GENERAL
Ciao Ciao Euro – Blue Ridge
…we continue to assign much higher odds to a
break-up of the monetary union, which is ultimately the most efficient
solution, although perhaps we are placing too great an emphasis on
policy-makers acting rationally. The
logic is really quite simple...
The Euro: an alternative moral tale – mainly
macro
If the Euro is to survive, the Core has to stop
thinking like the aggrieved party, and instead must recognise that it designed
the system that, quite simply, created this crisis.
IMF signals nervousness about Eurozone
exposures – A
Fistful of Euros
the Fund (which technically lends foreign
exchange to central banks) is actually lending huge amounts into budgetary
systems about which it knows quite little because the recent batch of borrowers
has been outside the usual discipline of budget scrutiny for developing
countries
In the Balance: An economic super-state? – BBC
(mp3)
At the end of a week of renewed financial
strains in the Eurozone, there was a little political relief for embattled
leaders. A referendum in Ireland approved a system of discipline for European government finances. The
rules could be a step on the road to a much more integrated Eurozone, perhaps
even a United States of Europe. Would that fix the economic problems and is it feasible politically?
And Europe's financial engineering - clever tricks, but do they do anything other
than hide the reality of who is paying the bills? Andrew Walker hears the views
of Huw Pill, Chief European Economist at Goldman Sachs, Michael Mainelli,
Executive Chairman of the financial think tank Z/Yen and Carl Astorri, senior
economist at the consultancy, Oxford Economics.
Instead, politicians would follow the Japanese
model, where debt amounts to 230% of GDP, and where utter fiscal gloom is
pervading the lives of the young. The US, with its ballooning
debt and out-of-control deficits, is already on that track. It may be OK for Greece or Italy. But is it wise for Germany?
One scenario for the eurozone – Marginal
Revolution
Germany supports a phased-in backstop of eurozone bank deposits, but with
intermediate goals and targets along the way.
They’re not simply going to write a blank check. Some of the goals and targets are fiscal,
while others involve turning over bank supervision to the EU. Obviously, none of this can be done quickly
EU-wide bank deposit scheme: neither
politically feasible nor credible – economistmeg
We have seen that national bank deposit
guarantee schemes have failed to stem the “bank jog” currently occurring in the
weaker EZ countries. A European-wide bank deposit guarantee would be an
improvement, but even if it could be agreed by European leaders, it may on its
own still fail to stop a bank run.
The government conducted a Yes campaign based
on fear. It warned that voting down the treaty would block Ireland's access from the permanent eurozone bailout fund, the ESM. The No side
had argued the treaty risks locking the country into a downward spiral of
austerity.
Democracy versus the Eurozone – Project
Syndicate
Daniel Gros: The broader message from the Greek and French elections is that the
attempt to impose a benevolent creditors’ dictatorship is now being met by a
debtors’ revolt. Financial markets have reacted as strongly as they have
because investors recognize that the “sovereign” in sovereign debt is an
electorate that can simply decide not to pay.
Chart of the day: Net Target2 Balances in
Eurosystem show capital flight – Credit
Writedowns
European money slows to a crawl – MacroBusiness
European monetary aggregate data from the ECB
came out this week and continues to follow the trends we have seen over the
last year.
The dark flip side of European technocracy – Opinion
/ Reuters
What is worrying is that Germany’s leaders are now trying to treat foreign politicians who question
German orthodoxy the same way they treat their own populists. When I was last
in Berlin, I asked one of Merkel’s aides what he thought her greatest achievements
during the crisis were. He replied: “We could teach the neocons a thing or two
about regime change.”
Citigroup's Menuet Says Main EU Problem Is
`Confidence' – BB (mp3)
Stannard Sees Increasing Evidence of Euro Zone
Slowdown – BB (mp3)
Save us from the saviours – London
Review of Books
Slavoj Žižek on Europe and the Greeks
BANKS
Bank exposure to European Debt – Thomson
Reuters
Interactive
graphic – see who is exposed to Spain, Greece, etc., data end of Dec-2011
SPAIN
Five hundred years of
crisis – Süddeutsche Zeitung / presseurop
Spain has frittered away its chances for
economic development for the second time. The first was after it discovered the
Americas in 1492, and the second was after it joined
the European Union in 1986. The anti-economic thinking that has dominated Spain is rooted in its history and
culture.
On Spain’s banking recap and
capital flight – alphaville
/ FT
J.P.Morgan: The BoP suggest that 60% of the outflow in 1Q12 was driven by foreigners exiting Spain, with the rest initiated by domestic residents. UBS: Assuming a bank recapitalization worth € 100 bln, the debt would instead pass 90% this year, peak at 94% in 2014 and then decline to 84% by 2020. These numbers suggest that, although putting considerable pressure on the sovereign market, the recapitalization would not push the debt to unsustainable levels.
J.P.Morgan: The BoP suggest that 60% of the outflow in 1Q12 was driven by foreigners exiting Spain, with the rest initiated by domestic residents. UBS: Assuming a bank recapitalization worth € 100 bln, the debt would instead pass 90% this year, peak at 94% in 2014 and then decline to 84% by 2020. These numbers suggest that, although putting considerable pressure on the sovereign market, the recapitalization would not push the debt to unsustainable levels.
…the potential for more capital flight in Spain remains significant
even after all that has taken place so far. The good news, though, is that when
all is said and done, we expect a big share of Spain’s NIIP, possibly up
to a third, will end up being owed to the public sector. Because of that, Europe needs to end its policy of
“constructive ambiguity.”
both had huge housing bubbles followed by
busts. Florida, however, has its retirement and much of its health care paid
for from Washington. So how big are the transfers?
Edge of a Precipice; Doublethink
Extraordinaire; Spain in Discussions With US Regarding Bank Aid; Gold Soars; Geithner to the
Rescue? – Mish’s
De Guindos is globe-trotting the world, holding
meetings with the EU in Brussels, with French president Hollande in France,
with Germany's finance minister in Berlin, with treasury secretary Tim Geithner
and the IMF in the US, asking for "assistance with no strings
attached" while insisting "Spain does not need a rescue and its banks
are not in trouble". This is exactly the kind of Orwellian story that is
nearly impossible to make up.
GREECE
Why a Grexit Would Make Lehman Look Like
Childs Play – TF
Market Advisors
The ECB, EFSF and IMF will take massive losses –
European Trade Will Decrease Dramatically – Other Devaluing Countries have been
Resource Rich – Other Devaluing Countries weren’t part of a Fragile Currency
Union – Other Devaluing Countries weren’t part of a Fragile Currency Union – Decoupling
is a Myth – A Grexit is So Bad That it Won’t Happen
remember the spectacular investment
opportunities the last time Russia, Brazil, and Argentina went bankrupt. When the noise is the loudest, the investor needs to
walk into the fire not run away from it.