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Anger in Greece at the austerity measures was evident in the results of the April 2012 elections. The two major parties polled even less than the low poll numbers that they expected. The Socialist Pasok party of former premier Papandreou received only 13% of the vote and not the 15-18% expected, the New Democracy party of Antonio Samaras received only 18.8% and not the 25% expected. As a result the two main parties that have ruled Greece received less than one third of the vote combined. The second largest party after New Democracy is now the Coalition of the Radical Left or Syriza, which received 16.78% of the vote. It is led by young Alexis Tsipras, 38, who has said the bailout treaties witht the EU and the IMF were "not salvation, but a tragedy." Syriza opposes the austerity measures and prefers to exit the eurozone. A extremist far right anti-immigrant party New Dawn received 7% of the vote showing the desperate situation. New Democracy's Samaras tried hard but failed to form a government, and under the Greek constitution each party gets a few days to form a government. The outcome is likely to be new elections in June 2012 and a caretaker government appointed by the president....

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Banco Santander SA will buy the remaining 10% of Banco Espanol de Credito SA, or Banesto, for 263 million euros by May 2013. This is part of the restructuring in the banking industry in Spain with Banco Santander replacing the Banesto brand and the private banking Banif brand and replacing it with the Santander brand. Santander will close 700 branches of the total of 4600 branches it, Banesto and Banif have in Spain. Spain's banking network will decline by 35% from 2008 to about 30,000 branches. This is also part of the consolidation of banks in Spain to five or six stronger and larger banks. Bankia SA which was required as part of the 40 billion euro bailout from the EU to Spain's banking sector to cut staff and branches, will cut 6000 staff, close over 1000 branches, and shut down real estate lending. Santander's move was intended to save 420 millon euros annually by reducing costs through consolidation. Santander is not one of the banks being bailed out.

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Analysts see the likelihood of Greece exiting the eurozone at over 50%. The actions of the ECB under Mario Draghi to provide funding to weak banks through the Long Term Financing Operation have reduced the effect the effects of contagion from a Greek default spreading to banks in other EU countries. The fiscal pact signed in Jan 2012 at the EU summit with automatic penalties for countries lacking budget discipline provides Angela Merkel more room with her domestic political base to support the EFSF's capacity to help other eurozone countries. Greece with its deteriorating economic situation would then be considered a special case.

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Moody's downgraded its outlook on Germany's triple-A credit rating to negative. It also shifted to negative the outlook on triple-A ratings of Netherlands. Spain's ten year bond yield went up to 7.51% on July 23, 2012 according to Tradeweb. Analysts estimate Spain needs to issue 28 billion euros of debt for the rest of 2012 to cover deficits and repay maturing debt, and 50 billion euros in short term Treasury bills. An additional 30 billion euros may be needed if tax revenues decline increasing the deficit, and to meet the needs of regional governments. In changing the outlook for Germany, Moody's emphasized the costs Germany would incur if Spain needed a full bailout and if the situation spread to Italy, including the large exposures of German banks to Italy and Spain.

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Banks claims on other banks in China increased for the financial sector from 25% in 2009 to 43% of total loans. The risk is that many of these claims are credit extended to China's shadow banking system which makes loans to property developers and other high risk borrowers. In this situation the non performing loan ratios released by the large Chinese banks and the core capital adequacy ratios are not a good measure for protection from risk in China's banking system and conceal hidden risks. Bank of China's nonperforming loan ratio fell to 0.94% in June from 1% at the end of 2011, and its core capital adequacy ratio moved from 10.08% to 10.15%. Orlik cites China bank analyst at Fitch, Charlene Chu, abut claims on banks having less regulatory risk weighting and thus concealing risk, which makes capital adequacy ratios inadequate to cope with the amount of real risk in the bank's loan portfolio. Just as happened in Spain after decades long boom and sense of safety in the banking system, problems were lying below the surface and the situation can change rapidly. ...

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Stephen Moore of the WSJ interviews Grover Norquist, head of the advocacy group Americans for Tax Reform. Republicans in Congress and other Republican leaders have signed on to the "no new taxes pledge" promoted by Norquist. There is increasing pressure on Norquist as the media, White House, and executives on Wall Street call for flexible positions from both sides on taxes and spending cuts. Norquist insists that not much has changed. He says that the increase in taxes on the rich is only symbolic and has to be followed up with increasing taxes on the middle class. He cites a Rasmussen poll that shows 75% of Americans believe this. Norquist is convinced that the Democrats with their spending plans are out to take the U.S. in the direction of European economies, the tax increase on the rich would be followed up with a energy tax or a value added tax to pay for unrestrained spending. His solution is for Republicans to pass a bill that extends the current tax rates past January after roughing it through the tax cliff date. Even the sequester option is better than increasing taxes says Norquist, letting the Defense Department make the cuts where appropriate. Norquist does not favor the option of reducing tax loopholes and deductions as a way to increase taxes as proposed by Simpson Bowles commission and Ryan-Romney in the election campaign. ...

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Anne Applebaum of the Washington Post points out that after the faltering campaign of Republican Party nominee Fillon, the only serious candidates remaining in the presidential election in France are Marie LePen of the National Front, and the former Economy minister in the Hollande government, Emmanuel Macron. Macron is now the only person with enough popularity to win over LePen's nationalist movement. Macron launched his En Marche movement in 2016 and his strategy is to bring together the centre right and the centre left moderate voters, and voters who favor remaining in the European Union. Older voters in France unlike that in the U.S. and the UK are favoring candidates other than LePen because they fear the impact on the French economy and their pensions from leaving the European Union. LePen favors holding a referendum to decide whether France should remain in the EU. Macron takes an opposite view fully supporting France's role in the European Union. He has not advocated the huge cuts that Fillon has for job cuts in the public sector, and is able to draw moderate centre left voters to his side. A look at the French presidential election in another piece in the Economist magazine shows that further out one goes from major cities in France there is a surge in the support for the National Front. Moderate parties other than the National Front draw support in most of the major cities and urban areas. Another similarity with the UK and U.S> is that more educated voters support moderate parties other than the National Front. As polls have been proven wrong in other elections it is difficult to know what is likely to happen in this election. Unemployment is high in France at 10% with little change since the election of the Socialist Hollande government. Other issues such as terrorism have unsettled French voters, making this election difficult to predict. Voter dissatisfaction is especially high among younger voters who face a high unemployment rate and stagnant economy. Neither candidate Macron or LePen offers a way out of the low economic growth and lack of new jobs. A lot depends on whether French voters are willing to take the risks of a LePen administration and the further uncertainty from a referendum for leaving the EU which cannot enhance the economic prospects of France.     ...

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One of the favorable factors for Iraq in recent years was the surge in oil production, adding 1 million barrels a day to reach 3.3 million barrels a day. It surged to an average of 3.7 million barrels a day in December 2014 after a deal with the Kurdish region in northern Iraq for an additional 550,000 barrels a day in exchange for Kurds getting a 17% share of federal revenues. This helped Iraq overcome other problems. The drop in oil prices has led to a 40% drop in revenues and the invasion by Islamic State in a loss of some production.The federal budget of $101 billion planned revenues is based on an oil price of $56 and exports of 3.3 million barrels a day, resulting in a $20 billion deficit. It assumes $10 billion in new tax revenues which may be hard to achieve with a lack of strong central government. Experts on Iraq's oil industry say large investments are needed to offset declining oil production from older oil fields in southern Iraq. Oil exports were 2.5 million barrels a day in 2014, and experts say even this will be hard to achieve for 2015. Investments could come from western oil companies, but Iraq and the Kurdistan region are behind in payments to oil companies. Iraq is considering issuing bonds for $10-$15 billion....

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This editorial in the Wshington Post is sharply critical of the Obama administration's policies of inaction in Syria and Iraq. It says president Obama and his administration will have to answer for the policies to the American people and the people of the Middle East and Europe.