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Tuesday, January 31, 2012

European Bailout Infographic: Presenting The Truckloads Of Cash Needed To Rescue The Insolvent PIIGS

...No, literally truckloads. Our friends at demonocracy.info have been kind enough to put together an infographic that explains the European bailout in simple, visual terms, that even the most innocent of FTL truckers can grasp without much exertion, for the simple reason that it shows all the bailouts amounts in terms of trucks of cash. And here is the kicker: one would need a 13 lane highway, filled with trucks bumper to bumper, stretching for about 3 kilometers to represent the €2.91 trillion in total amounts owed by the PIIGS and their citizens (whether voluntarily or not... actually make that involuntarily) to  Europe's largest banks. What is most frightening is what is not shown: just how it is that the world's central banks are keeping all of these banks propped up. Because sooner or later all this money will be discovered to have been fatally misallocated. Then the real bailout cost will become all too evident, and just like in the US, it will be in the double digit trillions. Which means the metaphorical highway of trucks full of cash will stretch on for kilometers and kilometers and so on (or miles, for the naive US-based truckers). But since that day is in the future, there is no reason to worry about it. 

Eurozone leaders sign up to budget controls

Only Britain and the Czech Republic refused to agree to the fiscal compact, due to be signed in March, that will impose quasi-automatic sanctions on countries that breach European Union budget deficit limits and pledge balanced budget rules will go into national law.

Prime Minister David Cameron said further reforms were still needed by eurozone states to end the debt crisis in the region.

"I don't think this treaty on its own will sort the eurozone's problems," he said after the leaders' meeting in Brussels. "There is a fiscal problem but there is also a competitiveness issue."

Countries like Italy and Portugal "need to reform their labour markets, open up their economies," Mr Cameron added.

Officially, the half-day summit focused mainly on a strategy to revive growth and create jobs at a time when governments across Europe are having to cut public spending and raise taxes to tackle mountains of debt.

But differences over the limits of austerity, and Greece's unfinished debt restructuring negotiations, hampered efforts to send a more optimistic message that Europe is getting on top of its debt crisis.

French President Nicolas Sarkozy told a news conference he expected a final agreement on reducing Greece's debt to private bondholders "in the next few days" and believed that European institutions - a clear reference to the European Central Bank - would decide independently to help meet a funding gap.

EU Council President Herman Van Rompuy said a deal was needed this week in order for it to be finalised in time to avert a Greek default in mid-March when it faces huge bond repayments.

Asked about a German proposal to place Greek public finances under the control of a European commissar, Mr Sarkozy said: "That there should be supervision is quite normal, but there can be no question of any country being put under stewardship."

The leaders agreed that a €500bn (£418bn) European Stability Mechanism (ESM) will enter into force in July, a year earlier than planned, to provide support for heavily indebted states.

However the eurozone is already under pressure from the US, China, the International Monetary Fund and some of its own member states to increase the size of the financial firewall.

Many economists doubt the wisdom of so severely restricting deficit spending and EU diplomats say the fiscal compact was mostly a political gesture to calm German voters angry at repeated euro zone bailouts and to restore market confidence.

President Sarkozy said Czech Prime Minister Petr Necas had said he could not sign up now for constitutional reasons.

There was no repetition of last month's confrontation between Mr Cameron and Mr Sarkozy when the Prime Minister vetoed efforts to amend the EU treaty to tighten eurozone budget discipline.

But the PM told reporters: "We are not signing this treaty. We are not ratifying it. And it places no obligations on the UK.

"Our national interest is that these countries get on and sort out the mess that is the euro," he added.

German Chancellor Angela Merkel said that although Cameron had shown no sign of relenting in his opposition to treaty change, the new pact could be easily slotted into EU law at a later date and she expected it would be within five years.

The Telegraph

Military Developments Around Israel

Muslim Brotherhood Will Cancel Egypt’s 1979 Peace Treaty With Israel

Egypt’s Muslim Brotherhood will eventually cancel the Camp David Agreement, despite the group’s announcement that it respects international agreements Egypt has signed, said Amin al-Sayed Ibrahim, head of Hezbollah’s political council.

Speaking to the “International Conference on Islamic Awakening and the Youths,” Ibrahim said that the Egyptian military, so as not to lose its clout, would never allow the Brotherhood to write the constitution or even form a constituent assembly to write the constitution.

Following their electoral victories in Parliament, Egypt's most organized political group has offered assurances that it would respect the 1979 peace treaty with Israel.

When asked early this month whether Washington believed that the Islamist party would uphold the treaty, State Department spokeswoman Victoria Nuland said that the party "has made commitments to us in this regard.”

Ibrahim said that the current unrest in Syria is a conspiracy and not a revolution, as western media claims. The Egyptian delegation clashed with him over the remarks.

“The Syrians transfer arms to the Palestinian resistance,” he said.

Over 1,200 young people from Iran as well as 73 other countries are participating in the two-day conference, Iran’s Fars news agency reported on Monday.

Al Masry Al Youm

Fuel on the Fire: Who's behind bloodshed in Syria?

Goldman Sachs cooked Greece books

Peres: Iran's 'evil' leaders must not be allowed to gain nuclear weapons

Iran's "evil" leaders cannot be allowed to obtain nuclear weapons, President Shimon Peres said on Tuesday, calling the Islamic Republic's nuclear ambitions the world's single most important issue.

Peres' comments came at the opening of the Herzliya Conference, which was attended by World Bank President Robert Zoellick, Czech Foreign Minister Karel Schwarzenberg, and former Greek Prime Minister George Papandreou.

Referring to Iran's contentious nuclear program, the president called the issue "ours and the world's central problem at this time, accusing Iran of attempting to achieve regional and "even global hegemony."

"Nuclear weapons mustn't be allowed to fall into the hands of Iran's Ayatollah regime," Peres said, calling Iran's religious leadership the "most morally corrupt regime in the world."

Hinting at the possibility of a strike against Iran's nuclear facilities, the president reiterated the Israeli stance, according to which "no option should be ruled out in our dealing with the Iranian danger. This is an existential threat."

"It is the duty of the international community to prevent evil and nuclear [weapons] from coming together. That is the obligations of most of the leaders of the free world, one which they must meet," Peres said.

On what he called "the moral significance of this battle," the president spoke of an Iranian regime which "executes people for their views. It funds, trains, and guides terrorists to spread terror and murder across the globe."

"This is a way of operation that must be condemned by everyone everywhere," Peres said, adding that, "eventually, the current Iranian leadership offers the future only destruction. It threatens human rights and the peace of nations."

In his address to the Herzliya Conference, president Peres also spoke of the necessity to restart peace negotiations with the Palestinians, saying that ending the Israeli-Palestinian conflict was the only way to ensure Israel isn't made into the scapegoat of a rapidly changing Middle East.

If peace is not advanced, the president said, religious extremism could gain control of the region, "an extremism which Iran attempts to lead using its two proxies: Hezbollah in Lebanon, Hamas in Gaza, as well as other extensions throughout the region."

"The terror organizations are trying to drag Israel into an Arab internal struggle so they can direct the masses' rage against us. They have no rehabilitation plans, only incitement habits," Peres added.

The only way to prevent this takeover of extremism, then, is "to put an end to the conflict between us and the Palestinians, similarly to the agreements with Egypt and Jordan."

"When I say we must, I say so because I believe ending the conflict is possible. I've known the people heading the Palestinian Authority for decades," Peres said, adding that he believed "[Palestinian] President Mahmoud Abbas and [Palestinian] Prime Minister Salam Fayyad are worthy partners who do not wish to see the conflict go further."

Speaking of the reasons for the recent inability to restart peace talks, the president said that the two issues mainly holding up negotiations were "borders and security."

"The borders must be set as to determine the security arrangements, and must be set soon. This kind of negotiations must take place outside the box, and away from the headlines. Through it both sides will achieve something which cannot be achieved without talks – an end to the conflict," Peres added.

The president's comments came after, on Sunday, Prime Minister Benjamin Netanyahu said that peace prospects with the Palestinians were looking poor.

"As things stand now, according to what happened over the past few days - when the Palestinians refused even to discuss Israel's security needs with us - the signs are not particularly good," he told his cabinet in public remarks.

Netanyahu's remarks came after Palestinian President Mahmoud Abbas told reporters in Ramallah on Saturday that Israel was to blame for the failure of the recent round of talks to relaunch direct talks.

Abbas claimed that during talks mediated by Jordan in recent weeks, Israel had presented an unclear position on security matters and on the question of borders between Israel and a future Palestinian state. Palestinian sources said Israel's border proposal would have prevented the establishment a Palestinian state.

Palestinian officials said last week an Israeli negotiator's verbal presentation on Wednesday of ideas for borders and security arrangements of a future Palestinian state was a non-starter, envisaging a fenced-off territory of cantons that would preserve most Jewish settlements.

Netanyahu said he still hoped the Palestinians would "come to their senses and continue the talks so that we can move on to real negotiations."

Israeli and Palestinian negotiators held five rounds of exploratory talks in Jordan, part of a push by international mediators to revive negotiations suspended in 2010 in a dispute over Jewish settlement building in the occupied West Bank.


Iran willing to attack on U.S. soil, U.S. intelligence report finds

If you Killed 5 of his scientists do not think they want to kiss you....

U.S. intelligence agencies believe that Iran is prepared to launch terrorist attacks inside the United States in response to perceived threats from America and its allies, the U.S. spy chief said Tuesday.

Director of National Intelligence James R. Clapper Jr. said in prepared testimony that an alleged Iranian plot to assassinate the Saudi ambassador in Washington that was uncovered last year reflects an aggressive new willingness within the upper ranks of the Islamist republic to authorize attacks against the United States.

That plot “shows that some Iranian officials — probably including Supreme Leader Ali Khamenei — have changed their calculus and are now more willing to conduct an attack in the United States in response to real or perceived U.S. actions that threaten the regime,” Clapper said in the testimony, which was submitted to the Senate Intelligence Committee in advance of athreat assessment hearing Tuesday. “We are also concerned about Iranian plotting against U.S. or allied interests overseas.”

The assessment signals a potentially dire new direction in the adversarial relationship between the United States and Iran, at a time when there are indications that a covert campaign is already underway to thwart Iran’s alleged ambition to develop a nuclear weapon.

Clapper’s warning about Iran was delivered as part of the U.S. intelligence community’s annual overview of the nation’s most serious national security concerns. As the hearing got underway, Clapper signaled that the United States is seeking to avoid a violent confrontation with Iran, instead pushing for more and more sanctions while also monitoring the possibility of a preemptive strike by Israel.

“Our hope is that the sanctions ... would have the effect of inducing a change in Iranian policy toward their apparent pursuit of a nuclear capability,” Clapper said. “Obviously this is a very sensitive issue right now. We’re doing a lot with the Israelis.”

Clapper’s testimony also calls attention to a heightened concern over cyber-related threats, as well as the diminished but persistent danger to the United States posed by al-Qaeda.

This year’s assessment is the first to evaluate al-Qaeda’s capabilities since Osama bin Laden was killed in a U.S. commando raid in May. That blow, combined with the toll taken by subsequent strikes and raids, has destroyed al-Qaeda’s core.

As a result, Clapper said in the testimony, the United States is entering a “critical transitional phase for the terrorist threat,” in which smaller-bore strikes from regional nodes are more likely than elaborate, mass-casualty plots.

If the pressure on al-Qaeda can be maintained, “there is a better-than-even chance that decentralization will lead to fragmentation,” Clapper said. The terrorist group “will seek to execute smaller, simpler plots to demonstrate relevance to the global jihad.”

The group’s affiliate in Yemen continues to be seen as the most likely source of plots targeting the United States. But the death of U.S.-born cleric Anwar al-Awlaki in a CIA drone strike in Yemen last year has at least temporarily eroded the affiliate’s ability to mount international attacks.

Tha washington Post

Deaths in Ukraine and Poland in freezing Europe weather

At least 30 people have died in Ukraine and 10 in Poland after heavy snow fall and a drop in temperatures across much of central and eastern Europe.

Three deaths were also reported in Serbia and one in Bulgaria.

Ukrainian health officials said more than 600 people had sought treatment for frostbite and hypothermia in just three days.

And over that time, nearly 24,000 people sought refuge in some 1,590 shelters, the officials say.

Temperatures have plunged to -16C (3F) during the day and -23C (-10F) at night.

Many of the dead were homeless people, whose bodies were discovered on the streets, Ukraine's Emergency Situations Ministry said.

Poland had been having a relatively mild winter, until temperatures dropped last Friday from just below freezing to -26C (-15F).

Malgorzata Wozniak of Poland's interior ministry told the Associated Press that elderly people and the homeless were among the dead.

Polish forecasters have warned that temperatures could fall further during the week, to below -20C during the day and -30C at night.

In Serbia, police reported that the snowy conditions had led to the deaths of a woman and two elderly men. Two other men, in their 70s, are believed to be missing in the south of the country.

The freezing conditions also claimed a life in neighbouring Bulgaria.

Emergency shelters offering food and heat are being set up in the Bulgarian capital Sofia and the Czech capital Prague, reports say.


'Israel sees narrowing window for Iran strike'

Israeli officials are quietly conceding that new international sanctions targeting Iran's suspect nuclear program, while welcome, are further constraining Israel's ability to take military action – just as a window of opportunity is closing because Tehran is moving more of its installations underground.

The officials said that Israel must act by the summer if it wants to effectively attack Iran's program.

A key question in the debate is how much damage Israel, or anyone else, can inflict, and whether it would be worth the risk of a possible counterstrike.

Israel has been a leading voice in the international calls to curb Iran's nuclear program. Like the West, it believes the Iranians are moving toward nuclear weapons capability – a charge Tehran denies.

Israel contends a nuclear-armed Iran would threaten its survival. It also fears an Iranian bomb would touch off a nuclear arms race in a region still largely hostile to Israel.

Israeli leaders say they prefer a diplomatic solution. But – skeptical of international resolve – Israel refuses to rule out the use of force, saying frequently that "all options are on the table."

Is time running out?

After calling for tougher sanctions against Iran at the World Economic Forum in Davos, Defense Minister Ehud Barak said Friday: "We must not waste time on this matter; the Iranians continue to advance (toward nuclear weapons), identifying every crack and squeezing through. Time is urgently running out."

Key Israeli defense officials believe that the time to strike, if such a decision is made, would have to be by the middle of this year.

Complicating the task is the assessment that Iran is stepping up efforts to move its work on enriching uranium deep underground.

Several officials at the heart of the decision-making structure, speaking on condition of anonymity because they were discussing some of Israel's deepest secrets, said they feel compelled to give the sanctions time.

In this way, somewhat paradoxically, the new economic sanctions the US and Europe are imposing – while meeting a repeated Israeli request – have emerged as an obstacle to military action.

Iranian nuclear facility (Photo: EPA)

An Israeli strike would risk shattering the US-led diplomatic front that has imposed four additional rounds of sanctions on Iran and jolt the shaky world economy by causing oil prices to spike. Still, the officials said that if Israel feels no alternative but to take military action, it will do so.

The US has sold Israel dozens of 100 GBU-28 laser-guided "bunker-buster" bombs. The 2.5-ton bombs are capable of penetrating more than 20 feet of solid concrete.

It's not clear how much damage the bunker-busters could actually do. Iran's main enrichment site at Natanz is believed to be about 25 feet (6 meters) underground and protected by two concrete walls.

US Defense Secretary Leon Panetta told The Wall Street Journal last week that even more sophisticated US bunker-busters aren't powerful enough to penetrate all of Iran's defenses.

'Strike won't really delay Iran'

Many believe that in the event of a strike, Iran would likely unleash its large arsenal of missiles capable of striking Israel.

Iran's local proxies, Hezbollah to Israel's north and Hamas to the south, possess tens of thousands of short-range rockets and missiles. American soldiers in the Persian Gulf might come under fire. Islamist backers of Iran could target civilians all over the world.

The prospect of a new conflagration in the Mideast is one reason cited by some influential Israeli figures, like recently retired spy chief Meir Dagan, when arguing against an Israeli military attack.

Perhaps the biggest factor in the Israeli thinking is how much damage an airstrike could even cause.

"What will tip the scales in favor or against an attack is whether we will really be able to do inflict serious damage," said Yiftah Shapir, an expert in nuclear arms proliferation at Tel Aviv University. "That will be more important than whether we are ready to absorb (the casualties) of an attack."

Israeli officials believe the Iranian nuclear program is so far advanced that any attack would delay it by two to three years at best, but not destroy it.

"It's a very advanced program with many facilities, some very large and some very fortified. To destroy them you need a series of massive assaults for two to three weeks, a month, something like that," Shapir said.


A Very Disturbing Chart and a MUST READ article on Silver

India defies sanctions, won't cut Iran oil imports

India has joined China in saying it will not cut back on oil imports from Iran, despite stiff new U.S. and European sanctions designed to pressure Tehran over its nuclear program.

"It is not possible for India to take any decision to reduce the import from Iran drastically because, after all, the countries which can provide the requirement of the emerging economy, Iran is an important country amongst them," India's finance minister Pranab Mukherjee told reporters Sunday in Chicago.

India and China together accounted for 34 percent of Iran's oil exports from January to September of 2011 -- slightly more than Europe, according to International Energy Agency data.

The move is likely to be seen as a political victory in Iran, but it's unclear how Chinese and Indian companies will actually be able to pay for Iranian oil without running afoul of the sanctions, analysts said.

"It's a blow," said David Hartwell, senior Middle East analyst at IHS Jane's, adding that Iran may have discounted prices to keep the Chinese and Indians on their side. "If you have two major countries like India and China saying they will not abide by the sanctions, that's going to keep a vital line open for the Iranians to continue to sidestep the sanctions and get foreign capital."

He said India and China could just be trying to buy time to diversify their oil supplies and may steer away from Iran, especially if Saudi Arabia -- India's largest source of oil imports -- were to ramp up production and offer an attractively priced alternative.

The European Union last week imposed an oil embargo against Iran and froze the assets of its central bank. In December, the U.S. said it would bar financial institutions from the U.S. market if they do business with Iran's central bank.

India and China are ravenous energy consumers and rely heavily on imported oil. Iranian oil accounts for 9 percent of India's oil consumption and 6 percent of China's, according to the latest data from the IEA.

Iran exports 2.5 million barrels of oil per day, about 3 percent of world supplies. About 500,000 barrels go to Europe and most of the rest goes to China, India, Japan and South Korea.

China has called for negotiations over Iran's nuclear program. South Korea has been non-committal about the sanctions, and Japan is seeking an exemption, saying its Iranian oil imports have steadily declined and probably will continue to do so.

Kyodo News agency reported that senior Japanese and U.S. officials on Thursday will hold their second meeting on the sanctions this month.

"I believe it may not be easy to come to a conclusion on this matter in the upcoming discussions," Foreign Minister Koichiro Gemba said.

Western sanctions could make it harder for India to pay for the oil it gets from Iran. Past sanctions have already delayed payments by Indian oil importers, who have had to scramble to find banks willing to handle transactions with Iran.

India's central bank governor D. Subbarao said last week that the current payment mechanism was "working fine," though India was also "exploring other options," which he declined to discuss.

Indian companies now reportedly route payments through Turkey's Turkiye Halk Bankasi AS, after EU pressure forced German-based Europaisch-Iranische Handelsbank AG to stop handling the payments last year.

IHS Jane's energy analyst said Turkey is unlikely to shut down that route immediately, noting that Turkish oil refiner Tupras also uses this payment mechanism.

"But this route remains susceptible to external pressure," she added by email. "India is now discussing rupee based payments and direct trade -- however that has a number of drawbacks for Iran given the trade imbalance and restrictions on use. China isn't publicly discussing options but I imagine other currency payments are also on the cards there."

Read more: http://www.foxnews.com/world/2012/01/30/india-defies-sanctions-wont-cut-iran-oil-imports-424131556/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxnews/world+(Internal+-+World+Latest+-+Text)&utm_content=Google+Reader#ixzz1l3ZTFSNh

George Soros: Not "Much Difference" Between Romney And Obama

They have them all......

Billionaire investor George Soros explains why there wouldn't be much difference for Wall Street between President Obama and Mitt Romney. He also tells Chrystia Freeland why his billionaire constituents see him as a traitor to his class.

"If it's between Obama and Romney, there isn't all that much difference except for the crowd that they bring with them," George Soros told Reuters in Davos, Switzerland.

"So it won't be that great a difference and I think there won't be a great deal of enthusiasm on either side of the battleground. It will be more civilised than the previous elections have been," he also said.

Real Clear Politics

EL-ERIAN: 4 Reasons The Global Economy Rests 'On A Knife's Edge'

mohamed el-erian pimco

The world faces a monumental but "unsettling" choice right now, writes PIMCO CEO and co-chief investment officer Mohammad El-Erian in a Foreign Policy article published today.

"It can either break out of its current malaise and deliver economic prosperity, jobs, and greater social fairness; or, instead, it can slip deeper into unemployment, inequality, financial instability, and trade wars."

The outcome of this make-it-or-break-it moment hinges on the outcomes of four major issues:
"European economic and financial fragmentation," which threatens to plunge the global economy into recession
"Disruptions in the Middle East" that could disrupt the entire region
"Central bank exhaustion" after they have run out of options to ease struggling economies
"Social unrest," in particular the inability of grassroots movements with complaints to transform themselves into forward-looking organizations that will influence policy

On the other hand, four "best case scenarios" could easily unsettle this trend. However, all these scenarios revolve around an efficient, forward-looking political leadership—and the people who vote that leadership into office:

It is not due to complicated technical difficulties that many of the world's economic problems persist and deepen. In most cases, today's malaise is a reflection of political dysfunction and ineffective leadership, both of which pre-empt any meaningful effort to take the difficult yet necessary decisions. Witness how the U.S. Congress has torpedoed President Barack Obama's job initiative. As a result, the credibility of the system itself suffers. Fortunately, several key countries, including the United States, are holding elections this year, giving citizens an opportunity to send a message to their elected representatives. The greater the clarity and urgency of that message, the higher the probability that bickering politicians can overcome real and perceived legacies to unite in doing the right thing for current and future generations of citizens.

Read more: http://www.businessinsider.com/el-erian-4-reasons-the-future-of-the-global-economy-rests-on-a-knifes-edge-2012-1?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheMoneyGame+(The+Money+Game)&utm_content=Google+Reader#ixzz1l2rC6q98

Portuguese storm gathers as EU leaders fight over Greece

Yields on Portuguese 10-year bonds hit a fresh record of 17.38pc on Monday even though the country is already shielded by a €78bn (£65.2bn) package from the EU, European Central Bank (ECB) and International Monetary Fund "troika" and does not have to tap the markets this year.

Reports also emerged on Monday night that European banks were gearing up to ask the ECB's emergency funding scheme for up to twice as much in funds as the central bank supplied in its debut €489bn auction last month.

The news reveals the extent of the liquidity squeeze on banks – with some chief executives looking to tap the ECB for up to triple the amount they originally borrowed, when the three-year money auction takes place on February 29.

The funding facility was launched in December last year to stave off a second credit crisis – with €230bn of bank bonds due for repayment in the first quarter of 2012.

Equity markets fell across Europe on Monday, with France's CAC and Spain's IBEX both down 1.6pc.

The FTSE 100 fell 1.1pc and Germany's DAX was off 1pc, while the iTraxx Crossover index measuring credit risk in Europe jumped 30 points to 637. Yields on Italian 10-year debt rose 21 points to 6.08pc.

The worries over Portugal continued to mount even as German Chancellor Angela Merkel backed away from demands for a European austerity commissioner to take control of the Greek budget, averting an explosive clash with Athens.

"We don't want controversial talks, but a discussion that is successful for the Greek people," she said, insisting that Germany's plan was just one many of options.

The change of tack came after Berlin's allies in the northern creditor bloc warned such heavy-handed diplomacy had become offensive and breached the spirit of the EU project.

"You never stoop to insults in politics. It solves nothing," said Austria's Chancellor Werner Faymann. Luxembourg's foreign minister Jean Asselborn said it behoves Europe's most powerful state to display a "little more caution", advising Germany to "watch out" as passions grow stronger.

The dispute overshadowed the summit, intended to promote EU growth and tackle youth unemployment – now 22pc Europe-wide and 51pc in Greece. Talk of growth at a time when EU austerity has entrenched severe slumps across southern Europe has left markets bewildered.

While EU leaders fleshed out a German-inspired "fiscal compact" to police the budgets of EMU states, Finland called it "at best unnecessary and at worst harmful" while Luxembourg deemed it a "waste of time". The pact has been weakened, allowing a breach of the new structural deficit limit of 0.5pc of GDP in a wider range of circumstances.

On Monday night, 25 of the 27 EU nations signed up to the fiscal compact, with the Czech prime minister joining the UK in staying outside the deal.

While German calls for an EU commissar for Greece are not new, the aggressive tone of the draft shocked EU veterans. It stipulated that Athens must give "absolute priority to debt service", "transfer national budgetary sovereignty", and agree to terms that make it impossible for Greece to "threaten lenders with default". Furious Greek leaders rejected the terms as debt servitude.

Analysts have questioned whether Germany deliberately called for conditions that Athens cannot accept, perhaps to force Greece's withdrawal from the euro and set an example to others.

The softening of the German stance does not in itself settle the Greek crisis – even assuming Athens agrees soon to a deal with private creditors for debt relief near 70pc. Greece will almost certainly need a further €15bn on top of the €130bn package in force, yet Mrs Merkel has warned that Germany will not provide any further funds.

Jacques Cailloux from RBS said there would be a chain reaction if the troika halts payments and sets in motion a Greek default and exit from EMU.

"That would the disaster scenario. Those who think this could be contained don't know what they are talking about. There would be extraordinary contagion, as we are already seeing in Portugal, spreading back to Spain, Italy, and France," he said.

Citigroup thinks Portugal's economy will contract by 5.7pc this year and 3.5pc next year, replicating the downward spiral seen in Greece as austerity began to bite.

While Portugal has delivered on its promises, the task may be Sisyphean with a combined public and private debt of 360pc of GDP – 100 percentage points higher than in Greece. Grit alone cannot overcome the same chronic lack of competitiveness.

Europe's leaders have vowed that they will not inflict a "haircut" on Portugal's creditors, insisting that Greece is a "special case". The relentless exodus from Portuguese debt suggests that investors do not believe them.

The Telegraph

Green Light to WW3?