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The European Union and the US will begin formal talks on a free-trade agreement, paving the way for the biggest trade deal in history.

European Commission President Jose Manuel Barroso made the announcement following President Barack Obama’s State of the Union address.

A deal would bring down trading barriers between the two biggest economies in the world.

EU-US trade is worth around 455 billion euros ($613 billion) a year.

Barack Obama announced US support for talks as part of his annual address to Congress on Tuesday, saying a free-trade deal would “boost American exports, support American jobs and level the playing field in the growing markets of Asia”.

In a joint statement, US and EU leaders said trade between the US and EU supported millions of jobs on both sides of the Atlantic.

“We are committed to making this relationship an even stronger driver of our prosperity,” the statement said.

The EU estimates that a “comprehensive and ambitious agreement” will boost annual GDP growth by 0.5%.

It is not clear how long the talks will take, but similar trade deals have involved years of negotiations.

The idea was discussed following the formation of a working group in 2011, and the formal talks may begin in the summer, EU Trade Commissioner Karel De Gucht said.

He said the deal would focus on bringing down remaining tariffs and other barriers to trade, and standardise technical regulations, standards and certifications.

The European Union and the US will begin formal talks on a free-trade agreement, paving the way for the biggest trade deal in history

The European Union and the US will begin formal talks on a free-trade agreement, paving the way for the biggest trade deal in history

Free trade between the US and the EU has been under informal discussion for years.

Previously politicians have been discouraged from pursuing free trade deals for fear of exposing domestic industries to greater competition from abroad.

But Steve Davies from the Institute of Economic Affairs, a think tank, said the economic crisis in Europe has injected more urgency into the talks.

“It’s happening now because there has been seriously depressed growth in the EU, and this will be good news for economic growth,” he said.

“On the American side, the critical factor is that Obama is now in his second term, so he doesn’t have the protectionist pressures from US businesses to worry about.”

Steve Davies said agriculture was likely to be particular area of contention, along with intellectual property, which could lead to political wranglings on both sides of the Atlantic.

Uniunea Europeana și SUA încep tratativele pentru acordul de liber schimb, care va duce la crearea celui mai mare acord comercial din istorie.

European Commission President Jose Manuel Barroso made the announcement following President Barack Obama’s State of the Union address.

A deal would bring down trading barriers between the two biggest economies in the world.

EU-US trade is worth around 455 billion euros ($613 billion) a year.

Barack Obama announced US support for talks as part of his annual address to Congress on Tuesday, saying a free-trade deal would “boost American exports, support American jobs and level the playing field in the growing markets of Asia”.

In a joint statement, US and EU leaders said trade between the US and EU supported millions of jobs on both sides of the Atlantic.

“We are committed to making this relationship an even stronger driver of our prosperity,” the statement said.

The EU estimates that a “comprehensive and ambitious agreement” will boost annual GDP growth by 0.5%.

It is not clear how long the talks will take, but similar trade deals have involved years of negotiations.

The idea was discussed following the formation of a working group in 2011, and the formal talks may begin in the summer, EU Trade Commissioner Karel De Gucht said.

He said the deal would focus on bringing down remaining tariffs and other barriers to trade, and standardise technical regulations, standards and certifications.

The European Union and the US will begin formal talks on a free-trade agreement, paving the way for the biggest trade deal in history

The European Union and the US will begin formal talks on a free-trade agreement, paving the way for the biggest trade deal in history

Free trade between the US and the EU has been under informal discussion for years.

Previously politicians have been discouraged from pursuing free trade deals for fear of exposing domestic industries to greater competition from abroad.

But Steve Davies from the Institute of Economic Affairs, a think tank, said the economic crisis in Europe has injected more urgency into the talks.

“It’s happening now because there has been seriously depressed growth in the EU, and this will be good news for economic growth,” he said.

“On the American side, the critical factor is that Obama is now in his second term, so he doesn’t have the protectionist pressures from US businesses to worry about.”

Steve Davies said agriculture was likely to be particular area of contention, along with intellectual property, which could lead to political wranglings on both sides of the Atlantic.

Workers across the European Union are staging a series of protests and strikes against austerity measures and rising unemployment.

General strikes in Spain and Portugal halted transport, businesses and schools and led to clashes between police and protesters in Madrid.

Smaller strikes were reported in Greece, Italy and Belgium, and rallies were planned in other countries.

Hundreds of flights have been cancelled in Spain and Portugal.

Airlines are recommending passengers check the schedules before setting out to airports.

The European Trade Union Confederation has co-ordinated the Europe-wide action.

The confederation’s Judith Kirton-Darling said austerity was not working.

“It’s increasing inequalities, it’s increasing the social instability in society and it’s not resolving the economic crisis,” she said.

Some 40 groups from 23 countries are involved in Wednesday’s demonstrations.

Unions in Spain and Portugal started strikes at midnight to protest against austerity measures that have combined tax rises with cuts in salaries, pensions, benefits and social services.

Marchers came out late on Tuesday in Spain, where 25% are unemployed, the highest rate in Europe.

“I have two sons in my house, one is getting subsidies, the other has been at home for the last three years,” said protesting housewife, Paqui Olmo.

“It is not that he doesn’t want to work, there is just no work.”

In the first reported clashes of the day, picketers and police fought at a Madrid bus depot where demonstrators were trying to stop buses from leaving.

There were outbreaks of violence in other Spanish cities, and the interior ministry said more than 30 arrests had been made.

The government has played down the strike, saying the electricity grid is registering 80% of its normal usage.

But unions claim the operations of several large companies, including Danone and Heineken, have ground to a halt.

Workers across the European Union are staging a series of protests and strikes against austerity measures and rising unemployment

Workers across the European Union are staging a series of protests and strikes against austerity measures and rising unemployment

In neighboring Portugal, demonstrators took to the streets in the early hours, carrying banners denouncing the European Union, International Monetary Fund and European Central Bank.

The so-called troika has bailed out Portugal to the tune of 78 billion euros ($100 billion), and demanded deep austerity measures in return.

Portugal’s public transport has come to a virtual standstill, and many schools and public offices are expected to be closed.

In Italy, unions have called for a series of rolling four-hour strikes through the day which were expected to affect road, rail and air transport.

Correspondents said early signs were that the impact had been fairly limited.

In Greece, the strike action is the third major walkout in two months.

Successive governments have been pushing through deeply unpopular spending cuts and tax rises in order to receive bailout payments from the IMF and EU.

Earlier this week, MPs backed a fifth austerity package of salary and pension cuts and labor-market reforms, as well as a stringent budget for next year.

The IMF and EU had demanded the measures in return for the next 31.5 billion-euro installment of the bailout.

The government, which is being forced into short-term financing in the bond markets, says it needs the bailout to avoid bankruptcy.

Athens police said they expected about 10,000 people to protest, which is a relatively small demonstration by the standards of Greece.

In France, the CGT union has called for public sector strikes, but there are questions about how many workers will stay away.

The strikes are not anti-government, analysts say, but rather a way of showing that workers in France are in solidarity with their fellow-workers elsewhere in Europe.

While some Belgian unions have said they will not be striking, all have expressed solidarity with the day’s protests.

Protesters are expected in Brussels outside the embassies of Germany, Spain, Greece, Cyprus, Portugal and the Republic of Ireland.

And Eurostar has warned of delays or cancellations and advised passengers wanting to travel from London to Brussels not to travel on Wednesday.

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Senior EU officials are warning that it is proving harder than ever to reach an agreement on the European Union’s next multi-annual budget.

Ministers are meeting on Monday for further talks and EU leaders will hold a special summit in November to try to strike a budget deal.

The European Commission has proposed an overall budget of 1,033 billion euros ($1,337 billion) for 2014-2020.

Senior EU officials are warning that it is proving harder than ever to reach an agreement on the European Union's next multi-annual budget

Senior EU officials are warning that it is proving harder than ever to reach an agreement on the European Union's next multi-annual budget

Every six years or so, the EU has a big political fight about the size and structure of its next multi-annual budget.

At a time of economic crisis, that looming row is once again upon us.

The Commission points out that the budget it has proposed represents only about 1% of Europe’s income, and many countries are supportive.

They want to protect spending programmes from which they benefit, such as the Common Agricultural Policy or Regional Funding for poorer areas of the European Union.

But a number of influential countries argue that increased spending is not tenable and they want a real freeze in the size of the budget.

 

EU Commission President Jose Manuel Barroso has called for the EU to evolve into a “federation of nation-states”.

Addressing the EU parliament in Strasbourg, Jose Manuel Barroso said such a move was necessary to combat the continent’s economic crisis.

He said he believed Greece would be able to stay in the eurozone if it stood by its commitments.

Jose Manuel Barroso also set out plans for a single supervisory mechanism for all banks in the eurozone.

He called the plans a “quantum leap… the stepping stone to the banking union”.

EU Commission President Jose Manuel Barroso has called for the EU to evolve into a federation of nation-states

EU Commission President Jose Manuel Barroso has called for the EU to evolve into a federation of nation-states

The European Central Bank would get much greater powers of oversight and regulation of Europe’s 6,000 banks under the plan.

Jose Manuel Barroso said he was not calling for a “superstate”, but rather “a democratic federation of nation states that can tackle our common problems, through the sharing of sovereignty”.

“Creating this federation… will ultimately require a new treaty,” he said.

The inability of governments thus far to respond effectively to economic developments was “fuelling populism and extremism in Europe and also elsewhere”, he added.

The banking union would be a big first step in the creation of closer union within the eurozone.

There will be opposition to the plans – the German government, for example, says far fewer banks should be involved.

Britain does not want to take part but supports the idea of a single supervisor for the eurozone, as long as it does not affect the integrity of the wider EU single market.

 

A new report by the aid watchdog Data shows that European debt crisis has led to cuts in government development aid to poor countries.

It is the first significant reduction in Europe-wide aid budgets for a decade.

The biggest percentage cuts in the year 2010/11 were made by two of the states worst affected by the debt crisis – Spain and Greece.

But overall European development aid was also down by 1.5%.

The report says the new figures “reveal that those bearing the brunt of Europe’s economic crisis include some of the world’s poorest people”.

“As austerity bites across Europe, we can now see the impact it is having on life-saving aid programmes,” it adds.

In the year 2010-11, Spain cut its aid budget – the sixth largest in Europe – by nearly a third.

Greece cut its much smaller programme by 40%, the Data study says.

A new report by the aid watchdog Data shows that European debt crisis has led to cuts in government development aid to poor countries

A new report by the aid watchdog Data shows that European debt crisis has led to cuts in government development aid to poor countries

The report is published as part of a lobbying campaign by aid agencies as EU leaders begin negotiating the next seven year European budget.

Over the last decade the trend has been for aid cash to rise.

European countries account for just over half of all global official development assistance.

Many of them have been slowly nudging towards a United Nations anti-poverty target of 0.7% of national income spent on aid.

The Netherlands and some Scandinavian countries have exceeded this proportion.

By far the biggest three donors are Germany ($14 billion – 0.39% of national income), UK ($13.5 billion – 0.55%) and France ($12 billion – 0.42%)

One of the authors of the Data report, Adrian Lovett, said the countries that would be worst affected by any prolonged aid cuts were poor African states.

He said: “The countries we’re worried about are mostly in Africa – for example Mozambique, Tanzania and Malawi.

“At the moment they need aid and its saving lives on a daily basis.”

There’s a broad official consensus among aid agencies – and the western governments that often finance them – that development aid works.

But aid is not without its critics.

Some say it is wastefully distributed and can discourage poorly performing developing country governments from accepting their responsibilities.

The argument goes that if Medecins Sans Frontieres run the best hospitals in Haiti, for example, or Oxfam successfully digs the best water wells in Chad, why should the governments there bother?

Such critics would also argue that countries such as China and India – and the many African states which currently have strong economic growth rates – are not getting richer because of aid.

In many of these cases, the aid critics say, infrastructure investment, commodities exports or liberalization have been far more significant than aid.

Adrian Lovett counters these arguments with the example of Ghana.

“Ghana has in the past had a substantial amount of aid. That assistance has been well used through smart leadership at the national level and better coordination by the various donors.

“So Ghana is now on the brink of ending its dependence on development cash. That’s exactly the route we see many African countries potentially taking.”

But Adrian Lovett drew a distinction between emergency aid – for famine victims, for example – and longer term development assistance.

He said aid advocates such as himself wanted, ultimately, to do themselves out of a job.

“There’s always going to be international action around humanitarian crises. That is a natural human impulse.

“But we do want to see a day when we will help some countries and they will also help us in return in a relationship of equals.

“We want that rather than the donor client relationship we have seen in the past.”

 

Political change within days in Greece may mean the country has to ultimately leave the euro.

If that was to happen, how would they go about introducing a new currency?

Greek voters could this week hand power to anti-austerity parties who want to scrap the bailout, the deal that qualifies Greece for vital eurozone funds.

This would bring the country a step closer to a possible exit from the euro. So how could a new currency like the drachma be (re)introduced?

A new government would have to produce enough new notes to replace those currently in use in Greece while also doing their best to prevent a run on the banks.

It would have to be introduced over a public holiday and there would be an interim phase between currencies.

The preparations would ideally occur in secret, says Jonathan Loynes, chief European economist of Capital Economics.

“If Greece were to introduce a new currency, they would have to impose some capital controls once the change had been announced. This would mean that people would only be able to withdraw a certain amount of money from their accounts, which would be necessary to keep things orderly and avoid a run on the banks.

“Then there would be some sort of public holiday during which banks and financial markets would be closed. In an interim period before the new currency is introduced, people could pay for things electronically or with small denominations of euros until the new currency became available.”

Political change within days in Greece may mean the country has to ultimately leave the euro

Political change within days in Greece may mean the country has to ultimately leave the euro

The new currency would then be introduced on a one-to-one exchange with the old, he says, but at some point the capital controls would be lifted and the new currency would sharply devalue.

This is what happened during Argentina’s economic crisis at the turn of the century. When the banking system came close to collapse, withdrawals were banned. The peso dropped in value, leading to high inflation, after Argentina defaulted on its public debt in 2002.

Recent reports have pointed towards English currency printer De La Rue as a possible source of new drachma banknotes.

Director of marketing for De La Rue, Rob Hutchison, will not comment on speculation that the company has drawn up a contingency plan for the production of new drachma, but he explains that the money-printing process itself can take several months.

“You have to consider the preparation of special banknote paper incorporating security features; the design of the notes; the process of bringing these elements together and then printing. It simply couldn’t be done overnight,” explains Rob Hutchison.

Economist and author of Greece’s Odious Debt, Jason Manoloupoulos, agrees: “I have heard that that the process could take anywhere between three to six months.”

So what is involved in the actual process of changing banknotes?

There is a lot to do, says Julie Girard, currency spokesperson for the Bank of Canada, which has been involved in that country’s recent transition from paper to polymer notes.

The many considerations in currency production range from the selection of the best base material and security features to the design on the notes.

“We have a team of chemists, physicists and engineers whose job it is to go out into the marketplace and see what types of security features are available, both in other currencies and through companies that produce security technology.”

These are assessed, as are different base materials to produce a cost-effective but secure note. Focus groups decide on designs and then notes are produced and distributed, says Julie Girard.

With so many cash transactions and withdrawals now taking place at ATMs and vending machines, these must be adapted to fit a new type of note.

“We spent about two years working with companies that produce machines which dispense, accept and sort paper currency, providing test notes and staff from the bank to help them. Some machines may have needed to be replaced, adapted or upgraded,” says Julie Girard.

Greece wouldn’t have the time that Canada did, but preparations may have been secretly going on for months.

Greeks have already reportedly begun to stash euros in safety deposit boxes and under mattresses.

These notes could be used to finance transactions even if another currency became the local tender, says Michael Massourakis, director of economic research for Alpha Bank, Greece.

“You can’t stop people using that money to buy things, even if you make it illegal to use foreign exchange in transactions. The euro could still be used afterwards on the black market, for example.”

But just how “new” would a new Greek currency be? Reports on Greece’s financial future concentrate on the idea of the drachma – the currency which was replaced by the euro in 2001. Could these old notes be re-used?

Although old drachma were still accepted in exchange for the euro by the Bank of Greece as recently as February 2012, most will have been shredded and burned, says the British Museum’s Thomas Hockenhull.

“If the original drachma printing plates still existed, it could be a fairly straightforward process to change the dates and use the existing machinery,” he says.

And coins may be ditched entirely. “They may just do away with coins and have only paper currency,” says Thomas Hockenhull.

“The cost of producing a coin can be more than that of making a paper note, because of the metal content.”

 

Romania’s centre-right government led by PM Mihai Razvan Ungureanu lost a confidence vote today after 78 days of governing.

The no-confidence bill was filed by the liberal and centre-left opposition (USL) and won 235 votes in the 471-seat chamber, while the government was backed by only got 9 lawmakers. It is for the second time parliament has dismissed a government since the fall of Communism in 1989.

 

Romania's centre-right government lead by PM Mihai Razvan Ungureanu lost a confidence vote today after 78 days of governing

Romania's centre-right government lead by PM Mihai Razvan Ungureanu lost a confidence vote today after 78 days of governing

The issue at stake were cuts to wages and pensions aimed at scrapping some of the imbalances in the system and requested by the International Monetary Fund (IMF).

President Traian Basescu will nominate a new prime minister who must then win parliament’s approval.

Opposition leader Victor Ponta welcomed the vote saying it marked the end of “an abusive system that uses any weapon possible”.

“Today there was justice,” he said.

 

King Juan Carlos of Spain has come under fire for hunting elephants in Botswana as his country is being sucked back into the eurozone’s financial crisis and one in two youngsters are jobless.

Spanish media have slammed King Juan Carlos, 74, for the reported 32,000 Euros ($43,000) cost of the trip – and have published angry editorials alongside pictures of a previous “Big Game” hunting expedition.

They are also angry at a “lack of transparency” from the Royal Household, three months after it promised to disclose its income following a corruption probe linked to his son-in-law, Inaki Urdangarin.

It comes as fears rise that Spain will become the latest member of the eurozone to beg for a financial bailout – as its 10-year yield’s creep perilously close to the 7% level which saw Ireland, Portugal and Greece receiving a handout.

The royal holiday last week would have remained secret if the king had not tripped on a step, fractured his hip and had to be flown back urgently to Madrid to undergo hip replacement surgery on Saturday morning.

King Juan Carlos called on Spanish leaders in his annual Christmas message to set a good example. More recently, he said there were times when he could not sleep because of concern about Spain’s youth unemployment problem.

Last week he cancelled his regular weekly meeting with Prime Minister Mariano Rajoy because he had already left for Botswana, several newspapers said.

El Mundo newspaper said in an editorial: “It was an irresponsible trip, taken at the worst possible moment.

“The image of a monarch hunting elephants in Africa at a time when the economic crisis in our country creates so many problems for the Spanish people is a very poor example.”

King Juan Carlos of Spain has come under fire for hunting elephants in Botswana as his country is being sucked back into the eurozone's financial crisis

King Juan Carlos of Spain has come under fire for hunting elephants in Botswana as his country is being sucked back into the eurozone's financial crisis

Most Spanish dailies and TV channels yesterday showed a picture of the king in front of a dead elephant, taken on a similar trip to Botswana in 2006.

The picture drew many internet and Twitter comments, some linking it to a Russian hunting trip in 2006 when the king was reported to have killed a bear which had been made drunk.

News of the King Juan Carlos’ latest trip came at a time when Spain’s political leaders face growing social anger.

Support for Mariano Rajoy fell sharply this month after his government announced deep spending cuts and health and education reforms to fight the sovereign debt crisis, an opinion poll showed yesterday.

ABC newspaper said it was Juan Carlos’ “bitterest year” since he came to the throne and became head of state shortly after the death in 1975 of dictator Francisco Franco.

King Juan Carlos, who oversaw the country’s tense transition to democracy, won respect from many Spaniards in 1981 when he publicly condemned an attempted coup.

He has remained very popular, though a poll in October showed that the Spanish people’s trust in the royal family was declining.

The monarchy was also criticized in December when Inaki Urdangarin, the husband of the King’s youngest daughter Cristina, was charged in a fraud and embezzlement case.

A separate accident also drew media attention to the royal family on Monday, when Felipe Juan Froilan, the 13-year-old son of the king’s eldest daughter Infanta Elena, accidentally shot himself in the foot with a shotgun during target practice outside a family home north of Madrid.

The incident reminded older Spaniards of a more serious royal shooting accident in 1956 when King Juan Carlos’ 14-year-old brother, Alfonso, died at the royal family’s home.

The palace said at the time that Alfonso was killed by a bullet in the head when a revolver he was cleaning went off accidentally. But historians have questioned the official version of events.

King Juan Carlos, a keen sailor, has had at least five hunting and skiing accidents in the past, some requiring surgery. He also had a lung operation in 2010 and knee and foot surgery in 2011.

Mariano Rajoy, who visited the king on Sunday, said he would resume his duties gradually and would attend their weekly meeting next Friday.

He said: “I saw him being very upbeat. He will recover very soon and resume his usual duties.”

Physicians caring for the king of Spain say he is likely to be recuperating for the next six weeks, as he delegates his duties as head of state to his son, Prince Felipe, while he recuperates.

The accident occurred early on Friday while the king was on safari in the Okavango area of Botswana. He was immediately flown home by private jet.

Angel Villamor, a spokesman for the medical team caring for him, said he is recovering well.

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