To kick off the Saturday evening, here's the Energy 52's Café Del Mar, a classic trance track from 1993. Stay sharp and remember to worship the Techno Viking (wiki, youtube, parody)
It’s a Friday, it’s quarter end, the weather is great, who knows what the market will do, but relying solely on central banks and promises that will never be kept and ignoring some tough data seems to be a tough way to make a living. – TF Market Advisor
EURO CRISIS: GENERAL
In the new Eurozone-CAC crisis days, the concept is to crush the private-sector holders, and that means no market access for a long time. Instead, we will have ongoing and increasing sunk costs by governmental institutions. Caveat: government does not know how to cut losses and run. Government only knows how to run up small losses until they are huge…I am more pessimistic about peripheral Europe than I have been.
…there appears to be no alternative to monetary stimulus. A change from inflation targeting may also be politically easier for the ECB, because it could be justified as a move back towards the ‘twin pillars’ approach and the Bundesbank’s money supply targeting.
Dutch government wobbles in talks on EU budget goals – euobserver.com
In what opposition parties have called "a very strange display", the Dutch coalition government on 29 March narrowly managed to avert collapse as it continues to haggle over spending cuts needed to bring it in line with EU budget rules.
It is not unusual for politicians to avoid some ugly truths during elections; but it is unusual, in recent times in Europe, to ignore them as completely as French politicians are doing.
Bondholder Losses Debated by EU to Avoid Bank Rescues – BB
Debt write-down tool – bail-in – European Commission (pdf)
A fiscal compact like the one approved recently is useful to anchor expectations of future adjustment, but only if the new system is flexible enough to be politically credible. Up-front gradualism must be the name of the game. And adjustment must be wedded to a growth strategy.
Charlemagne: Still sickly – The Economist
The euro zone’s illness is returning. A cure requires more integration, but Germany isn’t keen
Global house prices: Downdraft – The Economist
European house prices are finding it harder to defy gravity
Juncker 'furious' with talkative Austrian minister – euobserver.com
He told Le Monde over the phone that he wanted to "make a point" about the need to keep the ministers disciplined. "If we reveal the decisions before they are actually taken, then there's no need for me to hold a press conference," Juncker told the French paper.
'We need to invest in a European identity' – euobserver.com
The European Parliament is trying to cultivate a "European identity," with top officials saying that it is the only way to ensure a lasting union between member states.
Euro area balance of payments and international investment position statistics – ECB (pdf)
2011 quality report
The Gold Standard and the Euro – bruegel
Blogs review: The Gold Standard and the Euro – bruegel
The thesis that the gold standard was central into making the 1930 crisis the Great Depression goes back to research by Barry Eichengreen, Peter Temin and Jeffrey Sachs. The simplified version of the argument is that countries that maintained fixed exchange rate had to implement deflationary fiscal and monetary policy.
The new priority is the general election on May 6—the flood of euros having been secured for the time being. Politicians are jostling for position to grab whatever votes they can. They're no longer paying attention to their legislative work, the tough reforms that party leaders and the government had promised the bailout Troika. Some of which would have to be completed before the elections.
Citigroup’s Englander Says Euro to ‘Drift Upwards’ – BB (mp3)
EURO CRISIS: SPAIN
Violence, Firebombings Erupt as Spain Announces €27 Billion Deficit-Cutting Plan; Spanish Economy Will Implode; Spain Headed for Bond Revolt and Bailouts – Mish’s
With the suspension of the LTRO, and a budget targets that cannot possibly be met, look for a substantial move up in Spanish bond yields. A bond market revolt and bailout are in the cards this year. Ultimately, Spain will not survive in the Eurozone.
Spanish banks: The long kiss goodnight – The Economist
A bank merger sheds fresh light on a sickly industry
Once again, Spain is on the front-line of the euro crisis
In the Balance: The People are Revolting 31-Mar – BBC (mp3)
In the Balance this week dissects the Spanish economy and the English pasty. Lesley Curwen asks Nagore Calvo, Paola Subacchi and Bob McKee whether angry people can change the course of economic history. And, whether the family is becoming the new welfare state.
Is Spanish Regional Debt Out Of Control? – ZH
Spanish regional debt currently stands at 13% of GDP and has surged from EUR60bn in 2006 to over EUR140bn currently…What is more worrisome is the heavily front-loaded nature of the maturing debt
Spanish regional debt currently stands at 13% of GDP and has surged from EUR60bn in 2006 to over EUR140bn currently…What is more worrisome is the heavily front-loaded nature of the maturing debt
EURO CRISIS: ECB / LTRO / SMP
European Bailout Stigma Shifts From Banks To Sovereigns As Bundesbank Refuses PIG Collateral – ZH
And where Buba goes, everyone else is soon to follow. And what happens then? Since it is inevitable that Spain and Italy will be next on the bailout wagon, what happens when over $2 trillion in bonds suddenly become ineligible for cash collateral from the only solvent central bank in the world (aside for that modest, little TARGET2 issue of course).
And where Buba goes, everyone else is soon to follow. And what happens then? Since it is inevitable that Spain and Italy will be next on the bailout wagon, what happens when over $2 trillion in bonds suddenly become ineligible for cash collateral from the only solvent central bank in the world (aside for that modest, little TARGET2 issue of course).
Germany is preparing a raft of measures to safeguard its financial system and prevent excess stimulus from the European Central Bank leaking into an inflationary credit boom.
The Insanity Of The Sarkozy Carry-Trade's Contagion Risk In 3 Charts – ZH
…the banks in Italy, and more so Spain, are hugely more exposed to their sovereign's performance and with Spain's massive budget cuts - a vicious cycle of austerity to growth-compression to credit-contraction to Greece (firewall or not) is leaking into their bond markets, even with an active ECB doing SMP although inflation-constrained from LTRO3 perhaps.
…the banks in Italy, and more so Spain, are hugely more exposed to their sovereign's performance and with Spain's massive budget cuts - a vicious cycle of austerity to growth-compression to credit-contraction to Greece (firewall or not) is leaking into their bond markets, even with an active ECB doing SMP although inflation-constrained from LTRO3 perhaps.
ECB inflation-fighting powers remain intact – voxeu.org
A recent Vox column argued that with the three-year liquidity operations, the ECB has “hit a limit in its ability to prevent an acceleration of inflation”. This column explains why the ECB’s inflation-fighting powers remain intact – and why the risks of a sudden inflationary spike remain low.
EURO CRISIS: EFSF / ESM
Bailout Availability goes from €300 billion to €500 billion, kind of, maybe – TF Market Advisors
So at some point in the near future there will be about €40 billion of money sitting in the ESM and a bunch of promises from countries failing to live up to existing debt obligations, and that is the big firewall?
Wolfgang Schauble admits euro bail-out fund won't halt crisis – The Telegraph
Europe's "big bazooka" bail-out fund is not ready and won't stem the debt crisis that on Tuesday pounded Italy and the European Central Bank (ECB), admitted Wolfgang Schauble, Germany's finance minister.
Mark Grant Explains The Farce, The Hustle, And The Scam – ZH
Whether some proposed firewall is $760 billion or $1.3 Trillion or $13 Trillion makes no difference as in zero, nada, nothing and null. It is an IOU, a promise to pay and it is not counted in any European sovereign debt numbers nor is it counted in the figures for the European Union’s debt. It will not stop Spain or Portugal or Italy from asking for or needing money.
Whether some proposed firewall is $760 billion or $1.3 Trillion or $13 Trillion makes no difference as in zero, nada, nothing and null. It is an IOU, a promise to pay and it is not counted in any European sovereign debt numbers nor is it counted in the figures for the European Union’s debt. It will not stop Spain or Portugal or Italy from asking for or needing money.
Who's afraid of the big bad bailout fund? – Open Europe
Even jittery markets will be able to figure out that a large fund which would damage French and German credit ratings if ever extended will never be fully tapped. So clearly some circular logic at play. And let's not forget that it’s still far too small to save Italy and Spain should if worse come to worse.
A blizzard of bailout numbers – MacroScope / Reuters
Eurozone firewall to get minimal boost – euobserver.com