This morning’s key headlines from GenerationalDynamics.com.

* Once again, Turkey threatens Syria, but then says it won’t intervene

* Vietnam increases South China Sea presence to confront China

* Iceland rejects land sale to wealthy tycoon from China

* Egypt’s parliamentary election will proceed on Monday

* Rival army units clash in Yemen’s capital, Sanaa

* Yield inversion in Italy shows euro financial crisis deepens

* Greece to demand investors increase bond ‘haircut’ to 75%

Once again, Turkey threatens Syria, but then says it won’t intervene

Ahmet Davutoglu on Friday (Reuters)

Turkey’s Foreign Minister Ahmet Davutoglu said on Friday that Turkey can tolerate no more bloodshed in Syria and is ready to take action along with Arab powers if Syrian President Bashar al-Assad fails to take steps towards ending his crackdown on pro-democracy demonstrators. He said: “Today is an historic decision day for Syria. It must open its doors to observers. If it doesn’t, there are steps we can take in consultation with the Arab league. I want to say clearly we have no more tolerance for the bloodshed in Syria. The attitude of friendly and fraternal countries on this subject is clear.” Well, perhaps it’s not really so clear. On Friday, the latest deadline by the toothless Arab League passed, with no compliance from Syria. The Arab League put forth an awesome threat, if Syria doesn’t comply: “This is the collective wish of the Arab world and if they don’t, God forbid, we [will] have to meet again.” So the Arab League’s response will be to hold one more meeting! What steps does Turkey plan to take? Bülent Arinç, Turkey’s deputy prime minister said that it won’t involve actually intervening in Syria. “There is absolutely no such thing. Some Turkish politicians and some countries are saying Turkey will intervene in Syria. This is totally wrong. This is impossible, we don’t think of it.” Zaman (Istanbul)

Vietnam increases South China Sea presence to confront China

Vietnam is expanding its presence on the Spratly Islands in the South China sea by building roads and schools to assert sovereignty and to challenge China’s claims to the islands. The Philippines, Vietnam, China, Malaysia and Taiwan have troops on the Spratlys, a group of islands and reefs with a total land area equivalent to 1 1/2 times the size of New York’s Central Park. Vietnam also plans to seek talks with China on the Paracel Islands. China ousted Vietnam in a 1974 battle in which 71 soldiers were killed. Bloomberg

Iceland rejects land sale to wealthy tycoon from China

Iceland said on Friday it had rejected a bid by a Chinese tycoon to buy a 300-square kilometre (186 sq mile) chunk of isolated land on the North Atlantic island for green tourism, as it did not meet legal requirements on foreign ownership. Analysts had questioned the deal’s security aspects, given Iceland’s strategic location between Europe and the United States and its proximity to the Arctic where a number of nations are competing to make resource claims. In fact, the United States signed a mutual defense treaty with Iceland in 1951 because of the country’s strategic position during WWII. Reuters

Egypt’s parliamentary election will proceed on Monday

Pro-reform candidate and Nobel Peace Prize laureate Mohamed ElBaradei, draped in an Egyptian flag, is surrounded by protesters as he arrives for Friday prayers in Tahrir Square in Cairo. (AP)

Fears that unrest would cause Monday’s scheduled parliamentary election to be canceled were swept aside on Friday, when some 100,000 people crowded into Cairo’s Tahrir Square, demanding that the army step aside and give power to a civilian government. There was almost no violence, and the demonstrations had the air of a carnival, with men, women and face-painted children enjoying the autumn weather. The Muslim Brotherhood’s Freedom and Justice Party did not support the protest, fearing that the chaos might disrupt the elections that it is poised to dominate. This has led to accusations that the organization is selling out to the army. LA Times

Rival army units clash in Yemen’s capital, Sanaa

When Yemen’s president Ali Abdullah Saleh signed an agreement earlier this week to step down after 35 years of rule, it was hoped that it would end the protests and clashes between demonstrators and regime security forces. Instead, the agreement is triggering even more violent clashes than before between Saleh’s opponents and supporters. Friday’s clashes pitted Central Security forces commanded by Saleh’s nephew, Col. Yehia Saleh, against troops from the First Armored Division, headed by Gen. Ali Mohsen al-Ahmar, who defected and joined the protesters in March. Apart from the military clashes, there were huge protests in Sanaa on Friday, among people objecting to the clause in the agreement that gives Salah immunity from prosecution. AP

Yield inversion in Italy shows euro financial crisis deepens

There was so much bad news coming out of Europe on Friday that it’s hard to decide what to pick. The following charts are interesting:

Italy bond yields: 2 year at 7.664%, 10 year at 7.261% on 25-Nov-11

On Friday, the yields (interest rates) on Italy’s debt reached astronomical proportions. Investors borrowing money for 2 years demanded 7.664%, and those borrowing money for 10 years demanded 7.261%. Normally, short term bonds have lower yields than long term bonds since, after all, it’s riskier to lend money for 10 years than for 2. But in the case of Italy’s bonds, the yields are “inverted.” There are various theories on why this would happen, but the most reasonable seems to be that investors consider Italy’s chances of default to be very high for all bonds, but considers 10-year bonds slighly more likely to survive default proceedings than 2-year bonds. The yield curves for Greece, Ireland and Portugal all inverted shortly before these countries sought bailouts.

Germany 10 year bond yields at 2.263% on 25-Nov-11

Meanwhile, the hard core of the euro zone, Germany, saw its own 10-year yields continue to rise, following Wednesday’s failed bond auction, labeled by some analysts as a “catastrophe.” This indicates that the bond panic in Europe is continuing to spread into the core nations. The next meeting of the Eurogroup financial ministers will be on December 9. At that time, they’ll grant the next €8 billion bailout payment to Greece — just in the nick of time to avoid bankruptcy — but we’ll have to wait and see whether they announce some “big bazooka” to try to save the euro. Wall Street Journal (Access)

Greece to demand investors increase bond ‘haircut’ to 75%

Last month’s bailout agreement with the EU called for Greece’s investors, mostly banks, to take a 50% “haircut” on Greek bonds they own, up from the 21% “voluntary” haircut agreed two months earlier. Now reports suggest that the Greek government is playing hardball with the banks, demanding that the accept a 75% haircut, meaning that the nominal value of their bond holdings is reduced by 75%, and reserving the right to pass a law forcing reluctant creditors to accept the larger haircut. Kathimerini