Angela Merkel feels the urgency (Photo credit: Wikipedia)

Germany and European Union officials are urgently exploring ways to rescue Spain’s debt-stricken banks although Madrid has not yet requested assistance and is resisting being placed under international supervision, European sources said on Wednesday.

Spain, the euro zone’s fourth biggest economy, said on Tuesday it was effectively losing access to credit markets due to prohibitive borrowing costs and appealed to European partners to help revive its banks.

The European Central Bank dashed investors’ hopes of an easing of monetary policy or another flood of cheap liquidity for banks despite saying that the euro zone money market has again become “dysfunctional”. The ECB left interest rates on hold at 1 percent at its monthly meeting.

The move raised pressure on EU political leaders to outline a solution to the bloc’s festering debt crisis at a summit later this month.

Spanish Economy Minister Luis de Guindos said after talks at the European Commission on Wednesday there were no immediate plans to apply for a bailout. Spain would await the results of an IMF report and an independent audit of the banking sector, both due this month, before taking decisions on how to recapitalize the banks, he said.

ECB President Mario Draghi said financial markets were not wrong to be worried about the future of the euro zone but they underestimated the political commitment backing the single currency. He welcomed EU leaders’ agreement to step up work on a long-term vision for a full economic and monetary union.

“Some of the problems in the euro area have nothing to do with monetary policy,” he told a news conference. “I don’t think it is right for monetary policy to fill other institutions’ lack of action.”

Acknowledging that the rate-setting governing council’s decision was not unanimous, he said “a few members, I would say not many” had wanted a rate cut on Wednesday.

Asked whether the central bank would take supportive action if the EU summit agreed to move towards a fiscal and banking union, he said there was no such “horse-trading” but the ECB would monitor developments and stood ready to act.

Read more at Reuters…

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Not a good day for Europe

Traders fearful of a rupture in Europe’s financial system retreated Wednesday from risky investments. They punished stocks and fled to the safety of U.S. bonds, pushing the yield on the benchmark 10-year Treasury note to a record low.

Major U.S. stock indexes fell more than 1 percent. European stocks fell even more, and the euro dropped to a nearly two-year low against the dollar. Borrowing rates for Italy and Spain, both of which are seen as the next problem cases in Europe’s debt drama, rose sharply as traders dumped bonds issued by those governments.

Rising demand for low-risk, easily tradable securities pushed the yield on the 10-year Treasury note to 1.64 percent from 1.74 percent late Tuesday. German government bond yields, also seen as safe, turned lower.

The Dow Jones industrial average plunged 147 points to 12,433. The Dow has had a miserable May. It’s down 5.9 percent for the month, putting it on track this week to end its first losing month since September.

Concerns about Europe seemed to lurk around every corner: the European Commission said consumer confidence fell sharply in the region last month. Spaniards withdrew money from their banks, spreading fear about that nation’s ability to go on without bailouts. Spain’s main stock index fell two percent.

An opinion poll in Greece showed that the far-left Syriza party is gaining support ahead of key elections. Syriza opposes the system of bailouts and sharp budget cuts that have kept Greece afloat but also punished its economy. If the party wins, Greece may be forced to exit the euro currency. The shockwaves could topple nations that have received bailouts, like Portugal, and those that might need them, like Italy.

Amid the tumult, Europe’s executive branch called on the 17 nations that use the currency to create a “banking union” that can centrally oversee and — if needed — bail out the sector.

Read more at BusinessWeek.com

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Mary Kennedy was tragically found dead yesterday

Mary Richardson Kennedy, wife of Robert F. Kennedy Jr., was found dead at her Bedford home Wednesday afternoon, officials said.

Her official cause of death has not been released, but a source close to the investigation told The Journal News that she hanged herself.

Bedford Police responded to 326 South Bedford Road about 1:36 p.m. Wednesday and found a body inside an outbuilding on the property, officials said.

Officials at the Westchester County Medical Examiner’s Office confirmed that Kennedy’s body had been removed from the property Wednesday afternoon, but would not discuss how the 52-year-old died. An autopsy is scheduled for Thursday, officials said.

Kerry Lawrence, a White Plains attorney who had previously represented Kennedy in a drunken-driving case, also confirmed Kennedy’s death, but he, too, would not discuss details surrounding the tragedy.

“We deeply regret the death of our beloved sister Mary, whose radiant and creative spirit will be sorely missed by those who loved her,” the family said in a statement issued through Lawrence. “Our heart goes out to her children who she loved without reservation.”

South Bedford Road was closed heading toward Interstate 684 Wednesday afternoon. Helicopters hovered near the house.

Read more at Lohud.com

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Greece close to exiting the Euro

Prolonged electoral uncertainty has put Greece into a state of deep freeze, meaning whoever finally emerges as the new leader will take over a country already falling behind on its promises to lenders.

The European Union and International Monetary Fund demanded extensive cuts and reforms as part of a 130 billion euro bailout package agreed in March.

But Greece has had no elected government since an inconclusive election on May 6, and paralysis will continue for at least another month, even as funds dry up in the treasury.

Senior judge Panagiotis Pikrammenos was sworn in as interim prime minister on Wednesday, but he will not be empowered to take any political decisions – only to steer the country to a new vote on June 17.

“The only thing we are doing is waiting,” said a government official who declined to be named.

Another Greek official close to bailout negotiations said ministers in the outgoing cabinet have not been authorised to negotiate with Greece’s lenders since the May 6 election. A senior party official said the caretaker government would not publish any decrees and all tender procedures were suspended.

Leftists now favoured to win the next election have alarmed Europe by threatening to tear up the bailout altogether. But even if the next Greek government wants to keep to the agreement, it will have catching up to do from day one.

A privatisation programme already many times cut back has been suspended, a multi-billion euro spending cuts plan is far from being ready, tax collection continues to be weak and a bank recapitalisation plan is in limbo.

One consequence already became clearer on Wednesday: sources at the European Central Bank said it had withheld liquidity for some Greek banks because the bank recapitalisation plan had not yet been successfully implemented.

Even before the May 6 election, many reforms were put on the backburner to avoid antagonising voters, officials involved in bailout talks say. These include a plan to slash spending by over 11.5 billion euros in 2013-2014, which Greece must agree by late June to meet a key bailout target.

Read more at Reuters….

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The growing ranks of Syria’s disaffected appeared to get a high-profile addition Wednesday, when a man identifying himself as Abdo Hussam el Din, the country’s deputy oil minister, announced in a video posted on YouTube that he was defecting from the regime of President Bashar al-Assad.

“I am joining the revolution of this noble people who will not accept injustice,” says the man in Arabic. “I’ve been part of this government for 33 years and I have acquired many titles, and I do not want to retire serving the crimes of this regime.” He appears to be the same man pictured on the government’s oil website, which says he was appointed deputy oil minister in August 2009.

“I decided to join the voice of the righteous despite the notion that this regime will burn my house and harass my family and will invent many lies,” he adds.

The announcement came on the same day that the United Nations emergency relief chief met in Syria with top government officials and visited an area ravaged by weeks of government attacks, describing it as devastated. Read more on CNN….

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Not good news – the financial crisis in Greece appears to be worsening, threatening the entire global economy as a result. From the Guardian:

The French president Nicolas Sarkozy and German chancellor Angela Merkel will hold emergency talks on Wednesday in a desperate attempt to hold the eurozone together and formulate a response to the Greek prime minister's plan for a referendum on the austerity measures imposed by his European partners.

George Papandreou's socialist government is on the brink of collapse after his referendum plan sparked an angry reaction within his own party and plunged Europe back into turmoil, just days after a complex rescue deal had been agreed – requiring Greece to embark on tough cost-cutting measures….

Stock markets had reacted with alarm to the prospect that the €1tn deal to rescue the euro currency union was in danger of collapse. The FTSE 100 closed down 2.2% at 5421 after an initial fall of 5%. The German Dax index and French Cac remained 5% down at the close, while the Dow Jones closed down almost 2.5%.

This latest global economic crisis highlights the inherent instability of our modern financial system. Global markets are extremely volatile – beneficial to speculators and the ultra wealthy, but disastrous for everyone else. Due to lack of regulations on capital flow, money shoots from one side of the planet to another in the blink of an eye. A country can literally go bankrupt over night if investors decide to pull their money, giving governments little real control over their country's economic future.

The truth is, financial markets run the world, and they work in the interests of the rich. Lack of regulation leads to riskier investments, bubbles and the inevitable crash. Governments and the public step in to clean up the mess, then it's back to business as usual.The risk is socialized and the profit privatized – the defining characteristic of modern finance that masquerades as free market capitalism.

The idea that a developed industrialized nation like Greece could fall apart over night is a truly terrifying prospect, and a clear warning that the balance of power must shift if we are to attain some sort of functioning global economic system. Hopefully, the Greek crisis can be resolved without plummeting the planet into another recession, but regardless, things must change drastically to prevent this type of vulnerability. It is simply not sustainable in the long run.

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