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Friday, December 16, 2011

Syria deploys Russian anti-sea missiles on coast, Scuds on Turkish border

Expanded Russian military and diplomatic support for the Assad regime was underscored by the deployment Friday, Dec. 16, of advanced Moscow-supplied Yakhont (SSN-26) shore-to-sea missiles along Syria's Mediterranean shore to fend off a potential Western-Turkish invasion by sea. Last week, Russia airlifted to Syria 3 million face masks against chemical and biological weapons and the Admiral Kutznetsov carrier and strike group was sent on its way to Syria's Mediterranean port of Tartus.
Russian naval sources in Moscow stressed that the flotilla is armed with the most advanced weapons against submarines and aerial attack. Upon arrival, the Russian craft will launch a major marine-air maneuver in which Syrian units will take part.
Syria has received from Russia 72 Yakhont missiles able to hit marine targets up to a distance of 300 kilometers - i.e., over the horizon, our military sources report. The missile's radar remains inert, making it hard to detect, until it is close to target. It is then switched on to guide its aim.

Its high speed – 2,000 kmh – enables the Yakhont to strike before its target has time to activate self-defense systems.
Thursday night, in response to the deployment of 21 Syrian Scuds on the Turkish border, including five with chemical warheads, Ankara convened its top military council and declared its armed forces ready for war. Syria also rushed armored reinforcements to the Jordanian border.

DEBKAfile's military and intelligence sources report that the rush of Syrian war moves backed by Russia indicates that both believe a Western-Arab force is on the point of invading Syria. They are keeping an eye especially on Turkey which is suspected of having obtained a NATO marine and air umbrella, including the US Sixth Fleet, for military preparations aimed at ousting Bashar Assad, so repeating the operation against Libya's Muammar Qaddafi.
The diplomatic flurry around Syria was accentuated by US Defense Secretary Leon Panetta's arrival in Ankara Friday morning to find Turkish armed forces on war preparedness, and Syrian Vice President Farouk A-Shara's landing in Moscow for a crisis conference with Russian leaders.

Thursday night, Dec. 15, DEBKAfile reported:

War tensions around Syria rose alarmingly Thursday night, Dec. 15, when Turkey's top military council convened "to review the armed forces' preparedness for war" in response to the deployment of Syrian missiles, some tipped with chemical warheads, on their common border. DEBKAfile's military sources report the meeting was led by Turkish President Abdullah Gul and Prime Minister Tayyip Erdogan.

The Assad government also rushed armored units in two directions - to the Turkish frontier and also to the Jordanian border opposite the US special operations units from Iraq newly deployed to defend Jordan against a Syrian attack, as DEBKAfile reported on Dec. 13
Our sources report that 21 Syrian missile launchers, five of them Scud D with chemical warheads, are deployed in northern Syria opposite the Turkish Hatai (Alexandretta) district. They were moved up in broad daylight to make sure Western spy satellites and Turkish intelligence surveillance saw them. More are on the way.

In Israel, the IDF announced it was reconstituting the special command for operations behind enemy lines under the command of Brig. Gen. Shay Avital.

Before the military council convened in Ankara, Turkey placed its border contingents, air force and navy on war preparedness.

The official statement said the high military council had "assessed Turkish army needs and necessary steps to address these requirements…"

The Turkish press repeated a statement by Foreign Minister Ahmet Davutoğlu in an interview two weeks ago that Turkey does not want to consider a military option for intervention in neighboring Syria as Damascus cracks down on popular protest, but it is ready for any scenario.

The Turkish army has prepared operational plans for seizing parts of northern Syria if the situation there continues to deteriorate. Those plans would essentially carve Syria into two entities, with the Turkish army holding the north and protecting opposition and civilian populations, while the Syrian army and Assad loyalists would remain in control of the central and southern regions.

Germany’s Hidden Risk: Bloomberg Businessweek Opening Remarks

Involuntary lending is what happens when your teenager figures out how to charge stuff to your credit card. The kid promises to pay for the purchases but never gets around to it, so your involuntary loan keeps getting bigger. At some point it dawns on you that you might never get your money back.

Something similar is happening in Europe, except the dysfunctional family consists of central bankers, with Germany’s Bundesbank in the role of aggrieved parent, Bloomberg Businessweek reports in its Dec. 19 edition. The figures are hard to find, policy makers don’t like to talk about them, and the accounting is far from sexy. Outside of Germany, headlines have been few. But the numbers are huge -- so huge that they may be one of the biggest factors in whether the euro zone hangs together or falls apart.

Expect to hear more about this issue as the glow from the Dec. 8-9 Brussels summit continues to dim and the stresses on Europe’s common currency intensify. The term to remember is Target2. It’s the name for the European Central Bank’s suddenly important interbank payment system, which before the crisis was just a lowly bit of financial plumbing.

The bottom line: Germany’s Bundesbank -- BuBa for short -- has quietly, automatically lent 495 billion euros ($644 billion) to the European Central Bank via Target2. That lending has balanced correspondingly huge borrowings from Target2 by the central banks of weaker nations including Greece, Ireland, and Portugal -- and lately Spain, Italy, and even France. They are technically “claims,” not loans. To find them you have to root around in the footnotes of the reports of the 17 national central banks of the euro zone.
Lose Entire Claim

If the euro zone breaks into sorry little pieces, Germany could possibly lose its entire claim. It is 60 percent bigger than Germany’s annual federal budget -- and larger than the lending under the European Financial Stability Facility and other aid programs that have received more scrutiny.

Germany’s plight gives it an incentive to keep the euro zone intact. “If the euro breaks up then the whole claim is under risk,” Hans-Werner Sinn, president of the Ifo Institute, a Munich-based economic research group, said in an interview. Sinn, the first economist to focus attention on the Target2 imbalances earlier this year, wrote in a November research paper, “This may be the largest threat keeping Germany within the Eurozone.”
Back-Office System

Nobody designed Target2 to ensnare Germany as a creditor. It was the most boring back-office transaction-processing system imaginable when it was launched in 2007-08 as a successor to the equally boring original Target (a rough acronym for Trans- European Automated Real-time Gross Settlement Express Transfer system). In the early days of the euro currency, Germany wasn’t even always a creditor: It had a net liability of 31 billion euros ($40 billion) at the end of 2001.

Then came the financial crisis of 2007-08. Europe’s peripheral nations began to suffer capital flight. Until then their chronic trade deficits were completely offset by inflows of private capital, both loans and investments. Afterward, lenders and investors grew leery of putting more and more money into those countries. Euros began to flow from the periphery into Germany and to a lesser extent Luxembourg, the Netherlands, and Finland. The Target2 imbalances are an accounting reflection of those outflows. From 2008 to 2010, Sinn estimated in his paper, “Target credits financed almost the entire current- account deficits of Portugal and Greece and a quarter of the Spanish one.”
Powerful Forces

That makes it sound like a central-bank policy decision, which it wasn’t. On the micro scale it was nothing but routine transaction-processing. The most powerful forces are the unguided ones, like the wind and the tides.

Here’s how it happened. When a Greek businessperson buys a truck from Germany with money from a checking account, the transaction is carried out between the two nations’ central banks via Target2. The truck seller isn’t interested in financing the purchase -- it wants euros now. So the Bundesbank has to come up with money in order to deposit it in the seller’s checking account. In accounting terms, the Bundesbank acquires a liability (what it owes to the truck seller’s checking account) and an asset (a claim on the ECB).

The transformation of the Bundesbank’s balance sheet through this slow-but-steady process has been stunning -- and to hard-money Germans, sickening. At the end of 2006, Target claims represented just 7 percent of the Bundesbank’s assets. By this October they represented 64 percent, according to data compiled by economists Aaron Tornell of the University of California-Los Angeles and Frank Westermann of Germany’s University of Osnabrück. The collateral the ECB holds to back those loans is primarily the sovereign debt of the euro zone’s weakest nations. It’s a far cry from the gold that’s the Bundesbank’s second- biggest asset (17 percent).

Any losses on Target2 are supposed to be shared by the euro zone’s 17 central banks in proportion to their share of the ECB’s capital, which for Germany is 28 percent of the total. But since the central bank of any country that couldn’t repay Target2 obviously wouldn’t share in the losses, Germany would have to pick up even more than its share. And as Sinn notes, there are no laws governing who would be responsible for the claim if the euro zone broke up entirely.

The European Central Bank is trying to be reassuring about the growing Target2 imbalances. In its October monthly bulletin it said “the uneven distribution of central bank liquidity within the Eurosystem provides stability, as it allows financially sound banks -- even those in countries under financial stress -- to cover their liquidity needs.” The ECB, though, doesn’t report which central banks are in the black and which are in the red on Target2, since the combined positions always net out to zero.
Obscure Table

The 17 member central banks don’t exactly trumpet the numbers, either. At the Bundesbank, the most up-to-date figures are available only in an obscure table called “Time series EU8148: External position of the Bundesbank in the EMU / Claims within the Eurosystem / Other claims (net).”

As Europe’s financial crisis has worsened, the ECB has benevolently turned a blind eye to the poor quality of collateral posted by the Bank of Greece and others. But a reckoning is due. In an interview with Bloomberg News on Dec. 13, Bundesbank President Jens Weidmann expressed more concern about the collateral than the volume of ECB balances. “In a situation like the current one, where we are providing solvent banks with liquidity,” he said, “for me the size of the Target2 balances is less important than the risks we are taking on. It is my concern that we limit these risks as much as possible.”
‘Being Alarmist’

An alternate theory is that there’s really nothing to worry about. University College Dublin Professor Karl Whelan says Sinn, Tornell, Westermann, and other economists who have raised red flags over Target2 are being alarmist. While Europe has plenty of other problems, “this is a crisis that is not about to happen,” Whelan wrote in a recent article posted at VoxEU.org, a forum mostly for European economists.

Yeah, maybe. What happens next depends on how far Germany is willing to go in converting its treasured central bank into a repository for more claims on the ECB, which are ultimately backed by the junk debt of Southern Europe. To fund more loans to Target2, BuBa could either sell some of its gold (unlikely) or take in more euro deposits, which it could then recirculate via the ECB (much more likely). “In principle this can go on indefinitely,” says Ebrahim Rahbari, an economist for Citigroup in London.

Germany faces a dilemma familiar to anyone who has ever made a bad loan -- whether to keep throwing good money after bad to keep the debtor afloat or pull the plug and suffer the consequences. The half-trillion-euro claim the Bundesbank has on the ECB is an important but poorly understood factor in the decisions over the future of the euro. So it’s in the interests of everyone that central bankers provide more transparency when it comes to Target2. Says Citi’s Rahbari: “From the moment that you seriously start to consider breakup as a plausible scenario, these issues should probably be given more prominent space in the public debate.”


Israel's treatment at the UN 'obsessive' and 'ugly,' U.S. diplomat says

U.S. Ambassador to the United Nations Susan Rice denounced the treatment Israel receives in the United Nations on Thursday, adding that American support of Israel's security was an "essential truth."

Speaking at the annual reception of the Conference of Presidents Fund in New York, Rice said that the treatment Israel receives at the UN was “obsessive, ugly, bad for the United Nations and bad for peace.”

The ambassador stressed that the Obama administration was commitment to oppose all efforts to “chip away at Israel’s legitimacy,” adding that U.S. commitment to Israel’s peace and security was an “essential truth that will never change.”

The American official said U.S. President Barak Obama “has been clear all along that our special relationship with Israel is deeply rooted in our common interests and our common values,” adding that these common interests and values were the reason the U.S. has increased its financing of Israel’s military capabilities to record levels.

Other speakers at the Conference of Presidents event were Israeli Ambassador to the UN Ron Prosor and Consul General of Israel in New York Ido Aharoni.

At the event, Rice received a National Service Award from on behalf of the Conference of Presidents Fund for her service at the UN, particularly her opposition to the Durban III conference as well as her opposition to a unilateral recognition of Palestinian statehood.

While the event seemed to imply that the Obama administration had been supportive of Israel, a full page ad by the Emergency Committee for Israel (ECI), published in such leading newspapers such as the New York Times, the Miami Herald, and Variety, asked: "Why does the Obama administration treat Israel like a punching bag?"

Speaking of the ad, the ECI's chair Bill Kristol said that “the Obama administration has been using Israel as a punching bag. The pro-Israel wing of the pro-Israel community is punching back."

Another story causing a storm amid the U.S. Jewish voting public was stirred by the New York Times columnist Thomas Friedman, who in his column earlier this week titled "Newt, Mitt, Bibi and Vladimir" attacked Gingrich for calling the Palestinians "invented people," accusing him of pandering to Israel.

However it was Friedman's attack against Netanyahu that garnered the attention, as the veteran columnist wrote: "I sure hope that Israel’s Prime Minister, Benjamin Netanyahu, understands that the standing ovation he got in Congress this year was not for his politics."

An Israeli official told "Haaretz" that "Friedman has crossed a line that true friends of Israel should never allow themselves to cross and inadvertently encouraged anti-Semitism."

Eurozone crisis solution beyond reach

ROME/BERLIN – Credit rating agency Fitch told the eurozone on Friday it thinks a comprehensive solution to the bloc’s debt crisis is beyond reach, as it put an number of the bloc’s economies including Italy on watch for potential downgrades.

It reaffirmed France’s top-notch triple-A rating but even here said the outlook was now negative over a longer term.

Underscoring the tensions within the bloc over the crisis that has spread relentlessly over the past two years, Italy’s prime minister earlier urged European policymakers to beware of dividing the continent with their efforts to fight its debt crisis, warning against a “short-term hunger for rigor” in some countries, in a swipe at Germany.

Germany has led resistance to allowing the European Central Bank to ramp up its buying of government bonds on the open market to a big enough scale to douse the crisis.

Fitch said that following the EU summit a week ago it had concluded that “a ‘comprehensive solution’ to the eurozone crisis is technically and politically beyond reach.

“Of particular concern is the absence of a credible financial backstop. In Fitch’s opinion this requires more active and explicit commitment from the ECB to mitigate the risk of self-fulfilling liquidity crises for potentially illiquid but solvent Euro Area Member States,” Fitch said.
It put Belgium, Spain, Slovenia, Italy, Ireland, and Cyprus on negative watch. Another ratings agency, Standard & Poor’s, had already warned 15 of the currency bloc’s 17 members they were close to a downgrade.

Earlier German Chancellor Angela Merkel gained some respite from domestic pressure to take a tougher line in the eurozone crisis when Eurosceptics hostile to more bailouts lost a referendum in her junior coalition partner, the Free Democrats, aimed at blocking a permanent rescue fund.

Meanwhile, a first draft of a planned fiscal union treaty among eurozone countries and aspiring members, published on Friday, showed that countries could be taken to the European Court of Justice if they fail to meet agreed budget targets.

Ms. Merkel – under pressure from the revered Bundesbank to force debt-saddled eurozone countries to reform and save their way out of crisis with austerity measures – has led a push for automatic sanctions for deficit “sinners” in the bloc.

This has fed concerns that excessive belt-tightening in southern countries could send their economies into a negative spiral with no prospect of growing out of the crisis, while feeding resentment in the prosperous north.

Italian Prime Minister Mario Monti said Europe’s response to the debt crisis “should be wrapped in a long-term sustainable approach, not just to feed short-term hunger for rigor in some countries.

“To help European construction evolve in a way that unites, not divides, we cannot afford that the crisis in the eurozone brings us … the risk of conflicts between the virtuous North and an allegedly vicious South,” he told a conference in Rome.

In Germany, turnout in the FDP bailout referendum fell short of the necessary quorum of one-third of the party’s membership, and only 44.2% voted for dissident lawmaker Frank Schaeffler’s motion against the planned European Stability Mechanism.

A victory for the Eurosceptics could have brought down Ms. Merkel’s centre-right coalition, but the outcome still left the FDP split, with its public support in tatters.


French officials have sought to prepare the public for the likelihood that Paris will lose its top-notch rating from S&P for the first time since 1975, playing down the potential setback and focusing attention instead on neighbouring Britain.

“The economic situation in Britain today is very worrying, and you’d rather be French than British in economic terms,” Finance Minister Francois Baroin said in a radio interview, a day after Bank of France governor Christian Noyer said that if ratings agencies were even-handed, Britain deserved to be downgraded before France.

Britain’s Deputy Prime Minister Nick Clegg said French Prime Minister Francois Fillon had called him to explain that “it had not been his intention to call into question the U.K.’s rating but to highlight that ratings agencies appeared more focused on economic governance than deficit levels.”

Mr. Clegg’s office said he accepted the explanation “but made the point that recent remarks from members of the French Government about the U.K. economy were simply unacceptable and that steps should be taken to calm the rhetoric.”

Eurozone officials said potential downgrades, particularly from S&P, could raise the cost of borrowing for the region’s existing EFSF bailout fund but would not make a big difference to its operations.

EFSF chief Klaus Regling told the Rome conference there was about 600 billion euros available to fight the crisis, more than Italy and Spain’s combined funding needs for 2012.

“If Italy and Spain were to ask for support their gross financing needs for 2012 are less than that and I don’t think they would need to be taken off the market,” he said.

The EFSF has the option of providing first loss insurance on new bond issues, but the country concerned would have to make a formal request and negotiate conditionality, while the sum guaranteed would have to be agreed unanimously by EFSF members, subject to German parliamentary approval.

Eurozone countries are to hold a conference call next Monday to agree on a boost to the International Monetary Fund’s lending capacity, as part of measures to help cope with the debt crisis, to which they will commit 150 billion euros, Slovak Finance Minister Ivan Miklos told Reuters.

The United States has refused to offer any additional funding and it remains to be seen how much non-European economies such as China, Russia, Brazil and India are willing to commit.

The European Central Bank has resisted calls to embark on unlimited purchases of euro zone sovereign bonds to quell the debt crisis, putting the onus back on governments and their collective financial firewalls.

ECB President Mario Draghi said on Thursday that eurozone governments were on the right track to restore market confidence and the ECB’s bond-buy plan was “neither eternal nor infinite.”

But in one intriguing hint on Friday, Bank of Italy governor Ignazio Visco told the Rome conference: “The impression is that there is only one way to convince markets and we’ll work on that.” He did not elaborate.

The comments came amid growing signs that banks are resisting pressure from governments to come to the aid of debt-choked eurozone countries by using cheap money lent by the ECB to buy more sovereign bonds.

With eurozone governments needing to sell almost 80 billion euros of fresh debt in January alone, the stand-off between policymakers and banks could turn the slow-burning debt crisis into a conflagration in the New Year.

The chief executive of UniCredit, one of Italy’s two biggest banks, said this week using ECB money to buy government debt “wouldn’t be logical.”

In Greece, where the debt crisis began two years ago, a senior official of the EU/IMF troika team negotiating terms for a second bailout package said there was no guarantee that talks on the private sector’s contribution would lead to a voluntary deal involving the bulk of its creditors.

Agreement has been held up by wrangling over issues ranging from the credit status and interest coupons on the new bonds to legal guarantees to be offered by the official sector. Another key question is how many sign up to a private sector debt swap.

Failure to secure agreement could force a disorderly default which might in turn trigger a wider emergency across the eurozone.

Asked if there was a risk of a disorderly Greek default, the troika official said: “Our objective is still to have a voluntary operation. If you ask me: is there a guarantee that there will be a voluntary operation? Of course there can never be a guarantee.”

France rejects Russia’s Syria resolution as ‘unacceptable’

Russia unexpectedly presented a new, beefed-up draft resolution on the violence in Syria to the security council on Thursday. (Reuters

Russia’s draft U.N. Security Council resolution on Syria is unacceptable to France, but Moscow’s recognition that the body must react to the bloodshed is a positive step, France's Foreign Ministry said on Friday.

Russia unexpectedly presented a new, beefed-up draft resolution on the violence in Syria to the security council on Thursday. Western envoys said the text was too weak even though it expanded and toughened previous Russian drafts.

Both Russia and China vetoed a West European draft resolution in October that contained a threat of sanctions.

“For France, it is a positive development that Russia has decided to recognize that the serious deterioration of the situation in Syria merits a Security Council resolution,” French Foreign Ministry spokesman Bernard Valero told a regular news briefing.

Describing the blockage in the security council as scandalous, Valero said that a U.N. resolution should be quickly adopted condemning crimes against humanity in Syria and supporting a credible, political solution.

“It (France) is ready to work with all of its partners but it underlines that the Russian text has elements that are not acceptable in their current form,” Valero said.

“It’s in particular unacceptable to put the Syrian regime’s repression on the same level as the Syrian people's resistance,” he added.

Russia’s U.N. Ambassador Vitaly Churkin said on Thursday Russia did not believe both sides in Syria were equally responsible for the bloodshed and noted that the new draft called on both sides to halt the violence.

Al Arabiya News

Big Brother tactics track shoppers at stores


Retailers have a case of Web envy.

Brick-and-mortar stores have long wanted to track consumers the way online merchants do and are starting to figure out how. They're using security cameras to monitor shopping behavior and tracking mobile phones to divine which stores people visit.

The technologies mean retailers from discount chain Family Dollar Stores to luxury pen maker Montblanc can make changes on the fly - such as deploying more salespeople in a given department and moving high-margin merchandise to parts of the store where shoppers are more likely to see it.

"It's really a game-changing experience, and this is only the beginning," said Rodrigo Fajardo, a Montblanc brand manager, who says a 6-month-old tracking system prompted him to move best-selling items to another part of his Miami store, boosting sales 20 percent.

As increasing numbers of shoppers migrate to the Web, retailers are using the new technology to boost sales and keep market share.

Online stores have advantages, including the ability to track how long shoppers linger and what they click on, said Lora Cecere, an analyst at Altimeter Group in San Mateo. By contrast, brick-and-mortar merchants wait for sales numbers to come in before taking action, she said.

"Right now, physical stores are only looking at dollars per person, dollars per store and ignoring big problems until the numbers come in," she said. "To compete, they need to embrace this data so they have the ability to innovate."

For years, retailers have deployed security cameras, largely to deter and catch shoplifters. Now some are using the cameras to watch how shoppers behave.

3VR, a San Francisco security firm that made its first product for the CIA, realized its cameras could be used to gather consumer data two years ago when T-Mobile USA Inc. asked if the firm could count people entering its stores, 3VR Chief Executive Officer Al Shipp said.

T-Mobile now uses the cameras in 1,000 stores to track how people move around, how long they stand in front of displays, and which phones they pick up and for how long, Shipp said.

T-Mobile USA, which is owned by Deutsche Telekom AG, declined to comment.

3VR is now testing facial-recognition software internally that can identify shoppers' gender and approximate age. The software doesn't identify a person; it would give retailers a better handle on customer demographics at specific stores and help them gear promotions to age and gender, Shipp said.

This year, Family Dollar Stores began testing a monitoring system using cameras in 20 stores. Designed by San Jose's RetailNext, which is also working with Cie. Financiere Richemont SA's Montblanc, the system watches how customers interact with store displays. Then it correlates the results with sales data to figure out the percentage of customers who buy something, right down to individual products.

In many cases, the data refuted conventional wisdom, according to RetailNext CEO Alexei Agratchev. Retailers often put high-margin merchandise just inside the store entrance, believing shoppers will stop and take a look. Turns out most don't, Agratchev said.

"The stores have been a black hole," according to Agratchev, who says 40 chains are using RetailNext's technology. "People were convinced something was true and spending tens of millions based on that. Then it quickly became apparent it wasn't true."

While retailers are starting to understand the potential of security cameras as intelligence-gathering tools, it will take time for the technology to become widespread because loss-prevention managers rather than marketing types still have authority over the cameras, Shipp, a former Apple executive, said.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/12/14/BUR61MCECI.DTL#ixzz1ghsRKtVU

Top Turkish military council reviews preparedness for war


Top Turkish military council has said it reviewed Turkish military’s preparedness for war following a key meeting.

A statement released by General Staff in its web-site on Thursday said Supreme Military Council (YAŞ) discussed activities of Turkish military in domestic and border security, adding that it reviewed Turkish Armed Forces (TSK) preparedness for war.

The statement didn’t elaborate threats Turkey face and said it assessed Turkish army’s needs and necessary steps to address these requirements to this end.

Foreign Minister Ahmet Davutoğlu said in an interview two weeks ago that Turkey does not want to consider a military option for intervention in neighboring Syria as Damascus cracks down on popular protest, but it is ready for any scenario.

Davutoğlu also said the international community may decide a buffer zone is needed in Syria if hundreds of thousands of people try to flee the violence there.

Syria is facing growing economic sanctions and condemnation over what the United Nations calls "gross human rights violations", but President Bashar al-Assad shows no sign of buckling under pressure to end his military crackdown on protesters calling for his overthrow. UN said this week that death toll is more than 5,000.

"If the oppression continues, Turkey is ready for any scenario. We hope that a military intervention will never be necessary. The Syrian regime has to find a way of making peace with its own people," Davutoğlu then said.

Today's Zaman

Israel forms special ops command; experts eye Iran


(Reuters) - Israel said on Thursday it was unifying its special forces under one command, a move experts say could help Israel strike countries like Iran, whose nuclear program the Jewish state deems a threat to its existence.

"The primary task of the Corps will be to extend joint IDF (Israel Defence Force) operations into the strategic depth," said a statement from the military, announcing the formation of the "Depth Corps."

Citing interviews with senior Israeli officers, American journal Defense News said the Corps commandos would be able to operate "far from Israel's borders" in the "third circle" - a term that generally applies to the Gulf and the Horn of Africa.

Israeli media predicted that the Depth Corps might operate inside Iran, which a U.N. nuclear watchdog report last month said appeared to be working on designing a nuclear weapon.

That finding has ratcheted up tension between Iran and Western powers and Israel. Diplomatic sources said on Wednesday Iran could soon begin sensitive atomic activities in an underground facility deep inside a mountain.

Iran, which denies seeking the bomb, has lost several nuclear scientists and military brass to assassinations, suspected defections and explosions, feeding speculation that Israel and Western allies are already waging sabotage campaigns.

Elite ground, air and naval units would all retain their unique capabilities, Defense News reported, but the new structure would encourage them to more closely collaborate in mission planning.

The IDF's most prestigious unit, Sayeret Matkal, counts Prime Minister Benjamin Netanyahu among its veterans and is famed for carrying out the 1976 rescue of Israeli airline passengers hijacked on an Air France plane and flown to Uganda.

Bank of America sees deeper eurozone crisis before ECB rescue


The final trigger is most likely to be a bad debt auctions in Rome, pushing yields beyond the pain threshhold. Italy must raise €48bn (£40bn) in late February. But Greek elections in February are a minefield, and Spain's new government may reveal that the budget deficit is up to 1.5pc of GDP higher than planned. A blizzard of sovereign downgrades loom.

"The Eurozone is like sky-diving without a parachute. We think the ECB will provide a parachute in the end, but not until things get a lot worse," said Athanasios Vamvakidis, the bank's currency chief.

Euroland is already in recession, made worse by €1.5 trillion of bank deleveraging and fiscal tightening of 1.2pc of GDP in 2012, with a further 2pc to 3pc in 2013 as debt-brakes come into force.

"The ECB will have to step in," said Laurence Boone, the bank's Europe economist. She fears the crisis will blow up by Easter or the early summer. "We think the ECB will cut rates to 0.5pc by February, and then start to step up bond purchases as the situation deteriorates. There are ways of doing this within the bank's remit, and the Germans are in a minority."

The ECB can plausibly argue that the "monetary transmission channel" is no longer functioning if rock-bottom rates fail to halt bond turmoil in Italy. This should clear the way for radical action to cap yields.

Ultimately, the bank may play the deflation card, arguing that full-blown quantitative easing is needed to stop inflation (now 3pc) falling too low as commodities slide.

"The ECB is a forward looking bank. Mario Draghi has made it clear he is looking at leading indicators, which was less the Trichet habit."

Bank of America said British gilts should remain a safe-haven as long as the Coalition holds together. "The UK is the only advanced economy with a plan. You may not like the plan, but at least they know what they want to do," said Mr Vamvakidis. "If the risks to the global economy materialise, the plan will not work.

The very tight fiscal policy would make a UK recession worse, while loosening significantly could raise market concerns about UK debt sustainability."

The bank said Britain would not suffer any loss of growth if it withdrew from the EU and negotiated a European Free Trade Area deal. If the UK was forced to rely on World Trade Organisation rules, it might lose 0.2pc in annual growth.

Australian Banks Given One Week To Prepare For European "Meltdown"

Whereas previously we had heard extensive horror stories about banks being told to prepare for the end of the world in case the European summit (the latest and greatest one from last Friday which was supposed to find a cure for cancer among other things) failed, and even went so far as to read about preparations for trading in the drachma on a when issued basis, once the summit passed (and it was clear that media posturing would do nothing to fix what has already been a failure and it would be best to remove the threats of "reality" from the public's attention) all such "end of the world" speculation promptly disappeared - after all why remind people that things are now worse than ever. Until today. 

According to the Australian Finance Review (link - subscription required), banks down under "have been given 1 week by regulators to stress test how they would handle a spike in joblessness, plunge in home prices spurred by EU debt crisis." Aka a European "Meltdown." And since we don't have immediate access to the article, we leave it to Bloomberg First Word to describe for us what the article says:
Australian Prudential Regulation Authority envision worst-case scenario of 12% unemployment, 30% drop in house prices, 40% fall in commercial property values, AFR says Banks will assume that write-offs, other mitigation measures are unavailable; later stress tests might allow for such steps, AFR says
Australia’s banks have A$87.2b of exposure to Europe, or 2.7% of assets, with A$74.6b of it mostly tied to bank borrowers in France, Germany, Netherlands, AFR says, citing RBA statistics

Why is this notable? Because unlike before, when media reports were really a propaganda ploy to get European politicians to collaborate (what has now proven to be an impossible task), and nothing but a rhetorical device, this time around, the warning is for real. And, more importantly, we have a sense of urgency, courtesy of the 1 week deadline: the question then is is it really that bad, and does Europe truly have a little over a week for global banks to prepare for the inevitable fall out?

Lastly, how long until our own prudent leaders decide it may be time to push the Stress Test scheduled for next year forward, just in case the "unthinkable" does happen, and US banks end up getting stampeded even as the rest of the world is already prepared for a worst case scenario?

We are confident Tim Geithner will get right back to us asap on all of these open items.

Zero Hedge