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Germany's parliament, the Bundestag, ratified the fiscal pact agreement of eurozone countries of December 2011 on June 29, 2012. A two thirds majority was needed to approve the pact and the rescue fund called the European Financial Stability Facility or European Stability Mechanism. To get the opposition Social Democrats support chancellor Merkel had to agree to a "growth pact" at the June 2012 EU summit, a condition made by the opposition. Facing persistent German opposition in the negotiations for short term measures to allow the rescue fund to buy Spanish and Italian bonds directly in private markets and give direct aid to Spanish and Italian banks, prime minister Monti of Italy and prime minister Rajoy of Spain as a last resort told chancellor Merkel they would block the EU growth measures. It is at that point that Merkel made the concessions to allow direct aid by the rescue fund. Blocking the growth measures would have blocked the approval of the fiscal pact which Merkel had negotiated in December 2011, as the opposition Social Democrats would then withdraw their support. It is this manouevre that finally achieved a breakthrough in the marathon 14 hour negotations between Mario Monti and Angela Merkel, which Monti described as "hard and tense" but "worth it." ...

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Russia's decision to make Crimea an autonomous region inside Russia. This follows a referendum in which Crimeans voted to join Russia. Russian president Putin says Russia has no further interest in the rest of Ukraine.

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Actually some of this is a healthy development as more nations and people have a stake in the world economy. Take the Brazil situation for example . Clearly the Brazilian people are more favorable to globalization and its benefits than they were a decade ago at the height of the Asian crisis and the contagion effect on Brazil. Actually the advantages of free trade and a global trading system that benefits Brazil as well as China and India and other countries that buy its commodities such as iron ore is more now than ever because these nationas are benefitting from this trade. Because of the high prices of commodities and the agricultural products of Brazil, it has a currrent account surplus and its currency is strengthening. Instead of having to go to the IMF for assistance Brazil has large foreign exchange reserves that support its currency and which help it push up its investments as a share of GDP from 19% to closer to 25%, which should enable it to sustain about 5% growth year after year., according to Sergio Vale of MB Associados. A strong real, lower interest rates, and consumer credit have boosted the purchasing power of the middle class and the antipoverty programs of the Lula government have helped the poorer classes have a stake in the development. According to a recent Observador/Ipsos survey 23 million Brazilians have left social classes D and E and joined class C whose distinctive markings are a rented apartment, a car and some new gadgets. Actually quite to the contrary of the impression created by this article Brazil according to a former central bank governor is now showing a new enthusiasm for this kind of development which encompasses free trade and markets, a feeling that the stockmarket is not a casino and being part of the world economy is a good thing. The big discoveries of oil at Tupi and Carioca-Sugar Loaf in Atlantic offshore waters by Petrobras even though they are in miles deep waters and require special expertise must only have reinforced this mood. The danger to Brazil's enthusiasm comes not from nationalism of different countries trying to find better ways of meeting the aspirations of their people but from the risks in a global slowdown that started with the US subprime and mortgage crisis, the resulting credit tightening, and fall in consumption thats expected after years of overspending by the American consumer. Its now upto these individual countries, like Brazil, China, India and Russia, Japan as well as Germany France and other countries that are not directly part of the housing bubble and subprime and mortgage securitization mess affecting the USA, and the UK and Ireland and Spain to a lesser extent, to find ways of maintaining more modest but still substantial growth to meet the growing aspirations of people in these countries. In this sense the policy errors and regulatory errors made during this last decade in the US will actually have hurt the world economy and markets in a serious manner, and it is this that has now to be managed in a better way by these countries with the close cooperation between them and the USA. The situation in Brazil is repeated in the experience of India, China and Russia where for the first time there is enthusiasm for being part of the world economy. In the light of this development there is more reason for hope and more need for careful navigation mechanisms for these and other countries to weather the difficulties from a global slowdown and still sustain development that itself could help the USA work its way out of the current crisis through its exports....

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In August 2008 Russia invaded Georgia and established the independence of the 2 breakaway countries of South Ossetia and Abkhazia. Georgia tried to enter NATO that year but the French and the Germans objected, and the U.S. did not want to commit deep in the Caucasus region. In the 2012 election the anti-Moscow government of Mr. Saakashvili was replaced by a government that sought friendly relations with the West and with Russia. There are still no embassies between Russia and Georgia. A special representative to Russia was appointed in the new government of Mr. Bidzina Ivanishvili, a billionaire who made his money in metals and banking in Russia. Saakashvili is now a Ukrainian citizen and is a governor of Odessa province, on the Black Sea, with separatist influence. Russia's trade ties with Georgia, a destination for Georgia's exports including wine, are gradually being restored after a trade embargo imposed in 2006. The trade embargo was lifted in 2013. The representative to Russia says its no use keeping the illusion of NATO membership even though it is an objective, as Georgia has to defend itself, the consequence of being in a difficult region. The strident anti-Russian rhetoric is now muted, as Georgia rethinks its relationship with Russia and the West to live in a difficult neighborhood. Ukraine went through some wild swings with the Orange Revolution, and the change in government to a pro-Russian government that jailed the earlier leader for corruption, leading to the protest movement calling for close relations to the West, the collapse of the elected pro-Russian government followed by the election of Mr. Poroshenko, and the Russian intervention in Ukraine in 2014-2015, leading to western sanctions on Russia. The sanctions end in Jan 31, 2016. The situation in Ukraine may stabilize where the NATO readiness force and German chancellor Merkel's call for "a persistent NATO presence in the Baltic states," lead to a situation where Russia determines the best course is cooperation with its neighbors, and trade, economic relations....

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Italy's prime minister, Mario Monti, a senior EU official before becoming prime minister, has the credibility and credentials to bring the French and German sides together on a new plan forward for the European Union, says Steven Pearlstein of the Washington Post. In this report from Rome, where leaders of Italy, Spain, France and Germany are meeting to discuss solutions Pearlstein describes the solutions Monti is putting forward. The European Investment Fund would be built up so that it has funding of about $175 billion or 1% of Europe's GDP to finance truly productivity and growth enhancing projects of innovative small and medium sized business in transportation, energy, education and environmental sectors. These companies have suffered shortages of capital as banks pulled bank from lending. It is the inadequate private investment that is causing the greatest damage in this crisis and $175 billion is at the low end of the amount needed in this crisis. Other steps Monti is pushing forward- for immediate steps to tackle the crisis deposit insurance to prevent a run on banks is essential for European banks. This would come with a eurozone regulatory authority that would have the powers to regulate European banks. The European Financial Stability Facility would be the "sovereign buyer of last resort," under Monti's proposal. Eurobonds come up as a key part of the solution. This is not because German and French taxpayers would be required to finance economies of Spain and Italy. As was shown by the U.S. Troubled Asset Relief Program (TARP) a well designed program could pay for itself. This would include the EU financial authority taking up stakes in the banks getting help and closing banks that are insolvent. The key point is that if properly executed and executed in a timely and appropriate way this does not have to cost French and German taxpayers- the important thing being to support the eurozone economies before the situation deteriorates. Borrowing at 6% for Spain and Italy will only put the situation out of control as deficits rise rapidly. The concessions for tighter regulation of European banking systems, reducing risk in banking, setting up adequate reserves, closing poorly run banks, and ceding powers to a European Financial Authority that can make the final decisions, are the steps that would have to go with these arrangements. Sound financial management requires that the kind of banking risks taken in the speculative bubbles in Spain, the lack of transparency and credibility in banking estimates of bad loans in the system, and the glossing over the problems at Bankia, would have to be addressed in solutions through regulation by a credible European Financial Authority to convince skeptical German public opinion that financial accounts are conducted in a proper manner....

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Manuel Barroso, president of the European Commission, tells Italian newspaper La Repubblica on September 1, 2014, that Russian president Putin made some abnormal remarks in a phone conversation. Responding to Barroso's question about whether Russian troops had crossed into eastern Ukraine, Putin is reported to say: "That is not the question... But if I wanted to, I could take Kiev in two weeks." The WSJ editorial on September 3 referred to an earlier editorial on "Putin Bonaparte," giving some idea of how such comments by Putin are seen in the media, and how Putin's actions in Ukraine are creating new tensions with the NATO alliance and the U.S.

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Portugal's parliament gave preliminary approval to a new budget bill with 4.3 billion euros in tax increases on income, captal gains, property and car ownership, and 1 billion euros in spending cuts compared to the 2012 budget. Banco Espirito Santo was able to sell 750 million euros in 3 year bonds with an interest rate of 5.875%. Over 200 investors from France, UK, Germany made buying offers of more than 2.7 billion euros. The rate is lower than expected and reflects ECB policy support for bond markets of countries requesting aid.

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Patricia Kowsmann provides this picture of life in a town on Portugal's northern coast, Viana do Castelo, with a population of 87,000, as Portugal struggles to make a recovery. Viana do Castelo has shipyards and companies making metal bridges for highways. The money losing state owned shipyard was privatized and sold to Martifer SGPS SA to run till 2031. 600 workers at the shipyard were laid off. The new company plans to rehire 400 workers by 2016 but jobs will not be permanent. Companies making the bridges now sell to former Portuguese colonies of Angola, Mozambique, Brazil. 200,000 people have left the country to look for jobs or higer education, including the mayor's daughter in London. Exports are up and now make up 40% of Portugal's GDP, up from 27% in 2009. The economic growth is 0.9% in 2014, after declining 6% 2011-2013. Portugal accepted the last instalment of the bailout loan of 78 billion euros in 2014. It will auction 1.25 billion euros of bonds on July 22, 2015. Unemployment is now declining dropping to 14% from a high of 17%, and higher than the pre crisis level of 11%. Here in this coastal town the mayor Jose Maria Costa cut public employee salaries 15%, and also cut sports and cultural programs. Two food centers provide free lunch and dinner, and half of the 4000 children in school get subsidies for food and transport. A shipyard worker Antonio Gomes Barbosa 64, is one of the laid off workers. His son's architecture company closed and he left Portugal for Angola. Some of his co-workers now work at a shipyard in neighboring Spain....

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Iran will discontinue the second phase of the subsidy reduction program as the currency depreciates drastically in October 2012.

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Spanish banks agreed to reforms and job cuts as a condition for a 37 billion euro loan from the eurozone bailout fund, the European Stability Mechanism. The restructuring plan applies to Bankia, Novagalicia Banco, Catalunya Banc and Banco de Valencia, with the largest job cuts at Bankia bank. Bankia will have 6000 job cuts, 28% of the total employees, and cut branches by 39%. Banco de Valencia will be absorbed into Caixabank and receive 4.5 billion euros of the loan payment approved.

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Patrick Buisson, a key Sarkozy adviser, who helped him win the presidential election in 2007, says Marie LePen's chances in the 2017 election are dimmer than people realize. Her Front National is popular in the north of France with working class people who formerly voted in favor of the Communist or Left parties. In the south of France in areas like Nice her niece Marion is popular with people who have social views on the right on abortion, and gay marraige. The problem is reconciling these 2 blocs of voters and the way Le Pen appears to have moderated her views on social issues. The opposing candidate from the Right parties formerly led by Sarkozy is Francois Fillon, actually prime minister for the full term of 5 years under Sarkozy. Fillon's views are closer to the FN voters in the south and opposes gay marraige and abortion, and has a strong foothold with Catholic voters in traditionally Catholic France. It is this split that hurts LePen who had hoped to run against Bordeaux mayor LeJuppe. The left parties are in disarray and likely not to be a factor. Another difference is that the voters in the south of FN do not see it the same way as FN voters in the north on issues of increasing the size of the state. Voters in southern France do not favor increasing the size of the state as Le Pen has promised and opposed by Fillon. Fillon has plans to cut France's large state employees by 600,000. France has a large state owned sector of companies and increasing the work week to 48 hours, reducing the state sector size to help private companies with incentives is seen as a way to increase productivity and grow the economy, plans supported by Fillon. A major problem for Marie LePen is her family name of Le Pen which Buisson says people in France associate with her father Jean LePen, and extremist positions. Buisson thinks Marie LePen will never be able to shake off this image in the second round of the election as she loses some of her right wing Catholic support to Fillon, and fails to attract enough working class voters in the north of France because of the family name. ...

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The prospect of a combined vote of 30-35% for both major political parties of Samaras and Venizelos, with the rest of the vote splintered among right and left wing parties, in the 2012 Greece elections. This will make governing with austerity measures even more difficult.

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After the debt swap of old bonds for new bonds with private bondholders for an estimated 53% haircut, the IMF's March 2012 report on Greece says a lot remains unresolved. It predicts a "disorderly exit from the euro" without further help. The April 2012 elections may result in a dilution to committments to austerity policies in Greece, as these policies are highly unpopular in Greece. Greece is still "accident-prone." And competitiveness issues may take over a decade to resolve.

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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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Prime minister Monti of Italy played a key role in getting Germany to accept short term measures for the eurozone crisis. This includes having the European Financial Stability Facility, the eurozone's bailout fund, buying govenment bonds of Spain and Italy directly in private markets to reduce the unsustainably high yields on these bonds. The plans proposed by the EU include setting up a European banking regulator.

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The Wall Street Journal in a recent editorial called the European Union's June 2011 plan for Greece "the French Deception," because it favored French and German banks but made Greece's debt burden even less manageable. The Economist views the European Union actions with disdain and says they are sure to fail. It is skeptical whether the spending cuts will work because Greece's politicians are not likely to address the problems of poor tax and other payments collection, and is too interconnected with favored groups and lobbies to be able to take the needed actions. And spending cuts will fall hard on ordinary Greeks. Even with job cuts the sense is that it will fall not on full time civil servants with permanent contracts but people with temporary contracts. The Economist cites the example of items such as the overgenerous markup allowed for pharmacists that adds another 1.5 billion euros to the budget which will remain untouched as an example of many such items where the cuts will not fall because of strong lobbies and favored interests. The privatization scheme is deemed unrealistic because it expects to raise 51 billion euros in a crash sale of assets, which only makes it more likely that assets could fall into the hands of cronies with the right connections. The current efforts only make ordinary Greeks worse off with spending cuts and new taxes. The negative impact on economic growth of the austerity cuts creates the prospect for a deeper recession, political turmoil, and a debt default....