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This editorial in the WSJ reminds readers of China's warning about North Korea's nuclear weapons in April 2015, and says the nuclear agreements with North Korea never worked. It sees a similiar situation with the nuclear agreement the Obama administration is working out with Iran.

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Inflation was a little above the eurozone average of 0.7% for Jan. 2014 in Germany and below the average in Portugal, Spain, and Ireland.

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Even as huge losses continued at RBS bank bonuses remained high. After $15 billion in losses at RBS in 2013, banker bonuses were $960 million for the year. Banker bonuses declined from 679 million pounds in 2012 to 576 billion pounds in 2013. New CEO Ross McEwan, says "I need to keep people engaged." He announced another reorganization. He says RBS "is the least trusted company in the least trusted sector of the economy." This follows public criticism of RBS for not lending enough to small business and unfair treatment of customers. The new plan is for cost cuts to save 2.2 billion pounds by closing 16 corporate call centers and 11 offices in London. Sales and restructuring cuts are planned for 3.1 billion pounds in savings.

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Berkshire Hathaway's deal in Nov. 2012 to pay $780 million for claiming the future cash flows of life insurance portfolio of Caixabank in Spain. Caixabank will claim a pretax profit of $680 million which it will use to increase reserves.

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Irwin says about the revised Basel III rules in Jan. 2013- one hopes that Mervyn King of the Bank of England and Basel regulators are doing the right thing, striking the right balance between pushing for higher capital requirements and adjusting this to take into account the stalling economies of Europe and the U.S. Banks were given till 2019 to meet capital requirements. More assets are now eligible to meet capital requirements (including lower rated corporate bonds) under revised Basel III rules. The large legal settlements and speculative losses of large banks in Europe and the U.S. in 2012 put more pressure on banks with the risk of reduced lending.

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Matteo Renzi, Mayor of Florence, and a candidate for leadership of the Democratic Party in Italy described the voting for presidential candidate Marini, a union leader who is 80, as "disrespectful to the country," and as "a candidate of the past century." The voting exposed deep rifts between the younger and older generations in Italy.

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Japan's central bank chief, Shirakawa, has come under criticism from both the governing Democratic Party of Japan and the LDP for not acting strongly enough to support Japan's economic growth in 2012. He diluted efforts of setting a 1% inflation target by showing a lack of determination, saying the Bank of Japan could only do so much to tackle deflation, with effort to tackle structural inefficiencies required from the government. The impact of this was to strengthen the yen which weakens Japanese exporters. The LDP candidate for prime minister, Shinzo Abe, in Dec. 2012 general elections, was particularly critical of Shirakawa. Abe is likely to appoint Takatoshi Ito, a Tokyo University economist as the new central bank chief. Ito says Shirakawa talked down each BOJ monetary easing move with cautious language, describing it as a cold shower following each move. This is very different from the talk of the U.S. central bank chief Ben Bernanke, who gave clear signals to financial markets in his statements following monetary easing efforts of QE 1-3. Abe prefers a 2% inflation target and an activist central bank policy comparable to the U.S. Federal Reserve under Ben Bernanke. Financial markets and exchange rates for yen have responded positively to Abe's policy goals....

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The European Stability Mechanism made its first short term debt auction Jan. 8, 2013, by selling 1.927 billion euros of treasury bills. Japan remains a key investor. Japanese finance minister, Taro Aso, said Japan plans to to be an active investor in the ESM bond sales. He told a news conference: "Japan will purchase some ESM bonds using its foreign exchange reserves as it monitors progress in efforts to stabilize the European situation." Japan holds $1.27 trillion in foreign exchange reserves. The move pushed the yen lower. Investors pay the ESM to keep cash for three months- the ESM treasury bills had an average yield of minus 0.0324%. The ESM fund will be used for aid to Spain's banking sector, Greece, Ireland and Portugal. Plans are for the ESM to issue three month and six month bills twice a month to reach 18.5 billion euros by the end of 1st quarter 2013. The ESM fund rating is Aa1 by Moody's Investors Service, and AAA by Fitch Ratings.

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Mario Draghi, President of the ECB, turned down proposals to let European central banks send money to troubled European governments through the IMF. Draghi said- "we should't try to circumvent the spirit of the treaty, no matter what the legal trick is." The ECB also opposes large government bond buying to bring down yields on Italian and Spanish government bonds. The ECB by majority vote reduced interest rates in the eurozone by 0.25%, bringing interest rates down to 1%, and reversing rate increases under the previous president Trichet. It also made medium term funding available to European banks on better terms. According to a person in the room, German Chancellor Merkel opened the summit saying Germany opposes a plan to let the European Stability Mechanism (ESM) borrow from the ECB. The ESM is the bailout mechanism for future bailouts.

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The historical allusions in the media in Greece, Italy and Germany, and cultural perceptions which have increased differences in the European Union. This comes at a time of austerity programs in the Southern tier of EU countries and pressure on Germany to fund the debt reduction in some EU countries.

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Greek leader Alexis Tsipras of the Syriza party, the Coalition of the Radical Left, talks to Angelos and Granitsas of the Journal. He says it is in the interests of the European Union to continue funding to Greece, but if the EU stops the funding Greece will stop paying its debt. It will then use the funds going to the debt burden for paying retirees and workers. And it will also tear up the loan agreements signed earlier, and scrap plans for layoff of 150,000 workers in the government services by 2015. He would also reverse measures to lower private sector wages. He also looks favorably on nationalizing banks to better channel lending to where its needed. In his view it will be difficult for Greece either way. Even with funding Greece's GDP is expected to fall 5-7% in 2012, following several years of declining GDP.