We will have a mirror site at http://nunezreport.wordpress.com in case we are censored, Please save the link

Friday, June 15, 2012

Israel without Jerusalem is like a body without a heart....

Man's Way vs God's Way

European Central Bank last hope as dam breaks in Spain.... same as no hope

"We're facing maximum tension. The situation is unsustainable over time," said the country's finance minister Luis de Guindos. Yields on 10-year Spanish bonds yields punched to almost 7pc, above levels that triggered ECB intervention to back stop Spain last November.

"The ECB needs to intervene very quickly or it is game over," said Nicholas Spiro from Spiro Sovereign Strategy. "There is a whiff of capitulation in the air."

The dramatic escalation comes just days after the eurozone agreed a €100bn rescue package for the Spanish state to recapitalise its crippled banks. "It is very worrying. Markets are behaving as if the eurozone is heading for break-up," said Jens Sondergaard from the Japanese bank Nomura.

France's industry minister Arnaud Montebourg said the markets were flying out of control because the ECB was failing to take charge. "We need an ECB that does its job," he said.

In an astonishing outburst for a French minister, he lashed out at German Chancellor Angela Merkel and the "German right" for driving much of Europe into slump. "Certain European leaders, led by Mrs Merkel, are fixated by blind ideology."

Spain is caught in a vicious downward spiral as the property crash accelerates, further undermining the banks and state finances. This in turn is drawing Italy into the fire and threatens to overwhelm the EU's rescue machinery.

"We must have a real circuit breaker," said Sondergaard. "The question is whether the ECB will now blink and go down the route of quantitative easing (QE)".

He said the ECB should slash interest rates by half a point to 0.5pc and "pre-commit" to half a trillion euros of QE over coming months, blanketing the Spanish and Italian bond markets.

Nomura said the ECB must act with overwhelming force rather than engaging in piecemeal bond purchases that fail to restore confidence and have the toxic side-effects of pushing existing bondholders down the credit ladder -- the dreaded effect of "subordination".

"The eurozone has the wrong policy mix across the board. Fiscal policy is too tight; monetary policy is too tight; and the tough regulation of the banks is coming at the wrong time. Together it is all pushing the eurozone to breaking point," he said.

Spanish premier Mariano Rajoy said in a private letter to EU leaders last week that the ECB is the only body with firepower and nimbleness able to contain the crisis at this point.

The pleas have so far fallen on deaf ears in Frankfurt where ECB hawks insist that any such intervention to help EMU's struggling debtors would reduce the pressure for root-and-branch reforms.

The bank said in its June report on Thursday that Spain must make further draconian cuts to meet its deficit target of 3pc of GDP next year. It enraged monetarists by denying yet again that the eurozone faces a serious monetary slowdown or "an abrupt and disorderly adjustment" for banks -- or a credit crunch in layman's language.

"It shows fantastic complacency. They are not complying with their own mandate," said Professor Tim Congdon from International Monetary Research. Critics say that all key measures of the eurozone money supply are now contracting, pushing the whole region into deeper slump. The ECB has missed its 4.5pc growth target for M3 `broad money" by a wide margin.

Mr Spiro said the fast-escalating crisis in Italy may force the ECB to act. Foreigners own half Italy's €2 trillion public debt and they are increasingly shocked by the failure of the EU authorities to halt contagion. "Foreigners haven't been buying Italian bonds, but most have not been selling either. The risk is that they will now start selling en masse," he said.

"Italian banks are under massive financial repression to buy the debt but they are running out of money. The ECB will have to act but it has lost so much credbility already that it will have to buy on a massive scale to make a scrap of difference."

The ECB has already bought over €200bn of Italian, Spanish, Greek, Irish, and Portuguese bonds, justifying it as necessary to ensure the proper "transmission" of monetary policy. The move caused a storm in Germany, prompting the resignation to both German members of the ECB board last year. A chorus of economists have exhorted the ECB to cap Spanish and Italian yields at 5pc or so by pledging unlimited intervention. Yet such a naked rescue of insolvent states would trigger legal challenges in the courts for breach of the EU's no-bailout clause.

Professor Paul De Graue from the London School of Economics said the bank should go ahead anyway and "let the lawyers argue about it for the next ten years."

There are no such constraints on outright QE or money printing by the ECB, in extremis. Monetarists say the bank should buy the bonds of all EMU states to lift the entire region and prevent debt-deflation taking hold in the South.

Fresh data yesterday shows how desperate the crisis is becoming in Spain. The property crash is accelerating. House prices fell at a 12.6pc rate in the first quarter of this year, compared to 11.2pc the quarter before, and 7.4pc in the quarter before that. Prices have fallen 26pc from their peak.

"Fundamentals point to a further 25pc decline," said Standard & Poor's in a report on Thursday. It may take another four years to clear a glut of one million homes left from the building boom.

Mrs Merkel chided the country gently yesterday for letting a "property bubble" spin out of control in the boom years. Her words prompted a furious reaction from Madrid.

The Telegraph

Russia Denies Syria Helicopter Deliveries

Russia is not delivering new military helicopters to Syria, the Russian Foreign Ministry's information deparment said in a statement on Friday, in response to media reports claiming Syria was getting Mi-25 helicopter gunships from Moscow.

"As already stated, no new deliveries are being made to Syria of Russian military helicopters," the Foreign Ministry statement said, adding "all military-technical cooperation with Syria is limited to defensive weapons."

"As regards helicopters, there were planned overhauls of equipment supplied many years ago," the ministry said.

The ministry statement follows a denial by Foreign Minister Sergei Lavrov on Wednesday that new helicopters were being delivered.

“We are completing right now the implementation of contracts that were signed and paid for a long time ago,” Lavrov said after talks in the Iranian capital Tehran. “We are not delivering to Syria, or anywhere else, items that could be used against peaceful demonstrators,” Lavrov added.

The ministry's statement follows claims by US Secretary of State Hillary Clinton on Tuesday that Russia was supplying helicopters to Syria which were being used against civilians in the insurrection in that country. Clinton later clarified her statements on Thursday, acknowledging that Russia was returning used equipment to Syria.

“Whether they are new or they are refurbished, the concern remains that they will be used for the exact same purpose that the current helicopters in Syria are being used, and that is to kill civilians,” State Department Spokeswoman Victoria Nuland said, Al Arabiya reported.

“These are helicopters that have been out of the fight for some six months or longer. They are freshly refurbished. The question is simply what one expects them to be used for when one sees what the current fleet is doing.”

RIA Novosti

New Powers To 'Snoop' On Emails And Calls

The Government has announced legislation which will lead to a huge expansion of surveillance powers of communications on the internet and mobile phones.

The Communications and Data Bill will allow the police and security services to keep track of who is calling who on mobile phones, the email addresses of all correspondents, and the personal IDs of people chatting on social networking sites.

The bill has already been attacked by privacy and civil liberty campaigners.

They have noted that its controversial publication comes on the day that much of the media is focussed on David Cameron's appearance at the Leveson Inquiry.

They also say that whistleblowers could be vulnerable to exposure, as a result of the proposed changes.

The new powers are seen by the Government, the police and the security services as essential to keep pace with innovations on the internet.

These have allowed organised criminals and terrorists to evade traditional methods of phone interception and monitoring.

Of the information that could be collected, Home Secretary Theresa May said that a quarter is being missed. She added that the situation is likely to get worse.

Communications Service Providers will have to store communications data, possibly to specially fitted "black boxes" - funded by the taxpayer.

The government said the cost of this would be £1.8bn over 10 years, but would lead to benefits of up to £6.5bn.

Mobile phone operators will also be expected to provide the duration of calls, the time of day they were made and the location of the caller to police.

No warrant would be required for these surveillance operations, which would need to be authorised by a "senior officer", Whitehall sources said.

"There would have to be a reasonable suspicion of criminal activity to trigger this sort of data collection," an official said.

"And there will be no collection of data in real time," the official added. Local authorities will be excluded from collecting data.

A warrant, issued by the Home Secretary, would be needed to access the content of communications.

Oversight of the surveillance is likely to be a major political issue. Britain is already the most snooped upon country in the world by Closed Circuit Televisions (CCTV).

Sky News

IMF urges Europe to help refinance Irish bank bail out

Dublin, which signed up to an 85 billion euro ($108 billion) EU/IMF bailout in late 2010, aims to return to long term debt markets later this year to help it prepare for the ending of official funding next year and meet borrowing needs of up to 20 billion euros in 2014.

The IMF, one of the country's "Trokia" of lenders along with European Union institutions, said Ireland would need a "substantial improvement" in market conditions to achieve a planned return to bond markets to avoid a new bailout when the current one expires at the end of next year.

Growing market turmoil is increasing the importance of addressing the huge burden of 63 billion euros of debt taken on to bail out the country's banks, the IMF said in its quarterly report on Ireland.

"Tackling the issues remaining from Ireland's deep banking crisis in a proactive manner has become critical, and such efforts would be most effective as part of a broader European plan to stabilize the euro area," the report said.

One avenue would be for Europe to soften the terms of Ireland's bank bailout by replacing 30 billion euros of high-interest IOUs given mainly to the former Anglo Irish Bank with another instrument that would lengthen their maturity and cut their interest rate.

The Telegraph

Nigel Farage on Spanish Bailout....Peter Schiff Comments

Moody's cuts Dutch bank credit ratings on eurozone woes

Moody's has cut the credit ratings of some Dutch and Belgian banks, including ING and ABN Amro, because of the eurozone debt crisis.

Long-term ratings at ING, Rabobank, ABN, LeasePlan and KBC were all lowered by two grades. SNS was cut by one level.

"Dutch banks will face difficult operating conditions throughout 2012 and possibly beyond," Moody's said.

The cuts come amid fresh worries about debt-laden Spain, Italy and Cyprus.

A general election in Greece on Sunday may also undermine financial confidence, with anti-austerity parties expected to do well.

The Netherlands "is affected by the ongoing euro area debt crisis and regional economic weakness," Moody's said in a statement.

Among the Dutch banks, ING is now rated A3, while its ING Bank unit was also downgraded two levels, to A2. Rabobank Nederland was lowered to Aa2, the third-highest investment grade, ABN Amro to A2, and LeasePlan Corp to Baa2.

SNS is now Baa2. ING's ratings have a negative outlook and those of the other lenders are stable, Moody's said.

Belgium's KBC Group was lowered two levels to Baa1, and its KBC Bank unit to A3.

"Adverse operating conditions, including the current recession and declining house prices in the Netherlands, will likely persist at least through 2012," Moody's said in its statement.

In a separate statement, Moody's said that the downgrade for KBC was due to the "bank's higher sensitivity to the deteriorating European macro-economic environment".

Moody's said that the domestic environment for Dutch banks has weakened far less than in other parts of the euro bloc, underlined by the country's Aaa debt rating.

The agency recently slashed the ratings on a string of Spanish and Italian lenders.


The Collapsing Greek Health Care System Is In Critical Condition

While by now virtually everyone around the world is intimately familiar with the nuances of Greek electoral law, knows the names of Greek politicians better than of those at home, and is all too aware of the broader media propaganda that unless Greece does as the banks demand the world as we know it will end, one aspect of the Greek collapse into hell has gotten lost: the complete failure of the Greek healthcare system. As the following Reuters report shows, regardless of the outcome on Sunday, it just may be too late to preserve the future of Greek sickcare, and with that, of the entire population: "The country's state hospitals are cutting off vital drugs, limiting non-urgent operations and rationing even basic medical materials for exhausted doctors as a combination of economic crisis and political stalemate strangle health funding. "It's a matter of life and death for us," said Persefoni Mitta, head of the cancer patients' association, recounting the dozens of calls she gets a day from patients needing pricey, hard-to-find cancer drugs. "Why are they depriving us of life?"" They are depriving of you of life, Persefoni, because in old times, when a given country was enslaved, there was a specific aggressor that the people could revolt against. Now, when the slave-master is debt, and thus one's own desire to live beyond their means, it is far more difficult to look in the mirror and to revolt against what one sees. Which is why, one day at a time, the Greek civilization will continue to suffer the terminal consequences of infinite debt serfdom, until finally, after two thousand years, it no longer exists.

The sad tale continues:

The emergency has grown out of a tangle of unpaid bills, with pharmacists and doctors complaining of being unable to pay suppliers until competing health insurers clear a growing backlog of unfilled state payments.

Greece imports nearly all its medicines and relies heavily on patented rather than cheaper generic drugs, making it vulnerable to a funding squeeze that would grow sharply worse if it were forced out of the euro after elections on Sunday.

Long queues have been forming outside a handful of pharmacies that still provide medication on credit - the rest are demanding cash upfront until the government pays up a subsidy backlog of 762 million euros, or nearly $1 billion.

"We're not talking about painkillers here - we've learned to live with physical pain - we need drugs to keep us alive," Mitta, a petite former marathon runner and herself a cancer survivor, said in a voice shaky with emotion.

Greeks have long had to give medical staff cash "gifts" to ensure good treatment. Nevertheless the health system was considered "relatively efficient" before the crisis despite a variety of problems including a fragmented organisation and excess bureaucracy, according to a 2009 report for the Organisation for Economic Cooperation and Development.

But it has been unable to respond to the growing crisis. The European Union and International Monetary Fund, which provided a 130 billion euro lifeline to Greece in March, have demanded big cuts to the system as part of a wider package of austerity measures.

But powerful medical lobbies and unions have resisted fiercely. Caretaker Prime Minister Panagiotis Pikrammenos, in office until a new government is formed after the elections, has pleaded for a solution but been powerless to force a change.

"It is imperative that this matter is resolved immediately in order to prevent putting people's lives at risk," Pikrammenos said last week.

No bed sheets or paper...

Outside one of the 133 state hospitals - whose managers have sometimes been appointed as supporters of whichever political party was in power at the time - a banner put up by protesting staff reads "Hospitals Belong to the People". Inside, its gloomy labyrinth of corridors tell a different story.

A doctor at the university hospital in the northwestern Athens suburb of Chaidari cites a lack of basic examining room supplies in her own department, such as cotton wool, catheters, gloves and paper used to cover the examining table.

The shortage of paper, which is thrown out after each patient has used it, means corners have to be cut on hygiene.

"Sometimes we take a bed sheet instead and use it for several patients," said Kiki Kiale, a radiologist specialising in cancer screening. "It's tragic but there's no other solution."

Kiale, 52, said staff cutbacks and a lack of crucial equipment - including a digital mammography machine - meant some doctors were seeing 40 patients during a shift but many patients were still unable to get treatment.

In the chaos, patients can slip through the cracks or turn up for treatment again only when their illness has progressed too far for them to be saved.

And it just goes on and on...

Zero Hedge

Vote, Revolt, Repeat: Egypt back to ballot box

Germany sounds crisis alarm as Italy, France demand progress

Germany warned it could not save the eurozone alone and borrowing costs left Spain on the ropes as Italy and France held crisis talks aimed at tackling the debt crisis on Thursday.

Meeting in Rome, Italian Premier Mario Monti and France's President Francois Hollande stressed more needed to be done to ease market pressures amid black news for Spain, worrying signs in Italy and concern over the upcoming Greek election.

"The progress made, including in the governance of the eurozone, is not sufficient and we need to strengthen the weak parts of the system," Monti said, adding that the views of Italy and France on the crisis were closely linked.

International financial watchers are waiting with bated breath for a crucial Greek election which may see Greece exit the eurozone and could have a knock-on effect on struggling Spain and Italy.

In Athens, with just three days before the vote, thousands of people attended a campaign rally for leftist leader Alexis Tsipras who has promised to rip up bailout conditions that have brought Greece's economy to its knees.

But instead of challenging Brussels, Tsirpas promised if elected to form a government "for all Greeks... with Europe and the euro."

Monti and Hollande said they hope Greece will stay in the eurozone.

"I want to reaffirm the hope, shared with President Hollande, that Athens will remain in the eurozone and respect its engagements," Monti said.

The reference to the need to tackle governance in the eurozone came after Germany-fuelled calls for a big leap towards further EU integration.

Chancellor Angela Merkel had issued a harsh warning earlier Thursday on the impossibility of Berlin saving the eurozone on its own.

"Germany is strong, Germany is an engine of economic growth and a stability anchor in Europe. But Germany's powers are not unlimited," she said in a speech outlining Berlin's position ahead of the June 18-19 G20 meeting in Mexico.

In an attempt to ease the tension, Monti said he knew that "Merkel is continually looking for a solution for Europe" and "is always interested in finding the best answers both on growth and on stability."

The Franco-Italian talks came a week before a key four-way summit with Spain and Germany ahead of EU talks at the end of June.

Hollande described a "road map" he has prepared in light of the European Summit on June 28 and 29 in Brussels, which brings together "growth, stability and the reinforcement of the monetary and economic union."

Monti said he and Hollande had common goals and "exchanged opinions on the hypothesis" of "shared bonds" and discussed "sovereign debt and instruments to re-establish confidence in the most-exposed countries."

But Merkel earlier said that those clamouring for Germany to "pour billions into eurobonds, stability funds, European bank deposit guarantee funds" wanted a quick crisis fix that was unsustainable.

She stressed Europe would only find a way out of the crisis with a strong "political union" with greater fiscal coordination and oversight and insisted "financing growth with new borrowing must stop."

But French Prime Minister Jean-Marc Ayrault, France's number two and a Germanophile, urged Merkel to avoid "simplistic talk," adding: "we need to deal with things seriously and courageously."

While Italy reeled from a painful bond session Thursday, Spain's borrowing costs shattered euro-era records after Moody's downgraded its debt close to junk-bond status and warned of a growing risk of a full-blown bailout.

The eurozone's fourth biggest economy was forced last week to accept a bank bailout of up to 100 billion euros ($126 billion) but it failed to impress the bond markets, which fear the rescue may have added to the Spanish debt problem.

Meanwhile, nerves were stretched to straining point in Greece, which is running out of cash for salaries and pensions and where depression is rife.

Labour Minister Antonis Roupakiotis said that Greece should have enough cash to pay pensions at least for July after the Kathimerini daily said the state only had enough money to pay salaries and pensions until July 20.

Unemployment figures Thursday showed the jobless rate jumped to 22.6 percent in the first quarter, though the Greek stock market closed more than 10.0 percent higher, apparently reflecting an upsurge of confidence.

Greece has already been forced to seek international help twice, first for 110 billion euros in May 2010 and then for 130 billion euros earlier this year plus a 107-billion-euro private debt write-off.

Central Banks Promise To Save World On Monday

WASHINGTON (Reuters) - Central banks from major economies stand ready to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the outcome of Greek elections on Sunday causes tumultuous trading, G20 officials told Reuters.

A senior U.S. official cautioned that the Greek election will not provide "the definitive signal on what happens next" in the euro zone debt crisis.

But if severe market strains emerge after an unusual confluence of three elections this weekend - there are important polls in Egypt and France as well - central bankers are on standby to ensure enough cash is flowing through the financial system.

"The central banks are preparing for coordinated action to provide liquidity," said a senior G20 aide familiar with discussions among international financial diplomats. His statement was confirmed by several other G20 officials.

Wall Street stocks jumped sharply on the news, with the S&P 500 and the Dow Industrials both up more than 1 percent. The euro added to gains and U.S. government debt prices fell, boosting yields.

A move to boost liquidity could mark a dramatic backdrop to the G20 summit of world leaders, who will gather in Los Cabos, Mexico, on Monday and Tuesday where Europe's escalating crisis tops the agenda.

Leaders will be accompanied by finance ministers playing an advisory role. The ministers, who usually keep a low profile at these summits, have scheduled a working dinner on Monday and lunch on Tuesday.

Depending on the severity of the market response, an emergency meeting of ministers from the Group of Seven developed nations could be held on Monday or Tuesday in Los Cabos, with central bankers joining by phone, a second G20 official said.

Their first line of defense probably would be a statement that policymakers are ready to take whatever steps are needed to assure market stability.

This usually is a signal for technical steps to keep cash flowing through the financial system. Currency swap lines already are in place, which can be drawn upon to ensure there are enough dollars available if global investors rush into the safety of U.S. assets. Central banks also can hold extra auctions to flood banks with short-term cash via repurchase agreements.

Currency intervention also is possible, though less likely to be sanctioned by the G7. Japan and Switzerland might intervene to weaken their currencies if a rush to safe-haven assets pushes up the yen and the Swiss franc.

Japan already has indicated to its G7 partners concerns about yen strength and it had considered acting earlier this month, several sources with direct knowledge said.

The International Monetary Fund took the unusual step on Thursday of sanctioning currency intervention for Japan to counter stresses from Europe, noting its currency is "moderately over-valued.

As for Switzerland, it has drawn a line in the sand at 1.20 francs to the euro. Swiss National Bank Chairman Thomas Jordan and the country's finance minister, Eveline Widmer-Schlumpf, on Thursday both threatened capital controls to prevent the franc soaring if Europe's crisis deepens.

"The SNB will not tolerate this," Jordan said.


As if the election in Greece were not enough, investors will need to parse the impact of a presidential election in Egypt that could roil oil markets and an election in France that looks set to put socialists in control of parliament after gaining the presidency in May.

While central banks might stand together to counter credit tightness and market volatility, the bar would be far higher for coordinated monetary easing, which is considered unlikely.

The last time central banks cut interest rates collectively was in October 2008 after Lehman Brothers collapsed. In that episode, credit evaporated with overnight interbank rates shooting above 4 percent and stock market volatility as measured by the VIX fear index hitting a record above 80.

None of these measures is approaching severe stress today.

While volatility has risen sharply since March as global stock markets lost ground, at 24 the VIX is way below crisis levels. Interbank lending costs, measured by three-month LIBOR, EURIBOR and EONIA, are near record lows.

Read more: http://www.businessinsider.com/tag:reuters.com,0000:newsml_L1E8HCG3W#ixzz1xrYNcQgE

Nigel Farage on Spanish Bailout

Emergency action revealed to tackle 'worst crisis since second world war'

Sir Mervyn King has announced emergency measures to help banks and boost business lending after a warning from George Osborne that the "debt storm" raging on the continent had left the UK and the rest of Europe facing their most serious economic crisis outside wartime.

With one Spanish minister warning that the future of Europe could be decided within hours, the Bank of England will begin pumping a minimum of £5bn a month into City institutions within the next few days and the government expects to have a new "funding for lending" scheme for households and cash-starved small and medium-sized businesses in place within weeks.

The Bank and the Treasury believe their joint proposal, under which banks will receive cut-price funds provided they pass on the benefits to their business customers, could provide an £80bn boost to the stock of lending to the private sector and help alleviate growing fears of a second slump since the start of the financial crisis five years ago.

Both the governor and the chancellor used the backdrop of another day of financial and economic turbulence in the eurozone to express deep concern about the threat to Britain posed by Europe. With interest rates on Spain's 10-year borrowing hitting the 7% level and Angela Merkel insisting she was running out of patience with her fellow eurozone policymakers, King told a City audience at the Mansion House that there was a "large black cloud of uncertainty hanging over not only the euro area but our economy too, and indeed the world economy as a whole."

Osborne said things were likely to get worse in the eurozone before they got better and insisted that the time for decisions had come. Strongly defending the government's handling of the economy, the chancellor said it had been the hard-won credibility built up over the past two years that had allowed the Treasury and the Bank to take action.

Thursday night's announcements were designed to shore up confidence before this weekend's elections in Greece, seen as a possible trigger point for a new phase in Europe's debt crisis.

The Guardian

Currency Trader Shuts Down For Days before the economic storm

From Oanda

Due to the extreme volatility some market analysts foresee could result in the coming days, OANDA fxTrade will not accept any trading activity from 6:00 AM EST until approximately 3:00 PM EST, on Sunday, June 17, 2012. OANDA believes the convergence of a major market event during off-market hours represents a potential trading risk and has taken this rare step to protect traders from excessive rate fluctuations.

Please note that during this halt in trading, you can still access your account details but no trading activity will be accepted. For this reason, OANDA strongly recommends that all traders consider minimizing currency exposures prior to the trading halt.

If you do intend to maintain open positions during this period, be aware that OANDA will hold exchange rates steady during the trading halt. However, when trading resumes, rates will immediately adjust to the current market rate and it is possible that the updated rate could result in a margin closeout if the price has moved significantly against your positions.

Therefore, it is your responsibility to ensure you have adequate funds in your account to prevent a margin closeout.

OANDA apologizes for any inconvenience this may cause.

For more information, please contact a Customer Service representative.

Best regards,

The OANDA team

What do you get when you mix counterparty and agency risk, and throw in some currency collapse fear for good measure? This.

Zero hedge

Spain and Cyprus ratings cut by Moody's

The credit ratings of Spain and Cyprus have been cut by rating agency Moody's.

The move follows a 100bn-euro ($126bn; £81bn) bailout of Spain's banks by fellow eurozone countries agreed over the weekend. Cyprus is expected to seek its own bailout in the coming days.

Spain's government faces its highest borrowing costs in debt markets since joining the euro, as lenders fear for the country's future in the eurozone.

Spain's rating was cut three notches, from A3 to Baa3 - one notch above junk.

Cyprus' rating fell two notches, from Ba1 to Ba3, pushing it deeper into junk status.Grexit

Moody's said the ratings may be downgraded again after it concludes a review of Spain's creditworthiness within the next three months.

Many investors are restricted from investing in debts that are given a junk rating, implying that any further downgrade is likely to make it even harder for Spain to borrow.

Moody's has previously indicated that it will consider cutting the credit ratings of all eurozone governments - including top AAA-rated Germany - if it believes there is a material increase in the risk that Greece may be forced out of the eurozone.

One factor likely to bring the eurozone closer to a "Grexit" - as it has been dubbed by markets - would be a win by the anti-austerity radical left-wing Syriza party at new Greek parliament elections due on Sunday.Banks

Moody's said it had decided to cut Spain's rating due to the weakness of the Spanish economy, the government's difficulties in borrowing from financial markets, and the 100bn euros in additional debts to be taken on by Spain in order to prop up its banks.

The Spanish banks face potentially huge losses on loans they made to construction companies and mortgage borrowers during a property bubble in the last decade that has now burst.

The banks are undergoing two independent audits to determine how much more capital must be injected into them to absorb potential future losses.

The bailout agreed at the weekend would leave Spain's government sitting on the risk of any such losses.

It is also thought that the bailout will do little to help Spain's existing private-sector lenders, as the rescue loans are likely to be given priority if Spain has to renege on its debts in the future.

Markets have continued to react negatively to the rescue. On Thursday,Spain's 10-year implied cost of borrowing in the bond markets ended the day at an annual interest rate of 6.75%, close to a euro-era high set on Tuesday.

Meanwhile Cyprus is expected to seek a bailout of up to 5bn euros, or a quarter of its GDP, in order to finance a rescue of its own banks.

The Cypriot banks are heavily exposed to the troubled Greek banking system.

However, it is unclear whether the Cypriot government will seek a loan from its European partners, or will instead turn to Russia, who already provided it with a 2.5bn-euro loan in December.


Jobless claims on the rise

The number of Americans filing for first-time unemployment benefits climbed last week, indicating continued trouble for the labor market.

The Labor Department reported Thursday that 386,000 people filed new jobless claims in the week ended June 9, up 6,000 from the previous week's revised figure.

That was 11,000 more than expected. Economists surveyed by Briefing.com had forecast 375,000 people would file new claims.

Initial claims are a volatile number. But because they're closely correlated with layoffs, economists consider them to be a key gauge of the job market.

Nearly 3.3 million people filed for their second week of unemployment benefits or more in the week ended June 2, the most recent data available. That number was down 33,000 from the previous week.

Two weeks ago, the government released a May jobs report that indicated job growth is slowing sharply.

Mark Vitner, a senior economist at Wells Fargo, said the worse-than-expected jobs numbers released Thursday are a sign that economic growth may slow in the second half of the year.

"There is really no getting away from the point that things are slowing, the economy is slowing," Vitner said.

The dour outlook is partially attributable to headwinds from Europe, Vitner said.

"Now that the global economy is slowing, companies in the U.S. are becoming much more cautious about expanding," he said.

Yahoo Finance