Credit markets are signaling that the probability of some sort of debt mutualization has increased in the past couple of weeks. Alternatively, it is a sign that the end-game is starting. Either way, Germany ends up paying. France is a complete joke. Come on - lowering the retirement age to 60 years? I had high hopes on Hollande - that he would be a closet rationalist. In reality he seems to be just another somewhat crazy left-winger. I am very, very pessimistic on the Europe's outcome. Perhaps the ECB will print, and perhaps this can go on for a year or so... but what about the economy, what about the unemployed, the discontented? Is saving the euro and avoiding bank failures so important? Do they really want to have revolutions in Europe?
Stuxnetting the Eurozone's Trust – The Psy-Fi Blog
Markets and investors have long been possessed of a peculiar and unsubstantiatable notion, that the problems of the Eurozone are solvable as soon as people come to their senses and start engaging with financial reality rather than political theatre.
Europe's Dilemma: "Probability Vs Impact" – ZH
Deutsche Bank’s scenarios
The Bang! Moment is Here – John Mauldin / The Big Picture
The ECB Explained - How to Prevent a Bank Run - The Distant End Game - The Bang! Moment is Here
Europe Will Splinter Regardless of Greek Election Outcome; "France Has At Most Three Months Before Markets Make Their Mark" says German Official – Mish’s
Understanding the European Crisis Now – NYT
Nice 5min quickie for “dummies”. Yes, it does discuss TARGET2 as well
Who’s on the Hook for Europe’s Losses, and for How Much? – EconoMonitor
What do you get when you mix politics with fundamental principles of economics and accounting? The answer is politics… What do you get when you mix politics with fundamental principles of economics and accounting? The answer is politics.
A Strong Case for Monetisation of On-Going Budget Deficits in European Periphery Countries – EconoMonitor
Viable policy options for economic challenges facing euro area – CIGI
Full presentation pdf
The Deleveraging Story of Eurozone Banks Since 2008 – EconoMonitor
Europe’s banks are raising their capital-asset ratios to meet regulatory requirements. Many fear that this will trigger a contractionary shrinking of assets. This column presents new evidence that much of the ratio increases since 2009 have come fro new capital rather than reducing exposure to the real economy.
Options for Europe – Econbrowser
Discusses TARGET, the futility of internal devalutions, and the need for some to exit
The Merkozy Contagion Diet: Before and After Photos – TF Market Advisors
Two pictures. So much of what the EU has done over the past 2 years has created contagion risk rather than removed it.
This Week in the Euro Area and What to Expect from Greece on June 17 – PIIE
Eurepo curve inverts further – Sober Look
Capital flight out of Eurozone seen in foreign deposits at the ECB – Sober Look
Austerity Kills: How the EuroCrisis is Being Used to Break the Social Contract – naked capitalism
Preventing a Eurozone bank and bond run – voxeu.org
Whether the Greek elections this weekend trigger the Eurozone’s first exit or not, the possibility of exit is now firmly on the table. But where are the plans for this highly complex operation that could, if mishandled, cause untold economic damage in Europe and beyond? This column, by a Wolfson Prize finalist and a Nobel Laureate, sketches the core elements of one such plan.
The Eurofiscal Corruption Contest – The Portuguese Entry – Golem XIV
Argentina Delink, Default, and Devaluation – HistorySquared
A Global Perfect Storm – Project Syndicate
Unfortunately, Germany resists all of these key policy measures, as it is fixated on the credit risk to which its taxpayers would be exposed with greater economic, fiscal, and banking integration. As a result, the probability of a eurozone disaster is rising. And, while the cloud over the eurozone may be the largest to burst, it is not the only one threatening the global economy.
Euro area’s situation - analysis, challenges and solutions – BIS (pdf)
Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the Montreal conference: "Demographic shifts - threats or opportunities?", Montreal, 11 June 2012.
The present state of the euro-area sovereign debt crisis – BIS (pdf)
Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank, at the Bank of America Merrill Lynch Global Macro Conference, London, 12 June 2012.
Heterogeneity in a monetary union: What have we learned? – BIS (pdf)
Peter Praet, Member of the Executive Board of the ECB, at the 14th ECB and its Watchers Conference, Frankfurt am Main, 15 June 2012.
SocGen’s Chaigneau Says Europe Eying Closer Union – BB (mp3)
Dartmouth’s Blanchflower Sees No Orderly Fix for Europe – BB (mp3)
ECB Ready to Play? – Tim Duy’s Fed Watch
Draghi blinks. After dropping the ball and holding rates steady at the last meeting, ECB President Mario Draghi is signalling he is ready to get back into the game.
Don’t fear Target2. Fear its opponents. – Felix Salmon / Reuters
Casino Bar Shall Remain Open: ECB "On Standby" Promising Liquidity for Greek Election Fallout; Bank of England Launches Two New Stimulus Packages – Mish’s
On The Brink Of What? – Edward Hugh / Fistful of euros
This situation can end in either of two ways. The Euro can disintegrate, or full political union can be put in place. In either case Germany’s debt burden will increase.
Germany’s risk – mathbabe
5-year bond yields are going down while credit default (CDS) spreads are going up…I’ve got a short list of things that might be coming into play here besides the risk of a German default.
German sovereign CDS widening is a troubling sign – Credit Writedowns
Breaking up is hard to do – even for stoic Germany – MacroScope / Reuters
Merkel’s options: Pay, inflate, or else… – alphaville / FT
How Charles Dumas of Lombard Street Research gets from this poor performance in Dutch retail sales recently…to a (possible) eurozone endgame.
The Fate of the Monetary Union Lies in Germany’s Hands – Foreign Affairs
If the eurozone splinters, it will have been an avoidable disaster. After all, the ECB has already gone to great lengths to shore up the continent’s financial system. Now, the choice lies with Germany, which can save the monetary union if it allows for policies aimed at debt relief and growth, not just slashing deficits.
Germany, Greece and the Marshall Plan – Free exchange / The Economist
Albrecht Ritschl is professor of economic history at the London School of Economics and a member of the advisory board to the German ministry of economics: Old myths die hard, and the Marshall Plan is one of them.
The T Report: Banco de Ponzi – TF Market Advisors
Rescue Me – Edward Hugh / Fistful of euros
either the creation of a United States of the Euro Area, or to failure and disintegration of the Euro. There will be no middle path, so the stakes are now very high for all involved.
More pain for Spain – Free exchange / The Economist
If the timing was meant to reassure markets over the viability of Spain in the days before the Greek elections, then the content of the IMF’s latest report card on the country may do the opposite.
Deutsche Bank: "The Spanish Recapitalization Is Not Working" - A Market Shock Is Required – ZH
Citi's Buiter: Greece will be forced out of the euro regardless of who wins – ZH
Greece — What Matters And What Does Not – Mark Grant / ZH
What Is Going Through The Heads Of Greek Executives Right Now – ZH
Greek Election Cheat Sheet – ZH
Dread and Uncertainty Pervade Life in a Diminished Greece – NYT
Banks’ Fire Drill for Greece Election – DealBook / NYT
The Greek Decision Has Grown Spanish Branches – ZH
No place to hide if Greece smashes the euro – economicsuk.com
RBS’s Gallo Sees `Tail Risk’ of More Greek Elections – BB (mp3)