Here are
the weekend’s article links on the ever-lasting euro crisis.
GENERAL
Everywhere you turn, you will see exposure that
was never accounted for and is getting worse. Some Bundesbank official will
blabber on about not printing money and the market will become dizzy with fear.
The ECB’s bond portfolio turns into losses for the EU. The EFSF turns into
losses for the EU. Spain and Italy will need money from
the EU for their own problems. The EU is just Germany and France. They don’t have the money. Pandemonium ensues. Maybe it won’t be that
bad.
What is the long-term euro vision? – Hugo
Dixon / Reuters
The crisis has demonstrated that the current
system doesn’t work. But a headlong dive into a United States of Europe would be bad politics and bad economics. An alternative, more
attractive vision is to maintain the maximum degree of national sovereignty
consistent with a single currency. This is possible provided there are
liquidity backstops for solvent governments and banks; debt restructuring for
insolvent ones; and flexibility for all.
The nationalisation of markets: The rise of the
financial-political complex – The Economist
Each step taken by the authorities over the
past five years has been designed to prop up the economy and save the financial
system. But the cumulative effect has been the creeping nationalisation of
markets.
Last November, the Germany's economic advisor council, known as the Wisemen, recommended a
redemption fund in the euro zone as an alternative to joint bond proposals and
as a strategy to put the region's debt on a sustainable path. At the time,
proposal seemed to die an ignoble death, but it has been resurrected this week.
Reports suggest that just yesterday Merkel conceded she would re-examine the
proposal.
The future of the European Union: The choice – The Economist
A limited version of federalism is a less
miserable solution than the break-up of the euro
Martin
Feldstein: The European project has clearly failed to
achieve what French political leaders have wanted from the beginning: instead
of a sense of amity and unity in Europe, there is conflict. And, with German Chancellor Angela Merkel setting
conditions for the eurozone, France’s ambition to
dominate European policy has been thwarted.
An ever-deeper democratic deficit – The Economist
The level of further integration necessary to
deal with the euro crisis will be hard to square with the increasing
cantankerousness of Europe’s voters
The feeling’s mutual – The Economist
Mr Hollande and Mrs Merkel are clashing over
Eurobonds, and more
Europe’s weaker economies are in the grip of a worsening credit crunch
Christine Lagarde: can the head of the IMF save
the euro? – The
Guardian
Her charm is legendary, but Christine Lagarde,
head of the IMF, is far from a pushover. She talks about sexism, swimming and
saving the European economy
Bail-in provisions will exacerbate run on banks,
drive German asset inflation – Sober
Look
Unsecured bank bonds have basically become
equity with no up-side. The provisions will essentially put an end to most EU banks'
ability to issue anything but covered bonds.
Merkel's 6-Point Plan to Save Europe; Merkel
Backed Into Tight Corner: Social Democrats Threaten to Not Ratify Merkozy
Treaty Without Growth Measures; Merkel Coalition at Risk – Mish’s
It would be quite ironic and rather fitting if Germany and France fail to ratify the Merkozy treaty. 25 Nations have ratified the treaty
but France and Germany still have not.
The inverted Eurepo curve spells trouble – Sober
Look
A month ago the Eurepo curve was upward
sloping, as hopes of some sort of stabilization in the Eurozone later this year
still existed. These hopes have now been dashed, with the curve becoming
inverted in the short-end and flat at around 11bp out to one year.
ECB Weidmann: ECB Has Reached The Limit Of Its
Mandate – eFX
Research
excerpts: there are plenty of banks that are low on capital: BNP, SocGen, Credit Agricole and
Deutsche Bank.
Moody's downgrades three big Nordic banks – Reuters
Three of the Nordic region's biggest banks had
their credit ratings cut by Moody's Investor Service on Friday due partly to
the euro zone crisis, but the downgrades were relatively mild and showed the
banks remain some of the strongest in Europe.
GREECE
Greek euro exit flowchart: what happens next – The
Guardian
Lombard Street Research has provided a handy flowchart of the options ahead for the
eurozone. After the election on 17 June, all the possible outcomes are
considered, including austerity, referendum, euro exit and contagion
While everyone at the very top still hues to
the line that Greece should stay in the Eurozone, out of the other side of the
mouth comes but—especially since the focus is on Spain, the real problem, the
one problem that the Eurozone will have trouble digesting.
Four Euro Divorces But No Funeral (Yet) – ZH
JPMorgan’s
excellent charts together with asset class views for 4 scenarios
The costs of a Greek exit: Cutting up rough – The Economist
All in all, the Greek government owes the
governments and institutions of the euro area over €290 billion, about 3% of
euro-wide GDP, say economists at Barclays Capital. After an exit most of this would
probably never be repaid…. But could a Greek exit really be contained at its
borders?
Greek Crisis Map: The three phases of a crisis – Saxo
Bank
Greek Crisis Map: Three moving parts of the
investment universe
– Saxo
Bank
Greek Crisis Map: The consequences of a Greek
exit – Saxo
Bank
Greek Crisis Map: How to trade the crisis – Saxo
Bank
(the full doc in one pdf)
SPAIN
only three
ways Spain can regain competitiveness sufficiently to
raise savings and reverse the current account: The core countries increase
spending, Spanish austerity or Spain leaves euro.
Bankia Bailout Costs Rise Again, Now At €19
Billion, €4 Billion Increase Overnight – ZH
Spanish Lender Seeks 19 Billion Euros; Ratings
Cut on 5 Banks – NYT
The capital monster strikes – alphaville
/ FT
Spanish banks: The corralito risk – The Economist
Spain is home to some of Europe’s most vulnerable banks
News that Spain's Catalonia region is seeking
support from Madrid provided the headline trigger to the euro's slide and risk-off in North America after a quiet European morning.
Spain's wealthiest autonomous region,
Catalonia, needs financing help from the central government as it is running
out of options for refinancing debt this year, Catalan President Artur Mas said
on Friday.
S&P Junks Nationalized Bankia, Downgrades
Various Other Banks
– ZH