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Proposals for using a plan in the euro-zone, such as the Brady Plan. The Brady plan arranged for bondholders for Latin American debt to take losses of 30% in return for longer term debt instruments with lower rates, and backed by 30 year US zero coupon bonds. This helped restructure Latin American debt in the late 80's and early 90's, and helped countries in Latin America forge an economic recovery. At this time Angela Merkel from the German side is pushing for bondholders to take losses for having made risky loans, which was made part of the EU bailout plan in late November 2010. However investors in financial markets continued to push up bond yields for Belgium, Portugal, and also for Germany. There is the sense that something is needed that would require bondholders to take losses, with some compensating mechanism such as the Brady bonds. Also needed is a restructuring of debt without which euro-zone countries cannot stage an economic recovery. Ireland, Portugal and Spain can no longer devalue their national currencies as a way out of the financial crisis. This increases the urgency for coming up with a solution. Mr. Brady was asked about this at a financial markets conference recently. He said what is needed for such a plan to work, is to have a unified decision. In the Brady plan the US took the lead and agreement was arranged bringing together the bondholders and the sovereign countries. Nicholas Brady was Treasury Secretary of the US in the 1980's. Argentina, Brazil, Mexico and other countries restructured their debt, and commercal banks were able to reduce their exposure at a discount. The principal benefit to the lending banks was that they were able to exchange their claims on developing countries into tradeable instruments, and were able to get this debt off their balance sheets. The negotiations for the Brady bonds involved some form of "haircut" - meaning that the value of the bonds resulting from the restructurings was less than the face value of the bonds. All of the Brady bonds were eventually retired. By Mexico in 2003, and also by Brazil, Colombia and Venezuela....

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Showing how much the Social Democratic party in Germany needed to show progress on key issues Martin Schulz of the SPD was ordered by the party to bring up contentious issues in negotiations relating to social cohesion. One was the two tier system in healthcare where some are able to pay for more privileges in the nation's health care system with private insurance and others are in the public health system. The other issue is the ability under current German law for companies to issue 2 year temporary contracts. The SPD party did badly in the last elections because working class voters do not see it fighting hard enough for worker rights and ensuring an equitable system.On the health issue a commission will look into how the system can equalize medical fees between people privately and publicly insured. On the employment issue companies can only terminate without cause in 1.5 years instead of the 2 years. Small compromises, yet in long negotiations with a 24 hour session for a breakthrough and everyone exhausted, the snail's progress over 13 days and one night worked to set up a new coalition after all. Still one hurdle remains- getting the SPD membership to vote yes even though its youth wing is opposed. ...

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Following the defeat of chancellor Merkel's CDU party in the 2016 Berlin state election, getting just 17.6% of the vote, chancellor Merkel looked reflective and a bit emotional about the result. She urged Germans to understand that this decision on refugees will benefit Germany in the long run. She said she would work to regain the people's trust. Looking back she said-"If I could, I would turn back time by many, many years to better prepare myself and the whole German government for the situation that reached us unprepared in late summer 2015." She says the decision was "absolutely right" to admit the refugees from war torn Syria, but accepted that "it led to a time when we did not have enough control over the situation." Both the CDU and the SPD, the main parties, lost about 6-7 percentage points each in votes cast. Gainers were the Free Democratic Party with 6.7% of the vote, who gained votes from the CDU. For the SPD votes were lost to the Greens and the left party Die Linke each party winning over 15% of votes.  Both the CDU and the SPD had candidates who did not attract voter interest. A popular former Mayor of Berlin from the SPD did not run in this election. The anti-immigrant AfD party gained  about 14% of votes.  ...

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Questions raised by analysts at the Peterson Institute for International Economics and the European Policy Center in Brussels, about the lack of leadership from Chancellor Merkel of Germany and EU leaders in addressing swiftly the crisis facing Greece and countries in southern Europe. Facing voter displeasure in Germany Merkel stalled in the hope of delaying adecision till after a regional election in Germay on May 9. In the process Merkel turned a smaller crisis in Greece into a crisis facing many countries in Europe including Spain, Portugal and Italy, and a crisis for the euro currency. French member of Parliament Juvin, told the French press: "are they waiting for the collapse of the euro?" One sticking point is that the Lisbon Treaty has no provisions for coordinating fiscal policies, and Germany did not insist earlier on oversight of Greek statistics which were generally known to be false since the 1990's. Another French member of the European Parliament, Le Grip, insisted on the need for a new European economic government, and the creation of new institutional responsibilites. The problem lies in the feeling in countries like Germany not to cede sovereignty on economic matters to a European economic body. ...

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Former finance minister Peer Steinbruck will be the SPD candidate for chancellor of Germany in the 2013 elections. He is is trusted in Germany for his economic experience and handling of the economy during 2008-2009, especially with the eurozone crisis worsening. Helmut Schmidt, a former chancellor has endorsed Steinbruck. He could draw some right wing support from Merkel. Merkel is personally popular in Germany but the CDU has lost elections in key states, and its partner the Free Democrats is considered weak.

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Petrobras and the discovery 200 miles offfshore of the Tupi field with estimated reserves of 5-8 billion barrels of light crude oil. As Brazil is self sufficient in energy with its own ethanol industry helping substitute ethanol for oil at the pump, it can become a major exporter with this find. However even with Petrobras technology and expertise in offshore drilling its a challenge as the oil is 4.5 miles below the oceans surface, and involves drilling through 7000 feet of water and 17000 feet of sand rock and massive salt layer. Cost could approach $20 billion according to analysts with current inflation in oil drilling rig costs. It involves challenges like building floating liquefied natural gas plants. Gabrielli, the Petrobras CEO thinks Petrobras has the expertise to develop it on its own. If oil majors are given the chance to join in the development the investment terms will be ones that favor Brazil. Gabrielli pointed this out saying that Brazil had already incurred most of the risk in exploration offshore so the oil majors have far less risk and Brazil should invite them only on its own terms if needed. The Tupi field puts Brazil ahead of Canada in oil reserves and in the leagues of China and Nigeria, with new Brazilian reserves at 17.2 billion from the 12.2 billion barrels currently. Brazil has invested in refineries with 2 new refineries coming up in 2010 and 2014 to increase refining capacity by 40%. It is also investing to convert heavy crude oil into diesel and $8.6 billion to reduce sulfur at 11 refineries. The Tupi field will take about 7 years to develop. Similiarly the Kashgan field in the Caspian in Kazakhstan is also in difficult in this case icy and gases filled environment that will take years for a Eni led consortium to develop. When oil does come will the demand situation have changed with new conservation taking hold in the developed world and the cars in developing countries more like the Tata Nano at 54 miles per gallon consuming less gasoline? Even with increase in energy needs of developing countries, improved efficiency and new technology for conservation brought into developing countries could if not significantly reduce, at least moderate demand. To the point where prices drop from $100 a barrel to something more affordable to developing countries....

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The Economist warns in this editorial and cover issue that if Germany and the European Union do not act fast the Greek crisis could have a Lehmann like effect on Europe's banking systems, with a sovereign default. This would threaten the weaker economies of Portugal, Spain and Italy. As Simon Johnson has done on the pages of the New York Times, the Economist calls the German government and Chancellor Angela Merkel's handling of this crisis filled with ineptitude. Instead of leading the German people and giving a true account of things she followed public opinion- to see that Greece was punished for its mistakes and to provide a lukewarm show of support. A true account would have shown how Germay has gained from the euro, the huge portion of Greek debt that German banks hold, and the losses that the government would have to step in and avert in its banking system if Greece defaulted. Waiting till after a big regional election in Germany on May 9, was to show a lack of grasp of how such a crisis could explode if Greece in the meantime was shut out of capital markets (yield on Greek bonds shot up to 20%). Helping Greece was more in Germany's interest than an act of charity that public opinion in Germany seems to think it is. Other mistakes the Economist cites are- the idea that going to the IMF would be humiliating thus not bringing in the IMF actively much earlier. In the view of these experts it is the ineptitude that led to the loss of confidence in financial markets that now necessitates a much larger aid package for Greece, from $60 billon to $150 billion. The other is to have a slow decision making machinery in the Eurozone and knowing this not to have taken more aggressive action. Suggestions from the Economist as an adhoc measure- set up a single crisis management committee to make quick decisions. Set up a firewall between Greece and the other states like Spain and Italy so that contagion does not spread, with these countries also being shut out of financial markets at some future date if the situation deteriorates. The other is that the European governments should setup inter-governmental liquidity lines, and the European Central Bank act using the new arrangements....

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Brexit negotiation guidelines from the EU rule out parallel talks on both Britian's future relationship with the EU and the separation agreement negotiations, preferring a phased approach. Only when the first phase of separation is complete or at an advanced stage would the second phase of future relationship with the EU be negotiated. The EU Council president, Donald Tusk, says the process would be long, complex and at times confrontational. Der Spiegel online writing on the negotiation describes the approach in a meeting with the lead German negotiator Mr. Oettinger, on the team of Michael Barnier who leads the negotiations for the EU- Oettinger focussed on what Britain owes the EU, estimated at over 60 billion euros. So far apart are the British and EU positions that Michael Barnier has no idea on the pathway for these negotiations, only awareness of the priorities such as the rights of EU and British citizens in each others region, says Der Spiegel. Looking at Theresa May speaking in parliament about her decision to move forward with Brexit in a letter to the EU invoking Article 50, one senses a mixture of confidence and nationalist appeal, far different from reality on the ground. The Leader of the Opposition cited government figures for a sharp decline in GDP as a result of Brexit, and the Scottish leader in parliament went so far as to say the government attitude in negotiations made "Scottish independence inevitable"- all headwinds Theresa May appears to be ignoring or treating with disdain. At this time the EU and the British prime minister appear to be talking over rather than to each other.   ...

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Morse's reasoning and figures for a fall in oil prices by the end of this year and eventually settling down in the $90 price range? On the supply side he sees the OPEC decision to last year withhold oil production increases and this year's decision to put more oil on the market putting an additional 1.2 million barrels a day on the supply side. About 500,000 barrels a day are added to this from Iraq as security improves in Iraq to make this 1.7 million barrels a day. And refined product with refining capacity for the heavier crude has increased creating more competition among refiners leading to refined product increases lagging behind crude price increases. Add to this the large investments in the middle east and especially in Saudi Arabia to increase production, also in places like Nigeria and Angola, says Morse. On ther demand side he sees an astonishing decline of as much as 900,000 barrels a day year over year from 2008 over 2007 in the USA as fuel conservation is kicking in. On this score he sees a decline in oil price even if this decline had not happened in the USA. (From the video interview). This underscores the importance of everything else that is happening. He sees demand in China declining after the Olympics. The Chinese economy will slow as the Indian economy is already doing and oil imports will decline for China. At this point demand from India, China and other developing countries says Morse is increasing at 1 million barrels a day year over year and will now head downward. A couple of points are relevant in this context. One is that credit contraction in one study by University of Chicago economist Anil Kashyap is expected to be $1 trillion, in recent BW report on the economic situation and banks lending. With such a big impact industrial production by the end of this year and into 2009 will be severely impacted, especially as other countries in the EU and Asia are affected. This plus the dramatic nature of the shift to smaller cars as companies like Ford and its CEO Alan Mulaly vow to transform their production by 2009 to smaller cars is sure to bring further declines in demand. See recent statements by Mulaly and Ford. Morse's credentials show that he brings experience un teaching monetary policy at Princeton, as well as experience going back to being Deputy Assistant Secretary of State for international energy policy in the Carter administration , cofounder of consultants PFC Energy and publisher of Petroleum Intelligence Weekly, following the petroleum industry for many years. He has in the past predicted the emergence of Russia as a dominant oil supplier rivalling Saudi Arabia, and predicted the oil price increases based on fundamentals. So as he says the oil price has always been affected by fundamentals, that being the reason for the oil price increases in the last few years and now the moderating influences that reverse someof these oil price increases in the coming year and continue to exercize that moderating effect in coming years. ...

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The lack of economic opportunities for an increasingly urbanized African younger generation is a major challenge. The median age of 19 makes Africa the world's youngest continent. Megacities are growing up in places such as Lagos and Kinshasha as millions leave subsistence farming to go to cities. Unlike Asia and Latin American countries men and women are coming to shantytowns in cities at a time when Africa is much poorer for a similar level of urbanization that Asian and Latin American nations reached decades earlier. In 1993 this WSJ analysis and graphs show the Asian emerging economies and sub Saharan Africa had similar GDP per capita of $2415, by 2019 this was $4000 for Africa and $12,000 for Asian emerging economies. Latin America was at $10,000 in 1993 and in 2019 was at about $15,000. The gap widened considerably between Asia and African countries. Asian emerging economies increased GDP to 5 time from the same starting point as Africa in 1993, Africa doubled GDP over the period of 25 years to 2019. Latin America started from a much higher point and increased GDP by only 50% over 25 years. Asian economies that performed better over this period did better because of stable even entrenched governments such as in Singapore with Le Kuan Yew and in China with stable successive governments under CPC leadership of prime minister Deng. The difference in Asia was a commitment across all classes and groups to development, a sense of development as a way to make up for the years lost under colonialism of foreign powers in the eighteenth and nineteenth centuries. A sense of correcting historical injustice and wrongs. This is a missing ingredient in the processes unfolding in Latin America and Africa in the last 25 years. ...

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In a closely watched election Mr. Wilders of the far Right in Netherlands gains 20 seats, far behind centre right People's Party for Freedom and Democracy of prime minister Rutte who won 33 seats. The Dutch Green party which is strongly pro- Europe went from 4 seats to 14 seats, the Christian Democratic Appeal party gained 19 seats and the pro-European Democrats 66 party also gained 19 seats. In the 150 member parliament Rutte needs 76 seats to form a new coalition government, and he is likely to ally with these other parties to form a new government that supports strongly the European Union. This editorial in the NYT says the people of the Netherlands turned out in large numbers to support pro-European Union parties. Next the focus is on France and Marie Le Pen's challenge from the far Right. Cyber threats from Russia are seen as a way to discredit otherwise strong candidates, and the French government is taking this seriously. Chancellor Merkel said she "was very happy that a high turnout led to a very pro-European result," and president Hollande said this was "a clear victory against extremism."  ...