Eurozone collapse 'will send continent into depression'

By Bruno Waterfield, The Daily Telegraph

The collapse of the eurozone would cause a crash that would instantly wipe out half of the value of Europe's economy, plunging the continent into a depression as deep as the 1930s slump, the president of the European Commission has warned.

Jose Manuel Barroso issued his chilling warning as France began diplomatic overtures to create a eurozone vanguard, potentially with fewer than the 17 existing members of the single currency.

Mr Barroso said that if the euro area of the 17 member states or the wider 27-country EU broke apart the estimated initial cost would be up to 50 per cent of European gross domestic product. "It would jeopardize the future prosperity of the next generation. That is the threat that hangs over us," he said.

In a speech in Berlin aimed at tackling any support for a smaller elite eurozone compromised of the EU's strongest economies, Mr Barroso warned that the consequence of a split would be a million lost jobs in Germany.

The result of such an economic shock would be emergence of extremism and divisions within Europe, the former Portuguese prime minister told his German audience.

"Populism and sometimes even nationalism raises its head across our continent," he said. "This is ignoring the global realities as well as our common history that teaches us that this continent is simply too small and too inter-dependent for us to stand apart, to turn our backs to each other."

Financial markets tumbled yesterday as news broke that MPs in Germany's ruling Christian Democratic Union party plan to debate a motion next week allowing countries to leave the euro area.

Angela Merkel, the German chancellor, and Nicolas Sarkozy, the French president, first raised the prospect of a country exiting the euro last week when they said that a proposed Greek bailout referendum would be an in-or-out vote on euro membership.

Leaving the currency area is not envisaged under current euro rules. George Papandreou, the Greek prime minister, scrapped the ballot before stepping down and handing power over to a national unity government.

Reminding Germany of the legacy of the Second World War, Mr Barroso called on Europe's largest country and economy to "take its responsibilities seriously".

"Just as the founding fathers had a vision of Europe after two devastating world wars, we must also now act with resilience and with vision towards a Europe that is strong but open," he said. "Now is Germany's time to show that it is fighting the cause of a strong, integrated and competitive Europe."

A eurozone crash, the commission has predicted, would see pounds 10?trillion wiped off the value of the European economy, a catastrophe that would send living standards plummeting to the levels of Latin America. The shock would wipe out all the gains of Europe's longest period of peace since the Second World War and herald the political chaos and collapse of governments that ushered in Nazism 80 years ago.

"It would be worse than anything our post-war generation can even imagine," said an official. "Only those Europeans in their late eighties will have any idea about bad it could get."

11/11/11: How Friday Is Tied to the Mayan Apocalypse

by Stephanie Pappas, LiveScience Senior Writer

Friday's numerical date is written out as 11/11/11. And for some people, that number sequence is more than a coincidence or inevitability — it's a spiritual signal linked to 2012 Mayan prophecies of both doom and spiritual renewal.

Nov. 11, 2011 mythologies are pervasive on New Age corners of the Internet, with believers suggesting that 11/11 numerical sequences are signals from angels or numbers with hidden meanings. Even people who think little of numerology are finding meaning in the day: The Orlando Sentinel reports that Walt Disney World will host 11 weddings on 11/11/11.

But perhaps the most intriguing 11/11/11 mythology to pop up is the number's link with the supposed 2012 Mayan Apocalypse. The ancient Mayan long-count calendar ends on Dec. 21, 2012, and some people believe that this date will usher in a new spiritual era, or even doomsday. Nov. 11, 2011 most likely became linked with Dec. 21, 2012 when believers noticed that the U.S. Naval Observatory had set the exact time of the 2012 winter solstice for 11:11 Universal Time on Dec. 21, according to John Hoopes, a scholar of Maya history at the University of Kansas.

"It's essentially based on the notion of synchronicities," Hoopes told LiveScience. Synchronicities are meaningful coincidences, he said. And while everyone has a psychological tendency to find minding in random patterns the subcultures that believe in 2012 mythology tend to be those that dabble in psychedelics and cannabis, drugs that increase feelings of synchronicity.

Oil price to hit $175-$200 if Israel attacks Iran: analysts

Yadullah Hussain / Reuters

Oil prices could surge to $175-200 per barrel if Israel attacks Iran’s nuclear facilities, leading to the closure of an important oil route, according to market observers. Tensions between the two arch foes have escalated after the International Atomic Energy Agency reported it had ‘credible’ evidence of Tehran’s nuclear weapons plan.

In a survey of oil traders, Washington D.C.-based Rapidan Group said that participants expected an $11 rise in the price of a barrel in the immediate aftermath of an Israeli attack.

“Participants said prices could rise by $61/bbl under the prolonged disruption scenario where IEA [International Energy Agency] stocks are used. The scenario includes price change 30 days after an Israeli strike, and assumes a 21-day disruption of oil traffic through the Strait of Hormuz before returning to normal throughput of 15.5 million b/d. IEA countries offset half the loss with around 8 million b/d,” the Financial Times quoted from the report.

“Participants said prices could rise by $175/bbl under Rapidan’s prolonged disruption scenario, where no IEA stocks are used. The scenario looks at price change 30 days after an Israeli strike, and it assumes a 21-day disruption of the Strait of Hormuz before returning to normal throughput of 15.5 million b/d.”
The Strait of Hormuz is the world’s most important oil route, with 40% of the world’s oil passing through the narrow sea route between the Gulf of Oman and the Persian Gulf.

The IAEA findings came weeks after the United States said it unearthed a plot by Iranian agents to kill the Saudi ambassador to the U.S.

“Iran is the most important latent threat in the oil market,” Robert McNally, head of the Rapidan Group, told Platts Energy last week, partly because previous threats against Iran over the years have not materialised, and also as Arab Spring has stolen the limelight from Iran during the past ten months.

McNally noted that oil traders would not have ignored the alleged-Iranian plot to kill the Saudi ambassador had there been a Republican U.S. President, rather than Democrat Barack Obama, despite his hawkish stance on Iran.

Meanwhile, independent consultant Philip Verleger told the Financial Times that the Strait of Hormuz closure is a “$200-a-barrel scenario”.

Verleger correctly predicted in August 1990 the price rally after Iraq invaded Kuwait, the FT noted.

This is not such a far-fetched scenario as crude prices are gearing up to hit $150 as global markets show some signs of improvement and demand ramps up.

The International Energy Agency reported today that oil prices could hit $150 in the near-term if the energy sector remains under-invested.

“If between 2011 and 2015 investment in the MENA region runs one-third lower than the $100 billion per year required, consumers could face a near-term rise in the oil price to $150 per barrel,” the IEA said in its annual World Energy Outlook.

Oil prices have been historically high this year, with North Sea Brent crude oil futures averaging well over $100 per barrel, partly due to the loss of oil production from Libya during its civil war.

Religare, a U.K. based investment bank focused on emerging markets, has also raised the probability of an Israeli attack on Iranian nuclear facilities from 5% in March to 40% in October.

“From a comfortable level of 0% last year, we put the chances of an attack on Iranian nuclear facilities at 5% in March, 15% in June, 20% in September and then finally upgraded it to 40% in October, although we cautioned that it was highly unlike to occur before the IAEA directors meeting in mid-November, after which it would rise to this point,” said strategist Emad Mostaque.

“We maintain our position and see December as the most likely point (Christmas day would especially annoy everyone), diminishing back to 15-20% once we get through to mid-January as Iranian enrichment progresses to dangerous levels and the pace of rhetoric subsides.”

UBS: Here Are The 19 Countries Most Likely To Default

Mamta Badkar

Italy is being touted as the country that is too big to save. And with the ECB legally prevented from being a lender of last resort, an Italian debt restructuring is inevitable, according to Nouriel Roubini.

Italian 10-year yields have exploded over 7% and clearing house LCH.Clearnet SA has raised the cost of trading Italian debt.

With the the turmoil in Italy, Ireland is having a harder time convincing markets and investors that it could escape contagion. Meanwhile, Greece is still waiting on a new government.

As the European debt crisis continues, we drew on UBS analyst Andrew Cates' aggregate balance sheet risk index to provide a snapshot of the financial fragility of countries that look most likely to default. The factors that help determine balance sheet risk include high cumulative credit outstanding, high banking sector leverage as measured by loan-deposit ratios, and substantial public sector debt as a percentage of GDP.

Note: All data is for 2010. The Balance Sheet Risk index depends on several indicators that include public sector debt as a percent of GDP; loan to deposit ratio (which measures of banking sector stress); and credit to GDP ratio (which measures credit market stress). Credit market is the broader market through which companies try to raise funds through debt sales. It also includes indicators of external fragility like current account balance to GDP ratio and external debt to GDP ratio among others.

#19 U.S.Credit to GDP ratio: 5.1%
Loan deposit ratio: 147%
Public sector debt as a percent of GDP: 92.7%
Total score: 4.8

#18 PolandCredit to GDP ratio: 24.6%
Loan deposit ratio: 106.3%
Public sector debt as a percent of GDP: 54.2%
Total score: 4.8

#17 RomaniaCredit to GDP ratio: 21.2%
Loan deposit ratio: 113.3%
Public sector debt as a percent of GDP: 35.3%
Total score: 5.1

#16 NorwayCredit to GDP ratio: 24.8%
Loan deposit ratio: 214.9%
Public sector debt as a percent of GDP: 54.3%
Total score: 5.1

#15 CanadaCredit to GDP ratio: 23.4%
Loan deposit ratio: 199.3%
Public sector debt as a percent of GDP: 81.7%
Total score: 5.1

#14 ItalyCredit to GDP ratio: 25.3%
Loan deposit ratio: 165.2%
Public sector debt as a percent of GDP: 118.4%
Total score: 5.2

#13 FinlandCredit to GDP ratio: 19.9%
Loan deposit ratio: 156.4%
Public sector debt as a percent of GDP: 50%
Total score: 5.3

#12 BulgariaCredit to GDP ratio: 36%
Loan deposit ratio: 102.6%
Public sector debt as a percent of GDP: 16.6%
Total score: 5.3

#11 NetherlandsCredit to GDP ratio: 15.7%
Loan deposit ratio: 158.7%
Public sector debt as a percent of GDP: 66%
Total score: 5.4

#10 SwedenCredit to GDP ratio: 27.3%
Loan deposit ratio: 237.6%
Public sector debt as a percent of GDP: 41.7%
Total score:

#9 BelgiumCredit to GDP ratio: 22%
Loan deposit ratio: 98.1%
Public sector debt as a percent of GDP: 100.2%
Total score: 5.5

#8 FranceCredit to GDP ratio: 19.4%
Loan deposit ratio: 163.6%
Public sector debt as a percent of GDP: 84.2%
Total score: 5.5

#7 DenmarkCredit to GDP ratio: 44.1%
Loan deposit ratio: 346.1%
Public sector debt as a percent of GDP: 44.2%
Total score: 5.6

#6 HungaryCredit to GDP ratio: 21%
Loan deposit ratio: 123.6%
Public sector debt as a percent of GDP: 85.3%
Total score: 5.8

#5 UKCredit to GDP ratio: 35.2%
Loan deposit ratio: 150.5%
Public sector debt as a percent of GDP: 76.7%
Total score: 6

#4 GreeceCredit to GDP ratio: 55.7%
Loan deposit ratio: 117.7%
Public sector debt as a percent of GDP: 130.2%
Total score: 6.1

#3 SpainCredit to GDP ratio: 66%
Loan deposit ratio: 223%
Public sector debt as a percent of GDP: 63.5%
Total score: 6.3

#2 PortugalCredit to GDP ratio: 53.6%
Loan deposit ratio: 189.2%
Public sector debt as a percent of GDP: 83.1%
Total score: 7

#1 IrelandCredit to GDP ratio: 56.1%
Loan deposit ratio: 187.3%
Public sector debt as a percent of GDP: 99.4%
Total score: 7.6

Cutting back on salt 'may not lower heart risk'

Dramatically cutting the amount of salt in food might not protect against stroke and heart disease, a study claims.

By Nick Collins, Science Correspondent

In Caucasian people with normal blood pressure, a large reduction in the amount of salt they eat may actually do more harm than good, researchers said.

Reducing our salt intake is generally thought to protect the heart because it lowers our blood pressure, one of the leading risk factors for stroke and heart disease.

But a round-up of existing evidence published in the American Journal of Hypertension found that the moderate benefit to blood pressure could be cancelled out by increases in cholesterol and other harmful compounds.

Researchers from Copenhagen University Hospital in Denmark analysed 167 studies where participants reduced their salt intake by an average of 150 millimoles per litre – a much greater drop than health guidelines recommend.

In patients with high blood pressure this resulted in a drop of 3.5 per cent, but in people whose blood pressure was normal it fell by less than one per cent.

The modified diet also caused levels of cholesterol to rise by 2.5 per cent along with rises in certain hormones and chemicals linked to increased heart risk.

The findings question the idea that cutting back on salt would protect against stroke and heart disease in white patients whose blood pressure was already normal or low, the researchers said.

The results were not conclusive enough to show that Black or Asian people would experience the same effects, they added.

Dr Niels Graudal, who led the study, told Reuters: "I can't really see, if you look at the total evidence, that there is any reason to believe there is a net benefit of decreasing sodium intake in the general population."

Although cutting back on salt is known to reduce blood pressure, no study has shown beyond doubt that it can improve heart health in the general population.

While many governments, including Britain, recommend that people limit their salt intake, a number of recent studies have suggested there is no evidence that doing so can reduce the risk of heart problems.

But Prof Francesco Cappuccio of Warwick University, head of the World Health Organisation collaborating centre for nutrition, said the study was merely a "repackaged" version of previous research and failed to address previous criticism.

The study "should not distract our attention for implementing salt reduction policies at population level globally, as directed by national governments, the World Health Organization and the United Nations", he said.