Top Economics News

Greece has one last chance to stay in the euro area and must make a "maximum effort" to avoid being brought back several decades, warned Wednesday the central bank Hellenic.

Painting a picture severe the nation's finances, the Bank of Greece said that the failure to achieve its fiscal targets, delays in implementation of reforms and strong economic contraction had questioned his recent claims about the sustainability of the country's debt.

"The country must avoid at all costs further delays or deviations from objectives; every effort is needed to do better than the targets," said the Bank in its interim report on monetary policy.

"The current situation is the most critical period of Greek history of the postwar period. What is at stake is whether the country will remain within the euro area."

The new prime minister, Lucas Papademos, promised to push reforms forward, although he met a mixed support for the main parties and trade union opposition to the new austerity plan which he has committed.

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Equity markets have appeared hesitant and versatile throughout the session. The European equity markets ended in a disorganized, while at the same time, Wall Street also hesitated between increases and decreases.

Investors have welcomed the drop in bond yields Italian and Spanish through purchases of securities by the European Central Bank in the secondary market.

Traders also mention the idea that the ECB would lend the International Monetary Fund (IMF) to assist countries in the euro area.

But operators remain skeptical, however.

The new Italian Prime Minister revealed the composition of his government. In addition to its status as prime minister, he will take the reins of the Ministry of Economy at a time when the country is under pressure from the markets. Mario Monti.

The new Italian Prime Mario Monti said on Wednesday it would also economy minister, after his team presented to the President of the Republic Giorgio Napolitano. The former European Commissioner, 68, was named to replace Silvio Berlusconi as head of government while Italy is in danger of suffocation from the weight of its debt.

Monti also decided to create a large Ministry of Development, Infrastructure and Transport told the boss that the second national banking group Intesa Sanpaolo, Corrado Passera. Mr.Monti said the combination of these three portfolios within the same department by the "logic" to "put more centrally coordinated initiatives for economic growth."

Other key ministries were entrusted to experienced technocrats: Foreign Affairs to Ambassador Giulio Terzi di Sant'Agata, the Defense Admiral Giampaolo di Paola, the Interior to Prefect Anna Maria Cancellieri. Corrado Clini, Director General of Ministry of Environment in the last 10 years, was appointed minister. The government of Mario Monti has a total of three women who take charge of Justice, Interior and Labour and Social Policy, said Mr Monti.

Objective: six to eight billion euros in additional savings.The French government Monday unveiled new measures to contain its deficit and preserve its sovereign rating as part of a budget among "the most severe since 1945."

Prime Minister Francois Fillon, who will present the plan in mid-day after the cabinet meeting, prepared the minds saying Saturday that there was no alternative to the reduction of public spending.

The executive, who proceeded to the final Sunday arbitration, fails to speak always of "rigor" or "austerity" but "the moment of truth" announced by the prime minister sounds like this six months of the presidential election.

Private creditors of Greece may have to accept a loss of up to 60% on their sovereign debt to the Greek debt can become sustainable over the long term, according to a report that will serve as the basis for decisions of the leaders of the euro area meet Sunday and Wednesday in Brussels.

The EU finance ministers STRIPS for their Saturday on different scenarios and try to resolve their differences in voluntary or not of such private sector participation to a new bailout for Greece.

Friday night, they brought a breath of fresh air in Athens, giving the green light to the payment by mid-November of the next tranche of international assistance by 8 billion euros, without which Greece would default on its securities sovereigns in the coming weeks.

The International Monetary Fund still has to also accept the payment, he conditioned ambitious decisions of Heads of State and Government of the euro area to reduce the mountain of Greek debt.

According to the scenarios included in the report of the troika – IMF, ECB and European Commission – representing international donors in Greece, a 50% discount on Greek bonds held by private investors is necessary to reduce debt to 120% of GDP , against 162% today.

If it was intended to bring it below 110%, a discount of 60% would be necessary, the report, which warns that the Greek debt could have a peak at 186% of GDP.

A footnote on page mentions, however, opposition from the European Central Bank to the publication of such scenarios because it believes that investors will refuse to subscribe voluntarily to these losses, resulting in an inadequate Greek.

Fearing to trigger a credit event with unforeseeable consequences, France and several other countries are also reluctant to go beyond the envelope of 50 billion euros negotiated last July 21 with the banks, as demanded German authorities if necessary by forcing them to go the extra mile.

FUND SUPPORT FOR THE EURO AREA

Reflecting a view increasingly shared by European leaders, the Swedish Finance Minister Anders Borg has called for Saturday to a "substantial discount" on the Greek titles.

"I do not think we should use taxpayers' money.The safeguards system can not only restore confidence, "he said on his arrival at the meeting of EU finance ministers.

In addition to the Greek plan, they try to move forward on Saturday a comprehensive plan to recapitalize banks on the continent, aimed not only to prepare them for losses in Greece but also to restore investor confidence.

Several European and banking sources told Reuters earlier this week that the plan could be around 100 billion euros.

They must also continue work to define a formula acceptable to all the Fund to leverage support for the euro area (EFSF), on which Paris and Berlin are divided.

Friday night, after a meeting of the Eurogroup, which barely touched the issue, the economy minister, Baroin said that France continued to believe that the conversion of cash in bank was the best solution but did not make "one final point of confrontation."

"What counts is what works.And what works is what will go towards deterrence and effective firewall and it is around that we're trying to work, "the minister said to the press.

SARKOZY, MERKEL MEETING

Granted a banking license in EFSF would allow access to funding from the European Central Bank to increase its capacity for action by a factor of up to five.

But Berlin rejects this possibility, which would be to accept that the institution of Frankfurt finance the countries of the euro area, one of the dogmas explicitly excluded by the European treaties.

The other members of the euro area are also divided, Belgium and Spain having voted for a reconciliation BCE-EFSF while Slovakia and Austria have indicated that this solution was not studied.

A European source said Friday that among the solutions on which floor the ministers, not imply the

ECB.

This issue could be decided on Saturday evening at a bilateral meeting in Brussels between Nicolas Sarkozy and Angela Merkel, who will be joined by the presidents of the Commission and the European Council, José Manuel Barroso and Herman Van Rompuy.

European leaders are under intense pressure by their international partners to take decisive action against the crisis, less than two weeks of the G20 summit in Cannes, where they planned to hold them accountable.

Industrial production in France rose by 0.5% in August after rising 1.8% in July, against 1.5% in the first estimate, show statistics released Monday by INSEE.

Manufacturing output, which is to say, but including non-energy food, rose 0.7% after rising 1.8% the previous month, against 1.4% initially estimated.

Economists polled by Reuters on average expected a 1% drop in industrial production in August.

At three months, "the production is increasing (2.2%) in electrical, electronics, computers and machines and relatively stable in the other positions," said INSEE said in a statement.

Parallel to the industrial sector, construction activity rose 3.2% in August after rising 0.3% the previous month, against 0.1% originally announced.

Belgium, Luxembourg and France came Thursday to the heart of the negotiations on their respective participation in the rescue of a new Franco-Belgian bank Dexia, expected to lead discussions in a few days to a dismantling of the group ordered.

The Belgian government has warned Paris that Belgium did not intend to bear alone the financial burden of the rescue of the old world leader in financing local authorities, the first victim of the banking crisis of sovereign debt in the eurozone.

"It is clear that a very sensitive and crucial element in the negotiations, it is fair burden sharing," said Yves Leterme, Belgian Prime Minister in charge of current affairs, radio RTL.

If he declined to go into details of the negotiations, he recalled the nature "systemic" Dexia for the banking system.

His finance minister Didier Reynders also stressed the need for a balanced sharing of effort."Yes, we do not want to be alone with the whole group on our hands," he told reporters before a meeting of a small cabinet in Brussels.

"Do not forget that not only support the Belgian bank but it must continue to fund all the past, and we will not do it alone," said Didier Reynders, stating that it would begin negotiations with France after obtaining a government mandate.

In France, neither the Ministry of Finance or the Treasury or the Bank of France was immediately available to comment on the progress of negotiations on Dexia, whose board of directors to be held Saturday .

REDEMPTION FOR DEXIA BIL

Luxembourg has for its part that it was negotiating the acquisition of the Luxembourg subsidiary of Dexia, Dexia Banque Internationale à Luxembourg, with the help of an international investor.

The Minister of Finance of the Grand Duchy, Luc Frieden, said that negotiations on the resumption of Dexia BIL were in an advanced stage and could be finalized before the end of October, without specifying the identity of the investor.

With the statements of the Luxembourg authorities, the Dexia has suddenly turned down.

At 13:00, the action gave up 0.90% to 11.66 euros after

open up like other European banking shares.The European banking index progressed by 3.2%.

"This should generate a capital gain, which is positive.However, Dexia BIL is certainly rich in deposits, the sale of the blow will not ease the problems of financing the group, "said one trader in Paris.

The rescue plan could weigh on public finances of France and Belgium, already undermined by the crisis, and trigger negative reactions in public opinion.

The scenario being considered involves a backing of the main activities of Dexia in France at the Caisse des Depots (CDC) and the Postal Bank.

In Belgium, the plan could be realized by a partial nationalization of the retail or split it into a separately listed entity.

For the rest of the group, a "bad bank" would be set up to manage a large bond portfolio and an asset disposal program would be launched.

France and Belgium must commit to provide guarantees for the financing of the bond portfolio.

The New York Stock Exchange ended down 1.61% Wednesday, the Dow Jones industrial yielding 30 179.79 points to 11,010.90.

The S & P-500, wider, lost 24.32 points, or 2.07%, to 1151.06. The Nasdaq Composite fell on its side of 55.25 points (-2.17%) to 2491.58.

Volkswagen sales have increased strongly in July, the group said that its growth prospects remain in line with its forecasts.

The economic downturn does not seem to have a material impact on the activities of the German, European leader in the automobile.

"The Volkswagen Group maintained its growth trajectory due to its strong lineup," said the sales manager Christian Klingler in a statement.

Retail sales in July rose 16.3%, marking an acceleration from the pace through the first seven months of the year (14.4%).

China, Volkswagen's largest market by volume, has increased sales by 16.4% between January and July.Over the same period, sales in Central and Eastern Europe grew by 28.7%, and the United States of 21.4%.

But with a limited increase in German GDP to 0.1% in the second quarter, but the group could soon be in trouble in its home market, where one in three cars sold is a brand owned.

The opening Tuesday in Moscow MAKS air show and aerospace will be an opportunity for Russia to present its larger ambitions in the area, and perhaps to become the first customer of its own event.

Prime Minister Vladimir Putin is scheduled to visit Wednesday to the show, held every other year, which will be particularly marked by the first public flights of the Russian fifth generation fighter, the T-50.

Manufacturers of public civil and military aircraft should also take this opportunity to unveil new orders as well as partnerships with industry giants such as Boeing.

Last month, President Dmitry Medvedev had a blow to the domestic industry by announcing the armed forces that they can now also buy weapons outside Russia.

Analysts said this trend could lead to new large acquisitions comparable to the purchase from France of two helicopter carrier Mistral class.

"Russia is seeking to strengthen its arms industry with new technologies.It seeks abroad, which could mean that Russia will buy more than it sold during the show, "said Ruslan Pukhov, director of research firm CAST Moscow.

HUNTERS, AND CIVIL AIRCRAFT HELICOPTERS

The news agency reported Vedomosti this month that Russia was seeking to buy at the show for three billion dollars to combat aircraft and training.

In total, the organizer Aviasalon expects contracts for a total of ten billion dollars were signed during the last week that the rally.

The previous edition in 2009 had already reached a similar amount.

Russia seeks to breathe new life into its defense industry, fell into disuse after the collapse of the Soviet Union.

The Hunter T-50 is a belated effort and time and again pushed to compete with the F-22 co-developed by Lockheed Martin and Boeing.

Stealth, the T-50 is only the prototype of the fighter aircraft that Russia intends to eventually develop and mass produce in cooperation with its first export customer, India, for a contract estimated at $ 35 billion.

The conglomerate Russian Helicopters, which brings together eleven regional manufacturers of helicopters and continued production equipment brand Mil, should also announce at the show a series of contracts, primarily to Russian companies and the Ministry of Defence.

The civilian sector should also be highlighted, with probable orders of regional aircraft SuperJet 100, which has already registered 170.