With the global financial crisis taking hold and governments on both sides of the Atlantic rushing to the aid of banks, analysts have forecast a potential long-term downsizing of military budgets in Europe and the US.

The pressure that has been applied by the current crisis and uncertainty over whether the $700-billion US bailout scheme will in fact have a significantly remedying effect on the world's financial woes may make some military spending difficult to justify, the defense analysts, from London's International Institute for Strategic Studies, said Tuesday.

"I can't see defense is going to escape any kind of austerity measures," said defense economist Mark Stoker from the London institute, as quoted by Reuters.

"It would be very difficult for any government to justify cutting health and education in favour of, say, building two aircraft carriers and buying a load of planes to stick on them."

The European Commission has rejected a request from the French president that commission President Barroso work to overturn the European Parliament's decision banning the cutting of internet access to websurfers who download copyrighted films or music.

President Nicolas Sarkozy last week wrote to the EU executive asking Mr Barroso's "personal commitment" to rejecting an amendment buried within the parliament's vote on a telecoms bill approved by a large majority of lawmakers on 24 September.

"It is fundamental that the amendment adopted by the European Parliament be rejected by the commission," Mr Sarkozy wrote.

The amendment expressly forbade maneouvres such as the cut-off of internet service as a way of addressing piracy - something currently being considered by the French government. The European bill following the vote includes language declaring: "No restriction may be imposed on the fundamental rights and freedoms of end-users without a prior ruling by the judicial authorities."

This would in effect make a draft law on internet use planned by the French government null and void, as the latter stipulates that users who use the web for illegal downloading would see their internet access cut after two warning letters.

EUOBSERVER / BRUSSELS - Google News is to launching a special service covering the European Parliament elections next June.

Drawing on the experience from a similar new service in the US presidential elections, the search engine giant is currently considering its approach to the upcoming European elections, communications manager Bill Echikson told a group of journalists at a press briefing in Brussels on Tuesday (7 October).

Political parties in Europe struggle to find pan-European themes that galvanise people to go out and vote

Contacts directly with the European Parliament will soon be established, but a launch date is yet to be decided.

Google's US election service allows, among other things, users to search videos uploaded to YouTube's 'Politicians' category, including those of the official channels of candidates running in the elections.

Using speech recognition, the company can now let users search for exact words in the videos and jump directly to the specific parts. Quotes from the candidates can also be searched - and compared.

Some of the leading names in France's political and business elite went on trial yesterday over an arms-dealing scandal that could shine light on the murkiest dealings of the French state.

The son of the late President Mitterrand joined 41 prominent figures in court for the start of the "Angolagate" trial, concerning the alleged illicit sale of £450 million of Russian weapons and equipment to Angola in the 1990s. Jean-Christophe Mitterrand, 61, Jacques Attali, the intellectual and banker who advised the late President, and Paul-Loup Sulitzer, a popular thriller writer, are among the well-known accused who have generated huge interest in the proceedings.

But the main defendants are Arkadi Gaydamak, a Russian-Israeli billionaire, and Pierre Falcone, a French businessman, who have in turn implied that the French Government knew of and allowed a secret arms channel to Angola after a UN embargo blocked official French sales.

A Paris prosecutor has called for former French prime minister Dominique de Villepin to face trial for his alleged part in a plot to smear President Nicolas Sarkozy.

Mr de Villepin, 54, has been under judicial investigation since July last year over the so-called Clearstream affair, suspected of conspiring to slander Mr Sarkozy when the pair were arch-rivals to succeed president Jacques Chirac.

Judges suspect Mr de Villepin of helping to orchestrate the leak in 2004 of a list of bogus account-holders at the Clearstream bank in Luxembourg, which included Mr Sarkozy's name.

The account holders - including businessmen and public figures - were made to look as if they had received illicit kickbacks from arms sales.

In a report marking the close of investigations, prosecutor Jean-Claude Marin recommended that Mr de Villepin go on trial for "complicity in slanderous accusations".

TBILISI, Georgia: The cameras at Georgia's main opposition broadcaster, Imedi, kept rolling Nov. 7, when masked riot police officers, armed with machine guns, burst into the studio. They smashed equipment, ordered employees and television guests to lie on the floor and confiscated their cellphones. A news anchor remained on screen throughout, describing the mayhem. Then all went black.

The pretext for the raid -- which silenced the channel -- was a government claim that Imedi was fomenting unrest after it broadcast a statement by one of its founders, Badri Patarkatsishvili, promising to topple the government of President Mikheil Saakashvili.

Earlier that day, riot police lashed out with clubs and fired rubber bullets at unarmed antigovernment protesters. A nine-day state of emergency followed.

PODGORICA, Montenegro (AP) -- Montenegro's president has indicated his tiny Balkan state will recognize Kosovo's independence despite bitter opposition from traditional ally Serbia.

Vujanovic said Montenegro needed to make a decision on Kosovo's status soon.

President Filip Vujanovic said Tuesday the decision will have to be made soon because of Montenegro's desire to become an European Union and NATO member.

EUOBSERVER / BRUSSELS - The EU will start negotiations on a new partnership agreement with Moldova despite the risk the Communist government may exploit the move in the run up to general elections next spring, Kalman Miszei, the EU's top diplomat on Moldova told MEPs on Monday (6 October).

Estonian socialist MEP and head of the EU-Moldova delegation Marianne Mikko warned that the approval of a negotiation mandate for the new partnership pact by 27 EU states could be an image boost for the current Communist leadership, despite its poor record on economic and judicial reform, amid rampant corruption and human trafficking problems.

The Moldovan parliament: the current administration has not clamped down on crime and corruption

But the EU wants to speed-up negotiations with Moldova in the aftermath of the Russia-Georgia conflict, with Moldova also home to a Russian-fueled frozen conflict in Transnistria, a strategically important region bordering Ukraine on the EU's eastern fringe.

"The risk for the ruling party to exploit the benefits of a Commission mandate before the elections is outplayed by the positive effects of this EU signal to Moldova, which has a geopolitical significance," Mr Missei said. A "wait and see" attitude due to the upcoming elections would be far less effective, he added.

Abkhazia would never accept a return to Georgia and still hopes for international recognition of its independence, as well as for the EU to include it in its neighbourhood policy, representatives of the breakaway province told MEPs during a hearing on Monday (6 October) organized by the Green Party.

The Kodori gorge in Abkhazia, where Georgian troops were ousted by a massive Russian military offensive on 10 August

The host of the event, German Green MEP Cem Ozdemir, said that his group had suggested for a long time for such discussions to take place, in order to prevent the escalation of the conflict.

"You can't select your neighbours: You have to live together," he said, stressing that it is important for all parties involved in the conflict to look ahead and not to remain captive in a blame game.

With a small, green-striped Abkhaz flag set up in front of his laptop, Viacheslav Chirikba, a Western-schooled advisor to the president of Abkhazia, presented in harsh terms such as "genocide" and even "holocaust" the history of his "nation," concluding that "Georgia has lost every moral right to rule Abkhazia."

Poland is planning to propose a new version of its previous government's energy solidarity pact plan, lowering the threshold for EU intervention in the event of a major supply crunch.

Under current EU rules, the bloc must react if there is a "significant" disruption of gas supplies affecting 20 percent of the EU's total consumption for eight weeks or more.

Warsaw - the previous energy solidarity pact plan fell on deaf ears in Brussels

Poland wants the solidarity mechanism to kick in if disruption affects 50 percent of any one member state's imports however, covering a period of four weeks in winter and six weeks in summer - according to plans seen by Polish daily Gazeta Wyborcza.

The proposal also calls for the EU to oblige member states to store a part of their gas resources as they do with oil, and for the union to begin funding cross-border energy infrastructure.

Italy's Interior Minister, Roberto Maroni, has described it as a civil war - and 18 bullets pumped into an innocent man playing cards on a Sunday morning proved him right.

Stanislao Cantelli was the uncle of two supergrasses and distantly related to another local mafia boss but he had led a blameless life. Having recently retired from his job as a technician in a mozzarella cheese factory, he was often seen pottering around the town of Casal di Principe in his battered Fiat Punto. For relaxation, he repaired to the Circolo Sociale Ricreativo, a shop converted into a social club on Via Umberto I, to play poker.

But two of Cantelli's nephews have turned state's counsel, and the evidence of one of them, Luigi Diana, was crucial in leading to the issuing of arrest warrants for 107 gangsters and the confiscation of more than €100m (£78m) worth of gang-owned property. So on Sunday, Cantelli's card game was interrupted by two men on a motorbike, one armed with an automatic pistol, who burst into the club and repeatedly fired on him. All the witnesses to the killing fled.

Far-right Gov. Joerg Haider has set up a facility in the remote mountains of southern Austria to handle asylum seekers suspected as criminals, saying they need to be isolated to protect the people in the area.

<...>

Haider is now governor of Carinthia province and his regional government set up the facility for asylum seekers, which sits in a secluded pasture in the mountains of southern Austria at an altitude of about 3,900 feet.

''With this security precaution, we are protecting the Carinthian population,'' Haider told a news conference Monday. He said the number of criminal asylum seekers was on the rise.

European stock markets continued to slide in volatile trade Tuesday as finance ministers from across the continent unified to urge greater measures to secure private bank deposits in the European Union.

At a regular meeting in Luxembourg, the finance ministers of the EU's 27 member states agreed in principle that their countries should each, as a minimum, guarantee private bank deposits to a level of "at least" 50,000 euros ($67,500) "for at least one year," diplomats said.

 

The minimum deposit guarantee currently stands at 20,000 euros.

 

However, individual member states are free to set higher figures, the ministers agreed, acknowledging that "many member states are determined" to raise the limit to 100,000 euros.

 

The political agreement will only become law once the EU's executive, the European Commission, makes a binding legal proposal which member states formally approve.

In a SPIEGEL interview, Yale economist Robert Shiller discusses the causes and consequences of the global economic crisis. He argues there is a substantial risk of recession and that the next few years will be lean ones.

 A real estate firesale in southern California: "Right now, there are foreclosures on 10,000 homes a day in the United States. The people are being thrown out of their houses."

SPIEGEL: You predicted the end of the New Economy and that the real estate bubble in the United States would burst. What's coming next?

Shiller: I wish I could always be so prescient. But I will have to disappoint you: I do not see any new bubble developing right now.

Almost 300,000 British savers with the popular internet bank Icesave face a fight to recover their cash after it collapsed into receivership yesterday following the economic turmoil in Iceland

Icesave is owned by Landsbanki, Iceland's second largest bank, which has been swept up in the financial chaos that has engulfed the tiny Arctic country. It collapsed on Tuesday morning and is now being run by the Icelandic Financial Services Authority.

The UK authorities said that the estimated 275,000 British customers with the bank would - in the first instance - have to rely on the Icelandic Compensation Scheme, which promises to pay up to €20,887 (£16,240), to recover their cash.

"Icesave is not a British bank. We are obliged to top up the compensation to £50,000, but only above £16,000," said a spokesman for the British Financial Services Compensation Scheme.

WASHINGTON: The International Monetary Fund on Tuesday increased its estimate of global losses from the financial meltdown to $1.4 trillion and warned that the world's economic downturn was deepening.

"Declared losses on U.S. loans and securitized assets are likely to increase further to about $1.4 trillion," the IMF said, increasing the loss estimate from $945 billion in April and slightly up from $1.3 trillion it cited last month.

In its quarterly assessment of global capital markets, the IMF said global economic activity is slowing down as growth in advanced economies decelerates and emerging economies start to lose momentum.

"Despite better-than-expected performance early this year, rising financial turmoil has led to a downgrade in the IMF's baseline forecast for global economic growth in 2008-09," it said.

LUXEMBOURG: European Union finance ministers gathered here on Tuesday to seek elusive common ground to buttress the continent's banking system in the face of the financial crisis, raising the minimum level of guarantees for bank deposits to €50,000.

At a news conference in Luxembourg, Christine Lagarde, the French finance minister, said, "We agreed to raise the minimum guarantee to €50,000 while noting that many member states were determined to raise this to €100,000."

"One country on its own can't solve the problem," the Irish finance minister Brian Lenihan said, according to Reuters. Lenihan said the planned increase in guarantee levels was on the agenda. "That is a matter that is under consideration."

Despite proposals from France and Italy, the European Union has eschewed any common approach to the crisis, mainly because Germany has balked, afraid of being burdened with the costs of rescuing non-German banks.

Exclusive: Jeremy Warner on how a dramatic meeting in Downing Street is likely to lead to £50bn recapitalisation package - and why it may not be enough.

UK banks are set to agree a £50bn injection of taypayers' money under a bold plan to resolve the crisis in credit markets. Banking chiefs were this evening due to meet the Prime Minister to discuss the proposals, scheduled to be announced tomorrow morning, but subject to seeing the detail, are understood to have already agreed to be supportive. The plan could mean substantial dilution for some shareholders.

Sir Fred Goodwin's top bullet point in his slide presentation to the Merrill Lynch banking conference in London this morning was: "The outlook is subdued". Even by the notoriously phlegmatic standards of the Royal Bank of Scotland chief executive, this was something of an understatement. In fact the outlook is truly dire, as one glance at Sir Fred's plummeting share price reveals - at the close it was down by nearly 40 per cent to a fifteen year low of less than a pound. RBS was not alone. Halifax Bank of Scotland shares were down by a similar order of magnitude.

If there wasn't already a retail and wholesale run on these banks, there would have been by the time everyone had clocked the meltdown in share prices. Quite who was responsible for this latest, calamitous collapse in confidence scarcely seems to matter any more. Was it cack-handed briefing by the Treasury, or merely confidence sapping guesswork and speculation? Certainly it conforms to the Treasury's inept handling of this crisis from the start, where kite-flying and leaks over the Government's response have only succeeded in making a bad situation infinitely worse.

My translation... roughly

"Governemnt announces the creation of a fund at the treasury of 30 billion euros to buy "maximum quality" (you have to love the spanish press) actives of financial institution so as to facilitate credit to companies and citizens so as to activate the economy."  It is a temporal measure that we can carry on given our low levels of public debt" explained Zapatero, who was very clear that teh treasury will not accept any "toxic  paper" because there is no solvency problem but to eb sure that the credit market works properly."

The news reprot explains the "quality assets" are mortgages and other corporations credits of small and medium companies which the bank can join creating a fund which will be externally rated by the typcal monsters in the busniess of rating...

My reading is... a preventive bail-out and the government becoming a credit suppliers....so that the Spanish banks are guaranteed in an international meltdown event... and just to make sure that they do not take any risk from now on... (so they can use the money they probably earn to buy foreign assets?)

Is my reading correct?

http://www.lavanguardia.es/lv24h/20081007/53556083824.html

"El gobierno anuncia hoy el fondo con cargo al Tesoro de 30.000 millones de euros para comprar activos "de máxima calidad" de las entidades financieras y con ello facilitar el crédito a empresas y ciudadanos, con el fin de dinamizar la economía. "Se trata de un gran préstamo temporal y lo podemos realizar porque tenemos una deuda (pública) en unos niveles muy razonables", recalcó Zapatero, quien dejó claro que el Tesoro no asumirá "activos tóxicos", porque el objetivo no es resolver un problema de solvencia de las entidades financieras, sino propiciar el buen funcionamiento del mercado crediticio.

El fondo estará vigente hasta que los mercados recuperen su funcionamiento normal y a podrán acceder todas las entidades financieras residentes en España, cuando los activos que se refinancien sean españoles. Entres dichos activos, según fuentes del Ejecutivo, podrá haber desde préstamos hipotecarios hasta créditos a pequeñas y medianas empresas, que las entidades financieras agruparán en fondos de titulización que serán valorados por agencias de calificación crediticia.

Para comprar los activos de "máxima calidad", el Tesoro tendrá que emitir deuda del Estado que colocará al mejor precio entre inversores mediante una subasta. Si el fondo llegase hasta 50.000 millones de euros, la deuda del Estado se incrementaría en 5 puntos hasta llegar al 41% del PIB, aún lejos de la media europea, añadieron las fuentes. El objetivo del fondo, insistió Zapatero, es "prevenir riesgos" e "inyectar financiación en el mercado", ya que en estos momentos consideró que es la falta de crédito la que paraliza la actividad."

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

Asia-Pacific stock markets had a grim morning, with Japan losing more than seven per cent and Hong Kong nearly six per cent to overtake the S&P 500's 5.7 per cent drop on Wall Street overnight. Fears deepened that more financial institutions would fail after the International Monetary Fund said banks may need $675bn of fresh capital. Trading in Indonesia was suspended as shares fell more than 10 per cent for the second time this week.

The MSCI Asia Pacific index was 3.7 per cent lower at 95.07 by late morning in Tokyo, to come to close to its lowest levels since April 2005. Oil continued to decline, dropping to $89.10 a barrel in Singapore.

LOS ANGELES -- In a suicide note, Karthik Rajaram wrote that he had considered killing only himself because of his financial troubles, but decided to take his family with him.< Damian Dovarganes/Associated Press

The bodies of Karthik Rajaram and five family members were found in their Los Angeles home.

Mr. Rajaram, 45, shot his wife, three sons and mother-in-law in their bedrooms over the weekend, the police said, then shot himself. The police found him on Monday on the floor of a bedroom his youngest sons shared, close to their bodies.

On Tuesday, friends and colleagues said they were stunned to learn of the killings and unaware of the family's financial problems. The police said that in one of his two suicide notes, Mr. Rajaram said he was "broke," having lost most of his assets in the plummeting stock market. The police said he had been planning the killings for weeks

The bodies of Karthik Rajaram and five family members were found in their Los Angeles home.

La Bourse de Paris était en chute libre mercredi matin, le CAC 40 dégringolant de 8,18% et retombant à son plus bas niveau depuis décembre 2003, dans un marché affolé par la poursuite de la crise financière et ses répercussions sur l'économie.

Paris hitting five year low, losing 8.18% in the first hour of trading, amid news of Dexia being downgraded and losing 20%...

[Drew's WHEEEEE™ Technology]

Auferre, trucidare, rapere, falsis nominibus imperium; atque, ubi solitudinem faciunt, pacem appellant.

The Israeli prime minister will press Russian President Dmitry Medvedev not to sell anti-aircraft defences to Iran amid growing speculation the Jewish state will bomb Iran's nuclear facilities.

Ehud Olmert, on his final foreign trip as prime minister before a new coalition government is confirmed, flew to Moscow to urge Mr Medvedev not to sell weapons to "irresponsible elements".

It is feared Israel will see the proposed sale of a sophisticated version of the S-300 surface-to-air missile system as a reason to expedite plans for an attack on Iran.

"We will remind them again of matters that trouble us greatly," Mr Olmert said.

As East-West relations have deteriorated in the aftermath of Russia's brief war with Georgia in August, fears have mounted that Moscow could choose to goad Washington by selling Iran a version of the S-300.