Germany, France Close In on Crisis Plan

France and Germany grew closer Friday to a broad agreement on a plan intended to shore up financing for the bloc's troubled countries and capital for its overstretched banks.

The euro zone's largest members have yet to coalesce on crucial details, and the result of compromise could fall short of widespread investor hopes for a dramatic response to the sovereign-debt crisis.

The plan taking shape is built on three central elements: the new bailout for Greece, an effort to shore up the banks affected by Greek losses (and fearful of Italian and Spanish losses), and additional firepower for the bailout fund to provide a reassuring backstop.

"Germany and France have a common position and we are convinced that together we will be able to defend the common currency," said German Finance Minister Wolfgang Schäuble.

We have agreements "that will be very significant," added his French counterpart, François Baroin.

The two emerged optimistic from a lunch with French President Nicolas Sarkozy, which took place before a meeting of finance ministers from the Group of 20 industrialized and developing economies. Gulfs remain, however, particularly on how to handle Greece, which needs a second bailout, people familiar with the matter say.

Leaders hope to have the plan ironed by a series of meetings next weekend in Brussels, following Saturday's gathering of finance ministers in Paris. If they fail, another meeting awaits in early November.

Saturday's meeting here includes non-European countries, among them the U.S., which pushed Europe to speed up the process. Their counterparts from major emerging markets have delivered the same message.

Europe is faced with a crisis far more complex than the one it started with in early 2010. Greece still is the central problem, and needs another bailout in addition to the €110 billion ($152 billion) program granted in May 2010.

But a new bailout will come with losses for the banks and other private-sector investors who lent to Greece. There is broad concern that if creditors of Italy and Spain fear the same fate awaits them, there will be a flight out of those countries' bonds that Europe's bailout fund would be powerless to stop.

People close to the talks say officials here discussed steeper losses for Greece's private-sector creditors than had been contemplated in a July 21 agreement, a deal that one person familiar with the matter called "all but dead."

France and Germany don't yet agree on how much steeper those losses should be. France, whose banks have broad exposure to peripheral European markets, has resisted large losses.

The second element of the plan, to shore up banks, appears closer. One person familiar with the talks said the countries were nearing an accord on requiring a 9% level of so-called Tier 1 capital. It isn't yet clear how quickly that would be put in place.

The third element, boosting the European bailout fund, has been on the table for months. Several solutions, such as using European Central Bank financing to leverage the fund, have been rejected.

A likely outcome is an insurance plan under which the fund offers investors in European debt some protection against losses, in the hopes of drawing more buyers. But such a program is more limited than other options, like ECB financing, and less able to guard against a rapid cessation in lending to a big country like Italy or Spain.

None of the solutions would address investors' concerns definitively.

Some emerging economies, such as Brazil and China, have raised the prospect of providing funds to support a European bailout either directly or through the International Monetary Fund. But they have yet to coalesce around any proposals as they wait for euro-zone officials to draw up their own comprehensive plan.
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Reuters

France's President Nicolas Sarkozy, left, with Germany Finance Minister Wolfgang Schäuble after a meeting Friday at the Elysee Palace in Paris.
In the Works

Euro-zone officials are searching for common ground on three key elements of their rescue plan

Greece: Officials are reworking a July 21 agreement that would subject Greek bond investors to bigger cuts in the value of their holdings.
Bailout fund: Euro-zone nations are trying to boost the firepower in their €440 billion ($606 billion) European Financial Stability Facility, potentially through an insurance program to guarantee investors some protection against losses in European debt.
Banks: Governments need to shore up banks that are sitting on Greek debt that has tumbled in value. Countries are nearing an accord to set new capital thresholds.

Proposals in prior years to expand the IMF's resources by issuing bonds for the first time fizzled out, failing to get traction from the fund's major shareholders.

The U.S., the largest and most powerful IMF shareholder, maintains that Europe has ample resources to address the crisis on its own.

Treasury Department officials said the U.S. is willing to consider further IMF involvement only after European leaders settle on a path forward.

The escalating European crisis has overshadowed the G-20's plans from earlier in the year, when the global recovery appeared more sustainable.

G-20 officials in the spring agreed to focus on analyzing members' performance on a number of economic measures, such as deficits and trade surpluses. The exercise was expected to become a high-profile outlet to address mounting fiscal concerns in advanced nations and for the U.S. and other G-20 members to press China to appreciate its currency further.

Though the G-20's attention has shifted, the U.S. is ramping up pressure on China. It is using the latest meetings to call on the IMF to push nations on exchange-rate concerns and to press emerging-market economies to boost their domestic consumption to offset weaker growth in advanced economies.

The G-20 overall is stressing measures to boost growth around the world-even though members disagree about whether the world needs more stimulus or more fiscal austerity.

France, which leads the group this year, has asked members to have policy proposals to support the global recovery to present at the summit of heads of state in Cannes in early November. That effort marks a turnaround from a shared commitment at last year's summit to focus on deficit reduction.

Categorizing Luxury Cars by Price Points

The demand for luxury cars may have slowed down in the past couple of years due to the economic downturn, but it gradually picked up when the economy started to bounce back. This goes to show that ultra expensive vehicles are still relevant despite diminishing purchasing power or declining wealth. This also means that people pay a premium for prestige, and one way to do this is to buy cars that only the filthy rich can afford. However, just like in the ordinary car category, these expensive cars have their own segments as determined by the car manufacturers themselves.

The categorization is further fuelled by public opinion and critics' no holds barred reviews. In short, the segmentation has evolved based on the perception of the movers and shakers. Automobile manufacturers have created these cars with the wealthy big spenders in mind, and for good reason. There is a niche market so exclusive that it is highly profitable for carmakers.

Unlike in the ordinary car segments, luxury cars are categorized mainly for its price. The higher the price, the more appealing it is to the buyer. Since the cars are not mass produced, they are considered scarce and ownership of the car says so much of the person's stature. Although the price is the main factor, other variables are still being considered, such as engine type, build, design, and other discretionary features not found in ordinary cars. From the exterior alone, the cars already wear the badge of prestige, but the real kicker is the interior with all the built-in features that would make even the Batmobile look drab.

While a car in the $20,000-$30,000 price range may be considered a tad expensive for the common man, it can hardly be categorized as a luxury car. It just barely makes it in the category. A little over that price point is considered an entry-level prestige vehicle. These entry-level wonders elicit enough admiration and attract too much attention, but they are considered lightweights in the luxury car segments. In other words, they are not prestigious enough. After all, some people from the upper middle class can still afford cars in that price range.

It's when the car price reaches the $60,000 to $100,000 price range that the disparity becomes evident. This also quickly separates the rich from the ultra rich. In this price range, high-end vehicles such as Audi, Mercedes Benz, Cadillac, and Jaguar, dominate the scene. And then, of course, there are the ultra luxury cars, which command a sickeningly high price above and beyond the $100,000 mark. Only multimillionaires and billionaires would dare own cars with emblems of Rolls-Royce, Maserati, Aston Martin, Porsche, Lamborghini, and Ferrari, to name a few. They may be in the shape of a limousine, a hatchback, a sports car, or a convertible, but regardless of the form, they sure exude prestige and opulence. Having one or two of these cars parked in the garage already shows that the owner is no ordinary person. He or she can be a Hollywood actor, a sports figure, a tycoon, an heiress, or simply a person with deep pockets.