Europe  continues to be the boiling cauldron which may affect the US  presidential election and plunge the world into another financial  meltdown. European leaders continue to try and work through the  troubling fiscal issues and squabble over austerity versus spending.

The Markets: Concerns  about Europe's debt crisis resurfaced on Friday, weighing heavily on  the region's stock markets and pushing the euro to a two-year low.

Just  as eurozone finance ministers approved a bailout for Spain's banks, one  of the country's regions, Valencia, said it would become the first to  tap a new fund designed to provide liquidity to the country's 17  semi-autonomous regions.

The government also predicted that the recession would continue into 2013.

Spanish  markets slumped, with the Ibex stock index down 5.82 percent. The yield  on Spanish 10-year bonds shot up 0.25 percentage points to 7.22 percent  on the news.

Britain's FTSE  100 was down 1.09 percent at 5,651.77 while Germany's DAX lost 1.9  percent to 6,630.02. France's CAC 40 shed 2.14 percent to 3,193.89.

In  Milan, the main Italian stock index fell 4.4 percent after Premier  Mario Monti said the debt crisis had spread to Italy and that the  country would try to avoid requesting a bailout. Italy's 10-year bond  yield rose by a sharp 0.25 percentage points, to 6.16 percent.

The euro fell sharply, trading 0.9 percent lower on the day to $1.2163, the lowest level in two years.

http://azstarnet.com/news/world/europe-debt-concerns-push-markets-euro-lower/article_1b541804-7d77-5d12-aeb0-2eb3364d0283.html

Take This Job & Shove It: A  senior economist at the institution spearheading the bailouts of three  eurozone countries has lambasted its lack of leadership and said its  first female chief is not fit for the job.

In a letter obtained exclusively by CNN and  addressed to Shakour Shaalan, dean of the executive board of the  International Monetary Fund, 20-year veteran Peter Doyle says he is  "ashamed to have had any association with the Fund at all."

Doyle,  a former advisor to the IMF's European Department, which runs its  programs for Greece, Portugal and Ireland, argues the body's failure to  deliver timely and sustained warnings to the region's dithering  politicians had led to widespread suffering for those living in stricken  countries and the risk of worse to come.

The institution's lack of decisive action, Doyle says, has left "the second global reserve currency (the euro) on the brink."

"The fund for the past two years has been playing catch-up and reactive roles in the last ditch efforts to save it," he writes.

http://cnn.com/2012/07/19/business/imf-economist-letter/

Less Risk In Change: Why  has the European Central Bank changed its mind? As The Wall Street  Journal reported this week, the ECB—once an implacable opponent to  forcing losses on senior bondholders even in the weakest banks—now  thinks it might be a good idea.

In  his only public comments on the matter this week, ECB President Mario  Draghi noted that "the question of burden sharing with senior  bondholders is evolving at the European level."

He  was more explicit in private at last week's meeting of euro-zone  finance ministers, where he made plain in a discussion about terms of a  euro-zone bailout of up to €100 billion (about $123 billion) for Spanish  banks that the ECB had dropped its opposition to such burden sharing.  This was a 180-degree shift from the stance of his predecessor,  Jean-Claude Trichet, when Ireland needed to bail out its banks in 2010.

ECB  presidents change and times change too. The ECB is now preparing for a  role as the overarching supervisor of the euro zone's banks, part of a  broader shift in the euro zone on how best to handle bank failures.

http://online.wsj.com/article/SB10000872396390444464304577536983898858476.html

Spain:  On Friday the Euro Zone members agreed to bail out Spain, but that  hasn't quelled any fears in the country, Europe or the world.

The Bailout - Here is a glance at the aid package's main points:

_The  EU will provide up to (EURO)100 billion ($122.87 billion) for Spanish  banks struggling under a mountain of non-performing loans, foreclosed  property and other unwanted assets resulting from the collapse of the  country's real estate market. The precise figure will depend on how much  each bank needs, and this will be determined after detailed portfolio  assessments and stress tests due to be completed in September. Leading  Spanish banks, such as Banco Santander SA, are not expected to need any  help.

_Money from the  bailout will be used to help the banks recapitalize and shore up their  balance sheets against the prospect of further shocks in the Spanish  economy. Spain is currently in its second recession in three years and  saddled with a nearly 25 percent unemployment rate.

_The  money will be available until the end of next year, and most  recapitalization operations are expected to be completed in June of  2013.

_Funds will initially  come from the EU's existing bailout mechanism, known as the EFSF _ the  same one used in the bailouts of Greece, Ireland and Portugal. The goal  is for the money eventually to flow from a planned permanent mechanism,  the ESM, directly to the needy banks, rather than to the Spanish  government as will be the case at the outset. Under both arrangements,  when it comes to repaying, the EU's loans will not take precedence over  debt owed to other creditors _ a crucial point for private investors  worried that they might not be paid back.

_Toxic  assets will be segregated from Spanish banks into an Asset Management  Agency, essentially a `bad bank.' Spain's toxic assets are expected to  total about (EURO)200 billion euros.

_The  EU has not said what interest rate it will charge. Spain says the rate  will be variable and depend on conditions in the money market. Spanish  Economy Minister Luis de Guindos has said it would be under 4 percent.

_The average term of the loans will be 12.5 years, and the maximum 15.

_A  first tranche of (EURO)30 billion euros will be made available by July  31. But it will be held in reserve by the bailout fund and disbursed  only in the event of emergency. The size of the other tranches will be  determined depending on the needs of the Spanish banks.

http://azstarnet.com/news/world/glance-at-the-bailout-of-spain-s-trouble-banks/article_d2ff6c73-f7b0-575a-bb1c-6e37f1a3e95d.html

Shares Slump - SPAIN’S  stock market yesterday suffered its worst day in more than two years  despite eurozone finance ministers giving the green light for a €100  billion (£78bn) bail-out of the country’s banks.

The  agreement came as investor concerns on the stability of Spain’s  economy, and that the government itself might need rescuing, sent the  country’s borrowing costs soaring and stock prices plummeting.

Spain’s  main Ibex index closed down 5.8 per cent – its biggest one-day  percentage drop since May 2010 – while the interest rate on the  country’s ten-year bond moved further above the 7 per cent rate seen as  unsustainable. In London, the FTSE 100 dropped 1 per cent and the  pan-European DJ Eurostoxx 50 fell almost 3 per cent.

http://scotsman.com/business/economics/spanish-shares-slump-despite-78bn-eurozone-bail-out-1-2424086

Bond Yield - Yields  on Spanish 10-year government bonds soared to euro-era highs as  concerns over the impact of the banking-sector bailout on public debt as  well as new signs of trouble in regional finances sparked a selloff  across markets.

Stocks tumbled, pushing the euro to a two-year low against the dollar.

http://online.wsj.com/article/SB10000872396390444464304577538952005754794.html

The Main Act -  The  resurfacing of euro zone debt problems in the headlines was a reminder  that the bloc's problems are far from over. Spain's government also cut  its economic growth forecast, indicating the country would stay mired in  recession well into next year.

"It  looks as if Europe is taking center stage again, with Spain as the main  act," said Quincy Krosby, market strategist at Prudential Financial in  Newark, New Jersey.

http://news.yahoo.com/stock-index-futures-signal-mixed-start-084350711--finance.html

Fueling Global Fears - Concerns  that Spain won't be able to meet its funding needs helped to spark a  global selloff in financial markets Friday, as the government warned the  country's economic contraction would drag into next year, and one of  its most indebted regional administrations asked the central government  for help refinancing its debt.

The  market slump underscored fears that Spain's finances are spiraling out  of control and could require the country to seek a full rescue from the  European Union.

http://online.wsj.com/article/SB10000872396390444464304577538613391486808.html

People Not Happy - Spain  may soon be getting aid for its troubled banking sector, but that  appears to be of no comfort to the Spaniards. After Madrid passed  another round of tough austerity measures on Thursday, tens of thousands  took to the streets in some 80 cities around the country.

The  protests, which reportedly saw some 100,000 demonstrators in Madrid  alone, were called by the CCOO and UGT trade unions, which reject the  government's planned belt-tightening efforts. The two unions have  threatened to call a general strike in September. Dozens of injuries and  a handful of arrests were reported following scuffles with police.

http://spiegel.de/international/europe/protests-in-spain-as-eu-bank-aid-approved-a-845547.html#ref=rss

Greece: The  European Central Bank said it would reject Greek government bonds as  collateral for its normal lending operations beginning Wednesday,  raising pressure on Athens to comply with demands of its international  creditors for deep budget cuts.

Government  bonds and other debt securities backed by Greece "will become for the  time being ineligible for use as collateral" in the ECB's monetary  policy operations, the bank said in a statement.

http://online.wsj.com/article/SB10000872396390444097904577538873386439442.html

Privatization Chief Resigns - The  head of Greece's privatization agency said on Friday he was forced to  resign because its new government blocked his effort to sell off assets,  in the latest blow to a program central to Greek hopes of regaining  credibility with lenders.

The  acrimonious departure of Costas Mitropoulos risks further delays to  Greece's stalled privatization drive and raises uncomfortable questions  for the new administration just days before IMF, EU and ECB inspectors  arrive to assess compliance with reforms.

"The  newly elected government did not give the agency the support it needs,"  Mitropoulos, privatization chief since August 2011, wrote in his  resignation letter made public on Friday.

http://reuters.com/article/2012/07/20/us-greece-privatisations-idUSBRE86J0S220120720

France: President  Francois Hollande's plan for tens of thousands of state subsidized jobs  will not fix France's stagnant economy but it may be enough to keep  angry unions and jobless youths off the streets as layoffs mount after  the summer.

Two months into  his presidency, Hollande faces a gathering storm as unemployment climbs  past 10 percent and threatens to jump even higher this autumn.

Worsening  prospects for many jobless youths have fed frustration in the poor  suburbs that ring major French cities, which saw riots in 2005. France's  militant unions, alarmed by mounting factory closures, are bristling  for a fight.

http://reuters.com/article/2012/07/20/us-france-jobs-for-friday-idUSBRE86J0PQ20120720

United Kingdom: The  pace of decline in the UK manufacturing sector eased in June but the  sector remained in recession as export orders continued to fall.

The  closely-watched Purchasing Managers' Index (PMI), compiled by Markit,  rose to 48.6 last month from May's three-year low of 45.9.

Despite the improvement, the sector remains below the 50-mark that indicates contraction.

The data showed overseas demand fell for the third straight month.

Economists  said the weak data heightened pressure on the Bank of England (BoE) to  act to boost growth when its nine-strong committee meets on Wednesday.  The Bank will announce its decision on Thursday.

http://bbc.co.uk/news/business-18674680

Olympic Tourists Warned - Tourists  be warned: The Olympics crush has begun in London — and so has the  scramble for cold, hard cash in the pricey British capital.

Lines  are getting longer at ATMs, visitors are in sticker shock over British  prices and some befuddled tourists are wondering what currency to use.  Stores in the Olympic Park only accept certain credit cards and a  British financial authority is even recommending that tourists make sure  to bring British pounds with them.

http://bostonherald.com/news/international/europe/view.bg?articleid=1061147093

Euro Zone Loses: Europe's  highest court on Thursday handed a victory to Chinese firms seeking to  defend themselves against charges of unfair trade practices in a case  that has raised tensions between Brussels and Beijing.

The  decision could embolden more Chinese companies to challenge claims by  the European Commission, the EU executive body and lead trade enforcer,  that they are selling goods in Europe at unfairly low prices, lawyers  say.

http://online.wsj.com/article/SB10000872396390444464304577538293881076240.html

From the Cornfield, we must remain vigilant less we get caught with our pants down in the event the Euro Zone crumbles.