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Infratest Dimap polling institute is commissioned by DW.com to find out what Germans think of the refugee policy of chancellor Merkel one year later. In summer 2015 Merkel said on Aug 31, "We can do it." Costs related to the refugees are about $17 billion, do Germans think services are overstretched for education, healthcare housing and other services. On the other side German society is aging and for every 100 unemployed people there are 200 open positions for skilled personnel. But the refugees who are accepted do not have the skills required and have to acquire the skills or given training and education. On this issue DW.com asked the question whether it will strengthen the German economy. About 51% agree and 45% disagree on this question, and about the same number agree and disagree on the question that Germany will be overstretched providing the services for housing, education, healthcare and other services. The higher educated and young are more favorable to accepting refugees, with those over 50 and basic schooling unfavorable. On the AfD side most people are unfavorable, and in the Greens party most are favorable. On terrorist incidents probability, over 58% think this is more likely, 38% disagree. On the question of whether this will make Germany more diverse 56% agree, 40% disagree. Overall the situation appears to be balanced, with a range of views expressed, and the positive and negative sentiment "evenly balanced", says DW.com.  ...

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The recent appointment of fast food executive Andrew Puzder as Labor Secretary has caused great concern among union leaders. Puzder supports a $9 minimum wage compared to $15 supported by Democrats. Unions now represent 7% of the labor force, down from a high of 20% during Reagan's time when Reagan appointed a construction company executive as Labor Secretary and cut regulations.  Globalization has thinned the ranks of workers in unions. And the failure of Democratic administrations to stem the shift of factories overseas to China, Mexico and other places, as part of global supply chains focussed on cost, has weakened Democratic support among workers since the period of Bill Clinton. It eroded to the point where Obama won 65% of support among unions and Hillary Clinton won 56% in 2016. Interestingly the Republican Romney gained 33% versus 37% for Trump, showing voters were more inclined to move away from Democrats and only a smaller number willing to support Republicans, but the shift enough to give Republicans a win in 2016 for the presidency. The figures are from a Election Day survey of trade union AFL-CIO, and a larger proportion in midwestern states showed disaffection with policies from Clinton to Obama. In fact Obama spent years promoting another free trade agreement TPP that favored tech more than auto and older industries, just as Bill Clinton had promoted NAFTA, without giving thought to what this was doing to its worker base of support. A similar situation happened with Social Democrats in Germany as a SPD administration moved to the centre and handed Christian Democrats led by Merkel a win in parliamentary elections. As Democrats such as former Labor Secretary Reich, a professor at UC Berkeley who served under Bill Clinton, describe the problems of working class people their is less reflection on the impact of the changes from globalization and how Democrats handled or mishandled it, and more on the politics between the two parties.   ...

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Australia's minimum wage is set for 2015 at $16.87 Australian dollars per hour, or $13.55 U.S. dollars for people over the age of 20. This is 30% higher than the minimum wage of $10 in California, and almost double the federal minimum wage in the U.S. For years since the late 1990's it has been increased as Australia benefitted from a commodities boom. With the lower employment in the mining and other sectors in 2015, and a fading of the commodities boom, experts say the minimum wage needs to be restrained to reflect the changes in the economy. Unemployment at 4% in 2008, is now 6.1%. Unemployment for people 15-24 not attending school increased to 14.1% in Nov. 2014, declining to 13.1% in Dec. Workers under 21 are paid much less significantly lower on a sliding scale, an idea that could be borrowed in the U.S. as the minimum wage is raised higher to provide adequate income for workers with families to support. Experts point to high unemployment in the 1990's even when there was a low minimum wage. As a matter of fairness the wage setting body in Australia takes into account the median wage. It was 54% of the median wage in 2013, compared to 37% for the U.S., according to the OECD....

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Inflation in the eurozone is running at 0.7%, well below the target of 2%. In a opening speech for a 2 day conference organized by the ECB in May 2014, ECB president Draghi said the increase in the value of the euro since 2011 has made commodities like oil cost less in euros, contributing to lower inflation. A key concern referred to in Draghi's speech is the data from Spain and Portugal about the difficulty for business to get loans in Spain and Portugal. About 25% of Spanish businesses and 33% of Portgual's businesses have difficulty getting loans. Even profitable companies have difficulty getting loans. One way the ECB could tackle this is to make cheap loans available to eurozone banks conditional on the money being lent to businesses and not invested in government bonds, as has happened during prior ECB efforts to capitalize banks.

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John Bolton looks at the continual dithering behaviour of the U.S. president in the Middle East- Iran, Libya, Syria, Iraq in sequence- and provides some insights into the president's behaviour. He says it comes from Obama's distrust of the U.S. role in the world as a positive factor, and a deterministic view of the "arc of history" bending towards outcomes he finds ideologically acceptable. This coincides with a different public perception of America's role in the world, not so much of mistrust and skepticism, as of indifference and focus back on domestic issues following the event of the first war in Iraq and of the 2008-2009 financial crisis. The two are different in nature as the public including women may not share the ideological frame of mind of the president that the U.S. is not overall a serious positive factor in the world through the presidencies of TR, Wilson, FDR, Truman, Ike, to Kennedy, Reagan and Clinton, from the Russo-Japanese war, through the First and Second World War, the Berlin Airlift and the Korean War, to the Balkan conflict. Bolton writes at a time when the two perceptions are about to diverge as the U.S. returns to its normal role of positive and constructive engagement with the world....

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Thomas Sargent of New York University, the 2012 Nobel prize winner in economics, says the EU leaders can learn from the way the federal government in the U.S. handled the issue of state's debt when it came up in the 1790's and in 1840. In 1790 the federal government- under the leadership of Washington and Hamilton- saw the need to honor state's debt because of the contribution made by states in the war of independence and the U.S. assumed state's debt. In 1840 the U.S. refused to assume state's debt and states went into default. The result was beneficial because state's passed balanced budget rules and restrained reckless spending. Another benefit was that this preserved state rights to manage their finances and the federal structure setup under the constitution.

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Critics of the Obama administration's so-called "light footprint strategy" for the Middle East say it is more about keeping distance from problems in that region. This is a reaction to the extensive involvement of the U.S. in two wars in that region and intuitively makes sense, as well as being in line with American public opinion to focus on problems at home. The shift or pivot to Asia of president Obama also comes in that context. The problem with this approach is that this ignores the fact that most of the momentum and effort for the freedom struggles throughout the Middle East from Tunisia first, then Libya, Egypt, and now Syria, comes from within. The lead role is now being taken by France and Britain, with German public opinion also lined up in support. The U.S. in forfeiting its role as a facilitator with strategies such as "no-fly-zones" is losing the opportunity to gain the goodwill in the Middle East with cost that is negligible in comparison to the cost of Iraq and Afghanistan, and comes after the huge U.S. effort to remove one dictator in Iraq. A minor followup effort is all that is required from an administration that pushed for the "surge" in Afghanistan. When history is written the investment of the Obama administration in Afghanistan may show little results, if what is considered by the media and experts as an unpopular and undemocratic government of Karzai falls in the aftermath of the U.S. withdrawal. There is little doubt in public opinion in the U.S. and worldwide that the movement for freedom and democracy in the Middle East and democratically elected governments will become a lasting facet of the new Middle East. It also provides huge opportunties for trade and investment as is shown by the gains made by Turkey in just 2 years. This is why the Obama adminstration policies in the Middle East show a lack of grasp of the facts showing the Middle East as opportunity more than threat for the next decade, especially in its overreaction to the Bush era policies. This happens as there is a demographic explosion of young people in the Middle East. An administration that was keen to sense the demographic changes in North America, has failed to grasp this fact and why the struggle in the Middle East flashes daily on television screens young people carrying on the struggle. A pivot to Asia means a pivot to the Far East more than Asia because India is part of the South Asian-Middle Eastern region, which presents another paradox because as China is slowing the entire South Asian-Middle Eastern region of Asia is where future growth is expected to accelerate in the next decade. ...

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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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An average of major opinion polls compiled by Real Clear Politics website shows 50.5% of Americans opposed to the Obama U.S. health care law.

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There are similarities in the Republican and Democratic party platforms in 2016. One area of agreement is in the reinstatement of Glass Steagall Act. That legislation made in the Depression period to separate commercial banking from investment banking was changed  when president Clinton made changes in a deal with Senators Phil Gramm and Jim Leach in 1999. The too big to fail problems of banks and the problems of investment banks during the 2008 financial crisis are attributed to the lack of Glass Steagall protections for financial stability and safety. The result is that in the post 2016 environment banks can expect a tougher regulatory environment. Another are is in trade where both parties are expected to take tougher positions to protect U.S. interests. The Republican platform calls for "better negotiated trade agreemets that put America first."

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The riots in Athens as the Greek parliament voted to support the passage of an EU plan of austerity cuts, including a 22% cut in the minimum wage, pension cuts and large cuts in the number of government employees. The Popular Orthodox Rally party in the governing Greek coalition withdrew its support, 22 members of the Socialist party and 21 members of the New Democracy party in parliament opposed the measures. Elections are planned for April, 2012. Antonio Samaras, head of the New Democracy party, told parliament that he supported the measure only so that Greece could continue using the euro and have "the possibility tomorrow to negotiate and change the policy that is being imposed on us today."

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This report in the WSJ on a Gallup study with 87,000 interviews points to Trump supporters being affected more by racial isolation and cultural anxiety, health prospect anxiety,  than merely by being working class or in lower income groups affected by the shift in manufacturing jobs overseas. The report confirms previous observations that these Trump supporters are more likely to be whites without bachelors degrees. The information does'nt show that they face abnormally high degree of economic distress as those who have lost jobs in this recession, as they are shown to be less likely to be unemployed, more likely to be self-employed. The Gallup study does not show areas more adversely impacted by trade competition to have higher support for Trump. This is a critical finding.  An interesting finding is that Trump supporters are more likely to live in areas with higher mortality rates and poorer health outcomes, higher obesity rates, and lower rates of intergenerational mobility. This combines with living in much higher rates of being surrounded by whites, whiter and more racially isolated. The finding is that they have high cultural and economic anxiety from not finding their well being and prospects for children meet expectations. This may also explain the tendency not to be able to reason out possible outcomes based on policies of each candidate, less openness and more inward looking behaviours.   ...

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Several experts point to a dangerous change in the nature of unemployment in this downturn. Heidi Shierholz of the Economic Policy Institute, says people are more likely to get stuck with unemployment now than at any time in the post war period. Andrew Stettner, deputy Director of the National Employment Law Project, says a larger share of the unemployed are not going to be able to go to the same line of work. They will need new skills, just like an auto worker in a permanently downsized industry would have to find new skills to make a product in the renewable energy field or health care. And the law as it currently stands does not help either. Because if an unmeployed worker looks for training or goes back to school he loses his unemployment benefits, something the Obama administration proposes to change. What this means is that many of the unemployed will end up as permanent job losers. Rob Valetta, an economist at the San Francisco Federal Reserve Bank says that throughout the the last 3 decades including good times, the unemployment pool is shifting towards permanent job losers. Lawrence Katz, a Harvard University economist, points out that once workers exhaust their unemployment benefits and don't get new training, they become disconnected to the labor market, and bascially end up on disability or become permanently unemployed. The statistics bear this out. In April 2009, 47.1% of the people collecting state unemployment insurance exhausted the usual 26 weeks of benefits without finding work, according to the Bureau of Laor Statistics, that is the highest rate on record. In December 2007, there were about 2 unemployed workers for every job opening, according to Labor Department data. In March 2009 there were five unemployed workers for every opening. Mark Beaupre, 49, of Providence, R.I. lost his $8 an hour manufacturing job an year ago, one of many manufacturing jobs he has held since the 1980's. His wife Cathy lost her customer service job a year ago. This couple who together made $50,000 a year, are now behind on their mortgage payments and have applied for food assistance. At a recent job fair in Providence he says three thousand people turned up and he could not even get into the parking lot. ...

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Christina Romer, Prof. of Economics at the University of California, Berkeley, was chairwoman of the Council of Economic Advisors under U.S. president Obama. Here she discusses the different aspects of the debate on raising the minimum wage. Romer says the negative effects on unemployment are small. The impact on consumer spending is also limited. The anti-poverty effects are real for raising the minimum wage from the current $7.25 an hour, says Romer, as over half the families earning a minimum wage make less than $40,000 an hour. President Obama called for raising the minimum wage to $9 an hour in 2013. Studies show 13 million U.S. workers earning less than $9 an hour. Raising the incomes of these families by about $3500 an year under the president's proposal gives workers badly needed income to cope with rising cost of gas, food and other basic necessities. The effects on consumer spending are small, estimated at between $10 to $20 billion. Its main virtue is keeping the principle of fairness and maintaining social cohesion at a time of increaing inequality. Romer says there is competition for workers which makes it possible for workers at the lower end to get a fair wage, but does not account for the effect of high unemployment which takes pressure off raising the minimum wage in the market economy. Another benefit for countries of keeping a fair minimum wage is that other actions can be taken to improve competitiveness for business and manufacturing and reducing the deficit and be seen in a positive context of overall improvement. This is part of the case made in Europe for boosting the mnimum wage as austerity measures are taking place....

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Brenner of McGill University and Fridson of S&P say the Bernanke Federal Reserve in the U.S. is doing what President Truman and Treasury Secretary Snyder did in the war and postwar years- paying down the U.S. debt as cheaply as possible by inflating the money supply. There are no new monetary insights here, and even though the policy is maintained outwardly as one to promote economic growth and employment, the main focus is to keep the cost of paying down the debt as cheaply as possible with low rates. This hurts savers and retirees earning very little on savings. They cite Bernanke's writings that show he is imitating the policy of the war years when the U.S. held down interest rates and succeeded in doing this for a decade.

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ECB president Mario Draghi describes the problem of financial fragmentation in the EU, as each country's national supervisors ask their banks to withdraw their activities to within national boundaries. This ringfencing of liquidity positions means the interbank market is not functioning. Draghi says this financial fragmentation is within the mandate of the ECB to correct. He points to the risk of convertibility that has more and more to do with the premia being charged for Spain's and Italy's government bonds, not just the perception that the counter party can fail.-"To the extent that these premia have to do with factors inherent to my counterparty, they come into our mandate, they come within our remit." Draghi's effort to define the issues of financial fragmentation, and sovereign premia "hampering the functioning of the monetary policy transmission channels," is critical because the ECB sees it important to act within its mandate. The final point he makes is a political one about the future of the euro: "When people talk about the fragility of the euro, and the increasing fragility of the euro, and perhaps the crisis of the euro, very often non-euro area member states or leaders underestimate the amount of political capital that's been invested in the euro. We view this, and we are not unbiased observers in Frankfurt. We think the euro is irreversible. And its not an empty word now, because it preceded saying exactly what actions we are making that would make it irreversible." On the progress made, the acceptance of one financial and banking supervisor by member countries of the EU is seen as part of the idea of shared sovereignty necessary to put meaningful supervision across national boundaries in place. And on the structural reforms and deficit controls needed to be put in place he sees "the pace has been set, and all the signals that we get are they don't stop reforming themselves."...

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ECB president Mario Draghi tells a newsconference on April 14, 2015, that the bond buying program is "proceeding smoothly." He said that he does not see scarcity in the bond market. The ECB plans to continue its purchases of government bonds and other debt at a rate of 60 billion euros a month through September 2016. He said the program of very low interest rates for a very long time "is fertile terrain for financial instability imbalances," but he did not see evidence of systemically large financial imbalances at this time. The ECB approach would be to tackle the risks by using its power as a bank regulator, not by changing monetary policy, said Draghi. He was optimistic about the initial results, saying "more accomodative monetary policy is being translated into better credit conditions, which is something we have not seen before." The euro is down to $1.06 and low oil prices have helped improve economic conditions, as well as ongoing structural reforms pushed by the EU and ECB. Draghi's forecast for economic growth in the eurozone is now up from 1% to 1.5% for 2015....

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In remarks published in English on the Bundesbank website, Jens Weidmann, Bundesbank president and member of the ECB governing council said: "The ECB should be aware of its independence. This also requires it to respect, and not to overstep its own mandate." This is seen as a pushback by the Bundesbank to ECB president Draghi's comments on July 23, 2012, about doing all that is necessary to keep the eurozone together. Weidmann referring to the situation in France recollecting his days as a student in France in 1987, said there were "two different worldviews colliding." And that this situation prevailed in all political debates right up to the present day. He says about deflationary tendencies -"If these countries go through adjustment processes which result in decreases in wages and prices, then this constitutes one-off shifts in the wage and price structure and not deflation."

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MaC Group, a risk advisor to Spanish banks, says Spanish banks hold about 30 billion pounds of distressed real estate and unsellable land. Prices are down 28% from the peak in 2007, according to a report by the IESE Business School, and are expected to fall a further 15-20 percent in the next 2-3 years by some experts. Much of the bank owned land is far from city centers and there is no demand for this. One Madrid based consultant R.R. de Acuna Asociados, says 43% of bank owned land is poorly located and there may be no demand for unfinished residential units for decades. The new government of Mariano Rajoy plans to take action to cleanup the banking system. Louis de Guindos, director of PricewaterhouseCoopers and IE Business School Center of Finance is expected to become the new finance minister. Guindos says strict rules need to be implemented, with some banks able to handle this and others that won't. MaC Group's Cantos, a managing partner, says the gap is huge between prices offered by banks and what investors will pay- as much as 70%. Prime assets can be sold for 30% discount but the land, residential and commercial real estate will require discounts of 70%. Banks have made provisions for losses of 30%, and are now facing the prospect of another 40% in losses. As a result many of the medium and small sized banks which operate only inside Spain may have to be shut down or consolidated by the government of Mariano Rajoy. Only the larger banks like Banco Santander, Banco Bilbao, La Caxia, and Bankia are likely to surivive....

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In 2010 Chicago Federal Reserve president Charles Evans sugggested the Fed adopt a "7-3 rule"- the Fed would keep interest rates low and credit flowing till unemployment dropped below 7%, and inflation was below 2.5% and not taking off. He modified this to keeping rates low till unemployment reaches 6.5%, as long as inflation remained below 2.5%, on Nov. 27, 2012. In Fed meetings Evans was supported by vice chairman Janet Yellen, with Minneapolis Fed president Kocherlakota and Boston Fed president Rosengren offering similiar proposals. On Dec. 12, 2012, Fed chairman Bernanke announced a position very close to what Evans has suggested. Charles Evans, worked on the staff of the Chicago Fed for 20 years before being appointed president of the Chicago Fed in 2007, at the beginning of the financial crisis.

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The majority report of the Financial Crisis Inquiry Commisssion says Alan Greenspan and Ben Bernanke, regulators, and several financial institutions were responsible for what was an "avoidable disaster." The report criticizes Mr Greenspan for advocating deregulation and considers the failure to stem the flow of toxic mortgages under his leadership at the central bank as a "prime example" of negligence. The report also says that the New York Fed under Timothy Geithner, now Treasury Secretary, also missed signs of trouble at Citigroup and Lehman. There are 6 Democrats and 4 Republicans on the Commission. The fourth Republican has his dissent, calling policies to promote home ownership, the role of Fannie Mae and Freddie Mac a major cause. The panel was hobbled by internal divisions and staff turnover, which have made what should have been a report of major significance into one marred by partisan differences. The majority report itself was heavily shaped by Phil Angelides, the committee's chairman, and it has many literary phrases. Overleveraging was a critical factor in the crisis. For every $40 in assets, the US's 5 largest investment banks had only $1 in capital to cover losses. The banks hid their leveraging with derivatives, off-balance sheet entities and other devices. The banks relied heavily on short-term debt which worsened the crisis. The report also said the Clinton adminstration's decision to exempt over-the counter derivatives from regulation- made in the last year of Clinton's term- also helped set up the ground for later events leading to the crisis....

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Wall Street Journal reporters Walker in Berlin, Forelle in Brussels, and Meichtry in Rome, reconstruct the events during critical days after the indecision and failure to reach agreement during the July summit of eurozone countries. This took the form of intervews with leading players and over 25 policy makers. What emerges are accounts of how Germany's Angela Merkel, daughter of a Lutheran pastor, and protege of Eurozone founder, former German chancellor Helmut Kohl, handled the crisis. Merkel was widely criticized in the media for indecision. What emerges is an account of a leader who took decisive action at key moments in the crisis- leading to the formation of new governments in Greece and Italy taking action to improve finances, and negotiations with banks represented by the International Finance Corporation leading to acceptance by banks of a 50% loss on loans to Greece to reduce Greece's unsustainable debt burden. Merkel also worked with the European Central Bank's departing president Frenchman Claude Trichet and new president Italian Mario Draghi to resist French president Sarkozy's efforts to have the ECB assume responsibility for the crisis through large scale buying of Italian and Spanish bonds; which was opposed by German public opinion as a backdoor way of having German taxpayers assume responsibility for European debt. Shown are three critical moments when Merkel intervened. In October 2011, after Italian prime minister Berlusconi reneged on promises to make pension and other reforms to improve Italian finances because of political resistance. He survived a parliamentary no-confidence vote by one vote. Merkel took the lead on October 20, by directly calling Italian President Georgio Napolitano on the phone, to urge him to take action for forming a new government in Italy. The result was Napolitano talking with all political parties to form a new government, leading to the formation of a government by a non-political figure respected in Italy, former EU commissioner Mario Monti. A day earlier, on October 19, French President Sarkozy met ECB president, Trichet, at an event honoring him as departing ECB president in Frankfurt's Alte Oper concert hall. Trichet, Merkel and Sarkozy met in a side room. Sarkozy asked for decisive help from the ECB for large scale buying of Italian and Spanish bonds to lower yields, which had reached 7% on Italian bonds. Trichet responded that the ECB's charter did not allow it to finance governments, with the meeting ending in a shouting match between the two leaders. On October 21, EU and IMF inspectors warned that Greece's debt was reaching unsustainable proportions and austerity measures alone would not work, unless the bondholders, the European banks, took losses of 60% on their excessive lending to Greece. At this point France agreed to the German position arguing for this level of bondholder haircuts or losses, fearing the prospect of large future bailouts that would jeopardize France's triple AAA credit rating. The July 2011 summit accord had only provided for 10% in losses for bondholders. On October 27, at a meeting that went past midnight, Merkel and Sarkozy called IIF head Charles Dallara, who headed negotiating for the banks, to EU headquarters in Brussels. Merkel handed Dallara an agreement containing the 50% bondholder loss demand, and told Dallara- "This is the last offer." Merkel was saying banks would be left with nothing if they rejected it and Greece defaulted. Dallara called bankers and the IIF accepted Merkel's agreement. The final moment that October came on October 31, when Greece's prime minister Papandreou said he would call a referendum on the bailout provisions and austerity measures demanded by the IMF, the EU and the ECB. Bond markets reacted negatively to the announcement fearing a rejection and a Greek default. The Group of 20 leaders was meeting in Cannes, France on Nov. 2, 2011. Papandreou was asked to come to Cannes for a pre-summit meeting. Here Merkel told Papandreou- "the real question" for the referendum was, "Do you want to be in the euro, or not?" Days later Papandreou, lacking support in Greece from political parties and opposition inside his party, submitted his resignation. A non-political figure respected in Greece, former ECB vice president, Lucas Papademos, was appointed prime minister to head a Unity government. Polls after the appointment showed three fourths of Greeks said that this was "a positive step for Greece," with Papandreou's party getting only 11% support and the opposition led by Samaras about 20%. The criticism leveled at Merkel is that Germany should take responsibility for debt throughout the euro area through the issuance of eurozone bonds or the ECB buying large amount of bonds of Spain and Italy. Merkel faced strong opposition inside Germany and from the Bundesbank to this idea. The other criticism was based on austerity measures worsening the finances of Greece because of a lack of growth in the economy, which is true; yet Germany may see the situation in Greece as taking a long time to be resolved in any event because of excessive and faulty financial management. For Italy and Spain putting finances in order was a necessity, and austerity measures should lead to short term sacrifice but improve prospects for the long term by returning the economies to growth. Another criticism is the installation of governments that lack popular or electoral support. As the polls in Greece showed the Unity government there has far greater support and public opinion blames the politicians for the huge mess. In Italy, Berlusconi was widely seen as losing popular support when he resigned. And in Spain Mariano Rajoy, the newly elected prime minister, was elected with a huge majority in parliament following winning in local government elections. Merkel also held her own party, the Chrisitian Democrats together at the recent Leipzig convention. Mario Draghi, was elected with German support to head the European Central Bank. He has long argued for better management of Italian finances as head of Italy's central bank. Draghi was able to support Merkel with carefully planned and managed actions. First to reduce interest rates to support economic growth in a slowing eurozone. Following this with the ECB's Long Term Financing Operation in late December 2011, to provide unlimited loans to European banks at 1% interest for three years in exchange for a broadened list of collateral deposited at the ECB. In a final twist in this drama, Charles Dallara, who was a key negotiator for the U.S. Treasury in setting up the Brady Bonds- that converted bad Latin American government debt owed to U.S. banks in the 1980's into long term debt with large reductions in principal owed and lower interest rates. This was in exchange for guaranteed repayment with 30 year U.S. zero coupon bonds. Dallara was now a negotiator for the banks to reduce the chance of the very same bondholder haircuts that he had negotiated in an earlier period to solve the Latin American debt crisis. Other players in the drama were Axel Weber, head of the Bundesbank, Germany's central bank, who resigned after strong and outspoken opposition to the ECB's large scale purchase of bonds of Greece, Italy and Spain. Jens Weidmann, his protege, who replaced him. And Jurgen Stark, German representative at the ECB, who also resigned in opposition to Germany assuming responsibility for eurozone debt. ...

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523 European banks borrowed 489 billion euros from the European Central Bank on Dec. 21, 2011, under the newly created Long Term Financing Operation of the ECB. This is designed to meet the financing needs of European banks which are shutoff from normal financing of selling unsecured bonds to private investors because of market anxiety. Much of this is for replacing other outstanding ECB loans, with analysts estimating about 190 billion euros of new liquidity being injected into the banking system. This also has the effect of reducing the borrowing rates for government bonds. In Spain the government sold 5.6 billion euros of government bonds at an auction on Dec. 20, 2011, with the interest rates dropping from 5.7% a month earlier to 1.7%. Small and midsize banks in Spain helped surging demand by buying the bonds to use as collateral for three year loans from the ECB at 1%.