EU finance ministers met in Brussels on Wednesday for the last ECOFIN meeting of the Swedish Presidency and reached important agreements regarding a new financial supervisory structure, reverse charge for CO2 emission trading, and the implementation of fiscal exit strategies.

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Ministers agreed on a general approach regarding the establishment of three new authorities for supervision at the micro level: the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority.

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The ECOFIN Council agreed on a general approach aimed at combating VAT evasion, which will give Member States the opportunity to introduce a reverse charge for VAT in relation to emission allowances. The agreement will help Member States to be more efficient in combating fraud and thus enhance the effectiveness of the emission trading market.

European Commission Vice-President Antonio Tajani today attended the start of works for an urban highway tunnel in Maastricht (The Netherlands) that removes the last traffic lights on a vital trans-European north-south road link. The works are co-funded by the European Commission under the European Economic Recovery Plan 1 (EERP) Call launched on 30 March 2009. The EERP's TEN-T projects, such as the Maastricht tunnel, aim to boost the European economy following the financial and economic crisis by increasing Community investment in strategic sectors such as infrastructure - giving a positive after-effect on European mobility as a whole.

Vice-President Tajani, in charge of transport, commented, "Today's launch of a key project co-funded by the European Commission exemplifies how effective infrastructure development can positively affect national and international mobility, jump start the economy and improve the quality of life of Maastricht's citizens. The construction of this tunnel will complete a vital TEN-T link connecting northern and southern Europe, and thus further integrate Europe's transport network."

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The Maastricht project was one of 39 successful initiatives benefiting from EERP funding, a programme endorsed by the European Council in December 2008. The EERP is aimed at boosting the European economy during the current economic and financial crisis by increasing Community investment in defined strategic sectors and in particular in infrastructure projects, with the objectives of giving an immediate boost to the economy and at the same time enhancing Europe's longer-term sustainable growth potential. The Maastricht tunnel will receive a contribution from the EU of €15 million.

A panel of UN economists on Wednesday renewed its warning of a possible hard landing for the dollar in a world economy that remains fragile in spite of a predicted return to modest growth in 2010.

The UN team credited bold stimulus policies by governments for having averted a new great depression but said it was too early to return to "business as usual". Predicting mild 2.4 per cent growth next year, the authors of the UN's annual status report on the world economy said: "The recovery is uneven and conditions for sustained growth remain fragile."

The improved economic outlook was mainly based on companies restocking in the current phase of the inventory cycle rather than on stronger consumer or investment demand, the report said.

It warned that two risk factors could still push the world economy into a double-dip recession: a premature exit from stimulus policies, and a further widening of global imbalances related to the growing US external debt "which could cause a hard landing of the United States dollar and cause a new wave of financial instability".

Rob Vos, a Dutch economist and lead author of the report, told the Financial Times: "It's inevitable for the dollar to fall if the US wants to correct its external imbalances. A weaker dollar is part of the game."

I've never been fully committed to the notion that we're going to have a "double dip" -- that the economy will slide back into recession. But it has been clear for a while that it's a serious possibility, for two reasons. First, a large part of the growth we've had has been driven by the stimulus -- but the stimulus has already had its maximum impact on the growth of GDP, will hit its maximum impact on the level of GDP in the middle of next year, and then will begin to fade out. Second, the rise in manufacturing production is to a large extent an inventory bounce -- and this, too, will fade out in the quarters ahead.

Two stories this morning highlight the risks. The WSJ has a report on highway construction titled Job Cuts Loom as Stimulus Fades:

Highway-construction companies around the country, having completed the mostly small projects paid for by the federal economic-stimulus package, are starting to see their business run aground, an ominous sign for the nation's weak employment picture.

Meanwhile, the ISM for manufacturing suggests that industrial growth is already slowing down.

I'd be more sanguine about all of this if there were any indications that private, final demand is taking off -- consumers, business investment, whatever. But I haven't seen anything suggesting that sort of thing.

The chances of a relapse into recession seem to be rising.

In some influential circles, these questions are now asked: What's wrong with high levels of inequality in general, and with having very rich bankers in particular. After all, human societies have survived the presence of extremely wealthy individuals in the past - in fact, some now argue, the presence of such a "new aristocracy" can finance growth and spur innovation.
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Can the rich and powerful really be counted on to save the system, or just themselves?  Go back carefully through the early history of the Great Depression (see Lords of Finance).  Certainly the big  New York players saved banks and securities firms that were seen to be part of their club (e.g., Kidder Peabody), but they - and the New York Fed - were not so inclined to save financial institutions they regarded as less than central (e.g., Bank of the United States), even if this meant thousands of people lost their life savings.

When the Bank of England's Andrew Haldane speaks of a "doom loop," he is describing the declining future for our middle class.  Powerful financiers, by and large, did just fine during the Great Depression.

Companies in the U.S. cut an estimated 169,000 jobs in November, according to a private report based on payroll data.

The drop, the smallest since July 2008, compares with a revised 195,000 decline the prior month, data from ADP Employer Services showed today. The figures were forecast to show a decline of 150,000 jobs, according to the median estimate of 32 economists in a Bloomberg survey.

The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.

Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They've discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.

This means many Americans won't be rehired unless they're willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay as a condition for keeping them. Or they've lost higher-paying jobs and are now in a new ones that pays less.

Yet reducing unemployment by cutting wages merely exchanges one problem for another. We'll get jobs back but have more people working for pay they consider inadequate, more working families at or near poverty, and widening inequality. The nation will also have a harder time restarting the economy because so many more Americans lack the money they need to buy all the goods and services the economy can produce.

James Pethokoukis at Reuters provides excerpts from the most recent Goldman Sachs forecast and writes about the political implications, but the economic implications are also significant. From Goldman:

The key features of our 2011 outlook: (1) a strengthening in growth from 2.1% on average in 2010 to 2.4% in 2011, with real GDP rising at an above-potential 3½% pace in late 2011; (2) a peaking in unemployment in mid-2011 at about 10¾%; (3) extremely low inflation - close to zero on a core basis during 2011; and (4) a continuation of the Fed's (near) zero interest rate policy (ZIRP) throughout 2011.

You read that right. 2011.

Comcast is putting up more than £8bn in cash assets to buy 51% of NBC Universal from General Electric.

GE will retain 49% of the company, having struck a deal earlier this week to buy the 20% owned by French company Vivendi.

The deal brings together Comcast's extensive US cable TV, phone and broadband network and NBC's broadcast network and the Universal film studio and theme parks.

The meltdown of the U.S. housing market is not over yet, and home prices will soon start trekking downward again as a flood of foreclosures looms, a well-known economist said on Wednesday.

Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania, said in an interview with Reuters home prices will resume their decline by early next year as foreclosure sales pick up again.
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"Foreclosure sales will increase, and home prices will resume their decline by early 2010 as mortgage servicers figure out who will not qualify for a modification," he said.

Zandi said 7.5 million foreclosure sales will have taken place between 2006 and 2011. The majority of these sales, however, have not emerged yet, with 4.8 million foreclosure sales expected between 2009 and 2011.