- The Last Labor Day?

By E.J. Dionne WASHINGTON -- Let’s get it over with and rename the holiday “Capital Day.” We may still celebrate Labor Day, but our culture has given up on honoring workers as the real creators of wealth and their honest toil -- the phrase itself seems antique -- as worthy of genuine respect.
Imagine a Republican saying this: “Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.”
These heretical thoughts would inspire horror among our friends at Fox News or in the tea party. They'd likely label them as Marxist, socialist or Big Labor propaganda. Too bad for Abraham Lincoln, our first Republican president, who offered those words in his annual message to Congress in 1861. Will President Obama dare say anything like this in his jobs speech this week?
As for the unions, they are often treated in the media as advocates of arcane work rules, protectors of inefficient public employees and obstacles to the economic growth our bold entrepreneurs would let loose if only they were free from labor regulations.
So it would take a brave man to point out that unions “grew up from the struggle of the workers -- workers in general but especially the industrial workers -- to protect their just rights vis-a-vis the entrepreneurs and the owners of the means of production,” or to insist that “the experience of history teaches that organizations of this type are an indispensable element of social life.”
That’s what Pope John Paul II said (the italics are his) in the 1981 encyclical Laborem exercens. Like Lincoln, John Paul repeatedly asserted “the priority of labor over capital.”
That the language of Lincoln and John Paul is so distant from our experience is a sign of an enormous cultural shift. In scores of different ways, we paint investors as the heroes and workers as the sideshow. We tax the fruits of labor more vigorously than we tax the gains from capital -- resistance to continuing the payroll tax cut is a case in point -- and we hide workers away while lavishing attention on those who make their livings by moving money around.
Consider that what the media call economics reporting is largely finance reporting. Once upon a time, a lively band of labor reporters covered the world of work and the unions. If you stipulate that the decline of unions makes the old labor beat a bit less compelling, there are still tens of millions of workers who do their jobs every day. But when the labor beat withered, it was rarely replaced by a work beat. Workers have vanished.
But we are now inundated with news (and “news”) about the world of capital. CNBC and the other financial media are for investors what ESPN is for sports junkies. We cheer the markets, learn the obscure language of hedge fund managers, and get to know some of the big investors in off-field interviews. Workers are regarded as factors of production. At best, they’re consumers; at worst, they’re “labor costs” cutting into profits and the sacred stock price.
They have faded away in both high and popular culture, too. Can you point to someone “who makes art out of working-class lives by refusing to prettify them”?
The phrase comes from a 2006 essay by the critic William Deresiewicz who observed that we no longer have few novelists such as John Steinbeck or John Dos Passos who take the lives of working people seriously. Nor do we have television shows along the lines of “The Honeymooners” or even “All in the Family,” which were parodies of an affectionate sort. “First we stopped noticing members of the working class,” Deresiewicz wrote, “and now we’re convinced they don’t exist.”
In his extraordinary book “Stayin’ Alive: The 1970s and the Last Days of the Working Class,” Jefferson Cowie spoke of how little we identify working-class people with their labor. “Workers occasionally reappeared in public discourse as ‘Reagan Democrats’ -- later as ‘NASCAR Dads,’” he wrote, “or the victims of another plant shutdown or as irrational protectionist and protesters of free trade, but rarely did they appear as workers.”
With the worker disappearing from our media and our consciousness, isn’t it only a matter of time before Labor Day falls off the calendar? As long as it's there, it should shame us about our cool indifference to the heroism of those who go to work every day.




- La poste américaine en défaut de paiement


La trésorerie du service postal des Etats-Unis est tellement basse que celle-ci pourrait fermer dès cet hiver.
Le service postal des Etats-Unis (USPS) est au plus mal. Selon le New York Times, sa trésorerie est tellement basse que la poste américaine pourrait purement et simplement fermer dès cet hiver si le Congrès ne prend pas des mesures d'urgence d'ici là. Au mois de septembre, déjà, l'entreprise n'est pas en mesure depayer les 5,5 milliards de dollars (3,87 milliards d'euros) destinés à financer les futurs soins de santé de ses retraités.
Depuis quelques semaines, rapporte le quotidien américain, plusieurs mesures d'économie ont été prises pour réduire le déficit de l'entreprise qui s'élève à 9,2 milliards de dollars pour cette année fiscale. Pas suffisantes, semble-t-il. "Notre situation est extrêmement sérieuse", déclare au New York Times le patron de l'agence, Patrick R. Donahoe.
RÉDUIRE LES COÛTS D'ICI À 2015
Pourtant, note le quotidien "les causes de cette crise sont bien connues" mais "très difficiles à surmonter". La révolution numérique a encouragé les gens comme les entreprises à moins utiliser les services traditionnels de la poste. Par ailleurs, les statuts des salariés, négociés de longue date par les syndicats, sont très avantageux, augmentant d'autant les coûts de l'entreprise.
Enfin, alors que, dans d'autres pays, les services postaux se diversifient dans l'assurance ou la téléphonie, la poste américaine n'en a pas l'autorisation. L'entreprise réfléchit à d'autres moyens pour augmenter ses recettes commevendre de l'alcool ou encore afficher de la publicité sur ses camions.
M. Donahoe espère réduire de 20 milliards de dollars les coûts de fonctionnement annuel, qui s'élève à 75 milliards de dollars, d'ici à 2015. De nombreux bureaux de poste fermeront dans le cadre de ce plan d'économies. Toutefois, il sera difficile detailler dans l'emploi, à moins que le Congrès ne modifie la clause antilicenciement de l'entreprise. Mardi 6 septembre, le comité du Sénat pour la sécurité nationale et les affaires gouvernementales doit tenir une audience pour examiner les problèmes financiers de l'USPS.







- La conférence bancaire de Francfort tourne à la réunion de crise


Les dirigeants des grandes banques européennes sont réunis ce lundi à Francfort pour une conférence de deux jours axée sur les perspectives de la crise de la dette dans la zone euro.
Le rendez-vous bancaire annuel de Francfort, "Banks in Transition", se déroule cette fois-ci dans un contexte particulièrement tendu, avec la crainte désormais réelle que des pays fassent défaut sur leur dette.
Les investisseurs ont déserté les marchés d'actions et les introductions en Bourse, oxygène des banques d'investissement, se font désormais très rares. Les valeurs bancaires européennes sont en forte baisse ce lundi, analystes et investisseurs redoutant que les banques d'Europe ne soient contraintes de passer des provisions ou dépréciations supplémentaires sur les titres de dette d'Etat de la zone euro, ce qui les obligerait ensuite à augmenter leurs fonds propres.
Le président du directoire de Deutsche Bank, Josef Ackermann, a ouvert la conférence par une intervention sur l'évolution du contexte économique et de la régulation. "L'horizon du secteur financier dans son ensemble (...) est assez limité. Les perspectives de croissances des revenus sont limitées à la fois par la situation actuelle et les problèmes structurels", selon lui. Il a également souligné que certaines banques européennes ne survivraient pas si elles devaient réévaluer la dette souveraine de leurs comptes au prix du marché.
Il a ajouté que la volatilité des marchés demeurerait aussi longtemps qu'il y aurait de l'incertitude quant aux mesures de réduction de la dette et il a confirmé en outre qu'il restait opposé à toute idée d'émettre des euro-obligations pour résoudre la question de la dette. "C'est enfoncer une porte ouverte que de dire que beaucoup de banques européennes ne survivraient pas si elles devaient réévaluer la dette souveraine de leurs comptes au niveau du marché", a-t-il insisté.
Banques sous surveillance
En ce qui concerne les mesures prises dans la zone euro pour réduire la dette souveraine, il faut leur laisser le temps de faire leur effet et certains participants des marchés nourrissent des attentes irréalistes quant à la fréquence de ces mesures, a-t-il poursuivi.
Une recapitalisation obligée du secteur bancaire européen risquerait quant à elle d'envoyer un mauvais signal aux marchés, en l'espèce celui d'une perte de foi de la part des autorités dans la capacité des mesures prises à réussir, a ajouté Josef Ackermann.
Deutsche Bank, premier établissement bancaire allemand, a déjà prévenu qu'il lui serait plus difficile que prévu d'atteindre son objectif de 6,4 milliards d'euros de bénéfice annuel avant impôt.
Par ailleurs, la banque centrale allemande a confirmé ce lundi que la date butoir pour que les établissements décident de leur contribution au plan d'aide à la Grèce était fixée à ce mardi midi. Une porte-parole de la Bundesbank a précisé que le régulateur allemand des banques (BaFin) et le ministère des Finances transmettraient ces informations au gouvernement grec.
Avec la crise, les banques sont surveillées de particulièrement près, notamment au niveau de leurs fonds propres. Le Fonds monétaire international a appelé la semaine dernière à une recapitalisation urgente des établissements européens.
De source européenne, on indiquait à Reuters que le FMI évaluait à 200 milliards d'euros les besoins en fonds propres des banques du vieux continent.
Josef Ackermann a rejeté lundi les appels à une recapitalisation forcée des établissements, qui selon lui "menacerait d'envoyer le signal que la classe politique a perdu confiance en la capacité des mesures actuelles à atteindre leurs objectifs".
Le secteur est également marqué par les nombreuses suppressions d'emploi lancées par plusieurs poids lourds, tels que Barclays, HSBC, Goldman Sachs, Crédit suisse et UBS.


- La crise économique fait flancher le moral des cadres

Par Bertrand Le Balc'h - Le moral des cadres avait enregistré à la fin du printemps une spectaculaire amélioration ; la crise financière de cet été liée aux dettes souveraines des États-Unis et des pays de la zone euro a radicalement changé la donne. Et en cette rentrée de septembre, les cols blancs broient du noir.
C'est en tout cas ce qui ressort de la dernière vague du Baro-Éco de Viavoice pour HEC, Le Figaro et France Inter : en août, l'indice synthétique a chuté de 30 points par rapport à mai. «Du jamais vu. Et, à - 55, l'indice est tombé à son plus bas niveau depuis sa création en 2004», insiste François Miquet-Marty, président de Viavoice.
Tous les indicateurs sont dans le rouge et certains s'effondrent même purement et simplement. Ainsi, trois cadres sur quatre (+ 25 points) s'attendent à une dégradation du niveau de vie en France en général d'ici un an, contre un sur deux en mai. Et près de huit sur dix (+ 39 points) prévoient une hausse du chômage dans les mois qui viennent (le sondage a été réalisé avant la publication des mauvais chiffres de juillet). «L'ampleur de la détérioration des indicateurs macroéconomiques est particulièrement inquiétante», considère François Miquet-Marty.
Crainte d'une récession
Dans ce contexte, il n'est pas étonnant qu'ils soient pessimistes quant à l'évolution de la situation économique. Sept sur dix pensent que la France «va à nouveau être en récession» au cours des mois qui viennent. «Les risques de récession inquiètent d'autant plus que les États n'ont plus aujourd'hui les moyens de relancer l'économie», commente le président de Viavoice.
Les perspectives personnelles des cols blancs s'assombrissent également, alors même que le marché de l'emploi des cadres restait encore bien orienté en juillet, selon les dernières statistiques de l'Apec, avec des offres en hausse de 67 % sur 12 mois. Selon le baromètre de Viavoice, près d'un cadre sur deux (+ 16 points) pense que sa situation financière personnelle «va se dégrader». Plus de huit sur dix considèrent que les opportunités pour faire progresser leur carrière vont être «faibles». «Vote du budget, cadrage des propositions franco-allemandes contre la crise, G20 à l'automne : les rendez-vous de la rentrée apparaissent comme cruciaux pour restaurer la confiance des cadres», souligne François Miquet-Marty.


L'aide à la Grèce suspendue à une décision allemande

Les magistrats ont le pouvoir d'accorder un droit de regard plus important aux députés allemands dans l'attribution des aides européennes. (Reuters)
Les magistrats ont le pouvoir d'accorder un droit de regard plus important aux députés allemands dans l'attribution des aides européennes. (Reuters)
La Cour de Karlsruhe se prononce mercredi sur la validité de la première aide accordée à Athènes. Sa décision pourrait compliquer le vote du second plan.
Angela Merkel et son gouvernement retiennent leur souffle. Réputée pour sa tiédeur à l'égard de l'Europe, la Cour constitutionnelle de Karlsruhe s'invitera cette semaine dans le fiévreux débat sur le sauvetage de l'euro. Les juges se prononceront mercredi sur la légalité constitutionnelle de l'aide financière accordée à la Grèce en mai 2010. Leur décision pourrait avoir des répercussions sur le vote des députés allemands, qui doivent se prononcer le 29 septembre au Bundestag sur un élargissement des pouvoirs du Fonds européen de stabilité financière (FESF).
Déjà confrontée à une rébellion des députés de son parti conservateur (CDU), la chancelière allemande a pris soin de séparer en deux volets le vote sur l'aide à la Grèce et celui concernant l'adoption du futur mécanisme européen de stabilité (MES). Plus d'une vingtaine d'élus de la CDU menacent de ne pas ratifier les décisions prises au Conseil européen du 21 juillet, redoutant que Berlin ne transfère trop de pouvoir à Bruxelles. Les députés rechignent à venir en aide à la Grèce, qu'ils considèrent comme «un puits sans fond» et estiment que leurs prérogatives en matière budgétaire ont été piétinées. La Chancellerie redoute que la décision des juges de Karlsruhe ne vienne envenimer le débat.
Scepticisme grandissant
Première économie de la zone euro, l'Allemagne est également son principal bailleur de fonds et de nombreux élus à Berlin estiment qu'ils devraient à ce titre avoir beaucoup plus leur mot à dire sur les plans de sauvetage au sein de la zone que les autres pays. Si la Cour de Karlsruhe décidait d'octroyer aux députés allemands un droit de regard trop important dans l'attribution des aides européennes, le mécanisme pourrait s'en retrouver paralysé. Les députés allemands veillent déjà bec et ongles sur les intérêts de leurs contribuables depuis une décision de la Cour de Karlsruhe, datant de 2009, dans laquelle les juges avaient pris leurs distances avec le traité de Lisbonne. La Cour pourrait aussi décider de fixer des limites à l'attribution des aides aux pays en difficulté en raison de l'entrée en application dès 2012 du mécanisme de frein à la dette, la règle d'or allemande. Car ces aides pourraient entraîner des coupes dans les budgets de la République fédérale.
Outre-Rhin, la défiance à l'égard de la monnaie unique grandit. Une enquête de l'institut Allensbach auprès de parlementaires allemands de centre droit révèle que 76 % d'entre eux ont peu ou pas du tout confiance dans l'euro, contre 71 % dans un sondage similaire il y a deux mois. Celle-ci a été renforcée par le ­départ d'Athènes, vendredi, des représentants de l'Union euro­péenne, de la Banque centrale européenne et du Fonds monétaire international qui ont donné dix jours au gouvernement grec pour faire avancer les réformes structurelles dans le pays. Les partis de la coalition de centre droit au pouvoir ont multiplié ce week-end leurs avertissements à la Grèce, sommée de mettre en œuvre au plus vite ses promesses de réformes en échange d'aide pour rééquilibrer son budget.


- The Fatal Distraction

By PAUL KRUGMAN - Friday brought two numbers that should have everyone in Washington saying, “My God, what have we done?”
One of these numbers was zero — the number of jobs created in August. The other was two — the interest rate on 10-year U.S. bonds, almost as low as this rate has ever gone. Taken together, these numbers almost scream that the inside-the-Beltway crowd has been worrying about the wrong things, and inflicting grievous harm as a result.
Ever since the acute phase of the financial crisis ended, policy discussion in Washington has been dominated not by unemployment, but by the alleged dangers posed by budget deficits. Pundits and media organizations insisted that the biggest risk facing America was the threat that investors would pull the plug on U.S. debt. For example, in May 2009 The Wall Street Journal declared that the “bond vigilantes” were “returning with a vengeance,” telling readers that the Obama administration’s “epic spending spree” would send interest rates soaring.
The interest rate when that editorial was published was 3.7 percent. As of Friday, as I’ve already mentioned, it was only 2 percent.
I don’t mean to dismiss concerns about the long-run U.S. budget picture. If you look at fiscal prospects over, say, the next 20 years, they are indeed deeply worrying, largely because of rising health-care costs. But the experience of the past two years has overwhelmingly confirmed what some of us tried to argue from the beginning: The deficits we’re running right now — deficits we should be running, because deficit spending helps support a depressed economy — are no threat at all.
And by obsessing over a nonexistent threat, Washington has been making the real problem — mass unemployment, which is eating away at the foundations of our nation — much worse.
Although you’d never know it listening to the ranters, the past year has actually been a pretty good test of the theory that slashing government spending actually creates jobs. The deficit obsession has blocked a much-needed second round of federal stimulus, and with stimulus spending, such as it was, fading out, we’re experiencing de facto fiscal austerity. State and local governments, in particular, faced with the loss of federal aid, have been sharply cutting many programs and have been laying off a lot of workers, mostly schoolteachers.
And somehow the private sector hasn’t responded to these layoffs by rejoicing at the sight of a shrinking government and embarking on a hiring spree.
O.K., I know what the usual suspects will say — namely, that fears of regulation and higher taxes are holding businesses back. But this is just a right-wing fantasy. Multiple surveys have shown that lack of demand — a lack that is being exacerbated by government cutbacks — is the overwhelming problem businesses face, with regulation and taxes barely even in the picture.
For example, when McClatchy Newspapers recently canvassed a random selection of small-business owners to find out what was hurting them, not a single one complained about regulation of his or her industry, and few complained much about taxes. And did I mention that profits after taxes, as a share of national income, are at record levels?
So short-run deficits aren’t a problem; lack of demand is, and spending cuts are making things much worse. Maybe it’s time to change course?
Which brings me to President Obama’s planned speech on the economy.
I find it useful to think in terms of three questions: What should we be doing to create jobs? What will Republicans in Congress agree to? And given that political reality, what should the president propose?
The answer to the first question is that we should have a lot of job-creating spending on the part of the federal government, largely in the form of much-needed spending to repair and upgrade the nation’s infrastructure. Oh, and we need more aid to state and local governments, so that they can stop laying off schoolteachers.
But what will Republicans agree to? That’s easy: nothing. They will oppose anything Mr. Obama proposes, even if it would clearly help the economy — or maybe I should say, especially if it would help the economy, since high unemployment helps them politically.
This reality makes the third question — what the president should propose — hard to answer, since nothing he proposes will actually happen anytime soon. So I’m personally prepared to cut Mr. Obama a lot of slack on the specifics of his proposal, as long as it’s big and bold. For what he mostly needs to do now is to change the conversation — to get Washington talking again about jobs and how the government can help create them.
For the sake of the nation, and especially for millions of unemployed Americans who see little prospect of finding another job, I hope he pulls it off.



- [EURO
PLANS DE SAUVETAGE
Le Parlement allemand aura son mot à dire->http://www.presseurop.eu/fr/content/news-brief/914151-le-parlement-allemand-aura-son-mot-direDivide and Rescue]


Deux jours avant la date prévue pour son annonce, le 7 septembre, Der Spiegel révèle la teneur de l'arrêt de la Cour constitutionnelle allemande sur la constitutionnalité de la contribution de Berlin aux plans de sauvetage européens. Selon l'hebdomadaire, les juges de Karlsruhe "se sont mis d’accord pour exiger une participation substantielle [du Parlement fédéral] à toutes les mesures de sauvetage à venir". C'est-à-dire que le gouvernement ne pourra trouver d'accord avec ses partenaires européens sans l'accord du Parlement. Que cette décision intervienne au moment où débute au Parlement le débat sur le vote du plan de sauvetage grec est "en partie un hasard, en partie voulu", reconnaît le président de la Cour. Et de fait, note le Spiegel, "toutes les parties s’approchent d’une ligne de compromis” sur la répartition des pouvoirs de décision. "Le gouvernement a compris qu’il doit concéder aux députés un droit d’intervention", explique le Spiegel. Le représentant de l’Allemagne au FESF ne peut donner son accord qu'après celui du Bundestag– sinon il doit poser son veto." Et ceci, "même contre les doutes du Ministre des Finances Wolfgang Schäuble […] qui a peur que le FESF ne réagisse pas assez vite" face à la crise."Mais la chancelière, qui se préoccupe d'avoir un vote majoritaire de sa coalition, accepte les demandes des députés". Der Spiegel cite un juge de la Cour constitutionnelle : "Le droit du budget, ce sont les joyaux du Parlement. Mais quand le souverain commence à vendre ses bijoux, sa liberté risque d’être limitée."


- EURO CRISE DE LA DETTE

Tout se joue au Sud - "Moment de vérité pour l'Europe du Sud", titre La Tribune, au moment où trois pays du “Club Med” sont sous pression. Tout d'abord, la Grèce, sommée par les experts de la troïka (Commission européenne, BCE, FMI) de finaliser son budget 2012 avant tout versement d'une nouvelle aide. D’ici-là, la troïka a décidé de suspendre sa mission d'observation. Ensuite, l'Espagne, où les parlementaires ont "adressé un message de confiance" à l'Europe en adoptant le 2 septembre la "règle d'or" qui élève le principe d'équilibre budgétaire au rang constitutionnel. La réforme espagnole n'a plus qu'une étape à franchir, "sauf rebondissement", souligne le quotidien, avec le vote du Sénat la semaine prochaine. L'Italie enfin, avec Silvio Berlusconi pressé par le président de la BCE Jean-Claude Trichet et le patronat italien d'adopter un plan de rigueur pour restaurer la crédibilité du pays. "Après le départ vendredi [2 septembre] de la troïka internationale chargée de surveiller Athènes, la pression va être maximale sur tous les pays d'Europe du Sud pour qu'ils crédibilisent leurs programmes d'ajustement budgétaire. Faute de quoi, commente La Tribune, il sera impossible pour les gouvernements des pays 'créanciers' de faire avaliser l'accord européen par leurs Parlements. Une véritable course contre la montre est donc engagée, entre les marchés d'une part, qui ne croient pas une seconde que la Grèce parviendra un jour à rembourser sa dette, et les démocraties de la zone euro, qui tentent de sauver l'union économique et monétaire"



- Berlin Lays Groundwork for a Two-Speed Europe

Chancellor Angela Merkel has always rejected a two-track Europe. But with the euro crisis persisting, Berlin is now considering far-reaching new powers for the Euro Group -- to the detriment of the European Commission. Could it work? By SPIEGEL Staff
Info
Herman Van Rompuy tends to be overlooked whenever European heads of state and government meet for their summits. The Belgian politician, president of the European Council, is an inconspicuous man with a receding hairline and metal-rimmed glasses, someone who doesn't seek the limelight, and who enjoys writing haikus about nature in his free time. He is one of the most powerful politicians in Europe, but he is almost unknown in most EU countries, including Germany.
Van Rompuy has been traveling a lot lately. His current schedule includes meetings with Finnish Prime Minister Jyrki Katainen and French President Nicolas Sarkozy. On Monday, Van Rompuy meets with German Chancellor Angela Merkel in Berlin, where he can look forward to a particularly pleasant conversation. Merkel wants to propose giving the European Council president even more power.
The chancellor is planning her next political policy reversal . Until very recently, she has insisted that she was firmly opposed to creating divisions within Europe. But under the pressure of the euro crisis , Merkel has recently been thinking about abandoning the concept of a unified EU -- and assigning a key role to Van Rompuy in the process.
The EU has always been careful to ensure that all members acted in unison, whether it involved moving forward or standing still. But in times in which the common currency threatens to break apart, the 17 nations of the euro zone need a common economic and financial policy. Otherwise, as the crisis has demonstrated, the euro cannot function.
A New Power Center?
Today, it is primarily Great Britain that is preventing the EU from growing closer together. Merkel, though, has had enough -- and is now planning a two-speed Europe. It would mean tightly interlocking the countries of the euro zone, possibly by means of a separate treaty that would apply in parallel to the EU Treaty of Lisbon. This was the concept German Finance Minister Wolfgang Schäubleproposed last week to the leadership of his party, the center-right Christian Democratic Union (CDU). Merkel sees Van Rompuy, who already chairs the council of the 27 EU leaders, as the head of the new power center.
In addition to the club of 27 nations that primarily manages the common domestic market as it has done until now, Merkel envisions a tight alliance of the 17 euro-zone members -- one which would unify their fiscal, budgetary and social policies. This would create a two-class club, raising questions like: What happens to the European Commission? Will it still be responsible for economic matters in the euro zone, or will there be a new organization? The same questions apply to the European Parliament and the European Court of Justice in Luxembourg. Would all of these institutions have to be duplicated, meaning even more bureaucracy, effort and expense?
There are no answers yet to these questions, and there is already plenty of skepticism. The European Commission is just as opposed to Merkel's plans as most members of the European Parliament and many smaller EU countries are. They also have some within Merkel's own ranks raising their eyebrows. "We will not rescue the euro by creating more and more committees and instruments," says Horst Seehofer, the chairman of the CDU's Bavarian sister party, the Christian Social Union (CSU).
That is precisely what Merkel has in mind. She can draw on a concept known as "Core Europe," which was developed in the 1990s by the then-chairman of the CDU/CSU parliamentary group, a certain Wolfgang Schäuble, who now serves under Merkel as finance minister. Both have established various measures to rescue the euro in recent months, some for the EU as a whole and others exclusively for the 17 euro-zone member states.
Taking Things a Step Further
Although the heads of state and government have formally strengthened the Stability Pact for all EU countries, only those countries that have introduced the euro face the threat of harsh penalties. They, in particular, should commit to decreasing their government debt and strict conditions should govern the process. "No one cares whether Great Britain or Poland violate the 3 percent ceiling for the deficit," says a German government official.
A similar situation applies to the so-called Euro-Plus Pact. In it, the countries of the monetary union pledge to increase their competitiveness and fix weaknesses in their social systems, by raising the retirement age, for example. Every country that wants to participate can do so. Poland, for example, has joined the agreement. However, it cannot participate in the decision-making process. The rules were developed within the group of 17.
Labor Minister Ursula von der Leyen is interested in taking things a step further. She would like to see greater integration of social policy in the euro zone countries as well and envisions a Euro Group of labor ministers based on the finance minister model.
But it doesn't stop there. Merkel and Schäuble are seeking further steps toward integration in tax policy. At a meeting of the CDU/CSU parliamentary leadership last week, Schäuble said that because of resistance from countries like Great Britain, it is taking too long to agree on a financial-transaction tax applicable throughout the entire EU. Because of the delay, he said, he could imagine initially launching the project in the euro zone.
Giving Up Sovereignty
The scope of a joint corporate tax proposed by Merkel and Sarkozy at their meeting in mid-August is also likely to be expanded beyond the two largest member states. "This is much more broadly conceived," says a source within the German government. The two leaders envision a largely uniform tax for corporations within the euro zone.
All of these ideas amount to the euro countries gradually giving up parts of their national sovereignty. It wasn't until the crisis came along that a willingness to move in this direction began to emerge. Ironically, it is the countries most deeply affected by the crisis that serve as a model for this new approach. Greece, Ireland and Portugal have already overcome some obstacles when it comes to relinquishing sovereignty. Now the countries whose government finances are still healthy will be expected to give up some of their independence as well.
New bodies are to be formed to expedite the integration of the Euro Group. Germany and France want to make themselves more independent of the existing structures in the EU and no longer be solely dependent on the resources of the European Commission.
As a first step, the European Financial Stability Facility (EFSF), headed by theGerman economist Klaus Regling , is to develop its own analysis division. The division would monitor the financial markets and make proposals on how the EFSF can avert crises. Only the member states of the euro zone are involved in the EFSF. The Lisbon Treaty, the basis for the EU, has nothing to do with the institution.
The monetary union already had its own bodies that make decisions more or less independently of the European Commission. The important decisions have already been made for some time within the Euro Group, the group of finance ministers from the member states of the monetary union. They meet once a month, or more often, if necessary.




- Palestinians Expect 140 Countries to Back Its Statehood Bid, Shaath Says
By Saud Abu Ramadan and Calev Ben-David - About 140 countries are likely to support a Palestinian bid for statehood recognition at the United Nations General Assembly later this month, according to Palestinian negotiator Nabil Shaath.
“Many Palestinian leaders and officials went on separate tours and visits to convince the world’s countries to recognize the Palestinian state in the territories occupied by Israel in 1967,” said Shaath, a senior official in Palestinian Authority President Mahmoud Abbas’s Fatah faction. His remarks in Ramallah today were broadcast on Palestinian television.
Palestinian officials have said they are pursuing recognition at the UN for statehood due to a failure to restart negotiations with Israel that broke down a year ago over construction in West Bank settlements. Israel has warned that the Palestinian move might jeopardize the peace process.
The U.S. is making a final effort to restart peace talks and forestall the Palestinian bid, The New York Times reported today, citing unidentified American officials. The U.S. opposes the Palestinian bid for statehood and has veto power in the UN Security Council.
After traveling to the region last week, European Union foreign policy chief Catherine Ashton said her meetings with Abbas and Israeli Prime Minister Benjamin Netanyahu indicated a “real opportunity” to move forward on peace negotiations.
Economic Capability
The International Monetary Fund said in an April 6 report that the Palestinian Authority is capable of running the economy of an independent state. Though Palestinians have few natural resources and no independent access to ports, growth in the West Bank and Gaza Stripreached 9 percent in 2010, the IMF said in the report.
Israel captured the West Bank, Gaza and east Jerusalem in the 1967 Middle East war from Jordan and Egypt. While ceding much of its power with the 1993 Oslo agreements, Israel maintained authority over roads, airspace and borders.
Hamas seized control of Gaza in 2007, taking charge of the southern border with Egypt, though Israel operates a sea blockade of the territory and allows only limited exports.
Israel hasn’t spelled out how it will respond to recognition of Palestinian statehood in the General Assembly. Foreign Minister Avigdor Liberman, though, said July 17 that forcing a vote at the UN would be “the end of the Oslo Accords.”





- Europe stocks slammed; Germany drops over 5%


By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stocks finished sharply lower Monday, with the German market dropping more than 5%, as investors piled into safe-haven assets amid rising fears over Europe’s sovereign debt crisis and U.S. growth.
Sellers picked up the pace in the afternoon, with the Stoxx Europe 600 indexXX:SXXP -4.14% slumping 4.1% to close at 223.45.
The index tumbled 2.4% on Friday after data showed no growth in U.S. payrolls in August, a result well short of expectations.

The European Central Bank and the Bank of England are both expected to leave interest rates on hold on Thursday. The spotlight will fall on ECB President Jean-Claude Trichet's press conference.
The German DAX 30 index DX:DAX -5.28%sank 5.3% to close at 5,246.18, led lower by Deutsche Bank AG DE:DBK -7.93% , which tumbled 8.9%.
The biggest decliner for the Stoxx 600 was Clariant AG CH:CLN -16.27% . Shares sank 16.3% after the Swiss specialty-chemical group cut its full-year sales and profit outlook owing to a strong Swiss franc and the global economic slowdown.
Other chemical stocks followed Clariant lower, such as BASF DE:BAS -5.53% , which fell 5.6%, and Bayer AGDE:BAYN -4.70% , which declined 4.6% in Frankfurt.
Meanwhile, dramatic losses were seen for European bank shares.
“The banking sector continues to [be] under pressure today,” said Manoj Ladwa, senior trader at ETX Capital, in emailed comments. “The chances of a near-term recovery remain slim as euro-zone debt concerns, structural reform and a lawsuit for allegedly mis-selling mortgage debt all weigh heavy on the sector.”
Shares of Royal Bank of Scotland Group PLC RBS -4.69% UK:RBS -12.32% sank 12.3% after the bank was named last week in a lawsuit by the Federal Housing Finance Agency. The agency alleges that major U.S. and European banks misrepresented the quality of mortgages they sold during the housing bubble, and it is suing for billions of dollars in losses. Read U.S. sues big banks over mortgage losses
Also named in the lawsuit were Deutsche Bank AG, Societe Generale SA FR:GLE -8.64%SCGLY -6.02% , down 8.6%, Barclays PLC BCS -7.67% UK:BARC -6.69% , down 6.7%, and HSBC Holdings PLC UK:HSBA -3.81% HBC -1.44% , which declined 3.8%.
The French CAC 40 index FR:PX1 -4.73% finished 4.7% lower at 2,999.54. In addition to Societe Generale, shares of BNP Paribas SA FR:BNP -6.34% slumped 6.3% and Credit Agricole SA FR:ACA -5.51% slid 5.5%.
Also weighing on the CAC 40 was Schneider Electric SA FR:SU -6.59% , whose shares fell 6.6% after HSBC downgraded the firm to neutral from overweight, along with those of Alstom SA FR:ALO -6.14% , which dropped more than 6%.
Away from the main index, shares of Legrand SA FR:LR -4.75% fell 4.8% after also being cut to neutral from overweight.
In a note, HSBC said it reduced its 2011 earnings forecasts by 14% on average for the European capital-goods sector, and cut target prices 21% on average, partly due to higher risk premiums on cyclical stocks.


- German endgame for EMU draws ever nearer

For fifty years Germany has invariably stumped up the money required to keep Europe’s Project on track, responding to unreasonable demands with grace and generosity.


By Ambrose Evans-Pritchard, International Business Editor

It bankrolled French farmers through the Common Agricultural Policy, that disguised tithe for war reparations. It then bankrolled Spanish farmers as well.
It funded each new wave of EU expansion, though reeling itself from the €60bn annual cost of its own reunification. It gave up the cherished D-Mark, the anchor of German economic stability.
We are so used to German self-abnegation for the sake of Europe that we can hardly imagine any other state of affairs. But the escalating protest against EMU bail-outs by Germany’s key insistutions go beyond the banalities of money. The fight is over German democracy itself.
Those who talk of a Fourth Reich or believe that EMU is a "German racket to take over the whole of Europe" – as Nicholas Ridley famously put it -- have the matter backwards.
Germans allowed their country to be tied down with "silken chords". They are the most reliable defenders of freedom and parliamentary prerogative in Europe, precisely because they know their history.
Finance minister Wolfgang Schäuble could hardly have chosen a more toxic term than "Bevollmächtigung" or general enabling power when he requested blanket authority from the Bundestag for EU rescues, as if Weimar were so soon forgotten. He was roundly rebuffed.
You can feel the storm brewing in Germany. Within days of each other, President Christian Wulff accused the European Central Bank of going "far beyond" its mandate and subverting Article 123 of the Lisbon Treaty by shoring up insolvent states, and Bundesbank chief Jens Weidmann said bail-out policies had "completely gutted" the EU law.
Both believe the EU Project has taken a dangerous turn. Fiscal powers are slipping away to a supra-national body beyond sovereign control. "This strikes at the very core of our democracies. Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies," said Mr Wulff.
Otmar Issing, the ECB’s founding guru, fears that the current course must ultimately provoke the "resistance of the people". Instead of evolving into an authentic union with a "European government controlled by a European Parliament" on democratic principles, it has become deformed halfway house.
In its rush to save EMU, he said, Europe has forgotten that legislative primacy over tax and spending is the crucible of our democracies. It was monarchical assault on the power of the purse that led to England’s Civil War, and America’s Revolution.
We will find out to what extent Germany’s constitutional court shares these fears when it rules this Wednesday on the legality of the EU rescue machinery, and delivers its verdict of life or death for monetary union.
The opinion will be drafted by Udo di Fabio, a Wilhelmine nostalagic and declared enemy of "libertarian nihilism". The judge has an odd outlook perhaps for the grandson of an impoverished nobleman from the Abruzzi who found work in Duisburg steel mills. He is quintessentially German now.
His remarkable 2005 book "The Culture of Freedom" decries the "enfeebled" societies of the West, and judges multiculturalism and the welfare state to have failed miserably. He calls for a "renaissance of marriage and family" and a return to "the nation as common destiny". One awaits his Nieztschean verdict on Europe with curiosity.
The court is a formidable body, the last defender of sovereignty against EU overreach in a Europe of pliant judges. "European integration may not result in the system of democratic rule in Germany being undermined," was its verdict on the Lisbon Treaty.
In a defiant warning to the European Court and the plotters and usurpers of Brussels, it ruled that the nation states are "masters of the Treaties" and not the other way round. Core areas of policy – especially budgets -- "must forever remain German".
"The principle of democracy may not be balanced against other legal interests; it is inviolable."
"A blanket empowerment for the exercise of public authority may not be granted by the German constitutional bodies."
If democratic legitimacy is violated "in the course of the European integration", Germany must be prepared "in the worst case, even to refuse further participation in the European Union."
Even to refuse.
Yet the court – or Verfassungsgericht – did not actually block the Lisbon Treaty. It barked, but did not bite.
The assumption this time is that the eight judges will insist on beefed up powers for the Bundestag, but will not disturb the existing nexus of bail-outs and bond purchases. That is the most likely outcome.
Whether they go any further is the existential question for EMU. If they rule that the permanent bail-out fund (ESM) after 2013 breaches treaty law, they will queer the pitch greatly since the viability of the current fund (EFSF) depends on a hand-over.
If they rule in any significant way that the EFSF itself breaches Lisbon’s `no bail-out’ clause, or even that Germany cannot participate until the Treaty is changed, market confidence in monetary union will collapse instantly.
Whatever the court does, the simmering revolt in the Bundestag over recent weeks lays bare the salient strategic fact that Germany is not about to embrace fiscal union or quadruple the EFSF to €2 trillion, as deemed necessary by City analysts and EU officials to stabilize Italy and Spain. Nor will it pay for a third Greek rescue.
The implication of this may become clear very soon since the Greek rescue programme is disintegrating. As the Greek parliament’s watchdog admitted, the debt dynamic is "out of control". Public debt will reach 172pc of GDP next year. Draconian austerity has crushed the economy, leaving the budget deficit stuck near 9pc. Barclays expects a 5.7pc contraction of GDP this year.
The EU-IMF Troika left Athens abruptly on Friday, blaming Greece for failure to comply. The equal failure is the scorched-earth austerity policies imposed by the EU itself. Fiscal deflation cannot work in a rigid economy with a large trade deficit and a high debt stock. It ensures a Fisherite debt deflation spiral.
The IMF must know from its errors in Argentina a decade ago that Greece needs a 40pc devaluation and 50pc debt forgiveness to claw back to viability. Yet the EU has blocked both, and the Fund has until now acquiesced.
Perhaps there was no choice. Argentina was an isolated case in 2001. Greece is the detonating pin for EMU. Going to the root of Greece’s problem risks trauma and instant contagion to Portugal, and from there a systemic chain reaction through Spain and Italy to France.
Yet this is where we no find ourselves as the Bundestag draws its line in the sand. Greece will be pushed into default, with ever larger haircuts for bondholders.
Needless to say, battered banks, insurance companies, and pension fund will not wait for further rounds of punishment. They know that Italy must redeem €14.6bn of debt this week and €62bn by the end of September, the highest ever in a single month. It must roll over €170bn by December.
The ECB can in theory hold the line by soaking up the entire public debt of Italy, the world’s third largest at €1.84 trillion. The question is whether it can plausibly act on such a theory when the president of EMU’s dominant power deems this to be illegal.
Germany is not a banana republic. It is a sovereign democracy under the rule of law. Europe is belatedly discovering why this matters.



- Chinese Wikileak confirms gold price suppression, UAE gold imports up


The Chinese authorities have concluded that the US and Europe have been artificially suppressing the gold price for years, revealed a cable from the US Embassy in Beijing published by Wikileaks.
It reported a recent radio broadcast that said: ‘According to China’s National Foreign Exchanges Administration China’s gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the US and European countries. The US and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency.
Price suppression
‘They don’t want to see other countries turning to gold reserves instead of the US dollar or euro. Therefore, suppressing the price of gold is very beneficial for the US in maintaining the US dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.’
ArabianMoney is pretty clear on what is going to happen to the price of gold and silver as a 30-year suppression of prices breaks down. We have been discussing this for several years on this website. Visit our archives to see the articles.
UAE goes for gold
Meanwhile, gold imports into the United Arab Emirates shot up in May to $2.2 billion with $1.3 billion in gold re-exports leaving the country with a net gain of $900 million in bullion. Gold was the top item in non-oil trade in May that totalled $20 billion, 15 per cent up on a year ago.
The UAE has no official gold reserves but privately held gold stocks in the country are running at record, though unknown levels. Bank vaults report no spare capacity.
However, the best-seller in the UAE gold souks right now is one-kilogram bars of silver costing less than AED6,000. Silver as poor man’s gold has actually seen higher price rises than gold but with higher volatility.




- A different Israel, born in the summer of 2011

The protest movement’s achievements must no longer be measured by how many demonstrators it brings to the streets; enthusiasm must now be fused with pragmatic action.
By Carlo StrengerTags: Israel protest Tel Aviv



Time and again in the last weeks, attempts were made to declare the social protests were dead. Coming back from the demonstration in Tel Aviv on Saturday I can say beyond doubt that it is alive and kicking.
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Estimates Israel-wide have ranged from 400,000 to 460,000 participants. This means that between five and six percent of Israel’s population was on the streets. We spoke to people who had driven and walked for hours to arrive, people, who felt that it was their duty to make sure that the ruling classes, political and financial, could not move toward a sigh of relief and say “finally they are gone – back to business as usual.”
Daphni Leef, the young woman who started it all, reminded us that after the terror attacks in the South, demonstrations were cancelled out of solidarity with the dead and their families. As a result the ruling politicians said that the protest movement was dead. They thought the usual trick had worked - security trumps democracy.
But the trick failed, and the spirit of the protests is alive and well. Daphni Leef, spoke of a new solidarity, beyond left and right. She said that the most insulting expression in Israeli discourse is “the little citizen” – and that there should be a law against insulting citizens.
The protests have shown that it is not the citizens who are little: it’s the politicians. On a number of occasions I have had to spend time at the Knesset, appalled at a culture of what in Hebrew slang is called macherim - people glued to their cellphones, trying to squeeze millions of budget-shekels for a vote for their Knesset member – as if it was their money.
The head of Israel’s student union and one of the protest leaders, Itzik Shmuli, exclaimed that the demonstrators are the new Israelis, no longer willing to bow their heads, they demand their due - not more, not less.
These are Israelis who no longer willing to hear “there’s nothing to be done” (eyn ma la’asot). Most of all they are reminding elected politicians and their cronies that they are elected and paid to serve those who elected them, not to rule them.
The time has come to ask how the protest movement’s achievements can be stabilized. It must no longer be measured by how many demonstrators it brings to the streets, and how many tents there are on Rothschild Boulevard. Enthusiasm must now be fused with pragmatic action.
Nehemia Strasler wrote that there are differences between Daphni Leef and Itzik Shmuli. Leef rejects the Trajtenberg committee, and insists on demands that, unfortunately cannot be realized in Israel’s current economy. Itzik Shmuli, on the other hand, is willing to engage with Manuel Trajtenberg’s committee, and I agree with Strasler that this is wise.
From my acquaintance with Trajtenberg, I can assure the protesters that, in addition to being a brilliant economist of worldwide standing, he is a man of high ethical standards with a strong social conscience. He will not serve as Bibi’s fig leaf, and will not let him off the hook if the promise for lasting change is not kept.
The Trajtenberg commission will not leave intact the unbearable concentration of economic power in the hands of a few families; nor will it allow the continued mismanagement of land resources. Hopefully it will also lead to a sane, just, yet economically viable law of rent-protection and other changes in Israel’s economy.
In the short run, the protest movement should back Trajtenberg because this will put him in a stronger position. He will know that if his recommendations are rejected, we will take to the streets again.
In the long run, there is no way around engaging with the political system. I hope that the spirit of dignity and freedom these protests revived will be the beginning of a new political generation in Israel; that the Augean stables of Israel’s political class will be cleansed by the most democratic of means, without violence and without revolution. The people saying that they have had enough shows that the old needs to make room for the new.
So far the most gifted and the most idealistic of Israel’s citizens have refrained from entering politics, because they saw it as a petty and unproductive game. The protest movement may give birth to a new political party with younger people who will not forget why they took to the streets in the last two months.
Citizens with entrepreneurial experience and social activists, who have so far eschewed active politics, may join them.
Let us hope that, a few years down the road, we will be able to say that we participated in the birth of a new Israel in the Summer of 2011.


- German endgame for EMU draws ever nearer

For fifty years Germany has invariably stumped up the money to keep Europe's Project on track, responding to unreasonable demands with grace and generosity.
We will find out to what extent Germany's constitutional court (pictured) shares these views when it rules this Wednesday on the legality of the EU rescue machinery. Photo: AP

By Ambrose Evans-Pritchard, International Business Editor

It bankrolled French farmers through the Common Agricultural Policy, that disguised tithe for war reparations. It then bankrolled Spanish farmers as well.
It funded each new wave of EU expansion, though reeling itself from the €60bn annual cost of its own reunification. It gave up the cherished D-Mark, the anchor of German economic stability.
We are so used to German self-abnegation for the sake of Europe that we can hardly imagine any other state of affairs. But the escalating protest against EMU bail-outs by Germany’s key insistutions go beyond the banalities of money. The fight is over German democracy itself.
Those who talk of a Fourth Reich or believe that EMU is a "German racket to take over the whole of Europe" – as Nicholas Ridley famously put it -- have the matter backwards.
Germans allowed their country to be tied down with "silken chords". They are the most reliable defenders of freedom and parliamentary prerogative in Europe, precisely because they know their history.
Finance minister Wolfgang Schäuble could hardly have chosen a more toxic term than "Bevollmächtigung" or general enabling power when he requested blanket authority from the Bundestag for EU rescues, as if Weimar were so soon forgotten. He was roundly rebuffed.
You can feel the storm brewing in Germany. Within days of each other, President Christian Wulff accused the European Central Bank of going "far beyond" its mandate and subverting Article 123 of the Lisbon Treaty by shoring up insolvent states, and Bundesbank chief Jens Weidmann said bail-out policies had "completely gutted" the EU law.
Both believe the EU Project has taken a dangerous turn. Fiscal powers are slipping away to a supra-national body beyond sovereign control. "This strikes at the very core of our democracies. Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies," said Mr Wulff.
Otmar Issing, the ECB’s founding guru, fears that the current course must ultimately provoke the "resistance of the people". Instead of evolving into an authentic union with a "European government controlled by a European Parliament" on democratic principles, it has become deformed halfway house.
In its rush to save EMU, he said, Europe has forgotten that legislative primacy over tax and spending is the crucible of our democracies. It was monarchical assault on the power of the purse that led to England’s Civil War, and America’s Revolution.
We will find out to what extent Germany’s constitutional court shares these fears when it rules this Wednesday on the legality of the EU rescue machinery, and delivers its verdict of life or death for monetary union.
The opinion will be drafted by Udo di Fabio, a Wilhelmine nostalagic and declared enemy of "libertarian nihilism". The judge has an odd outlook perhaps for the grandson of an impoverished nobleman from the Abruzzi who found work in Duisburg steel mills. He is quintessentially German now.
His remarkable 2005 book "The Culture of Freedom" decries the "enfeebled" societies of the West, and judges multiculturalism and the welfare state to have failed miserably. He calls for a "renaissance of marriage and family" and a return to "the nation as common destiny". One awaits his Nieztschean verdict on Europe with curiosity.
The court is a formidable body, the last defender of sovereignty against EU overreach in a Europe of pliant judges. "European integration may not result in the system of democratic rule in Germany being undermined," was its verdict on the Lisbon Treaty.
In a defiant warning to the European Court and the plotters and usurpers of Brussels, it ruled that the nation states are "masters of the Treaties" and not the other way round. Core areas of policy – especially budgets -- "must forever remain German".
"The principle of democracy may not be balanced against other legal interests; it is inviolable."
"A blanket empowerment for the exercise of public authority may not be granted by the German constitutional bodies."
If democratic legitimacy is violated "in the course of the European integration", Germany must be prepared "in the worst case, even to refuse further participation in the European Union."
Even to refuse.
Yet the court – or Verfassungsgericht – did not actually block the Lisbon Treaty. It barked, but did not bite.
The assumption this time is that the eight judges will insist on beefed up powers for the Bundestag, but will not disturb the existing nexus of bail-outs and bond purchases. That is the most likely outcome.
Whether they go any further is the existential question for EMU. If they rule that the permanent bail-out fund (ESM) after 2013 breaches treaty law, they will queer the pitch greatly since the viability of the current fund (EFSF) depends on a hand-over.
If they rule in any significant way that the EFSF itself breaches Lisbon’s `no bail-out’ clause, or even that Germany cannot participate until the Treaty is changed, market confidence in monetary union will collapse instantly.
Whatever the court does, the simmering revolt in the Bundestag over recent weeks lays bare the salient strategic fact that Germany is not about to embrace fiscal union or quadruple the EFSF to €2 trillion, as deemed necessary by City analysts and EU officials to stabilize Italy and Spain. Nor will it pay for a third Greek rescue.
The implication of this may become clear very soon since the Greek rescue programme is disintegrating. As the Greek parliament’s watchdog admitted, the debt dynamic is "out of control". Public debt will reach 172pc of GDP next year. Draconian austerity has crushed the economy, leaving the budget deficit stuck near 9pc. Barclays expects a 5.7pc contraction of GDP this year.
The EU-IMF Troika left Athens abruptly on Friday, blaming Greece for failure to comply. The equal failure is the scorched-earth austerity policies imposed by the EU itself. Fiscal deflation cannot work in a rigid economy with a large trade deficit and a high debt stock. It ensures a Fisherite debt deflation spiral.
The IMF must know from its errors in Argentina a decade ago that Greece needs a 40pc devaluation and 50pc debt forgiveness to claw back to viability. Yet the EU has blocked both, and the Fund has until now acquiesced.
Perhaps there was no choice. Argentina was an isolated case in 2001. Greece is the detonating pin for EMU. Going to the root of Greece’s problem risks trauma and instant contagion to Portugal, and from there a systemic chain reaction through Spain and Italy to France.
Yet this is where we no find ourselves as the Bundestag draws its line in the sand. Greece will be pushed into default, with ever larger haircuts for bondholders.
Needless to say, battered banks, insurance companies, and pension fund will not wait for further rounds of punishment. They know that Italy must redeem €14.6bn of debt this week and €62bn by the end of September, the highest ever in a single month. It must roll over €170bn by December.
The ECB can in theory hold the line by soaking up the entire public debt of Italy, the world’s third largest at €1.84 trillion. The question is whether it can plausibly act on such a theory when the president of EMU’s dominant power deems this to be illegal.
Germany is not a banana republic. It is a sovereign democracy under the rule of law. Europe is belatedly discovering why this matters.




- European Stocks Fall Sharply as Debt Fears Hit Banks


By: Patrick Allen

European shares fell sharply on Monday amid renewed fears over the euro zone debt crisis and a warning from Deutsche Bank’s CEO on the outlook for banks.

The DAX [.GDAXI 5250.56 -287.77 (-5.2%) ] led the losers, falling by over 5 percent, while stocks in London and Paris also fell sharply.
The biggest loser in Germany is Deutsche Bank [DB 36.27 -2.33 (-6.04%) ] after CEO Joseph Ackermann told a banking conference that the euro zone debt crisis could kill weak banks and stunt profits for the rest of industry for years to come.
You can tune in to CNBC TV for a Special, 2 1/2-Hour 'European Closing Bell' from 9:30 am ET to noon ET Monday on the European Market sell-off.
Stocks in Asia had tracked Wall Street’s Friday close which saw the Dow[.DJIA 11240.26 -253.31 (-2.2%) ] lose over 250 points following news that the world’s biggest economy created no jobs in August.
Once European stocks open losses intensified as investors fretted over the euro zone debt crisis and weaker-than-forecast services data from across the euro zone.
MAIN EUROPEAN MARKETS
.FTSE
5111.04
-180.99
-3.42%
505,279,302
.GDAXI
5251.04
-287.29
-5.19%
155,465,791
CAC40
3000.28
-148.25
-4.71%
132,625,394
Over the weekend a meeting of politicians, economists and business leaders on Lake Como outside of Milan saw Italy's austerity measures and possible changes to Silvio Berlusconi's 45 billion euro package take center stage.
Italian Economy Minister Giulio Tremonti used the meeting in Ambrosetti to repeat his call for a euro bond warning one is launch or "we will have critical problems."
The comments followed a warning by ECB president Jean-Claude Trichet that Italy must follow through on its austerity program, which was agreed with the ECB in return for the central banks support in the bond market.
It is “essential that the target that was announced to diminish the deficit will be fully confirmed and implemented".
Berlusconi's austerity program does not go far enough, according to Former UniCredit CEO Alessandro Profumo. Speaking in an interview with Italian daily Corriere della Sera Profumo warned that Italy needs an additional €400 billion in austerity measures to bring its debt-to-GDP ratio below 100 percent.
The ECB is expected to discuss the buying of Italian bonds at its meeting in Frankfurt this week.
Ahead of an interview with CNBC on Monday, former German Chancellor Gerhard Schroeder told Der Spiegel that we need a "United States of Europe" to avoid further crisis, claiming governments will have to give up national sovereignty.
The comments came as Germany debated the breakdown in talks between the Greek government and officials from the EU, ECB and IMF on Friday.
Christian Lindner, deputy leader of Germany’s junior coalition partner Free Democrats, said “the breakdown of talks between the Troika and Greece is a blow to the stability of the euro [EUR=X 1.4104 -0.006 (-0.42%) ]” and claimed Athens is shirking its responsibilities on austerity.
A German court will rule on the legality of the Greek bail-out packages on Wednesday.
A regional election over the weekend saw support for Angela Merkel's center right coalition fall sharply with the opposition Social Democrats soaring.
Greece's finance minister said on Sunday that the government was speeding up structural reforms and dismissed reports about a break down in relations between Athens and its international lenders.
On Friday the Greek government will learn how many private investors have signed up to its debt swap deal.


- Deutsche Bank CEO Sees Bleak Outlook for Banks

Europe's sovereign debt crisis will stunt bank profits for years and could kill off the weakest, Deutsche Bank Chief Executive Josef Ackermann warned industry bosses on Monday amid intense scrutiny of the sector's finances.
Photo: Paul Alvord
"Prospects for the financial sector overall are rather limited," the CEO of Germany's top bank said. "The outlook for the future growth of revenues is limited by both the current situation and structurally."
Ackermann was speaking at Frankfurt's annual Banks in Transition conference against a backdrop of gloom in the capital markets, where fears some euro zone countries could default on their debts have sent investors scurrying for shelter.
Shares in the banks that hold much of that debt dropped on Monday towards the two-year lows they reached in August.
Fears about how the crisis will play out have halted the takeovers and stock market listings that are the lifeblood of the bloc's investment banks as slowing global economic growth puts the prospect of recovery further into the future.
Despite his gloomy outlook for profits, Ackermann rejected calls for urgentrecapitalization .
International Monetary Fund chief Christine Lagarde called in August for mandatory capitalization of European banks to prevent a world recession .
A forcible recapitalisation would "threaten to send the signal that politics has lost faith in the ability of existing measures to succeed," said the boss of Germany's biggest lender.
Haircut Could Kill
Ackermann also warned that many European banks could go under if they had to accept the "haircut" on their sovereign debt holdings that has been proposed in some quarters.
"It's stating the obvious that many European banks would not survive having to revalue sovereign debt held on the banking book at market levels," he said.
Deutsche [DBKGN.DE 23.79 -2.23 (-8.57%) ], Germany's largest lender and global investment banking player, has already warned that reaching its goal of 6.4 billion euros ($9.1 billion) in pretax profit for this year was becoming more difficult and required a quick and sustained resolution of the European sovereign debt crisis.
The crisis has kept banks hostage to market concerns about their capital strength and access to funding, concerns that were stoked again last week when a European source told Reuters that the IMF saw a capital shortfall of 200 billion euros ($284 billion) among European lenders.
The chief executives of Commerzbank, Societe Generale [SOGN.PA 20.58 -1.585 (-7.15%) ] and UniCredit will also set out their visions for the way forward in difficult terrain.
As the prospects recede for a return of confidence, some major lenders, including Barclays [BARC.L 155.45 -9.75 (-5.9%) ], HSBC [HSBA.L 506.50 -18.00 (-3.43%) ], Goldman Sachs [GS 107.06 -5.10 (-4.55%) ], Credit Suisseand UBS, have begun to slash tens of thousands of high-paying jobs.
The CEO of JP Morgan's [JPM 34.63 -1.67 (-4.6%) ] investment bank, Jes Staley, will give the view from the other side of the Atlantic.
Ackermann may also face questions over a report that securities packaged by Deutsche are among half a dozen deals being examined by Britain's Serious Fraud Office (SFO).
The British bankers attending may be asked about a weekend report that Prime Minister David Cameron wants a watering down of proposals from the Independent Commission on Banking (ICB) to ring-fence the retail arms of top UK banks, over fears they could hurt the economy.



- Don't Bet on a 'United States of Europe'

By: Patrick Allen - The man who ran Germany when the euro began trading has an idea to save the euro zone: the creation of a "United States of Europe." Gerhard Schroeder, the social democrat who took Germany into the euro, told Der Spiegel on Sunday that the euro alone could not drive an economic bloc the size of the American economy.

"The current crisis makes it relentlessly clear that we cannot have a common currency zone without a common fiscal, economic and social policy. We will have to give up national sovereignty,” Schroeder said in the interview.
This would mean, according to the former German Chancellor, the creation of a government from the European Commission that would be overseen by the European Parliament.
Praising Angela Merkel and Nicolas Sarkozy for sending a strong signalthat they are on a path to fiscal union, Schroeder threw his support behind the idea of a joint euro bond.
His old political enemy Angela Merkel will not welcome Schroeder joining the ranks calling for a euro bond. The idea remains very unpopular in Germany where over the weekend Merkel and her ruling coalition government lost a regional election to Schroeder’s former party, the social democrats.
Over the weekend, Italian Economy Minister Giulio Tremonti used a press conference at the Ambrosetti meeting on Lake Como in Italy to repeat his call for a euro bond warning that without one "we will have critical problems."
In an interview with CNBC, the European Competition Commissioner Joaquin Almunia said fiscal union is needed. “This is one moment where we need greater integration. We need to learn from history to look forward with ambition,” he said.
Calling for fiscal union, Almunia also called for clear strategies and objectives following 10 years of the Lisbon Treaty.
Troubled Politics
The problem, as always with the euro zone, is that plans for further integration will crash into political and economic realities that have led us to the current state of affairs.
In Italy, Silvio Berlusconi’s government is under pressure to deliver on austerity measures worth 45 billion euros ($63.45 billion). Following a number of concessions to political pressure groups, the austerity measures are being questioned by the one man Italy needs to back the plan, Jean-Claude Trichet.
In return for ECB support for the Italian bond market, Berlusconi and his finance minister Giulio Tremonti signed up to a plan to cut the euro [EUR=X 1.4108 -0.0056 (-0.4%) ] zone’s third-largest economy's budget deficit.
Just weeks later, Trichet is warning that it is “essential that the target that was announced to diminish the deficit will be fully confirmed and implemented."
The former boss of Unicredit, Alessandro Profumo, told an Italian newspaper over the weekend that Italy needs austerity measures worth 400 billion euros if Italy’s debt to gross domestic product ratio is to fall below 100 percent.
Or take Greece, where on Friday talks between the government and officials from the EU, IMF and ECB where suspended amid a battle over Athens commitment to its austerity program.
With the economy contracting, the Greek government is failing to meet its obligations under the terms of the first rescue package and the second rescue package remains in doubt following a lukewarm take-up of a debt swap plan by private investors and demands for collateral by Finland to lend any more cash to Athens.
Governments in Italy and Greece are struggling to sell austerity to their electorates and in Germany Angela Merkel is under immense pressure not to hand more tax money or Germany’s credit rating to spendthrift euro zone members to the south.
Over the weekend, Merkel’s center-right coalition lost heavily in a regional election and on Wednesday Germany’s top court will rule on whether handing over billions to the European Financial Stability Fund, the euro zone's bailout fund, is constitutional.
Creating a "United States of Europe" when Europe’s leaders are unable to agree on short-term measures aimed at shoring up confidence in the euro is a big ask for those actually in power.
It is far easier for former leaders and those working at the European Commission to tell those holding power how to get out of trouble when they don’t have to answer to voters themselves.






- UK services slowdown 'worst since foot-and-mouth'

A woman walks past boarded-up shops in Clapham Junction on 10 August. The riots were partly blamed for the poor services sector figures. Photograph: Peter Macdiarmid/Getty Images
Britain's services sector has suffered its sharpest slowdown since the foot-and-mouth crisis of 2001, fuelling concerns that the dominant part of the UK economy is faltering.
Growth across the UK services sector slumped in August, according to a monthly survey of purchasing managers conducted by Markit and the Chartered Institute of Purchasing & Supply. The seasonally adjusted index, which measures activity across the sector, fell to 51.1 in August from 55.4 in July. This is the second-biggest fall on record – worse than in the weeks after the collapse of Lehman Brothers. It disappointed economists who had expected a reading of 54 points, rather than a result closer to the 50-point mark that separates expansion from contraction.
David Noble, chief executive of CIPS, described the drop in the services purchasing managers' index as "eye-watering". It sent the pound falling to a six-week low of $1.6103 against the dollar.
Markit said that the general economic uncertainty is hurting the UK services sector, leaving many companies struggling to generate new business. Some firms also reported that the riots that struck parts of the UK last month had also hit trading.
"Allied with soft manufacturing data and a slowdown in construction growth, the overall picture provided by the latest PMI surveys is one of a stuttering UK private sector," said Markit's senior economist, Paul Smith.
"Job losses were again reported as firms remain reluctant to replace leavers or are forced to cut positions in response to excess capacity," Smith added.
Markit/CIPS also found that business confidence in the UK services sector was the lowest for a year. The survey found that worries over the impact of government spending cuts were also "depressing sentiment".
Howard Archer, chief UK economist at IHS Global Insight, said the services data "really rings the growth alarm bells".
He said: "The very sharp slowdown in activity in the services sector in August indicated by the purchasing managers' survey is a particularly significant blow to the economy given the sector's dominant role. Even allowing for any impact from the riots and a correction after a surprise spike up in services activity in July, this is a hugely disappointing survey. The only crumb of comfort is that it shows services activity is still expanding."
A separate survey of the eurozone economy published on Monday showed that the risks of Europe slumping back into recession this year have increased. Growth in economic activity across the eurozone fell to its lowest rate in almost two years, according to Markit. The research group reported that the combined eurozone services and manufacturing PMI fell to 50.7 in August, with business optimism falling significantly in Germany, France, Spain and Italy.
Chris Williamson of Markit said that austerity measures and fears over the future of the eurozone are eating into economic demand, and could push the region towards a double-dip recession.
"The PMI suggests that economic growth in the third quarter of 2011 is unlikely to improve on the 0.2% seen in the three months to June, and a contraction in the final quarter looks a distinct possibility unless business and consumer confidence improve noticeably in coming months," Williamson warned.
The Chinese services sector is also suffering, according to HSBC's monthly PMI survey. It showed that China's services companies grew at their lowest rate since the survey began in November 2005, at 50.6 in August from 53.5 in July.




- G7 to Seek Ways to Prop Up Global Economic Growth

Group of Seven financial leaders, worried about risks to global growth, are likely to agree this week to keep monetary policy accommodative, slow fiscal consolidation in countries where that is possible and implement structural reforms, a G7 source said.
Jeff Titcomb | Photographer's Choice | Getty Images
Finance ministers and central bank governors of the United States, Canada, Japan, Germany, France, Italy and Britain (G7) meet on Friday in the French port of Marseilles to discuss what action to take to prop up the slowing global economy.
"The main issue will be the slowdown in the global economy and what is the best way to tackle that," a G7 official with knowledge of the preparations for the meeting said.
The source said that there was a sense among G7 countries that the global economy had entered the most difficult period since the collapse of Lehman Brothers and that there was a risk of recession — either in technical terms, seen as two straight quarters of contraction, or with positive growth but a widening output gap.
This was because temporary factors such as high oil prices were exacerbated by the sovereign debt crisis and the uncertainty created by the U.S. debt limit debate — all dealing a major blow to confidence, the official said.
"There will be an indication that monetary policy will remain accommodative, and that fiscal consolidation will go on, but in some countries at a slower pace in the short term," the G7 official said.
The accommodative monetary policy stance discussions would include issues such as quantitative easing, the official said.
No official communiqué was planned after the meeting, but there could be a briefing by France, which will chair the talks, the official said.
The official said the slower pace of fiscal consolidation demanded in the short-term in countries that did not face immediate market pressure would be in return for more fiscal consolidation sought in 2013, 2014 and 2015, depending on economic developments in 2012.
Italy is likely to come under pressure to implement structural reforms to boost its economic growth rate and therefore ease concerns in the market about its ability to pay back its public debt of 120 percent of GDP.
The euro zone debt crisis will be discussed at the G7 because it is one of the major reasons for the fall in investor confidence, but it was unlikely that euro zone countries would be pressured to do more than already agreed, the source said.
There was unlikely to be pressure, for instance, for the euro zone to further increase its emergency bailout fund, the EFSF, because more financial commitments to the fund from Germany and France could undermine their AAA credit rating.
"The mood is not for finger-pointing, but what we can do together to address the issues, that have become incredibly more complicated," the official said.
The G7 is also likely to point to the need for a "rotation of growth" — that when developed countries are slowing down, emerging economies like China and other Asian powerhouses should pick up the slack.
In this context, the G7 is likely to call for economies with large current account surpluses to increase domestic demand and allow their exchange rates to appreciate, the official said.
The G7 is also likely to discuss the IMF's call for further recapitalization of European banks, the sources said, but the EU is likely to stick to its position that bank stress tests last July were an adequate indication of the sector's capital needs and that work to address them was already under way.
Japan was likely to bring up the issue of the appreciation of the yen, but the recent rise of the U.S. dollar against most major currencies as investors sought a safe haven was likely to make any currency discussion less sharp, the official said.
There was unlikely to be any agreement on any joint intervention on the foreign exchange markets, the official said.


- California Employment at Record Low 55.4 Percent as Fewer Women Find Jobs
By Christopher Palmeri - The percentage of working-age Californians with jobs has fallen to a record low, and employment may not return to pre-recession levels until the second half of the decade, according to a research group.
Just 55.4 percent of working-age Californians, defined as those 16 or older, had a job in July, down from 56.2 percent a year earlier and the lowest level since 1976, the Sacramento- based California Budget Project said in a report released late yesterday.
California’s 12 percent unemployment rate in July, the nation’s second-highest after Nevada, compared with 9.1 percent nationwide. The most-populous state lost 1.4 million jobs during the recession that began three years ago, and has gained back only 226,800, or about 17 percent, according to the report.
Alissa Anderson, deputy director of the research group, which concentrates on issues facing low- and middle-class Californians, said women have disproportionately trailed men in regaining jobs.
“Women represent nearly half of the workforce,” Anderson said in a telephone interview. “They gained just one of the 10 jobs added.”
Job losses in local government, health care and other industries where women make up a large portion of the workforce contributed to the weak employment picture. Women have lost jobs in industries such as retail and financial services, while men in those fields gained.
“As businesses cut costs, the first thing to go is administrative support positions where women tend to work,” Anderson said.