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Yannis Stournaras, economcs professor at the University of Athens becomes the finance minister in the new administration of prime minister Antonis Samaras. He holds a doctorate from Oxford University in economic theory and policy, lectured at St. Catherine's College, Oxford and at the Oxford Institute for Energy Studies. He was special advisor on monetary policy to the finance minstry and Greece's central bank. His public official positions include vice chairman of the Greek natural gas company and board member of the public debt management agency. He is well qualified to lead the effort for Greece to remain in the European Union with modified terms that extend the achievement of deficit targets by 2 years to 2016, and offer tax cuts and other growth oriented measures to get the Greek economy back on the path to recovery and growth after 4 years of declining GDP. He also brings a sense of committment to the EU, because he was chief economic advisor to Greece's Finance Ministry in 1994-2000 and took part in the negotiations that led to Greece's joining the eurozone in 2001. His strong views about changes needed to Greece's overregulated economy which favors special interests also coincide with the moves for labor and other reforms taken by the Monti and Rajoy governments in Italy and Spain. ...

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Auto sales in the U.S. reached 1.33 million vehicles in May, a 25% increase over the previous year, with the previous years figures skewed by the tsunami in Japan and shortages for Japanese manufacturers. The seasonally adjusted annual sales rate was 13.8 million vehicles. Employment increased to 644,000 workers in the U.S. auto industry, an increase in the first quarter of 2012 of 6% over the prior year, according to Bureau of Labor Statistics. The basic reason for the increased demand is the aging of cars on the road to about 10.8 years, according to vehicle registration information.

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Italy raised 18 billion euros in a record auction on Oct. 18, 2012, meeting its needs for the rest of the year. Italy's yield dropped to 4.64% on Oct 18. Spain raised 4.6 billion euros at 5.32%. Italy sold most of the BTP Italia bonds to Italian citizens with a 4 year bond linked to Italian inflation and designed for Italian retail investors with a new eBay type internet platform, including a loyalty premium of extra 40 basis points. Italian retail investors have 8 trillion euros in net private wealth and household wealth in Italy is more than 4 times the sovereign debt, according to the Bank of Italy. This is a big difference compared to Spain, because the interest on the bonds remains in Italy for consumption and investment. Spanish households are highly indebted after the housing bubble.

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Italy's National Reform Plan shows a forecast of GDP contraction in 2012 of 1.2%, up from an earlier forecast. Italy will show a budget deficit of 0.5% of GDP in 2013. Italy's Deputy Economy Minister Vittorio Grilli poitsed out that in structural, cyclically adjusted terms Italy will post a budget surplus of 0.6% of GDP in 2013, that fiscal policy was tightening. This was confirmed by the IMF which said that Italy will achieve structural balance in 2013- which means that if the economy were operating at full potential Italy would have a balanced budget.

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The IMF predicts GDP decline of 1.9% in Italy in 2012.

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Italy's borrowing costs increased by one percentage point one week after the July 22, 2011 eurozone debt deal for Greece. The Italian Treasury sold 2.7 billon euros of 10 year bonds with a yield of 5.77%. The yield in late June for a similiar bond issue was 4.94%. Yields on Spain's 10 year bonds increased to 6%. German bonds are getting investors with a 10 year bond yield that has decreased to 2.62%, which means the gap between the German bonds and the bonds of southern European countries is widening.

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Greg Ip provides useful insights into the nature of the economic recovery in Britain compared to the U.S. by 2015. The recovery in Britain has done better than in the U.S. in job creation, but has lagged behind in productivity gains. The labor force participation rate is 72% in Britain compared to 68% in the U.S., going back up to 2007 levels in Britain, whereas in the U.S. it has steadily declined with some older working class Americans too discouraged to look for work and left behind. Stagnant wage growth is a major issue in Britain, more so than in the U.S. where wage growth is slow. Economic austerity is not the main cause of the economic difficulties as the coalition government of prime minister Cameron relaxed earlier goals for austerity by 2012 with tax revenues and growth below forecasts. The structural budget deficit has been reduced by 6.6% of GDP since the peak, and the Office of Budget Responsibility estimates the UK economy was 1.5%-2% smaller by 2013 because of the austerity policies. Britain was also affected by the eurozone crisis to a larger degree than the U.S. Productivity remains a long term challenge- with needed investments in housing, education and infrastructure, improved lending for new business, and higher tech improvement exports....

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Spain's 2015 general election leads to the likelihood of a coalition from the centre right or the centre left parties. The conservative Partido Popular lost its parliamentary majority and won 123 seats as the largest party in the new parliament. The centre right have 163 seats, the centre left have 159 seats, leading to an inconclusive result with both sides seeking to form a new coalition government. Years of austerity policies under prime minister Rajoy and high unemployment of about 20% hurt the ruling party, even though the economy has recovered from the worst effects of the housing crisis and is growing at 3%.

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S&P downgrades Netherlands to double-A-plus and raises Spain's outlook from negative to stable while retaining Spain's triple-B-minus rating.

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A bright spot in Spain's credit ratings comes from DBRS.

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Portugal's economy is shrinking. Austerity measures taken in exchange for 78 billion euros from the IMF and the EU under a May, 2011 agreement have reduced the prospects of growth. The ratio of debt to GDP was 107% in May 2011. It is expected to reach 118% in 2013 because the economy is shrinking- even though Portugal will have achieved its targets for reducing the budget deficit. Portugal's finance minister, Vitor Gaspar, a former ECB research director, has reduced the budget deficit by one third by cutting spending, pensions, wages and increasing taxes. GDP fell by 1.5% in 2011 and is expected to decline by 3% in 2012. Even the IMF says in its recent economic review that if growth is lacking the debt of Portugal "would not be sustainable." David Bencek, analyst at the Kiel Institute for the World Economy, says that the Portuguese economy lacks the structure needed to grow, and therefore has debt that is unsustainable. Portugal lacks a manufacturing base and exports, and was just emerging from decades of neglect by military rulers of education and other essential parts of a modern economy when it joined the EU....

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Selling of sovereign bonds by European banks to meet new requirements for adequate capital reserves by the European Banking Authority is having a Catch 22 effect, as this raises the yields at auctions of sovereign bonds of Italy, Spain and other countries.

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Italy's finance minister, Tremonti, met with Jiwei, chairman of the China Investment Corporation, China's sovereign wealth fund. Italy's is trying to persuade Chinese officials to authorize buying Italian government bonds. This would reduce pressures on Italy's borrowing rates in world financial markets.

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An increasing portion of Spain's 663 billion euros, or $876 billion, in home mortgages is likely to default. As unemployment rises and unemployment benefits run out for the unemployed more people are likely to default under the burden of large debt. Some of the largest Spanish banks are likely to need a bailout. Analysts estimate a bailout of Spain to be at least 200 billion euros or $264 billon. The large increase in the IMF Fund recently completed by IMF head Christine Lagarde may be designed to handle such a crisis.

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Portugal's parliament gave preliminary approval to a new budget bill with 4.3 billion euros in tax increases on income, captal gains, property and car ownership, and 1 billion euros in spending cuts compared to the 2012 budget. Banco Espirito Santo was able to sell 750 million euros in 3 year bonds with an interest rate of 5.875%. Over 200 investors from France, UK, Germany made buying offers of more than 2.7 billion euros. The rate is lower than expected and reflects ECB policy support for bond markets of countries requesting aid.

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After 16 months of talks political leaders from Dutch language Flanders, French speaking Wallonia, and multilingual Brussels, historically at odds with each other, come up with a new arrangement for running the country in 2011. Belgium will move closer to being a confederation like Switzerland, with powers and funds shifted to the regions. Of particular significance is the resentment by the Flemish people in the north of an administrative arrangement that was setup along French lines. The new devolution of powers gives autonomy to the Flemish region. In the past frequent coalition governments have added to the political instability.

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Global austerity measures could lead to a weaker and slower recovery in the absence of other policy actions to tackle the deficits in the medium term.