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Sunday, July 8

8th Jul - Weekender: Euro Crisis

The weekend’s article selection on the euro crisis. A special section on “Fixit”-talk (Finland leaving euro)

Earlier on MoreLiver’s:

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GENERAL
Euro break-up: Let Germany lead the northern core and France the rest The Telegraph
The respected economist and Telegraph columnist summarises the argument for an orderly break-up of the eurozone if a struggling member was forced to leave that won him the Wolfson Economics prize.

The Euro Crash Refuses To Go On VacationTestosterone Pit
That top economists would directly, publically, and en masse attack the government is unusual in Germany. Chancellor Angela Merkel was furious. She had to explain once again what the agreement’s “small print,” that apparently no one has read yet, really contained. The EU Summit “changed nothing” in Germany, she said.

Steepening periphery curves combine need for yield with increasing sovereign risksSober Look
Other than rolling very short maturities at lower rates, Eurozone periphery government financing is becoming increasingly more expensive.

It Ain't Priced In Bruce Krasting
On Swiss peg, possibility of capital controls, weakness of euro (EURUSD to parity?)

On The Unintended Consequences Of Europe's 'Naked CDS' BanZH
Citigroup: the ban seems likely to add to selling pressure on cash bond spreads in peripherals, even if it brings down CDS and tightens the basis.

Euros keep pouring into Switzerland as the nation tries to fight deflation Sober Look
The CPI number once again came in negative, justifying Zurich's defense of the EUR/CHF peg.

EURUSD Slides To 2 Year Low As Reality Supercedes Hope ZH
Friday’s market action.

SUMMIT / PLANS
Neither Grexit, Nor Spexit, It’s Fixit or Fexit A Fistful of Euros
Huge post from Edward Hugh: discusses ESM, what the summit really meant, and what options are left for the euro area.

Doubts Emerge in Bloc's Rescue DealWSJ
One of the few areas where finance ministers are expected to make significant progress on Monday is the details of the Spanish bank bailout. While final sign-off is expected later in July, officials have said the list of conditions to be attached to the assistance is likely to be largely decided and a rough figure for the total agreed.

An incomplete step towards a Banking UnionDaniel Gros / voxeu.org
The EZ crisis – born as a debt crisis (Greece) – has grown up into a banking crisis (Ireland, Cyprus, Spain, …). This column argues that Spain is symptomatic of larger banking problems, so the EU Summit decisions on banking union are welcome and critical to any long-term solution. Yet someone must pay for Spanish bank losses. Spanish politics is shielding Spanish creditors, European politics is shielding EZ taxpayers, so the Spanish government will pay – and in doing so may go the way of Ireland. This crisis is far from over.

The EU summit euphoria drowned by European bureaucracy Sober Look
EZ-wide bank regulation, ESM funding to Spanish banks and ESM sovereign purchases are “complicated”.

ECB
ECB board member: Euro-bashing is Anglophone overload A Fistful of Euros
More substantively. there is a strange symmetry between this view and the pre-crisis gloating of the European Commission that the single currency’s American critics had been all wrong.

Draghi's zero deposit rate policy put an end to euro money market fundsSober Look
Such conditions simply make it impossible to operate a euro denominated money market fund, causing these firms to pull such products off the market

Deposit-Rate Cut May Help France; Spain a Bigger Question MarketBeat / WSJ
A sign of health in the European banking system would be for the German banks to turn around and start lending those deposits south. Even a 0% deposit-facility rate isn’t, alone, enough to do it.

Commerzbank's Rieger Says ECB Arsenal Is `Very Limited'BB (mp3)

Pimco's Balls Says European Rate Cuts `Irrelevant'BB (mp3)

FINLAND
Is it Worth Fixing – Could Finland Be Next? Nouriel Roubini / EconoMonitor
For the time being, the forces formally supporting a “Fixit” are in the minority, but there is now significant internal debate on the pros and cons of membership.

Could Finland be the first country to leave the euro? Wonkblog / WP

Finance Minister: Finland "Will Not Hang Itself to the Euro at Any Cost" Slate

Finland Threatens to Leave Euro Rather Than Pay Debts of Others; Eight Things To Remember Mish’s

Finland warns of euro exit rather than pay debts of others The Independent

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