasury yield has jumped to 2.83 percent from 1.66 percent May 2. The idea behind quantitative easing (QE) was to push long-term rates down, and the Fed was spectacularly successful at that, which helped the housing market recover, Naroff tells Newsmax TV in an exclusive interview....But, "the second that they [the Fed] started talking about tapering, that's when the markets have taken back over," he said. Naroff hopes the Fed doesn't curb its QE, because he doesn't think the economy is strong enough to handle it. 
The problem is that even if the Fed cuts just $10 billion from its $85 billion of monthly bond purchases, the market will be waiting for the next reduction, Naroff says.
"Once you start the process, then the market starts focusing on what comes after," he said. "If you start with 10, then the market says, when are they going to go 25, when are they going to stop?"
So the Fed is now giving way to the expectations of the market, Naroff says. "And that's where they've lost control of the long end." Meanwhile, he is concerned about the strength of the consumer sector. "Retail sales are up [they rose 0.2 percent in July], but really when you look at the details, there was not a whole lot of conviction on the part of consumers," Naroff said. "They're not going out and buying anything."  That's because personal income is stagnant, he says. "Wages aren't even keeping up with the modest inflation pace," Naroff said. "Real earnings are flat to down, and you can't have strong spending and strong growth if wages don't pick up."  As for housing, the July housing starts data was a mixed bag, Naroff says. Overall home starts rose 5.9 percent last month from June. But single-family housing starts dropped 2.2 percent. This decline "is a worry for me because that [single-family homes] is the component of housing which is likely to have the greatest sensitivity to change in mortgage [rates]," Naroff said.
"So despite the fact that the National Association of Homebuilders said that builder confidence is rising, . . . we may be seeing some early signs of problems there." The problems would show up in construction rather than prices, Naroff says. "On the permit data, we're likely to see that begin to soften, because builders are not taking out permits unless they think they can sell the product," Naroff said. "There's not a whole lot of speculative building going on right now."
But home prices are somewhat insulated he says. "Prices will hold up in no small part because there's not a lot of supply out there."

ECB - Troubled bank balance sheets ...

Troubled bank balance sheets had the potential to “choke the engine of recovery” in the 17-nation bloc, and “exert a more persistent drag on economic growth,” said Mr Coeuré, who sits on the executive board of the European Central Bank (ECB). Mr Coeuré said ailing banks had to be repaired or shut down. Failure to do so could result in a decade of stagnant growth in the eurozone, similar to Japan in the 1990s. He said the eurozone crisis risked creating a Japanese-style wave of “zombie banks” in which lenders, fearful of falling foul of capital rules, chose to “evergreen” - or roll over - bad loans instead of recognizing losses on their books. This had led to the “perverse” practice of banks extending credit to insolvent borrowers, rather than lend to creditworthy firms, said Mr Coeuré. Banks then “gambl[ed] on the hope that [firms] would recover or that the government would bail them out”. Mr Coeuré called on leaders to complete the steps needed to implement the eurozone’s banking union. He also said measures were needed to tackle youth unemployment...

Meanwhile, Olli Rehn, an incompetent idiot, the European commissioner for economic and monetary affairs, said the next tranche of Greece’s bail-out could be paid in installments amid growing frustration with Athens’ slow pace of reform.

“It is possible, but not certain,” Mr Rehn said on Friday. “It all depends on whether Greece can meet all requirements that they are committed to.”  A separate report by the European Commission and the ECB showed that Spain’s troubled lenders did not need further taxpayer support. The eurozone’s fourth largest economy has so far received €41.3bn to recapitalize its banks....

German politicians have been vocal in their opposition to the EU Commission's plans for a single bank resolution authority, concerned that it could override a national decision on how to deal with a struggling bank. Yesterday finance minister Wolfgang Schaeuble warned that the plans could require treaty change. I would strongly ask the commission in its proposal for a [single resolution mechanism] to be very careful, and to stick to the limited interpretation of the given treaty.  We have to stick to the given legal basis, as otherwise we risk major turbulence.  More on the plans for the so-called "single resolution mechanism" to be proposed by the EU Commission today.  If plans go ahead at the planned pace, a new agency within the European Central Bank will be in charge of the wind-down or rescue of failed banks by 2015. The eventual aim is for the ECB to draw from a common multibillion euro fund, supplied by eurozone banks. However, since it will take years to accumulate the €60bn needed for a bank resolution fund, it will be limited to overseeing national-level bank bail-outs to begin with.