Qantas flight lands safely in Dubai after engine issues

Qantas has confirmed its flight from Singapore to London has landed safely in Dubai after an engine was shut down.

    The flight was QF31 and had 258 passengers on board, with four pilots and 21 cabin crew, Qantas said.
The plane is an Airbus A380 superjumbo and engine number four suffered "an engine oil defect", a spokeswoman said.
Friday's problem comes exactly one year after a mid-air engine blast forced an emergency landing of a Qantas A380 jet in Singapore.
Last year's emergency landing resulted in Qantas grounding its entire fleet of A380 aircraft for safety checks.
A Qantas spokeswoman told the BBC that the two incidents were unrelated.
She added that the company currently had engineers on the ground assessing what caused Friday's shut down.
Growing troubles The incident is the latest in a long line of problems for Qantas.
It has been involved in a labour dispute with workers, which saw the company ground its entire fleet of aircraft earlier this week. The company has been asked by the Australian Competition and Consumer Commission to compensate passengers affected by the grounding.
At the same time, the company has seen its earnings come under pressure.
Its international operations are losing about $200m Australia dollars ($207m; £130m) a year due to higher fuel prices, wages and a stronger Australian dollar.
It has also been hurt by a number of natural disasters in some of its biggest and most profitable markets.
Floods and cyclones in Australia and a devastating earthquake in New Zealand earlier this year saw a number of its flights in the region being cancelled.
That was followed by an earthquake and tsunami in Japan, which resulted resulted in further losses for the airline.
Earlier this year, the carrier said it expected the disasters to cost it as much as $140m. It also claimed that the grounding of A380 aircraft last year hurt its income by $80m.

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G20 seeks solution to debt crisis

The G20 leaders are set to continue their talks on Friday as they seek to find a sustainable solution to the eurozone debt crisis.

      They are expected to discuss ways to increase the firepower of the International Monetary Fund (IMF).
The hope is that increased resources will help the IMF to support struggling eurozone economies, such as Greece.
There have also been calls for a "financial firewall" to protect vulnerable economies such as Italy.
The US President, Barack Obama, said on Thursday that resolving the eurozone debt crisis was "the most important aspect of our task over the next two days".
Greek threat The second day of the G20 meeting will also see the Greek prime minister George Papandreou face a confidence vote in parliament.
The opposition as well as several government MPs have called for Mr Papandreou to quit after his decision on Monday to hold a national vote sparked a turmoil on financial markets and upset his German and French counterparts.

Some members from his own party, including the finance minister said that they were against the referendum.

On Thursday, the prime minister said he would scrap the move if the conservative opposition party voted to pass the bailout package in parliament.
However, there are fears that he may lose the confidence vote and Greece may have to hold fresh elections, a move which may further delay the implementation of a Greek bailout package.
Eurozone leaders have already withheld 8bn euros ($11bn; £7bn) of fresh rescue loans to Greece and there are fears that further delays may see the government run out of cash and default on its payments.
Mixed messages In other developments on the first day of the two-day G20 summit in Cannes:

• President Obama warned that the eurozone financial crisis threatened to engulf the world
• Italy is to commit to further cuts to its debts and its annual borrowing rate according to a draft communique
• China indicated that it would not consider providing money to the eurozone bailout fund until the situation in Greece has been resolved
• Chinese President Hu Jintao also played down the chance of allowing the value of the yuan to rise, contradicting more optimistic remarks by the US
• India and Canada expressed their opposition to the idea of a tax on financial transactions, something strongly backed by eurozone governments
• the G20 agreed to look at the credit default swaps markets, which has been blamed by some European leaders for exacerbating the eurozone debt crisis

'Health and vigour' Meanwhile UK Prime Minister David Cameron has called for "political will" to solve the current economic woes.
In a report to the summit, Mr Cameron said willingness to act in a united way was the way forward.
"We have the machinery that we need already," he said.
"What we need above all is the most precious and intangible commodity - political will.
"Political will to act together, and to build the consensus we need to confront squarely the problems before us so that we can return our economies to health and vigour."

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G20 'agrees to boost' International Monetary Fund

The Group of 20 leaders have agreed to increase the firepower of the International Monetary Fund (IMF).

It means the Fund will be more able to support struggling eurozone economies.
French President Nicolas Sarkozy confirmed that most talks had revolved around the eurozone crisis.
In Greece, Prime Minister George Papandreou has defied calls to resign ahead of a vote of confidence on Friday. He has said he may scrap a plan for a referendum on the bailout deal.
Mr Papandreou's surprise decision on Monday to hold a national vote sparked turmoil on financial markets and upset his German and French counterparts.
However, facing opposition from his own finance minister, on Thursday the prime minister said he would scrap the referendum if the conservative opposition party voted to pass the bailout package in parliament.
But the opposition as well as several government MPs have called for Mr Papandreou to quit and there are fears that he may lose the confidence vote.

The debt crisis also continues to threaten the much bigger Italian economy.

Rome has been finding it increasingly difficult to borrow money in financial markets, and the Prime Minister, Silvio
Berlusconi, has been called upon by some of his own MPs to quit. China reticence
In other developments on the first day of the two-day G20 summit in Cannes:

• US President Barack Obama warned that the eurozone financial crisis threatened to engulf the world
• Italy is to commit to further cuts to its debts and its annual borrowing rate according to a draft communique
• China indicated that it would not consider providing money to the eurozone bailout fund until the situation in Greece has been resolved
• Chinese President Hu Jintao also played down the chance of allowing the value of the yuan to rise, contradicting more optimistic remarks by the US
• India and Canada expressed their opposition to the idea of a tax on financial transactions, something strongly backed by eurozone governments
• the G20 agreed to look at the credit default swaps markets, which has been blamed by some European leaders for exacerbating the eurozone debt crisis                                                                                                                                                                                                   Euro exit Eurozone leaders had wanted to present the G20 with a clear action plan, but Greece has thrown this into disarray.
  Eurozone governments struck a deal with Greece last week for a debt write-down and to bolster Europe's bailout fund and support the banking sector.
  But it is feared that the package may yet unravel.
  The French and German leaders, and Mr Papandreou himself, openly talked for the first time of the possibility of Greece leaving the euro if it is unable to ratify the bailout package.
  On Thursday, German Chancellor Angela Merkel said that the stability of the eurozone was more important than Greece's continued membership of it.
  The view was echoed by Mr Sarkozy, who warned: "We cannot accept the explosion of the euro, which would be the explosion of Europe."
  Eurozone leaders made clear that the next 8bn-euro tranche of bailout money would not be released to Greece until after any referendum had been held.
   On Thursday, the Greek finance minister, Evangelos Venizelos - who led an internal government revolt against Mr Papandreou's referendum plan - said the government still had enough cash to get by without the bailout loan until 15 December.
  Pressure on Italy There was continuing unease on the bond markets, with Italy and Spain forced to pay higher interest rates in order to borrow billions of euros.
  Many economists fear that if Greece does exit the euro, it could lead to financial contagion, as investors and ordinary bank depositors in other eurozone countries may fear that their own government will follow suit.
  The biggest fears surround Italy, whose economy and debts dwarf those of Greece.
  
  Italy's one-year cost of borrowing has risen to 5.1%, its highest since joining the euro, and far above the mere 0.3% interest rate that Germany must pay.
  The country's cost of borrowing has continued to rise despite interventions by the European central bank to buy up Italian debts.
  Just like Athens, Rome is under pressure from European counterparts to implement further economic reforms and austerity. But also as in Greece, this is undermining the political cohesion of the government.
  Six Italian government MPs wrote an open letter on Thursday calling on Mr Berlusconi to make way for a transitional government.
  The Italian cabinet agreed a limited package of budget reforms at an emergency meeting on Wednesday evening.
  But they failed to agree to issue a decree implementing the changes, meaning that they must now go to a confidence vote in parliament - one that Mr Berlusconi may be at risk of losing.
  
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Greece and the euro: A game-changing summit after all

Last week's European summit was supposed to be the game-changer, but the real change in the game might have happened on Wednesday night here in Cannes, as a direct result of the Greek prime minister's shock decision to call a referendum.

                  The change is that for President Sarkozy and Chancellor Merkel, keeping Greece in the euro is no longer priority number one. And a eurozone without Greece is no longer necessarily the worst outcome.
Just a few months ago, when Greece came under pressure, these two leaders were making joint statements saying "the future of Greece is in the euro." Not now.
To a packed hall of journalists here in Cannes, the French president and the German chancellor have now told the world that Greece could stay in the euro - but it had to want it.
If the Greeks are going to get a referendum - President Sarkozy said - that is the question they ought to be asked.
France and the rest of the eurozone have done everything they can to help Greece, but "there are rules" to this common European currency.
Greece has to decide whether it wants to follow them.
The leaders made no effort to hide their frustration that the Prime Minister had taken this step, "unilaterally", "without consultation", and only days after a European summit that was supposed to have put the eurozone on a better path.
The hard news that came out of their statement was that there would definitely be no disbursement of the next slice of bailout money until the referendum question is resolved.
And the vote itself will be held on 4 December - earlier than initially suggested, and a week before the Greeks have to make a crucial €12bn bond payment.
But there was another crucial message in tonight's joint appearance: France and Germany want Greece in the eurozone but they don't want it at any price.
Put it another way: they don't want to keep Greece in the euro if the price of its membership is going to be never-ending drama and uncertainty.
Of course, you can see all this as scare tactics: a message to the Greeks that they should not expect to hold the rest of Europe to ransom.
That is certainly a good part of the story. But this feels like more than brinkmanship. There is a weary sense among officials here in Cannes that Greece is reaching the end of the road, and the priority now must be to contain the damage.
That is why the talk is all of accelerating the creation of the European Stability Mechanism, the successor to the EFSF. And of additional IMF funds to backstop the entire system.
If and when it happens, that new money won't be for Greece: it will be there to persuade the financial markets, finally, that the resources are there to protect everyone else from any Greek fallout.
It will be interesting to see how the financial markets respond tomorrow.
Since Monday we've been talking about the Greek prime minister's "great gamble" with the referendum. The French and German leaders have just made a great gamble of their own.

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Eurozone leaders admit exit from euro is possible

Markets are behaving in a way that I find even more baffling than usual.

          Naturally I can understand why investors may be taking comfort from ...
But that doesn't imply that the grip on power of the current Greek government, or of a coalition that may replace it, would be anything other than tenuous.
So whether through plebiscite or general election, the Greek people may yet turn their back on the package their government has agreed of rescue loans and budget squeeze.
But perhaps more importantly, eurozone leaders have for the first time (in my memory) publicly conceded that it is possible to leave the eurozone.
The point about joining the euro is that it is supposed to be forever. And as the new president of the European Central Bank Mario Draghi pointed out today, there is no legal mechanism for withdrawal from the euro.
So it was momentous to hear the German Chancellor Angela Merkel say that "the (Greek) referendum will revolve around nothing less than the question 'does Greece want to stay in the euro, yes or no?'"
Contagion dangers Certainly I can't recall a European leader, let alone the government head of the most powerful economy in Europe, acknowledging that it is anything other than fatuous to suggest that a eurozone member could revert to a national currency.
What's more, the Luxembourg premier Jean-Claude Juncker, who also chairs meetings of eurozone finance ministers - and has been around the euro scene seemingly forever - went further, saying that the authorities were "absolutely prepared" for the possibility of Greece adopting a new currency in place of the euro.
He added: "It's not only about Greece, it's also about possible contagion dangers for others and we'll do everything…to build firewalls".
Which is absolutely the point.
In and of itself, Greek withdrawal from the euro would be very painful for its creditors, who would incur huge losses, for Greek businesses, many of which would go bust, and for Greek people, who would face the risk of hyperinflation from a collapsing new Greek currency.
Just to give some idea of the scale of losses, overseas banks have lent $131bn (£82bn) altogether to the Greek public and private sectors and have $64bn (£40bn) of contingent and potential liabilities.
So if there were a default on much of these loans, and if they were redenominated into neo drachmas, we would be looking at losses of perhaps £90bn for non-Greek banks.
And then there would be additional losses for the European Central Bank, the eurozone's bailout funds, and the IMF - which (according to Open Europe) have collectively lent around 130bn euros (£112bn) to the Greek government. Losses for European and other taxpayers on all that could be more than £80bn.
On top would be devastating losses for Greek banks - which would be bankrupted - and for Greek and non-Greek investors.
It would be carnage.
Saying goodbye But it as as well to remember that Greece is a relatively small economy.
The real disaster for the eurozone and for global economy would be if it looked a realistic possibility for a vastly bigger, indebted economy, such as Italy, to leave the currency union.
Italy's government debt on its own is not far short of 2 trillion euros.
The recent rise in the interest rate that Italy has to pay for loans reflects a rise from negligible to possible in investors' assessment of whether they could be paid back by Italy in a currency other than euros.
The implied interest rate that Italy has to pay to borrow for ten years is stubbornly refusing to fall below 6% - which is dangerously close to a rate that is unaffordable and that could tip the Italian economy into vicious cycle of economic contraction.
Quite how that interest rate can be reduced - in the absence of a eurozone bailout fund with firepower vastly greater than the trillion euros of its proposed expansion and after the admission by Mrs Merkel that a country could say goodbye to the euro - well my powers of imagination are failing me.
Or to put it another, in the history of the eurozone, the panicked admission by eurozone leaders that Greece or any country could regain an autonomous currency may turn out to be a very important milestone - and a milestone that may be on the side of the road to ruin.

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Papandreou blinks first in euro poker game

ATHENS - The last 24 hours have seen all manner of political gyrations here. If one had to sum up what it has all meant, it is that the government of George Papandreou has felt the heat from Europe's most powerful players and realised that it cannot take it.

                            This city is still wracked with rumour about how he might bring Greece through this acute phase of its ongoing crisis, but the prime minister seems to have realised that either he, or his plan to put the European Union's bail out package to a national referendum, will have to go.
German Chancellor Angela Merkel on Wednesday characterised Mr Papandreou's proposed vote as a game of poker, and she was evidently determined that he should blink first.
Briefing from European Central Bank and EU officials that failure in the referendum would force Greece out of the euro and, some suggested, of the EU itself has startled many people here.
Soundings of public opinion suggest that most could oppose the bail out because of its accompanying austerity measures, but that the majority of Greeks are still in favour of remaining in the EU.
The linkage between a possible No vote and continuing membership of the union proved too much for many of Mr Papandreou's supporters, including his Finance Minister Evangelos Venizelos, who this morning withdrew his support from the referendum plan.
Many Greeks still feel they should be at the heart of Europe, and the sharp response to Mr Papandreou's referendum plan - particularly from France and Germany - put that role in jeopardy.
Speaking to his party in parliament on Thursday evening, the Greek leader said he had been told during those Cannes talks that not only would a "no" in the referendum mean leaving the euro, but that the question of rejoining would be off the agenda for at least a decade.
When I suggested this evening to an MP from his party that this type of talk could easily have been a bluff intended to intimidate Greece, they replied, "yes, but we cannot take the chance".
The issue of whether France and Germany could really precipitate a meltdown of the Greek economy by withholding as they had threatened, the 8bn euros in emergency aid needed to keep the economy afloat during the coming week is therefore unlikely to be tested.
A decision by Mr Papandreou to backtrack on the referendum plan would suggest that Mrs Merkel has won her poker game.
On Thursday morning it became apparent that the prime minister, who has a small majority, faced a big enough revolt within his party to make it unlikely that he could win a vote of confidence, and so press on with his referendum.
At times it was rumoured that he had gone to the president's office to tender his resignation.
When he appeared in front of his party in the evening, Mr Papandreou tried another option. He suggested that the opposition join him in endorsing the European bail out plan, implying that this could make a national vote unnecessary.
Until now, the New Democracy party, his main opponents, have refused to back the European rescue plan or the referendum, calling instead for immediate parliamentary elections.
Where does this all leave us? It shows that Mr Papandreou would prefer to avoid the referendum by gaining cross party support for the economic hardship that will inevitably follow acceptance of the EU bail out.
Whether people come to agree that he has successfully intimidated the New Democracy opposition into supporting these measures or whether he has overplayed his hand, infuriating Greece's creditors, and will soon have to resign are questions for tomorrow.

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Euro crisis - not over tonight

When you watch the limos draw up; the men and women in suits walk out and talk about the need to do a deal, it is all too easy to think that this latest European summit - the 14th in the past 18 months - is all about them and not about us.

           Then you have to remind yourself that what is being discussed, debated and haggled over is how to save countries from bankruptcy, banks from going under, the currency which was meant to bind 17 countries together from collapsing - any one of which could push not just the European economy but the global economy into a nose dive.
The Eurozone looks set to announce tonight not a deal to save the Euro but the outlines of the framework for what might become that deal if the details can be hammered out. On her way in to this summit Germany's Chancellor Merkel revealed how little might be achieved tonight when she said: "I believe all travel here today with the aim of at least getting a bit further on."
Many believe that it is only when Germany agrees to underwrite the debts of the Eurozone or agrees to let the European Central Bank do it that this crisis will end. German taxpayers and the German government are understandably reluctant to do that.
David Cameron believes that it may not be until this crisis reaches two minutes to midnight that the real deal is done. That will not be tonight.

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A tankist view of the euro crisis

In search of a metaphor in this crisis, I repeatedly come back to tank armour. An ultra-modern tank is almost impossible to kill because it is covered with a mixture of ceramic, textile and metal plating that is designed to disperse the incoming energy of an anti-tank projectile: laterally.

        After it's done its job the armour does not look pretty, but it works - as long as you don't get hit again.
For all the criticism of the eurozone - the greyness of the political elite, the indecision, the  etc - their strategy is not just "kicking the can down the road". It is about dispersing the energy of the debt explosion.
For velocity itself is important in the kind of collision we are talking about: over-accumulated debt impacting on real world growth. If you can slow it down, a debt explosion looks like just a long, dreary recession as people pay down their borrowings.
Now to the design of the armour: the complex system being - I will not say designed, but improvised - is composed of layers.
Layer one is the Greek debt write-off. This disperses the stress away from the Greek treasury - which can no longer control its ballooning deficits - and into the EU banking system. It takes down the Greek and Cypriot banks, but the hit it makes on the French, Belgian and German banks is - with one condition - survivable.
The condition is that it does not trigger default clauses in the insurance contracts numerous investors have taken out against a Greek default.
Right now, the politicians are trying to avoid this by declaring the write-offs "voluntary": many free market theorists are appalled, seeing this as a breach of the principles of derivatives markets.
However, if we suppose they pull it off, and no  meltdown takes place, then the stress is effectively transferred from Greece, to European Union banks to the global hedge funds and pension funds that hold the CDS.
Right now I would bet this works.
The second layer of armour is the 108bn euro bank recapitalisation programme: money from states, Far Eastern investors and the  (see below) will be used to shore up the balance sheets of the affected banks.
To visualise this, again, imagine a uranium dart hitting a surface that spreads the impact - in this case across a complex fabric of financial entities stretching from Dubai to Shanghai. The overhead cost in terms of destruction is, of course, shareholder value: French banks, indeed any banks taking the recap money, will see their existing share holdings diluted.
Again - this should work.
The deepest layer of armour Europe is trying to clad itself with is the EFSF. There is 726bn euros of taxpayers money committed, which translates into 440bn euros lendable. What they are trying to do is turn that into 1.4tn euros lendable - and the Brits want even larger - by getting, again, global lenders - including China, Brazil, the IMF and Middle East Money - to lend against the 440bn: once again spreading the impact laterally.
Here is the biggest problem - because to make this work you have to "anchor" the 440bn to something real. This can only be eurozone taxpayers' money. And the means of anchoring it become quite problematic.
If the world still accepted blithely the financial wizardry of special purpose vehicles, where E1 is turned into E10 on the five loaves and two fishes principle, it could simply be "declared" that 440 equals 1400.
But it doesn't, and can't. The easiest way to provide surety would be to let the European Central Bank do it: it is already buying tens of billions of Euros worth of debt short term to keep Italy and Spain afloat. But neither the rules nor the culture nor the leadership of the ECB will permit involvement. The Germans have specifically this Wednesday morning excluded ECB involvement.
The other option is direct taxpayer guarantees - which then show up on the books of countries, weakening their ability to borrow further.
At each level then, the EU response consists in taking a concentrated impact and spreading it out - across Europe, across the world, and over time.
However, in economics as opposed to inert matter, there is the problem of people not wanting to take the hit. Right now nobody wants to admit they are even putting themselves in line to take the hit: the German parliament, the kebab-shop phobic Italian right, the IMF, the Greek people. Everybody wants someone else to take the hit.
However the point of spreading the force of the impact is to avoid blowing up.
So here is the key question: does what they design today take the hit adequately?
It needs to take Greece out of its death spiral, save Europe's banks, avoid a CDS-triggered meltdown and swallow up the borrowing needs of Spain and Italy for at least a year. And it needs to be able to do this instantly, on - as sprinter Linford Christie used to say - the "B of the Bang".
And it needs to do so in a way that prevents repetition 18-months down the line. In tank terms - the vehicle needs to speed away out of range of the next impact.
But it can't. It is slowing down. Fundamentally growth is not going to rescue the entire eurozone because five of its members are trapped within an austerity programme in a continent whose whole economy is rapidly cooling down, and which needs fundamental structural reform.
Right now, we are close to the point of impact. The armour absolutely has to be designed right and it has to hold as the impact of a Greek default is felt.
If it does, there is one - guiltily unstated - fact to bear in mind: there is another tempting target - with equally shoddy armour and a similarly dodgy engine: the United States. If the Europeans do a deal today, there is a good change that the fissile matter in the global system gets focused on the US.
They used to say politics is war by other means: now it is economics that fits the epithet.
Brutal, tankist and about survivability.

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Will Germany insure Italy against default?

When the French president and German chancellor on Thursday conceded that the impending weekend eurozone summit would not announce the promised rescue package, they swore blind (well, in diplomatic speak) that we would have "a comprehensive and ambitious response" to the financial crisis by close of play today "at the very latest".

It is now clear that is not going to happen. With a following wind, there will be political agreement from eurozone leaders on the broad principles of the rescue - although that is by no means certain.
What we won't have is the all-important technical detail of how those principles will be put into practice.
So why haven't markets melted down? And why are we not seeing a wholesale withdrawal of vital finance from Europe's banks?
Well, whether it's cold logic or hot naivete, investors are persuaded that eurozone leaders will ultimately do the right thing - and that the direction of travel to a solution is clear.
That confidence could evaporate if the political crisis in Italy makes it less likely that there will be early moves in that country to reduce the massive burden of its public-sector debt by shrinking the state: in those circumstances German legislators will be hugely reluctant to use the German balance sheet to provide emergency loans to Italy; Germany won't want to throw good money after bad.
Even so, Germany's lower house of parliament is expected later today to give Mrs Merkel the authority to approve an increase in the financial firepower of the European Financial Stability Facility - presumably because they have been persuaded that the consequences of doing otherwise would rebound painfully on their country and economy.
As I have been banging on about, there's only about 250bn euros left in the EFSF kitty, following the bailout commitments it has already made to Greece, Portugal and Ireland, and taking account of disbursements it may have to make for the rescues of banks.
So there is only just enough to keep Italy afloat for the best part of a year, should the Italian government suddenly find it impossible to borrow on markets (not impossible).
German opposition For investors, emergency cash that could be exhausted in a few months by one unfortunate accident is no kind of insurance policy at all. If the firepower of the EFSF isn't massively expanded, the eurozone will be seen as unprotected against even mild storms, and not remotely ready for possible tsunamis.
Now the obvious way for the EFSF to obtain more bang for its euro is to mandate the European Central Bank to lend alongside it. This is what France - backed by the UK - wanted. And it would have been the "
The point is that there is no limit to what the ECB can lend, because (to state the bloomin' obvious) it can create money at will. Deploying the ECB in this way would have been the big bazooka that the British prime minister has been requesting.
But for German politicians, sanctioning the ECB to lend directly to governments would have been the slippery slope to debasement of the euro (there's hyperinflationary history haunting them here). So they said "nein", and the ECB is out of the picture (although whether it can be kept permanently offside is moot).
In place of central bank lending, therefore, we now have complex financial engineering to boost the bailout fund. Which some would see as one of those delicious ironies, since eurozone eminences have been among the most critical of how bankers in the US and UK abused financial engineering in the boom years to hide the risks that were accumulating in the financial system.
At this juncture, eurozone leaders want to use financial engineering to hide the risks their taxpayers would be taking in lending to over-indebted eurozone members.
The idea is for the 250bn euros left in the eurozone kitty to be used as a kind of insurance premium. What would happen is that those lending to an Italy, for example, would - for free - be insured by the bailout fund against the risk that Italy would be unable to repay its debts.
There are a couple of techniques for doing this under consideration. But the important points are these: using the 250bn euros in this way should mean that more than 1tn euros of new rescue loans could be created; the implicit risks taken by the bailout fund, and by Germany in particular as the main guarantor of the fund, would rise exponentially.
Which is why even this way of expanding the EFSF is massively controversial in Germany. It is why Mrs Merkel has been unable to give formal approval to boosting the EFSF, till mandated to do so by her parliament.
Is all this political and financial fudging and mudging reason enough to retreat back under the duvet and fear the worst? Not yet.
Bolstering banks The other two elements in the eurozone rescue package are in better shape.
Agreement is expected to be reached - though not today - with private sector creditors on slashing what they'll be repaid by the Greek government by around 60%, so that Greece stands a fighting chance of crawling out alive from under the burden of its excessive debts.
"We're not going to get the deal with banks today," said an official. "But I think we can be confident there will be a deal."
Also most of the work on strengthening the eurozone's banks has been completed. In theory, we could still get official confirmation tonight from the European Banking Authority that eurozone banks will have to raise around 110bn euros to protect themselves against potential losses on loans to heavily indebted governments such as Greece, Portugal, Ireland, Italy and Spain.
And that means individual banks are likely to be forced by their respective stock-market listing authorities to disclose how much capital they are each being forced to raise and how they intend to do this.
As I have said before, the UK's banks have been passed by the Financial Services Authority as adequately capitalised: they won't have to raise a bean in new capital.
But in Spain, Italy, Portugal, Ireland, Cyprus, Germany, France - and especially - Greece, banks will have to find a way to obtain buckets and buckets of new capital.
Much of it, for countries like Greece that are already on financial life support, will have to come from the eurozone's bailout fund, the European Financial Stability Facility.
Which takes us back to the reason to be fearful.
There will be no stability for the eurozone without the bailout fund, the EFSF, having the resources to do its vital job of demonstrating to the world that there's no possibility of Italy or Spain going bust - or at least not for a year or two, during which Spain and Italy ought to be able to mend their finances.
And, right now, there is no certainty Germany will give the necessary underwriting to the EFSF, so that it will have big enough boots to bash up speculators betting on the collapse of Italy and Spain.
Update 1822 It is as well to start with news that will be viewed by investors as positive - which is that European leaders' expected statement about how to strengthen banks will generally be seen as sensible.
It involves many banks raising around 110bn euros of capital in total, as a protection against future losses. The only ones exempted will be those like Britain's and Ireland's, whose ratio of capital to assets is already more than 9%, after making provision for falls in the value of loans to over-indebted governments like Greece's.
And, to help banks borrow in nervous markets, and avoid a new credit crunch, banks will be offered taxpayer guarantees for their debt.
There's the rub. Those taxpayer guarantees will be another drain on the eurozone's bailout fund, the European Financial Stability Facility - and with all the commitments it's already made to assorted rescues, the kitty is looking depleted.
Which is why it really matters that there are more than woolly words from eurozone leaders on how they'll boost the bailout fund's resources
One deed that won't come - today at least - is a pledge by the International Monetary Fund to help augment bailout resources.
And nor will a deal be done - yet - with banks on reducing what Greece repays them.
If such delays to a credible rescue package don't spook markets, then European leaders will need to thank Mario Draghi - soon to take over as president of the European Central Bank - who promised that the central bank won't for now end its exceptional help to countries like Italy and Spain whose borrowing costs have soared to dangerous levels.

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Plan B for the eurozone?

Plan A for fixing the eurozone is turning out to be painfully slow. Even if we get an agreement out of Wednesday's summit, it seems now there will be plenty of details left for officials to fill in later.

          If previous deals are any guide, there will also plenty of holes - which investors and commentators will be quick to spot. But for many, the most gaping absence will be the one I discussed in my last post: economic growth.
On today's negotiations, the rule of thumb for officials is that the bigger the 'haircut' for private holders of Greek government debt, the more ambitious the plans for the bailout fund, the European Financial Stability Facility, will need to be, and the more likely it is that France will persuade Germany to go along with the whole thing.

That deal has yet to be done. It's not clear it will be done by the end of play on Wednesday. But the worry for investors - and the likes of the IMF - is that the countries in trouble are simply not going to grow quickly enough to stay on top of their debts. Even if, in the case of Greece, that debt is sharply reduced.
Why? Because, as I have discussed many times before, this is not just a debt crisis for the so-called 'periphery' economies. (I think we are supposed to forget, in these conversations, that the EU came of age with the Treaty of Rome.) It is also a crisis of competitiveness.
The way the German finance minister tells it, the first step on the road to increased competitiveness, for any country, is to bring the public finances under control. The other key element is structural reform - of labour regulations, pensions and the like - to make the country more dynamic and support growth.
These steps might be painful in the short term, but Wolfgang Schauble (and George Osborne) would say, there is no alternative. They would also say that countries that do these things are ultimately rewarded. Look at Germany, Mr Schauble would say: we went through our own period of slow growth and painful reform in the early years of this century. Now look at us.
Now, it will not be news to you that many see this view as dangerously one-sided. They point out that Germany was able to grow in a period of flat domestic demand because external demand was booming. And a lot of that demand for German goods came from the rest of the eurozone (the same countries who are now in trouble).
Put it another way: domestic reform is a necessary condition for successful adjustment, but it's not sufficient. It also matters what's going on in the world outside. This may be especially true in a currency union, where the usual route - a nominal devaluation - is blocked.
Here's the economics bit: if those periphery countries are going to become more competitive, without a currency depreciation, it follows that their domestic prices and wages need to fall, relative to German ones, and their domestic consumption needs to grow more slowly than their net exports.
That will happen - is happening - when their economies collapse and domestic prices and wages fall through the floor. But we'd rather they combine it with economic growth, and at least some stability of nominal incomes (and, incidentally, so would the people holding their debt, because it then has a chance of a being repaid).
That means that external demand needs to be going up, and, as long as the European Central Bank is trying to keep average eurozone inflation slightly below 2%, that probably means that inflation in Germany needs to be significantly above 2%.
Will all of these things happen? It is possible. But it does not seem very likely, when the German finance minister keeps asserting the absolute necessity of price stability, and asserting that there is no "symmetry" between debtors and creditors in the eurozone.
In London last week, Mr Schauble said suggestions that Germany's current account surplus needs to fall "did not make any sense".
Is there anything they can can do to make the "solution" to the euro crisis more growth-friendly? Well,  have pointed to some interesting possibilities.
First, there are the unused structural and cohesion funds that some of the crisis economies have access to. In some cases these are pretty sizeable. For Portugal, Bruegel's Benedicta Marzinotto, reckons these could be worth over 9% of GDP. Greece has untapped funds worth around 7% of GDP.
She says, in effect, the European Commission needs to stuff procedure and start finding ways to spend this money usefully.
Second, the Bruegel economists say the IMF-EU supported adjustment programmes need to become more focussed on growth. They point out that as market pressure has increased, governments have increasingly turned to growth unfriendly tax increases to fill gaps in deficit plans. That threatens to make a difficult situation even worse.
They also think the so-called "troika" - the European Commission, ECB and the IMF - should be looking for imaginative ways to help encourage structural reform and economic growth at the same time - for example, through temporary wage subsidies for new businesses, or programmes to support lending to SMEs.
Finally, there is a part of Plan B that may move up the agenda regardless, if the European recovery continues to stall: a radical change of heart at the ECB.
Economists such as David Owen have already proposed that the central bank should cut interest rates by half a percentage point and announce 1tn euros (£868bn) in genuine quantitative easing, buying government bonds from across the eurozone to boost nominal demand.
Germany might support the first of these - spending more EU money, at least if it came with enough strings attached.
In fact, Mr Schauble has been publicly berating the European Commission for not moving faster on the "Marshall Fund for Greece" that was promised back in July. (Remember that? I thought not.)
But, you will not hear many Germans advocating a more radical approach to economic growth from the ECB. Quite the contrary.
In fact, it is Germany's reluctance to have the central bank more deeply involved in the rescue of the eurozone that has made it so difficult to agree a deal in the past week.
The "crunch points" and "moments of truth" for the euro will come and go. I'm afraid the question of economic growth will be with us for a long time.

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Eurozone rescue proposals

This Wednesday, Europe's leaders meet yet again to try to solve the eurozone debt crisis once and for all.

The meeting will try to agree a plan that was developed at a summit over the weekend, just the latest in a series of summits that have tried to address the eurozone's problems.
There has been widespread criticism that Europe's governments have been far too slow in grasping the gravity of the situation. Differences still remain.
In the past year, problems have spread from Greece to the Irish Republic and Portugal, to Spain, and to Italy. Even France is beginning to look vulnerable.

So what now?

Why the need for further action?

Bailout packages for Greece (twice), Portugal and the Republic of Ireland have already been agreed, but stock markets remain in turmoil.
The reason is simple.
Despite the tens of billions of euros pumped into these countries, together with widespread austerity measures adopted by these and most other European nations, investors still believe there is far too much debt swilling about in the eurozone economy.
Many believe a Greek default is all but inevitable.
In the meantime, bond yields have shot up in Spain and Italy, raising pressure on them to sort out their finances, and they have had their credit ratings slashed.
There is talk that France could be the next country to have its debt downgraded.
And investors also fear that banks in France and Germany do not have enough cash in reserve to withstand defaults by their debtors.
Italy and Spain are massive economies that are too big to bail out under the current funding arrangements.
The fact that it took several months for the July deal to be ratified by each and every country in the 17-nation eurozone is also a further issue for any new deal.

What is the latest plan?

There are three main strands to what might become a plan of action.
Greek 'haircut' Greece will simply be allowed to pay back less than it actually borrowed. This means those institutions that lent money to Athens will have to write off some of the money they are owed.
Eurozone proposals put forward in July suggested creditors write off about 20% of what they are owed, but the latest suggestion is that this so-called "haircut" would actually be higher than 50%.
Reports suggest that France and Germany are split on the level and how to implement it.
France wants less - as its banks are the most heavily exposed to Greek debt.
More money The eurozone rescue fund, known as the European Financial Stability Facility (EFSF), would be given more firepower.
Originally, the idea was to massively increased in size, from 440bn euros ($595bn; £383bn) to about 2tn euros.
A fund of this size should be able to deal with the huge economies of Spain and Italy.
However, simply scaling up the size of the fund is not politically feasible, as this would involve increasing the size of the guarantees provided by the member governments.
And that is something that many governments, including Germany's, would find impossible to explain to their voters.
Another option, favoured by France, involved getting the fund to borrow additional money from the European Central Bank.
But the idea was strongly resisted by the ECB itself, and has now been blocked by Germany.
One option still being considered is for the EFSF to provide guarantees when countries such as Italy or Spain need to borrow more money.
The guarantee would only cover the first 20%-30% of any debt write-off by these governments.
By limiting the guarantee in this way, it means the 440bn euros will stretch much further.
But it also means that if a government did default on its guaranteed debts, then the EFSF - which in turn means German and other taxpayers - could stand to lose all of the money that it guaranteed.
Bank rescues Finally, there is a plan to strengthen the big European banks that could be hit by any defaults on national debt obligations by Greece.
Of the three strands, this is the only one that seems fully agreed by the governments.
Banks will be required to raise about 110bn euros in new capital - that is the banks' ability to absorb losses without going bust.
They will do this by selling new shares to investors. If investors won't buy, then the banks' respective governments will step in.
And if their governments don't have the money either - as is likely at least in the cases of Greece, Portugal and the Irish Republic - then the EFSF will have to cough up the shortfall.
Bank shares have been among the worst hit over the past few months, as investors lost faith in their ability to stave off losses.
This loss of confidence claimed  earlier this month. If the eurozone cannot agree a deal, other banks could follow.

What impact is it designed to have?

Letting Greece off some of the money that it owes means very simply that it has less to pay back and is therefore less likely to default on the rest.
Bolstering the EFSF means that the safety net, in the event of any default or a need to provide further bailout funds to indebted nations, is large enough to prevent the problem spreading out of control.
Providing more capital to banks will allow them to cover any losses from any possible default, as well as restoring confidence in the sector, allaying fears of another credit crunch.
It means banks would be able to carry on lending, providing businesses with much-needed funds to grow and to help drive overall economic growth, which is absolutely key to solving the debt crisis in the long term.
If individual economies can grow faster, then they can better afford to reduce their deficits and pay down their own debts.
Finally, it is also hoped that decisive action will at last restore confidence, not only in the financial system, but in policymakers' ability to respond to crises.

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The deadline Europe cannot afford to miss

                            Will this meeting be the one to stabilise the eurozone? 

         It's a self-appointed deadline the eurozone can't afford to miss
By the early hours of Thursday, we may finally discover how much firepower has been amassed to try and blast away the debt turmoil steadily spreading from Europe's financially wayward periphery to its core.
At 18.00 local time in Brussels, all 27 leaders begin their crucial and once-delayed summit.
Afterwards comes a working dinner for the leaders of the 17 euro-using countries that have to share the rescue bill. Then the talking goes on until the final documents can be agreed.
Whatever is decided and disclosed at the concluding news conference, the EU leaders won't have long to wait to see how it all goes down in the rest of the world.
Just a few hours later, the Asian, European and US markets will open in turn and deliver their verdict.
Hitch And right until the 11th hour, things weren't quite going according to plan.
The Polish Presidency suddenly announced the postponement of an EU finance ministers meeting, scheduled for just prior to the event.
Those involved downplayed the significance of the change. But this didn't stop many observers wondering if key political decisions could not be reached - or were being batted on to the heads of government to decide among themselves.
Either way, few expect the final package will quite be the "big bazooka" demanded by the British Prime Minister David Cameron.
Yet the nature of the deal that's finally agreed will show whether the partners - and Germany in particular - have the will and capability to hold the currency zone together.
We are about to witness what may go down in history as one of the most significant meetings in EU history.
Of all the myriad issues that need fixing. the financial world expects clear responses on three crucial issues - arranged here in order of difficulty for the summiteers.

1: Beef up the rescue fund to protect Italy and Spain

Europe desperately needs to stabilise the Spanish and Italian debt markets to convince investors their holdings are safe.
That's because Italy accounts for 25% of European debt, Spain 9%. That's compared to 7% for Greece, Ireland and Portugal combined.
The main bailout fund seems likely to be boosted from 440bn euros to "beyond one trillion euros", according to a briefing in the Bundestag by German Chancellor Angela Merkel.
Yet even that one trillion figure remains well short of the firepower the market has repeatedly said may be needed.
What's more, that magic figure may only be reached through the creation of a kind of insurance scheme. Pre-summit papers circulating in Brussels suggest the 440bn euros European Financial Stability Facility (EFSF) will be set up to guarantee some of the face value of bonds issued by the likes of Italy and Spain.
Some European partners led by France would have far preferred the EFSF to be given a banking licence so it could tap the resources of the ECB - the only institution capable of creating money.
But Germany was implacably opposed to the idea. Such "leveraging" of the fund would also have been a breach of existing EU law.

2: Reduce Greece's Debt Mountain

The eurozone may finally push Greece's lenders to take as much a a 60% cut in the face value of their loans.
The latest report from the Troika ( EU Commission, the IMF and the ECB) suggested Greek debt could be brought down to just above 120% of GDP by the end of 2020 if a 50% loan discount was applied.
On the eve of the event, banks and bondholders were still resisting a "haircut" on that scale.
They argue more than a 40% cut would likely trigger costly insurance claims and could, in turn, tip Italian and Spanish debt markets over the edge.
Everyone is desperate to avoid a so called "credit event" or series of disorderly defaults where market developments like bond yields, credit ratings and the cost of loan insurance runs out of control.

3: Recapitalise Vulnerable Banks

This summit isn't just about saving countries that cannot service their debts.
It is also about shoring up the banks that lent to those countries.
The costly emergency rescue of Dexia has concentrated minds here. The larger the "haircut" imposed on European banks holding distressed sovereign debts, the greater the buffer those banks may need to stay afloat.
A figure of 100bn euros has already been agreed. Where possible, the cash will be sought from commercial lenders.
But as long as high anxiety persists in the debt markets, national governments and the EFSF bailout fund may have to come up with the lion's share.

The IMF and some leading US banks are among those in the markets who believe the real requirement may be up to three times as much.
This is an emergency financial summit, but it may also be seen as a turning point for the EU itself.
On Thursday, the 17 eurozone members are expected to make a start on mutual budget monitoring and integration - to prevent any repetition of the current fiasco.
Whether or not this requires a tricky EU treaty change, such centralisation will inevitably widen the gap between euro and non-euro members.
The UK has already said it will not tolerate being locked out of key financial decisions made by the 17 eurozone countries.
There is a worry that summit decisions could set in motion a process that sends the single market into reverse.
It was the German finance minister who warned that this summit would be far from presenting a miracle cure.
The world can only watch and wait and hope that this time the eurozone finally manages to take three small steps towards recovery.

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James Murdoch declines $6m bonus over NoW controversy

News International boss James Murdoch has declined a $6m (£3.7m) bonus, citing the "current controversy" over phone hacking at the News of the World.

      His father, News Corp boss Rupert, received a $12.5m (£7.7) bonus. His total remuneration for the year to 30 June was $33.3m (£20.5m), up 47%.
James Murdoch saw his pay packet rise 74% to $17m, but said declining the bonus was the "right thing to do".
The phone-hacking scandal led to the closure of the News of the World.
Chief executive Rebekah Brooks was among a number of senior figures to resign over phone hacking, including Les Hinton - who led News Corp's financial news service Dow Jones.
Mrs Brooks was arrested in July by Metropolitan Police officers investigating phone hacking at the News of the World.
She was editor of the paper when the voicemail of murdered schoolgirl Milly Dowler was allegedly intercepted.
In July, Rupert and James Murdoch were grilled by the UK House of Commons culture committee - an occasion the News Corp founder described as the most humble day of his life.
James Murdoch, deputy chief operating officer at News Corp, said in his statement: "In light of the current controversy surrounding News of the World, I have declined the bonus that the company chose to award to me.
"While the financial and operating performance metrics on which the bonus decision was based are not associated with this matter, I feel that declining the bonus is the right thing to do.
"I will consult with the compensation committee in the future about whether any bonus may be appropriate at a later date," he said.
Resignation Details about the pay package were released in regulatory filings ahead of News Corp's annual meeting next month.
News Corp deputy chairman Chase Carey saw his pay rise 16% to $30.2 million.
Meanwhile, News Corp also announced on Friday that its long-time director Thomas Perkins is stepping down.
Mr Perkins, a Silicon Valley venture capitalist, said that, at 80 years old, it was time to move on.
He said the company should not have octogenarians on its board - "unless one of them owns the company, which Rupert does".
Mr Perkins added that the decision to leave had nothing to do with the phone-hacking affair.

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US regulator to sue banks over subprime mortgage losses

US authorities are to sue 17 major banks for losses on mortgage-backed investments that cost taxpayers tens of billions of dollars.

    The Federal Housing Finance Agency said it was taking action against banks including Goldman Sachs, Barclays, Bank of America, Deutsche Bank, and HSBC.
The agency says they misrepresented the quality of the mortgages they sold during the housing bubble.
The values plunged as the US was engulfed in the financial crisis.
The FHFA oversees mortgage giants Fannie Mae and Freddie Mac.
The two firms lost more than $30bn (£18.5bn), partly because of their investments in the subprime mortgages, and were bailed out by the US government.
Since the rescues, US taxpayers have spent more than $140bn to keep the firms afloat.
Other banks facing action include Royal Bank of Scotland, Nomura, Citigroup, and Societe Generale.
A spokesman for RBS said: "We believe we have substantial and credible legal and factual defences to these claims and will defend them vigorously."
Speculation in recent days that the FHFA was about to launch legal action had led to falls in US bank share prices.
That there had been "improper actions by the firms and individuals".
"Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities," the statement said.
Major banks are already negotiating with the attorneys general of all 50 states to settle mortgage abuses.
The banks were looking for a comprehensive deal that would protect them from future litigation.
But the FHFA's action may complicated attempts to reach a deal with the states.

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A lost decade?

First the dot.com bust, then the terrorist attacks on the World Trade Center, the Pentagon and other targets. The United States economy started the decade shaken to the core, but it responded with an astounding economic boom.
Ten years on, however, the US economy is in dire straits again, and most people are poorer than they were before. How did it happen? 

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How did the US debt get so bad?

The US had its debt downgraded by the ratings agency Standard & Poor's last month after narrowly averting a debt default. The debt problem has not gone away, though, and total US debt is expected to overtake GDP, the total amount of goods and services produced in the country, this year.

On individual debt, many people blame the period of extremely low interest rates that followed the dotcom bubble bursting and 9/11 for creating the housing market boom, which then led to the sub-prime mortgage crisis. That was followed by the financial crisis that caused the 2008 recession.

The federal government is estimated to have spent about $1.6tn (£988bn) on its response to the financial crisis, which put a big dent in the public finances. The crisis also meant that the government received less in taxes from companies and individuals hit by the downturn.

Fighting wars in Iraq and Afghanistan has been another big cost for the public finances in the past 10 years, estimated to have cost about $1.25tn so far. Some people also blame President Bush's tax cuts for the level of debt that the US government now finds itself dealing with.

Among the most serious problems since the financial crisis has been rising unemployment, which increases the amount the government has to pay in benefits as well as reducing the tax take. Most disturbingly, there has been zero net job creation in the US since 2000.

More than half of the annual budget is mandatory spending, which would be difficult to cut. Of the discretionary spending, more than half goes on security, which is also hard to reduce. Without tax rises or major economic growth, it would be hard to cut enough to get rid of the deficit. 

 

 

 

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US economy: No new jobs added in August

The US economy added no net new jobs in August, according to the key non-farm payrolls figures from the Department of Labor.

    The August number was much worse than had been expected - the predicted figure was an addition of about 70,000 new jobs.
The unemployment rate remained unchanged from July at 9.1%.
In addition, the figures for the previous two months were revised down to show weaker jobs growth.
The Labor Department now says that in July 85,000 jobs were created, down from 117,000 in the earlier estimate, while the number of jobs added in June was revised down from 46,000 to 20,000.
"Companies that are overall doing OK are hesitating to hire and invest further, creating some fragility for the economy," Virginie Maisonneuve, head of global equities at Schroders told BBC News.
"We will need some help from the Fed and the government to avoid a recession."
US government bonds rallied after the figures were released.
The yield, which is the implied cost of borrowing, of the 10-year Treasury bond fell instantly from 2.13% to 2.03%, in anticipation of a possible further round of debt purchases by the Federal  


''Reserve.''

   Global stock markets had been lower all day on Friday ahead of the numbers and they fell further after the publication.

The Dow Jones Industrial Average in New York opened down 2%.
'Rough month' It is the first time since 1945 that there has been a zero payrolls figure.
The figure followed 10 consecutive months of job additions.
A strike by 45,000 Verizon workers reduced the figure, as striking workers do not appear on payrolls, although those employees have now returned to work.
"August was a pretty rough month for the economy," said Ryan Sweet at Moody's Analytics in Pennsylvania.
"We saw financial markets tighten. I think businesses sort of responded by putting hiring on the back-burner."
Average hourly earnings fell by 3 cents to $23.09, while the average working week dropped to 34.2 hours from 34.3 hours in July.
The size of the labour force increased by 366,000 to 153.6m.
 
'No confidence'
Attention will now turn to a speech by President Obama next Thursday, in which he is due to outline a new plan for boosting growth and creating jobs.
"US companies have no confidence in the US economy and no confidence in the country's political leadership, so it's no surprise no jobs are being created," said Max Johnson at Currency Solutions.
"The US economy is looking increasingly forlorn and this latest jobs data will apply further downward pressure on the dollar."
A total of 17,000 jobs were added in the private sector in August, which were precisely cancelled out by 17,000 jobs lost in the public sector.
Local government has cut a total of 550,000 jobs since the employment peak in September 2008.
The number of people forced to work part-time because they were unable to find full-time employment rose from 8.4 million in July to 8.8 million in August.

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RBS agrees to end work for Belarus

Royal Bank of Scotland (RBS) has said it will no longer do fundraising work for the Belarus government following a campaign by human rights groups.

    Free Belarus Now and Index on Censorship argued that companies such as RBS were helping to support the regime of "Europe's last dictator".
Index said that RBS and other banks had sold $1.85bn (£1.1bn) worth of government bonds over the past year.
The decision followed a meeting at the bank's headquarters last week.
"Given sanctions, the deteriorating political situation in Belarus and the fact that it has reneged on key elements of the IMF programme, RBS has ceased any type of capital-raising for or on behalf of the Belarus Republic, and we have no plans to change that position until these issues have been resolved," said RBS in a statement.

"In assessing where we do business, we have a responsibility to consider a number of factors, including social and ethical issues and compliance with the letter and spirit of all international sanctions."

The European Union has frozen the assets of President Lukashenko and a number of other officials and imposed a travel ban on them due to the deteriorating democratic and human rights situation in the eastern European country.
There is also an arms embargo and an export ban on materials that might be used for internal repression.
'Clear signal' Belarus is facing an economic crisis and is in talks with the International Monetary Fund about a possible loan, but the organisation wants to see major changes in the economy before extending financial help.
"We're delighted that RBS has heeded our calls to stop acting as a broker for authoritarian President Lukashenko," said Mike Harris, head of advocacy at Index on Censorship.
"This couldn't come at a more crucial time. The government of Belarus needs nearly $1bn a month in foreign capital. RBS has sent a clear signal not to risk investing in a regime that violates fundamental human rights and may not last."
According to the IMF, Belrus is experiencing a financial crisis, including rampant inflation, because of excessive credit growth and wage increases that it could not afford.

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Greece's Alpha Bank and Eurobank EFG are to merge

Greece's second and third biggest banks, Eurobank EFG and Alpha Bank, have announced that they are to merge.

    In a statement, the banks said that their merger would, "play a vital role in the economic recovery of Greece".
The Greek government has encouraged banks to pool resources to help them cope with the country's debt crisis.
Qatar Investment Authority (QIA), which is already an Alpha shareholder, is expected to take a bigger stake in the new bank.
Shares in Greek banks have fallen by more than 50% this year, but they rallied in early trading on Monday.
QIA holds 5% of Alpha and is expected to take 15% of the merged entity.
The new bank will be the biggest bank in southeastern Europe, with assets of 146bn euros ($212bn; £129bn) and 1,300 branches.
Eurobank shareholders will receive five new Alpha Bank shares for every seven Eurobank shares they own.
The banks estimate that the merger will create about 650m euros of synergy saving per year.
Eurobank has recently sold its Polish subsidiary and promised to raise its capital further after failing EU-wide bank stress tests.
As major debtors of the Greek government, Greek banks have fared particularly badly in the sovereign debt crisis, surviving only with the assistance of the European Central Bank.
The second bailout for Greece will involve its banks having to accept lower interest payments on their holdings of Greek government bonds, albeit over a longer period.
Alpha Bank rejected a merger offer from the country's biggest lender, National Bank, in February.
The planned merger between Eurobank and Alpha Bank comes as rare good news for the Greek government, which has been calling on the country's banks to pool their resources.
The government goes into key talks with the European Union and the International Monetary Fund this week about the second bailout, having just increased its forecast for the contraction of its economy this year from 3.5% to 4.5%.

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Bank of America sells shares in China Construction Bank

Bank of America is selling about half of its 10% stake in China Construction Bank for $8.3bn (£5.1bn) in cash.

    The largest US bank said the sale would help it strengthen its capital base to comply with new global regulations, known as Basel III.
It has agreed to sell 13.1bn shares in the Chinese bank to a group of investors it did not name.
The sale is expected to complete in the third quarter and should generate an after-tax gain of $3.3bn.
It is expected to increase its core capital by $3.5bn.
The sale marks the bank's latest move to increase its capital base, and chief financial officer Bruce Thompson said it had added about $5.8bn to its core capital in the month of August "through non-core asset sales and other actions".
News of the sale lifted Bank of America's shares 5.3% in New York.
In recent weeks its share price has tumbled on concerns that it might have to raise outside capital through a share offering not only to meet Basel III rules, but to cope with billions in problem mortgage loans on its books.
Last week US billionaire Warren Buffet said his company Berkshire Hathaway would invest $5bn in Bank of America and strongly endorsed the bank's management team.

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