Europe leaders warn of difficult 2012

European leaders have warned of a difficult year ahead, as many economists predict recession in 2012.

German Chancellor Angela Merkel said Europe was experiencing its "most severe test in decades" but that Europe was growing closer in the debt crisis.

France's President Sarkozy said the crisis was not finished, while Italy's president called for more sacrifices.

Growth in Europe has stalled as the debt crisis has forced governments to slash spending.

The leaders' new year messages came as leading economists polled by the BBC said they expected a return to recession in Europe in the first half of 2012.

The cost of borrowing for some of the eurozone's largest economies, including Italy and Spain, has shot up in recent months as lenders fear governments will not be able to pay back money they have already borrowed.

With growth stalled, the pressure is on governments across Europe, not just ones using the single currency, to cut spending in order to meet debt obligations.

Fears are now focusing on a potential second credit crunch, triggered by the exposure of banks across Europe to Italy's huge debt.Euro defended

In her TV address, Chancellor Merkel said that despite Germany's relatively good economic situation, "next year will no doubt be more difficult than 2011".

"The road to overcome it [debt crisis] remains long and not without setbacks, but at the end of this path Europe will re-emerge stronger from the crisis than it was when it entered it."

She defended the euro, saying it had made "everyday life easier and our economy stronger... and protected from something worse" in the financial crisis of 2008.

Heading into an election year trailing his Socialist rival Francois Hollande in the polls, French President Nicolas Sarkozy said structural changes to the economy were needed in order to return to growth.

http://www.bbc.co.uk/news/world-europe-16377010 

Spain sets out 8.9bn euros of new austerity measures

Spain's new conservative government has outlined 8.9bn euros ($11.5bn, £7.5bn) in new spending cuts and tax rises to lower the country's borrowing.

The announcement is the first in a wave of austerity measures, with a total of 16.5bn euros to be cut in 2012.

It also said Spain's 2011 deficit will be about 8% of its output - higher than the 6% seen by the previous government.

The Popular Party last month ousted the Socialists from power at elections amid deep economic gloom.

The government of new Prime Minister Mariano Rajoy has vowed to meet Spain's target of reducing the public deficit to 4.4% of gross domestic product in 2012, no matter what.

On Friday, Deputy Prime Minister Soraya Saenz de Santamaria maintained a freeze on public sector wages for another year and ruled out practically all government hiring.

"This is the beginning of the beginning," Ms Saenz de Santamaria said.

"We are facing an extraordinary, unexpected situation, which will force us to take extraordinary and unexpected measures."

Taxes on the wealthiest Spaniards will also be raised for at least two years, raising 6bn euros, she said.

Spain's borrowing costs have jumped in the last year - reaching as high as 6.7% for 10-year debts - as investors feared that Spain might join Greece, the Irish Republic and Portugal in needing a bailout.

The country's economy has shrunk sharply since a housing bubble burst in 2008, and it has an unemployment rate of 21%, the highest in Europe.

The austerity measures have sparked a number of large protests across the country.

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http://www.bbc.co.uk/news/business-16364313

The outlook for gold going into 2012: $1,525 is critical (GLD)

December 30, 2011 at 10:20 am by Richard Rittorno

Gold is trading up 1.84% or $28.30 to $1,569.20 in early morning trading on the last market day of the year.  Should the shiny metal be back on traders’ screens after falling off a cliff? 

Gold bulls saw bullion drop some 20% from the September 6 high of $1,920.30, leaving prices on the edge of the bear market zone.

The question is who will be in charge from this point; the bulls or bears?  Going into the New Year, traders are asking themselves whether to sell or buy gold in 2012.

According to some, gold prices are attractive down here.  

Here’s why:

• Drawing Fibonacci from the low to the high on the one-year chart, price held the 0.618% support level.

• Today’s price action thus far is attempting to finish a morning star candlestick formation, but is not valid until the close.  

• Traders will find the $1,525 level become key for the current Fibonacci wave (0.786% retracement level), the high to low Fibonacci 0.618 level hits the $1,525 price level — and if traders draw a downward Fibonacci wave starting from the high, $1,525 sits right on the B wave segment and price turned.

Fundamentally, gold’s safe haven status has lost its shine because current global conditions are deflationary.

http://emergingmoney.com/analysis/the-outlook-for-gold-going-into-2012-1525-is-critical-gld/