- After Geithner Strikes Out In Poland, Papandreou Cancels U.S. Trip And Hurries To Greece
Gus Lubin | A few hours ago Timothy Geithner was in Poland promoting his plan for a EuroTARP, while Greek PM George Papandreou was preparing to fly to New York for meetings with the U.N. and the IMF.
But something went wrong.
Geithner's meeting ended in discord with no pledge to recapitalize banks.
Papandreou canceled his trip after talking to Finance Minister Evangelos Venizelos, who had been in Poland with Geithner, planning instead to return to Greece.
"The prime minister judged that he should not be away. He wants to ensure that all of Greece's commitments (to its European Union partners) are fulfilled," government spokesman Ilias Mossialos told Reuters.
Greece meets with the Troika next week to secure the next $8 billion loan tranche. Rumor has it that the Troika wants harder austerity measures.



China Warns The U.S. Against Vetoing Palestine's UN Request
Robert Johnson |
A state-run Chinese newspaper has warned of rising Mid-East conflicts if the U.S. vetoes Palestine's bid for UN membership next week.
Palestinian president Mahmud Abbas is expected to request UN induction next Friday, while Washington warns the move will be "counter-productive".
The China Daily says, "If the US chooses to fly in the face of world opinion and block the Palestine UN bid next week, not only will Israel become more isolated but tensions in the region will be heightened even more. "The majority of the international community deems an independent state as the inalienable right of the Palestinians" (via AFP).
The expected request comes almost a year after peace talks with Israel crumbled over its settlement construction on Palestine land.
The U.S. has said it will veto the request because it will harm negotiations, and that a Palestinian state will only come from negotiations directly with Israel.



- La révolution sur Wall Street en direct






- First Anti-Euro Protest in Front of the ECB



Watching politicians and bankers bickering over a Euro rescue on the back of Eurozone taxpayers for more or less 2 years by now, a group of Germans has staged the first protest in front of the headquarters of the European Central Bank (ECB) on Tuesday.
Some 100 protesters, organized by the fringe Partei der Vernunft (Party of Reason) held up banners with two key demands: "Raus aus dem Euro" (Out of the Euro) and "Stoppt die Schuldenunion" (Stop the debt union), according to a report by German daily FAZ.
Raus aus dem Euro - Germans protest against the Euro and a European Union of debts in front of the ECB in Frankfurt.
This is a historic moment as it represents the first organized democratic resistance against the common currency that has led to the UDE aka United Debts of Europe.
Recent surveys show that 77% of Germans resist the creation of the European Financial Stability Fund (EFSF) and its highly undemocratic successor ESM (Euro Stability Mechanism). The German parliament will vote on the ESM on September 26 and due to heavy losses of the small liberal coalition partner in latest regional elections chancellor Angela Merkel must be less than certain to get a successful vote on an instrument that would put Germany into the top position to pay for the long profligacy of the weaker Euro members. The strategy of paying thy neighbours debt has never worked in history.
It's now Down to 2 Choices
The growing bifurcation of opinions among Eurozone politicians and the general populations cannot be overlooked anymore. Europeans are taxed to the hilt, suffer from economic conditions where all the freshly digitized money reaches the financial industry but never the real economy and are fed up with an increasingly undemocratic EU apparatus where the few sane voices in the European Parliament (EP) like Nigel Farage are ignored by autocratic decisions in the unelected European Commission and the EU Council.
While politicians have busied themselves in the last 2 years with a string of weekly emergency meetings in 5-star locations - ironically preaching austerity - debts have seen only one way: up.
Either Germany Leaves - Or Greece Exits First
We are certainly very close to a major event that will mark the beginning of the disintegration of not only the Euro, but of the EU itself.
A steady stream of rumors whose reliability is difficult to estimate tells this blogger that Austria, Finland, Germany and the Netherlands have already printed local currencies and could exit the Eurozone within the remainder of September, leaving the mess created by profligate southern Eurozone members behind them.
An exit of the (not so) strong aforementioned 4 countries will be complicated due to 12 years of monetary integration and would be a strong signal that European unity in debts has nowhere further to go.
This possibility would be a strong setback especially to France, whose egomaniac leader Sarkozy wants to avoid descending from his status as an equal partner vis-a-vis Germany at all costs.
For this reason we can rule out to find a harmonic solution of the insurmountable debt problem in all countries not only of the Eurozone, but the EU as a whole.
Flirting with money from China or Russia, which surprisingly announced today it would buy the dreaded Eurozone bonds the ESM wants to issue, will not be on the cards either. China, faced with more domestic problems than one can count, and Russia are not in the position to squander their money on a bankrupt EU without risking heavy internal opposition. Both countries are far behind the (crumbling) infrastructure of the old world and have enough to do on their respective home territories.
This leaves the other option of a non-voluntary Greek exit, that can be expected any day given the stress in the system and its inability to access capital markets due to prohibitively high interest rates north of the 100%-mark.
As this is a first in modern history nothing can be ruled out from this moment onwards.
End of the Euro is also End of the EU
France and Germany will then be faced with the completely different task of not only digesting billions (or trillions?) of PIIGS debt that will have to be written off to a very large degree, but also the challenge of holding together a European Union whose only common denominator are debts on all levels, public and private.
I have intentionally avoided any figures in this post as we are now in the third year of bad 'surprises' by cheating Eurozone members. The volume of this mess will only be discovered in national bankruptcy proceedings and bank liquidations.
Finding a lot of bank analyst 'research' in my inbox that suddenly mention the coming end of the Euro in its current form, I do not deviate from my earlier forecast Euro Until the Endsieg. The end of the Euro was also correctly predicted 11 months ago in this blog: 20.10.2010 - The Day the Euro Started Dying.
The Swiss Franc is No Safe Haven
Readers are also probably better off in the medium and long term by abandoning the illusion that the Swiss Franc is a safe haven. The Swiss economy depends very heavily on its financial sector that contributes at least 12% to domestic GDP. A world of several 100 million investors cannot find a safe haven in the currency of a 7 million people. As the old adage goes, "one can hedge 100 million but not one trillion", the Swiss franc cannot shoulder the mistakes of the rest of the world.
All dissolutions of monetary systems ended in economic hardship, wars and revolutions. This time will be no different.




- Euro Collapse Could Lead to War: Polish FinMin


A collapse of Europe’s monetary union would likely lead to a breakup of the European Union as a whole, posing significant risks to the region and even raising the possibility of war in the long term, Poland’s Finance Minister told CNBC late on Thursday.

"If the euro zone were to fall apart then it's hard to exclude the possibility of EU falling apart as well," Polish finance minister Jacek Rostowski said in an interview.
"The EU has been one of the two great pillars of European peace and security of the past 60 years," he said.
"Therefore the danger in a longer-time horizon, in 10-20 years, in the absence of one of the key elements of our security system and one of the key elements of our political system, which ensures we deal with problems in this peaceful, democratic way we've developed, the risk of all sorts of authoritarian political movements, and therefore even war, in the long horizon, rises,” he said.
On Friday, Treasury Secretary Timothy Geithner will join EU finance ministers at a meeting in Poland, which holds the rotating EU presidency, to urge them to take decisive action in response to the euro zone debt crisis.
Poland joined the European Union in 2004, but has not adopted the euro.
"I think a lot has been done and a lot is on its way,” Rostowski said of the meeting of EU finance ministers on Friday and Saturday.
He said the intervention on Italian and Spanish bond markets by the European Central Bank had been “very courageous but also necessary and essential and correct.”
“The ECB has provided a window of opportunity, given democracy a time to work,” Rostowski said.
He warned however that EU leaders had to use the time gained by the ECB’s intervention effectively.
“We really are very close to twelve o'clock and the fact we've been given a little more time does not mean we can afford to waste any of it. We have to use every second of that time to come to agreement, to devise solutions, and not delay and not pass the ball backwards and forwards without coming up with the goods," Rostowski said.


- Europe's Impossible Choice: The Greek Exit Paradox
Published: Friday, 16 Sep 2011 | 12:56 AM ET
By: Peter Guest

German Chancellor Angela Merkel and French President Nicolas Sarkozy have both said that Greece will not leave the euro, but the "unthinkable" is now being seriously considered at all levels. Just who gets to make that call, and whether sticking or twisting would be the more painful option, is being hotly debated.
Bank of Greece headquarters

A man walks outside the Bank of Greece headquarters during a demonstation against government's austerity measures in central Athens.
A Greek exit from the euro would be unprecedented, and some analysts have seen it as an irreversible step towards a breakup of the single currency in its current form. Others say that the country is a "diseased limb" that needs to be excised to protect the remaining countries and save the euro zone.
Saving Greece introduces issues of moral hazard, but letting it fail and fall away seems to run counter to the European vision of mutual support and solidarity.
Letting Greece stay in shows the solidity of the euro zone, and the commitment of the whole to its member states, political analysts say. But it could also tell markets that Brussels is incapable of taking the tough decisions needed to make the union viable economically.
A report, released on Tuesday by Citigroup economist Willem Buiter, said that while Greece leaving the single currency looks more likely than ever, it would have very limited benefits for the country or the euro area as a whole, and that it would have large direct and indirect negative effects on both.
Citi believes that Greek government debt will reach 167 percent of gross domestic product (GDP) by the end of 2011. Slippage in the reform and privatization program as well as worse-than-expected growth figures have blown the country's attempts to rein in its unsustainable debt.
"Structural reforms are going nowhere and the lack of realism in the forecast of the proceeds from privatization is becoming clear," Buiter wrote. "Austerity fatigue in Greece is visible and audible, and so is bailout fatigue in the core euro area member states."
'Reform Fatigue'
Speaking on Thursday evening, Christine Lagarde, the new head of the IMF,said that Greece was suffering from "reform fatigue".
Practically, what does that mean?
First, Greece will probably default at some stage. The timing and nature of that default depend on a number of factors, not least the appetite among the more developed member states to keep throwing money at the problem while other vulnerable economies make good their own structural reforms.
The ability of the Greek government to continue with its cutbacks despite opposition from its own population is also critical. Should the "Troika" of the International Monetary Fund (IMF), European Union and European Central Bank (ECB) determine that the country is "willfully non-compliant" with its conditional structural reforms, financing could be withheld and the country would almost inevitably default.
The ECB would no longer accept Greek government debt as collateral when lending to the country's banks, and the emergency liquidity assistance (ELA) offered by the ECB would not be forthcoming. This, Buiter said, could push Greece to leave the euro of its own volition.
"If you want the euro zone to survive, you have to find a way to force the vast majority, if not all, the states that are participating in it, to be fiscally responsible according to German rules. That is something that is physically impossible for Greece to do. If you take steps to keep Greece in the union, you actively encourage everyone else to act like Greece."
Peter Zeihan - Lead Europe Analyst, Stratfor
"Faced with the disappearance (as far as Greek banks and sovereign are concerned) of the euro area lender of last resort, Greece could blunder into exiting from the euro area. It is the denial of access for banks to ECB/Eurosystem funding and to the ELA facility that would be the defining moment for Greece in our view," Buiter wrote.
In this scenario, Greece would be unlikely to pay back most of its international creditors, except for the IMF, Buiter said.
So why not leave? After all, competitive devaluation of currencies against the deutschmark was key to the performance of Southern European economies pre-euro. As Buiter explained, a reincarnated drachma would instantly lose value – he estimates as much as 40 percent. As soon as a euro exit appeared inevitable, there would be a run on the banks.
"The Greek banking system would be destroyed even before Greece had left the euro area," Buiter said.
Institutions holding drachma instruments, and those still denominated in euros would see huge imbalances develop in their portfolio. Corporates exposed in this way, and any remaining banks, would have a high chance of following the sovereign and defaulting.
The competitive benefits of devaluation, Buiter noted, would be short-lived without the same structural reforms to the economy and labor market that the Troika has prescribed. Leaving the euro, he concluded, would lead to a financial collapse and a deeper recession than it is currently suffering from.


- Event Risk Remains Huge Despite Central Banks' Intervention


By: Patrick Allen -
There was talk of an event risk going into Thursday’s market open, and the speculation proved correct.

After UBS announced it had lost $2 billion due to an alleged rogue trader, the world's major central banks stepped into the void created by the euro zone debt crisis.
The Federal Reserve and the European Central Bank, in co-ordination with the Bank of England, Swiss National Bank and Bank of Japan announced a plan to offer three-month dollar loans to commercial banks in order to avoid a liquidity crisis in the euro zone banking system.
The intervention, 24 hours before euro zone finance ministers met in Poland to discuss their next response to the Greek problem, boosted the euro and saw stocks in the euro zone’s troubled banks rise sharply, with the exception of UBS [UBS 11.80 0.39 (+3.42%) ].
The intervention brought much-needed relief to the market, according to John Higgins, a senior market economist at Capital Economics, but is no “silver bullet.”
“Of course, the demand for dollar funding in the euro zone is symptomatic of a broader liquidity squeeze,” Higgins wrote in a research note.
The problem for Higgins is that while liquidity is not as big a problem as it was in late 2008 following the collapse of Lehman Brothers, solvency is.
“Even if banks in the euro-zone have less of a liquidity problem on their hands today than they did in late 2008, they have a greater solvency problem. This is reflected in the fact that the cost of insuring against a default by the banks is much higher,” Higgins explained.
“Policymakers’ response to the financial crisis was to recapitalize the banks and transfer risk to the public sector,” he said.
Escalation of Crisis?
This is now coming back to haunt the banks, according to Higgins, as they hold so much government debt and the governments themselves are in no position to offer renewed support.
“We expect a further near- to medium-term escalation of the euro zone crisis involving the default of a sovereign in, and the possible departure from monetary union of, at least one country,” said Higgins.
The move by the central banks has been welcomed by Carl Weinberg, the chief economist at High Frequency Economics but he thinks more action is needed.
“While liquidity provision by the ECB is an important short-term solution to the logjam, the ultimate longer-term restoration of confidence in the market can only come when solvency is assured for all financial institutions,” said Weinberg.
Weinberg believes the only game in town is saving the banks. “As we see it, the time frame required to rehabilitate Greece’s public finances now exceeds the patience of its creditors and donors.”
The start of trade on Monday is now a huge risk, according to Weinberg, if Friday's meeting in Poland fails to end with concrete action.
“The most important thing right now, in our view, is to save the banks regardless of what happens to Greece. If we lose the euro land banking system because governments did not bother to think ahead about what a Greek default might mean, then we will get a depression in euro land,” said Weinberg.


- La Fed accusée de truquer le cours du brut américain par une journaliste du Financial Times

Depuis le début de l'année, le brut américain se négocie très en dessous des cours du baril de Brent. Une situation inédite, qui ne peut s'expliquer que partiellement, juge un nombre croissant d'experts de premier plan. Une journaliste du site internet du Financial Times suggère une manipulation de la banque centrale américaine. Sa hiérarchie la soutient.
Sur le marché du pétrole brut, il existe deux prix de référence : celui du baril de Brent de la mer du Nord et celui du West Texas Intermediate(WTI), le brut léger américain. Le prix du Brent est devenu le repère principal du marché, puisqu'il sert à négocier les deux tiers des contrats internationaux. Le WTI, lui, est avant tout utilisé pour les contrats du seul marché nord-américain.
Le WTI a longtemps été légèrement plus cher que le Brent. C'était logique, puisque le WTI est un pétrole brut plus léger que le Brent, par conséquent moins cher à raffiner, et donc plus recherché. Mais depuis le début de l'année, cette tendance traditionnelle s'est radicalement inversée. Un écart de 26,40 dollars séparait hier le cours du WTI (83,60 dollars) de celui du Brent (110 dollars).
Cette nouveauté est expliquée par deux facteurs convaincants : d'un côté, l'explosion de la demande de la Chine et de l'Inde, qui négocient la plupart de leurs contrats sur la base de la valeur du Brent ; de l'autre, un engorgement du marché américain, dû à l'augmentation très forte de la production de sables bitumineux canadiens et à la relative mollesse de la croissance de la consommation aux Etats-Unis, induite par la crise.
Mais pour certains analystes de premier plan, ces explications commencent à apparaître un peu courtes pour justifier l'ampleur et la stabilité de l'écart entre la valeur du WTI et celle du Brent (entre 25 et 30 % depuis cet été).
Izabella Kaminska, une journaliste du Financial Times spécialiste de l'énergie et des politiques des banques centrales, défend une explication scandaleuse dans un post daté du 30 août, qui fait depuis pas mal de bruit dans les salles de marché des matières premières : selon elle, le prix du WTI serait manipulé par la Fed, la banque centrale américaine.
Dans un style que l'on s'attend à trouver sur un site complotiste plutôt que sur 'Alphaville', blog très pointu du quotidien économique le plus réputé de la planète, Izabella Kaminska écrit :
« Est-ce qu'une sorte d'intervention du gouvernement ou du secteur privé inspirée par la Fed pourrait être à l'origine du mystère ?
Il est improbable, bien sûr, que nous en soyons un jour certains. Mais voici toutefois une série d'analystes qui notent de plus en plus que quelque chose de très étrange est en train de se passer sur leur marché. Quelque chose qui ne peut être expliqué ni par les fondamentaux [de l'offre et de la demande], ni par les flux financiers. »
Suivent des extraits de cinq analyses publiées aux cours des dernières semaines, qui toutes constatent les mêmes incohérences.
Dans une note de conjoncture, la banque Barclays relève qu'à Cushing (Oklahoma), principal site d'entreposage de brut aux Etats-Unis, les stocks « sont au plus bas depuis novembre 2010 », c'est-à-dire avant que le prix du WTI ne décroche de celui du Brent. Parmi d'autres facteurs qui devraient logiquement tirer les prix du WTI vers le haut, la banque d'affaires britannique souligne qu'au deuxième trimestre 2011, la production canadienne de sables bitumineux a été ralentie par plusieurs incidents, notamment par d'importants feux de forêt. La conclusion des analystes de Barclays est pour le moins dubitative :
« Face à cette réalité, expliquer un écart de valeur supérieur à 20 dollars entre le WTI et les autres valeurs repères [du marché pétrolier] conduit à pointer une erreur systématique du marché, autrement dit un marché qui n'envoie pas du tout les signaux corrects. »
Robert Campbell, de Reuters, dans une dépêche datée du 29 août, constate pour sa part :
« Les analystes du pétrole sont de plus en plus d'accord pour affirmer que l'écart entre le Brent et le West Texas Intermediate est fondamentalement injustifié, mais rares sont ceux qui souhaitent dire quand cet écart pourrait s'effondrer. »
Olivier Jakob, enfin, directeur de la société de conseil suisse Petromatrix, fait part de sa profonde perplexité :
« Le recours aux réserves stratégiques américaines, la chute de Tripoli, les stocks de brut à Cushing en dessous des capacités d'utilisation... rien n'y fait (...). Nous continuons à ne pas écrire quoi que ce soit pour expliquer l'écart croissant entre le Brent et le WTI. »
Olivier Jakob, de Petromatrix, a mis la puce à l'oreille d'Izabella Kaminska dès février 2009, après la première apparition d'une divergence inhabituelle entre le cours du WTI et celui du Brent, au second semestre 2008 (*). Depuis, M. Jakob accuse régulièrement United States Oil Fund (USO), un important fonds d'investissement pétrolier américain, de truquer le cours du WTI dans le but de le maintenir artificiellement bas. Le 24 février 2009, Izabella Kaminska décrivait déjà ce qu'elle nomme « le mystère de l'United States Oil Fund ». (*) Correction, voir commentaires.
Loin de se désolidariser de la journaliste, Ed Crooks, rédacteur en chef duFinancial Times aux Etats-Unis sur les questions d'énergie et d'industrie, juge la thèse de sa collègue « fascinante », dans un tweet publié du 30 août.
L'accusation n'en demeure pas moins vertigineuse, et bien que le mobile économique et politique paraisse évident, aucune preuve n'est fournie (comme le reconnaît d'emblée la journaliste).
Bien sûr, le scandale d'Enron, en 2001, a montré à quel point les cours de l'énergie américains pouvaient être manipulés. Mais la Fed n'a joué aucun rôle dans cette affaire. De plus, malgré la proximité entre la direction de la compagnie Enron et de nombreux membres de l'administration Bush, à commencer par le président George W. Bush lui-même, la justice américaine n'a pas établi de complicité du gouvernement des Etats-Unis, seulement des liens étroits de connivence et de favoritisme.
Il est intéressant de noter que le fonds USO, que montrent du doigt Olivier Jakob et Izabella Kaminska, est géré par Brown Brothers, Harriman & Co. Les nombreuses connexions interlopes entre ce très prestigieux cabinet d'affaires de Wall Street et les milieux du renseignement et de la diplomatie américains, ainsi que l'appartenance de la plupart de ses dirigeants historiques à la plus célèbre des sociétés secrètes d'outre-Atlantique, les Skull and Bones, ont été soulignées dans bon nombre de travaux d'historiens et de journalistes américains (voir en particulier Family of Secrets, le livre d'enquête aussi fouillé que troublant de Russ Baker.) Prescott Bush, le grand-père de George W. Bush, fut longtemps l'un des principaux associés de Brown Brothers, Harriman & Co.
L'opacité de la gestion du marché pétrolier demeure profonde. Le New York Times s'est inquiété, par exemple, du fonctionnement impénétrable de IntercontinentalExchange (ICE), une société incontournable sur de nombreux marchés financiers, à commencer par ceux de l'énergie. Le quotidien new-yorkais critique en particulier le secret total maintenu dans la conduite des tâches de régulation et de contrôle dévolues à cette multinationale depuis la crise financière de 2008. ICE a été fondée en 2000 par BP, Total, Shell, Goldman Sachs, Morgan Stanley, Deutsche Bank et la Société Générale, afin de gérer les échanges électroniques dans le domaine du pétrole et du gaz naturel. ICE occupe désormais un rôle central dans la gestion de la transparence – toute relative, selon leNew York Times – des marchés dérivés, lesquels étaient au coeur du krach de 2008.
A suivre ?

- Dette : Geithner critique les Européens


Après avoir demandé mercredi aux Européens "d'en faire plus", le secrétaire au Trésor américain Timothy Geithner s'est dit vendredi préoccupé par les divisions entre Européens au sujet de la crise de la dette, notamment entre les gouvernements et la Banque centrale.
"Il est très dommage de constater qu'un conflit existe entre les gouvernements et la Banque centrale européenne. Tout le monde doit travailler ensemble afin d'éviter des risques catastrophiques pour les marchés financiers", a-t-il déclaré en marge d'une réunion des ministres des Finances européens à laquelle il a été convié, en Pologne.
Timothy Geithner a promis l'assistance des États-Unis pour aider l'Europe à sortir de la crise de la dette. "Tout le monde doit travailler ensemble (...) afin d'éviter des risques catastrophiques pour les marchés financiers", a-t-il souligné, exhortant à éviter à tout prix "la menace de défauts en cascade" des pays de la zone euro.


- Geithner Presses EU to Act; Meets Resistance


U.S. Treasury Secretary Timothy Geithner drew a cool response from EU policymakers when he urged them to leverage their bailout fund to better tackle the debt crisis and to start speaking with one voice.
In a 30-minute meeting with euro zone finance ministers on Friday, Geithner pressed for the 440 billion euros European Financial Stability Facility (EFSF) to be scaled up to give greater capacity to combat the bloc's debt malaise, a senior euro zone official said.

One analyst familiar with the proposal said it would involve the EFSF guaranteeing a portion—perhaps 20 percent—of potential losses on euro zone debt, so that its capital would effectively stretch five times further.
Geithner's presence at the meeting underscored the depth of U.S. alarm but ministers were resistant to Washington telling the 17-country euro zone and its finance chiefs what to do.
"He conveyed dramatically that we need to commit money to avoid bringing the system into difficulty," Austria's Finance Minister Maria Fekter told reporters after the meeting.
"I found it peculiar that even though the Americans have significantly worse fundamental data than the euro zone, that they tell us what we should do and when we make a suggestion ... that they say no straight away."
Fekter said there had been particular disagreement over suggestions that Europe should find more money to fight the crisis. When German Finance Minister Wolfgang Schaeuble explained that would not go down well with taxpayers and that the only way to fund it would be a financial transaction tax, Geithner flatly ruled that out.
However, one senior official said Geithner's proposal on leveraging the EFSF had neither been rejected nor endorsed.
"It is being discussed," the official said, emphasizing that the priority was for euro zone national parliaments to ratify new powers for the EFSF agreed in July so it can lend to countries under attack in the markets and buy sovereign bonds to prop up struggling states.
While no one described the gathering as ill-tempered or heated, it appeared clear from the reaction afterwards that Geithner and the Europeans did not see entirely eye-to-eye.
Jean-Claude Juncker, the chairman of the Eurogroup, said he was not prepared to discuss issues privy to the euro zone with someone from outside the currency bloc.
"We are not discussing the expansion or increase of the EFSF with a non-member of the euro area," he told reporters.
He also ruled out any further fiscal stimulus, something Washington has also called for. "Fiscal consolidation remains a top priority for the euro area," he said.
In a separate development that could have implications for Greek debt sustainability, financial sources told Reuters less than 75 percent of private creditors had agreed to take part in a bond swap scheme aimed at keeping Athens afloat, well below the 90 percent target. The measure is a vital part of a second Greek bailout agreed in July.
Belgian Finance Minister Didier Reynders said one option could be for the EFSF to make up the difference while Greek bankers say a shortfall could be covered from funds set aside to support banks in need.
'End Loose Talk'
With most economists saying a Greek default is inevitable at some point and the much larger Italian economy—which would be too big for the euro zone to bail out—not out of the firing line despite approval of a new austerity package this week, the pressure is on to act.
A Reuters poll of more than 50 economists across Europe gave a 65 percent chance Greece would default with half of them saying it would do so in within 12 months. Few expected it to be forced out of the currency bloc.
Speaking to a group of policymakers and bankers after the meeting, Geithner said the EU needed to end "loose talk" about a break-up of the euro and work more closely with the European Central Bank on solutions.
"What is very damaging (in Europe) from the outside is not the divisiveness about the broader debate, about strategy, but about the ongoing conflict between governments and the central bank, and you need both to work together to do what is essential to the resolution of any crisis," he said.
"Governments and central banks have to take out the catastrophic risks from markets ... (and avoid) loose talk about dismantling the institutions of the euro."
Meanwhile, Greece's international lenders said on Friday they would delay a crucial visit to the debt-laden country next week, and European finance ministers demanded that Athens fulfil its pledges to win further aid.
Officials from the European Union, the IMF [cnbc explains] and the European Central Bank, known as the troika, were expected to return to Athens on Monday after cutting short an inspection visit earlier this month to give Greece time to come up with measures to fill a budget gap.
But the Finance Ministry said on Friday the top troika officials would instead hold a conference call with Greek Finance Minister Evangelos Venizelos.
The ECB reluctantly agreed last month to buy the bonds of Italy and Spain after they came under market attack, on the understanding the EFSF would take up the cudgels once changes to the fund agreed in July are in place. That was too much for some in the ECB—the top German official at the bank,Juergen Stark, announced his resignation last week.
"We are observing tensions in sovereign risk in the EU area, which we consider part of global tensions. It calls for us being alert ... putting our house in order," ECB President Jean-Claude Trichet told reporters.
In a news conference after finance ministers met alone to discuss the specifics of the crisis, Juncker and the European commissioner for monetary affairs, Olli Rehn, focused on the need for Greece to stick rigidly to commitments it has made.
Inspectors from the ECB, EU and IMF should report back on progress in early October, Rehn said, meaning that the next disbursement of aid to Greece from its first bailout—vital to avert imminent default—could be paid by mid-October.
A Greek government official said the heads of an EU/IMF inspection team would not arrive in Athens as planned on Monday to resume a performance review due to technical reasons and will instead hold a teleconference with the finance minister.
"The intention is to meet the fiscal targets for this year and next year without delay, without exception and deviations," Greek Finance Minister Evangelos Venizelos told reporters.
With no dramatic new policy unveiled, the euro[EUR=X 1.3797 -0.0084 (-0.61%) ] gave up some of the gains seen in the previous session when the ECB and other top central banks joined forces to offer more dollar liquidity to banks struggling to secure funds.
"All the headlines that are coming out of the Ecofin meeting are pretty negative and the euro's resilience after the coordinated action from central banks on Thursday seems to be coming off," said Jeremy Stretch head of currency strategy at CIBC World Markets.
Among the issues finance ministers must try to resolve is a row over the terms of a second bailout for Greece, with countries such as Finland demanding collateral in return for new loans—a major obstacle to a deal.
An adviser to Finnish Finance Minister Jutta Urpilainen said it would probably not be until early October that the dispute was fully resolved.
Collateral is a must for Helsinki but officials say a solution is coming together whereby it is made so expensive to demand it that no country but Finland will take it.


- Analysis: Volatility stymies even smart money




By Edward Krudy (Reuters) - Volatility in equity markets is burning smart-money players, and even experienced traders are finding it hard to keep up.
Some fund managers have been dipping back into stocks to pick up bargains but could end up in a value trap if equities fall into a bear market and the economy falls into recession.
Others are taking a wait-and-see approach after getting blindsided by market swings not seen at least since the financial crisis -- and by some measures well before that.
Most are unlikely to dive back in given fears over Europe's debt crisis and fears of a second recession in the United States that sent equity markets sliding over the summer.
The $2 trillion hedge fund industry -- often seen as the smartest of the smart -- will ultimately play an important role in whether stocks can rise over the long-term. Uncertainty there means more of the same churning action and precipitous falls without that wall of money to act as a back stop.
"Gross exposures have come down industrywide and large bets in either direction have also decreased because of the volatility," said Robert Francello, head of equity trading a Apex Capital, a hedge fund in San Francisco.
Francello said that as well, short-selling bans on banks in parts of Europe were hurting liquidity "no question."
A recent survey of hedge fund managers found that bearish sentiment rocketed in August to its highest level in a year.
The survey by BarclayHedge and TrimTabs Investment Research showed bearish sentiment rose to 42 percent in August from 27 percent in July.
It also revealed very bearish views on the economy. About 56 percent think the U.S. economy is already in recession or will slip into recession soon, and just 3 percent say economic growth is set to accelerate.
For Sam Ginzburg, head of capital markets at First New York Securities, where he trades his firm's capital, the "binary" situation is presenting investors with something akin to a zero sum game.
"There's a lot of money to be made or lost right now," he said. "If you have a view, meaning this isn't 2008 all over again and you think things are going to settle out and you start buying some of the mega-cap, big-cap stocks that will do well as the economy does better -- or vice versa -- the amount of money you can make is astounding," he said.
But for Ginzburg that time is not now. He said his fund was still "light" compared with the amount of money he could invest.
Over the summer the S&P 500 index, a broad measure of U.S. large-cap stocks, crashed 17 percent in just 14 trading days between July 21 and August 10. For investors, that was one of the most trying periods on record, and they are just not ready to start taking on big bets.
One market veteran who runs a proprietary trading firm in New York told his traders they could "go to zero (and) get the hell out of here" in August as the firm's inventories shrunk to just 15-20 percent of what they could be.
"It's just like betting on horses," he said. "That two-week period was the hardest I have ever had todeal with."
Joseph Mazzella, a senior trader at Knight Capital, agreed. Knight has one of the biggest retail books in the business and deals with a host of institutional clients.
"This is the most difficult trading environment I've ever seen," Mazzella said. "Performance has struggled, it's a really difficult year".
Many hedge funds cut bullish bets that they put on in the first half of the year, and comparisons with the financial meltdown of 2008-2009 abound.
"There is a lot of pain out there," said Mazzella. "These guys have just been whipsawed like crazy."
Earlier in the year many hedge funds built up bullish positions in growth-oriented stocks -- bets that are likely to have been cut over the summer.
Data compiled by Credit Suisse from filings with regulators show that up until the end of June hedge funds were overweight stocks that are expected to do well in a growth environment.
But Pankaj Patel, the Credit Suisse analyst who compiled the data, said given what he is hearing from hedge fund clients, he expects many of them have become much more defensive.
"They are not telling us that they are taking a defensive move but talking to them you could sense that," he said. "Before they were not asking about the economy."
Options activity suggests uncertainty is running high.
Todd Salamone, an analyst at Schaeffer's Investment Research, said an increase in early September in downside protection in the form of put option buying on major exchange-traded funds based on equity indexes suggests some funds are hedging renewed equity exposure.
However, a lack of call buying on CBOE Volatility index options, which are another hedging vehicle for fund managers, sends the opposite signal.
"There is not a consensus there, and that is why we are having this choppiness," said Salomone.
In terms of institutional flows Knight's Mazzella has been seeing a flight to defensive bets.
"The only thing we see is a very defensive shift: utilities, healthcare, consumer staples; everything else is for sale," he said. "People are playing technology a little bit but everybody's leery so it's very much defensive positioning."
"We went from no protection being bought in the market to massive protection, and massive defensive positioning," he said. "So if you want to play the contrarian angle we probably went too far again."



- Greece under pressure as finance ministers put brakes on bailout

Decision on €8bn Greek bailout delayed till October, while US secretary of state Geithner urges eurozone leaders to do more


European finance ministers on Friday heaped pressure on the Greek government to accelerate its privatisation programme and implement deeper spending cuts, after they told Athens a crucial €8bn (£6.9bn) bailout payment would be delayed until next month.
Luxembourg prime minister Jean-Claude Juncker, who chaired a meeting of the eurogroup of single currency finance ministers in Poland on Friday, said officials recognised the renewed efforts by Greece to meet its fiscal targets, but a decision on releasing the next tranche of cash would not be taken until October.
The move was met with incredulity by Greek officials. They have already warned they will be out of money by mid-October and are reported to be making contingency plans to lay off public sector workers.
US secretary of state Tim Geithner, who flew to Poland on Friday to emphasise Washington's fears of a second financial meltdown, urged eurozone countries to expand their bailout fund to better tackle the debt crisis. He warned the debt crisis posed a "catastrophic risk" to financial markets and added "What is very damaging [in Europe] from the outside is not the divisiveness about the broader debate, about strategy, but about the ongoing conflict … You need … to work together to do what is essential to the resolution of any crisis."
A wider meeting of EU finance ministers, including the chancellor, George Osborne, will take place on Saturday in Wroclaw. They are under pressure to put aside their differences and agree an expanded bailout facility to calm fears of defaults across the continent's southern states.
French bank shares, which have lost more than 50% of their value since July on worries that they could default if Greece goes bust, were under pressure again on Friday while Italy faces a ratings downgrade by Moody's that could spook markets and trigger another round of selloffs.
Fears of a broader credit crunch, as banks refuse to lend to each other, has already forced the world's major central banks to promise unlimited amounts of US dollars to European banks unable to access international money markets.
Eurozone policymakers remain deeply divided over their next move, with some German politicians contemplating the breakup of the currency club rather than commit further taxpayer funds.
In a 30-minute meeting with eurozone ministers, Geithner is understood to have pressed for the €440bn European financial stability facility (EFSF) to be scaled up to give greater capacity to combat the problems infecting not just Greece, but also Portugal, Spain, Italy and Ireland. Geithner also said the EU needed to end "loose talk" about a breakup of the euro and work more closely with the European Central Bank (ECB) on solutions. He said: "Governments and central banks have to take out the catastrophic risks from markets … [and avoid] loose talk about dismantling the institutions of the euro."
His comments were leapt on by Austria's finance minister Maria Fekter: "He conveyed dramatically that we need to commit money to avoid bringing the system into difficulty," she said. "I found it peculiar that even though the Americans have significantly worse fundamental data than the eurozone, that they tell us what we should do and when we make a suggestion … that they say no straight away."
She said there had been particular disagreement over suggestions that Europe should commit more money to fighting the crisis. When German finance minister Wolfgang Schäuble explained that would not go down well with taxpayers and that the only way to fund it would be a financial transaction tax, Geithner ruled any such tax out. "In these countries, there is a desire for a transaction tax," Fekter said. "[Geithner] ruled that out."
Inspectors from the ECB, EU and International Monetary Fund (IMF) are currently in Athens and should report back on progress in early October, European commissioner for monetary affairs, Olli Rehn said – meaning that the next disbursement of aid to Greece from its first bailout could be paid by mid-October.
Concerns that statistics from Athens failed to present an accurate picture of its finances were given weight after two members of the government's statistics board resigned and another was quoted as alleging that 2009 deficit data had been artificially inflated in order to ensure bailout funds would be forthcoming.


- Gordon Brown fears euro crisis worse than Lehman as 1930s beckon

Gordon Brown has warned that Europe's fast-escalating crisis is now more dangerous than the Lehman Brothers disaster three years ago, threatening to tip the West into a 1930s-style slump unless global leaders work together to take dramatic action.
Gordon Brown fears euro crisis worse than Lehman as 1930s beckon
Gordon Brown says the eurozone crisis will not begin to be resolved until government realise is "a banking problem and a growth problem".
By Ambrose Evans-Pritchard, Dalian, China

"The euro can't survive in its present form and will have to be reformed drastically," he told a mostly-Chinese audience at the World Economic Forum in Dalian.
The former Prime Minister said EMU's malaise is at root a banking crisis, not a debt crisis. "The European banks as a whole are grossly under-capitalised: they have liabilities far in excess of American banks. We have now got the inter-play with sovereign debt because we socialised the liabilities," he said.
"It has morphed into a sovereign debt crisis, and is more serious than 2008 because governments then could intervene to sort of out banks. Now both banks and governments have problems," he said.
"You cannot begin to solve this unless you realise that it is a banking problem and a growth problem, as well as being a fiscal problem. You have to take co-ordinated action in all three areas," Mr Brown said, echoing the views of the International Monetary Fund.
He added that the €440bn (£385bn) European Financial Stability Facility (EFSF) bail-out fund will need "substantially more resources" to cope, with an expanded role for the IMF to shore up the whole EMU system. "People do not believe that Greece can pull through without a default," he said.
Mr Brown called for a revival of the "global growth pact" agreed at the G20's London Summit in March 2009, combining stimulus from America, Europe and Asia to create a multiplier effect that breaks the vicious cycle.
"China must be persuaded to increase consumption," he said, touching on the core issue of East-West trade imbalances that lie behind the global crisis. China's consumption has actually fallen from 48pc in the late 1990s to 36pc of GDP, reflecting a deeply distorted economy.
The suggestion met a caustic response from Singapore's former foreign minister George Yeo Yong-Boon, sitting next to him. "China is not going to consume to save the world. It will act in its own enlightened self-interest," he said.
Chinese premier Wen Jiabao said earlier this week that his country will shift from export-led growth to greater internal demand under its new five-year plan, but this is unlikely to be fast enough to satisfy the rest of the world.
Mr Yeo said talk of global architecture is an attempt by Western countries to wriggle out of hard choices and "pass on their pain" to somebody else. The "Old Cathedral" of global affairs – built on American power – is crumbling and should not be rebuilt.
"China and India are going to grow whatever happens to the global system. The world will muddle along as it has for much of history," he said.
Mr Yeo called for a bout of "creative destruction" in the West, warning of "very painful" times as American and European workers learn to compete toe-to-toe with educated Asians willing to put in longer hours for much lower pay. This may test political systems to breaking point.
"If Greece leaves the euro, it is more likely the eurozone can be saved, and it would have an illuminating effect on politics in Europe," he said, echoing a widespread view among Asia's policy elite.
Mr Brown said the momentum from the G20 accord in 2009 had been squandered, degenerating into currency squabbles and misplaced obsession with fiscal austerity. Citing Winston Churchill's aphorism, he said leaders had been "resolved to be irresolute, adamant for drift, solid for fluidity, and all-powerful for impotence."
"Unless there is global co-ordination, I foresee 10 years of low growth in Europe and America, with very high levels on unemployment, that will lead in the end to greater protectionism. This is exactly like the 1930s."
Mr Brown said Europe's austerity drive reflects same misguided views that prevailed during the Great Depression when Keynesian proposals were dismissed as "inflation, extravagance, and bankruptcy".
"You can impose all the fiscal contraction in the world, and yet more austerity, and that will drive the economy further into recession. Greece's economy will contract 5pc this year, and we're not seeing recovery in Spain, Portugal, Italy and Ireland," he said.
"The Europeans can hold hundreds of meetings but if they are not prepared to face up to the problem they are dealing with, they are not going to get the right answer."
Mr Brown admitted that he was hardly a pin-up politician for stimulus and global action, having lost last year's election on such a manifesto, saying: "People preferred a more parochial solution, seeing debt as the bigger problem. But I have been proved right."




- Les Français hostiles à une nouvelle aide à la Grèce


68% des Français désapprouvent l'augmentation de la contribution française au sauvetage de la Grèce, selon un sondage Ifop pour Dimanche Ouest France.
Les Français seraient-ils devenus moins solidaires avec la Grèce ? Ou tout simplement, inquiets qu'une nouvelle aide au pays creuse encore un peu plus l'endettement de la France ? En juin dernier, 59% d'entre eux s'étaient déclarés favorables à une aide française pour sauver la Grèce au nom de la solidarité européenne. Trois mois plus tard, ils désapprouvent à 68% la nouvelle contribution financière de la France à la Grèce, estimée à 15 milliards d'euros par François Fillon, selon un sondage Ifop pour Dimanche Ouest France.
Dans le détail, 30% des personnes interrogées se déclarent «tout à fait hostiles» et 38% «plutôt» hostiles à cette nouvelle aide. Pour 87% d'entre eux, l'argent prêté à la Grèce est de l'argent perdu. Ils estiment en effet que le pays ne pourra jamais rembourser ses dettes.
Si la Grèce n'est pas sauvée...
Une position qui n'empêche pas la majorité des Français (84% des personnes interrogées) de reconnaître que si la Grèce n'est pas sauvée, les difficultés de la zone euro vont s'accroître dangereusement.
Depuis vendredi, les ministres des Finances de la zone euro sont réunis en Pologne pour discuter de la nouvelle aide de 158 milliards d'euros pour la Grèce. Une réunion que le secrétaire au Trésor américain, Timothy Geithner, présent pour la première fois, a quitté les mains vides et en désaccord avec les Européens. L'Eurogroupe a par ailleurs repoussé à la mi-octobre toute décision sur le versement d'une nouvelle tranche de huit milliards, dans le cadre du premier plan d'aide de 110 milliards.
Pour répondre aux inquiétudes de Timothy Geithner, le président de la Banque centrale européenne, Jean-Claude Trichet, a affirmé à l'issue de la réunion des ministres des Finances européens que «la zone euro se porte mieux économiquement que d'autres grands pays développés». La crise couve entre les Européens et les Américains...



- Les Américains font la leçon aux Européens, en vain


Le secrétaire d'État au Trésor, Timothy Geithner, s'inquiète des «propos inconsidérés» poussant à sortir la Grèce de la zone euro.
De notre envoyé spécial à Wroclaw.
Les Européens espéraient «un dialogue entre amis», les Américains se présentaient «sans arrogance». Las. Avec la déstabilisation des marchés et une inquiétude croissante des deux côtés de l'Atlantique, le secrétaire au Trésor américain, Tim Geithner, n'a pu s'empêcher de faire la leçon à ses dix-sept homologues de la zone euro réunis vendredi à Wroclaw (Pologne).
Le secours apporté par cinq banques centrales - dont la Fed américaine - aux banques de la zone euro n'aura pas dissimulé longtemps l'absence de réponse politique concertée à la crise. Au nom des Européens, le président de l'Eurogroupe Jean-Claude Juncker a décliné les projets de Tim Geithner, en évoquant «des différences d'approche avec nos collègues américains». Le secrétaire au Trésor, lui, a mis le doigt là où la monnaie unique fait mal: il s'est inquiété publiquement «du conflit entre les gouvernements et la Banque centrale européenne», une semaine après la démission fracassante du chef économiste de la BCE.
L'Amérique de Barack Obama, bientôt lancée dans une campagne présidentielle, redoute une faillite de la Grèce, une contagion aux banques européennes et une possible fracture de la zone euro. Si la crise s'approfondit, c'est l'économie américaine qui en subirait le contrecoup, choc inverse de celui qui avait frappé l'Europe après la faillite de la banque Lehman Brothers en 2008.
Le premier message de Washing­- ton est de pousser les Européens à parler d'une seule voix et à agir de manière décisive. «Les gouvernements et la Banque centrale doivent travailler ensemble (…) afin d'éviter des risques catastrophiques pour les marchés financiers», dit le secrétaire au Trésor. Et il insiste, en dénonçant la cacophonie qui déstabilise la monnaie commune: «Chacun devrait aussi s'abstenir de propos inconsidérés sur la fin de la zone euro.» Visés: les tenants d'une expulsion de la Grèce…
Refus d'une taxe sur les transactions financières
L'invitation inédite lancée par la Pologne - pays hôte car présidant actuellement l'UE - à Timothy Geithner avait tout pour embarrasser, en pleine tourmente, les ministres des Finances de l'euro. On a vu François Baroin accueillir le patron du Trésor américain d'une solide poignée de mains à Wroclaw. Mais l'Eurogroupe l'a soigneusement tenu à distance. Il n'a pas formellement participé au cénacle, mais à une «conversation préalable» d'une heure environ. Contrairement aux usages, il ne s'est pas non plus adressé aux journalistes sur place. Pour dire ses vérités à l'Europe, il a préféré un auditoire de banquiers dans un autre quartier de la ville.
Certains n'ont pas pris de gants pour dire que l'Europe n'a aucune leçon à recevoir. Les États-Unis, croulant sous les déficits, devraient balayer devant leur porte, explique le Belge Didier Reynders. «L'Amérique n'a rien à nous dicter quand elle-même refuse platement nos suggestions», ajoute l'Autrichienne Maria Fekter. Il est vrai que Tim Geithner a répété vendredi son opposition frontale à la taxe sur les transactions financières poussée à Paris, Berlin et Bruxelles.
Décisions reportées
Pour la seconde fois en huit jours, le secrétaire au Trésor quitte l'Europe les mains vides. Vendredi, les Européens ont fait la moue devant sa suggestion de «démultiplier» les moyens du FESF, le fonds de sauvetage des pays de l'euro en difficulté. «Ce n'est pas un sujet qui se discute avec un pays extérieur à l'UE», a signifié Jean-Claude Juncker. Même fin de non-recevoir sur l'idée américaine de soutenir la croissance sur fonds publics : «même un âne ne bute pas deux fois sur la même pierre», lâche Didier Reynders, convaincu de l'urgence de lutter d'abord contre les déficits.
Pour les Américains comme pour les Européens, le rendez-vous européen de Wroclaw se termine sur un préoccupant sentiment d'inachevé, même pour les urgences. L'Eurogroupe a repoussé à la mi-octobre toute décision sur le versement de 8 milliards d'euros à la Grèce. Il n'a pas non plus trouvé d'accord sur les garanties que la Finlande exige de la Grèce.