Extreme concern was quietly voiced Sunday, Dec. 18, by American and European official circles over the state of Turkish Prime Minister Tayyip Erdogan's health – and especially its impact on present and impending events in Syria and other parts of the Middle East, including Iran, DEBKAfile's Western intelligence sources report. Those sources say Erdogan is suffering from Rectosigmoid cancer, but were not sure if it had reached the advanced Stage TIII (spread out of the colon to regional lymph nodes).
They also said they did not know what treatment he had received at the Istanbul hospital where he was first admitted and latterly at the Hacettepe Hospital in Ankara.
Sunday, Turkish Health Minister Recep Akdag, talking to local journalists, told them not to pay attention to the "gossip" that the hospital had prepared a special room for the prime minister to conduct affairs of state, but did not deny it. No denials were issued either of Turkish news reports about Erdogan undergoing "abdominal surgery " on Nov. 26. They also reported that, since he was released, an air force ambulance helicopter had been standing outside his home.
According to reports flying around Ankara Sunday, which were neither confirmed nor denied, the Turkish prime minister is back in hospital.
DEBKAfile's sources would only admit they are worried because the lengthy medical treatment he needs has already had an effect on the state of Middle East decision-making, especially in relation to the urgent Syrian crisis.
Thursday night, Dec. 15, Erdogan and President Abdullah Gul led a top military command council meeting in Ankara to review preparations for war on two possible fronts - Syria and Iran, if Tehran decides to come to Bashar Assad's aid.
On Friday, the Turkish prime minister met US Defense Secretary Leon Panetta who flew in from Baghdad.
When Turkish journalists asked after his health, Erdogan replied: "I'm fine and I will be better."
Our sources point out that whatever decisions were made at the Turkish military council conference and the consultations between Turkish and American security chiefs, Erdogan's ill health was clearly uppermost in every mind in Ankara – and not only there.
In Washington, there is considerable anxiety. US President Barack Obama regards Erdogan as a personal friend and his senior ally in the execution of administration Middle East policies, especially with regard to Iran and Syria. The two leaders were recently described by insiders as having developed "intimate relations of trust." According to some sources, they had at least 14 phone conversations in recent months.
The question asked in Washington is this: Is the Turkish leader in fit condition to continue to help the Obama administration carry forward their agreed plans in the region?
They were not encouraged by the comment heard from Deputy Prime Minister Bulent Arinc while Erdogan was away from Ankara.
He chastised the ruling Justice and Development Party –AKP for "divisions… in Edrogan's absence…" over a bill for regulating the nomination of party candidates.
Turkish pundits saw those "divisions" as symptoms of a power struggle already afoot over the Erdogan legacy.
And so the next day, Arinc admitted "he had made a very big mistake" in bringing the argument out in the open.
There were no comments in Israel on the Turkish prime minister's medical condition.
European leaders are under renewed pressure to boost the firepower of the EU's multibillion-euro bailout package after Belgium's credit rating was cut.
Moody's downgraded Belgium by two notches to Aa3, its fourth highest rating. It warned that indebted eurozone countries such as Belgium will find it increasingly hard to fund their debts or achieve economic growth in the face of Europe's austerity drive.
"The fragility of the sovereign debt markets is increasingly entrenched and unlikely to be reversed in the near future," warned Moody's.
Rival ratings agency Fitch earlier said it would consider cutting Belgium's credit rating, along with those of Spain, Italy, Slovenia, Cyprus and Ireland. France's AAA credit rating remained intact for another day, although Fitch did revise its outlook down to "negative".
The latest credit rating changes came on the day that the EU released details of the "fiscal compact" deal designed to rescue the euro and prevent countries from going bust. This was published amid concerns over rising bad debt levels in European banks and the growing dependence of major lenders on funds provided by the European Central Bank.
French president Nicolas Sarkozy and German chancellor Angela Merkel said the fiscal compact could go ahead with the backing of just nine of the eurozone's 17 members. It will allow Brussels to enforce greater budgetary control and provide a solid firewall against shocks from the financial system.
But Fitch said the wrangling over fundamental aspects of the compact and the failure to clearly identify who will pay if the plan fails was undermining its standing with the markets.
As if to emphasise this point, the new prime minister of Italy, Mario Monti, openly disagreed with Berlin over the speed and severity of proposed cuts to public spending. He warned that further demands from the EU for cuts would undermine his efforts to bring stability and threaten a north-south eurozone split.
Monti said that Europe's response to the debt crisis "should be wrapped in a long-term sustainable approach, not just to feed short-term hunger for rigour in some countries".
He added: "To help European construction evolve in a way that unites, not divides, we cannot afford that the crisis in the eurozone brings us … the risk of conflicts between the virtuous north and an allegedly vicious south."
Monti is under pressure from Italian unions, which have warned that the country risked a "social explosion" if the technocrat prime minister pressed ahead with huge spending cuts and tax rises.
Public sector workers are expected to join a nationwide strike on Monday after MPs in Rome backed a €30bn (£25bn) austerity programme that includes an increase in VAT to 23% and a rise in the pension age, eventually up to 70. The cuts package was approved by 495 votes to 88. Had it been defeated, Monti and his government of technocrats would have been forced to resign exactly a month after the economist was sworn in with the task of keeping Italy from being the next victim of Europe's debt crisis.
On the bond markets, Italy's borrowing costs declined along with those of Spain after the European Central Bank intervened to buy Italian and Spanish debt from some of the continent's worst-hit banks. Deutsche Bank and BNP Paribas were downgraded on Thursday after repeated concerns that their loans to southern European countries could become worthless.
The eight-page compact being touted by Sarkozy and Merkel as the answer to the eurozone's debt and deficit crisis confers new powers on the European Court of Justice for policing balanced budget legislation limiting national debt levels in all eurozone countries, and commits the signatories to quasi-automatic penalties against countries that break the 3% maximum limit on budget deficits, with the European Commission as the referee.
The first draft of the "fiscal and stability compact" – agreed at a watershed EU summit last week in which Britain deployed its veto – was circulated to the 27 governments of the EU ahead of what promises to be acrimonious negotiations starting next week.
A simple majority of eurozone countries – nine of 17 – would see the "fiscal union" come into force within a month of the nine ratifications, a move clearly designed to stymie, for example, a no vote in a potential Irish referendum or a rejection by other eurozone parliaments.
Senior EU officials confirmed that all 27 EU governments, including veto-wielding British, would be involved in the negotiations, though the UK was being accorded mere "observer status" in the talks, according to the officials. British sources contested that second-rank status.
David Cameron's unprecedented veto last week thwarted German plans to anchor the new pact in a revised EU Lisbon treaty, forcing the other 26 to take the "second-best" route of forging a new international treaty between governments which may not contradict the Lisbon treaty.
The two main innovations going beyond the existing stability pact governing the euro are the automatic sanctions for those breaking deficit limits, and a "debt brake" that pledges participating countries to enact balanced budgets and ties their hands on public spending and borrowing. Two EU institutions – the court of justice and the European Commission – would be empowered to rule on conformity with these stipulations and the commission would effectively be charged with imposing fines.
The Guardian
Jean Claude Juncker, the head of the Eurogroup, said all 27 European Union finance ministers, including George Osborne, would talk together tomorrow afternoon to approve or reject extending the funds to the IMF as agreed in Brussels by December 19. The loans would be used by the IMF to support struggling eurozone countries.
The finance ministers are also tasked with devising a voting system to govern the European Stability Mechanism (ESM) after the Brussels decision to replace unanimity sparked a revolt. The ministers are under pressure to have a deal ready for approval by EU leaders when they convene on Tuesday.
There are fears that a failure to reach an agreement on either the IMF loans or the ESM would rattle markets which already have to digest the mass credit rating downgrade warnings on eurozone sovereigns that were announced on Friday night.
Fitch placed six countries, including Spain and Italy, on “negative watch”, while Moody’s downgraded Belgium. Standard & Poor’s has said 15 eurozone states face a downgrade, including France and Germany.
Mariano Rajoy is due to make his first speech to the Spanish parliament, setting out his long-awaited austerity plans. The new prime minister has hardly made any public announcements on Spain’s economic future since he was swept to power last month.
Mr Rajoy will be sworn in as prime minister on Wednesday when he will also name his cabinet, including his finance minister. The cabinet will meet for the first time on Friday. Although the yield’s on Spain’s 10-year debt dropped at the end of last week, the country faces an even tougher time on the bond market after Fitch’s warning.
Separately, Jurgen Stark said he decided to quit as senior economist at the European Central Bank (ECB) because he disagreed with its bond-buying policy.
The Telegraph
(Reuters) - Germany's Finance Minister Wolfgang Schaeuble said the country may pay its full contribution to the euro zone's permanent rescue fund in 2012, a regional German paper wrote.
"It is clear that the sooner and the more paid-in capital the ESM (European Stability Mechanism) has, the more it gains trust on the financial markets," he was quoted as saying by the Rheinische Post Duesseldorf, in an interview to appear in Monday's print edition. "My priority is to create trust."
The Finance Ministry was unavailable to comment.
European leaders agreed in Brussels last week to accelerate the launch of the ESM by a year to mid-2012, as part of measures aimed at putting an end to a devastating debt crisis.
The ESM, which will replace the temporary EFSF bailout fund, will have an effective lending capacity of 500 billion euros and total subscribed capital of 700 billion euros, of which 80 billion euros will be paid-in capital from euro zone countries.
EU leaders agreed earlier this year that the paid-in capital will be channelled into the fund over five years in five equal installments.
Germany's total contribution to the paid-in capital is set for 21.5 billion euros, paid in instalments of 4.3 billion euros. Earlier this year, it was reticent to pay up its contribution at a faster pace, due to concerns about sticking to its debt brake and consolidating its own budget.
Schaeuble was cited earlier this week by a newspaper as saying Germany would fund its contribution to the ESM with a supplementary budget.
A government source told Reuters earlier this week that Germany's first instalment could be much higher than previously planned "because people want the ESM to be able to act soon."
The statement of rating agency Fitch on Friday that a comprehensive solution to the euro zone crisis was beyond the region's reach has heightened pressure on leaders to get to grips with the turmoil.
The chairman of euro zone finance ministers, Jean-Claude Juncker, said on Wednesday he would like all paid-in capital for the ESM to be contributed during its first year of operation, to ensure it had the firepower to deter speculation.
Schaeuble was also cited as saying the new fiscal compact for all European Union member states except Britain - which last week vetoed it - should be implemented by March 2012, and the new treaty for a stability union should be linked to the ESM treaty.
"It would make sense for the new pact to be linked with the new ESM treaty," he said. "That would mean that solidarity is inseparable from solidity."
"Markets want to see actions," he said.
The bottom line is that apparently some warehouses and bullion dealers are not a safe place to store your gold and silver, even if you hold a specific warehouse receipt. In an oligarchy, private ownership is merely a concept, subject to interpretation and confiscation.
Although the details and the individual perpetrators are yet to be disclosed, what is now painfully clear is that the CFTC and CME regulated futures system is defaulting on its obligations. This did not even happen in the big failures like Lehman and Bear Sterns in which the customer accounts were kept whole and transferred before the liquidation process.
Obviously holding unallocated gold and silver in a fractional reserve scheme is subject to much more counterparty risk than many might have previously admitted. If a major bullion bank were to declare bankruptcy or a major exchange a default, how would it affect you? Do you think your property claims would be protected based on what you have seen this year?
You always have counter-party risk if you hold gold and silver through another party, even if they are a Primary Dealer of the Federal Reserve. As Ben said, the Fed offers no seal of approval.
If a Bankruptcy Trustee can pool your bullion into the rest of the paper assets and then liquidate it at prices that are being front run by the Street, you will have to accept whatever paper settlement that they give you.
The customer money and bullion assets are not lost, or rehypothecated or anything else. This is a pseudo-legal fig leaf, a convenient rationalization.
The customer assets were stolen, and given to at least one major financial institution by MF Global to satisfy an 11th hour margin call in the week of their bankruptcy, even as MF Global was paying bonuses to its London employees.
And in an absolutely classic Wall Street move, they are still charging the customers storage fees on the bullion which they have misappropriated from them. lol.
And now that powerful financial institution does not want to give the customer money and metal back. And they are apparently so powerful that the Trustee and the Court are reluctant to try and force its return to the customers, which is customary in this type of preferential distribution of assets prior to a bankruptcy, much less assets that were stolen. And keep in mind that in those last days the firm sent checks instead of wire transfers to customers so they could bounce them, and in a few cases even reversed completed wire transfers!
And so in the great Wall Street tradition they are trying to force the customers and the public to take the loss. The regulators and the exchange are aghast, and are trying to imagine how to resolve and spin this to preserve investor confidence and prevent a run on the system.
'Let them eat warehouse receipts.'
For many this would have been unthinkable only a few months ago. They had been cautioned and warned repeatedly, but chose to trust the financial system. And now they are suffering loss and anxiety, frozen assets, and the misappropriation of their wealth.
How more plainly can it be said? The US financial system as it now stands cannot be trusted to observe even the most basic property rights as it continues to unravel from a long standing culture of fraud.
Get your money as far away from Wall Street as is possible. And if you want to own gold and silver, take delivery and store it in a secure private facility outside the fractional reserve system.
Zero Hedge
BRUSSELS (Reuters) - The euro zone will tackle its debt crisis this week by offering more cash to the IMF and long-term liquidity to banks, while moving toward tighter fiscal rules, after ratings agency Fitch cast doubt on its capacity to respond decisively.
"We all know that Europe has not been able to convince markets that its governance set-up and its measures against the crisis were enough," Italian Deputy Economy Minister Vittorio Grilli said in a newspaper interview published Sunday.
"More integration and more effective instruments are needed. We are not yet there," he told Il Sole 24 Ore.
Euro zone leaders agreed on December 9 to write into national constitutions a rule that budgets have to be balanced or in surplus in structural terms. If they are not, automatic corrective measures would follow.
Such rules would sharply limit government borrowing, bring down debt and, euro zone politicians hope, help restore market trust in the sustainability of public finances.
But constitutional changes will take a year or more and markets want reassurance now that money invested in euro zone debt is safe, especially after banks were asked to accept a 50 percent loss on their Greek bonds in October as part of a second bailout of the country which sparked the debt crisis.
European leaders have belatedly insisted that the Greek case was unique and did not set a precedent.
To address market concerns that they do not have enough money to prevent the crisis from engulfing Italy and Spain, euro zone leaders brought forward by one year to July 2012 the launch of their 500 billion euro permanent bailout fund.
ECB President Mario Draghi told Monday's Financial Times that euro zone politicians needed to move fast to make the European Financial Stability Fund (EFSF) operational, as any delay would end up raising the cost.
Euro zone leaders also agreed to offer 150 billion euros in bilateral loans to the IMF to raise its crisis-fighting capacity. Up to 50 billion euros ($65.1 billion) more might come from non-euro zone European countries and possibly more from outside Europe.
Euro zone finance ministers will discuss at a Monday teleconference the draft text of the new euro zone fiscal compact so that it can be finalized by the end of January, EU officials said.
They will also consider the size of individual bilateral loans to the International Monetary Fund, in talks from 1430
GMT.
There are still doubts about this scheme. Germany's Bundesbank said last week it would only contribute if non-euro zone and non-European countries did too and the level of outside commitment is not clear.
Another topic for the ministers to discuss Monday will be the voting method in the euro zone's permanent bailout fund, the European Stability Mechanism (ESM).
Leaders decided on December 9 to abolish unanimity in ESM voting to prevent small countries blocking major decisions.
Finland objects to the change, because to accept it the Finnish government would have to have a two thirds majority in parliament, which it does not have.
German Finance Minister Wolfgang Schaeuble tried to show his backing for the permanent bailout mechanism in an interview published Monday, by saying his country may pay its full contribution to the mechanism next year.
"It is clear that the sooner and the more paid-in capital the ESM has, the more it gains trust on the financial markets," regional paper Rheinische Post Duesseldorf quoted him as saying. "My priority is to create trust."
Leaders will decide in March if the combined lending capacity of the temporary fund, the 440 billion euro EFSF, and the ESM, should be capped at 500 billion euros, or raised by the amount already spent by the EFSF.
"It is clear that in the short term, to fight the crisis of the single currency, the bailout instruments, such as the EFSF and ESM funds, must be reinforced," Italy's Grilli said.
Italy's austerity budget, vital for Rome's attempts to get its accounts in order and do its part to try to save the euro from collapse, enters its final stretch this week with unions still on the warpath.
SOLUTION "BEYOND REACH"
Market response to the December 9 summit has been cool, mainly because of the reluctance of the European Central Bank to step up euro zone bond purchases and declare its readiness to do so.
"While acknowledging the extraordinary measures the ECB has adopted to provide liquidity to the European banking sector, its continued reluctance to countenance a similar degree of support to its sovereign shareholders undermines the efforts by euro area member states to put in place a credible financial 'firewall'," Fitch ratings agency said Friday.
Draghi declined to give a clear answer when asked in the Financial Times interview whether the ECB would keep buying government bonds once the EFSF entered the picture, and also warned governments not to expect the ECB to become a lender of last resort. [ID:nL6E7NI0RO]
Other uncertainties also weighed.
"A week after the Brussels summit the basis of the agreement reached there has begun to unravel even more quickly than is normally the case," Emirates NBD bank said in a research note.
"Virtually all aspects of the deal appear to be being pulled and picked apart, from the degree of fiscal integration, the amount of firepower available for the bailout funds, and even to the support pledged to the IMF," the bank said.
"As a result the emphasis is likely to fall even more heavily on the ECB to keep the Eurozone system functioning."
The ECB, which is forbidden by EU law from directly financing government deficits, welcomed the December 9 agreement on more fiscal discipline in the euro zone, but doused expectations it would ramp up sovereign debt buying in return.
As a result, Fitch concluded that a 'comprehensive solution' to the crisis was technically and politically beyond reach.
COMMUNICATIONS NOT POLICY PROBLEM
Euro zone policymakers said the ECB's role in the crisis was impossible to communicate clearly because of legal and political constraints. But they said the bank would not, in the end, allow the crisis to threaten the survival of the currency bloc.
A declaration from the ECB that it would buy unlimited amounts of euro zone bonds for as long as necessary would immediately calm markets, but would probably break EU law and would relax pressure on politicians to reform their economies.
"The ECB simply can't and won't say that, and it's very unreasonable to even expect it," one euro zone official said.
Instead, the bank was likely to keep quietly buying enough Spanish and Italian bonds to keep both countries on the market but with financing costs sufficiently high to keep pressure on their lawmakers to quickly accept tough reforms.
"This is the most expensive approach, also not likely to work in the longer run, but still it is the only one possible," the euro zone official said.
ECB executive board member Lorenzo Bini Smaghi signaled the same in an interview published in Il Sole 24 Ore Sunday, saying ECB bond interventions were very effective in specific situations when the market risked going into "tailspin."
At the same time they created "perverse incentives" that reduced the pressure on single governments to adopt financial discipline, he said.
Instead of unlimited bond buying, the ECB will offer banks this week an opportunity to borrow money for three years for the first time, extending the current one-year ceiling for refinancing.
France hopes banks will use the money to buy euro zone bonds and ease the upward pressure on yields, but Italy's Unicredit bank said last week this "wouldn't be logical" for banks that are under pressure to reduce risk and rebuild capital.
Fitch warned that six euro zone economies including Italy and Spain could be hit with credit downgrades in the near future. This is the second time in two weeks that the euro zone has been threatened with multiple ratings markdowns after a similar statement from Standard & Poor's. [ID:nL6E7NG46A]
Fitch said it might also cut AAA-rated France within two years. A poll showed French voters overwhelmingly fear serious damage to the economy if France loses its top rating, despite attempts by President Nicolas Sarkozy to reassure them such a blow would be surmountable.
