You probably heard the news, but if you haven't, the Turkey-IMF saga has come to an end:

http://www.imf.org/external/np/sec/pr/2010/pr1076.htm

For my part, I am really happy for my good call, done at a time the consensus view was that the agreement would be sealed in a matter of weeks, if not days:

http://www.hurriyetdailynews.com/n.php?n=fool-some-sometimes-you-can-2010-01-03

According to Bundesbank President Axel Weber, Germany’s economic recovery is “essentially intact”, and is now set to benefit from stronger demand in countries outside the euro region.

“I firmly believe that the recovery process that began in summer 2009 is essentially intact, and that it will continue despite the slower growth dynamic in the winter semester. An additional factor in this context is that the German labor market continues to be in extremely robust shape.”

Turkey suddenly came into the spotlight two weeks ago with the arrests of more than five dozen military officers, some of them still on active duty, for an alleged coup plot that would put even the most imaginative Hollywood screenwriters to shame.

The plan, codenamed sledgehammer, was alleged to include the bombing of a major mosque, planting of weapons at the headquarters of religious sects and the gunning down of a Turkish fighter jet (which would be blamed on Greece), all to create the necessary circumstances for a military takeover.

On March 5th, following Prime Minister Papandreou’s consultations with the European Commission, the European Central Bank and the IMF, the Greek parliament approved the austerity plan intended to reassure international financial markets on Greece’s creditworthiness. The plan envisages budget cuts of 4.8 billion Euros, about 2.5 points of GDP, comprising of  both expenditure cuts (one month wage cut and pensions’ freeze for public employees) and revenue increases (+ 2% on VAT , +20% on luxury goods, tobacco, alcohol, gasoline). While protests are already taking the streets, news agencies unveiled the details of the European support strategy:  a guarantee fund of 20-25 billion which would allow German KfW bank and the French Caisse des Dépôts, both publicly-owned, to underwrite the securities that markets would not be willing to roll-over. This fund would be financed by Germany (5 billion) and other Euro members (on the basis of their shares in the BCE). Meanwhile, the latest auction of ten-year Greek Treasury bonds was a success: all securities were subscribed (at a 6.4% interest rate).  Moreover, Moody's, the rating agency, decided to confirm the current A2 rating: this will allow banks to continue to use Greek debt as collateral for their refinancing operations at the ECB. These are good signs, for sure. So, is the danger (of default and contagion) over?

American officials are annoyed and deeply skeptical – not thinking that this will amount to anything.  But the future has finally arrived – or perhaps its arrival has just been announced – in the form of the European Monetary Fund.

Two months ago we wrote in our monthly letter that we anticipated social unrest will ripple through Europe as fiscal retrenchment is imposed across a number of eurozone nations. We were not kidding – it is said civilization has a thin veneer, and we do not offer such warnings lightly. These are matters of some gravity.

 It's not often that I await the ECB after-meeting press conference statements of Jean Claude Trichet with such an intense feeling of anxiety and bated breath. But this time, as the song goes, it will be different. This time there are plenty of reasons to think that, having been the first off the mark in looking for the exit, Europe's monetary leaders may sound a note of caution at tomorrow's meeting, and indeed indicate there may well be solid grounds for at least taking a time out, if not engaging in a longer process of pausing for extended thought. My advice: if you don't actually have any pressing need to hit the eject button, then don't do it.

Yesterday I argued that Latvia's cost-cutting efforts are evident compared to a cross-section of European Union countries. Latvia's efforts, while commendable, were very much a function of the emergency IMF loan in December 2008 and the ensuing recession in 2009. But I now see a very scary trend emerging across Europe, the fight for exports.

One of the more surprising announcements of support for a bailout of Greece comes from none other than Theodor Waigel, the former German Finance Minister who invented the Stability and Growth Pact.

Last week’s inauguration of Viktor Yanukovich as the President of the Ukraine marked an important shift in the country’s political alignment. Yanukovich’s victory, a close ally of Russian Prime Minister Vladimir Putin, reverses the country’s Orange Revolution—when Ukrainians embraced Viktor Yushchenko and the West in 2005. Like an elastic band, the Ukraine tried to pull itself as close as it could to the West. Traditionally, the eastern boundary of Europe was the River Don. This would encompass all of the Ukraine. However, the country is more culturally aligned with Russia than any other state. Indeed, the Rus originated in the fertile plains outside Kiev and, along with Swedes and other tribes, migrated east to colonize the Eurasian steppes. The Ukraine was always seen as Russia’s soft underbelly, which was fully demonstrated by Operation Barbarossa in 1941. Hence, it was for this reason that Moscow never took well to the idea of the Ukraine joining NATO or becoming a member of the European Union. Hence, Moscow made life miserable for Kiev, with moves such as blocking all natural gas supplies in the thick of a brutal winter. After the 2008 debacle in Georgia, where it was left to fend for itself against the Russian bear, the Ukraine realized that it was a minor pawn for the West. Leading politicians, such as Prime Minister Yulia Tymoshenko, began making overtures to Moscow—slowly leaving Viktor Yushchenko as an isolated figure. Now, the elastic band snapped in the opposite direction, and the Ukraine is firmly ensconced within the Russian orbit. Although Yanukovich won the presidency by a narrow margin, the Ukraine would have still swung to the east regardless of who won—given that his rival, Prime Minister Yulia Tymoshenko, was also in the Russian camp. The electoral results in the Ukraine, along with the declining popularity of Georgian President Mikheil Saakashvili, are allowing Russia to reassert its influence over its traditional domain. It is also a reaffirmation of the dwindling influence of the U.S. and Europe.