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The strong showing by National Front leader Marie Le Pen and her focus on the economy in France, and the lack of growth with austerity measures, is likely to change the way the eurozone countries respond to the deficits and German insistence on austerity cuts. Marie Le Pen's economic positions for more government spending to reduce unemployment and provide additional benefits is closer to Socialist candidate Hollande's position. The right wing party in Holland also voiced the same concern recently- that it did not want to hurt Dutch pensioners with austerity cuts- when it refused to support the Dutch government leading to its collapse and new elections.

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An increasing portion of Spain's 663 billion euros, or $876 billion, in home mortgages is likely to default. As unemployment rises and unemployment benefits run out for the unemployed more people are likely to default under the burden of large debt. Some of the largest Spanish banks are likely to need a bailout. Analysts estimate a bailout of Spain to be at least 200 billion euros or $264 billon. The large increase in the IMF Fund recently completed by IMF head Christine Lagarde may be designed to handle such a crisis.

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Scott Shane of the NYT provides this exceptional account of how the ideology of Wahhabism on which the Saudi monarchy is based has influenced the evolution of Islam, but not in the way other religions have evolved into more moderate and open religions. Christianity evolved from the period of religious conflict, and evolved to the point that the basis of progress was based on education and technology in most of northern and southern Europe. Where the evolution did not take place because of more intolerant behaviours such as in Spain with the Spanish Inquisition and ideas from the medieval period, this development based on education and technology lagged severely behind.  Wahhabism developed as a result of a sect started by a religious cleric Wahhab in a poor desert region around Mecca and Medina, now the Saudi Kingdom, who sought the help of a tribal chief Ibn Saud. They used the religious-political alliance to gain tribal dominance in the region. Wahhabism sought to change Islam by banning worship and religious rites at tombs common in that period. It also as Brookings scholar William McCants cited here says, drew "sharp lines" and intolerance between believers and non-believers- all non-believers including other sects of Islam, Shiites, Christians. The movement spread throughout the region, but was crushed by the Ottoman Empire based in Istanbul, Turkey, by the 1850's, only to be revived in the 1920's following the collapse of the Ottoman Empire. A Norwegian expert Heggenhammer cited here says clearly Islam did not benefit from the evolution that other religions had, and Wahhabism has slowed this evolution into and open, tolerant religion because of its "sharp lines" and intolerance of other faiths and ideas with the Wahhabism from a medieval perod. In India the British rule brought enlightenment thinkers (John Stuart Mill for example was a clerk for the British East India company). But no such change happened under Ottoman rule to inspire leaders like Gandhi and Nehru to setup a new constitution that made changes from medieval Hindu beliefs such as caste and religious practices based on superstition.  The development of an oil rich state in Saudi Arabia with the discovery of oil, and the dependence from 1950-2010 of the global economy, has led say experts to the export of the Wahhabist kind of Islam to other countries in Middle East and South Asia. This they say made the evolution to democracy and peaceful coexistence difficult or impossible in the region. ...

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Germany's central bank, the Bundesbank, has 495 billion euros in claims on the European Central Bank through the interbank payment system known as Target2. Hans-Werner Sinn, president of the Ifo Institute in Munich, says the breakup of the Euro zone would mean that this claim would be put at risk. Data compiled by Tornel of the University of California, Los Angeles, and Westermann of the University of Osnabruck, Germany, show Target claims going from 7% of Bundesbank assets in the beginning of 2006 to 64% by October 2011. Collateral on these loans held by the ECB is mainly sovereign debt of the financially weakest ECB countries such as Greece, Ireland, Portugal and Spain. Losses on these loans are to be distributed among 17 eurozone central banks according to the proportion of their share in ECB capital, with Germany's being 28%. However with dire finances in some countries Germany could end up with a much larger share of losses. This gives Germany one more reason for the statement that the breakup of the eurozone is unthinkable....

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Portugal's foreign minister, Paulo Portas, resigns in protest against continuity of austerity measures signalled by the selection of Ms. Albuquerque as the new finance minister. Portas's party is part of the coalition of centre right parties in the administration of prime minister, Pedro Passos Coelho. Cuts in public employee pay and spending on health and education, income and sales tax increases, have cut the deficit to 6.4% of GDP by 2013 from about 10% in 2010. The cost of this is an economy that is shrinking more than expected- by 4.8% in 2011 and 2012, and an additional 2.3% in 2013. Unemployment exceeds 17% in 2013. The loan terms negotiated for the 78 billion euro bailout with the IMF and E.U. in 2010, were renegotiated so that the 3% of GDP target for the deficit for 2013 was relaxed to 5.5%. Portas's party and other leaders are calling for a further renegotiation to take into account the economic conditions in Portugal and boost growth. Portas's party opposed the effort to cut labor costs of companies with a large increase in worker social security contributions, a measure seen as counterproductive even by business leaders that was later dropped. In financial markets the 10 year Portugal bond yield increased 0.22% to 6.615%....

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The 15 nation euro area contracted by 0.2 % in the 2nd quarter of 2008. Figures for France, Spain and Germany showed flat or receding growth.

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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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Mexico sends 80% of its exports to the US, and China a significant $439 billion in additional exports to US, which makes it incredible that for so long it did not take effective action to stop fentanyl flows, and Mexico allowed migrant trafficking across it's borders through 2016-2024. Even in the face of this becoming an explosive issue in the US with DJT elected in 2016 and the Border Wall being built. A silent but still existing in plain sight idea that the US would tolerate such flows became part of the culture in media outlets in the US and Europe and China and other parts of the world, even when there was a storm of discontent building about manufacturing shipped overseas hurting communities in the US since 2010, with added burden of safety endangered in these neighborhoods from fentanyl, drugs and illegal migrants. What worsened this situation and pain in the US was the idea that somehow it was the US's fault, an incomprehensible disdain for the US, US that enabled the modernization of China, Mexico, and Canada's economies. China sends $439 billion in exports more than the US does to China (US exports $143 billion China $582 billion in 2024). It is only surface presentation of indignation of face saving that these trading partners are showing when the real facts point to an extraordinary and incomprehensible disdain for the US as a nation in decline. There is a feeling in parts of Europe of American disdain for  Europe, without mention of the disdain for the US in Europe, China, Mexico and Canada and other parts of the world. Particularly disdain for neglected communities in the US that have suffered for far too long under previous administrations of Clinton-Bush-Obama with shipping of manufacturing and jobs overseas and inaction on drugs and illegal migrant flows. The EU Canada retaliatory approach has not worked. When DJT proposed doubling the tariffs imposed by US in the face of Canada EU retaliatory steps, the EU and Canada pulled back. Part of the reason is that in the case of Canada it is an economy one tenth the size of the US. The other is that there are real concerns on the US side that Canada EU are not playing fairly in trade. And Canada, Mexico, China, have not stopped the flow of fentanyl into the US.  ...

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Polls by Renato Mannheimer show popular support for the People of Freedom party of Mr. Berlusconi, which won 37% of the vote in 2008, is now down to 17% This comes after a series of corruption scandals. The most recent involves embezzlement of 1.7 million dollars by a politician from the Rome-Lazio regional government. New parties are being formed which are drawing increasing support. The Five Star Movement of Beppe Grillo, a former comedian, which opposes being in the eurozone and calls it a "noose" for Italy shows 18% support, according to a poll by the SWG agency. In that poll the Italy of Values party had 6% support, and the Left Ecology party 6%. Mannheimer says only one third of Italian voters are now in favor of the large established parties, indicating a big change is underway in Italian politics. The new parties are also critical of prime minister Monti's policies. This happens just as political and business leaders in Italy are calling for Monti to run for office to continue policy changes he has made to improve Italy's competitiveness and lead to economic recovery. Monti, a former EU Commissioner, was appointed as prime minister after pressure from German chancellor Merkel and the EU led to a loss of parliamentary support for Mr Berlusconi with key members of his own party defecting. After passing legislation for changes to Italian labor laws and making other shanges to improve Italy's competitiveness since taking office in November 2011, Monti is now seen in Italy, and outside Italy in EU circles, as the only person who can lead Italy out of the economic crisis; even though his reforms and austerity measures have not proved popular....

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In a shift from statements at earlier summits which focussed on fiscal restraint, the Camp David summit continued the "firm committment to fiscal consolidation," yet emphasized jobs and economic growth as "imperative." There is new flexibility to address needs for economic growth and no specific timetables for fiscal balance as in previous summits. Obama had many one to one encounters with the other leaders. He discussed the euro crisis with Cameron while working out on a treadmill, and watched the Champions League soccer final between Chelsea and Bayern Munich with Merkel and Cameron. Each leader of the G-8, Harper of Canada, Monti of Italy, Hollande of France, Medvedev of Russia, Cameron of Britain, Noda of Japan, Merkel of Germany, was assigned a cabin in the rustic wooded setting of Camp David's mountains. A special effort was made to see that Germany's Merkel did not feel isolated in the setting because of the growing sentiment that austerity policies pushed by Germany are not working. On Iran, Obama stated that he was "hopeful that we can resolve this issue in a peaceful fashion that recognizes their sovereignty, but also recognizes their responsibilities."...

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The Bank of Italy, is conducting central bank examinations of Italian banks in July 2013. The loan portfolios of the 8 largest banks are being examined, and on-site inspections are being conducted for 20 other banks. This could lead to Italian banks having to sell assets or take other steps to improve capital positions. During the last central bank examinations in the fall of 2012 Italian banks were required to set aside 3.4 billion euros to protect against bad loan losses. Bad loan losses are increasing at Italian banks as businesses and individuals fall behind on payments with the worsening economy in 2013, and into 2014. Non-performing loans are up to 249 billion euros, or 14.2% of the banking industry's total loans, according to the Bank of Italy. This is up from 157 billion euros, or 8.9% of total loans in 2010.

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This Economist briefing on Spain concludes that Spain has achieved much since the 1978 constitution setup the basis for democracy and human rights, administrative decentralisation. Referendums can be polarizing and a better solution can be found by recognizing Catalan cultural diversity within Spain, says the Economist. Spain has shown that it can be democratic, be tolerant of immigration, respect human rights, and has increased participation of women in government. The hurdle of Catalan separatism can be overcome though embracing cultural diversity.

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Moody's downgrades the credit ratings of 26 Italian banks in May 2012. Italy's largest retail bank Intesa Sanpaolo SpA, showed net profit of 804 million euros, up 22% from the prior year. Of this 183 million euros was from capital gains made using the ECB low cost loans under special ECB financing to buy government debt. The ECB financing was through the Long Term Refinancing Operation launched by the ECB in December 2011, which benefitted Italian and Spanish banks.

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Spain delays setting up a financing mechanism for aiding regions short of funds by extending existing credits till Spain's high bond yields of 7% decline.

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Efforts being made to convince the Spanish government of Mariano Rajoy to accept IMF aid to recapitalize its banks. The IMF released information showing Spanish banks would need to raise at least 37 billion euros or $46 billion to prevent a worsening of the banking crisis. The report was released before the meeting of EU finance ministers on June 9-10 to persuade the Spanish government to accept IMF aid. The eurozone bailout fund was given powers in 2011 to make loans to governments for the purpose of recapitalizing banks, with conditions and terms set for the financial sector not for the government's spending plans. According to people aware of the discussions taking place in the European Commission and the IMF, one option is to have the European Banking Authority and not the IMF oversee the program. This avoids the usual stigma of accepting aid coming from the IMF with strict conditions attached including restrictions on the government's fiscal plans.

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Portugal showed growth in GDP of 1.1% in the second quarter of 2013 from the prior quarter, according to Eurostat. Higher petroleum exports and better prices were part of the reason for the improvement in exports. At the same time Portugal's business leaders and mid sized businesses are improving competitiveness and exports as a way to create growth. Here the NYT's Raphael Minder shows the progress in exporting olive oil at a midsized olive producing farm business in the Alentejo region of Portugal. Morais de Almeida and Miguel de Almeida shifted direction to export to Brazil at this 127 year old olive farm business called Herdade de Manantiz. Manantiz had to use European and Portuguese rural development subsidies for 40% of the cost to put in its first irrigation system, as banks have reduced credit. The Almeida family tapped into family savings for the rest of the funds. This investment of 197,000 euros will help quadruple production at the 529 acre olive farm and generate exports. Brazil took in 524 bottles, and buyers are being contacted in Sweden and Japan for the oil produced from galega olives, unique to Portugal....

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S&P downgrades France's credit rating from AA+ to AA. Government spending at 56% of GDP remains at the second highest level in the EU, second to Denmark. President Hollande has reduced the deficit mainly by raising taxes which is seen as having reached its limit. The French economic growth was at 0.5% for the second quarter of 2013 compared to the first quarter, unemployment is high at 11.1%.