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Greece's national statistics agency Elstat shows data indicating a rapidly deteriorating Greek economy. The unemployment rate went up to 20.9% in November, up from 18.2 % the prior month, with the total number of unemployed at 1.029 million. Industrial output declined by 11.3% in December 2011 compared to the prior year. The unemployment rate is 48% for young people ages 15-24 for November 2011 compared to 35.6% in the prior year. For women the unemployment rate was 25.4% in November, compared to 17% the prior year. In the region of Attica, which includes Athens, the unemployment rate was 21.1% in November compared to 19.2% in October, and 13.9% the prior year. This creates new concern whether austerity measures will work and whether the Greek people can go through a decade of austerity programs, with debt still at 120% of GDP in 2020 under the program designed by the EU and the IMF, or whether there are other solutions that offer more hope of recovery.

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The Swiss National Bank spent $63 billion in May 2012 to prevent the Swiss Franc from appreciating beyond 1.20 per euro. The Swiss Bank is printing francs and buying up euros to keep its peg set in September 2011. The peg is intended to preserve Swiss export competitiveness.

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With the Swiss economy experiencing falling wages and prices, fears of a deflationary spiral have led the Swiss central bank to take strong action to preserve export competitiveness. The Swiss National Bank is doing this by buying euros and keeping the Swiss Franc from appreciating above 1.20 euros to the franc, a peg set in Sept 2011. Since 2010 the central bank has printed Swiss Francs to buy euros and other currencies resulting in a quadrupling of the foreign assets it holds to about the size of its GDP- about 500 billion Swiss francs or $541 billion. Action of this size is unprecedented and comes as the eurozone economies contract in 2013. It has worked for 16 months and Switzerland has managed to increase exports to the eurozone and keep the Swiss franc below 1.20 euros. Japan's new prime minister Shinzo Abe is pushing a similiar policy to bring the yen down to 90 yen to the dollar to improve export competitiveness.

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German chancellor, Angela Merkel's advisor, Uwe Corsepius, briefed European Union ambassadors on the draft document for EU economic integration, prepared by the German ministry. This document identifies six priorities: abolition of wage indexation systems, agreement on mutual recognition of education qualifications, creation of a common base for assessing corporate tax, adjustment of the pension systems, establishment of a national crisis management regime for banks and new legal measures to force countries to commit to tough fiscal policies through a "debt alert mechanism." Under the plan countries will be assessed agaist economic indicators and tracked by the European Commission. Other steps Merkel is proposing are coordinating retirement ages across countries. See the interview with Portugal's prime minister Socrates, where he supports the coordination of the retirement age. Socrates does not commit to taking out the adjustment of wages for inflation in that interview. The leaders of 27 countries of the EU meet February 4 in Brussels, and this document will be discussed at the meeting....

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Joe Nocera compares the German insistence for tough austerity measures in Greece, Italy, Spain and Portugal, to the insistence ofthe Allies for large reparations from Germany after the First World War, which Germany was not able to pay and left it bankrupt by the late 1920's. He cites the failure of orthodox positions on financial and monetary policy to tackle complex issues such as the overvalued currencies of southern Europe, as productivity moved in opposite directions between Southern Europe and Germany. Austin Goolsbee, a former chairman of Council of Economic Advisors, makes the same point in an op-ed piece in the Journal, 11/29/2011. Nocera says this position is simiiar to the position on debt reduction for homeowners facing U.S. foreclosures with government intervention, where little action has been taken worsening the housing crisis and derailing the U.S. economy.

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The increasing likelihood that Greece will exit the eurozone. This happens as the New Democracy party fails to form a coalition and the other parties are offered a chance to form a coalition. The other opposition parties gained far more votes than New Democracy and Pasok in the elections and some parties favor Greece exiting the eurozone. New elections will be held in June if no government is formed. The current government of Lucas Papademos says it needs an extra year to complete the privatizations, public sector layoffs and improvements in tax collection, giving Greece till 2015 to get the job done. As a senior advisor to Papademos, George Pagoulatos, put it: "There is a sense that Greece has passed its pain threshold... Greece needs some oxygen to breathe." Both the Ifo Institute's Sinn and John Taylor see the exit from the eurozone as the best option for Greece, as interest rates on Greek debt have been reduced and Greek banks recapitalized with the March 2012 bailout. John Taylor, WSJ, Feb. 22, 2012, A Better Grecian Bailout/ WSJ, Feb. 17, 2012, Interview: Ifo's Sinn: In Greece's Interest to Leave the Eurozone.This may already be the preparation the IMF, ECB, EU, and the Greece government has laid out as an option if the voters in Greece overwhelmingly rejected further austerity. This now appears to have happened and far more quickly than politicians in Athens, Brussels and Berlin had anticipated....

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The German and French positions on solutions to the eurozone debt crisis are in conflict. As a result the negotiations between France's Sarkozy and Germany's Merkel are deadlocked. The basic differences revolve around three basic issues. Germany wants to see a lasting solution in which Greece debt is restructured so that banks and other creditors that loaned money to Greece voluntarily take losses so that Greece's debt can be reduced to a sustainable level of no more than 50% of what it is now. France, the ECB and the French banks do not want to restructure Greek debt in this manner beyond the 21% reduction in value of debt under the July 2011 agreement. The voluntary reduction in Greek debt by the banks would prevent a default by Greece and unsettling of the financial markets. France fears market contagion from the restructuring of Greece debt that would place pressure on French banks as the value of the Greek, Spanish and Italian sovereign debt French banks hold declines in value. That would require a major recapitalization of French banks and additional cuts to the French budget. Additional twists to the negotiations are that Sarkozy is unpopular in France with elections six months away. For this reason Sarkozy would prefer to recapitalize after 9 months. A way to get around the need for more deficit cutting (austerity measures) in France, is for the European Financial Stability Fund to be able to borrow money from the European Central bank. The ECB can print euros in that situation. Germany's chancellor Merkel has to consider German public opinion and experts from the German central bank, who are adamantly against using the ECB to print money and Germany committing itself to bankrolling most of the effort. Germany wants France to use its own money to recapitalize French banks, with Germany only responsible for recapitalizing its banks. Merkel told her parliamentary caucus in Berlin that "the path is closed for using the European Central Bank to ease liquidity problems." Because of Germany's insistence on financial soundness for any solution, France being in the more difficult financial position and Sarkozy facing elections willing to come up with a short term fix, and the unwillingness of French and German banks to take the losses necessary for a lasting solution, the Germans see a real solution taking a long time. ...

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The differences in the negotiations relate mainly to taxes and pension cuts. Greece agreed to to phase out a special grant for pensioners with low income by 2018, but rejected immediate cuts to pension payments. Greece agreed to lenders conditions for increasing restaurant value added tax to 23%, if hotels can be kept at 13%. Greece wanted to keep a 30% discount on all value added tax rates in the Aegean Islands. Greece initially suggested increasing corporate taxes to 29%, which creditors rejected seeing that reducing economic growth. Greece then proposed increasing this to 28%. Some experts believe the two sides are not that far apart, and the bigger problem is a breakdown of trust. Antonis Samaras, the opposition New Democracy party leader, and former prime minister in 2014, said Mr. Tsipras "was bringing the country into a total deadlock." The referendum on July 5 he said, "is essentially yes or no to Europe."

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The value of the gold holdings of the Swiss central bank, the Swiss National Bank, declined by 15 billion Swiss Francs ($16.6 billion) in 2013, as the price of gold declined by 28% in 2013. The loss was much more than gains of 3 billion francs in foreign currency positions and 3 billion francs in profit from sales from a fund holding troubled assets. As a result the bank will not pay dividends fro the first time since its founding in 1907. Prices declined as the Fed announced a policy of reversing its bond buying in 2013. In 2008-2012 the U.S. Fed's bond buying efforts pushed up prices of gold holdings as a hedge against inflationary risks. Signs of economic recovery in the U.S. are likely to lead to further price declines. Purchases of gold made after 2010 are now showing losses. The Russian central bank made 30% of all gold purchases since 2010 made by central banks and reported to the IMF.

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Views of East Germans in the city of Erfurt on the eve of the 20th anniversary of Germany's reunification. Disparities remain after over a trillion dollars were invested to improve conditions in East Germany, yet the positive changes are visible. In this city of Erfurt the burning of lowgrade coal for heating homes made the air less breathable. It could take years just to buy a car. Still Germans in the east are disappointed, as their expectations were high during reunification. Wages in the east are 80% of wages in the west and unemployment is 12%, and the average wealth of east Germans is 40% lower than west Germans. Young people have immigrated to the west, leaving older people and retirees. Because of this the term reunification is less used than the term "die Wende"- meaning the turn or the change. A sense of the loss of the old values forged in a socialist state is still felt deeply by some east Germans and the change has been largely positive but wrenching in terms of a loss of identity, a sense of being treated as immigrants in their own country....

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The IMF, ECB, and the EU, are requiring Greece to make cuts to private sector salaries by a reported 25% to bring Greece's wages more in line with a country like Portugal, because of the lower productivity of Greek workers and a way to make Greek goods more competitive. This is one way to accomplish what a devaluation of the drachma would have done when Greece was outside the eurozone. Greece's minimum wage is about $1000 a month- officials from the troika want to see this go down about $750 a month. The difficulty is that consumer prices are higher in Greece, with gasoline at $8 a gallon and other prices higher due to cartels that control the distribution of consumer goods in Greece. Other austerity measures required by the troika as a condition for further aid to Greece are pension cuts and higher taxes on businesses. Labor unions and business leaders pointed out other factors affecting Greece's competitiveness in a letter to prime minister Papademos as they opposed drastic wage cuts- the letter said " competitiveness is affected more by factors like bureaucracy- which is fed by complex regulation, state intervention, the tax system, corruption and antibusiness mentality rather than wage costs."...