Spanish Shares Open Higher As Bond Yields Collapse

Spain's stock market rose in early trading Monday, despite losses elsewhere across the world, amid expectation the European Central Bank may purchase Spanish and Italian government bonds.

A Madrid-based trader said the ECB news, which has resulted in a collapse in Spanish bond yields, is the main reason for the bounce after last week's selloff. At 0710 GMT, the country's blue-chip index was up 2.2% at 8,862.7.

Spanish bank stocks, among the worst losers in recent days, led the rebound. The shares of the country's two largest banks, Banco Santander SA (STD) and BBVA SA (BBVA.MC), were both over 4% higher in heavy-volume trading. More than 11 million Santander shares had been traded at that point, compared with just two million shares of Telefonica SA (TEF), Spain's largest company by market value.

The ECB said late Sunday it would actively implement its government bond-buying program, signaling it may purchase Italy's and Spain's government bonds. European traders said the central bank has already been spotted buying Italian bonds.

 

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Posted in: Spanish Shares Open Higher As Bond Yields Collapse

ECB intervention brings early relief to European stock markets

European stock markets shrugged off fears of panic on Monday morning, with the Spanish and Italian stock indices rising as their government's debt costs fell.

The Italian FTSE MIB index was up 2.8% this morning, while Spain's Ibex 35 rose 2.6%, defying predictions of a heavy selloff following S&P's downgrading of the US credit rating on Friday night.

In the City, the FTSE 100 fell 66 points at the start of trading this morning, but swiftly reversed as traders become more confident. By 8.25am the blue chip index was in positive territory by 8:25, up 18 points at 5,265 as widespread fears of further panic selling on the markets failed to materialise.

Italy and Spain's borrowing costs also fell, after the European Central Bank said it would intervene by buying up the two countries' debt. Bond yields were down to 5.6% for Italy and 5.7% for Spain, though traders suggested the falls may not last.

Yields on 10-year Italian and Spanish bonds had spiked last week, rising above 6%, as Eurozone debt fears spread from the currency area's peripheral states towards the centre.

The French CAC index rose 1%, while the German Dax was up 0.1%. There had been fears that the US debt downgrade late on Friday night might accentuate last week's sell-off in global markets.

 

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Posted in: ECB intervention brings early relief to European stock markets

Banks that were perceived to have heavy exposure to Greece were penalized

“Banks that were perceived to have heavy exposure to Greece were penalized,” said John Stopford, the London-based head of fixed income at Investec Asset Management Ltd., which manages more than $90 billion. “Now, maybe people will be more worried about exposure to other parts of Europe.”
A benchmark index of credit-default swaps on European banks and insurers climbed as much as 23 percent last week to a record 218.5 basis points on Aug. 5, according to JPMorgan Chase & Co. The extra yield investors demand to buy bank bonds instead of benchmark German bunds is now 231 basis points, or 2.31 percentage points, the most since Jan. 20, Bank of America Merrill Lynch data show.
Bondholders are assigning a higher perceived risk to bank debt on concern that last month’s second Greek bailout won’t prevent the sovereign crisis from engulfing Spain and Italy, deepening lenders’ losses on government securities. The ECB, which last week broke an 18-week hiatus by buying Irish and Portuguese securities, said yesterday it will “actively implement” its bond-purchase program, and said it welcomed pledges from Italy and Spain to reduce their deficits.
“There’s a lot of volatility around sovereigns, which leads to uncertainty for banks and warrants a premium,” said Hans Stoter, head of credit investments at ING Investment Management in the Hague, Netherlands, which manages 218 billion euros of fixed-income assets.
Societe Generale (GLE) SA said last week it may miss its 2012 earnings target after discounting the value of its Greek notes, following similar writedowns by institutions including Deutsche Bank AG and BNP Paribas SA. Analysts have cited concern that banks don’t have sufficient capital to endure further writedowns as a motivation for EU leaders to bolster sovereign debt values in the region.
Sales Stutter
Bank bond sales slowed to about 7.7 billion euros ($11 billion) since the beginning of July, the lowest this year and less than half the 27 billion-euro monthly average for 2011, according to data compiled by Bloomberg.
Greece’s second rescue package proposed that banks accept a 21 percent writedown on the value of their Greek debt. Europe’s 90 biggest lenders hold about 98 billion euros of the country’s notes, the European Banking Authority said July 15.
In a statement issued in the name of President Jean-Claude Trichet after an emergency teleconference meeting of policy makers yesterday, the Frankfurt-based ECB said “a decisive and swift” implementation of reforms by both governments is “essential.” It also called on all euro-area governments to follow through on the measures agreed at a July 21 summit, including allowing the European Financial Stability Facility to purchase bonds on the secondary market.
Greece’s bailout terms may set a “precedent” for future restructurings, according to Fitch Ratings and Moody’s Investors Service. Last week, Standard & Poor’s removed its AAA rating for U.S. Treasuries, citing a political impasse that cannot reduce the deficit of the world’s biggest economy.
SocGen, France’s second-largest bank, reported a 31 percent drop in second-quarter profit because of a 395 million-euro writedown on Greek government debt. Deutsche Bank took a 155 million-euro hit and BNP Paribas (BNP) marked down 534 million euros of Greek IOUs. Royal Bank of Scotland Group Plc said Aug. 5 that it lost money in the first half after writing down Greek holdings by 733 million pounds ($1.2 billion).
Crisis Contagion
Speculation that other countries will succumb to the crisis drove yields on Italian and Spanish government debt to euro-area records and closer to the 7 percent level that presaged the rescues of Greece, Ireland and Portugal than the 2.34 percent borrowing cost of Germany, which has set the benchmark lending rate since the inception of the common currency.
“If Italy is sucked into the peripheral crisis then it starts to become a systemic issue for European banks because Italian government debt is quite widely held,” said Roger Doig, a London-based analyst at Schroders Plc, which manages 36.5 billion pounds of fixed-income assets. EU agencies may have to purchase as much as 850 billion euros of Italian and Spanish debt, or about half of the amount actively traded, according to a note published yesterday by strategists at Royal Bank of Scotland Group Plc.
European banks outside Italy held $233.5 billion of the country’s public-sector debt at the end of March, while foreign lenders held $90.3 billion of Spanish state obligations, according to the Bank for International Settlements in Basel, Switzerland.
Swaps Surge
The Markit iTraxx Financial index of credit-default swaps on the senior debt of 25 banks and insurers climbed to 211 basis points, the highest since March 2009, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. That’s 71 basis points more than the Markit iTraxx Europe Index of investment-grade companies, the biggest gap in five months.
The 10-year euro swap spread, which shows the difference between the swap rate and the yield on German bunds and is used as a measure of perceived risk, has climbed 78 percent in the past five weeks to 69.93 basis points. The spread reached an 18- month high of 73.34 basis points Aug. 4.
European governments’ deteriorating finances contrast with the relatively robust balance sheets of the region’s non- financial companies, which have been “hoarding liquidity,” according to Dagmar Kent Kershaw, head of credit fund management at Intermediate Capital Group Plc in London, which manages 12 billion euros of assets.
Corporates Safer
Yield premiums on non-financial corporate bonds are rising at a slower pace than on bank debt, with spreads increasing 11 percent since the end of June to 139 basis points, according to Bank of America’s EMU Corporates Non-Financial index of bonds issued by companies including BP Plc and Daimler AG.
Non-financial corporate securities returned 0.6 percent this month, compared with 0.3 percent from bank bonds, Bank of America index data show.
“Non-financials might be viewed as a safer-haven investment, but spreads here are widening too,” said Suki Mann, head of credit strategy at SocGen in London.
The European Central Bank restarted its bond-purchase program to prop sovereign debt markets last week following a four-month hiatus, though it limited itself to buying the debt of Ireland and Portugal. World stock markets lost more than $4.4 trillion since July 26 as speculation mounts that the global economy faces a recession that would send more countries begging for international bailouts.
Italian lenders UniCredit SpA and Banco Popolare SC (BP) led Bank of America’s Euro Banking index of bond spreads wider since the start of July. Relative yields on the debt of UniCredit, Italy’s biggest bank, surged 189 basis points to 444 on Aug. 4 and Banco Popolare bond spreads widened 179 basis points to 463, the index data show.

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Posted in: Banks that were perceived to have heavy exposure to Greece were penalized

Greek default virtually 100 per cent

Moody's downgraded Greece's bond ratings by a further three notches Monday and warned that it is almost inevitable the country will be considered to be in default following last week's new bailout package.

The agency said the new EU package of measures implies "substantial" losses for private creditors. As a result, it cut its rating on Greece by three notches to Ca -- one above what it considers a default rating. It also put eight Greek banks on review for a possible downgrade.

Though Moody's said a Greek debt default is "virtually certain," it noted that the new measures will increase the likelihood that Greece will be able to stabilize and eventually reduce its overall debt burden.

It also said the package also benefits other eurozone countries by "containing the near-term contagion risk that would likely have followed a disorderly payment default or large haircut on existing Greek debt."

In recent weeks, financial markets have been rocked by fears that much bigger economies like Spain and Italy may get dragged into Europe's debt crisis mire, which has also seen Ireland and Portugal bailed out alongside Greece.

Eurozone countries and the International Monetary Fund last week agreed to give Greece a second bailout worth C109 billion ($155 billion), on top of the C110 billion granted in rescue loans a year ago.

If all goes to plan, banks and other private investors will contribute some C50 billion ($71 billion) to the rescue package until 2014 by swapping Greek bonds that they hold for new ones with lower interest rates or slightly lower face value, or selling the bonds back to Greece at a low price

"The support package incorporates the participation of private sector holders of Greek debt, who are now virtually certain to incur credit losses," Moody's said in a statement. "If and when the debt exchanges occur, Moody's would define this as a default by the Greek government on its public debt."

Despite Greece's new package, which was more comprehensive than many in the markets had predicted, Moody's said it's going to take many years of hard graft for Greece to get complete control of its debts.

"Greece will still face medium-term solvency challenges -- its stock of debt will still be well in excess of 100 per cent of GDP for many years and it will still face very significant implementation risks to fiscal and economic reform," Moody's said.

The agency added that it will reassess Greece's rating once the bond exchange has been completed "to ensure that it reflects the risk associated with the country's new credit profile, including the potential for further debt restructurings."

On Friday, ratings agency Fitch also said Greece faced a default but that it would reassess the rating once the new bonds are issued -- implying that the bad rating might only last for a few days.

While Greece's brush with default will be a first for a euro country, the immediate practical consequences of the rating for Greece should be limited.

For weeks, the overriding fear was that, because of the bad rating, already struggling Greek banks would be frozen out of the European Central Bank's emergency liquidity operations.

However, last week eurozone leaders found a way around that threat by promising to temporarily deposit C35 billion with the ECB to boost the creditworthiness of defaulted bonds used as collateral by Greek banks, until the default rating has been lifted.

Crucially for Greece and Europe as a whole, the International Swaps and Derivatives Association, a trade association, said the new rescue deal is not expected to trigger payment of bond insurance because private sector involvement is voluntary.

Greek government spokesman Elias Mossialos brushed off Moody's downgrade as of "no practical value," arguing that domestic lenders can count on secure credit lines under the terms of the new bailout.

"Unfortunately for them, (ratings agencies) won't have anything to work on for many years," he said in a radio interview. "Perhaps the finance ministry should cancel its subscriptions, because I think the Greek government pays subscriptions to these agencies to receive their results ... I don't think we need them any longer."

 

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Posted in: Greek default virtually 100 per cent

George Osborne claimed the UK would be kept out of the latest Brussels deal to prop up the struggling Mediterranean country.

Taxpayers will have to fork out more than £1billion in a second Greek bailout – at the same time as losing millions in loan interest repayments from Ireland.


George Osborne claimed the UK would be kept out of the latest Brussels deal to prop up the struggling Mediterranean country.

But because of the UK’s multi-billion pound stake in the International Monetary Fund, the Government cannot escape contributing to the £96billion agreement.

The UK holds a 4.5% stake in the IMF, which is expected to make up around 30% of the bail-out to Greek PM George Papandreou’s debt-laden nation. The other 70% will come from countries in the Eurozone, led by Germany under Angela Merkel.

The agreement, thrashed out by EU leaders on Thursday, is the second time in a year British taxpayers have had to contribute £1billion to bail out the Greeks.




British banks are also exposed to Greece’s £298billion overall debt – which is 60% more than its annual Gross Domestic Product.

But there was good news yesterday as shares rose over the new rescue package.

UK and French markets gained more than 1% in morning trading, before slipping slightly, with the FTSE 100 index ending up 0.6% and the Cac 0.7% higher.

But last night it emerged Britain has been forced to slash the interest we charge Ireland for the £3.26billion loan made in November as part of the complex debt deal. Mr Osborne insisted easing the pressure on our near neighbours was in the UK’s “national interest”. The Chancellor said “We stayed out of the Greek bailout as promised. But, for Britain, Ireland is a special case. Our loan will help them and is in our national interest.”

He vowed the interest, which was fluctuating at around 5.9% would not fall below the 3% cost to Britain of making the loan.




The Irish government came away from the crisis summit with another victory, after Eurozone leaders announced they would continue lending it money beyond 2013 – if it is not able to borrow on the markets. Experts said this was another bailout. Despite the financial markets welcoming the deal, some critics claim it was the first step to a United States of Europe. Tory MP Douglas Carswell said it was “very bad news” and likened membership of the euro to being stuck in a “burning building with no exit”. Euro leaders also failed to dampen concerns that they were using the crisis to increase the EU’s power.

French President Nicolas Sarkozy revealed his ambition was “to seize the Greek crisis to make a quantum leap in eurozone governance”.

The latest international bail-out is seen as an attempt to finally ensure the stability of the single currency and stave off worries the debt crisis will spread to Italy and Spain.

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Posted in: George Osborne claimed the UK would be kept out of the latest Brussels deal to prop up the struggling Mediterranean country.

Alleged Norwegian spree killer has EDL links

The rightwinger allegedly responsible for the Mumbai-style massacre and bombing in Norway appears to have ties with UK-based “counter-jihad movement” the English Defence League.

In online rants, alleged murderer Anders Behring Breivik describes himself as a rightwing conservative opposed to “Eurabia”, the “Islamisation of Europe” and the erosion of Christian values.

In a post on Norwegian website document.no he describes his admiration for the English Defence League, his contacts with the group and aspiration to set up a Norwegian sister organisation:

Quote:
I strongly doubt that your theory is correct. The whole conflict between GDP and EDL started with a change of leadership in the EDL for a few months ago. They threw out the racist and denounced the BNP. They chose instead SIOE's ideological basis that is more or less mainstream view on the right side in Western Europe now (Vienna School of Thought).
Nick was very offended and began to demonize the EDL. Although they are now attacking each other as they compete not at all as these are two quite different fronts. 90% of all votes in the EDL continued GDP (Since this is the only alternative to multikulti in the UK) and 90% of GDP supports EDL regardless of what Nick had to think.

Second, Labour governs intelligence service. They had never in his life supported the EDL as these create a lot of positive attention for the cultural conservative movement in the UK.

I have on some occasions discussed with SIOE and EDL and recommended them to use conscious strategies.

The tactics of the EDL is now out to "entice" an overreaction from Jihad Youth / Extreme-Marxists something they have succeeded several times already. Over The reaction has been repeatedly shown on the news which has booster EDLs ranks high. This has also benefited GDP. WinWin for both.

But I must say I am very impressed with how quickly they have grown but this has to do with smart tactical choice by management.

EDL is an example and a Norwegian version is the only way to prevent Flash / SOS to harass Norwegian cultural conservatives from other fronts. Creating a Norwegian EDL should be No. 3 on the agenda after we have started up a cultural conservative newspaper with national distribution.

 

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Posted in: Alleged Norwegian spree killer has EDL links

Spain's Banks Aren't Going Bust

Global investors' attention is focused on Greece, and worries have been raised about the solvency of other European nations. In Spain, however, there's good news: As a result of our government's wide-reaching measures, our financial institutions are set to emerge as more efficient and resilient to any future crises. Herein lie lessons for the rest of Europe and for the world.

Spanish financial institutions were extremely resilient to the first phase of the crisis, thanks to prudent retail-banking business models that were funded mainly through deposits and long-term debt issuance. They had negligible exposure to U.S. housing assets and good profitability and capital buffers. They also benefited from the Bank of Spain's high-quality supervision.

Nevertheless, fast credit growth in the boom years and overexposure to the construction sector and real-estate assets eventually took their toll. These problems, coupled with turmoil in the international financial markets, led to questions about solvency and, at times, made it difficult for some institutions to access certain types of funding.

Our banks reacted by cutting operating costs, broadening their deposit bases and reinforcing the quality of their funding. Yet the crisis highlighted some additional vulnerabilities, especially for our cajas, or savings banks, which make up 50% of our financial system. Many of these small, fragmented institutions had grown too large and too fast in the previous years, and had a limited ability to access additional capital when the downturn hit.

 

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Posted in: Spain's Banks Aren't Going Bust

Germany announced on Thursday that a deadly infection there which has killed three people and left more than two hundred ill has been traced to Spanish cucumbers.

Germany announced on Thursday that a deadly infection there which has killed three people and left more than two hundred ill has been traced to Spanish cucumbers.

The outbreak, which began in northern Germany and has now spread to the south, is a particularly aggressive strain of E.coli and is resistant to many antibiotics. Hamburg’s health senator, Cornelia Pruefer-Storcks, said the city’s Hygiene Institute have discovered the bacteria on three cucumbers from Spain, and investigations are currently under way to determine their exact source.

Europa Press reports that the bacteria were identified on a fourth cucumber whose country of origin is not yet known.

The Senator however noted that the analyses have only been carried out on produce in Hamburg, adding that other produce may have been the source of the infection elsewhere in the country.

The German public, particularly those in the north of the country, were advised this week to not eat any vegetables, especially lettuce, tomatoes and cucumber, without cooking.

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Posted in: Germany announced on Thursday that a deadly infection there which has killed three people and left more than two hundred ill has been traced to Spanish cucumbers.

Spain is seeking to extend guarantees on about 80 billion euros ($113 billion) of bank bonds beyond the end of June to help lenders’ access to funding.

The government asked the European Commission for an additional six months for the backing first made during the credit crisis in 2008, according to a Madrid-based official at the Spanish Treasury, who declined to be identified because of ministry policy.
Spanish lenders are under pressure as the deficit crisis that triggered bailouts of Greece, Portugal and Ireland makes investors wary of bank debt. Bondholders want 189 basis points in extra yield to buy a five-year Spanish covered bond, the most popular type of debt issued by the country’s banks, instead of a note issued by a German lender. The difference was 143 basis points in April, according to data compiled by Bloomberg.
“Clearly, this move signals that the overall funding conditions for some Spanish banks remain challenging and that for some issuers capital market access is limited,” said Leef Dierks, a London-based analyst at Morgan Stanley.
The nation’s largest lenders, Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA, haven’t sold government guaranteed bonds after raising the equivalent to $91 billion by selling debt including covered bonds and unsecured debt since January 2010, according to Bloomberg data.

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Posted in: Spain is seeking to extend guarantees on about 80 billion euros ($113 billion) of bank bonds beyond the end of June to help lenders’ access to funding.

The International Monetary Fund is still willing to consider giving Greece "more time" to repay its loan

The International Monetary Fund is still willing to consider giving Greece "more time" to repay its loan as the country struggles with a debt crisis, an IMF spokeswoman said Thursday.
"As we have said for some months, there was a question of whether the program for Greece should be extended to give more time, whether it should switch to an extended-fund facility" or EFF, spokeswoman Caroline Atkinson said at a news briefing in Washington.
"If Greece needs more time to get to a position where they are finished with the program, EFF allows for a longer period," she said.
The 30-billion-euro ($42.7 billion) IMF loan extended to Greece in May 2010 calls for repayments through 2015. The EFF, a loan program used for countries facing longer-term economic adjustments, would extend the repayment schedule to 2020.
Atkinson said the interest rate would remain the same for Greece.
In November, Greece sought an extension of the debt repayment, and IMF officials, including managing director Dominique Strauss-Kahn, have indicated their support.
But the IMF's executive board, comprised of 24 countries and groups of countries, has not acted.
The 30-billion-euro loan was the IMF's biggest ever and was a part of a larger 110-billion-euro ($156.6 billion) support package from the European Union.
The possibility of a delay in repayment of the EU-IMF loan for Greece was first mooted when the two agreed in November on a bailout for Ireland that had a considerably longer repayment period.
Atkinson noted that before the IMF takes any program to the executive board, there is a judgment on debt sustainability.
She declined to comment on the IMF's ongoing discussions with Greek authorities in Athens.
A top IMF official said Thursday that the latest aid review did not point to Greece having to restructure its debt, noting the country had assets worth several hundred billion euros which it could sell.
The next IMF review of Greek aid is due in June but "at this point, on the basis of our program, we think that Greece should be moving in the right direction to a position where its debt is sustainable," said Antonio Borge, the IMF director for Europe.
It "therefore does not require restructuring," he said.

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Posted in: The International Monetary Fund

Six more boatloads of migrants, mostly Libyans, arrived at the Italian island of Lampedusa yesterday,

Six more boatloads of migrants, mostly Libyans, arrived at the Italian island of Lampedusa yesterday, exacerbating a refugee crisis that already appears to have ended the long-standing Schengen arrangement for passport-free movement around Europe.

In Italy, which has born the brunt of waves of migrants fleeing turmoil first in Tunisia and now Libya, key members of the government were again warning about the repercussions of Nato's bombing campaign across the Mediterranean.

"For this reason we have continually pressed for a strong diplomatic response to the situation in Libya," said Italy's interior minister Roberto Maroni, of the anti-immigration Northern League party, who has repeatedly called for an end to Italy's role in Nato air raids. "Otherwise there is no way to stop the boats."


Ignazio Accomando, from the National Institute for the Health of Migrants, told the Ansa news agency: "About 2,000 migrants are expected to arrive on the island. They are tired, worn out, dehydrated and with some bruises, but overall there are no particularly grave health cases."

The UN warned yesterday that one in 10 migrants fleeing Libya by sea is likely to die during the crossing. The arrival of tens of thousands of North Africans has caused political fall-out across Europe with the EU preparing to reintroduce passport checks among Schengen-zone countries, after pressure from France and Italy. The cracks in the Schengen zone appeared to widen this week when Denmark decided to reinstate controls on its borders with Germany and Sweden to clamp down, it said, on drug and weapons smuggling.

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Posted in: arrived at the Italian island of Lampedusa yesterday,mostly Libyans,Six more boatloads of migrants

Markets are expected to react negatively on Monday to the news of Mr Strauss-Kahn's detention in New York

.
The former French finance minister had been a key ally for the European Union as Greece, Ireland and Portugal all sought billion pound bail-outs to pay their debts.
Europe's finance ministers are due to meet in Brussels on Monday to hammer out the final details of a €78bn (£69bn) IMF-backed bail-out for Portugal and discuss further funding for Greece.
Mr Strauss-Kahn had been due to brief German chancellor, Angela Merkel, on Sunday on the IMF's position as well as attend meetings in Brussels.
Economists said Mr Strauss-Kahn's absence could not have come at a more sensitive time. Concerns are growing that Greece will fail to hit IMF imposed targets to qualify for June's €3.3bn payment from last year's original €110bn bail-out. Simon Ward, chief economist at fund manager Hen-derson, said: "I would think that the Portuguese bail-out is pretty much locked down, but the question of additional support for Greece remains. This will complicate negotiations and I would expect the markets to react negatively."

Mr Ward said Mr Strauss-Kahn, who has denied the sexual assault charges, had been "crucial" in securing US-backed funding of the rescue deals. "He has steam-rollered any opposition to the European bail-outs and has been a crucial figure," said Mr Ward.
"A person a bit less suppor-tive of the eurozone and we could potentially have already seen a default in one of those struggling economies."
US economist Nouriel Roubini said he had expected Mr Strauss-Kahn to back a rescheduling of interest payments on Greek debts rather than any further cash bail-out.
The IMF, which extended almost $92bn (£57bn) in emergency loans last year, said it remained "fully functioning and operational" following the arrest of its chairman. John Lipsky, the IMF's first deputy managing director is its acting head. Mr Lipsky, who announced last Thursday that he would step down in August, on Sunday held an emergency board meeting in Washington.
The IMF has already come under pressure from the US Congress to be tougher on European debts. Mr Ward said the arrest could "open the door" to those wanting the IMF to rein in its lending.
The fund has found its ability to offer cash in return for structural reforms, debt rest-ructuring and currency depreciation has been limited in Europe given the EU control of debts and the single currency.
Mr Strauss-Kahn was due to stand down next year. Traditionally, a European leads the IMF, with the US taking the lead at the World Bank. David Cameron has said the IMF should look outside Europe for its new leader, given the growth of India and China.
Separately, Italian central bank governor Mario Draghi is on Monday expected to be approved as the next president of the European Central Bank.

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Posted in: Markets are expected to react negatively on Monday to the news of Mr Strauss-Kahn's detention in New York

German Finance Minister Wolfgang Schaeuble said Sunday Greece could be granted an extension to the repayment of its massive debt but only if private creditors are also involved.

German Finance Minister Wolfgang Schaeuble said Sunday Greece could be granted an extension to the repayment of its massive debt but only if private creditors are also involved.
In an interview with ARD public television, Schaeuble insisted on waiting for the results of an examination of Greek public accounts next month before deciding if new measures were required.
But if they prove necessary, "a central point will be avoided (...) to relieve private creditors at the expense of the taxpayer".
"We must have a clear rule: if there is a rescheduling (of the debt), all credit must be rescheduled," he said.
Officials from the EU, the IMF and the European Central Bank are examining Greek finances and the progress of an austerity programme imposed as a condition of last year's international bailout.
They will report back in June.
The 110-billion-euro ($155 billion) rescue in spring 2010 was the first of three European rescues, followed by Ireland and Portugal.
However a severe recession has complicated Athens' efforts to bring its finances in order.
Greece was expected to return to the financial markets next year but it appears unlikely and there is speculation that it will need further financial assistance.
The German daily Die Welt reported Saturday that the EU Commission, the IMF and Germany were calling for Greece to reschedule its massive debt burden, due to a deteriorating situation.
Citing unnamed sources, Die Welt said the International Monetary Fund (IMF), the European Union executive arm and the government in Berlin believed prolonging the repayment terms on some loans to Greece has become the least worst option to save the country from defaulting.
However the European Central bank and France remain opposed to any such debt restructuring, the article added.
EU Commission spokesman on economic affairs Amadeu Altafaj dismissed the report as "absurd".
"A restructuring of Greek debt is out of the question," he told AFP.
Speculation has mounted in recent days that Greece will need an additional 60 billion euros ($85 billion) over the next two years as it won't be able to return to financial markets next year as expected to re-finance its massive debt.

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Posted in: German Finance Minister Wolfgang Schaeuble said Sunday Greece could be granted an extension to the repayment of its massive debt but only if private creditors are also involved.

IMF Managing Director Dominique Strauss-Kahn decides to seek diplomatic immunity to avoid sexual assault charges

IMF Managing Director Dominique Strauss-Kahn decides to seek diplomatic immunity to avoid sexual assault charges, he will likely have an uphill climb, a Reuters review of U.S. and international laws and treaties, International Monetary Fund policies and recent U.S. court rulings suggests.

Under the IMF's Articles of Agreement, employees are granted a limited form of diplomatic immunity known as "acts immunity," which refer to actions related to activities performed in the course of their work for the Fund. Article IX of the agreement notes that the Fund's staff "shall be immune from legal process with regard to acts performed by them in their official capacity." Even then, the agreement says, the IMF may elect to waive immunity.

The IMF's limited immunity provision is unlikely to protect Strauss-Kahn from prosecution for sexual assault, an expert in international law argued. "Acts immunity only covers actions taken in the course of his duties. Coming out of your bathroom stark naked and attacking a chambermaid probably doesn't qualify," Kurt Taylor Gaubatz, an associate professor in the Graduate Program in International Studies at Old Dominion University, wrote in a blog post on Sunday. Gaubatz did not respond to requests for additional comment.

Federal law in the United States may also make it difficult for Strauss-Kahn to claim diplomatic immunity. The International Organizations Immunities Act applies a limited scope of exemption from prosecution similar to the IMF's own rules. It says "representatives of foreign governments in or to international organizations" and "employees of such organizations" are immune from lawsuits and the legal process "relating to acts performed by them in their official capacity."

On Sunday, New York Police Department spokesman Paul Browne said Strauss-Kahn does not have diplomatic immunity, though Browne did not elaborate on why the NYPD believes diplomatic immunity does not apply. A spokeswoman for the French Consulate in New York, Marie-Laure Charrier, referred questions about possible diplomatic immunity to the IMF. A statement posted on the IMF Web site on Sunday did not address the issue.

Despite the limited immunity provided by IMF rules, Strauss-Kahn could still try to leverage his status as a quasi-diplomat in his legal defense. One of his attorneys is William Taylor, a partner with law firm Zuckerman Spaeder in Washington. Taylor has represented a range of high-profile clients, including former White House chief of staff Mack McLarty, in civil and criminal actions. The Wall Street Journal reported in October 2008 that Taylor also represented Strauss-Kahn in the controversy over an affair the married IMF chief allegedly had with a female subordinate at the Fund. Taylor did not respond to requests for comment on Sunday.

One possible legal defense strategy for Strauss-Kahn could be to try to apply the Vienna Conventions on Diplomatic Relations, which grant broad immunity from prosecution to diplomats serving in foreign jurisdictions. Article 31 of the convention says "a diplomatic agent shall enjoy immunity from the criminal jurisdiction of the receiving State." The U.S. ratified the treaty in 1972. The treaty also renders diplomats immune from prosecution in civil and administrative matters, with some exceptions. Under the convention, diplomats are not immune from "action relating to any professional or commercial activity exercised by the diplomatic agent in the receiving State outside his official functions."

The issue has come up in recent years in civil cases in the United States. Three domestic workers employed by foreign diplomats in the United States have filed federal lawsuits alleging they were underpaid or physically and verbally abused. The workers claimed that their diplomatic employers violated the Fair Labor Standards, and that they are not exempt from prosecution under the Vienna Conventions' exemption for "commercial activity ... outside his official functions." But federal judges have dismissed all of the cases. Most recently, on April 26, U.S. District Judge James Boasberg in Washington threw out a case alleging that Lebanese Ambassador Antoine Chedid and his wife underpaid and verbally abused their maid. His decision relied, in part, on a State Department filing in a separate case, which found that hiring household workers for assistance during diplomatic service is covered by the Vienna Convention's immunity provisions.

On March 25, four former employees of a senior Qatari diplomat in the United States filed a similar abuse case, which also alleges sexual assault, in federal district court in Washington.

To be sure, there may be some precedent for a Strauss-Kahn legal defense that claims diplomatic immunity. Last June, British newspaper the Telegraph reported that Pakistani investigators dropped an inquiry into allegations that Paul Ross, head of the IMF's Pakistan unit, abused his wife by throwing her out of their home. "The police officer dealing with the case said that as soon as they found out that Mr. Ross had diplomatic status they abandoned the case," the Telegraph reported. At the time, the IMF said it was conducting an internal inquiry.

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Greece demands more help and Portugal awaits a bailout

As Greece demands more help and Portugal awaits a bailout, the euro zone crisis is creating political turmoil. Bruno Waterfield in Brussels and Philip Aldrick report.

An undercurrent of anger and mistrust will permeate tonight's critical meeting of euro zone ministers in Brussels as they grapple with a spiralling Greek debt crisis and try to seal a €78 billion ($104 billion) bailout for Portugal. As if the euro's problems were not enough, seething resentments will add a new political dimension to the talks.

The inclement mood was set 10 days earlier. On May 6, Jean-Claude Juncker, Luxembourg's Prime Minister and chairman of the euro group of single currency members, called a secret meeting of the European Union's most powerful countries at the Chateau de Senningen on the outskirts of the tiny Duchy state.

Gathered at the 18th century former paper mill were finance ministers from Germany, France, Italy and Spain - the euro's G20 members, Jean-Claude Trichet, the president of the European Central Bank, and Olli Rehn, the EU commissioner for monetary affairs.

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Top of the agenda was the fate of Greece, after the International Monetary Fund - on the hook for €30 billion of the €110 billion rescue - demanded that the EU come up with a new strategy as Greece continued to plunge into debt and recession.

Sparking rumours that Athens was set to leave the euro, George Papaconstantinou, the Greek Finance Minister, was summoned to explain how his country could take further savage austerity measures and speed up privatisation of lucrative state-owned industries.

As news of the meeting leaked out, financial markets sent the euro into a nosedive. In a desperate bid to end the turmoil, Mr Juncker, who had not informed other euro zone finance ministers of the meeting, chose to lie. ''I totally deny there is a meeting,'' said his spokesman, as speculation mounted.

Mr Juncker had already horrified many of his counterparts by bragging last month that he often ''had to lie'' to suppress public debate over euro zone economic policies which, he claimed, were too important for open contemplation.

''I am for secret, dark debates,'' he said. ''When the going gets tough, you have to lie.''

The lies and the elite gathering sparked a furious response from euro members, as MPs in national parliaments demanded an explanation of what was going on. Gunther Krichbaum, the chairman of the Bundestag's powerful European scrutiny committee, said that he had been ''shocked and dismayed'' at Mr Juncker's deceit.

''That does not create trust on decision-making. That is a very serious mistake, because trust is important,'' he said.

Mr Krichbaum, a senior German MP and member of Angela Merkel's ruling Christian Democrats, warned that conspiracies to deceive the public over bailouts and elite meetings threatened to destroy the euro. ''If we don't pay attention to this then Europe will fall apart,'' he said.

Diplomats from smaller member states, excluded from the talks, accused the big euro countries of playing ''ham-fisted cloak-and-dagger games''. ''Acting like this is almost guaranteed to create crisis, and these are the people in charge. There are going to be some very angry people around the table demanding what the hell are they playing at,'' said an official from a non-G20 euro zone country.

The mistrust, disarray and bitterness could not have come at a worse time, as problems multiply for the euro zone. The Senningen meeting was sparked by heated words at last month's IMF summit in Washington, where the US and Canada demanded assurances that IMF's loans for Greece, Ireland and Portugal would not be wasted. With Greece due to be assessed for a fifth, €3.3 billion tranche of the IMF loan in June, they wanted assurances that the fund was not about to throw good money after bad.

For the IMF, it has been an unusually hands-off process. A typical IMF program consists of a three-pronged remedy: fiscal consolidation and structural reform, debt restructuring, and a currency depreciation. The principle is to create a more competitive economy, while trimming the debt burden.

A falling currency makes the country more competitive, an effect that is augmented by structural reforms such as pay cuts, as happened in Ireland.

However, IMF officials have had their hands tied in Europe. Brussels controls currency and debt. Tweaking the other alone just kills off demand and risks recession, which in turn makes it more difficult to improve the public finances. Greece is a case in point. It is expected to contract 3.5 per cent this year - a European Commission estimate - and last week it revealed it had fallen €313 million short of its target deficit reduction for the first quarter.

Although it cut spending by more than planned, tax receipts suffered a €1.28 billion shortfall ''mainly due to the larger than projected recession'', the Ministry of Finance said. Worse still, the IMF, which is carrying out an assessment of Greece with the EU, is said to be concerned that interest rates on Greek borrowing, at about 13 per cent, are putting the country in an impossible situation.

Athens cannot afford to refinance its €330 billion of sovereign debt at those levels, so it will either become wholly dependent on bailout money or suffer a massive default. Neither is a viable option.

The IMF-EU report on Greece, due to be completed last week and expected to make grim reading, will be used to decide next month whether Athens can no longer comply with the conditions for IMF funds. The answer is expected to be negative, which is why a second rescue is now being discussed.

So severe are the problems that euro zone ministers - including Wolfgang Schauble, Germany's Finance Minister - are contemplating how to restructure Greek debt, fully aware of the risk of financial market turmoil from fears that Ireland and Portugal would also be unable to pay back loans.

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Europe has moved to reverse decades of unfettered travel across the continent

Europe has moved to reverse decades of unfettered travel across the continent on Thursday when a majority of EU governments agreed on the need to reinstate national passport controls amid fears of a flood of immigrants fleeing the upheaval in north Africa.

In a serious blow to one of the cornerstones of a united, integrated Europe, EU Interior Ministers embarked on a radical revision of the passport-free travel regime known as the Schengen system to allow the 26 participating governments to restore border controls.

They also agreed to combat immigration by pressing for “readmission accords” with countries in West Asia and North Africa to send refugees back to where they came from.

The policy shift was pushed by France and Italy, who have been feuding and panicking in recent weeks over a small influx of refugees from Tunisia. But 15 of the 22 EU states which had signed up to Schengen supported the move on Thursday, with only four resisting, according to officials and diplomats present.

The issue now goes to a summit of EU Prime Ministers and Presidents next month. But the “reforms” of the Schengen system also need to go through the European Parliament where there will be strong resistance to empowering national governments to reinstate controls.

The border-free region embraces more than 400 million people in 22 EU countries as well as Switzerland, Liechtenstein, Norway, and Iceland. It extends from Portugal to Russia's borders on the Baltic and from Reykjavik to Turkey's border with Greece.

The move to curb freedom of travel came as the extreme nationalist right, which is increasingly dictating or influencing policy across Europe, chalked up a notable victory in Denmark, a Schengen country, which announced it was unilaterally re-erecting controls on its borders with Germany and Sweden.

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5.2 magnitude earthquake was felt across the Murcia region, where hundreds of British expatriate live, from Alicante to Malaga and as far away as Madrid.

The epicentre was registered in the Tercia mountain range close to the town of Lorca, where several buildings were destroyed including a medieval church bell tower. It was the worst earthquake in Spain for 50 years.
Authorities confirmed that at least ten people had died, including a child of 13 years old.
Francisco Jodar, the mayor of the town said: "Unfortunately people have died as a result of cave-ins and falling debris. We're trying to find out if people have been trapped inside the collapsed houses."
Television images showed streets in the historic quarter of the town strewn with rubble and crushed cars. There were also reports that historical heritage sites as the Sanctuary of the Virgen de la Huerta and several local temples had been damaged.
The local hospital was evacuated raising fears over how those injured would be treated and military units were dispatched to the earthquake zone to help in the rescue.
An earlier quake registering 4.4 on the Richter scale occurred at 5.05pm local time, and the second bigger shock of 5.2 followed at 6.47pm.
Residents in the town, which has a population of around 90,000, described the terrifying moments when the quake struck.
"There was a tremendous roar and the church was split in half," Catalina Lopez, told Spanish state television.
One neighbour said that most people had already left their houses before the second bigger quake struck.
"I felt a movement of such force, and with such noise, that made all the furniture jump about. It was terrifying," said Juani Avellaneda.
"Everyone ran into the street and then when we were thinking it was safe to return to our houses, the shaking started again," he said.
Lorca dates back to the Bronze Age and is thought to have gained its name from the Romans. The old part of the town is made up of a network of narrow alleyways.
Spain is at moderate risk of earthquakes. On average every 200 years an earthquake of over six on the Richter scale occurs. In 2007 an earthquake of 6.3 magnitude struck the region in Cabo Sao Vicente on Portugal's southern coast, with no reports of damage or casualties.

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A 97-year-old Hungarian accused of massacring civilians in Serbia in 1942 has gone on trial in Hungary.

Sandor Kepiro was listed by the Simon Wiesenthal Center as the world's most wanted Nazi war crimes suspect.

More than 1,200 Jewish, Serb and Roma civilians were murdered over three days by Hungarian forces in a notorious massacre in the city of Novi Sad.

As Mr Kepiro arrived at court he told reporters he was "completely innocent" and called the trial a "circus".

After using a walking stick on his way into the court in Budapest, he took his seat and displayed a printed sheet of paper stating: "Murderers of a 97-year-old man!"

The former police captain is accused of "complicity in war crimes".

Prosecutor Zsolt Falvai detailed the charges. He said Mr Kepiro was directly responsible for the death of 36 Jews and Serbs - including 30 who were put on a lorry on the defendant's orders and taken away and shot.

Mr Kepiro denied the charges. He said that, in fact, he had been "the only person to refuse the order to use firearms", and that he had intervened to save five people about to be killed by a corporal.

'No clemency'
Hundreds of families were rounded up by the Hungarians, allies of Nazi Germany, in January 1942 on the banks of the Danube River in Novi Sad and then shot.

Sandor Kepiro was convicted of involvement in the killings in Hungary in 1944 but his conviction was quashed by the fascist government and he later fled to Argentina.

He returned to Hungary in 1996 and was tracked down by the Nazi-hunting Simon Wiesenthal Center a decade later to a flat opposite a synagogue in Budapest.

Mr Kepiro had sued the director of the Center, Efraim Zuroff, for defamation. But that case was dismissed on Tuesday. The Budapest tribunal said Mr Zuroff had the right to call him a war criminal because of the 1944 verdict.

On Thursday Mr Zuroff said it was imperative that Nazis were brought to justice.

"There can be no clemency, no sympathy and no ignoring of the facts," he said.

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A body from the 2009 Air France crash that killed all 228 people aboard has been raised from the depths of the Atlantic Ocean.

Floating wreckage was recovered soon after the crash
The body has been preserved by high pressure and low temperatures while it lay in the submerged wreckage for nearly two years.
And it was still belted to an airline seat as French investigators brought it aboard their search vessel off Brazil's northeast coast from a robot submarine.
The search party located the wreckage a month ago after nearly two years of scouring the seabed.
In recent days they also found the Airbus A330's cockpit voice recorder and 'black box' data memory unit.

The black box recorder located after two years
If the units are in good condition, they could solve the mystery about why Flight AF447 from Rio de Janeiro to Paris fell into the Atlantic during an intense high-altitude thunderstorm.
They were discovered about 3,900m (12,800ft) below the surface by submarine.
A statement from the French Gendarmerie, which has experts on a recovery boat, said that the body was pulled up on Thursday morning.
Recovering the remains involved great technical difficulty, it said, and it is unclear if all the bodies found in the latest search can be recovered.

A spokesman for the recovery operation said: "It's difficult because the bodies are well preserved on the seabed with the pressure and the temperature, but bringing them up through warmer water causes decomposition."
The French Interior Ministry said in a statement that investigators on board the search vessel had taken DNA samples from the body, which would be sent back to France along with the two black boxes and used to try and identify the victim.
Theories about the cause of the disaster have focused on the possible icing up of the aircraft's speed sensors, which seemed to give inconsistent readings before communication was lost.

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Posted in: A body from the 2009 Air France crash that killed all 228 people aboard has been raised from the depths of the Atlantic Ocean.

The surge of north African migrants into Italy and France will mean Europe will impose internal passport border controls once again to stop the flow of illegal arrivals

The surge of north African migrants into Italy and France will mean Europe will impose internal passport border controls once again to stop the flow of illegal arrivals, if proposals before EU home ministers are approved.

The so-called Arab spring has led to a massive wave of immigration from north-western Africa to the tiny Italian island of Lampedusa following the Tunisian uprising and air strikes in Libya.

Most of the young immigrants arrive in overcrowded fishing boats and have paid traffickers. They are processed on Italian soil and provided with temporary papers before heading north to France in the search of work.

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Italy has granted temporary permits to more than 25,000 Arab migrants in the past couple of months, although the mainly French-speaking Tunisian immigrants generally head to France.

France has closed a railway frontier near the Italian border town of Ventimiglia and imposed extra checks on the papers of all immigrants.

The Italian government has argued for years that the influx is a Europe-wide problem and that measures to discourage the arrivals, and absorb those already in Europe, must be international. The proposals to allow the 25 countries within the passport-free Schengen zone to close their frontiers were unveiled on Wednesday at the European Commission and will be debated at a meeting of EU home affairs ministers next week.

Under the plan, it would be the EU itself that made the decision on whether each situation is classified an ''emergency''. The EU Home Affairs Commissioner, Cecilia Malmstrom, said the moves would be strictly monitored and ''very limited''.

She said the EU could step in to handle situations where either a member state is ''not fulfilling its obligations to control its section of the external border, or where a particular portion of the external border comes under unexpected and heavy pressure due to external events''. Ms Malmstrom said: ''We are seeing exceptional events across the Mediterranean.''

The EU is now also to consider allowing an intensification of surveillance as well as checks at national borders after increasing demands from France and Italy for a review of the Schengen agreement, which does not include Britain.

These calls have been viewed with alarm by many other European states which believe that the free movement of people across borders is a fundamental plank of the common market and political union.

There is also likely to be consternation at the European Commission being the decision-maker on what constitutes exceptional circumstances, as it means Brussels will take control from national capitals.

During the past three years, Mediterranean nations including Italy have attempted to reach agreements with north African nations, including Libya, to discourage the departure of immigrants from their coastlines.

Thousands of sub-Saharan refugees, particularly Nigerians, have been trafficked from the north African coastline to Lampedusa after long road trips. However, the uprisings in North Africa have changed this.

The European Council on Refugees and Exiles argues that Europe cannot encourage democracy in north Africa and then turn its back on people fleeing conflict.

The proposals will be submitted to an emergency meeting of EU interior ministers next Thursday.

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Posted in: The surge of north African migrants into Italy and France will mean Europe will impose internal passport border controls once again to stop the flow of illegal arrivals