The Balkan Chronicle

Bosnia's central bank said Thursday it will switch the peg of its convertible mark to another "stable" foreign currency in case the euro collapses, but hopes there won't be a need.

"In case of a non-desirable scenario, regarding the model of Bosnia's monetary policy, we would seek a possibility to index the local currency to another stable foreign currency," the central bank's press office said in a statement.

It added that the "stability, the level of economic relations and foreign exchange with that country would be crucial" for the decision on a possible new currency.

Amid mounting Greek fears that Europe's escalating debt crisis could derail efforts to negotiate a second bailout for the debt stricken nation, Athens' interim coalition government has speeded up the process to pass the budget which aims to reduce the deficit from more than 9% this year to 6.7% by the end of 2012 through a combination of spending cuts, tax increases and public sector job losses. Addressing the 300-member chamber, Antonis Samaras, the conservative New Democracy leader, said with Greece heading for a fifth year of recession it was "essential" that the priority was now put on kick-starting the economy through jobs and growth

The global financial crisis is not unknown. The Pakistan Writer's Forum invited reputed economist Dr. M. Umer Chapra to speak on this subject on Feb. 26 at Shaheen Restaurant, Jeddah.

Chapra, author of several books, served for over 35 years as senior economic advisor at the Saudi Arabian Monetary Agency (SAMA) and has been working for the Islamic Reserach and Training Institute of the Islamic Development Bank, Jeddah, since 1999. He is also a recipient of the King Faisal Award for his contribution to Islamic economics and finance.

As shockwaves from the eurozone crisis radiate outwards, Hungary has felt the full force of their impact.

Maybe. Or maybe not?

Budapest has endured three difficult bond auctions in a week, yields have shot up, and the forint has tumbled to record lows. That, in turn, is fuelling inflation and increasing the pain for hundreds of thousands of Hungarians who took out mortgages in foreign currencies when the forint was much

Fitch and Standard & Poor's on Friday shifted their credit outlook for Hungary, rated on the lowest investment grade, to negative – making a downgrade to junk status appear only a matter of time.

Concerns are growing in the Western Balkans over the consequences that the Eurozone debt crisis, especially as concerns Italy and Greece, will have on the economies of the countries in the region.

The concern, underscored the World Bank in a report released over the past few days, concerns in particular a possible reduction in investment flow and trade, the probable drop in remittances from the diaspora, and a decrease in banking activities, Italy and Greece, alongside Austria and France, are the countries hit the hardest in the banking sector of the Balkan region.

The German Christian Democratic Union (CDU) chaired by Angela Merkel urged to introduce changed in the Lisbon Treaty and other European agreements stipulating an opportunity for European countries to pull out from the eurozone. The countries would preserve their EU membership in such a move.

Greece has a new government, but it has not led to any positive changes. The problem of the national debt crisis remains the same. Western media paid attention to the fact that the newly appointed prime ministers of the problematic countries of the eurozone and the new chairman of the European Central Bank are closely related to Goldman Sachs Bank.

The global economic situation is becoming more dire every day. Approximately half of all US banks have significant exposure to the debt crisis in Europe. Much more dangerous for the US taxpayer is the dollar's status as reserve currency for the world, and the US Federal Reserve's status as the lender of last resort. As we've learned in recent disclosures, this has not only benefited companies like AIG, the auto industry and various US banks, but multiple foreign central banks as they have run into trouble. Nothing has been solved, however, by offering up the productivity of Americans as a sacrificial lamb. Greece is set to be the first domino to fall in the string of European economies at risk. Rather than learning from Greece's terrible example of an over-consuming public sector and drowning private sector, what is more likely from our politicians is an eventual bailout of European investors.

The International Monetary Fund says Kosovo's limited access to global markets has spared it from financial turmoil in the eurozone crisis, even though the country's official currency is the euro.

In a statement posted on its website on Sunday, the IMF said "Kosovo has remained largely unaffected by financial turbulence in the euro area, owing to limited integration into global financial markets."

This paper draws attention to the important but neglected monetary role of the prohibition of iktinaz (hoarding). It defines iktinaz in economic terms and explains that the prohibition of riba, though necessary, is not by itself a sufficient condition for conducting a proper Islamic monetary policy. If the prohibition of iktinaz is not fully integrated in the system, it will continue to disturb the demand for money, monetary policy, and overall economic performance, regardless of the prohibition of riba and the imposition of zakat. The paper argues that the prohibition of iktinaz is not intended to be merely acknowledged, rather it is intended that Muslims sincerely adhere to it. Increasing public awareness about the meaning of the strict prohibition of iktinaz and the existence of appropriate financial tools to absorb savings efficiently are among the necessary conditions for a successful Islamic monetary policy.

A disorderly default in Greece just became a much bigger possibility, after PM George Papandreou announced a referendum on austerity yesterday.

If the Greeks vote no, this could be the end of Greece's participation in the euro, and spark contagion that could spread across Europe.

The Bank for International Settlements keeps a running tally of who has the biggest sovereign exposure to Greece. Although Japan, France, and Germany have all cut their debt exposure to Greece since earlier this year, they still stand to lose big if Greece decides austerity isn't worth it.

China is very likely to contribute to the eurozone’s bail-out fund but the scope of its involvement will depend on European leaders satisfying some key conditions, two senior advisers to the Chinese government have told the Financial Times.

Any Chinese support would depend on contributions from other countries and Beijing must be given strong guarantees on the safety of its investment, according to Li Daokui, an academic member of China’s central bank monetary policy committee, and Yu Yongding, a former member of that committee.

Eurozone leaders were struggling on Tuesday to reach agreement on a much-anticipated deal to reverse their spiralling debt crisis amid mounting signals a definitive agreement would not be reached at a key summit on Wednesday night.

According to officials briefed on deliberations, talks between European government negotiators and representatives of Greek bondholders remained inconclusive, putting at risk one of the three key pillars of a deal: a final resolution on Greece’s second bail-out.

Almost exactly two years since the onset of the Greek debt crisis, the European Commission has set out to create a comprehensive strategy to rein in the crisis and return to a viable path of economic prosperity. The deadline: Sunday, October 23.

With fiscal instability and credit contagion continuing to rock markets internationally, the world’s leading economies emphasized the need for immediate action at the recent G20 meeting. The group of finance ministers and central bankers pressured Europe on Saturday to “decisively address the current challenges,” and complete a plan before this weekend to resolve the sovereign debt crisis.

The state-backed Qatar National Bank is in talks to buy the Turkish division of Dexia, the struggling French-Belgian bank.

In a statement, the Qatar bank, which is 50 percent owned by the country’s sovereign wealth fund, the Qatar Investment Authority, said it was in negotiations to acquire a controlling stake in Dexia’s DenizBank. Officials from the bank were not immediately available to comment on the size of the deal.

For years, Progressive Radio News Hour contributor Bob Chapman warned about troubled Eurozone financial institutions and possible sovereign defaults.

Greece died months ago. Default is certain. Only its obituary hasn't appeared. Germany prepared contingency plans to reissue the Deutschemark if Eurozone stability crumbles.

Six possible sovereign defaults loom if contagion spreads out of control. "Considering the condition of other European banks, and the possibility that three major French banks may be purchased by China, we could see disruption in the global banking system," warns Chapman.

The date is May 11, 1931. Creditanstalt, a little-known Austrian bank, suddenly announces it can’t make its dept payments. An unstoppable chain reaction results.

Bank failure, stock market crash, mass business closures, 25 percent unemployment, trade wars, runaway inflation, multiple currency collapses, the Great Depression, World War ii. All of it began with a little-known bank in a small country in the heart of Europe.

Macedonia through the Western Balkans Investment Framework (WBIF) has received grants of over Euro 5.67 million for eight projects. WBIF was presented Friday in Skopje by Vice PM Teuta Arifi and Christos Gofas - Head of Section in the European Commission Enlargement Directorate General.

"Today, a working meeting on Western Balkans and EU funds is being wrapped up. I think the meeting was effective. Within WBIF, Macedonia so far has applied with eight projects and has managed to receive nearly six million euros of investments in connection to several crucial projects," Arifi stated.

Strike-hit Greece was in shock Thursday amid new budget cuts to avoid imminent default, as global markets were in retreat over forecast downturns in the United States and the eurozone.

The U.S. Federal Reserve failed to restore confidence with a $400 billion boost to the U.S. economy, but top financial bodies urged the European Union to get on top of its debt crisis and recapitalize its banks.

Hungary's government will close the "era of bankers" and put an end to the practice of making borrowers shoulder all losses and risks, Prime Minister Viktor Orbán said in a Monday interview with daily Metropol on Monday.

The era of bankers has ruined Europe, and within it, Hungary, Orbán said. Over the past 15-20 years, banks have made people believe they could borrow without consequences, and that they would always have unrestrained access to cheap credit, he explained.

Unhappy Germans want them out. Plenty of Greeks themselves would be glad to oblige, relieved to quit a currency club that they feel is more curse than blessing.

Suddenly, a growing number of voices are asking whether the only way to quell the raging European debt crisis is for Greece to leave the Eurozone, the currency union that was supposed to stitch the continent into a unified economic powerhouse.

Financial commentators floating the once-unthinkable suggestion have been joined in recent days by members of the ruling German coalition, alarmed at the prospect of German taxpayers being on the hook for the profligate spending of Greeks, and by Dutch Prime Minister Mark Rutte, who said heavily indebted countries should be forced to choose between handing control over their budgets to their European partners or exiting the Eurozone.