Far-reaching action is needed to tackle Britain's deficit, Nick Clegg said today as the Office for Budget Responsibility revised economic growth predictions down to 2.6% from Labour's figure of 3-3.5%.

In a speech to the Institute for Government, the deputy prime minister said Labour had left a "terrible legacy" and insisted the coalition government must act now to cut debt or risk losing its capacity to protect those most in need.

He singled out a soaring bill for "unreformed gold-plated" public sector pension schemes as an area facing urgent cutbacks.

Earlier today the OBR, headed by the former Treasury mandarin Sir Alan Budd, said growth in the economy, which the previous government predicted would range between 3% and 3.5% for 2011, was revised down to 2.6%.

The spending watchdog also said the scale of borrowing was about £155bn - £8bn lower than in Alistair Darling's March budget, and £23bn lower over the five years to 2014-15.

WASHINGTON -- Searching for a way to satisfy both the United States government and its own shareholders, the board of BP on Monday was examining three options for what to do with its next dividend, a person with direct knowledge of the board's discussions said.

The company's $10.5 billion annual dividend has become a point of contention as President Obama has said BP should not be paying stockholders when fishermen, oil workers and small-business owners are saying they cannot get the company to pay their loss claims from the oil spill in the Gulf of Mexico.The discussions came as Mr. Obama was on his way to the Gulf Coast on Monday, his fourth trip to the region since the disaster struck, and as the company said it would increase the amount of oil they recover from the damaged well each day.

In answer to a request by the administration over the weekend that BP provide "a faster plan" to siphon off and collect the gushing oil, one with "greater redundancy and reliability," the company said in a statement on Monday that it had come up with a new plan to siphon off from 40,000 to 53,000 barrels of oil a day by the end of June, up from the 15,000 barrels they are now collecting. If successful, the plan would happen two weeks earlier than they originally had suggested.

Their revised plan also includes methods to achieve even greater redundancy beyond June, to better allow for bad weather or unforeseen circumstances, administration officials said.Mr. Obama's trip to the Gulf Coast will be his first overnight visit since the April 20 rig explosion that caused the spill and, after three trips to Louisiana, his first tour of the states to the east -- Mississippi, Alabama and Florida -- that are in the direction of the spewing oil's drift. With each trip, he has grown more critical of BP's response, channeling the increasing anger and desperation of coastal residents and politicians.

(Reuters) - Moody's Investors Service on Monday downgraded Greece government bond ratings into junk territory, citing the risks in the euro zone/IMF rescue package for the debt-laden country.

The agency downgraded the rating by four notches to Ba1, placing it one notch into junk status. The outlook is stable.

Moody's also downgraded Greece's short-term issuer rating to not-prime from Prime-1.

June 14 (Bloomberg) -- United Auto Workers President Ron Gettelfinger, ending eight years as the union's leader, said the U.S. auto industry is recovering and credited President Barack Obama with saving it.

"There is strong evidence that the worst is behind us and the industry has clearly rebounded," he said today in a farewell speech at the UAW's constitutional convention in Detroit. "Without hesitation, President Obama addressed the auto industry crisis."

Gettelfinger, 65, is retiring this week after two terms as president. He overcame the union's shrinking size to persuade the U.S. Congress and Obama to rescue General Motors Co. and Chrysler Group LLC last year. The UAW has fallen to about 355,000 members from a 1979 peak of 1.5 million, according to the U.S. Bureau of Labor Statistics.

Bob King, 63, who leads the UAW's bargaining with Ford Motor Co., has been chosen by the union's Administration Caucus to replace Gettelfinger when delegates elect a new leader June 16 at the convention. The Administration Caucus has controlled the Detroit-based union since 1946.

une 14 (Bloomberg) -- The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

"It is the mother of all bailouts," said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.

Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation's $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

French President Nicolas Sarkozy and German Chancellor Angela Merkel announced after talks in Berlin on Monday that they will call for a bank levy and a tax on financial market transactions at the G20 meeting in Toronto later this month.

French President Nicolas Sarkozy and German Chancellor Angela Merkel have announced they will call for a bank levy and a tax on financial market transactions at the G20 meeting in Toronto later this month.

Sarkozy also dropped his call for a new secretariat for eurozone members following talks in Berlin with Merkel.
  
"We would be better off making the European systems a bit lighter by not creating institutions, to focus instead on being more pragmatic," he told reporters.

Merkel also discussed concerns about Spain's economic stability, saying the country knows it can make use of the 750 billion euro rescue mechanism established for the euro amid worries about the country's ability to refinance itself on capital markets.

A Senate proposal to force banks to shed their lucrative yet risk-laden derivatives units -- which is vehemently opposed by Wall Street -- is gaining steam, picking up the support of some regional Federal Reserve chiefs with more on the way.

Yet President Barack Obama's Treasury Department, led by Timothy Geithner, continues to oppose the measure, Senate aides say, who add that Treasury is supporting Wall Street over Main Street by opposing the measure considered of "utmost importance" to financial stability. "It shows the access of the major Wall Street banks in the Treasury Department in spades," one Senate aide said on the condition of anonymity.

Assistant Treasury Secretary for Financial Institutions Michael S. Barr is said to be leading Treasury's efforts.....Treasury is joined in its opposition to the measure by the Federal Reserve's Washington-based Board of Governors and the head of the Federal Deposit Insurance Corporation, Sheila Bair.

Meanwhile, supporters include the longest-serving policy maker in the Fed, Federal Reserve Bank of Kansas City President Thomas Hoenig, Federal Reserve Bank of Dallas President Richard Fisher, Nobel Prize-winning economist Joseph Stiglitz and House Speaker Nancy Pelosi. Hoenig and Fisher wrote letters of support last week to Senate Agriculture Committee Chairman Blanche Lincoln, the author of the provision, referring to it as "of utmost importance to our nation's long-term financial and economic stability."

....

Lincoln's proposal would compel the nation's megabanks to move their swaps-dealing units, which deal and trade in a type of financial derivative product, into a separately-capitalized institution within the larger bank holding company. The affected firms collectively would have to raise tens of billions of dollars to protect their swaps desks in case their bets go bad. Or, they could disband the activity altogether.

Francisco González actually said that the Spanish private sector has greater difficulties funding itself than the government.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

As Mervyn King of the Bank of England brilliantly explained, the authorities had to do in the short-term the exact opposite of what was needed in the long-term: they had to pump in a lot of credit to make up for the credit that disappeared and thereby reinforce the excess credit and leverage that had caused the crisis in the first place. Only in the longer term, when the crisis had subsided, could they drain the credit and reestablish macro-economic balance. This required a delicate two phase maneuver just as when a car is skidding, first you have to turn the car into the direction of the skid and only when you have regained control can you correct course.

The first phase of the maneuver has been successfully accomplished - a collapse has been averted. In retrospect, the temporary breakdown of the financial system seems like a bad dream. There are people in the financial institutions that survived who would like nothing better than to forget it and carry on with business as usual. This was evident in their massive lobbying effort to protect their interests in the Financial Reform Act that just came out of Congress. But the collapse of the financial system as we know it is real and the crisis is far from over.

Indeed, we have just entered Act II of the drama, when financial markets started losing confidence in the credibility of sovereign debt. Greece and the euro have taken center stage but the effects are liable to be felt worldwide.  Doubts about sovereign credit are forcing reductions in budget deficits at a time when the banks and the economy may not be strong enough to permit the pursuit of fiscal rectitude. We find ourselves in a situation eerily reminiscent of the 1930's. Keynes has taught us that budget deficits are essential for counter cyclical policies yet many governments have to reduce them under pressure from financial markets. This is liable to push the global economy into a double dip.

It is important to realize that the crisis in which we find ourselves is not just a market failure but also a regulatory failure and even more importantly a failure of the prevailing dogma about financial markets. I have in mind the Efficient Market Hypothesis and Rational Expectation Theory. These economic theories guided, or more exactly misguided, both the regulators and the financial engineers who designed the derivatives and other synthetic financial instruments and quantitative risk management systems which have played such an important part in the collapse. To gain a proper understanding of the current situation and how we got to where we are, we need to go back to basics and reexamine the foundation of economic theory.

We are currently in the midst of a Fourth Turning. This twenty year Crisis began during the 2005 - 2008 timeframe with the collapse of the housing bubble and subsequent repercussions on the worldwide financial system. It is progressing as expected, with the financial crisis deepening and leading to tensions across the world. It will eventually morph into military conflict, as all prior Fourth Turnings have. The progression from High to Awakening through the Unraveling took from 1946 until 2006. The most treacherous period of the Saeculm is upon us. The intensity of a Crisis is very much dependent upon how a country and its citizens prepare for the Crisis during the final years of the Unraveling. The last Unraveling period in U.S. history from 1984 through 2005 was symbolized by Boomer greed, materialism, debt and selfishness. When Michael Lewis graduated from Princeton University in 1985 and joined Salomon Brothers, I'm sure he didn't realize that he would end up book-ending the Unraveling period in his two best-selling books about Wall Street.

In his latest book, The Big Short: Inside the Doomsday Machine, Lewis seems bewildered by the fact that his first book Liar's Poker, written in 1989,  didn't dissuade college students from pursuing careers on Wall Street. If Lewis had read The Fourth Turning by Strauss & Howe when it was published in 1997, he would have understood why the people on Wall Street couldn't change. The generations were just acting out their part in a grand never ending cycle. Lewis explains what he thought would happen:

"I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous--which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people's money, would be expelled from finance."

Another sign of the imminent return of the Deutsche Mark comes this weekend courtesy of BoersenNEWS.de, one of the largest German stock market portals. Due to popular demand, the portal has reintroduced quotations in DEM, alongside those in EUR: "Due to the ongoing Euro crisis many investors expect the return of the Deutsche Mark. A recent survey, showed that 39% of 1,364 börsennews.de users, would like the good old Deutsche Mark reintroduced. Börsennews.de has responded and will immediately display share prices in Euro and Deutsche Mark." The commentary on this symbolic switch is enough to indicate just how the majority of Germany feels about this issue: "With the symbolic reinstatement of the Deutsche Mark Börsennews.de is not supporting to the abolition of the Euro, however the desire of many citizens for economic security. One thing is clear, the German Mark represented the economically strong and healthy Germany. The Euro represents a cracked economic system, not only throughout the world, in Europe, but above all in Germany." We couldn't have said it better ourselves. Suddenly, Jim Rickards' observation that Germany and Russia could be very well considering a new gold- and oil-backed currency, does not seem all that very ludicrous to us. In fact, should the two countries indeed be in such deliberations (and for their literal recent proximity, look no further than the seating chart in this year's Mayday parade in Moscow), the end of fiat could be approaching much faster than previously expected.