A Quiet Week Ahead for Investors

The week ahead is very thin, with little in the way of economic releases, public statements or speeches. It should be a week to reflect and analyze. If the EU can keep things under control and Iran is quiet, investors will have a bit of time to recover.

The weeks highlight a few:

In Australia, data on skilled vacancies and merchandise imports is set for release.

The Bank of England will also release the minutes of its last meeting, while data on housing starts and building approvals is due in the United States.

The European Union will release draft proposals regarding the regulation of shadow banks.

The International Monetary Fund will host high level talks at the two day China-India conference in New Delhi.

RBA Governor Glenn Stevens will speak at an investment conference in the week ahead.


The National Association of Home Builders housing market index for March will be released in the United States on Monday.


The RBA will release the minutes of its March policy meeting, where it kept the official cash rate on hold for the second consecutive time. Investors will watch carefully for any reflection on the expected direction that rates will take over the rest of the year. Most economists are still expecting at least one more rate cut in 2012.

US February housing starts figures and building approval data released. Economists are forecasting housing starts to be flat for the month, at around 700,000.

In the United Kingdom, February consumer price index data is awaited, alongside retail price index figures for the month.


The international merchandise figures for February reported by the Australian Bureau of Statistics. Also the Department of Education and Workplace Relations will release its skilled vacancies index for February.


February existing home sales figures in the US, along with the weekly Energy Information Administration petroleum status report. Analysts expect the data to show a rise in home sales of about two per cent.

Mortgage Bankers Association mortgage applications figures are also due.

Elsewhere, the Bank of England will release the minutes of its last policy meeting.

UK public sector net borrowing for February is also due.  

Also due is the highly anticipated jobless claims data is out in the US. February retail sales data is expected in the UK.


US new home sales figures for February and experts expect sales to have risen by 6,000 to 327,000.

That wraps up a quiet week around the globe.

Who is creating all these new jobs in the US ?

The US federal government reported broad-based gains in jobs for last month, supported by the ADP payroll report and the Non Farms Jobs report released last week, but which industries will be adding over next year?

The information-technology sector is ready to add jobs, while more financial-services firms and the government will be cutting back, according to an evaluation of more than 2,000 executives by Company Executive Board, a research firm. The survey, which questions executives worldwide but is heavily weighted in Northern America, revealed that 64% in the IT sector which includes PC hardware, software and services firms target to add on to their headcount in 2012.

The February payrolls report noted computer-systems design as one of the most powerful sectors, adding ten thousand positions last month. Against this just 27% of fiscal services executives, which include banking, insurance and property worker, plan to add staff this year, and 42% expect to scale back their headcount.

In the payrolls report, finance activities managed to add six thousand positions in last month, but which has come on top of contemporary cuts in the sector. The government sector was most under stress, with just 9% hoping to add staff in the CEB survey compared with 71% planning on cutting jobs.

According to US Statistics Agency information, government continued to cut jobs in last month after trimming about 22,000 positions a month all though 2011. Overall, the human resource managers in the CEB survey were more hopeful for 2012 than they were in 2011. Some 66% of respondents predicted income at their corporations to increase compared with 57% in the prior survey.

Far more inspiring, a majority 52% expect their peers to increase up from 43%. Survey respondents have a tendency to be more hopeful about their own prospects than those of their peers. 


US-EU-Japan file complaint against China with WTO

The US, the EU and Japan have lodged complaints with the World Trade Organization (WTO), stating that China is reducing its exports of rare earth minerals that are of extreme importance to the production of technology components.

China has a monopoly on the worldwide supply of 17 rare minerals that are essential to make high-tech products such as hybrid cars, weapons, flat-screen TVs, mobile phones, and lenses.

But the Communist Nation has cut its export quotas of these compounds over several years to cope with the increased need within its own borders, though the government also cites environmental concerns as the reason for the restrictions.

US industry officials suggest it is an unfair trade practice, against rules established by the WTO, a group that includes China as a member. This is going to be difficult to prove, no one can force a nation to export products it needs at home.

The Obama Administration planned to announce the US’ filing of a complaint from the White House this week.

The fresh action is part of Obama’s broader effort to crack down on what his administration sees as unfair trading practices by China.

Senior administration officials said Beijing’s export restrictions give Chinese companies a competitive advantage by providing them access to more of these rare materials at a cheaper price, while forcing US companies to manage with a smaller, more costly supply.

The three separate but coordinated filings with the WTO formally request dispute settlement consultation, which is the first step in a WTO complaint. The major issue is nationalism and what a country does within its own borders with products from its own borders.

Responding to the complaints, “China defended its curbs on production of rare earths as an environmental measure.”

Global manufacturers that depend on Chinese supplies were alarmed by Beijing’s decision in 2009 to limit exports while it built up an industry to produce lightweight magnets and other goods that use them. At the same time these manufacturers should have never allowed themselves to be at the mercy of a single supplier or government.

China has about 30% of rare earths deposits, but accounts for 97 per cent of the world’s production. China’s Ministry of Commerce confirmed in a statement on its website that it has received the request for dispute settlement.

China “has emphasized repeatedly that the policy aims to protect resources and the environment and realize sustainable development”, the statement said.

A Chinese foreign ministry spokesman, Liu Weimin, said at a briefing that the government believes the policy is in line with WTO rules. Which it seems to be.

European Inflation Review

A report released today, showed Eurozone annual inflation was 2.7% in Last month, unchanged compared with the previous month. A year earlier the rate was 2.4%. Monthly inflation was 0.5% in Last month 2012. Malta’s inflation rate is 2.3% slightly below the Eurozone average.

EU annual inflation was 3.0% in last month, up from 2.9% from the first month of the year. A year earlier the rate was 2.9%. Monthly inflation was 0.5% in Last month 2012, according to Eurostat, the statistical office of the EU.

Inflation in the European States

In the last month 2012, the lowest annual rates were recorded in Sweden (1.0%), Greece (1.7%) and Spain (1.9%), and the highest in Hungary (5.8%), Estonia and Poland (both 4.4%). Compared with first month of the 2012, annual inflation fell in nine member states, remained stable in five and rose in eleven.

The lowest 12-month averages up to last month 2012 were registered in Sweden (1.3%), Slovenia (2.1%) and Malta (2.3%), and the highest in Romania (5.1%) and Estonia (5.0%).


The main components with the highest annual rates in last month were transport (4.6%), housing (4.4%) and alcohol and tobacco (4.1%), while the lowest annual rates were observed for communications (-3.0%), recreation and culture (0.9%) and education (1.0%).

Other sub indexes reported, showed fuels for transport (+0.38 percentage points), gas and heating oil (+0.14 each) had the largest upward impacts on the overall rate, while telecommunications (-0.19), cars (-0.09) and rents (-0.08) had the largest downward impacts. Fuel costs were the most inflated.

If energy products were removed from the equation or reduced from their high levels since January, overall inflation would have been very low. The high price of crude oil is slowly having a far reaching effect through the economy.


Bernanke Speaks Gold Drops… Did You Miss The Trade ?

Trading Gold by the Text Book

Since gold is volatile and will react to most economic indicators, especially announcements from the Federal Reserve. The gold price is sensitive to a number of scheduled U.S. and Euro area macroeconomic announcements—including retail sales, non-farm payrolls, and inflation. Gold’s high sensitivity to real interest rates and its unique role as a safe-haven and store of value typically leads to a counter-cyclical reaction to surprise news, in contrast to their commodities. It also shows a particularly high sensitivity to negative surprises that might lead financial investors to become more risk averse.  

Just about any investors could have and should have “sold” gold this week. All the signs were there. Gold had climbed to an unsupported level, on a combination of market indicators and geopolitical worries combined with uneasiness over Greece and the Eurozone.

Recently, a new economic indicator has been added to the markets, it is called Ben Bernanke, every time this man speaks gold drops.

The last time Fed head Bernanke spoke gold plunged close to 75.00 in minutes. When the FOMC released their minutes and statement, telling the markets they were going to hold rates close to zero until 2014 gold dropped like a lead balloon.

The drop in gold today was predictable and from the basic trading manual for beginners.

The US economy was doing well, all indications show that hiring’s are up, unemployment is slowly falling, and recovery is on track. In Europe both Greece and Portugal, have been handled. Spain and Italy are no longer looking as problematic as they were a few weeks ago.

Investors are no longer in need to a safety net. It was time to venture out to find riskier assets.

Gold is trading at 1637.25 down 56.95 joining most of the commodities trading lower today.

Gold should find a bit of support around the 1625 level, but will most likely break through, especially if there is a strong jobs report on Thursday.

Fed Chairman Bernanke today said again that the pace of the economic recovery has been “frustratingly slow.”

Don’t worry if you missed this trade there will be other chances.

Results of Economic Events Around the Globe

Today, the first-ever release of GDP data covering all the Group of 20 countries showed the world economy slowed to a quarter-on-quarter growth rate of 0.7% in the fourth quarter from 0.9% in the third quarter.

 Fed Chairman Bernanke today said again that the pace of the economic recovery has been “frustratingly slow.” Bernanke said that “the condition of community banks is improving” despite economic uncertainties. “Profits of smaller banks were considerably higher in 2011 than in the previous year, nonperforming assets were lower, provisions for loan losses fell appreciably, and capital ratios improved,” In his address Bernanke said. The Fed is trying to listen and understand small banks’ concerns about regulation.

The U.S. current account deficit, on trade in goods and services, income, and donations, widened to $124.1 billion in the fourth quarter, or 3.2% of gross domestic product, much larger than expected. Import prices rose 0.4% in February due to oil, the Labor Department reported . It’s the first increase in since December and biggest gain since April 2011.

U.S. consumers’ pushed up retail sales rose 1.1% to $407.8 billion.

In the FOMC statement released yesterday, the minutes stated. “The recent increase in oil and gasoline prices will push up inflation temporarily, but the FOMC anticipates that subsequently inflation will run at or below the rate it judges most consistent with its dual mandate,” and continued “But the labor market has improved at a faster pace than expected, given the current pace of growth. First-quarter gross domestic product is expected to decelerate to roughly 2% from the 3% pace in the fourth quarter.”

Business inventories climbed in January as car dealers correctly anticipated a strong pickup in demand, according to data released Tuesday.

Inventories rose a seasonally adjusted 0.7% to $1.57 trillion, the largest increase since October, the Commerce Department said. Economists polled by MarketWatch had anticipated a 0.5% gain.

Banks’ use Tuesday of the European Central Bank’s overnight deposit facility increased from Monday’s elevated level, reflecting the vast amount of excess liquidity present in the banking system in the wake of the ECB’s longest-ever loans.

 But the surprise of the day, was the number of British workers seeking jobless benefits rose by 7,200 in February to 1.61 million, the Office for National Statistics reported Wednesday. Economists had forecast a rise of 5,000. The number of unemployed persons rose by 28,000, rising well above forecasts, surprising lawmakers and economist.

Today, Euro-zone countries formally approved Greece’s second bailout, Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of the Eurogroup of euro-zone finance ministers, said in a statement.

Consumer Sentiment and Housing in Oz Fall

Consumer sentiment in Ozzie Land has fallen following the Reserve Bank of Australia’s (RBA) decisions in February and March to keep the official interest rate on hold, a survey shows. Many consumers are worried about mortgage rates and other adjustable rates, as banks are raising interest rates regardless of the moves by the central bank.

Home purchases have declined also, as both real estate investors and private buyers have moved from the market after the expectations were dashed.

The Westpac Consumer Sentiment Index fell by 5.0 per cent to 96.1 index points in March, from 101.1 points in February. Westpac chief economist Bill Evans said the fall meant pessimism now outweighed optimism among consumers.

He said the index was now below its October 2011 level.

That was before the RBA cut the official interest rate by 25 basis points in November and, by the same amount, in December. The cash rate has remained at 4.25 per cent since the December move. Mr Evans said the rate hold had hurt consumer confidence.

“With the two previous rate cuts, in November and December, being passed on in full by the banks, it is reasonable to assume that many borrowers expected a further cut in the mortgage rate of 0.25 per cent.”Instead, mortgage rates were actually increased in the following week with banks raising mortgage rates by an average of 0.10 per cent.

“It is likely that this reversal has impacted confidence.”

All five components of the survey fell this month, with the sub index tracking how consumers view the state of their family finances down 8.6%. The outlook for family finances over the next 12 months fell 4.5 per cent while the sub index covering economic conditions over the next five years fell 6.1 per cent.

Housing prices in Australia rose at the end of last year, as real estate investors moved heavily into the market as interest rates were reduced twice. The demand pushed up prices, which has not fallen, since the investors have left the markets, accounting for the drop in housing sales.

FOMC Brief and Too The Point

The FOMC members held their course today, taking no new actions and offering few hints about their eagerness to start on future programs to strengthen the recovery. In their appraisal of the U.S. Economy, the central bank officers recognized increase in the employment market, but warned that business hazards remain and that inflation could rise briefly due to the current increase in gas and oil costs. All but one member voted to keep the central bank’s easy-money policies in place after a one-day meeting of the Fed. Open Market Council, the Federal Reserve’s policy-making body. The Federal Reserve repeated its goal to keep short term interest at “low levels” thru late 2014. 

On Wednesday, Fed Chief Ben Bernanke will make his statement; the FOMC was so brief it would lead one to believe the Bernanke may have some surprises in store in his address.

Below is the actual first few paragraphs of the statement containing the gist of the entire statement.

“Information received since the Federal Open Market Committee met in January suggests that the economy has been expanding moderately. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The housing sector remains depressed. Inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

The FED is Coming Up and the ECB is Done

The FOMC decision on Tuesday will be watched by investors and economists around the globe, although no new initiatives are expected. Operation Twist continues (ends at the end of Q2), the Fed prolonged their “conditional promise” to keep Fed funds rate unchanged till late 2014 at the previous FOMC meeting, making it unlikely the Fed would decide something else at this one-day meeting. The attention will go to the statement and the description of the state of the economy. Mr. Bernanke mentioned a new process called “Sterilization’ last week and perhaps we will get a bit more about that but it is not expected. Otherwise the Fed has become somewhat more optimistic on the labor market and what does it make of inflation?

For that we will need to wait on the FOMC Minutes that will be published in a late. However, the improving labor market is diminishing chances on another purchase program, even if such a plan might resurface fast if the economy would falter again. The FOMC meeting shouldn’t reveal much new information. But one never knows, they have been known to surprise the markets.

The ECB meeting had no lasting effect on bond trading. An initial stumble in the Bund was reversed later on during the press conference. The ECB staff forecast negative growth figure in 2012 (slightly above consensus), but a slow recovery in the following year. More interesting was a sharp upward revision of inflation (to 2.4% in 2012) and the fact the ECB sees it only below 2% in early 2013. This could possibly have to do with oil prices pushing petrol prices upwards. This suggests a possibility of lowering of rates is growing stronger.

Mr. Draghi was very pleased with the success of the 3-yr LTRO on which he detailed in length. It is unlikely another 3-year LTRO will be held, but he was cautious and didn’t rule it out altogether. Although, last week he referred to the procedure as a “non-standard non regular event”. It is obvious that following the LTRO’s the ECB will take time to examine its effects on the economy.

The ECB is also well aware that the time it bought by the LTRO may be squandered by banks and governments by relieving the market pressures. Now the ECB’s efforts will continue to put pressure on both to address their problems.

Mr. Draghi also devoted a lot of time to quash German fears that the non-conventional policy of the ECB is saddling the institution with too much risk. A view that is growing throughout financial circles.

Is Japan Headed for a Financial Meltdown

Over the past few weeks, most economists and investors have been watching the story in Greece unfold. Waiting at the back door are Hungary, Portugal, Spain and Italy. The EU has spent a lot of time and effort pushing austerity measures and using standardized calculations to evaluate budgets and financial projections, in many cases ignoring cultural and financial differences.  EU ministers have tied debt to GDP, which is a text book approach. Except it doesn’t always work and sometimes it just is plain old fashion wrong. Let’s take a look at our close ally and friends, but a country no one can really figure out.

Japan’s debt to GDP ratio is the worst in the developed world, yet the BoJ’s interest rates are the lowest available, excluding Switzerland.

The main reason is that for the close to 15 years we’ve seen an excess of Japanese savings and a deficit of demand for those savings. So the Japanese government was able to issue debt without any competition from the private sector. But the Japanese demographic profile means that more workers are withdrawing from the workplace and drawing down their retirement savings.

The Japanese government is running a fiscal deficit of 10 to 11 per cent of GDP. Expenses for social security accounts for ¥27 trillion against total revenues of approximately ¥45 trillion. In addition, the Japanese government has interest expense of ¥10 trillion. Add them both together, and the Japanese government is spending 90 per cent of its total revenue on these two items.

We think that we are in the midst of an inflexion point, where there’s not enough Japanese savings to finance Japanese government debt. That means that the Japanese government will have to borrow in international capital markets. Given Japan’s risk profile – its debt to GDP ratio is 230 per cent – Japan may have to pay, say, 3 to 3.5 per cent to borrow. But that would push Japan’s interest expense to ¥30-35 trillion. We believe that is a recipe for disaster. The Bank of Japan has announced that it will start buying a lot of Japanese government debt, which will temporarily allay the problem. But if the market starts thinking that Japanese inflation will pick up, interest rates will be pushed higher.

One important item that has provided stability in Japan and peace of mind for investors in Japanese bonds has been Japan’s consistent current account surplus. However beginning before, but accelerating after the accident at Fukushima, Japan has seen its trade balance decline sharply. The reactor meltdowns and subsequent closure of the vast majority of nuclear plants has forced Japan to aggressively shift away from nuclear base load power. But that has meant it has had to pay a lot for LNG, oil and coal for its power generators. But this shift can and will be addressed and changed. This is only a temporary adjustment, large and important but temporary.

Last year, Japan’s had a trade deficit for the first time since 1980. New data just released shows that Japan also ran the largest single month full current account deficit since the oil shocks of the 1970’s. 

Will a Japanese crisis happen – there are some clear warning signs. If so it will happen sooner rather than later. No one ever thought we would see what we are witnessing in the EU, and even when all the signs were present politicians, lawmakers, economists and analysts turned a blind eye. 

My Desk Diary March 5-9th Events Around the Globe

The events listed under each geographic area, start from the most current to the earliest of the week from March 5-9th. Many events are left out as they have been updated or changed by newer releases. For example the ADP payroll report is not listed since the US report superseded it on Friday; events during the week involving the PSI bond swap are also left off since the only news that is important is it was completed.


The U.S. created 227,000 jobs in February and more people found work in the prior two months than previously reported, suggesting the economy’s recent momentum is likely to continue.

The unemployment rate, meanwhile, was unchanged at 8.3% as nearly half-a-million workers reentered the labor force in search of job, the Labor Department.

Household debt edged up 0.3% in the fourth quarter, the Fed reported in its flow-of-funds report, as consumer credit surged at a 7% annualized rate. Household debt had declined for 13 consecutive periods before the slender fourth-quarter advance.

The U.S. trade deficit widened sharply in January, driven higher by record imports of autos, capital goods and food, government data reported.  The trade gap expanded 4.3% in January to $52.6 billion from $50.4 billion in December.

The Fed is considering a new form of “sterilized” quantitative easing that would allow asset purchases despite high oil prices, according to a report in The Wall Street Journal. Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.

The Canadian Central Bank held rates today at 1% following the lead of banks around the world.

The Institute of Supply Management said its non-manufacturing PMI climbed to 57.3 in February from a reading of 56.8 the previous month. Economists had expected the index to decline to 56.1.

Another report showed that U.S. factory orders fell, but at a slower than forecast rate in January, declining by a seasonally adjusted 1.0%, compared to forecasts for a 1.3% slide.


The International Swaps and Derivatives Association said Friday that the Greek government’s use of collective-action clauses, or CACs, to amend to terms of Greece-issued bonds qualifies as a “credit event” for Greece. A credit event requires a payout to those who held credit default swaps as insurance to protect them in the event of a Greek default.

The Fitch ratings agency downgraded Greece to “restricted default” over the bond swap — a move that had been expected. Fitch was the third agency to downgrade Greece into default, after Moody’s and Standard & Poor’s.

The deal is done, finally. Greece finished their debt swap with private creditors. Bondholders representing some 85% of Greece’s outstanding private-sector debt, well above the government’s minimum threshold, have agreed to the swap, easing pressures on the eurozone.

Conditions are in place for Greece to get its second bailout, said Eurogroup President Jean-Claude Juncker in a statement released Friday. “I welcome the significant progress achieved in the preparation of the second Greek adjustment program,” said Juncker, after a teleconference between euro-zone finance ministers on Friday

The Bank of England announced their current rate decision which was as expected to hold rates. No new additions to their monetary easing policies announced in February.

The European Central Bank committee held lending rates at the current rate of 1% and made no comments on any additional lending policies.

Prices for Italian government bonds jumped and Spanish bonds also rose Thursday, sending yields lower on expectations Greece will successfully complete its voluntary debt swap with private investors. Italy’s 10-year bond yield fell 0.20

 German production climbed 1.6% from December. Economists were expecting an increase of 1.1% in the euro zone’s largest economy. 

In the UK, house prices fell by 0.5% in February from January and were down 1.9% in the three months to February from the same period a year ago, according to the Halifax House Price Index. Prices were down 1.1% in the latest three months to February from the previous 3-month period.

EU’s Rehn: Eurozone Currently in a Mild Recession but Signs of Improvement but, risk of credit crunch in European economy has been prevented largely due to long-term liquidity offer of ECB. The Commission supports combining remaining resources of EFSF with ESM to make sturdier European firewall.

UK services sector saw growth slow in February after the surge in January, the CIPS/Markit index shows. The headline service sector CIPS/Markit index fell to 53.8 in February from an unrevised 56.0 in January, well below analysts’ median forecast for a 55.0 outturn. The detail, however, was more encouraging showing a rise in business expectations and easing inflation pressure.

Business expectations rose to their highest level for a year while output charges declined. Markit said sales were supported by discounting, with margins squeezed as input cost continued to rise.

Spanish Prime Minister Mariano Rajoy on Friday announced a new deficit to gross domestic product target for the country of 5.8% in 2012, against a prior target of 4.4%, according to media reports. Rajoy made the comments in Brussels. Spanish media has been reporting for days that the government would raise its target.


Australia posted a seasonally-adjusted trade deficit of 673 million Australian dollars ($717.2 million) in January, the Australian Bureau of Statistics said Friday. Economists had been expecting a surplus of A$1.5 billion

China’s consumer price index rose at a weaker-than-expected rate of 3.2% in February from the same month a year earlier. The producer price index for February came in at 0%, also weaker than expected and slowing from January’s 0.7% year-on-year increase.

China’s industrial production and retail sales growth weakened in the first two months of 2012 from the year-earlier period, an official data release showed Friday.

The New Zealand Reserve Bank has held the official cash rate at its historic low of 2.5 per cent at its review. Reserve Bank Governor Alan Bollard opted against making a rate change when releasing the quarterly monetary policy statement. He said if the New Zealand dollar remained at its high levels it would lessen the need to raise the rate. Dr Bollard says the New Zealand economy was continuing to improve despite the export sector being impacted by the high dollar.

Australia’s seasonally-adjusted unemployment rate increased 0.1 percentage points to 5.2% in February, the Australian Bureau of Statistics said Thursday Australia’s fourth-quarter gross domestic product rose 0.4% against economists’ expectations of a 0.8% gain, disappointing government officials and the markets.

South Korea kept its key interest rate on hold at 3.25% on Thursday, according to reports. The decision was widely expected.

Japan’s trade deficit widened in January to 1.382 trillion yen ($17.0 billion), up 245.9% compared to the year past. Japan’s current account deficit totaled 437.3 billion yen in the month. The trade deficit and current account deficit were the largest on record.

China will extend yuan-denominated loans to other nations that make up the Bric group of nations.

Japan’s crude imports from Iran in January fell 23 percent from a year ago to 1.67 million kiloliters, or 338,900 barrels a day, according to data from the Ministry of Economy, Trade and Industry

Premier Wen Jiabao, in his annual state-of-the nation report to China’s parliament, reduces growth for 2012 of 7.5 percent. That would be the slowest pace of expansion since 1990 and well down on last year’s 9.2 percent growth rate.

Japan’s unemployment rate inched up to 4.6 per cent in January from a revised 4.5 per cent in the previous month.

January household spending fell by an inflation-adjusted 2.3 per cent year-on-year. The fall was bigger than a 0.8 per cent drop economists had expected.

The nation didn’t sell any of its currency from Jan. 30 to Feb. 27, the ministry’s month-end data posted on its website shows.

Companies’ capital spending jumped by the most in nearly five years in the fourth quarter. Capital spending excluding software rose 4.9 percent from a year earlier, after declining 11 percent in the previous quarter.

Notes from my desk – a little of this and a little of that

The U.S. created 227,000 jobs in February and more people found work in the prior two months than previously reported, suggesting the economy’s recent momentum is likely to continue.

The unemployment rate, meanwhile, was unchanged at 8.3% as nearly half-a-million workers reentered the labor force in search of job, the Labor Department reported Friday. That’s usually a good sign because it means people believe more work is available.

The increase in nonfarm jobs topped 200,000 for the third straight month, which reinforces the view of an economy gathering strength as 2012 unfolds. The past three months of full-time job growth is the fastest since the end of the recession and marks the best performance since 2006.

The U.S. trade deficit widened sharply in January, driven higher by record imports of autos, capital goods and food, government data reported.  The trade gap expanded 4.3% in January to $52.6 billion from $50.4 billion in December.

 The deal is done, finally. Greece finished their debt swap with private creditors. Bondholders representing some 85% of Greece’s outstanding private-sector debt, well above the government’s minimum threshold, have agreed to the swap, easing pressures on the eurozone.

Conditions are in place for Greece to get its second bailout, said Eurogroup President Jean-Claude Juncker in a statement released Friday. “I welcome the significant progress achieved in the preparation of the second Greek adjustment program,” said Juncker, after a teleconference between euro-zone finance ministers on Friday

The dollar gained against most major rivals on Friday, with details on Greece’s bond swap due as well as key U.S. jobs data. The ICE dollar index which measures the greenback against a basket of six currencies traded at 79.21, from 79.090 late the previous day.

UK construction output fell sharply in January following a large decrease in December, figures published by National Statistics Friday showed. Construction output fell 12.3% on the month in January, after a 11.8% monthly decline in December. Output was down 2.3%compared with January 2011. Output prices rose at their fastest since April 2011 and core inflation ticked up for the first time in five months, raising concerns over the inflationary outlook. Manufacturing output growth eased in January, following a strong rise in the previous month

Inflation expectations for the year ahead eased back in February to 3.5% from the 4.1% seen in November, the latest Bank of England/ GfK NOP Inflation Attitudes survey shows. This was the lowest reading on this measure since August 2010.Expectations for inflation in the 12 months after that also eased back to 2.9% from 3.4% In November while longer-term inflation expectations (i.e. in 5 years time or so) fell to 3.2% from the 3.5%seen in November.

Spain: Commission spokesman said “Technicians of the European Commission have been in Madrid this week to collect information on the 2011 public accounts” adding “it is a normal practice in all countries under an excessive deficit procedure”

Italy: January SA industrial output -2.5% m/m, WDA -5.0% y/y,on a contraction across all output sectors, posting the worst fall in the y/y index since Dec 2009 (-6.5% y/y). The m/m decline follows m/m gains of +1.2% in December and +0.2% in November.–January unadjusted y/y output fell -2.1%, up from -7.7% y/y in Dec

 France’s central government deficit at end-January amounted to E12.5 billion, down E918 million from the previous-year level, the Budget Ministry said Friday. Outlays totaled E32.8 billion, E6.5 billion higher than in January 2011. This was mainly due to a new financial management system that allowed ministries to hit the ground running at the start of the year, the ministry explained.

Australia posted a seasonally-adjusted trade deficit of 673 million Australian dollars ($717.2 million) in January, the Australian Bureau of Statistics said Friday. Economists had been expecting a surplus of A$1.5 billion

China’s consumer price index rose at a weaker-than-expected rate of 3.2% in February from the same month a year earlier, according to data released Friday. The CPI print is lower than the 3.4% expected by economists surveyed by Dow Jones Newswires and FactSet Research, and is sharply lower than the 4.5% increase seen in January. The producer price index for February came in at 0%, also weaker than expected and slowing from January’s 0.7% year-on-year increase.

China’s industrial production and retail sales growth weakened in the first two months of 2012 from the year-earlier period, an official data release showed Friday. Industrial production for the January to February period climbed 11.4%, falling short of a 12.4% increase anticipated in a FactSet Research survey. Retail sales for the two-month period climbed 14.7%, also coming in below expectations of a 17.5% jump.

Iraq had opened last month the new Single-point Mooring, or SPM, built by a subsidiary of Australia’s Leighton Holding Ltd. , but bad weather and some technical faults delayed the start of loading from the terminal, one of five the company is building in southern Iraq. Iraq has started crude oil exports from a new floating terminal at a rate ranging between 240,000-600,000 barrels a day, a senior Iraqi oil official said Friday. Iraq is currently exporting around 1.7 million barrels a day from the south, but it couldn’t export some extra 150,000-200,000 barrels a day because of lack of export capacity in Basra oil terminals,

Do We Really Think That The Greek Crisis Is Behind Us…

The Greek ministry announced the result of its bond restructuring early Friday morning. The government claimed 83% of bondholders had willingly submitted to the deal, and that it would invoke supposed collective-action clauses to force the exchange on almost all of the rest, bringing collaboration up to 96%.

Greece had estimated 206 bn. ($273 bn.) in bonds for the exchange.

Just over a hundred bln will be cut from the amount Greece owes.

While a consummated debt swap has been on the horizon for at least a weeks. The result of the debt exchange had been getting more and more clear over the previous several days, however it remains a major point for the EU Union’s common currency, and for the debt crisis that started in Greece more than 2 years back and has threatened the union ever since then.

Demonstrators raise a Greek flag in front of parliament in a rally against austerity and industrial measures and corruption in Athens ‘ Syntegra Square in June 2011.

It’s also a critical landmark for Greece, which may get some alleviation from its debt, and, crucially, secure more help from Europe. But the country is still devastated by austerity and years of recession.

Few think its economic future, at least in the shorter term, is any brighter. Greece’s debt burden now more than 160% of its annual GDP. The ECU stepped in with rescue loans and put Greece on an economic diet. Still the debt mountain grew.

EU leaders maintained for over a year that Greece would not be permitted to fail and would pay back its creditors ; then, last year, it became obvious the costs of keeping her  floating were too much for the remainder of the eurozone  to bear.

At first offer for a debt restructuring, in July, asked non-public creditors to forsake roughly ten percent of the face value of their holdings. As Greece’s finances deteriorated, that plan evaporated. The restructuring now set to be executed will see Greece axe 53.5% from the face value of around two hundred bln in bonds held by private creditors.

Greece’s other major creditors include its fellow euro-zone countries, which have lent 53 bill, the other international financial organizations including the IMF, which lent twenty bn., and the ECB and state central banking institutions, which acquired more than fifty bln of its bonds.

None of those loans are covered by the restructuring.

Of the 206 bn. in total instruments in private hands, 177 bn. are central authority bonds issued under the laws of Greece, about ten bln are bonds issued by state owned corporations and warranted by Greece and eighteen bln are executive bonds issued under the laws of foreign jurisdictions, where Greece’s reach is more limited.

Greece’s laws changed in February which permit the country to bind all Greek-law holders to the exchange with the acceptance of two thirds. That threshold was simply cleared, and Greece asserted all 177 bill will be pushed into the exchange. Of the foreign-law bonds, 69% accepted the exchange, as did the majority of the state-owned-company bonds. Greece stated that it would give resistant bondholders 2 weeks to switch their minds; nevertheless it implied it might play tricky. There are therefore around nine billion of bonds belonging to creditors who may challenge the exchange thru courts or settlement panels.

Bondholders who submit to the swap or are compelled to do so will get a package of instruments including money or short term bonds issued by the euro-zone rescue fund valued at 15% of the value of whatever they exchange, and a collection of Greek bonds maturing over the following eleven to thirty years priced at 31.5%. Those bonds have just started trading in a theoretical “gray market,” expounded folk acquainted with the problem. The new 30-year bond was quoted between fifteen and seventeen cents, and an 11-year bond at between twenty and twenty-two cents. Those levels imply that financiers think Greece will not meet its obligations in the future and a further rescue will be required.

Central Banks Are Becoming Big Business – US, Japan, England, ECB

Central banking has changed into a worldwide expansion industry. However it is not just the dimensions of balance sheets that are changed: so too have their composition. With rates close to nil, the U.S, U.K, Japanese and EU central banking institutions have pumped money into the monetary system. But each has selected a different method and will face different challenges when they try and shrink again. The expansion in balance sheets has been alarming: The mixed assets of the 4 central banking institutions will top $9 trillion by the end of March, compared to $3.5 trillion 5 years back, Deutsche Bank says. The European Central Bank’s three trillion ( $3.93 trillion ) balance sheet is the most important relative to the economy, at 32% of nominal euro-zone GDP, followed by the Bank of Japan with thirty percent, the UK Central Bank with 21% and the Fed Reserve with 19%. The BOE’s balance sheet has expanded quickest in the emergency, more than tripling to £321 bln ($504.6 bln).

But the change in composition and maturity profile of the balance sheets has been similarly notable. In Jan 2007, the Federal Reserve held $779 billion of U.S. Treasury’s, of which 52% matured in under a year and only 19% in more than 5 years. Now, it holds $1.65 trillion of Treasury’s, of which 57% mature in more than 5 years.

Of the BOE’s £255 bln face price of gilts, 72% mature in more than 5 years, with 26% maturing in more than twenty years.

The ECB has concentrated on loans to banks. From 450 bln of usually one-week loans in Jan 2007, its exposure has risen to 1.1 trillion of usually three-year loans. So although it has acquired 284 bill of government and covered bonds, the maturity of its assets is weighted towards shorter-maturity bank loans.

But the ECB is taking higher credit risk than the BOE or Fed thanks to the loan collateral it is accepting, even after big haircuts.

The BOJ is both offering loans and purchasing Japanese govt. bonds and other assets under its latest sixty five trillion ($803.5 bill) program but has centered purchases on 2 year bonds so far.

To tighten policy, central banking organizations could raise rates, sell assets or mop up liquidity thru market operations. Due to the long-maturity bonds the Federal Reserve and BOE hold, even by 2015 they may still face a troublesome task in selling assets without interrupting markets. So they are likely to raise rates first but might take forever to run down their holdings.

The ECB is counting on a total recovery in private funding markets to exit from its loans which is a long way from guaranteed.

In the meantime, the BOJ has been clung to an ultra-loose policy for some time.

The exit for every one of them is probably going to be a long and steady process. 

BoE and ECB Bank Decisons Up To The Minute

Three years of extremely low interest rates will slide past today with little sign that the Bank of England is set to ease up on its emergency support.

Economists think rates will remain at 0.5% until the end of next year and possibly for as long as three more years, adding to the pain for savers. They seem to be following the guideline of the US Federal Reserve who announced their policy of maintaining low interest rates until the end of 2014.

On the third anniversary of its decision to cut rates to an all time low, todays  meeting of the bank’s monetary policy committee is expected to be low key, with no change expected in rates or its ‘money-printing’ program.

The QE policy adopted last month was also unleashed three years ago and  received a further injection of £50 billion growing to  £325 billion, despite pushing up inflation rates.

The Bank of England offered no surprises in today’s announcement, keeping its key lending rate at a record low, where it’s stood close to 1000 days while making no changes to its quantitative-easing program already in practice. Policymakers also voted to make no changes to the size of the bank’s asset-purchase program, the centerpiece of its quantitative-easing strategy, after boosting the program by 50 billion pounds ($78.8 billion.

The European Central Bank said they will keep the current lending rate unchanged. At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.00%, 1.75% and 0.25% respectively.

The panel “has spent the past two years wrestling with the proven fact that although inflation appeared stuck well above the two percent target, the base weakness in the economy meant there were reasons to fret that inflation would become entrenched at ‘too low’ a level in the medium term” Now, with inflation beginning to decline and the committee’s forecasts highlighting fears inflation could fall below target, there seems to be “no powerful momentum behind further policy loosening,” Hayes announced. Annual inflation came in at 3.6% in Feb, down from a top of 5.2% last Sep. Industrial activity over coming months is probably going to be rocky nonetheless, and will dictate policy.

Policy makers will be closely watching the euro-zone to work out if the current stabilizing in the of the crisis can be maintained, strategists said. Council members also need to permit time for the Greek rescue to become effective and also to have enough time to breathe as the markets, judiciary, economic experts and stockholders have been pushed to their limits. The wait and see policy is the very best at this time.

Draghi, in the meantime, is predicted to take a wait-and-see approach after the completion last week of the ECB’s 2nd, three-year long-term refinancing operation, or LTRO. The near term loans program last week saw eight hundred banking establishments borrow some 530 billion euro ( $700.3 billion ) in three-year loans fixed to the ECB’s one percent refi rate. It followed the ECB’s first-ever three-year LTRO in December. The quantity of participation was more than the markets had predicted. 


Asian Markets Closing and European Markets Opening

Word is that Greece has 58 per cent of private sector participants signed up to the debt swap deal so far, which at the very least means the Greek government has the numbers it needs to activate collective action clauses – if they need to. That said, the IIF and some major bond holders have all expressed confidence that Greece will get over 75 per cent participation. If on the other hand they don’t and then have to activate the CDSs? No one really knows what the market impact will be. Theoretically it should be nothing, but history has shown this isn’t the case and contagion fears have often shot up. But my gut feel now is that it might pass without incident, a bit of risk for sure, but not the carnage that we would have seen even last year. That’s largely because I think market psychology has changed. You can only cry wolf so many times and there is already considerable evidence of Greek fatigue. 

As it is for last night, the euro bounced around (70 pip range) but ended little changed at 1.3131. European stocks were then higher with the DAX up 0.6 per cent, the CAC up 0.9 per cent and the FTSE 0.4 per cent higher. Reports in the paper and newswires suggest this is because of the new pledges and also because of the ADP employment report, which showed jobs growth of 216,000.

 It’s all positive don’t get me wrong, but the pledge news isn’t new and the ADP result came in as expected. It’s not even a great survey. Yesterday’s moves were inexplicably large – yes inexplicably – and this is just a very modest correction I think. So across the Atlantic, the S&P500 is up about 0.6 per cent with financials, industrial s and consumer services the main out-performers, although all sectors other than utilities look to be higher at this stage. The Dow futures is currently 83 points higher 12844, the Nasdaq  futures is up 0.8% while the S & P 500 is 0.4% higher

On the debt side, US treasuries sold modestly with the yield on the 10-year about 1 basis point higher at 1.967 per cent. The 5-year was also 1 basis point higher (0.84 per cent and the 2-year was almost 3 basis points higher at 0.3 per cent.

 A Wall Street Journal report suggested that Bernanke’s was itching to print more money. You can’t keep this guy away from the printing press for too long In any case the WSJ suggests the Fed is considering a number of QE approaches, including operation twist mark II renamed to “Sterilization “

 The Aussie futures then were mixed, down a tic or so.

 Elsewhere gold climbed $10 to $1685, Crude was 1.6 per cent higher on WTI ($106.4), while Brent was 1.9 per cent to $124.32.

 The Australian dollar was otherwise little changed at 1.0574

Treasury Select Committee Drills Head Honcho’s of Credit Ratings Agencies

Top Management from Moody’s and Standard & Poor’s stopped short of saying sorry for the losses suffered by speculators after they did not spot the problems brewing in the USA sub-prime mortgage market during questioning by the Treasury Select Panel . Frederic Drevon, of Moody’s Services, would only say the company “was not satisfied” with its ratings on financial instruments connected with the US mortgage market.

Dominic Crawley, Standard & Poor’s head of monetary services ratings, asserted the company had “expressed regret” that its research and rating on US sub-prime didn’t mirror what at last occurred in the market.

Paul Taylor, group CEO of Fitch Ratings declared that as far as structured finance transactions were concerned “we have apologized”.

Andrew Tyrie, boss of the Treasury Select Committee, claimed it was “deeply concerning” that Moody’s and. Standard & Poor’s didn’t feel that they had anything to say sorry for. In the session, in which witnesses faced an antagonistic line of querying from MPs, the agencies appeared to wish to play down their role and stressed that stockholders should base their calls on a variety of views and info, and not just those of the ratings agencies.

They claim that there ratings are only one piece of vital info which is available to the market and investors, but there are several other pieces of important info around about credit call making,” Mr Crawley expounded. “We have been clear that we don’t expect an individual financier, or at the other end of the range a complex asset chief, to depend only on what we provide.”

Mr Taylor stated that though ratings were a good evaluation of long term credit suitability, there wasn’t any guarantee that agencies wouldn’t miss things in future times.

“If you are telling me that I need to forecast each default that comes up, with 100% precision, then that is impossible.”.

Mr Tyrie made it obvious he was disenchanted with the result of the session in his concluding remarks, and declared issues including competition in the sector, regulation and the fees and services offer and would explored these further.

He stated: “It appears that you have left the council unconvinced that many of the issues attached to rating agencies in 2008 have yet been adequately addressed.”.

Following the session Mr Tyrie added: “If even one of the ratings agencies had drilled down more deeply into the depth of products developed [in the run-up to the crisis] and challenged them, we’d all be in a miles better place now.”. 

If Production is Up and Demand is Down.. Just Why is Crude Oil Surging

Crude oil output from the Organization of Petroleum Exporting Countries rose to 30.87 million barrels a day in Jan, asserts a survey by Platts. The OPEC output was 30.83 million bpd in December. According to the survey, which was conducted on OPEC, oil industry officers and researchers, this leaves the organization over-producing its output ceiling by 870,000 bpd. A 200,000-bpd increase in Libyan production to one million bpd just 600,000 bpd short of pre-uprising output early last year more than offset mixed reductions totaling 170,000 bpd from Angola, Iran, Nigeria and Venezuela. The output from UAE also saw a little increase of 10,000 bpd to 2.56 million bpd, the survey announced.

“Libyan production is obviously recovering, and it is going to be fascinating to discover how the markets react to these rising volumes… …especially when OPEC is significantly over-producing its 30-million bpd ceiling and with the Vienna secretariat predicting that requirement for OPEC crude in Q1 will be far below current production,” stated by Mr John Kingston, Platts world director of reports. The survey noted that output from OPEC leader, Saudi Arabia at 9.8 million bpd, unvaried from December.

OPEC trimmed its demand outlook for crude from its twelve members for 2012 in total to 30.04 million bpd from the 30.15 million projected four weeks ago.

But for the first 3 months of the current year, the organization slashed its prior prediction by 290,000 bpd to 29.55 million bpd from 29.84 million bpd 4 weeks ago. This tends to suggest that OPEC may want to rein in production over the following 2 months, the survey asserted. OPEC ministers in December agreed to set crude output for all twelve members, including Iraq and Libya, at thirty million bpd. But they didn’t set individual shares. 

With revised GDP forecasts in China cutting GDP by expansion by almost 2% and the economy still sluggish in Europe, demand should continue to drop. Current production levels are more than required to replace any losses due to the embargo of Iranian Oil.

G8 Meeting In Chicago In May.. Will They Discuss the Financial Transaction Tax

It’s fitting that the G8is meeting in Chicago this May. In a city with the highest sales tax in the country, where the state tax rate was recently increased by 66% and property taxes went up $300 per homeowner, and where 2012 state education spending was cut by a greater percentage than in any other state, a tax break of $85 million per year was given to the largest and most diverse financial exchange in the world.

The CME Group, made up of the Chicago Mercantile Exchange and the Chicago Board of Trade, had a profit margin higher than any of the top 100 companies in the nation over the past three years.

That leads us to another astonishing fact: an American mother pays nearly a 10% sales tax on shoes for her kids, while millionaire investors pay .002 percent (2-thousandths of a percent) for a financial instrument. 

The FTT is sensible, equitable, and long overdue and familiar to some of your more farsighted G8 members. The United Kingdom has had a tax on stock trades for decades. French President Nicholas Sarkozy insisted that his country, despite opposition from the European Union, would institute an FTT. Germany favors a tax, as reportedly do Brazil, Argentina, and South Africa.  The Belgian finance minister recently stated, “All goods and services are regularly subject to tax, so I don’t see why financial transactions would have exceptional protection.”

The Bank for International Settlements reported in 2008 that annual trading in derivatives had surpassed $1.14 quadrillion. For the U.S. alone, revenue estimates by the Center for Economic and Policy Research and the Chicago Political Economy Group approach a half-trillion dollars annually

The FTT would also limit the speculative trading that contributed to the financial meltdown in 2008, and which continues to devastate Greece and other financially troubled countries.

Bankers, trade associations, and conservative research groups have concocted a variety of arguments against the FTT, including its effect on ordinary investors, the practicality of collecting the tax, and the risk of exchanges bolting to other countries. But ordinary investors and retirement funds can be exempted from the tiny amount they might be taxed; the modern electronic trading system can easily incorporate a new fee; and a global tax would leave nowhere for tax avoiders to hide.

The Wall Street Journal calls the FTT a “sin tax” which would punish Main Street. It seems, rather, that Main Street has been punished by the absence of an FTT. Considerable support for the tax exists outside of the financial industry. Bill Gates, George Soros, prominent economists, Catholic development groups, National Nurses United, the Pope. In 1989 Lawrence Summers recommended a securities transaction tax. Even Fortune admits, “There is growing consensus from diverse corners of society for some sort of financial transaction tax.”

The FTT is fair and equitable, and should be instituted. How the funds are used is a different story for a different time. Banks, Financial Institutions and Major investment brokers are greedy, that do not want to give up their multimillion dollar salaries, their houses in the Hamptons, and their 2500.00 suits, and someone needs to tell these boys, that it is time to give back what you take.

First the UK goes, then the Irish Rethink and Now Holland faces problem with the EU

Dutch populist politician Geert Wilders has requested a nationwide ballot on changing from the euro and reintroducing the guilder. The idea is not very likely to achieve success in the near term; it marks a serious change in the discourse over the single currency, in one of the “core” eurozone states – one of the few, together with Germany, that keeps a top-quality credit rating. “With the guilder, Holland would be master of its own economics again,” Mr Wilders announced at a meeting in The Hague on Monday. His call came hours after he had a meeting with the countries P. M. to talk about new spending cuts required by the European budget rules that, ironically, Holland itself asked in return for collaborating in a new rescue package for Greece. Mr Wilders heads the Liberty Party, the nations’ third-largest, and is an essential partner for P. M. Mark Rutte’s minority government.  Mr Rutte depends on outside help from Liberty to realize a majority in parliament. Mr Wilders is typically renowned for his anti-immigrant stances, but he is also an established septic of European Union.

He has opposed any help for wrestling states in the sovereign debt crisis, exclaiming the Greeks should return to the drachma. He also was an outstanding figure in Hollands’ refusal of the European constitution in 2005. He recognized on Monday it might cost financially to leave the single currency and worked out the new guilder might rise by ten percent against the Euro dollar in the near term, harming exports. Current research does not address the probable costs if a Dutch exit leads to a new acute finance crisis in Europe. A majority of Dutch citizens say they’d like to remain in the single currency, though most regret joining it.

Eagerness has declined as the country’s economy has weakened recently. The government’s stats agency revealed last week the country is in recession. Earlier Monday, Mr Wilders had a meeting with Mr Rutte at the beginning of talks to scale back the nations’ debt. An executive projection last week put the deficiency at 4.5 % of GDP this year, larger than the 3 % authorized under European Fiscal Pact rules, because of the business slowdown. To attain the 3 % target, the country would most likely have to chop spending on retirees medical and pensions.

But Mr Wilders declared his party would only accept new budget cuts in return for cuts on international aid and cultural programs.

 European President Rompuy has expounded the cuts needed of Holland are “actually not so massive” compared with what Greece is undergoing. “I would not over-dramatize the situation,” he announced on Dutch TV. The remarks weren’t well-received, given continuing discontent over prior rounds of spending cuts. A strike by cleaners is now entering its tenth week, while police went on strike in 4 provinces on Monday over a pay freeze in 2012. Elementary school teachers are due to strike countrywide on Tues. over funding cuts. 

The Dutch would like to see small budget cuts with a push on growth, which most believe is the best formula, unfortunately the new EU pact will push them into austerity measures, which are not working throughout Europe.