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The owner of the Sips Cafe in midtown Manhattan is one of many investors stuck with large losses on the day the Swiss National Bank removed its cap on the Franc.

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Christian Noyer, the Governor of the Bank of France, says that the supervisory infrastructure and deposit guarantee structure for the eurozone has not kept up with the creation of a single currrency, leaving an obvious gap that has to be fixed. Of particular importance is the link between sovereign and banking risks that is behind dangers in today's eurozone crisis, especially in Spain, which he says should be broken. The creation of a single euroarea supervisory authority is a prerequisite for a deposit guarantee fund that will separate and delink bank and sovereign risks. The other step is to create a banking resolution scheme similiar to what the U.S. has setup, with the FDIC having a resolution plan to come in and unwind a failing bank, include large banks with systemic risk.

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Italian prime minister, Mario Monti, told the European Parliament in Strasbourg, that he wanted to see more power reside in the European Parliament, that democracy was consistent with integration. German chancellor Merkel says the European Commission should "act more like a government with all the powers," and the European Parliament should become more important than national parliaments. This is the vision of Europe that leaders are supporting in 2012. Monti gave as one major reason for a European governing entity- national governments with their own local interests had created the economic trouble Europe faces today, with Greece being a textbook example of how everything can go wrong. Germany and France, he says relaxed the fiscal discipline rules of the Stability and Growth Pact, and this could happen again.

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The meeting of EU leaders in Brussels in Oct. 2012 focusses on the issue of setting up banking supervision for eurozone banks. France pushed hard for setting up the banking supervisory authority by Jan 2013. German chancellor Merkel facing elections in Sept. 2013 pushed for a longer time frame into 2013. Setting up the banking supervision, a basic part of the new eurozone financial architecture, would clear the way for direct aid to Spanish banks. In the end Germany and France agreed to complete the legislation setting up the supervisory system by the end of 2012, and getting the supervisory authority- to be placed under the ECB- operational "over the course of 2013," in Merkel's words.

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This Journal editorial says Germany and France will have to pay for preserving the Eurozone one way or another. It suggests a direct approach of the German and French governments injecting capital for recapitalizing German and French banks that would take losses on bad loans to Greece, Ireland, Portugal, and Spain; combining this with bondholder haircuts for creditors, and reforms that include spreading the burden for Irish bank debt and cleaning up the cajas savings banks mess in Spain. This would mean exactly the opposite of what is taking place now, including the abandoning of individual country rescues and bailouts; which the Journal calls extending loans and pretending the problem is not with German and French banks that would have losses on the bad loans. The problem is that this places the entire burden on austerity measures in each bailout country which reduces growth and raises unemployment to levels that make the problem much worse than before. This is not happening because of a serious failure to reach agreement on the shared sacrifice and cooperation between the governments, creditor banks, the ECB and other parties in the eurozone, on a serious debt restructuring across the eurozone that would put the euro back to stability with some mechanism for serious financial discipline in eurozone states....

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The exit of Greece from the eurozone would cost Germany $127 billion or 3% of GDP, according to economists at a German bank. Francois Baroin, departing finance minister of France, estimated the cost for France to be $50 billion, or 3% of GDP. The costs in terms of disorderly exit in how it impacts Spain and Italy in financial markets is less certain.

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Hedge funds betting against China's currency in Jan. 2016 puts Wall Street at odds with China's central bank's effort to manage the decline in the currency. Some hedge funds see a large drop in the value of the yuan in 2016-2017. China also faces the risk of large capital outflows. This is happening against the backdrop of China's effort to cut overcapacity in steel and other industries, manage large debt and the slowing economy, to shift towards a less export dependent and more domestic consumption oriented economy. Hedge funds are taking short positions against the yuan, as they expect China will need to recapitalize its banks considering the rapid acceleration in debt, leading to further depreciation in the currency.

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Mario Monti, the new prime minister of Italy, is taking on one of Italy's toughest problems, a pervasive culture of tax evasion. The loss to the economy is not measured ony in terms of the loss of money to the Treasury, which one estimate puts at $340 billion a year. This burdens companies and the manufacturing sector with higher taxes and reduces investment in new plants, research and development, capital equipment, which would increase jobs. By encouraging this culture of tax evasion Berlusconi undercut and jeopardized his own plans to bring new economic growth to Italy. Berlusconi prevented allegations of false accounting against his companies by passing a law through parliament that made reduced penalties for false accounting. In Italy one saying goes that "only fools pay." In a country of 60 millon people only 394,000 people earn an income of more than $135,000 a year. "Evasion totale," referred to in newspapers in Italy is about total evasion by some owners of large property. One effort in parliament is to introduce legislation that would require the use of debit or credit cards, electronic transfer or other similiar methods of payment for amounts above a certain amount- with one of the amounts proposed being 100 euros. A recent poll by Demopolis showed that 73% of Italians polled want to see strong action to prevent tax evasion. This is also a strong reason why Monti, Draghi at the ECB, Bundesbank officials at Germany's central bank, and German chancellor Merkel, do not see the ECB's large scale buying of eurobonds by essentially printing money as a solution to eurozone debt problems- it puts off taking the neccessary and essential steps for reviving eurozone economies....

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Yale Prof. Fair says that evidence from his model shows the yuan appreciation having a positive effect on American jobs looks better than it really is. Two negative effects are in play. The first is that Chinese output decreases will have an effect on Chinese imports that will affect US exports. And the other effect that will come into play is the increase in US prices. His conclusion is that it unlikely we will see a large increase in American jobs from the appreciation of China's currency.

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A ZDF poll in Dec. 2016 shows 64% of the German people support chancellor Merkel's decision to run for fourth term. Of CDU supporters 89% support Merkel. If the election were held today CDU/CSU would win 36%, SPD 21%, Greens 11% and FDP 5%. Schulz is a lot more popular than Sigmar Gabriel in the SPD. About 51% of the German people support Martin Schulz, current head of the European parliament, Gabriel gets only 29%. With SPD supporters Schulz has 64%. Merkel could form a government with Greens and FDP support. See the related article on Greens and CDU positions coming closer.

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A government watchdog in Germany keeps track of what members of Germany's parliament the Bundestag earn in secondary income from speaking fees and other sources. The watchdog is called Abgeordnetenwatch or parliamentarian-watch. German parliamentarians are now required to list what bracket they are in with the highest at 250,000 euros with no ceiling set. One exception is for lawyers, consultants and farmers who can avoid transparency for upto 3.3 million euros. Unusually these professional backgrounds are left as exceptions. Still Germany is making an effort in this direction where such an effort is absent in the U.S. leading to a credibility gap for established parties and politicians, and leaving an opening for criticism from outsiders who can say they have no connection to lobbyists. German members of parliament earn an income of 9300 euros a month.

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Ed Miliband, leader of the Labor party, tells British prime minister Cameron in parliament on Dec. 12, 2011: "It's not a veto when the thing you wanted to stop goes ahead without you. That's called losing.That's called being defeated. That's called letting Britain down." Miliband was asking what purpose was being served, when it was expected that the European Union leaders were unlikely to provide Britain with safeguards for its financial industry, and when Britain has actually led the way in calling for stricter capital reserve requirements than Basel III standards accepted in Europe. Olli Rehn, European commissioner for economic and monetary affairs, said Britain cannot separate its financial industry from the rest of Europe: "If this move was intended to prevent bankers and financial corporations in the City from being regulated, that is not going to happen."

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The ECB's effort to attract talent from national central banks to fulfill its role as supervisor of 7000 banks in the eurozone countries by the second half of 2014. Supervisors who are hired will be located at the ECB's headquarters in Frankfurt. The ECB positions offer attractive perks for young workers with families and children.