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IMF chief unveils euro plan and warns of '1930s moment'

In a wide-ranging speech at the German Council on Foreign Relations think tank in Berlin, Ms Lagarde also called for an additional $500bn (£320m) for the IMF as it seeks to keep afloat countries battered by the crisis.

And she had a dire warning for policymakers if they failed to do what was necessary, saying the world could slide into a "1930s moment" of isolationism, which led to the Great Depression and eventually to world war.

On the eurozone, Ms Lagarde acknowledged that a great deal had already been accomplished but that the policies agreed so far "form pieces, but pieces only, of a comprehensive solution."

She said the crisis-wracked eurozone had to focus on rediscovering growth as well as bolstering its defences against contagion from the debt turmoil and pulling closer together politically and economically.

To spur growth, she called indirectly on the European Central Bank to lower interest rates, already at a record low. With inflation falling sharply, "additional and timely monetary easing will be important," she said.(means Inflation)

"We need a larger firewall," she added. "Without it, countries like Italy and Spain that are fundamentally able to repay their debts could be forced into a solvency crisis by abnormal financing costs."

She proposed "folding" the leftover cash in the eurozone's current rescue pot, the EFSF, into the permanent ESM bailout fund when the latter comes into force, likely in the middle of this year.

However, departing from the text of her speech, she stressed: "I am not talking about doubling" the €500bn ESM as reportedly wanted by Italian Prime Minister Mario Draghi.

In addition, she said the ECB should "provide the necessary liquidity support to stabilise bank funding and sovereign debt markets".

And she argued that "political agreement on a joint bond to underpin risk sharing would help convince markets of the future viability of European economic and monetary union."

The creation of such a "eurobond" has long been a contentious issue among top policymakers, with the European Commission and France being in favour of such an instrument but German Chancellor Angela Merkel is strictly opposed for now.

Partly to assist in battling the crisis, both in the eurozone and further afield, Lagarde said: "I am convinced that we must step up the fund's lending capacity."

"In the coming years, we estimate a global potential financing need of $1 trillion. To play its part, the IMF would aim to raise up to $500 billion in additional lending resources," she said.

And following what she termed "so much loose talk about special 'European bailouts'," she stressed IMF help was "for all members" but insisted that "any support we provide to euro area countries must be anchored in a clear policy framework for the entire euro area."

After a turbulent 2011, Ms Lagarde announced that Tuesday's updated IMF economic projections would result in "lower growth forecasts for most parts of the world."

"Even these lower forecasts assume a constructive policy path that is by no means assured," she cautioned.

And she warned that if policymakers failed to grasp the seriousness of the situation, "we could easily slide into a '1930s moment'."

"A moment where trust and cooperation break down and countries turn inward. A moment, ultimately, leading to a downward spiral that could engulf the entire world."

However, Ms Lagarde said, "I believe we can avoid such a scenario ... although the economic outlook remains deeply worrisome, there is a way out."

The Telegraph

Eurozone finance ministers reject Greek debt offer

The blow came after a day in which European markets had risen on hopes that attempts to resolve the latest phase of the Greek debt crisis would be successful.

Eurozone ministers have demanded that negotiations between the Greek government and Institute of International Finance (IIF) reach agreement on a lower average coupon, or interest rate, on new Greek bonds issued in return for a haircut on existing debt held by private investors.

"The ministers have sent the offer back for negotiations," said an official last night. "The ministers want a lower coupon than presented in the offer."

The offer, negotiated during tense talks that rattled markets last week, assumed an average coupon on new Greek bonds of 4pc.

The new bonds, likely to have maturity of 30 years, would replace existing Greek debt as sweetener for writing down existing Greek bonds owned by banks and private investors.

The International Monetary Fund (IMF) has insisted that the coupon rate must not exceed 3.5pc on average if the deal is to reduce the currently unsustainable burden of Greek debt to manageable levels.

If the coupon is 4pc then the cost for Germany and other eurozone countries of a second Greek bailout in March will rise beyond a €30bn figure earmarked for sweetening a debt write down for the private sector.

Jean-Claude Juncker, head of the eurozone finance ministers' group, last night confirmed that the group wants a rate below 4pc and insisted that rates must be on average 3.5pc or below until 2020.

Eurozone officials have insisted that there are no plans to increase the €130bn of official financing for Greece under a second bailout package agreed in October.

A deal with its private creditors is a precondition for Greece to get the second bail-out from its eurozone partners, after it received €110bn in May 2010.

Angela Merkel, the German Chancellor, said there would be no question of a temporary loan for Greece if the private-sector involvement (PSI) dragged on. Wolfgang Schaeuble, the German finance minister, said he wanted a second bail-out programme for Greece to be in place by March.

Athens faces a March 20 deadline to repay €14.4bn in debt.

As well as the terms of the Greek debt restructuring, eurozone finance ministers were meeting in Brussels last night to discuss new treaties designed to impose greater fiscal discipline ahead of the EU leaders summit on January 30.

Mario Monti, the Italian Prime Minister, said no decision had been reached on the treaty concerning the permanent bail-out fund, the European Stability Mechanism (ESM).

Earlier on Monday, investors had shrugged off the stalemate in the negotiations between Greece and its private sector bondholders, optimistic that eurozone policy-makers were determined to secure a deal and avoid a messy default.

The FTSE 100 closed up 0.9pc at 5,782.56, the highest close price since July 29. The DAX in Frankfurt and CAC 40 in Paris both rose 0.5pc, to 6,436.62 and 3,338.42 respectively.

Benchmark 10-year Italian bond yields fell by 14 basis points to 6.073pc, reflecting the calmer mood among investors.

Christine Lagarde, head of the IMF, joined calls from the Italian Government and Spain for Europe to boost the size of is future bail-out fund, the European Stability Mechanism (ESM).

"We need a larger firewall," she said. "Without it, countries like Italy and Spain, that are fundamentally able to repay their debts, could potentially be forced into a solvency crisis by abnormal financing costs."

Germany may be open to boosting the aid limit from €500bn, Government officials in Berlin said. However a spokesman for Chancellor Merkel last night denied reports the country was ready to agree to an increase of the size of the bailout fund to €750bn.

Ms Lagarde set out a raft of other proposals to fight the eurozone crisis, including lower rates imposed by the European Central Banks and the creation of eurobonds, as she warned of dimmer world growth prospects.

The Telegraph

Report: Russia to deliver combat jets to Syria

Russia has signed a contract to sell combat jets to Syria in a show of support for President Bashar Assad's regime, a newspaper reported Monday.

The business daily Kommersant said, citing a source close to Russia's Rosoboronexport state arms trader, that the $550-million deal envisages the delivery of 36 Yak-130 aircraft. A spokesman for Rosoboronexport refused to comment on the report.

If confirmed, the deal would mark an open defiance of international efforts to put pressure on Assad's regime, which has faced broad condemnation for its brutal crackdown on an uprising. The UN says more than 5,400 people have died over 10 months.

Russia's Foreign Minister Sergey Lavrov said last week that Moscow doesn't consider it necessary to offer an explanation or excuses over suspicions that a Russian ship had delivered munitions to Syria despite an EU arms embargo.

Lavrov told a news conference that Russia was acting in full respect of international law and wouldn't be guided by unilateral sanctions imposed by other nations.

He accused the West of turning a blind eye to attacks by opposition militants and supplies of weapons to the Syrian opposition from abroad and warned that Russia will block any attempt by the West to secure United Nations support for the use of force against Syria.

Russia has been a strong ally of Syria since Soviet times when the country was led by the president's father Hafez Assad. It has supplied Syria with aircraft, missiles, tanks and other modern weapons.

The Yak-130 is a twin-engined combat trainer jet that can also be used to attack ground targets. The Russian air force has recently placed an order for 55 such jets.


Haaretz

Benjamin Netanyahu renews speculation over military action against Iran

The Israeli prime minister riled senior commanders by advancing the candidacy of his military secretary, Maj Gen Yihanan Locker, for the post after the present commander signalled his desire to retire.

Mr Netanyahu's reported interference in the military appointments system has prompted a political backlash in Israel and elicited a stiff protest from Gen Benny Gantz, the chief of staff of the Israel Defence Forces.

In a sign of fresh tension over Iran between Israel's defence and political establishments, Gen Gantz is backing Maj Gen Amir Eshel, said to be opposed to military strikes against Tehran's nuclear facilities, for the position.

"A situation in which a major general is appointed against the wishes of the chief of staff is untenable," Gen Gantz told a government committee, according to Israeli newspaper reports.

Mr Netanyahu, supported by Ehud Barak, his defence minister, is widely known to lead a camp favouring military action against Iran but he has run into persistent opposition from senior military and intelligence commanders who question whether unilateral air strikes would be effective.

The prime minister has also come under intense US pressure to tone down a recent surge in belligerent rhetoric towards Iran.

Following a telephone conversation with President Barack Obama earlier this month, Mr Netanyahu grudgingly gave his backing to new US and EU sanctions against Iran.

But in a speech delivered ahead of International Holocaust Remembrance Day, which will be marked on Friday, Mr Netanyahu returned to a familiar theme by giving warning that Israel had the military means to defend itself against foreign aggression. His comments appeared clearly aimed at Iran.

"The Jewish people and the Israeli government have the right, the obligation and the ability to prevent another destruction of the Jewish people or an attack on its state," he said.

The Telegraph

Iran to sell its oil for Gold!!!!

Iran to sell its Oil for Gold ,what will you have real money in gold or silver or fiat promissory note that looses value daily ! Gaddafi tried to get gold for oil and we all know what NATO did. Let's see what happens here....the smart people form the west are with Iran. We can see the fraud of the elite machine (Rothschild, USA, Britain, Rockefeller, English Royals, Dutch Royals, George Soros, Hitlery Clinton, Bush Snr, Lowry, Silverstein, Bernake, Berzynsky, Murdoch, etc...) They are trying to keep the petrol dollar going as long as possible and the Corporate Warlords in Power, simple as that. One of those US Freedoms WE want to spread/share with the world.Thats right, The system is not sustainable,Obama wants to raise the debt ceiling 1.3 trillion dollars,This is to cover debt owed to other countries.As you can see the dollar is loosing power as the worlds reserve currency.Replace it with the true world currency.. Silver and gold are money and nothing else.