1read’s Weblog

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You will find the following most powerful people 2012 according to FORBES mentioned in ‘THE WORLD today’: Barack Obama (1), Angela Merkel (2), most powerful woman also in 2013, Vladimir Putin (3), Ben Bernanke (6), Abdullah bin Abdul Aziz al Saud (7), Mario Draghi (8), Xi Jinping (9), David Cameron (10), Francois Hollande (14), Warren Buffett (15), Mario Monti (29), Ban Ki-moon (30), Christine Lagarde (38), ranking 7 in the list of most powerful women 2013.

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U.S. President Barack Obama wins a second term, defeating his challenger Republican Mitt Romney, chosing voters to preserve the status quo of divided Government in Washington, retaining Democrats a narrow majority in Senate and keeping Republicans majority in the House. President Obama faces tough battles in a still-divided Congress, capable of blocking his every move and is insisting in an immediate middle-class tax freeze to keep economy growing, reiterating that rich must pay more in taxes, saying House majority leader Republican Boehner that Republicans won’t agree to higher taxes. Failure to come to a bipartisan agreement will endanger the nation’s AAA credit rating – warning now also Fitch and Moody’s on U.S. downgrade, and automatic tax increases to most Americans and massive spending cuts to military and domestic programs mandated starting January 2013 by the austerity measures known as the ‘fiscal cliff’ would drive the U.S. most likely back into recession. President Obama has to address also urgent national security issues, including the nuclear standoff with Iran, the civil war in Syria, winding down of the war in Afghanistan and dealing with an increasingly assertive China. Re-elected Republican House speaker Boehner dismissed a new Obama offer that would raise tax rates on income over $400.000, raise $1,2 Trillion in new revenue and cut $930 Billion in spending over the next decade, but failed with his plan that would raise taxes on Americans earning more than $1 Million annually, reaching Senate a last-minute ‘fiscal cliff’-agreement, passing a bill raising tax rates on couples making more than $450.000 a year and on single people earning more than $400.000 a year, postponing massive spending cuts for two months allowing to prepare during this time a new savings program, making the measure its final passage in the divided Republican-controlled House of Representatives sending legislation to President Obama. The minimum-compromise avoids austerity but doesn’t resolve dangers of national default, high unemployment and U.S. debt problem, continuing discussions about spending cuts and debt ceiling, hitting the Government its $16,394 Trillion debt limit, undertaking Treasury ‘extraordinary measures’ to leave it with more cash on hand, as in a matter of weaks outflows will overwhelm inflow, nominating Obama his Chief of Staff Jacob J. Lew to be next Secretary of Treasury. The House voted to suspend temporarily Federal debt ceiling allowing the Government to borrow as needed through May 18, 2013, putting off any potential default, however including a provision that docks lawmaker’s pay if a budget blueprint is not passed by April 15, 2013, accepting Senate Democrats GOP debt-limit plan, reaching public debt $16,739 Trillion and budget deficit $1,059 Trillion nearing the end of March 2013. Fiscal talks failed to prevent automatic budget cuts, called sequestration, amounting to $85 Billion, beginning March 1, and totaling $1,2 Trillion over a decade. The House passed a bill extending funding through the second half of the current fiscal year ending September 30, approving a GOP-budget blueprint seeking $4,6 Trillion savings over 10 years without raising new taxes, hoping to reach a small surplus by 2023 through deep cuts to healthcare and social programs that aid the poor, approving Senate Democrats narrowly a $3,7 Trillion budget blueprint for 2014, aiming to reduce deficits by $1,85 Trillion over a decade, including unspecified tax rises worth about $975 Billion, beginning now the difficult task to work and agree on a budget compromise. A $59,4 Billion dividend payment to the Government by tax-payer owned Fannie Mae will help to delay the effective date on which the U.S. would hit its debt limit until at least Labor day. Congress suspended debt limit until May 18 and the next day the limit automatically would be raised to the Government’s debt level at that time, which is estimated to be about $16,8 Trillion.

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President Obama’s budget deficit rose to a postwar record of $1,297 Trillion in FY2011, decreasing to $1,089 Trillion ending FY2012 and could drop to $642 Billion in FY 2013 thanks to tax revenues and cash from Fannie Mae and Freddie Mac. Averting default Congress approved a bill signed by President Obama into law raising U.S. debt limit of actually $14,294 Trillion by at least $2,1 Trillion meeting spending needs until after November 2012 elections and finding a compromise on deficit reductions of $2,4 Trillion or more over the next decade, reaffirming Fitch the U.S. triple-A rating, maintaining also Moody’s the AAA-rating for the U.S. adding a negative outlook on the grade, lowering Standard & Poor’s the AAA rating the U.S. held for 70 years to AA+ keeping the outlook at negative, saying the bipartisan debt agreement failed to ensure necessary reduction of record deficits. After the U.S. debt ceiling has been raised already to $15,194 Trillion, President Obama  requested a final increase of $1,2 Trillion raising ceiling to $16,394 Trillion to cover financial needs for fiscal year 2012, exceeding current U.S. GDP of $15, 544 Trillion. Obama’s ‘American Recovery and Reinvestment Bill of 2009′ established permanent middle-class tax cuts getting relief about 95% of taxpayers and included a ‘Buy American’ clause. President Obama signed a landmark health care reform bill into law pushed by Democrats, a plan with an estimated cost of $940 Billion aimed to guarantee affordable health insurance for most Americans providing coverage to 32 Million people, who would be otherwise uninsured, cutting the Federal deficit by $138 Billion over the first 10 years. 26 states announced legal action to block the law and a Federal judge ruled that key part of health care bill violates Constitution, filing the U.S. Justice Department a petition asking the Supreme Court to consider the constitutionality of the Obama Administration health-care overhaul, abandoning the White House a controversial part of the healthcare law dropping plans to implement a new program to provide Americans with long-term-care insurance seen as financially not viable. Seen as a win for the President, the Court backed Obama on health law, limiting ruling however Medicaid provisions. Congress repealed ‘don’t ask, don’t tell’, lifting a ban on gay men and lesbians serving openly in military, sending the bill to President Obama, who had campaigned in favor of this historic measure. The U.S. and Moscow put into force the new Strategic Arms Reduction Treaty/ START lasting 10 years, an important successor agreement replacing a key ‘Cold War’ – era nuclear disarmament treaty – reducing warheads on both sides by about 30%. The Congress approved long-awaited free trade agreements with strategic allies South Korea, Colombia and Panama, seen as a rare bipartisan achievement and passed as expected the extension of payroll tax cut and jobless benefits, maintaining Medicare reimbursement rates for doctors. The U.S. declared officially war in Iraq over, withdrawing all U.S. troops at the end of 2011, warning implicitly neighbor Iran not to interfere in Iraq, signalizing President Obama Asia as top priority, a shift popular with regional Governments wary of China’s accelerating rise. President Obama renewed oath for 2nd term, the 57th Presidential Inauguration, delivering agenda setting speech heralding a bolder leadership style, addressing the need of greater equality, immigration reform, gay rights, climate change, saying we are made for the moment and calling on Americans to seize it together, hitting the President’s popularity a 3-year high. In his State of the Union address the President pledged to fight a higher minimum wage and for a strong middle class, more Government investment in schools and clean energy, and deficit reduction through spending cuts and tax increases, pushing Congress to act on guns, immigration and climate change, announcing to open trade talks with E.U. and to return 34.000 troops from Afghanistan, about half of the U.S. force, before February 2014.

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“Organizing for America”

Government web site tells you if eligible to refinance mortgage. 30-year-fixed mortage rate average higher at 3,59%.

President Obama is calling on all of us – United We Serve:

President Obama’s campaign promise of giving 95% of working Americans a tax cut – Recovery Act tax cuts and savings:

Standing with President Obama to pave the way for a clean energy future that: – Combats climate change, – creates a new economy powered by green jobs and – ends our dependence on foreign oil.

Take a look at the recap we put together — and share it with friends:

Real effects of the steps President Obama and Democrats have taken to rebuild our economy:

President Obama frustrated: Calling on Congress to take action on job:

Check out our new health care app:

President Obama’s plan to avoid ‘Fiscal Cliff’:

Speaking from the heart as President and a parent after the tragic and senseless death of 20 children and 6 adults:

President Obama’s inauguration:

Stand with President Obama in tackling this critical issue and tell Congress it’s time to act:

Working the next four years:

Support of comprehensive immigration reform:

Stand with the President and support agenda we are fighting for:

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ECONOMIC OUTLOOK 2013 – The stock market will be a riskier place in 2013 and isn’t expected to move significantly higher, ending 2012 a pretty stellar year. Major stock indexes enjoyed their best performances since the financial crisis in 2009 thanks in large part to stimulus efforts of the world’s central banks and despite recent pressures due to the ongoing U.S. budget discussions, remaining uncertainties in relation with spending cuts and debt ceiling. Modest recoveries in the U.S. and Japan, despite maintaining super easy-money policies to stimulate growth, and a poor economic outlook in the €uro-zone with considerable risks of new tensions, will contribute to slow global economic expansion in 2013, continuing China to be an important engine for the regional and world economies. Central banks doubling their efforts to support growth are facing the risk of overburdening, narrowing their capacity to undertake additional measures; they most likely will keep record low interest rates and maintain inflation under control. Starting 2013 Basel III will be gradually implemented to improve global minimum capital standards to make international banking system more secure, approving Europe a joint regulation of banks giving the ECB direct supervision of Euro-zone’s largest lenders from early 2014, seen as a decisive step to resolve Euro-zone’s financial crisis.

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The Federal Reserve headed by Ben Bernanke is justifying renewed stimulus efforts/QE4 to boost economic recovery also in 2013 by continuing purchases of $45 Billion in long-term Treasury bonds and of $40 Billion in mortgage-backed securities a month, saying it expects to keep short-term interest rates near zero until unemployment rate fell to 6,5% or lower, providing the medium-term inflation does not exceed 2,5%, keeping the Fed in January 2013 rates and policy steady, growing concerns over risks of ongoing QE4, increasing the possibility that bond buying could slow, defending Bernanke his easy-money policies, warning against premature action. Unemployment rate declined from 7,6% in March 2013 to 7,5% in April 2013, adding U.S. employers 165.000 jobs, reaching weekly first time jobless claims 340.000. The Conference Board Consumer Confidence index rebounded in April 2013 rising to 68,1, after dropping to 61,9 the previous month. U.S.- consumer spending, which accounts for about 70% of the U.S. gross domestic product, rose 0,7% in February 2013, paying Americans 35 cents more for gasoline, increasing incomes 1,1% after tumbling 3,6% in January 2013, reaching savings rate 2,6% up from 2,2% in January 2013. Consumer credit grew in August 2012 from the previous month by $18,1 Billion to $2.73 Trillion, rising overall non revolving credit, which includes student credit as well as auto loans, by $13,9 Billion, increasing revolving credit, which includes credit-card debt, by $4,2 Billion. The U.S. consumer price index/CPI declined 0,2% in March 2013 and 1,5% over the last 12 months, increasing the core index excluding volatile food and energy prices 0,1%, up 1,9% from a year ago. According to the Institute for Supply Management/ISM its index of factory activity fell to 50,7% in April 2013 from 51,3% the previous month. The ISM index for the non-manufacturing sector registered 56% in February 2013, up from 55,2% the previous month, indicating continued growth at a slightly faster rate, while the non-manufacturing business activity index registered 56,9%, 0,5% higher than the 56,4% reported in January 2013, jumping the new orders index to 58,2% from 54,4% in January 2013. U.S. automakers sold in 2012 about 14,5 Million vehicles, compared with annual sales of 12,778 Million in 2011, continuing a slowing growth trend for automakers in April 2013, marking overall industry new car sales for the sixth consecutive month around 15 Million units, growing April 2013 sales of GM and Chrysler 11%, gaining Ford sales 18%, declining sales of Toyota 1,1% and those of Volkswagen/VW 10%. China’s sales of passenger vehicles increased 6,8% to 14,68 Million in 2012 from the previous year, surpassing the U.S. registering with 13% the best sales growth since 2008 and Europe, reaching passenger vehicles sales 12,5 Million, 1,1 Million units less than in 2011. China’s vehicle sales in the first 4 months of 2013 reached 7,27 Million units, up 13,2% year-on-year. GM’s worldwide sales rose 2,9% to 9,29 Million vehicles in 2012, while Toyota’s worldwide sales increased 23% to 9,75 Million vehicles, regaining the title as No.1 in global auto sales, reporting Volkswagen/VW occupying third place global sales of 9,07 Million units, up 11,2% from 2011, reaching global vehicle sales in the 1stQ. 2013 of Toyota 2,43 Million, of GM 2,35 Million and of VW 2,27 Million. U.S. retail sales rose a slight 0,1% in April 2013 after declining a revised 0,5% from February to March 2013, increasing sales figures 3,7% compared with April 2012. The U.S. annual inflation rate 2012 fell to 2,07% from 3,2% in 2011, declining to 1,5% in March 2013, down from 2% the previous month. U.S. trade gap 2012 narrowed 3,5% to a year-low of $540,4 Billion, rising trade deficit with China to $315,1 Billion. U.S.-GDP rose 2,2% in 2012, expanding at an annual rate of 2,5% in the 1stQ. 2013, after growing at an annualized pace of 0,4% in the 4thQ. 2012, predicting the Federal Reserve a growth between 2,3% and 3% for 2013. The IMF lowered its world growth forecast for 2013 to 3,3%, seeing elevated debts of industrialized nations and pending structural reforms as major risks to growth and job creation. The 27-nation European Union GDP expanded by 1,5% in 2011, forecasting the EU a contraction of 0,3% for 2012, and a growth of 0,4% for 2013 and of 1,6% for 2014, making EU27 up about 30% of the world economy, shrinking the 17-nation €uro-zone economy by 0,5% in 2012 and by 0,2% in the 1stQ. 2013, forecasting EU for 2013 an economic contraction of 0,4%, remaining the €uro-zone the main weak link in the global economy, returning to growth in 2014 expanding by 1,2%/1,4%, predicting EU Commission €uro-zone countries average budget deficit will increase from 2,6% in 2012 to 2,8% of GDP in 2013. The annual inflation rate in the €uro-zone decreased in April 2013 to 1,2%, well below the ECB target of 2%, hitting the bloc’s average unemployment rate new high of 12,1% in March 2013. ECB cut its key rate in May 2012 from 0,75% to a record-low of 0,50%, helping to fight €uro-zone recession, opening door for more easing.

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BRIC-COUNTRIES: Developing BRIC countries Brazil and Russia are commodity producers and beneficiaries of higher commodity prices, while India and China are both commodity consumers. Brazil replaced Britain as the world’s sixth largest economy, after the U.S., China, Japan, Germany and France, slowing growth in 2012 to 0,9%, down from 2,73% in 2011, expecting Brazil to grow by 3,09% in 2013. Russia, the energy giant, is targeting an expansion by 3,5% for 2012, down from 4,3% in 2011, and a growth of 3,6% in 2013. India’s  economy grew 6,9% in fiscal year ending March 31, 2012, slowing its growth in the current fiscal year 2012-2013 to about 5%, expecting growth will accelerate in the fiscal year 2013-2014 to 6,5%, giving Standard & Poor’s the country a negative outlook due to high debt and fiscal deficit, falling China’s GDP growth to 7,8% in 2012, down from 9,24% in 2011, and may rise again in 2013, predicting the World Bank a growth of 8,3%. The 4 BRIC countries invited in 2010 South Africa to join the group, accounting roughly for 42% of the world’s population and representing a combined GDP of $14,9 Trillion, launching plans for a joint development bank.

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MIST-COUNTRIES: Newly industrializing economies/NIE =Mexico, Indonesia, South Korea and Turkey – faster developing than BRIC-countries.

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U.S. BANKS: During the global financial crisis Lehman Brothers filed for Chapter 11 bankruptcy protection owing a record $639 Billion to creditors in the U.S., Europe and Asia. Barclays Bank purchased Lehman’s core US-broker-dealer-operations in a $1,75 Billion deal, turning itself into a universal bank, and Japan’s largest brokerage Nomura acquired Lehman’s flagship operations in Asia including its equities operations and investment banking in Europe and the Middle East. After bankruptcy judge approved payback plan Lehman Brothers exits bankruptcy protection in March 2012 starting on April 17 to distribute about $65 Billion of asset value left to creditors who had asserted more than $300 Billion in claims. Goldman Sachs repaid a $10 Billion Government aid after raising $7,5 Billion in public offers and receiving an investment from Berkshire Hathaway purchasing $5 Billion in preferred shares and getting warrants for another 5 Billion in common stock. The bank bought back after receiving regulators’ permission the preferred shares it sold to Berkshire Hathaway paying $1,64 Billion for Warren Buffett’s help, dropping net earnings for the year 2011 67% to $2,5 Billion, reporting for 2012 net earnings of $7,48 Billion or $14,13 per common share on net revenues of $34,16 Billion, increasing its net earnings for the 1stQ. 2013 to $2,26 Billion or $4,29 per common share on net revenues of $10,09 Billion. The S.E.C. sued Goldman Sachs for securities fraud, off-loading risk of sub-prime home loans and commercial mortgages misleading investors, who lost money as the  mortgage market collapsed, agreeing the bank to pay a record $550 Million to settle charges. Revised deal over warrents issued during financial crisis will make Warren Buffett’s Berkshire Hathaway a major shareholder in Goldman Sachs. Morgan Stanley, actually perceived as the least creditworthy of the six largest U.S. banks, posted for the full year 2011 an income of $4,2 Billion or $1,26 per diluted share, reporting for 2012 an income from continuing operations of $48 Million or a loss of $0,03 per diluted share, and for the 1stQ. 2013 an income from continuing operations of $1 Billion or 50 cents per diluted share on net revenues of $8,2 Billion, seeing lower earnings from commodities trading. Morgan Stanley had suspended in 2008 discussions about increasing the participation of the China Investment Corp/CIC, a shareholder with a 9,9% stake, after Mitsubishi UFJ Financial Group offered to pay $9 Billion for a 21% stake in the US bank and $3,5 Billion to take over 100% of the Union Bank of California, merging the Japanese bank its security subsidiary with Morgan Stanley’s Japanese securities operations. Reshaping its structure, isolating its money losing operations into a new unit called Citi Holdings, keeping its healthy key businesses in an unit called Citicorp, the financial giant sold its 64% stake in Japanese Nikko Asset Management to The Sumitomo Trust & Banking Corp for about $795 Million after it sold its Japanese brokerage business Nikko Cordial Securities and other parts of Nikko Citigroup’s Japans operations for about $5,76 Billion to Sumitomo Mitsui Financial Group/SMFG as well as its Japanese trust bank NikkoCiti Trust & Banking Corp  for about $200,7 Million to Nomura Trust & Banking Corp, obtaining vital capital injections. Citigroup converted preferred shares and trust-preferred securities into new common stock, including $33 Billion from private holders and $25 Billion out of the $45 Billion invested by the Government, which left the U.S. with the largest ownership stake of about 27% or 7,7 Billion shares, repaying $20 Billion of  the remaining Tarp funds, selling off Treasury the total of its 7,7 Billion common shares making a profit for taxpayers on the rescue of $12,3 Billion including share gain, dividends and proceeds from other securities. Citigroup, the nation’s third largest bank, reported for the full year of 2012 a net income of $7,5 Billion or $2,44 a share on revenue of $70,2 Billion, declining profit 32% and revenue 11% from 2011, rising earnings 30% in the 1st.Q. 2013 to $3,8 Billion or $1,23 a share growing revenue 6% to $20,5 Billion. In September 2012 Citigroup has been writing down the value of its retail brokerage business by $4,7 Billion, $2,9 Billion after taxes, selling its 49% stake in the brokerage unit Smith Barney to Morgan Stanley, resigning Citi’s CEO Pandit after board clash abruptly, taking the helm Mike Corbat. Wells Fargo, the largest U.S. home lender, closed a $15,8 Billion stock deal to buy all of Wachovia Corporation and returned $25 Billion TARP funds, increased for the full year of 2011 net income 28% to 15,9 Billion or 2,82 per diluted share, becoming the nation’s biggest bank by stock market value reaching $178 Billion, about $70 Billion more than Citigroup and some $8 Billion more than JP Morgan Chase, but Wells Fargo has still fewer deposits than its closest competitor. Wells Fargo posted for 2012 a net income of $18,9 Billion, up 19% from 2011, and a record diluted EPS of $3,36 on revenues of $86,1 Billion, reporting for the 1stQ. 2013 earnings of $5,17 Billion or 92 cents a share, falling revenue to $21,3 Billion, coming much of the profit from cost-cutting. Bank of America bought Merrill Lynch for about $50 Billion, making the U.S. bank which also purchased troubled mortgage giant Countrywide the second largest financial institution in the world. BofA, the biggest U.S. mortgage servicer, repaid all of its $45 Billion Government bailout funds, raising $18,8 Billion in fresh capital, posting for the full year 2011 a net income to common shareholders of $85 Million or 1 cent a share, increasing net income 2012 to $4,2 Billion or $0,25 per diluted share on revenues of $84,235 Billion, jumping net income for the 1stQ. 2013 to $2,62 Billion or 20 cents a share, falling revenue 8,4% to $23,85 Billion, struggling the bank still to recover from bad loans. Billionaire Warren Buffett purchased through his investment company $5 Billion in preferred shares of the bank, which agreed to sell 23,5 Billion shares reducing its stake in China Construction Bank to 1%, gaining $5,1 Billion, using proceeds to raise capital of Bank of America Corp. BofA is cutting $5 Billion in annual costs until 2013, slashing 30.000 jobs, keeping its option open putting Countrywide, once the No. 1 mortgage lender, into bankruptcy. JPMorgan Chase bought the troubled fifth largest U.S. investment bank Bear Stearns and acquired almost all of Washington Mutual/ WAMU, with $307 Billion in assets the nation’s largest savings and loan and among the worst hit by the housing crisis, creating a nationwide retail franchise rivaled only by Bank of America, which lost the title as the U.S. nation’s biggest bank as JP Morgan Chase passed BofA’s $2,2 Trillion in assets. JP Morgan Chase returned the U.S. capital investment of $25 Billion, reporting for the full year 2011 a profit of $19 Billion and for 2012 a record profit of $21,3 Billion or $5,20 per share on full-year revenues of $99,9 Billion, cutting JP Morgan’s board CEO Dimon’s pay by 50% citing failures of management in relation with about $6 Billion in losses from risky derivatives bets last year, rising the bank’s 1stQ. 2013 overall net income to $6,53 Billion or $1,59 per share, benefiting from setting aside less money to cover legal expenses, falling total revenue 3,6% to $25,12 Billion. Moody’s cut credit rating of 15 major banks, including Bank of America, Citigroup, JP Morgan Chase, Goldman Sachs, UK-banks Barclays and HSBC and Germany’s Deutsche Bank, citing risks to long-term profitability.

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TIGHTER REGULATIONS: After EU regulators insisted in the necessity to increase transparency in the $648 Trillion over-the-counter/OTC privately traded derivatives markets (about ten times the GWP/2011=$69,11 Trillion), dominated by many of the world largest banks and linked to the global credit crisis, banks agreed to an European clearing mechanism for European Union-based credit default swap/CDS contracts, acting as buyer to every seller and as seller to every buyer, absorbing losses in the event of default, crafting the U.S. rules for a stricter control of OTC derivatives making its trading safer and more transparent, to be negotiated in the future through exchanges or central clearing houses regulated by the Security Exchange Commission/SEC and the Commodity Future Trading Commission/CFTD, approving U.S. regulators new rules governing how swaps are traded, completing a long delayed effort to further improve control of derivatives trading. European leaders negotiated a new model for financial supervision creating three new agencies starting to operate beginning 2011 to monitor banks, insurance companies and trading on markets, the European Banking Authority/EBA-London, the European Securities and Markets Authority/ ESMA-Paris and the European Insurance and Occupational Pensions Authority/EIOPA-Frankfurt, complemented by the European Systemic Risk Board monitoring potential threats to financial stability and a European System of Financial Supervisors checking quality and consistency of national regulatory authorities. The Obama administration supported an overhaul of the U.S. financial regulatory system/Wall Street Reform to protect consumers and avoid risky practices, giving the Federal Reserve new oversight powers, controlling the SEC rating agencies.

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EUROPE/RUSSIA/JAPAN/CHINA/INDIA: The German Government completed the total nationalization of troubled Hypo Real Estate, one of Europe’s biggest commercial property lenders, transferring the bank €210 Billion in risk positions and non strategic assets to a ‘bad bank’.  The Hypo Real Estate Nationalization Bill created the contingency initiative called Special Fund for Financial Market Stabilization/SoFFIN for an amount of up to €500 Billion to control the troubled mortgage lender and safeguard the overall German banking system, creating a ‘bad bank’ plan, estimating the Government that German banks may have as much as €230 Billion worth of toxic assets in their books. SoFFIN has been reactivated and extended until the end of 2014 making available loan guarantees reaching €400 Billion and direct credits of up to €80 Billion to help German financial institutions, allowing a smooth transition to the planned European bank-rescue fund starting probably in 2015. Like big U.S. banks also German banks will be asked to make emergency plans to prevent collapse if they faced serious problems, emphasizing that they could not count on Government help. Germany’s economy expanded by just 0,75% in 2012, after contracting GDP by 0,6% in the last quarter of 2012, growing GDP by just 0,1% in the 1stQ. 2013, expecting German Government a growth of only 0,4% for 2013, rising to up to 2% in 2014. German exports of goods and services in 2012 rose to €1,097 Trillion, totaling  imports €909,2 Billion, reaching trade surplus €188,1 Billion and exports to EU member States still 57%. The German State deficit fell to 0,8% of GDP in 2011 from 4,1% in 2010 and a balanced budget may be reached already in 2013, however rising German public debt to 81,9% in 2012 from 80,5% of GDP in 2011, declining unemployment rate to 7,3% in March 2013, dropping inflation to 1,7% the same month. Deutsche Bank raised €10,2 Billion increasing its share to a controlling stake above 50% in Postbank, buying also one of Europe’s oldest private banks Sal. Oppenheim, reporting a net profit of €4,3 Billion for 2011 and of only €665 Million for 2012, after posting a net loss of €2,2 Billion in the 4thQ. 2012. Reversing policy after the Japanese nuclear debacle Germany’s coalition decided to go nuclear-free by 2022, closing immediately eight of its oldest reactors and to phase out the nine remaining operating facilities over the next decade. Former East German civil-rights activist Joachim Gauck was elected as German President replacing Christian Wulff. Chancellor Merkel, enjoying enormous popularity among Germany’s general population, is up for re-election in 2013 intending to run for a third term. After a surprise nationalization of Fortis Dutch business, French BNP Paribas took control of troubled Fortis operations in Belgium and Luxembourg in a €14,5 Billion deal. France’s GDP grew an estimated 0,2% in 2012, contracting by 0,2% in the 1stQ. 2013, falling into recession after falling already by 0,3% in the 4thQ. 2012, predicting EU Commission for 2013 an economic expansion of only 0,1% and for 2014 of 1,2%. New French President socialist Francois Hollande promised to shift burden of hardship to the rich and soft current prescription of German-led austerity, winning socialists historic absolute Parliament majority. The British Government nationalized part of UK’s banking system, buying up to Pstg.50 Billion preference shares or other interest bearing shares in 7 big UK banks, granting Pstg.250 Billion of loan guarantees up to three years and another Pstg.100 Billion in short-term liquidity. The Royal Bank of Scotland/RBS, the Halifax Bank of Scotland/ HBOS and Lloyds TSB more urged to be recapitalized participated in the program, owning British taxpayers 70% of RBS and 43,5% of Lloyds, creating the British Government the UK Financial Investments Ltd/UKFI to control its stakes in financial institutions, while Barclays and HSBC raised capital from private investors to avoid conditioned Government support. The British Government increased its rescue package by another Pstg.100 Billion adding new measures, such as an insurance against a fee to protect financial institutions against future defaults on mortgage and other loans. Britain’s economy grew by 0,8% in 2011 and most likely posted a zero growth in 2012, after shrinking GDP by 0,3% in the 4thQ. 2012 and may slide back into recession in the 1stQ. 2013, however still expecting to grow by 0,9% for the full year of 2013, reaching public debt 90% and budget deficit 6,3% of GDP in 2012, downgrading Standard & Poor’s Britain’s triple A rating to negative, cutting Moody’s and Fitch Britain’s AAA rating one notch to AA1. Ending 13 years of Labor Party rule the leader of the Conservative Party David Cameron became new Prime Minister forming a coalition with Liberal Democrats, resigning defeated Gordon Brown. UBS posted a net loss attributable to shareholders of CHF2,511 Billion or negative diluted earnings per share of CHF0,67 in 2012. Swiss Parliament approved in 2010 the U.S.-UBS tax treaty lifting the veil on the country’s traditional banking secrecy. Credit Suisse reported a net income attributable to shareholders of CHF1,349 Billion in 2012. Russia supported its banking system using its biggest states banks VTB and Sberbank, providing much needed longer-term liquidity, shored up its weakened stock markets and established a new recovery plan offering $90 Billion in stimulus spending through tax cuts and social welfare benefits to stimulate domestic consumer demand. With rising energy prices, a strengthened financial sector, an improved investment climate and diversifying its economy Russia showed signs of recovery, reaching its gold and foreign exchange reserves again $507,5 Billion. The Russian Government plans to issue ruble denominated bonds and prepared a privatization program over 5 years worth some $40 Billion, selling minority stakes in about 900 State controlled companies helping to finance budget deficit. The Government sold 7,6% of Sberbank, retaining control over the largest Russian bank keeping 50% plus 1 share. The Russian Government, said it still owes 25 Trillion Rubles/$785 Billion to the public from lost Soviet savings, signing Putin an order to halt payments on the notes until at least 2015. The Russian Federation’s debt in national and foreign currency reached $545,1 Billion at the end of 2011 or 29% of GDP and would rise to about 55% of GDP if the outstanding Soviet debts were included. Prime Minister Vladimir V. Putin, whose United Russia party lost its two-thirds majority in DUMA, continuing still as the strongest political power, won overwhelmingly re-election for six years to the Russian Presidency and was sworn in, taking previous President Medvédev Putin’s place as Prime Minister heading also the United Russia Party. Russian Band Pussy Riot was convicted of hooliganism and sentenced to two years in prison, marching opposition against Putin. After endless negotiations a Ministerial Conference finally accepted Russia as a WTO member. Japan’s public debt mountain exceeds 235% of GDP, while budget deficit 2013 may reach 9,8%, urging the IMF to take measures to reduce debt. Acknowledging that its global economic status is declining Japan said it will work to open up the country, redoubling efforts to forge free trade agreements, turning trade focus to China and South Korea. Quake-hit Japan approved a budget blueprint 2012/13 of $1,16 Trillion that includes record high spending aggravating its debt problem raising pressure to increase taxes, expanding its economy by 2% in 2012, rising GDP at an annualized rate of 3,5% in the 1stQ. 2013, posting Japan’s trade balance in fiscal year 2012/2013 a record trade deficit of $83,4 Billion, dropping exports 2,1% while imports rose 3,4%, falling exports to China due to tensions over territorial dispute by 9,1% and to the EU suffering from €uro-zone’s debt crisis by 14%, meaning the weaker yen higher costs for rising imports of natural gas prized in the U.S. currency. Following ECB and the Fed also Japan’s Central Bank announced fresh monetary easing extending asset-buying by €97 Billion to €778 Billion, adopting 2% inflation target, continuing unprecedented stimulus saying it will double its holdings of Government bonds and  double money supply until 2014 to bolster growth of the world’s 3rd-largest economy. Japan’s consumer prices fell 0,5% year-on-year in March2013, underlining difficult Government task to pull the economy out of 15 years of deflation. Liberal Democrats, Japan’s opposition party, won a landslide election victory, becoming its hawkish leader Shinzo Abe Prime Minister for a second time, unveiling a $116 Billion economic stimulus package to lift real economic growth by 2% and create 600.000 new jobs, forecasting for the fiscal year beginning in April 2013 a growth rate of 2,5%, offering G7 tacit approval for weaker yen raising hopes the world’s third largest economy could awaken from its long slumber. China put into force a massive stimulus initiative of $586 Billion, including heavy infrastructure investments, tax cuts and low interest rate loans, accelerating growth contributing to the region’s stabilization, surpassing Germany as the world’s biggest exporter, overtaking the U.S. as the biggest energy consumer and probably also as the biggest oil importer, passing Japan to become the world’s second largest economy, expanding GDP 9,24% in 2011, slowing to 7,8% in 2012 and further to an annualized rate of 7,7% in the 1stQ. 2013, still above growth target of around 7,5% for 2013, reaching GDP 51,93 Trillion yuan/$8,28 Trillion, rising annual inflation rate to 2,4% in April 2013, growing foreign trade at a slower pace of 6,2% in 2012, missing target of 10%. China surpassed the U.S. to become the world’s biggest trading nation in 2012, totaling imports and exports of Chinese goods $3,87 Trillion, amounting the U.S. trade of goods to $3,82 Trillion, reaching China’s GDP 2012 yuan 51,93 Trillion/$8,3 Trillion compared to the U.S. GDP of actually $15,6 Trillion. Steering China’s economy away from a double-digit export led growth to a more sustainable expansion of its domestic consumption will be a top priority of the Government, targeting an average growth rate of 7% through 2015, ensuring retail sales to maintain an annual increase of 15% during the five-year plan 2011-2015 and reach 32 Trillion yuan/$5,08 Trillion by 2015. New Chinese leadership under CPC General Secretary Xi Jinping, confirmed by the People’s Congress as President replacing Hu Jintao, urged party leaders to build a clean Government, maintain self-discipline and professional conduct, calling for an acceleration in economic restructuring and the advancement of innovation. China’s People’s Congress named Li Keqiang as new Prime Minister, replacing Wen Jiabao, saying the country will target a smaller role for the State. China and Japan, the world’s second and third largest economies, unveiled important deals to tighten finance ties, supporting Japan the sale of bonds denominated in China’s yuan, buying Japan’s Government eventually up to $10 Billion worth of yuan-bonds, agreeing also to encourage the use of their own currencies in bilateral trade, dealing in the future largely without using the U.S. Dollar, agreeing China, Japan and South Korea to press ahead with purchase of each other’s Government bonds. India is the world’s largest arms importer, procuring weapons in relation with its tense relationship with Pakistan and seeing China increasingly as potential threat. Its trade deficit for fiscal year 2012/2013 grew to $190,91 Billion, from $183,3 Billion the previous year, with oil imports increasing to $169,25 Billion from $154,96 Billion in 2011/2012. India’s public debt reached 67,59% of GDP, rising 2012/2013-budget deficit to 5,2%, targeting for 2013/2014 a reduction to 4,8%. The country’s gold and foreign exchange reserves rose to $295,25 Billion in April 2013.

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U.S. HOUSING MARKET: Sales of previously occupied homes rose 0,6% in April 2013 to a seasonally adjusted annual rate of 4,97 Million, the highest level in 3-1/2 years, jumping the median sales price 11% to hit $192.800. The NAR-index of the so-called pending home sales slipped 0,4% to 104,8 in February 2013 from a downwardly revised 105,02 in January 2013, holding back the market in many areas a limited inventory, but is 8,4% above February 2012. New single family home sales climbed further in April 2013, increasing 2,3% to a seasonally adjusted annual rate of 454.000, rising the median sales price for new homes to $271.600. Privately owned housing starts fell 16,5% below the revised March 2013 rate of 1.021.000 to a seasonally adjusted annual rate of 853.000 in April 2013, still 13,1% above the April 2012 rate, rising building permits to a seasonally adjusted annual rate of 1.017.000, 14,3% above the revised March 2013 rate of 890.000. Home builder confidence in the housing market held steady at 47 in January 2013 after eight consecutive months of increases, lifting dwindling inventories U.S. home prices. About 1,3 Million homes or 3,2% of all U.S. homes were in any stage of the foreclosure process in October 2012, down from 1,4 Million the previous month, as the housing market showed signs of improvement. The Homeowner Affordability and Stability Plan’, a mortgage loan-modification program, pledged up to $75 Billion providing incentives to lenders to change terms of loans to make them more affordable to struggling homeowners, reducing interest rates to as low as 2% with payments reaching 31% of their income, and allowing four to five Million homeowners to refinance their mortgages into loans with cheaper payments through Fannie Mae and Freddie Mac, increasing the guarantee against losses on the mortgage investments of the two Government controlled mortgage giants to $200 Billion each, rising also the size of their portfolio limits from $850 Billion to $900 Billion. To fight the foreclosure another plan encourages homeowners who have not been rescued through a loan modification program paying them some cash to sell their houses for less than the balance of the mortgages, compelling lenders to accept that deal forgiving the difference between the market price of the property and what they are owed. The Obama Administration pumped $3 Billion into its Hardest Hit Fund/HUD intended to assist unemployed homeowners at risk of foreclosure not to lose their homes. Fannie Mae and Freddie Mac seized by the Treasury Department and put into a Government conservatorship run by the Federal Housing Agency reported substantial losses in 2009 and 2010, totaling Government assistance $148,2 Billion to keep them operating ensuring that mortgage credit remains available, owning taxpayers about 79,9% of the two companies which may need over the next three years some $215 Billion more to survive. Allowing the Government to exceed the current emergency limit of $400 Billion for the two mortgage giants, which own or guarantee almost 31 Million home loans worth about $5,5 Trillion facing mounting losses from mortgage defaults, the Obama administration pledged to provide to them until the end of 2012 unlimited financial assistance to stay afloat. However the final intention of the Government is to reduce its engagement in the mortgage market starting soon to wind down mortgage giants Fannie Mae and Freddie Mac, studying a single way to package home loans into securities as an interim step to develop a home mortgage guarantee system. According to reports some $2 Trillion of the $6 Trillion in U.S. mortgages and home-equity loans that were securitized during the height of the housing bubble from 2005 to 2007 are likely to go into default, causing the housing bust ultimately losses of $1,1 Trillion on those bonds to be absorbed by bondholders and partly by banks. U.S. regulators reached an $8,5 Billion settlement to resolve  claims of foreclosure abuses with 10 major lenders, including JP Morgan Chase, Bank of America, Citibank and Wells Fargo, allowing homeowners to benefit from mortgage relief. Separately Bank of America agreed to pay $11,6 Billion to Fannie Mae to settle claims over troubled mortgages, mostly loans issued by the bank’s Countrywide Financial subsidiary.

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BASEL III/G20/G8/G7/GCC/APEC/IMF/WORLD BANK: The Basel Committee on Banking Supervision advanced on Basel III, announcing higher global minimum capital standards to create a more secure financial system, agreeing on transitional arrangements for implementing gradually starting in 2013 and ending in 2019 new standards rising levels of minimum common equity/risk weighted assets/RWAs from actually 2% to 3,5% on January 1, 2013 to 4% on January 1, 2014 and to 4,5% on January 1, 2015 and of Tier 1 capital/RWAs from actually 4% to 4,5% on January 1, 2013 to 5,5% on January 1, 2014 and to 6% on January 1, 2015, remaining total capital/RWAs at 8% from January 1,2013 through 2015, requiring a counter-cyclical capital conservation buffer to be phased from January 1, 2016 to January 1, 2019 when it must reach 2,5%, rising minimum common equity/RWAs to 5,125%/2016, 5,75%/2017, 6,375%/2018 and 7%/2019, increasing Tier 1 capital/RWAs to 6,625%/ 2016, 7,125%/2017, 7,875%/2018 and 8,5%/2019, growing also total capital/RWAs to 8,625%/2016, 9,125%/2017, 9,875%/ 2018 and 10,5%/2019. The Financial Stability Board/FSB published for the G20 nations an update of the goup of global systemically important 28 banks, classifying Citigroup, Deutsche Bank, HSBC and JP Morgan Chase as the financial institutions with the highest risk level, needing 2,5% of additional common equity loss absorbency as a percentage to risk-weighted assets, inviting national authorities to begin to apply requirements to local banks. The Basel Committee eased new global bank liquidity rules giving banks four more years, until 2019, to build up cash buffers, widening the range of assets banks can put in the buffer to include shares and retail mortgage-backed securities (RMBS) as well as lower rated company bonds. During the global finance crisis former President Bush invited leaders of developed and developing countries to a G20-meeting, participating Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United States, also the European Union, IMF, World Bank and United Nations, approving to reinforce international cooperation to boost growth policies according to domestic conditions. Gulf Cooperation Council/GCC finance ministers proposed a joint response after a sharp decline in oil prices left their economies vulnerable threatening their financial sector and above all government and privately funded projects across the region as the United Arab Emirates/UAE property prices fell. The 21 APEC member economies, including the United States, Canada, Australia, Japan, China, Russia, Chile, Peru and Mexico, accounting for 49% of world trade and representing 55% of the global gross domestic product, agreed to increase efforts to stimulate recovery and economic growth. China with the world’s largest foreign exchange reserves exceeding $3,4 Trillion held $1,22 Trillion in U.S. debt in February 2013, holding Japan with the world’s second largest gold and foreign exchange reserves of $1,27 Trillion U.S.-Treasuries worth $1,119 Trillion. Japan acknowledged it could buy up to $10 Billion worth of Government bonds from China, its largest trading partner, and would be the first developed country to buy yuan-denominated bonds with foreign exchange reserves, agreeing Japan also to support the sale of China’s yuan-bonds by Japanese companies in Tokyo and foreign markets, announcing China and Japan, the world’s second and third largest economies, to encourage the use of their own currencies in bilateral trade, which up to now is conducted mostly in U.S. Dollar, reaching China a similar agreement with Brazil. China’s Government proposed to replace the present U.S. Dollar dominated currency system, expanding the role of the ‘Special Drawing Rights’ of the IMF  based on a basket of currencies -US$, Yen, €uro and Pound Sterling-creating a new reserve currency disconnected from individual nations, increasing Chinese efforts to promote the use of their local currency internationally, switching to the yuan for its foreign trade, offering other BRIC countries yuan loans, wishing to establish the yuan as reserve currency, widening the yuan’s daily trading band against the US Dollar from 0,5% to 1%. To be added to the IMF currency basket China has to make its currency fully convertible. G20 nations pledged $1,1 Trillion tripling available IMF funds immediately to $500 Billion and later to $750 Billion, creating the IMF additional $250 Billion in ’Special Drawing Rights’, providing $100 Billion to the World Bank and other multilateral development banks and increasing world trade financing available for cross-border trade by $250 Billion through export credit agencies in each country. G20 leaders announced that the ‘Financial Stability Forum/ FSF’ will be replaced by the new ‘Financial Stability Board/FSB’, including as members all the G20 countries, Spain and the European Commission, to collaborate with the IMF avoiding through early warnings future macroeconomic and financial risks, creating stricter capital requirements for banks revamping risk management and accounting systems, strengthening regulations of financial sector and control of systemically important financial institutions, including hedge funds and credit rating agencies, taking action against tax havens, implementing limits on bank pay and bonuses and call on accounting standard setters to work urgently on a common international approach to dealing with toxic assets on the balance sheet. World leaders agreed to expand the role of G20 as a global forum for economic cooperation taking a lead in global recovery and decided to fundamentally reform the banking system, tightening regulation on complex financial instruments and to limit bonus pay. G8 leaders condemned North Korea’s nuclear test and missile launches, watching outside world after North Korean dictator’s sudden death transition to his third son and heir apparent Kim Jong-un as new leader of the isolated nation. Tehran made it clear it had no intention to stop uranium enrichment, adopting the U.N. Security Council pushed by the U.S. drastic new Iran sanctions, persisting Iran in provocations activating the reactor at the Russian built Bushehr nuclear power plant operating under IAEA supervision and unveiling its first home made unmanned long-range bomber drone capable of launching missiles and torpedoes, set to gain also more influence in Iraq with the departure of U.S. combat forces. Iran threatened to disrupt the flow of Middle East oil to world markets, warning the U.S. it will not tolerate any interference with the passage of vessels, agreeing the EU to ban Iranian oil imports, escalating confrontation with Iran over its nuclear program, accepting Iran to resume nuclear talks with U.S. and five other world powers February 26, 2013, rejecting Iran’s Supreme Leader direct talks with U.S., preferring U.S. a diplomatic solution, maintaining a military option on the table. G20 agreed on the historic IMF reform, allowing to transfer 6,4% of voting power to dynamic emerging-market and developing countries by the fall of 2012 doubling the fund’s quotas standing currently at $328 Billion, keeping industrialized nations with 57,7% the majority while emerging economies obtain 42,3%, becoming China with a quota exceeding 6% behind the U.S. and Japan the fund’s third most powerful member, ahead of Germany (5,6%), France, Britain and Italy, giving also a bigger stake and more voting rights to Russia, India and Brazil to form part of the 10 largest shareholders, surrendering Europe 2 seats on the 24-member executive board, retaining the U.S. with a quota of more than 17% its voting power as important decisions require a super-majority of 85%. The IMF failed to agree on vote reforms, delaying agreement on quota formula until 2014. During his four nation tour of Asia and first visit to India President Obama announced trade deals worth almost $15 Billion between American and Indian companies, renewed in Indonesia his call for expanding ties with moderate Muslim world, visited Seoul to participate in the G20 summit and continued trip to Japan to attend APEC meeting, where he confirmed a new commitment to Asia as a strategic center of power. G20 leaders discussed the issue of imbalances, urging the IMF to work on guidelines to identify big persistent dangerous imbalances, promised to avoid ‘competitive devaluation’ of currencies and ‘uncoordinated economic actions’ and approved Basel III and IMF reform, and G20 Finance Ministers agreed on a list of five indicators to measure global economic imbalances and subject seven of the world’s largest economies to heightened scrutiny. President Obama signed a trade and co-operation agreement to strengthen ties with Brazil, visiting also Chile and El Salvador. G8 leaders agreed to update nuclear safety standards after Japanese nuclear power plant debacle, implement global minimum standards for internet, and offered economic aid programs of up to $40 Billion to Egypt and Tunisia to continue transformation into democracies supporting the ‘Arab spring’ in North Africa and the Middle East, coming $10 Billion in form of bilateral aid from G8 members, $20 Billion from international financial institutions and $10 Billion from Saudi Arabia, Qatar and Kuwait. French Finance Minister Lagarde was named as the first woman to head the IMF after its managing director Strauss-Kahn resigned being indicted by a grand jury of New York on criminal sexual-assault charges, finally dismissed by a State judge. The World Bank selected U.S. nominee Jim Yong Kim as new President. China Bank chief and Finance Minister pulled out of the anual IMF meeting in Tokyo, signaling a major escalating in the dispute over islands and a further deterioration in relations between China and Japan. On his fifth trip to Southeast Asia President Obama made a historic visit to Myanmar as part of a strategic move to shape new relationships deepening competition with China over influence in the region. The 2012 U.N. conference on climate change extended Kyoto Protocol until 2020, agreeing 37 industrialised nations to continue to cut their greenhouse gas emissions within the Kyoto II regulation, the sole legally binding climate plan for combating global warming, pulling out Russia, Japan and Canada, while the U.S. never ratified the pact. The international community condemned DPRK’s satellite launch, violating U.N. Security Council Resolution 1874 banning North Korea to launch ballistic missiles, confirming the country its 3rd. nuclear test, scrapping North Korea armistice that ended war with South Korea in retaliation for new U.N. sanctions backed by China, threatening to attack U.S. mainland, Hawaii and Guam, declaring Korean peninsula in ‘state of war’, warning North Korea it will restart nuclear reactor, saying the U.S. it remains committed to the security of its allies in the region, deploying its second guided-missile destroyer and moving a sea-based missile-tracking radar platform close to North Korea, blocking North Korea the entry of South Korean workers to a joint border industrial zone, withdrawing its own workers, urging North Korea embassy evacuations, moving two missiles with an estimated range of about 1.800 miles to its east coast, warning North Korea ahead of an announced missile test foreigners in the South to be ready to evacuate, deploying Japan Patriot missiles defense system in Tokyo, saying U.S. commander the U.S. is capable to intercept a ballistic missile launched by North Korea if it decides to strike, offering U.S. and South Korea to return to negotiations with North Korea to reduce tensions, agreeing China and U.S. to cooperate on North Korean crisis. 85-year-old Pope Benedict XVI announced he would retire after nearly 8 years on February 28, 2013, citing his health is deteriorating, considered as a decision out of humility and responsability, becoming the first Pontiff to abdicate in 600 years, becoming Pope Emeritus after retirement. 76-year-old Argentine Cardinal Jorge Mario Bergoglio was elected 266th Pope, the first South American Pope, and will be known as Pope Francis (Francisco). After the death of Venezuela’s charismatic President Chavez prevails uncertainty in the deeply divided oil-rich, but little developed country, setting April 14 for Presidential election. The U.N. approved global arms treaty, the first international treaty regulating global arms trade.

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‘ARAB SPRING’: Unrest forced Egypt’s President Mubarak to step down, handing over power to the ‘Supreme Council of the Armed Forces’, becoming Muslim Brotherhood’s Mohammed Morsi the first democratically elected President in Egyptian history and the first elected Islamist Head of State in the Arab World, approving Egypt a new Islam-backed constitution, deepening the influence of Islamic law, however losing Morsi support among the population, calling opposition for a unity Government, granting Egypt court appeal for ex-President Mubarak ordering retrial. Protests spread across the Middle East, assuming elected Vice President Hadi as new President of Yemen, erupting new protests in Tunesia after leftist opposition leader Belaid was assassinated, resigning PM after failing to form a Government of technocrats, naming President Marzouki Interior Minister Larayedh as PM, who formed a new Islamist-led Government, banning Sunni ruling family of Bahrain all protests, increasing U.S. financial sanctions against Syria followed by the EU enforcing in addition an arms embargo and banning imports of Syrian oil, confirming the Arab League suspension of Syria’s membership, topping Syrian refugees in Turkey 100.000, becoming France the first Western country to recognize Syrian rebel coalition as legitimate leader of Syria, granting Turkey, followed by Britain and six Gulf nations recognition of the united Syrian opposition, expressing more than 100 countries and organizations their support for the anti-Assad movement, endorsing a newly formed insurgent coalition which selected as new leader Ghassan Hitto to form a interim Government, sending the U.S. and Germany Patriot missiles and troops to Syrian border in Turkey, reaching Syrian estimated death toll 70.000, taking opposition Syria’s Arab League summit seat, suspecting and evaluating White House a poison gas/Sarin exposure in Syria, threatening Syria with retaliation after Israel’s airstrikes on Damascus targeting arms for Hezbollah, blaming Turkey Syria for deadly car bombs that killed 46 people in a Turkish border town, advancing Lebanese fighters from the militant goup Hezbollah backed by members of Syrian army into key rebel town Quasayr near the Lebanon border, threatening Israel more attacks on Syria to control militia, becoming the war a regional conflict. Protesters in Jordan denounced King Abdullah II, demanding swift reforms or an end of the monarchy. Saudi king Abdullah bin Abdulaziz Al Saud announced $36 Billion worth of social benefits increasing spending further including $67 Billion on housing to maintain order in the oil-rich kingdom, where demonstrations are strictly prohibited by law, demanding influential Saudi intellectuals far-reaching political and social reforms moving toward a constitutional monarchy, challenging Saudi clerics reforms proposed by the king, allowing the monarch for the first time women to vote. Popular uprising in Libya turned into an armed conflict overthrowing Qaddafi’s regime taking over power a National Transitional Council/NTC organized by the opposition, proclaiming after Qaddafi’s death formally the country’s liberation, voting Libyans in first free elections in decades claiming Liberal Party lead. Libyan protesters confronted Benghazi militias apparently involved in the violent U.S.consulate attack during which the U.S. ambassador and three more Americans were killed. Libyan Parliament approved new cabinet of 29 Ministers of Prime Minister Ali Seidan, granting Oman asylum to Qaddafi family. President Obama announced to support the ‘Arab Spring’, helping democracy movements in the Middle East and North Africa, promising $2 Billion in loan guarantees and debt forgiveness for Egypt and measures to stabilize Tunisia’s economy, signaling he wants to move forward with peace negotiations between Israel and Palestinians mentioning two sovereign States with secure borders in a possible deal based on 1967 borders rejected by Israel, warning on Palestinian bid for full UN membership, submitting Palestinian Authority formally application for Palestinian statehood to Ki-moon, the U.N. General Secretary, changing U.N. Assembly Palestine’s ‘entitity’ status to ‘non-member state’, recognising implicitly its sovereignty.

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EUROPEAN DEBT CRISIS: ECB – exchange reference rates 05/23/13  – 1,-€uro/€ = US Dollar/USD 1,2888, Pound sterling/GBP 0,85515, Swiss Franc/CHF 1,2486, Japanese Yen/JPY 131,07 and Chinese Yuan Renminbi/CNY 7,9055. The IMF offered a new more flexible Precautionary and Liquidity Line/PLL as insurance for nations, giving countries with relatively good economic policies access to credit for six months, boosting its own bailout fund of actually $380 Billion to be able to address global financing needs over the next two years, totaling new commitments from 37 nations $456 Billion in additional emergency lending capacity, refusing the U.S. and Canada to take part. As of August 2012 the IMF had program arrangements with 10 countries in Europe totaling about €124,06 Billion. Moving EU closer to a fiscal union the new German-led EU fiscal pact to fix the root causes of €uro-zone’s debt crisis, includes automatic sanctions for countries with budget deficits above 3% of GDP, reducing new debt to 0,5% of GDP and committing each nation to adopt in its constitution a ‘debt brake’ preventing it from running persistently budget deficits. With the exception of Britain and the Czech Republic, 25 of the 27 EU member States signed the new European fiscal compact with balanced budget rules in national legislation. EU lawmakers backed new powers for the EU Commission to check Euro-zone countries’ draft budgets to verify if they are in line with EU rules, asking for changes if they are not, to prevent another sovereign debt crisis. Croatia voted to become the 28th member of the European bloc. EU Commission chief Barroso signalled that EU’s focus on austerity has hit the limits of public acceptance, joining IMF’s concern over the impact of public spending cuts, mentioning Governments could be given more leeway if they were struggling to get their budget deficits within the required ceiling of 3% of GDP. European leaders flexibilized access to €uro-zone rescue funds, signaling a step towards a banking union, enabling €uro-zone rescue funds to directly recapitalize banks without the money going via Governments and adding to national debt levels once a single banking supervisory mechanism overseen by the ECB has been set up, breaking progressively the vicious link between sovereigns and banks, waiving the so-called preferred status for the bailout fund on the €100 Billion rescue of Spanish banks over private claims, obtaining Italy a commitment that the rescue fund will, if called by Rome, purchase limited amounts of Government debt on open markets, provided the country sticks to its current reform program, approving also a growth package worth €120 Billion, including redirecting €55 Billion to €80 Billion of EU funds for job creation, promoting a €10 Billion capital increase of EIB to provide additional €60 Billion in loans and creating €5 Billion in project bonds for infrastructure. Finland has insisted on collateral from both Greece and Spain in exchange for rescue loans and considers to block the decision which allows the rescue funds to purchase Government bonds in the open market, saying the approach isn’t efficient, fearing making access to rescue funds more and more easy will reduce efforts of crisis Nations to attend necessary reforms and increasing bailouts may produce soon a shortfall between demand and available resources. EU leaders agreed on historic budget deal, cutting the ‘payment ceiling’ for the next seven-year budget from €942,8 Billion to €908,4 Billion, meeting British PM austerity demand asking for a limit of €900 Billion, and reducing the higher ‘commitment ceiling’ from €993,6 Billion for the last budget from 2007-2013 to €960 Billion for the budget 2014-2020. To enter into force the budget still needs the approval of the European Parliament, rejecting EU lawmakers the deal offering constructive EU budget talks. Euro leaders reconciled a general time table delaying a package of reforms to further tackle debt crisis until June 2013, limiting German Chancellor Merkel risk-sharing with a ‘substantial shock absorber’ fund and a common unemployment insurance to help €uro-zone States in trouble, talking about support linked to improvements of competitiveness and growth, suggesting a solidarity mechanism with a very limited budget of Euro 10 or 15 or 20 Billion. Dutch Finance Minister Jeroen Dysselbloem was elected to replace resigning Luxembourg Premier Jean-Claude Juncker as €uro-Group chief. Finance Ministers of the 27 EU-States approved the introduction of the new financial transaction tax in the 11 nations which are backing it, among them Austria, France, Germany, Italy, Portugal and Spain, as efforts failed to implement the tax EU-wide, blocked by Britain fearing it would drive financial businesses out of London and opposed by Sweden, planning EU 11-nation financial transaction tax from 2014, suggesting a rate of 0,1% for trading stocks and bonds and of 0,01% for derivatives. The EU agreed to initiate a pilot program on European project bonds 2012/13, making a cooperation between private stake holders and the European Investment Bank/EIB , EU and the member States on infrastructure projects easier, setting the EU aside €230 Million in guarantees to attract a total of €4,6 Billion of investment. British PM Cameron promised citizens a vote before the end of 2017 whether to exit the EU, if Conservatives win 2015 elections, calling for a full EU treaty renegotiation, ruling out opposition Labour party support for in-out referendum. President Obama warned Cameron, who ordered rebellious lawmakers to back his plan for a law guaranteeing  a vote on Britain’s EU membership, of risks if Britain exits EU, saying he should fix the country’s relationship with the bloc before taking any steps to leave. E.U. and the U.S. will begin to negotiate a trade agreement, hoping it can be finalized in about two years, but there are many sensitive and complex issues, such as agricultural products, expecting U.S. Senators to open up Europe to American farm products. EU cleared for talks with tax havens to fight against tax evasion. Standard& Poor’s and Moody’s downgraded France from AAA to AA+, losing also Austria its AAA rating, cutting further ratings of Italy, Spain, Portugal, Cyprus, Malta, Slovakia and Slovenia, keeping Germany, Finland, Netherlands and Luxembourg their AAA rating, downgrading Fitch and Moody’s Euro-nations and European financial institutions, lowering Moody’s outlook for Germany, six German States and 17 German State-backed regional banks, Luxembourg and Netherlands from stable to negative, cutting triple-A rating of €uro rescue fund by one notch to ‘AA1′, downgrading Moody’s Slovenia further into junk territory. According to European Banking Authority/EBA stress test systemically relevant European banks need additional capital of €115 Billion and EU lenders will have to comply gradually with the Basel III requirements, allowing Governments to introduce stricter capitalization rules to improve protection against a new financial crisis. EBA will determine guidelines for the planned ECB asset quality review and the subsequent stress test once a new law setting up the ECB as banking supervisor is adopted, delaying the bloc’s next round of stress test until 2014. The European Commission announced plans for a centralized €uro-zone ‘banking union’, taking on the responsibility for restructuring and winding down failing banks and guarantee depositors’ savings across the 17 member States. European leaders approved a joint regulation of banks, agreeing to hand the ECB from July 2014 direct oversight of €uro-zone’s at least 150 largest banks, all major cross-border lenders and State aided institutions, with assets of more than €30 Billion or representing more than a fifth of a State’s national output, enabling also ECB to intervene with smaller lenders and borrowers at the first sign of troubles. The next step will be a unified bank resolution scheme to close or salvage struggling banks as well as pay for the cost involved, which according to the German Government and Central Bank make Lisbon treaty changes necessary, followed than by a coherent framework across Europe for deposit protection. The new bank-supervision arm of the ECB may be headed by French Danièle Nouy, actually a senior official of Bank of France, would be allowed to take over supervision of a lender at the request of the ESM, making possible a direct emergency recapitalisation even before ECB’s supervision regime is fully established and operational, but requires unanimous approval. The EU is redrafting conditions of the planned bank rescue fund which would force struggling countries to share risks shouldering a portion of future bailouts, either investing in failing banks alongside the ESM or guaranteeing the ESM against any losses, considering to introduce caps on direct aid from the bailout fund, recommending Germany to set a global limit of less than €80 Billion. U.S.Treasury declined to label China as ‘currency manipulator’, while the Fed’s QE1/2/3/4 measures are also criticized for aiming to weaken the Dollar, rising global currency tension, saying Japan’s new PM Abe the country must defend itself against attempts of other Governments to devalue their currencies by ensuring the yen weaken as well, recommending G7 and G20 faster moves toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, avoiding currency manipulation, calling France for a weaker €uro to help French exports, considering the €uro trading around 1,35 as too strong, hurting also peripheral €uro-zone nations such as Spain and Italy. Ireland became after Greece the second €uro-nation to apply formally for EU/ ECB/ IMF help and the first to use the EFSF, obtaining an emergency aid package of €85 Billion to support state finances/€50 Billion and stabilize banks/ €35 Billion. Ireland cut its budget deficit 2011 to 13,4% of GDP, falling to 7,6% in 2012, forecasting EU for the country a growth of 1,1% in 2013 and of 2,2% in 2014, extending loan maturities by 7 years. Spain with a record-unemployment rate exceeding 27% and significant growth and deficit risks, announced plans to sell a 30% stake in the national lottery, privatize partially airports in Madrid and Barcelona and for a partial State-takeover to recapitalize its troubled savings banks, preparing plans to establish a ‘bad bank’ to receive toxic property assets from struggling banks. Spain asked for €uro-zone help to bailout its ailing banks, agreeing €uro-zone Finance Ministers to provide up to €100 Billion, authorizing the EFSF to buy Spanish debt in the primary or secondary market with unused funds of the banking aid program. The Spanish Government requested finally only €37 Billion for its struggling banks, adding €2,5 Billion for its planned ‘bad bank’ , approving EU Commission payment of €39,5 Billion. Spain wants to avoid a formal sovereign aid program, seeking to break the link between sovereigns and banks, and will receive EFSF/ESM money for the recapitalization of banks through its Fund for Orderly Bank Restructuring/ FROB, confirming Spanish Government to impose heavy losses on investors of nationalized banks. Spanish budget deficit rose to 10,6% of GDP in 2012, targeting Government a reduction to 6,3% in 2013, needing two extra years until 2016 to meet EU’s public deficit limit of 3%, predicting EU Commission that Spain remains in recession in 2013 contracting GDP by up to 1,5%. After approving austerity measures worth €16,5 Billion, a tough austerity budget to produce savings of €27 Billion and further spending cuts of  €10 Billion, reforming education- and healthcare systems, Spanish Government announced a fourth austerity package worth €65 Billion over two and a half years, including sales tax increase from 18% to 21%, rising drastic savings measures until 2014 further to €102 Billion, unveiling budget proposal 2013 with a new severe round of spending cuts of €40 Billion. Spanish public debt increased to 84,2% in 2012 from 69,3% of GDP in 2011. Spain’s ruling party leaders, including PM Rajoy, are facing corruption allegations. EU/ IMF/ECB approved a bailout package worth €78 Billion for Portugal, agreeing the nation on a wide-ranging privatization program of €5,3 Billion and tax increases. Portugal’s budget deficit reached 6,4% of GDP in 2012, growing its debt-to-GDP ratio to 123,6%, primarily because its economy is shrinking, increasing jobless rate to 15%, signaling the €uro-group more flexibility in the terms of its bailout memorandum, extending fiscal adjustment period and the application of the EU deficit limit of 3% of GDP one year until 2015, lengthening loan maturities by 7 years. Portugal returned to capital markets swapping successfully short for longer-dated debt. Italy with a public debt of more than €1,9 Trillion/127% of GDP in 2012, the world third largest after the U.S. and Japan and €uro-zone’s third largest economy, facing 2013 another year of recession, forecasting EU Commission GDP will shrink by at least 1%, approved emergency austerity measures worth some €100 Billion, narrowing budget deficit from 3,8% of GDP in 2011 to 3% in 2012. The Italian Government approved an emergency budget containing tax rises and spending cuts totaling €30 Billion and €80 Billion in growth measures, including the sale of Government property, issuing preferential bonds for infrastructure projects, reforming labor market, confirming new cuts to save €26 Billion over three years, delaying  new sales tax increase until after the first half of 2013. Centre-left Democratic party leader Bersani won a narrow Parliamentary election victory, controlling the Lower House, while centre-right Democratic alliance of Berlusconi got enough votes to deny its main rival the necessary support to form a stable Government, failing Bersani to form Government, resigning as centre-left party leader. 87-year-old President Napolitano, re-elected by Italian lawmakers for a second term, nominated centre-left party/PD deputy leader moderate Enrico Letta as Prime Minister, who formed a Government uniting left and right ending political stalemate, making Angelino Alfano, secretary of the centre-right party/PDL and one of Berlusconi’s closest allies, Deputy Prime Minister and Interior Minister, while rising 5-Star movement of comic Grillo will become the largest opposition party, getting Italy’s new three-party coalition sworn in. Cyprus became the 5th EU member to request bailout mainly for its struggling banks, which would mainly benefit Russians who are said to have deposited about 20,25 Billion in Cyprus banks, while the island is accused to provide opportunities for money laundering. Conservative candidate Anastasiades won Cyprus runoff vote, confirming the IMF a three-year loan of €1 Billion and providing €uro-zone partners €9 Billion, including the unprecedented bailout deal a contribution to the cost of rescue of €5,8 Billion from depositors in Cyprus banks, rejected by the country’s Parliament. EU officials reached a last-minute agreement committing Cyprus to overhaul its financial institutions and to merge its two largest banks, the Bank of Cyprus and the insolvent Laika Bank, using deposits over €100.000 in both banks, which are not guaranteed by the State under EU law to resolve Laiki’s debts and recapitalize the Bank of Cyprus through a deposit/equity conversion, meaning a one-time contribution of 37,5% will be charged on deposits over €100.000 and senior bondholders in Laiki Bank would be wiped out and those in Bank of Cyprus would have to make a contribution to collect the total of €5,8 Billion. Losses could grow another 22,5%, up to 60%, if experts determine that Bank of Cyprus needs further capitalisation. After cost of the country’s bailout increases to €23 Billion, Cyprus said it will cover the difference. The latest EU-China summit ended with the promise that China will continue to support Europe, its largest trading partner, but criticized the bloc for keeping arms embargo and its reluctance to recognize China’s full market economy status. Relying debt crisis nation’s financial institutions increasingly on the exceptional support of the ECB, including probably weaker banks exposed to be winded down, its President Mario Draghi eased collateral requirements further providing even unlimited three-years funds, taking Euro zone lenders in three-year loans at ECB’s key rate of 1% € 489,19 Billion in December 2011 and another €529,5 Billion in February 2012, meaning the long-term refinancing operation/ LTRO totaling more than €1 Trillion also a rescue package for debt crisis nations, guarantying ECB unlimited liquidity provisions to banks as long as needed, at least until July 9, 2013. Seen as a small sign that debt crisis is easing, nearly 300 banks will repay earlier as expected about €137 Billion of cheap three-year funds. The ECB spend €208,7 Billion in its Securities Markets Program/SMP, purchasing on the secondary market sovereign debt from Greece/€30,8 Billion, Ireland/€13,6 Billion, Portugal/€21,6 Billion, Italy/€99 Billion and Spain/43,7 Billion, but remained reluctant to be lender of last resort to Governments. After rising borrowing costs for Spain and Italy to new record highs, ECB chief Draghi announced that the central bank is ready to renew the Government-bond-purchase program, conditioned that a country first asks to use the European bailout fund agreeing to certain conditions, setting no limits on the amounts of bonds to be bought with remaining maturities of one to three years on the secondary market until interest rates fall to a reasonable level, seeking the involvement of IMF to help set conditions for individual countries, treating the ECB itself not as a preferred creditor as to not drive other buyers away. Addressing inflation fears the ECB plans for each Euro it spends on bond-buying to withdraw an equivalent from the financial system, disclosing each week the amount of bonds purchased, the average maturity and the countries that issued them. China’s Dagong Global Credit Rating accused his three dominating Western rivals to be politicized and becoming too close to the clients they were assessing, downgrading the U.S.-credit rating adding a negative outlook because of doubts about the American intention to repay debts. The EU wants more control of credit rating agencies through the European Securities and Market Authority/ ESMA, approving the European Parliament stricter rules making rating companies more accountable for mistakes, seen as another important step towards financial stability, demanding more transparency when rating sovereign States, respect timing regulation on sovereign ratings and justify the timing of publication of unsolicited ratings, limiting owning stakes, blocking any investor from owning stakes of more than 5% in more than one rating company, giving investors the right to sue rating companies. EU already cleared the way for credit rating competition agreeing to require companies to rotate agencies and in turn encourage ratings competitors to enter the market. EU Finance Ministers agreed on a temporary mechanism to stabilize the Euro establishing an emergency safety net of €500 Billion, including the European Financial Stability Facility/EFSF with €440 Billion in credits/ guarantees of up to three years from €uro-nations to extend financial assistance to troubled €uro-nations and a balance of payment facility of the EU Commission, the European Financial Stability Mechanism/ EFSM increased to €60 Billion open to all EU countries, with complementary loans from the IMF reaching €250 Billion, rising the total to €750 Billion, creating a special purpose vehicle based in Luxembourg to make the €440 Billion available to the 17 €uro-zone members. The €uro-zone bailout funds, the  EFSF and the future permanent ESM have been made more flexible, allowing to give States ‘precautionary credit lines’ before they were shut out of the markets, lend Governments money to recapitalize struggling banks and to buy up bonds of highly indebted nations in the secondary market in ‘exceptional’ circumstances and subject to ECB approval. Financial and political problems in Greece, Italy and Spain made leverage efforts of downgraded EFSF like insuring new bonds issued by distressed €uro-zone Governments offering investors first-loss guarantees from 20% to 30% more difficult, deciding €uro-zone leaders that the EFSF and the future permanent ESM will be managed by the ECB. EU leaders approved an amendment to the EU-treaties when expiring the temporary €uro-zone’s rescue facility/EFSF, backing constitutionally the creation of a permanent €uro-safety-net, called European Stability Mechanism/ESM for member countries in crisis, replacing the EFSF/€440 Billion and the EFSM/60 Billion, and including the IMF participation of €250 Billion the total available for troubled nations would reach €750 Billion. €uro-nations will finance the ESM paying €80 Billion in cash to give the fund with a capital stock more credibility, pledging also €620 Billion in guarantees or callable capital for a total of €700 Billion to ensure a lending capacity of €500 Billion. In case that a country would appear to be insolvent it has to negotiate a comprehensive restructuring plan with its private sector creditors, including a standstill, extension of the maturity, interest rate cut and/or ‘haircut’, before it can obtain additional assistance through the ESM, urging Germany that EU nations need an ‘Insolvency Statute’. Accordingly debt issued from the moment the ESM enters into force will include collective action clauses/CAC’s forcing bondholders to accept restructuring measures if necessary. €uro-zone leaders signed off the €500 Billion permanent rescue fund ESM, allowing a private sector involvement/PSI according to IMF rules, deciding that only countries which previously ratified the new fiscal pact may request credits. Following demands to increase Euro-zone debt ‘firewall’ to €1 Trillion, €uro-zone Finance Ministers agreed to boost the bloc’s emergency funding to roughly €800 Billion, making unused €240 Billion of EFSF money as a kind of emergency reserve available for another year until mid-2013. Euro-nations will allow the ESM to leverage its capital with the same techniques as its predecessor the EFSF, whose leverage efforts failed as investors remained cautious, hoping to boost ESM lending capacity eventually to more than €2 Trillion to be able to bailout if necessary Spain and Italy, opposing German politicians to give the ESM a banking license allowing it to obtain ECB funding. Germany’s highest court ruled that a Parliamentary panel of nine lawmakers to decide on €uro-zone aid was largely unconstitutional and that Germany must convene all 620 members of its Parliament to approve most emergency measures to be taken by the €uro-zone’s rescue fund. German Parliament ratified ESM and the fiscal compact, backing the Constitutional Court the treaty to establish the ESM, however attaching as a key condition a

requirement for parliamentary approval of any increase in the agreed-upon German contribution of €190 Billion, considering judges the framework of the constitution to be largely exhausted when it comes to further transfers of competences to Brussels, launching Euro-zone the ESM officially October 8, 2012. €uro-zone Finance Ministers decided that bailout loans to Greece, Ireland and Portugal can be improved, cutting interest rates to about 3,5%/3,9% and extending repayment periods to a minimum of 15 years and even up to 30 years with a grace period of 10 years. Greece received a first financial aid package of €110 Billion, coming €80 Billion from Euro-zone members and €30 Billion from the IMF, approving €uro-zone Finance Ministers a second bailout of €130 Billion to cover financial needs until 2014, including a private sector involvement/PSI designed to cut current Greek debt from €350 Billion by €107 Billion reducing it from 170,6% in 2011 to about 120% of GDP by 2020. €uro-zone Finance Ministers released €94,5 Billion in new Greek bailout funds after authorizing already €30 Billion for the payment of sweeteners to support the private sector bond-swap and €5,5 Billion to pay off accrued interest to investors. According to the Institute of International Finance/IIF private creditors took a debt cut of 53,5% facing an overall loss of around 75% if they bought old bonds at their face value, exchanging their holdings of Greek bonds against new ones with a maturities of 11 and 30 years under English law with a coupon of 2% until 2015, increasing to 3% until 2020, of 3,65% in 2021 and then of 4,3% from 2022 through 2042, receiving holders of new bonds GDP-linked securities for annual payments of up to 1% beginning 2015 according to Greek economic growth in excess of specified targets. Private creditors held about €206 Billion in Greek debt of which €177,5 Billion were under Greek law, tendering bondholders €152 Billion of Greek-law bonds or 85,8%, activating Greece collective action clauses/CACs on these bonds to force all holders to sign up for the swap, while out of a total of €28,5 Billion in Greek bonds issued under foreign law or by State-owned companies guaranteed by Greece, €20,3 Billion were also tendered, informing Athens that it reached a participation rate of 96,9% worth about €199 Billion, representing bond holdouts not agreeing to the debt exchange around 3% of the privately held debt. The International Swaps and Derivatives Association/ ISDA declared Greek debt swap as ‘credit event’, triggering bond insurance/CDS payments of $3,362 Billion setting value of 21,5% of par for Greek bonds meaning CDS will have to pay as loss compensation $2,64 Billion or $78,5 cents on the Euro to settle contracts. Protecting its Greek bond portfolio worth €55 Billion bought in the secondary market at discounted prices paying about €43 Billion, the ECB had exchanged bonds at their face value for new ones, planning to distribute profit made through the technical operation to the 17 Euro-zone central banks to lend it on to the EFSF, allowing €uro-zone Governments to reduce bailout interests for Greece from actually 3,5% to 2%. National European central banks holding  €12 Billion more of Greek bonds bought at a discount agreed to give up profits and to pass those gains back to the Greek Government. The successful private sector involvement/PSI bond swap exchanged every 100 Euros of old bonds with 31,5 Euros of new Greek bonds and 15 Euros of top-rated EFSF bonds with a two-year maturity, a near cash-equivalent for which the the EFSF committed up to €30 Billion provided as sweeteners out of the second Greek bailout package, which includes €23 to recapitalize Greek banks. The IMF approved a loan worth €28 Billion to Greece over a four year period as part of the second international bailout package, withdrawing still available €10 Billion of the first bailout package, covering the IMF loan part of Greece’s financial needs of €21 Billion until the first quarter of 2016. There will be a permanent European team in Athens monitoring Greece’s implementation of the ‘Troika’s’ austerity measures and bailout money for Athens will prioritize Greek foreign debt repayment. Greece’s GDP shrank by 6,8% in 2012, predicting EU a contraction of 4,2% for 2013, hitting jobless rate 27,2% in January 2013. Greek Parliament approved a five-year austerity package totaling €78 Billion including an ambitious privatization program which may reach €19 Billion until 2015, and passed additional budget savings of €3,3 Billion for 2012 to unlock the second bailout package. Elected Prime Minister, New Democracy leader Samaras asked for a 2-year-extension of the fiscal adjustment period and an application of the EU deficit limit of 3% of GDP only from 2016 onwards. Greek Parliament passed a new austerity package of €13,5 Billion and approved the austerity budget 2013. Greece’s international lenders discussed Greek budget deficit and financial requirements, including how to finance extra funding needs over €32,6 Billion, about €13,5 Billion until 2014, as a result of granting Athens 2 years more to reduce budget deficit, reaching an agreement which will allow to release next aid tranche of €34,3 Billion, amount which would increase to around €49,1 Billion, considering installments due until march 2013. The agreement is expected to reduce Greek debt by €40 Billion to 124% of GDP by 2020, coming close to IMF’s  ambition of a debt-to-GDP ratio of 120% until 2020, putting together a package of steps including a debt buyback  from private investors at about 35 cents in the Euro using EFSF/ESM funding of around €10 Billion, a reduction of lending rates especially of the first Greek aid package, returning profits of €11 Billion and also future accounting profits to Greece on ECB’s holding of Greek bonds bought at a deep discount in the secondary market, an extension to repayment terms by 15 years of the old and new bilateral and EFSF loans and deferring EFSF loans’ interest for 10 years. There remains still a financial gap for 2015 and 2016 and according to the IMF the Euro-group made a binding promise to reduce Greek public debt to 110% by 2022 re-establishing Greek debt sustainability. Greek public debt reached 156,9% of GDP at the end of 2012, jumping the budget defit to 10% of GDP. Greece offered private investors through a modified Dutch auction a range from a minimum of 30,2% to 38,1% and a maximum of 32,2% to 40,1% of the principal amount, meeting Greece its debt buyback target of €30 Billion, reaching after extending deadline until December 11, 2012 €31,9 Billion, paying on average at a third (33,8 cent) of their face value. After the successful debt buyback €uro-zone Finance Ministers released disbursement of €34,3 Billion, receiving Greece another €14,8 Billion in the first quarter of 2013. Standard & Poor’s raised credit rating of Greece’s sovereign debt six levels, praising strong determination of €uro-zone nations to keep the country as a member State. China revealed the creation of a €3,6 Billion fund to help Greek shipping companies buy Chinese made vessels, planning the Chinese state owned container terminal operator COSCO, which has a 35-year concession to operate Greece’s main port Piraeus a deal worth €3,4 Billion, to increase its investment allowing by 2015 to move 3,7 Million containers a year. Europe is challenged to grow from the Economic and Monetary Union/ EMU into a political and fiscal union deepening integration and coordination on financial, economic and social policies to increase competitiveness, harmonizing taxes, wage bargaining, vacations and the retirement age, curbing effectively debts, approving the European Parliament six directives reforming the Growth and Stability Pact tightening the control of national budgets (€uro-zone limit 3% of GDP) and of national debts (€uro-zone limit 60% of GDP) to detect problems early to act in time, introducing tougher budgetary rules to ensure deficit cutting measures. The new economic policy package, including a commitment to insert until 2012 a debt limit into the constitution, is named the €uro Plus Pact or the Six Pack of legislative measures, running on an intergovernmental basis for €uro-zone members and was joined by all EU nations with the exception of Britain, Sweden, Hungary and the Czech Republic. Germany’s constitution is already limiting the country’s budget deficit to 0,35% of GDP or to about €10 Billion until 2016, allowing States no debts at all as from 2020. French public debt rose to 90,2% of GDP in 2012, reaching French budget deficit 4,8%, surpassing target of 4,5%, increasing jobless rate to 10,6% at the end of 2012, announcing Paris new budget savings of €11 Billion and €18,6 Billion until 2013 and of €65 Billion until 2016, unveiling Hollande’s budget 2013 ‘unprecedented effort’ to fund €36,9 Billion in savings and includes 75% supertax on the rich, which has been declared unconstitutional by the French Constitutional Council, freezing total Government spending, forecasting EU for 2013 a deficit of still 3,7%, getting probably also France like Spain two years more to meet EU deficit target of 3%. French economy may weaken further due to its dependency on the south European market, as Italy, Portugal and Spain will remain in recession during 2013. French President Hollande making changes to his failed proposal for a 75% top tax on the rich, calls now to shift burden of the payment from individuals to businesses that pay salaries over €1 Million. Germany is resisting the idea of a shared liability, issuing joint European Government bonds/€uro-bonds, short-term €uro-bills or Stability Bonds, socializing risk and responsibility, suggested to cover deficits of €uro-members up to a predetermined percentage of GDP, as long as member States pursue their own fiscal policy and a deeper fiscal union has not been reached. The German Council of economic experts proposed a debt redemption fund, saying such a fund would be in conformity with the German Constitution, to place €uro-zone member States’ debts in excess of 60% of GDP, forming a new mutualised bond market worth some €2,3 Trillion, arranging redemptions within 25 years, pledging each country a specific tax to provide the cash, while crisis nations Greece, Portugal and Ireland, receiving actually bailout aid would not be able to participate. Germany banned uncovered short-selling of €uro-zone Government bonds, credit default swaps based on those bonds and of shares from Germany’s leading financial institutions, extending legal prohibition to all uncovered sales, saying that speculations in financial markets are fuelling the €uro-zone’s debt crisis, announcing the EU new financial market regulations tightening rules on naked short-selling and dealing with naked CDS’s, largely banning this sort of operations on Government bonds of all 27 EU nations as from November 2012. German authorities agreed to regulate banking, imposing as a contribution to the costs of financial stability a levy of 15% of the annual net profit on financial institutions to finance a bank restructuring fund overseen by the Federal Authority for Financial Market Stabilization/ FMSA, which is also controlling SoFFIN and Germany’s ‘bad banks’. Taking effect beginning 2011 the fund, which is expected to raise about €1 Billion a year, will handle troubled banks to avoid at an early stage that a bank becomes insolvent, reducing the reliance on State bailouts. Troubled €uro-countries known as PIIGS, including Portugal, Greece, Spain, Italy and Ireland will face again in 2013 a difficult year. According to the EU Commission twelve EU nations face economic risks and the Commission will propose corrections: Belgium, France, Finland and Britain – exporters suffering considerable market share losses, high public debt; Italy – high public debt and slow growth; Spain – excessive jobless rate; Denmark  - exporters with market share losses, high private debts; Hungary, Cyprus and Bulgaria – high public debt, elevated current account deficit; Slovenia – high production costs; Sweden – record high real estate prices.  €uro- zone’s public debt rose to 90,6%, while EU’s public debt reached 85,3% of GDP in 2012.

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GOLD Price USD1.390,81  –   05/23/13 -  Commodity favored as safe-heaven during times of uncertainty. The U.S. currency is losing its global reserve status driven by power of emerging market economies, calling China for a multi-currency system to replace the Dollar. Expansionary monetary policies, increasing gold demand from China and continuing central banks buying the precious metal to reduce their dependence on the Dollar, have pushed gold prices higher. While Goldman Sachs sees an ending of the 11-year rally of the yellow metal and a gold price below $1.400, other analysts expect a still rising gold price due to a strong demand in the short and medium term.

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Estimated global gold production amounted to 2.692 tonnes in 2012, up 1,2% from 2011 with around 2660 tonnes, increasing output in China 11,66% to 403,1 tonnes, remaining the world’s biggest gold producer for six years since 2007, followed by Australia/250 tonnes, the United States/230 tonnes, Russia/205 tonnes and South Africa/170 tonnes. The largest proven and probable ore reserves are in South Africa, the United States (Nevada, Alaska, California, Colorado, New Mexico, Utah), Russia, Canada, Brazil, Ghana and Zimbabwe; total reserves are estimated at 60.000 tons. Central banks and supranational institutions hold around 32.000 tonnes of gold, continuing central banks to be net buyers of gold, soaring their purchases from 439,7 tonnes in 2011 to 534,6 tonnes in 2012, while more than 105.000 tonnes are in private hands, around 22.000 tonnes in coin and bullion and exceeding 83.000 tonnes in jewellery. The 10 largest official gold holders are:  United States/ 8.133,5 tonnes, Germany/3.396,3 tonnes, IMF/2.814,1 tonnes, Italy/2.451,9 tonnes, France/2.435,4 tonnes, China/1.054,1 tonnes, Switzerland/1.040,1 tonnes, Russia 873,6 tonnes, Japan 765,2 tonnes, Netherlands/612,5 tonnes. China with the world’s largest foreign exchange reserves of $3,4 Trillion at the end of 2012 is seen as a very substantial player in the global gold market, reaching its annual demand to 776,1 tonnes in 2012. But global jewellery demand 2012 fell 3% to 1.908,1 tonnes, with the biggest absolute decline noted in India, the world largest gold consumer. China, the world’s second largest gold-buyer behind India saw in 2012 a 1% growth in jewellery demand to 510,6 tonnes. The world gold demand 2012 declined for the first time in three years, reaching about 4.405 tonnes, and was flat in China and fell 12% in India. Gold trade is seen as a chief driver of economic diversification in the Gulf region and particularly in Dubai, reexporting into the vigorous Arab markets. Global annual gold investment demand 2012 dropped 10% to 1.534,6 tonnes, led by a 17% dip in bar and coin demand, with bar investment falling by a fifth to 941,1 tonnes. China’s demand for gold as an investment increased 2% and stood at a very healthy level of 265,5 tonnes in 2012. Wordlwide investment via gold-backed exchange-traded funds/ETF rose, increasing ETF demand by more than half to 279 tonnes in 2012. Bar and coin investment fell sharply in the U.S. and Europe, in the U.S. by more than a third to 53,4 tonnes and European buying down 29% to 273,6 tonnes in 2012. Gold mining will not going to be easier, it gets deeper and more expensive and general fundamental outlooks for gold continue quite positive.

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WTI CRUDE OIL $94,30/BRENT CRUDE OIL $102,60   –   05/23/13  OPEC confirmed oil output ceiling of 30 mb/d, despite Saudi Arabia’s call for a higher output target, favoring a price of about $100,- per barrel, saying it is looking for a sustained market for crude oil over the long term with a reasonable price to cover rising cost of oil production and ensure exploration can continue. EU put into force a full Iran oil embargo starting July 1, 2012, as sanctions over Tehran’s nuclear program begin to hurt the country’s economy.

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The International Energy Agency/IEA cut its forecast for global oil demand growth in 2013 by 25.000 b/d to 795.000 b/d reaching 90,6 mb/d, citing weaker than expected oil-use in developed economies, particularly Europe and Japan. Oil demand 2013 of  the United States is estimated at 18,2 mb/d, followed by China with 9,8 mb/d.. NON-OPEC oil and liquid fuels production of NON-OPEC countries reached 52,63 mb/d and of OPEC nations 36,40 mb/d in 2012, while OPEC’s crude oil output was 30,89 mb/d. Projected OPEC crude oil supply will decrease in 2013 by 0,4 mb/d coming from Saudi Arabia in response to expected NON-OPEC supply growing to 54,4 mb/d, reaching OPEC supply 30,25 mb/d in March 2013, down from 30,42 mb/d in February 2013, while Saudia Arabia supply was at 9,23 mb/d in March 2013. NON-OECD countries are accounting for all of the world’s consumption growth in the next two years, with the largest consumption coming from China, the Middle East and Brazil, continuing to decrease consumption of nations belonging to the OECD, becoming China eventually the world’s top oil importer after shale revolution is reducing U.S. need to import crude. The U.S. is enjoying a gas and oil boom thanks to shale gas and shale oil produced mostly from the Bakken shale formation in North Dakota and Montana, the huge expanse of oil-bearing rock, and the Eagle Ford one in Texas, importing also increasingly heavy crude, known as bitumen found primarily in Canada’s Alberta Province, becoming for the first time in decades a net exporter of petroleum products, such as jet fuel, heating oil and gasoline. According to a report of the International Energy Agency/IEA the shale oil boom means the United States may overtake Saudi Arabia and Russia as the world’s largest oil producers by 2020, becoming the largest global producer of natural gas already by 2015. Driven by high prices and new drilling methods/hydraulic fracturing/fracking, the U.S. production of crude oil (around 6,4 mb/d in 2012) and other liquid hydrocarbons, including natural gas liquids and biofuels, rose about 7% in 2012 to an average of 10,9 mb/d and is expected to reach 11,4 mb/d in 2013, compared to a liquid fuels production in Saudia Arabia, which averaged 11,6 mb/ in the first half of 2012. Growing production from unconventional sources of oil – tight oil, oil sands and biofuels – is expected to be the sole cource of the next growth in the global oil supply to 2020. NON-OPEC country Russia, a net oil exporter, continues also in 2012 as the world’s largest oil producer increasing output nearly 1% to 10,37 mb/d, followed by OPEC nation Saudi Arabia, cutting-back its production to 9,025 mb/d in December 2012, down from 9,72 mb/d in October 2012 and of over 10 mb/d earlier in 2012 to guarantee oil price stability, ranking NON-OPEC nation U.S. third, OPEC country Iran fourth and NON-OPEC country China fifth, covering its oil output about half of its national demand. Russian energy giant, State-controlled Rosneft is buying in a $55 Billion deal all of TNK-BP, selling BP its share for about $27 Billion, and AAR, belonging to a group of 4 Russian billionaires, its participation for about $28 Billion, becoming BP with a future stake of 19,75% in Rosneft its second largest shareholder, keeping Russia BP’s technical expertise and international clout. Rosneft, already the top oil company in the world’s biggest producing country, will be pumping more oil and gas than its global U.S. competitor Exxon Mobil. Canada has about 175 Billion barrels of recoverable bitumen from oil sands with today’s technology and Alberta oil sands with an estimated total bitumen reserve between 1,7 Trillion and 2,5 Trillion barrels, more than the total OPEC oil reserves of about 900 Billion barrels, are for decades not considered  part of the world’s oil reserves because the oil there wasn’t economically extractable at prevailing prices but could become the most important source of new oil in the world in coming years, buying PetroChina, Asia’s largest oil and gas company, and Sinopec, a Chinese State controlled company, full ownership stakes and participations in important oil sands projects in Alberta, urging the Government of Canada to approve a pipeline to Canada’s Pacific coast so that tankers can ship oil sands crude to China. China National Offshore Oil Corporation/CNOOC revealed to acquire Canada’s NEXEN, obtaining access to giant oil- and gas fields, approving Canada and the U.S. regulators the $15,1 Billion bid, paving way for the largest Chinese foreign adquisition, taking Sinopec a 49% stake of the North Sea oil production of Canada’s Talisman Energy paying $1,5 Billion. China’s State-owned oil companies spent since 2009 $92 Billion in oil and gas assets in countries from the U.S. to Angola and the country is expected to produce about 3 mb/d abroad in 2015 up from 1,5 mb/d in 2011. There are also expectations Arctic may hold as much as 90 Billion barrels or 13% of the world’s undiscovered oil and 30% of the world’s undiscovered gas reserves. NON OPEC country Brazil’s newly discovered deep-water ‘pre-salt’ oilfields like Tupi, Lara and Guará, located in an area of 800 sq km offshore 16.400 feet below sea level, which may contain between 50 Billion and more than 100 Billion barrels, could transform the country into one of the major oil-producing and -exporting countries, announcing the state-controlled PETROBRAS the discovery of 65 Million barrels in the Barracuda oil field 100 km off the coast of Rio de Janeiro and that it will invest about $224 Billion over the next 5 years to increase oil output, turning to China, Brazil’s biggest trade partner, for cash, signing a loan agreement of $10 Billion with the China Development Bank and a 10 year pact for delivery of up to 200.000 barrels a day of crude oil to Chinese companies. PETROBRAS filed for a record global stock offer of $67 Billion to finance part of its ambitious offshore plans to turn Brazil into a major oil exporter, making Brazil’s Congress PETROBRAS sole pre-salt operator. Oil output in Mexico is also slowing down, facing the state owned oil company PEMEX a chronicle lack of cash and of technical capacity for deep water exploration and production. Concerns over Venezuela’s socialist revolution delay one of the biggest biddings to explore oil fields, called the Carabobo auction, competing Chinese, Russian, Indian, Colombian and Brazilian state oil companies with oil majors Shell, BP, Chevron, Total, Eni and Statoil for access to the Orinoco belt with a huge potential of tar-like extra-heavy crude, requiring the Venezuelan state oil company Petróleos de Venezuela/PDVSA at least a 60% share in each project, getting partners at most a 40% share, but will have to provide a 100% financing, announcing Venezuela deals with Russia and China with investments up to $36 Billion producing until 2012 about 900.000 barrels a day from the heavy oil deposits Junin 4, Junin 6 and Carabobo. China agreed to invest $20 Billion in two Iranian oil fields projected to produce 700.000 b/d. Exxon Mobil and Russian oil giant Rosneft agreed to explore oil and gas in the Arctic Kara Sea and in the deep waters of the Black Sea, two of the most promising  and least explored sea offshore areas globally, giving the U.S. access to potentially huge oil and gas fields in Russia’s Arctic Sea shelf and Russia stakes in Exxon’s operations in the Gulf of Mexico and Texas, raiding Russian officials the Moscow office of BP, whose hopes ended of developing Arctic offshore oilfields with Russia. The world is not running out of oil, the biggest threat to the future of supplies is the lack of spare production capacity worldwide to cover a shortfall. Shortfalls are caused by oil rich countries such as Nigeria, Kuwait, Venezuela, Iran and Iraq, where politics has stymied production growth. Saudi Arabia is completing the development of its giant Khursaniyah field, complying with a huge expansion program to increase its production capacity of about 12,5 mb/d, producing currently around 9 mb/d, leaving 3,5 mb/d as spare capacity, expected to rise its crude production capacity by 2020 to 15 mb/d with an export potential of 10 mb/d. OPEC member Iraq, with the world’s fourth largest proven oil reserves estimated to stand at 143,1 Billion barrels, is opening its giant key producing oilfields to British and US companies to restore its oil infrastructure, seeking to raise output to an average of 3,7 mb/d in 2013, producing 3,2 mb/d in February 2013, and may be able to match its 1979 output record of 3,8 mb/d. OPEC’s proven crude oil reserves estimates rose 12,1% to 1,19 Trillion barrels or to 81,3% of the world’s proven crude reserves in 2010, led by Venezuela with 296,5 Billion barrels surpassing Saudi Arabia with 264,5 Billion barrels, Iran with 151,1 Billion barrels and Iraq with 143,1 Billion barrels, showing BP statistics Venezuela still with 211,2 Billion barrels in conventional oil reserves, avoiding unconventional oil reserves such as Venezuelan heavy crude of the Orinoco Belt.

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