The eurocritics are getting ever more analytical – and nasty. The ten years of "growth" in Europe was basically a ponzi, with investments from the North to the South. Then the private debt became public debt. Now it is becoming a common European debt. Alternatives are now openly discussed: how to exit the euro zone, how to manage the capital flows (national interest rates are back!), how democracy has left the building.
There is more in today's earlier Five Ways to Break Up. Keep in touch with me through Twitter, Facebook, email, paper.li.
News – Between The Hedges
Markets – Between The Hedges
Recap – Global Macro Trading (on holiday)
The Closer – alphaville / FT
Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ
FX Options Analytics – Saxo Bank
EURO CRISIS: GENERAL
The Ugly Truth For Northern Europeans – ZH
...in order for the mercantilists of the north to have these jobs, and to sell their wares, they have had to put large portions of their income into savings that was backed by the worthless debt of their target export markets. The north has executed a classic vendor finance structure, with no chance the financing will ever be paid back…. In the event of a mass default, euro break-up or EMU unwind, this ugly truth will become immediately transparent. The entirety of the northern financial system will be insolvent
Vulturecrats – Golem XIV
Our political and moral landscape has already altered. Those who rule over us have accepted without discussion, on our behalf, that some banks are too big to fail and that inconvenient laws that threaten them can and must be routinely set aside. I see no reason why our leaders won’t also decide that certain nations whose debts are considered too big and too important for other nations, shouldn’t be seen as too big to be allowed to vote.
Our political and moral landscape has already altered. Those who rule over us have accepted without discussion, on our behalf, that some banks are too big to fail and that inconvenient laws that threaten them can and must be routinely set aside. I see no reason why our leaders won’t also decide that certain nations whose debts are considered too big and too important for other nations, shouldn’t be seen as too big to be allowed to vote.
On The Demise Of European Bank Debt – ZHAs a Bank bondholder: You now sit towards the bottom of the capital structure, you're in a much thinner slice than you used to be, the quality of your asset pool has deteriorated, the correlation of your asset pool has risen sharply
The austerity question: ‘How’ is as important as ‘how much’ – voxeu.org
Europe’s embrace of austerity has sparked a debate among economists. This column argues that the debate has gone astray. Until the critical principle – ‘how’ is as important as ‘how much’ – is embraced, the austerity debate in Europe will continue to be completely out of line with the real economic trade-offs.
Golden Rules for the Eurozone – Project Syndicate
In the aftermath of the crisis, some policymakers are beginning to see that a monetary union is not necessarily identical with unfettered capital mobility. Recognition of diverse credit quality is a step back into the nineteenth-century world, and at the same time forward to a more market-oriented and less distorting currency policy. Different interest rates in different countries might open the door to a more stable eurozone.
Wolfson Economics Prize for eurozone contingency planningPrize for the best plan on how to exit the eurozone, the finalists have been selected:
Wolfson Economics Prize – Policy Exchange
Videos: Shortlist – Credit Writedowns (all on one page)
Five Ways to Break Up the Euro – MarketBeat / WSJ
On Lord Wolfson’s Economic Prize for Leaving Euro Area – Credit Writedowns
On Lord Wolfson’s Economic Prize for Leaving Euro Area – Credit Writedowns
An 11-year-old’s solution to the euro crisis – Wonkblog / WP
Raison d’etat and leaving the euro, by Jurre (aged 11) – alphaville / FT
Raison d’etat and leaving the euro, by Jurre (aged 11) – alphaville / FT
EURO CRISIS: PIIGS
The more Spanish officials talk about the budget the less credible it seems… Contrary to the conventional narrative about fiscal profligacy on the periphery, Italy’s fiscal policy has been among the tightest in the euro zone as it is one of the few countries that can point to a primary budget surplus.
I think that is the real reason you are seeing Eurocrats like Olli Rehn making such odd statements about Spain. He desperately wants the world to believe that the EuroZone actually has a credible plan because Spain is such an unmanageable problem. But the EuroZone has never had one, and still doesn’t.
Spanish banks may be forced to seek eurozone bailout – Open Europe
…the increasing exposure of its banks to potentially toxic loans, the difficulty in curbing Spanish regions' spending and the risk of reforms not taking effect quickly enough, all raise serious questions as to whether the Spanish economy will make it through without some sort of external help. (full pdf)
The EU commission remains convinced that the harsh austerity measures will eventually bring Portugal back to economic growth.
Sudden stops in the euro area – bruegel
Many analysts and observers have put forward that the euro crisis is a balance-of-payments crisis at least as much as a fiscal crisis. The issue has gained further relevance with the widening of imbalances among euro-area central banks within the Target 2 settlement system and has important implications for both the short and the long-term policy responses. In a recent paper, we provide evidence of capital flows reversals in Greece, Ireland, Portugal, Spain and Italy and show that on the basis of the Calvo criteria, these episodes can be characterised as Sudden Stop. We discuss the implications of this finding for the Target2 discussion and the appropriate responses to the euro crisis.
OTHER
60+ pages of market goodness, view online or download as pdf.
Goldman Undeterred, Sees June As Next QE3 Announcement Window – ZH
All the others say the latest FOMC minutes show no more, but GS thinks it will come.
All the others say the latest FOMC minutes show no more, but GS thinks it will come.
Five Years After Crisis, No Normal Recovery – View / BB
Rogoff & Reinhart: On the point of whether the aftermath of financial crises plays out differently than normal recoveries, the evidence isn’t mixed at all. As our studies and many others have confirmed -- including the misconstrued recent Fed study -- financial crises leave behind deep recessions of long duration and considerable volatility.
OFF-TOPIC
Rajlich: Busting the King's Gambit, this time for sure – Chessbase
Fifty years ago Bobby Fischer published a famous article, "A Bust to the King's Gambit", in which he claimed to have refuted this formerly popular opening. Now chess programmer IM Vasik Rajlich has actually done it, with technical means. 3000 processor cores, running for over four months, exhaustively analysed all lines that follow after 1.e4 e5 2.f4 exf4 and came to some extraordinary conclusions.
The Secret Science of Memorable Quotes – technology review
Computer scientists have analysed thousands of memorable movie quotes to work out why we remember certain phrases and not others