Greece blinking Will Italy or Spain barge doors first..?

Euro Zones End Game.. Surgery or contagion .. Next Week

The G20 and World Central Bankers League have been pushing the World economy out of the hole of depression from 2008. The Lehhman Crisis culminated into the Landmark of its Own. While US interest rate buried underground, the ' Free Money ' streamed into Hard Assets and New Gold Investment Wave is ebbing the world. The American easing and Housing Crisis:  emboldened $ bears to press the panic Button on $ as Reserve Currency. While barley 15 months ago Euro was pampered to replace the greenback. The fall in dollar had counter effects on Inflation rising and thus devaluation of all other currencies followed the lead,  last year. Which in turn created the another crisis in Euro and particularly cracked the weaker areas of Euro zone. Here came ' PIGS '. The rattle has now turned into a Roar.

A thunderstorm had mean while struck the Central Asian politics. Upheavals in Tunisia, Egypt, Libya, Syria, UAE, Pakistan, Indonesia. While, the Brutal Force of nature hit the Japan, Australia, Indonesia, Peru, Chile and Pakistan. The War in Afghanistan is besieged. The tensions in Iran-US still threaten to blow into a war..?
India stifled by the Inflation, the government is rattled by the Corruption. The opening of retail remains impasse in vogue. 

The 23rd June Joint Action to release the Crude Oil Reserve's successfully derailed the Oil ' rally '. The Rising Bond Market yields is now beacon of the near future. Which is flashing fully Red.

While, China and India are slowing down rapidly. Raising Alarms and Flashing the signals of Global Slow Down. The pace of slow down and its impact is exerting from Europe.

Will Europe disintegrate..? Will Euro as Currency disintegration be averted and  ' Risk ' trade .?

How all this may impact on the Half on S&P 500, dependent on World Trade shall be..?

Next Week, Market will look into future and will Watch the European in Hectic activities.

Merkel - Sarkozy Pact , Timothy Geitner's European Meetings, ECB Meet Thursday, Mario Monti's Italian Budget, Greek Budget and Finally Euro Parliament on Friday may draw Curtains on to Whether Greek remains in Euro Zone. It Seems that resolution is Whether Whole of Europe will suffer from the Either a Surgery or a Contagion of Debt. In short, next week shall be the week when Europe decides How to Suffer.?  and Bear the pain. It seems French want it Slow Death and Germans want a Surgery..!

In either case risk may take a dive in the Sands of Atlantic... and Across the world.

Greece Default Time and Human Face..

The Economist front Page

Greece's economy will continue to shrink by 2.5 percent next year, compared with a 5.5 percent contraction in 2011, according to the country's 2012 budget draft released on Monday.

Government debt is seen climbing to 172.7 percent of the country's gross domestic product (GDP), from an estimated 161.8 percent this year, the budget draft showed. The jobless rate is expected to rise to 15.2 percent in 2011 and to 16.4 percent in 2012.

Will Greece come out of this unscathed..?

Even, a smallest infant may reply it. But, is Mr. Market will not get scarred ? Well, it seems to be seized with it. No sooner, the Final Chapter of Bankruptcy Is Opened the Market's May dive to Abyss. But, thereafter it will soon remove the over nurtured biases and shall bounce back to recover the ground. This Obvious call has a Caveat that while Greek Ship sinks, who will sink in the whirlpool of the Sunken ship..?

Will it be French Banks or German Suppliers..? And, Who else may follow... ? And, What may happen to Euro and its other smaller participants..? This question grown in worries, clouded fog.

Greece.. Human Face is where I ponder and dwell...

US home sales fall, Wait Bernanke's discourse

August new home sales dropped 2.3% to 295,000. It was in line with consensus expectations and comes after July was upwardly revised to a 302,000 unit pace (was 298,000). The Northeast fell 13.6% to a 19,000-unit pace, likely from Hurricane Irene distortions. However, the South and the West also declined, down 2.4% and 6.3%, respectively. The Midwest had an 8.2% gain to 53,000, the third monthly gain. Total sales are up 6.1% over last August, with the Midwest up 65.5% year over year and the South up 9.3%. The Northeast and the West are down 36.7% and 10.6%, respectively. The months' supply of unsold homes on the market edged up to 6.6 months, near the 6.5-month rate in July and the historic averages of 5.5 to 6 months. The median sales price fell 8.7% in August over last year to $209,100. The report came in about as expected, to likely have a small effect on markets today.


Ben Bernanke Chairman FOMC is to deliver speech tommarow and Would add to Juices of the Fomc meet


Chocolate to the Diabetic :


While, Germans are calling EFSF as the ' Chocolate to Diabetic' and the Greece despise towards the Germans is on Rise. French Leaders are intense in Defacing the EFSF and is the Campaign Issue 

Obama Tax, falling Market's, Greek Desperation

Greek's Conference marathon to continue : Desperation, palpable 


Greece's conference call with the European Commission, the International Monetary Fund and the European Central Bank could last until Tuesday or later, according to published reports. Markets around the world have been in turmoil during recent days over the possibility of a Greek default. Monday's conference call came after Greece Finance Minister Evangelos Venizelos promised to hurry budget reforms and make cuts to the nation's civil-service staff. 

Dollar Libor at the yearly High :


The cost to borrow money in dollars remained at the highest level in more than a year on Monday while the rate to borrow euros was little changed. The London interbank offered rate, or Libor, for three-month dollar loans traded at 0.35133%, little changed from Friday and up from 0.34289% a week ago, according to FactSet Research. The three-month Libor rate for euros was little changed at 1.48375%, near the highest since early 2009. The one-week Libor rate for euros was 1.05063%, also unchanged from Friday and down from higher levels seen in early August.


Gold Sinks with all metals and Commodities :


 Gold futures fell 2% Monday to close at their lowest level in more than three weeks, pressured by broad losses in the U.S. stock market and commodities, as a stronger U.S. dollar dulled demand for the metal. Gold for December delivery fell $35.80 to close at $1,778.90 an ounce on the Comex division of the New York Mercantile Exchange. That was the lowest closing level for futures prices since Aug. 25. Given how long the European debt crisis has been going on, it's no surprise that gold's failing to get a lift from the Greek debt concerns and right now, the movement in gold is really focused on the stronger U.S. dollar, said Jeffrey Wright, senior analyst of metals and mining equity research at Global Hunter Securities.

Obama's tax adventure :

 In a blunt rejoinder to congressional Republicans, President Barack Obama called for $1.5 trillion in new taxes Monday, part of a total 10-year deficit reduction package totaling more than $3 trillion. He vowed to veto any deficit reduction package that cuts benefits to Medicare recipients but does not raise taxes on the wealthy and big corporations.

"We can't just cut our way out of this hole," the president said.

The president's proposal would predominantly hit upper income taxpayers but would also reduce spending in mandatory benefit programs, including Medicare and Medicaid, by $580 billion. It also counts savings of $1 trillion over 10 years from the withdrawal of troops from Iraq and Afghanistan.

The deficit reduction plan represents an economic bookend to the $447 billion in tax cuts and new public works spending that Obama has proposed as a short-term measure to stimulate the economy and create jobs. And it gives the president a voice in a process that will be dominated by a joint congressional committee charged with recommending deficit reductions of up to $1.5 trillion.

His plan served as a sharp counterpoint to Republican lawmakers, who have insisted that tax increases should play no part in taming the nation's escalating national debt. Obama's plan would end Bush-era tax cuts for top earners and would limit their deductions.

"It's only right we ask everyone to pay their fair share," Obama said from the Rose Garden at the White House.

In issuing his threat to veto any Medicare benefits that aren't paired with tax increases on upper-income people, Obama said: "I will not support any plan that puts all the burden for closing our deficit on ordinary Americans."

Responding to a complaint from Republicans about his proposed tax on the wealthy, Obama added: "This is not class warfare. It's math."

The Republican reaction was swift and derisive.

"Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth_or even meaningful deficit reduction," Senate Republican leader Mitch McConnell said in a statement issued minutes after the president's announcement. "The good news is that the Joint Committee is taking this issue far more seriously than the White House."

Obama's proposal comes amid Democratic demands that Obama take a tougher stance against Republicans. And while the plan stands little chance of passing Congress, its populist pitch is one that the White House believes the public can support.

The core of the president's plan totals just over $2 trillion in deficit reduction over 10 years. It would let Bush-era tax cuts for upper income earners expire, limit deductions for wealthier filers and close loopholes and end some corporate tax breaks. It also would cut $580 billion from mandatory programs, including $248 billion from Medicare. It also targets subsidies to farmers and benefits programs for federal employees.

Officials cast Obama's plan as his vision for deficit reduction, and distinguished it from the negotiations he had with House Speaker John Boehner in July as Obama sought to avoid a government default.

As a result, Obama's proposal includes no changes in Social Security and no increase in the Medicare eligibility age, which the president had been willing to accept this summer.

Administration officials also said that Obama's $1.5 trillion in new taxes is a goal that Congress could achieve through a broad overhaul of the tax code. They said the president's specific proposals represent one way to get to that goal under the existing tax code.

Coupled with about $1 trillion in cuts already approved by Congress and signed by the president, overall deficit reduction would total more than $4 trillion, a number many economists cite as a minimum threshold to bring the nation's debt under control.

Key features of Obama's plan:

—$1.5 trillion in new revenue, which would include about $800 billion realized over 10 years from repealing the Bush-era tax rates for couples making more than $250,000. It also would place limits on deductions for wealthy filers and end certain corporate loopholes and subsidies for oil and gas companies.

—$580 billion in cuts in mandatory benefit programs, including $248 billion in Medicare and $72 billion in Medicaid and other health programs. Other mandatory benefit programs include farm subsidies and federal employee benefits. Administration officials said 90 percent of the $248 billion in 10-year Medicare cuts would be squeezed from service providers. The plan does shift some additional costs to beneficiaries, but those changes would not start until 2017.

—$430 billion in savings from lower interest payment on the national debt.

— $1 trillion in savings from drawing down military forces from Iraq and Afghanistan.

Republicans have ridiculed the war savings as gimmicky, but House Republicans included them in their budget proposal this year and Boehner had agreed to count them as savings during debt ceiling negotiations with the president this summer.

Illustrating Obama's populist pitch on tax revenue, he suggested that Congress establish a minimum tax on taxpayers making $1 million or more in income. The measure — the White House calls it the "Buffett Rule" for billionaire investor Warren Buffett — is designed to prevent millionaires from taking advantage of lower tax rates on investment earnings than what middle-income taxpayers pay on their wages.

That minimum rate, however, is not included in the White House revenue projections. Officials said it was a suggestion for Congress if it were to undertake an overhaul of the tax code.

.At issue is the difference between a taxpayer's tax bracket and the effective tax rate that taxpayer pays. Millionaires face a 35 percent tax bracket, while middle income filers fall in the 15 or 25 percent bracket. But investment income is taxed at 15 percent and Buffett has complained that he and other wealthy people have been "coddled long enough" and shouldn't be paying a smaller share of their income in federal taxes than middle-class taxpayers.

Associated Press

Finnish F. M. Jutta Urpilainen, demands collateral from Greece

Finland's finance minister said she doesn't expect the eurozone to resolve a dispute over her country's demand for collateral for loans to Greece at a meeting Friday — adding to concerns over the currency union's ability to stamp out its crippling debt crisis.

U.S. Treasury Secretary Timothy Geithner joined the meeting in Wroclaw, Poland — the first time that a U.S. finance chief has attended such a gathering — in a sign of how the U.S. is getting increasingly concerned over the global impact of the eurozone debt crisis.

Geithner has been pushing his European counterparts to finally find a lasting solution to its debt troubles, which have dragged on for almost two years.

But hopes for some tangible progress were quickly thwarted, when Finnish Finance Minister Jutta Urpilainen said that there was still no solution to her country's demand for guarantees to back its contribution to a second, euro109 billion rescue package for Greece.

The small Nordic country's demand has triggered similar requests from several other states, including Austria and the Netherlands.

If the requests were fulfilled, providing the collateral could shave off hundreds of millions of euros from the overall bailout sum.

"Unfortunately I don't see that we can find a solution tonight," Urpilainen said as she arrived for a meeting with her eurozone counterparts in Wroclaw, Poland.

The dispute has unsettled markets, as it is another sign of divisions between the 17 countries that use the euro over whether they can actually save Greece, which has been relying on emergency loans from other eurozone countries and the International Monetary Fund for more than a year.

The rescue faces several other challenges. Greece's international debt inspectors interrupted their most recent review mission two weeks ago after they discovered that Athens was set to miss its budget targets. Since then, Greece has announced a special property tax, which the government says should cover the revenue shortfall.

Meeting strict budget, privatization and reform targets set out in Greece's deal for a first euro110 billion rescue package is a prerequisite for receiving the next aid installment, which is due by the end of the month.

Without the euro8 billion ($11 billion) tranche, the country would run out of money by mid-October and potentially defaulting on its debts.

However, Austria's Finance Minister Maria Fekter, traditionally a hard-liner when it comes to sticking to the bailout conditions, said she was "very optimistic that the next tranche can be paid out to Greece."

She warned against a Greek default, which she said would be "very costly."

However, she did not rule it out as a possibility in the future.

"Should a situation arise, where this way (of providing rescue loans) suddenly becomes more expensive than the alternative, we will have to think about the alternative," Fekter said. "But at the moment this is not yet the case."

Referring to the debate about collateral, Fekter said she had proposed a model where guarantees would be available for everyone that wants them.

Friday's meeting comes after several turbulent weeks on global financial markets, triggered by fears over the impact of a potential Greek default as well as mounting evidence of a slowdown of the world economy. Some eurozone banks have been facing difficulties to obtain short-term funding in U.S. dollars as other lenders worry about their exposure of the debt of struggling countries like Greece, Spain or Italy.

Those funding issues pushed the European Central Bank, the U.S. Federal Reserve and three other major central banks to give banks easier access to dollars on Thursday, in the hope they can stop credit from seizing up like it did after the collapse of U.S. investment bank Lehman Brothers three years ago.

Greek Finance Minister Evangelos Venizelos, meanwhile, defended his country's efforts, and called on the other eurozone states to clear up the remaining issues that have delayed the new bailout and quickly implement changes to the region's bailout fund that were also agreed at the July summit.

"We are on track to implement the (bailout) program," Venizelos said. "And we believe that the implementation of the decision of the 21 July is the unique way to go ahead. Not only for Greece but for the eurozone as a whole."

European Parliament hard vibes on defaulting Euro Nations : Poland Stick

Poland's finance minister said Friday that after a yearlong dispute his European Union counterparts have signed off on tougher budget rules that punish overspending governments.

Jacek Rostowski said that the 27 ministers approved at their meeting in Wroclaw, Poland, a compromise that Polish officials had worked out with the European Parliament earlier this week.

Under the new rules, it will be easier to put sanctions on governments that breach the EU's limits on debts and deficits. Governments who ignore warnings that they risk breaking debt rules can also be punished.

For years European countries — including Germany and France — have broken the EU rule requiring deficits to be kept below 3 percent of gross domestic product. Experts say that the lack of accountability has helped cause the rise in government debt that is currently afflicting the region.

The eurozone ministers are under intense pressure to find solutions to the debt crisis that has hobbled their 17-nation currency union for almost two years.

U.S. Treasury Timothy Geithner's presence at the informal meeting — the first time for an American Treasury chief — was an indication of the international pressure building on European officials to fix their crisis and keep it from hurting the global economic recovery.

French Bank more downgrade Imminent by Moody's

While S&P appears to have completely forgotten about the country of Belgium, Moody's has realized that should Greece default, which is now inevitable, there may be aftershocks. On June14th 2011, it focused on France, and its three main banks Credit Agricole, SocGen and BNP, all of which it has put on downgrade review with a one notch maximum downgrade potential (except for SocGen which is two). Moody's also refreshed those who care that its downgrade review of Belgium's Dexia is ongoing and could result in a two-notch downgrade. 

From Moody's

Moody's Investors Service had placed the standalone financial
strength ratings and long-term debt and deposit ratings of three
French banking groups -- Credit Agricole SA (CASA), BNP Paribas
SA (BNPP), and Societe Generale SA (SocGen) on review for possible
downgrade.

The primary focus of all three reviews will be the banks' credit
exposures to Greek government debt and the Greek private sector and the
potential for inconsistency between the impact of a possible Greek default
or restructuring and current rating levels. The review of SocGen
will also assess the likelihood of future government support since our
systemic support assumption is currently higher than the average for the
French banking system.

Moody's also noted that exposures to Greece are to be included within
the ongoing review for possible downgrade of Dexia Group's core
operating banks.

The specific rating actions taken today are:

- Credit Agricole SA (CASA): standalone credit strength C+
/ mapping to A2 on Moody's long-term scale, with an
adjusted baseline credit assessment (BCA) of Aa3 and a senior long-term
rating Aa1, all on review for downgrade.

- BNP Paribas SA (BNPP): B-/A1 and Aa2 ratings on
review for downgrade.

- Societe Generale SA (SocGen): C+/A2 and Aa2 ratings
on review for downgrade.

The short-term Prime-1 ratings of the three French banking
groups have been affirmed.

Moody's notes that CASA's and BNPP's reviews are unlikely
to lead to downgrades of more than one notch. SocGen's debt
and deposit ratings could be downgraded by as much as two rating notches
because its review will include a reassessment of the uplift it receives
from systemic support, which is currently higher-than-average
for the French banking system.

A full list of affected entities and ratings can be found at the end of
this press release.

RATINGS RATIONALE

Today's actions reflect Moody's concerns about these banks'
exposures to the Greek economy, either through direct holdings of
government bonds or credit extended to the Greek private sector directly
or through subsidiaries operating in Greece, a key factor for CASA
and SocGen due to their local Greek banks. The magnitude and composition
of these exposures differ substantially across these banking groups.

Potential mitigants to these concerns are the strong financial profiles,
substantial scale and earnings diversification of the French banking groups
covered by this review. Moody's will focus on the potential
impact of various scenarios for Greek government and private-sector
credit exposures on the profitability, capital and funding positions
of these banks.

Moody's may take similar actions on other banks with direct exposures
to Greece in the coming weeks, if it considers that their ratings
may be inconsistent with the potential impact of a Greek default or restructuring.
Additionally, we are closely monitoring the risks that would likely
result from a Greek default scenario, e.g. the potential
impact on weaker countries, the capital markets, and funding
conditions, and are taking those risks into consideration in our
ratings of banks across the Eurozone.

DETAILED RATIONALE AND REVIEW CONSIDERATIONS FOR CASA, SOCGEN AND
BNPP

CREDIT AGRICOLE SA (CASA)

For CASA, the principal direct risk in Moody's view arises
from the group's local subsidiary, Emporiki, and from
its private sector credit exposures in Greece. Indeed on 3 June
2011, Moody's downgraded the standalone credit assessment
and the senior long-term deposit ratings of Emporiki to Caa1 and
B1 respectively, in response to the downgrade of the Greek government.
Emporiki reported a net customer loan book of EUR21.1 billion at
31 March 2011 compared to Groupe Credit Agricole's consolidated
Core Tier 1 capital of EUR50.8 billion. Moody's therefore
considers that the secondary effects of a Greek default scenario could
have a significant impact on the bank, owing to these direct exposures
to the local economy, and the ratings agency's belief that
CASA will continue to provide funding and capital support to Emporiki.
Moody's review will therefore focus on the potential impact of the
various scenarios on the group's profitability, capital and
funding.

Moody's expected the direct impact of a default or restructuring
of Greek government bonds to be limited in the case of CASA, given
the rating agency's view that it has a relatively modest exposure
to such debt (EUR0.6 billion net at 31 March 2011).

SOCIETE GENERALE

Similarly to Credit Agricole SA, SocGen has a majority stake in
a local bank, General Bank of Greece (Geniki), and thus faces
risks from its private sector credit exposures in the country (Geniki
reported a net customer loan book of EUR3.4 billion at 31 March
2011, of which we understand a material proportion relates to multi-national
companies, compared to SocGen's consolidated Core Tier 1 capital
of EUR29.4 billion). Moody's also downgraded on 3
June 2011 the standalone credit assessment and senior ratings of Geniki
to Caa1 and B1 respectively, and the ratings agency believes that
SocGen will continue to provide funding and capital support to its subsidiary.

However a default or restructuring of Greek government bonds would be
more material for SocGen than it would be for CASA, given SocGen's
exposure to Greek government debt, reported to be EUR2.5
billion net as at 31 March 2011, although we understand that this
exposure has since been reduced. Moody's review will therefore
focus on the potential impact of the various scenarios on the bank's
profitability, capital and funding.

Furthermore, in its review, Moody's will also re-assess
the systemic support assumptions currently factored into the long-term
ratings to reflect the post-crisis support environment.
The group currently benefits from a three-notch uplift from its
intrinsic financial strength equivalent on the long-term rating
scale (above average for France), compared to the two-notch
uplift assigned prior to Moody's downgrade of the financial strength
rating on 14 April 2009.

BNP PARIBAS

Unlike CASA and SocGen, BNPP does not have a local subsidiary bank
in Greece and, as such, its relative exposure to the local
economy is more modest. Instead, BNPP's main risk arises
from its substantial direct holdings in Greek government debt: EUR5.0
billion of net exposure as at 31 December 2010, compared to Common
Equity Tier 1 capital of EUR56.6 billion at end-March 2011,
in addition to exposures to other weaker Eurozone countries, e.g.
Portugal (EUR1.9 billion of net government debt exposure as at
31 December 2010).

Moody's therefore expects the review of BNPP's ratings to
focus on the direct and indirect impact of a Greek government debt default/restructuring
on the bank's profitability, capital and funding.

DEXIA

Dexia reported EUR3.5 billion of gross banking book exposure to
the Greek government as at 31 March 2011, compared to Core Tier
1 capital of EUR17.0 billion, and which is part of the group's
total maximum reported credit risk exposure to Greece of EUR5.4
billion at the same date.

In our existing review for possible downgrade of Dexia's three main
operating banks, (Dexia Credit Local, Dexia Bank Belgium and
Dexia Banque Internationale à Luxembourg), opened on 28 March,
2011, we identified three main factors we would consider.

- Dexia's ability to raise long-term funding at a cost that
preserves the economics and the viability of its public finance core business;

- Its ability to continue deleveraging its legacy assets without
adversely affecting the average quality and duration of the bond portfolio
in run-off; and

- The potential impact of Basel III regulations on Dexia's liquidity
management and the group's capitalisation.

We will also consider the potential impact of a Greek government default/restructuring
on Dexia within our review, which we expect to conclude in the coming
weeks. As previously stated at the opening of our review,
we see the potential downside to the A1 long-term senior debt and
deposit ratings to be limited to one or possibly two notches. Our
decision to affirm the Prime-1 short-term ratings was driven
by our expectation that systemic support would be forthcoming for Dexia's
financing needs, as it was in the past.

OTHER BANKS' EXPOSURES TO GREECE AND POTENTIAL SIMILAR ACTIONS

With regard to the other large French banks rated by Moody's --
namely, Banque Federative du Credit Mutuel, Credit Industriel
et Commercial, Credit Mutuel Arkea and BPCE -- the rating agency
perceives their exposures to be lower compared to those of CASA,
SocGen, BNPP and Dexia.

As stated, Moody's will consider similar actions for other
banks, should the rating agency believe that their ratings would
be potentially inconsistent with the direct or indirect impact of a Greek
default or restructuring.

German Funding European Neighbourhood now winding up..?

Head of Germany’s high court, Andreas Vosskuhle, left, pronounces the judgment, while judge Rudolf Mellinghoff,right, looks on in the court room in Karlsruhe,Germany, Wednesday Sept. 7, 2011. Germany’s high court on Wednesday upheld the country’s participation in eurozone bailout funds, but ruled that parliament should be more involved in such decisions. 


 Presiding Judge Andreas Vosskuhle said even though the Federal Constitutional Court had rejected lawsuits arguing that Germany’s participation had violated parliament’s right to control spending of taxpayer money, it was not giving a rubber-stamp to the chancellor’


The ruling means that while Germany’s agreement to take part in the financial rescue of Greece will not be affected, participation in future bailouts might become more complicateds office. 

US Banks can handle Greece,Ireland & Portugal. But..?

 The exposure of U.S. banks to Greece, Ireland and Portugal is manageable and quite small, Federal Reserve Chairman Ben Bernanke told U.S. Senator Bob Corker in a letter written in July that was released Tuesday. The nearly $200 billion exposure the Bank for International Settlements has reported capture only one side of banks' credit-default swap exposure, Bernanke said. Confidential supervisory information and CDS data from the Depository Trust & Clearing Corp.'s trade information warehouse indicate that the exposures are "quite small." Bernanke does note a sovereign credit event could affect a broad range of markets and financial institutions.








Note :
What is possibly stuck is the ' Sub Prime Mortgages' and the Contagion of the smaller three on the make up of Euro and dereference in growth. The FOMC decesion to keep interest rate low till, at least mid 2013 and its declaration in minutes, possibly reflect the risks involved. In a case, where Germany is politically affected by ' cuddling' of the European debt, shall create fissure within Euro zone and taking cue from this shall be approaching French Elections. However, the apprehensions about the Italy and more so Spain, may also have cascading effect.
As, the Euro plunged towards $1.40 today, speaks volume. 
The question of Euro zone dissipation appears to be the ' Sword ' dangling the all markets and will have ' Largest' ramifications post ' turbulences'  like Mid-70's.

Dr. Trichet's Banking Lab. Post Mortem. Rating Agencies

Most European Banks Pass The Stress Test, But Capital Concerns Persist: "

Standard & Poor's Ratings Services does not currently expect to revise any of its ratings based on the release of the results of the European Banking Authority's (EBA) stress tests on European banks. Most of the 90 participating banks passed the tests, which we had expected in view of significant capital raising by the banks since the financial crisis and the modest macroeconomic downturn assumed by the EBA.

We consider the EBA's stress test assumptions to be akin to a 'BB' stress scenario under our rating methodology. It is therefore not unexpected that the stress test results are relatively favorable. In our rating analysis, we routinely assess the resilience of banks' capitalization to more substantial stress events through our risk-adjusted capital ratios. The risk-weights and capital charges incorporated in our risk-adjusted capital framework assess the potential impact of a mid-single-digit percentage point decline in GDP over three years in mature economies. In addition, we have undertaken periodic analyses of more severe scenarios. These "what-if" scenarios are not the central expectation on which we base our ratings, but simulate potential downside risks. Our conclusion from this work is that, although the sector undoubtedly appears to have improved its position since the financial crisis, capital remains a neutral or a negative rating factor for most European banks. We expect that the stress test process is likely to add further impetus to banks' capital raising efforts in the lead-up to the implementation of Basel III.

Rather than the simple pass/fail outcome, we consider that the most informative aspect of the EBA's stress test process is the release of risk exposure data. This information is much more granular than the disclosures typically found in banks' regular reporting. We will continue to analyze these figures and expect the outcome of our analysis to support the conclusions we have reached with our risk-adjusted capital ratios.

 

                                                                   Overview

• We do not currently expect to take rating actions on the basis of the information disclosed in the European bank stress test results published on July 15, 2011.


• Through our risk-adjusted capital framework, we routinely assess the resilience of rated banks' capitalization to more substantial stress events than the moderate downturn scenario used in the EBA's stress tests.


• Although the sector undoubtedly appears to have improved its position since the financial crisis, we continue to believe that capital remains a neutral or a negative rating factor for most European banks.


• We consider that the European bank stress tests did not fully capture key rating factors such as the potential implications of a sovereign default or banks' funding imbalances.

In our view, the value of stress testing exercises stems from the credibility of the underlying assumptions. Having reviewed the stress test results, we remain of the view that the exercise was an improvement on the equivalent process undertaken last year, but could usefully have been more challenging in terms of the severity of the economic and market assumptions. For example, the EBA's adverse scenario assumed a 0.4% contraction in real GDP in the EU as a whole in 2011-2012. Although this is well below consensus expectations, we consider that a moderately harsher scenario would have added greater value in terms of assessing the resilience of the sector.
The results of the stress test vary considerably across the sector, and this variance is in line with the large gap seen in our ratings on the banks with the strongest and weakest creditworthiness. Sovereign support remains an important rating factor for many European banks. For example, the EBA reported that, of the €1 trillion of core Tier 1 capital held by the 90 stress tested banks at year-end 2010, 16% had been provided by governments or other public sector entities. Equally, indebted governments rely to a material extent on their domestic banks to fund their deficits, as illustrated by the data on banks' sovereign exposures. The unwinding of this interdependency is likely to be difficult and take an extended period of time. In our view, the potential implications of a sovereign default or restructuring on the banking sector were not fully considered in the EBA's stress tests.

Other than higher funding costs, which had a material impact on the results, the stress test process did not consider banks' funding and liquidity positions. We consider that the major challenges facing European banks are their ability to access public funding markets, reduce their dependence on central bank money, and strengthen their liquidity buffers. These issues will have a material impact on the sector's growth and earnings potential in the coming years. The EBA has stated that it has conducted reviews of European banks' liquidity positions, but will not publish the findings."

                                                                 ( Standard & Poors )
What is the Take Away ..?


The European Banks are tested Essentially for the ' Milder ' Adverse Economic Scenario than the Implied by the Ground Circumstance. Where the Capital is inter-dependent between Banks and Or Government, the Effects are not replicated. I.e. the Impact Value should be doubled or given to that Factor. 


In Short, the Data is not analysed to the Logical Extent, but is Validated superficially.


DR.Trichet your lab has smooth wheel Under the " Running Wheels" ?

5th of S&P 500 Reports and Housing Data, Debt Crisis wait Next Week

The European Banking Drama and Italian/ Spanish Banks, (De) stressed Test will Continue to Haunt the Market, as Last Weeks Legacy. The Hectic activity at White House and failed Summit, may drive the Monday.
The Bond Market may usurp the Yields, as a Feat Gauge. While, US Markets closed with VIX above 20%.
The Monday's Earning reports are IBM, Mosiac, Haliburton, Chales Schwab.

Tuesday,  A Banking Day :  The course will begin the with Australian Bank Rate decision. Indian market would have HDFC Bank and Crompton Greaves, Chambal fertilizer results. Soon, ZEW survey will take the Shot at German Economic Sentiment and other consumer surveys. The US markets shall open with Building Permits and Housing Starts. But, the Bank of America, Goldman Sachs, Wells Fargo, Coca Cola and Novartis  all will bring the markets live. While, Apple, Blackrock, Yahoo will  post Closing Bell. While, Crude oil is expected to play the rear. The Dodd-Frank Regulation will catch the talks.

Wednesday : The China will fire its Economic Leading Indicators, to Kick start the Trade. The Chinese Banks are expected to take it slow on Rates and reserves, for a while. In India, Dr Reddy's will bring out results. The Minutes of Bank of England should a passing event. The Existing Home Sales are expected to be show More Ghost Inventories live and MBA Purchase applications being sideways. The banking agenda continues with Bank of Canada declaring Rate decision. CAD $/ USD movement will be the trade.
 The EIA Petroleum Inventories may impress the Fresh series for the Crude/ its Derivatives. FED will have its bytes. AMR, BlackRock, EMC and Abbott will spread the result card. Intel, eBay, American Express add on Bell.

Thursday :  The Japanese Merchandise data and Import/Export to Opens the Yen/$. The Indian Markets digets the results from Hero Honda, Hind.Zinc, Sesa Goa, Kotak-Mah. Bank. The Inflation figures will set the back drop for the forthcoming RBI meet. The European summit on Greece will rumble at Brussels.
The Flash PMI's of Germany, France and Major Euro area will echo the activity. The US FHFA Housing Index, Jobless claims and LEI may push the DEBT talk in Full Focus. AT&T, Morgan Stanley, Pepsico, and the Market will close the bell with Microsoft, along with Roche, AMD.

Friday :  The China PMI is trade opener. Indian market have Axis Bank, Canara and Allahabad Bank results.
The Candian CPI carries to the US Trade, Where, Caterpillar, GE, Verizon, Honeywell may reflect what is passed on the Consumers and what is absorbed.

All the impasse will not over shadow the US Debt reaching the Crisis Point