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Thursday, December 22

22nd Dec - After Hope, Back to Fear

Buy the rumor, sell the fact
Still some LTRO commentary, but the talk is definitely returning to business as usual - i.e. fear & loathing. Standard Thursday's "Back to School" coming out later, and a Holiday Readings, (almost) completely off-topic links to both old and new articles that I've found interesting.

- MoreLiver

Then to the links:

News – BTH
What do the neg. watch countries have in common?
Morning Briefing  – Saxo Bank
FX option vols – Saxo
Markets Live – alphaville / FT
Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ

How Bad Ideas Worsen Europe’s Debt MeltdownJohn H. Cochrane / BB View
After hopium, three choices: monetary union without sovereign defaults (fiscal union), monetary union without sovereign defaults, breakup

Flowcharting Europe's Sovereign And Bank Debt ProblemsZH
the latest updated UBS flowchart summarizing Europe's sovereign and bank problems. Because there are many. We hope this makes it clearer.

U.S. Exposure to Europe – Unknowns UnknownsThe Big Picture
German banks endured a run on June 1, 1930… This was not the end for German banks. Publicized meetings among government authorities and official proclamations dragged into 1932: the Euro summits of the day.

Is a eurozone bailout already in play?Credit Writedowns
It seems likely that the rich nations in Northern Europe will end up bailing out their poorer brethren. Whether they call it a bailout or not is another issue.

On the ECB’s Long-Term Refinancing Operation and 2012 macro ideas for investorsCredit Writedowns
In sum, Europe is certainly a problem that will flare because the longer-term solution is a combination of credit writedowns, more bank capital, a lender of last resort and economic growth. Right now, the solution is no credit writedowns, maybe some bank capital eventually, some monetisation and economic anti-growth. Big difference.

1996 UBS Redux: Who Should Have Been In The Euro?ZH
Back in 1996 UBS published research saying that the Euro should consist of five or six countries. What would have happened if the Euro had consisted of those countries, and no more?

How to avoid the ‘zombification’ of EuropeGeorge Magnus / FT
Needed: banking federalism in addition to a fiscal union, growth critical: by effectively binding banks and sovereigns even more closely together, (LTRO) is a roundabout route to nationalisation of sovereign finance, which ironically, makes fragmentation of the euro more likely.

Herr Draghi or Signor Draghi, and the ECB's Santa RallyEvans-Pritchard / The Telegraph
Can the ECB doves engineer enough stimulus to head off disaster in Club Med, without causing a disgusted Germany to pick up its marbles and walk out. Probably not. And can any level of stimulus ever close the 30pc structural gap in labour competitiveness between North and South, still growing wider by the day? Certainly not.

Eurozone zombies follow Mario Draghi's cheap money – Reece / The Telegraph
Mario Draghi donned his plague suit on Wednesday and urged European banks to "Bring out your dead". But rather than financial corpses it was €489bn (£408bn) of zombie debt from zombie banks that emerged blinking into the daylight.