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Tuesday, October 4, 2011

prophecy of upcoming conflict between Pakistan and India

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Some thoughts about the rapture

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EU Flags Bigger Losses for Greece Bondholders

European governments hinted that bondholders may be saddled with bigger losses on Greek debt, intensifying market jitters that a second aid package designed to quell the fiscal crisis might unravel.
Finance ministers in Luxembourg considered recrafting a July deal that foresaw investors contributing 50 billion euros ($66 billion) to a 159 billion-euro rescue. The debt exchanges and rollovers targeted bondholder losses of 21 percent.
“We have to recalculate what that will actually cost and how to deal with it, but that is not being discussed now because we haven’t had the report from Greece yet,” Austrian Finance Minister Maria Fekter told reporters today at a meeting of European officials.
Together with plans to get more firepower out of the region’s 440 billion-euro rescue fund, the review of Greece’s aid package was a response to growing international frustration with Europe’s inability to get to grips with the crisis after 18 months of incremental steps marked by clashes between Germany, France and the European Central Bank.
European stocks fell for a third day and investors shunned riskier countries’ bonds amid concern that the crisis is careening out of control. The euro has dropped about 8 percent since the end of August, trading at $1.3182 as of 1:30 p.m. in London.

Insulating Italy

Europe’s financial leaders are fighting on multiple fronts, trying to repair Greece’s recession-struck economy while insulating Italy and Spainand shoring up banks that the International Monetary Fund says face as much as 300 billion euros in credit risks.
The stress on banks in Europe’s better-off economies was in the spotlight today with shares in Dexia SA, a French-Belgian lender, plunging on concern it will require a second bailout. The French and Belgian governments vowed “all necessary measures” to protect clients and will guarantee all Dexia’s loans.
A seven-hour meeting of euro-area finance chiefs yesterday yielded an agreement to pursue “technical revisions” to the July accord on private sector burden-sharing, Luxembourg Prime Minister Jean-Claude Juncker told reporters early today. He spoke of “changes” to the Greek outlook that spurred the reassessment.

Debt Swap

Juncker gave no details about a possible recalibration of the “voluntary” debt exchange, the new element in the follow- up package hammered out after last year’s 110 billion-euro lifeline failed to stabilize Greece. The Institute of International Finance industry group estimates that the debt swap, still being negotiated, will amount to a writedown of 21 percent.
“No, no,” Spanish Economy Minister Elena Salgado told reporters today when asked about deeper writedowns. “I insist: no.”
European leaders have gone back and forth over the sanctity of bond contracts as the crisis escalated. A November 2010 pledge to rule out writedowns unravelled a month later, only to be reaffirmed in July. The latest about-face came after seven countries including Germany, Europe’s dominant economy, weighed calling for Greek writedowns of as much as 50 percent, two European officials said.

Credibility ‘Dent’

“The reopening is probably going to be quite bad for the markets,” said Peter Schaffrik, head of European interest-rate strategy at Royal Bank of Canada’s RBC Capital Markets in London. “There is a big dent to European credibility.”
The ministers also pushed back a decision on the release of Greece’s next 8 billion-euro loan installment until after Oct. 13. It was the second postponement of a vote originally slated for yesterday as part of the 110 billion-euro lifeline granted to Greece last year.
Scrounging for savings, the Greek cabinet on Oct. 2 announced 6.6 billion euros of cuts, mostly by slashing public payrolls. Greece will “very likely” have to make extra reductions for 2013 and 2014, a two-year phase that will be the focus of the rest of the review by European Union,European Central Bank and IMF officials, EU Economic and Monetary Commissioner Olli Rehn said.

Deficit Goal

Greece’s revised 2011 deficit goal may be 8.5 percent of gross domestic product compared with a previous target of 7.6 percent, Rehn said. He called the new target “plausible” and lauded Greece’s “important steps” toward further savings next year.
While an Oct. 13 meeting to decide on the next payout was canceled, Juncker said he is “nevertheless optimistic when it comes to the issue of the disbursement” by the end of October. The decision now dovetails with an Oct. 17-18 summit of European government leaders to address the crisis. Juncker said Greece can pay its bills in the meantime.
“Greece is not the scapegoat of the euro zone,” Greek Finance Minister Evangelos Venizelos said yesterday. “Greece is a country with structural difficulties.”
Finance ministers held a first discussion over how to further enhance the region’s rescue fund, setting aside a plea by German Finance Minister Wolfgang Schaeuble to postpone that debate until the remaining countries have endorsed the fund’s latest upgrade.
Fourteen of the 17 euro countries have approved the reinforcement, which will empower the European Financial Stability Facility to buy bonds on the primary and secondary markets, offer precautionary credit lines and enable capital infusions for banks.

Credit Lines

Juncker announced “good progress” on the credit lines and bank-recapitalization tools. Avoiding the word “leveraging,” he said work is under way to scale up the fund’s capacity without requiring each country to chip in more.
“We are checking if yes or no we could increase the efficiency of the different instruments,” Juncker said. Asked whether the ECB would be tapped to boost the fund’s clout, he said: “I don’t think that this will be the main avenue of our considerations.”
The ministers also smoothed a snag en route to a second Greek package by settling the terms under which collateral will be offered to AAA rated Finland, home to a euro-skeptic movement that catapulted to third place in April elections by opposing further bailouts.

Finnish Mood

While the party now known as “The Finns” didn’t make it into the ruling coalition, it captured the Finnish mood and hardened the stance of new Prime Minister Jyrki Katainen in the euro-rescue bartering.
Under the accord, Greek bonds will be transferred from Greek banks to a trustee, which will sell them and invest the proceeds in AAA rated bonds with maturities of 15 to 30 years.
In exchange for the special treatment, Finland will speed its payments into a planned permanent rescue fund and forego a share of profits from EFSF emergency loans. Collateral wouldn’t cover its entire Greek exposure. In the event of default, it couldn’t cash in on the collateral until Greece’s official loans mature, a wait that might last 30 years.
“It’s a complicated financial structure,” said EFSF Chief Executive Officer Klaus Regling, who brokered the collateral arrangement. He and Juncker said Finland is the only country likely to take advantage of it.


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Last week, The Blaze reported that in his bid to the United Nations, Palestinian President Mahmoud Abbas asked the Security Council to recognize a Palestinian state based on the 1947 UN Partition Plan – an area much larger than that designated by the 1967 borders – stripping Israel of its only major international airport and its entire capital, Jerusalem. The 1967 borders had until now been the publicly stated demand of the Palestinians and their supporters in Europe and the United States, even as Israel has held 1967 lines leave the country nine miles wide and thus indefensible.
Slowly but surely, with the help of Arabic speakers monitoring what the Palestinians say to their people when the West isn’t watching, we are learning that the 1947 Partition Plan Abbas requested at the UN doesn’t provide as much land as they really want.
It’s one thing for a “man on the street” (what we in the news business like to call “MOS”) to blurt out his fantasy that Israel disappear. It’s quite another when the suggestion comes from the mouths of very senior Palestinian Authority officials, which has recently occurred at least twice.
First, Abbas Zaki, a senior member of the Fatah Central Committee told Al Jazeera television on September 23rd that any negotiated “settlement” should be based on 1967 borders. Indefensible for Israel, true, but not an outrageous thing to say in public discourse, right? (President Obama has said the same thing). But listen further. Zaki then goes on to say, “When we say that the settlement should be based upon these borders, President (Abbas) understands, we understand, and everybody knows that the greater goal cannot be accomplished in one go.” Code for: negotiate, get as much as you can, and then move the yardstick down the road saying that’s not enough.
“If Israel withdraws from Jerusalem, evacuates the 650,000 settlers, and dismantles the wall [separating the West Bank from Israeli communities], what will become of Israel? It will come to an end,” he says.
Even more chilling evidence of the Palestinian Authority’s hidden intentions and desire to keep them out of Western ears, Zaki also tells his Al Jazeera interviewer:
“If we say that we want to wipe Israel out… C’mon, it’s too difficult. It’s not [acceptable] policy to say so. Don’t say these things to the world. Keep it to yourself.”
Watch the clip, monitored and translated by MEMRI, the Middle East Media Research Institute, which also reports Zaki called President Obama and Israeli Prime Minister Benjamin Netanyahu “scumbags” and in 2008 called the U.S. “an enemy country.”
In response, Israel’s Deputy Foreign Minister Danny Ayalon says:
“here is further proof that the conflict is not about territory. The Palestinians have been offered a state repeatedly for several decades and have rejected each and every offer. This is less about the creation of a Palestinian state than it is about the destruction of the one Jewish State.”
In its report, Israel National News writes the Palestinians “plan to destroy Israel in stages, while pretending to seek a peaceful compromise”:
The statement by Abbas Zaki, a senior member of the Fatah Central Committee led by Palestinian Authority Chairman Mahmoud Abbas, is one of the most damning statements ever made by an Arab official regarding Fatah’s “stages plan.” The interview was aired on Al Jazeera on September 23, at about the same time that Abbas was presenting the case for independent statehood in the United Nations. Possibly the hype around Abbas’s speech gave Zaki confidence that his statement would go by unnoticed – as it largely has.
Zaki is not the only one. Another senior Palestinian official suggests two states for two peoples is not good enough. Nabil Shaath, Fatah’s head of Foreign Relations says Israel is not a Jewish state and Palestinian refugees presently living in other Arab countries must be allowed to resettle in the land where Israel sits. He also suggests that Arab citizens of Israel will be part of the Palestinian state. Forget 1967 or even 1947 borders, Shaath is talking all of Israel between the Jordan River on the East and Mediterranean Sea on the West.
On July 13th, MEMRI translated Shaath’s interview with Lebanon’s ANB TV:
Shaath says:
“The story of ‘two states for two peoples’ means that there will be a Jewish people over there and a Palestinian people here. We will never accept this – not as part of the French initiative and not as part of the American initiative. We will not sacrifice the 1.5 million Palestinians with Israeli citizenship who live within the 1948 borders, and we will never agree to a clause preventing the Palestinian refugees from returning to their country. We will not accept this, whether the initiative is French, American, or Czechoslovakian [sic].”
Shaath is not just any Palestinian official. He was the Palestinians’ “chief negotiator” with Israel and the Palestinian Authority’s first ever foreign minister. To clarify the distinction between the Palestinian Authority and Fatah: Fatah and Hamas are the two main political parties dominating Palestinian politics. President Mahmoud Abbas heads both the Palestinian Authority and the Fatah party.
This wipe-Israel-off-the-map rhetoric doesn’t end with statements made by officials in TV interviews. It continues with actual maps. Specifically, the latest official one published by the Palestinian Authority (PA) tourism ministry which has no Israel on it at all.
If you examine this PDF file, you can see “Palestine” covers the territories including the entire West Bank (Judea and Samaria), the Gaza strip, Jerusalem and every inch of territory that is the State of Israel. Israeli cities are re-named to Arabic names, such as Tel Aviv – “Tel Ar Rabee” and the biblical town Be’er Sheba – “Bir Assaba.”
Director of the Israel Resource News Agency David Bedein who obtained a copy of the map tells The Blaze:
“The PA Ministry of Tourism map, designed for wide distribution among visitors to areas under control of the PA, represents the continued consistent vision of the PLO state in the making: A Palestine without Israel.
Since the genesis of the Oslo process, all new Israeli maps – by law – designate areas that have been ceded to the PA, while all new PA maps decimate Israel completely, as distributed in their schools, offices, media and magazines.”
Bedein whose organization studies the issue extensively explains that the Palestinians promised both the U.S. and Israel it would stop publishing maps like these but continue to do so both in school textbooks and official government publications.
These maps also reflect the position of Hamas, the terrorist group running Gaza, whose political leader Ismail Haniyeh told a Tehran audience this weekend that “occupied Palestinian land” can be liberated only through armed resistance. Speaking via video link to the fifth annual Palestinian resistance conference sponsored by Iran, Haniyeh said “the Palestinians will not give an inch of their land to Israel.”
The Jerusalem Post reports:
Haniyeh has been consistently critical of the PA’s efforts at the UN to gain state recognition, saying “liberation” of the land comes before the “state.”
One would expect Hamas, to make statements like the controversial ones above, but not Palestinian Authority officials tasked with negotiating honestly with Israel, the U.S. and the European Union. The Hamas leader called negotiations a “mirage.” Looking at the recent statements and publications from the Palestinian Authority, he might be onto something.


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Deja vu as FTSE begins final quarter in red

Greece’s prediction that it would miss a deficit target despite more austerity measures helped London’s blue-chips begin the last three months of the year in the red and traders were talking of “Groundhog day” on the bourse.

Concerns around Greece’s teetering finances and prospects for global growth meant there was a strong sense of deja vu as banks and mining stocks once again led the index lower. Vedanta Resources was the sharpest faller, sliding 91p to £10.10 while fellow miner, Xstrata shed 29.9 to 790.9p. High street lenders, Royal Bank of Scotland and Lloyds Banking Group dropped 1.03 to 22.46p and 1.41 to 33.46p respectively.

Morgan Stanley was taking no chances on the miners, reducing its earnings predictions to reflect a lowering of price forecasts by the broker’s commodities team.

“Rising risks of a developed market recession and deteriorating prospects of global growth have prompted our commodities team to revise house price forecasts. We have reduced our base metals estimates by an average of 16pc, and kept our iron ore prices unchanged,” said Morgan Stanley. “Notably, we upgraded gold and silver prices to reflect strong safe-haven demand for both metals.”


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UK managers expect double-dip recession

A man is seen in a job centre plus in Westminster, central London

The Chartered Management Institute (CMI) said it saw little prospect of an early recovery. It called for the coalition Government to go further and faster with its deficit reduction programme to improve longer-term prospects and introduce incentives to provide some growth stimulus.

Only 8pc of the 616 CMI members polled for the organisation's half-yearly economic survey expected to see any growth in the economy over the next 12 months, and more than two-thirds felt the economy will sink back into recession.

The survey results also delivered another blow to Mr Cameron's hopes that the private sector can fill the gap left by the public sector rundown. They show private sector managers are most pessimistic about the employment outlook with 81pc expecting further cuts compared with 73pc in the public sector.

There are also signs of impatience with the speed of the spending cuts. While 60pc expect their business to suffer from the reduction in Government spending, 25pc are critical about the way the programme is being handled..

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European uncertainty making global situation worse: Flaherty

Chris Wattie/Reuters

The Greek debt crisis is getting worse rather than better, Canadian Finance Minister Jim Flaherty said on Monday as he urged European leaders to take clear and decisive action to avoid a banking meltdown.

“Ultimately the whole world would be affected if there were a bank meltdown, a credit crunch, coming out of Europe. So this is a serious situation and it’s been serious for quite some time. It’s getting worse because of the continued uncertainty,” Mr. Flaherty told Sun TV.

“It is quite frustrating and that’s why we’re trying to impress on them (European leaders) that these are extraordinary times – you can’t follow normal processes.”

In earlier remarks at a news conference, he urged European ministers meeting on Monday to be decisive and remove uncertainty on Europe.

“We want them to take the bull by the horns here, deal with the issues, be clear about what they’re doing and bring it to a conclusion,” the Conservative minister said.

Greece’s admission that it would miss its deficit target this year despite harsh new austerity measures sent stock markets reeling on Monday and raised new doubts over a planned second international bailout.

Canada’s bank exposure to Europe and particularly Greece is relatively small, Mr. Flaherty said, “but knock-on effects to the world economy can be difficult, and that’s what we’ve been worried about constantly with respect to Greece and some of the other largely indebted economies in Europe.”

He added: “We want the eurozone members to be decisive, to remove the uncertainty, and to be clear in their commitment about what they’re going to solve the problem. This problem is soluble in Europe, and it’s up to the Europeans to solve it.”

Mr. Flaherty will make a speech at a financial conference in New York on Wednesday and he said he would urge European bankers there to move forward on the debt crisis.

He repeated his government’s willingness to launch new economic stimulus measures if necessary, but he said government fiscal policy is already stimulative and more measures are not required at present.
Financial Post

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UK construction activity slows to 'near stagnation'

Cranes on a construction site

Activity in the UK construction sector slowed to "near stagnation" in September, a closely-watched survey has suggested.

The Markit/Cips construction purchasing managers' index (PMI) fell to 50.1, just fractionally above the 50 "no-change" threshold that separates expansion from contraction.

In August, the index had read 52.6.

Markit said fewer new orders was the reason behind the slowdown, but added that staffing levels rose slightly.

Confidence in the sector remained relatively subdued, the research group said.

Also on Tuesday, builders' merchant Wolseley announced a return to full-year profit but said recent weaker economic forecasts were likely to have an impact on its markets.

On Monday, Markit/Cips data showed surprise growth in the manufacturing sector.


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China warns of trade war if U.S. bill passes

A 100 yuan banknote (R) is placed next to a $100 banknote in this picture illustration taken in Beijing November 7, 2010. REUTERS/Petar Kujundzic

(Reuters) - An angry China warned Washington on Tuesday that passage of a bill aimed at forcing Beijing to let its currency rise could lead to a trade war between the world's top two economies.

China's central bank and the ministries of commerce and foreign affairs accused Washington of "politicising" currency issues and putting the global economy at risk after U.S. senators voted on Monday to start a week of debate on the bill.

The response suggested China sees a greater risk from the proposed bill than it has in the past when U.S. lawmakers attempted to put forward similar legislation to speed up the pace of appreciation in the yuan, or renminbi.

Beijing made similar remarks last year after the House of Representatives passed a currency bill that later failed to make any further progress in Congress.

Tuesday's coordinated salvo and the central bank's warning of a trade war and a slowdown in China's exchange rate reforms indicated Beijing was taking the latest currency bill more seriously.

"It is very rare for three different ministries of the country to refute something so quickly and strongly, showing how deeply the Chinese government is concerned about the yuan bill," said Wang Zihong, a researcher at the China Academy of Social Sciences, a top government think tank.

"The strong responses made by the Chinese government may also suggest that the possibility would be quite high this time that the United States will pass the final bill in the end and that Beijing is worried about the possible negative impact on China's exports resulting from the legislation," he said.

U.S. Senate vote opened a week of debate on the Currency Exchange Rate Oversight Reform Act of 2011, which would allow the U.S. government to slap countervailing duties on products from countries found to be subsidising their exports by undervaluing their currencies.

U.S. lawmakers, eyeing 2012 elections, said keeping China's currency undervalued had cost American jobs and that a fairer exchange rate would help cut an annual trade gap Washington puts at more than $250 billion.

"By using the excuse of a so-called 'currency imbalance', this will escalate the exchange rate issue, adopting a protectionist measure that gravely violates WTO rules and seriously upsets Sino-U.S. trade and economic relations," foreign ministry spokesman Ma Zhaoxu said in a statement posted on China's official government website (www.gov.cn) on Tuesday.

"China expresses its adamant opposition to this."

Ma urged U.S. legislators to "proceed from the broader picture of Sino-U.S. trade and economic cooperation" and "forsake protectionism."

He repeated Beijing's position that it will continue to gradually reform its currency policy, "strengthening the flexibility of the renminbi exchange rate."

China's exchange rate has long been a bone of contention between Beijing and Washington. The yuan has appreciated some 30 percent against the dollar since it was revalued in 2005, although critics say it is still valued too low and gives Chinese exporters an unfair advantage.

The emergence of China as the world's fastest-growing major economy has led to often testy relations with the United States. The most recent tension was over U.S. plans for a $5.3 billion upgrade of the F-16 A/B fighter fleet of Taiwan, which Beijing considers to be a breakaway province.


Monday's vote bolsters prospects for the bill to clear the Democrat-run Senate later this week, but prospects for action in the Republican-controlled House of Representatives are murky.

If the bill did clear both chambers, it would present President Barack Obama with a tough decision on whether to sign the popular legislation into law and risk a trade war with Beijing, or veto it to pursue a more diplomatic approach.

"My colleagues, both Democrats and Republicans, agree that China's deliberate actions to devalue its currency give its goods an unfair competitive advantage in the marketplace," said Senate Majority Leader Harry Reid.

China has routinely denied claims that its policies are responsible for trade imbalances and a high rate of unemployment in the United States, saying that structural problems were to blame.

"It is widely understood that the renminbi exchange rate is not the cause of China-U.S. trade imbalances," Ma said.

China's central bank said in a statement that the bill failed to address the underlying issues in the U.S. economy.

"The yuan bill passed by the U.S. senate will not solve its problems, such as insufficient savings, high trade deficit and high unemployment rate, but it may seriously affect the whole progress of China's reform of its yuan exchange rate regime and may also lead to a trade war which we would not like to see."

Ma said Beijing would continue "proactive" and "gradual" reform of the currency and the central bank added Chinese inflation had already pushed the real yuan exchange rate further "toward the equilibrium."

Ministry of Commerce spokesman Shen Danyang said the United States was trying to pass on the blame for its own failings.

"Trying to turn domestic disputes onto another country is both unfair and in violation of standard international rules, and China expresses its concern," he said in a statement issued on the ministry's website.

The Senate move had to be viewed in the context of deepening economic and political uncertainties in the United States, as well as dwindling approval ratings ahead of next year's elections, the state news agency Xinhua said in a commentary.

"U.S. politicians are using the pretext of creating jobs and playing the China currency card -- the practice of diverting attention from domestic conflicts has almost become a political convention in recent years," it said.


Shen said any move by the United States to force the yuan to appreciate would undermine joint efforts to revive global economic growth, which took another blow on Monday with data showing that global manufacturing shrank in September for the first time in over two years.

"It will weaken China-U.S. efforts to join hands and together promote global economic recovery," he said. "The global economic is in a complex, sensitive and changeable period, and so even more needs a stable international monetary environment."

U.S. critics of China's currency policy have gained some traction as a weak economy keeps U.S. unemployment stuck above 9 percent and as 2012 presidential elections draw near.

Passage of the bill by the Democratic-controlled Senate would send it to the House, which is run by traditionally free-trade-friendly Republicans.

A China currency bill passed the House last year with 99 Republican votes, but lapsed because the Senate took no action. This year, the bill already has more than 200 House co-sponsors and this week supporters expect to reach 218, the number needed to pass it.

However, House Republican leaders have not shown a great appetite to pursue currency legislation, and it is unclear if the bill would ever face a vote in that chamber.

As with similar legislation in the past, the Obama administration has not taken a public stance on the bill, although White House spokesman Jay Carney said on Monday that the president shares "the goal it represents."

The Senate decision was a sign that China was being made a scapegoat by struggling western economies, said Wang Jun, researcher at the China Center for International Economic Exchanges.

"Maybe the United States will not be the only and last country to do so. With the worsening of the European sovereign debt crisis, we must also be on high alert that euro zone countries could also press China on the exchange rate issue.

"We need to launch some pre-emptive measures to hit back against any more attacks," Wang said.

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Jim Rogers on RT

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Dexia warning spooks global investors

Franco-Belgian financial group Dexia called an emergency board meeting on Monday after concerns about its exposure to Greece and a Moody's warning about its liquidity position raised pressure on Belgium and France to act.

Dexia shares tumbled 10 per cent on Monday after Greece said its steps to avoid bankruptcy were falling short and credit agency Moody's raised concerns about the lender's access to funds.

Investors pegged losses among Wall Street banks overnight to the sharp falls in Dexia.

The bank summoned board members for a board meeting late on Monday, a source familiar with the matter told Reuters.

Belgian and French finance ministers were also meeting together with other euro zone leaders on Monday evening. Belgium's Didier Reynders said the two states, both Dexia shareholders, would do all that was required to support their banks.

"Whether it is Dexia or another, we are following the situation day-by-day," Reynders told reporters on arriving at the Eurogroup meeting in Luxembourg.

"To help the banks... the first thing to do is to help Greece. If you resolve the Greek problem you are a long way along the path," he continued, adding that Dexia was not among the most troubled banks in the continent.

The mid-tier bank has neverthelss one of the largest exposures to Greece among overseas lenders and has been at the centre of media speculation in recent weeks that it will split or needs another bailout, potentially from taxpayers.

According to a source familiar with the situation, Dexia's shareholders were keen to avoid a capital increase, but the group was likely to put a part of its French municipal lending unit Credit Local for sale.

Alex Koagne, analyst at Natixis in Paris said there could not be any demerger until capital was pumped in.

"An injection is needed so the bank can withstand losses on toxic assets," he said.

He estimated Dexia needed 5 billion euros in additional capital to have a 9 per cent common equity Tier 1 ratio under Basel III rules.

Dexia is not the only European bank facing a need for capital as regulations become tougher, profits sag and lenders face losses on sovereign bonds if the euro zone crisis is not resolved.

Banks face a 148 billion euro capital shortfall under a base case and a 227 billion shortfall under a stressed scenario, according to analysts at JPMorgan, who say Unicredit , Deutsche Bank , Lloyds , Societe Generale and Barclays each face a deficit of over 7 billion euros under its stressed scenario.

If banks are unable to raise the capital privately, government ownership of the sector could jump to 22 per cent from 7 per cent now, JPMorgan analyst Kian Abouhossein said in a note.

European bank stocks were down 2.6 per cent by 1056 GMT, with French banks BNP Paribas , Societe Generale and Credit Agricole , each down over 3 per cent.

Dexia, which received a 6 billion euro ($US8 billion) bailout from Belgium, France and other major shareholders at the height of the financial crisis in 2008, held 3.8 billion euros of Greek sovereign bonds at the end of June and had a credit risk exposure to the country of 4.8 billion euros.

Dexia's market capitalisation is only 2.5 billion euros, and its core capital is seen as insufficient to absorb big hits.

The company has taken a 338 million euro hit to cover a 21 per cent loss on Greek sovereign debt maturing by 2020, part of a plan agreed by private sector investors in July.

But with market prices indicating investors could suffer a loss of 50 per cent or more, Dexia's Greek bill could be more than 1 billion euros more.

Dexia Chairman Jean-Luc Dehaene said after a board meeting last week that neither Dexia nor its shareholders wanted the group to break apart and that it would continue to examine options to strengthen its balance sheet.

Dexia came unstuck when short-term credit dried up in the depths of the 2008 financial crisis, since a large proportion of its long-term lending to public authorities was financed by short-term borrowing.

Moody's said on Monday Dexia had experienced further tightening of its access to market funding.

Read more: http://www.smh.com.au/business/world-business/dexia-warning-spooks-global-investors-20111004-1l5vl.html#ixzz1ZpJKQo9c

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Eurozone finance ministers refuse immediate bailout for Athens

Luxembourg prime minister and Eurogroup president Jean-Claude Juncker

Eurozone finance ministers have put off until next month any decision to give the green light for a further €8bn bailout for Greece despite recognising that the Athens government had made some considerable progress in slashing the country's debts.

Jean-Claude Juncker, Eurogroup chairman, repeatedly made plain early on Tuesday that none of the eurozone countries was urging a Greek default and categorically denied that there was any question of Greece leaving the euro area.

In a move certain to disappoint markets, the 17 finance ministers sent signals they had no intention of agreeing to reboot the zone's rescue fund of €440bn closer to the €2tn or more demanded by leading investors and analysts. EU officials reiterated that there was "no Plan B".

But Juncker and Olli Rehn, the EU economic and monetary affairs commissioner, indicated that ministers had for the first time discussed measures to improve the bailout fund's efficiency and effectiveness in order to raise its firepower – code for raising the guarantees it needs for buying up more government bonds in the secondary market. Juncker said: "We consider that we should by no means increase the fund's financial volume."

He dropped a broad hint that private bondholders would be forced to pay more than the 21% "haircut" agreed at the 21 July meeting that increased the fund's volume and approved the second €109bn bailout for Greece – ascribing that to "technical" reasons.

Juncker and Rehn recognised Greece had made strides towards overcoming its debts and budget deficit but said that the Athens government had to be stricter about structural reforms and more ambitious in implementing privatisations.

It emerged that the ministers will be asked to approve the fresh €8bn aid as late as at a new meeting on 13 November once inspectors from the troika of European commission, European Central Bank and IMF have given their latest – and delayed – progress report on compliance. Juncker insisted that Greece could meet all its financial obligations – and suggested the new tranche of aid would be paid out in November.

After the Greek cabinet sent the euro and stock markets plunging on Monday by admitting on Sunday the country would not meet its target budget deficit this year or next, Evangelos Venizelos, had sought to win favours by insisting that the new budget was "very ambitious".

Entering Monday night's talks, he declared that the intention was to present "for the first time after many years" a primary surplus of €3.2bn next year compared with a deficit of €29bn only two years ago. He said the fiscal consolidation had been "very strong and very fast."

On Sunday Greece said its deficit would be 8.5% of GDP this year compared with a target of 7.6% and 6.8% in 2012 compared with a target of 6.5% but Venizelos insisted it had taken "all the necessary and difficult measures to fulfil its obligations".

He said: "Greece is a country with structural difficulties but Greece is not the scapegoat of the eurozone." Even so, anxieties about a Greek default sent the euro to a 10-year low against the yen and a nine-month low against the US dollar.

The French president, Nicolas Sarkozy, meanwhile said he would meet the German chancellor, Angela Merkel, in Berlin on Sunday for talks on "ways and means to accelerate the economic integration of the eurozone economy".

Ostensibly, the eurozone's two most powerful political figures are preparing the way for the crucial summit of the 17 member countries that will take place on 18 October or a day after a summit of all 27 EU countries, including the UK.

But the talks are bound to raise market hopes that the pair will come up with an outline plan for substantially increasing the scope of the European financial stability facility (EFSF) that can be put to the eurozone summit without necessarily boosting its funds. Slovakia assured ministers that its parliament would endorse the enhanced EFSF by 14 October.

Christian Noyer, Bank of France governor, indicated he was open to a scheme that would allow the EFSF to be leveraged – most likely by increasing the guarantees it can rely on to buy up more bonds and make bigger precautionary loans to countries suspected of being in trouble.

The Guardian

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