Time is running out for German retail group Arcandor after Berlin rejected two separate requests for state aid on Monday, pushing it closer to insolvency. But Chancellor Angela Merkel, bolstered by Sunday's European election results, can afford to stay firm.

The German government refused two separate requests for state aid for struggling retail and tourism group Arcandor on Monday in a move that makes the company's insolvency more likely.

First, a German government steering committee refused to award €650 million ($901.2 million) in government loan guarantees.

 Arcandor employees protest in Essen, western Germany, on Monday. Then the government said no to a separate request for a loan totalling €437 million to stave off insolvency. German news agency dpa cited unnamed government sources as saying Arcandor's creditor banks and shareholders weren't contributing enough to help the company. It's unclear whether the government's decision is final.

The refusal to award the €650 million in loan gurantees had been expected after the European Commission had already said the company failed to meet key criteria that would allow it to tap Germany's €100 billion special fund for struggling businesses hit by the global economic downturn.

Fears remain over the Latvian currency after the central bank said it has spent almost 1bn euros ($1.4bn; £876m) this year supporting the lat.

If Latvia was forced to devalue the lat, it could trigger a wave of revaluations in Eastern Europe and hurt European banks invested in Latvia.

The central bank sold 237m euros of the currency last week, taking its total this year to 907m euros.

The lat is under pressure after a bond auction failed.

Latvia is hoping to raise money from the European Union and the International Monetary Fund, after securing a 7.5bn euro bail-out from them in December.

WASHINGTON -- President Obama was getting his daily economic briefing one recent morning when a fly distracted him. The president swatted and missed, just as the pest buzzed near the shoes of Lawrence H. Summers, the chief White House economic adviser. "Couldn't you aim a little higher?" deadpanned Christina D. Romer, the chairwoman of the Council of Economic Advisers.

Mrs. Romer was joking, she said in an interview, adding, "There are only a few times that I felt like smacking Larry." Yet few laughed in the president's presence.

If the Oval Office incident was meant as a lighthearted moment, it also exposed the underlying tensions that have gripped Mr. Obama's economic advisers as they have struggled with the gravest financial crisis since the Depression, according to several dozen interviews with administration officials and others familiar with the internal debates.

David Rosenberg at Gluskin Sheff flagged a different way of looking at US unemployment figures on Monday; rather than noting the slowing rise in unemployment, he pointed in the direction of the number of people employed part-time and average hours worked.

In which case the two following trends can be observed:

The part-timezation effect of slowing wage growth and declining hours has had one major impact on corporate America, says Rosenberg: a decreasing wage bill. Unfortunately, this comes at the expense of personal income and aggregate demand, which are needed to grow top-line revenues.

What it equals -- in no uncertain terms according to Rosenberg -- is a clear and ongoing `deflation alert'. A fact currently being ignored by the bond markets.

A U.S. Supreme Court justice granted on Monday a request to put on hold the sale of bankrupt automaker Chrysler LLC to a group led by Italian carmaker Fiat SpA.

U.S. Supreme Court Justice Ruth Bader Ginsburg, in a one-sentence order, said the orders of the bankruptcy judge allowing the sale "are stayed pending further order of the undersigned or of the court."

Ginsburg acted as a 4 p.m. EDT deadline from a U.S. appeals court in New York was due to expire. The appeals court order would have allowed Chrysler to proceed with its sale to Fiat, a union-aligned trust and the U.S. and Canadian governments. ...

Indiana pension funds and consumer groups had asked the Supreme Court on Sunday to stop the sale of Chrysler while they challenged the deal.

The Obama administration, earlier on Monday, urged the Supreme Court to allow the sale, saying that blocking the deal would have "grave consequences."

Solicitor General Elena Kagan of the U.S. Justice Department, the administration's lawyer before the high court, said in a written argument that blocking the sale could force Chrysler's liquidation. ...

[Caselaw, Absolute Priority, Collides with Bankruptcy Act of 2005]

The Indiana pension funds argued that the sale of Chrysler unlawfully rewards unsecured creditors ahead of secured lenders and amounts to an illegal reorganization plan, and that the U.S. Treasury Department overstepped its legal authority by using bailout funds for Chrysler when Congress intended the money for banks.

No questions yet on the SCOTUS calendar. If I were an atty for Indiana, I'd stick with (1)a,b. (2) is sediment at the bottom of the black hole called EESA where Geithner dwells, cool and comforted.

Diversity is the key to economic and political evolution.

The Obama administration intends to spend $93 million to boost the nation's use of wind energy. Yet in Pipestone, Minn., 160 employees of a wind power company will lose their jobs this summer.

Suzlon Rotor Corp. in Pipestone will cut its workforce in half because of weak demand for its wind turbine blades -- even as state and federal officials are still pushing renewable energy sources. The disconnect is explained, in part, by the steep drop in orders for wind turbines in the past six months as the recession deepened, the banking crisis spread and the price of oil dropped.

"2008 was probably the best year that wind energy had in the United States," Suzlon spokesman Mike Aabram said Monday. "2009 dropped off because of the economic downturn."

Suzlon, whose parent corporation is based in India, received state and local financial incentives to open a plant in late 2006. Employment peaked at about 500 a year or so ago, and Suzlon now employs 324 people. Seventy jobs at Suzlon will be cut Aug. 2, and 90 more are scheduled to be cut by Sept. 12, the company said.

Suzlon hopes the economy will recover late this year or early next year, Aabram said. "Anybody who is laid off is going to be the first considered for any available jobs when they are able to hire again."

The International Monetary Fund has called on eurozone governments to take urgent steps to clean up the banking system as losses mount, and advised the European Central Bank to prepare "all unconventional options" in case the crisis deepens.

"To restore confidence, you need total disclosure of possible losses," said Dominique Strauss-Kahn, the IMF's managing director. "Not only losses which are linked to the original sub-prime crisis, but also the losses linked to the slowdown in the economy, and impaired assets. There are lots of things that still have to be disclosed," he said, adding that credit mechanism remained jammed.

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The IMF says eurozone banks will need to raise a further $375bn (£235bn), compared to $250bn for US banks, and has called for a stress-test along the lines of the US Treasury probe.

There are widespread concerns that Germany in particular is hiding bank problems until after the September elections, using its "bad bank" scheme to keep "zombie institutions" alive.

I wish Dominique Strauss-Kahn and Europeans better luck on the "total disclosure of possible losses" thing than we have had in the USA.  A series of European banks performing self exams, the penalty for failure of which consists of death?


As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."