In the battle over who should become the next president of the European Commission, David Cameron is depicted as the loser - "isolated", "incompetent", a serial mis-reader of Brussels politics.

Yet David Cameron is not alone in finding himself in a corner, defending a position he cannot retreat from.

Several leaders who doubted whether Jean-Claude Juncker was the best candidate for the job are now uncomfortably lining up behind him.

But Angela Merkel's position is almost as uncomfortable as that of David Cameron. Frau Europe's authority has been damaged.

It was not just that she was forced to back down when she suggested other names apart from that of Mr Juncker should be considered for the top job.

She flinched as some outraged German columnists pointed out that during the campaign she had told voters the election would determine the next Commission president.

Although much of the German political establishment has seen a strengthening of the European Parliament as one answer to the EU's democratic deficit, Chancellor Merkel is said to be uncomfortable at a shift in power towards the European Parliament which could weaken the ability of heads of government to define the agenda.

There is already a fall-out from the battle over the Commission presidency.

The centre-left in Europe, led by Italian Prime Minister Matteo Renzi and President Francois Hollande of France, have seized an opportunity to push their case for a change of course in Europe. Yes, they have agreed to back Mr Juncker but in exchange for a commitment to support their growth agenda.

The centre-left wants a more flexible interpretation of the EU's budget and deficit rules.

Chancellor Angela Merkel of Germany and her centre-left coalition partner have cut a deal which strengthens the chances of Jean-Claude Juncker becoming the next chief of the EU executive, presaging a defeat for David Cameron who has vowed to fight Juncker's appointment to the bitter end.

Sigmar Gabriel, the German vice-chancellor and leader of the Social Democrats (SPD), joined Merkel in backing Juncker for the job of European commission president while dropping demands that Martin Schulz, the outgoing German president of the European parliament, be made the German commissioner in Juncker's team.

The deal in Berlin came as the EU's centre-left government leaders prepared to meet in Paris on Saturday to coordinate positions ahead of what promises to be a turbulent EU summit next week focused on Juncker, the former Luxembourg prime minister.

Following last month's European elections, leaders are to meet for a summit on Thursday and Friday to debate who should be the next commission chief.

Cameron has waged a loud and aggressive campaign in what looks like a doomed attempt to sway minds against Juncker. Officials in Brussels say the Cameron campaign has been driven by Conservative party politics, with fateful implications for Britain's future in Europe.

The deal in Berlin suggests that domestic party politics in Germany have played an even bigger role in resolving the controversy over Juncker and the EU's future leadership team.

Schulz led the European social democrats in the recent election as contender for the commission job while Juncker, with Merkel's backing, led the campaign for the Christian democrats who won, making the Luxembourger the frontrunner. Cameron had no say in either candidacy since the Conservatives are aligned with neither grouping after the prime minister parted company with Europe's Christian democrats in 2009.

"The SPD will accept a commissioner from [Merkel's] CDU," Gabriel told Der Spiegel, "provided Schulz is elected president of the European parliament".

That represented a climbdown. The SPD had previously threatened to block Juncker in the necessary vote in the European parliament unless Schulz was named by Merkel as the new German commissioner.

Schulz told the Guardian last week that Juncker had offered him the post of vice-president of the commission and also warned that it would be "easier" for the SPD to support Juncker in a vote if he was assured of the job.

It is not clear how the Berlin deal will go down in the rest of Europe and whether Merkel, the most powerful leader in the EU, will get her way. But it suggests she will push to have Juncker nominated next week. If she does, Cameron will insist on a vote at the summit, will vote against, will force other leaders to show their true colours on Juncker, and will probably lose in the qualified majority vote.  Until now, these decisions have always only been taken by consensus by national EU leaders....Well...Merkel is by far not as powerful as many people are led to believe. Juncker wasn't her favorite candidate in the first place but letting him down and thus defying the Spitzenkandidat process she had agreed to earlier would have undermined her credibility and ended her career. That's why the social democrats pushed so hard.
Then there's the concessions she did have to make: Schulz becoming president of the European Parliament even though his group is not the largest. Helle Thorning-Schmidt, a Denish social democrat, becoming president of the Council of Ministers. And most importanly: Loosening the ties on austerity within the eurozone, thus making Juncker acceptable to Renzi.
So Merkel didn't come out as a winner, but Cameron wasn't even allowed to take part in the game.

Money needs to go where you need it to go. Private banks only lend a small fraction of what they could lend into industry because of the risk. With private banks creating 97% of all new broad money into the economy in the form of debt the kind of change you want wont happen. Private banks prefer to speculate in derivatives and property or use it to rig LIBOR rates, so doing the same old thing like QE doesn't work. banks dont give a damn about social policy that government wants to follow they go where the profit is, which most definitely are not social projects where the people want it to go. Private banks control the money so believe me when i say they will not give that control up without regulation and another form of money reform its just not in their interest. We need a sovereign money creation economy, where the introduction of money is done centrally where government and the people want it to go, not where the banks want it to go.

Most economists don't include money creation in their models of the economy , which is completely crazy, because if you don't count money in the economic models you cant see what effects it has. 

The best way to really understand how a sovereign money system would operate is to seek sites about how this can be done. 

www.positivemoney.org has a lot of very good ideas if you can go through the literature. 

Its also very interesting to see that most people talk in banking circles about fractional reserve banking, but that doesn't happen , it doesn't exist. 

Here is a link to the Bank of England quarterly report that proves that a) 97% of all money is created by private banks and b) fractional reserve banking is a much vaunted but not a truthful explanation of banking in the modern economy.

http://www.bankofengland.co.uk/publications/Pages/quarterlybulletin/m05.aspx

Banks (private) do not work the way you think they do. They do not lend savers money into the economy, they create the debt electronically and add interest. There are not enough savers in the world to cover the debt that is lent by banks(not even a tiny fraction of that debt) How many grannies savings accounts would you need to cover lending to just the U.K.'s mortgages? never mind the $634 Trillion debt the U.S. carries, its laughable really that we fell for it. 

This massive amount of debt IS 97% CREATED BY BANKS.  So sovereign money is the solution.

Source EU Observer - BRUSSELS - The setting could not be less spectacular – one of the more nondescript rooms in the European Parliament's glass towers overlooking Place Luxembourg in Brussels, where a handful of officials gather with armfuls of papers.  At intervals, members of the Parliament's catering staff silently walk round the room offering tea and coffee. Unless you were involved, you wouldn't know that the meeting – one of around 1,000 so-called 'trialogue' meetings to take place in 2013 – was actually happening.  At this particular gathering to discuss plans to re-write the EU's accounting directive in March 2013, MEPs from the Parliament's legal affairs committee – Klaus Lehne, Arlene McCarthy, Eva Lichtenberger, Alexandra Thein and Saj Karim – made a breakthrough.  They secured rules that will shine a light on the payments made to governments by companies working in the controversial extractive industries – rules that should help prevent corruption and dodgy dealing between companies and governments.  An Irish government official, whose country has been tasked with leading the talks (because Ireland held the rotating EU presidency at the time), agreed that, without exception, all payments over €100,000 must be publicly disclosed. This will apply to every individual project or contract undertaken by a company.  The new reporting requirements will mark a sea-change in how the industry is regulated yet the trialogue meeting where it happened remains a closed process.  Search for any mention of trialogues in the EU treaties and you will draw a blank.  This is because despite being an accepted part of the lawmaking landscape, in legal terms trialogues don't exist.  All trialogue meetings are informal and the timing of the meetings are not known to most MEPs, let alone the ordinary public. There are no formal minutes taken. Some are over within a few minutes. Others can go on all day and well into the night.   The last trialogue on the single resolution mechanism (SRM), the final, and arguably most controversial piece of banking union legislation, lasted 16 hours through the night on 19 March as lawmakers sought (successfully) to close a deal in time for the end of the parliamentary term.  Despite the sense of intrigue that should surround a lawmaking process that few people are aware is happening, attending the average trialogue meeting would be a perfect cure for insomniacs, as civil servants and politicians drone through a bill line by line, article by article.  But they matter. If the EU's bi-monthly leaders' summits are the glamorous (in the loosest sense of the word) side of the EU, the trialogue meetings are the main engine driving the sausage factory that churns out EU laws in Brussels.

The triumph of the trialogue - In terms of numbers, the volume of legislation does not appear to have changed much in the past two legislatures. MEPs and ministers adopted a total of 447 laws in the 2004-9 parliament. By November 2013, politicians had signed off on 395 files and, even with a wild flurry of activity as they seek to conclude as much legislation as possible before May's elections, the total number of files is likely to be around 500.  But what has changed is the way the laws are agreed.

The formal structure for breaking the impasse between the institutions mentioned in the treaties is the conciliation committee.

Banks with high levels of distressed debts will have to face the music eventually as interest rates return to normal and this will be the moment of highest risk for the Eurozone. The question is what will be the trigger for rates to increase - growth in the US, a credit crunch in China or war in Russia - take your pick! The deepening slowdown in emerging markets is holding back global recovery and risks fresh financial strains in Spain, Britain and other European countries with large bank exposure to the bloc, the OECD has warned.

Rintaro Tamaki, chief economist for the OECD club of rich states, said bond tapering by the US Federal Reserve has “only just begun” and threatens to trigger a fresh wave of capital flight from vulnerable parts of the emerging market nexus. “There remains a risk that capital flows could intensify,” he said.

Mr Tamaki said Spanish bank exposure to developing countries is 35pc of Spain’s GDP, mostly through the operations of Santander and BBVA in Latin America. Exposure is 21pc for Britain and 18pc for Holland. The US is largely insulated at just 3pc of GDP.

Much of Britain’s link is through lending to Chinese companies on the dollar market in Hong Kong. British-based banks account for almost a quarter of the estimated $1.1 trillion of foreign-currency loans to China.

The OECD called on the Fed to go easy on bond tapering and said the European Central Bank and the Bank of Japan may have to step up stimulus to prevent the recovery faltering. This round if it really gets out of sync, would be far worse than anything previous. I have my doubts if Yellen will soften up on the tapering as she is a home baser. Vlad could knock the chessboard as EU landers stew with fiscal ferment. The Greeks will need more bailout dosh too....given the recent meetings for the 3rd bailout have stalled.

I have my doubts that Draghi can control a potential runaway situation when real asset shifting starts. The Eurozone economics aren't that sound as he makes them out to be given lander debt is rising faster.

A new "low" is coming with levies; just park ones dosh in the right place.

Well....lot's of hot aair - in fact The EU is a "bad joke" ...

According to Portuguese MEP Paulo Rangel: “The new process under which the European Commission President is elected by the European Parliament will fortify the Commission's democratic legitimacy and political role and will make the upcoming elections more substantial, by linking European voters to the election of the Commission President.”

The Report on the implementation of the Lisbon Treaty with respect to the European Parliament (EP) stresses the need to reinforce the Commission's democratic legitimacy, independence and political role.

Paulo Rangel’s Report urges the European Council to take the results of the elections into account and honour the citizens' choice when nominating the proposed candidate for the position of President of the European Commission. The Report also foresees that the candidate will need to present the next term’s policy guidelines for discussion to the European Parliament before getting the job.

The text also suggests that Commissioners should, as much as possible, be selected amongst the elected Members of the EP and that the new President-elect of the Commission should be more autonomous when selecting the College of Commissioners.

European Commission to function more efficiently...Rangel’s Report takes a further view with additional measures for the more effective functioning of the Commission - without prejudice to the right to appoint one Commissioner per Member State - by suggesting the appointment of Commissioners without portfolio or the establishment of a system of Vice-Presidents with responsibilities over major thematic clusters and with competences to coordinate the work of the Commission in the corresponding areas.

The Report also urges the next Convention to consider how the Commission is formed in order to reinforce its democratic legitimacy and calls on the next Commission President to consider how its composition, construction and political priorities will strengthen policy which is close to the citizens. In addition, it suggests that the next Convention should envisage a reduction of the number of votes required to apply a motion of censure against the Commission.

This important Report was approved by the EP in plenary with 298 votes in favour, 102 votes against and 25 abstentions.

BRUSSELS - The Greek economy will stay in recession in 2014 for the seventh consecutive year, according to the OECD.  The Paris-based Organisation of Economic Co-operation and Development (OECD) think-tank forecasts a further 0.4 percent economic slowdown next year in its economic survey of Greece published Wednesday (27 November), lower than the 0.6 percent growth currently projected by the Greek government and its creditors.   It also says that Greece will struggle to bring its debt burden below a massive 160 percent of GDP by the end of the decade, nearly 40 percent higher than the 124 percent expected by the European Commission.  The OECD states that a sharp fall in prices could also force Greece to seek more time and money from its creditors. Greece is currently three years into a €240 billion emergency loan programme.  "If negative inflation risks materialise, assistance from Greece's euro area partners may need to be considered," the OECD said.  Speaking in Athens on Wednesday, OECD Secretary-General Angel Gurría said that it was "imperative that both the costs and the benefits of adjustment are shared fairly” if the country's reform programme was to work.  However, Gurria was full of praise for Athens' progress in reforming its economy and particularly a “spectacular reversal in the balance of payments”.      Greece has lost more than 25 percent of its economic output since 2007 and seen its unemployment rate climb to 27 percent, the highest in the EU. Its debt pile is expected to peak at around 180 percent this year, nearly double the average across the rest of the eurozone.  The OECD report calls on the Greek government to scrap 555 regulations hindering businesses ranging from retailers to building materials sector and tourism, arguing that slashing red-tape would lead to an extra €5.2 billion in economic activity.  "A more rapid return of confidence and foreign capital, attracted by low asset prices, and privatisation, could support domestic demand through both investment and consumption," it argued.  For his part, Kostis Hatzidakis, Greece's minister for competitiveness agreed that the government would continue its programme of market liberalisation. "It is true that our economy has been plagued by bureaucracy, protectionism and market distortions for a long time," he said.

Ukrainian President Viktor Yanukovych has defended his move to put on hold a historic deal with the EU, amid continuing mass protest rallies.  He said he was forced by economic necessity and the desire to protect those "most vulnerable".  The EU has accused Russia of exerting heavy economic pressure on Ukraine. Clashes between protesters and police continued on Monday. Meanwhile, jailed opposition leader Yulia Tymoshenko announced an indefinite hunger strike.  'No alternative'  Mr Yanukovych was speaking publicly for the first time since the announcement on Thursday that his government was halting preparations to sign the association and free trade agreements with the EU.  More confrontations between protesters and police early Monday morning in front of Ukraine's government building indicate that the situation remains very volatile.  In an echo of the Orange Revolution nine years ago, protesters set up a tent camp in front of the main demonstration's stage.  Ukrainian opposition leaders say political actions will continue through the week until the Vilnius summit, where Ukrainian officials were supposed to sign the free trade agreement with the EU. Many demonstrators say that they believe President Yanukovych will succumb to the pressure of the rallies and complete another about-turn - and sign the agreement.   This of course depends on whether the protesters can maintain their own momentum over the coming days.  The decision triggered mass protests in Kiev and a number of other cities across Ukraine.  "I want peace and calm in our big Ukrainian family," Mr Yanukovych said in a video statement, describing himself as a "father".  He stressed that his government had not given up attempts to bring closer ties between Ukraine and the EU.  "I would like to underline this: there is no alternative to the creation of a society of European standards in Ukraine and my policies on this path always have been, and will continue to be, consistent.  "But I would be dishonest and unfair if I had not taken care of the most disadvantaged and vulnerable, who may carry the brunt during a transitional period."  Mr Yanukovych's government last week said it was halting preparations for signing the treaties, amid concern for possible mass job losses in the short-run.  Opponents are accusing the president of keeping talks with the EU alive while never intending to sign the deal at an EU summit in Vilnius, Lithuania, on 28-29 November. They also say he has bowed to growing pressure from Russian President Vladimir Putin, who wants Kiev to join the Moscow-led Customs Union. The grouping also includes Belarus and Kazakhstan.  Mr Putin denies the claims, instead accusing the EU of trying to force Kiev into singing the agreements. European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso said on Monday the door was still open for Ukraine to sign the agreements at the summit in Vilnius.

Yes, let's be honest, the de facto leadership of all things in Europe is exercised by Germany. The problem is that unless or until we all accept and formalize that a German politician (former STASI officer - merkel) captains the European Union and that Germany calls all of the shots, then it's the same as if there was nobody in charge.
Everybody was sure that somebody would do it. Anybody could have done it, but nobody did it. Somebody got angry about that because it was everybody’s job. Everybody thought that anybody could do it, but nobody realized that everybody wouldn’t do it. It ended up that everybody blamed somebody when nobody did what anybody could have done.My dual military related and commercial career to date has led me to hold a few golden rules dear to my heart.One of my golden rules is this. When one enters a situation where there is clearly a crisis playing out, the first question to be asked is, "Who is in charge here?" The answer can tell you a lot about why the crisis might have arisen in the first place, and can give some indication of the chances of the crisis being controlled and resolved.  If the person questioned can't answer straight away, confidently that "So-and-so is in charge", then you already have some understanding of why the organization is in a crisis. If the person questioned answers along the lines of "I think Blogs is in charge but, err, then again it could be Smith in charge. Err, or is it Jones in charge? Not sure really. One of them, is in charge anyway ... I think."...And there you have it. Nobody's quite sure who's really in charge at the ECB. Indeed, nobody's really sure who's in charge at the ECB; or in charge of the Euro Monetary Union; or in charge of the European Union. These are all just monstrous, dysfunctional European institutions which can neither jointly nor severally take 400 million European citizens to the economic and social paradise of a super state (which is what the European Union is supposed to be about). This is as much because the structures for governance of these organizations are a shambles, as it is because the underlying concept itself - of slamming sovereign nations together into a super state without democratic consent and without a single, clearly identified leader at the helm - is a monstrous deceit.  And now we have the particular situation explained by AEP above where the best the nascent European superstore's bank can do is to slam the continent into deflation. That's terrific, just terrific. A dysfunctional monetary union, tucked inside a dysfunctional economic and political union with, sitting behind it all, a dysfunctional central bank. An organization in crisis if ever there was one.

WASHINGTON — Two long-range American bombers have conducted what Pentagon officials described Tuesday as a routine training mission through international air space recently claimed by China as its “air defense identification zone.” The Chinese government said Saturday that it has the right to identify, monitor and possibly take military action against aircraft that enter the area, which includes sea and islands also claimed by Japan. The claim threatens to escalate an already tense dispute over some of the maritime territory.   American officials said the pair of B-52s carried out a mission that had been planned long in advance of the Chinese announcement this past weekend, and that the United States military would continue to assert its right to fly through what it regards as international air space.   Pentagon officials said the two bombers made a round-trip flight from Guam, passing through a zone that covers sea and islands that are the subject of a sovereignty dispute between Japan and China.   Officials said there had been no Chinese response to the bomber run.   Within hours of the Chinese announcement this weekend that it had declared what Beijing termed an “East China Sea Air Defense Identification Zone,” Defense Secretary Chuck Hagel issued a statement expressing deep concern over the action.  “We view this development as a destabilizing attempt to alter the status quo in the region,” Mr. Hagel said. “This unilateral action increases the risk of misunderstanding and miscalculations.”   Mr. Hagel noted that “this announcement by the People’s Republic of China will not in any way change how the United States conducts military operations in the region.”  Pentagon officials said the training sortie by the two B-52s could be seen as underscoring that commitment to preserving traditional rules of international air space.   Mr. Hagel’s statement said the United States had conveyed “concerns to China through diplomatic and military channels, and we are in close consultation with our allies and partners in the region, including Japan.”  His statement concluded by noting the United States is “steadfast in our commitments to our allies and partners. The United States reaffirms its longstanding policy that Article V of the U.S.-Japan Mutual Defense Treaty applies to the Senkaku Islands.”   The move by China appeared to be another step in its efforts to intensify pressure on Japan over the Japanese-controlled islands in the East China Sea that are at the heart of the dispute.  The declaration, from a Ministry of National Defense spokesman, Col. Yang Yujun, accompanied the ministry’s release of a map, geographic coordinates and rules in Chinese and English that said “China’s armed forces will take defensive emergency measures to respond to aircraft that do not cooperate in identification or refuse to follow orders.”  “The objective is to defend national sovereignty and territorial and air security, as well as to maintain orderly aviation,” Colonel Yang said in comments issued on the ministry’s website.

Public confidence in the European Union has fallen

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

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

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

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

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

                        

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

BBC News reports...

The former Italian Prime Minister, Silvio Berlusconi, has relaunched Forza Italia, the center-right party that brought him two power two decades ago.

A leaders' meeting voted to suspend the People of Freedom Party (PDL) and restore the name used until 2007. Deputy Prime Minister Angelino Alfano and other PDL figures were absent from the vote, hinting at party divisions. Earlier this month party moderates refused to support Mr Berlusconi's attempt to bring down the government. The national council of the PDL will meet on 8 December to ratify the decision of its leaders.

"With today's decision we returned fully to the status of Forza Italy that gives the president the right and duty to delegate responsibilities and functions," said Mr Berlusconi in a press conference after the meeting.

He said the move had been voted for "unanimously" by those present at the meeting, which was not attended by Mr Alfano, who is the PDL secretary, and four other government ministers.

Turbulent period

"The five members who have decided not to attend tonight agreed that it was better to have a unanimous decision and therefore, with my consent, have not participated," Mr Berlusconi said.

But he insisted that the party was still united.

Silvio Berlusconi: "We have decided, not without internal travail, to express a vote of confidence in this government"

"We continue to focus on the desire for unity, which is something we all believe in, regardless of any points on which we are divided," he said.

But political observers say a party split is very likely, with Mr Berlusconi's relaunch of Forza Italia indicating that he is attempting to transfer influence towards more conservative elements in the party.

It has been a turbulent period for Silvio Berlusconi.

Four weeks ago Mr Berlusconi promised to topple the government by withdrawing the PDL's support for the cross-party government of Prime Minister Enrico Letta- a move which prompted a vote of confidence by the Senate.

But he was forced into a humiliating climbdown when it became clear that several of his senators would back the government.

In August he was convicted of fraud and tax evasion. The Italian Senate will soon vote on whether to expel him, a move which would open up the risk of arrest over other criminal cases.

Negociators Thursday plunged into difficult budget talks to avoid a repeat crisis within months, and quickly agreed to lower their sights from the sort of grand bargain that has eluded the two parties for three years.

After approval late Wednesday of the agreement ending the standoff, the deal-making mantle shifted overnight from the leaders of the Senate to the Budget Committee leaders, Senator Patty Murray, Democrat of Washington, and Representative Paul D. Ryan, Republican of Wisconsin, two less senior lawmakers who nonetheless could make very effective salespeople since they command loyal followings in their parties. The political pressure lifted as well, for now. But the need for a bipartisan breakthrough, even a modest one, was amplified by the economic costs wrought by the 16-day shutdown and near-default on government obligations.       

“The key now is a budget that cuts out the things that we don’t need, closes corporate tax loopholes that don’t help create jobs, and frees up resources for the things that do help us grow — like education and infrastructure and research,” President Obama said Thursday from the White House, setting ambitious goals for Congress even as his own role in the bargaining was unclear.

The question of what a new House-Senate budget conference can deliver by its Dec. 13 deadline — in time for Congress to act by Jan. 15 on funding to keep the government open — remained the subject of deep skepticism, well earned by past failures at reaching so-called grand bargains for deficit reduction and spending investments in the past three years.

With the scope of the talks narrowed for now, on the table are ideas left over from past, failed bargaining: possible reductions in other programs — like farm subsidies, federal pensions, the Postal Service and unemployment insurance — and relatively minimal tax loophole closings, possibly as little as $55 billion.

Several hundreds of people were protesting in the village of Silistea-Pungesti in Eastern Romania on Wednesday against plans by US company Chevron to start operating the first shale gas exploration drill in the county of Vaslui, news agency Agerpres reports.

Protesters - some of whom have come from the Barlad, Iasi and other cities in the region of Moldova, Eastern Romania, some of whom are locals from Pungesti - installed tents on the field where Chevron machines are to be deployed. They remained there over night to protest today and said they would not leave the perimeter and would not allow representatives of the US company to come to the area.

On Wednesday afternoon, some 500 people were taking part in the protest. Some locals forced a line of intervention police deployed in the area and managed to reach the perimeter they were not allowed in. Vaslui county prefect Radu Renga warned that laws must be complied it and that gendarmes have to intervene when public order and traffic on public roads are affected.

The first exploration drill is to be deployed in the close vicinity of the village of Pungesti.

Chevron Romania holds another three certificates for the county of Vaslui to start explorations in order to identify possible shale gas reserves.

A European Parliament report seen by SPIEGEL estimates that 3,600 international organized crime organizations operate within the EU. The damage done to European economies by organized crime totals hundreds of billions of euros according to a European Parliament special committee investigating crime, money laundering and corruption. The CRIM committee estimates that around 880,000 slave laborers live in the EU, of whom 270,000 are victims of sexual exploitation. Human trafficking alone generates profits of around €25 billion while the illegal trade in human organs and wild animals makes for a further estimated profit of between €18 and €26 billion annually. Meanwhile, cybercrime causes an estimated €290 billion of damage. The report calls rampant corruption 'a serious threat' with 20 million cases worth a total of €120 billion registered in the public sector alone. The European Commission has called for intensified cross-border cooperation between police forces and judiciaries in member states. Proposals include the elimination of tax havens and the criminalisation of vote-buying throughout the EU. The committee further advocates that individuals convicted of money laundering or corruption are excluded from involvement in government procurement for a period of five years. Whistleblowers who expose malpractice in either business or government are to be provided with Europe-wide legal protection and freedom from criminal prosecution. The European Parliament will vote on the CRIM report on October 23.

BRUSSELS—England is blocking final approval of a powerful new supervisor for euro zone banks until it receives further guarantees that countries outside the currency union won't be disadvantaged.

At a meeting of European Union ambassadors on Friday, the U.K. asked to delay final approval of the so-called single supervisory mechanism for the third time in less than a month.

The single banking supervisor is the first leg of the euro zone's ambitious banking-union project, which aims to draw a line under the region's recent debt crisis. The hope is the new supervisor, under the auspices of the European Central Bank, will allow banking crises to be spotted—and dealt with—before they become systemic.

The legislation has already been approved by the European Parliament, and approval by EU member states is usually a formality at this stage.

Britain previously asked to postpone final approval of the legislation on Sept. 25, to allow its parliament to review last-minute tweaks that would give European lawmakers greater oversight of the supervisor's activities.

Now, the U.K. is also pushing for political assurances that safeguards introduced into the legislation—aimed at preventing the euro zone from pushing through financial rules as a bloc in decisions that affect the EU as a whole-—aren't watered down, EU officials said.

"We have consistently said that we support the creation of a euro zone banking union, but we have also been clear that there need to be safeguards to ensure the integrity of the single market is guaranteed, and that the rights of countries not taking part are protected," a U.K. government spokesman said.

The safeguards aim to ensure that the new supervisor, which will cover the 17 euro zone states as well as any non-euro countries that choose to join, can't use its inbuilt majority of the EU's 28 members to dominate the European Banking Authority, which sets standards across the EU.  Under a deal hammered out in December, binding regulation can only be agreed by the EBA with a "double majority"— simple majorities of states both inside and outside the euro zone. EU governments have agreed not to change that voting system until the number of EU states outside the banking union falls to four. However, British officials are now worried that the voting rules will be watered down once the single supervisory mechanism, or SSM, is agreed, and that those weaker rules will be applied to legislation on bank resolution—the second leg of banking union. An EU official said the U.K. wanted reassurance that changes to the voting rules in the EBA wouldn't happen for "a couple of decades."

"We're confident that we can get the assurances that we need and that this can be sorted out quickly," a British official said. The EU official said EU member states might circulate a text to reassure the U.K. The U.K. has said that it won't participate in the banking union, but has worked hard to ensure its own supervisor doesn't get overpowered by the SSM in EU-wide decisions.

Chantal Hughes, a spokeswoman for the European Commission, the EU's executive, said she was confident the U.K.'s concerns could be resolved in "the next few days."

The truth about Merkel's 4th. Reich

It's becoming clear how hard is going to be for Frau Merkel to form a new government. The SPD wants the Finance Ministry and will ballot its members on any deal. In the end, though, they're likely to reach an agreement, say media commentators.

The election may have been held eight days ago, but Germany is no closer to forming a government. It could take until December or January, the general secretary of the opposition Social Democrats (SPD), Andrea Nahles, warned on Monday. The SPD, in a canny move to drive up its price for joining a coalition and to secure grass-roots support for a deal, decided at a party conference on Friday that it will ballot its 470,000 members on any agreement. That means they can say in talks, "we can't give in on that point because our members won't back it. That's bad news for Chancellor Angela Merkel, because it will make the talks to form a so-called grand coalition of the two main parties all the more difficult. As if that weren't enough, Bavarian governor Horst Seehofer, an important conservative ally of hers, on Sunday narrowed her negotiating position with some undiplomatic rhetoric before preliminary talks had even begun.

In the last five years, there have in fact been a significant number of new guidelines, laws, drafts and recommendations. The banks were forced to increase the size of their financial cushions, for example, but they still aren't large enough. Regulators devised split banking systems designed to shield customer deposits from risky trading activities, but the concepts are half-baked and have yet to be fully implemented.

The leading industrialized nations agree that banks should be liquidated in accordance with clear rules -- and without adversely affecting taxpayers, if at all possible. Nevertheless, there are still no uniform international principles to achieve this goal. Most countries don't even have an insolvency statute for the industry.

Bankers' bonuses were capped, but then their fixed salaries were increased dramatically. Regulators had vowed to rein in the rampant trade in derivatives among banks by requiring it to be conducted on supervised exchanges. Instead, the over-the-counter derivatives market has grown by 20 percent since 2009.

Over the years, lawmakers have lost sight of the most important objectives of regulation. Secure savings deposits, a continuous supply of credit and a functioning payment transaction system are as important to an economy as intact water pipes or power grids. The point is to ensure that this supply functions properly. At the same time, governments and taxpayers cannot allow themselves to be held hostage by the banks, merely because they can guarantee a basic supply of capital.

"What is needed is fundamental structural change, which, as in other industries, costs money. Lawmakers shy away from that," says Clemens Fuest, President of the Center for European Economic Research (ZEW).

Financial industry executives take every opportunity to warn that if regulators take aim at financial groups, then businesses, savers and investors will ultimately suffer.

I am going to ruffle a few feathers, but let me still say it – We had a dream run from 2003-2008 and now it is over. The days of 20% salary hikes and 30% stock returns are gone (at least for now) for the masses.

If you are really good at your job or in investing, you may get above average raises or returns, but that is not going to be the norm for everyone

If you entered the workforce in 80s or 90s, you may have seen tough times yourself (or maybe your family did). The reason why the current slowdown feels horrible is because our expectations are high now. Don’t get me wrong – I am equally angry with the government for running the economy to the ground.

I  faced a similar market from 2000-2003, when the market dropped by around 50% over a three year period. At the market bottom in April 2003, capital goods companies like BHEL, Blue star were selling at 5 times earnings. The current market darlings like Asian paints (15 times PE), Marico (around 5-7 times PE) and other consumption stocks were selling a very low PEs too.  At the risk of getting philosophical, I can think of the following things to do this time around.

- Assess your risk tolerance:  If you have trouble sleeping in the night after seeing your portfolio drop by 10-15% ,  you should reduce your level of equity holdings.  My thumb rule – will I be able to sleep well if my portfolio dropped by 40%+ ? 

- Clean out the trash: Now is a good time to clear up junk from the portfolio. A bear market and 40% loss on weaker ideas concentrates your mind. One should evaluate each position closely, sell the weaker ones and redeploy the cash in the better ideas.

- Have faith:  There is no data or logical argument which can make you hold on to your stocks or add money to it. You need to trust that the markets will recover in time and so will your portfolio.

It is easy for people to say that they want to think independently and stand apart from the crowd. Now that that we have a blood on the streets and no end in sight, you will know whether you can truly do that.

Spain claims sovereignty over Gibraltar, which is a British overseas territory. There have been lengthy traffic delays at its border with Spain since the extra checks began.  The UK says it is considering legal action over the checks, which Spain argues are needed to stop smuggling and are proportionate. Spain also denies they have been imposed in retaliation for an artificial reef installed by Gibraltar which Spain says will disrupt its fishing fleet. Downing Street said on Friday that Mr. Cameron had called Mr. Barroso to raise "serious concerns" that Spain's actions were politically motivated and "disproportionate" - and broke EU rules on freedom of movement. He said the UK wanted to resolve the row through "political dialogue". But as the checks continued, Mr. Cameron added, the UK was "collating evidence on the sporadic nature of these measures which would prove that they are illegitimate".

"In the meantime, we believe that the European Commission, as guardian of the treaties, should investigate the issue," a Downing Street spokesman said. He said the prime minister had urged President Barroso to "send an EU monitoring team to the Gibraltar-Spain border urgently to gather evidence of the checks that are being carried out". "The PM emphasised that the Commission has a responsibility to do this as part of its role overseeing the application of [European] Union law," added the Downing Street spokesman. A European Commission spokesman said President Barroso had told Mr Cameron the situation was being monitored to "ensure respect for EU law". "President Barroso also expects that this matter is addressed between the two countries concerned in a way that is in line with their common membership of the EU," the spokesman added. Deputy Prime Minister Nick Clegg is also due to speak to his Spanish counterpart, Soraya Saenz de Santamaria, to press the UK government's concerns.