What makes this election victory by the GOP even more significant is that it is almost certain to derail healthcare reform, an issue very close to the former senator’s heart. On top of this, any chance of meaningful climate change legislation is off the cards, as is pretty much anything else the Obama administration advocates. The GOP have managed to sabotage anything the administration proposes, such is its singlemindedness in destroying a presidency that voted in on a promise of change. The US faces a serious political crisis, entirely the fault of a lunatic right-wing GOP- one that would make Reagan turn in his grave- and a Democratic party that never ceases to amaze by its ineptitude. At possibly one of the most critical periods in American history the country is being plunged into  yet another stretch of political paralysis, with no serious attempt is made to address its deep structural problems in the US economy and society and a fasting US leadership in the world at precisely the time that America needs to safeguard its influence with the rise of China and other emerging regional superpowers. And perhaps the most worrying thing of all, virtually no chance of any climate change leadership in a decade which most scientific opinion is convinced is crucial for the future of the planet.

This is a deeply depressing time. It is not yet 9 years since September 11th. How America can have lost its way so quickly is simply staggering.

Bank fee has merits but lacks financial clout (FT)

Why America and China will clash (FT)

BoE nerves to be tested as inflation jumps record amount (Daily Telegraph)

The situation in Greece will presumably dominate the meeting of Eurozone finance minsters in Brussels this week. Greece’s finance minister Papaconstantinou said, “If there is something lacking (in our crisis plan), we will take additional measures.” He added, “As a new government, our priority of re-establishing reliability in our statistics and outlining our growth and stability program has helped create a new climate of hope but there is still work to do.” The sheer scale of the the  task facing the socialist government doesn’t sit well with the track record of fiscal discipline by previous Greek governments. The current plan is to cut the budget gap to 2.8% of GDP in 2012 from a deficit of 12.7% today. This year the deficit is to be reduced by the equivalent of 4% of GDP. Such stringent cuts would test the most socially cohesive and law-abiding society. The fact that Greece has shown a relative propensity for social unrest- witness the riots in December 2008- has led to nervousness among European officials and international investors. Strong words from the ECB and some German politicians about the lack of options have not quelled doubts that Greece will be able to repair its fiscal position. Today’s Daily Telegraph reports that the ECB has issued a document titled: “Withdrawl and explusion form the EU and EMU”. A long hot summer of rioting on the streets of Athens will do little to give investors confidence in the country or the periphery of Europe and will lead investors to speculate that Greece will be the first country to leave the eurozone. And with it the potential for further countries to exit. In any case, the position of the Euro is looking increasingly precarious.

Obama enters Kennedy fight (FT)

The Chinese state’s brutal side (Economist)

Obama: time to get tough (Economist)

Bears in a China shop (Economist)

Digging out of debt (Economist)

Wall Street may reduce compensation costs to avoid public outcry (Bloomberg)

Pound gains as central bank prepares for bond buying assessment (Bloomberg)

Waiting for better times is not substitute for action (Mohamed El-Erian, Pimco)

China’s economy: not just another fake (Economist)

Ailes’ new political-media party: The FNC-RNC hostile takeover (Daily Dish)

Unholy alliance at war with Obama’s foreign policy (FT)

A further factor weighing on risk sentiment was the continued concern over Greece and its ability to address its dire fiscal position. The ECB’s Trichet highlighted both the concern he had about Greece and ruled out any bailout, either by the central bank or another EU member. Moreove, German Chancellor Angela Merkel  is quoted as saying that she is not worried about the solidity of Germany’s finances because a law passed in her first term would ensure that public budgets were consolidated in the years ahead. However, she notes: “But what worries me … is whether all the euro countries will stick to similar stipulations.” She adds: “Who is supposed to tell the Greek parliament that it needs to carry out a pension reform?” She concludes: “In view of this the EUR is going to be in a very difficult situation in the next few years.” Her comments were briefly posted on the governments website before being removed. The government’s press department said that the comments were published accidentally. EURUSD has fallen to 1.4400, a low for the week.