Europe could be in worst hour since WWII: Merkel (Reuters)

LEIPZIG, Germany (Reuters) – German Chancellor Angela Merkel said on Monday that Europe could be living through its toughest hour since World War Two as new leaders in Italy and Greece rushed to form governments and limit the damage from the euro zone debt crisis.

A rally on financial markets sparked by the appointment of respected European technocrats in Rome and Athens soon stalled. Analysts warned that daunting obstacles could hinder decisive action needed to breathe new life into their ailing economies.

Italy had to pay a euro-lifetime record yield of 6.3 percent to sell five-year bonds with investors wary of buying its debt until prime minister-designate Mario Monti can undertake profound economic reforms.

In a first sign of trouble for new Greek Prime Minister Lucas Papademos, the leader of the main conservative party rejected any toughening of austerity and refused to sign a letter sought by European authorities pledging support for a new 130 billion euro bailout.

Merkel dramatized the situation facing the euro zone in an attempt to rally her conservative party behind the government at a congress in Leipzig.

"Europe is in one of its toughest, perhaps the toughest hour since World War Two," she told her Christian Democrats (CDU), saying she feared Europe would fail if the euro failed and vowing to do anything to stop this from happening.

In a one-hour address, Merkel called for closer European political union but offered no new ideas for resolving the crisis that has forced bailouts of Greece, Ireland and Portugal, raising fears about the survival of the 17-state currency zone.

European Union governments have until a summit on December 9 to come up with the outlines of a much bolder and more convincing strategy, with some form of massive, visible financial backing.

Prospects are uncertain as the German government, the Bundesbank and hardliners in the European Central Bank have blocked key policy options. These include issuing common euro zone bonds, mutualising the euro zone's debt stock, letting the ECB create money to fight the crisis, or act as a lender of last resort, directly or via the euro zone rescue fund.

HIGH DRAMA IN ROME

In weekend drama, Italy's president asked Monti, a former European commissioner, to form a government to reverse a disastrous collapse of market confidence in an economy whose debt burden is too big for the euro bloc to bail out.

Italians sang, danced and drank champagne in the streets to celebrate the resignation of scandal-plagued billionaire Silvio Berlusconi, and an impromptu orchestra near the presidential palace played the Hallelujah chorus from Handel's Messiah.

The ECB has been buying troubled euro zone governments' bonds episodically to try to stabilize markets. But figures released on Monday showed it halved its weekly bond buy at the height of the Italian government crisis last week, suggesting it was no longer willing to help Berlusconi.

After a tumultuous week, when Italy's borrowing costs rose to the kind of levels that saw Ireland and Greece forced to seek international bailouts, initial market reaction was positive on Monday, with both stocks and bond markets lifted.

But in a sign of the fragile state of confidence, the trend was reversed after the Italian bond auction, and the release of figures showing industrial production slumped by 2 percent in the euro zone in September, raising the specter of recession.

"(Monti) is perceived to be a positive change for the country," said Annalisa Piazza, rate strategist at Newedge.

"Cautiousness on the future developments in Italy is fully justified. Credibility has been lost and it will take a while for market participants to believe that the country is back on the right track."

Monti held talks with political parties on Monday before separate meetings with trade unions and employers on Tuesday, as he moves to appoint what is expected to be a relatively small cabinet made up of experts from outside parliament.

He went to work after a frenetic weekend in which Italy's parliament approved a package of economic reforms agreed with European leaders, clearing the way for Berlusconi to resign.

"Monti spoke about a significant program with many sacrifices," Francesco Nucara, a lawmaker from one of the myriad tiny parliamentary groups involved in the talks, said after meeting the prime minister designate.

"IT DOESN'T END HERE"

But some were skeptical about the strategy to reverse the collapse of market confidence in Italy.

"It doesn't end here" read a headline in Libero, a fiercely pro-Berlusconi daily which said that "the Left and its newspapers may have uncorked the champagne too early".

While Italy's problems and the long-drawn-out departure of Berlusconi have pushed the collapse of the much smaller Greek economy backstage, IMF and European leaders will keep Papademos under pressure to implement radical reforms.

Papademos succeeded George Papandreou, whose proposal to hold a referendum on the bailout terms prompted EU leaders to raise the threat of a Greek exit from the currency bloc.

The new premier, who oversaw Greece's entry to the euro zone in 2002, must win a confidence vote on Wednesday before meeting euro zone finance ministers in Brussels on Thursday.

The Herculean task facing Papademos was illustrated on Monday when New Democracy leader Antonis Samaras said he would not vote for new austerity measures, adding that the policy mix of spending cuts and tax rises agreed with international lenders should be changed in favor of economic growth.

"I agree with the goals to cut government spending ... to reduce debt, to erase the deficit, to make structural changes. I do not agree with whatever stunts growth," he told party MPs.

Inspectors for Greece's international lenders, known as the troika, were due to meet the new administration of Papademos following Wednesday's confidence ballot but uncertainty surfaced over whether they would indeed come.

DISRUPTIVE DEMONSTRATIONS

Most Greeks hailed Papademos's appointment, but thousands of people angry at more than a year of austerity are expected to rally on Thursday, the anniversary of a 1973 student uprising that helped to bring down a 1967-1974 military junta.

That could complicate talks between the troika and the new cabinet, as the demonstration is expected to shut down central Athens and could be the biggest rally in months of protests that have at times erupted into bloody clashes.

"They may come at the end of the week but nothing is fixed," Carlos Martin Ruiz de Gordejuela, spokesman for the European Commission's mission in Greece, said of the troika team, which had been expected to arrive early in the week.

Monday's euro zone industrial production figures pointed to a sharp contraction toward the end of the year and the risk of a double-dip recession.

The slide in output at factories in the 17 nations sharing the single currency was the biggest fall since February 2009 -- when the economy was reeling from the worst financial crisis since the 1930s.

"It clearly doesn't bode well for the future," said Francois Cabau, an economist at Barclays Capital. "If we don't see some resolution of the euro zone sovereign debt crisis, business confidence could go even lower."

(Additional reporting by Philip Pullella and James Mackenzie in Rome, Ben Harding and Harry Papachristou in Athens, Eva Kuehnen in Frankfurt, Alexandra Hudson in Berlin and Robin Emmott in Brussels, writing by Peter Millership; Editing by Paul Taylor)

View the original article here

Response to 'credible threat' shows how much has changed since 9/11 (The Christian Science Monitor)

On Thursday, federal and New York City authorities disclosed that the U.S. had received specific and credible but uncorroborated intelligence indicating three individuals may have entered the U.S. as part of a possible plot to attack Washington or New York on the tenth anniversary of the September 11, 2001 attacks.

Nothing may come of the threat, but national, state, and local law enforcement agencies are taking no chances.

In New York, police are paying particular attention to bridges and tunnels, checking vehicles. Armed transit police and National Guard troops are patrolling Penn Station. Unattended cars parked suspiciously in Washington are being towed, and police there are working 12-hour shifts.

IN PICTURES: American Jihadis

The reason authorities are paying such close attention to the most recent threat may not be because of newly gathered intelligence alone, but rather from a steady string of lower-level attack threats in the US since 9/11, plotted by individuals and small groups inspired by Al Qaeda.

Al Qaeda’s capabilities may have been degraded in the years since 2001, says Amy Zegart, professor of public policy at UCLA's School of Public Affairs and a senior fellow at Stanford's Hoover Institution. But the group once led by Osama bin Laden has since “morphed into a more complicated, decentralized and elusive threat” including affiliates or franchise groups operating in places like Yemen and Somali and “homegrown terrorists inspired by violent extremism, often through the Internet in the comfort of their own living rooms,” she writes this week in a Los Angeles Times column.

“Plots by homegrowns and franchise groups have risen dramatically in recent years,” she writes, pointing to the Ft. Hood shootings, the Christmas Day “underwear” bomber, the plot to explode printer cartridges on cargo planes, and the Times Square bomb plot.

There have been other attacks and attempted attacks as well: the Somalia-born teen who plotted to explode a bomb in the Portland, Ore., Pioneer Courthouse Square just as families had gathered for a Christmas tree lighting; the shooting of two US military recruiters in Little Rock, Ark.; the arrest of Army Private 1st Class Naser Abdo with guns and explosives near Fort Hood, Texas, last July; the arrest a month earlier of two men – US citizens who had converted to Islam – who tried to acquire machine guns in order to attack the Military Entrance Processing Station just south of Seattle.

From September 11, 2001 to May 2009, US authorities reportedly uncovered 21 plots, and in the past two years they have made arrests in connection with at least 33 more.

In a report for the Bipartisan Policy Center last September, national security experts Peter Bergen and Bruce Hoffman called 2009 a “watershed year in terrorist attacks and plots in the United States” with a total of 11 jihadist attacks, plots, or efforts by Americans to travel overseas to receive terrorist training. That year, at least 43 Americans or residents aligned with Sunni militant groups were charged or convicted of terrorism crimes.

What’s more, Bergen and Hoffman reported, would-be jihadists were not necessarily poor, uneducated, or without opportunity, as many had assumed after 9/11. Nor did they fit any particular ethnic profile. Of the 57 individuals charged or convicted between January 2009 and when their report was made in September 2010, more were Caucasian-Americans, than were Arab-Americans. (The largest portion – 31 percent – were Somali-Americans.)

At a recent Monitor-sponsored press breakfast, Homeland Security Secretary Janet Napolitano said, “Categorically the country is safer now that it was prior to 9/11.”

a€?We have many layers of security in place that didna€?t exist before, beginning with intelligence gathering and information sharing,a€

But like virtually every expert on national security and domestic terrorism, Ms. Napolitano says the toughest problem remains the single individual or small group who may not have the ability to carry out mass attacks but who could slip through intelligence nets and do considerable damage.

"It is much more difficult to defeat a lone actor for all the reasons you would suspect,” she told Atlantic national correspondent and Bloomberg columnist Jeffrey Goldberg this week (before the latest credible threat). “They usually use simpler tradecraft, they're not conspiring with people, there's nothing to intercept, a lot of times they act on almost a sporadic basis, so it's very hard to predict,”

"The growth of homegrown violent extremism within the United States, individuals and small cells, is something that I've seen expand in my tenure as secretary,” she said. “Protecting the American people from this is one of the most difficult problems we have."

Although attempts at domestic terrorism in the United States may have been on the rise in recent years, the ability to intercept would-be terrorists has increased as well a€“ often through the use of informants.

Senior counterterrorism officials said Friday that authorities have a general sense of who is behind the most recent plot involving a car bomb and who may be tasked to carry it out, but they don't have exact identities yet, according to the AP. They said there is at least one US citizen among the three people.

IN PICTURES: American Jihadis

Get daily or weekly updates from CSMonitor.com delivered to your inbox. Sign up today.

View the original article here