Calls for "new Europe"..[ 2529 ]

Italy at breaking point, Merkel calls for "new Europe"

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IMF: dangerous phase for world economy

Tue, Nov 8 2011

By Barry Moody and Andreas Rinke

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ROME/BERLIN | Wed Nov 9, 2011 1:21pm EST
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(Reuters) - Italian borrowing costs reached breaking point Wednesday after Prime Minister Silvio Berlusconi's insistence on elections instead of an interim government opened the way to prolonged instability and delays to long-promised economic reforms.
In a dramatic escalation of the euro zone debt crisis, Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable, reflecting an evaporation of investor confidence and prompting German Chancellor Angela Merkel to issue a call to arms.
Merkel said Europe's plight was now so "unpleasant" that deep structural reforms were needed quickly, warning the rest of the world would not wait. "That will mean more Europe, not less Europe," she told a conference in Berlin.
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She called for changes in EU treaties after French President Nicolas Sarkozy advocated a two-speed Europe in which euro zone countries accelerate and deepen integration while an expanding group outside the currency bloc stayed more loosely connected -- a signal that some members may have to quit the euro if the entire structure is not to crumble.
"It is time for a breakthrough to a new Europe," Merkel said. "A community that says, regardless of what happens in the rest of the world, that it can never again change its ground rules, that community simply can't survive."
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Portugal and Ireland were forced to seek EU-IMF bailouts when their borrowing costs reached similar levels and clearing house LCH.Clearnet sounded another alarm by increasing the margin it demands on debt from the euro zone's third largest economy, effectively raising the cost of holding Italian bonds.
The European Central Bank, the only effective bulwark against market attacks, wasted no time intervening to buy Italian bonds in large amounts but remains reluctant to go further.
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"The ECB is buying aggressively," one trader said.
Italy has replaced Greece at the center of the euro zone debt crisis and is on the cusp of requiring a bailout that Europe cannot afford to give.
Unlike Greece, an Italian default would threaten the entire euro project. EU treaty changes could take a year or more. Rome does not have that much time.
Euro zone officials said a bailout of Italy was not being planned for. "Financial assistance is not in the cards," one official said, adding that the bloc was not even considering extending a precautionary credit line to Rome.
Having lost his majority in a key parliamentary vote, Berlusconi confirmed he would resign after implementing economic reforms demanded by the European Union, and said Italy must then hold an election in which he would not stand.
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He opposed any form of transitional or unity government -- which the opposition and many in the markets favor -- and said polls were not likely until February, leaving a three-month policy vacuum in which markets could create havoc.
Italian President Giorgio Napolitano, expressing alarm about a collapse in market confidence, said there was no doubt about the resignation of Berlusconi once economic reforms were implemented by parliament within days.
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"Therefore, within a short time either a new government will be formed ... or parliament will be dissolved to immediately begin an electoral campaign," Napolitano said.
Even with the exit of a man who came to symbolise scandal and empty promises, it will not be easy for Italy to convince markets it can cut its huge debt, liberalize the labor market, attack tax evasion and boost productivity.
"There is no guarantee (Berlusconi's) successor will be able to do a better job. Just keep your eyes on the Italian yield for now," Christian Jimenez, fund manager and president of Diamant Bleu Gestion, said.
While Italian bonds blew out, worries that the debt crisis could be infiltrating the core of the euro zone were reflected in the spread of 10-year French government bonds over their German equivalent blowing out to a euro era high around 140 basis points.

FRUSTRATION

Policymakers outside the euro area kept up pressure for more decisive action to stop the crisis spreading.
Christine Lagarde, head of the International Monetary Fund, told a financial forum in Beijing that Europe's debt crisis risked plunging the global economy into a Japan-style "lost decade."
"Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand ... we could run the risk of what some commentators are already calling the lost decade."
Berlusconi has reluctantly conceded that the IMF can oversee Italian reform efforts.
Euro zone finance ministers agreed Monday on a roadmap for leveraging the 17-nation currency bloc's 440-billion-euro ($600 billion) rescue fund to shield larger economies like Italy and Spain from a possible Greek default.
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But there are doubts about the efficacy of those complex plans, and with Italy's debt totaling around 1.9 trillion euros even a larger bailout fund could struggle to cope.
Lagarde said she was hopeful the technical details on boosting the European Financial Stability Fund (EFSF) to around 1 trillion euros would be ready by December.
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Many outside Europe are calling on the ECB to take a more active role as other major central banks do in acting as lender of last resort. German opposition to that remains implacable, seeing it as a threat to the central bank's independence.
But with the ECB just about the only buyer of Italian bonds, according to traders, it will have to act more aggressively to contain the latest wave of crisis, despite internal opposition to its bond-buying program.
"The ECB will be drawn like every one else by the weight of gravity (to act)," a second euro zone official said.

GREEK DRAMA

With the markets' fire turned firmly on Italy, Greece's struggle to find a new prime minister became something of a sideshow, but one which demonstrated the difficulty in taking decisive action anywhere within the euro zone.
Greek Prime Minister George Papandreou said he was stepping down without saying who would succeed him as the nation heads toward bankruptcy, but party sources said leaders had agreed it would be the speaker of parliament. [ID:nL6E7M90T2]
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Parties from left and right settled on veteran socialist Filippos Petsalnikos, barring-last minute snags, the sources said, turning to their own political class after ditching a plan to recruit a former top European Central Bank official.
The socialist and conservative parties had wanted former ECB vice-president Lucas Papademos to lead a government of national unity but he appears to have made demands about his level of influence which they could not swallow.
(Additional reporting by Dina Kyriakidou and Lefteris Papadimas in Athens, Emelia Sithole-Matarise, Kirsten Donovan and William James in London; Writing by Mike Peacock; Editing by Janet McBride and Jon Hemming)

Greek Prime Minister.Steps Down..[ 2528 ],

Clearing Way for New Government

Papandreou Steps Down as Greek Prime Minister

REUTERS

Greek Prime Minister Georgios Papandreou stepped down on Wednesday.

 

SPIEGEL International. 9/11/2011

Greek Prime Minister Georgios Papandreou stepped down on Wednesday, clearing the way for a coalition government to take over. Filippos Petsalnikos, the speaker of the Greek parliament and an experienced politician, looks set to become the new prime minister.

Greek Prime Minister Georgios Papandreou has announced his resignation, making way for a new coalition government.

Greek political leaders have agreed on a new government, Papandreou said on Wednesday as he stepped down. While he did not name his replacement, he said in an address to the nation: "I would like to wish every success to the new prime minister and of course the new government. I will stand by them and I will support them with all my strength." Greece would implement an EU bailout decision and do all it can to stay in the euro, he added.
Sources from the two major parties said earlier on Wednesday that party leaders have agreed on speaker of the Greek parliament Filippos Petsalnikos, an experienced politician, to head the country's new coalition government, barring any last-minute changes.
The coalition will be put in place to implement the drastic restructuring program and to prepare for fresh elections.

"We have agreed on Petsalnikos but things can change between now and when the prime minister sees the president," a source close to the discussions between the ruling Socialists and the conservative opposition New Democracy told Reuters on condition of anonymity.
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Bitter Quarrels
For days, the parties have been bargaining over the formation of a transitional government to lead the country. The socialists and conservatives had previously resisted such a national unity coalition for months. But while they finally accepted on Sunday that it was necessary, the question of who will get what post -- including that of prime minister -- has been the source of bitter quarrels over the past few days.
Yet the parties have no choice: If they want to receive the next tranche of funding from the European Union and the International Monetary Fund in order to save Greece from bankruptcy, they have to come to an agreement.
dsk -- with wires

Orion seen from the Rover...[ 2527 ]

Image of the Day:Orion seen from the Rover

The Apollo 16 Lunar Module "Orion" is photographed from a distance by astronaut Chares M. Duke Jr., Lunar Module pilot, aboard the moving Lunar Roving Vehicle. Astronauts Duke and Commander John W. Young, were returing from the third Apollo 16 extravehicular activity (EVA-2). The RCA color television camera mounted on the LRV is in the foreground. A portion of the LRV's high-gain antenna is at top left.

Image Credit: NASA and Chares M. Duke Jr.

Ex-central banker may become Greek PM...[ 2526 ]

Ex-central banker frontrunner to become Greek PM

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former ECB vice president Lucas Papademos 
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By Dina Kyriakidou and Lefteris Papadimas
ATHENS | Mon Nov 7, 2011 3:25pm EST
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(Reuters) - A former deputy head of the European Central Bank emerged on Monday as frontrunner to become Greek prime minister, as party leaders bargained over who will lead a "100 day coalition" to push through a bailout before the nation runs out of money.
Under EU pressure, an unaccustomed spirit of compromise seeped into Greek politics as the top parties haggled over the jobs in a government which will run Greece only until early elections in February.
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A source at the opposition conservatives said nothing had been agreed yet with the ruling socialists on who should lead the government of national unity, and refused to comment on speculation that former ECB vice president Lucas Papademos would get the job.
However, the opposition source told Reuters that his New Democracy party accepted that socialist Finance Minister Evangelos Venizelos could stay in his job at a time of national crisis.
"The economic ministries, including finance minister Venizelos and his team, should stay for the sake of continuity," said the source, giving the first indication of who will occupy any of the cabinet posts.
New Democracy would also vote for the 2012 budget and back a bond swap plan contained in the bailout package, under which the value of banks' holdings of Greek government debt will be halved.
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RESTORING ORDER
Whoever leads the transitional government of national unity will have a monumental task in restoring order to a country whose chaotic economy and politics are shaking international faith in the entire euro project.
European Union leaders want Greece to form the coalition quickly and push the 130 billion euro bailout through parliament, for the sake of a nearly bankrupt nation and to shore up confidence in euro zone.
Despite the sealed lips on both sides, Papademos remained a possible frontrunner for premier. An aide said the Greek economist, who left the ECB last year, had arrived in Athens on Monday from the United States where he is a Harvard academic.
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Outgoing Prime Minister George Papandreou has been in touch with Papademos, a senior government official told reporters. "The prime minister had several telephone contacts with Mr Papademos in the last days," the official said.
Papademos oversaw the nation's adoption of the euro in 2002 as Bank of Greece governor before moving to the ECB, and is a well-known figure in European capitals.
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Papandreou sealed a deal on Sunday with New Democracy on the crisis coalition to approve the international financial aid package. On Monday he informed European leaders, including German Chancellor Angela Merkel and European Commission President Jose Manuel Barroso, by phone about efforts to form the coalition, his office said.
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The Greek leaders' immediate job is to agree the new prime minister, who must exert authority over hardened party chiefs and made decisions which will affect Greeks for a decade.
Papandreou also spoke to conservative New Democracy party leader Antonis Samaras on the coalition, and his office said more talks would follow later in the day.
In an early sign that a broad compromise will be hard to achieve, President Karolos Papoulias's plan to summon the heads of all leading parties for more negotiations on Monday was dropped after two leftist parties refused to attend.
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HANDS FULL
Greeks worry that any new premier will have hands full merely getting Papandreou's socialist PASOK party and New Democracy to work together, whether or not the leaders join the cabinet.
"I'm afraid the new government will very soon turn out to be problematic," conservative former finance minister Stefanos Manos told Reuters.
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"The new prime minister will ... not give the impression that he is in charge. Everyone will be looking to the two party leaders who will be running things behind the scenes," he said, adding: "The civil service won't implement any decision and everyone will be waiting for the election."
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At least the two parties agreed on the likely lifespan of the coalition, deciding in the early hours of Monday morning that February 19 would be the preferred date for an election. Venizelos went later on Monday to explain Greece's plans to his fellow euro zone finance ministers at a meeting in Brussels.
Brussels has piled pressure on Athens to approve the bailout, a last financial lifeline for Greece which faces big debt repayments in December. The EU fears that the Greek crisis will spill into much bigger euro zone economies such as Italy and Spain -- which would be far harder to rescue.
Papandreou, who sealed his fate last week with an attempt to call a referendum on the bailout which backfired, will stand down when the new government takes over.
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IMMENSE SUFFERING
Greeks have suffered immensely in the two years that Papandreou has run the country. International lenders have demanded wave after wave of pay and pension cuts, plus tax increases and job losses in return for emergency aid. This has helped to keep Greece in four successive years of recession.
The Communist PAME labor group will hold a rally in Athens on November 10 to oppose a new government which it said "has the task to save the monopolies and crush the popular movement."
"They want to vote through the new bailout... which will leave Greek people with their hands tied for many years."
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The ESEE retail federation expressed qualified relief that politicians were coming to terms, calling for "consensus and cooperation so as to save what can be saved in the short time left," it said in a statement.
Greek bank shares, the country's best benchmark of market sentiment with the government shut out of bond markets, rose 3 percent on the coalition deal.
A new coalition would be sworn in and hold a confidence vote within a week if all goes to plan, the government says.
Many Greeks remained skeptical about a coalition tasked with imposing more austerity to tackle a huge budget deficit.
"Hurrah, we are saved!" said plumber George Vihos sarcastically. "Why should we celebrate now that they will make sure we bear the pain?"
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On Sunday European Economic and Monetary Affairs Commissioner Olli Rehn told Reuters that euro zone finance ministers would insist on hearing a plan for a unity government from Venizelos at Monday's Eurogroup meeting.
Papandreou had sought the referendum to show that harsh cuts demanded in the bailout had public support, but the risk that a "no" vote could bring about a sudden bankruptcy caused mayhem in markets, anger in Europe and rebellion in the ruling party.
He soon ditched the idea and won a confidence vote in parliament, but only after promising to make way for the national unity coalition.
(Additional reporting by Rene Maltezou, Dina Kyriakidou, Angeliki Koutantou and George Georgiopoulos; Writing by David Stamp)

Russian space astronauts "to return" from Mars ...[ 2525 ]

Russian space test nears end, astronauts "to return" from Mars

TREND///4 November 2011, 12:15 (GMT+04:00)

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The longest isolation experiment in the history of space travel was counting down to an end on Friday, with six virtual astronauts more than ready to exit a chamber they have been locked in for 520 days.

The seal on an exit hatch on the mock spaceship in a Moscow research institute was scheduled to be broken at 2 pm local (1000 GMT) to allow six men from Russia, China, France and Italy to end a simulated flight to Mars begun on June 3 2010, DPA reported.

The crew had finished the last experiments and packed its things, mission controllers at the Russian Institute for Biomedical Problems said, according to the Interfax news agency.

The subjects' closest relatives had been invited to Moscow to be present at the experiment's end so that each astronaut could end his 17-month journey in a loved one's arms, mission controllers said.

Also on hand would be a multi-national press corps and representatives of the participating German Aerospace Centre (DLR) and the European Space Agency ESA, the report said.

Because of the possible risk of infection, the "Martians" will be protected from exposure to the general public until November 8, when a press conference is scheduled in the Russian capital.

During 520 days in their tubular module, the men had hardly any contact with the outside world, but were constantly monitored by doctors and psychologists via data link.