Google Analytics

Monday, May 21

21st May - US Close: Saving Euro 1000bn

Some very interesting and high-quality research pieces in this post – take a look at the highlighted ones. Also see today’s earlier Extra: European updates and US Open: Phew, no Grexit yet for more. JP Morgan-post is also updated.

We also retain our rather gloomy forecast that a broad break-up of the euro will occur unless policymakers respond with a suitably bold and proportionate policy response – UBS 18th May  

Exposure to Greece. IMF and private loans are extra...
Posted during the weekend:

Follow ‘MoreLiver’ on Twitter or Facebook.  
News – Between The Hedges
Markets – Between The Hedges
The Closer – alphaville / FT
Market Commentary – A View from My Screens
Market Commentary – Marc to Market
Tyler’s US Summary – ZH
Add at least €200bn to the firewall

Debt crisis: live – The Telegraph
The Euro Crisis Blog – WSJ
Tracking Europe’s Debt Crisis – NYT
FX Options Analytics – Saxo Bank
European 10yr Yields and Spreads – MTS indices

Four Reasons Why The Euro Is Not CrashingZH
UBS: 1) ECB has not yet done QE 2) EZ runs a current account surplus 3) higher oil prices have led to more petrodollars that are diversified to Europe 4) EZ banks selling foreign assets to shrink their balance sheets.

Euro Bonds Would Cost Germany BillionsSpiegel
Many prominent politicians are calling for the introduction of jointly issued euro bonds to help combat the European debt crisis. But research conducted by the German government suggests that the bonds would face tough legal challenges, and would cost Germany billions in additional borrowing costs.

Ten Reasons for EuropeProject Syndicate
Dominique Moisi: It is precisely at this critical moment that it is essential to re-inject hope and, above all, common sense into the equation. So here are ten good reasons to believe in Europe

Cembalest On Germany: "You Can Ignore Economics, But It Will Not Ignore You"ZH
JPMorgan: If Germany would want to stop the crisis (for now) the price would be one trillion euros, and if Germany pays half of it, its debt/GDP would rise above 100%.

Wonkbook: What if we'd had Europe's rules?Wonkblog / WP
But the reality of the euro zone is they lack the two main mechanisms we used to respond to the 2008 financial crisis. We managed our fiscal policy using Treasury bonds and our monetary policy using a Federal Reserve that judged itself empowered to do whatever was necessary to stop the panic.

China overdoing it
Greek funny money, reduxalphaville / FT
Greece could issue scrip and have this circulate as “money” during a funding stand-off with the Troika — without getting chucked out of the eurozone.

No one wins this game of chickenFree exchange / The Economist
…the staffs of the European Commission and ECB are preparing emergency scenarios for a Greek exit. Perhaps that's only sensible and perhaps that's a part of the euro area's bluff. The upshot of the preparation is to make an exit very nearly inevitable.

Perhaps Greece won’t leave the euro, after allWonkblog / WP
You can’t have a good game of chicken without the prospect of a crash. But that also means that, with a few miscalculations, the whole thing really could end in disaster.

Endgame in Greece: Don’t Look for an Imminent “Grexit”PIIE
Two main scenarios: 1) Greece has a “second TARP vote” on June 17 2) Syriza Wins and Greece Becomes Montenegro for a While

Forget 'GREXIT'; Meet 'GEURO'ZH
Deutsche Bank on parallel currency in Greece.

Argentina Is On The Greek Side, But Why Is The IMF Holding It Hostage?ZH
JPMorgan’s charts on Argentina before and after their exit – things did turn out for the better.

El-Erian Says Greek Euro Exit Probably Inevitable: Tom KeeneBB
Pimco’s El-Erian Says Greece Will Exit, Yields to DropBB (mp3)

Carry is a risk-on trade
How Overvalued Is Southern Europe?Krugman / NYT
We know that huge current account imbalances opened up when capital rushed to the European periphery after the euro was created, and reversing those imbalances must involve a large real devaluation — a devaluation that has barely begun.

Spain, Italy, Greece and the Forthcoming EU Summitdshort
Three stock market charts. All of them are down, by the way.

The Elephant In The Room: European Capital (Out)flows And Another €215 Billion In Spanish Deposit FlightZH
Citi’s excellent piece: …capital flight will stop only once there is decisive policy intervention. The longer investors have to wait for this, the more decisive it will need to be. Even a Euro area-wide deposit guarantee scheme might struggle to be credible if investors fear the incentives for redenomination are strong enough.

EU statistics office to double-check Spanish deficiteuobserver

Follow ‘MoreLiver’ on Twitter or Facebook.