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Friday, August 10

10th Aug - Weekender: Best of The Week

Here are the best links from my ending week’s posts. Next up the US Open post, come back later for the usual weekend specials.

Previously on MoreLiver’s:

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Debt crisis threatens to break up Europe The Telegraph
Philip Aldrick: Tensions within the eurozone over how to resolve the debt crisis are turning countries against each other and threatening to rip Europe apart, Italian Prime Minister Mario Monti has warned.

Euro elites should say if they could ever view single currency as a failureThe Telegraph
Roger Bootle: What conditions could convince the euro elites that the euro was a failure and if they can imagine such conditions, then what stops them from concluding that they exist now?

Europe is like 19th century Japan Svenska Dagbladet
A fragmented territory controlled by local potentates with a weak central government that is not taken seriously by the rest of the world: the EU now resembles Japan in 1860s, argues a Swedish journalist. But the construction of a real European political power could prove to be counter-productive.

Eurogeddon: The first two and a half years of the euro crisisThomson Reuters
A new e-book from Reuters Breakingviews edited by Hugo Dixon. Find out which countries were fit for the single monetary policy, if it might be better to abandon the single currency, whether the euro zone can solve its troubles. Also full pdf

September Will be a Doozy Again this YearEconomist Meg
For the second September in a row, developments in the EZ have the potential to be highly dramatic, and this time not just in the weaker, peripheral countries.

In Order To Be Saved, Spain And Italy Must First Be Destroyed ZH
Citigroup’s long note. Spain and Italy require 700bn for a two-year program.

Is the Official Sector Initiative next for Greece?Sober Look
Instead, the official sector, which holds about three quarters of Greek debt, needs to participate in some fashion IF Greece's debt profile is going to change substantially. And the IMF appears to be reaching the point that Greece's debt profile must change substantially IF it is to continue to participate in assistance programs.

Morning Briefing: The ties that bindBNY Mellon
Germany is inextricably linked to those whom it would have linger on the cliff-edge

The World from Berlin 'Vengeance for ECB Bond-Buying Will Be Bitter' Spiegel
Investors may not have liked what European Central Bank head Mario Draghi had to say on Thursday, but it was the clearest indication yet that a plan is finally taking shape to reduce borrowing costs for Spain and Italy. Germany remains wary, though, and commentators say the outcome could be disastrous.

Ironisch Bundesbank lessons alphaville / FT
In 1975 the German central bank was buying government bonds because of low growth. So why does the Bundesbank oppose it now?                   

Tempted, Angela?The Economist
A controlled break-up of the euro would be hugely risky and expensive. So is waiting for a solution to turn up

Breaking up the euro area: The Merkel memorandumThe Economist
Angela Merkel, the German chancellor—and also, in effect, the euro area’s boss—has always insisted that she wants to preserve the euro area in its current form.

Venetian cunning of Draghi-Monti masterplan may save euro for now The Telegraph
Ambrose Evans-Pritchard: So we enter the treacherous market month of August with Europe in limbo. The actors wait upon each other. World finance held hostage to a fiendishly complicated game of diplomatic chess.

Draghi breaks the ultimate euro tabooGavyn Davies / FT
Mr Draghi could simply have repeated the old line that the operation of the Target 2 system is enough to ensure that the euro can never fall apart. By admitting the reality that the system is no longer 100 per cent credible in the eyes of the market, the ECB president has invited investors to ask whether his proposed interventions are powerful enough to deal with problem he has raised.

Mario Draghi Cannot Save the Euro View / BB
 A broader question is what, if anything, Draghi might achieve with a looser monetary policy. The euro area has many problems, including a lack of competitiveness in the periphery, chronically poor growth in countries such as Portugal and Italy, deeply damaged public finances in Greece and Spain, and a labor force that’s not mobile enough to go where the jobs are. Which of these could be resolved by reducing interest rates across the board?

Analysis of the recent ECB press conference Kiron Sarkar / The Big Picture
The above measures if implemented (likely), as proposed by Draghi, are bullish. Yes, there are risks, but…Indeed, I could argue that Draghi’s plan is even more important that his previous LTRO programme on behalf of European banks.

Draghi’s planThe Economist
A lot of things have to go right for the ECB’s bond-buying plan to succeed

Euro zone gymnastics MacroScope / Reuters
All roads point to September, once the German constitutional court has presumably cleared the way for the bloc’s ESM bailout fund to come into being. At some point after that, Spain could ask for help from the fund to lower its borrowing costs rather than seek a sovereign bailout and, from what Draghi has said, the ECB could pile in behind. If that joint action turned the tide in Madrid’s favour it’s possible that Italy, which after all is running a primary surplus, would be taken out of the firing line.

Goldman Sachs: Focus: Europe’s ‘red line’ZH
Segmentation of the Euro interbank market is significant

All eyes on asset encumbrance in Europealphaville / FT
Fitch: As a percentage of funded banking assets, encumbrance is highest in parts of the peripheral eurozone, Scandinavia and specialist property lenders. Across a sample of major European banks, Fitch estimates median encumbrance to be around 28% of funded banking assets.

Indicators of market segmentationECB (pdf)
media request following the ECB press conference on 2 August 2012 (4 pages)

Heterogeneity in euro area financial conditions and policy implications ECB (pdf)

Raging Bulls: How Wall Street Got Addicted to Light-Speed TradingWired
Wall Street used to bet on companies that build things. Now it just bets on technologies that make faster and faster trades.

Your Complete Guide To The Coming Fiscal Cliff ZH
Goldman Sachs’ research report

Things that make you go hmmmGrant Williams / ZH
Excellent newsletter, plenty on ECB (or download the pdf)

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