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Monday, June 18, 2012

Steve Quayle: The Day After Red Screen

Mass Fish Kill in canal near Lake Manitoba, Canada (June 17, 2012)

Final words before war? Israel threatens Iran if nuke talks fail

Forget The Election Results Greece Is Still Doomed

The election results from Greece are in and the pro-bailout forces have won, but just barely.  It is being projected that the pro-bailout New Democracy party will have about 130 seats in the 300 seat parliament, and Pasok (another pro-bailout party) will have about 33 seats.  Those two parties have alternated ruling Greece for decades, and it looks like they are going to form a coalition government which will keep Greece in the euro.  On Monday we are likely to see financial markets across the globe in celebration mode.  But the truth is that nothing has really changed.  Greece is still in a depression.  The Greek economy has contracted by close to 25 percent over the past four years, and now they are going to stay on the exact same path that they were before.  Austerity is going to continue to grind away at what remains of the Greek economy and money is going to continue to fly out of the country at a very rapid pace. Greece is still drowning in debt and completely dependent on outside aid to avoid bankruptcy.  Meanwhile, things in Spain and Italy are rapidly getting worse.  So where in that equation is room for optimism?
Right now the ingredients for a "perfect storm" are developing in Europe.  Government spending is being slashed all across the continent, ECB monetary policy is very tight, new regulations and deteriorating economic conditions are causing major banks to cut back on lending and there is panic in the air.
Unless something dramatic changes, things are going to continue to get worse.
Yes, the Greek election results mean that Greece will stay in the euro - at least for now.
But is that really a reason for Greeks to celebrate?
Right now, the unemployment rate in Greece is about 22 percentBusinesses continue to shut down at a staggering rate and suicides are spiking.
So far this month, about 500 million euros a day has been pulled out of Greek banks.  The entire Greek banking system is on the verge of collapse.
Meanwhile, the Greek government is still running up more debt.  It is being projected that the Greek budget deficit will be about 7 percent of GDP this year.
The Greeks went to the polls and they voted for more of the same.
Are they crazy?
Someone once said that the definition of insanity is doing the same thing over and over again and expecting different results.
Unfortunately, it looks like things are going to continue to get worse in Greece for quite some time.
And the rest of Europe is heading into a very bleak economic future as well.
At the moment, unemployment in the eurozone is at a record high.
Most analysts expect it to go even higher.
To say that Spain has an unemployment problem would be a massive understatement.  The unemployment rate in Spain is even higher than the unemployment rate in Greece is.  In fact, unemployment in Spain is the highest that it has ever been since the introduction of the euro.
The Spanish banking system is a complete and total disaster at this point.  The Spanish government has already asked for a 100 billion euro bailout for its banks.
But that might not be nearly enough.
Spain is facing a housing collapse similar to what the United States went through back in 2008 and 2009.  Right now, home prices in Spain are absolutely collapsing....
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.

Meanwhile, money is being pulled out of banks in Spain at a very alarming rate.  As panic spreads we are seeing slow motion bank runs all over Europe.  Over the past few months massive amounts of money have been moved from troubled nations to "safe havens" such as Switzerland and Germany.
Investors are getting very nervous and yields on Italian and Spanish debt are spiking again.
Last week yields on Spanish debt hit their highest levels since the introduction of the euro.  Without massive ECB intervention the yield on 10 year Spanish bonds will almost certainly blow well past the 7 percent danger mark.
The credit rating agencies are indicating that there is danger ahead.  Moody's recently downgraded Spanish debt to just one notch above junk status.  Spain is heading down the exact same road that Greece has gone.
The situation in Europe is very grim.
Greece is going to need bailouts for as far as the eye can see.
Spain is almost certainly going to need a huge bailout.
Italy is almost certainly going to need a huge bailout.
Ireland and Portugal look like they are going to need more money.
France is increasingly looking vulnerable, and Francois Hollande appears to have no real solutions up his sleeve.
As I have said so many times before, watch Europe.
Every few weeks there are headlines that declare that "Europe has been saved" but things just keep getting worse.
The governor of the Bank of England, Mervyn King, said the following a few weeks ago....
"Our biggest trading partner is tearing itself apart with no obvious solution."
And that is the truth.  There is no obvious solution to the problems in Europe.  The politicians could kick the can down the road for a while longer, but in the end there will be no avoiding the pain that is coming.
The equation for what is happening in Europe that I have shared before still applies....
Brutal austerity + toxic levels of government debt + rising bond yields + a lack of confidence in the financial system + banks that are massively overleveraged + a massive credit crunch = A financial implosion of historic proportions
We are watching a slow-motion financial train wreck that is absolutely unprecedented happen right in front of our eyes and our politicians are powerless to stop it.
It is going to be a long, hot summer for the European financial system.
On election day in Greece, the mood was incredibly somber.  Instead of celebrating, most Greeks seemed resigned to a very hard future.  As an article in the Telegraph described, the entire nation seems to be grinding to a halt....
This is the election that is supposed to decide whether Greece stays in the euro. Yet as it, and Europe, face what could be their Katrina moment, the dominant sense here is not of panic, or fear, or even hope - but of a country in suspended animation, grinding to a halt.
The Athens Heart shopping centre, in the southern suburbs, is polished, full of big brands, and almost totally empty of customers. "We've had five sales all day," says Steryiani Vlachakou, the assistant in the Champion sportswear store. "It's been getting a lot, lot worse."

Sadly, it is not only Greece that is doomed.
The truth is that all of Europe is doomed, and when Europe falls the entire globe is going to feel it.
So get ready for the hard times that are coming.  The pain is going to be immense and most people are not even going to see it coming.

Indonesia’s Mount Marapi volcano spews volcanic ash

Mount Marapi in West Sumatra province spewed volcanic ash up to 500 meters into the sky on Sunday morning. “The volcano spewed volcanic ash for about 10 minutes starting at around 08.30 a.m.,” Mubarak, who lived on the slope of the volcano, said on Sunday. 

“The volcanic ash fell on around the volcano’s slope,” he said. Before spewing volcanic ash, the 2,891-meter high volcano released white thick smoke as high as 50 meters from its crater, he said. Since its alert status was raised on August 3, 2011, the volcano had spewed white smoke and volcanic ash almost every day, he said. The Bukittinggi Center for Volcanology and Geological Disaster Mitigation (PVMBG) still maintains the volcano’s alert status at the second highest alert level. “PVMBG still recommends keeping the volcano at the second highest alert status and declaring it off-limits to anyone climbing within 3 km of its peak,” PVMBG officer Warseno said. 

 The volcano has spewed thick smoke and volcanic ash almost every day since it began showing signs of increased activity on August 3, 2011.
Extinction Protocol

IDF tanks move closer to Egypt border

The IDF has deployed Armored forces near the Israel-Egypt border, moving tanks closer to the fence, Ynet has learned. The unusual move followed Monday's terror attack on defense contractor crews building the new security fence.

The attack claimed the life of Said Phashpashe, 36, from Haifa. Golani soldiers who were scrambled to the area killed two terrorists.

Ynet was able to document the presence of Israeli tanks in close proximity to the border – maneuvers which are barred by Jerusalem's peace treaty with Cairo.

IDF tank near the border (Photos: Yoav Zitun)

The last time the IDF boosted its front-line combat vehicle presence in the sector was in August 2011, following a murderous terror attack by the Islamic Jihad, which left nine Israelis dead.

At the time, the military deployed several armored personnel carriers along the border, as part of the heightened security measures in the sensitive area.

Shuttled into new position

Ynet's chief military commentator Ron Ben Yishai noted that several months ago, Israel and Egypt arrived at an agreement by which Cairo would be able to deploy 20 tanks near the border, to ward off attacks by Bedouins on Egyptian forces, despite the fact that such a move contradicts the peace treaty.

It is likely that the deal also allowed Israel to do the same in favor of increased protection for the area's communities.

Gaza Division Southern Brigade Commander Col. Tal Harmoni held a press briefing Monday, following the terror attack: "We are in a race against the clock to close the border," he told reporters. "We have to seal off the border as soon as we can to prevent exactly these kinds of attacks."

Harmoni added that as tragic as the attack's result were, "It could have been far worse – a large-scale attack was prevented.

"The IDF has strong ties with the Egyptians forces, who are working tirelessly to thwart such incidents," he concluded.


Egypt: Brotherhood Claims Victory in Presidential Election

Remember the one that said ¨Our capital it´s going to be Jerusalem an not Cairo¨
Well he won.....

The Muslim Brotherhood declared early Monday that its candidate, Mohammed Morsi, won Egypt's presidential election.

The Associated Press reported that at a pre-dawn press conference declaring their win, officials from the fundamentalist group, banned for decades and repeatedly subjected to crackdowns under former President Hosni Mubarak's rule, were ebullient and smiling.

Final official results are not expected until Thursday, AP noted. The Brotherhood's declaration was based on results announced by election officials at individual counting centers, where each campaign has representatives who compile the numbers and make them public before the formal announcement. The Brotherhood's early, partial counts proved generally accurate in last month's first round vote.

The group said Morsi took 51.8 percent of the vote to rival former Prime Minister Ahmed Shafiq's 48.1 percent out of 24.6 million votes cast, with 98 percent of the more than 13,000 poll centers counted.

Earlier on Sunday night, just two hours after polls closed, the Brotherhood claimed that Morsi was leading in several provinces, the Al-Arabiya network reported. Morsi campaign official Yasser Ali told a news conference that Morsi had 61 percent of the 1.4 million votes counted so far, compared to 39 percent for Shafiq.

Al-Arabiya reported that a Shafiq campaign official dismissed the Brotherhood's count, saying his candidate was ahead, but gave no numbers.

Voter turnout on Saturday, the first day of the second round of the presidential elections, was low compared to the first day of the first round.

Meanwhile on Sunday, Egypt’s ruling military issued an interim constitution defining the new president's authorities, The Associated Press reported.

With parliament dissolved and martial law effectively in force, the generals granted themselves considerable authority and the main role in charting the country's future..

According to a copy of the new constitution document obtained by AP, the generals would be the nation's de facto legislators and control the budget. They also will name the 100-member panel tasked with drafting a new constitution, thus ensuring the new charter would guarantee them a say in key policies like defense and national security as well as shield their vast economic empire from civilian scrutiny.

Arutz Sheba

Multiple Church Bombings in Nigeria ...killed 21 and injured at least 100

ABUJA - Three churches were bombed this morning in Kaduna, Nigeria, igniting riots in the state capital and prompting a 24-hour curfew. The blasts killed 21 and injured at least 100. The violence Sunday is just the latest development in areas where tensions have risen dramatically recently.

Kaduna has been tense since after the 2011 elections when riots broke out killing nearly 700 people. Locals say the violence was political but it also cut across religious lines, deepening distrust between Muslims and Christians.

Kaduna city, the capital of Kaduna state, is now roughly divided like the country of Nigeria between a mostly-Muslim north and a predominately Christian south.

Sunday, after churches were bombed in Zaria and Kaduna city, two cities that are still recovering from last year’s carnage, riots broke out in Kaduna.

Femi Odekunle, a Nigerian professor of criminology, says increasing violence in Nigeria may have religious overtones, but the root of the problem is increasing poverty and the unequal distribution of resources in Nigeria, Africa’s most populous nation and biggest oil exporter.

"I am just telling you the inequality, political, economic, social even in terms of the legal administration of criminal justice. The inequality is there," said Odekunle.

The Nigerian Red Cross says rescue operations are ongoing. Spokesperson Nwakpa O. Nwakpa said calm is returning to Kaduna city.

No group has claimed responsibility for the church bombings, but the Islamist militant group popularly known as Boko Haram has taken responsibility for other similar attacks, including church bombings on Christmas day that killed more than 40 people, and a church bombing early this month in Bauchi that left 15 dead.

Boko Haram is blamed for more than 1,000 deaths since it began violent operations in 2009, attacking security forces, churches, schools, government buildings, newspaper offices and market places.


Russia flies anti air, anti ship missiles to Assad as its fleet heads to Tartus

Moscow is using the time up until Russian President Vladimir Putin faces US President Barack Obama across the G20 conference table in Los Cabos, Mexico Sunday, June 17 - or in its corridors - to ship sophisticated arms to Syria able to prevent a no-fly zone and a fleet of warships to the Mediterranean port of Tartus.
While Pentagon sources Friday disclosed the approach of a “small contingent” of Russian warships to Tartus, DEBKAfile’s military and intelligence sources have discovered that heading for the Russian base at this Syrian port is a Russian fleet that includes Ropucha-toad or Project 775 class landing-craft carrying Russian marines. Each craft can carry 250 marine personnel and 500-ton armored vehicles.
And flying overhead are Russian air transports that are touching down at Syrian air bases bearing, according to our sources, a variety of sophisticated munitions for the Syrian army: advanced Russian Pantsyr-S1 anti-air missiles capable of hitting fighter-bombers flying at an altitude of 12 kilometers and cruise missiles; self-propelled medium range anti-air Buk-M2 missiles (NATO codenamed SA-11). They are capable of downing aircraft flying at an altitude of 14 kilometers and Mach 32 speed; and shore-based Bastion anti-ship missiles which can reach vessels sailing 300 kilometers out to sea.

Russia is, in a word, supplying Bashar Assad, his regime and his army, with the very weapons they may need for warding off Western and Arab air efforts to impose a no-fly zone over Syria, while at the same time enabling him to repel seaborne assaults by his foes from the Mediterranean.
Since Syrian units have not been trained in the use of these advanced weapons, they are mostly likely coming with Russian technical teams to operate them - although they would be presented as “instructors.”
The Russians are not trying to conceal their military intervention in Syria in support of the Assad regime.
Friday, June 16, Anatoly P. Isaykin, director of Rosoboronexport (the Russian state arms export authority) said quite openly: I would like to say these mechanisms are really good means of defense, a reliable defense against attacks from air or sea. This is not a threat, but whoever is planning an attack should think about this.” The next day, Saturday, a source in the Russian General Staff told the Itar-Tass government news agency, “Several warships of the Russian Black Sea Fleet, including large landing ships with marines aboard, are fully prepared to take to the sea in case it is necessary to protect the Russian logistics base in Tartus, Syria, since it is a zone of the Fleet’s responsibility.”

DEBKAfile’s sources in Washington, Moscow and the Persian Gulf expect the Russian and US presidents to get together in the course of the G20 summit for a meeting that will determine whether or not the US and its European and Arab allies go forward with their planned military intervention in Syria.
Agreement between the two presidents on their Syria and Iran policies could arrest this plan, whereas their failure to agree would quicken its pace.


Greek, Spanish savings flee eurozone crisis

In Europe's most economically stricken countries, people are taking their money out of banks as a way to protect their savings from the growing financial storm.

People are worried that their savings could be devalued if their country stops using the euro, or that banks are on the verge of collapse and that governments cannot make good on deposit insurance. So in Greece, Spain and beyond they are withdrawing euros by the billions — behavior that is magnifying their countries' financial stresses.

The money is being hoarded at home or deposited in banks in more stable economies.

It's a steady bank "jog" at the moment, not a full-bore run. But it threatens to undermine the finances of those countries' already-stressed lenders. And if it does turn into a full bank run after Greece's crucial election on Sunday, it could hasten financial disaster in Europe and help spread turmoil around the world.

Since the Greek debt crisis broke in late 2009, deposits have fallen by 30 percent. Savers have slowly pulled some €72 billion ($90.24 billion) from local lenders, with total household and corporate deposits standing at €165.9 billion ($207.94 billion) in April, according to the latest data from the Bank of Greece.

Spanish deposits have fallen about six percent over the past year. They dipped suddenly in April by about €3.1 billion, or 1.8 percent, to €1.624 trillion as problems with the country's troubled banks started to grow to alarming proportions.

This is despite the fact that deposits are guaranteed by the government up to €100,000 across the eurozone.

Spain's financial turmoil quickly worsened in late May, when Bankia, the country's second-largest lender, announced it needed capital of €19 billion to stay afloat. Bankia denied reports of a rush by its customers to withdraw, but the bailout scared Spaniards who assumed their money was safe.

Bankia client Rosa Monsivais panicked and decided she had to move her savings from Bankia to a bank she thought would be safer. She chose a foreign bank with Spanish operations, the Dutch owned ING bank.

It took longer than she thought, leading to anxious days until she knew her money was in her new account.

"It scared me a little. I took all my money out and put it in ING," said Monsivais, a 41-year-old graphic artist who would not say how much money she moved. "But it took a full week to do this kind of transaction. I was reading the newspaper each day and it worried me."

The money across Europe is headed different places.

Some has simply been withdrawn and spent out of urgent need as people lose their jobs due to recessions. Some is winding up in bank accounts or invested in countries that are more stable such as Germany. The rest is being invested in property or bonds being issued by other countries that use the euro.

The flight of money from other countries was seen as one factor pushing up central London house prices, according to Knight Frank, a real estate agency dealing in high-end property.

"While it looks very much that the surge in Greek buyers has fallen off sharply since the beginning of the year — those who had the funds to buy have done so — we are now seeing a noticeable uptick in interest from France, Italy, Spain and even German-based purchasers looking at the prime London market," the company said in its Prime Central London Index report.

Meanwhile, some money appears to be simply hoarded at home, despite the risk of theft. Last month, police in Athens arrested a gang that specialized in breaking into basement storage spaces under apartment blocks, netting a rich haul in stashed cash and valuables.

"What the average Greek has in mind is to secure the euros they currently hold," said Theodore Krintas, managing director at Attica Wealth Management. "That has been going on for a long time, and will continue as long as the uncertainty increases concerning Greece's position in the near future in the eurozone and the European Union."

Sunday's vote could determine whether Greece stays in the euro or leaves in chaos. Since 2010, Greece has been dependent on two bailouts totaling €240 billion in loans to pay its bills. In return, the government had to promise to make deep spending cuts to lower its deficit. That has helped put the country in a deep recession. Leading political figures have called for renegotiating or rejecting the bailout deal, which could lead to a payment cutoff from mistrustful eurozone governments and the IMF.

If Greece reneges on the strict austerity measures that come with its rescue package, it could be forced to abandon the euro. Greece's departure from the eurozone would likely cause financial chaos across Europe: Greek debts would go from being denominated in sturdy euros to being denominated in Greek drachmas of dubious value.


World Bank chief Robert Zoellick: Developing nations should prepare for 'Lehmans moment'

Policymakers and investors are nervously awaiting the outcome of this weekend's Greek election, which could empower radical leftists threatening to tear up the terms of a bailout deal and send shockwaves through financial markets.

Developing countries needed to "prepare for the uncertainty coming out of the eurozone and the wider financial markets", Zoellick told theObserver.

"It will be better if they can avoid piling up short-term debts that can come due in volatile periods and look to the fundamentals of future growth - infrastructure and human capital," he said.

The World Bank had been increasing its lending to support Bulgaria's banking system - one of the most exposed to Greece - and acting to prevent a credit crunch in southeast Europe, the paper reported Zoellick as saying.

The bank was also taking unspecified measures to protect countries in north Africa that were vulnerable to Europe's debt crisis and trade finance facilities were being strengthened for francophone west Africa, the newspaper added.

"Uncertainty in markets is now starting to increase costs for developing countries," Zoellick said. "The ripple effects are making everybody's life harder."

In a reference to tensions in the eurozone over Greece's future, Zoellick said: "Europe may be able to muddle through but the risk is rising. There could be a Lehmans moment if things are not properly handled."

The bankruptcy of US bank Lehman Brothers in September 2008 triggered a global financial slump that indebted Western nations are still struggling to recover from.

The Telegraph

Venezuela building drones with Iran, Russia, China

Venezuela has made its first drone with help from allies Iran, Russia and China, and plans to start exporting it soon.

In a televised speech addressed to military officers at Venezuela's Defense Ministry, President Hugo Chavez said the aircraft is only equipped with a camera and is solely for defensive purposes, according to Reuters.

"We don't have any plans to harm anyone," Chavez said during the broadcast. "We are doing this with the help of different countries including China, Russia, Iran, and other allied countries."

The drone "does not carry arms" and has a 100-kilometer (60 mile) sweep, reported Agence France-Presse. "It can fly solo for some 90 minutes and reach an altitude of 3,000 meters (9,000 feet)," said General Julio Cesar Morales Prieto, president of Venezuela's state-run Military Industrial Company Cavim.

According to the Associated Press, Chavez also said that Venezuela has begun to assemble Kalashnikov assault rifles with the help of Russia. Morales Prieto said 3,000 AK-103 assault rifles have been assembled since Venezuela and Russia signed an agreement in 2005 to build a Kalashnikov assembly factory. Though construction of the factory has not yet been completed, production has begun. It will eventually be able to produce 25,000 rifles each year.


Document shows first step to banking union in Europe

The “limite” text - published exclusively by The Daily Telegraph, is secret, restricted for the "eyes only" of diplomats and officials preparing for the 28 and 29 June European Council in Brussels.

Most of the text, the annexed “Compact for Growth and Jobs”, are deals on project bonds and other small scale EU initiatives that FranCois Hollande is trumpeting as a €120bn “growth pact”.

The first draft is relatively uncontroversial because the eurobond and "banking union" issues are currently all too sensitive to be committed to paper for officials.

Other so-called "non-papers" are circulating at a top secret level between national capitals and Brussels.

The difficult issues not included in the draft are the “p.m” items in the draft: “other financial stability measures” and “PEC report on EMU”.

Translated from the Brussels jargon, the PEC – president of the European Council – report will be Herman Van Rompuy’s preliminary text of the future of “Economic and Monetary Union”. This will be circulated in sealed envelopes next week.

The separate text will set out a “roadmap” to a banking union, polling debt via some kind of eurobonds and political union via EU treaty change over the next 10 years.

Also important and controversial is will the “other financial stability measures” paper, including financial transition tax proposal and moves towards a banking union that can be taken by the EU before the end of the year.

Britain faces major fight over an FTT, or some other banking levy, at a meeting of EU finance ministers on Friday ahead of the summit next week.

The UK – which has no veto under current proposals on deepening EU banking regulation – also faces the ECB becoming Europe’s main banking regulator and the creation of national bank resolution funds that can be asked to contribute to European bank bailouts on a “compulsory” basis.

The Telegraph

Here is the text:

During the last two and half years, the European Union has taken important and far-reaching steps to overcome the crisis. Today, while the current economic situation remains unsatisfactory and continued efforts are needed to address challenges in relation to the sovereign debt crisis and the banking sector. Growth is expected to pick up in the second half of 2012 and gradually gain more momentum in 2013. We agreed today on a "Compact for Growth and Jobs", encompassing action to be taken by the Member States and the European Union with the aim of enhancing our competitiveness. We also endorsed the country specific recommendations to guide Member States' policies and budgets. Finally, we stressed the role the forthcoming Multiannual Financial Framework should play in strengthening growth. [p.m. PEC report on EMU] All of this underscores our determination to take the required measures to ensure a financially stable, competitive and prosperous Europe and thus enhance the welfare of citizens.

I. 1.

GROWTH AND JOBS The European Union is determined to continue to do everything necessary to put Europe back on the track of growth. Recalling the importance of fiscal consolidation, structural reform and targeted investment for sustainable growth, the European Council adopted a new Compact for Growth and Jobs for Europe, providing a coherent framework for action at national, EU and euro-area levels, using all possible levers and instruments (see annex).


The European Council endorses the country-specific recommendations which Member States will implement in their upcoming national decisions on budgets, structural reforms and employment policies, thus bringing the 2012 European Semester to a close. p.m. Report on EMU
MULTIANNUAL FINANCIAL FRAMEWORK The European Council held an in-depth discussion with the President of the European Parliament on the future Multiannual Financial Framework.


The European Council discussed how the new MFF can best contribute to the creation of growth and jobs, including how to prioritise the quality of European Union spending,

enhance its quality and better align it with the objectives of the Europe 2020 Strategy. 6. It welcomed the progress achieved under the Danish Presidency, provides a basis for the final stage of the negotiations. It called on the incoming Presidency and the President of the European Council to work closely together to further develop the Negotiating Box, with a view to the European Council reaching an agreement among Member States before the end of 2012, further to which the relevant legislative texts will be adopted following the procedures enshrined in the Treaty and fully respecting the role of the different institutions. III. OTHER ITEMS
a. Enlargement: p.m. in the light of GAC discussion on Montenegro. b. Justice and Home Affairs: the European Council

welcomed the progress achieved on the Dublin Regulation, the Directive on Reception Conditions, the Directive on Asylum Procedures and in relation to resettlement. It reiterated its commitment to the completion of the Common European Asylum System by the end of 2012. It also underlined the importance of free movement in the Schengen area and noted the state of work on the proposals relating to its governance and to the Visa Regulation. It underlined the importance of solidarity, the management of external borders and the fight against irregular immigration. It will revert to these matters as necessary.
work on the nuclear safety stress tests, invited Member States to ensure the full and timely implementation of the recommendations presented in the report from ENSREG and looked forward to the Commission's final report later this year. It also welcomed the completion of the work of the Ad Hoc Group on nuclear security and call for the rapid implementation of its recommendations. It called for further efforts to cooperate with all EU neighbouring countries on these issues.

d. Foreign policy: p.m.
ANNEX "COMPACT FOR GROWTH AND JOBS" The Members of the European Council, Expressing their determination to stimulate job rich growth, in the context of the Europe 2020 Strategy, Stressing the need to mobilise all levers and instruments to that end, Recalling the importance of sound public finances, structural reform and targeted investment for sustainable growth, Have agreed on the following Compact: ACTION TO BE TAKEN AT THE LEVEL OF THE MEMBER STATES

All Member States remain fully committed to taking immediate action required at national level to achieve the objectives of the Europe 2020 Strategy. The European Union's new tools for economic governance must be applied fully and effectively.


In the implementation of the Country-specific Recommendations, Member States will put particular emphasis on the following aspects:
a.pursuing differentiated growth-friendly fiscal consolidation, preserving public investment

in research and innovation, education and energy and ensuring the sustainability of pension systems;

b.restoring normal lending to the economy and urgently completing the restructuring of the

banking sector;
Member States will address deep-rooted imbalances and go further with structural reforms, with particular efforts to improve the investment environment, including through the digital economy, the opening up of network industries, the removal of disproportionate restrictions on service providers and improvements in the quality of public administration. THE CONTRIBUTION OF EUROPEAN POLICIES TO GROWTH


Further urgent measures are needed at the level of the European Union in order to boost growth and jobs in Europe and enhance the financing of the economy in the short to medium term.

a. Deepening the Single Market in new areas will be a key factor in promoting growth, in

particular in digital and network industries. The Commission intends to present further measures to that end in autumn 2012 as part of the second Single Market Act. All Single Market Act measures presently on the table should be adopted before the end of the year; in particular, agreement should be reached as soon as possible on the proposals on accounting, on alternative dispute resolution and online dispute resolution, on public procurement and on the recognition of professional qualifications. The Commission's proposals to improve Single Market governance and to maximise the benefits of the Services Directive are welcomed.
b. Swift progress is required to achieve the Digital Single Market, which will provide new

dynamism to the European economy. In particular, new initiatives are required in this respect with a view to developing online sales and facilitating the transition to e-invoicing.

The full implementation of the internal energy market by 2014 will significantly contribute to the EU's competitiveness, growth and employment. Following the timely adoption of the Energy Efficiency Directive, Member States must rapidly implement it; making full use of its provisions in order to exploit the significant potential for job-creation in this sector.

d. p.m. patent e. It is crucial to boost the financing of the economy. The EIB's paid in capital should

be increased by x billion euro, which will substantially increase its overall lending by x billion euro and thus unlock up to x billion euro of additional investment, spread across the European Union, including in the most vulnerable countries. This decision should be taken by the EIB Board so as to ensure that it enters into force no later than 31 December 2012. The Project Bond pilot phase should immediately be launched, bringing additional investments of up to 4.5 billion euro for pilot projects in key transport, energy and broadband infrastructure. The use of such financial instruments should be developed in the future, in the light of the lessons to be drawn from the pilot phase. Member States will work with the Commission in using part of their Structural Funds allocation to share the EIB loan risk and provide loan guarantees for SMEs. To date, 20 billion euro of Structural Funds have been reprogrammed in support of research and innovation, SMEs and youth employment.
f. The European Union's budget must be a catalyst for growth across Europe, notably by

leveraging productive investments. The future Multiannual Financial Framework must be fully mobilised in support to growth, competitiveness and convergence.
g. Tax policy must contribute to fiscal consolidation and growth. The Commission is pursuing

work on concrete ways to improve the fight against tax fraud and tax evasion and will soon present an Action Plan including options for dealing with tax haven issues and aggressive tax planning. Rapid agreement must be reached on the negotiating directives for savings taxation agreements with third countries. [p.m. FTT in the light of ECOFIN Council on 22 June 2012].

h. Boosting employment, for both women and men, in particular for young people, is a clear

priority. The Council will further examine and decide on

the proposals contained in

the Commission's "Employment package", putting emphasis on job creation, structural reform of labour markets and investment in human capital. It is crucial to address youth unemployment, in particular through the Commission's initiatives on youth guarantees and quality framework for traineeships. Labour mobility should be facilitated, notably by developing the EURES portal into a true European placement and recruitment tool, establishing new EU instruments to better track new skills required, improving the recognition of professional qualifications, reducing the number of regulated professions and strengthening the portability of pensions and other social rights. EU governance, including multilateral surveillance of employment policies, must be enhanced.
i. Trade must be better used as an engine for growth. The European Union is determined

to promote free, fair and open trade whilst at the same time asserting its interests, in a spirit of reciprocity and mutual benefit in relation to the world's largest economies. In this perspective, the ongoing and potential upcoming negotiations have a particularly high economic importance. Agreements which have been concluded must be rapidly ratified. The FTA agreements with Singapore and Canada should be finalised by the end of the year, negotiations with India also need to be rapidly finalised, and work should continue towards the deepening of the EU's trade relationship with the US and Japan.
j. Financial stability is a prerequisite for growth. The report presented by the President of the

European Council sketches out important ideas in that respect. Looking to the immediate future, the Council should rapidly examine the Commission's proposals on EU-wide rules for bank recovery and resolution, deposit guarantee schemes and capital requirements. The signatories of the ESM Treaty will ensure its entry into force by 9 July 2012. EMU-RELATED GROWTH FACTORS 5) There are areas where the Member States sharing a single currency, and others willing to join the effort, want to go further in their efforts to coordinate and integrate their economic policies, whilst ensuring coherence between those efforts and the activities of the European Union and fully respecting the integrity of the European Union as a whole. The Member States taking part in the Euro Plus Pact are committed to further deepen the coordination of their economic policies, with the objective of improving competitiveness and thereby leading to a higher degree of convergence reinforcing the social market economy. Participating Member States accordingly agree to identify common concrete political objectives and subscribe to additional concrete commitments. 7) Together with the other elements of this Compact, the Treaty on Stability, Coordination and Governance will further strengthen economic and fiscal coordination. The signatories of the Treaty underline their determination to quickly ratify it.

US enlists Britain's help to stop ship 'carrying Russian attack helicopters' to Syria

The MV Alaed, a Russian-operated cargo vessel, is currently thought to be sailing through the North Sea after allegedly picking up a consignment of munitions and MI25 helicopters - known as "flying tanks" - from the Russian Baltic port of Kaliningrad.

Washington, which last week condemned Moscow for continuing to arm the Syrian regime, has asked British officials to help stop the Alaed delivering its alleged cargo by using sanctions legislation to force its London-based insurer to withdraw its cover.

Under the terms of the current European Union arms embargo against Syria, imposed in May last year, there is a ban on the "transfer or export" of arms and any related "brokering" services such as insurance. Withdrawal of a ship's insurance cover would make it difficult for it legally to dock elsewhere and could force it to return the cargo to port.

The request to London from US officials comes after the US Secretary of State, Hillary Clinton, disclosed on Tuesday that Moscow was in the process of shipping a batch of attack helicopters to Syria.

Dismissing Russian government claims that its weapons sales to Syria would not be used for internal repression, Mrs Clinton warned the shipment could "quite dramatically" escalate the conflict, which has already claimed an estimated 10,000 lives. Yesterday, the United Nations monitoring mission said it had suspended its work because of "intensifying" violence on either side, which was putting its teams of unarmed observers at risk.

The helicopters Mrs Clinton was referring to are believed to be part of a 36-strong consignment ordered by the Syrian government at the end of the Soviet era, some of which were transferred back to Russia recently for routine maintenance. They are understood to have been serviced by the state-owned helicopter manufacturer, Mil, at their premises at Factory 150 in Kaliningrad.

While the Kremlin, which has so far vetoed calls for a United Nations arms embargo against Syria, insists that Mil is merely honouring the terms of an existing business contract, critics point that such helicopters have helped spearhead President Bashar al-Assad's attempts to suppress the uprising against him. Last week it was reported that helicopters had repeatedly fired rockets at a hospital in a rebel enclave outside Aleppo in northern Syria.

Shipping records show that on Thursday - the most recent date for which data is available - the Alaed was off the north-west coast of Denmark, apparently heading south towards the entrance to the English Channel. It is insured by Standard P and I Club, which is managed by Charles Taylor and Co Ltd of London, whose offshore syndicate director, Robert Dorey, confirmed on Saturday that they were investigating claims that the ship was carrying arms.

"We were informed on Friday evening that the ship might be carrying weapons, in particular attack helicopters, missiles and non-specific munitions, and we are making inquiries to establish what their side of the story is," said Mr Dorey. "There are exclusion clauses in our cover, and for anyone involved in improper or unlawful trade, we can cancel cover. We are investigating whether or not to do so in this case."

Like most international cargo ships, the Alaed has a complex ownership and management structure. Its registered owner is Volcano Shipping on the island of Curacao in the Dutch Antilles, but it is listed as part of a fleet belonging to a Russian company, FEMCO, which was unavailable for comment last night. According to FEMCO's website, the ship's commercial management and chartering is carried out by United Nordic Shipping, a Danish company based in Copenhagen, but yesterday, United Nordic shipping said that the management agreement had never actually been finalised, and that FEMCO's website was wrong.

"To the best of our knowledge the vessel is managed and operated by FEMCO in Russia," said Soeren Andersen, United Nordic Shipping's managing director. "We have no knowledge of or involvement in the vessel's current charter or trading - a fact we have also satisfactorily accounted for to the Danish authorities."

A source close to United Nordic added: "The Danish authorities contacted us a few days ago to ask about the ship, and said it was related to possible shipments of weapons to Syria."

The claims about the Alaed's cargo will fuel the growing row over Russian involvement in supplying arms to Syria, which Moscow has long seen as a strategic partner because of the Russian naval base in the Syrian port city of Tartus.

Last week, The Sunday Telegraph disclosed how the Professor Katsman, a ship belonging to a firm owned by a Russian billionaire, Vladimir Lisin, docked in Syria with a suspected weapons cache on May 26, one day after the massacre of more than 100 people in the Syrian village of Houla.

Dr Lisin, a steel magnate who is also vice-president of the Russian Olympic Committee, now faces calls from British MPs to have his invitation to London 2012 withdrawn. Sources close the Games organisers have said, however, that accredited Olympic representatives of foreign countries enjoy an effective "diplomatic immunity" that would be revoked only in the most serious of circumstances.

On Saturday, Dr Lisin said that the accusations against him were "groundless" and said an internal investigation he ordered at his transport firm, Universal Cargo Logistics (UCL) had found no evidence that the cargo was dangerous or violated international law.

"The evidence I was presented with indicates that according to the documentation the company was not transporting arms for either side of the Syrian conflict," Dr Lisin said in emailed comments.

"To date, I have not received a single [piece of] evidence to the contrary. If at some point someone does bring such evidence to my attention, I shall be grateful and will take all the possible measures available to me."

UCL said that as part of its investigation it requested information on the Professor Katsman's cargo from the owner, which it named as another Russian company. The company told UCL that the containers the Professor Katsman delivered to Syria "was a general cargo of non-military purpose featuring electrical equipment and repair parts (rotor blades) in containers and wooden crates", he said.

Dr Lisin is reported to be one of Russia's richest men and is well-connected to the country's political elite. Victor Olersky, a former board member of Dr Lisin's shipping firm, North Western Shipping Company, is now a Russian deputy transport minister, while Dr Lisin himself has been photographed meeting both the Russian president, Vladimir Putin, and the Russian prime minister, Dmitry Medvedev.

Dr Lisin also described calls to bar him from the Olympic Games as opportunistic "self promotion."

"I am against armed conflict in any region of the world, including Syria," he said. "Sadly, there are those who try to use the tragedy of the Syrian people for self-promotion... At the same time, I would like to ask those who consider themselves to be reasonable and responsible to refrain from groundless accusations that will do nothing more than aggravate the relations between people, businesses, and states.

"I have no doubt that the International Olympic Committee, the National Olympic Committee of the United Kingdom, and the Organising Committee of the 2012 Olympics will preserve the traditions of the Olympic movement that has always been above political gambling."

Meanwhile, Russia and the West are at further loggerheads over Moscow's plans to press ahead with a deal to supply President Assad's regime with state-of-the art attack jets.

In a move that US intelligence officials fear could plunge the Syrian conflict into even greater long-term bloodshed, the Kremlin is pushing on with an existing 2007 contract to provide two dozen Mig-29M2 fighter aircraft, estimated to be worth £250 million to the Russian defence industry.

While the aircraft may not be ready for delivery for many months, Washington fears if President Assad's regime is still intact it could use them to devastating effect against the country's rebel enclaves. They could also be used to hinder any Western plans for a no-fly zone, which some analysts believe may eventually prove the only way to provide Syria's rebel movement with a safe haven.

"Delivery of the Migs will helps prop Assad up and give him some credibility, which is not the message the US wants to see," said Washington-based national security analyst John Pike. "The Migs would make it more difficult to enforce a no fly zone, and would increase the amount of time that the Syrian air force could survive, although possibly only by a matter of a few days."

Rafif Jouejati, spokeswoman for the Free Syria Foundation, a US-based Syrian activist group, said: "Russian arms are flooding into Syria. If Assad gets these new and advanced Migs it will be terrible – a fearful thing."

She dismissed Russian claims that the aircraft were largely to provide strategic air defences against Syria's historic enemy, Israel. "It is preposterous to argue that Assad needs them as a defence against Israel with everything else that is happening right now."

She also claimed Mr Lisin ought to have ordered his shipping firms be more proactive in finding out what any ships heading to Syria contained.

"When your ship is taking a cargo to Syria – a country embroiled in civil war – it is your duty to know what that cargo contains. You can't hide behind a lack of knowledge when little children are being slaughtered."

The Kremlin has dismissed Western criticisms of its arms policy to Syria as hypocritical, saying that other governments are also fuelling the conflict by arming anti-Assad guerrillas. The Daily Telegraph disclosed yesterday that representatives of the main rebel group, the Free Syrian Army, had held meetings with US government officials to discuss getting them to authorise shipments of heavy weapons, including missiles.

British MPs are calling for Rosoboronexport, the Kremlin-owned arms export firm that has a monopoly on Russian arms exports, to be banned from exhibiting at the trade section of next month's Farnborough Airshow. Last week, Rosoboronexport had a stall at the Eurosatory 2012 arms exhibition in Paris, where videos of Russian attack helicopters were on display. Igor Sevastyanov, the company's deputy CEO, said: "No-one can ever accuse Russia of violating the rules of armaments trade set by the international community.

"The contract (with Syria) was signed long ago and we supply armaments that are self-defence rather than attack weapons."

On Monday Caroline Lucas, the Green Party MP for Brighton, raised the issue of Rosoboronexport's attendance at Farnborough with the Foreign Secretary, William Hague, in Parliament. She said: "It is deeply alarming that while the Russian state-owned company Rosoboronexport continues to sell weapons to the Syrian government – despite appalling state-sponsored atrocities in the country – it will nevertheless be allowed to exhibit its wares on UK soil at Farnborough International Airshow.

"The Foreign Secretary has assured me in Parliament that he will look into the matter, but with the air show only a few weeks away, I would urge him to act now to prevent Rosoboronexport from entering altogether."

She added: "By taking measures to ban Rosoboronexport from Farnborough and revoke Mr Lisin's invitation to the Olympics, the United Kingdom can lead by example in showing that it is prepared to take a moral stand against all of those foreign companies accused of involvement in the sale of weapons to deadly and undemocratic regimes."

An FCO spokesman said that Mr Hague was still considering the matter, but added: "Farnborough International Air Show is a commercial event run by Farnborough International Ltd. The British Government plays no part in deciding which companies are invited to the event."

Asked about the Alaed last night, a spokesman for the Foreign Office said it was “urgently looking into any possible breaches of the EU arms embargo on Syria.”

“We are aware of reports that a ship carrying a consignment of refurbished Russian-made attack helicopters is heading to Syria and that it is travelling in international waters near the UK,” the spokesman added. “The Foreign Secretary made clear to Russian Foreign Minister Lavrov when they met on 14 June that all defence shipments to Syria must stop. We are working closely with international partners to ensure that we are doing all we can to stop the Syrian regime’s ability to slaughter civilians being reinforced through assistance from other countries.”

The Telegraph