This morning’s key headlines from GenerationalDynamics.com.

Germany continues to insist that Greece be allowed to default

Greece 2 year bonds – 39.0%

Germany’s panel of economy advisers is urging a default on Greece’s debt, with a “haircut” on existing bonds of around 50%. This comes on a day when yields (interest rates) on Greek 2 year bonds surged from 36% to 39%, as Europe’s bond panic continues. However, European Central Bank (ECB) President Jean-Claude Trichet is bitterly opposed to allowing Greece to default, saying that it would be catastrophic for the European banking system. Reuters

Merkel and Sarkozy to meet on Wednesday in Berlin

The tension and suspense are increasing, as the world waits for the European summit on Thursday to decide on the next bailout of Greece, and whether to let Greece default or to kick the can down the road once again. French President Nicolas Sarkozy and German Chancellor Angela Merkel will meet in Berlin on Wednesday to prepare for the summit. The two will dine together in Berlin before traveling to Brussels on Thursday morning. AFP

Israel intercepts the final ‘Freedom Flotilla II’ boat

Only one ship escaped Greece’s grounding of all the ships in the “Freedom Flotilla II.” The French yacht Dignite-Al Karame attempted to reach Gaza on Tuesday, but was intercepted by Israeli naval commandos. The commandos took control of the vessel quickly and faced no resistance from the passengers. They offered the passengers refreshments, and took them into custody. Haaretz

China’s aggressive naval buildup threatens conflict

China’s string of pearls

China’s “string of pearls” consists of port and airfield construction projects, diplomatic ties and force modernization. These “pearls” range from the coast of mainland China to the recently upgraded military facilities on Hainan Island, China’s southernmost territory. They extend through the South China Sea to the Strait of Malacca, over to the Indian Ocean and along the coast of the Arabian Sea and Persian Gulf. They include an airstrip on Woody Island in the Paracel archipelago east of Vietnam. A container shipping facility in Chittagong, Bangladesh, a deep-water port in Sittwe, Myanmar, and a potential naval base in Gwadar, Pakistan are also “pearls”, all of them representing Chinese geopolitical influence or military presence. Until recently, China lacked the technical and industrial capacity to build a modern navy. Starting from the 1990s, China kicked off its naval modernization effort by acquiring a range of new weapons including anti-ship ballistic missiles (ASBMs), submarines and surface ships. China is also developing the world’s first anti-ship ballistic missile, a system specifically designed to defeat US carrier strike groups. Asia Times

Philippine politicians to visit disputed Spratly islands

China is criticizing a plan by Philippine legislators to make a special visit to the Spratly islands in the South China Sea, in order to assert the country’s claim to the islands, in opposition to China’s claims. There are six nations claiming the islands. China has said the planned trip by the lawmakers could damage bilateral ties. BBC

House bill would cut aid to Palestinians, Lebanon

The House Foreign Affairs Committee will consider a bill that would condition further aid to the Palestinian Authority on its recognition of Israel as a Jewish state. Even if passed by the committee, the bill has little chance of becoming law. Jerusalem Post