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Thursday, April 19, 2012

Eurozone crisis deepens and tensions rise within European Union

The outlook for the eurozone took a turn for the worse on Wednesday after data showed the economy deteriorating in Italy and Spain and the Portugese prime minister refused to rule out the need for a second bailout.

Stock markets tumbled across Europe after the Italian prime minister Mario Monti warned that he would miss deficit targets agreed with Brussels after suffering slower than expected growth.

A report by Spain's central bank also spooked the markets after it revealed a dramatic rise in the value of bad loans held by the country's banks. The amount of bad loans on the books of Spanish banks has risen to an 18-year high of 8.15% in February and accounted for €143.8bn (£117.7bn) of their outstanding €1.76 trillion of loans.

EU data for the construction industry revealed a dramatic collapse in activity last month with Italy one of the worst affected nations.

Tensions inside the EU, which had abated after a lending spree by the European Central Bank before Christmas, began to resurface after the boss of the German central Bank, Jens Weidmann, warned Spain to sort out its own finances without seeking an international bailout.

But several economists believe that Spanish banks will have to turn to the euro zone's rescue fund, the European Financial Stability Facility (EFSF), for help in covering losses caused by a property market crash.

Likewise, investors are fretting about how Spain's centre-right government can enforce deep austerity while reviving a recession-bound economy at the same time.

"They're going to need EFSF money to recapitalise the banking sector," said Carsten Brzeski, a senior economist at ING in Brussels. "I think we'll only see a real end to the Spanish misery if the real-estate market stabilises."

Madrid is likely to hold out for some time. "The underlying picture in Spain is dramatic, but is it dramatic in the way that it needs a bailout package tomorrow? No," Brzeski said. "But if you look ahead, let's say the next six months, I would not be surprised if they [the banks] have to get some kind of European support."

Some of the biggest investor groups are betting Spain and Portugal will be frozen out of international money markets within the next 18 months and are hedging against Germany being forced to act as lender of last resort.

A US hedge fund run by the billionaire John Paulson, who earned huge profits when the financial crisis struck from bets against the overheated US housing market, revealed he was now shorting European sovereign bonds, including Germany. Paulson expects the euro crisis to deepen and eventually undermine Berlin's status as a safe haven.

The head of German life insurer Allianz Leben, Maximilian Zimmerer, appeared to support this view in an interview with financial daily Handelsblatt. He said the safety of long-term German government bonds was overrated.

"They are overvalued; the yield is too low. If a eurozone country runs into trouble, Germany in any case will have to pick up the bill in the end," Zimmerer said.

Spain is widely considered to be nearing the point where it enters a debt spiral as rising unemployment and falling house prices undermine its banks, which in turn have kept the government afloat by lending it hundreds of billions of euros, much of it borrowed from the ECB.

The struggling right-wing administration of Mariano Rajoy, has dismissed concerns that he could be forced to plead for funds from Brussels despite wrestling with declining tax receipts and conflicts with regional government that are seeking to block spending cuts.

The Madrid stock market has fallen more than 15% in recent months amid increasing concerns for the key banking sector. Defaults are rising and credit is shrinking at a record pace as 24% unemployment undermines the quality of loans built up in the country's credit boom and saps the appetite of banks to make new ones.

Mario Monti's government made matters worse after he said the Italian economy would suffer a 1.2% fall in GDP in 2012, not the 0.4% decline previously pencilled in. He also admitted the deficit will be higher than planned over the next two years.

It now expects to post a deficit of 0.5% of GDP next year, up from a previous target of 0.1%.

European construction industry data added to the gloom in Rome. It showed activity fell by 3.7% across the EU in February, and by 7.1% within the eurozone. Italy's construction sector saw a 9.9% decrease in output.

The Guardian

The Santorini volcano caldera is awake again and rapidly deforming

Santorini is a volcanic island that has been relatively calm since its last eruption in 1950. But, its caldera is awake again and rapidly deforming at levels never seen before. Georgia Tech Associate Professor Andrew Newman has studied Santorini since setting up more than 20 GPS stations on the island in 2006.

Professor Andrew Newman has positioned more than 20 GPS stations on Santorini. Some have moved as much as 9 centimeters since the caldera rewakened in January of 2011. Should the volcano erupt underwater, it could produce local tsunamis, which could be dangerous for cruise ships that commonly visit the tourist attraction.

“After decades of little activity, a series of earthquakes and deformation began within the Santorini caldera in January of 2011,” said Newman, whose research is published by Geophysical Research Letters. “Since then, our instruments on the northern part of the island have moved laterally between five and nine centimeters. The volcano’s magma chamber is filling, and we are keeping a close eye on its activity.”

Newman cannot be certain whether an eruption is imminent since observations of such activity on these types of volcanoes are limited. In fact, similar calderas around the globe have shown comparable activity without erupting. However, Newman says the chamber has expanded by 14 million cubic meters since last January. That means enough magma has been pumped into the chamber to fill a sphere three football fields across.

Should Santorini erupt, Newman says it will likely be comparable to what the island has seen in the last 450 years.

“That could be dangerous,” notes Newman. “If the caldera erupts underwater, it could cause local tsunamis and affect boat traffic, including cruise ships, in the caldera. Earthquakes could damage homes and produce landslides along the cliffs.”

More than 50,000 tourists a day flock to Santorini in the summer months (from May to October). It’s common to see as many as five cruise ships floating above the volcano.


Santorini is the site of one of the largest volcanic events in human history. The Minoan eruption, which occurred around 1650 B.C., buried the major port city of Akrotiri with more than 20 meters of ash and created Santorini’s famous, present-day cliffs.

Newman says such history will likely not repeat itself any time soon. Such an eruption comes along once every 100,000 years, and the current inflation in the magma chamber is less than 1 percent of the Minoan blast.
The destruction of the Minoan Civilization

Somewhere between history and myth lie two historical events of immense importance that shook up and overwhelmed the Hellenic grounds: the destruction of the Minoan Civilization and the eruption of the Santorini Volcano, almost 3,500 years ago.

In Amnissos, the port of Knossos, the scientists examined findings that contained ash, marine species, cattle bones, floor and wall plaster, pumice and seashells. They figured out immediately that this could be explained only by a massive and sudden inflow of water and they called in Kostas Sinolakis, a tsunami expert.

The only way they could have been deposited on the land of Crete was by a tsunami. The tidal wave caused by Santorini Volcano travelled and hit the shores of Crete, destroying the plantations, the crops, the ships and commerce, devitalizing and deviating the Minoan Civilization. The Minoan ports and infrastructures were destroyed by the 50 feet waves and were never rebuilt.

Based on highly accurate and specialized software, Dr Sinolakis managed to reconstruct and enact the way that this tsunami travelled across the Aegean building a full picture of its scale and impact.

Using radio carbon techniques they compared the geological findings with the eruption era; all pieces were finally falling into place.

The conclusion was horrifying: not only one, but several successive tsunamis, of more than 50 feet (15m) were hitting the Cretan shores, every thirty minutes.

The watchers

Who is Magog? - Chuck Missler

Monsanto taking over global agriculture

Syria ,Apartment Burning In Residential Area Of Jouret Shiyah After Being Hit By Mortar 19.04.2012

More U.S. cities set to enter default danger zone

(Reuters) - America's swelling ranks of fallen municipal borrowers have been blamed in the past year on 'what-were-they-thinking' causes, be it a Taj Mahal sewer system in Alabama or an overpriced trash incinerator in Pennsylvania's capital city of Harrisburg.

But the next series of major cities and counties in danger of defaulting on their debt can hardly point to one single decision for their malaise. Whether it be Detroit, Miami or Providence, Rhode Island, their problems have a lot more to do with financial policies that put them on course to live well beyond their means.

Municipal defaults have shot up since 2007 and are on pace for another high year in 2012, according to Richard Lehmann, publisher of the Distressed Securities Newsletter.

Many failures will be due to local politicians' willingness to give unionized local government workers lucrative pensions and health care benefits when times were good. For others, the housing bust was enough to destroy their real estate tax base. They almost all share the failure to prepare for a rainy day.

Now, belt tightening by state and federal governments is adding to the pain - as contributions to governments at city and county levels get squeezed. Many of the places in the worst condition are in the Northeast, Midwest, California and Florida.

The new tide of defaults may worry some investors in the $3.7 trillion municipal bond market who have so far shrugged off the fiscal crises of local governments and yield cuts in local government services.

"This is a lagging process," said Richard Ciccarone, managing director at McDonnell Investment Management. "Capitulation may not come for years. In the crash of 1929, the defaults did not come until 1934 or 1935. The marginals hang on as they can."

Take a look at Miami. The city just added a futuristic baseball stadium to its skyline and is gaining prominence as a global business center even as Miami's exposure to declining housing values, low reserves and high pension obligations worry some bond buyers.

The long-running housing crisis threatens Miami because drops in city property values are only now strongly hurting tax payments, according to institutional investor Chris Ihlefeld of Thornburg Investment Management.

"Miami was dealt a pretty big blow following and during the recession in terms of property tax revenues," he said. "Part of the smoothing process implies that when you had a problem two years ago, it'll show up now."

Ihlefeld said his firm had concluded that Miami, which is wrestling with a budget shortfall nearing $40 million, had relatively high debts and other credit negatives.

Detroit, where the long decline of the region's car-making industry and $300 million a year in pension costs may help lead to a state-government takeover, also suffers from weakened tax collections, along with many other local governments.

Administrators of Chicago's vast public schools system face a $700 million budget gap created by shrinking federal funds and widening debt, pension and other costs. Chicago's mayor warned last week that property taxes in the city would have to be hiked 150 percent if government-workers pensions are left as they are.

One of New York's wealthiest counties, Suffolk County on Long Island, in March declared a financial emergency and reported worryingly low liquidity and a projected three-year deficit of $530 million blamed partly on overspending.

Twenty three villages and cities in Ohio, as well as five school districts in the state with a slowly expanding economy and a history of heavy home foreclosures, are in fiscal emergency, according to the Ohio state auditor's office.

Badly hit by the burst of the property boom, California's Stockton, with 292,000 people and east of San Francisco, has endorsed defaults on $2 million of debt payments and may file for municipal bankruptcy if it cannot reach deals with creditors. The California ski resort, Mammoth Lakes, is also bargaining with creditors in a bid to avoid bankruptcy.

By far the most populous state and issuer of muni bonds, California suffers from sagging home prices, with values in Los Angeles and San Francisco off 40 percent in the five years through January, according to data reported by Standard & Poor's/Case-Shiller.

Declining property values that result in lower property tax assessments are likely to continue since property assessments trail by years falls in market prices.

"Over the next year or two, there is a big risk of more Chapter 9 filings in certain parts of the country: California, Rhode Island and the Midwest," said municipal bankruptcy lawyer David Dubrow of Arent Fox.

In California, in addition to Stockton, Monrovia and Pomona could find themselves in crisis, according to an analyst who sees low liquidity, excessive debt loads and outsized pension liabilities as key warnings.

In Rhode Island, where the governor backs legislation to reduce operating costs for distressed local governments, cities such as Providence and Pawtucket are seen as possible candidates for bankruptcy. Afflicted by underfunded pensions, the state's Central Falls is bankrupt.

Despite the growing list of potential defaults, it is still a relatively rare occurrence for issuers to miss scheduled bond payments in America's $3.7 trillion municipal debt market.

Still, such failures have ballooned in the past years.

Bond defaults were $25.355 billion in 2011, or nearly five times the value of defaults in 2010, according to Lehmann. In 2012's first quarter, defaults totaled $1.245 billion, or more than double the $522 million of last year's first quarter.

Municipal bankruptcies, such as last November's landmark, $4.23 billion Chapter 9 filing by Alabama's Jefferson County mainly because of its excessively expensive sewer system mocked as a Taj Mahal project, have picked up, too.

Chapter 9 municipal bankruptcy filings doubled to 13 in 2011 from six in 2010, but still remain rare among the more than 60,000 issuers, with only 49 of the 264 cases since 1980 being towns, cities, villages or counties, according to James Spiotto of Chapman and Cutler LLP. States are ineligible for Chapter 9.

Outsized pension-deficit payments and other liabilities, as well as depressed local economies or failing government projects such as Harrisburg's trash incinerator, often herald crises, according to Ciccarone.

Many local governments struggle even as broad, if muted, economic gains lift revenues for states and some local governments, which reported to the U.S. Census that overall revenue rose in late 2011 to a 23-year quarterly high of $387.2 billion.

That was a ninth consecutive up quarter for local government and state revenue and solidified 2011 as the best-ever year with total revenue of $1.35 trillion..

That broad snapshot obscures often crushing pension deficits and other dogged problems that individual local governments face.

Persistently high jobless rates and reductions in state and federal aid, as well as round after round of government layoffs, service cuts and fee increases in recent years, leave mayors and other local officials with few ready remedies, according to Moody's Investor Service Managing Director Naomi Richman.

At an industry conference last month in Philadelphia, Richman said, "A lot of the easy fixes are gone."


US begins military exercises with Philippines

Nearly 7,000 American and Filipino soldiers began a 12-day military exercise in Manila onMonday amid wide suspicion of the annual drill's aim at containing China and growingconcerns over the South China Sea.

The joint exercise, named "Balikatan" or "shoulder to shoulder", started with an openingceremony attended by Philippine Armed Forces Chief General Jessie Dellosa and USAmbassador to the Philippines Harry Tomas at the military's general headquarters in CampAguinaldo. It will continue through April 27.

In a speech at the opening ceremony, Dellosa did not specifically mention China but stressedthat the drill displayed strong US support for its ally.

"Given the international situation we are in, I say that this exercise, in coordination with allthose we had in the past, (is) timely and mutually beneficial," Dellosa said.

"The conduct of this annual event reflects the aspirations to further relations with our strategically, a commitment that has to be nurtured, especially in the context of the evolving challengesin the region."

Shi Yinhong, a professor of US studies at Beijing-based Renmin University of China, said theUS and the Philippines view China as the imaginary target, which is "very clear" judging by thetraining courses their militaries use.

"The number of participants and the training content suggest the US intends to deter China inthe short term from imposing any possible military threat to the Philippines. As for the long-term significance, the regular drill certainly strengthens the strategic military alliance betweenWashington and Manila to contain Beijing in the South China Sea," Shi said.

The Philippine military said the venue of the training exercises includes the area of SouthChina Sea off Palawan, where both forces will pursue amphibious exercises and gas and oilplatform defense drills.

Prior to the exercise, Emmanuel Garcia, the Balikatan public affairs officer, said on Sunday thatthe exercise is not in anyway related to the standoff between Philippine and Chinese ships atthe Huangyan Island in the South China Sea. He said the military training would be focused onmaritime security and counter-terrorism. He stressed that the exercises are not directed at anycountry.

"The ongoing drill is merely one of the frequent joint exercises of the US and the Philippines.However, in such a sensitive area and at such a sensitive moment, the drill conducted by acountry that has disputable claims with China and no other maritime threat speaks to a hiddenmotive for (the Philippines)," said Li Guoqiang, director of the Research Center of ChineseBorderland History and Geography in China's Academy Social Science.

Reiterating that the Philippines had violated China's sovereignty and triggered a standoff inwaters off the Huangyan Island, which is an integral part of Chinese territory, Foreign Ministryspokesman Liu Weimin on Monday also said that China expects relevant countries to do moreto deepen mutual trust and protect peace and stability in the region.

Shi said Beijing's attitude shows that China still puts the overall stability of the region first,although the moves by the US across the Asia Pacific will "raise strategic doubts" betweenWashington and Beijing.

"Maybe we need not to exaggerate the influence of the annually scheduled drill," Li said. "Butits frequency, the escalating scale and the disregard of China's concerns are clearly violationsof the Declaration on the Code of Conduct on the South China Sea, as well as the consensusreached by Beijing and Manila."

China daily

Russia sends ships for China war games

A quartet of warships from Russia's Pacific Fleet left port in Vladivostok last weekend, bound for war games with China in the Yellow Sea, official media said.

The ships, identified as the guided missile cruiser Varyag and the large antisubmarine ships Marshal Shaposhnikov, Admiral Panteleyev and Admiral Vinogradov, left the Russian Far East port Sunday, the Chinese news agency Xinhua reported.

They are expected to arrive next Sunday in the Yellow Sea to participate in weeklong war games there along with the Chinese navy.

Chinese officials say more than 20 Russian and Chinese warships and support vessels will be involved in the exercise, which observers say will be the largest the two countries have staged since starting the annual exercises in 2005.

They're being carried out under the umbrella of the Shanghai Cooperation Organization -- a security group comprised of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Its members are stepping up military, intelligence and counter-terrorism cooperation, analysts say.

Chinese military spokesman Yang Yujun announced this month the Chinese navy and the Russian navy are having the exercises under an agreement reached in Moscow last year during a visit by PLA Chief of General Staff Chen Bingde, the Taipei Times reported.

Chen said the games would be concluded in Qingdao, in China's Shandong Province. In all, Russia is planning to dispatch more than 10 warships.

Rear Adm. Leonid Sukhanov, the Russian navy's deputy chief of staff, told the Chinese Communist Party-run People's Daily the Yellow Sea exercises will provide a good test for the two countries' armed forces.

"The joint naval exercise will be held within the framework of strategic partnership principles agreed by leaders of both countries," he said. "Armament, support and protection systems will be practically tested, as well as command and control systems of the Russian and Chinese armed forces."

The Hong Kong newspaper Oriental Daily reported the Sino-Russian exercises will be the largest undertaken by the Chinese navy.

They come after the United States late last year signaled it is refocusing its strategic capabilities on the Asia-Pacific region in what U.S. President Barack Obama has called a "return" to Asia following a decade of conflicts in Afghanistan and Iraq.

That move has been interpreted as a check on the growing military ambitions of China in the region.

The Sino-Russian exercises this month are being carried out at the same time the U.S. Navy is participating in the "Balikatan" drills with the Philippines in the South China Sea.

Under those exercises, close to 8,000 troops from the United States and the Philippines will conduct drills at three locations, including the island ofPalawan, which borders the South China Sea and the disputed Spratly islands, the Voice of America reported.

Tensions between the Philippines and China are stained due to arguments over the island chain.

But the timing of the two sets of war games is probably coincidental, Steve Tsang, director of the University of Nottingham's China Policy Institute, told the Hong Kong online newspaper Asia Sentinel.

"It would be more telling if Beijing and Moscow choose to present this as a specific parallel event or an unrelated event being held simultaneously by accident," he said.

"But the most powerful message being sent is that China and Russia are strategic partners willing and able to work together when and where desired by both sides."

Space War

Netanyahu links Holocaust to Iranian threat

Prime Minister Benjamin Netanyahu said Wednesday that people who dismiss the Iranian threat as a whim or an exaggeration "have learnt nothing from the Holocaust."

Speaking at the state ceremony for Holocaust Remembrance Day at the Warsaw Ghetto Square in Jerusalem's Yad Vashem Museum, Netanyahu said: "I believe in our ability to defend."

"A nuclear Iran is an existential threat on the State of Israel and also on the rest of the world," Netanyahu said. "We have an obligation to prevent Iran from obtaining nuclear weapons. It's the world's obligation, but above all it is our obligation.

"Remembering the Holocaust is not merely a matter of ceremony or historic memory. Remembering the Holocaust is imperative for learning the lessons of the past in order to ensure the foundations of the future. We shall never bury our heads in the sand. "

Addressing criticism following his proclamations of Iran as an existential threat, the prime minister said: "I hope the day comes when

we learn of calls for Israel's annihilation in history classes only, and not in daily media reports. But that day is not here yet. The Iranian regime is openly calling for our destruction and working frantically for the development of nuclear weapons as a means to that end.

"I know that some people don't appreciate me speaking such uncomfortable truths. They would rather we not talk about Iran as a nuclear threat, they claim that, though it may be true, this statement serves to sow panic and fear."

President Shimon Peres also spoke at the ceremony. "The Nazi dictator's crematoriums created a global disaster and a Holocaust for my people," he said. "Holocaust deniers are denying the actions of their predecessors to cover up for their own actions. The lie of denial will not extinguish the fire of the inferno."

Peres addressed the tragic accident in Mount Herzl in which Sec.-Lt. Hila Bezaleli, 20, was killed when a lighting fixture collapsed. He offered his condolences to the officer's family and to that of a Combat Engineering Corps soldier who died at an IDF base apparently due to a heart defect earlier on Wednesday.

"On my way here, the bright lights of Jerusalem changed into the flames that consumed my people. This is us, this is our nation. A nation bearing a great light; a nation bearing fathomless orphanhood."

Linking the memory of the Holocaust and the Iranian threat, Peres said, "Today we are a strong nation. Humankind has no choice but to learn the lessons of the Holocaust and face existing threats, before it is too late.

"Iran stands at the center of the threat to Israel. It is the terror hub. It presents a threat to world peace. One should not underestimate Israel's unconcealed and hidden capabilities to deal with this threat."

Gantz: IDF is a wall of protection

Speaking at the Holocaust Remembrance Day ceremony at Kibbutz Tel Yitzhak, IDF Chief of Staff Lieutenant General Benny Gantz said, "Tonight, 70 years later, standing in the land of Israel I look before me and see the embodiment of the strength of the Jewish nation. The leitmotif that no enemy has ever been able to cut off."

Gantz said that the IDF draws it strength from the determination of Holocaust survivors and that never again shall the Jewish people stand defenseless.

"We are the arm of steel that will respond to any attempt to hurt us with a harsh blow. We are the people's wall of protection," he said.

Minister Dan Meridor said: "There is a false claim that the State of Israel was established because of the Holocaust. This is not true. The Holocaust happened because there was no state of Israel and six million Jews instead of 10 million live here now because of the Holocaust. "


India tests nuclear-capable missile that can reach China

(Reuters) - India successfully test-fired on Thursday a nuclear-capable missile that can reach Beijing and Eastern Europe, thrusting the emerging Asian power into a small club of nations that can deploy nuclear weapons at such a great distance.

Footage showed the rocket with a range of more than 5,000 km (3,100 miles) blasting through clouds from an island off India's east coast. It was not immediately clear how far the rocket flew before reaching its target in the Indian Ocean.

The defense minister said the test was "immaculate".

"Today's successful Agni-V test launch is another milestone in our quest to add to the credibility of our security and preparedness," Prime Minister Manmohan Singh said in a message to the scientists who developed the rocket.

Almost entirely Indian-made, the Agni-V is the crowning achievement of a program developed primarily with a threat from neighboring China in mind. It will not be operational for at least two years, the government says.

Only the U.N. Security Council permanent members - China, France, Russia the United States and Britain - along with Israel, are believed to have such long-range weapons.

Fast emerging as a world economic power, India is keen to play a larger role on the global stage and has long angled for a permanent seat on the Security Council. In recent years it has emerged as the world's top arms importer as it upgrades equipment for a large but outdated military.

"It is one of the ways of signaling India's arrival on the global stage, that India deserves to be sitting at the high table," said Harsh Pant, a defense expert at King's College, London, describing the launch as a "confidence boost".

The launch, which was flagged well in advance, has attracted none of the criticism from the West faced by hermit state North Korea for a failed bid to send up a similar rocket last week.

China's Foreign Ministry said the two countries should "work hard to uphold friendly strategic cooperation", and for peace and stability in the region.

"China and India are large developing nations. We are not competitors but partners," the Chinese ministry spokesman, Liu Weimin, said when asked about the missile test at a briefing.

The Global Times tabloid, which is owned by the Chinese Communist Party's main mouthpiece the People's Daily, struck a less conciliatory tone.

"India should not overestimate its strength, "the paper said in an editorial published before the launch, which was delayed by a day because of bad weather.

India has not signed the non-proliferation treaty for nuclear nations, but enjoys a de facto legitimacy for its arsenal, boosted by a landmark 2008 deal with the United States.

On Wednesday, NATO said it did not consider India a threat. The U.S. State Department said India's non-proliferation record was "solid", while urging restraint.


India says its nuclear weapons program is for deterrence only. It is close to completing a nuclear submarine that will increase its ability to launch a counter strike if it were attacked.

India lost a brief Himalayan border war with its larger neighbor, China, in 1962 and has ever since strived to improve its defenses. In recent years the government has fretted over China's enhanced military presence near the border.

It is buying more than 100 advanced fighter jets, likely Rafales built by France's Dassault, in one of the largest global arms deals.

Even so, slow procurement procedures and corruption scandals mean its army, the world's second biggest, relies on critically outdated guns and suffers ammunition shortages.

Defense analyst Uday Bhaskar said India was not in an arms race with China, which has far greater capabilities, including missiles with a range closer to 10,000 km (6,000 miles).

"As and when Agni-V moves from technological proficiency to assured, credible and proven operational induction - maybe by 2014 - India will move towards acquiring that elusive mutuality it seeks with China," Bhaskar said in a column for Reuters.

Thursday's launch may prompt a renewed push from within India's defense establishment for a fully fledged intercontinental ballistic missile (ICBM) program, with weapons capable of reaching the Americas, though some of India's allies may bridle at such an ambition.

"Policy-wise it becomes more complicated from now on, until Agni-V, India really has been able to make a case about its strategic objectives, but as it moves into the ICBM frontier there'll be more questions asked," said Pant.

The Agni-V is the most advanced version of the indigenously built Agni, or Fire, series, part of a program that started in the 1960s. Earlier versions could reach old rival Pakistan and Western China.

The three stage rocket is powered by easier-to-use solid rocket propellants, can carry a 1-tonne nuclear warhead and is road mobile.


Fears grow Spain will need bail out as 10-year bond rate rises near critical 7% that tipped Portugal, Greece and Ireland over the edge

Spain plunged deeper into crisis yesterday amid mounting fears that it will need an emergency bailout to save it from financial ruin.

Borrowing costs soared and the cost of insuring Spanish debt against default hit a record high as investors fretted about the health of the economy and banking system.

The bleak start to the week sparked warnings that Spain will be the fourth eurozone country to need a bailout following the rescues of Greece, Ireland and Portugal.

A report by the International Monetary Fund is today expected to warn that the eurozone faces recession this year with Spain and Italy among those economies worst hit.

‘We’re back in full crisis mode,’ said Lyn Graham-Taylor, a strategist at banking giant Rabobank. ‘It is looking more and more likely that Spain is going to have some form of bailout.’

Spain is suffering from a deep economic slump following a spectacular and bruising crash in its property market. Unemployment is the highest in Europe with a record 4.75million out of work. Half of Spanish youngsters do not have a job.

The government is battling to cut the crippling deficit and has embarked on one of the toughest austerity programmes in Europe.

But Madrid recently admitted that the deficit will fall from 8.5 per cent of national output last year to 5.3 per cent this year – more than the 4.4 per cent planned. Economy minister Luis de Guindos yesterday conceded that the country was back in recession.

Anger: Frustration at what is seen as a never-ending line of cuts has resulted in a series of riots across Spain in recent weeks

He said the first three months of 2012 followed ‘a similar pattern to the last quarter of last year’ when output fell 0.3 per cent – resulting in two consecutive quarters of decline.
That put Madrid firmly back in the danger zone with yields worryingly close to the 7 per cent level which triggered emergency bailouts in other countries.

Spanish ten-year bond yields – the interest the government pays to borrow money – jumped above 6 per cent for the first time this year to 6.17 per cent.

Borrowing costs in Spain are now higher than in December when the European Central Bank flooded the eurozone banking system with cheap funds in a desperate attempt to prevent another credit crunch and ease pressure on countries such as Italy and Spain.

‘This artificial high from the ECB drugs has worn off and now we’re basically back to where we started,’ said Chris Scicluna, head of economic research at Daiwa Capital Markets Europe.

‘After three months that were calmer than expected, the euro crisis is back,’ said Holger Schmieding, chief economist at Berenberg Bank in London.

‘The speed of the recent surge in yields has elements of a renewed market panic.’

Despite the doom and gloom, European markets opened slightly up this morning.

Help: The European Central Bank may be forced to intervene in the Spanish crisis should the country's 10-year government bond rate rise even further

The FTSE 100 started 0.26 per cent up at 5,681.19; France's CAC 40 is 0.30 per cent up at 3,215.03 and Germany's DAX is 0.48 per cent up at 6,656.77.

Asian stock markets also vacillated between gains and losses today as signs of a recovering U.S. economy offset Spanish fears.

Japan's Nikkei 225 index rose 0.2 per cent to 9,487.59 as the yen stabilised against the dollar.

But South Korea's Kospi index slipped 0.1 per cent to 1,990.29 and Hong Kong's Hang Seng fell 0.3 per cent to 20,558.38.

On the up: Chaos in euroland has pushed the pound to a 19 month-high against the single currency

Australia's S&P/ASX 200 gained marginally to 4,305.90. Benchmarks in mainland China, Singapore and Taiwan fell while Indonesia and the Philippines rose.

A strong retail sales report in the US was not enough to counteract fears that the debt crisis enveloping Europe's smaller economies might morph into something even bigger.

'Eurozone stress, particularly in Spain continues to act as a weight on market sentiment, with equity markets ignoring a relatively strong US retail sales report,' said analysts at Credit Agricole CIB in Hong Kong.

Read more: http://www.dailymail.co.uk/news/article-2130564/Were-crisis-mode-Fears-grow-Spain-need-bailing-10-year-bond-rate-rises-critical-7-saw-Portugal-Greece-Ireland-need-help.html#ixzz1sQ5uoFIz

IMF fears $3.8 trillion forced asset sale by eurozone banks

The IMF's spring Global Financial Stability Report said that should markets lose faith in the effectiveness of eurozone policies, rising funding costs and increased stresses within the banking system could force banks to rapidly reduce their balance sheets to raise capital buffers.

Under the scenario, the supply of eurozone credit would fall by 4.4pc and growth in the region would be cut by 1.4pc.

The sell-off among 58 of the biggest banks in the European Union included in the IMF's analysis would be equivalent to 10pc of total assets, and the balance sheet adjustment would also involve a significant reduction in bank lending, it said.

The UK banks involved in the study were state-backed Royal Bank of Scotland and Lloyds Banking Group, as well as HSBC and Barclays.

A second global credit crunch would make it more difficult still for UK households and businesses to borrow from banks.

"Such a large-scale deleveraging would have consequences well beyond the euro area. The fire sale of bank assets could have a significant impact on asset prices and market liquidity," the IMF said.

José Viñals, director of Monetary and Capital Markets at the IMF, said that while policy actions in the eurozone had eased the sense of crisis, risks remained.

"Policy actions have brought gains but current efforts are not enough to bring lasting stability. It is too soon to say we have exited the crisis. Pressures on European banks remain."

He said that while some deleveraging was desirable where it increased banks' capital positions and reduced the reliance on wholesale funding, the pace and nature must be correct.

The IMF said that banks would prioritise the disposal of non-core and foreign assets before moving onto home markets and lending reduction the higher the stress.

To achieve lasting global financial stability, the IMF said swift fiscal integration was needed in the eurozone, close regulation of banks, continued loose monetary policy, and a gradual withdrawal of fiscal support where possible.

"We need a vision of 'more and better' Europe," said Mr Viñals. Even though it may be politically difficult to achieve, "a consensus needs to be agreed now," he said.

The IMF also suggested eurozone countries should further increase its combined bailout funds to increase confidence in the region's ability to deal with further shocks.

The European Financial Stability Facility and European Stability Mechanism have a total firepower of €740bn (£606bn).

The Washington-based fund singled out the US and Japan for criticism, arguing those countries posed "a latent threat to financial stability" because they had so far failed to adequately address their large deficits

The Telegraph

North Korea threatens retaliation, nuclear test expected soon

SEOUL — A bristling North Korea said on Wednesday it was ready to retaliate in the face of international condemnation over its failed rocket launch, increasing the likelihood the hermit state will push ahead with a third nuclear test.

The North also ditched an agreement to allow back inspectors from the International Atomic Energy Agency. That followed a U.S. decision, in response to a rocket launch the United States says was a disguised long-range missile test, to break off a deal earlier this year to provide the impoverished state with food aid.

Pyongyang called the U.S. move a hostile act and said it was no longer bound to stick to its side of the February 29 agreement, dashing any hopes that new leader Kim Jong-un would soften a foreign policy that has for years been based on the threat of an atomic arsenal to leverage concessions out of regional powers.

“We have thus become able to take necessary retaliatory measures, free from the agreement,” the official KCNA news agency said, without specifying what actions it might take.

Many analysts expect that with its third test, North Korea will for the first time try a nuclear device using highly enriched uranium, something it was long suspected of developing but which it only publicly admitted to about two years ago.

“If it conducts a nuclear test, it will be uranium rather than plutonium because North Korea would want to use the test as a big global advertisement for its newer, bigger nuclear capabilities,” said Baek Seung-joo of the Seoul-based Korea Institute for Defence Analysis.

Defence experts say that by successfully enriching uranium, to make bombs of the type dropped on Hiroshima nearly 70 years ago, the North would be able to significantly build it up stocks of weapons-grade nuclear material.

It would also allow it more easily to manufacture a nuclear warhead to mount on a long-range missile.

The latest international outcry against Pyongyang followed last week’s rocket launch, which the United States and others said was in reality the test of a long range missile with the potential to reach the U.S. mainland.

China, the North’s main economic and diplomatic backer, called for “dialogue and communication” and continued engagement with the International Atomic Energy Agency inspectors.

North Korea has insisted that the rocket launch, which in a rare public admission it said failed, was meant to put a satellite into orbit as part of celebrations to mark the 100th birthday of former president Kim Il-sung, whose family has ruled the autocratic state since it was founded after World War Two. Kim died in 1994.

The peninsula has been divided ever since with the two Koreas yet to sign a formal peace treaty to end the 1950-53 Korean War.


Recent satellite images have showed that the North has pushed ahead with work at a facility where it conducted previous nuclear tests.

While the nuclear tests have successfully alarmed its neighbors, including China, they also showcase the North’s technological skills which helps impress a hardline military at home and buyers of North Korean weapons, one of its few viable exports.

The North has long argued that in the face of a hostile United States, which has military bases in South Korea and Japan, it needs a nuclear arsenal to defend itself.

“The new young leadership of North Korea has a very stark choice; they need to take a hard look at their polices, stop the provocative action,” U.S. Secretary of State Hillary Clinton said at a news conference in Brazil’s capital.

The Swiss-educated Kim Jong-un, who is in his late 20s, rose to power after the death of his father, Kim Jong-il, last December. The country’s propaganda machine has since made much of his physical likeness to his revered grandfather, the first leader and now North Korea’s “eternal president”.

But hopes that the young Kim could prove to be a reformer have faded fast. In his first public speech on Sunday, the chubby leader made clear that he would stick to the pro-military policies of his father that helped push the country into a devastating famine in the 1990s.

Kim is surrounded by the same coterie of generals that advised his father and he oversaw Sunday’s mass military parade.

He urged his people and 1.2 million strong armed forces to “move forward to final victory” as he lauded his grandfather’s and father’s achievements in building the country’s military.

Siegfried Hecker, a U.S. nuclear expert who in 2010 saw a uranium enrichment facility in North Korea, believes the state has 24-42 kg (53 to 95 pounds) of plutonium, enough for four to eight bombs.

Production of plutonium at its Yongbyon reprocessing plant has been halted since 2009 and producing highly enriched uranium would simultaneously allow Pyongyang to push ahead with its nuclear power program and augment its small plutonium stocks that could be used for weapons, Hecker says.

“I believe North Korean scientists and engineers have been working to design miniaturized warheads for years, but they will need to test to demonstrate that the design works: no nuclear test, no confidence,” Hecker said in a paper last week.

“Unlike the claim that Pyongyang can make that its space launch is purely for civilian purposes, there is no such civilian cover for a nuclear test. It is purely for military reasons.”

National Post

Mexico raises volcano alert level after rumbling

MEXICO CITY (AP) – Authorities in Mexico have raised the alert level for the Popocatepetl volcano southeast of Mexico City due to increasing activity. It's now at the fifth step on a seven-level warning scale.

A lava dome is growing in the volcano's crater, the National Disaster Prevention Center said Tuesday. The 17,886-foot volcano also has been spewing fragments of incandescent rock recently, as well as water vapor and ash.

The volcano could experience "significant explosions of growing intensity that hurl incandescent rocks significant distances," large ash showers and possible flows of mud and molten rocks down the volcano's flanks, the center said.

The agency said the area has been closed to visitors and urged people to stay at least seven miles (12 kilometers) from the crater, which is about 40 miles southeast of Mexico's capital. It also recommended that people in the surrounding areas clean ash from weak rooftops and to cover their mouths to avoid inhaling it.

The alert is now at the highest level of the yellow stage; the next stage is a red alert, which presumably would prompt evacuations to begin.

Known as "El Popo," the volcano staged its most violent eruption in 1,200 years on Dec. 18, 2000, when an explosion sent up a plume of red-hot rock and forced the evacuation of thousands of people who live at the volcano's base.

The volcano, which seats in the central states of Mexico, Puebla, and Morelos, has been erupting intermittently since December 1994.