IMF Sees U.S. Fading as Global Growth Engine

Please see the source for the video.

 

• Fund lowers forecast for U.K. growth after soft first quarter
• Growth seen picking up in China, Japan, euro zone, Canada

The world is leaning less on its biggest economy to sustain the global recovery, according to the International Monetary Fund.

The fund left its forecast for global growth unchanged in the latest quarterly update to its World Economic Outlook, released Monday in Kuala Lumpur. The world economy will expand 3.5 percent this year, up from 3.2 percent in 2016, and by 3.6 percent next year, the IMF said. The forecasts for this year and next are unchanged from the fund’s projections in April.

ECB ready to cut rates and push banks into lending to boost euro zone economy

(Reuters) – The European Central Bank is poised to impose negative interest rates on its overnight depositors, seeking to cajole banks into lending instead and to prevent the euro zone falling into Japan-like deflation.

At its meeting on Thursday, ECB policymakers may also launch a loan program for banks with strings attached to make sure the money actually gets out into the euro zone economy.

It will be the first of the “Big Four” central banks – ECB, Bank of England, Bank of Japan and U.S. Federal Reserve – to go the negative interest rate route, essentially charging banks to deposit with it.

Bank of Cyprus Depositors Hand Over 47.5% in Bail In-Source

ATHENS–Large deposit holders at Bank of Cyprus PCL (BOCY.CP) will see almost half of their deposits turned into equity at the lender as part of the country’s international bailout, a senior bank official said Sunday.

After an all day meetings Saturday between President Nicos Anastasiades and representatives from the country’s creditors–its euro-zone partners and the International Monetary Fund–it was decided that 42.5% of all deposits over 100,000 euros ($132,764) will be converted into shares as part of its recapitalisation plan, the official said.

Greece Ousted from Index of ‘Developed’ Countries

Like other countries within the region that are yet to go into full-blown crisis, Greece failed from the beginning, and what’s more is that it was known. A second supporting link can be found here, from Spiegel Online.

The latest setback for Greece: booted the euro-zone member from its index of developed countries.

The decision, announced late Tuesday, is the first time the index provider demoted a country from its “developed” to its “emerging-market” category since the launch of its flagship emerging-markets index in 1987.

It affirms what investors have believed for years. Multiple bailouts by the European Union and the International Monetary Fund, a sharp contraction in gross domestic product and a still-large debt burden mean Greece now has more in common with Hungary than France.

Euro Rises as Sweden Threatens to Join Currency Wars

In case anyone didn’t catch last week’s currency news:

The so-called currency wars progressed further in today’s session, as two new countries jumped on the bandwagon of selling or threatening to sell its own currency to unwind recent strength.

Overnight, RBNZ Governor Wheeler announced that the central bank had already once intervened in Forex markets to bring down the price of the New Zealand Dollar. During European trading hours, Swedish Finance Minister Borg said the Krona’s strength may become an issue for the country’s central bank.

Euro Zone Crisis Has Increased I.M.F.’s Power

FRANKFURT — When Wolfgang Schäuble, the German finance minister and war horse of European politics, celebrated his 70th birthday at a theater in Berlin last September, two of the most powerful women in the world offered warm words in his honor.

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Ms. Lagarde’s presence reflected her close, longtime friendship with Mr. Schäuble. But it also was a confirmation of the enormous stature that Ms. Lagarde and the I.M.F. have acquired in Europe as a result of the euro crisis.

The I.M.F. has more say over crisis management than many euro zone members, and Ms. Lagarde has become a quasi head of state, whose views carry more weight than those of many elected leaders. Indeed, without the I.M.F.’s money and advice, the euro zone might have fallen apart by now.

Clouds of crisis return to Europe

Europe’s brief respite from political and financial turmoil has come to an abrupt halt in the wake of a nerve-rattling Italian election, Britain’s loss of its cherished triple-A credit rating and troubling developments on other fronts.

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On Monday, the euro fell to its lowest level against the U.S. dollar in six weeks, but strengthened slightly against the British pound, which was shaken by the credit downgrade announced late Friday by Moody’s Investors Service. The Standard & Poor’s 500 index lost more ground in a single session that at any time since November. Italian bonds plunged and German bonds and U.S. Treasuries rallied, as nervous investors once again looked for safer harbours.

Two unlikely political hotheads – loudmouth comedian Beppe Grillo and Silvio Berlusconi, the aging schmoozer who never says die – turned the Italian election on its head, virtually guaranteeing that the country faces a period of political chaos.

Berlusconi says Italy may be forced to leave the euro zone

ROME (Reuters) – Former prime minister Silvio Berlusconi said on Tuesday Italy would be forced to leave the euro zone unless the European Central Bank gets more powers to ensure lower borrowing costs.

Berlusconi, who announced this month he will again lead his People of Freedom party (PDL) in a national election expected in February, said on a talk-show on state broadcaster RAI that the ECB should become a lender of last resort for the currency bloc.

Only Misunderstandings

ATHENS/BERLIN (Own report) – Amid mass protests, the German Chancellor visited Athens, Tuesday, to promote new opportunities for German companies. The privatization of state enterprises and infrastructure must be accelerated, was the demand in Berlin even preceding Merkel’s visit. The Chancellor remembers all too well how the German Democratic Republic’s enterprises were liquidated, and therefore knows how to pluck out a country’s industrial filets to sell them off to profit-seeking investors. Interested Germans such as those in the Chancellor’s delegation will be in a privileged position, through the creation of “special economic zones” in Greece, which has been Berlin’s long time demand. A spokesperson for the German government recently commented on the effects of the German austerity dictate, which has led to the impoverishment of the population, saying “we have succeeded in reducing the unit labor costs by double-digit percentage points.” Foreign policy experts in the German capital attribute yesterday’s mass protests to “misunderstandings” and recommend that Berlin undertake targeted PR measures, to impede future resistance to German policies of domination. They allege that the Greek population is “badly informed,” but has a right to “comprehensible press releases” for more in depth explanations of the German austerity policy.

Three Months to Save the Euro: George Soros

Regardless of who the message is from, all signs still point towards Germany as the winner of the Euro crisis. It’s also interesting to note that the Deutschmark coming back is mentioned in articles a little more often than usual lately, indicating that it could be slowly being introduced in people’s minds to build support for it — such as what we’re seeing with the Eurobonds.

Here is currency wrecker, convicted felon and “philantrophist” George Soros on the Euro:

Euro-zone governments have around three months to ensure the survival of the single currency, billionaire investor George Soros said in a speech on Saturday.

“We are at an inflection point. After the expiration of the three months’ window, the markets will continue to demand more but the authorities will not be able to meet their demands,” he warned in a speech at the Festival of Economics in Trento, Italy.

The European Union is “like a bubble” – not a financial bubble but a political bubble — that could pop as a result of the euro -zone crisis, Soros said.

“In the boom phase, the EU was what the psychoanalyst David Tuckett calls a ‘fantastic object’ – unreal but immensely attractive,” he said.

“In retrospect, it is now clear that the main source of trouble is that the member states of the euro have surrendered to the European Central Bank (ECB) their rights to create fiat money. They did not realize what that entails – and neither did the European authorities,” he said.

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Soros believes Germany will eventually do what it takes to keep the euro zone going because of the large losses German banks would suffer if it broke up and the damage to exports which could be caused by a return to the Deutschmark, which would likely be substantially stronger than the euro.

“A German empire with the periphery as the hinterland,” could be the result of the current predicament, he warned.

Full article: Three Months to Save the Euro: George Soros (CNBC)

Europe’s new soft right is winning

This is only the tip of the iceberg. Expect a shift to the hard right as Europe’s economic crisis continues and as the EU forces itself to consolidate into an even tighter political-economic union to save the Euro and/or United States of Europe.

Although it may be a different world, this phenomenon also applies in politics. Ten years ago, Europe was almost entirely dominated by social-democratic governments: with Tony, Gerhard and Göran [Blair in the UK, Schröder in Germany and Persson in Sweden] leading the way. Then something happened: a new player entered the market.

Last week, the Norwegian conservative party, Høyre, launched a new web domain [arbeidspartiet.no] “working party”, which is confusingly similar to the name of the Norwegian Labour Party [Arbeiderpartiet]. Over the last few months, Høyre’s leader Erna Solberg has taken to banging on about “human beings before billions”, while the party’s rising star Torbjørn Røe Isaksen has declared that Høyre no longer wants to deregulate the labour market and that it has nothing against trade unions.

All of this is designed to combat a perception of Høyre as a heartless club for rich people. The strategy is obviously outright copied from Swedish Prime Minister Fredrik Reinfeldt. So you want to copy the Swedes? say the Norwegian social democrats, who are quick to point out that in the wake of six years under the Reinfeldt’s conservative government, unemployment in Sweden now stands at 8%.

In spite of this performance, Fredrik Reinfeldt and his centre-right Alliance for Sweden has proved to be a remarkably successful export. From David Cameron’s Great Britain to Angela Merkel’s Germany, Europe’s destiny is now in the hands of a soft modernised right. David Cameron speaks of “progressive conservatism”: a term that is every bit as contradictory as “peacekeeping missile” or “environmentally friendly dry cleaning”, but he is the one who is prime minister. And you would be forgiven for thinking that he is Fredrik Reinfeldt’s public-school educated twin brother.

At the same time, Europe’s most powerful woman, Angela Merkel, has staked her claim on a platform of pragmatism and watery centrism. Needless to say, the German social democrats are none too pleased. If Angela Merkel agrees to a compromise with socialist François Hollande, how can they vote against such a proposal? And let’s not forget that that the growth pact was their idea.

 

Full article: Europe’s new soft right is winning (presseurop)

Euro Officials Begin to Weigh Greek Exit as Euro Weakens (Update 1)

“We’re really getting to a denouement,” Michael O’Sullivan, head of portfolio strategy at Credit Suisse Private Banking, said today in a Bloomberg Television interview. “We’re getting to the part where a decision has to be made” on whether Greece leaves the 17-nation currency union, he said.

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A Greek departure from the euro could trigger a default- inducing surge in bond yields, capital flight that might spread to other indebted states and a resultant series of bank runs. Although Greece accounts for 2 percent of the euro-area’s economic output, its exit would fragment a system of monetary union designed to be irreversible and might cause investors to raise the threat of withdrawal by other states.

Full article: Euro Officials Begin to Weigh Greek Exit as Euro Weakens (Update 1) (Bloomberg)

This is Germany’s Moment!

It appears the current phase of Europe’s debt crisis is entering its last hour. We’ll know soon, but it’s possible the weekend of May 5, 2012, will be remembered as a transformative moment in the history of Europe.

Once again, the nation at the center of it all is Germany.

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Finally, there’s the run-off presidential election in France, which could have enormous impact on Germany and Europe. From the moment the debt crisis began in 2008, the responsibility of fixing it has rested primarily on the German-French axis. Truth be told, President Sarkozy’s main responsibility has been to embrace the solutions coming from Berlin, giving them added legitimacy in the eyes of Europe and the rest of the world.

If Socialist candidate Francois Hollande is elected, Germany loses its French toady.

That’s not all. When it comes to solving Europe’s debt woes, Hollande’s view is the antithesis of that of Angela Merkel and German public opinion. He’s already stated that he won’t support the fiscal pact as it currently exists. When it comes to Europe’s finances, he said last week, “It’s not for Germany to decide for the rest of Europe.” He also believes that instead of austerity, the solution to Europe’s debt woes is printing and spending more money. “So many people in Europe are waiting for our victory,” he said recently, “I don’t want a Europe of austerity, where nations are forced on their knees.”

Read between the lines of that statement. This man isn’t merely campaigning for leadership of France, he’s making a play for leadership of Europe. In another recent address, Hollande told supporters that “the people of Europe expect that we, the people of France, will provide Europe with another perspective, another direction, another orientation.”

They say Hollande lacks personality and charisma. Well, he makes up for it in audacity. He sincerely believes the rest of Europe wants him elected so France can replace Germany at the helm of Europe!

That’s never going to happen. France lacks both the financial health and political muscle to replace Germany as the arbiter of this crisis. Nevertheless, France’s dissension under Hollande could throw Europe into financial and political turmoil. Der Spiegel reported recently that “for France’s neighbors and the fight against the sovereign debt crisis in Europe,” Hollande’s election “will set everything back to square one.”

As you can see, Europe’s financial crisis isn’t even close to being over—though it is likely entering a new, more exciting, more dramatic, more sobering chapter!

It’s possible, likely even, that the convergence of these events—the widespread resistance to German-imposed austerity, the renaissance of nationalism, Spain’s imminent default, the collapse of the Dutch government, and the inconveniently timed national elections in Greece and France—will produce a moment of historic importance. As this unfolds, don’t take your eyes off the nation at the center of it all.

As Ambrose Evans-Pritchard wrote, “The epicenter of Europe’s political crisis may soon be Germany itself.”

We must watch for Germany’s response. It will have a colossal impact on Europe, and on the rest of the world.

Full article: This is Germany’s Moment! (The Trumpet)

Germans float direct EU control over Greek budget

Being that Germany is the EU, look for the major influences of future change and reform to come from Berlin — as well as increased power in Berlin’s favor.

The unprecedented and sweeping powers for creditors would indeed deal a huge blow to Greece’s sovereignty, but they could help mobilize more support for the government in Athens from its European partners.

Several German lawmakers have repeatedly said that giving more money to Greece is unthinkable without stricter enforcement and control of the conditions attached to the rescue packages.

Greece is currently locked in a twin effort, seeking to secure a crucial debt relief deal with private investors while also tackling the pressing demands from its European partners and the IMF for more austerity measures and deeper reforms.

Failure on either front would force the country to default on its debt in less than two months, pouring new fuel on the fires of Europe’s debt crisis.

Continue reading article: Germans float direct EU control over Greek budget (AP)

DAVOS:Euro-Zone Bonds A Way Out Of Crisis-Deutsche Bank’s De Weck

Look for it to eventually happen as EU leaders, Merkel in particular, continue calling for further integration as a solution to the EU crisis. This would likely play into China’s hands as it would be more than happy to divest from US bonds as it continues to wage economic war against the United States. It would be the final straw that would break the camel’s back as it would trigger a complete collapse of the United States.

DAVOS, Switzerland (Dow Jones)–A manager at Deutsche Bank AG (DB) said Wednesday that the introduction of euro-zone bonds are a way out of the debt crisis, once closer fiscal integration is achieved.

“Euro-zone bonds are a solution,” Pierre De Weck, who heads the bank’s private wealth management arm, said at the Davos world economic forum.

A painful adjustment process is necessary for the euro zone and it is unfortunate that Germany is opposed to the introduction of euro-zone bonds, he added.

Continue reading article: DAVOS:Euro-Zone Bonds A Way Out Of Crisis-Deutsche Bank’s De Weck (Wall Street Journal)