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Joseph Stiglitz writes that keeping the dollar as the reserve currency is no longer the option. He tells us that it comes with some hidden costs such as a weaker global economy. Having developing countries keep hundreds of billions of dollars in the US in low interest earning reserves makes no sense considering the needs of developing countries, and the improved prospects for the USA and Europe in exports to a growing developing country economies. He points out that a new global reserve currency, with an orderly transition, may be the most important reform to ensure the longterm health of the world's economy. Its bad for the USA to keep exporting T-bills, says Stiglitz, as it does not create jobs. And its bad for all concerned as it lowers global economic growth. Especially he says when it is so unseemly for developing countries not to use the money to improve living standards in their own countries, with the help of exports from developed countries, that in the end improves global growth and the global future....

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Wolfgang Ischinger, former German ambassador to the U.S. 2001-2006 and president of the Munich Security Conference, says that one thing that would make a difference in the current state of German and European relations with the U.S. after NSA spying on chancellor Merkel, is for president Obama to show contrition. The continuing dynamics are important, as is evident in the deterioration in relations in 2003 following the American intervention in Iraq when not enough was done, says Ischinger. His view is that the proposals to limit diplomatic personnel of the U.S. in European countries, or putting on hold the Trans-Atlantic trade talks, are not good ideas as they do not help restore trust. Building on a report by the European parliament in 2001 on protections against intelligence operations would be a good start.

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Nick Clegg, deputy prime minister, and the leader of the British Liberal Democrats party, the junior member in the coalition government in Britain, said he was "bitterly disappointed" by prime minister Cameron's decision to reject a pact for 27 EU nations to revise E.U. treaties. He told the BBC in a long interview :"This is bad for Britain." Britain is close to becoming a country "hovering in the mid-Atlantic and not being taken seriously in Europe." But he said "it would be a disaster" for the Liberal Democrats to withdraw from the coalition. Cameron's conditions for protecting Britain's financial industry were rejected by Merkel and Sarkozy.

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People in Poland, Hungary, and other countries in Central Europe took out mortgages in Swiss Francs. The jump in the value of the Franc means their payments go up increasing economic pain in these countries. In Hungary the government of Viktor Orban has converted most franc loans into local currency forint loans at favorable rates and this will now be seen as a remarkably positive move. Poland has a growing economy compared to Hungary with borrowers in francs with higher incomes than Hungary, yet with 37% of the homeowner loans in Swiss Francs political parties are looking for support before elections offering to shift these loans into the local currency. Banks in Poland are well capitalized and are not likely to be seriously affected.

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France's unemployment rate for youth 15-24 is over 25%. France's president Hollande has a plan to get companies to hire young workers on a permanent contract. The "generation contract" gives small business 4000 euros a year for three years to hire a young person on a permanent contract a the same time committing to keep an employee over 57 years in age. Companies with over 300 employees are required to set targets for hiring younger workers and keeping older workers or face sanctions. The program would cost France $1 billion a year and the government estimate is to generate 500,000 jobs in 5 years. A think tank OFCE sees this as generating about 100,000 jobs, because many companies would have hired anyway. The German approach is focussed on state sponsored apprenticeships and vocational training, which some French companies says is the right direction for France. German youth unemployment is 8.1%, with 2.6 million students at vocational schools, and 1.46 million apprentices. Beginning Jan 2013, Germany will support youth from other eurozone countries with language courses and travel costs to work in these programs in areas of Germany with shortages of workers....

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Talks on June 28-29 in Rome between President Francois Hollande of France and Chancellor Angela Merkel of Germany. They will be joined by the Italian and Spanish prime ministers, Mario Monti and Mariano Rajoy. Hollande has invited the opposition Social Democrats in Germany for talks in Paris to win support for his approach to the eurozone crisis. The growth initiative proposed by Hollande is fairly modest and Merkel has expressed her support for this. The tougher issues revolve around some acceptable form of mutualizing of eurozone debt to tackle a loss of confidence in financial markets without a surrender of sovereignty by France and other eurozone nations- a particularly sensitive issue in France. More Europe, would mean more German influence in decisionmaking. Germany rejects eurobonds and direct aid to banks from the ECB. Centralized banking supervision and close regulation by a new European regulatory authority would be needed as part of a new eurozone financial architecture. The immediate issues are of some form of deposit insurance for the eurozone banking system so that there is no run on the banks in Spain and other countries....

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This analysis by Gerald Seib in the WSJ shows the FBI chief Comey reopening the investigation into Clinton's email server just one week before election date November 8, as a move that does not enhance the democratic process because either way it will lead to questions why this was done at this late stage. The emails were found on a laptop used by Huma Abedin, an assistant to Hillary Clinton. Experts say the emails can be processed in a few days, and the FBI, the Justice Department are moving quickly to do this. 

Election experts say most of the decided voters for both parties will not be affected by this especially since most people will have made up their minds by now. Some voters who had questions about Trump might be moved to vote for him, and some undecided voters may be less enthused to come out to vote, though it is not clear at this stage. By mid week a clearer picture is likely to emerge. 

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With yields on ten year Greek bonds reaching new highs, the Economist says it is time to go to Plan B. The German government wants to see something different from a continuation of the 2010 plan and merely loaning more funds to Greece. One option is for Greece to pledge privatization proceeds as collateral for new loans. Another option is the restructuring of Greece's debt, even though the German government is reluctant to impose losses on holders of Greek bonds. But Trichet and the ECB are opposed to any restructuring. ECB officials fear this could cause a crisis like that caused by the collapse of Lehman Brothers in 2008. And privately ECB officials say they could go so far as to refuse to accept Greek bonds as collateral for ECB loans if a restructuring goes through. The contagion from a Greece default could affect Ireland, Portugal, and impact the European banking system and the ECB's own balance sheet. Yet a sounder plan would be for European governments to come up with the funds to recapitalize hard hit banks, knowing that Greece will never be able to pay back its loans under the current plan. The IMF and the German government should push for an orderly restructuring of Greece's debt as the only workable solution, says the Economist....

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German chancellor Angela Merkel arrived for a meeting of eurozone leaders in Brussels on October 23, 2011. She said: "I believe that now we have reached a more realistic view of the situation in Greece and that we will provide the necessary means to be able to protect the euro." Germany has insisted that bondholders take writeoffs of between 50-60% of Greek debt so that Greece would have sustainable debt. A review of Greece's debt by the European Commission in coordination with the ECB and the IMF shows that Greece's debt situation is totally unsustainable and will require a bondholder writeoff of around 60%. according to that report a 60% writeoff for bondholders would be required to bring Greece's debt below 110 percent of GDP by 2020. This has supported the German "realistic" view and Jean-Claude Juncker of Luxembourg, who heads the euro group of finance ministers stated that "we agreed yesterday (Friday, Oct. 21) that we have to have a significant increase in the banks' contribution." France also backed away from the plan it was supporting for the European Financial Stability Facility (the fund established to lend to troubled countries) to borrow from the European Central Bank, something Germany opposes. French finance minister Francois Baroin, said the issue was "not a definitive point of discussion for us,... what matters is what works." The Dutch support the Germans on these issues and Dutch finance minister, Jan Kees de Jager, said the use of the European central bank was "no longer an option." Options being considered are for the European Financial Stability Facility to offer insurance against a portion of losses on Italian and Spanish bonds....

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Michas points out that the first bailout loan was made to the Papandreou Greek government without getting the opposition to agree on the terms of the loan. This has led to the opposition parties using the austerity cuts to win public support and undermine the government, making it even harder to carry through the changes and spending cuts.

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A former prime minister of Poland for 7 years, Donald Tusk, becomes the president of the European Council in 2014.

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Banks in Britain will be charged a 50% tax on 2009 bonuses of more than 25,000 pounds or $40,800. It will be imposed directly on the bonus pool at banks and will be paid by the bank. It takes place effective immediately and affects 2009 profits. The public in Britain is sympathetic to such a move and it comes in the midst of concerns about the British deficits similar in proportion to that of Greece, and of the Dubai debt crisis. Andrew Hilton, who runs CSFI, a research center focussed on financial issues put it aptly: "I think banking has become a truly parasitical business. Bankers these days borrow money at 30 basis points and lend it to te governmet at 300 basis points and then they go play golf."

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As the first day of talks happens in Brussels between Barnier of the EU and Davis of Britain, EU officials say Britain must meet spending pledges it made of 60 billion euros. Britain says there are different legal views on what is owed. Experts see little chance the two sides can reach an agreement by the deadline of March 2019. With the fragile coalition government in Britain talks appear to be very precarious with no clear view what Brexit means.

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The Economist takes a pessimistic view of EU's relations with Turkey, based now it says on expediency- the EU's need for Turkey to stem the flow of refugees, Turkey facing a sensitive border with Syria and internal opposition to the Erdogan government after restrictions on the media and the judiciary. Turks get visa free entry into Germany in exchange for taking back refugees crossing the Aegean into Europe.

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Mario Draghi faces his first test as head of the European Central Bank as Italian bond yields approach 8%. Draghi has limited purchases of bonds of troubled EU countries to 5-10 billion euros each week. This has been sufficient to keep Italian bond yields from going out of control, but high enough to keep pressure on governments in Italy, Spain, Portugal and Greece to make necessary changes. France, Germany and other countries in the EU are working on new rules for making strict budget discipline legally binding, with enforcement sanctions by a EU budgetary authority. Germany is pushing for the new rules. France's Sarkozy with a legacy of Gaullist reluctance to surrender sovereignty in such matters had resisted such calls in the past, but is moving in the direction of convergence of fiscal policies as the only way to preserve the euro currency and the EU idea alive. Draghi is taking a flexible stance on inflation and lowering rates compared to his predecessor, Trichet. He sees signs of slowing manufacturing activity and credit tightening in Europe as signs that inflation will come down from above 3% to something closer to the 3% target set by the ECB. Economists expect him to lower interest rates for the eurozone to 1% from 1.25%, when the ECB meets in a week. The manufacturing purchasing manager's index went down to 46.4 in November, below the breakeven point of 50, which signals a contraction. Output and orders were down across all of Europe, including Germany. Economists say Draghi has left open the possibility of larger bond purchases if the new rules are made legally binding on eurozone members....

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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....