Here are this week's best reads from my previous posts.
My views:
EURO CRISIS: GENERAL
Research Euro area: "What to watch" in the coming months – Danske Bank (pdf)
Global Economics View 27-Feb – Citi (pdf)
Why Does The ECB Not Put Its Mouth Where Its Money Is? The ECB As Lender Of Last Resort For Euro Area Sovereigns And Banks
LTRO: The Ultimate Collection – MoreLiver’s Daily
the largest or at least the most hand-picked post on the ECB’s LTRO
Goldman: Germany Is Now On The Hook By €1 Trillion (Or 40% Of GDP) – ZH
Goldman Sachs: Germany is the country that has pushed the most for PSI in Greece in an attempt to foster future market discipline, but is also the one that has the biggest stake in conditional aid programs to the periphery and seen its ‘target 2 imbalance’ vis-à-vis the EUR periphery reach almost EUR 1trn on the latest count.
Goldman Sachs: Germany is the country that has pushed the most for PSI in Greece in an attempt to foster future market discipline, but is also the one that has the biggest stake in conditional aid programs to the periphery and seen its ‘target 2 imbalance’ vis-à-vis the EUR periphery reach almost EUR 1trn on the latest count.
EURO CRISIS: GREECE
A Bad Eurogroup Decision on Greece – PIIE
There are at least ten reasons why this agreement is wrong. So what should have been done instead? The European Union will have to revisit its bad decision of February 21 on the Greek crisis. The earlier it does so, the less the cost will be. The euro area needs to broaden the default but keep it amicable and to keep Greece within its membership. The trick is to treat the ECB, the European Union, and EU countries as private bondholders and make their own sacrifice deeper. The European Union should take more costs of the Greek crisis as defaults on bonds and offer less as assistance, or to be more specific as loans.
A Bad Eurogroup Decision on Greece – PIIE
There are at least ten reasons why this agreement is wrong. So what should have been done instead? The European Union will have to revisit its bad decision of February 21 on the Greek crisis. The earlier it does so, the less the cost will be. The euro area needs to broaden the default but keep it amicable and to keep Greece within its membership. The trick is to treat the ECB, the European Union, and EU countries as private bondholders and make their own sacrifice deeper. The European Union should take more costs of the Greek crisis as defaults on bonds and offer less as assistance, or to be more specific as loans.
Greece has now broken the sovereign-default taboo; many countries both inside and outside Europe have way too much debt; and now that debt relief is an option for politicians to seriously consider, it’s pretty much certain that at some point another European government will end up choosing that option.
Why the ISDA ‘No’ Vote on Greek CDS Actually Matters – MarketBeat / WSJ
The reason all this legal mumbo-jumbo matters is that the ECB has been accumulating debt of other countries. Were any of those countries to undergo a similar restructuring – which some think is a real possibility for Portugal – private bond holders could find themselves pushed aside again.
The reason all this legal mumbo-jumbo matters is that the ECB has been accumulating debt of other countries. Were any of those countries to undergo a similar restructuring – which some think is a real possibility for Portugal – private bond holders could find themselves pushed aside again.
The second Greek bailout - Bad for Greece, bad for eurozone taxpayers – Open Europe
Given the sizeable debt relief needed in Greece, a fuller coercive restructuring would have been a simpler and more effective option from the start. Even at this late stage it still presents a viable option and is the only hope of putting Greece on a sustainable path while still keeping it in the eurozone – although even that may not be enough.
Given the sizeable debt relief needed in Greece, a fuller coercive restructuring would have been a simpler and more effective option from the start. Even at this late stage it still presents a viable option and is the only hope of putting Greece on a sustainable path while still keeping it in the eurozone – although even that may not be enough.
This week Europe’s leaders faced a choice somewhat similar and perhaps equally momentous as America’s leaders faced in 1787. But this week they chose a path that looks punitive and short-sighted, pursuing European unification but likely to generate discord and eventually fragmentation. Seldom does one act determine the future, but they might find it difficult to undo what’s been done this week. The only certain result is much suffering and humiliation for the Greek people. We can only guess at how this will work for Europe as a whole
Greek CDS Would Be Fine If People Would Just Leave It Alone For A While – Dealbreaker
So there is absolutely no doubt whatsoever that if Greece’s plan goes off as planned then at some point between now and step (7) you will have a credit event.
EURO CRISIS: OTHER PIIGS
Portugal’s aid package assumes it can return to the capital markets in the second half of last year. This seems less likely with each passing day.
That Portugal enigma, demystified – alphaville / FT
Citigroup explains Portugal is not fiscally sustainable: the size of the haircut will need to be raised to 50%... assuming that market access cannot be regained before 2016, Portugal would need an extension in its official funding of between €50bn to €65bn.
Citigroup explains Portugal is not fiscally sustainable: the size of the haircut will need to be raised to 50%... assuming that market access cannot be regained before 2016, Portugal would need an extension in its official funding of between €50bn to €65bn.
The program is on track, but challenges remain… The fiscal deficit target for 2012 remains within reach.
Sharpen the Mower: Spain Needs Triple the Budget Cuts and Tax Hikes to Meet EMU Imposed Budget Targets – Mish’s
Many structural reforms pertaining to jobs and work rules are quite necessary. The accompanying tax hikes are not and the Spanish economy is poised to implode as a result. Not to worry, EU commissioner Jean-Claude Juncker promises to "examine the situation with calm and serenity".
OTHER
A Behind The Scenes Glimpse Into The Magic Of The Market – ZH
What the art of stage magic and finance have in common? (This was exactly why I posted the original Teller’s article)
What the art of stage magic and finance have in common? (This was exactly why I posted the original Teller’s article)
Will the Central Bank Bail-Outs Ever End? – EconoMonitor
Guess which US bank holds assets equal to a fifth of US GDP and half of it in extremely long maturities (10+ years)?
The State of the World: A Framework – Stratfor
George Friedman: Three major areas of the world are in flux: Europe, China and the Persian Gulf. Every country in the world will have to devise a strategy to deal with the new reality, just as 1989-1991 required new strategies. The most important country, the United States, had no strategy after 1991 and has no strategy today.
Capital preservation via a defensive asset allocation is priority. Over the next couple of years, cash could work as both an insurance against sharp downturns and the required seeding-capital to quickly size opportunities. Still, in the longer-run keeping liquid portfolios will result in low returns.
Bengt Holmström’s guest lecture from 23-Feb: Have to buy time, but also have to come up with long-term vision. Have to break link between sovereign and bank crises. Better understanding of liquidity, crises and banking system.
Long newsletter, better than any magazine, funnier than Conan.
DIVERSION
Adventures in behavioral neurology – Edge
Long article by Vilayanur Ramachandran, Director of the Center for Brain and Cognition and Distinguished Professor with the Psychology Department and Neurosciences Program at the University of California
I walked very slowly. I was new here, a first-timer. That Wednesday, I was eager to hear Merkel, but on my way I got sidetracked in the lounge by conversations that seemed interesting, especially the ones I wasn’t part of. It was a name-dropper’s paradise (also Felix Salmon / Reuters).
How Companies Learn Your Secrets – NYT