Greece has fallen behind with its budget cuts and is asking lenders for more time to meet the conditions of the 130 billion euro aid package. But that would require fresh help of up to 50 billion euros, SPIEGEL has learned. Neither Berlin nor the IMF are prepared to make that money available.

Germany and other important international creditors are not prepared to extend further loans to Greece beyond what has already been agreed, German newspaper Süddeutsche Zeitung reported on Monday. In addition, SPIEGEL has learned that the International Monetary Fund (IMF) too has signalled it won’t take part in any additional financing for Greece.

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Roy Johnson fell so far behind on his $1,000-per-month mortgage payments that last year he allowed the redbrick, three-bedroom ranch he had owned since 1963 to lapse into foreclosure.

“I couldn’t pay it any longer,” he said. “One day, I woke up and said, ”˜Hell, I’m through with it. I’m walking away from the house.’ ”

That decision swept Mr. Johnson, 79, into a rapidly expanding demographic: older Americans who have lost their homes in the Great Recession. As he hauled his belongings by pickup truck from this Atlanta suburb and moved into his daughter’s basement, Mr. Johnson became one of the one and a half million Americans over the age of 50 who lost their houses to foreclosure between 2007 and 2011. Of those, the highest foreclosure rate was for homeowners over 75.

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Discussion among eurozone leaders about the future of their single currency has become an increasingly divisive affair. On the surface, religion has nothing to do with it – but could Protestant and Catholic leaders have deep-seated instincts that lead them to pull the eurozone in different directions, until it breaks?

Following the last European summit in Brussels there was much talk of defeat for Chancellor Merkel by what was described as a “new Latin Alliance” of Italy and Spain backed by France.

Many Germans protested that too much had been conceded by their government – and it might not be too far-fetched to see this as just the latest Protestant criticism of the Latin approach to matters monetary, which has deep roots in German culture, shaped by religious belief.

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The Rt Revd Justin Welby, Bishop of Durham, has been invited to sit on the Parliamentary Commission On Banking Standards. His appointment to the Commission underlines the depth and value of the non-partisan expertise the Lords Spiritual bring to their work in the House of Lords.

The Commission will be chaired by Andrew Tyrie MP, Chairman of the Commons Treasury Select Committee.

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Facing the same financial stressors that pushed San Bernardino toward bankruptcy, cities across California are slashing day-to-day services and taking other drastic actions to skirt a similar fiscal collapse.

For some, it may not be enough.

San Bernardino on Tuesday became the third California city to seek bankruptcy protection in the last month and, while no one expects the state to be consumed by municipal insolvencies, other cities teeter on the abyss.

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Angela Merkel took a tough stance ahead of the EU summit, insisting she would not make concessions. But Italy and Spain broke the will of the iron chancellor by out-negotiating her in the early hours of Friday morning. Germany caved in to demands for less stringent bailouts and direct aid to banks.

Mario Monti was so relieved that he even spoke about football. He is proud and happy that the Italian national team defeated Germany in the semi-finals of the European Football Championship, the Italian prime minister said in the early hours of Friday morning after the marathon night of European Union summit meetings. Given that Monti isn’t much of a soccer fan, Italian journalists saw his comments as a veritable emotional outburst.

With good reason. Monti emerged from the late-night negotiations as a clear victor, having broken Chancellor Angela Merkel’s resistance just as Italian striker Mario Balotelli cracked the German defense on the pitch in Warsaw earlier in the evening. In 15 hours of negotiations in Brussels, Monti together with Spanish Prime Minister Mariano Rajoy secured easier access to the permanent euro-zone bailout fund, the European Stability Mechanism (ESM)….

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Stockton, California–This Gold Rush-era port city, an epicenter of California’s agricultural exports, will become the nation’s largest city to seek protection under the U.S. bankruptcy code after its City Council on Tuesday stopped bond payments, slashed employee health and retirement benefits and adopted a day-to-day survival budget.

City Manager Bob Deis likened the process to cutting off an arm to save the body. He is expected to file bankruptcy papers immediately…..

Stockton..[had] been in negotiations with its creditors since late March under AB 506, a new California law requiring mediation before a municipality can file for reorganization of debt. It was the first use of the law, and policy analysts who watched its torturous and tedious progress have titled their report on it “Death by a Thousand Meetings.” Mediations ended Monday at midnight.

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Ambitious plans to be put before this week’s EU summit ”“ yes indeed, yet another crisis summit ”“ to turn the eurozone into something much closer to a fiscal union make for easy analysis. On almost any level you care to take, they won’t work.
Here’s the plan. In return for debt pooling, Brussels would be given far reaching powers to rewrite national budgets for member states that breach debt and deficit rules.
Under the previously agreed fiscal compact, Brussels already has the powers to vet budgets before they are submitted to national parliaments, but this goes much further, allowing the EU in effect to over-rule national governments and impose its own diktats on member states….

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European authorities have unveiled their vision for the future of monetary union.

It includes the creation of a European treasury, which would have powers over national budgets.

The document, released ahead of Thursday’s EU summit, says such fiscal union could lead to common debt being issued by eurozone countries.

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Investment experts at Deutsche Bank now feel that a collapse of the common currency is “a very likely scenario.” German companies are preparing themselves for the possibility that their business contacts in Madrid and Barcelona could soon be paying with pesetas again. And in Italy, former Prime Minister Silvio Berlusconi is thinking of running a new election campaign, possibly this year, on a return-to-the-lira platform.

Nothing seems impossible anymore, not even a scenario in which all members of the currency zone dust off their old coins and bills — bidding farewell to the euro, and instead welcoming back the guilder, deutsche mark and drachma.

It would be a dream for nationalist politicians, and a nightmare for the economy. Everything that has grown together in two decades of euro history would have to be painstakingly torn apart. Millions of contracts, business relationships and partnerships would have to be reassessed, while thousands of companies would need protection from bankruptcy. All of Europe would plunge into a deep recession

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As financial markets slide toward disaster, scarcely pausing to celebrate the “success” of the Greek election or the deal to recapitalize Spanish banks, the euro project is finally revealing its fatal flaw. One country poses an existential threat to Europe ”“ and it is not Greece, Italy or Spain. Every serious proposal to resolve the euro crisis since 2009 ”“ haircuts for bank bondholders, more realistic fiscal consolidation targets, jointly guaranteed eurobonds, a pan-European bailout fund, quantitative easing by the European Central Bank ”“ has been vetoed by Germany, and this pattern looks likely to be repeated next week.

Nobody should be surprised that Germany has become the greatest threat to Europe. After all, this has happened twice before since 1914. To state this unmentionable fact is not to impugn Germans with original sin, but merely to note Germany’s unusual geopolitical situation….

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The U.S. recovery is hobbled by an economic divide that separates Americans not by income or wealth but by their access to credit….

Last year, nearly 90% of all new mortgages originated went to households with high credit scores; before the financial crisis, it was about half, according to Moody’s Analytics and Equifax Inc., a credit monitoring service.

Shrunken access among credit have-nots is triggering more than personal plight. It has weakened the influence of the Fed””one of the best hopes for spurring stronger economic growth””and raised doubts within the central bank about whether it is doing much to reduce unemployment.

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Group of 20 leaders focused their response to Europe’s financial crisis on stabilizing the region’s banks, raising pressure on German Chancellor Angela Merkel to expand rescue measures as contagion engulfed Spain.

As U.S. President Barack Obama called after-dinner talks with euro-area leaders at the G-20 summit in Mexico, the Treasury department’s top international negotiator, Lael Brainard, said Europe is making an effort to “break the feedback loop” between banks and government debt, the link that is worsening Spain’s woes.

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After spending yesterday in Berlin, I can tell you the German government is mightily fed up with all this speculation – and fed up with getting blamed for everything bad happening in the global economy (last week’s cover of the Economist, for example).

I interviewed the Deputy Finance Minister – Secretary of State Steffen Kampeter – after the German chancellor’s strident speech to the Reichstag.

He made clear that on one major point – eurobonds – the speculation about what Germany might be willing to accept in time for the summit was simply wrong.

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The mainstream parties “looted Greece, and afterward they took the Greek flag and they offered it to Angela Merkel,” the German chancellor, Mr. [Alexis] Tsipras said in a campaign rally in Athens Thursday.

Though Syriza’s message has caught on, not all of the disaffected are ready to embrace the party. Anna Konstantoulaki, a third-year Spanish-literature student at the University of Athens, voted in May for a tiny party. She doesn’t know what to do now. She is upset with mainstream parties but not sure Mr. Tsipras is capable of running the country.

“I am very confused,” she says. “The last few days, I can’t stop thinking about what is going to happen.” She adds: “I’m scared, actually.”

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The hundreds of billions of dollars that banks, insurance companies and other international investors poured into this country after the advent of the euro financed roads and houses, raised wages and helped Constantine Choutlas sustain a 1,000-person construction firm with projects such as building the athletes’ village for the 2004 Olympics.

What it did not do was build a competitive economy, and when the rest of the world woke up to that fact and the money rushed away, so did Choutlas’s business.

“You could see it wouldn’t last. The country was just borrowing money,” Choutlas, whose Proodeftiki Technical has been scaled back to a handful of employees, said as he jabbed a finger in the air for emphasis. “Nobody, nobody, nobody, said lets take a look at where we are going.”

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For one thing, such a bailout is illegal under the Maastricht Treaty, which governs the euro zone. Because the treaty is law in each member state, a bailout would be rejected by Germany’s Constitutional Court.

Moreover, a bailout doesn’t make economic sense, and would likely make the situation worse. Such schemes violate the liability principle, one of the constituting principles of a market economy, which holds that it is the creditors’ responsibility to choose their debtors. If debtors cannot repay, creditors should bear the losses.

If we give up the liability principle, the European market economy will lose its most important allocative virtue: the careful selection of investment opportunities by creditors. We would then waste part of the capital generated by the arduous savings of earlier generations. I am surprised that the president of the world’s most successful capitalist nation would overlook this.

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After clinching Spain’s €100 billion bank bailout, Prime Minister Mariano Rajoy flew to Poland on Sunday for the Spanish team’s soccer match, declaring “this matter is now resolved.”

Not so fast, prime minister.

On Tuesday, Spain’s long-term borrowing costs soared to their highest level since the country joined the euro zone. Investors have apparently concluded that the rescue is potentially a much better deal for the banks and their shareholders than for the government, its taxpayers and bondholders.

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…there are too many unanswered questions. How much capital will actually be provided? Which banks will need to be recapitalized? How will the process be managed? The answers won’t be known until two independent valuation experts have reported at the end of June. The International Monetary Fund assessment estimates €37 billion was needed to ensure all banks had a 7% core Tier 1 ratio on a phased-in Basel III basis. But the market will probably demand at least 9% on a fully loaded Basel III basis after substantial new write-downs, suggesting a number much closer to the full €100 billion.

One key unknown is where the bailout money will come from. Will it be from the old euro-zone bailout fund, the European Financial Stability Facility, or the new European Stabilization Mechanism, due to come into existence in July? If it comes from the ESM, existing government bondholders will be subordinated””no small concern given €100 billion is more than 10% of Spanish government debt outstanding. That could affect the willingness of bond markets to keep funding the government.

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Europe may have sidestepped its latest catastrophe, at least for the moment, by hammering out a €100 billion bailout plan for Spain’s failing banks over the weekend.

But the intervention will do little to address the problem that continues to plague the Continent’s increasingly vulnerable financial institutions. Namely: a longstanding addiction to the borrowed money that provides the day-to-day financing that they need to survive.

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Spain’s banking crisis did not come out of the blue.

In the 1990s, the Spanish suffered a bout of collective madness. Interest rates fell from 14 per cent (with the peseta) to 4 per cent (with the euro) in a matter of weeks.

In 1998, the centre-right government passed a law that increased the amount of land for development. Developers got rich, selling the idea that property would always go up in value. You could buy a flat on the Mediterranean for $156,000 and sell it the next day for $234,000; by the end of the month it would be worth $390,000…..

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Europe is to offer Spain a bailout package of up to €100 billion ($125 billion) to help rescue the country’s banks and keep the 17-country eurozone from breaking apart.

After months of fierce denials, Spain admitted it would tap the fund as it moved faster than expected to stem the economic crisis that has ravaged Europe for two years.

Spain becomes the fourth – and largest – European economy to ask for help and its admission of help comes after months of market concern about its ability to pay its way. In recent weeks investors have demanded higher and higher costs to lend to Spain, and it became clear it would be just too expensive for the country to borrow the money necessary for a bank rescue from the markets.

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From manufacturers in the Midwest to upscale retail shops in Manhattan, a wide variety of American companies are feeling the pinch of Europe’s economic contraction, helping to hold back recovery in the United States.

Ford, the iconic U.S. car company, says that Europeans are not only buying fewer cars, but are replacing fewer parts. Kraft Foods, which is behind such brands as Swedish Fish and Dentyne, says sales of candy and gum in Europe are lagging. And jeweler Tiffany & Co. says fewer European tourists are shopping at its flagship Fifth Avenue store.

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The eurozone sovereign debt emergency showed no signs of abating yesterday as the Spanish government desperately haggled over the terms of its expected bailout and the European Central Bank refused to ease monetary policy for the currency bloc, despite signs of stricken European economies sinking still deeper into recession.

Madrid’s Economy Minister, Luis de Guindos, insisted once again he was not making any plans to follow Greece, Portugal and Ireland in requesting a bailout from the European Union and the International Monetary Fund. But, behind the scenes, Spanish ministers accept that an external rescue of the country’s beleaguered banking sector is now necessary. Spain is trying to persuade its European partners to allow the European bailout fund to inject capital directly into its banks, rather than diverting the money through the state. Madrid fears that a full-blown national bailout would be accompanied by an onerous EU/IMF inspection system.

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An essential element of Greece’s recovery plan has been to collect more taxes from a population that has long engaged in tax avoidance. The government is owed 45 billion euros in back taxes, tax officials in Athens said, only a fraction of which will ever be recovered.

To understand the difficulty, just talk to Nikos Maitos, a longtime official in Greece’s financial crimes investigation unit.

When he and a team of inspectors recently prowled the recession-hit island of Naxos for tax evaders, a local radio station broadcast his license plate number to warn residents.

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“Germany should reflect quickly but deeply, and act,” Italian Prime Minister Mario Monti said late last week.

Few Germans, however, share that sense of urgency. With German unemployment at a 20-year low and falling, and the country’s economy continuing to grow despite the debt crisis, not many Germans see the crisis as a threat to their way of life.

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Exactly 30 minutes into the problem-solving the researchers interrupted each group. They entered the room bearing a plate of cookies. Four cookies. The team consisted of three people, but there were these four cookies. Every team member obviously got one cookie, but that left a fourth cookie, just sitting there. It should have been awkward. But it wasn’t. With incredible consistency the person arbitrarily appointed leader of the group grabbed the fourth cookie, and ate it. Not only ate it, but ate it with gusto: lips smacking, mouth open, drool at the corners of their mouths. In the end all that was left of the extra cookie were crumbs on the leader’s shirt.

This leader had performed no special task. He had no special virtue. He’d been chosen at random, 30 minutes earlier. His status was nothing but luck. But it still left him with the sense that the cookie should be his.

This experiment helps to explain Wall Street bonuses and CEO pay, and I’m sure lots of other human behavior. But it also is relevant to new graduates of Princeton University.

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Europe is at the abyss ”” again. Its turmoil is rattling global stock markets and stoking fear and bewilderment. The obvious question is, what’s the solution? The answer is, there is no solution. Europe faces choices, some bad and others worse. Unfortunately, it’s unclear which are which. The best that can be imagined is that Europe lurches from crisis to crisis and that its slumping economy weakens the already fragile global recovery. The worst is a massive flight from the euro and an economic free fall that resurrects the dark days of 2008 and 2009.

Can anyone doubt that the euro’s creation in 1999 was a huge blunder? It aimed to promote European prosperity and unity, but it’s doing just the opposite. The very belief in its early success reduced interest rates in Europe’s periphery (Greece, Portugal, Spain, Ireland, Italy). Low rates fed credit booms and housing bubbles that, once burst, caused recessions and swollen budget deficits.

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Euro-zone governments have around three months to ensure the survival of the single currency, billionaire investor George Soros said in a speech on Saturday.

“We are at an inflection point. After the expiration of the three months’ window, the markets will continue to demand more but the authorities will not be able to meet their demands,” he warned in a speech at the Festival of Economics in Trento, Italy. (Read the text of his speech.)

The European Union is “like a bubble” ”“ not a financial bubble but a political bubble — that could pop as a result of the euro -zone crisis, Soros said.

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On consecutive days last week, two of the most powerful figures in Europe ”” Mario Draghi, president of the European Central Bank, and Olli Rehn, the most senior economic official in Brussels ”” warned that the future of the euro zone was in doubt. In the words of Mr. Rehn, the union might well disintegrate unless policy makers took steps to bind the euro’s 17 nations closer together.

Coming as they did from two men at the very soul of the European project, the reprimands were a stark reminder of just how much the Spanish financial meltdown had shaken the confidence of the European brain trust, to say nothing of investors from New York to Beijing.

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