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Wednesday, May 23

23rd May - US Close: Summit to kick Greece?

Here are the US close regulars and other article links.  Some interesting rumors floating around, some of them outlined below. It might be that they are just increasing the pressure on Greeks to vote "correctly" - or are actually preparing to kick Greece out.Of course, in order to make it look like they mean it, it will have to look like they mean it. This makes it very hard to decipher what is really going on.

My guess is they probably want to throw Greece out, as politically they could put all the blame on Greeks and the European banks are relatively safe, as their losses have already been socialized. But they have to make it look like they really, really wanted Greece to stay. It's like with you mother-in-law visiting. You have to act, sob at the door that she must already leave and oh when will I see you again. Crocodile tears and all. Even if inside you're dancing.

Earlier today:

News – Between The Hedges
Markets – Between The Hedges
The Closer – alphaville / FT
Market Commentary – A View from My Screens
Asian Morning Briefing – BNY Mellon
Tyler’s US Summary – ZH
  As Reality Recedes, Rumor Rampage Returns

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

The outflows, the balances
EU Summit Dinner Menu: IndigestionCredit Writedowns
The scope for compromise that seems most realistic is 1) allowing countries extra time to reach fiscal targets, 2) expanded EIB and project bonds for infrastructure/public investment, 3) provide easier access to cohesion funds and 4) EMU-wide guarantee for savings deposits. The last point seems to be a bit of a stretch… The bottom line is that today’s informal EU summit is not the real thing. It is out of the late June summit that a new effort will likely emerge.
Euro Basis Swap Flashing Coordinated Liquidity Intervention Red Light ZH
With LTRO funding now faded and perception of the sustainability of European banks becoming dismal, US banks are charging ever higher rates for Eurozone banks to borrow.

EU Summit Dinner Menu: IndigestionMarc to Market
The EU informal summit will be held over a dinner and despite the attention it is receiving, it still seems unreasonable to expect anything concrete. Negotiating positions will be staked out, but most of the issues will require greater negotiations. June or even July seems a more likely time frame for yet another "comprehensive solution."

European banks are leveraged
Goldman Pops The "Deus GrEx Machina" BalloonZH
Goldman Sachs: the ECB cannot deal with concerns about bank solvency and/or deposit currency redenomination. That requires a pan-Euro area guarantee of the Euro value of bank deposits by the fiscal authorities.

Capital is leaving Europealphaville / FT
new capital flow data from March, which worsened considerably, via a missive from Nomura analysts on Wednesday

In Europe, Time for Plan B, Only There’s No Plan, and No TimeMarketBeat / WSJ
Something concrete finally came out of a eurocrat summit. The Germans said no… This crisis was ultimately going to resolve itself in one of two ways: the Continent was either going to form a United States of Europe, or the euro experiment was going to fail. It appears to be going in the latter direction.

Sitting At The Edge Of The WorldMark Grant / ZH
If you listen carefully you can hear the tremors in the Spanish voices, the inflections of need, the beginnings of sentences not quite finished. Spain has arrived at the wall; now all that is left is the public announcement.

Germany's free borrowing 'destroying Europe'euobserver
European Parliament chief Martin Schulz has launched a scathing attack on the German chancellor for promoting policies he says drive up the borrowing costs of other euro-countries, while Germany has just hit a record zero-percent interest rate on its bonds.
Follows the CB balance sheets

SocGen’s Sebastien Galy Says Euro Should `Slide Lower’BB (mp3)

UBS’s Yu Sees Weaker Euro, Stronger DollarBB (mp3)

Europe's Game Of Chicken Enters The Twilight ZoneZH
on Monday a Eurogroup Working Group held a teleconference in which officials "agreed to prepare for individual contingency plans if and when Greece exits."

Euro-Zone Leaders Step Up Greece Contingency PlansWSJ
Euro-zone officials have stepped up planning to contain the fallout of a possible Greek exit from the euro zone, even as European leaders meeting here Wednesday said they want the country to remain in the single currency area.

Germany holds a gun to Greece's headThe Telegraph
Pressure on Greece increased dramatically on Wednesday night after Germany's central bank called for a suspension of financial support to Athens and eurozone finance ministries agreed to draft contingency plans for a Greek exit from the euro.

I find your lack of faith disturbingalphaville / FT
The ‘Greece’ section of the Bundesbank’s latest report on the German economy must be read to be believed: Eurosystem should not increase its risks from Greece

S&P 500 selects the President
QE's Long Shadow Is Getting ShorterZH
Still more room to go before the end of “QE bottom”

China’s ‘1 per cent’ riskalphaville / FT
FT Alphaville has been focusing on signs that China may be suffering a “capital outflow” problem. We also think global markets may be under appreciating the problem.

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